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 | ||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended 31 March 2013 | ||
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)
Alison Kay
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 |
Name of each exchange on which registered |
|
Ordinary Shares of 11 17/43 pence each | The New York Stock Exchange* | |
American Depositary Shares, each representing five | The New York Stock Exchange | |
Ordinary Shares of 11 17/43 pence each | ||
6.625% Guaranteed Notes due 2018 | The New York Stock Exchange | |
6.30% Guaranteed Notes due 2016 | The New York Stock Exchange | |
Preferred Stock ($100 par value-cumulative): | ||
3.90% Series | The New York Stock Exchange | |
3.60% Series | 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 issuers classes of capital or common stock as of March 31, 2013 was
Ordinary Shares of 11 17/43 pence each | 3,794,575,998 |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes þ 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 þ
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 þ 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 ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ | Accelerated filer ¨ | Non-accelerated filer ¨ |
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 þ 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 þ
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 2013 and is dated 10 June 2013. Details of events occurring subsequent to the approval of the annual report on 15 May 2013 are summarised in section Further Information which forms a part of this Form 20-F . The content of the Groups 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 | |||||
1 |
Identity of directors, senior management and advisors |
Not applicable |
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2 |
Offer statistics and expected timetable |
Not applicable |
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3 |
Key Information |
|||||||
3A Selected financial data |
Summary consolidated financial information |
194-195 | ||||||
Financial reviewFinancial performance |
46-51 | |||||||
Additional informationOther disclosuresExchange rates |
186 | |||||||
Exchange Rates |
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Further
Information |
|
|||||
3B Capitalization and indebtedness |
Not applicable |
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3C Reasons for the offer and use of proceeds |
Not applicable |
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3D Risk Factors |
Additional informationBusiness information in detailRisk Factors |
176-178 | ||||||
4 |
Information on the company |
|||||||
4A History and development of the company |
Delivering our strategyWhat did we achieve? |
36-43 | ||||||
Financial reviewFinancial position and resourcesSummarised balance sheet |
52-56 | |||||||
Additional informationKey milestones |
187 | |||||||
Useful information |
196 | |||||||
Additional informationOther disclosuresGeneral |
184 | |||||||
4B Business overview |
Where we operate |
17 | ||||||
What we do |
12-16 | |||||||
Principal operations |
18-25 | |||||||
Operating environment |
10-11 | |||||||
Additional informationBusiness information in detailRegulation |
170-175 | |||||||
Additional informationBusiness information in detailRisk factorsInfrastructure and IT systemsWe may suffer a major network failure or interruption, or may not be able to carry out critical non network operations and Customers and counterparties |
176, 178 | |||||||
4C Organizational structure |
Note 33 to the consolidated financial statementsSubsidiary undertakings, joint ventures and associatesPrincipal subsidiary undertakings |
155 | ||||||
4D Property, plants and equipment |
Where we operate |
17 | ||||||
Principal operations |
20-24 | |||||||
Our vision and strategyOur vision and strategic objectivesEmbed sustainability and Drive growth |
9 | |||||||
Operating environmentEnergy policy |
10-11 | |||||||
Financial reviewFinancial position and resourcesSummarised balance sheetProperty, plant and equipment |
52 | |||||||
Additional informationOther disclosuresProperty, plant and equipment |
187 | |||||||
Note 10 to the consolidated financial statements Property, plant and equipment |
123 |
i
Item |
Form 20-F caption | Location in the document | Page | |||||
Note 19 to the consolidated financial statementsBorrowings |
134-135 | |||||||
4A |
Unresolved staff comments |
Additional informationOther disclosuresUnresolved SEC staff comments |
189 | |||||
5 |
Operating and financial review and prospects |
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5A Operating results |
Financial ReviewFinancial performance |
46-51 | ||||||
Principal operations |
18-25 | |||||||
Financial ReviewFinancial position and resourcesNet debt |
53-55 | |||||||
Note 30 to the consolidated financial statementsFinancial risk(a) Market risk(i) Foreign exchange risk |
147-148 | |||||||
Operating environment |
10-11 | |||||||
5B Liquidity and capital resources |
Financial reviewFinancial performanceFinancial position and resources |
52-57 | ||||||
Delivering our strategyWhat did we achieve?Driving growth and What are the risks?An inability to access capital markers at commercially acceptable interest rates could affect how we maintain and grow our business |
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42-43
33 |
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Financial reviewFinancial position and resourcesCommitments and Contingencies |
57 | |||||||
Additional informationDirectors report disclosuresMaterial interests in shares |
183 | |||||||
Material Interests in Shares |
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Further
Information |
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Note 19 to the consolidated financial statementsBorrowings |
134-135 | |||||||
5C Research and development, patents and licenses, etc. |
Additional informationDirectors report disclosuresResearch and development |
183 | ||||||
5D Trend information |
Financial ReviewFinancial performance |
46-57 | ||||||
Principal operations |
18-25 | |||||||
Operating environment |
10-11 | |||||||
5E Off-balance sheet arrangements |
Financial ReviewFinancial position and resourcesOff-balance sheet items |
57 | ||||||
5F Tabular disclosure of contractual obligations |
Note 27 to the consolidated financial statementsCommitments and contingencies |
143 | ||||||
5G Safe Harbor |
Important notice |
1 | ||||||
Cautionary Statement |
Back cover | |||||||
6 |
Directors, senior management and employees |
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6A Directors and senior management |
Our Board Additional informationDirectors report disclosuresBoard biographies |
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26-27
180-182 |
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6B Compensation |
Remuneration Report |
68-90 |
ii
Item |
Form 20-F caption | Location in the document | Page | |||||
Note 2 to the consolidated financial statementsOperating costs(c) Key management compensation |
109 | |||||||
Note 22 to the consolidated financial statementsPensions and other post-retirement benefits |
136-138 | |||||||
Note 29 to the consolidated financial statementsActuarial information on pensions and other post-retirement benefits |
144-147 | |||||||
Share Ownership |
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Further
Information |
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6C Board practices |
Corporate GovernanceThe Board |
59-60 | ||||||
Corporate GovernanceBoard and Committee Membership and attendance |
62 | |||||||
Corporate GovernanceAudit Committee |
63-65 | |||||||
Corporate GovernanceRemuneration ReportsRemuneration Committee |
68 | |||||||
Our Board Our governance structure Additional informationDirectors report disclosures |
|
26-27
28-29 180-182 |
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Remuneration ReportExecutive Directors service contracts, external appointments and retention of fees policy, termination and mitigation and Non-executive Directors fees and letters of appointment |
78-79 | |||||||
6D Employees |
Note 2 to the consolidated financial statements(b) Number of employees |
109 | ||||||
Additional informationOther disclosuresEmployees |
186 | |||||||
6E Share ownership |
Remuneration ReportAll-employee share plans Remuneration ReportImplementation Report 2012/13 Shareholding for Executive Directors |
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74
82 |
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Remuneration ReportImplementation Report 2012/13Remuneration during the year ended 31 March 2013Directors interests in share options, Directors interests in the LTPP, PSP and DSP, and Directors beneficial interests Share ownership |
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86-90
Further
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7 |
Major shareholders and related party transactions |
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7A Major shareholders |
Additional informationDirectors report disclosuresMaterial interests in shares |
183 |
iii
Item |
Form 20-F caption | Location in the document | Page | |||||
7B Related party transactions |
Note 28 to the consolidated financial statementsRelated party transactions |
144 | ||||||
7C Interests of experts and counsel |
Not applicable |
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8 |
Financial information |
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8A Consolidated statements and other financial information |
Audit opinion for Form 20-F Basis of preparation |
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95
97-98 |
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Recent accounting developments |
99 | |||||||
Consolidated primary statements |
100-104 | |||||||
Notes to the consolidated financial statements |
105-142 | |||||||
Notes to the consolidated financial statementssupplementary information |
143-164 | |||||||
Chairmans Statement |
2-3 | |||||||
8B Significant changes |
Subsequent Events |
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Further
Information |
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9 |
The offer and listing |
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9A Offer and listing details |
Additional informationOther disclosuresThe offer and listingPrice history |
189 | ||||||
Price History |
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Further
Information |
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Useful informationShare price |
196 | |||||||
Exchange Rates |
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Further
Information |
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9B Plan of distribution |
Not applicable |
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9C Markets |
Useful informationShare price |
196 | ||||||
9D Selling shareholders |
Not applicable |
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9E Dilution |
Not applicable |
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9F Expenses of the issue |
Not applicable |
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10 |
Additional information |
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10A Share capital |
Not applicable |
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10B Memorandum and articles of association |
Additional information Other disclosuresArticles of association and Corporate governance practices: differences from New York Stock Exchange (NYSE) listing standards |
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184-185
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Additional informationDirectors Report disclosuresShare capital |
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183
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10C Material contracts |
Additional informationOther disclosuresMaterial contracts |
187 | ||||||
10D Exchange controls |
Additional informationOther disclosuresExchange controls |
186 | ||||||
10E Taxation |
Additional informationOther disclosuresTaxation |
187-189 | ||||||
10F Dividends and paying agents |
Not applicable |
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10G Statement by experts |
Not applicable |
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10H Documents on display |
Additional informationOther disclosuresDocuments on display |
186 | ||||||
10I Subsidiary information |
Not applicable |
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11 |
Quantitative and qualitative disclosures about market risk |
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11A Quantitative information about market risk |
Note 14 to the consolidated financial statementsDerivative financial instruments |
127-129 |
iv
Item |
Form 20-F caption | Location in the document | Page | |||||
Note 30 to the consolidated financial statementsFinancial risk |
147-152 | |||||||
Note 31 to the consolidated financial statementsCommodity risk |
153-154 | |||||||
Financial reviewFinancial position and resources |
52-57 | |||||||
11B Qualitative information about market risk |
Note 14 to the consolidated financial statementsDerivative financial instruments |
127-129 | ||||||
Note 30 to the consolidated financial statementsFinancial risk |
147-152 | |||||||
Note 31 to the consolidated financial statementsCommodity risk |
153-154 | |||||||
Financial reviewFinancial position and resources |
52-57 | |||||||
Delivering our strategyWhat are the risks? |
32-33 | |||||||
12 |
Description of securities other than equity securities |
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12A Debt securities |
Not applicable |
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12B Warrants and rights |
Not applicable |
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12C Other securities |
Not applicable |
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12D American depositary shares |
Additional informationOther disclosuresDescription of securities other than equity securities; depositary fees and charges |
186 | ||||||
Additional informationOther disclosuresDepository payments to the Company |
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185
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Definitions and glossary of terms |
190 | |||||||
13 |
Defaults, dividend arrearages and delinquencies |
Not applicable |
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14 |
Material modifications to the rights of security holders and use of proceeds |
Not applicable |
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15 |
Controls and procedures |
Additional informationControlsInternal control over financial reporting, Disclosure controls and Changes to internal control over financial reporting |
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179 |
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16 |
16A Audit committee financial expert |
Corporate GovernanceAudit CommitteeExperience |
63 | |||||
16B Code of ethics |
Additional informationDirectors report disclosuresCode of Ethics |
185 | ||||||
16C Principal accountant fees and services |
Corporate GovernanceAudit CommitteeExternal Audit |
64 | ||||||
Note 2 to the consolidated financial statements(e) Auditors remuneration |
110 | |||||||
16D Exemptions from the listing standards for audit committees |
Not applicable |
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16E Purchases of equity securities by the issuer and affiliated purchasers |
Not applicable |
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16F Change in registrants certifying accountant |
Not applicable |
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16G Corporate governance |
Additional disclosuresOther DisclosuresCorporate governance practices: differences from New York Stock Exchange (NYSE) listing standards |
185 | ||||||
16H Mine safety disclosure |
Not applicable |
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17 |
Financial statements |
Not applicable |
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v
Item |
Form 20-F caption | Location in the document | Page | |||||
18 |
Financial statements |
Company accounting policies Basis of Preparation |
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165 97-98 |
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Recent accounting developments |
99 | |||||||
Consolidated primary statements |
100-104 | |||||||
Notes to the consolidated financial statements |
105-142 | |||||||
Notes to the consolidated financial statementssupplementary information |
143-164 | |||||||
Report of Independent Registered Public Accounting Firm |
95 | |||||||
19 |
Exhibits |
Filed with the SEC |
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vi
We have changed the way we present our Annual Report and Accounts so we can describe strategic information and our business model in a way that we believe is easier to understand. This information is set out in our Strategic Review, with more detailed information, where relevant, included in Additional Information.
We use a number of technical terms and abbreviations within this document. In the interest of saving paper, we do not define terms or provide explanations every time they are used; please refer to the glossary on pages 190 to 193 for this information.
Directors Report
The Directors Report, prepared in accordance with the requirements of the Companies Act 2006 and the UK Listing Authoritys Listing, and Disclosure and Transparency rules, comprising pages 6 to 91 and 170 to 189, was approved by the Board and signed on its behalf by:
Alison Kay
Group General Counsel & Company Secretary
Company number 4031152
15 May 2013
Important notice
This document contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. For a description of factors that could affect future results, reference should be made to the full cautionary statement on the back cover of this document and to the risk factors section on pages 176 to 178.
Copyright National Grid plc 2013 ©, all rights reserved. The commission of any unauthorised act in relation to this document may result in civil and/or criminal action.
Strategic Review pages 01 to 57 | ||
02 | Chairmans statement | |
04 | Chief Executives review | |
06 | Financial review in brief | |
08 | Our vision and strategy | |
10 | Operating environment | |
12 | What we do | |
17 | Where we operate | |
18 | Principal operations | |
26 | Our Board | |
28 | Our governance structure | |
30 | Internal control and risk management | |
32 | What are the risks? | |
34 | How executive remuneration aligns to Company strategy | |
36 | What did we achieve? | |
44 | Measuring performance our KPIs | |
46 |
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Corporate Governance pages 58 to 91 | ||
The Corporate Governance Report, introduced by the Chairman, contains details on the activities of the Board and its committees during the year, including reports from the Nominations, Audit and Remuneration Committees, as well as details of our shareholder engagement activities.
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58 | Corporate Governance contents | |
59 | Cross reference to Directors Report statutory and other disclosures | |
68 | Remuneration Report | |
91 |
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Financial Statements pages 92 to 169
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Including the Independent Auditors reports, consolidated financial statements prepared in accordance with IFRS and notes to the consolidated financial statements, as well as the Company financial statements prepared in accordance with UK GAAP.
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92 | Introduction to the financial statements | |
93 | Statement of Directors responsibilities | |
94 | Audit opinions | |
96 |
Contents of financial statements
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Additional Information pages 170 to 196 | ||
Additional disclosures and information, definitions and glossary of terms, summary consolidated financial information and other useful information for shareholders including contact details for more information or help.
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170 | Contents of additional information | |
190 |
Definitions and glossary of terms
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www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 01 |
Strategic Review
The Board is proposing a recommended final dividend of
26.36p 2011/12: 25.35p
|
Impressions and reflections on 2012/13
This has been a significant year for National Grid, which has seen substantial change in both the UK and US.
One of the most important changes we have seen is Ofgems introduction of RIIO, a new eight year regulatory framework in the UK. In February 2013, we agreed all the UK RIIO price control arrangements proposed by Ofgem. The Board believes the combination of revenue allowances and incentive mechanisms provides a good opportunity to earn appropriate returns for investors, while delivering essential infrastructure investment for the benefit of consumers and the UK economy.
The Board has seen improved operational performance in the US, as well as the outcome of important rate filings, as Steve describes in his review on page 05. Also in the US, our response to Superstorm Sandy showed we have made improvements in our operational processes and the way we interact with our stakeholders.
Superstorm Sandy was a significant example of the changing weather patterns that we are increasingly seeing in both the UK and US, with 2012 being one of the wettest years on record in the UK. This creates considerable operational challenges for our business and, when severe weather events occur, we need to be able to respond effectively and efficiently.
We announced our new dividend policy in March 2013. This has been a top priority for the Board over the last year and is an important part of the way we create shareholder value. The new policy will aim to grow the ordinary dividend at least in line with the rate of RPI inflation each year for the foreseeable future. It will also support our long-term ambition to target a sustainable dividend in real terms for our shareholders, while helping us maintain the strong balance sheet we need to fund the business. The Board has recommended an increase in the final dividend to 26.36p per ordinary share, ($2.0088 per American Depositary Share), in line with our one year policy of targeting 4% growth in the year 2012/13, bringing the full year dividend to 40.85p per ordinary share.
Being a responsible business
We contribute to our communities directly and indirectly in many ways. We maintain and operate the critical infrastructure needed to keep the lights on and the heating working across the UK and northeastern US, we employ more than 25,000 people and in 2012/13 contributed £1.2 billion in taxes in the UK alone.
02 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Our contribution goes further. For example, we estimate we support around 30,000 jobs in the first tier of our supply chain in other words, jobs in companies that are our suppliers across the globe.
We are proud of our role serving the communities in which we operate. We strive to be a responsible business, seeking to balance the need to build infrastructure efficiently with consideration for the environment.
We are constantly looking for new ways to build and maintain our networks, applying innovative design and being both creative and flexible in our approach to connecting people to the energy they need.
The way in which we conduct business with our partners is equally important. Our aim of forging strong relationships built on trust is reflected in our refreshed vision statement. It is also reflected in our line of sight the framework that we use to link our objective setting right back to our strategy and vision. In addition to focusing on what we must do to achieve our vision, we are now placing even greater emphasis on how we do it.
I firmly believe that a company needs to act and behave responsibly in seeking to meet the varied needs of its many stakeholders, and our role as an essential utility reinforces that requirement. To this end, we are implementing a comprehensive communications programme in 2013/14 to help remind all employees of the standards that are expected of us collectively and as individuals.
Effective governance
We are implementing the phased transition of the Boards membership that I set out in last years Annual Report and Accounts. The challenges we have over the coming years in the UK and US require a fresh focus, so we have been investing time and effort to develop the Board, refreshing its balance of skills, experience, knowledge and diversity. This brings a broad range of perspectives and challenge, which together with strong teamwork are important factors that I believe contribute to an effective board.
Over the year we have welcomed Nora Mead Brownell, Mark Williamson and, most recently, Jonathan Dawson to our Board as Non-executive Directors. You can read more about the committees they have joined on page 62, as well as the appointment process on page 67.
As a result of the Boards transition, Stephen Pettit and Linda Adamany stepped down from the Board in 2012 and Ken Harvey and George Rose will step down at this years AGM.
Ken has been the Senior Independent Director since 2004 and chairman of the Remuneration Committee since 2011. Mark Williamson will succeed Ken as Senior Independent Director and Jonathan Dawson will take over from him as chairman of the Remuneration Committee. George has been chairman of the Audit Committee for more than 10 years and Mark Williamson will take over this role when George steps down. Chairmanship of these committees plays an important role in making sure the Board meets its responsibilities to shareholders and stakeholders.
I would like to thank Ken and George for their commitment to the Board and the very valuable contribution they have made.
In January 2013, Helen Mahy left the Company after 11 years. I would like to thank Helen for her valuable contribution and commitment to the Company and the Board. We have appointed Alison Kay as our new Group General Counsel & Company Secretary. See page 182 for her biography.
Looking ahead
As we enter a new phase for National Grid, I believe we are well positioned for the future. We have a refreshed Board that is operating effectively and will continue to set the tone at the top, helping us to meet the challenges we have on both sides of the Atlantic.
On many occasions during the year in particular during Superstorm Sandy our employees dedication to customers has been outstanding. I am confident that our people will continue to help make National Grid a company we can all be proud of and I thank all our employees for their hard work and commitment to our success.
Sir Peter Gershon
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 03 |
Strategic Review
Impressions and reflections on 2012/13
It has been another hugely important year for National Grid, both in the UK and US. We have been working hard to secure appropriate regulatory arrangements while bedding down significant organisational changes on both sides of the Atlantic.
These activities create the foundation for our long-term success, in continuing to meet the needs of our customers, delivering our targeted returns and securing long-term financing for important investments.
In the US, following our restructuring and cost reduction programme, we have continued to embed the process changes we have introduced.
Superstorm Sandy tested the improvements we had made to our emergency response processes. Throughout 2012, we worked to improve these processes, from training and customer communications through to the way we work on damage assessment, repairing assets and providing accurate estimated times of restoration.
We also had to respond to a significant snowstorm in the US during the early part of 2013. As with Sandy, our employees hard work and dedication made sure that we were able to restore power to our customers quickly and efficiently.
How we performed during 2012/13
After a challenging 2011/12, we boosted our efforts to improve our safety performance. Regrettably, in early April 2013 one of our contractors was fatally injured while working on a gas main upgrade near Albany, New York. We have been thoroughly investigating this tragic event in order to learn from it and prevent a recurrence.
Safety is not just about keeping our people safe. It is also about making sure members of the public are not put at risk by our operations and we have seen significant progress in this area, with a 41% reduction in injuries to members of the public compared with last year.
04 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
We are committed to raising the standards of visible safety leadership across the business and supporting a culture of instinctive safety in our people. We have also been maintaining a relentless focus on process safety, supported by a new process safety management system.
We have delivered good financial performance across our businesses with a 12% increase in adjusted earnings per share. For more information on our financial results see page 06.
I am delighted that we received commendations for our contribution to the success of the London 2012 Olympic and Paralympic Games, working closely with the London Organising Committee to safely ensure resilient energy supplies to the venues.
However, there are areas that we need to improve. For example, in the UK we have a massive challenge to deliver the energy infrastructure the country needs, while minimising the impacts on communities and the environment. We know we need to change the way we engage with our stakeholders and the public about our infrastructure plans. We are making efforts to focus on this through a campaign called Powering Britains Future. We have held a number of forums bringing together leaders from across the energy industry with stakeholders from government, consumer and environmental groups. Our aim is to develop a clearer energy story and explain the difficult decisions that need to be taken when balancing the need for, and cost of, this new infrastructure with protecting the landscape.
We are encouraging a national conversation about the UK energy challenge and a platform for people to share their ideas is provided at www.poweringbritainsfuture.co.uk.
In the US, we updated and consolidated our many legacy systems on to one single platform. With a system implementation of this scale and complexity we expected some difficulties following go live. We have, however, experienced operational difficulties that significantly exceeded our expectations and we have devoted significant time and resources to resolving these.
Learning from these challenges and events is particularly important if we are to drive continuous improvement.
Changes in regulation
We are restructuring our UK business, which includes focusing the organisation on four main end-to-end processes that deliver our regulatory outputs and value to our customers.
The changes aim to make sure we are well positioned to deliver value under RIIO, the new regulatory framework, and are prepared for our potential new role under Electricity Market Reform (EMR). This is intended to provide greater financial certainty to generation companies and aid growth of greener sources of power that will need connecting to the grid.
In the US, we will continue to submit rate filings so we can appropriately recover our cost of operations and invest so we can provide for the safe, reliable and efficient delivery of energy to customers. Over the past year, we received unanimous approval from RIPUC for rates that took effect in February 2013. Our New York filing also received unanimous approval, with new rates taking effect in April 2013.
People
I am committed to developing all our employees to the best of their abilities. I am also determined to create an inclusive, high performance culture at National Grid. We need people with the right skills and experience to meet the current and future requirements of our business. This will include a mixture of
experienced engineers and development programme trainees, from apprentices to graduates. That means we need people with STEM (science, technology, engineering and mathematics) skills, so I believe it is important for us to continue the work we are doing with schools, to inspire the next generation of engineers and technicians.
This will help us achieve our refreshed vision connecting you to your energy today, trusted to help you meet your energy needs tomorrow.
The results of our 2013 employee opinion survey, completed by 79% of our employees, included an engagement score of 63%. This is an important measure. It highlights, for example, the extent to which employees would recommend National Grid to others as a place to work, as well as giving their time and energy to make it a success. For more information see page 39.
In the previous years survey, employees told us we could increase the opportunities we provide for personal development. Consequently, among the initiatives we have introduced is the development of an academy a global, centralised hub of all our learning and development. This provides a clear learning path for all our employees that is aligned to the needs of the business. It brings together and shares best practice from our own Company, as well as from our external partners.
I am proud of all our employees who have volunteered in their local communities, giving their time, skills and enthusiasm to support a wide range of projects. These ranged from environmental initiatives to projects helping young people improve their STEM skills, as well as supporting our various partner charities, such as Special Olympics GB, Girls Inc. in the US and City Year in both countries. I would like to take this opportunity to say thank you to everyone who has been involved in these valuable initiatives.
Our priorities for next year
| Safety our safety performance is moving in the right direction but it remains a top priority for us as we seek to achieve a world-class safety level; |
| Execution we will only succeed if we deliver on our commitments consistently, effectively and efficiently. Performance matters and we have to push ourselves as hard as we can to drive the performance edge we will need this year; and |
| Customer and communities we have refined a lot of our processes so customers and communities are at the heart of our focus, but we still have a lot more to do. |
Steve Holliday
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 05 |
Strategic Review
This year has seen good financial performance. Our financial measures have mostly improved compared with the prior year and we continue to see opportunities for growth in the future.
52% +100 bps Total shareholder return
£3,644m +4% Adjusted operating profit*
56.1p +12% Adjusted EPS*
£4,037m -10% Cash generated from operations
13.6% +60 bps UK return on equity
9.2% +40 bps US return on equity
£33.7bn +8% Regulated assets: UK RAV and sterling equivalent of US rate base
* Items presented as adjusted exclude exceptional items, remeasurements and stranded cost recoveries. See pages 50 and 51 for further details Comparative amounts have been restated to reflect the impact of additional shares issued as scrip dividends
|
Total shareholder return (TSR)
We measure TSR as a key performance indicator (KPI) on a cumulative three year basis. The measure reflects changes in our share price and also assumes dividends paid to shareholders over that period were reinvested in our shares. Cumulative TSR for the period 1 April 2010 to 31 March 2013 was 52% (1 April 2009 to 31 March 2012: 51%; 1 April 2008 to 31 March 2011: 4%). This reflects our strong dividend yield as well as the recovery in the financial markets since 2008/09.
Earnings measures
Adjusted operating profit
Our adjusted operating profit has increased 4% to a record high of £3,644 million, driven by higher net regulated income in our UK Transmission and UK Gas Distribution businesses of £277 million and £85 million respectively, as a result of the impact of inflation and other price control allowances. Our US Regulated business further contributed as a result of higher Niagara Mohawk deferral recoveries and higher revenues from the increase in rate bases of our FERC regulated entities.
Major storms in the US (Superstorm Sandy and Storm Nemo) had an adverse impact on operating profit of £136 million in 2012/13, £20 million higher than the costs of Tropical Storm Irene and the Massachusetts October snowstorm in 2011/12. Timing benefits of £16 million in 2012/13 were in line with the £18 million net benefit in 2011/12.
The £105 million decrease in adjusted operating profit for 2011/12 compared with 2010/11 was due to adverse timing differences of £256 million and higher storm costs in the US of £116 million (due to Tropical Storm Irene and the October snowstorm in Massachusetts). These were partially offset by an increase in UK regulated revenues of £220 million and improved results from other activities.
Adjusted earnings and EPS
Our adjusted net interest charge remained broadly level with 2011/12 at £920 million, with a reduction in the cost of our index-linked debt offsetting the impact of higher debt levels and loss on disposal of financial instruments. The £217 million decrease in adjusted net finance costs in 2011/12 to £917 million was mainly due to: lower interest rates on short term instruments; lower debt repurchase costs; the benefit of lower average net debt as a result of those debt buy backs; and a favourable variance in pension interest due to a higher than expected rate of return on US pension assets.
Our adjusted tax charge was £69 million lower than 2011/12, mainly due to changes in tax provisions in respect of prior years and a 2% decrease in the UK statutory corporation tax rate in the year, partially offset by increased taxes on higher taxable profits. As a result of this, our effective tax rate for 2012/13 was 25.0% (2011/12: 29.2%; 2010/11: 29.2%). The 2011/12 effective tax rate before exceptional items, remeasurements and stranded cost recoveries did not change from 2010/11 because a fall in prior period tax credits was primarily offset by a 2% reduction in the UK corporation tax rate and a change in the UK/US profit mix.
The above earnings performance has translated into adjusted EPS growth in 2012/13 of 6.1p (12%) (adjusted EPS growth in 2011/12 of 0.4p (1%)). The impact of the movements above on adjusted EPS for 2011/12 and 2012/13 has been shown in the chart opposite:
06 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Cash generated from operations
Cash generated from operations was £4,037 million (2011/12: £4,487 million; 2010/11: £4,854 million). Adjusted operating profit before depreciation, amortisation and impairment increased by £228 million year on year, however this was offset by a year-on-year reduction in working capital of £556 million and the cessation of stranded cost recoveries in 2012/13 (£247 million received in 2011/12). The adverse working capital is driven by the US, due to the timing of cost recoveries from LIPA relating to Superstorm Sandy, as well as increased receivables due to a colder winter and higher commodity prices in 2013 compared with 2012.
The reduction in cash generated from operations from 2010/11 to 2011/12 reflected lower operating profits, unfavourable movements in the UK due to higher Gas Distribution receivables, higher pension deficit payments and lower stranded cost recoveries than in 2010/11. These were offset by working capital movements due to the weather in the US (including lower receivables due to the milder winter, lower gas costs and improved collections).
Asset return measures
UK return on equity
The UK ROE has increased 60 bps to 13.6%, mainly driven by outperformance in the gas transmission and distribution businesses against allowed returns, as well as the benefit of a lower tax charge in the period. Our electricity transmission returns have remained broadly constant year on year. The UK ROE for 2012/13 has now returned to the same level as 2010/11, following UK RAV growth driven by RPI and investment in 2011/12.
US return on equity
The US ROE has increased 40 bps to 9.2%, mainly driven by customer growth in our Massachusetts Gas business and recognition of the full allowed return in our Niagara Mohawk electricity business following the reversal of a prior period provision. The increase of 50 bps from 2010 to 2011 mainly related to the impact of our restructuring savings and the full-year impact of our new Massachusetts Gas rate plan which was effective from November 2010.
Regulated assets
Our regulated assets have increased by £2.5 billion, reflecting the continued high levels of investment in our network in both the UK and US. The UK RAV increased by £1.6 billion reflecting inflation and significant capital expenditure in our UK Transmission business in particular. The US rate base increased by £0.9 billion, £0.5 billion due to foreign exchange movements and £0.4 billion due to investment in our networks and working capital movements.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 07 |
Strategic Review
Our vision sets out our intentions and aspirations at the highest level, while our strategic objectives outline what we need to do to achieve that vision.
08 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
What our vision and strategic objectives mean to us
Our vision sets out our intentions and aspirations at the highest level. Our strategic objectives set out what we believe we need to achieve to deliver our vision and be recognised as a leader in the development and operation of safe, reliable and sustainable energy infrastructure.
Deliver operational excellence achieve excellent levels of safety, reliability, security and customer service.
Our customers, communities and other stakeholders demand safe, reliable and secure supply of their energy. This is reflected in our regulatory contracts where we are measured and rewarded on the basis of meeting our commitments to customers and other stakeholders.
Excellence in operational processes should allow us to manage our assets efficiently, deliver network improvements quickly and provide services that meet the changing demands of customers. Engagement with our customers and communities will make sure our outputs reflect their needs and priorities. It will help maximise the benefits our stakeholders derive from the value we deliver.
Engage our people create an inclusive, high performance culture by developing all our employees.
It is through the hard work of our employees that we will achieve our vision, respond to the needs of our stakeholders and create a competitive advantage. Creating an engaged and talented team that is aligned with our strategic objectives is vital to our success. Our presence within the communities we serve, the people we work with and our opportunities to grow both individually and as a business are all important to making National Grid a good place to work.
Stimulate innovation promote new ideas to work more efficiently and effectively.
Our commitment to promoting innovation underpins how we will run our networks more efficiently and effectively and deliver on our regulatory incentives. Across our business, we will explore new ways of thinking and working to benefit every aspect of how we deliver on our customer and stakeholder commitments.
Embedding innovation and new technology into our operations makes sure we deliver continuous improvements in the quality and cost of our services.
Engage externally work with external stakeholders to shape UK, EU and US energy policy.
Policy decisions by regulators, governments and others directly affect our business. We engage widely in the energy policy debate, making sure our position and perspective shape future policy direction. We also engage with our regulators to manage uncertainty and provide the right mechanisms so we can deliver infrastructure that meets the demands of a changing energy landscape.
Embed sustainability integrate sustainability into our decision making to create value, preserve natural resources and respect the interests of our communities.
Our long-term sustainability strategy sets our ambition to deliver these aims and to embed a culture of sustainability within our organisation. That culture will make sure we make decisions that protect and preserve natural resources and benefit the communities in which we operate. We remain committed to our targets of a 45% reduction in Scope 1 and 2 greenhouse gas emissions by 2020 and 80% by 2050.
Drive growth grow our core businesses and develop future new business options.
We continue our aim of gaining the best possible value from our existing portfolio while exploring and evaluating opportunities for growth. Making sure our portfolio of businesses maintains the appropriate mix of growth and cash generation is necessary to meet the expectations of our shareholders.
We review investment opportunities carefully and will only invest where we can reasonably expect to earn an adequate return. Combining this disciplined approach with operational and procurement efficiencies gives us the best possible opportunity to drive strong returns and meet our commitments to investors.
How our strategy creates value
Our vision and strategic objectives explain what is important to us, so we can meet our commitments and deliver value.
Shareholder value
Regulatory frameworks operating under robust regulatory frameworks can help to reduce cash flow volatility. Shaping these frameworks to maintain a balance of risk and return underpins our investment proposition.
Reputation, safety and capability our approach to safety and our reliability record underpin our reputation and brand. These are important factors that enable positive participation in regulatory discussions and the pursuit of new business opportunities.
Efficient operations efficient capital and operational expenditure allows us to deliver regulatory outputs at a lower cash cost and reduces working capital requirements.
Maximising revenues positive performance under incentive mechanisms, and delivery of the outputs our customers and regulatory stakeholders require, helps us to maximise allowed revenue.
Funding and cash flow management positive net cash flows and an innovative funding strategy help to deliver long-term growth. Outperforming the allowed cost of debt can provide improved profitability.
Disciplined investment we can achieve future revenue and earnings growth by increasing our regulatory asset value and rate base in line with regulatory capital allowances. Investment in non-regulated assets helps us to use and enhance our core capabilities with the aim of delivering attractive returns.
Customer and community value
Safety and reliability providing reliable networks in a safe way is at the core of customer expectations.
Affordability providing services in a cost efficient way helps to reduce the impact on customer bills.
Customer service providing reliable services that meet the needs of our customers and communities is a crucial part of the value they receive from us.
Environmental sustainability we aim to protect the environment and preserve resources for current and future generations.
Emergency services we provide telephone call centres, coordinate the response to make safe unplanned gas escapes and respond to severe weather events.
Community engagement we listen to the communities we serve and work to address concerns about the development of our networks. Our people volunteer for community based projects and we support educational initiatives in schools.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 09 |
Strategic Review
Our operations are influenced and affected by what is going on in the world around us. We shape our decision making to try and balance the impact of these external factors, so we can deliver value for our customers, shareholders and other stakeholders.
Macroeconomic factors
Our rate plans and price controls are agreed against the backdrop of the broader macroeconomic environment.
In the UK, low economic growth is projected in 2013 and, as a result, it is unlikely that we will see a significant decline in the unemployment rate during 2013.
Unemployment in the US has seen a slow but steady decline throughout 2012. However, with only modest growth forecast for 2013 this is likely to remain high for a while. In the US, we retain some risk of bad debts when customers are unable to pay their bills, so these conditions can have a more direct impact on our financial performance.
In the US, consumer confidence has remained weak, with more people believing that business conditions will worsen in the short term than those believing they will improve. This view puts considerable downward pressure on bills. We must accommodate our customers affordability concerns while fulfilling our obligations to provide safe and reliable services and making necessary system investments.
The environment for infrastructure investment in the UK and Europe is evolving, with new investors continuing to be attracted to regulated assets. Sovereign wealth and infrastructure funds are becoming more prominent investors in UK assets.
In the US, we saw a number of major utility mergers during 2012 as our peers and competitors sought to gain efficiencies from greater scale and position themselves for growth opportunities. We have also seen independent transmission developers pursuing large scale projects connecting wind power across the country, as well as prominent utilities investing capital in non-regulated solar assets.
Changing energy mix
Our networks exist to transmit and distribute energy from its source to its place of use. Changes to the energy mix and location of centres of supply and demand will create pressures on our networks. We may need to continue to invest in our networks to meet these challenges.
In the UK, some older coal fired power stations are closing to comply with the Large Combustion Plant Directive and recent fuel prices have reduced the economic viability of gas fired power stations to the point where some are now being mothballed or closed. Looking further ahead, a continued decline in fossil fuel fired electricity generation is to be expected if the governments carbon reduction targets are to be met.
New low carbon generation will not necessarily be located in the same place as existing plant and will probably require new connections. Where gas comes into the UK is also changing with forecast reductions in North Sea production and increased reliance on imported gas. We will need to adapt our network to ensure sufficient capacity is in place to move gas from these different source locations to the demand centres.
In the US, increased gas supplies, resulting from developments in shale gas, have led to lower gas prices and created increased demand. This is fuelling growth of gas distribution as customers convert to gas.
Additionally, our electricity distribution customers benefit from lower electricity prices as gas fired generation often sets the market price for electricity in the northeastern US. As more generation plants convert to low priced natural gas, opportunities for investment in additional gas network capacity may arise.
Energy policy
Policy decisions by governments, government authorities and others can have a direct impact on our business. They can affect the amount and location of investment required in our networks and the way we operate. They can also change our compliance obligations. Understanding the evolving policy environment is important to understanding the challenges and opportunities we have ahead.
In the UK, energy policy continues to evolve from the Climate Change Act 2008 which commits the UK government to reducing UK greenhouse gas emissions to a level at least 80% lower than a 1990 baseline by 2050.
In November 2012, the Energy Bill, which implements the main aspects of Electricity Market Reform (EMR), was introduced to parliament. EMR seeks to set out the future industry context and promote investment in low carbon generation by providing greater financial certainty to investors. The Energy Bill is expected to receive Royal Assent this year.
At a European level, the three cornerstones of sustainability, security of supply and affordability underpin energy policy. Greater levels of market integration, interconnection and renewable generation are fundamental to achieving these policy objectives. While European developments present challenges, the significant level of investment required may create opportunities for growth.
10 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
In the US, many of the developments at a federal level have been through federal agency regulations and Presidential executive orders. We have supported some additional requirements, such as those of the Environmental Protection Agency (EPA) to implement new air and water quality regulations. We are also working with EPA to ensure our Long Island power generation fleet complies with any new regulations and to remediate contaminated sites where we hold legacy liability.
At a state level, energy policy continues to evolve in the northeastern US. This is driven by interest in promoting energy efficiency, maintaining reliability and deploying renewable technologies that help meet environmental and energy diversity goals.
All of the states in which we operate have standards that meet or exceed EPAs regulations. In particular, the nine northeastern states that participate in the Regional Greenhouse Gas Initiative agreed to reduce power plant emissions and increase funding for energy efficiency and clean energy.
Regulatory developments
In the UK, the regulatory focus during the year has been the finalisation of the new RIIO price controls. RIIO gives greater focus to incentives and innovation than the previous regulatory regime.
The projected increase in offshore wind generation and interconnection has created a debate on the regulatory approach to electricity transmission investment a debate we are fully engaged in. Competition is already in place for offshore development in the UK and Ofgem has stated its intent to retain the option of using greater competition for certain large onshore projects.
In the US, we have completed new rate filings for our gas and electricity businesses in New York and Rhode Island. In Massachusetts, we are actively involved with the Massachusetts Commission and neighbouring utilities in the grid modernisation notice of inquiry. This addresses grid reliability during extreme weather conditions, system efficiency and interconnection of distributed generation.
We are also actively involved in the New York Energy Highway initiative to examine new ways of delivering infrastructure in the state. All these initiatives will present new opportunities to respond to customers needs and build the necessary infrastructure to address these needs.
In addition to the investment required for new connections and to meet the challenges of changing supply and demand patterns, we need to replace ageing infrastructure in both the UK and US. Cast iron gas mains still in use can be more than 100 years old and over time can create a safety risk and also contribute to greenhouse gas emissions through leaks.
The recent severe weather in the US has also highlighted the potential need for additional investment in network resilience. Regulators and policymakers are beginning to ask utilities to put plans in place to strengthen their networks ability to withstand the effects of severe weather.
Innovation and technology
New technology can change the way we do business. The pace of technological development in the energy sector is accelerating as new technologies take shape and approach commercial viability. HVDC technology could play an important part in the development of a more integrated electricity grid, particularly the extension of offshore links. While carbon-based generation is likely to remain a significant part of the global energy mix, carbon capture and storage technologies may become critical to governments achieving their climate change targets. Technologies such as energy storage, electric transportation and distributed generation, all have the potential to affect our networks significantly.
The development of smart grids will change how loads are balanced across the distribution network. It will allow our customers to make smarter energy choices and will increase network flexibility. New consumer products, such as alternative fuelled vehicles and distributed generation, will increase demand and require new infrastructure.
Innovation goes further than new technology. We need to increase the flexibility of our infrastructure to respond to developments as they arise. This can mean managing energy and networks differently, rather than creating new infrastructure to meet supply and demand changes.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 11 |
Strategic Review
Electricity
The electricity industry connects generation sources to homes and businesses via transmission and distribution networks. Electricity is sold to consumers by companies who have bought it from the generators and pay to use the networks across which it is transmitted.
12 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 13 |
Strategic Review
What we do
Gas
The gas industry connects producers, processors, storage, transmission and distribution network operators, as well as suppliers to industrial, commercial and domestic users.
14 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 15 |
Strategic Review
What we do
How we make money from our regulated assets
16 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 17 |
Strategic Review
UK Transmission
What we do
We own the electricity transmission system in England and Wales. Our networks comprise approximately 7,200 kilometres (4,470 miles) of overhead line, 1,400 kilometres (870 miles) of underground cable and 329 substations. We are also the national electricity transmission system operator, responsible for both the England and Wales transmission system, and the two high voltage transmission networks in Scotland, which we do not own.
Day-to-day operation of the system involves the continuous real-time matching of demand and generation output. We are also designated as system operator for the new offshore electricity transmission regime.
We own and operate the gas national transmission system in Great Britain, with day-to-day responsibility for balancing demand. Our network comprises approximately 7,660 kilometres (4,760 miles) of high pressure pipe and 23 compressor stations.
Principal risks
| The energy landscape in the UK and Europe is changing. These changes could have an impact on our business so it is important that we are involved in the discussions surrounding their development. |
| In order to deliver strong financial and operational performance under RIIO, we will need to successfully complete multiple complex business improvement and transformation activities that will affect our people, processes and systems. |
| Delivery of construction projects, to which we are committed, may be affected if we are unable to obtain planning consents in a timely manner. |
| Our operations could be disrupted by industrial action by employees. |
Where we are heading
2012/13 has been a significant year, marking the start of a major transformation programme that will enable us to respond to our changing external and internal operating environment.
Having established an operating model that allows us to see and understand more clearly the performance of our regulated businesses, we are now focused on driving performance to make sure we meet the needs of our customers and stakeholders and deliver value under the new price controls.
In particular we will need to be sharper in our commercial relationships, driving the performance of our contractors.
We have been asked by DECC to act as delivery body for its potential electricity market reforms (see page 10). We will carry out analysis to help inform Government decisions on energy policy, as well as administering key parts of the enduring regime.
How we are progressing
| Delivered strong safety, operational, customer and financial performance in 2012/13. |
| Secured new eight year price controls for electricity transmission and gas transmission. |
| Emphasised end-to-end electricity and gas transmission processes in our organisational design. |
| Refined our organisational design and appointed managers into their roles. We are reducing the number of manager roles by 22% and, at the same time, we have clearly articulated peoples accountabilities. |
| Fundamentally changed our partnering approach for delivering major transmission capital projects. This involves revised contracts with our electricity alliance partners that make accountability clearer. We have also introduced additional layers of competition for delivery of some aspects of our work. |
Priorities for the year ahead
| Continue to improve safety performance and maintain focus on specific areas including induced voltage. |
| Build on the foundations we have established during 2012/13 and deliver under the first year of our new price control. |
| Embed the organisational design through all layers of our business. |
| Define and embed new ways of working. |
| Continue to enhance our capabilities in process and performance excellence, as well as commercial and contract management. |
| Increase innovation to help us meet the output measures we are committed to delivering under RIIO. |
| Continue to work closely with DECC and Ofgem to help inform and manage security of supply through a period of significant change in the UK energy market. |
18 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
UK Transmission
The results of the UK Transmission segment for the years ended 31 March 2013, 2012 and 2011 were as follows:
Years ended 31 March | ||||||||||||||
2013 £m |
2012 £m |
2011
£m |
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|
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Revenue |
4,246 | 3,804 | 3,484 | |||||||||||
Operating costs excluding exceptional items |
(2,637 | ) | (2,450 | ) | (2,121) | |||||||||
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Adjusted operating profit |
1,609 | 1,354 | 1,363 | |||||||||||
Exceptional items |
(43 | ) | | (70) | ||||||||||
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Operating profit |
1,566 | 1,354 | 1,293 | |||||||||||
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Principal movements (2010/11 2012/13)
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 19 |
Strategic Review
Principal operations
UK Gas Distribution
What we do
We own and operate four of the eight regional gas distribution networks in Great Britain. Our networks comprise approximately 131,000 kilometres (82,000 miles) of gas distribution pipeline and we transport gas from the gas national transmission system to around 10.9 million consumers on behalf of 26 gas shippers. Gas consumption in our UK networks was 306 TWh in 2012/13 compared with 259 TWh in 2011/12.
We manage the national gas emergency number (0800 111 999). This service, along with the enquiries lines, appliance repair helpline and meter enquiry service, handled 2,480,669 calls during 2012/13.
Principal risks
| The potentially dangerous nature of our activities, for our employees, contractors and the public, drives us to stay focused on process and personal safety. |
| Our ability to deliver our operational performance and standards of service relies on the underlying availability, accuracy and integrity of our businesses systems and data. |
| In order to deliver strong financial and operational performance under RIIO, we will need to realise the benefits of our end-to-end business processes and new contractual arrangements with our alliance partners. |
| Our operations could be disrupted by industrial action by employees. |
Where we are heading
Two years into our transformation programme in Gas Distribution, we have established the foundations for success under RIIO. We will now build on this so we can meet the needs of our customers and stakeholders and deliver value under the new price control.
Our customers and stakeholders have told us what they expect of us through the RIIO talking networks consultation, so we will continue to make sure we can provide a safe and reliable service at the right cost.
To make sure our transformation is sustainable we will continue to develop a culture of process and performance excellence so that all our people, including supervisors and field force, are empowered to innovate and improve our business.
We will also increase our commercial and contract management capability to make sure we can drive the performance of our contractors who deliver a significant proportion of our work.
How we are progressing
| Delivered strong safety, operational, customer and financial performance in 2012/13. |
| Secured a new eight year price control for Gas Distribution. |
| Completed the roll out of new systems and processes through our Gas Distribution front office (GDFO) project a significant milestone in our transformation programme. All four of our gas distribution networks are now using GDFO systems to help deliver our major processes: emergency response, repair, mains replacement and connections. |
| Maintained our focus on process and performance excellence by continuing to build skills and capabilities and further strengthening a culture of continuous improvement. |
| Agreed new terms and conditions with our 1,900 directly employed field force employees. The new arrangements support improved productivity and increased flexibility, so we can perform under RIIO. |
| Agreed new contracts to deliver £3.5 billion of investment (primarily mains replacement and connections). These Gas Distribution strategic partnerships align our contract partners incentives with the way we are incentivised under RIIO. |
Priorities for the year ahead
| Continue to improve safety performance and maintain focus on specific areas, including reducing cable strikes and safer operation of road vehicles. |
| Maintain a strong focus on the service we provide to our customers, including improving our response to complaints and enquiries and showing our customer facing employees how customers rate the service they provide. |
| Continue to build our capabilities in process and performance excellence, as well as commercial and contract management. |
| Work closely with our Gas Distribution strategic partners so we change to the new contracts quickly and smoothly. An effective transition will help make sure we maintain a high standard of work, strong safety and customer performance and continue to meet work delivery targets. |
| Increase innovation to help us meet the output measures we are committed to delivering under RIIO. |
20 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
UK Gas Distribution
The results of the UK Gas Distribution segment for the years ended 31 March 2013, 2012 and 2011 were as follows:
Years ended 31 March | ||||||||||||||
2013 £m |
2012 £m |
2011
£m |
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Revenue |
1,714 | 1,605 | 1,524 | |||||||||||
Operating costs excluding exceptional items |
(920 | ) | (842 | ) | (813) | |||||||||
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Adjusted operating profit |
794 | 763 | 711 | |||||||||||
Exceptional items |
(31 | ) | (24 | ) | (40) | |||||||||
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Operating profit |
763 | 739 | 671 | |||||||||||
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Principal movements (2010/11 2012/13)
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 21 |
Strategic Review
Principal operations
US Regulated
What we do
We own and operate electricity distribution networks in upstate New York, Massachusetts, and Rhode Island. Through these networks we serve approximately 3.4 million electricity consumers in New England and upstate New York.
We also own and operate 50 electricity generation units on Long Island that together provide 3.8 GW of power under contract to LIPA. Our plants consist of oil and gas fired steam turbine, gas turbine and diesel driven generating units ranging from 2 MW to 385 MW.
Our US gas distribution networks provide services to around 3.5 million consumers across the northeastern US, located in service territories in upstate New York, New York City, Long Island, Massachusetts and Rhode Island. We added 29,925 new gas heating customers in these areas in 2012/13.
We are responsible for billing, customer service and supply services. We forecast, plan for and procure approximately 13.9 billion standard cubic metres of gas and 30 TWh of electricity annually across three states.
We own and operate an electricity transmission system of approximately 14,000 kilometres (8,700 miles) spanning upstate New York, Massachusetts, Rhode Island, New Hampshire and Vermont operating nearly 160 kilometres (100 miles) of underground cable and 522 substations.
We also maintain and operate the electricity transmission and distribution system on Long Island owned by LIPA, covering 3,185 square kilometres (1,230 square miles). Our contract with LIPA expires on 31 December 2013, and we will continue to service and provide support during the transition process.
Principal risks
| The potentially dangerous nature of our activities, for our employees, contractors and the public, drives us to stay focused on process and personal safety. |
| Our approach to preventing and responding to catastrophic gas or electricity network interruptions is affected by the increasing frequency and severity of storms and evolving stakeholder expectations. |
| The transformation of our information systems may fail to deliver anticipated benefits, which could affect our US business plan or cause delays to financial reporting that breach our debt covenants. |
| Our ability to recover incurred expenditure in a timely manner may be affected by the changes in regulation or decisions by regulators on regulatory filings. |
Where we are heading
Having reorganised our US businesses in 2011 under a model that acknowledges our regulatory jurisdictions, we have introduced a programme that aims to make sure operational excellence is a hallmark of our processes and culture by 2015.
We call this journey towards operational excellence Elevate 2015 and it focuses on eight end-to-end business processes. During 2012/13, we focused on our meter to cash and emergency response processes. Others are now taking shape, including workplace safety, network operations, rate case management, customer service and asset maintenance.
As we enhance each business process, our decision-making criteria are governed by four main principles: safety and reliability, stewardship, customer responsiveness and cost competitiveness.
How we are progressing
| Overall reliability improved for our electricity and gas businesses despite the severe weather events experienced. |
| Significant improvements to our emergency preparedness processes to better address safety, customer satisfaction and restoration response time. During Superstorm Sandy (see page 37) and Storm Nemo our restoration efforts were lauded by community leaders, regulatory officials and customers for our emergency preparedness, community outreach and communication, as well as relatively swift restoration times. |
| New rate cases filed for our upstate New York and Rhode Island gas and electricity businesses, each of which was approved by its respective regulatory body. Officials praised the quality of the Companys rate case plan and supporting data as well as our community outreach and communications. |
| We implemented our new enterprise resource planning system in November and December which, in time, is expected to enable further operational efficiencies and support process improvements. |
Priorities for the year ahead
| Drive our focus and behaviours to prevent injuries and safeguard the public. |
| Improve the customer experience through end-to-end process excellence and delivery of our work plan on time and on budget. |
| Embed the new system into our end-to-end processes and begin to extract value from this investment in line with our plan. |
| Embed a regulatory focus and rate case readiness into our business practices and systems. Commence preparations for expected rate case filings in calendar year 2014 for the electricity business in Massachusetts and the gas businesses in downstate New York and Long Island. |
| Increase the level of our engagement with and volunteering in our communities. |
22 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
US Regulated
The results of the US Regulated segment for the years ended 31 March 2013, 2012 and 2011 were as follows:
Years ended 31 March | ||||||||||||||
2013 £m |
2012 £m |
2011
£m |
||||||||||||
|
||||||||||||||
Revenue excluding stranded cost recoveries |
7,918 | 7,516 | 8,391 | |||||||||||
Operating costs excluding exceptional items, remeasurements and stranded cost recoveries |
(6,665 | ) | (6,326 | ) | (6,984) | |||||||||
|
||||||||||||||
Adjusted operating profit |
1,253 | 1,190 | 1,407 | |||||||||||
Exceptional items and remeasurements |
170 | (296 | ) | (51) | ||||||||||
Stranded cost recoveries |
14 | 260 | 348 | |||||||||||
|
||||||||||||||
Operating profit |
1,437 | 1,154 | 1,704 | |||||||||||
|
||||||||||||||
|
|
|
|
|
|
|
Principal movements (2010/11 2012/13)
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 23 |
Strategic Review
Principal operations
Other activities
Grain LNG
Grain LNG is one of three LNG importation facilities in the UK. It was constructed in three phases becoming operational in 2005, 2008 and 2010 respectively. It operates under long-term contracts with customers and provides importation services, storage and send out capacity on to the national transmission system. We are exploring with customers a number of developments to the Grain site to enhance its revenue earning capability.
BritNed
BritNed is a joint venture between National Grid and TenneT, the Dutch transmission system operator, which built, and now owns and operates a 1,000 MW subsea electricity link between the UK and the Netherlands, which is approximately 260 kilometres (162 miles) in length. BritNed, which entered commercial operations on 1 April 2011, is a merchant interconnector that sells its capacity via a range of explicit and implicit auction products.
Metering
National Grid Metering (NGM) provides installation and maintenance services to energy suppliers in the regulated market in Great Britain. It maintains an asset base of around 15 million domestic, industrial and commercial meters. Through Ofgems Review of Metering Arrangements, National Grid has been appointed National Metering Manager to facilitate the transition to smart metering in the domestic sector.
NGM has also been leading a pricing consultation to define the tariff caps to apply in future to traditional domestic gas metering. This process is due to conclude in summer 2013. In addition, NGM has been further developing its services in the industrial and commercial market.
NGM achieved its highest customer satisfaction scores for the last six years for both domestic, and industrial and commercial businesses.
UK Property
National Grid Property is responsible in the UK for the management, clean up and disposal of surplus sites, most of which are former gasworks. This year has seen us embedding our outsourcing agreement with Capita Symonds that was signed in May 2012 and our new tender arrangements for the clean up of contaminated land. Both of these have started to deliver operational and financial efficiencies in managing and cleaning up our surplus estate.
Xoserve
Xoserve delivers transactional services on behalf of all the major gas network transportation companies in Great Britain, including National Grid. Xoserve is jointly owned by National Grid, as majority shareholder, and the other gas distribution network companies.
US non-regulated businesses
Some of our US businesses are not subject to state or federal rate-making authority, including interests in certain of our LNG road transportation, certain gas transmission pipelines (the Millennium and Iroquois gas transmission pipeline projects are regulated by FERC, however our minority equity interests in them are not), and certain commercial services relating to solar installations, fuel cells and other new technologies.
Corporate activities
Corporate activities comprise central overheads, insurance and expenditure incurred on business development.
24 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Other activities
The results of our other activities segment for the years ended 31 March 2013, 2012 and 2011 were as follows:
Years ended 31 March |
||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | ||||||||||||||||||||||||||||
£m | £m | £m | ||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||
Revenue |
642 | 715 | 678 | |||||||||||||||||||||||||||
Operating costs excluding exceptional items |
(654 | ) | (527 | ) | (559) | |||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||
Adjusted operating (loss)/profit |
(12 | ) | 188 | 119 | ||||||||||||||||||||||||||
Exceptional items |
| 104 | (42) | |||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||
Operating (loss)/profit |
(12 | ) | 292 | 77 | ||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||
|
Principal movements (2010/11 2012/13)
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 25 |
Strategic Review
The successful delivery of our strategy is dependent upon attracting and retaining the right talent. This starts with our Board; a broad range of expertise and backgrounds ensures a good balance of skills, expertise and knowledge. However, creating a high performing Board where directors work well together is not just about skills and experience; it is also about behaviours and dynamics.
As already highlighted, the Board has been in a state of transition recently. This has allowed us to think hard about creating an inclusive and diverse culture that fosters positive behaviour and encourages dynamics to come to the fore of all boardroom interactions. We have used the opportunity of the Board refresh to widen the range of knowledge and background of the members. The appropriate skills base is complemented by a diversity of thinking styles. Hence, lively debate and constructive challenge is encouraged at all times; the boardroom is a place where questions are valued, no debate is discouraged and all Non-executive Directors have an equal voice regardless of their background, expertise and tenure.
This enables the Board to be a sounding board for ideas. Management are encouraged to bring their proposals before the Board during the development phase to allow the Non-executive Directors the opportunity to input, challenge and review prior to a project seeking full financial sanction. In this way, the Board works collectively to challenge the Company to deliver superior performance and enhances the Companys ability to understand and anticipate opportunities and challenges.
On these pages we set out the age, committee membership and tenure of our Board members. For their full biographical details, see pages 180 to 182.
26 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Our Chairman is responsible for the leadership and management of the Board and its governance. By promoting a culture of openness and debate, he facilitates the effective contribution of all Directors and helps maintain constructive relations between Executive and Non-executive Directors.
Our Chief Executive is responsible for the executive leadership and day-to-day management of the Company, to ensure the delivery of the strategy agreed by the Board. Through his leadership of the Executive Committee, he demonstrates commitment to safety, operational and financial performance.
|
Our Senior Independent Director acts as a sounding board for the Chairman and serves as an intermediary for the other Directors, as well as shareholders as required.
Independent of management, our Non-executive Directors bring diverse skills and experience, vital to constructive challenge and debate. Exclusively, they form the Audit, Nominations, Remuneration and SEH Committees, and have a key role in developing proposals on strategy. |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 27 |
Strategic Review
28 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 29 |
Strategic Review
Internal control and risk management
The Board is committed to protecting our reputation and assets, as well as safeguarding the interests of our shareholders. We achieve this through maintaining a sound system of internal control.
30 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Our system of internal control and, in particular, our risk management process, has been designed to support our strategic and business objectives as well as internal control over financial reporting. We aim to do this through:
| mitigating risk; |
| making sure our information, including financial reporting, is accurate and reliable; |
| complying with our obligations both internal and external; |
| applying sound governance practices; and |
| making informed and timely decisions to further our objectives. |
As we have shown in the diagram opposite, the Board establishes the control environment. Supported by dedicated, specialist teams, it sets risk appetite, approves policies and monitors performance. Where appropriate it delegates authority to its committees.
Combined with the assessments completed by process owners, this top down and bottom up approach is used to maintain quality within the internal control process.
Our internal controls are designed to manage rather than eliminate material risks. We balance the costs of internal controls with the magnitude and likelihood of the risks being managed in light of our risk appetite.
Accurate and reliable information plays a vital role in our decision making, while education, training and awareness are all important elements that help us maintain effective internal controls.
Our internal control process starts with identifying risks, compliance matters and other issues. We do this through routine reviews carried out by process owners and facilitated by relevant dedicated, specialist teams. We record risks in our risk register, assess the implications and consequences for the Group and determine the likelihood of occurrence.
We put in place action plans, controls and other process improvements designed to address the risks and issues we have identified. We assess the effectiveness of our controls regularly and seek independent assurance where it is appropriate to do so.
We formally report the outcomes of our risk identification and control assessments to senior management and the relevant oversight bodies. This informs our decision-making and provides assurances about our internal controls to management and the Board.
We regularly monitor our action plans, other process improvements and the status of risks. The results of our review help update the process as the cycle continues.
Internal control over financial reporting
We have specific internal mechanisms to govern the financial reporting process and the preparation of the Annual Report and Accounts. Our financial controls guidance sets out the fundamentals of internal control over financial reporting which are applied across the Group and the group accounting guides provide guidance on our accounting policies.
Within our processes we have system, transaction and oversight controls. In addition, our businesses prepare detailed monthly management reports which include analysis of their results along with comparisons to relevant budgets, forecasts and prior year results. These are presented to and challenged by senior management within Finance. The Finance Director, in turn, presents a consolidated management report to the Board.
These reviews are supplemented by quarterly performance reviews, attended by the Chief Executive and Finance Director. They discuss historical results and expected future performance and involve senior management from both operational and financial areas of the business.
Reviewing the effectiveness of our internal control
Each year the Board reviews the effectiveness of our internal control process, including financial reporting, to make sure it remains robust. The latest review covered the financial year to 31 March 2013 and the period to the approval of this Annual Report and Accounts. It included:
| the receipt of a letter of assurance from the Chief Executive which consolidates the main matters of interest raised through the year-end assurance process; |
| where appropriate, assurance from our committees, with particular reference to the reports received from the Audit and SEH Committees on reviews undertaken at their meetings; and |
| assurances about the certifications required under Sarbanes-Oxley as a result of our US reporting obligations. |
Our internal control processes comply with the Turnbull guidance on internal control and the requirements of the UK Corporate Governance Code. They are also the basis of our compliance with obligations set by the Sarbanes-Oxley Act 2002 and other internal assurance activities.
|
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 31 |
Strategic Review
Below is an overview of some of the main risks we face that could have a material adverse effect on our business, financial condition, results of operations and reputation, as well as the value and liquidity of our securities. For a more comprehensive description, please see pages 176 to 178. We have included some examples of the actions implemented to address these risks. It is not always possible to eliminate a risk even where a response is in place and considered effective.
32 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 33 |
Strategic Review
How executive remuneration aligns
to Company strategy
The Remuneration Committee aligns the remuneration policy to our Company strategy and main business objectives. Performance-based incentives are earned through achieving demanding targets for short-term business and individual performance, as well as creating long-term shareholder value.
34 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
The Remuneration Committee determines remuneration policy and practices through which we aim to attract, motivate and retain high-calibre Executive Directors and other senior employees to deliver value for shareholders and high levels of customer service, safety and reliability.
Alignment to strategy
While aligning the remuneration policy to our strategic objectives, the Remuneration Committee aims to ensure the policy:
| reflects shareholders and customers interests; |
| takes into account risk-related factors; and |
| contributes to driving the highest possible ethical standards. |
Each year we review our incentive plans, ie the APP and LTPP, to confirm the performance measures remain closely aligned with the Companys strategic objectives.
APP
Steve
|
Nick
|
Tom King |
||||||
|
||||||||
Financial measures for 2012/13 (i) |
Adjusted
EPS |
Adjusted EPS | Adjusted EPS | |||||
|
||||||||
Consolidated
cash flow |
Consolidated cash flow
|
Consolidated cash flow
|
||||||
|
||||||||
UK ROE |
UK adjusted operating profit
|
US operating profit (US GAAP basis) | ||||||
|
||||||||
US ROE |
UK ROE
|
US cash flow | ||||||
|
||||||||
N/A |
N/A
|
US ROE
|
(i) Financial measures represent 70% of the APP.
Individual performance objectives in the APP reflect 30% of the plan and are defined in terms of target and stretch performance requirements. The performance objectives change each year, depending upon business priorities. Examples of individual objectives include regulatory management, business development activities and customer satisfaction improvement programmes.
The Remuneration Committee may use its discretion to reduce APP awards to take account of significant safety or service standard incidents. In addition, the Remuneration Committee considers environmental, social and governance issues in its assessment of performance.
LTPP
Performance measure |
Definitions and
|
Weighting |
||||
|
||||||
Adjusted EPS | Threshold performance | 50% of the plan | ||||
where EPS growth exceeds RPI growth by 3% | ||||||
Upper target performance |
||||||
where EPS growth exceeds RPI growth by 8% | ||||||
Performance period |
||||||
3 years |
||||||
|
||||||
Relative TSR compared with the FTSE 100 | Threshold performance |
25% of the plan |
||||
where TSR is at the median of the FTSE 100 | ||||||
Upper target performance |
||||||
where TSR performance is 7.5% above that of the median company in the FTSE 100 | ||||||
Performance period |
||||||
3 years |
||||||
|
||||||
UK and US ROEs based on UK Transmission and UK Gas Distribution ROEs and on US Regulated returns | Threshold performance | 25% of the plan | ||||
where allowed regulatory returns are achieved (UK) and -1% (US) | ||||||
Upper target performance |
||||||
where allowed regulatory returns are out-performed by 2% (UK) and 1% (US) | ||||||
Performance period |
||||||
4 years
|
If the Remuneration Committee considers the underlying financial performance of the Company does not justify the vesting of LTPP awards, even if some or all the performance measures are satisfied in whole or in part, it can declare that some or all the awards lapse.
Overall, the Remuneration Committee believes the measures offer a balance between meeting the needs of all our stakeholders and incentivising Executive Directors to achieve sustainable performance.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 35 |
Strategic Review
It has been another important year for National Grid as we secured appropriate regulatory changes and continued to bed down organisational change in both the UK and US. Here, we highlight some of the work we did, and initiatives we introduced, during 2012/13 to support delivery of our strategy.
Delivering operational excellence
Safety remains a top priority for us and we strive to improve our performance. We also recognise the vital importance of good customer service and community relationships. Our licences and regulatory agreements set our reliability targets and these are linked to our revenue streams.
Safety
Our ambition is to achieve a world-class safety level by 2015, featuring a lost time injury frequency rate of below 0.1. We intend to achieve this through a relentless leadership focus, robust safety management systems and tactical actions focused on our main risks, which may vary between regions and business areas.
Our employee lost time injury frequency rate for 2012/13 was 0.17, compared with 0.18 in 2011/12. While this represents a marginal improvement we recognise that we need to do more to achieve our ambition. We have included below some examples of our main safety initiatives, which aim to reduce incidents.
In the UK, we introduced our Take Care campaign, which focused on cable avoidance in our UK Gas Distribution business. We also updated our overhead line rules for work at height and guidance about the use of equipment at height.
We connect office-based employees to the safety aspects of our operational activities through targeted campaigns, raising the profile of safety in the workplace and behaviours at home. Examples of our initiatives during 2012/13 include interactive experiences, screen savers and seasonal safety messages.
In the US, we launched an initiative aimed at reducing and eliminating risks associated with securing loads. This involved upgrading vehicles and improving load securing devices, as well as training and exercises.
At a local level, we developed safety plans that gave supervisors and crew leaders greater authority to take action to address their most pressing safety needs. We also arranged a number of sessions in which survivors of utility industry accidents shared how their lives had changed in an instant and talked to employees about how they can make a personal commitment to safety.
In 2012/13, we published our Company wide process safety management system and updated our process safety commitment statement. We have modified our global incident reporting system so we can better differentiate process related incidents to improve communication, enhance visibility and share information relating to process safety events.
We have been continually increasing awareness and developing our safety culture through training initiatives, including elearning.
Delivering customer service
We measure the success of our customer service initiatives through the Ofgem customer satisfaction studies and independent customer research in the UK. In the US, several independent customer research studies and other measures are used to supplement the four J.D. Power and Associates customer satisfaction studies. The results of the studies can be found on page 45.
In the UK, our customer satisfaction results have demonstrated improvement in some areas in Transmission and Gas Distribution. In the US, although the overall JD Power residential customer satisfaction quartile results remained unchanged and commercial studies saw a decline, we achieved significant improvements in key internal transaction studies including website satisfaction and electricity order fulfilment. Work continues to enhance service to our customers as part of our Elevate 2015 programme, large end-to-end process review and improvement activities, customer callback programme, and our more actionable approach to measuring customer satisfaction.
36 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
One area in which we have been improving how we communicate with customers is our response to storms. Through Twitter and Facebook we are now providing real-time weather updates, safety tips, outage reporting, restoration times and community resources before, during and after a storm. We are also using YouTube and Flickr to illustrate, through videos and photos, how we prepare for storms and restore service. More than 104,000 US customers are enrolled in our broadcast text alert programme, which we activate during major storms to provide outage updates and safety tips. During 2012/13, we launched a further texting programme that provides area specific outage numbers and estimated restoration times.
From their mobile devices, US customers can now report and check the status of their outages, as well as view important safety tips, contact information and outage data including maps, online via m.nationalgrid.com. During the February 2013 snowstorm, more than 11,000 customers reported outages through this website, which received around 205,000 visits.
As part of our preparations to respond to Superstorm Sandy, the most devastating storm to hit the US eastern seaboard in more than 100 years, more than 250 employees supported the community liaison effort, assigned to the towns expected to be hardest hit by the storms.
Reliability
We aim to deliver reliability by: planning our capital investments to meet challenging demand and supply patterns; designing and building robust networks; risk-based maintenance and replacement programmes; and detailed and tested incident response plans.
In the UK, we are pleased to report that our Gas Distribution business successfully met all its regulatory standards of service again this year with all networks running on Gas Distribution front office systems for emergency, repair, mains replacement and connections activities.
In the US, we met all but three of our regulatory reliability and service replacement targets. In New York, two gas metrics were slightly below target due to the severe impact of Superstorm Sandy and we have petitioned for an exemption on these measures in light of the special circumstances. In Massachusetts, we missed one of our electricity circuit level metrics and avoided a financial penalty due to earned offsets for good performance on the system metrics.
For further details on our reliability performance, see page 45.
UK business changes
We are restructuring our UK business so that we are well positioned to deliver value under RIIO and are ready for our potential new role under Electricity Market Reform.
We have completed our UK organisational design for senior leaders. We are consulting UK Transmission employees on a number of changes which, if agreed, will reduce costs and increase efficiency. We have redefined our organisational design, reducing the number of manager roles by 22%.
During the year, new terms and conditions of employment have been agreed for around 1,900 Gas Distribution directly employed field staff. The changes focus on rewarding individual rather than collective performance.
From 1 April 2013, UK Gas Distribution entered into contracts with Balfour Beatty Utility Solutions and a joint venture of Morrison Utility Services and Skanska Construction UK Limited called tRIIO, to replace our previous alliance and coalition arrangements. Mainly covering our mains replacement programme, the contractual framework is aligned to the new regulatory incentives regime.
US storm response updates
Superstorm Sandy was a significant test for our emergency response processes, which we overhauled following the major storms of 2011. Throughout 2012, we focused on employee development and training and upgrading our restoration processes and equipment. We improved the way we work on damage assessment, customer communications, securing restoration resources, repairing assets and providing accurate estimated times of restoration.
Before Sandy made landfall, we had thousands of employees ready in support roles, a full complement of line and tree crews, as well as hundreds of supplemental crews from across 40 states and five provinces in Canada.
Upstate New York, Massachusetts and Rhode Island had about 530,000 electricity outages and around 700 flood related gas outages (mainly in Rhode Island). We completed restoration in these service territories in six days.
In downstate New York, it took more than two weeks to restore the LIPA served Nassau and Suffolk Counties, which saw around 1.1 million wind and flood related electricity outages. These same counties, along with Brooklyn, Queens and Staten Island, experienced more than 140,000 flood related gas outages.
The Governor of New York has established a commission (commonly referred to as the Moreland Commission) to review the response of New York utility companies to storms in recent years. That Commission has indicated that it will conclude its work in late spring or early summer. In December 2012, MADPU issued an order detailing penalties associated with the response by a number of utilities to Tropical Storm Irene and the October snowstorm in 2011. This included a penalty of around $19 million relating to our Massachusetts Electric business. We are appealing this decision, as are the other utilities involved.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 37 |
Strategic Review
What did we achieve?
Continued
US foundation programme
We have continued work on our US foundation programme throughout the year. The programme relates to the development and implementation of our new US enterprise resource planning system, which went live during November and December 2012. The successful delivery of this programme is seen as a key enabler for delivering our strategic objectives in the US, by creating an integrated platform that allows process and system standardisation across our activities. The new system replaced two legacy and a number of ancillary systems and will support business processes for finance, human resources, supply chain and certain elements of our operational systems such as fleet and inventory management.
As with many system implementations of this magnitude and complexity, we expected some degree of difficulty in the months following go live. We have, however, experienced operational difficulties that significantly exceeded our expectations. The most substantial of these related to our payroll processing, where we experienced a number of errors in employee pay and delays in providing employees with their statutory tax statements. We implemented an extensive stabilisation programme to identify and resolve or mitigate these payroll issues and by year end they were substantively resolved. These and other system conversion difficulties and their consequential impacts have delayed production of local financial reporting. As a result, we have sought extensions of time relating to the filing of certain financial reports and other related regulatory filings from our US regulators, from some finance providers and other parties requiring financial statements from some of our operating companies.
Recognising the importance of these issues we have focused considerable efforts on their resolution, together with external support. We have undertaken a review of the project implementation to identify lessons learnt, particularly focused on the payroll issues, and this has been presented to the Audit Committee. We will continue to assess these lessons and identify changes to processes for other similar programmes in the future.
Engaging our people
Engaging our people helps to retain the best possible range of talent and experience, which will be necessary to meet the needs of our business. We are committed to developing our employees to the best of their abilities and to creating an inclusive and diverse culture.
We measure employee engagement through our employee opinion survey. Below we describe the results of this years survey and highlight some of the actions that have been taken in response to previous ones.
Development
The results of our 2012 survey showed that one of the three main factors driving engagement in our Company was having opportunities for personal development.
To develop the leadership capability of our next generation of managers and middle level leaders, we introduced a new global leadership development framework in 2012.
Our UK business has developed an education and readiness programme to raise everyones awareness and understanding of RIIO, and how we will need to change the way we work both as an organisation and as individual employees.
In the UK, our graduate retention levels are consistently high, standing at 85% in January 2013. We also achieved a number of awards (see panel External recognition).
We provide training and other support so that our people can build, maintain and operate our networks safely and reliably.
During 2012/13, we provided around 150,000 days of training for our employees and 20,000 days of training for non employees globally. We also increased the amount of specialist technical training delivered in-house, to reduce costs.
Appreciate
The results of past employee surveys showed us that employees see recognition as an important part of engagement. So, we have launched appreciate, a global recognition programme that encourages our people to recognise and reward their colleagues for a job well done. Features include career milestones and the Chairmans Awards, as well as an online system employees can use to send and receive feedback on great work they see. The system also administers non-financial awards.
External recognition
Some of the awards and other means of external recognition we have received over the last year include:
Inclusion in the Times Top 50 Employers for Women 2013. We have appeared in the list since 2006. A ranking of 84 in the Times Top 100 Graduate Employers up 11 places from 2011. Moving from 14 to 3 in The Job Crowd Top 50 Companies for Graduates to work for and first place for working within the energy and science sector. Recognised by Diversity Inc. magazine as one of the top seven regional utilities for diversity in the US, as well as by Diversity Careers in Engineering/Technology as a best diversity company.
|
38 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Promoting inclusion & diversity
We aim to develop and operate our business with an inclusive and diverse culture, with equal opportunity in recruitment, career development, training and reward. This applies to all employees regardless of race, gender, nationality, age, disability, sexual orientation, gender identity, religion and background. Where existing employees become disabled, our policy is to provide continued employment and training wherever practical.
These policies support the attraction and retention of the best people, improve effectiveness, deliver superior performance and enhance our success.
We promote inclusion & diversity both within and outside our Company. In the US, we recognise the markets in which we conduct business are becoming increasingly diverse. We reflect this through our supplier diversity programme, through which we invite small businesses, as well as ones owned by women, veterans or people from minority groups, to participate in our sourcing opportunities. This means we can provide a fair, competitive environment that includes all firms in the communities we serve. Our female employees are able to access the Springboard and Spring Forward development programmes in the UK and Women Empowered in the US. On the basis of headcount, the percentage of women in management positions is 25.5%, a figure we intend to improve, and 22.7% of employees throughout the Company are women.
In the US, we attended 41 recruiting events focused on people with disabilities, ethnic diversity, women and veterans.
Our employee survey
The results of our 2013 survey, which was completed by 79% of our employees, have helped us identify specific areas where we are performing well and those areas we need to improve.
Our engagement index has fallen by three points to 63%. It is fair to assume the problems we experienced with payroll in the US and the extensive changes we have introduced in the UK have contributed to the fall in our engagement score.
Managers receive a simple scorecard that aims to create greater leadership accountability and we produce survey reports and action plans at Company, regional, business unit, function and team levels. Managers also have access to an engagement framework. This provides them with practical tools and guidance to support them when developing action plans for their teams.
Attracting the best people
During 2012/13, we received more than 90,000 applications for jobs and have welcomed nearly 2,000 new employees globally.
We have introduced a web-based recruitment system to improve our hiring process in the UK and are planning a similar initiative in the US.
In the UK, we have continued our programmes designed to inspire the engineers and scientists of the future. Last year, around 6,500 young people discovered more about energy through National Grid employees, and thousands more visited our website www.nationalgrideducation.co.uk.
In the US, we face similar challenges in attracting top quality, well trained candidates so we can maintain the number and quality of our workforce. Over the next 10 years, we expect to fill a significant number of management roles that require an engineering background, delivering a number of initiatives similar to those in the UK.
We also completed the third year of our engineering pipeline programme, which aims to inspire promising students to become engineers and provide them an opportunity for fast tracked employment with National Grid. During the year we selected 40 high calibre, high school students into the programme.
Stimulating innovation
Encouraging and adopting new ideas helps us to work efficiently and effectively. This in turn helps us to access investment and growth opportunities as well as to engage with our regulators. It is essential to efficiently deliver what is required.
New sources of funds
This year we issued more than £5 billion in new bonds and other debt to raise new capital as well as to refinance maturing debt. As we continue to invest in our networks and other assets, we will need to raise new financing in the future. To attract good pricing for our debt and maintain a strong balance sheet, we consider different options for how and where to do this.
Over the past year we achieved two firsts for National Grid.
We issued our largest maple bond one that is issued by a foreign company in the Canadian market for Canadian investors. We achieved a nominal amount of C$750 million the largest ever corporate maple bond at the time and followed this two months later with a second maple bond with a nominal amount of C$400 million.
We also issued our first hybrid bonds, achieving nominal amounts of £1 billion and 1.25 billion both with very good pricing. A hybrid bond has certain characteristics of both debt and equity and, as a result, is treated by our rating agencies as half equity and half debt in their analysis. This in turn helps us maintain our credit ratings, while securing the funding we need.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 39 |
Strategic Review
What did we achieve?
Continued
UK innovation initiatives
We have commissioned a study highlighting a least cost route to how the UK can meet its 2020 renewable and 2050 carbon targets. The study paid particular attention to heat and described the transitional and long-term role gas has to play as part of a balanced approach. The analysis has been adopted by DECC and has been used extensively in the development of the governments heat policy paper The Future of Heating: Meeting the Challenge , published in March 2013.
We have been involved in a project that is investigating the feasibility of injecting hydrogen gas, generated from electrolysis fed from excess renewables, into the UK gas networks. The project includes preliminary research into the application for the UK market and the creation of a generation simulation model. This aims to identify the possible scale of production and financially viable production facilities, as well as options for use.
We are also a partner in the European Gas Research Group, investigating the safe transportation, network developments and implications for customer appliances of hydrogen enriched natural gas.
We have continued to make good progress on developing the T-pylon and reached a major milestone this year by erecting the first full size prototype suspension pylon in January followed in April by the tension pylon. We are now conducting mechanical tests to verify the pylons capabilities. You can read more about the project in our T-pylon blog, available on our website.
Our partnership with Manchester University in the UK has seen the development of an electrically insulating composite cross arm for transmission pylons. In future this may allow us to increase the voltage on overhead lines from 275 to 400 kV without replacing the existing pylons with taller structures.
Smart grid pilot in Massachusetts
We received approval of our $43.6 million (£27.8 million) smart grid pilot programme in August 2012. The pilot will be conducted in the US city of Worcester, Massachusetts. It will test customer acceptance of new technology, ranging from new meters to devices on our grid, to in-home devices that should help them save energy.
Plans are under way to open a new sustainability hub that will provide customers with an opportunity to see new technology and find out more about environmental issues.
In May 2012 we announced that we will participate in the Green Button initiative, a programme inspired by the White Houses challenge to the energy industry. It is a joint effort among several utilities, technology companies and the federal government to help consumers save energy and money by providing access to standardised, routine, easy to understand data relating to their energy usage.
We plan to offer Green Button to the 15,000 customers who will be included in our smart grid pilot in Worcester.
Real-time information sharing
In the US, we have developed new technology to help keep our community liaison employees up to date with near real-time information during storms. Developed at a cost of less than $150,000, it displays information from many systems, from estimated restoration times to the location of crews, hospitals, schools and our lines, using a geographic mapping application.
Using the same technology, we built a damage assessment application to help better forecast restoration times. Employees and contractors use tablets or smartphones to collect information about parts of the system that are damaged. This information is instantly shared with our command centre and our jurisdictional presidents. It is also used to provide information to crews, which helps us to provide quicker restoration responses.
IdeasNet
Our strategy recognises that innovation must go beyond new technologies, as we look to embrace continuous improvement within everything we do.
During the year, we trialled programmes aimed at helping us improve the way we collaborate, share knowledge, generate ideas and exchange good practices. This involved using online social tools, including IdeasNet, which encourages employees to submit ideas that will improve the efficiency and effectiveness of our processes.
In the UK for example, many employees responded to a challenge to find ways of digging fewer and smaller holes as part of the work we do in our Gas Distribution business. A number of these ideas have been taken forward to the next stage of development.
40 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Engaging externally
We work with external stakeholders to shape energy policy as these decisions directly affect our business. We seek to understand the expectations of all our stakeholders so we can deliver a service that meets their needs.
Regulatory agreements
In the UK, we have agreed all the price control arrangements Ofgem has proposed for RIIO. In the US, we reached agreement on our rate case filings in Rhode Island and New York. We expect to file our next round of rate cases in 2014, including filings for our electricity business in Massachusetts and our downstate gas businesses in New York. More details on these filings can be found on pages 172 to 175. Our objective is to have the right cost of service with the ability to earn a fair and reasonable rate of return while providing a safe and reliable service to customers.
Powering Britains Future
In the UK, we have launched a nationwide conversation about the challenges we face in delivering the energy infrastructure the country needs and minimising the impacts on communities and the environment.
Our Powering Britains Future campaign aims to raise awareness about the scale of the energy challenge facing the UK and find common ground with stakeholders and the public so we can work together to find solutions.
The campaign started with a stakeholder forum in London, bringing together senior representatives from bodies including the Campaign to Protect Rural England, the consumer group Which? and the National Trust, as well as industry and government leaders.
You can find out more about the campaign at www.poweringbritainsfuture.co.uk.
Our Brussels office
In 2012, we opened an office in Brussels to give us a closer insight into the evolution of EU policy and legislation in the energy sector.
Talking networks
Consulting with the people who have a stake in what we do has always been fundamental to National Grid.
In preparing for the new UK regulatory framework RIIO, we wanted to make sure we fully understood our stakeholders priorities and could take their views into account when shaping our delivery plans.
We have continued our talking networks initiative to gather views from consumers, government, the energy sector and environmental organisations through workshops, surveys, meetings and forums. We have published the outcome of our consultations on the talking networks section of our website, describing the feedback we received and the action we are taking as a result.
Stakeholder engagement is an enduring approach that will continue through the RIIO period and beyond. Through talking networks we continue to encourage our stakeholders to let us know how we are doing, how they would like to engage with us and where we should focus our resources.
Doing the right thing
Conducting our business in an ethical manner is extremely important to us and at the heart of our policy of doing the right thing . We were very disappointed when we fell short of the standards we expect during some interactions with New York state employees. Following our disclosure to and continued cooperation with regulators, we agreed to pay a fine of $1.67 million to NYPSC. We have updated our internal policies and enhanced our business ethics training to help prevent a recurrence. We have also completed an independent review of our ethics and compliance programme. The Joint Commission on Public Ethics has not yet concluded its review of this matter.
Engaging customers in the US
Our US tagline Here with You, Here for You reflects our renewed commitment to customers and local communities. In 2012, we engaged with customers at nearly 280 local events, including county fairs in New York, Massachusetts and Rhode Island. Through these events, we highlighted our legacy in each respective community and talked to customers about safety and energy efficiency. We are confident that, because of our ongoing presence, customers view us as a local company with deep roots in our communities.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 41 |
Strategic Review
What did we achieve?
Continued
Embedding sustainability
By embedding sustainability into our decision-making we aim to create value, preserve natural resources and respect the interests of our communities.
Our approach to sustainability has involved developing our long-term strategy under the banner of Our Contribution. This responds to external drivers and input from stakeholders, drives efficiency, supports growth and profitability, and aims to:
| build a culture of sustainability within our organisation; and |
| integrate sustainability into our decision-making and everyday activities, so we can protect and preserve natural resources, as well as respect the interests of the communities in which we operate. |
Through our sustainability summit we worked with many of our external stakeholders to discover and define our long-term ambition for National Grids climate change, sustainability and environmental strategy. The initial programme to deliver Our Contribution builds on projects developed through the summit.
Among the initiatives has been the launch of a competition for our UK suppliers. We have challenged them to find innovative ways of implementing the principles of the circular economy, promoted by the Ellen MacArthur Foundation, into the design of the materials, plant, processes and equipment they supply to us.
We have robust investigation and remediation programmes to clean up waste. We also have controls in place to minimise or mitigate releases to the environment during remediation activities. These range from containment to spill response contracts and equipment.
We called on these controls following a spill of suspected gas condensate and oily water in the Paerdegat Basin area of Brooklyn, New York during our operations there. We engaged a clean up contractor to clean out an affected sewer and used sweeps and booms to capture floating material in the basin. We will also consider whether a longer-term sampling and remediation effort is needed. Our actions and investigations continue but we may be subject to financial penalties as a result of this incident.
Climate change
This year our business units have continued their focus on reducing greenhouse gas emissions and we remain on target to achieve our 2020 and 2050 targets of a 45% and 80% reduction in emissions.
We measure and report our emissions of the six Kyoto greenhouse gases using the methodologies set out in the WRI/ WBCSD Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (Revised Edition).
Our total Scope 1 and 2 greenhouse gas emissions (excluding line losses) for 2012/13 were around 8.2 million tonnes carbon dioxide equivalent, representing a 58% reduction compared with our 1990 baseline. This equates to an intensity of 569 tonnes per £million of revenue.
Our Scope 1 and 2 greenhouse gas emissions are independently verified; a copy of the verification statement is available on our website.
We have continued our investigations into new technology and processes in areas such as capturing SF6 emissions and replacements for SF6 used in switchgear, where promising alternatives include CF3I (trifluoroiodomethane) and vacuum circuit breaker technology. As SF6 is 23,900 times more potent than CO2 any reduction or elimination will play a significant role in future emission reduction programmes.
Our Gas Distribution mains replacement programmes in the UK and US have continued to deliver a reduction in emissions due to gas leaks in line with expectations. In the UK, investment in pressure management equipment and an increased focus on system operating pressures has also helped reduce leakage.
In the US, we have completed the first phase of a project designed to identify vulnerable redundant oil filled electrical assets and remove them from the system. Our US electricity generation operations have also been incorporated into our US environmental management system, further extending the coverage of our operations certified to the international standard ISO 14001.
Driving growth
Growing our core businesses and developing future new business options depend on delivery of our investment plans. Combining this with operational and procurement efficiencies contributes to our ability to achieve strong returns and meet our commitment to investors.
Capital expenditure in the UK
Capital expenditure in the UK this year was £2.5 billion. Much of this work involves asset replacement but there are also a number of new initiatives. Two significant projects we have been working on are the Western Link and London power tunnels.
Western Link: The Western Link is a joint project with SP Transmission, part of Iberdrola Group. It will bring renewable energy from Scotland to homes and businesses in England and Wales, via a pair of HVDC cables, approximately 422 kilometres long, between Hunterston in Scotland and Deeside in North Wales. The cable will travel for 385 kilometres under the Irish Sea before coming ashore on the Wirral and travelling underground to Deeside.
42 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
At present, the Scotland and England power transmission networks are connected by two overhead power lines and some smaller 132 kV circuits across the boundary which are of limited capacity. The Western Link will provide a further connection, easing pressure on the existing bottlenecks and helping to bring more renewable energy through the system.
A contract valued at more than £1 billion has been let by the joint venture to a consortium which will design, manufacture and construct the link. Planning applications and easements are in progress and work has started on site.
The project is expected to become operational in 2016.
Upgrading to natural gas in New York
We have begun work on a project to connect our existing distribution systems in Brooklyn and Queens, New York the first pipeline to be installed in the area in 50 years. Known as the Brooklyn/Queens Interconnect, it will help meet future energy needs for customers.
This project will allow for more conversions to natural gas. The additional capacity will give New York City property owners a lower-cost alternative as they consider ways to comply with the citys Clean Heat initiative, which we support.
Power supply agreement with LIPA
We have a new agreement with LIPA that we filed with FERC that when effective will give Long Island better options for updating and modernising our power plants through repowering existing facilities while reducing energy costs, further improving environmental performance, and removing uneconomic generation. This is an important part of the effort to enhance the overall efficiency of Long Islands power supply resources.
Strategic workforce planning
To help drive growth, we need to consider our long-term workforce needs. Our strategic workforce planning approach allows us to look ahead up to ten years and forecast these needs, based on our business plans and an ageing workforce. In the UK, the approach has allowed us to plan for RIIO, identifying any gaps we may have in terms of skills and experience to meet new ways of working under the new regulatory arrangements.
We are now taking the same strategic workforce planning approach in our US business, beginning with our network strategy and operations teams. In 2012, we implemented a global workforce planning analytics tool and expect to develop our plans further by building on what we have learnt in the UK.
Clean Line investment
In November 2012 we announced a $40 million equity investment, of which $12.5 million was invested in 2012/13, in Clean Line, a developer of long distance, HVDC transmission projects to move renewable energy to market. This investment provides an avenue into a potential growth market for us.
Carbon capture and storage
Carbon capture and storage (CCS) is an innovative technology designed to capture, transport and permanently store carbon dioxide emissions beneath the seabed.
The UK is well placed for the deployment of CCS technology as there are clusters of power generation and industrial carbon dioxide emitters with nearby storage. At National Grid, we are looking to use our high pressure gas pipeline and wider project experience to create the initial infrastructure for CCS. By doing this, we believe we can demonstrate its potential and provide a basis for deployment.
During 2012/13, we have secured a storage site in the North Sea which has the capacity to support a network in the Yorkshire and Humber region and potentially beyond we are now further appraising the site to confirm its suitability. We have also consulted further on the proposed onshore pipeline route and have identified sites for above ground infrastructure.
Power stations and industry in the Yorkshire and Humber area produce around 15% of the countrys carbon dioxide emissions. So, the decarbonisation of this cluster would bring significant benefits to the UK and help meet statutory targets to reduce greenhouse gas emissions by 80% by 2050.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 43 |
Strategic Review
Measuring performance our KPIs
We measure the achievement of our objectives, make operational and investment decisions and reward our employees using both qualitative assessments and quantitative indicators. To provide a full and rounded view of our business, we use non-financial as well as financial measures. Although all these measures are important, some are considered to be more significant than others, and these are designated as KPIs.
KPIs are used to measure our progress on strategic priorities, aligning with those activities that combine to deliver our strategy. Non-financial KPIs are often leading indicators of future financial performance as improvements in these measures build our competitive advantage, for example through attractive regulatory arrangements and in competition for future growth opportunities. Financial KPIs are trailing indicators of the success of past initiatives and specific programmes. They also highlight areas for further improvement and allow us to ensure our actions are culminating in sustainable long-term growth in shareholder value. |
|
|||
We have started a review to determine whether the current Group KPIs remain relevant under RIIO, as the way our allowed revenues are calculated and how they will vary according to our actual performance has changed.
It is possible that this may lead to increased volatility in our statutory revenue figures or some changes to the balance between operating and capital expenditure in the business. We will report on the new KPIs when they have been agreed by the Board.
Commentary on our overall financial results can be found on pages 46 to 57, and information on the performance and financial results of each business area is set out on pages 18 to 25. |
# Refers to the six elements of our strategy: operational excellence; engage our people; stimulate innovation; engage externally; embed sustainability; and drive growth
~ Adjusted earnings exclude exceptional items, remeasurements and stranded cost recoveries
Comparative data has been restated for the effect of the bonus element of the rights issue and the scrip dividend issues à From continuing operations * Rebased for rights issue Prior years have been restated for consistency D Prior years have been restated on a constant currency basis |
44 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Non-financial KPIs
|
||||||
Strategic element | KPI | Definition | ||||
|
||||||
Deliver operational excellence | Employee lost time injury frequency rate | Number of employee lost time injuries per 100,000 hours worked on a 12 month basis | ||||
|
||||||
Deliver operational excellence | Network reliability targets | Various definitions appropriate to the relevant business area | ||||
|
||||||
Engage our people | Employee engagement index | Employee engagement index calculated using responses to our employee survey | ||||
|
||||||
Deliver operational excellence | Customer satisfaction | Our position in customer satisfaction surveys | ||||
|
||||||
Embed sustainability | Greenhouse gas emissions |
Percentage reduction in greenhouse gas emissions against our 1990 baseline
|
See pages 22 and 37 for additional details on Elevate 2015 and network reliability, respectively
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 45 |
Strategic Review
Andrew Bonfield Finance Director
Introduction
This year has seen good financial performance across our business. Notwithstanding the impact of major storms in the US, we have seen a year of record adjusted operating profits. Adjusted earnings per share at 56.1p has increased by 12%, reflecting solid operational performance across all our regulated businesses and driven by increased revenue from RPI indexation and the rollover of the transmission price control in the UK and increased deferral recoveries in upstate New York in the US. Adjusted earnings also benefited from a lower effective tax rate and flat net finance costs, partially offset by increased costs for the implementation of our new enterprise resource planning system in the US and other higher operating costs.
In the coming year, we will seek to extract additional value from the investments we have been making through our transformation programmes and restructurings, our focus on end-to-end process improvements and our new US back office system. Coupled with the new RIIO price controls in the UK and the rate plans agreed in New York and Rhode Island in the US, we are well positioned for the future.
Our confidence in the outlook for the Group has allowed the Board to agree a new dividend policy to grow the dividend at least in line with RPI inflation each year for the foreseeable future. Our dividend is an important part of our returns to shareholders along with growth in the value of the asset base attributable to equity holders.
Continuing to deliver an attractive, growing dividend while maintaining a strong balance sheet are key targets for us in the coming years. We aim to do this through growth in assets, earnings and cash flows, supported by improved cash efficiency. Together with robust regulatory frameworks we are confident that we can maintain strong, stable credit ratings and a prudent level of gearing, while delivering attractive returns to shareholders.
|
Andrew Bonfield
|
46 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Measurement of financial performance
We principally discuss our results on an adjusted basis. The rationale for using adjusted measures is explained on page 50. Results on an adjusted basis are presented before exceptional items, remeasurements and stranded cost recoveries. See pages 50 and 51 for further details and reconciliations from the adjusted profit measures to IFRS, under which we report our financial results and position.
Key performance indicators (KPIs)
Our financial KPIs are set out on page 44. Details of the total shareholder return (TSR) and adjusted earnings per share have been discussed in the financial review in brief section on pages 06 and 07.
Group return on equity
We measure our performance in generating value for our shareholders by dividing our annual return by our equity base.
Group ROE has increased in the year to 11.2%, reflecting our focus on driving efficient growth in our business. The increased return in 2012/13 was driven by higher revenues in the UK, due to inflation and other allowances in our price controls, higher US deferrals income and lower taxes due to a reduction in UK corporation tax rates and changes to tax provisions. Offsetting these, the return in 2012/13 was constrained by the impact of major storms in the year. Excluding these major storm costs, 2012/13 ROE was 11.7% (2011/12: 11.3%; 2010/11: 10.8%).
Regulated controllable operating costs
We measure regulated controllable operating costs as a proportion of our regulated assets, as measured by our UK RAV and our US rate base.
This ratio reduced to 6.6% in 2012/13, compared with 6.8% in 2011/12 and 7.3% in 2010/11 on a constant currency basis, reflecting our continued focus on cost optimisation (particularly in our US business) and our continued efficient investment in regulated assets.
Return on capital employed
RoCE is designed to provide a performance comparison between our regulated UK and US businesses and is one of the measures that we use to make strategic and investment decisions around our portfolio of businesses.
The table below shows the RoCE for our businesses over the last three years:
RoCE
|
Years ended 31 March
|
|||||||||
2013 %
|
2012 %
|
2011 %
|
||||||||
|
||||||||||
UK regulated
|
8.8
|
8.6
|
8.5
|
|||||||
US regulated |
7.1 | 6.8 | 7.1 | |||||||
|
||||||||||
|
||||||||||
|
The UK RoCE has increased from 8.6% to 8.8% in 2012/13 mainly due to the benefits of inflation on our RPI-X price controls together with strong performance under incentive schemes and the decrease in the UK corporation tax rate from 26% to 24%. The increase in the US RoCE from 6.8% to 7.1% is primarily due to increased deferral recoveries for Niagara Mohawk. Excluding the impact of major storm costs, the US RoCE would have been 7.7%, an increase of 0.1% compared with 2011/12 (7.6%).
Interest cover
In order to continue to deliver sustainable growth, we remain disciplined in the way we manage our balance sheet. The principal measure we use to monitor financial discipline is interest cover, being a measure of the cash flows we generate compared with the net interest cost of servicing our borrowings. The table below shows our interest cover for the last three years:
Years ended 31 March
|
||||||||
2013 times
|
2012 times
|
2011 times
|
||||||
|
||||||||
Interest cover |
3.9 | 3.9 | 3.8 | |||||
|
Interest cover for 2012/13 has remained the same at 3.9 times, reflecting flat finance costs year on year.
The primary reasons for the increase in 2011/12 were a fall in finance costs driven by interest rates on short-term instruments combined with benefits from our 2010/11 debt buy back programme partially offset by a small decrease in our operational cash inflows for the year.
Our target long-term range for interest cover is between 3.0 and 3.5, which we believe is consistent with single A range long-term senior unsecured debt credit ratings within our main UK operating companies, National Grid Electricity Transmission plc (NGET plc) and National Grid Gas plc (NGG plc).
Some of our regulatory agreements impose lower limits for the long-term senior unsecured debt credit ratings that certain companies within the group must hold or the amount of equity within their capital structures. These requirements are monitored on a regular basis in order to maintain compliance. One of the key limits requires National Grid plc to hold an investment grade
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 47 |
Strategic Review
Financial review
Continued
long-term senior unsecured debt credit rating. We believe our aim of maintaining single A range long-term senior unsecured debt credit ratings within our main UK operating companies is consistent with this. Further details on credit ratings can be found on the debt investors section of our website.
Dividends and dividend cover
The proposed total ordinary dividend for 2012/13 amounts to £1,494 million or 40.85 pence per ordinary share. This represents an increase of 4% over the previous years ordinary dividend per share of 39.28 pence.
Years ended 31 March
|
||||||||||
Dividends |
2013
pence |
2012
pence |
2011
pence |
2010
pence |
2009
pence |
|||||
|
||||||||||
Interim
|
14.49
|
13.93
|
12.90
|
13.65
|
12.64
|
|||||
Final |
26.36 | 25.35 | 23.47 | 24.84 | 23.00 | |||||
|
||||||||||
Total |
40.85 | 39.28 | 36.37 | 38.49 | 35.64 | |||||
|
||||||||||
|
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Dividends
per ADS |
$ | $ | $ | $ | $ | |||||
|
||||||||||
Interim
|
1.15
|
1.10
|
1.02
|
1.15
|
0.95
|
|||||
Final |
2.01 | 2.02 | 1.90 | 1.77 | 1.74 | |||||
|
||||||||||
Total |
3.16 | 3.12 | 2.92 | 2.92 | 2.69 | |||||
|
||||||||||
|
||||||||||
|
Dividends expressed in dollars per ADS in the table above reflect the amounts paid or payable to ADS holders, rounded to two decimal places.
The final dividend proposed in respect of each financial year is reported in the financial statements for the following year. Therefore, the proposed final dividend for 2012/13 of 26.36 pence per share, amounting to approximately £967 million (assuming all dividends are settled in cash), will be reported in the financial statements for the year ending 31 March 2014.
Dividend cover
Years ended 31 March
|
||||||
Total ordinary dividends covered by: |
2013 times |
2012 times |
2011
times |
|||
|
||||||
Adjusted earnings
|
1.4
|
1.3
|
1.4
|
|||
Earnings |
1.5 | 1.5 | 1.8 | |||
|
||||||
|
||||||
|
Scrip take up
Dividend | Proportion taking up scrip | |
|
||
2010/11 final
|
34%
|
|
2011/12 interim
|
7%
|
|
2011/12 final
|
48%
|
|
2012/13 interim |
35% | |
|
||
|
||
|
The following chart shows the five year trend in adjusted profit attributable to equity shareholders of the parent (adjusted earnings) and adjusted earnings per share.
In accordance with IAS 33, all earnings per share and adjusted earnings per share amounts for comparative periods have been restated as a result of shares issued via scrip dividends and the bonus element of the rights issue.
Diluted adjusted earnings per share and diluted earnings per share are shown in the table below:
Years ended 31 March
|
||||||
2013
pence |
2012
pence |
2011
pence |
||||
|
||||||
Adjusted diluted earnings per share
|
55.8
|
49.7
|
49.3
|
|||
Diluted earnings per share |
62.3 | 55.4 | 60.9 | |||
|
||||||
|
||||||
|
As discussed on page 16, our allowed revenues are set in accordance with our regulatory price controls or rate plans. We calculate the billing rates we charge our customers based on the estimated volume of energy we believe will be delivered during the coming period. The actual volumes delivered will differ from this estimate and 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 level of revenue, the balance must be returned to customers in subsequent periods, and if we collect less than the allowed level of revenue we may recover the balance from customers in subsequent periods. In addition, 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 operating profit for the year includes an estimated in year over collection of £16 million (2011/12: £18 million; 2010/11: £274 million) and our closing balance at 31 March 2013 was £126 million over-recovered. All other things being equal, the majority of that balance would normally be returned to customers in the following year.
In 2012/13, two major storms in the US, Superstorm Sandy and Storm Nemo, had a material effect on the results of National Grid. These two major storms reduced operating profit by £136 million. In 2011/12, results were also affected by two major storm events, Tropical Storm Irene and the October 2011
48 National Grid plc Annual Report and Accounts 2012/13
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www.nationalgrid.com |
snowstorms in Massachusetts, which reduced operating profit in 2011/12 by £116 million. There were no major storms in 2010/11.
The table below shows adjusted operating profit and operating profit excluding the impact of timing differences and major storms.
Years ended 31 March
|
||||||||||||
Excluding the impact of timing
differences and major storms |
2013
£m |
2012
£m |
2011
£m |
|||||||||
|
||||||||||||
Adjusted operating profit
|
|
3,764
|
|
|
3,593
|
|
|
3,326
|
|
|||
Operating profit |
3,874 | 3,637 | 3,471 | |||||||||
|
||||||||||||
|
||||||||||||
|
||||||||||||
|
The significant drivers affecting our adjusted earnings including impacts on adjusted operating profit, adjusted net interest charge and adjusted tax charge have been discussed in the financial review in brief section on pages 06 and 07.
Exceptional charges of £84 million in 2012/13 consisted of restructuring costs of £87 million less a gain on sale of our EnergyNorth gas business and Granite State electricity business in New Hampshire of £3 million.
Exceptional charges of £122 million in 2011/12 consisted of restructuring charges of £101 million, environmental charges of £55 million and impairment charges of £64 million, offset by net gains on the disposals of subsidiaries of £97 million and other net gains of £1 million.
Exceptional charges of £350 million in 2010/11 consisted of restructuring costs of £89 million, environmental charges of £128 million, impairment costs and related charges of £133 million and other charges of £15 million, offset by net gains on disposals of three subsidiaries and an associate of £15 million.
Remeasurements on commodity contracts represent mark-to-market movement on certain physical and financial commodity contract obligations in the US. 2012/13 included a gain of £180 million (2011/12: loss of £94 million; 2010/11: gain of £147 million).
Exceptional finance costs and other remeasurements
There were no exceptional finance costs in 2012/13 or 2011/12. There were £73 million of exceptional finance costs during 2010/11 relating to the early redemption of debt following the rights issue in June 2010, offset by £43 million of exceptional interest income relating to tax settlements in the US. Financial remeasurements relate to net gains and losses on derivative financial instruments, 2012/13 included a gain of £68 million (2011/12: £70 million loss; 2010/11: £36 million gain).
Stranded cost recoveries were substantially recovered in prior years, the £14 million recognised in 2012/13 represents the release of an unutilised provision recognised in prior years related to the disposed plants (2011/12: £260 million; 2010/11: £348 million).
Taxation related to exceptional items, remeasurements and stranded cost recoveries changes each year in line with the nature and amount of transactions recorded.
In addition, exceptional tax from 2012/13 included an exceptional deferred tax credit of £128 million arising from a reduction in the UK corporation tax rate from 24% to 23% applicable from 1 April 2013. Similar reductions in the UK corporation tax rate in 2011/12 from 26% to 24% and in 2010/11 from 28% to 26% resulted in £242 million and £226 million deferred tax credit respectively.
More information on exceptional items, remeasurements and stranded cost recoveries can be found in note 3 to the consolidated financial statements on page 112.
We manage our tax affairs in a proactive and responsible way in order to comply with all relevant legislation and minimise reputational risk. We have a good working relationship with all relevant tax authorities and actively engage with them in order to ensure that they are fully aware of our view of the tax implications of our business initiatives. Responsibility for our tax strategy rests with the Finance Director and the Global Tax and Treasury Director who monitor our tax activities and report to the Finance Committee.
We have taken the decision to provide additional information on our total UK tax contribution. The total amount of taxes which we pay and collect in the UK year on year is significantly more than the corporation tax which we pay on our UK profits. Within the total, we include significant other taxes paid such as business rates and taxes on employment together with employee taxes and other indirect taxes.
For 2012/13 our total tax contribution to the UK Exchequer, inclusive of taxes collected and taxes borne, was £1.2 billion. Taxes borne by the Company directly in 2012/13 were £678 million, a 12% increase on taxes borne in 2011/12 of £603 million, due to higher corporation tax payments in the current year. Our 2011/12 total tax contribution was £1.1 billion. The Hundred Groups 2012 Total Tax Contribution Survey ranked National Grid as the 16th highest contributor of UK tax. The most significant amounts making up the 2012/13 amount were as follows:
The UK tax charge for the year disclosed in the accounts in accordance with accounting standards and the UK corporation tax paid during the year will differ. For transparency, we have included a reconciliation on page 50 of the tax charge for the income statement to the UK corporation tax paid in 2012/13.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 49 |
Strategic Review
Financial review
Continued
The tax charge for the Group as reported in the income statement is £624 million (2011/12: £521 million). The UK tax charge as per note 5 to the accounts is £332 million (2011/12: £175 million) and UK corporation tax paid was £243 million (2011/12: £170 million), with the principal differences between these two measures as follows:
We have total unrecognised deferred tax assets in respect of losses of £335 million (2011/12: £362 million) of which £319 million (2011/12: £353 million) are capital losses in the UK. These losses arose as a result of the disposal of certain businesses or assets and may be available to offset against future capital gains in the UK.
Development of future tax policy
We believe the continued development of a coherent and transparent tax policy in the UK is critical to help drive growth in the economy. As a result, we are actively contributing to the development of tax policy by engaging with government officials to promote sustainable investment.
We also contribute to research into the structure of business taxation and its economic impact by contributing to the funding of the Oxford University Centre for Business Taxation at the Saïd Business School.
We are a member of a number of industry groups which participate in the development of future tax policy, including the Hundred Group, which represents the views of Finance Directors of FTSE 100 companies and several other large UK companies and of which our Finance Director is Chairman of its Tax Committee. This helps to ensure that we are engaged at the earliest opportunity on taxation issues which affect our business.
Use of adjusted profit measures
In considering the financial performance of our businesses and segments, we analyse each of our primary financial measures of operating profit, profit before tax, profit for the year attributable to equity shareholders and earnings per share into two components.
The first of these components is referred to as an adjusted profit measure, also known as a business performance measure. This is the principal measure used by management to assess the performance of the underlying business.
Adjusted results exclude exceptional items, remeasurements and stranded cost recoveries. These items are reported collectively as the second component of the financial measures.
Note 3 on page 111 explains in detail the items which are excluded from our adjusted profit measures.
Adjusted profit measures have limitations in their usefulness compared with the comparable total profit measures as they exclude important elements of our financial performance. However, we believe that by presenting our financial performance in two components it is easier to read and interpret financial performance between periods, as adjusted profit measures are more comparable having removed the distorting effect of the excluded items. Those items are more clearly understood if separately identified and analysed. The presentation of these two components of financial performance is additional to, and not a substitute for, the comparable total profit measures presented.
Management uses adjusted profit measures as the basis for monitoring financial performance and in communicating financial performance to investors in external presentations and announcements of financial results. Internal financial reports, budgets and forecasts are primarily prepared on the basis of adjusted profit measures, although planned exceptional items, such as significant restructurings, and stranded cost recoveries are also reflected in budgets and forecasts. We separately monitor and disclose the excluded items as a component of our overall financial performance.
Reconciliations of adjusted profit measures to the total profit measure, that includes both components can be found on page 51.
Our financial results are reported in sterling. Transactions for our US operations are denominated in dollars and so the related amounts that are reported in sterling depend on the dollar to sterling exchange rate. As the average rate of the dollar at $1.57:£1 in 2012/13 was stronger than the average rate of $1.60:£1 in 2011/12, the same amount of revenue, adjusted operating profit and operating profit in dollars earned in 2011/12 would have been reported as £150 million, £21 million and £22 million higher respectively if earned in 2012/13. In 2010/11, the average rate was $1.57:£1; if the revenue, adjusted operating profit and operating profit in dollars recognised in 2010/11 was earned in 2011/12 it would have been reported as £135 million, £21 million and £26 million lower respectively.
The balance sheet has been translated at an exchange rate of $1.52:£1 at 31 March 2013 ($1.60:£1 at 31 March 2012).
50 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 51 |
Strategic Review
Financial review
Financial position and resources
Summarised statement of financial position
As at 31 March |
||||||||
2013
|
2012
|
|||||||
|
||||||||
Goodwill and intangibles |
5,617 | 5,322 | ||||||
Property, plant and equipment |
|
36,592 |
|
|
33,701 |
|
||
Investments and other non-current assets |
|
753 |
|
|
687 |
|
||
Pension assets |
|
195 |
|
|
155 |
|
||
Current assets* |
|
3,201 |
|
|
2,611 |
|
||
Current liabilities* |
|
(3,282 |
) |
|
(3,155) |
|
||
Deferred tax liabilities |
|
(4,076 |
) |
|
(3,738) |
|
||
Provisions and other non-current liabilities |
|
(3,644 |
) |
|
(3,652) |
|
||
Net debt |
|
(21,429 |
) |
|
(19,597) |
|
||
Pensions and other post-retirement obligations |
|
(3,694 |
) |
|
(3,088) |
|
||
|
||||||||
Net assets |
|
10,233 |
|
|
9,246 |
|
||
|
||||||||
|
|
* | Excludes amounts related to net debt and provisions reported in other lines and includes assets and liabilities of businesses held for sale |
Goodwill and intangibles increased by £295 million to £5,617 million as at 31 March 2013. This increase primarily relates to foreign exchange movements of £266 million and software additions of £175 million offset by amortisation of £101 million. In 2011/12, goodwill and intangibles increased by £45 million to £5,322 million as a result of software additions offset by amortisation and the impairment of the acquisition-related intangible asset of £64 million. This related to the contract to operate and maintain the electricity distribution network on behalf of LIPA, which will not be renewed on expiry in December 2013.
Property, plant and equipment increased by £2,891 million to £36,592 million as at 31 March 2013. This was principally due to capital expenditure of £3,511 million on the extension of our regulated networks and foreign exchange movements of £680 million, offset by £1,281 million of depreciation in the year. Property, plant and equipment increased by £1,745 million to £33,701 million for the year ended 31 March 2012 due to capital expenditure of £3,172 million partially offset by £1,212 million of depreciation and net disposals of £279 million, primarily the disposal of OnStream in October 2011.
The table below shows our capital expenditure, including expenditure on both property, plant and equipment and intangibles, over the last five years, by segment. The largest area of organic growth is in the UK Transmission segment, and we expect that to remain the case for the next few years.
Capital expenditure increased in each of the three regulated businesses including record amounts in our UK Transmission and US Regulated businesses.
As a result of capital expenditure in 2012/13, and after allowing for depreciation, foreign exchange movements and in the UK, inflation, we estimate that our regulated assets have increased by approximately £2.5 billion (2011/12: £1.5 billion).
Investments and other non-current assets
Investments and other non-current assets have increased by £66 million to £753 million. This is principally due to changes in the fair value of our US commodity contract assets and available-for-sale investments, and an equity investment in Clean Line Energy Partners LLC of $12.5 million by 31 March 2013. For the year ended 31 March 2012, investments and other non-current assets decreased by £41 million to £687 million principally due to a £58 million decrease in the fair value of our US commodity contract assets driven by a fall in electricity prices partially offset by an increase in other receivables.
52 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Current assets have increased by £590 million to £3,201 million at 31 March 2013. Driven by the US, this primarily reflects the timing of cost recoveries from LIPA relating to Superstorm Sandy and an increase in trade receivables due to colder weather in February and March 2013 compared with 2012, which also led to an offsetting decrease in inventories which were £85 million lower. For the year ended 31 March 2012, current assets decreased by £211 million to £2,611 million. This was due to a fall in trade receivables of £230 million, primarily reflecting the impact of warmer weather in March 2012 on our US Regulated segment revenues.
Current liabilities have increased by £127 million to £3,282 million due to increased payables and accruals relating to Superstorm Sandy and Storm Nemo. Current tax liabilities were £152 million lower primarily due to higher tax payments made in 2012/13 and larger prior year tax credits arising in 2012/13, although these were partially offset by a larger current year tax charge. For the year ended 31 March 2012, current liabilities decreased by £286 million to £3,155 million. Trade payables were £190 million lower, reflecting the impact of lower commodity prices in our US Regulated segment. Current tax liabilities were £120 million lower primarily due to tax payments made in 2011/12.
The net deferred tax liability increased by £338 million to £4,076 million. The main reasons for this movement were the £508 million deferred tax charge, including the impact of the reduction in the statutory tax rate for future periods of £128 million, partially offset by the deferred tax credit on actuarial losses on pensions and other post-retirement benefits. For the year ended 31 March 2012, the deferred tax liability decreased by £28 million to £3,738 million. This decrease mainly arose from the deferred tax charge for the year of £381 million being more than offset by the £403 million deferred tax credit arising on actuarial losses relating to pensions and other post-retirement benefits.
Provisions and other non-current liabilities
Provisions and other non-current liabilities decreased slightly by £8 million to £3,644 million as at 31 March 2013. Total provisions increased by £29 million in the year. The underlying movements include additions of £92 million and £83 million to the environmental and other provisions respectively, as well as foreign exchange movements of £65 million. The other provisions additions include £33 million of increased liabilities insured by our insurance subsidiaries. These are offset by payments of £231 million in relation to all classes of provisions. Other non-current liabilities have decreased by £37 million reflecting changes in the fair value of US commodity contract liabilities. For the year ended 31 March 2012, provisions and other non-current liabilities decreased by £106 million to £3,652 million. Additions to environmental provisions were £58 million primarily due to revisions to our cost estimates. This was offset by payments in relation to provisions totalling £228 million.
Funding and liquidity risk management
Funding and liquidity risk management is carried out by the treasury function under policies and guidelines approved by the Finance Committee of the Board. The Finance Committee is responsible for the regular review and monitoring of treasury activity and for the approval of specific transactions, the authority for which fall outside the delegation of authority to management.
The primary objective of the treasury function is to manage our funding and liquidity requirements. A secondary objective is to manage the associated financial risks, in the form of interest rate risk and foreign exchange risk, to within pre-authorised parameters. Some examples of the management of funding and liquidity are given on page 33 and details of the main risks arising from our financing and commodity hedging activities can be found in the risk factors discussion starting on page 176 and in notes 30 and 31 to the consolidated financial statements.
Surplus funds
Investment of surplus funds, usually in short-term fixed deposits or placements with money market funds that invest in highly liquid instruments of high credit quality, is subject to our counterparty risk management policy.
Net debt trend
The trend in net debt as shown in the chart above highlights our rights issue in June 2010 and the significant capital expenditure programme we have had in the last few years.
Composition of net debt
Net debt is made up as follows:
As at 31 March | ||||||||
2013
|
2012
|
|||||||
|
||||||||
Cash, cash equivalents and financial investments |
6,102 | 2,723 | ||||||
Borrowings and bank overdrafts |
|
(28,095) |
|
|
(23,025) |
|
||
Derivatives |
|
564 |
|
|
705 |
|
||
|
||||||||
Total net debt |
|
(21,429) |
|
|
(19,597) |
|
||
|
||||||||
|
|
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 53 |
Strategic Review
Financial review
Continued
The increase in net debt of £1,832 million to £21,429 million is explained in the chart below:
Factors decreasing net debt
Our primary source of cash relates to operating cash flows as detailed separately below.
Factors increasing net debt
Our primary use of cash is for capital expenditure and other investing activities. This has increased by £214 million year on year primarily due to increased investment in our UK Transmission business. We also utilised cash for dividends which decreased by £196 million year on year. The decrease in cash dividends is due to significantly higher scrip take up in the year compared with 2011/12. This is offset by the growth in the dividend. Net interest paid was £38 million higher than prior year, reflecting higher average net debt during the year. Tax paid was £28 million higher than prior year primarily due to higher taxable profits. Non cash movements related to increases in the value of inflation linked debt and remeasurements and movements in the sterling to dollar exchange rate.
Operating cash flows
Cash flows from our operations are largely stable over a period of years. Our electricity and gas transmission and distribution operations in the UK and US are subject to multi-year rate agreements with regulators. In the UK, we have largely stable annual cash flows. However, in the US our short-term cash flows are dependent on the price of gas and electricity and the timing of customer payments. The regulatory mechanisms for recovering costs from customers can result in significant cash
flow swings from year to year. Changes in volumes in the US, for example as a consequence of abnormally mild or extreme weather or economic conditions affecting the level of demand, can affect cash inflows in particular.
For the year ended 31 March 2013, cash flow from operations decreased by £450 million to £4,037 million as detailed on page 07. For the year ended 31 March 2012, cash flow from operations decreased by £367 million to £4,487 million due to lower operating profits, unfavourable working capital movements, higher pension payments and lower stranded cost recoveries.
The increase of £482 million in 2010/11 to £4,854 million was due to higher operating profits and lower pension payments.
Borrowings
The Finance Committee controls refinancing risk by limiting the amount of our debt maturities arising from borrowings in any one year which is demonstrated by our maturity profile.
The maturity profile of gross borrowings by our major entities is illustrated below:
54 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
During the year we continued to refinance where attractive opportunities arose, including issuing our first hybrid bonds worth £2.1 billion in March 2013. In total, we received £5.1 billion of proceeds from new loans and debt issuance, including a C$750 million bond in NGET in September 2012, and 1.25 billion and £1 billion from the hybrid bonds in NGG Finance in March 2013. We also repaid a total of £1.2 billion of borrowings during the year.
As at 31 March 2013, total borrowings of £28,095 million (2012: £23,025 million) including bonds, bank loans, commercial paper, finance leases and other debt had increased by £5,070 million representing our new loans and debt issuances in the year. We expect to repay £3,448 million of our maturing debt in the next 12 months including commercial paper and we expect to be able to refinance this debt through the capital and money markets.
Further information on borrowings can be found on the debt investors section of our website and in note 19 of the consolidated financial statements.
Derivatives
2013
|
2012
|
|||||||
|
||||||||
Interest rate swaps |
|
303 |
|
|
187 |
|
||
Cross-currency interest rate swaps |
|
512 |
|
|
740 |
|
||
Foreign exchange forward contracts |
|
(48 |
) |
|
59 |
|
||
Forward rate agreements |
|
(5 |
) |
|
(5) |
|
||
Inflation linked swaps |
|
(198 |
) |
|
(276) |
|
||
|
||||||||
Total as at 31 March |
|
564 |
|
|
705 |
|
||
|
||||||||
|
|
We use derivative financial instruments to manage our exposure to risks arising from fluctuations in interest rates and exchange rates. We value our derivatives 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. The decrease in our derivatives of £141 million therefore represents movements as a result of underlying market variables and the composition of the derivative portfolio.
The currency exposure on our borrowings is managed through the use of cross-currency swaps and results in a net debt profile post-derivatives that is almost entirely sterling/dollar.
The impact on net debt from our use of derivatives can be seen in the currency and interest rate profiles shown below:
The interest rate profile of net debt is actively managed under the constraints of our interest rate risk management policy as approved by the Finance Committee. Our interest rate exposure, and therefore profile, will change over time. The chart below shows the interest rate profile of our net debt before derivatives.
We have invested some of the proceeds from the issuance of our hybrid bonds in short-term money funds at floating interest rates. As a result, we are currently in a net asset position on floating instruments and our exposure is shown as a negative in the chart above.
The charts below show the impact, as at 31 March 2013, of derivatives on our net debt for 2013/14 and future years. The 2013/14 position reflects the use of derivatives, including forward rate agreements to lock in interest rates in the short term. The effective interest rate on treasury managed debt for the year was 5.1% (2011/12: 5.4%). The future years position excludes derivatives that mature within the next year.
Further details on our foreign currency and interest rate risk management can be found in the risk factors discussion on pages 33 and 177 and in note 30(a) of the consolidated financial statements.
Net pension and other post-retirement obligations
We operate pension arrangements on behalf of our employees in both the UK and US and also provide post-retirement healthcare and life insurance benefits to qualifying retirees in the US.
In the UK, the defined benefit section of the National Grid UK Pension Scheme and the National Grid Electricity Group of the Electricity Supply Pension Scheme are closed to new entrants. We have started discussions with our employees and our trade union partners to ensure our defined benefit pension schemes are affordable and sustainable for the future. Membership of the defined contribution section of the National Grid UK Pension Scheme is offered to all new employees in the UK. We are currently reviewing the defined contribution arrangement we offer to employees and new hires in the UK.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 55 |
Strategic Review
Financial review
Continued
In the US, we operate a number of pension plans, which provide both defined benefits and defined contribution benefits. We also provide post-retirement benefits other than pensions to the majority of employees. Benefits include healthcare and life insurance coverage to eligible retired employees.
Pension plan assets are measured at the bid market value at the reporting date. Plan liabilities are measured by discounting the best estimate of future cash flows to be paid out by the plans using the projected unit method. Estimated future cash flows are discounted at the current rate of return on high quality corporate bonds in UK and US debt markets of an equivalent term to the liability.
A summary of the total UK and US assets and liabilities and the overall net IAS 19 accounting deficit is shown below:
Net plan liability |
UK £m |
US £m |
Total £m |
|||||||||||||
|
||||||||||||||||
As at 1 April 2012 |
(668 | ) | (2,265 | ) | (2,933) | |||||||||||
Exchange movements |
| (112 | ) | (112) | ||||||||||||
Current service cost |
(90 | ) | (130 | ) | (220) | |||||||||||
Expected return less interest |
66 | 3 | 69 | |||||||||||||
Curtailments, settlements and other |
(15 | ) | (45 | ) | (60) | |||||||||||
Actuarial gains/(losses) |
||||||||||||||||
on plan assets |
1,028 | 148 | 1,176 | |||||||||||||
on plan liabilities |
(1,691 | ) | (415 | ) | (2,106) | |||||||||||
Employer contributions |
201 | 486 | 687 | |||||||||||||
|
||||||||||||||||
As at 31 March 2013 |
(1,169 | ) | (2,330 | ) | (3,499) | |||||||||||
|
||||||||||||||||
Represented by: |
||||||||||||||||
Plan assets |
17,392 | 5,893 | 23,285 | |||||||||||||
Plan liabilities |
(18,561 | ) | (8,223 | ) | (26,784) | |||||||||||
|
||||||||||||||||
Net plan liability |
(1,169 | ) | (2,330 | ) | (3,499) | |||||||||||
|
||||||||||||||||
|
The principal movements in net obligations during the year arose as a consequence of a decrease in the discount rate following declines in corporate bond yields. Actuarial gains on plan assets reflected improvements in financial markets.
Plan assets are predominantly invested in equities, corporate bonds, gilts, property and short-term investments. Our plans are trustee administered and the trustees are responsible for setting the investment strategy and monitoring fiduciary investment performance, consulting with us where appropriate.
The investment profile of our pension plan assets is illustrated below:
Further information on our pension and other post-retirement obligations, including details of the actuarial valuations that are performed for our UK pensions can be found in note 29 to the consolidated financial statements.
Actuarial valuation of UK pensions
A triennial valuation is carried out for the trustees of our two UK defined benefit schemes by professionally qualified actuaries and agreed with us following consultation. The next full actuarial valuations of both the National Grid UK Pension Scheme and the National Grid Electricity Group of the Electricity Supply Pension Scheme are to be performed as at 31 March 2013 with the valuation results expected to be agreed by mid 2014.
Further detail on the results of the last full triennial valuations performed as at 31 March 2010 can be found in note 29 to the consolidated financial statements.
56 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
There were no significant off balance sheet items other than the contractual obligations shown in note 30(d) to the consolidated financial statements, and the commitments and contingencies discussed below.
The following table summarises the commitments and contingencies outstanding at 31 March 2013 and 2012.
2013
|
2012 £m |
|||||||||||
|
||||||||||||
Future capital expenditure contracted but not provided for |
3,011 | 2,728 | ||||||||||
Operating lease commitments |
742 | 706 | ||||||||||
Energy purchase commitments |
3,995 | 4,174 | ||||||||||
Guarantees and letters of credit |
1,332 | 1,344 | ||||||||||
|
||||||||||||
|
The increase in capital expenditure contracted but not provided for is a result of the continued ramp up in our capital investment programme.
The energy purchase commitments reflect obligations to purchase energy under long-term contracts. These contracts are used in respect of our normal sale and purchase requirements and do not include commodity contracts carried at fair value. Substantially all our costs of purchasing electricity and gas supply for our customers are recoverable at an amount equal to cost. The timing of recovery can vary between financial periods leading to an under- or over-recovery within any particular financial period (see timing differences as discussed on page 48).
We propose to meet all our commitments, as well as working capital requirements, from existing cash and investments, operating cash flows, existing credit facilities, future facilities and other financing that we reasonably expect to be able to secure in the future.
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.
Further information on commitments and contingencies can be found in note 27 to the consolidated financial statements.
Having made enquiries, the Directors consider that the Company and its subsidiary undertakings have adequate resources to continue in business for the foreseeable future, and that it is therefore appropriate to adopt the going concern basis in preparing the consolidated and individual financial statements of the Company. The Directors consider that a robust going concern assessment process was undertaken and the results were discussed and challenged formally at the Audit Committee in May 2013, who recommended the Boards approval at the meeting in May 2013 prior to approving the Annual Report and Accounts.
The process undertaken involved consideration of the forecasts produced for the UK and US businesses for a period to March 2015. This period is considered to be the foreseeable future as required for this going concern assessment only, and is in accordance with company law, accounting standards and the Listing Rules. The forecasts include the impact of the RIIO price control framework on our UK regulated businesses and the impact of agreed and ongoing rate plan filings with the relevant US state and federal bodies for our US businesses. While we have forecasts that extend to the end of each of our current rate plans (for example until 2021 for the UK regulated businesses), we have not considered going concern formally for these periods, due to the increased forecasting risk and uncertainty involved.
This assessment also considered the significant solvency and liquidity risks involved in delivering our forecasts for the foreseeable future. These are wider than the current global economic uncertainty and include recognising the risks around the continued significant investment programme that the Group has committed to and the potential risk that the credit ratings on some of our issued debt are changed. Any change would increase the cost of servicing this debt, therefore reducing the overall profitability of the Group. The assessment also considered the Groups ability to obtain additional funding across a number of scenarios reflecting the current economic uncertainty, especially in Europe. This analysis also noted the fact that the debt markets remained a viable source of funding for the Group even at the height of the credit crunch in 2007 and 2008. Given the significance of maintaining our overall credit rating, the Group has policies and procedures in place to help mitigate this risk as far as possible, as described on page 33. Additional oversight is also provided by the Finance Committee (see page 66).
More detail on our financial risks, including liquidity and solvency, is provided in note 30 to the consolidated financial statements. There have been no major changes to the Groups significant liquidity and solvency risks in the year.
|
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 57 |
Corporate Governance
Chairmans foreword
As part of the Board transition programme I reported last year, Nora Mead Brownell, Mark Williamson and Jonathan Dawson have joined our Board. We said goodbye to Stephen Pettit and Linda Adamany in 2012, with Ken Harvey and George Rose stepping down from the Board following the conclusion of this years AGM.
On behalf of the Board, I would like to thank Ken and George for their commitment to the Company and the valuable contribution they have made as Non-executive Directors they have carried out their duties with diligence and care. Ken has been Senior Independent Director since 2004 and Remuneration Committee chairman since 2011, while George has been chairman of the Audit Committee for more than ten years. These are important roles in ensuring the Board meets its responsibilities to shareholders and stakeholders. The Nominations Committee report on page 67 sets out the recruitment processes followed for our new Non-executive Directors.
The fresh insight and external perspectives that Nora, Mark and Jonathan bring are complemented by the accumulated Company knowledge and understanding that our longer serving Directors provide. With the changes in membership, skills, experience and dynamics arising from the refreshing of the Board, we felt it would be timely to undertake an external review of the Board and its committees performance and effectiveness. The review was conducted with a focus on inclusion & diversity. Further details of the process, as well as examples of agreed actions, are set out on pages 60 and 61.
Following the publication of a new edition of the UK Corporate Governance Code last autumn, we have produced this years Annual Report and Accounts in line with the updated requirements. This is part of our continuing commitment to best practice in corporate governance and I am pleased to tell you that we comply in full with the new requirements as detailed in our compliance statement.
Additionally, we have made some changes to the presentation, structure and content of the Annual Report and Accounts. Our approach takes on board elements of the draft regulations on narrative reporting and directors remuneration, published by the Department for Business Innovation and Skills in the last year.
I hope you find the changes helpful to your understanding of our strategy and performance, as well as how these link to Directors remuneration.
Sir Peter Gershon Chairman
|
Governance contents
|
||
58 | Governance framework | |
59 | The Board | |
59 | The Board and its committees | |
59 | Board composition | |
59 | Director induction and development | |
59 | Non-executive Director independence | |
60 | Board evaluation and effectiveness | |
60 | Director election and re-election | |
62 | Board and committee membership and attendance | |
63 | Audit Committee | |
66 | Finance Committee | |
66 | Safety, Environment and Health Committee | |
67 | Nominations Committee | |
68 | Remuneration Report | |
91 |
Shareholder engagement
|
Governance framework
Compliance statement
The Board considers that it complied in full with the provisions of the UK Corporate Governance Code 2010 (the Code) and, additionally, the new edition of the UK Corporate Governance Code 2012 (the new Code) during the financial year being reported taking account of the transitional arrangements suggested by the Financial Reporting Council for external audit tendering.
|
This report explains key features of the Companys governance structure to provide a greater understanding of how the main principles of the Code and the new Code have been applied and to highlight areas of focus during the year. The report also includes items required by the Disclosure and Transparency Rules. The index at the top of the next page sets out where to find each of the disclosures required in the Directors Report. As required by the Code, our business model is explained starting on page 08.
A full description of the matters reserved for the Board, together with other documentation relating to the Companys governance, is available on our website.
Examples of changes during the year
On Stephen Pettits departure, the Risk & Responsibility Committee which he chaired was replaced by a new committee, the Safety, Environment and Health (SEH) Committee chaired by Philip Aiken, to get a sharper focus on safety, environment and health matters. The areas of responsibility previously covered by the Risk & Responsibility Committee, and which are not within the remit of the SEH Committee, including security, corporate responsibility (beyond the specific areas of safety, environment and health), business conduct and inclusion & diversity, are now within the remit of the Board and other committees.
Additionally, in line with common practice, the Executive Committee is no longer a committee of the Board, although its levels of authority, role and responsibilities remain unchanged. For more information on the role and responsibilities of the Executive Committee, see page 28.
In relation to compliance with the new Code, the Board has considered and endorsed the arrangements to enable it to confirm the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and no changes to the assurance processes are required.
58 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
The Board
The Board reserves a number of matters for its sole consideration where these matters impact the strategic direction, effective oversight and reputation of the Company.
Examples of Board focus during the year
| visible safety leadership and embedding genuine learning to help prevent repeat injuries through safety initiatives; |
| RIIO and US rate cases; |
| major storm activity lessons learnt; |
| US foundation programme systems implementation; |
| the 2013 strategic business plan assumptions; |
| Electricity Market Reform, including future generation scenarios; |
| Group financing strategy; |
| the new dividend policy; |
| refreshed corporate vision statement; |
| results of 2012 employee opinion survey, including proposed high level actions to address key themes globally; and |
| executive succession, including the results of external assessment and benchmarking of high performing individuals. |
Examples of expected Board focus for next year
| review of safety performance and initiatives; |
| strategy sessions; |
| change programmes in the UK business to reflect RIIO and Elevate 2015 in the US; |
| UK security of supply; |
| US foundation programme post systems implementation review; |
| UK and US operational deep dives; |
| talent management update, including regeneration of ageing workforce, capabilities, and inclusion & diversity; and |
| results of 2013 employee opinion survey and proposed high level actions. |
The Board and its committees
In order to operate efficiently and to give appropriate attention and consideration to matters, the Board has delegated authority to its committees to carry out tasks as defined in the committees terms of reference, which are available on our website. Details about the workings of the Board and the committee structure are set out in summary on pages 28 and 29 with reports from each Board committee together with details of their activities during the year on pages 63 to 90.
The Executive Committee has responsibility for making management and operational decisions about the day-to-day running of the Company. Further information on the membership and operation of the Executive Committee is included on pages 28 and 29.
Board composition
The phased and orderly transition of the Board has continued as detailed in the Chairmans foreword to this report, noting that Maria Richter is expected to step down from the Board in July 2014. The Nominations Committee and the Board consider balance as a key requirement for the composition of the Board, not only in terms of the number of Executives and Non-executives, but also with regard to the mix of skills, experience, knowledge, independence and diversity. Biographical and experience details for current Directors are set out on pages 180 to 182. The Directors during the year are set out on page 62 together with details of committee membership and attendance. For further details regarding the Directors service contracts and letters of appointment, see pages 78 and 79 in the Remuneration Report.
Director induction and development
The Chairman, with the support of the Group General Counsel & Company Secretary, is responsible for the induction of new Directors and ongoing development of all Directors. Personal development and training needs were discussed at the one-to-one meetings with the Chairman as part of the Board performance evaluation process.
As the internal and external business environment changes, it is important to ensure the Directors skills and knowledge are refreshed and updated regularly. Updates on corporate governance and regulatory matters are provided at Board meetings, with details of development opportunities available in our online document library.
Non-executive Directors induction programme
On appointment to the Board, new Non-executive Directors receive an induction programme including:
Directors information pack to provide background information on our businesses and operations, policies and procedures as well as guidance on statutory duties as a director and other corporate governance matters; one-to-one meetings with other Directors and senior management in the UK and US; and operational site visits.
Programmes are tailored depending on the experience and background of each individual and the committees on which they serve.
Recognising that Noras experience is predominantly in the US, her induction included a meeting with our external legal advisors to discuss the duties and requirements of being a director in the UK.
As Mark is chairman designate of the Audit Committee, he has met with members of senior management from the finance team including the Finance Director, Group Financial Controller, Director of Corporate Audit and US Chief Financial Officer. He has also met with our external auditors, analysts and brokers.
Jonathan has met our external remuneration advisors and senior management involved with the Remuneration Committee as he will be taking over as committee chairman. His induction programme includes meetings covering the regulatory environment in which we operate and our regulated businesses.
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Non-executive Director independence
The independence of the Non-executive Directors is considered at least annually along with their character, judgement, commitment and performance on the Board and relevant committees. The Board, in its deliberations, specifically took into consideration the Code and examples of indicators of potential non independence, including length of service. Following the annual evaluation of independence, with a particularly rigorous review for those Directors who have served greater than six years, each of the Non-executive Directors, with the exception of the Chairman, at year end has been determined by the Board to be independent.
The experience and knowledge of Ken Harvey, George Rose and Maria Richter, who have each served on the Board for more than nine years, have been key to the orderly succession of our Board, facilitating a structured handover and continuity during this period of change.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 59 |
Corporate Governance
Corporate Governance
Continued
Board evaluation and effectiveness
The Board agreed this year it would be beneficial and timely, given the changes in Board composition, to undertake an external evaluation of Board and committee performance to provide fresh insight and objectivity to the process. Schneider Ross was appointed to conduct an evaluation of the Board and its committees, having previously provided inclusive leadership training to the Company in 2009. The Board agreed this previous relationship would not impact in any way the independence of the review.
The Board recognises the value of inclusive leadership and a diverse Board. In considering the review process this year, it noted the anticipated benefits to be gained by undertaking an external review from an inclusion & diversity perspective.
Schneider Ross held confidential one-to-one interviews with 24 people comprising Directors and members of the leadership team. Mark Williamson and Jonathan Dawson did not participate due to the timing of their appointments. The focus for these discussions was on the behavioural aspects of Board effectiveness such as:
| how the Board works together as a unit; |
| the quality of inputs, discussions and decision-making; |
| the leadership demonstrated both individually and collectively; and |
| specific themes, for example differences in perspectives between male and female Board members and more recently appointed Non-executive Directors were asked about their integration and induction to the Board. |
Questionnaires were designed to gather views and feedback on the overall effectiveness, performance and processes of the Board and each of the committees including the Executive Committee. Additionally this year, regular attendees of the Board and committee meetings were surveyed to gain a different perspective and a more holistic picture of performance.
In total 47 people, including regular attendees and two external advisors, were invited to complete questionnaires anonymously online.
Schneider Ross presented the key conclusions of the evaluation at a meeting of the Nominations Committee with the Executive Directors present. Findings, which were debated openly, had been grouped into three themes:
| Mechanics: for example the role, composition and processes of the Board and its committees. |
| Dynamics: such as teamwork, quality of discussions, debate and decision-making. |
| Specifics: including leadership, succession planning, risk appetite and reporting, and inclusion & diversity. |
As a result of their evaluation, Schneider Ross commented:
With the Board in the later stages of its transition, the boardroom dynamic continues to evolve. We have made a set of recommendations which, taken together, we believe should drive progress towards a truly high performing, inclusive Board where constructive challenge from a diverse group of Non-executive Directors makes its full contribution to excellent decision-making.
Each committee chairman was requested to prepare an action plan for their respective committee for presentation to the April Board meeting. Noting the suggestions, the Board agreed areas of improvement and actions for further enhancements. Progress against all action plans will be monitored throughout the year; see table opposite for examples.
In addition to the review by Schneider Ross and on receipt of its findings, Sir Peter met with each Board member to discuss their individual performance, with the exception of Ken Harvey and George Rose as they will not be standing for re-election at this years AGM.
Progress against the examples from the combined action plan reported last year, which includes items identified from the performance evaluation process together with Sir Peters complementary review, is set out opposite.
Director election and re-election
At a private meeting of the Non-executive Directors, Ken Harvey, as Senior Independent Director, led a review of Sir Peters performance. In their deliberations the Non-executive Directors, with input from the Executive Directors, assessed his ability to fulfil his role as Chairman. They concluded that Sir Peters performance and contribution are strong and that he demonstrates effective leadership. Ken also met privately with Schneider Ross to discuss feedback on the Chairman obtained from their review, which Ken then discussed with Sir Peter.
Following recommendations from the Nominations Committee, the Board considers all Directors continue to be effective, committed to their roles and have sufficient time available to perform their duties. There have been no significant changes to Sir Peters commitments during the year and the arrangements he has in place to fulfil his role given he is also chairman of another FTSE 100 company are considered effective. Therefore, in accordance with the Code, all Directors, with the exception of Ken Harvey and George Rose, will seek election or re-election as set out in the Notice of the 2013 AGM.
60 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 61 |
Corporate Governance
Corporate Governance
Continued
Board and committee membership and attendance
Listed below is the Board and committee membership and attendance. Instances of non attendance during the year were considered and determined as being reasonable due to the individual circumstances. Should any Director be unable to attend a meeting, the Chairman and committee chairman are informed and the absent Director is encouraged to communicate opinions and comments on the matters to be considered.
Board and committee membership, attendance (i) and independence | ||||||||||||||||
Board |
Audit
Committee |
Finance
Committee |
Nominations
Committee |
Remuneration
Committee |
SEH
Committee (ii) |
Executive
Committee (iii) |
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Non independent |
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Non-executive Chairman |
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Sir Peter Gershon |
11 of 11 | 7 of 7 | ||||||||||||||
Chief Executive |
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Steve Holliday |
11 of 11 | 4 of 4 | 3 of 3 | |||||||||||||
Executive Directors |
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Andrew Bonfield |
11 of 11 | 4 of 4 | 2 of 3 | |||||||||||||
Tom King |
11 of 11 | 3 of 3 | ||||||||||||||
Nick Winser |
11 of 11 | 3 of 3 | ||||||||||||||
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Independent |
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Non-executive Directors |
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Ken Harvey |
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(Senior Independent Director) |
11 of 11 | 7 of 7 | 6 of 6 | 3 of 3 | ||||||||||||
Philip Aiken |
11 of 11 | 6 of 6 | 6 of 7 | 3 of 3 | ||||||||||||
Nora Mead Brownell (iv) |
9 of 9 | 5 of 6 | 4 of 4 | 3 of 3 | ||||||||||||
Jonathan Dawson (v) |
1 of 1 | |||||||||||||||
Paul Golby |
11 of 11 | 7 of 7 | 6 of 6 | 3 of 3 | ||||||||||||
Ruth Kelly |
11 of 11 | 6 of 6 | 4 of 4 | 7 of 7 | ||||||||||||
Maria Richter |
11 of 11 | 6 of 6 | 4 of 4 | 7 of 7 | ||||||||||||
George Rose |
10 of 11 | 6 of 6 | 6 of 7 | 6 of 6 | ||||||||||||
Mark Williamson (vi) |
6 of 6 | 4 of 4 | 2 of 2 | 5 of 5 | ||||||||||||
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Linda Adamany (vii) |
6 of 6 | 3 of 3 | 3 of 3 | 1 of 1 | ||||||||||||
Stephen Pettit (viii) |
4 of 4 | 2 of 2 | 1 of 1 | 3 of 3 | ||||||||||||
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Total number of meetings |
11 | 6 | 4 | 7 | 6 | 3 | 3 | |||||||||
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(i) | Attendance is expressed as number of meetings attended out of number possible or applicable for the individual Director. |
(ii) | The SEH Committee replaced the Risk & Responsibility Committee in July 2012. The Risk & Responsibility Committee held one meeting during the year, chaired by Stephen Pettit and attended by all other members: Linda Adamany; Philip Aiken; Paul Golby and Ken Harvey. |
(iii) | Meeting attendance is reported until June 2012, after which the Executive Committee ceased to be a committee of the Board. |
(iv) | Nora Mead Brownell was appointed to the Board on 1 June 2012. |
(v) | Jonathan Dawson was appointed to the Board on 4 March 2013. |
(vi) | Mark Williamson was appointed to the Board on 3 September 2012. |
(vii) | Linda Adamany stepped down from the Board on 31 October 2012. |
(viii) | Stephen Pettit stepped down from the Board on 30 July 2012. |
62 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Audit Committee
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George Rose Committee chairman
Consistent with the early adoption of the new Code, we have included additional information this year. We hope you find this helpful in better understanding the work of the committee.
We have continued to closely monitor our US financial controls programme that began during the last financial year. Given the importance of this project, in June, I and two of my fellow committee members met representatives from the US finance team for an update on the progress of preparations and training, ahead of the implementation of a new enterprise resource planning system.
Following the reallocation of the responsibilities of the Risk & Responsibility Committee at the end of July, the committees remit was expanded to include reporting on our standards of ethical business conduct. This aligns well with the other work the committee reviews on fraud, bribery and internal controls.
During the year, we have said goodbye to Linda Adamany and welcomed Mark Williamson to the committee. Mark has a wealth of financial experience and will take over as committee chairman when I stand down in July. To help with the handover of responsibilities, I felt it was important for the committee, especially Mark, to be involved in the development of the committees action plan which stems from the results of this years performance evaluation review. Mark has already made a tangible contribution to the committee and I have no doubt it will continue to perform effectively and evolve under his leadership.
George Rose
Review of the year
Some of the significant issues the Audit Committee considered in relation to the financial statements during the year are set out below:
US financial controls programme; environmental provision; pensions; and recoverability and disclosure of storm costs.
Examples of other matters the Audit Committee reviewed:
the revised corporate risk policy; Sarbanes-Oxley Act 2002 (SOX Act) testing and attestations; data assurance processes and the programme to improve the Company wide framework; and business conduct reports, including employee survey results in relation to questions on ethics, disciplinary statistics and activities of the business conduct committees.
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Experience
The Board has determined that George Rose and Mark Williamson have recent and relevant financial experience and are suitably qualified audit committee financial experts, within the meaning of the SEC audit committee financial expert requirements. The Board also considers George and Mark to be independent within the meaning of the New York Stock Exchange listing rules.
Mark Williamson joined the committee on 3 September 2012 and will take over as chairman of the Audit Committee following the AGM on 29 July 2013. A tailored induction programme has been developed, see page 59 for details. In support of this, Mark has been introduced to senior finance team members to enhance his understanding of the finance function. At Georges invitation he also attended meetings in May 2013 between the committee chairman and management, and between the committee chairman and the external auditors to strengthen the transfer of knowledge and further develop key relationships.
The composition of the committee during the year is set out on page 62, with biographical details and experience of members on pages 180 to 182 respectively.
Financial reporting
The committee monitors the integrity of the Companys financial information and other formal documents relating to its financial performance and makes appropriate recommendations to the Board before publication.
A key factor in the integrity of financial statements is ensuring that suitable and compliant accounting policies are adopted and applied consistently on a year-on-year basis and across the Company. In this respect, the committee also considered the estimates and judgements made by management when accounting for non-standard transactions, the treatment of exceptional items and in provision calculations.
These considerations are supported by input from other assurance providers, for example the group controls, risk management and ethics and compliance teams, corporate audit and the SEH Committee as well as our external auditors. In addition, the committee also considers reports of the Disclosure Committee, see page 65 for more information.
Summarised below are some of the significant issues the committee considered in relation to the financial statements during the year.
US financial controls programme: An important milestone of the programme took place when we implemented a new enterprise resource planning system, which went live during November and December 2012. A status update was provided at the January committee meeting and initial findings on the lessons learnt, in particular in relation to payroll processing, were presented to the committee in March.
At that meeting the committee discussed the initial findings and noted the Executive Committee would review in depth the lessons learnt and how these could be applied across the business. An update will be provided to the Board in June this year.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 63 |
Corporate Governance
Corporate Governance
Continued
Environmental provision: at the half year and year end we reviewed the Companys environmental provision to ensure that it remained appropriate. A deep dive on the process of calculating the environmental provision summarising the accounting requirements, the judgements involved in estimating environmental liabilities and how these change over the life of the site to which the liabilities relate, was presented at the September meeting. The committee noted the report and agreed the environmental provision recognised is appropriate; no follow up action was required.
Pensions: movements in the market value of plan assets and changes in economic assumptions, principally the discount rate, were noted along with their consequential impact on net pension and other post-retirement liabilities. Input from external actuaries provided additional assurance over these assumptions. The committee noted the proposed accounting treatment and accepted the judgements of management.
Recoverability and disclosure of storm costs: the committee discussed the disclosures around the financial impact of Superstorm Sandy in our half year results statement, and the impact of storm costs on cash flows and working capital. The committee noted the position in relation to these evolving disclosures with subsequent approval of the half year results by the Board.
Confidential reporting procedures and whistleblowing
The integrity of the financial statements is further supported by the confidential reporting and whistleblowing procedures in place. The committee reviews these procedures once a year to ensure that appropriate processes are in place to treat complaints confidentially and implement proportionate, independent investigation in all cases.
Internal (corporate) audit
The committee receives twice yearly reports on the control environment from the Director of Corporate Audit. These reports highlight key improvement themes and recommend areas for business focus, with additional analysis provided around causal factors such as knowledge and responsibility transfer. In addition, the committee has visibility of management responsiveness in addressing audit actions. The audit plan, which contains mandatory, risk-based and cyclical reviews, was approved by the committee in March 2012, and was built around focus areas such as organisational change, major system change, security and business resilience, and capital spend.
Corporate audit continue to plan on a risk-based approach for the majority of work, but have introduced greater structure to the smaller cyclical element of their work programme to ensure coverage of key processes over a defined period. The inherent risk of each process is assessed and in turn is used to inform audit frequency, with elements of higher risk processes being audited on a more frequent basis. The committee supports this approach which was used for the first time in developing the plan for the year ending March 2014.
External audit
The committee is responsible for overseeing relations with the external auditors, including the approval of fees, and makes recommendations to the Board on their appointment and reappointment.
Details of total remuneration for auditors for the year, including audit services, audit related services and other non-audit services, can be found in note 2(e) of the consolidated financial statements on page 110.
Auditor independence and objectivity
The independence of the external auditors is essential to the provision of an objective opinion on the true and fair view presented in the financial statements. Auditor independence and objectivity is safeguarded by limiting the nature and value of non-audit services performed by the external auditors, ensuring that employees of the external auditors who have worked on the audit in the past two years are not appointed to senior financial positions within the Company, and the rotation of the lead engagement partner at least every five years. The current lead engagement partner has held the position for three years.
Non-audit services provided by the external auditors
Non-audit services provided by the external auditors require approval by the committee. Approval is given on the basis the service will not compromise independence and is a natural extension of the audit or if there are overriding business or efficiency reasons making the external auditors most suited to provide the service. Certain services are prohibited from being performed by the external auditors, as required under the SOX Act.
Total non-audit services provided by PwC during the year ended 31 March 2013 were £2.3 million (2012: £3.8 million) which comprised 23% (2012: 44%) of total audit and audit related fees. Total audit and audit related fees include the statutory fee and fees paid to PwC for other services which the external auditors are required to perform, for example regulatory audits and SOX Act attestation. Non-audit fees represent all other services provided by PwC not included in the above.
Significant non-audit services provided by PwC in the year included quality assurance provided on the US financial controls improvement programme (£0.7 million) and tax compliance services in territories other than the US (£0.5 million).
PwC were engaged on the US financial controls improvement programme, as they were best placed to provide valuable insight on the programme, given their in depth knowledge of our control environment and relevant utilities experience. They were appointed in an advisory capacity only and were not involved in designing or implementing new controls and processes, thereby helping to safeguard independence and objectivity.
The committee considered that tax compliance services were most efficiently provided by the external auditors as much of the information used in preparing computations and returns is derived from audited financial information. In order to maintain the external auditors independence and objectivity, management reviewed and considered PwCs findings and PwC did not make any decisions on behalf of management.
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64 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Audit quality
To maintain audit quality and provide comfort on the integrity of financial reporting, the committee reviews and challenges the proposed external audit plan to ensure that PwC have identified all key risks and developed robust audit procedures. The committee also considers PwCs response to accounting, financial control and audit issues as they arise, and meets with them at least annually without management present providing the external auditors with the opportunity to raise any matters in confidence.
Auditor appointment
An annual review is conducted by the committee of the level and constitution of the external audit and non-audit fees and the effectiveness, independence and objectivity of the external auditors.
The annual review includes consideration of:
| the external audit process globally; |
| the auditors performance; |
| the expertise of the firm and our relationship with them; and |
| the results of questionnaires completed by National Grid employees engaged with the audit and members of the Audit Committee. |
Following this years annual review, the committee is satisfied with the effectiveness, independence and objectivity of the external auditors, and recommend to the Board their reappointment for a further year. A resolution to reappoint PwC and giving authority to the Directors to determine their remuneration will be submitted to shareholders at the 2013 AGM.
Audit tender
PwC have been the Companys external auditors since the merger with Lattice Group plc in 2002, having been the incumbent external auditors of both the merging parties. The new Code requires FTSE 350 companies to put the audit services contract out to tender at least once every ten years, to enable the committee to compare the quality and effectiveness of the services provided by the incumbent auditors with those of other audit firms. Transitional arrangements provided by the Financial Reporting Council indicate the Company should tender the audit, at the latest, at the time of the next audit partner rotation currently scheduled for 31 March 2015.
We may, however, put the audit out to tender at any time before this date. There are no contractual obligations restricting our choice of external auditors and no auditor liability agreement has been entered into.
Audit information
Having made the requisite enquiries, so far as the Directors in office at the date of the approval of this report are aware, there is no relevant audit information of which the auditors are unaware and each Director has taken all reasonable steps to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.
Internal control, risk and compliance
We consider regularly the effectiveness of financial reporting, internal controls and compliance with applicable legal and internal requirements. We also review the procedures for the identification, assessment, mitigation and reporting of risks.
To continuously improve and remain at best practice levels, the risk management team reviews risk standards, emerging trends and concepts being driven by the main consultancy firms and look to apply these as appropriate. The standards issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and the international risk standard ISO 31000 are used to inform the principles of our risk management process as appropriate. Specific improvements delivered during the year, and ongoing, to address key concepts within the standards were noted by the committee at its meeting in September. Details of our internal control and risk management systems, including over the financial reporting process can be found on pages 30 and 31 and page 179 with our risk factors in full on pages 176 to 178.
The changes to the compliance management process reported last year are now embedded and continue to evolve. During the year the global ethics and compliance team has focused on promoting improved consistency across compliance reports and changes are being trialled in relation to fraud and bribery returns. The committee received a paper on the Companys anti-bribery procedures and reviewed the adequacy of these. It noted that no material instances of non compliance had been identified and that progress continued on the minor improvements recommended to the Board as a result of the prior years review.
Disclosure Committee
The role of the Disclosure Committee is to assist the Chief Executive and the Finance Director in fulfilling their responsibility for oversight of the accuracy and timeliness of the disclosures made, whether in connection with our presentations to analysts, financial reporting obligations or other material stock exchange announcements.
This year the committee met for the purposes of considering the announcements of the full and half year results and the interim management statements and reported on the matters arising to the Audit Committee. In doing so it spent time considering the Companys disclosure obligations relating to RIIO, US rate filings and the effects of Superstorm Sandy. The committee also reports the results of its evaluation of the effectiveness of the Companys disclosure controls to the Audit Committee.
The committee is chaired by the Finance Director and its members are the Group General Counsel & Company Secretary, the Global Director of Tax and Treasury, the Group Financial Controller, the Director of Investor Relations, the Director of Corporate Audit and the Deputy Group General Counsel, with other attendees as may be appropriate.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 65 |
Corporate Governance
Corporate Governance
Continued
Finance Committee
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Maria Richter Committee chairman
Following the departure of Stephen Pettit in July, we have welcomed Mark Williamson and Jonathan Dawson to the Finance Committee.
This year we have continued to focus on funding plans to take into account international debt market conditions. The committee received regular reports on treasury, tax, insurance and pensions activities to keep us advised of progress and we approved recommendations where appropriate.
External advisors gave presentations relating to the eurozone crisis and the potential impact of worldwide derivatives legislation from the G20 Accord in Pittsburgh. Additionally, to ensure the committee was advised on the progress of transactions such as the issuance of Canadian dollar, US dollar and Hong Kong dollar bonds and floating-rate instruments, updates were circulated between meetings.
Some items the committee considered and approved, due to their nature, were also presented to the Board such as the renewal of the SEC debt shelf, a legal requirement, and the funding strategy. As a number of new Non-executive Directors have joined the Board over the year, a presentation on the work and remit of the committee was given to the Board in April 2013. This was aimed at helping all Directors understand the role and responsibilities of the Finance Committee.
Maria Richter
Review of the year
Examples of matters the Finance Committee considered during the year include:
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| long-term funding requirements, including the issuance of new hybrid bonds, the largest bond issue by us to date, and new maple bonds, one of which was the largest corporate maple transaction of its kind in Canadian history at the time; | |||
| setting and reviewing treasury policies; | |||
| treasury performance updates provided at each meeting; | |||
| UK and US tax updates; | |||
| activities of the Energy Procurement Risk Management Committee in the US; | |||
| foreign exchange policy; | |||
| underlying financial assumptions in the business plan; | |||
| pensions updates including funding of the Companys pension deficits; and | |||
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insurance renewal strategy.
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66 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Recruitment Processes
Non-executive Directors The recruitment processes undertaken for the appointment of Nora, Mark and Jonathan were formal, rigorous and transparent. The Nominations Committee appointed an executive search consultancy, Spencer Stuart, JCA Group and Russell Reynolds Associates respectively, and the following process was undertaken:
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| a role profile was prepared against which potential candidates were considered; | |
| from a long list of candidates, a shortlist of preferred candidates was selected; | |
| Sir Peter Gershon and a minimum of two other members of the committee together with Steve Holliday interviewed the shortlisted candidates. Additionally, Andrew Bonfield met the shortlisted candidates for the future Audit Committee chairman position; | |
| the committee considered the candidates against the objective criteria set out in each profile, with due regard to diversity; | |
| a preferred candidate recommendation was made by the committee to the Board for consideration and approval; and | |
| the Board agreed to the appointments as recommended. | |
Spencer Stuart, JCA Group and Russell Reynolds Associates only provide recruitment consultancy services to the Company.
Board diversity and the Davies Review
The board diversity policy reaffirms our aspiration to meet the target of 25% of Board positions to be held by women by 2015, as set out by Lord Davies and continues to support the engagement of executive search firms who have signed up to the Voluntary Code of Conduct on gender diversity and best practice.
The Nominations Committee is responsible for developing measurable objectives to support the implementation of the board diversity policy and for monitoring progress towards the achievement of these objectives.
We currently have 21.4% women on our Board, which will change to 25% on the departure of Ken and George, and 20% women on our Executive Committee. The Board expects the diversity of the executive and leadership population to improve by 2015. The number of women in management positions and throughout the organisation is set out on page 39 along with initiatives to develop women and promote diversity throughout our organisation.
Our executive and leadership population is regularly and rigorously assessed against achievement of individual objectives and key leadership qualities to help build a sustainable development and succession plan.
We have a programme of executive sponsorship and mentoring of high potential female and minority ethnic managers in order to ensure increased diversity throughout our leadership. |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 67 |
Corporate Governance
Pay policy report 2012/13
Remuneration Committee
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Ken Harvey Committee chairman
I am pleased to present the Remuneration Report for 2012/13. We have made no major changes to our remuneration policy during the year. However, you will find changes to the format of this years Remuneration Report where we have followed some of the key reporting principles from the draft regulations published by the Department for Business, Innovation & Skills (BIS). The format of the report is, therefore, a policy report detailing the remuneration policy (pages 68 to 79) and an implementation report (pages 80 to 90) which details the changes in the financial year, such as salary changes, Annual Performance Plan (APP) payments and vested Performance Share Plan (PSP) awards.
While we have adopted some of the BIS principles on a voluntary basis this year, some elements of the draft regulations (at the time of going to print) are subject to further amendment and therefore full adoption will be implemented in a future years report when the regulations become effective.
Examples of new areas of disclosure to be found in this report include: the single figure table (page 83), the Chief Executives total remuneration over the last five years (page 84) and the spend on Executive Director pay relative to key metrics (page 85).
Our policy of relating pay to the Companys business priorities and its performance continues to be the strong principle underlying the Remuneration Committees consideration of executive remuneration. 2012/13 was a year of good financial and operational performance. This included strong earnings growth, the approval of a number of important regulatory arrangements in the UK and US, strong reliability performance |
and continued delivery of the significant investment programme that will drive our long-term shareholder value. However, the implementation of our enterprise resource planning system in the US did not proceed in the way envisaged. These things are taken into consideration when remuneration decisions are made.
Overall, we aim to ensure the Company continues to attract, motivate and retain high calibre individuals to deliver the highest possible performance for our shareholders and customers. We believe the mix of our remuneration package provides an appropriate and balanced opportunity for executives and their senior teams. Our incentive plans are reviewed annually to ensure they remain closely aligned with the Companys strategic objectives and our shareholders interests, while continuing to motivate and engage the team leading the Company to achieve stretching targets.
The remuneration framework for Executive Directors remains relatively straightforward. Our incentive plans comprise of the APP with a compulsory share deferral element and the Long Term Performance Plan (LTPP). We have clawback provisions for both those plans in the event of financial misstatement. We have meaningful share ownership requirements for Executive Directors which are exceeded in all cases (except for Andrew Bonfield who is building up his shareholding), and the dilution levels from our share plans remain well below prescribed limits. We operate a mitigation policy in the event of early termination by the Company of an Executive Directors employment.
Following the introduction of the new UK regulatory framework (RIIO see pages 171 and 172 for further details), we have commenced a review to assess its implications for our remuneration strategy and, in particular, to examine whether the performance measures used in the incentive plans align with the optimum outcome for National Grid and all our stakeholders. This work will continue over the coming months and any changes will be presented to shareholders next year.
Ken Harvey
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Remuneration Committee
The Remuneration Committee members are Ken Harvey, George Rose, Paul Golby, Nora Mead Brownell and Jonathan Dawson. Each of these Non-executive Directors served throughout the year, except Nora and Jonathan who joined the Board on 1 June 2012 and 4 March 2013 respectively. Stephen Pettit stepped down from the Board and the Committee on 30 July 2012.
The Global Human Resources Director and Global Head of Compensation & Benefits provide advice on remuneration policies and practices and are usually invited to attend meetings, along with the Chairman, Chief Executive and Group General Counsel & Company Secretary. No Director or other attendee is present during any discussion regarding his or her own remuneration.
As well as having regular meetings during the year, we have an annual review and strategy meeting where we review our remuneration practices and incentive plans to ensure they remain aligned to the Companys strategic goals. We also
take the opportunity to assess external trends and best practice, and undertake an in depth review of a particular remuneration element each year.
Alignment of the remuneration policy with the Company strategy
The Remuneration Committee aims to align the remuneration policy to our Company strategy and key business objectives. Therefore, the performance criteria in our incentive plans, both short- and long-term, are designed to underpin the Company vision and strategy.
When aligning the remuneration policy to our strategic objectives, the Committee aims to ensure the policy reflects our shareholders, customers and regulators interests. In addition, the Committee ensures the policy adheres to our internal control, risk and compliance processes.
68 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Remuneration policy
The Remuneration Committee determines remuneration policy and practices with the aim of attracting, motivating and retaining high calibre Executive Directors and other senior employees to deliver value for shareholders, and high levels of customer service, safety and reliability in an efficient and responsible manner. The Remuneration Committee sets remuneration policies and practices in line with the Companys strategy and best practice in the markets in which the Company operates. Remuneration policies continue to be framed around the following key principles:
Competitive package with cost management |
Total rewards are set at levels that are competitive in the relevant market. For UK-based Executive Directors, the primary focus is placed on companies ranked (in terms of market capitalisation) 11-40 in the FTSE 100. This peer group is considered to be appropriate for a large, complex, international but predominately regulated business. For US-based Executive Directors, the primary focus is placed on US utility companies.
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Sustainable growth |
A significant proportion of the Executive Directors total reward should be performance based. Performance based incentives are earned through the achievement of demanding targets for short-term business and individual performance as well as long-term shareholder value creation.
Incentive plans, performance measures and targets are stretching and aligned as closely as possible with shareholders long-term interests.
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Motivation and risk management
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Remuneration structures should motivate employees to enhance the Companys performance without encouraging them to take undue risks, whether financial or operational.
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The Remuneration Committee is briefed on key remuneration policy changes affecting employees more generally in the Company and depending on the scope of that change its approval is sought. Having this wider insight into remuneration practices across the Company means the Remuneration Committee can take this information into consideration when making decisions about the Executive Directors remuneration.
The key elements of the remuneration package for Executive Directors are shown in the tables below:
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70 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
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Additional notes to the LTPP and PSP
LTPP
Details regarding the LTPP performance measures and vesting requirements are provided in the table below:
Performance measure |
Definitions and measurement | Vesting requirements | ||||||||
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EPS |
The EPS measure is calculated by reference to annualised growth in adjusted EPS (on a continuing basis and excluding exceptional items, remeasurements and stranded costs) over a three year performance period. See page 48 for further details.
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Threshold performance 25% of the shares subject to this measure will vest where EPS growth exceeds RPI growth by 3 percentage points.
Upper target performance 100% of the shares subject to this measure will vest where EPS growth exceeds RPI growth by 8 percentage points.
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TSR |
In calculating TSR (on an annualised compound basis) it is assumed that all dividends are reinvested. No shares will be released under the TSR part of the award if the Companys TSR over the three year performance period, when ranked against that of the FTSE 100 comparator group, falls below the median.
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Threshold performance 25% of the shares subject to this measure will vest for TSR at median.
Upper target performance 100% of the shares subject to this measure will vest where National Grids TSR performance is 7.5 percentage points above that of the median company in the FTSE 100.
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ROE |
The ROE measure is derived from the returns on page 07. In the UK, this is based on the UK Transmission and UK Gas Distribution ROEs. For the US, it is based on US regulated returns by jurisdiction. There is a four year performance period. The Chief Executive and Finance Director are targeted on both the UK and US ROEs. For the UK- and US-based operational Directors, they are targeted on their respective UK or US ROEs.
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Threshold performance 25% of the shares subject to this measure will vest where the allowed regulatory returns in the UK are achieved and 1 percentage point below the allowed regulatory returns in the US.
Upper target performance 100% of the shares subject to this measure will vest for out-performance of regulatory returns by 2 percentage points in the UK and 1 percentage point in the US.
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PSP (the predecessor to the LTPP) operated for awards between 2003 and 2010 inclusive
| The general operation of the PSP is similar to that detailed above under the LTPP, as is the population who participate in the plan. |
| The value of shares (ADSs for US-based Executive Directors and relevant employees) constituting an award (as a percentage of salary) varied by grade and seniority subject to a maximum, for all Executive Directors, of 200% of salary. The provisions in the PSP rules allowed awards up to a maximum value of 250% of salary, although no awards were made above 200%. |
| Shares vest after three years, conditional upon the satisfaction of the relevant performance criteria. Vested shares must then be held for a further period (the retention period) after which they are released to the participant on the fourth anniversary of the date of grant. During the retention period, the Remuneration Committee has discretion to pay an amount, in cash or shares, equivalent to the dividend which would have been paid on the vested shares. |
| Awards vest based on the Companys TSR performance when compared with the FTSE 100 at the date of grant (50% of the award) and the annualised growth of the Companys EPS (50% of the award). The same performance criteria are cascaded to all participants in the plan. |
Details regarding the PSP performance measures and vesting requirements are provided in the table below:
72 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Common policy elements of the LTPP and PSP
| The Remuneration Committee believes the measures offer a balance between meeting the needs of shareholders (by measuring TSR performance against other large UK companies) and providing a measure of performance (EPS growth and including ROE for the LTPP) over which the Executive Directors have direct influence. All these measures are key financial performance indicators for the Company, our shareholders and/or our regulators. |
| No re-testing of performance is permitted for the awards that do not vest after the performance periods and any such awards lapse. |
| If the Remuneration Committee considers, in its absolute discretion, the underlying financial performance of the Company does not justify the vesting of awards, even if some or all the performance measures are satisfied in whole or in part, it can declare that some or all the award lapses. |
| In addition, the Remuneration Committee retains the right, in exceptional circumstances, to reclaim any monies based on financial misstatement and/or the misconduct of an individual through means deemed appropriate to those specific circumstances. |
| Under the terms of the LTPP and PSP, the Remuneration Committee may allow shares to vest early to departing participants, including Executive Directors, to the extent the performance conditions have been met, in which event the number of shares that vest will be pro rated to reflect the proportion of the performance period that has elapsed at the date of departure. |
Benefits
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Purpose and link to strategy |
To attract, motivate and retain high calibre Executive Directors and other senior employees to deliver value for shareholders and high levels of customer service, safety and reliability in an efficient and responsible manner. |
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Operation |
The Company provides competitive benefits to Executive Directors. Business expenses incurred are reimbursed in such a way as to give rise to no benefit to the Executive Director. |
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Flexible benefits plan |
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Additional benefits may be purchased under the flexible benefits plan in which UK-based Executive Directors, along with all other UK employees, have been given the opportunity to participate. The plan operates by way of salary sacrifice, that is, the participants salaries are reduced by the monetary value used to purchase benefits under the plan. | ||
Similar plans are offered to US-based employees. However, they are not salary sacrifice plans and therefore do not affect salary values. Tom King was a participant in such a plan during the year. |
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Opportunity |
Benefits include a fully expensed car or a cash alternative in lieu of a car, use of a driver when required, private medical insurance and life assurance. |
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Many of the flexible benefits are linked to purchasing additional healthcare and insurance products for employees and their families. Andrew Bonfield participates in this plan and the impact on his salary is shown in Table 1A on page 86. |
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Performance metrics
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None. |
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Changes in the year
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None. | |
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Page
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See page 86. |
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All-employee Share Plans
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Purpose and link to strategy |
The all-employee share plans allow UK or US-based employees to participate in either HM Revenue & Customs (UK) or Internal Revenue Service (US) approved plans. We believe by offering participation in such plans, it encourages all employees (including Executive Directors) to become shareholders in National Grid.
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Operation | Sharesave: | |
Employees resident in the UK are eligible to participate in the Sharesave plan. Under this plan, participants may contribute between £5 and £250 in total each month, for a fixed period of three years, five years or both. Contributions are taken from net salary. | ||
SIP: |
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Employees resident in the UK are eligible to participate in the SIP. Contributions up to £125 are deducted from participants gross salary and used to purchase ordinary shares in National Grid each month. The shares are placed in trust. | ||
US Incentive Thrift Plans: |
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Employees of National Grids US companies are eligible to participate in the Thrift Plans, which are tax-advantaged savings plans (commonly referred to as 401(k) plans). They are defined contribution pension plans that give participants the opportunity to invest up to applicable federal salary limits. The federal limits for calendar year 2012 are: for pre-tax contributions a maximum of 50% of salary limited to $17,000 for those under the age of 50 and $22,500 for those over 50; for post-tax contributions, up to 15% of salary limited to the lesser of 100% of compensation or $50,000. For calendar year 2013, participants may invest up to the applicable federal salary limits ie for pre-tax contributions a maximum of 50% of salary limited to $17,500 for those under the age of 50 and $23,000 for those over 50; for post-tax contributions up to 15% of salary limited to the lesser of 100% of compensation or $51,000. | ||
ESPP: |
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Employees of National Grids US companies are eligible to participate in the ESPP (commonly referred to as a 423(b) plan). Eligible employees have the opportunity to purchase ADSs on a monthly basis at a 15% discounted price. Under the plan employees may contribute up to 20% of base pay each year up to a maximum annual contribution of $18,888 to purchase ADSs in National Grid.
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Opportunity | Sharesave: | |
At the end of the savings period, contributions can be used to purchase ordinary shares in National Grid at a discount capped at 20% of the market price set at the launch of each savings period.
SIP: If the shares are left in trust for at least five years, they can be removed free of UK income tax and National Insurance Contributions.
US Incentive Thrift Plans: Employees may invest their own and Company contributions in National Grid shares or various mutual fund options. The Company matches 50% of the first 8% of salary contributed.
ESPP: Any ADSs purchased through the ESPP may be sold at any time, however, there are tax advantages for ADSs held for at least two years from the offer date.
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Performance metrics
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None for any of the all-employee share plans. | |
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Changes in the year
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None for any of the all-employee share plans. | |
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Page
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See pages 87 and 90 for details of participation by the Executive Directors.
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74 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
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76 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Performance elements in the Executive Directors remuneration package
Illustrated below is the current remuneration package for the Chief Executive and other Executive Directors (excluding pensions, all-employee share plans and non-cash benefits) for assuming on target performance and maximum stretch performance for the incentive plans (APP and LTPP).
The assumptions for at threshold are based on 6.66% of maximum (10% of salary) for the APP and 25% of maximum (50% of salary) for LTPP awards. For the Chief Executive, due to the higher LTPP award level, the at threshold assumption is 56.25% of salary.
The assumptions used for target performance are based on 40% of maximum (60% of salary) for the APP and 50% of maximum (100% of salary) for LTPP awards. For the Chief Executive, due to the higher LTPP award level, the target assumption is 112.5% of salary.
Executive Directors remuneration package (key elements expressed as a percentage of the package)
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Executive Directors |
Date of contract | Notice period | ||||
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Steve Holliday |
1 April 2006 | 12 months | ||||
Andrew Bonfield |
1 November 2010 | 12 months | ||||
Nick Winser |
28 April 2003 | 12 months | ||||
Tom King
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11 July 2007 | 12 months |
78 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Non-executive Directors |
Date of appointment to the Board |
Date of next election |
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Sir Peter Gershon |
1 August 2011 | 2013 AGM | ||||||
Ken Harvey (i) |
21 October 2002 | | ||||||
Philip Aiken |
15 May 2008 | 2013 AGM | ||||||
Nora Mead Brownell |
1 June 2012 | 2013 AGM | ||||||
Jonathan Dawson |
4 March 2013 | 2013 AGM | ||||||
Paul Golby |
1 February 2012 | 2013 AGM | ||||||
Ruth Kelly |
1 October 2011 | 2013 AGM | ||||||
Maria Richter |
1 October 2003 | 2013 AGM | ||||||
George Rose (i) |
21 October 2002 | | ||||||
Mark Williamson |
3 September 2012 | 2013 AGM | ||||||
Linda Adamany (ii) |
1 November 2006 | | ||||||
Stephen Pettit (iii)
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21 October 2002 | |
(i) | Ken Harvey and George Rose will step down from the Board at the close of the 2013 AGM. |
(ii) | Linda Adamany stepped down from the Board on 31 October 2012. |
(iii) | Stephen Pettit stepped down from the Board on 30 July 2012. |
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Review of the year
During the year, the following regular agenda items have been discussed:
| review and approval of salary increases for Executive Directors and direct reports to the Chief Executive including the salary budget for all non unionised employees in the Company; |
| approval of the Remuneration Report and analysis of associated AGM voting levels; |
| review of achievement for financial measures and individual objectives under the outgoing years APP; |
| approval of the forthcoming years APP financial measures and individual objectives; |
| review and approval of awards made under the LTPP; |
| review of all share plan performance measures including the annual vesting of the PSP awards; |
| review of Executive Director and senior management shareholding guidelines including achievement against them; |
| review of risk matters in incentive plans; |
| review of dilution levels; and |
| review of the code of conduct for the independent remuneration advisors to the Remuneration Committee. |
Annual review and strategy meeting (to ensure remuneration practices are reviewed and align to Company strategy)
| consideration of current guidelines by advisory bodies and institutional investors regarding executive remuneration, including a detailed review of the draft BIS regulations; |
| review of the Remuneration Report disclosures and voluntary early adoption of some of the key areas under the draft BIS regulations; |
| review of external market data for all areas of remuneration including performance measures used in incentive plans and plan design; and |
| discussion regarding performance measures for the APP and LTPP under RIIO. |
Additional items during the year
| pension/retirement plan strategy discussion; and |
| consideration of responses for BIS consultations. |
The Board has accepted all the recommendations made by the Remuneration Committee during the year.
The Remuneration Committee has authority to obtain the advice of external independent remuneration consultants. It is solely responsible for their appointment, retention and termination together with approval of the basis of their fees and other terms. Remuneration Committee advisors are chosen following a robust tender process.
In the year to 31 March 2013, the following advisors provided services to the Remuneration Committee:
| Towers Watson, independent remuneration advisors. Separate teams in the firm provide general remuneration, pension and benefits advice to the Company. In this respect, the Remuneration Committee is satisfied that any potential conflicts are appropriately managed. Towers Watson is a member of the Remuneration Consultants Group and the Remuneration Committee has carefully reviewed their voluntary code of conduct in relation to executive consulting in the UK; |
| Alithos Limited, provision of TSR calculations for the PSP and LTPP; |
| Linklaters LLP, advice relating to Directors service contracts as well as providing other legal advice to the Company; and |
| KPMG LLP, advice relating to pension taxation legislation. |
Salary
June 2012
Salary increases for Executive Directors during the reporting year (ie effective from 1 June 2012) were on average 2.74% and were reported in the previous years Remuneration Report. Those increases were consistent with a salary increase budget of 3% for employees generally across the business, UK and US.
June 2013
The Company is at the beginning of a number of important regulatory arrangements in both the UK and US, in particular the new RIIO framework. In recognition of the significant changes being implemented across the business, the Executive Directors will not receive salary increases in June 2013. The next review will, therefore, be in June 2014.
80 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
APP performance for 2012/13
The following table details the financial targets for 2012/13 and performance achieved against them as well as examples of performance against individual objectives:
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2012/13 APP awards as a percentage of salary
Executive Directors
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%
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Steve Holliday |
85 | |||
Andrew Bonfield |
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96
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Nick Winser |
92 | |||
Tom King
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72 |
Vested 2009 PSP award
The upper target for the EPS performance criteria was met partially (50.3% of the shares subject to that performance measure vested) but threshold performance against the TSR element of the award was not achieved resulting in shares subject to that measure lapsing. This resulted in vesting at 25.15% of the award. The shares then entered the retention period. The Remuneration Committee agreed to pay a cash amount equivalent in value to the net dividends (after taxes, commissions and any other charges) that would be paid during the retention period in respect of the shares comprised in the vested award. These payments were made in August 2012 and February 2013, to align broadly with dividend payments to our shareholders (see Table 4 on page 89, footnote (ii)).
Vesting history of the PSP
The following table details the vesting of the PSP over the years it has been in operation, shown as a percentage of the award.
Note: All awards subject to a retention period before release.
Shareholding for Executive Directors
Each of the Executive Directors has surpassed the respective share ownership guideline (except for Andrew Bonfield who is more recently appointed).
Executive Directors |
Ordinary
shares at 31 March 2013 |
% of
salary
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Shares
in Trust at 31 March 2013 (iii)(iv) |
% of
salary held in shares in Trust (i)(ii) |
Total
ordinary shares
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% of
salary held in ordinary shares and shares in Trust (i)(ii) |
Shares subject
to performance conditions (v) |
% of salary for
shares subject to performance conditions (i)(ii) |
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Steve Holliday |
630,476 | 484 | 439,792 | 338 | 1,070,268 | 822 | 1,083,070 | 832 | ||||||||||||||||||||||||
Andrew Bonfield |
505 | 0.54 | 84,334 | 91 | 84,839 | 92 | 679,022 | 733 | ||||||||||||||||||||||||
Nick Winser |
295,775 | 417 | 201,579 | 284 | 497,354 | 701 | 534,754 | 753 | ||||||||||||||||||||||||
Tom King (vi)
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274,010 | 285 | 288,640 | 301 | 562,650 | 586 | 739,575 | 771 |
(i) | The salary used for calculating the value of shareholding is the salary earned in the year (see Table 1A on page 86). |
(ii) | The share price used for calculating the value of shareholding is 765p, which was the closing share price on 28 March 2013 (the last trading day in March 2013). |
(iii) | Shares held in Trust include vested but unexercised options for the Share Matching Plan (where applicable, see Table 3 on page 87), shares awarded under the DSP and vested shares under the PSP (see Table 4 on pages 88 and 89). Unvested shares in the PSP and LTPP, and unexercised options held under Sharesave are not included. |
(iv) | Shares in Trust are shown on a gross basis, ie before deductions for income tax and other withholdings. |
(v) | Shares subject to performance conditions which may or may not vest. These shares have not been included in the earlier columns. |
(vi) | Shares converted from ADSs where each ADS represents five ordinary shares. |
Share dilution through the operation of share-based incentive plans
Where shares may be issued or treasury shares reissued to satisfy incentives, the aggregate dilution resulting from executive share-based incentives will not exceed 5% in any 10 year period. Dilution resulting from all incentives, including all-employee incentives, will not exceed 10% in any 10 year period. The Remuneration Committee reviews dilution against these limits regularly and under these limits the Company currently has headroom of 4.07% and 7.75% respectively.
82 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Single figure calculation based on the draft BIS regulations. For further details, please see pages 86 to 89
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2012/13
(£000s) (i)
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Steve Holliday |
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Base Pay |
996 | |||||
APP |
846 | (ii) | ||||
Benefits in Kind (cash and non-cash) |
31 | |||||
2009 PSP vesting value including cash payments in lieu of dividends |
714 | (iii) | ||||
Pension |
812 | (iv) | ||||
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Total |
3,399 | |||||
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Andrew Bonfield |
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Base Pay |
709 | |||||
APP |
677 | (ii) | ||||
Benefits in Kind (cash and non-cash) |
54 | |||||
2009 PSP vesting value including cash payments in lieu of dividends |
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Pension |
213 | (v) | ||||
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Total |
1,653 | |||||
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Nick Winser |
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Base Pay |
543 | |||||
APP |
500 | (ii) | ||||
Benefits in Kind (cash and non-cash) |
11 | |||||
2009 PSP vesting value including cash payments in lieu of dividends |
357 | (iii) | ||||
Pension |
336 | (iv) | ||||
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Total |
1,747 | |||||
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Tom King |
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Base Pay |
734 | |||||
APP |
526 | (ii) | ||||
Benefits in Kind (cash and non-cash) |
24 | |||||
2009 PSP vesting value including cash payments in lieu of dividends |
494 | (iii) | ||||
Pension |
980 | (vi) | ||||
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Total |
2,758 | |||||
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(i) | For Tom King the exchange rate averaged over the year 1 April 2012 to 31 March 2013 to convert dollars to UK pounds sterling is $1.57:£1. |
(ii) | The APP value reflects the full award before the deferral into shares on a compulsory basis. |
(iii) | During the year, the 2009 PSP award vested and entered a retention period, to be released in June 2013. The value shown uses the closing share price on the date of vesting (2 July 2012) ie 681p. |
(iv) | The pension value represents the additional benefit earned in the year (excluding inflation as measured by the consumer price index (CPI)) multiplied by a factor of 20. |
(v) | Andrew Bonfield is a member of the DC section of NGUKPS. The pension value represents 30% of salary via a combination of a cash allowance in lieu of pension contributions (£184,385) and Company pension contributions (£28,367). |
(vi) | The pension value represents the additional benefit earned in the year (excluding inflation) multiplied by a factor of 20. |
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External appointments and retention of fees
In line with our policy, the table below details the Executive Directors who served as non-executive directors in other companies during the year ended 31 March 2013.
Executive Directors |
Company |
Retained fees (£) |
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Steve Holliday |
Marks and Spencer Group plc | 85,000 | ||||
Andrew Bonfield |
Kingfisher plc | 80,000 | ||||
Nick Winser
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Kier Group plc
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44,000
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Chief Executives total remuneration for the period 2008/09 to 2012/13
The following table provides details of the Chief Executives total remuneration for the period 2008/09 to 2012/13, using the same methodology as that used for the single figure calculation.
2008/09 |
2009/10 |
2010/11 |
2011/12 |
2012/13 |
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Chief Executives total remuneration (£000s) (i) |
3,624 | 3,982 | 3,805 | 3,604 | 3,399 | |||||||||||||||
APP awards as a percentage of maximum potential (%) |
92 | 95.33 | 81.33 | 68.67 | 56.65 | |||||||||||||||
PSP awards vested as a percentage of maximum potential (%)
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100
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100
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65.15
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49.5
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|
25.15
|
|
(i) | The values are based on the methodology used for the single figure calculation (see page 83 for further details) and therefore include salary, APP, Benefits in Kind, vested PSP awards and pension benefits earned each year. |
Total shareholder return performance graph
The graph below represents the comparative TSR performance of the Company from 31 March 2008 to 31 March 2013.
This graph represents the Companys performance against the performance of the FTSE 100 index, which is considered suitable for this purpose as it is a broad equity market index of which National Grid is a constituent. This graph has been produced in accordance with the requirements of Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008.
In drawing this graph, it has been assumed that all dividends have been reinvested. The TSR level shown at 31 March each year is the average of the closing daily TSR levels for the 30 day period up to and including that date.
84 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Relative importance of spend on pay
The following table sets out the amount of Executive Directors total remuneration (using the single figure methodology used on page 83) in 2012/13, compared with other key metrics.
Key metric |
£m | |||
|
||||
Market capitalisation as at 31 March 2013 |
28,040 | |||
Dividends (interim and final for year ended 31 March 2013) |
1,494 | |||
Revenue |
14,359 | |||
Adjusted operating profit |
3,644 | |||
Cash flow generated from operations |
4,037 | |||
Capital investment (including joint ventures) |
3,700 | |||
Executive Directors total remuneration
|
|
10
|
|
Non-executive Directors fees
In 2012/13 the basic fee for UK-based, Non-executive Directors was £60,000 pa and for those who are US-based, £72,000 pa. The committee membership fee was £8,000 pa per membership and for those who are chairman of a committee, an additional fee of £12,500 pa was paid. The Audit Committee chairman received a fee of £15,000 pa to recognise the additional responsibilities commensurate with that role and the Senior Independent Director received a fee of £20,000 pa.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 85 |
Corporate Governance
Remuneration Report
Implementation report 2012/13
Continued
Remuneration during the year ended 31 March 2013
Sections 1, 2, 3, 4 and 6 comprise the auditable part of the Remuneration Report, being the information required by Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008.
1. Directors emoluments
The following tables set out the pre-tax emoluments for the years ended 31 March 2013 and 2012, including APP awards but excluding pensions, for individual Directors who held office in National Grid during the year ended 31 March 2013.
Table 1A | Year ended 31 March 2013 |
Year ended
|
||||||||||||||||||||||
|
||||||||||||||||||||||||
Executive Directors |
Salary (i)
£000s |
APP
£000s |
Benefits
|
Benefits
in Kind (ii) (non-cash) £000s |
Total
£000s |
Total
£000s |
||||||||||||||||||
|
||||||||||||||||||||||||
Steve Holliday |
996 | 846 | 12 | 19 | 1,873 | 2,001 | ||||||||||||||||||
Andrew Bonfield (iii) |
709 | 677 | 234 | 5 | 1,625 | 1,653 | ||||||||||||||||||
Nick Winser |
543 | 500 | | 11 | 1,054 | 1,057 | ||||||||||||||||||
Tom King (iv) |
734 | 526 | 5 | 19 | 1,284 | 1,449 | ||||||||||||||||||
|
||||||||||||||||||||||||
Total |
2,982 | 2,549 | 251 | 54 | 5,836 | 6,160 | ||||||||||||||||||
|
||||||||||||||||||||||||
|
(i) | For the reasons provided on page 80, the Executive Directors will not receive salary increases in June 2013, the next review will be in June 2014. As reported in last years Remuneration Report, salaries effective from 1 June 2012 were: Steve Holliday £1,000,000; Andrew Bonfield £712,000; Nick Winser £546,000; and Tom King £724,203. |
(ii) | Benefits in Kind comprise benefits such as private medical insurance, life assurance, either a fully expensed car or cash in lieu of a car and the use of a driver when required. In the case of Andrew Bonfield, a cash allowance in lieu of additional Company pension contributions is included (see Table 2 on page 87 for further details). |
(iii) | Andrew Bonfield participates in FPS which operates by way of salary sacrifice, therefore, his salary is reduced by the value of the benefits he has elected under the Plan. The value of these benefits is included in the Benefits in Kind (non-cash) figure. The value is £442. |
(iv) | For Tom King the exchange rate averaged over the year 1 April 2012 to 31 March 2013 to convert dollars to UK pounds sterling is $1.57: £1. |
Table 1B | Year ended 31 March 2013 |
Year ended
|
||||||||||||||
|
||||||||||||||||
Non-executive Directors |
Fees £000s |
Other emoluments £000s |
Total £000s |
Total £000s |
||||||||||||
|
||||||||||||||||
Sir Peter Gershon (i) |
475 | 17 | 492 | 228 | ||||||||||||
Ken Harvey (ii) |
108 | | 108 | 104 | ||||||||||||
Philip Aiken |
84 | | 84 | 76 | ||||||||||||
Nora Mead Brownell (iii) |
73 | | 73 | | ||||||||||||
Jonathan Dawson (iv) |
6 | | 6 | | ||||||||||||
Paul Golby (v) |
76 | | 76 | 13 | ||||||||||||
Ruth Kelly (v) |
76 | | 76 | 38 | ||||||||||||
Maria Richter |
101 | | 101 | 101 | ||||||||||||
George Rose (ii) |
91 | | 91 | 91 | ||||||||||||
Mark Williamson (vi) |
44 | | 44 | | ||||||||||||
Linda Adamany (vii) |
51 | | 51 | 88 | ||||||||||||
Stephen Pettit (viii) |
32 | | 32 | 97 | ||||||||||||
|
||||||||||||||||
Total |
1,217 | 17 | 1,234 | 836 | ||||||||||||
|
||||||||||||||||
|
(i) | Sir Peter Gershons other emoluments comprise medical insurance, cash in lieu of a car and the use of a driver when required. The figure shown for the year ended 31 March 2012 represents a partial year. Sir Peter Gershon joined the Board on 1 August 2011 as Deputy Chairman and became Chairman on 1 January 2012. |
(ii) | Ken Harvey and George Rose will step down from the Board at the close of the 2013 AGM. |
(iii) | Nora Mead Brownell joined the Board on 1 June 2012. |
(iv) | Jonathan Dawson joined the Board on 4 March 2013. |
(v) | The figures shown for the year ended 31 March 2012 represent partial years. Paul Golby joined the Board on 1 February 2012 and Ruth Kelly on 1 October 2011. |
(vi) | Mark Williamson joined the Board on 3 September 2012. |
(vii) | Linda Adamany stepped down from the Board on 31 October 2012. |
(viii) | Stephen Pettit stepped down from the Board on 30 July 2012. |
86 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
2. Directors pensions
The table below provides details of the Executive Directors pension benefits.
Additional
benefit earned during year ended 31 March 2013 pension £000s |
Accrued
as at
31 March 2013
|
Transfer value of accrued
|
Increase in
value less
|
Additional
£000s |
Transfer value
|
|||||||||||||||||||||||
Table 2 |
2013 £000s |
2012 £000s |
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Steve Holliday (iii) (iv) |
50 | 474 | 12,330 | 10,675 | 1,655 | 39 | 1,003 | |||||||||||||||||||||
Andrew Bonfield (v) |
| | | | | | | |||||||||||||||||||||
Nick Winser (iv) (vi) |
22 | 266 | 6,185 | 5,685 | 500 | 16 | 352 | |||||||||||||||||||||
Tom King (vii)
|
|
49
|
|
|
479
|
|
|
3,827
|
|
|
2,864
|
|
|
963
|
|
|
49
|
|
|
392
|
|
(i) | The transfer values shown at 31 March 2012 and 2013 represent the value of each Executive Directors accrued benefits based on total service to the relevant date. Transfer values for the UK-based Executive Directors have been calculated in line with transfer value bases agreed by the UK Pension Scheme Trustees. The transfer values for the US-based Executive Director have been calculated using discount rates based on high quality US corporate bonds and associated yields at the relevant dates. |
(ii) | The UK-based Executive Directors participate in FPS, a salary sacrifice arrangement. Therefore, contributions paid via salary sacrifice have not been deducted from the figures in the table above. Information about the contributions paid via FPS can be found in footnotes (iii), (v) and (vi) below. |
(iii) | In addition to the pension above, for Steve Holliday there is an accrued lump sum entitlement of £126,000 as at 31 March 2013. The increase to the accumulated lump sum including inflation was £4,000 and excluding inflation was £1,000 in the year to 31 March 2013. The transfer value information above includes the value of the lump sum. Contributions were paid via FPS of £21,000. |
(iv) | The requirements for the calculation of pensionable salary in the table on page 83 are different to those for this table. Therefore, in order to achieve alignment between the tables, figures reported in the 2011/12 Directors Remuneration Report for the transfer value of accrued benefits as at 31 March 2012 have been rebased. |
(v) | Andrew Bonfield does not participate in either of the Companys defined benefit pension arrangements. Andrew is a member of the DC section of the NGUKPS and the Company has made contributions of £28,367 to this arrangement. In addition, £14,183 was paid via FPS. Andrew also received a cash allowance in lieu of additional Company contributions equal to 26% of base salary. This allowance is included in Table 1A on page 86. |
(vi) | In addition to the pension above, for Nick Winser there is an accrued lump sum entitlement of £306,000 as at 31 March 2013. The increase to the accumulated lump sum including inflation was £11,000 and excluding inflation was £4,000 in the year to 31 March 2013. The transfer value information above includes the value of the lump sum. Contributions were paid via FPS of £33,000. |
(vii) | For Tom King, the exchange rate as at 31 March 2013 was $1.51945:£1 and as at 31 March 2012 was $1.59960:£1. In addition to the pension quoted above, through participation in the 401(k) plan in the US, the Company made contributions worth £1,878 to a defined contribution arrangement. |
3. Directors interests in share options
Executive Share Option Plan (ESOP)
The table below provides details of the Executive Directors holdings of share options awarded under the Share Matching Plan (Share Match) and Sharesave plans.
Table 3 |
Options held
at 1 April 2012 |
Options
|
Market price
at exercise (pence) |
Options
granted during the year |
Options held at
31 March 2013 |
Exercise price
per share (pence) |
Normal exercise
period |
|||||||||||||||||||||
|
||||||||||||||||||||||||||||
Steve Holliday |
||||||||||||||||||||||||||||
Share Match |
16,092 | | | | 16,092 | 100 in total | Jun 2006 to Jun 2013 | |||||||||||||||||||||
21,383 | | | | 21,383 | nil | May 2007 to May 2014 | ||||||||||||||||||||||
Sharesave |
3,921 | | | | 3,921 | 427.05 | Apr 2014 to Sep 2014 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total |
41,396 | | | 41,396 | ||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Andrew Bonfield |
||||||||||||||||||||||||||||
Sharesave |
3,421 | | | | 3,421 | 445 | Apr 2016 to Sep 2016 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total |
3,421 | | | 3,421 | ||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
|
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 87 |
Corporate Governance
Remuneration Report
Implementation report 2012/13
Continued
4. Directors interests in the LTPP, PSP and DSP
The table below provides details of the Executive Directors holdings of shares awarded under the LTPP whereby Executive Directors receive a conditional award of shares, up to a current maximum of 200% of salary (225% of salary for the Chief Executive), which is subject to performance criteria over a three year performance period for the annualised growth of the Companys EPS (50% of the award), see page 48 for further information, and the Companys TSR performance (25% of the award) when compared with the FTSE 100. The final 25% of the award is subject to ROE performance over four years. See page 07 for further information.
The table includes shares awarded under the PSP whereby Executive Directors received a conditional award of shares, up to a maximum of 200% of salary, which is subject to performance criteria over a three year performance period. Awards vest based on the Companys TSR performance when compared with the FTSE 100 at the date of grant (50% of the award) and the annualised growth of the Companys EPS (50% of the award). Shares are then released on the fourth anniversary of the date of grant, following a retention period.
The table includes share awards under the DSP, where Executive Directors receive an award of shares representing one half of any APP award earned in the year. The deferred shares are held in Trust for three years before release.
Table 4 |
Type of
award |
PSP, LTPP
|
Awards
lapsed during year |
Awards
vested in year |
Release
of PSP awards in year |
Awards
granted during year |
Market price
at award (pence except #) |
Date of
award (dd/mm/yy) |
Conditional
awards at 31 March 2013 |
Release date (dd/mm/yy) |
||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Steve Holliday |
||||||||||||||||||||||||||||||||||||||||
PSP | 156,653 | | | 156,653 (i | ) | | 584.57 | 25/06/08 | | 25/06/12 | ||||||||||||||||||||||||||||||
PSP | 391,212 | 292,823 (ii | ) | 98,389 (ii | ) | | | 472.89 | 25/06/09 | 98,389 | 25/06/13 | |||||||||||||||||||||||||||||
PSP | 384,220 | | | | | 494.5076 | 29/06/10 | 384,220 | 29/06/14 | |||||||||||||||||||||||||||||||
LTPP | 362,148 | | | | | 605.7605 | 28/07/11 | 362,148 |
|
28/07/14
& 28/07/15 |
|
|||||||||||||||||||||||||||||
LTPP | | | | | 336,702 | 668.2456 | 28/06/12 | 336,702 |
|
28/06/15
& 28/06/16 |
|
|||||||||||||||||||||||||||||
DSP | 68,960 | | 68,960 (iii | ) | | | 541.14 | 11/06/09 | | 11/06/12 | ||||||||||||||||||||||||||||||
DSP | 130,636 | | | | | 506.294 | 15/06/10 | 130,636 | 15/06/13 | |||||||||||||||||||||||||||||||
DSP | 97,359 | | | | | 592.6 | 15/06/11 | 97,359 | 15/06/14 | |||||||||||||||||||||||||||||||
DSP | | | | | 75,933 | 658.47 | 14/06/12 | 75,933 | 14/06/15 | |||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Total |
1,591,188 | 292,823 | 167,349 | 156,653 | 412,635 | 1,485,387 | ||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Andrew Bonfield |
||||||||||||||||||||||||||||||||||||||||
PSP | 236,464 | | | | | 570.9098 | 30/11/10 | 236,464 | 30/11/14 | |||||||||||||||||||||||||||||||
LTPP | 229,463 | | | | | 605.7605 | 28/07/11 | 229,463 |
|
28/07/14
& 28/07/15 |
|
|||||||||||||||||||||||||||||
LTPP | | | | | 213,095 | 668.2456 | 28/06/12 | 213,095 |
|
28/06/15
& 28/06/16 |
|
|||||||||||||||||||||||||||||
DSP | 29,184 | | | | | 592.6 | 15/06/11 | 29,184 | 15/06/14 | |||||||||||||||||||||||||||||||
DSP | | | | | 55,150 | 658.47 | 14/06/12 | 55,150 | 14/06/15 | |||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Total |
495,111 | | | | 268,245 | 763,356 | ||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Nick Winser |
||||||||||||||||||||||||||||||||||||||||
PSP | 78,292 | | | 78,292 (i | ) | | 584.57 | 25/06/08 | | 25/06/12 | ||||||||||||||||||||||||||||||
PSP | 195,521 | 146,348 (ii | ) | 49,173 (ii | ) | | | 472.89 | 25/06/09 | 49,173 | 25/06/13 | |||||||||||||||||||||||||||||
PSP | 196,356 | | | | | 494.5076 | 29/06/10 | 196,356 | 29/06/14 | |||||||||||||||||||||||||||||||
LTPP | 174,986 | | | | | 605.7605 | 28/07/11 | 174,986 |
|
28/07/14
& 28/07/15 |
|
|||||||||||||||||||||||||||||
LTPP | | | | | 163,412 | 668.2456 | 28/06/12 | 163,412 |
|
28/06/15
& 28/06/16 |
|
|||||||||||||||||||||||||||||
DSP | 33,804 | | 33,804 (iii | ) | | | 541.14 | 11/06/09 | | 11/06/12 | ||||||||||||||||||||||||||||||
DSP | 64,370 | | | | | 506.294 | 15/06/10 | 64,370 | 15/06/13 | |||||||||||||||||||||||||||||||
DSP | 48,354 | | | | | 592.6 | 15/06/11 | 48,354 | 15/06/14 | |||||||||||||||||||||||||||||||
DSP | | | | | 39,682 | 658.47 | 14/06/12 | 39,682 | 14/06/15 | |||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Total |
|
791,683 | 146,348 | 82,977 | 78,292 | 203,094 | 736,333 | |||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
|
88 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Table 4 |
Type of
award |
PSP, LTPP
and DSP
1 April 2012 |
Awards
year |
Awards
in year |
Release
of PSP awards in year |
Awards
year |
Market price
at award
|
Date of
award (dd/mm/yy) |
Conditional
31 March 2013 |
Release
date (dd/mm/yy) |
||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Tom King (iv) |
||||||||||||||||||||||||||||||||||||||||
PSP | 18,157 | | | 18,157 (i) | | $57.2505 # | 25/06/08 | | 25/06/12 | |||||||||||||||||||||||||||||||
PSP | 54,403 | 40,720 (ii) | 13,683 (ii) | | | $38.6002 # | 25/06/09 | 13,683 | 25/06/13 | |||||||||||||||||||||||||||||||
PSP | 57,762 | | | | | $37.4465 # | 29/06/10 | 57,762 | 29/06/14 | |||||||||||||||||||||||||||||||
LTPP | 45,537 | | | | | $49.4093 # | 28/07/11 | 45,537 |
|
28/07/14
& 28/07/15 |
|
|||||||||||||||||||||||||||||
LTPP | | | | | 44,616 | $51.9094 # | 28/06/12 | 44,616 |
|
28/06/15
& 28/06/16 |
|
|||||||||||||||||||||||||||||
DSP | 13,804 | | 13,804 (iii) | | | $39.2373 # | 11/06/09 | | 11/06/12 | |||||||||||||||||||||||||||||||
DSP | 18,776 | | | | | $37.7474 # | 15/06/10 | 18,776 | 15/06/13 | |||||||||||||||||||||||||||||||
DSP | 13,937 | | | | | $48.261 # | 15/06/11 | 13,937 | 15/06/14 | |||||||||||||||||||||||||||||||
DSP | | | | | 11,332 | $51.2887 # | 14/06/12 | 11,332 | 14/06/15 | |||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Total ADSs |
222,376 | 40,720 | 27,487 | 18,157 | 55,948 | 205,643 | ||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) | The 2008 PSP award vested partially (at a vesting level of 49.5% of the award) in July 2011 and then entered a retention period. The vested shares were released on the fourth anniversary of the date of grant (ie June 2012). The closing share price on the date of release was 661p (ADS $51.52). |
(ii) | The 2009 PSP award vested partially in July 2012 at a vesting level of 25.15% of the award. The award then entered a retention period. Cash payments in lieu of dividends accrued during the retention period were paid as follows: Steve Holliday £27,713 in August 2012 and £15,841 in February 2013; Nick Winser £13,850 and £7,917 respectively; Tom King £17,575 and £10,020 respectively. |
(iii) | Following the three year deferral period, the 2009 DSP award was released in June 2012. Cash payments in lieu of dividends accrued during the deferral period were paid as follows: Steve Holliday £110,642; Nick Winser £54,236 and Tom King £75,566. The closing share price on the date of release was 659.50p (ADS $51.19). Exceptionally, this award for Steve Holliday and Nick Winser was made over restricted shares. The award was subject to income tax and National Insurance Contributions on grant and therefore the shares shown reflect the net number of shares. |
(iv) | All awards were made over ADSs and each ADS represents five ordinary shares. |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 89 |
Corporate Governance
Remuneration Report
Implementation report 2012/13
Continued
5. Directors beneficial interests
The Directors beneficial interests (which include those of their families) in National Grid ordinary shares of 11 17 ⁄ 43 pence each are shown below.
Table 5 |
Ordinary shares at
or, if earlier, on
|
Ordinary shares at
or, if later, on
|
Options/awards over
ordinary shares at
|
Options/awards over
ordinary shares at 1 April 2012 |
||||||||||||
|
||||||||||||||||
Sir Peter Gershon |
41,486 | 18,055 | | | ||||||||||||
Steve Holliday (ii) (iii) |
630,476 | 484,560 | 1,526,783 | 1,632,584 | ||||||||||||
Andrew Bonfield (ii) (iii) |
505 | 287 | 766,777 | 498,532 | ||||||||||||
Nick Winser (ii) |
295,775 | 224,473 | 736,333 | 791,683 | ||||||||||||
Tom King (iv) |
274,010 | 209,285 | 1,028,215 | 1,111,880 | ||||||||||||
Ken Harvey (v) |
5,236 | 5,236 | | | ||||||||||||
Philip Aiken |
4,900 | 4,900 | | | ||||||||||||
Nora Mead Brownell (vi) |
5,000 | * | | | ||||||||||||
Jonathan Dawson (vii) |
| * | | | ||||||||||||
Paul Golby |
2,500 | 2,500 | | | ||||||||||||
Ruth Kelly |
800 | 800 | | | ||||||||||||
Maria Richter |
14,357 | 14,357 | | | ||||||||||||
George Rose (v) |
6,792 | 6,792 | | | ||||||||||||
Mark Williamson (viii) |
4,726 | * | | | ||||||||||||
Linda Adamany (ix) |
2,800 | 2,800 | | | ||||||||||||
Stephen Pettit (x)
|
|
4,061
|
|
|
4,061
|
|
|
|
|
|
|
|
(i) | There has been no other change in the beneficial interests of the Directors in ordinary shares between 1 April 2013 and 15 May 2013, except in respect of routine monthly purchases under the SIP (see note (iii) below). |
(ii) | Each of the Executive Directors, with the exception of Tom King, was for Companies Act purposes deemed to be a potential beneficiary under the National Grid plc 1996 Employee Benefit Trust and the National Grid Employee Share Trust. Steve Holliday, Andrew Bonfield and Nick Winser thereby have an interest in 16,092 and 600,216 ordinary shares in the aforementioned trusts respectively, as at 31 March 2013 (with the latter trust holding 86,708 ADSs in addition). |
(iii) | Beneficial interests include shares purchased under the monthly operation of the SIP in the year to 31 March 2013. In April and May 2013 a further 32 shares were purchased on behalf of Steve Holliday and a further 31 shares were purchased on behalf of Andrew Bonfield, thereby increasing their beneficial interests. |
(iv) | Shares converted from ADSs where each ADS represents five ordinary shares. |
(v) | Ken Harvey and George Rose will step down from the Board at the close of the 2013 AGM. |
(vi) | Nora Mead Brownell joined the Board on 1 June 2012. |
(vii) | Jonathan Dawson joined the Board on 4 March 2013. |
(viii) | Mark Williamson joined the Board on 3 September 2012. |
(ix) | Linda Adamany stepped down from the Board on 31 October 2012. |
(x) | Stephen Pettit stepped down from the Board on 30 July 2012. |
6. National Grid share price range
The closing price of a National Grid ordinary share on 28 March 2013 (the last trading day in March 2013) was 765p. The range during the year (previous 52 weeks) was 765p (high) and 633p (low). The Register of Directors Interests contains full details of shareholdings and options/awards held by Directors as at 31 March 2013.
The Remuneration Report has been approved by the Board and signed on its behalf by:
Ken Harvey
Chairman of the Remuneration Committee
15 May 2013
90 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
We believe it is important to maintain effective channels of communication with our debt and equity institutional investors and individual shareholders to understand their views about the Company and ensure they are provided with timely and appropriate information on our strategy, performance, objectives, financing and other developments.
The Company maintains appropriate controls on the dissemination of price sensitive information. For more information on the role of the Disclosure Committee, see page 65.
A shareholder analysis and a list of material interests in our shares are set out on pages 187 and 183 respectively.
Institutional investors
The Board oversees investor engagement, which is managed by the Chief Executive, Finance Director and Director of Investor Relations. We undertake a comprehensive programme of engagement for institutional investors and research analysts, including meetings, presentations, webinars and attendance at key investor conferences, which provides the opportunity for our current and potential investors to meet with Executive and operational management.
In the past year, we have focused on updating investors about regulatory processes in the UK and US, notably Ofgems RIIO price controls.
The Board receives regular feedback on investor perceptions and opinions about the Company and specialist advisors, our brokers and the Director of Investor Relations provide updates on market sentiment to the Board. The Board also receives annually the results of an independent audit of investor perceptions.
Sir Peter contacts our major shareholders at the time of our full-year results to offer them the opportunity to meet with him, the Senior Independent Director, and any of our other Non-executive Directors, so they can discuss any issues they feel unable to raise with members of the Executive team.
In addition to the engagement activities set out above, this year we will be introducing a stewardship meeting. With a governance theme, the event aims to provide investors with an insight into our decision-making processes, the work of our committees and the implications of the new regulatory regimes in the UK and US. The event will also provide the opportunity for attendees to ask questions and meet members of the Board and for our newer Non-executive Directors to understand the views and concerns of our shareholders about the Company.
Debt investors
Over the last year representatives from our treasury team, together with the Finance Director and other senior management from across the business, have met with debt investors in Australia, Canada, Europe, the Far East and the US. These events have been used to discuss key topics such as Ofgems RIIO price controls and the regulatory process in the US. A series of events were held ahead of our issuance of £2.1 billion of hybrid bonds, to improve investor awareness and increase take up.
With the total debt issued during the year at £5.1 billion, it is important for us to explain to debt investors why this money is required and what protections are in place to safeguard their potential investment. We also communicate to our debt investors through regular Company announcements as well as via the debt investor section of our website, which contains bond prospectuses, credit ratings, materials on the retail bond issued in 2011 and subsidiary year-end reports. The website also contains information on the long-term debt maturity profile, enabling investors to see our future refinancing needs.
Individual shareholders
Engagement with individual shareholders, who represent more than 95% of the shareholders on our share register, is led by the Group General Counsel & Company Secretary. Shareholders are invited to learn more about the Company through the shareholder networking programme, see below, and the exhibits at the AGM.
In addition, shareholders were also invited by Capita Registrars to visit their offices to increase awareness of the services they provide to our shareholders.
Annual General Meeting
This will be held on Monday 29 July 2013 at The International Convention Centre in Birmingham. The Notice of Meeting for the 2013 AGM, available on our website, sets out in full the resolutions for consideration by shareholders together with explanatory notes and further information on the Directors standing for election and re-election. The AGM can be viewed by webcast on our website where information on how to view the webcast can also be found.
Shareholder networking
The shareholder networking programme normally takes place twice a year and includes visits to UK operational sites and presentations by senior managers and employees over two days. The costs of the programme (including reasonable shareholder travel to and from the event) are paid for by the Company.
If you are a UK resident shareholder and would like to take part please apply online via the Investors page on our website. You can also apply in person at the AGM. Only those successful in the selection ballot will be contacted, with priority given to those who have not recently attended.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 91 |
Financial Statements
Introduction to the financial statements
We have adopted a revised presentational format to provide shareholders and users of these financial statements with additional information and guidance and to make them easier to understand.
Throughout these financial statements we have included Keeping it simple boxes, providing commentary in plain English on what the disclosures mean and why they are important to the understanding of our financial performance and position. We also include a number of boxes highlighting Our strategy in action which draw out the key elements of our business model, set out in the Strategic Review on pages 01 to 57, and show how the disclosures reflect this strategy.
Keeping it simple
Audit opinions
We have two audit opinions on our financial statements, reflecting our dual listing on the London Stock Exchange and the New York Stock Exchange. Due to the different reporting requirements for each listing, our auditors are required to confirm compliance with each set of standards in a prescribed format. There are also additional specific disclosure requirements due to our US listing which are included in the notes. |
Consolidated financial statements
We are required to present certain minimum information in the primary financial statements, which together set out the overview of the results of the business for the year and financial position at year end.
The consolidated income statement shows all revenue earned and costs incurred in the year, with the difference being the overall profit for the year.
The consolidated statement of comprehensive income records certain items as prescribed by the accounting rules. For us, the majority of the income or expense included here relates to movements in actuarial assumptions on pension schemes and the associated tax impact. These items are not part of profit for the year, yet are important to allow the reader to gain a more comprehensive picture of our performance as a whole.
The consolidated statement of financial position sets out all the Groups assets and liabilities at the year end, analysed between the net assets we have for use in the business and those held for sale. As a capital intensive business, we have significant amounts of physical assets and corresponding borrowings.
The consolidated statement of changes in equity shows the additions (where it came from) and reductions (where it went) to equity. For us, the main items included here are the profit earned and dividends paid in the year.
The consolidated cash flow statement shows how the cash balance has moved during the year. Cash inflows and outflows are presented to allow users to understand how they relate to the day-to-day operations of the business (Operating activities); the money that has been spent or earned on assets in the year, including acquisitions of physical assets or other businesses (Investing activities); and the cash raised from debt or share issues and other loan borrowings or repayments (Financing activities). |
Notes
Notes to the financial statements provide additional information required by statute, accounting standards or other regulations to assist in a more detailed understanding of the primary financial statements. In many notes we have included an accounting policy that describes how the transactions or balance in that note have been measured, recognised and disclosed. The basis of preparation section provides details of accounting policies that apply to transactions and balances in general. |
92 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Statement of Directors responsibilities
The Directors are responsible for preparing the Annual Report and Accounts, including the consolidated financial statements and the Company financial statements, the Directors Report, including the Remuneration Report and the Strategic Review, in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, and the Company financial statements and the Remuneration Report in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom generally accepted accounting practice, UK GAAP). In preparing the consolidated financial statements, the Directors have also elected to comply with IFRS, issued by the International Accounting Standards Board (IASB). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company on a consolidated and individual basis and of the profit or loss of the Company on a consolidated basis for that period.
In preparing these financial statements, the Directors are required to:
| select suitable accounting policies and then apply them consistently; |
| make judgements and estimates that are reasonable and prudent; |
| state that the consolidated financial statements comply with IFRS as issued by the IASB and IFRS adopted by the European Union and, with regard to the Company financial statements, that applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and |
| prepare the consolidated financial statements and Company financial statements on a going concern basis unless it is inappropriate to presume that the Company, on a consolidated and individual basis, will continue in business, in which case there should be supporting assumptions or qualifications as necessary. |
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Companys transactions and disclose with reasonable accuracy at any time the financial position of the Company on a consolidated and individual basis, and to enable them to ensure that the consolidated financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation and the Company financial statements and the Remuneration Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and its subsidiaries and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Each of the Directors, whose names and functions are listed on pages 26 and 27, confirms that:
| to the best of their knowledge, the consolidated financial statements and the Company financial statements, which have been prepared in accordance with IFRS as issued by the IASB and IFRS as adopted by the European Union and UK GAAP respectively, give a true and fair view of the assets, liabilities, financial position and profit of the Company on a consolidated and individual basis; |
| to the best of their knowledge, the Annual Report and Accounts includes a fair review of the development and performance of the business and the position of the Company on a consolidated and individual basis, together with a description of the principal risks and uncertainties that it faces; and |
| they consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Companys performance, business model and strategy. |
By order of the Board
Alison Kay
Group General Counsel & Company Secretary
15 May 2013
Company number: 4031152
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 93 |
Financial Statements
[INTENTIONALLY LEFT BLANK]
94 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Report of Independent Registered
Public Accounting Firm
to the Board of Directors and Shareholders of National Grid plc
Audit opinion for Form 20-F
In our opinion, the accompanying consolidated statements of financial position and the related consolidated income statements, consolidated statements of comprehensive income, consolidated cash flow statements and consolidated statements of changes in equity, present fairly, in all material respects, the financial position of National Grid plc and its subsidiaries at 31 March 2013 and 31 March 2012, and the results of their operations and their cash flows for each of the three years in the period ended 31 March 2013 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board and in conformity with International Financial Reporting Standards as adopted by the European Union.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of 31 March 2013, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Companys management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the Additional information section appearing on page 179 of the 2013 Annual Report and Accounts.
Our responsibility is to express opinions on these financial statements and on the Companys internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A companys 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 companys internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) 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 authorisations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the companys 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.
PricewaterhouseCoopers LLP
London
United Kingdom
15 May 2013
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 95 |
Financial Statements
Contents of financial statements
96 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Accounting policies describe our approach to recognising and measuring transactions in the year. Accounting policies applicable across the financial statements are shown below. Accounting policies that are specific to a component of the financial statements have been incorporated into the note that provides additional information regarding that component.
This section also shows areas of judgement and key sources of estimation uncertainty in these financial statements as well as new EU endorsed accounting standards, amendments and interpretations, whether these are effective in 2013 or later years. We explain how significant changes are expected to affect our performance.
|
National Grids 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, with its registered office at 1-3 Strand, London WC2N 5EH.
The Company 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 of Directors on 15 May 2013.
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 as adopted by the EU. They are prepared on the basis of all IFRS accounting standards and interpretations that are mandatory for periods ending 31 March 2013 and in accordance with the Companies Act 2006 applicable to companies reporting under IFRS and Article 4 of the EU IAS Regulation. The 2012 and 2011 comparative financial information has also been prepared on this basis.
The consolidated financial statements have been prepared on an historical cost basis, except for the recording of pension assets and liabilities, the revaluation of derivative financial instruments and certain commodity contracts and investments classified as available-for-sale.
The consolidated financial statements have been prepared on a going concern basis following the assessment made by the Directors as set out on page 57.
These consolidated financial statements are presented in pounds sterling, which is also the functional currency of the Company.
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 (see accounting policy C). Actual results could differ from these estimates.
A. Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries, together with a share of the results, assets and liabilities of jointly controlled entities (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, less any provision for impairment.
A subsidiary is defined as an entity controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
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 ventures and associates into line with those used by the Company in its consolidated financial statements under IFRS. Intercompany transactions are eliminated.
The results of subsidiaries, 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.
B. 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 adoption of hedge accounting requires inclusion in other comprehensive income note 14.
On consolidation, the assets and liabilities of operations that have a functional currency different from the Companys 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 weighted average exchange rates for the period where these do not differ materially from rates at the date of the transaction. Exchange differences arising are classified as equity and transferred to the consolidated translation reserve.
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Financial Statements
Basis of preparation
Continued
C. 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 contained 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 categorisation of certain items as exceptional items, remeasurements and stranded cost recoveries and the definition of adjusted earnings notes 3 and 6. |
| Classification of business activities as held for sale and discontinued operations note 18. |
| Hedge accounting note 14. |
| Energy purchase contracts classification as being for normal purchase, sale or usage note 27. |
IFRS provides certain options available within accounting standards. Choices we have made, and continue to make, include the following:
| Presentation formats. We use the nature of expense method for our income statement and total our statement of financial position to net assets and total equity. In the income statement, we present subtotals of total operating profit, profit before tax and profit from continuing operations, together with additional subtotals excluding exceptional items, remeasurements and stranded cost recoveries. Exceptional items, remeasurements and stranded cost recoveries are presented separately on the face of the income statement. |
| Customer contributions. Contributions received prior to 1 July 2009 towards capital expenditure are recorded as deferred income and amortised in line with the depreciation on the associated asset. |
| Financial instruments. We normally opt to apply hedge accounting in most circumstances where this is permitted. For net investment hedges, we have chosen to use the spot rate method, rather than the alternative forward rate method. |
Key sources of estimation uncertainty that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows:
| Impairment of goodwill note 8. |
| Review of residual lives, carrying values and impairment charges for other intangible assets and property, plant and equipment notes 9 and 10. |
| Estimation of liabilities for pensions and other post-retirement benefits notes 22 and 29. |
| Valuation of financial instruments and derivatives notes 14, 30 and 31. |
| Revenue recognition and assessment of unbilled revenue note 1. |
| Recoverability of deferred tax assets note 5. |
| Environmental and decommissioning provisions note 23. |
In order to illustrate the impact that changes in assumptions could have on our results and financial position, we have included sensitivity analysis in note 34.
98 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Recent accounting developments
New IFRS accounting standards and interpretations adopted in 2012/13
During the year ended 31 March 2013, the Company has not adopted any new IFRS, IAS or amendments issued by the IASB, or interpretations issued by the IFRS Interpretations Committee, which have had a material impact on the Companys consolidated financial statements.
New IFRS accounting standards and interpretations not yet adopted
The Company enters into a significant number of transactions that fall within the scope of IFRS 9 on financial instruments. The IASB is completing IFRS 9 in phases and the Company is evaluating the impact of the standard as it develops. It is currently expected that the standard will be required to be adopted by the Company on 1 April 2015. We are currently assessing the likely impact of this standard on the Companys consolidated financial statements.
IFRS 10 on consolidated financial statements, IFRS 11 on joint arrangements, IFRS 12 on disclosures of interests in other entities and IFRS 13 on fair value measurements and consequent amendments to IAS 27 and IAS 28 were issued in May 2011. These standards are not expected to have a significant impact on the consolidated financial statements. The standards are required to be adopted by the Company on 1 April 2013.
The amended version of IAS 19 on employee benefits, issued in June 2011 and effective for periods beginning after 1 January 2013, requires net interest to be calculated on the net defined benefit asset/(liability) using the same discount rate used to measure the defined benefit obligation. Where the expected return on assets exceeds the discount rate, the adoption of the amended standard will result in a reduction in reported net income and an increase in other comprehensive income (OCI). The impact on the Companys financial statements for the period of initial application of the amended standard will depend upon reported pension assets and liabilities and the relationship between the expected return on assets and the discount rate at the date of adoption. If the amended standard had been adopted for the year ended 31 March 2013, net income would have been reduced by £142m and OCI increased by £146m.
The amendments to IAS 1 (Presentation of Financial Statements), issued in June 2011 and effective for periods beginning on or after 1 July 2012, require entities to group items presented in OCI based on whether they are potentially reclassifiable to profit or loss subsequently. It also requires tax associated with any items presented before tax to be shown separately for each of the two groups of OCI items. These amendments are presentational only and will not affect the results of the Group when adopted.
Other standards and interpretations or amendments thereto which have been issued, but are not yet effective, are not expected to have a material impact on the Companys consolidated financial statements.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 99 |
Financial Statements
for the years ended 31 March
Notes |
2013 £m |
2013 £m |
2012 £m |
2012 £m |
2011 £m |
2011 £m |
||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Revenue |
1(a | ) | 14,359 | 13,832 | 14,343 | |||||||||||||||||||||||
Operating costs |
2 | (10,605) | (10,293) | (10,598) | ||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Operating profit |
||||||||||||||||||||||||||||
Before exceptional items, remeasurements and stranded cost recoveries |
1(b | ) | 3,644 | 3,495 | 3,600 | |||||||||||||||||||||||
Exceptional items, remeasurements and stranded cost recoveries |
3 | 110 | 44 | 145 | ||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||
Total operating profit |
1(b | ) | 3,754 | 3,539 | 3,745 | |||||||||||||||||||||||
Finance income |
||||||||||||||||||||||||||||
Before exceptional items |
4 | 1,252 | 1,301 | 1,281 | ||||||||||||||||||||||||
Exceptional items |
3,4 | | | 43 | ||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||
Total finance income |
4 | 1,252 | 1,301 | 1,324 | ||||||||||||||||||||||||
Finance costs |
||||||||||||||||||||||||||||
Before exceptional items and remeasurements |
4 | (2,172) | (2,218) | (2,415) | ||||||||||||||||||||||||
Exceptional items and remeasurements |
3,4 | 68 | (70) | (37) | ||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||
Total finance costs |
4 | (2,104) | (2,288) | (2,452) | ||||||||||||||||||||||||
Share of post-tax results of joint ventures and associates |
13 | 18 | 7 | 7 | ||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Profit before tax |
||||||||||||||||||||||||||||
Before exceptional items, remeasurements and stranded cost recoveries |
1(b | ) | 2,742 | 2,585 | 2,473 | |||||||||||||||||||||||
Exceptional items, remeasurements and stranded cost recoveries |
3 | 178 | (26) | 151 | ||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||
Total profit before tax |
1(b | ) | 2,920 | 2,559 | 2,624 | |||||||||||||||||||||||
Taxation |
||||||||||||||||||||||||||||
Before exceptional items, remeasurements and stranded cost recoveries |
5 | (686) | (755) | (722) | ||||||||||||||||||||||||
Exceptional items, remeasurements and stranded cost recoveries |
3,5 | 62 | 234 | 261 | ||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||
Total taxation |
5 | (624) | (521) | (461) | ||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Profit after tax |
||||||||||||||||||||||||||||
Before exceptional items, remeasurements and stranded cost recoveries |
2,056 | 1,830 | 1,751 | |||||||||||||||||||||||||
Exceptional items, remeasurements and stranded cost recoveries |
3 | 240 | 208 | 412 | ||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Profit for the year |
2,296 | 2,038 | 2,163 | |||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Attributable to: |
||||||||||||||||||||||||||||
Equity shareholders of the parent |
2,295 | 2,036 | 2,159 | |||||||||||||||||||||||||
Non-controlling interests |
1 | 2 | 4 | |||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
2,296 | 2,038 | 2,163 | ||||||||||||||||||||||||||
|
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Earnings per share* |
||||||||||||||||||||||||||||
Basic |
6 | 62.6p | 55.6p | 61.2p | ||||||||||||||||||||||||
Diluted |
6 | 62.3p | 55.4p | 6.9p | ||||||||||||||||||||||||
|
*Comparative amounts have been restated to reflect the impact of additional shares issued as scrip dividends
The notes on pages 105 to 164 form part of the consolidated financial statements.
100 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
of comprehensive income
for the years ended 31 March
Notes |
2013 £m |
2012 £m |
2011 £m |
|||||||||||||
|
||||||||||||||||
Profit for the year |
2,296 | 2,038 | 2,163 | |||||||||||||
Other comprehensive (loss)/income: |
||||||||||||||||
Exchange adjustments |
117 | 27 | (95) | |||||||||||||
Actuarial net (losses)/gains |
22 | (930 | ) | (1,325 | ) | 571 | ||||||||||
Deferred tax on actuarial net gains and losses |
5 | 249 | 403 | (181) | ||||||||||||
Net (losses)/gains in respect of cash flow hedges |
(31 | ) | (18 | ) | 7 | |||||||||||
Transferred to profit or loss on cash flow hedges |
73 | 19 | (7) | |||||||||||||
Deferred tax on cash flow hedges |
5 | (13 | ) | 2 | (2) | |||||||||||
Net gains on available-for-sale investments |
20 | 16 | 16 | |||||||||||||
Transferred to profit or loss on sale of available-for-sale investments |
(10 | ) | (9 | ) | (3) | |||||||||||
Deferred tax on available-for-sale investments |
5 | (2 | ) | (2 | ) | (1) | ||||||||||
Share of post-tax other comprehensive loss of joint ventures |
| | (4) | |||||||||||||
|
||||||||||||||||
Other comprehensive (loss)/income for the year, net of tax
|
(527 | ) | (887 | ) | 301 | |||||||||||
|
||||||||||||||||
Total comprehensive income for the year |
1,769 | 1,151 | 2,464 | |||||||||||||
|
||||||||||||||||
Attributable to: |
||||||||||||||||
Equity shareholders of the parent |
1,768 | 1,149 | 2,460 | |||||||||||||
Non-controlling interests |
1 | 2 | 4 | |||||||||||||
|
||||||||||||||||
1,769 | 1,151 | 2,464 | ||||||||||||||
|
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Financial Statements
Consolidated statement of financial position
as at 31 March
Notes |
2013 £m |
2012 £m |
||||||||||
|
||||||||||||
Non-current assets |
||||||||||||
Goodwill |
8 | 5,028 | 4,776 | |||||||||
Other intangible assets |
9 | 589 | 546 | |||||||||
Property, plant and equipment |
10 | 36,592 | 33,701 | |||||||||
Other non-current assets |
11 | 104 | 95 | |||||||||
Pension assets |
22 | 195 | 155 | |||||||||
Financial and other investments |
12 | 278 | 251 | |||||||||
Investments in joint ventures and associates |
13 | 371 | 341 | |||||||||
Derivative financial assets |
14 | 1,972 | 1,819 | |||||||||
|
||||||||||||
Total non-current assets |
45,129 | 41,684 | ||||||||||
|
||||||||||||
Current assets |
||||||||||||
Inventories and current intangible assets |
15 | 291 | 376 | |||||||||
Trade and other receivables |
16 | 2,910 | 1,971 | |||||||||
Financial and other investments |
12 | 5,431 | 2,391 | |||||||||
Derivative financial assets |
14 | 273 | 317 | |||||||||
Cash and cash equivalents |
17 | 671 | 332 | |||||||||
|
||||||||||||
Total current assets |
9,576 | 5,387 | ||||||||||
|
||||||||||||
Assets of businesses held for sale |
18 | | 264 | |||||||||
|
||||||||||||
Total assets |
54,705 | 47,335 | ||||||||||
|
||||||||||||
Current liabilities |
||||||||||||
Borrowings |
19 | (3,448 | ) | (2,492) | ||||||||
Derivative financial liabilities |
14 | (407 | ) | (162) | ||||||||
Trade and other payables |
20 | (3,051 | ) | (2,685) | ||||||||
Current tax liabilities |
(231 | ) | (383) | |||||||||
Provisions |
23 | (308 | ) | (282) | ||||||||
|
||||||||||||
Total current liabilities |
(7,445 | ) | (6,004) | |||||||||
|
||||||||||||
Non-current liabilities |
||||||||||||
Borrowings |
19 | (24,647 | ) | (20,533) | ||||||||
Derivative financial liabilities |
14 | (1,274 | ) | (1,269) | ||||||||
Other non-current liabilities |
21 | (1,884 | ) | (1,921) | ||||||||
Deferred tax liabilities |
5 | (4,076 | ) | (3,738) | ||||||||
Pensions and other post-retirement benefit obligations |
22 | (3,694 | ) | (3,088) | ||||||||
Provisions |
23 | (1,452 | ) | (1,449) | ||||||||
|
||||||||||||
Total non-current liabilities |
(37,027 | ) | (31,998) | |||||||||
|
||||||||||||
Liabilities of businesses held for sale |
18 | | (87) | |||||||||
|
||||||||||||
Total liabilities |
(44,472 | ) | (38,089) | |||||||||
|
||||||||||||
Net assets |
10,233 | 9,246 | ||||||||||
|
||||||||||||
Equity |
||||||||||||
Called up share capital |
24 | 433 | 422 | |||||||||
Share premium account |
1,344 | 1,355 | ||||||||||
Retained earnings |
13,132 | 12,297 | ||||||||||
Other equity reserves |
25 | (4,681 | ) | (4,835) | ||||||||
|
||||||||||||
Shareholders equity |
10,228 | 9,239 | ||||||||||
Non-controlling interests |
5 | 7 | ||||||||||
|
||||||||||||
Total equity |
10,233 | 9,246 | ||||||||||
|
The consolidated financial statements set out on pages 97 to 164 were approved by the Board of Directors on 15 May 2013 and were signed on its behalf by:
Sir Peter Gershon Chairman
Andrew Bonfield Finance Director
102 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Consolidated statement of changes in equity
for the years ended 31 March
|
Called up
share capital £m |
|
|
Share
premium account £m |
|
|
Retained
earnings £m |
|
|
Other
equity reserves £m |
(i)
|
|
Total
shareholders equity £m |
|
|
Non-
controlling interests £m |
|
|
Total
equity £m |
|
||||||||
At 1 April 2010 |
298 | 1,366 | 7,316 | (4,781 | ) | 4,199 | 12 | 4,211 | ||||||||||||||||||||
Profit for the year |
| | 2,159 | | 2,159 | 4 | 2,163 | |||||||||||||||||||||
Total other comprehensive income/(loss) for the year |
| | 390 | (89 | ) | 301 | | 301 | ||||||||||||||||||||
Total comprehensive income/(loss) for the year |
| | 2,549 | (89 | ) | 2,460 | 4 | 2,464 | ||||||||||||||||||||
Rights issue |
113 | | | 3,101 | 3,214 | | 3,214 | |||||||||||||||||||||
Transfer between reserves |
| | 3,101 | (3,101 | ) | | | | ||||||||||||||||||||
Equity dividends |
| | (1,064 | ) | | (1,064 | ) | | (1,064 | ) | ||||||||||||||||||
Scrip dividend related share issue |
5 | (5 | ) | 206 | | 206 | | 206 | ||||||||||||||||||||
Issue of treasury shares |
| | 18 | | 18 | | 18 | |||||||||||||||||||||
Purchase of own shares |
| | (3 | ) | | (3 | ) | | (3 | ) | ||||||||||||||||||
Other movements in non-controlling interests |
| | | | | (7 | ) | (7 | ) | |||||||||||||||||||
Share-based payment |
| | 25 | | 25 | | 25 | |||||||||||||||||||||
Tax on share-based payment |
| | 5 | | 5 | | 5 | |||||||||||||||||||||
At 31 March 2011 |
416 | 1,361 | 12,153 | (4,870 | ) | 9,060 | 9 | 9,069 | ||||||||||||||||||||
Profit for the year |
| | 2,036 | | 2,036 | 2 | 2,038 | |||||||||||||||||||||
Total other comprehensive income/(loss) for the year |
| | (922 | ) | 35 | (887 | ) | | (887 | ) | ||||||||||||||||||
Total comprehensive income for the year |
| | 1,114 | 35 | 1,149 | 2 | 1,151 | |||||||||||||||||||||
Equity dividends |
| | (1,319 | ) | | (1,319 | ) | | (1,319 | ) | ||||||||||||||||||
Scrip dividend related share issue |
6 | (6 | ) | 313 | | 313 | | 313 | ||||||||||||||||||||
Issue of treasury shares |
| | 13 | | 13 | | 13 | |||||||||||||||||||||
Purchase of own shares |
| | (4 | ) | | (4 | ) | | (4 | ) | ||||||||||||||||||
Other movements in non-controlling interests |
| | | | | (4 | ) | (4 | ) | |||||||||||||||||||
Share-based payment |
| | 24 | | 24 | | 24 | |||||||||||||||||||||
Tax on share-based payment |
| | 3 | | 3 | | 3 | |||||||||||||||||||||
At 31 March 2012 |
422 | 1,355 | 12,297 | (4,835 | ) | 9,239 | 7 | 9,246 | ||||||||||||||||||||
Profit for the year |
| | 2,295 | | 2,295 | 1 | 2,296 | |||||||||||||||||||||
Total other comprehensive income/(loss) for the year |
| | (681 | ) | 154 | (527 | ) | | (527 | ) | ||||||||||||||||||
Total comprehensive income for the year |
| | 1,614 | 154 | 1,768 | 1 | 1,769 | |||||||||||||||||||||
Equity dividends |
| | (1,433 | ) | | (1,433 | ) | | (1,433 | ) | ||||||||||||||||||
Scrip dividend related share issue |
11 | (11 | ) | 623 | | 623 | | 623 | ||||||||||||||||||||
Issue of treasury shares |
| | 19 | | 19 | | 19 | |||||||||||||||||||||
Purchase of own shares |
| | (6 | ) | | (6 | ) | | (6 | ) | ||||||||||||||||||
Other movements in non-controlling interests |
| | | | | (3 | ) | (3 | ) | |||||||||||||||||||
Share-based payment |
| | 20 | | 20 | | 20 | |||||||||||||||||||||
Tax on share-based payment |
| | (2 | ) | | (2 | ) | | (2 | ) | ||||||||||||||||||
At 31 March 2013 |
433 | 1,344 | 13,132 | (4,681 | ) | 10,228 | 5 | 10,233 |
(i) | For further details of other equity reserves, see note 25. |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 103 |
Financial Statements
Consolidated cash flow statement
for the years ended 31 March
Notes |
2013 £m |
2012 £m |
2011 £m |
|||||||||||||
Cash flows from operating activities |
||||||||||||||||
Total operating profit |
1(b) | 3,754 | 3,539 | 3,745 | ||||||||||||
Adjustments for: |
||||||||||||||||
Exceptional items, remeasurements and stranded cost recoveries |
3 | (110 | ) | (44 | ) | (145 | ) | |||||||||
Depreciation, amortisation and impairment |
1,361 | 1,282 | 1,245 | |||||||||||||
Share-based payment charge |
20 | 24 | 25 | |||||||||||||
Changes in working capital |
(410 | ) | 146 | 185 | ||||||||||||
Changes in provisions |
(53 | ) | (116 | ) | (93 | ) | ||||||||||
Changes in pensions and other post-retirement benefit obligations |
(413 | ) | (386 | ) | (304 | ) | ||||||||||
Cash flows relating to exceptional items |
(112 | ) | (205 | ) | (147 | ) | ||||||||||
Cash flows relating to stranded cost recoveries |
| 247 | 343 | |||||||||||||
Cash generated from operations |
4,037 | 4,487 | 4,854 | |||||||||||||
Tax (paid)/received |
(287 | ) | (259 | ) | 4 | |||||||||||
Net cash inflow from operating activities |
3,750 | 4,228 | 4,858 | |||||||||||||
Cash flows from investing activities |
||||||||||||||||
Acquisition of investments |
(14 | ) | (13 | ) | (135 | ) | ||||||||||
Proceeds from sale of investments in subsidiaries |
183 | 365 | 11 | |||||||||||||
Purchases of intangible assets |
(175 | ) | (203 | ) | (176 | ) | ||||||||||
Purchases of property, plant and equipment |
(3,214 | ) | (3,147 | ) | (2,958 | ) | ||||||||||
Disposals of property, plant and equipment |
32 | 24 | 26 | |||||||||||||
Dividends received from joint ventures |
21 | 26 | 9 | |||||||||||||
Interest received |
29 | 24 | 26 | |||||||||||||
Net movements in short-term financial investments |
(2,992 | ) | 553 | (1,577 | ) | |||||||||||
Net cash flow used in investing activities |
(6,130 | ) | (2,371 | ) | (4,774 | ) | ||||||||||
Cash flows from financing activities |
||||||||||||||||
Proceeds of rights issue |
| | 3,214 | |||||||||||||
Proceeds from issue of treasury shares |
19 | 13 | 18 | |||||||||||||
Purchase of own shares |
(6 | ) | (4 | ) | (3 | ) | ||||||||||
Proceeds received from loans |
5,062 | 1,809 | 767 | |||||||||||||
Repayment of loans |
(1,210 | ) | (1,914 | ) | (2,878 | ) | ||||||||||
Net movements in short-term borrowings and derivatives |
452 | (49 | ) | 348 | ||||||||||||
Interest paid |
(792 | ) | (749 | ) | (965 | ) | ||||||||||
Exceptional finance costs on the redemption of debt |
| | (73 | ) | ||||||||||||
Dividends paid to shareholders |
(810 | ) | (1,006 | ) | (858 | ) | ||||||||||
Net cash flow from/(used in) financing activities |
2,715 | (1,900 | ) | (430 | ) | |||||||||||
Net increase/(decrease) in cash and cash equivalents |
26(a) | 335 | (43 | ) | (346 | ) | ||||||||||
Exchange movements |
14 | | (3 | ) | ||||||||||||
Net cash and cash equivalents at start of year |
299 | 342 | 691 | |||||||||||||
Net cash and cash equivalents at end of year (i) |
17 | 648 | 299 | 342 |
(i) | Net of bank overdrafts of £23m (2012: £33m; 2011: £42m). |
104 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Notes to the consolidated financial statements analysis of items in the primary statements
This note sets out the financial performance of the business split into the different parts of the business (operating segments). We monitor and manage the performance of these operating segments on a day-to-day basis.
|
Our strategy in action
We own a portfolio of businesses that includes a mixture of cash generative developed assets with minimal investment requirements (such as National Grid Metering, included within Other), businesses with low to medium levels of growth and positive cash generation (such as UK Gas Distribution and US Regulated) and businesses with high levels of investment and growth (such as UK Transmission).
We generate 96% of our revenue from our regulated businesses in the UK and US. We work with our regulators to obtain robust regulatory agreements that balance the risks we face with the opportunity to deliver reasonable returns for our investors. When investing in non-regulated businesses we aim to leverage our core capabilities to deliver higher returns for investors.
Our regulated businesses earn revenue for the transmission, distribution and generation services they have provided during the year. The revenue recognised may differ from the revenue allowed under our regulatory agreements and differences are adjusted against future prices. Our non-regulated businesses earn revenue in line with their contractual terms.
|
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 and previously, recovery of US stranded costs during the year. It excludes value added (sales) tax and intra-group sales.
Revenue includes an assessment of unbilled energy and transportation services supplied to customers between the date of the last meter reading and the year end. This is estimated based on historical consumption and weather patterns.
Where revenue exceeds the maximum amount permitted by regulatory agreement and adjustments will be made to future prices to reflect this over-recovery, no liability is recognised, as such an adjustment 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.
US stranded costs are various generation-related costs incurred prior to the divestiture of generation assets beginning in the late 1990s and costs of legacy contracts that are being recovered from customers. The recovery of stranded costs and other amounts allowed to be collected from customers under regulatory arrangements is recognised in the period in which these amounts are recoverable from customers. The recovery of stranded costs was substantially completed at 31 March 2012.
We present revenue and the results of the business analysed by operating segment, based on the information the Board of Directors uses internally for the purposes of evaluating the performance of operating segments and determining resource allocation between operating segments. The Board is National Grids chief operating decision-making body (as defined by IFRS 8 Operating Segments) and assesses the performance of operations principally on the basis of operating profit before exceptional items, remeasurements and stranded cost recoveries (see note 3).
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 105 |
Financial Statements
Notes to the consolidated financial statements
Continued
1. Segmental analysis continued
The following table describes the main activities for each operating segment:
UK Transmission | High voltage electricity transmission networks, the gas transmission network in Great Britain, UK liquefied natural gas (LNG) storage activities and the French electricity interconnector. | |
UK Gas Distribution | Four of the eight regional networks of Great Britains gas distribution system. | |
US Regulated | Gas distribution networks, electricity distribution networks and high voltage electricity transmission networks in New York and New England (including EnergyNorth and Granite State up to the date they were sold on 3 July 2012) and electricity generation facilities in New York and Massachusetts. |
Other activities primarily relate to non-regulated businesses and other commercial operations not included within the above segments, including: UK based gas and electricity metering activities; UK property management; a UK LNG import terminal; other LNG operations; US unregulated transmission pipelines; together with corporate activities.
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.
(a) Revenue
2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||
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 |
||||||||||||||||||||||||||||||||||||||||
UK Transmission |
4,246 | (86 | ) | 4,160 | 3,804 | (5 | ) | 3,799 | 3,484 | (7 | ) | 3,477 | ||||||||||||||||||||||||||||
UK Gas Distribution |
1,714 | (47 | ) | 1,667 | 1,605 | (52 | ) | 1,553 | 1,524 | (60 | ) | 1,464 | ||||||||||||||||||||||||||||
US Regulated |
7,918 | | 7,918 | 7,795 | | 7,795 | 8,746 | | 8,746 | |||||||||||||||||||||||||||||||
Other activities |
642 | (28 | ) | 614 | 715 | (30 | ) | 685 | 678 | (22 | ) | 656 | ||||||||||||||||||||||||||||
14,520 | (161 | ) | 14,359 | 13,919 | (87 | ) | 13,832 | 14,432 | (89 | ) | 14,343 | |||||||||||||||||||||||||||||
Total excluding stranded cost recoveries |
14,359 | 13,553 | 13,988 | |||||||||||||||||||||||||||||||||||||
Stranded cost recoveries |
| 279 | 355 | |||||||||||||||||||||||||||||||||||||
14,359 | 13,832 | 14,343 | ||||||||||||||||||||||||||||||||||||||
Geographical areas |
||||||||||||||||||||||||||||||||||||||||
UK |
6,421 | 6,000 | 5,556 | |||||||||||||||||||||||||||||||||||||
US |
7,938 | 7,832 | 8,787 | |||||||||||||||||||||||||||||||||||||
14,359 | 13,832 | 14,343 |
In the UK, there was a cumulative over-recovery of £16m* at 31 March 2013 (2012: under-recovery of £26m*; 2011: under-recovery of £34m*). In the US, accumulated regulatory entitlements to future revenue net of over- or under-recoveries amounted to £1,330m* at 31 March 2013 (2012: £1,429m*; 2011: £1,618m*).
*Unaudited
106 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
1. Segmental analysis continued
(b) Operating profit
A reconciliation of the operating segments measure of profit to total profit before tax is provided below. Further details of the exceptional items, remeasurements and stranded cost recoveries are provided in note 3.
Total non-current assets other than financial instruments, deferred tax assets and pension assets located in the UK and US were £23,344m and £19,340m respectively as at 31 March 2013 (31 March 2012: UK £21,793m, US £17,666m; 31 March 2011: UK £20,720m, US £17,003m).
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 107 |
Financial Statements
Notes to the consolidated financial statements
Continued
Below we have presented separately certain items included in our operating costs. These include a breakdown of payroll costs (including disclosure of amounts paid to key management personnel) and fees paid to our auditors.
|
Rentals under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease.
Before exceptional items,
remeasurements and stranded cost recoveries |
Exceptional
items,
|
Total |
||||||||||||||||||||||||||||||||||
2013 £m |
2012 £m |
2011 £m |
2013 £m |
2012 £m |
2011 £m |
2013 £m |
2012 £m |
2011 £m |
||||||||||||||||||||||||||||
Depreciation and amortisation |
1,361 | 1,267 | 1,245 | | 5 | 7 | 1,361 | 1,272 | 1,252 | |||||||||||||||||||||||||||
Payroll costs |
1,441 | 1,389 | 1,460 | 22 | 82 | 36 | 1,463 | 1,471 | 1,496 | |||||||||||||||||||||||||||
Purchases of electricity |
1,251 | 1,356 | 1,547 | (111) | 89 | (65 | ) | 1,140 | 1,445 | 1,482 | ||||||||||||||||||||||||||
Purchases of gas |
1,384 | 1,518 | 2,102 | (69) | 5 | (82 | ) | 1,315 | 1,523 | 2,020 | ||||||||||||||||||||||||||
Rates and property taxes |
969 | 955 | 945 | | | | 969 | 955 | 945 | |||||||||||||||||||||||||||
Balancing Services Incentive Scheme |
805 | 818 | 581 | | | | 805 | 818 | 581 | |||||||||||||||||||||||||||
Payments to other UK network owners |
487 | 407 | 298 | | | | 487 | 407 | 298 | |||||||||||||||||||||||||||
Other |
3,017 | 2,348 | 2,210 | 48 | 54 | 314 | 3,065 | 2,402 | 2,524 | |||||||||||||||||||||||||||
10,715 | 10,058 | 10,388 | (110) | 235 | 210 | 10,605 | 10,293 | 10,598 | ||||||||||||||||||||||||||||
Operating costs include: |
||||||||||||||||||||||||||||||||||||
Inventory consumed |
389 | 360 | 451 | |||||||||||||||||||||||||||||||||
Operating leases |
109 | 97 | 89 | |||||||||||||||||||||||||||||||||
Research expenditure |
15 | 15 | 16 | |||||||||||||||||||||||||||||||||
(a) Payroll costs
|
|
|||||||||||||||||||||||||||||||||||
2013 £m |
2012 £m |
2011 £m |
||||||||||||||||||||||||||||||||||
Wages and salaries (i) |
1,625 | 1,597 | 1,592 | |||||||||||||||||||||||||||||||||
Social security costs |
120 | 116 | 119 | |||||||||||||||||||||||||||||||||
Pension costs (note 22) |
209 | 208 | 208 | |||||||||||||||||||||||||||||||||
Share-based payment |
20 | 24 | 25 | |||||||||||||||||||||||||||||||||
Severance costs (excluding pension costs) |
|
16 | 35 | 56 | ||||||||||||||||||||||||||||||||
1,990 | 1,980 | 2,000 | ||||||||||||||||||||||||||||||||||
Less: payroll costs capitalised |
|
(527 | ) | (509 | ) | (504 | ) | |||||||||||||||||||||||||||||
1,463 | 1,471 | 1,496 |
(i) | Included within wages and salaries are US other post-retirement benefit costs of £49m (2012: £66m; 2011: £11m). For further information refer to note 22. |
108 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
2. Operating costs continued
(b) Number of employees
31 March
2013 Number |
Monthly
average 2013 Number |
31 March
2012 Number |
Monthly
average 2012 Number |
|||||||||
|
||||||||||||
UK |
9,881 | 9,800 | 9,675 | 9,704 | ||||||||
US |
15,343 | 15,446 | 15,970 | 16,377 | ||||||||
|
||||||||||||
25,224 | 25,246 | 25,645 | 26,081 | |||||||||
|
The vast majority of employees in the US are either directly or indirectly employed in the transmission, distribution and generation of electricity or the distribution of gas, while those in the UK are either directly or indirectly employed in the transmission and distribution of gas or the transmission of electricity. At 31 March 2013, there were 2,151 (2012: 2,357) employees in other operations, excluding shared services.
(c) Key management compensation
2013 £m |
2012 £m |
2011 £m |
||||||
|
||||||||
Salaries and short-term employee benefits |
8 | 10 | 10 | |||||
Post-retirement benefits |
3 | 6 | 6 | |||||
Share-based payment |
5 | 5 | 6 | |||||
|
||||||||
16 | 21 | 22 | ||||||
|
Key management compensation relates to the Board of Directors, including the Executive Directors and Non-executive Directors for the years presented.
(d) Directors emoluments
Details of Directors emoluments are contained in the audited part of the Remuneration Report, which forms part of these financial statements.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 109 |
Financial Statements
Notes to the consolidated financial statements
Continued
2. Operating costs continued
(e) Auditors remuneration
Auditors remuneration is presented below in accordance with the requirements of the UK Companies Act 2006 and the principal accountant fees and services disclosure requirements of Item 16C of Form 20-F:
2013 £m |
2012 £m |
2011 £m |
||||||||
Audit fees payable to the parent Companys auditor and its associates in respect of (i): |
||||||||||
Audit of the parent Companys individual and consolidated financial statements |
1.1 | 1.1 | 1.0 | |||||||
The auditing of accounts of any associate of the Company |
6.0 | 5.2 | 4.8 | |||||||
Other services supplied (ii) |
2.7 | 2.3 | 2.1 | |||||||
9.8 | 8.6 | 7.9 | ||||||||
Total other services (iii) |
||||||||||
Tax fees (iv) |
||||||||||
Tax compliance services |
0.5 | 0.5 | 0.5 | |||||||
Tax advisory services |
0.3 | 0.2 | 0.4 | |||||||
All other fees (v) |
||||||||||
Other assurance services |
0.1 | 0.3 | 0.4 | |||||||
Services relating to corporate finance transactions not covered above |
0.3 | 0.2 | 0.4 | |||||||
Other non-audit services not covered above |
1.1 | 2.6 | 1.0 | |||||||
2.3 | 3.8 | 2.7 | ||||||||
Total auditors remuneration |
12.1 | 12.4 | 10.6 |
(i) | Audit fees in each year represent fees for the audit of the Companys financial statements and regulatory reporting for the years ended 31 March 2013, 2012 and 2011, and the review of interim financial statements for the six month periods ended 30 September 2012, 2011 and 2010 respectively. |
(ii) | 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) and audit reports on regulatory returns. |
(iii) | There were no audit related fees as described in Item 16C(b) of Form 20-F. |
(iv) | Tax fees include amounts charged for tax compliance, tax advice and tax planning. Total tax fees for the year ended 31 March 2013 were £0.8m (2012: £0.7m; 2011: £0.9m). |
(v) | All other fees include amounts relating to assurance provided on transformation initiatives and sundry services, all of which have been subject to approval by the Audit Committee. Total other fees for the year ended 31 March 2013 were £1.5m (2012: £3.1m; 2011: £1.8m). |
In addition, fees of £0.1m were incurred in 2013 in relation to the audits of the pension schemes of the Company (2012: £0.1m; 2011: £0.1m).
Subject to the Companys Articles of Association and the Companies Act 2006, the Audit Committee is solely and directly responsible for the approval of the appointment, reappointment, compensation and oversight of the Companys independent auditors. It is our policy that the Audit Committee must approve in advance all non-audit work to be performed by the independent auditors to ensure that the service will not compromise auditor independence. Certain services are prohibited from being performed by the external auditors under the Sarbanes-Oxley Act 2002.
110 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
3. Exceptional items, remeasurements and stranded cost recoveries
To monitor our financial performance, we use a profit measure that excludes certain income and expenses. We call that measure business performance. We exclude items from business performance because we think these items are individually important to understanding our financial performance and, if included, could distort understanding of the performance for the year and the comparability between periods. This note analyses these items, which are included in our result for the year but are excluded from business performance.
|
Our financial performance is analysed into two components: business performance, which excludes exceptional items, remeasurements and stranded cost recoveries; and exceptional items, remeasurements and stranded cost recoveries. Business performance is used by management to monitor financial performance as it is considered that it improves the comparability of our reported financial performance from year to year. Business performance subtotals are presented on the face of the income statement or in the notes to the financial statements.
Items of income or expense that are considered by management for designation as exceptional items include such items as 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 debt redemption costs as a consequence of transactions such as significant disposals or issues of equity.
Costs arising from restructuring programmes include redundancy costs. Redundancy costs are charged to the 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.
Remeasurements comprise gains or losses recorded in the income statement arising from changes in the fair value of commodity contracts and of derivative financial instruments to the extent that hedge accounting is not achieved or is not effective. These fair values increase or decrease because of changes in commodity and financial indices and prices over which we have no control.
Stranded cost recoveries represent the recovery, through charges to electricity customers in upstate New York and New England, of historical generation-related costs, related to generation assets that are no longer owned by National Grid. Such costs have been recovered from customers as permitted by regulatory agreements, with substantially all having been recovered by 31 March 2012.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 111 |
Financial Statements
Notes to the consolidated financial statements
Continued
3. Exceptional items, remeasurements and stranded cost recoveries continued
2013 £m |
2012 £m |
2011 £m |
||||||||||||
Included within operating profit: |
||||||||||||||
Exceptional items: |
||||||||||||||
Restructuring costs (1) |
(87 | ) | (101 | ) | (89 | ) | ||||||||
Environmental charges (2) |
| (55 | ) | (128 | ) | |||||||||
Net gain on disposal of businesses (3) |
3 | 97 | 15 | |||||||||||
Impairment charges and related costs (4) |
| (64 | ) | (133 | ) | |||||||||
Other (5) |
| 1 | (15 | ) | ||||||||||
(84 | ) | (122 | ) | (350 | ) | |||||||||
Remeasurements commodity contracts (6) |
180 | (94 | ) | 147 | ||||||||||
Stranded cost recoveries (7) |
14 | 260 | 348 | |||||||||||
110 | 44 | 145 | ||||||||||||
Included within finance income: |
||||||||||||||
Exceptional items: |
||||||||||||||
Interest credit on tax settlement (8) |
| | 43 | |||||||||||
Included within finance costs: |
||||||||||||||
Exceptional items: |
||||||||||||||
Debt redemption costs (9) |
| | (73 | ) | ||||||||||
Remeasurements: |
||||||||||||||
Net gains/(losses) on derivative financial instruments (10) |
68 | (70 | ) | 36 | ||||||||||
68 | (70 | ) | (37 | ) | ||||||||||
Total included within profit before tax |
178 | (26 | ) | 151 | ||||||||||
Included within taxation: |
||||||||||||||
Exceptional credits arising on items not included in profit before tax: |
||||||||||||||
Deferred tax credit arising on the reduction in the UK corporation tax rate (11) |
128 | 242 | 226 | |||||||||||
Other (8) |
| | 59 | |||||||||||
Tax on exceptional items |
31 | 54 | 79 | |||||||||||
Tax on remeasurements (6,10) |
(92 | ) | 42 | 36 | ||||||||||
Tax on stranded cost recoveries |
(5 | ) | (104 | ) | (139 | ) | ||||||||
62 | 234 | 261 | ||||||||||||
Total exceptional items, remeasurements and stranded cost recoveries after tax |
240 | 208 | 412 | |||||||||||
Analysis of total exceptional items, remeasurements and stranded cost recoveries after tax: Exceptional items after tax |
75 | 174 | (16 | ) | ||||||||||
Remeasurements after tax |
156 | (122 | ) | 219 | ||||||||||
Stranded cost recoveries after tax |
9 | 156 | 209 | |||||||||||
Total |
240 | 208 | 412 |
(1) | Restructuring costs for the year include: costs related to the restructuring of our UK operations of £66m in preparedness for delivering RIIO; costs for transformation-related initiatives in the UK and US of £31m; and a credit of £10m for the release of restructuring provisions in the UK recognised in prior years. |
For the years ended 31 March 2012 and 31 March 2011, restructuring costs included: costs for the restructuring of our US operations of £58m and £10m respectively which included severance costs and pension and other post-retirement curtailment gains and losses; costs for transformation-related initiatives of £54m and £103m respectively; credits of £11m and £39m respectively for the release of restructuring provisions in the UK recognised in prior years; and in 2011 a charge of £15m related to the integration of KeySpan. |
(2) | For the years ended 31 March 2012 and 31 March 2011, environmental charges included £55m and £58m respectively related to US specific exposures and £70m in 2011 related to UK specific exposures. Costs incurred with respect to US environmental provisions are substantially recoverable from customers. |
112 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
3. | Exceptional items, remeasurements and stranded cost recoveries continued |
(3) | During the year, we recognised a gain of £3m on the disposal of our EnergyNorth gas business and Granite State electricity business in New Hampshire. During the year ended 31 March 2012, we sold two subsidiaries resulting in a gain on disposal of £72m. We also recognised gains of £25m in relation to disposals of businesses in prior years, representing the release of various unutilised provisions. During the year ended 31 March 2011, we sold three subsidiaries and an associate resulting in a gain of £15m. |
(4) | Impairment charges and related costs for the year ended 31 March 2012 of £64m represented an impairment of intangibles (originally recognised on the acquisition of KeySpan) related to our LIPA management services agreement contract, following the announcement on 15 December 2011 that the agreement would not be renewed after 31 December 2013. During the year ended 31 March 2011, impairment charges and related costs included a charge of £49m related to an investment in a joint venture; an impairment charge of £34m against the goodwill related to our US companies in New Hampshire; and a charge of £50m related to our US generation assets for impairment and associated decommissioning. |
(5) | Other exceptional charges for the years ended 31 March 2012 and 2011 included an amortisation charge of £5m and £7m respectively in relation to acquisition-related intangibles. For the year ended 31 March 2012, other exceptional charges also included a release of £6m of unutilised provisions in our metering business, originally recognised during the year ended 31 March 2010. The charge for the year ended 31 March 2011 included a penalty of £8m levied by Ofgem on our UK Gas Distribution business. |
(6) | Remeasurements commodity contracts 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. |
(7) | Stranded cost recoveries of £14m substantially represent the release of an unutilised provision recognised in a prior period. For the years ended 31 March 2012 and 2011, stranded cost recoveries on a pre-tax basis consisted of revenue of £279m and £355m offset by operating costs of £19m and £7m respectively. This represented the recovery of some of our historical investments in generating plants that were divested as part of the restructuring and wholesale power deregulation process in New England and New York during the 1990s. The recovery of these stranded costs was substantially completed at 31 March 2012. |
(8) | During the year ended 31 March 2011, we reached agreement with the US tax authorities on the settlement of pre-acquisition tax liabilities that resulted in the repayment of tax and interest accruing. |
(9) | Debt redemption costs in the year ended 31 March 2011 represent costs arising from our debt repurchase programme following the rights issue on 14 June 2010. |
(10) | Remeasurements net gains/(losses) on derivative financial instruments comprise gains/(losses) arising on derivative financial instruments reported in the income statement. These exclude gains and losses for which hedge accounting has been effective, which have been recognised directly in other comprehensive income or which are offset by adjustments to the carrying value of debt. The tax charge in the year includes a credit of £1m (2012: £1m; 2011: £104m) in respect of prior years. |
(11) | The exceptional tax credit arises from a reduction in the UK corporation tax rate from 24% to 23% included and enacted in the Finance Act 2012 and applicable from 1 April 2013. Other UK tax legislation also reduced the UK corporation tax rate in the prior periods (2012: from 26% to 24%; 2011: from 28% to 26%). These reductions have resulted in a decrease in deferred tax liabilities. |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 113 |
Financial Statements
Notes to the consolidated financial statements
Continued
This note details the interest income generated on our financial assets and the interest expense incurred on financial liabilities. It also includes the expected return on pension assets, which is offset by the interest payable on pension obligations. In reporting business performance, we adjust net financing costs to exclude any net gains or losses on derivative financial instruments included in remeasurements.
|
2013 £m |
2012 £m |
2011 £m |
||||||||||
|
||||||||||||
Finance income |
||||||||||||
Expected return on pension and other post-retirement benefit plan assets |
1,222 | 1,273 | 1,256 | |||||||||
Interest income on financial instruments: |
||||||||||||
Bank deposits and other financial assets |
20 | 19 | 22 | |||||||||
Gains on disposal of available-for-sale investments |
10 | 9 | 3 | |||||||||
|
||||||||||||
Finance income before exceptional items |
1,252 | 1,301 | 1,281 | |||||||||
|
||||||||||||
Exceptional items |
||||||||||||
Exceptional interest credit on tax settlement |
| | 43 | |||||||||
|
||||||||||||
Finance income |
1,252 | 1,301 | 1,324 | |||||||||
|
||||||||||||
Finance costs |
||||||||||||
Interest on pension and other post-retirement benefit plan obligations |
(1,153 | ) | (1,203 | ) | (1,231) | |||||||
Interest expense on financial liabilities held at amortised cost: |
||||||||||||
Bank loans and overdrafts |
(65 | ) | (84 | ) | (85) | |||||||
Other borrowings |
(1,052 | ) | (1,105 | ) | (1,184) | |||||||
Derivatives |
51 | 122 | 84 | |||||||||
Unwinding of discounts on provisions |
(75 | ) | (72 | ) | (128) | |||||||
Less: interest capitalised (i) |
122 | 124 | 129 | |||||||||
|
||||||||||||
Finance costs before exceptional items and remeasurements |
(2,172 | ) | (2,218 | ) | (2,415) | |||||||
|
||||||||||||
Exceptional items |
||||||||||||
Exceptional debt redemption costs |
| | (73) | |||||||||
|
||||||||||||
Remeasurements |
||||||||||||
Net gains/(losses) on derivative financial instruments included in remeasurements (ii): |
||||||||||||
Ineffectiveness on derivatives designated as: |
||||||||||||
Fair value hedges (iii) |
17 | 9 | 40 | |||||||||
Cash flow hedges |
(7 | ) | 14 | 9 | ||||||||
Net investment hedges |
(26 | ) | (15 | ) | 7 | |||||||
Net investment hedges undesignated forward rate risk |
26 | 39 | (16) | |||||||||
Derivatives not designated as hedges or ineligible for hedge accounting |
58 | (117 | ) | (4) | ||||||||
|
||||||||||||
68 | (70 | ) | 36 | |||||||||
|
||||||||||||
Exceptional items and remeasurements included within finance costs |
68 | (70 | ) | (37) | ||||||||
|
||||||||||||
Finance costs |
(2,104 | ) | (2,288 | ) | (2,452) | |||||||
|
||||||||||||
Net finance costs |
(852 | ) | (987 | ) | (1,128) | |||||||
|
(i) | Interest on funding attributable to assets in the course of construction was capitalised during the year at a rate of 4.4% (2012: 5.2%; 2011: 5.3%). |
(ii) | Includes a net foreign exchange loss on financing activities of £32m (2012: £280m gain; 2011: £173m gain) offset by foreign exchange gains and losses on derivative financial instruments measured at fair value. |
(iii) | Includes a net gain on instruments designated as fair value hedges of £67m (2012: £233m; 2011: £86m) offset by a net loss of £50m (2012: £224m; 2011: £46m) arising from fair value adjustments to the carrying value of debt. |
114 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Tax is payable in the territories where we operate, mainly the UK and the US. This note gives further details of the tax charge and tax liabilities, including current and deferred tax. The current tax charge is the tax payable on this years taxable profits. Deferred tax is an accounting adjustment to provide for tax that is expected to arise in the future due to differences in 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 taxation 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 calculation of the Groups total tax charge involves a degree of estimation and judgement, and management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
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 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 taxable profit or loss.
Deferred tax liabilities are recognised on taxable temporary differences arising on investments in subsidiaries and jointly controlled entities 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 set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company and its subsidiaries intend to settle their current tax assets and liabilities on a net basis.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 115 |
Financial Statements
Notes to the consolidated financial statements
Continued
5. Taxation continued
Tax charged/(credited) to the income statement
Adjustments in respect of prior years include the following amounts that relate to exceptional items, remeasurements and stranded cost recoveries: £nil for corporation tax (2012: £nil; 2011: £207m credit) and a £1m deferred tax credit (2012: £1m credit; 2011: £44m charge).
116 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
5. Taxation continued
Tax (credited)/charged to other comprehensive income and equity
2013 £m |
2012 £m |
2011 £m |
||||||||||
Corporation tax |
||||||||||||
Share-based payment |
1 | (3 | ) | (1) | ||||||||
Deferred tax |
||||||||||||
Share of other comprehensive income of joint ventures and associates |
| | (2) | |||||||||
Available-for-sale investments |
2 | 2 | 1 | |||||||||
Cash flow hedges |
13 | (2 | ) | 2 | ||||||||
Share-based payment |
1 | | (4) | |||||||||
Actuarial (losses)/gains |
(249 | ) | (403 | ) | 181 | |||||||
(232 | ) | (406 | ) | 177 | ||||||||
Total tax recognised in the statement of comprehensive income Total tax relating to share-based payment recognised directly in equity |
|
(234
2 |
)
|
|
(403
(3 |
)
) |
|
182
(5) |
|
|||
|
||||||||||||
(232 | ) | (406 | ) | 177 | ||||||||
|
The tax charge for the year after exceptional items, remeasurements and stranded cost recoveries is lower (2012: lower; 2011: lower) than the standard rate of corporation tax in the UK of 24% (2012: 26%; 2011: 28%):
Before
2013 £m |
After
exceptional
£m |
Before
£m |
After
exceptional
£m |
Before
£m |
After
exceptional
£m |
|||||||||||||||||||
Profit before tax |
||||||||||||||||||||||||
Before exceptional items, remeasurements and stranded cost recoveries |
2,742 | 2,742 | 2,585 | 2,585 | 2,473 | 2,473 | ||||||||||||||||||
Exceptional items, remeasurements and stranded cost recoveries |
| 178 | | (26 | ) | | 151 | |||||||||||||||||
Profit before tax |
2,742 | 2,920 | 2,585 | 2,559 | 2,473 | 2,624 | ||||||||||||||||||
Profit before tax multiplied by UK corporation tax rate of 24% (2012: 26%; 2011: 28%) |
658 | 701 | 672 | 665 | 692 | 735 | ||||||||||||||||||
Effects of: |
||||||||||||||||||||||||
Adjustments in respect of prior years |
(116 | ) | (117 | ) | 1 | | (95 | ) | (258 | ) | ||||||||||||||
Expenses not deductible for tax purposes |
37 | 169 | 36 | 55 | 42 | 204 | ||||||||||||||||||
Non-taxable income |
(24 | ) | (152 | ) | (19 | ) | (30 | ) | 5 | (136 | ) | |||||||||||||
Adjustment in respect of foreign tax rates |
133 | 157 | 75 | 75 | 74 | 120 | ||||||||||||||||||
Impact of share-based payment |
2 | 2 | 1 | 1 | 1 | 1 | ||||||||||||||||||
Deferred tax impact of change in UK tax rate |
| (128 | ) | | (242 | ) | | (226 | ) | |||||||||||||||
Other |
(4 | ) | (8 | ) | (11 | ) | (3 | ) | 3 | 21 | ||||||||||||||
Total tax |
686 | 624 | 755 | 521 | 722 | 461 | ||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||
Effective tax rate |
25.0 | 21.4 | 29.2 | 20.4 | 29.2 | 17.6 |
Factors that may affect future tax charges
A reduction in the UK corporation tax rate to 21% from 1 April 2014 was announced in the Autumn Statement and a further reduction to 20% from April 2015 was announced in the 2013 UK Budget Report. These reductions have not been substantively enacted and have not been reflected in these financial statements. The Groups tax charge will reflect these reductions in the UK corporation tax rate once the changes have been enacted.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 117 |
Financial Statements
Notes to the consolidated financial statements
Continued
5. Taxation continued
Taxation 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:
Deferred tax (assets)/liabilities |
Accelerated tax depreciation £m |
Share- based payment £m |
Pensions
and other
retirement
£m |
Financial instruments £m |
Other net
temporary differences £m |
Total £m |
||||||||||||||||||
|
||||||||||||||||||||||||
Deferred tax assets at 31 March 2011 |
(2) | (18) | (882) | (60) | (706) | (1,668) | ||||||||||||||||||
Deferred tax liabilities at 31 March 2011 |
5,186 | | 111 | 6 | 131 | 5,434 | ||||||||||||||||||
|
||||||||||||||||||||||||
At 1 April 2011 |
5,184 | (18) | (771) | (54) | (575) | 3,766 | ||||||||||||||||||
Exchange adjustments |
10 | | (3) | (1) | (4) | 2 | ||||||||||||||||||
Charged/(credited) to income statement |
307 | | 128 | (34) | (20) | 381 | ||||||||||||||||||
Credited to other comprehensive income |
| | (403) | | | (403) | ||||||||||||||||||
Disposals |
(28) | | | | | (28) | ||||||||||||||||||
Reclassified as held for sale |
10 | | 1 | | 14 | 25 | ||||||||||||||||||
Other |
| | 3 | | (8) | (5) | ||||||||||||||||||
|
||||||||||||||||||||||||
At 31 March 2012 |
5,483 | (18) | (1,045) | (89) | (593) | 3,738 | ||||||||||||||||||
|
||||||||||||||||||||||||
Deferred tax assets at 31 March 2012 |
(1) | (18) | (1,173) | (98) | (702) | (1,992) | ||||||||||||||||||
Deferred tax liabilities at 31 March 2012 |
5,484 | | 128 | 9 | 109 | 5,730 | ||||||||||||||||||
|
||||||||||||||||||||||||
At 1 April 2012 |
5,483 | (18) | (1,045) | (89) | (593) | 3,738 | ||||||||||||||||||
Exchange adjustments |
149 | | (47) | (1) | (32) | 69 | ||||||||||||||||||
Charged/(credited) to income statement |
329 | 2 | 132 | 68 | (23) | 508 | ||||||||||||||||||
Charged/(credited) to other comprehensive income and equity |
| 1 | (249) | 15 | | (233) | ||||||||||||||||||
Other |
| | | | (6) | (6) | ||||||||||||||||||
|
||||||||||||||||||||||||
At 31 March 2013 |
5,961 | (15) | (1,209) | (7) | (654) | 4,076 | ||||||||||||||||||
|
||||||||||||||||||||||||
Deferred tax assets at 31 March 2013 |
(2) | (15) | (1,363) | (16) | (777) | (2,173) | ||||||||||||||||||
Deferred tax liabilities at 31 March 2013 |
5,963 | | 154 | 9 | 123 | 6,249 | ||||||||||||||||||
|
||||||||||||||||||||||||
5,961 | (15) | (1,209) | (7) | (654) | 4,076 | |||||||||||||||||||
|
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 £4,076m (2012: £3,738m).
At the reporting date there were no material current deferred tax assets or liabilities (2012: £nil).
Deferred tax assets in respect of capital losses, trading losses and non-trade deficits have not been recognised as their future recovery is uncertain or not currently anticipated. The deferred tax assets not recognised are as follows:
2013 £m |
2012 £m |
|||||||
|
||||||||
Capital losses |
323 | 353 | ||||||
Non-trade deficits |
1 | 2 | ||||||
Trading losses |
11 | 7 | ||||||
|
The capital losses and non-trade deficits that arise in the UK are available to carry forward indefinitely. However, the capital losses can only be offset against specific types of future capital gains and non-trade deficits against specific future non-trade profits. The capital losses that arise in the US can only be offset against future capital gains but will expire in the year ended 31 March 2018 if they remain unused. The trading losses arising in the UK are available to carry forward indefinitely and the trading losses arising in the US have a 20-year carry forward time limit.
The aggregate amount of temporary differences associated with the unremitted earnings of overseas subsidiaries and joint ventures for which deferred tax liabilities have not been recognised at the reporting date is approximately £1,817m (2012: £1,729m). No liability is recognised in respect of the differences because the Company and its subsidiaries are in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future. In addition, as a result of a change in UK tax legislation, which largely exempts overseas dividends received on or after 1 July 2009 from UK tax, the temporary differences are unlikely to lead to additional tax.
118 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Earnings per share (EPS) is the amount of post-tax profit attributable to each share. Basic EPS is calculated on profit 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.
|
Adjusted earnings per share, excluding exceptional items, remeasurements and stranded cost recoveries, are provided to reflect the business performance subtotals used by the Company. For further details of exceptional items, remeasurements and stranded cost recoveries, see note 3.
(a) Basic earnings per share
Earnings 2013 £m |
Earnings
per share 2013 pence |
Earnings 2012 £m |
Earnings
per share 2012* pence |
Earnings 2011 £m |
Earnings
per share 2011* pence |
|||||||||||||||||||
|
||||||||||||||||||||||||
Adjusted earnings |
2,055 | 56.1 | 1,828 | 50.0 | 1,747 | 49.6 | ||||||||||||||||||
Exceptional items after tax |
75 | 2.0 | 174 | 4.7 | (16) | (0.5) | ||||||||||||||||||
Remeasurements after tax |
156 | 4.3 | (122) | (3.3) | 219 | 6.2 | ||||||||||||||||||
Stranded cost recoveries after tax |
9 | 0.2 | 156 | 4.2 | 209 | 5.9 | ||||||||||||||||||
|
||||||||||||||||||||||||
Earnings |
2,295 | 62.6 | 2,036 | 55.6 | 2,159 | 61.2 | ||||||||||||||||||
|
||||||||||||||||||||||||
2013
millions |
2012
millions |
2011
millions |
||||||||||||||||||||||
|
||||||||||||||||||||||||
Weighted average number of shares basic* |
3,664 | 3,659 | 3,525 | |||||||||||||||||||||
|
*Comparative amounts have been restated to reflect the impact of additional shares issued as scrip dividends
(b) Diluted earnings per share
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 119 |
Financial Statements
Notes to the consolidated financial statements
Continued
Dividends represents the return of profits to shareholders. Dividends are paid as an amount per ordinary share held. We retain part of the profits generated in the year to meet future growth plans and pay out the remainder in accordance with our dividend policy.
|
Interim dividends are recognised when they become payable to the Companys shareholders. Final dividends are recognised when they are approved by shareholders.
The following table shows the actual dividends paid to equity shareholders:
2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||||
Pence
per share |
Total £m |
Settled
via scrip £m |
Pence
per share |
Total £m |
Settled
via scrip £m |
Pence
per share |
Total £m |
Settled
via scrip £m |
||||||||||||||||||||||||||||||||
Interim year ended 31 March 2013 |
14.49 | 527 | 187 | | | | | | | |||||||||||||||||||||||||||||||
Final year ended 31 March 2012 |
25.35 | 906 | 436 | | | | | | | |||||||||||||||||||||||||||||||
Interim year ended 31 March 2012 |
| | | 13.93 | 497 | 34 | | | | |||||||||||||||||||||||||||||||
Final year ended 31 March 2011 |
| | | 23.47 | 822 | 279 | | | | |||||||||||||||||||||||||||||||
Interim year ended 31 March 2011 |
| | | | | | 12.90 | 451 | 65 | |||||||||||||||||||||||||||||||
Final year ended 31 March 2010 |
| | | | | | 24.84 | 613 | 141 | |||||||||||||||||||||||||||||||
39.84 | 1,433 | 623 | 37.40 | 1,319 | 313 | 37.74 | 1,064 | 206 |
The Directors are proposing a final dividend for the year ended 31 March 2013 of 26.36p per share that will absorb approximately £967m of shareholders equity (assuming all amounts are settled in cash). It will be paid on 21 August 2013 to shareholders who are on the register of members at 7 June 2013 and a scrip dividend will be offered as an alternative, subject to shareholders approval at the Annual General Meeting.
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 each year by performing an impairment review.
|
Goodwill is recognised as an asset and is not amortised, but is tested for impairment annually, or more frequently if events or changes in circumstances indicate a potential impairment. Any impairment is recognised immediately in the income statement and is not subsequently reversed.
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.
Impairment
Goodwill is allocated to cash-generating units and this allocation is made to those cash-generating units that are expected to benefit from the business combination in which the goodwill arose.
Impairments of goodwill are calculated as the difference between the carrying value of the goodwill and the estimated recoverable amount of the cash-generating unit to which that goodwill has been allocated. 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.
Impairments are recognised in the income statement and are disclosed separately.
120 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
8. Goodwill continued
Total £m |
||||
|
||||
Cost at 1 April 2011 |
4,776 | |||
Exchange adjustments |
22 | |||
Reclassified as held for sale (i) |
(22) | |||
|
||||
Cost at 31 March 2012 |
4,776 | |||
Exchange adjustments |
252 | |||
|
||||
Cost at 31 March 2013 |
5,028 | |||
|
||||
Net book value at 31 March 2013 |
5,028 | |||
|
||||
Net book value at 31 March 2012 |
4,776 | |||
|
(i) | Relates to our New Hampshire businesses which were classified as held for sale at 31 March 2012 (see notes 3 and 18). |
The amounts disclosed above as at 31 March 2013 include balances relating to the following cash-generating units: New York £2,898m (2012: £2,752m); Massachusetts £1,082m (2012: £1,028m); Rhode Island £403m (2012: £383m); and Federal £645m (2012: £613m).
Goodwill is reviewed annually for impairment and the recoverability of goodwill at 31 March 2013 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, 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.
Our plans have proved to be reliable guides in the past and the Directors believe the estimates are appropriate.
The future growth rate used to extrapolate projections beyond five years has been maintained at 2.25% (2012: 2.25%). The growth rate has been determined having regard to data on projected growth in US real gross domestic product. Based on our business place 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 an effective pre-tax discount rate of 9% (2012: 9%). The discount rate represents the estimated weighted average cost of capital of these operations.
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 fair value exceeds the carrying amount.
Other intangible assets includes software and acquisition-related assets (such as brand names and customer relationships), which are written down (amortised) over the length of period we expect to receive a benefit from the asset.
|
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 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: an asset is created that can be identified; it is probable that the asset created will generate future economic benefits; and 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.
On a business combination, as well as recording separable intangible assets possessed by the acquired entity at their fair value, identifiable intangible assets that arise from contractual or other legal rights are also included in the statement of financial position at their fair value. Acquisition-related intangible assets principally comprise customer relationships.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 121 |
Financial Statements
Notes to the consolidated financial statements
Continued
9. Other intangible assets continued
Other intangible assets are amortised on a straight-line basis over their estimated useful economic lives. Amortisation periods for categories of intangible assets are:
Amortisation periods | Years | |||
|
||||
Software |
3 to 10 | |||
Acquisition-related intangibles |
10 to 25 | |||
Other licences and other intangibles |
3 to 5 | |||
|
Software £m |
Acquisition- related £m |
Other £m |
Total £m |
|||||||||||||
|
||||||||||||||||
Cost at 1 April 2011 |
800 | 115 | 4 | 919 | ||||||||||||
Exchange adjustments |
1 | 1 | | 2 | ||||||||||||
Additions |
203 | | | 203 | ||||||||||||
Disposals |
(105) | | (4) | (109) | ||||||||||||
|
||||||||||||||||
Cost at 31 March 2012 |
899 | 116 | | 1,015 | ||||||||||||
Exchange adjustments |
20 | 6 | | 26 | ||||||||||||
Additions |
175 | | | 175 | ||||||||||||
Disposals |
(26) | | | (26) | ||||||||||||
Reclassifications (i) |
(37) | | | (37) | ||||||||||||
|
||||||||||||||||
Cost at 31 March 2013 |
1,031 | 122 | | 1,153 | ||||||||||||
|
||||||||||||||||
Accumulated amortisation at 1 April 2011 |
(383) | (31) | (4) | (418) | ||||||||||||
Exchange adjustments |
(1) | | | (1) | ||||||||||||
Amortisation charge for the year |
(74) | (5) | | (79) | ||||||||||||
Impairment charge for the year (note 3) |
| (64) | | (64) | ||||||||||||
Disposals |
89 | | 4 | 93 | ||||||||||||
Reclassifications between categories |
16 | (16) | | | ||||||||||||
|
||||||||||||||||
Accumulated amortisation at 31 March 2012 |
(353) | (116) | | (469) | ||||||||||||
Exchange adjustments |
(6) | (6) | | (12) | ||||||||||||
Amortisation charge for the year |
(101) | | | (101) | ||||||||||||
Disposals |
9 | | | 9 | ||||||||||||
Reclassifications (i) |
9 | | | 9 | ||||||||||||
|
||||||||||||||||
Accumulated amortisation at 31 March 2013 |
(442) | (122) | | (564) | ||||||||||||
|
||||||||||||||||
Net book value at 31 March 2013 |
589 | | | 589 | ||||||||||||
|
||||||||||||||||
Net book value at 31 March 2012 |
546 | | | 546 | ||||||||||||
|
(i) | Reclassifications represents amounts transferred to property, plant and equipment (see note 10). |
Following the recognition of an impairment charge in relation to acquisition-related intangibles, the net book value has been fully written off.
122 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
10. Property, plant and equipment
The following note shows the physical assets controlled by us. The cost of these assets primarily represents the amount initially paid for them. 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) and charging the cost of the asset to the income statement equally over this period.
|
Our strategy in action
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 have the flexibility and resilience necessary to meet future challenges. 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 as well as the cost of any associated asset retirement obligations.
Property, plant and equipment includes assets in which the Companys 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.
Contributions received prior to 1 July 2009 towards the cost of property, plant and equipment are included in trade and other payables as deferred income and credited on a straight-line basis to the income statement over the estimated useful economic lives of the assets to which they relate.
Contributions received post 1 July 2009 are recognised in revenue immediately, except where the contributions are consideration for a future service, in which case they are recognised initially as deferred income and revenue is subsequently recognised over the period in which the service is provided.
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:
Depreciation periods | Years | |||
Freehold and leasehold buildings |
up to 65 | |||
Plant and machinery |
||||
Electricity transmission plant |
15 to 60 | |||
Electricity distribution plant |
15 to 60 | |||
Electricity generation plant |
20 to 40 | |||
Interconnector plant |
15 to 60 | |||
Gas plant mains, services and regulating equipment |
30 to 100 | |||
Gas plant storage |
15 to 21 | |||
Gas plant meters |
10 to 33 | |||
Motor vehicles and office equipment |
up to 10 |
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are, depending on their magnitude, recognised as an exceptional item within operating profit in the income statement.
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.
Material impairments are recognised in the 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.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 123 |
Financial Statements
Notes to the consolidated financial statements
Continued
10. Property, plant and equipment continued
Land and buildings £m |
Plant and machinery £m |
Assets in the
course of
£m |
Motor vehicles and office equipment £m |
Total £m |
||||||||||||||||
Cost at 1 April 2011 |
1,758 | 40,898 | 2,417 | 1,052 | 46,125 | |||||||||||||||
Exchange adjustments |
5 | 66 | 2 | | 73 | |||||||||||||||
Additions |
161 | 757 | 2,170 | 84 | 3,172 | |||||||||||||||
Disposals |
(8 | ) | (294 | ) | (4 | ) | (612 | ) | (918 | ) | ||||||||||
Reclassified as held for sale |
(3 | ) | 11 | | (3 | ) | 5 | |||||||||||||
Reclassifications between categories |
100 | 1,261 | (1,610 | ) | 249 | | ||||||||||||||
Cost at 31 March 2012 |
2,013 | 42,699 | 2,975 | 770 | 48,457 | |||||||||||||||
Exchange adjustments |
55 | 803 | 45 | 13 | 916 | |||||||||||||||
Additions |
141 | 704 | 2,584 | 82 | 3,511 | |||||||||||||||
Disposals |
(24 | ) | (311 | ) | (2 | ) | (130 | ) | (467 | ) | ||||||||||
Reclassifications (i) |
140 | 1,471 | (1,642 | ) | 68 | 37 | ||||||||||||||
Cost at 31 March 2013 |
2,325 | 45,366 | 3,960 | 803 | 52,454 | |||||||||||||||
Accumulated depreciation at 1 April 2011 |
(409 | ) | (13,100 | ) | (2 | ) | (658 | ) | (14,169 | ) | ||||||||||
Exchange adjustments |
(1 | ) | (18 | ) | | | (19 | ) | ||||||||||||
Depreciation charge for the year (ii) |
(54 | ) | (1,056 | ) | | (102 | ) | (1,212 | ) | |||||||||||
Impairment charge for the year (iii) |
| (15 | ) | | | (15 | ) | |||||||||||||
Disposals |
8 | 257 | | 374 | 639 | |||||||||||||||
Reclassified as held for sale |
| 18 | | 2 | 20 | |||||||||||||||
Reclassifications between categories |
20 | 110 | | (130 | ) | | ||||||||||||||
Accumulated depreciation at 31 March 2012 |
(436 | ) | (13,804 | ) | (2 | ) | (514 | ) | (14,756 | ) | ||||||||||
Exchange adjustments |
(11 | ) | (216 | ) | | (9 | ) | (236 | ) | |||||||||||
Depreciation charge for the year (ii) |
(75 | ) | (1,085 | ) | | (121 | ) | (1,281 | ) | |||||||||||
Disposals |
23 | 299 | 2 | 96 | 420 | |||||||||||||||
Reclassifications (i) |
| | | (9 | ) | (9 | ) | |||||||||||||
Accumulated depreciation at 31 March 2013 |
(499 | ) | (14,806 | ) | | (557 | ) | (15,862 | ) | |||||||||||
Net book value at 31 March 2013 |
1,826 | 30,560 | 3,960 | 246 | 36,592 | |||||||||||||||
Net book value at 31 March 2012 |
1,577 | 28,895 | 2,973 | 256 | 33,701 | |||||||||||||||
(i) Represents amounts transferred between categories and from other intangible assets (see note 9).
(ii) Includes amounts in respect of capitalised depreciation of £21m (2012: £19m).
(iii) Relates to impairment of LNG assets. |
|
|||||||||||||||||||
2013 £m |
2012 £m |
|||||||||||||||||||
Information in relation to property, plant and equipment |
|
|||||||||||||||||||
Capitalised interest included within cost |
|
1,275 | 1,148 | |||||||||||||||||
Net book value of assets held under finance leases (all relating to motor vehicles and office equipment) |
|
188 | 207 | |||||||||||||||||
Additions to assets held under finance leases (all relating to motor vehicles and office equipment) |
|
48 | 36 | |||||||||||||||||
Contributions to cost of property, plant and equipment included within: |
|
|||||||||||||||||||
Trade and other payables |
|
43 | 43 | |||||||||||||||||
Non-current liabilities |
|
1,492 | 1,467 |
124 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Other non-current assets includes assets that do not fall into any other non-current asset category (such as goodwill or property, plant and equipment) and the benefit to be received from the asset is not due to be received until after 31 March 2014.
|
2013 £m |
2012 £m |
|||||||
Commodity contract assets |
47 | 36 | ||||||
Other receivables |
51 | 54 | ||||||
Prepayments |
6 | 5 | ||||||
104 | 95 |
There is no material difference between the fair value and the carrying value of other non-current assets.
12. Financial and other investments
Financial and other investments includes two main categories. Assets that are classified as available-for-sale typically represent investments in short-term money funds and quoted investments in equities or bonds of other companies. The second category is loans and receivables which includes cash balances that cannot be readily used in operations, principally collateral pledged for certain borrowings and restricted cash balances relating to our UK pension schemes.
|
Financial assets, liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into, and recognised on trade date. Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any other categories.
Loans receivable and other receivables are initially recognised at fair value and subsequently held at amortised cost using the effective interest method. Interest income, together with gains and losses when the loans and receivables are derecognised or impaired, are recognised in the income statement.
Available-for-sale financial investments are recognised at fair value plus directly related incremental transaction costs, and are subsequently carried at fair value in the statement of financial position. Changes in the fair value of available-for-sale investments are recognised directly in equity, until the investment is disposed of or is determined to be impaired. At this time the cumulative gain or loss previously recognised in equity is included in the income statement for the period. Investment income is recognised using the effective interest method and taken through interest income in the income statement.
Subsequent to initial recognition, the fair values of financial instruments measured at fair value that are quoted in active markets are based on bid prices for assets held and offer prices for issued liabilities. When independent prices are not available, fair values are determined by using valuation techniques that are consistent with techniques commonly used by the relevant market. The techniques use observable market data.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 125 |
Financial Statements
Notes to the consolidated financial statements
Continued
12. Financial and other investments continued
2013 £m |
2012 £m |
|||||||
Non-current |
||||||||
Available-for-sale investments |
278 | 251 | ||||||
Current |
||||||||
Available-for-sale investments |
4,441 | 1,675 | ||||||
Loans and receivables |
990 | 716 | ||||||
5,431 | 2,391 | |||||||
Total financial and other investments |
5,709 | 2,642 | ||||||
Financial and other investments include the following: |
||||||||
Investments in short-term money funds |
4,120 | 1,342 | ||||||
Managed investments in equity and bonds (i) |
453 | 441 | ||||||
Bank deposits (i) |
165 | 9 | ||||||
Cash surrender value of life insurance policies |
145 | 130 | ||||||
Other investments |
4 | 4 | ||||||
Restricted cash balances (ii) |
822 | 716 | ||||||
5,709 | 2,642 |
(i) | Includes £296m (2012: £286m) of current investments which are held by insurance captives and are therefore restricted. |
(ii) | Principally comprises collateral placed with counterparties with whom we have entered into a credit support annex to the ISDA Master Agreement £507m (2012: £461m), and secured bank accounts with charges in favour of the UK pension schemes Trustees of £179m (2012: £146m). |
Available-for-sale investments are recorded at fair value. Due to their short maturities the carrying value of loans and receivables approximates their fair value. The maximum 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 30(c). None of the financial investments are past due or impaired.
13. Investments in joint ventures and associates
Investments in joint ventures and associates represents businesses we do not control, but in which we have up to a 50% equity holding and exercise joint control or significant influence.
|
A joint venture is an entity established to engage in economic activity, which the Company jointly controls with its fellow venturers. An associate is an entity which is neither a subsidiary nor a joint venture, but over which the Company has significant influence.
2013 £m |
2012 £m |
|||||||
Share of net assets at 1 April |
341 | 356 | ||||||
Exchange adjustments |
9 | (15 | ) | |||||
Additions |
14 | 13 | ||||||
Share of retained profit for the year |
18 | 7 | ||||||
Dividends received |
(21 | ) | (26 | ) | ||||
Other movements |
10 | 6 | ||||||
Share of net assets at 31 March |
371 | 341 |
A list of principal joint ventures and associates is provided in note 33.
126 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
14. Derivative financial instruments
A derivative is a financial instrument used to manage the risk associated with fluctuations in the value of certain assets or liabilities. In accordance with Board approved policies, we use derivatives to manage our exposure to fluctuations in interest rate and foreign exchange rate on borrowings and other contractual cash flows.
Derivative financial instruments are initially recognised at fair value and subsequently remeasured at fair value at each reporting date. Changes in fair values are recorded in either the income statement or other comprehensive income depending on the applicable accounting standards.
Analysis of these derivatives and the various methods used to calculate their respective fair values is detailed below and in note 30.
|
Derivatives are financial instruments that derive their value from the price of an underlying item such as interest rates, foreign exchange, credit spreads, commodities, equity or other indices. Derivatives enable their users to manage their exposure to these market or credit risks. We use derivatives to manage the interest rate and foreign exchange risks from our financing portfolio and this enables the optimisation of the overall cost of accessing debt capital markets. We also use derivatives to manage our operational market risks from commodities. The commodity derivative contracts are detailed in note 31.
Derivative financial instruments are recorded at fair value through profit or loss. Where the fair value of a derivative is positive it is carried as a derivative asset, and where negative as a derivative liability. Assets and liabilities on different transactions are only reported net if the transactions are with the same counterparty, a legal right of set off exists and the cash flows are intended to be settled on a net basis. Gains and losses arising from the changes in fair value are included in the income statement in the period they arise.
We calculate fair value of the financial derivatives by discounting all future cash flows by the market yield curve at the reporting date. The market yield curve for each currency is obtained from external sources for interest and foreign exchange rates. In the case of derivative instruments that include options, the Blacks variation of the Black-Scholes model is used to calculate fair value.
Where possible, derivatives held as hedging instruments are formally designated as hedges as defined in IAS 39. Derivatives may qualify as hedges for accounting purposes if they are fair value hedges, cash flow hedges or net investment hedges.
Hedge accounting allows derivatives to be designated as a hedge of another (non-derivative) financial instrument, to mitigate the impact of potential volatility in the income statement of changes in the fair value of the derivative instruments. To qualify for hedge accounting, documentation is prepared specifying the hedging strategy, the component transactions and methodology used for effectiveness measurement. National Grid uses three hedge accounting methods, which are described as follows:
Fair value hedges
Fair value hedges principally consist of interest rate and cross-currency swaps that are used to protect against changes in the fair value of fixed-rate, long-term financial instruments due to movements in market interest rates. For qualifying fair value hedges, all changes in the fair value of the derivative and changes in the fair value of the item in relation to the risk being hedged are recognised in the income statement to the extent the fair value hedge is effective. Adjustments made to the carrying amount of the hedged item for fair value hedges will be amortised over the remaining life, in line with the hedged item.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 127 |
Financial Statements
Notes to the consolidated financial statements
Continued
14. Derivative financial instruments continued
Cash flow hedges
Exposure arises from the variability in future interest and currency cash flows on assets and liabilities which bear interest at variable rates or are in a foreign currency. Interest rate and cross-currency swaps are maintained, and designated as cash flow hedges, where they qualify, to manage this exposure. Fair value changes on designated cash flow hedges are initially recognised directly in the cash flow hedge reserve, as gains or losses recognised in equity and any ineffective portion is recognised immediately in the income statement. Amounts are transferred from equity and recognised in the income statement as the income or expense is recognised on the hedged item.
Forward foreign currency contracts are used to hedge anticipated and committed future currency cash flows. Where these contracts qualify for hedge accounting they are designated as cash flow hedges. On recognition of the underlying transaction in the financial statements, the associated hedge gains and losses, deferred in equity, are transferred and included with the recognition of the underlying transaction.
When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is transferred to the income statement.
Where a non-financial asset or a non-financial liability results from a forecasted transaction or firm commitment being hedged, the amounts deferred in equity are included in the initial measurement of that non-monetary asset or liability.
Net investment hedges
Borrowings, cross-currency swaps and forward currency contracts are used in the management of the foreign exchange exposure arising from the investment in non-sterling denominated subsidiaries. Where these contracts qualify for hedge accounting they are designated as net investment hedges.
The cross-currency swaps and forward foreign currency contracts are hedge accounted using the spot to spot method. The foreign exchange gain or loss on retranslation of the borrowings and the spot to spot movements on the cross-currency swaps and forward currency contracts are transferred to equity to offset gains or losses on translation of the net investment in the non-sterling denominated subsidiaries, with any ineffective portion recognised immediately in the income statement.
Derivatives not in a formal hedge relationship
Our policy is not to use derivatives for trading purposes. However, due to the complex nature of hedge accounting under IAS 39 some derivatives may not qualify for hedge accounting, or are specifically not designated as a hedge where natural offset is more appropriate. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised in remeasurements within the income statement.
Discontinuation of hedge accounting
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised or no longer qualifies for hedge accounting. At that time, any cumulative gains or losses relating to cash flow hedges recognised in equity are initially retained in equity and subsequently recognised in the income statement in the same periods in which the previously hedged item affects net profit or loss. Amounts deferred in equity with respect to net investment hedges are subsequently recognised in the income statement in the event of the disposal of the overseas operations concerned. For fair value hedges, the cumulative adjustment recorded to the carrying value of the hedged item at the date hedge accounting is discontinued is amortised to the income statement using the effective interest method.
Embedded derivatives
No adjustment is made with respect to derivative clauses embedded in financial instruments or other contracts that are defined as closely related to those instruments or contracts. Consequently these embedded derivatives are not accounted for separately from the debt instrument. Where there are embedded derivatives in host contracts not closely related, the embedded derivative is separately accounted for as a derivative financial instrument.
128 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
14. Derivative financial instruments continued
Our use of derivatives may entail a derivative transaction qualifying for one or more hedge type designations under IAS 39. The fair value amounts by designated hedge type can be analysed as follows:
2013 | 2012 | |||||||||||||||||||||||||
Assets
£m |
Liabilities
£m |
Total
£m |
Assets
£m |
Liabilities
£m |
Total £m |
|||||||||||||||||||||
Fair value hedges |
||||||||||||||||||||||||||
Interest rate swaps |
390 | | 390 | 230 | | 230 | ||||||||||||||||||||
Cross-currency interest rate swaps |
349 | (7 | ) | 342 | 409 | (12 | ) | 397 | ||||||||||||||||||
739 | (7 | ) | 732 | 639 | (12 | ) | 627 | |||||||||||||||||||
Cash flow hedges |
||||||||||||||||||||||||||
Interest rate swaps |
| (90 | ) | (90 | ) | | (87 | ) | (87 | ) | ||||||||||||||||
Cross-currency interest rate swaps |
361 | (148 | ) | 213 | 448 | (57 | ) | 391 | ||||||||||||||||||
Foreign exchange forward contracts |
3 | (2 | ) | 1 | | (5 | ) | (5 | ) | |||||||||||||||||
Inflation linked swaps |
4 | (20 | ) | (16 | ) | 2 | (18 | ) | (16 | ) | ||||||||||||||||
368 | (260 | ) | 108 | 450 | (167 | ) | 283 | |||||||||||||||||||
Net investment hedges |
||||||||||||||||||||||||||
Cross-currency interest rate swaps |
141 | (197 | ) | (56 | ) | 149 | (214 | ) | (65 | ) | ||||||||||||||||
Foreign exchange forward contracts |
8 | (47 | ) | (39 | ) | 50 | | 50 | ||||||||||||||||||
149 | (244 | ) | (95 | ) | 199 | (214 | ) | (15 | ) | |||||||||||||||||
Derivatives not in a formal hedge relationship |
||||||||||||||||||||||||||
Interest rate swaps |
887 | (884 | ) | 3 | 754 | (710 | ) | 44 | ||||||||||||||||||
Cross-currency interest rate swaps |
33 | (20 | ) | 13 | 33 | (16 | ) | 17 | ||||||||||||||||||
Foreign exchange forward contracts |
4 | (14 | ) | (10 | ) | 14 | | 14 | ||||||||||||||||||
Forward rate agreements |
| (5 | ) | (5 | ) | | (5 | ) | (5 | ) | ||||||||||||||||
Inflation linked swaps |
44 | (226 | ) | (182 | ) | 37 | (297 | ) | (260 | ) | ||||||||||||||||
968 | (1,149 | ) | (181 | ) | 838 | (1,028 | ) | (190 | ) | |||||||||||||||||
2,224 | (1,660 | ) | 564 | 2,126 | (1,421 | ) | 705 | |||||||||||||||||||
Hedge positions offset within derivative instruments |
21 | (21 | ) | | 10 | (10 | ) | | ||||||||||||||||||
Total |
2,245 | (1,681 | ) | 564 | 2,136 | (1,431 | ) | 705 |
The maturity profile of derivative financial instruments is as follows:
2013 | 2012 | |||||||||||||||||||||||||
Assets
£m |
Liabilities
£m |
Total
£m |
Assets
£m |
Liabilities
£m |
Total £m |
|||||||||||||||||||||
Less than 1 year |
273 | (407 | ) | (134 | ) | 317 | (162 | ) | 155 | |||||||||||||||||
Current |
273 | (407 | ) | (134 | ) | 317 | (162 | ) | 155 | |||||||||||||||||
In 1-2 years |
42 | (44 | ) | (2 | ) | 109 | (74 | ) | 35 | |||||||||||||||||
In 2-3 years |
75 | (51 | ) | 24 | 92 | (60 | ) | 32 | ||||||||||||||||||
In 3-4 years |
119 | (121 | ) | (2 | ) | 84 | (30 | ) | 54 | |||||||||||||||||
In 4-5 years |
84 | (55 | ) | 29 | 116 | (132 | ) | (16) | ||||||||||||||||||
More than 5 years |
1,652 | (1,003 | ) | 649 | 1,418 | (973 | ) | 445 | ||||||||||||||||||
Non-current |
1,972 | (1,274 | ) | 698 | 1,819 | (1,269 | ) | 550 | ||||||||||||||||||
2,245 | (1,681 | ) | 564 | 2,136 | (1,431 | ) | 705 |
For each class of derivative the notional contract* amounts are as follows:
2013 £m |
2012 £m |
|||||||
Interest rate swaps |
(16,603) | (17,342) | ||||||
Cross-currency interest rate swaps |
(9,641) | (6,305) | ||||||
Foreign exchange forward contracts |
(3,142) | (4,636) | ||||||
Forward rate agreements |
(2,443) | (4,223) | ||||||
Inflation linked swaps |
(1,390) | (1,379) | ||||||
Total |
(33,219) | (33,885) |
*The notional contract amounts of derivatives indicate the gross nominal value of transactions outstanding at the reporting date
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 129 |
Financial Statements
Notes to the consolidated financial statements
Continued
15. Inventories and current intangible assets
Inventories represent assets that we intend to use in order to generate revenue in future periods, either by selling the asset itself (for example fuel stocks) or by using it to fulfil a service to a customer (consumables) or to maintain our network.
|
Inventories are stated at the lower of cost, calculated on a weighted average basis, 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 and are initially recorded at cost and subsequently at the lower of cost and net realisable value. Where emission allowances are granted by relevant authorities, cost is deemed to be equal to the fair value at the date of allocation. Receipts of such grants are treated as deferred income, which is recognised in the income statement as the related charges for emissions are recognised or on impairment of the related intangible asset. A provision 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.
2013 £m |
2012 £m |
|||||||
|
||||||||
Fuel stocks |
114 | 191 | ||||||
Raw materials and consumables |
156 | 143 | ||||||
Work in progress |
13 | 13 | ||||||
Current intangible assets emission allowances |
8 | 29 | ||||||
|
||||||||
291 | 376 | |||||||
|
There is a provision for obsolescence of £27m against inventories as at 31 March 2013 (2012: £28m).
130 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
16. Trade and other receivables
Trade and other receivables are amounts which are due from our customers for services we have provided. Other receivables also include prepayments made by us, for example, property lease rentals paid in advance.
|
Trade, loan and other receivables are initially recognised at fair value and subsequently measured at amortised cost, less any appropriate allowances for estimated irrecoverable amounts. A provision is established for irrecoverable amounts when there is objective evidence that amounts due under the original payment terms will not be collected.
2013 £m |
2012 £m |
|||||||
|
||||||||
Trade receivables |
1,325 | 933 | ||||||
Prepayments and accrued income |
1,421 | 963 | ||||||
Commodity contract assets |
42 | 35 | ||||||
Other receivables |
122 | 40 | ||||||
|
||||||||
2,910 | 1,971 | |||||||
|
Trade receivables are non interest-bearing and generally have a 30-90 day term. Due to their short maturities, the fair value of trade and other receivables approximates their book value. Commodity contract assets are recorded at fair value. All other receivables are recorded at amortised cost.
Provision for impairment of receivables
2013 £m |
2012 £m |
|||||||
|
||||||||
At 1 April |
270 | 283 | ||||||
Exchange adjustments |
13 | 1 | ||||||
Charge for the year, net of recoveries |
75 | 103 | ||||||
Uncollectible amounts written off against receivables |
(97 | ) | (117) | |||||
|
||||||||
At 31 March |
261 | 270 | ||||||
|
Trade receivables past due but not impaired
2013 £m |
2012 £m |
|||||||
|
||||||||
Up to 3 months past due |
242 | 171 | ||||||
3 to 6 months past due |
45 | 53 | ||||||
Over 6 months past due |
4 | 4 | ||||||
|
||||||||
291 | 228 | |||||||
|
For further information on our wholesale and retail credit risk, refer to note 30(c). For further information on our commodity risk, refer to note 31.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 131 |
Financial Statements
Notes to the consolidated financial statements
Continued
Cash and cash equivalents includes cash balances, together with short-term investments with an original maturity of less than three months that are readily convertible to 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.
Net 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 30(a)(i).
2013 £m |
2012 £m |
|||||||
|
||||||||
Cash at bank |
99 | 60 | ||||||
Short-term deposits |
572 | 272 | ||||||
|
||||||||
Cash and cash equivalents excluding bank overdrafts |
671 | 332 | ||||||
Bank overdrafts |
(23 | ) | (33) | |||||
|
||||||||
Net cash and cash equivalents |
648 | 299 | ||||||
|
At 31 March 2013, £21m (2012: £29m) of cash and cash equivalents were restricted. This primarily relates to cash held in captive insurance companies.
132 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
18. Businesses classified as held for sale
When the Directors have taken the decision to dispose of a component of the business, but the sale has not been completed at the year end, the assets and liabilities relating to that component are removed from individual lines in the statement of financial position and grouped into assets held for sale and liabilities held for sale. This enables users of the financial statements to understand more clearly what assets and liabilities the remaining business holds for continuing operations.
|
Assets and businesses classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. No depreciation is charged on assets and businesses classified as held for sale.
Assets and businesses are classified as held for sale if their carrying amount will be recovered or settled principally through a sale transaction rather than through continuing use. This condition is regarded as being met only when the sale is highly probable and the assets or businesses are available for immediate sale in their present condition or the sale relates to a subsidiary acquired exclusively with a view to resale. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
As at 31 March 2012, our EnergyNorth gas business and Granite State electricity business in New Hampshire were reclassified as businesses held for sale. On 3 July 2012 we completed the sale of these businesses for net proceeds of £183m.
The results of these businesses were not separately disclosed from those of continuing operations as they did not constitute a separate major line of business or geographical area of National Grids operations.
There were no assets or liabilities related to businesses held for sale at 31 March 2013.
2013 £m |
2012 £m |
|||||||
|
||||||||
Goodwill |
| 34 | ||||||
Other intangible assets |
| 1 | ||||||
Property, plant and equipment |
| 192 | ||||||
Other receivables |
| 3 | ||||||
|
||||||||
Non-current assets |
| 230 | ||||||
|
||||||||
Inventories |
| 7 | ||||||
Trade and other receivables |
| 25 | ||||||
Financial investments |
| 2 | ||||||
|
||||||||
Current assets |
| 34 | ||||||
|
||||||||
Assets of businesses held for sale |
| 264 | ||||||
|
||||||||
Trade and other payables |
| (15) | ||||||
|
||||||||
Current liabilities |
| (15) | ||||||
|
||||||||
Borrowings |
| (10) | ||||||
Other non-current liabilities |
| (2) | ||||||
Deferred tax liabilities |
| (9) | ||||||
Pensions and other post-retirement benefit obligations |
| (14) | ||||||
Provisions |
| (37) | ||||||
|
||||||||
Non-current liabilities |
| (72) | ||||||
|
||||||||
Liabilities of businesses held for sale |
| (87) | ||||||
|
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 133 |
Financial Statements
Notes to the consolidated financial statements
Continued
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. As indicated in note 14, we use derivatives to manage risks associated with interest rates and foreign exchange.
|
Our strategy in action
Our price controls and rate plans require us to fund our networks within a certain ratio of debt to equity 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 take account of certain other metrics used by credit rating agencies.
|
Borrowings, which include interest-bearing and inflation linked debt and overdrafts are recorded at their initial fair value which normally reflects the proceeds received, net of direct issue costs less any repayments. Subsequently these are stated at amortised cost, using the effective interest method. 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.
2013 £m |
2012 £m |
|||||||
|
||||||||
Current |
||||||||
Bank loans |
1,194 | 1,061 | ||||||
Bonds |
1,761 | 1,356 | ||||||
Commercial paper |
438 | | ||||||
Finance leases |
20 | 22 | ||||||
Other loans |
12 | 20 | ||||||
Bank overdrafts |
23 | 33 | ||||||
|
||||||||
3,448 | 2,492 | |||||||
|
||||||||
Non-current |
||||||||
Bank loans |
1,863 | 2,160 | ||||||
Bonds |
22,435 | 18,012 | ||||||
Finance leases |
175 | 185 | ||||||
Other loans |
174 | 176 | ||||||
|
||||||||
24,647 | 20,533 | |||||||
|
||||||||
Total |
28,095 | 23,025 | ||||||
|
Total borrowings are repayable as follows:
2013 £m |
2012 £m |
|||||||
|
||||||||
Less than 1 year |
3,448 | 2,492 | ||||||
In 1-2 years |
1,872 | 1,867 | ||||||
In 2-3 years |
860 | 1,725 | ||||||
In 3-4 years |
1,255 | 828 | ||||||
In 4-5 years |
1,420 | 1,252 | ||||||
More than 5 years: |
||||||||
by instalments |
71 | 77 | ||||||
other than by instalments |
19,169 | 14,784 | ||||||
|
||||||||
28,095 | 23,025 | |||||||
|
134 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
19. Borrowings continued
The fair value of borrowings at 31 March 2013 was £30,792m (2012: £25,217m). Market values, where available, have been used to determine fair value. Where market values are not available, fair values have been calculated by discounting cash flows at prevailing interest rates. The notional amount outstanding of the debt portfolio at 31 March 2013 was £27,391m (2012: £22,618m).
The assets of the Colonial Gas Company and the Niagara Mohawk Power Corporation and certain gas distribution assets of the Narragansett Electric Company are subject to liens and other charges and are provided as collateral over borrowings totalling £512m at 31 March 2013 (2012: £487m).
Collateral is placed with or received from any 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 £730m (2012: £655m) in respect of cash received under collateral agreements. For further details of our borrowing facilities, refer to note 32. For further details of our bonds in issue, please refer to the debt investor section of our website.
Assets held under finance leases are recognised at their fair value or, if lower, the present value of the minimum lease payments on inception. The corresponding liability is recognised as a finance lease obligation within borrowings. Rental payments are apportioned between finance costs and reduction in the finance lease obligation, so as to achieve a constant rate of interest.
Assets held under finance leases are depreciated over the shorter of their useful life and the lease term.
Finance lease obligations
Trade and other payables includes amounts owed to suppliers, tax authorities and other parties which are due to be settled within 12 months. The total also includes deferred income, which represents monies received from customers but for which we have not yet completed the associated service. These amounts are recognised as revenue when the service is provided.
|
Trade payables are initially recognised at fair value and subsequently measured at amortised cost.
2013 £m |
2012 £m |
|||||||
|
||||||||
Trade payables |
2,033 | 1,530 | ||||||
Deferred income |
155 | 305 | ||||||
Commodity contract liabilities |
69 | 149 | ||||||
Social security and other taxes |
131 | 107 | ||||||
Other payables |
663 | 594 | ||||||
|
||||||||
3,051 | 2,685 | |||||||
|
Due to their short maturities, the fair value of trade and other payables approximates their book value. Commodity contract liabilities are recorded at fair value. All other trade and other payables are recorded at amortised cost.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 135 |
Financial Statements
Notes to the consolidated financial statements
Continued
21. Other non-current liabilities
Other non-current liabilities includes deferred income which will not be recognised as income until after 31 March 2014. It also includes payables that are not due until after that date.
|
2013 £m |
2012 £m |
|||||||
|
||||||||
Deferred income |
1,579 | 1,557 | ||||||
Commodity contract liabilities |
70 | 111 | ||||||
Other payables |
235 | 253 | ||||||
|
||||||||
1,884 | 1,921 | |||||||
|
Commodity contract liabilities are recorded at fair value. All other non-current liabilities are recorded at amortised cost. There is no material difference between the fair value and the carrying value of other non-current liabilities.
22. Pensions and other post-retirement benefits
Substantially all our employees are members of either defined benefit or defined contribution pension plans. The principal UK schemes are the National Grid UK Pension Scheme and the National Grid Electricity Group of the Electricity Supply Pension Scheme. In the US, we have a number of plans and also provide healthcare and life insurance benefits to eligible retired US employees. The fair value of plan assets and present value of defined benefit obligations are updated annually. For further details of each scheme/plans terms and the actuarial assumptions used to value the associated assets and obligations, see note 29. Below we provide a more detailed analysis of the amounts recorded in the primary financial statements.
|
For defined contribution schemes, the Group pays contributions into a separate fund on behalf of the employee and has no further obligations to employees. The risks associated with this type of scheme are assumed by the member.
For defined benefit retirement schemes, members receive benefits on retirement, the value of which is dependent on factors such as salary and length of pensionable service. The Group underwrites both financial and demographic risks associated with this type of scheme.
The cost of providing benefits in a defined benefit scheme is determined using the projected unit method, with actuarial valuations being carried out at each reporting date.
The Groups obligation in respect of defined benefit pension schemes is calculated separately for each scheme by estimating the amount of future benefit that employees have earned for their pensionable service in the current and prior periods.
That benefit is discounted to determine its present value and the fair value of scheme assets and any unrecognised past service cost is then deducted. The discount rate used is the yield at the valuation date on high quality corporate bonds.
The Group takes advice from independent actuaries relating to the appropriateness of the assumptions which include life expectancy of members, expected salary and pension increases, inflation and the return on scheme assets. We note that comparatively small changes in the assumptions used may have a significant effect on the income statement and statement of financial position.
The liabilities of the defined benefit schemes are measured by discounting the best estimate of future cash flows to be paid using the projected unit method. This method is an accrued benefits valuation method that makes allowance for projected earnings.
These calculations are performed by a qualified actuary.
Actuarial gains and losses are recognised in full in the period in which they occur in the statement of other comprehensive income.
136 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
22. Pensions and other post-retirement benefits continued
Amounts recognised in the income statement and statement of other comprehensive income
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 137 |
Financial Statements
Notes to the consolidated financial statements
Continued
22. Pensions and other post-retirement benefits continued
Pensions | US other post-retirement benefits | |||||||||||||||||||||||||
2013 | 2012 | 2011 | 2013 | 2012 | 2011 | |||||||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||||
Changes in the present value of defined benefit obligations (including unfunded obligations) |
||||||||||||||||||||||||||
Opening defined benefit obligations |
(21,386 | ) | (19,480 | ) | (19,598 | ) | (2,630 | ) | (2,458 | ) | (2,602 | ) | ||||||||||||||
Current service cost |
(177 | ) | (159 | ) | (165 | ) | (43 | ) | (37 | ) | (37 | ) | ||||||||||||||
Interest cost |
(1,020 | ) | (1,063 | ) | (1,084 | ) | (133 | ) | (140 | ) | (147 | ) | ||||||||||||||
Actuarial (losses)/gains |
(1,930 | ) | (1,673 | ) | 185 | (176 | ) | (83 | ) | 28 | ||||||||||||||||
Curtailment gain/(loss) on redundancies and settlements |
43 | (13 | ) | 10 | 5 | (23 | ) | 29 | ||||||||||||||||||
Transfers in |
| 1 | 1 | | | | ||||||||||||||||||||
Special termination benefits |
(20 | ) | (13 | ) | (17 | ) | | | | |||||||||||||||||
Curtailment cost augmentations |
(2 | ) | (2 | ) | (2 | ) | | | | |||||||||||||||||
Plan amendments |
| | (28 | ) | | | 14 | |||||||||||||||||||
Medicare subsidy received |
| | | (19 | ) | (6 | ) | (5 | ) | |||||||||||||||||
Employee contributions |
(3 | ) | (3 | ) | (3 | ) | | | | |||||||||||||||||
Benefits paid |
1,070 | 1,035 | 985 | 123 | 127 | 117 | ||||||||||||||||||||
Transferred to liabilities of businesses held for sale |
| 3 | 7 | | 2 | 2 | ||||||||||||||||||||
Exchange adjustments |
(251 | ) | (19 | ) | 229 | (147 | ) | (12 | ) | 143 | ||||||||||||||||
Closing defined benefit obligations |
(23,676 | ) | (21,386 | ) | (19,480 | ) | (3,020 | ) | (2,630 | ) | (2,458 | ) | ||||||||||||||
Changes in the fair value of plan assets |
||||||||||||||||||||||||||
Opening fair value of plan assets |
19,957 | 18,903 | 18,186 | 1,192 | 1,066 | 950 | ||||||||||||||||||||
Expected return on plan assets |
1,130 | 1,189 | 1,185 | 92 | 84 | 71 | ||||||||||||||||||||
Actuarial gains/(losses) |
1,150 | 466 | 298 | 26 | (35 | ) | 60 | |||||||||||||||||||
Transfers out |
| (1 | ) | (1 | ) | | | | ||||||||||||||||||
Employer contributions |
425 | 415 | 408 | 262 | 198 | 158 | ||||||||||||||||||||
Employee contributions |
3 | 3 | 3 | | | | ||||||||||||||||||||
Benefits paid |
(1,070 | ) | (1,035 | ) | (985 | ) | (123 | ) | (127 | ) | (117 | ) | ||||||||||||||
Assets distributed in settlements and transfers |
(39 | ) | | | (6 | ) | | | ||||||||||||||||||
Exchange adjustments |
214 | 17 | (191 | ) | 72 | 6 | (56 | ) | ||||||||||||||||||
Closing fair value of plan assets |
21,770 | 19,957 | 18,903 | 1,515 | 1,192 | 1,066 | ||||||||||||||||||||
Actual return on plan assets |
2,280 | 1,655 | 1,483 | 118 | 49 | 131 | ||||||||||||||||||||
Expected contributions to plans in the following year |
364 | 353 | 353 | 196 | 248 | 200 |
We make provisions when an obligation exists, relating to events in the past and it is probable that cash will be paid to settle it, but the amount of cash required can only be estimated.
The main estimates relate to environmental and decommissioning costs for various sites we own or have owned which require restoration or remediation and other provisions, including lease contracts we have entered into that are now unprofitable.
|
Our strategy in action
We are committed to the protection and enhancement of the environment. However, we have acquired, owned and operated a number of businesses which have, during the course of their operations, created an environmental impact. We have a provision that reflects the expected cost to remediate these sites and it is uncommon that new sites with significant expected costs are added to the provision as a result of current operations.
|
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.
Provision is made for decommissioning and environmental costs, based on future estimated expenditures, 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.
138 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
23. Provisions continued
Changes in the provision arising from revised estimates or discount rates or changes in the expected timing of expenditures that relate 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 as a financing charge.
Environ- | Decom- | Total | ||||||||||||||||||||||
mental | missioning | Restructuring | Emissions | Other | provisions | |||||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
|
||||||||||||||||||||||||
At 1 April 2011 |
1,150 | 120 | 128 | 24 | 392 | 1,814 | ||||||||||||||||||
Exchange adjustments |
4 | 1 | | | 1 | 6 | ||||||||||||||||||
Additions |
58 | 1 | 39 | 7 | 14 | 119 | ||||||||||||||||||
Unused amounts reversed |
(9 | ) | | (23 | ) | (6 | ) | (17 | ) | (55) | ||||||||||||||
Reclassified as held for sale |
3 | | | | | 3 | ||||||||||||||||||
Unwinding of discount |
53 | 1 | | | 18 | 72 | ||||||||||||||||||
Utilised |
(101 | ) | (11 | ) | (74 | ) | (2 | ) | (40 | ) | (228) | |||||||||||||
|
||||||||||||||||||||||||
At 31 March 2012 |
1,158 | 112 | 70 | 23 | 368 | 1,731 | ||||||||||||||||||
Exchange adjustments |
45 | 5 | | 1 | 14 | 65 | ||||||||||||||||||
Additions |
92 | | 31 | 1 | 83 | 207 | ||||||||||||||||||
Unused amounts reversed |
(55 | ) | (20 | ) | (5 | ) | (3 | ) | (4 | ) | (87) | |||||||||||||
Unwinding of discount |
59 | | | | 16 | 75 | ||||||||||||||||||
Utilised |
(101 | ) | (16 | ) | (43 | ) | (14 | ) | (57 | ) | (231) | |||||||||||||
|
||||||||||||||||||||||||
At 31 March 2013 |
1,198 | 81 | 53 | 8 | 420 | 1,760 | ||||||||||||||||||
|
||||||||||||||||||||||||
2013 | 2012 | |||||||||||||||||||||||
£m | £m | |||||||||||||||||||||||
|
||||||||||||||||||||||||
Current |
308 | 282 | ||||||||||||||||||||||
Non-current |
1,452 | 1,449 | ||||||||||||||||||||||
|
||||||||||||||||||||||||
1,760 | 1,731 | |||||||||||||||||||||||
|
Environmental provision
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:
2013 | 2012 | |||||||||||||||||||||||||
Discounted | Undiscounted | Real | Discounted | Undiscounted | Real | |||||||||||||||||||||
£m | £m | discount rate | £m | £m | discount rate | |||||||||||||||||||||
|
||||||||||||||||||||||||||
UK sites (i) |
302 | 397 | 2% | 306 | 423 | 2% | ||||||||||||||||||||
US sites (ii) |
896 | 1,014 | 2% | 852 | 960 | 2% | ||||||||||||||||||||
|
||||||||||||||||||||||||||
1,198 | 1,411 | 1,158 | 1,383 | |||||||||||||||||||||||
|
(i) | 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 between 2013 and 2062. A number of uncertainties affect the calculation of the provision, including the impact of regulation, accuracy of the site surveys, unexpected contaminants, transportation costs, the impact of alternative technologies and changes in the discount rate. This provision incorporates our best estimate of the financial effect of these uncertainties, but future material 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. |
(ii) | The remediation expenditure in the US is expected to be incurred between 2013 and 2058. The uncertainties regarding the calculation of this provision are similar to those considered in respect of UK sites. However, unlike the UK, with the exception of immaterial amounts of such costs, this expenditure is expected to be largely recoverable from ratepayers under the terms of various rate agreements in the US. |
Decommissioning provision
The decommissioning provision primarily represents £69m (2012: £74m) of expenditure relating to asset retirement obligations expected to be incurred until 2058. It also includes the net present value of the estimated expenditure (discounted at a real rate of 2%) expected to be incurred until 2038 in respect of the decommissioning of certain nuclear generating units that National Grid no longer owns.
Restructuring provision
The restructuring provision principally relates to business reorganisation costs in the UK and the US and is expected to be incurred until 2014. At 31 March 2013, £5m of the total restructuring provision (2012: £8m) consisted of provisions for the disposal of surplus leasehold interests and rates payable on surplus properties with expenditure expected to be incurred until 2018.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 139 |
Financial Statements
Notes to the consolidated financial statements
Continued
23. Provisions continued
Emissions provision
The provision for emission costs is expected to be settled using emission allowances granted.
Other provisions
Included within other provisions at 31 March 2013 are amounts provided in respect of onerous lease commitments of £165m (2012: £178m).
Other provisions also include £174m (2012: £141m) 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 and there is, therefore, no identifiable payment date. It also includes £13m (2012: £13m) in respect of obligations associated with investments in joint ventures.
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 satisfy employee share option 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 | ||||||||
Ordinary shares | millions | £m | ||||||
At 1 April 2011 |
3,648 | 416 | ||||||
Issued during the year in lieu of dividends (i) |
53 | 6 | ||||||
At 31 March 2012 |
3,701 | 422 | ||||||
Issued during the year in lieu of dividends (i) |
94 | 11 | ||||||
At 31 March 2013 |
3,795 | 433 |
(i) | The issue of shares in lieu of dividends 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 11 17 ⁄ 43 pence nominal value each including American Depositary Shares. The ordinary and American Depositary Shares 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, National Grid plc has amended its Articles of Association and ceased to have authorised share capital.
Treasury shares
At 31 March 2013, the Company held 129m (2012: 135m) of its own shares. The market value of these shares as at 31 March 2013 was £989m (2012: £854m).
The maximum number of shares held during the year was 135m ordinary shares (2012: 140m) representing approximately 3.6% (2012: 3.8%) of the ordinary shares in issue as at 31 March 2013 and having a nominal value of £15m (2012: £16m).
140 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Other equity reserves are different categories of equity as required by accounting standards and represent the impact of a number of our historical transactions.
|
Other equity reserves comprise the translation reserve (see accounting policy B), cash flow hedge reserve (see note 14), available-for-sale reserve (see note 12), 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.
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 |
Available-
for-sale £m |
Capital
redemption £m |
Merger
£m |
Total
£m |
|||||||||||||||||||
At 1 April 2010 |
414 | (97 | ) | 48 | 19 |
|
(5,165
|
)
|
(4,781 | ) | ||||||||||||||
Exchange adjustments |
(95 | ) | | | | | (95 | ) | ||||||||||||||||
Net gains taken to equity |
| 7 | 16 | | | 23 | ||||||||||||||||||
Transferred to profit or loss |
| (7 | ) | (3 | ) | | | (10 | ) | |||||||||||||||
Rights issue (i) |
| | | | 3,101 | 3,101 | ||||||||||||||||||
Transferred to retained earnings (i) |
| | | | (3,101 | ) | (3,101 | ) | ||||||||||||||||
Deferred tax |
| (2 | ) | (1 | ) | | | (3 | ) | |||||||||||||||
Share of other comprehensive loss of joint ventures |
| (4 | ) | | | | (4 | ) | ||||||||||||||||
At 31 March 2011 |
319 | (103 | ) | 60 | 19 | (5,165 | ) | (4,870 | ) | |||||||||||||||
Exchange adjustments |
27 | | | | | 27 | ||||||||||||||||||
Net (losses)/gains taken to equity |
| (18 | ) | 16 | | | (2 | ) | ||||||||||||||||
Transferred to profit or loss |
| 19 | (9 | ) | | | 10 | |||||||||||||||||
Deferred tax |
| 2 | (2 | ) | | | | |||||||||||||||||
At 31 March 2012 |
346 | (100 | ) | 65 | 19 | (5,165 | ) | (4,835 | ) | |||||||||||||||
Exchange adjustments |
117 | | | | | 117 | ||||||||||||||||||
Net (losses)/gains taken to equity |
| (31 | ) | 20 | | | (11 | ) | ||||||||||||||||
Transferred to profit or loss |
| 73 | (10 | ) | | | 63 | |||||||||||||||||
Deferred tax |
| (13 | ) | (2 | ) | | | (15 | ) | |||||||||||||||
At 31 March 2013 |
463 | (71 | ) | 73 | 19 | (5,165 | ) | (4,681 | ) |
(i) | During the year ended 31 March 2011, the Company raised £3.2bn (net of expenses of £105m) through a rights issue of 990m new ordinary shares at 335 pence each on the basis of two new ordinary shares for every five existing ordinary shares. The issue price represented a discount of 44% to the closing ex-dividend share price on 20 May 2010, the announcement date of the rights issue. The structure of the rights issue initially gave rise to a merger reserve under section 612 of the Companies Act 2006, representing the net proceeds of the rights issue less the nominal value of the new shares issued. Following the receipt of the cash proceeds through the structure, the excess of the net proceeds over the nominal value of the share capital issued was transferred from the merger reserve to retained earnings. |
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 of £5,745m and merger differences of £221m and £359m.
The cash flow hedge reserve on interest rate swap contracts will be continuously transferred to the income statement until the borrowings are repaid. The amount due to be released from reserves to the income statement next year is £14m and the remainder released with the same maturity profile as borrowings due after more than one year.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 141 |
Financial Statements
Notes to the consolidated financial statements
Continued
Net debt represents the amount of cash and financial investments held, less borrowings, overdrafts and related derivatives.
|
The movement in cash and cash equivalents is reconciled to movements in net debt.
(a) Reconciliation of net cash flow to movement in net debt
2013 £m |
2012 £m |
2011 £m |
||||||||||
Increase/(decrease) in cash and cash equivalents |
335 | (43 | ) | (346 | ) | |||||||
Increase/(decrease) in financial investments |
2,992 | (553 | ) | 1,577 | ||||||||
(Increase)/decrease in borrowings and related derivatives |
(4,304 | ) | 154 | 1,763 | ||||||||
Net interest paid on the components of net debt |
756 | 721 | 1,011 | |||||||||
Change in net debt resulting from cash flows |
(221 | ) | 279 | 4,005 | ||||||||
Changes in fair value of financial assets and liabilities and exchange movements |
(536 | ) | (87 | ) | 690 | |||||||
Net interest charge on the components of net debt |
(1,017 | ) | (1,042 | ) | (1,228 | ) | ||||||
Reclassified as held for sale |
| (2 | ) | 9 | ||||||||
Other non-cash movements |
(58 | ) | (14 | ) | (68 | ) | ||||||
Movement in net debt (net of related derivative financial instruments) in the year |
(1,832 | ) | (866 | ) | 3,408 | |||||||
Net debt (net of related derivative financial instruments) at start of year |
(19,597 | ) | (18,731 | ) | (22,139 | ) | ||||||
Net debt (net of related derivative financial instruments) at end of year |
(21,429 | ) | (19,597 | ) | (18,731 | ) |
(b) Analysis of changes in net debt
Cash
and cash
|
Bank
overdrafts £m |
Net cash
and cash equivalents £m |
Financial
investments £m |
Borrowings
£m |
Derivatives
£m |
Total
(i)
£m |
||||||||||||||||||||||
At 1 April 2010 |
720 | (29 | ) | 691 | 1,397 | (25,095 | ) | 868 | (22,139 | ) | ||||||||||||||||||
Cash flow |
(333 | ) | (13 | ) | (346 | ) | 1,551 | 2,933 | (133 | ) | 4,005 | |||||||||||||||||
Fair value gains and losses and exchange movements |
(3 | ) | | (3 | ) | (34 | ) | 402 | 325 | 690 | ||||||||||||||||||
Interest charges |
| | | 25 | (1,337 | ) | 84 | (1,228 | ) | |||||||||||||||||||
Reclassified as held for sale |
| | | | 9 | | 9 | |||||||||||||||||||||
Other non-cash movements |
| | | | (68 | ) | | (68 | ) | |||||||||||||||||||
At 31 March 2011 |
384 | (42 | ) | 342 | 2,939 | (23,156 | ) | 1,144 | (18,731 | ) | ||||||||||||||||||
Cash flow |
(52 | ) | 9 | (43 | ) | (577 | ) | 1,343 | (444 | ) | 279 | |||||||||||||||||
Fair value gains and losses and exchange movements |
| | | 8 | 22 | (117 | ) | (87 | ) | |||||||||||||||||||
Interest charges |
| | | 23 | (1,187 | ) | 122 | (1,042 | ) | |||||||||||||||||||
Reclassified as held for sale |
| | | (2 | ) | | | (2 | ) | |||||||||||||||||||
Other non-cash movements |
| | | | (14 | ) | | (14 | ) | |||||||||||||||||||
At 31 March 2012 |
332 | (33 | ) | 299 | 2,391 | (22,992 | ) | 705 | (19,597 | ) | ||||||||||||||||||
Cash flow |
325 | 10 | 335 | 2,963 | (3,433 | ) | (86 | ) | (221 | ) | ||||||||||||||||||
Fair value gains and losses and exchange movements |
14 | | 14 | 47 | (452 | ) | (145 | ) | (536 | ) | ||||||||||||||||||
Interest charges |
| | | 30 | (1,137 | ) | 90 | (1,017 | ) | |||||||||||||||||||
Other non-cash movements |
| | | | (58 | ) | | (58 | ) | |||||||||||||||||||
At 31 March 2013 |
671 | (23 | ) | 648 | 5,431 | (28,072 | ) | 564 | (21,429 | ) | ||||||||||||||||||
Balances at 31 March 2013 comprise: |
||||||||||||||||||||||||||||
Non-current assets |
| | | | | 1,972 | 1,972 | |||||||||||||||||||||
Current assets |
671 | | 671 | 5,431 | | 273 | 6,375 | |||||||||||||||||||||
Current liabilities |
| (23 | ) | (23 | ) | | (3,425 | ) | (407 | ) | (3,855 | ) | ||||||||||||||||
Non-current liabilities |
| | | | (24,647 | ) | (1,274 | ) | (25,921 | ) | ||||||||||||||||||
671 | (23 | ) | 648 | 5,431 | (28,072 | ) | 564 | (21,429 | ) |
(i) | Includes accrued interest at 31 March 2013 of £250m (2012: £178m). |
142 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Notes to the consolidated financial statements supplementary information
This section includes information that is important to enable a full understanding of our financial position, particularly areas of potential risk that could affect us in the future.
We also include specific disclosures for British Transco Finance Inc., Niagara Mohawk Power Corporation and National Grid Gas plc in accordance with various rules including Rule 3-10 of Regulation S-X, as they have issued public debt securities which have been guaranteed by National Grid plc and one of its subsidiary companies, National Grid Gas plc. Additional disclosures have also been included in respect of the two guarantor companies. These disclosures are in lieu of publishing separate financial statements for these companies. See note 35 for further information.
27. 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 operating lease rentals, energy purchase agreements and contracts for the repurchase of network 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.
|
2013
£m |
2012
£m |
|||||||
Future capital expenditure |
||||||||
Contracted for but not provided |
3,011 | 2,728 | ||||||
Operating lease commitments |
||||||||
Less than 1 year |
109 | 81 | ||||||
In 1-2 years |
84 | 96 | ||||||
In 2-3 years |
74 | 89 | ||||||
In 3-4 years |
72 | 66 | ||||||
In 4-5 years |
70 | 63 | ||||||
More than 5 years |
333 | 311 | ||||||
742 | 706 | |||||||
Energy purchase commitments (i) |
||||||||
Less than 1 year |
1,094 | 1,073 | ||||||
In 1-2 years |
535 | 511 | ||||||
In 2-3 years |
394 | 403 | ||||||
In 3-4 years |
306 | 357 | ||||||
In 4-5 years |
263 | 276 | ||||||
More than 5 years |
1,403 | 1,554 | ||||||
3,995 | 4,174 | |||||||
Guarantees and letters of credit |
||||||||
Guarantee of sublease for US property (expires 2040) |
293 | 304 | ||||||
Guarantees of certain obligations of Grain LNG Import Terminal (expire up to 2028) |
159 | 161 | ||||||
Guarantee of certain obligations for construction of HVDC West Coast Link (expected expiry 2016) |
618 | 691 | ||||||
Other guarantees and letters of credit (various expiry dates) |
262 | 188 | ||||||
1,332 | 1,344 |
(i) | 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 (ie normal purchase, sale or usage) and hence are accounted for as ordinary purchase contracts. Details of commodity contracts that do not meet the normal purchase, sale or usage criteria, and hence are accounted for as derivative contracts, are shown in note 31. |
The total of future minimum sublease payments expected to be received under non-cancellable subleases is £23m (2012: £22m).
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.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 143 |
Financial Statements
Notes to the consolidated financial statements supplementary information
Continued
28. Related party transactions
A related party is a company or individual who has an interest in us, for example a company that provides a service to us with a director who holds a controlling stake in that company and who is also a Director of National Grid plc. The related parties identified include joint ventures, associated undertakings, 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:
2013
£m |
2012
£m |
2011
£m |
||||||||||
Sales: Goods and services supplied to a pension plan and joint ventures |
10 | 10 | 11 | |||||||||
Purchases: Goods and services received from joint ventures and associates (i) |
133 | 95 | 84 | |||||||||
Interest income: Interest receivable on loans with a joint venture |
| | 2 | |||||||||
Receivable from a pension plan and joint ventures |
3 | 2 | 2 | |||||||||
Payable to joint ventures and associates |
6 | 6 | 8 | |||||||||
Dividends received from associates (ii) |
21 | 26 | 9 |
(i) | During the year the Company received goods and services from a number of joint ventures and associates, including Iroquois Gas Transmission System, L.P. of £37m (2012: £39m; 2011: £40m), Millennium Pipeline Company, LLC of £35m (2012: £32m; 2011: £28m) for the transportation of gas in the US and NGET/SPT Upgrades Limited of £52m (2012: £14m; 2011: £6m) for the construction of a transmission link in the UK. |
(ii) | Dividends were received from Iroquois Gas Transmission System, L.P. of £12m (2012: £17m; 2011: £9m) and Millennium Pipeline Company, LLC of £9m (2012: £9m; 2011: £nil). |
Details of investments in principal subsidiary undertakings, joint ventures and associates are disclosed in note 33 and information relating to pension fund arrangements is disclosed in notes 22 and 29. For details of Directors and key management remuneration, refer to note 2(c) and the audited section of the Remuneration Report.
29. Actuarial information on pensions and other post-retirement benefits
Further details of the defined benefit scheme/plans terms and the actuarial assumptions used to value the associated assets and obligations are set out in this note.
When deciding on these assumptions we take independent actuarial advice. Comparatively small changes in the assumptions used may have a significant effect on the overall deficit or surplus of a defined benefit scheme/plan.
|
UK pension schemes
National Grids defined benefit pension arrangements are funded with assets held in separate trustee administered funds. The arrangements are subject to independent actuarial valuations at least every three years and following consultation and agreement with us, the qualified actuary certifies the rate of employers contribution, which, together with the specified contributions payable by the employees and proceeds from the schemes assets, are expected to be sufficient to fund the benefits payable under the schemes. The last full actuarial valuations were carried out as at 31 March 2010. The 2013 valuation process has commenced.
The results of the 2010 valuations are shown below:
NG UK Pension Scheme | NGEG of ESPS (i) | |||||||
Latest full actuarial valuation |
31 March 2010 | 31 March 2010 | ||||||
Actuary |
Towers Watson | Aon Hewitt | ||||||
Market value of scheme assets at latest valuation |
£13,399m | £1,531m | ||||||
Actuarial value of benefits due to members |
£(13,998)m | £(2,038)m | ||||||
Market value as percentage of benefits |
96% | 75% | ||||||
Funding deficit |
£599m | £507m | ||||||
Funding deficit (net of tax) |
£461m | £390m |
(i) | National Grid Electricity Group of the Electricity Supply Pension Scheme. |
We have started discussions with our employees and our trade union partners to ensure our defined benefit pension schemes are affordable and sustainable for the future.
144 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
29. Actuarial information on pensions and other post-retirement benefits continued
National Grid UK Pension Scheme
The 2010 actuarial valuation showed that, based on long-term financial assumptions, the contribution rate required to meet future benefit accrual was 35% of pensionable earnings (32% employers and 3% employees). In addition, National Grid makes payments to the scheme to cover administration costs and the Pension Protection Fund (PPF) levy. The employer contribution rate and administration costs will be reviewed as part of the 2013 actuarial valuation.
Following the 2010 actuarial valuation, National Grid and the Trustees agreed a recovery plan which would see the funding deficit repaid by 31 March 2027. Under the schedule of contributions, no deficit contributions were made in 2010/11 or 2011/12. Annual payments of £47m, rising in line with the RPI from March 2010, commenced in 2012/13 and are due to continue until 2027.
As part of this agreement, National Grid has established a secured bank account with a charge in favour of the Trustees. The balance of the bank account at 31 March 2013 was £170m. The funds in the bank account will be paid to the scheme in the event that National Grid Gas plc is subject to an insolvency event, or is given notice of less than 12 months that Ofgem intends to revoke its licence under the Gas Act 1986. The funds in the bank account will be released back to National Grid if the scheme moves into surplus.
This scheme ceased to allow new hires to join from 1 April 2002. A defined contribution arrangement was offered for employees joining after this date. National Grid is currently reviewing the defined contribution arrangement it offers to employees and new hires in the UK.
National Grid Electricity Group of the Electricity Supply Pension Scheme
The 2010 actuarial valuation showed that, based on long-term financial assumptions, the contribution rate required to meet future benefit accrual was 29.6% of pensionable earnings (23.7% employers and an average of 5.9% employees). The employer contribution rate will be reviewed as part of the 2013 actuarial valuation.
Following the 2010 actuarial valuation, National Grid and the Trustees agreed a recovery plan that will see the funding deficit repaid by 31 March 2027. Under the schedule of contributions, payments of £45m were made in 2010/11 and 2011/12 and a further payment of £38m was made in 2012/13. Thereafter, an annual payment of £38m is due to be made, rising in line with RPI. As part of this agreement, National Grid has established a secured bank account with a charge in favour of the Trustees. The balance of the bank account at 31 March 2013 was £9m. The funds in the bank account will be paid to the scheme in the event that National Grid Electricity Transmission plc (NGET) is subject to an insolvency event, or ceases to hold a licence granted under the Electricity Act 1989. The funds in the bank account will be released back to National Grid if the scheme moves into surplus.
National Grid has also agreed to make a payment in respect of the deficit up to a maximum of £220m should certain triggers be breached; namely if NGET ceases to hold the licence granted under the Electricity Act 1989 or NGETs credit rating by two out of three specified agencies falls below certain agreed levels for a period of 40 days.
The scheme closed to new members from 1 April 2006. A defined contribution arrangement was offered to new hires from this date. National Grid is currently reviewing the defined contribution arrangement it offers to employees and new hires in the UK.
US pension plans
National Grids defined benefit pension plans in the US provide annuity or lump sum payments for vested employees. Non-union employees hired on or after 1 January 2011 are provided with a defined contribution plan. A defined contribution plan is also provided to two groups of represented US employees. In addition, a matched defined contribution plan is offered to all eligible employees. The assets of the plans are held in separate trustee administered funds.
Employees do not contribute to the defined benefit plans. Employer contributions are made in accordance with the rules set out by the US Internal Revenue Code and can vary according to the funded status of the plans and the amounts that are tax deductible. At present, there is some flexibility in the amount that is contributed on an annual basis. In general, the Companys policy for funding the US pension plans is to contribute amounts collected in rates. These contributions are expected to meet the requirements of the Pension Protection Act of 2006.
US retiree healthcare and life insurance plans
National Grid provides healthcare and life insurance benefits to eligible retired US employees. 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 health and welfare plans. However, in general, the Companys policy for funding the US retiree healthcare and life insurance plans is to contribute amounts collected in rates.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 145 |
Financial Statements
Notes to the consolidated financial statements supplementary information
Continued
29. Actuarial information on pensions and other post-retirement benefits continued
Asset allocations
UK pensions | US pensions | US other post-retirement benefits | ||||||||||||||||||||||||||||||||||||||
2013 % |
2012 % |
2011 % |
2013 % |
2012 % |
2011 % |
2013 % |
2012 % |
2011 % |
||||||||||||||||||||||||||||||||
Equities (i) |
30.9 | 33.3 | 34.5 | 47.2 | 47.7 | 51.5 | 75.0 | 76.6 | 76.5 | |||||||||||||||||||||||||||||||
Corporate bonds (ii) |
33.4 | 33.1 | 30.3 | 43.2 | 42.5 | 40.7 | 24.6 | 22.7 | 22.6 | |||||||||||||||||||||||||||||||
Gilts |
27.3 | 24.3 | 26.8 | | | | | | | |||||||||||||||||||||||||||||||
Property |
6.2 | 7.2 | 5.9 | 4.0 | 3.8 | 2.0 | | | | |||||||||||||||||||||||||||||||
Other |
2.2 | 2.1 | 2.5 | 5.6 | 6.0 | 5.8 | 0.4 | 0.7 | 0.9 | |||||||||||||||||||||||||||||||
Total |
100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 |
(i) | Included within equities at 31 March 2013 were ordinary shares of National Grid plc with a value of £16m (2012: £13m; 2011: £12m). |
(ii) | Included within corporate bonds at 31 March 2013 was an investment in a number of bonds issued by subsidiary undertakings with a value of £69m (2012: £50m; 2011: £39m). |
Target asset allocations
NGUK PS
% |
ESPS
% |
US
pensions % |
US
% |
|||||
Equities (i) |
31 | 45 | 47 | 70 | ||||
Bonds, property and other assets |
69 | 55 | 53 | 30 | ||||
Total |
100 | 100 | 100 | 100 |
(i) | Included within equities are hedge fund and active currency investments. |
Actuarial assumptions
For UK schemes, the expected long-term rate of return on assets has been set reflecting the price inflation expectation, the expected real return on each major asset class and the long-term asset allocation strategy adopted for each scheme. The expected real returns on specific asset classes reflect historical returns, investment yields on the measurement date and general future return expectations, and have been set after taking advice from independent actuaries.
For US plans, the estimated rate of return for various passive asset classes is based both on analysis of historical rates of return and forward-looking analysis of risk premiums and yields. Current market conditions, such as inflation and interest rates, are evaluated in connection with the setting of our long-term assumptions. A small premium is added for active management of both equity and fixed income. The rates of return for each asset class are then weighted in accordance with the actual asset allocation resulting in a long-term return on asset rate for each plan.
UK pensions | US pensions | US other post-retirement benefits | ||||||||||||||||||||||||||||||||||||||
2013
% |
2012
% |
2011
% |
2013
% |
2012
% |
2011
% |
2013 % |
2012 % |
2011 % |
||||||||||||||||||||||||||||||||
Discount rate (i) |
4.3 | 4.8 | 5.5 | 4.7 | 5.1 | 5.9 | 4.7 | 5.1 | 5.9 | |||||||||||||||||||||||||||||||
Expected return on plan assets |
4.9 | 5.5 | 6.1 | 6.4 | 6.6 | 7.2 | 6.6 | 6.8 | 7.1 | |||||||||||||||||||||||||||||||
Rate of increase in salaries (ii) |
4.1 | 4.0 | 4.4 | 3.5 | 3.5 | 3.5 | 3.5 | 3.5 | 3.5 | |||||||||||||||||||||||||||||||
Rate of increase in pensions in payment |
3.4 | 3.2 | 3.5 | | | | n/a | n/a | n/a | |||||||||||||||||||||||||||||||
Rate of increase in pensions in deferment |
3.4 | 3.2 | 3.5 | | | | n/a | n/a | n/a | |||||||||||||||||||||||||||||||
Rate of increase in RPI (or equivalent) |
3.4 | 3.2 | 3.5 | 2.4 | 2.1 | 2.2 | n/a | n/a | n/a | |||||||||||||||||||||||||||||||
Initial healthcare cost trend rate |
n/a | n/a | n/a | n/a | n/a | n/a | 8.0 | 8.0 | 8.5 | |||||||||||||||||||||||||||||||
Ultimate healthcare cost trend rate |
n/a | n/a | n/a | n/a | n/a | n/a | 5.0 | 5.0 | 5.0 |
(i) | The discount rates for pension liabilities have been determined by reference to appropriate yields on high quality corporate bonds prevailing in the UK and US debt markets at the reporting date. |
(ii) | A promotional scale has also been used where appropriate. |
2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||
UK
years |
US
years |
UK
years |
US
years |
UK
years |
US
years |
|||||||||||||||||||||||||||
Assumed life expectations for a retiree at age 65 |
||||||||||||||||||||||||||||||||
Today |
||||||||||||||||||||||||||||||||
Males |
22.7 | 19.5 | 22.5 | 19.4 | 22.4 | 18.8 | ||||||||||||||||||||||||||
Females |
25.2 | 21.4 | 25.0 | 21.3 | 24.9 | 20.8 | ||||||||||||||||||||||||||
In 20 years |
||||||||||||||||||||||||||||||||
Males |
25.0 | 21.0 | 24.9 | 20.9 | 24.7 | 18.8 | ||||||||||||||||||||||||||
Females |
27.6 | 22.2 | 27.5 | 22.2 | 27.4 | 20.8 |
146 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
29. Actuarial information on pensions and other post-retirement benefits continued
The history of the present value of obligations, the fair value of plan assets and of experience adjustments is as follows:
2013 £m |
2012 £m |
2011 £m |
2010 £m |
2009 £m |
||||||||||||||||
Present value of funded and unfunded obligations |
(26,696 | ) | (24,016 | ) | (21,938 | ) | (22,200 | ) | (18,299 | ) | ||||||||||
Fair value of plan assets |
23,285 | 21,149 | 19,969 | 19,136 | 15,519 | |||||||||||||||
(3,411 | ) | (2,867 | ) | (1,969 | ) | (3,064 | ) | (2,780 | ) | |||||||||||
Difference between the expected and actual return on plan assets |
1,176 | 431 | 358 | 3,192 | (3,952 | ) | ||||||||||||||
Experience gains/(losses) on plan liabilities |
134 | (54 | ) | 28 | 509 | (125 | ) | |||||||||||||
Actuarial (losses)/gains on plan liabilities |
(2,106 | ) | (1,756 | ) | 213 | (3,923 | ) | 1,934 |
Our activities expose us to a variety of financial risks: market risk, including foreign exchange risk, fair value interest rate risk, cash flow interest rate risk, commodity price risk; credit risk; and liquidity risk. Our overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential volatility of financial performance. We use financial instruments, including derivative financial instruments, to manage risks of this type.
This note describes our approach to managing market risk, including an analysis of assets and liabilities by currency type and an analysis of interest rate category for our net debt. We are required by accounting standards to also include a number of specific disclosures (such as an analysis of contractual undiscounted cash flows by year falling due) and have included these requirements below.
|
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, as well as written policies covering specific areas such as 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.
(a) Market risk
(i) Foreign exchange risk
National Grid operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the dollar. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities, and investments in foreign operations.
Our policy for managing foreign exchange transaction risk is to hedge contractually committed foreign currency cash flows over a prescribed minimum size. Where foreign currency cash flow forecasts are less certain, our policy is to hedge a proportion of such cash flows based on the probability of those cash flows occurring. Instruments used to manage foreign exchange transaction risk include foreign exchange forward contracts and foreign exchange swaps.
Our policy for managing foreign exchange translation risk relating to our net investment in foreign operations is to maintain a percentage of net debt and foreign exchange forwards so as to provide an economic offset of our cash flows arising in the foreign currency. The primary managed foreign exchange exposure arises from the dollar denominated assets and liabilities held by our US operations, with a further small euro exposure in respect of a joint venture investment.
During 2013 and 2012, derivative financial instruments were used to manage foreign currency risk as follows:
2013 | 2012 | |||||||||||||||||||||||||||||||||||||||||
Sterling
£m |
Euro
£m |
Dollar
£m |
Other
£m |
Total £m |
Sterling
£m |
Euro
£m |
Dollar
£m |
Other
£m |
Total £m |
|||||||||||||||||||||||||||||||||
Cash and cash equivalents |
238 | 1 | 432 | | 671 | 14 | 1 | 317 | | 332 | ||||||||||||||||||||||||||||||||
Financial investments |
3,938 | 124 | 1,289 | 80 | 5,431 | 1,021 | 84 | 1,200 | 86 | 2,391 | ||||||||||||||||||||||||||||||||
Borrowings (i) |
(12,573 | ) | (5,220 | ) | (8,678 | ) | (1,624 | ) | (28,095 | ) | (11,034 | ) | (4,146 | ) | (7,284 | ) | (561 | ) | (23,025 | ) | ||||||||||||||||||||||
Pre-derivative position |
(8,397 | ) | (5,095 | ) | (6,957 | ) | (1,544 | ) | (21,993 | ) | (9,999 | ) | (4,061 | ) | (5,767 | ) | (475 | ) | (20,302 | ) | ||||||||||||||||||||||
Derivative effect |
320 | 5,368 | (6,684 | ) | 1,560 | 564 | 2,584 | 3,845 | (6,206 | ) | 482 | 705 | ||||||||||||||||||||||||||||||
Net debt position |
(8,077 | ) | 273 | (13,641 | ) | 16 | (21,429 | ) | (7,415 | ) | (216 | ) | (11,973 | ) | 7 | (19,597 | ) |
(i) | Includes bank overdrafts. |
The overall exposure to dollars largely relates to our net investment hedge activities as described in note 14.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 147 |
Financial Statements
Notes to the consolidated financial statements
supplementary information
Continued
30. Financial risk continued
The currency exposure on other financial instruments is as follows:
2013 | 2012 | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||||||||||
Sterling
£m |
Euro
£m |
Dollar
£m |
Other
£m |
Total
£m |
Sterling £m |
Euro
£m |
Dollar
£m |
Other
£m |
Total
£m |
|||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Trade and other receivables |
151 | | 1,338 | | 1,489 | 112 | | 896 | | 1,008 | ||||||||||||||||||||||||||||||
Trade and other payables* |
(1,328 | ) | | (1,437 | ) | | (2,765 | ) | (1,034 | ) | (1 | ) | (1,238 | ) | | (2,273) | ||||||||||||||||||||||||
Other non-current liabilities |
(22 | ) | | (283 | ) | | (305 | ) | (24 | ) | | (340 | ) | | (364) | |||||||||||||||||||||||||
|
*Comparatives have been reclassified to present items on a basis consistent with the current year classification
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.
(ii) Cash flow and fair value interest rate risk
National Grids interest rate risk arises from our long-term borrowings. Borrowings issued at variable rates expose National Grid to cash flow interest rate risk, partially offset by cash held at variable rates. Borrowings issued at fixed rates expose National Grid to fair value interest rate risk.
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) subject to constraints. We do this by using fixed- and floating-rate debt and derivative financial instruments including interest rate swaps, swaptions and forward rate agreements.
We hold some borrowings on issue that are inflation linked. We believe that these provide a partial economic offset to the inflation risk associated with our UK inflation linked revenues.
The table in note 19 (borrowings) sets out the carrying amount, by contractual maturity, of borrowings that are exposed to interest rate risk before taking into account interest rate swaps.
During 2013 and 2012, net debt was managed using derivative instruments to hedge interest rate risk as follows:
2013 | 2012 | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||||||||||
|
Fixed
rate £m |
|
|
Floating
rate £m |
|
|
Inflation
linked £m |
|
|
Other
£m |
(i)
|
|
Total
£m |
|
|
Fixed
rate £m |
|
|
Floating
rate £m |
|
|
Inflation
linked £m |
|
|
Other
£m |
(i)
|
|
Total
£m |
|
|||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents |
577 | 94 | | | 671 | 289 | 43 | | | 332 | ||||||||||||||||||||||||||||||
Financial investments |
540 | 4,843 | | 48 | 5,431 | 742 | 1,523 | | 126 | 2,391 | ||||||||||||||||||||||||||||||
Borrowings (ii) |
(17,767 | ) | (3,700 | ) | (6,617 | ) | (11 | ) | (28,095 | ) | (13,394 | ) | (3,314 | ) | (6,304 | ) | (13 | ) | (23,025) | |||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Pre-derivative position |
(16,650 | ) | 1,237 | (6,617 | ) | 37 | (21,993 | ) | (12,363 | ) | (1,748 | ) | (6,304 | ) | 113 | (20,302) | ||||||||||||||||||||||||
Derivative effect (iii) |
1,555 | (1,132 | ) | 141 | | 564 | 1,220 | (567 | ) | 52 | | 705 | ||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Net debt position |
(15,095 | ) | 105 | (6,476 | ) | 37 | (21,429 | ) | (11,143 | ) | (2,315 | ) | (6,252 | ) | 113 | (19,597) | ||||||||||||||||||||||||
|
(i) | Represents financial instruments which are not directly affected by interest rate risk, such as investments in equity or other similar financial instruments. |
(ii) | Includes bank overdrafts. |
(iii) | The impact of 2013/14 (2012: 2012/13) maturing short-dated interest rate derivatives is included. |
148 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
30. Financial risk continued
(b) Fair value analysis
The financial instruments included on the statement of financial position are measured at fair value. These fair values can be categorised into hierarchy levels that reflect the significance 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.
2013 | 2012 | |||||||||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||
Level 1
£m |
Level 2
£m |
Level 3
£m |
Total
£m |
Level 1
£m |
Level 2
£m |
Level 3
£m |
Total £m |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Available-for-sale investments |
4,510 | 209 | | 4,719 | 1,741 | 185 | | 1,926 | ||||||||||||||||||||||||
Derivative financial instruments (excluding commodity contracts) |
| 2,197 | 48 | 2,245 | | 2,078 | 58 | 2,136 | ||||||||||||||||||||||||
Commodity contracts |
| 26 | 63 | 89 | | 13 | 58 | 71 | ||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
4,510 | 2,432 | 111 | 7,053 | 1,741 | 2,276 | 116 | 4,133 | |||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||
Derivative financial instruments (excluding commodity contracts) |
| (1,529 | ) | (152 | ) | (1,681 | ) | | (1,193 | ) | (238 | ) | (1,431) | |||||||||||||||||||
Commodity contracts |
| (5 | ) | (134 | ) | (139 | ) | | (62 | ) | (198 | ) | (260) | |||||||||||||||||||
|
||||||||||||||||||||||||||||||||
| (1,534 | ) | (286 | ) | (1,820 | ) | | (1,255 | ) | (436 | ) | (1,691) | ||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Total |
4,510 | 898 | (175 | ) | 5,233 | 1,741 | 1,021 | (320 | ) | 2,442 | ||||||||||||||||||||||
|
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 3 derivative financial instruments include cross-currency swaps with an embedded call option, currency swaps where the currency forward curve is illiquid and inflation linked swaps where the inflation curve is illiquid. In valuing these instruments a third party valuation is obtained to support each reported fair value.
Our level 3 commodity contracts primarily consist of our forward purchases of electricity and gas where pricing inputs are unobservable, as well as other complex transactions. Complex transactions can introduce the need for internally developed models based on reasonable assumptions. Industry standard valuation techniques such as the Black-Scholes pricing model and Monte Carlo simulation are used for valuing such instruments. Level 3 is also applied in cases when optionality is present or where an extrapolated forward curve is considered unobservable. All published forward curves are verified to market data; if forward curves differ from market data by 5% or more they are considered unobservable.
The changes in value of our level 3 derivative financial instruments are as follows:
Derivative financial instruments |
Commodity contracts | Total | ||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
2013
Level 3 valuation £m |
2012
Level 3 valuation £m |
2013
Level 3 valuation £m |
2012
Level 3 valuation £m |
2013
Level 3 valuation £m |
2012
Level 3
£m |
|||||||||||||||||||
|
||||||||||||||||||||||||
At 1 April |
(180 | ) | 54 | (140 | ) | (79 | ) | (320 | ) | (25) | ||||||||||||||
Net gains/(losses) for the year (i) (ii) |
79 | (47 | ) | 45 | (98 | ) | 124 | (145) | ||||||||||||||||
Purchases |
| (184 | ) | (14 | ) | (36 | ) | (14 | ) | (220) | ||||||||||||||
Settlements |
(3 | ) | (3 | ) | 39 | 73 | 36 | 70 | ||||||||||||||||
Reclassification out of level 3 |
| | (1 | ) | | (1 | ) | | ||||||||||||||||
|
||||||||||||||||||||||||
At 31 March |
(104 | ) | (180 | ) | (71 | ) | (140 | ) | (175 | ) | (320) | |||||||||||||
|
(i) | Gains of £79m (2012: £47m loss) are attributable to derivative financial instruments held at the end of the reporting period. |
(ii) | Gains of £51m (2012: £96m loss) are attributable to commodity contract financial instruments held at the end of the reporting period. |
In 2013 the transfers out of level 3 were driven by changes in the observability of extrapolated forward curves.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 149 |
Financial Statements
Notes to the consolidated financial statements
supplementary information
Continued
30. Financial risk continued
(b) Fair value analysis continued
The impacts on a post-tax basis of reasonably possible changes in significant level 3 assumptions are as follows:
Commodity contracts |
Other derivative
financial instruments |
|||||||||||||||
|
|
|
|
|||||||||||||
2013
Income statement £m |
2012
Income statement £m |
2013
Income statement £m |
2012
Income statement £m |
|||||||||||||
|
||||||||||||||||
10% increase in commodity prices (i) |
40 | 28 | | | ||||||||||||
10% decrease in commodity prices (i) |
(23 | ) | (16 | ) | | | ||||||||||
Volume forecast uplift (ii) |
(4 | ) | (5 | ) | | | ||||||||||
Volume forecast reduction (ii) |
4 | 6 | | | ||||||||||||
Forward curve extrapolation |
| (2 | ) | | | |||||||||||
+20 basis point change in LPI market curve (iii) |
| | (62 | ) | (56) | |||||||||||
20 basis point change in LPI market curve |
| | 60 | 52 | ||||||||||||
|
(i) | Level 3 commodity price sensitivity is included within the sensitivity analysis disclosed in note 34. |
(ii) | Volumes were flexed using maximum and minimum historical averages, or by ±10% where historical averages were not available. |
(iii) | A reasonably possible change in assumption of other level 3 derivative financial instruments is unlikely to result in a material change in fair values. |
The impacts disclosed above were considered on a contract by contract basis with the most significant unobservable inputs identified.
(c) 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. We are exposed to credit risk on our cash and cash equivalents, derivative financial instruments, deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions.
Treasury credit risk
Counterparty risk arises from the investment of surplus funds and from the use of derivative instruments. As at 31 March 2013, the following limits were in place for investments held with banks and financial institutions:
Maximum limit
£m |
Long-term limit
£m |
|||||||
|
||||||||
AAA rated G8 sovereign entities |
Unlimited | Unlimited | ||||||
Triple A vehicles |
301 | 255 | ||||||
Triple A range institutions (AAA) |
1,027 to 1,549 | 517 to 811 | ||||||
Double A range institutions (AA) |
613 to 772 | 312 to 386 | ||||||
Single A range institutions (A) |
211 to 301 | 108 to 154 | ||||||
|
As at 31 March 2012 and 2013, 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.
The counterparty exposure under derivative financial contracts as shown in note 14 was £2,245m (2012: £2,136m); after netting agreements it was £1,337m (2012: £1,453m). This exposure is further reduced by collateral received as shown in note 19. Additional information for commodity contract credit risk is in note 31.
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 lay down the level of credit relative to the regulatory asset value (RAV) for each credit rating. In the US, we are required to supply electricity and gas under state regulations. Our credit policies and practices are designed to limit credit exposure by collecting security deposits prior to providing utility services, or after utility service has 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. Management does not expect any significant losses of receivables that have not been provided for as shown in note 16.
150 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
30. Financial risk continued
(d) Liquidity analysis
Our policy is to determine our liquidity requirements by the use of both short- and long-term cash flow forecasts. These forecasts are supplemented by a financial headroom analysis which is used to assess funding adequacy for at least a 24 month period.
We believe our contractual obligations, including those shown in commitments and contingencies in note 27 can be met from existing cash and investments, operating cash flows and other financings 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 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 lenders 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 an analysis of the contractual undiscounted cash flows payable under financial liabilities and derivative assets and liabilities as at the reporting date:
At 31 March 2013 |
Less
than 1 year £m |
1-2 years
£m |
2-3 years
£m |
More
than 3 years £m |
Total £m |
|||||||||||||||
|
||||||||||||||||||||
Non-derivative financial liabilities |
||||||||||||||||||||
Borrowings, excluding finance lease liabilities |
(3,061 | ) | (1,836 | ) | (790 | ) | (21,704 | ) | (27,391) | |||||||||||
Interest payments on borrowings (i) |
(951 | ) | (861 | ) | (842 | ) | (15,775 | ) | (18,429) | |||||||||||
Finance lease liabilities |
(27 | ) | (26 | ) | (26 | ) | (151 | ) | (230) | |||||||||||
Other non interest-bearing liabilities |
(2,696 | ) | (235 | ) | | | (2,931) | |||||||||||||
Derivative financial liabilities |
||||||||||||||||||||
Derivative contracts receipts |
1,388 | 816 | 1,053 | 441 | 3,698 | |||||||||||||||
Derivative contracts payments |
(1,309 | ) | (469 | ) | (969 | ) | (569 | ) | (3,316) | |||||||||||
Commodity contracts |
(150 | ) | (41 | ) | (35 | ) | (25 | ) | (251) | |||||||||||
|
||||||||||||||||||||
Total |
(6,806 | ) | (2,652 | ) | (1,609 | ) | (37,783 | ) | (48,850) | |||||||||||
|
||||||||||||||||||||
At 31 March 2012 |
Less
than 1 year £m |
1-2 years
£m |
2-3 years
£m |
More
than 3 years £m |
Total £m |
|||||||||||||||
|
||||||||||||||||||||
Non-derivative financial liabilities |
||||||||||||||||||||
Borrowings, excluding finance lease liabilities |
(2,157 | ) | (1,822 | ) | (1,707 | ) | (16,725 | ) | (22,411) | |||||||||||
Interest payments on borrowings (i) |
(819 | ) | (749 | ) | (655 | ) | (8,927 | ) | (11,150) | |||||||||||
Finance lease liabilities |
(22 | ) | (44 | ) | (30 | ) | (151 | ) | (247) | |||||||||||
Other non interest-bearing liabilities |
(2,124 | ) | (253 | ) | | | (2,377) | |||||||||||||
Derivative financial liabilities |
||||||||||||||||||||
Derivative contracts receipts |
536 | 1,186 | 600 | 1,004 | 3,326 | |||||||||||||||
Derivative contracts payments |
(336 | ) | (992 | ) | (370 | ) | (851 | ) | (2,549) | |||||||||||
Commodity contracts |
(257 | ) | (54 | ) | (43 | ) | (62 | ) | (416) | |||||||||||
|
||||||||||||||||||||
Total |
(5,179 | ) | (2,728 | ) | (2,205 | ) | (25,712 | ) | (35,824) | |||||||||||
|
(i) | 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. |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 151 |
Financial Statements
Notes to the consolidated financial statements
supplementary information
Continued
30. Financial risk continued
(e) Capital risk management
National Grids 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 maintain or adjust the capital structure as appropriate in order to achieve these objectives.
Maintaining appropriate credit ratings for our regulated 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 our interest cover. Interest cover for the year ended 31 March 2013 was 3.9, consistent with the year ended 31 March 2012. Our long-term target range for interest cover is between 3.0 and 3.5, which we believe is consistent with single A range long-term senior unsecured debt credit ratings within our main UK operating companies, National Grid Electricity Transmission plc and National Grid Gas plc, based on guidance from the rating agencies.
In addition, we monitor the regulatory asset value (RAV) gearing within each of National Grid Electricity Transmission plc and the regulated transmission and distribution businesses within National Grid Gas plc. 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%.
The majority of our regulated operating companies in the US and the UK (and one intermediate UK holding company), which are all consolidated subsidiaries of National Grid, are subject to certain restrictions on the payment of dividends by administrative order (by regulators relevant to the individual company), 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;
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 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 the Narragansett Electric Company, 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 2013 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.
Some of our regulatory and bank loan agreements additionally impose lower limits for the long-term credit ratings that certain companies within the Group must hold. All the above requirements are monitored on a regular basis in order to ensure compliance. The Company has complied with all externally imposed capital requirements to which it is subject.
152 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
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.
Commodity contracts that meet the definition of a derivative and which do not meet the exemption for normal sale, purchase or usage are carried at fair value.
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 Company uses itself meet the normal purchase, sale or usage exemption of IAS 39 Financial Instruments: Recognition and Measurement. They are, therefore, not recognised in the financial statements. Disclosure of commitments under such contracts is made in note 27.
We enter into forward contracts for the purchase of commodities, some of which do not meet the own use exemption for accounting purposes and hence are accounted for as derivatives. We also enter into derivative financial instruments linked to commodity prices, including index-linked swaps and futures contracts. These derivative financial instruments are used to manage market price volatility and are carried at fair value on the statement of financial position, with the mark-to-market changes reflected through earnings.
Remeasurements of commodity contracts carried at fair value are recognised in the income statement, with changes due to movements in commodity prices recorded in operating costs and changes relating to movements in interest rates recorded in finance costs.
Where contracts are traded on a recognised exchange and margin payments are made, the contract fair values are reported net of the associated margin payments.
The credit policy for commodity transactions is owned and monitored by the energy procurement risk management committee, under authority delegated by the Board and Executive Committee, and establishes controls and procedures to determine, monitor and minimise the credit risk of counterparties.
The counterparty exposure for our commodity derivatives is £89m (2012: £71m), and after netting agreements it was £87m (2012: £58m).
The fair value of our commodity contracts by type can be analysed as follows:
2013 | 2012 | |||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Assets
£m |
Liabilities
£m |
Total
£m |
Assets
£m |
Liabilities
£m |
Total
£m |
|||||||||||||||||||
|
||||||||||||||||||||||||
Commodity purchase contracts accounted for as derivative contracts |
||||||||||||||||||||||||
Forward purchases of electricity |
| (89 | ) | (89 | ) | | (119 | ) | (119) | |||||||||||||||
Forward purchases/sales of gas |
46 | (45 | ) | 1 | 48 | (77 | ) | (29) | ||||||||||||||||
Derivative financial instruments linked to commodity prices |
||||||||||||||||||||||||
Electricity swaps |
16 | (1 | ) | 15 | 1 | (25 | ) | (24) | ||||||||||||||||
Electricity options |
16 | | 16 | 10 | | 10 | ||||||||||||||||||
Gas swaps |
10 | (4 | ) | 6 | 12 | (39 | ) | (27) | ||||||||||||||||
Gas options |
1 | | 1 | | | | ||||||||||||||||||
|
||||||||||||||||||||||||
89 | (139 | ) | (50 | ) | 71 | (260 | ) | (189) | ||||||||||||||||
|
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 153 |
Financial Statements
Notes to the consolidated financial statements
supplementary information
Continued
31. Commodity risk continued
The maturity profile of commodity contracts is as follows:
2013 | 2012 | |||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Assets
£m |
Liabilities
£m |
Total
£m |
Assets
£m |
Liabilities
£m |
Total
£m |
|||||||||||||||||||
|
||||||||||||||||||||||||
Less than one year |
42 | (69 | ) | (27 | ) | 35 | (149 | ) | (114) | |||||||||||||||
|
||||||||||||||||||||||||
Current |
42 | (69 | ) | (27 | ) | 35 | (149 | ) | (114) | |||||||||||||||
|
||||||||||||||||||||||||
In 1-2 years |
13 | (23 | ) | (10 | ) | 9 | (38 | ) | (29) | |||||||||||||||
In 2-3 years |
10 | (23 | ) | (13 | ) | 5 | (28 | ) | (23) | |||||||||||||||
In 3-4 years |
14 | (16 | ) | (2 | ) | 6 | (22 | ) | (16) | |||||||||||||||
In 4-5 years |
2 | (8 | ) | (6 | ) | 11 | (16 | ) | (5) | |||||||||||||||
More than 5 years |
8 | | 8 | 5 | (7 | ) | (2) | |||||||||||||||||
|
||||||||||||||||||||||||
Non-current |
47 | (70 | ) | (23 | ) | 36 | (111 | ) | (75) | |||||||||||||||
|
||||||||||||||||||||||||
Total |
89 | (139 | ) | (50 | ) | 71 | (260 | ) | (189) | |||||||||||||||
|
For each class of commodity contract, our exposure based on the notional quantities is as follows:
2013 | 2012 | |||||||
|
||||||||
Forward purchases of electricity (i) |
2,595 GWh | 3,403 GWh | ||||||
Forward purchases/sales of gas (ii) |
59m Dth | 106m Dth | ||||||
Electricity swaps |
6,309 GWh | 5,380 GWh | ||||||
Electricity options |
32,299 GWh | 36,580 GWh | ||||||
Gas swaps |
66m Dth | 84m Dth | ||||||
Gas options |
4m Dth | 8m Dth | ||||||
NYMEX gas futures (iii) |
17m Dth | 21m Dth | ||||||
|
(i) | Forward electricity purchases have terms up to four years. The contractual obligations under these contracts are £174m (2012: £206m). |
(ii) | Forward gas purchases have terms up to four years. The contractual obligations under these contracts are £119m (2012: £148m). |
(iii) | NYMEX gas futures have been offset with related margin accounts. |
To support our long-term liquidity requirements and provide backup to commercial paper and other borrowings, we agree loan facilities with financial institutions over and above the value of borrowings that may be required. These facilities have never been drawn, and our undrawn amounts are listed below. |
At 31 March 2013, we had bilateral committed credit facilities of £2,009m (2012: £1,140m). In addition, we had committed credit facilities from syndicates of banks of £877m at 31 March 2013 (2012: £844m). All committed credit facilities were undrawn in 2013 and 2012. An analysis of the maturity of these undrawn committed facilities is shown below:
2013
£m |
2012
£m |
|||||||
|
||||||||
Undrawn committed borrowing facilities expiring: |
||||||||
Less than 1 year |
| 313 | ||||||
In 1-2 years |
1,140 | | ||||||
In 2-3 years |
877 | 1,140 | ||||||
In 3-4 years |
| 531 | ||||||
In 4-5 years |
869 | | ||||||
|
||||||||
2,886 | 1,984 | |||||||
|
Subsequent to 31 March 2013, £1,140m of the facilities included above have been renegotiated to £1,165m for a further five years.
Of the unused facilities at 31 March 2013, £2,568m (2012: £1,671m) was held as backup to commercial paper and similar borrowings, while £318m (2012: £313m) is available as backup to specific US borrowings.
Further information on our bonds can be found on the debt investor section of our website.
154 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
33. Subsidiary undertakings, joint ventures and associates
While we present consolidated results in these financial statements as if we were one company, our structure is such that there are a number of different operating and holding companies that contribute to the overall result. Our structure has evolved through acquisitions as well as regulatory requirements to have certain activities within separate legal entities. |
Principal subsidiary undertakings
The principal subsidiary undertakings included in the consolidated financial statements at 31 March 2013 are listed below. These undertakings are wholly-owned and, unless otherwise indicated, are incorporated in England and Wales.
Principal activity | ||
|
||
National Grid Gas plc | Transmission and distribution of gas | |
National Grid Electricity Transmission plc | Transmission of electricity | |
New England Power Company (i) | Transmission of electricity | |
Massachusetts Electric Company (i) | Distribution of electricity | |
The Narragansett Electric Company (i) | Transmission and distribution of electricity | |
Niagara Mohawk Power Corporation (i) | Transmission of electricity and distribution of electricity and gas | |
National Grid Metering Limited | Metering services | |
National Grid Grain LNG Limited | LNG importation and storage | |
Boston Gas Company (i) | Distribution of gas | |
National Grid Generation LLC (i) | Generation of electricity | |
KeySpan Gas East Corporation (i) | Distribution of gas | |
The Brooklyn Union Gas Company (i) | Distribution of gas | |
NGG Finance plc | Financing | |
National Grid Property Holdings Limited | Property services | |
National Grid Holdings One plc | Holding company | |
Lattice Group plc | Holding company | |
National Grid USA (i) | Holding company | |
Niagara Mohawk Holdings, Inc. (i) | Holding company | |
National Grid Commercial Holdings Limited | Holding company | |
National Grid Holdings Limited | Holding company | |
KeySpan Corporation (i) | Holding company | |
National Grid North America Inc. (formerly National Grid Holdings Inc.) (i) | Holding company | |
British Transco Finance Inc. (i) | Financing | |
British Transco International Finance BV (incorporated in the Netherlands) | Financing | |
|
(i) | Incorporated in the US. |
Principal joint ventures and associates
The principal joint ventures and associated undertakings included in the financial statements at 31 March 2013 are listed below. These undertakings are incorporated in England and Wales (unless otherwise indicated).
% of ordinary | ||||
shares held | Principal activity | |||
|
||||
BritNed Development Limited |
50 | UK/Netherlands interconnector | ||
NGET/SPT Upgrades Limited |
50 | England/Scotland interconnector | ||
Millennium Pipeline Company, LLC (i) |
26.25 | Transmission of gas | ||
Iroquois Gas Transmission System, L.P. (i) |
20.4 | Transmission of gas | ||
|
(i) | Incorporated in the US. |
A full list of all subsidiary and associated undertakings is available from the Group General Counsel & Company Secretary.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 155 |
Financial Statements
Notes to the consolidated financial statements
supplementary information
Continued
34. Sensitivities on areas of estimation and uncertainty
In order to give a clearer picture of the impact that potential changes in estimates and assumptions could have on our results and financial position, the following sensitivities are presented. These sensitivities are hypothetical only, as they 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. |
Revenue accruals
A 10% change in our estimate of unbilled revenues at 31 March 2013 would result in an increase or decrease in our recorded net assets and profit for the year of approximately £77m (2012: £49m) net of tax.
Asset useful lives
An increase in the economic useful lives of assets of one year on average would reduce our annual depreciation charge on property, plant and equipment by £68m (2012: £70m) (pre-tax) and our annual amortisation charge on intangible assets by £15m (2012: £11m) (pre-tax).
Hedge accounting
If, using our derivative financial instruments, hedge accounting had not been achieved during the year ended 31 March 2013, the profit after tax for the year would have been £184m lower (2012: £165m higher) and net assets would have been £106m higher (2012: £163m higher).
Provisions
A 10% change in the estimates of future cash flows in respect of provisions for liabilities would result in an increase or decrease in our provisions of approximately £176m (2012: £173m).
Assets carried at fair value
A 10% change in assets and liabilities carried at fair value would result in an increase or decrease in the carrying value of derivative financial instruments and commodity contract liabilities of £56m (2012: £71m) and £5m (2012: £19m) respectively.
Pensions and other post-retirement benefits
The impact of increases in the discount rate, salary inflation and life expectancy is shown in the table below. The effect of a change in the discount rate, driven by changes in corporate bond interest rates, would be expected to have a partial offset due to the related effects on asset values.
Change in pensions and other | Change in annual pension and | |||||||||||||
post-retirement benefit obligations |
other post-retirement benefits cost |
|||||||||||||
2013 | 2012 | 2011 | 2013 | 2012 | 2011 | |||||||||
£m | £m | £m | £m | £m | £m | |||||||||
|
||||||||||||||
Sensitivities (all other assumptions held constant): |
||||||||||||||
0.1% change in discount rate |
396 | 346 | 304 | 7 | 7 | 7 | ||||||||
0.5% change in long-term rate of increase in salaries |
178 | 158 | 162 | 9 | 8 | 8 | ||||||||
Change of one year to life expectancy at age 60 |
815 | 686 | 653 | 7 | 6 | 7 | ||||||||
|
||||||||||||||
2013 |
2012 | 2011 | ||||||||||||
£m | £m | £m | ||||||||||||
|
||||||||||||||
Sensitivities to a 1% change in assumed healthcare cost trend rates: |
||||||||||||||
Increase |
||||||||||||||
Effect on the aggregate of the service costs and interest costs |
32 | 29 | 28 | |||||||||||
Effect on defined benefit obligations |
453 | 366 | 330 | |||||||||||
Decrease |
||||||||||||||
Effect on the aggregate of the service costs and interest costs |
(26) | (25) | (23) | |||||||||||
Effect on defined benefit obligations |
(378) | (310) | (282) | |||||||||||
|
156 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
34. Sensitivities on areas of estimation and uncertainty continued
Financial risk
Our financial instruments are sensitive to changes in market variables, being UK and US interest rates, the UK RPI and the dollar to sterling exchange rate. The changes in market variables impacts the valuation of our borrowings, deposits, derivative financial instruments and commodity contracts. The following analysis illustrates the sensitivity of our financial instruments to the changes in market variables.
The following main assumptions were made in calculating the sensitivity analysis:
| 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 2013 and 2012 respectively; |
| the statement of financial position sensitivity to interest rates relates only to derivative financial instruments and available-for-sale investments, as debt and other deposits are carried at amortised cost and so their carrying value does not change as interest rates move; |
| the sensitivity of accrued 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 recorded in the income statement as they are designated using the spot rather than the forward translation method. The impact of movements in the dollar to sterling exchange rate are recorded directly in equity. |
Using the above assumptions, and a number of others which have a far smaller impact overall, the following table shows the illustrative effect on the income statement and items that are recognised directly in equity that would result from reasonably probable movements in the UK RPI, UK and US interest rates and in the dollar to sterling exchange rate, after the effects of tax.
Income | Other equity | Income | Other equity | |||||||
statement | reserves | statement | reserves | |||||||
2013 | 2013 | 2012 | 2012 | |||||||
+/- £m | +/- £m | +/- £m | +/- £m | |||||||
|
||||||||||
UK RPI +/- 0.50%* |
25 | | 24 | | ||||||
UK interest rates +/- 0.50% |
98 | 90 | 38 | 54 | ||||||
US interest rates +/- 0.50% |
87 | 16 | 23 | 11 | ||||||
US dollar exchange rate +/- 10% |
65 | 600 | 39 | 571 | ||||||
|
*Excludes sensitivities to Limited Price Inflation index. Further details on sensitivities are provided in note 30(b)
The other equity reserves impact does not reflect the exchange translation in our US subsidiary net assets. It is estimated this would change by £712m (2012: £691m) in the opposite direction if the dollar exchange rate changed by 10%.
Commodity risk
A sensitivity analysis has also been prepared on the basis that all commodity contracts are constant from the reporting date. Based on this, an illustrative 10% movement in commodity prices would have the following impacts after the effects of tax:
Income | Income | |||
statement | statement | |||
2013 | 2012 | |||
£m | £m | |||
|
||||
10% increase in commodity prices |
45 | 29 | ||
10% decrease in commodity prices |
(34) | (23) | ||
|
The income statement sensitivities would affect commodity remeasurements.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 157 |
Financial Statements
Notes to the consolidated financial statements
supplementary information
Continued
35. Additional disclosures in respect of guaranteed securities
We have three debt issuances (including preferred shares) that are listed on a US national securities exchange and are guaranteed by companies in the Group. These guarantors commit 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 companies providing the guarantees, 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 condensed consolidating financial information, comprising statements of comprehensive income, statements of financial position and cash flow statements, is given in respect of National Grid Gas plc (subsidiary guarantor), which became joint full and unconditional guarantor on 11 May 2004 with National Grid plc (parent guarantor) of the 6.625% Guaranteed Notes due 2018 issued in June 1998 by British Transco Finance Inc., then known as British Gas Finance Inc. (issuer of notes). Condensed consolidating financial information is also provided in respect of Niagara Mohawk Power Corporation as a result of National Grid plcs guarantee, dated 29 October 2007, of Niagara Mohawks 3.6% and 3.9% issued preferred shares. National Grid Gas plc, British Transco Finance Inc., and Niagara Mohawk Power Corporation are wholly-owned subsidiaries of National Grid plc.
The following financial information for National Grid plc, National Grid Gas plc, British Transco Finance Inc., and Niagara Mohawk Power Corporation on a condensed consolidating basis is intended to provide investors with meaningful and comparable financial information and is provided pursuant to various rules including Rule 3-10 of Regulation S-X in lieu of the separate financial statements of each subsidiary issuer of public debt securities.
This financial information should be read in conjunction with the Companys financial statements and footnotes presented in our 2012/13 Annual Report and Accounts.
Summary statements of comprehensive income are presented, on a consolidating basis, for the three years ended 31 March 2013. Summary statements of comprehensive income of National Grid plc and National Grid Gas plc are presented under IFRS measurement principles, as modified by the inclusion of the results of subsidiary undertakings on the basis of equity accounting principles.
The summary statements of financial position of National Grid plc and National Grid Gas plc include the investments in subsidiaries recorded on the basis of equity accounting principles for the purposes of presenting condensed consolidating financial information under IFRS. The summary statements of financial position present these investments within non-current financial and other investments.
The consolidation adjustments column includes the necessary amounts to eliminate the intercompany balances and transactions between National Grid plc, National Grid Gas plc, British Transco Finance Inc., Niagara Mohawk Power Corporation and other subsidiaries.
158 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
35. Additional disclosures in respect of guaranteed securities continued
Summary statements of comprehensive income for the year ended 31 March 2013 IFRS
Parent
guarantor |
Issuer of notes |
Subsidiary
guarantor |
||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
National
£m |
Niagara
Mohawk Power Corporation £m |
British
Transco Finance Inc. £m |
National
£m |
Other
subsidiaries £m |
Consolidation
adjustments £m |
National
consolidated £m |
||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Revenue |
| 2,129 | | 3,062 | 9,345 | (177) | 14,359 | |||||||||||||||||||||||||||||||||
Operating costs |
||||||||||||||||||||||||||||||||||||||||
Depreciation and amortisation |
| (119) | | (511) | (731) | | (1,361) | |||||||||||||||||||||||||||||||||
Payroll costs |
| (282) | | (238) | (943) | | (1,463) | |||||||||||||||||||||||||||||||||
Purchases of electricity |
| (561) | | | (579) | | (1,140) | |||||||||||||||||||||||||||||||||
Purchases of gas |
| (151) | | (128) | (1,036) | | (1,315) | |||||||||||||||||||||||||||||||||
Rates and property taxes |
| (141) | | (235) | (593) | | (969) | |||||||||||||||||||||||||||||||||
Balancing Service Incentive Scheme |
| | | | (805) | | (805) | |||||||||||||||||||||||||||||||||
Payments to other UK network owners |
| | | | (487) | | (487) | |||||||||||||||||||||||||||||||||
Other operating costs |
| (356) | | (573) | (2,313) | 177 | (3,065) | |||||||||||||||||||||||||||||||||
| (1,610) | | (1,685) | (7,487) | 177 | (10,605) | ||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Operating profit |
| 519 | | 1,377 | 1,858 | | 3,754 | |||||||||||||||||||||||||||||||||
Net finance costs |
(181) | (58) | | (280) | (333) | | (852) | |||||||||||||||||||||||||||||||||
Dividends receivable |
| | | | 1,900 | (1,900) | | |||||||||||||||||||||||||||||||||
Interest in equity accounted affiliates |
2,437 | | | 8 | 18 | (2,445) | 18 | |||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Profit before tax |
2,256 | 461 | | 1,105 | 3,443 | (4,345) | 2,920 | |||||||||||||||||||||||||||||||||
Taxation |
39 | (178) | | (174) | (311) | | (624) | |||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Profit for the year |
2,295 | 283 | (i) | 931 | 3,132 | (4,345) | 2,296 | |||||||||||||||||||||||||||||||||
Amounts recognised in other comprehensive income (ii) |
(527) | (54) | | 3 | (480) | 531 | (527) | |||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Total comprehensive income for the year |
1,768 | 229 | | 934 | 2,652 | (3,814) | 1,769 | |||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Attributable to: |
||||||||||||||||||||||||||||||||||||||||
Equity shareholders |
1,768 | 229 | | 934 | 2,651 | (3,814) | 1,768 | |||||||||||||||||||||||||||||||||
Non-controlling interests |
| | | | 1 | | 1 | |||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
1,768 | 229 | | 934 | 2,652 | (3,814) | 1,769 | ||||||||||||||||||||||||||||||||||
|
(i) | Profit for the year for British Transco Finance Inc. is £nil as interest payable to external bond holders is offset by interest receivable on loans to National Grid Gas plc. |
(ii) | Includes other comprehensive income relating to interest in equity accounted affiliates. |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 159 |
Financial Statements
Notes to the consolidated financial statements
supplementary information
Continued
35. Additional disclosures in respect of guaranteed securities continued
Summary statements of comprehensive income for the year ended 31 March 2012 IFRS
Parent
guarantor |
Issuer of notes |
Subsidiary
guarantor |
||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
National Grid plc £m |
Niagara
Mohawk Power Corporation £m |
British
£m |
National
plc £m |
Other
subsidiaries £m |
Consolidation
adjustments £m |
National Grid consolidated £m |
||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Revenue |
| 2,269 | | 2,909 | 8,828 | (174) | 13,832 | |||||||||||||||||||||||||||||||||
Operating costs |
||||||||||||||||||||||||||||||||||||||||
Depreciation and amortisation |
| (115) | | (491) | (666) | | (1,272) | |||||||||||||||||||||||||||||||||
Payroll costs |
| (273) | | (228) | (970) | | (1,471) | |||||||||||||||||||||||||||||||||
Purchases of electricity |
| (530) | | | (915) | | (1,445) | |||||||||||||||||||||||||||||||||
Purchases of gas |
| (169) | | (133) | (1,221) | | (1,523) | |||||||||||||||||||||||||||||||||
Rates and property taxes |
| (137) | | (236) | (582) | | (955) | |||||||||||||||||||||||||||||||||
Balancing Service Incentive Scheme |
| | | | (818) | | (818) | |||||||||||||||||||||||||||||||||
Payments to other UK network owners |
| | | | (407) | | (407) | |||||||||||||||||||||||||||||||||
Other operating costs |
1 | (501) | | (486) | (1,590) | 174 | (2,402) | |||||||||||||||||||||||||||||||||
1 | (1,725) | | (1,574) | (7,169) | 174 | (10,293) | ||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Operating profit |
1 | 544 | | 1,335 | 1,659 | | 3,539 | |||||||||||||||||||||||||||||||||
Net finance costs |
(133) | (71) | | (406) | (377) | | (987) | |||||||||||||||||||||||||||||||||
Dividends receivable |
| | | | 350 | (350) | | |||||||||||||||||||||||||||||||||
Interest in equity accounted affiliates |
2,141 | | | 5 | 7 | (2,146) | 7 | |||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Profit before tax |
2,009 | 473 | | 934 | 1,639 | (2,496) | 2,559 | |||||||||||||||||||||||||||||||||
Taxation |
27 | (195) | | (102) | (251) | | (521) | |||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Profit for the year |
2,036 | 278 | (i) | 832 | 1,388 | (2,496) | 2,038 | |||||||||||||||||||||||||||||||||
Amounts recognised in other comprehensive income (ii) |
(887) | (50) | | 9 | (880) | 921 | (887) | |||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Total comprehensive income for the year |
1,149 | 228 | | 841 | 508 | (1,575) | 1,151 | |||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Attributable to: |
||||||||||||||||||||||||||||||||||||||||
Equity shareholders |
1,149 | 228 | | 841 | 506 | (1,575) | 1,149 | |||||||||||||||||||||||||||||||||
Non-controlling interests |
| | | | 2 | | 2 | |||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
1,149 | 228 | | 841 | 508 | (1,575) | 1,151 | ||||||||||||||||||||||||||||||||||
|
(i) | Profit for the year for British Transco Finance Inc. is £nil as interest payable to external bond holders is offset by interest receivable on loans to National Grid Gas plc. |
(ii) | Includes other comprehensive income relating to interest in equity accounted affiliates. |
160 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
35. Additional disclosures in respect of guaranteed securities continued
Summary statements of comprehensive income for the year ended 31 March 2011 IFRS
Parent
guarantor |
Issuer of notes |
Subsidiary
guarantor |
||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
|
National
Grid plc £m |
|
|
Niagara
Mohawk Power Corporation £m |
|
|
British
Transco Finance Inc. £m |
|
|
National
Grid Gas plc £m |
|
|
Other
subsidiaries £m |
|
|
Consolidation
adjustments £m |
|
|
National
Grid consolidated £m |
|
||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Revenue |
| 2,606 | | 2,739 | 9,174 | (176) | 14,343 | |||||||||||||||||||||||||||||||||
Operating costs |
||||||||||||||||||||||||||||||||||||||||
Depreciation and amortisation |
| (133) | | (455) | (664) | | (1,252) | |||||||||||||||||||||||||||||||||
Payroll costs |
| (288) | | (236) | (972) | | (1,496) | |||||||||||||||||||||||||||||||||
Purchases of electricity |
| (628) | | | (854) | | (1,482) | |||||||||||||||||||||||||||||||||
Purchases of gas |
| (244) | | (141) | (1,635) | | (2,020) | |||||||||||||||||||||||||||||||||
Rates and property taxes |
| (151) | | (239) | (555) | | (945) | |||||||||||||||||||||||||||||||||
Balancing Service Incentive Scheme |
| | | | (581) | | (581) | |||||||||||||||||||||||||||||||||
Payments to other UK network owners |
| | | | (298) | | (298) | |||||||||||||||||||||||||||||||||
Other operating costs |
| (375) | | (489) | (1,836) | 176 | (2,524) | |||||||||||||||||||||||||||||||||
| (1,819) | | (1,560) | (7,395) | 176 | (10,598) | ||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Operating profit |
| 787 | | 1,179 | 1,779 | | 3,745 | |||||||||||||||||||||||||||||||||
Net finance costs |
(261) | (119) | | (395) | (353) | | (1,128) | |||||||||||||||||||||||||||||||||
Dividends receivable |
| | | | 400 | (400) | | |||||||||||||||||||||||||||||||||
Interest in equity accounted affiliates |
2,356 | | | 7 | 7 | (2,363) | 7 | |||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Profit before tax |
2,095 | 668 | | 791 | 1,833 | (2,763) | 2,624 | |||||||||||||||||||||||||||||||||
Taxation |
64 | (236) | | (97) | (192) | | (461) | |||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Profit for the year |
2,159 | 432 | (i) | 694 | 1,641 | (2,763) | 2,163 | |||||||||||||||||||||||||||||||||
Amounts recognised in other comprehensive income (ii) |
301 | 49 | | 7 | 351 | (407) | 301 | |||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Total comprehensive income for the year |
2,460 | 481 | | 701 | 1,992 | (3,170) | 2,464 | |||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Attributable to: |
||||||||||||||||||||||||||||||||||||||||
Equity shareholders |
2,460 | 481 | | 701 | 1,988 | (3,170) | 2,460 | |||||||||||||||||||||||||||||||||
Non-controlling interests |
| | | | 4 | | 4 | |||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
2,460 | 481 | | 701 | 1,992 | (3,170) | 2,464 | ||||||||||||||||||||||||||||||||||
|
(i) | Profit for the year for British Transco Finance Inc. is £nil as interest payable to external bond holders is offset by interest receivable on loans to National Grid Gas plc. |
(ii) | Includes other comprehensive income relating to interest in equity accounted affiliates. |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 161 |
Financial Statements
Notes to the consolidated financial statements
supplementary information
Continued
35. Additional disclosures in respect of guaranteed securities continued
Statements of financial position as at 31 March 2013 IFRS
Parent
guarantor |
Issuer of notes |
Subsidiary
guarantor |
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
National
£m |
Niagara
Mohawk Power Corporation £m |
British
£m |
National
£m |
Other
subsidiaries £m |
Consolidation
adjustments £m |
National Grid consolidated £m |
||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Non-current assets |
||||||||||||||||||||||||||||
Goodwill |
| 737 | | | 4,291 | | 5,028 | |||||||||||||||||||||
Other intangible assets |
| | | 199 | 390 | | 589 | |||||||||||||||||||||
Property, plant and equipment |
| 4,441 | | 12,122 | 20,029 | | 36,592 | |||||||||||||||||||||
Deferred tax assets |
| | | | | | | |||||||||||||||||||||
Other non-current assets |
| 21 | | 12 | 71 | | 104 | |||||||||||||||||||||
Amounts owed by subsidiary undertakings |
295 | | | 5,609 | 2,043 | (7,947) | | |||||||||||||||||||||
Pension assets |
| 195 | | | | | 195 | |||||||||||||||||||||
Financial and other investments |
12,166 | 21 | | 43 | 9,896 | (21,477) | 649 | |||||||||||||||||||||
Derivative financial assets |
585 | | | 977 | 410 | | 1,972 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total non-current assets |
13,046 | 5,415 | | 18,962 | 37,130 | (29,424) | 45,129 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Current assets |
||||||||||||||||||||||||||||
Inventories and current intangible assets |
| 28 | | 22 | 241 | | 291 | |||||||||||||||||||||
Trade and other receivables |
3 | 428 | | 380 | 2,099 | | 2,910 | |||||||||||||||||||||
Amounts owed by subsidiary undertakings |
9,470 | 18 | 202 | 202 | 12,250 | (22,142) | | |||||||||||||||||||||
Financial and other investments |
2,385 | 32 | | 854 | 2,160 | | 5,431 | |||||||||||||||||||||
Derivative financial assets |
163 | | | 119 | 60 | (69) | 273 | |||||||||||||||||||||
Cash and cash equivalents |
338 | 9 | | 20 | 304 | | 671 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total current assets |
12,359 | 515 | 202 | 1,597 | 17,114 | (22,211) | 9,576 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Assets of businesses held for sale |
| | | | | | | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total assets |
25,405 | 5,930 | 202 | 20,559 | 54,244 | (51,635) | 54,705 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Current liabilities |
||||||||||||||||||||||||||||
Borrowings |
(613) | (69) | (4) | (1,103) | (1,659) | | (3,448) | |||||||||||||||||||||
Derivative financial liabilities |
(228) | | | (86) | (162) | 69 | (407) | |||||||||||||||||||||
Trade and other payables |
(44) | (132) | | (590) | (2,285) | | (3,051) | |||||||||||||||||||||
Amounts owed to subsidiary undertakings |
(9,029) | (70) | | (3,152) | (9,891) | 22,142 | | |||||||||||||||||||||
Current tax liabilities |
| (59) | | (26) | (146) | | (231) | |||||||||||||||||||||
Provisions |
| | | (63) | (245) | | (308) | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total current liabilities |
(9,914) | (330) | (4) | (5,020) | (14,388) | 22,211 | (7,445) | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Non-current liabilities |
||||||||||||||||||||||||||||
Borrowings |
(2,762) | (1,798) | (198) | (6,247) | (13,642) | | (24,647) | |||||||||||||||||||||
Derivative financial liabilities |
(458) | | | (420) | (396) | | (1,274) | |||||||||||||||||||||
Other non-current liabilities |
| (281) | | (1,053) | (550) | | (1,884) | |||||||||||||||||||||
Amounts owed to subsidiary undertakings |
(2,042) | | | | (5,905) | 7,947 | | |||||||||||||||||||||
Deferred tax liabilities |
(1) | (563) | | (1,817) | (1,695) | | (4,076) | |||||||||||||||||||||
Pensions and other post-retirement benefit obligations |
| (977) | | | (2,717) | | (3,694) | |||||||||||||||||||||
Provisions |
| (268) | | (121) | (1,063) | | (1,452) | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total non-current liabilities |
(5,263) | (3,887) | (198) | (9,658) | (25,968) | 7,947 | (37,027) | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Liabilities of businesses held for sale |
| | | | | | | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total liabilities |
(15,177) | (4,217) | (202) | (14,678) | (40,356) | 30,158 | (44,472) | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Net assets |
10,228 | 1,713 | | 5,881 | 13,888 | (21,477) | 10,233 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Equity |
||||||||||||||||||||||||||||
Called up share capital |
433 | 123 | | 45 | 182 | (350) | 433 | |||||||||||||||||||||
Share premium account |
1,344 | 1,930 | | 204 | 7,426 | (9,560) | 1,344 | |||||||||||||||||||||
Retained earnings |
13,132 | (340) | | 4,325 | 6,468 | (10,453) | 13,132 | |||||||||||||||||||||
Other equity reserves |
(4,681) | | | 1,307 | (193) | (1,114) | (4,681) | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Shareholders equity |
10,228 | 1,713 | | 5,881 | 13,883 | (21,477) | 10,228 | |||||||||||||||||||||
Non-controlling interests |
| | | | 5 | | 5 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total equity |
10,228 | 1,713 | | 5,881 | 13,888 | (21,477) | 10,233 | |||||||||||||||||||||
|
162 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
35. Additional disclosures in respect of guaranteed securities continued
Statements of financial position as at 31 March 2012 IFRS
Parent
guarantor |
Issuer of notes |
Subsidiary
guarantor |
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
National
Grid plc |
Niagara
Mohawk Power Corporation |
British
Transco Finance Inc. |
National
Grid Gas plc |
Other
subsidiaries |
Consolidation
adjustments |
National
consolidated |
||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Non-current assets |
||||||||||||||||||||||||||||
Goodwill |
| 701 | | | 4,075 | | 4,776 | |||||||||||||||||||||
Other intangible assets |
| 9 | | 229 | 308 | | 546 | |||||||||||||||||||||
Property, plant and equipment |
| 4,038 | | 11,650 | 18,013 | | 33,701 | |||||||||||||||||||||
Deferred tax assets |
1 | | | | | (1 | ) | | ||||||||||||||||||||
Other non-current assets |
| 2 | | 11 | 82 | | 95 | |||||||||||||||||||||
Amounts owed by subsidiary undertakings |
537 | | | 5,611 | | (6,148 | ) | | ||||||||||||||||||||
Pension assets |
| 155 | | | | | 155 | |||||||||||||||||||||
Financial and other investments |
10,811 | 22 | | 37 | 9,838 | (20,116 | ) | 592 | ||||||||||||||||||||
Derivative financial assets |
624 | | | 856 | 339 | | 1,819 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total non-current assets |
11,973 | 4,927 | | 18,394 | 32,655 | (26,265 | ) | 41,684 | ||||||||||||||||||||
|
||||||||||||||||||||||||||||
Current assets |
||||||||||||||||||||||||||||
Inventories and current intangible assets |
| 36 | | 25 | 315 | | 376 | |||||||||||||||||||||
Trade and other receivables |
4 | 405 | | 282 | 1,280 | | 1,971 | |||||||||||||||||||||
Amounts owed by subsidiary undertakings |
9,346 | 32 | 191 | 173 | 9,740 | (19,482 | ) | | ||||||||||||||||||||
Financial and other investments |
830 | 22 | | 432 | 1,107 | | 2,391 | |||||||||||||||||||||
Derivative financial assets |
207 | | | 85 | 135 | (110 | ) | 317 | ||||||||||||||||||||
Cash and cash equivalents |
26 | 1 | | | 305 | | 332 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total current assets |
10,413 | 496 | 191 | 997 | 12,882 | (19,592 | ) | 5,387 | ||||||||||||||||||||
|
||||||||||||||||||||||||||||
Assets of businesses held for sale |
| | | | 264 | | 264 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total assets |
22,386 | 5,423 | 191 | 19,391 | 45,801 | (45,857 | ) | 47,335 | ||||||||||||||||||||
|
||||||||||||||||||||||||||||
Current liabilities |
||||||||||||||||||||||||||||
Borrowings |
(897 | ) | (12 | ) | (4 | ) | (832 | ) | (747 | ) | | (2,492) | ||||||||||||||||
Derivative financial liabilities |
(202 | ) | | | (52 | ) | (18 | ) | 110 | (162) | ||||||||||||||||||
Trade and other payables |
(37 | ) | (258 | ) | | (573 | ) | (1,817 | ) | | (2,685) | |||||||||||||||||
Amounts owed to subsidiary undertakings |
(8,429 | ) | (260 | ) | | (1,051 | ) | (9,742 | ) | 19,482 | | |||||||||||||||||
Current tax liabilities |
| (173 | ) | | (21 | ) | (189 | ) | | (383) | ||||||||||||||||||
Provisions |
| (22 | ) | | (57 | ) | (203 | ) | | (282) | ||||||||||||||||||
|
||||||||||||||||||||||||||||
Total current liabilities |
(9,565 | ) | (725 | ) | (4 | ) | (2,586 | ) | (12,716 | ) | 19,592 | (6,004) | ||||||||||||||||
|
||||||||||||||||||||||||||||
Non-current liabilities |
||||||||||||||||||||||||||||
Borrowings |
(3,119 | ) | (1,309 | ) | (187 | ) | (6,568 | ) | (9,350 | ) | | (20,533) | ||||||||||||||||
Derivative financial liabilities |
(463 | ) | | | (391 | ) | (415 | ) | | (1,269) | ||||||||||||||||||
Other non-current liabilities |
| (235 | ) | | (1,079 | ) | (607 | ) | | (1,921) | ||||||||||||||||||
Amounts owed to subsidiary undertakings |
| | | | (6,148 | ) | 6,148 | | ||||||||||||||||||||
Deferred tax liabilities |
| (400 | ) | | (1,824 | ) | (1,515 | ) | 1 | (3,738) | ||||||||||||||||||
Pensions and other post-retirement benefit obligations |
| (913 | ) | | | (2,175 | ) | | (3,088) | |||||||||||||||||||
Provisions |
| (248 | ) | | (102 | ) | (1,099 | ) | | (1,449) | ||||||||||||||||||
|
||||||||||||||||||||||||||||
Total non-current liabilities |
(3,582 | ) | (3,105 | ) | (187 | ) | (9,964 | ) | (21,309 | ) | 6,149 | (31,998) | ||||||||||||||||
|
||||||||||||||||||||||||||||
Liabilities of businesses held for sale |
| | | | (87 | ) | | (87) | ||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total liabilities |
(13,147 | ) | (3,830 | ) | (191 | ) | (12,550 | ) | (34,112 | ) | 25,741 | (38,089) | ||||||||||||||||
|
||||||||||||||||||||||||||||
Net assets |
9,239 | 1,593 | | 6,841 | 11,689 | (20,116 | ) | 9,246 | ||||||||||||||||||||
|
||||||||||||||||||||||||||||
Equity |
||||||||||||||||||||||||||||
Called up share capital |
422 | 117 | | 45 | 182 | (344 | ) | 422 | ||||||||||||||||||||
Share premium account |
1,355 | 1,835 | | 204 | 7,426 | (9,465 | ) | 1,355 | ||||||||||||||||||||
Retained earnings |
12,297 | (363 | ) | | 5,287 | 4,303 | (9,227 | ) | 12,297 | |||||||||||||||||||
Other equity reserves |
(4,835 | ) | 4 | | 1,305 | (229 | ) | (1,080 | ) | (4,835) | ||||||||||||||||||
|
||||||||||||||||||||||||||||
Shareholders equity |
9,239 | 1,593 | | 6,841 | 11,682 | (20,116 | ) | 9,239 | ||||||||||||||||||||
Non-controlling interests |
| | | | 7 | | 7 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total equity |
9,239 | 1,593 | | 6,841 | 11,689 | (20,116 | ) | 9,246 | ||||||||||||||||||||
|
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 163 |
Financial Statements
Notes to the consolidated financial statements
supplementary information
Continued
35. Additional disclosures in respect of guaranteed securities continued
Cash flow statements
Parent
guarantor |
Issuer of notes |
Subsidiary
guarantor |
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
National Grid plc |
Niagara
Mohawk Power Corporation |
British
Transco Finance Inc. |
National Grid Gas plc |
Other
subsidiaries |
Consolidation
adjustments |
National
consolidated |
||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Year ended 31 March 2013 |
||||||||||||||||||||||||||||
Net cash flow from operating activities |
36 | 162 | | 1,608 | 1,944 | | 3,750 | |||||||||||||||||||||
Net cash flow from/(used in) investing activities |
(979 | ) | (286 | ) | | (1,345 | ) | (1,048 | ) | (2,472 | ) | (6,130) | ||||||||||||||||
Net cash flow from/(used in) financing activities |
1,255 | 132 | | (240 | ) | (904 | ) | 2,472 | 2,715 | |||||||||||||||||||
|
||||||||||||||||||||||||||||
Net increase/(decrease) in cash and cash equivalents in the year |
312 | 8 | | 23 | (8 | ) | | 335 | ||||||||||||||||||||
|
||||||||||||||||||||||||||||
Year ended 31 March 2012 |
||||||||||||||||||||||||||||
Net cash flow from operating activities |
75 | 441 | | 1,596 | 2,116 | | 4,228 | |||||||||||||||||||||
Net cash flow from/(used in) investing activities |
559 | (287 | ) | | (1,171 | ) | (1,166 | ) | (306 | ) | (2,371) | |||||||||||||||||
Net cash flow from/(used in) financing activities |
(808 | ) | (155 | ) | | (502 | ) | (741 | ) | 306 | (1,900) | |||||||||||||||||
|
||||||||||||||||||||||||||||
Net increase/(decrease) in cash and cash equivalents in the year |
(174 | ) | (1 | ) | | (77 | ) | 209 | | (43) | ||||||||||||||||||
|
||||||||||||||||||||||||||||
Year ended 31 March 2011 |
||||||||||||||||||||||||||||
Net cash flow from operating activities |
55 | 742 | | 1,596 | 2,465 | | 4,858 | |||||||||||||||||||||
Net cash flow from/(used in) investing activities |
2,127 | (377 | ) | | (909 | ) | (1,850 | ) | (3,765 | ) | (4,774) | |||||||||||||||||
Net cash flow from/(used in) financing activities |
(2,180 | ) | (365 | ) | | (621 | ) | (1,029 | ) | 3,765 | (430) | |||||||||||||||||
|
||||||||||||||||||||||||||||
Net increase/(decrease) in cash and cash equivalents in the year |
2 | | | 66 | (414 | ) | | (346) | ||||||||||||||||||||
|
Cash dividends were received by National Grid plc from subsidiary undertakings amounting to £570m during the year ended 31 March 2013 (2012: £200m; 2011: £150m).
Maturity analysis of parent Company borrowings
164 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
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 of individual financial statements under UK GAAP
These individual financial statements of the Company have been prepared in accordance with applicable UK accounting and financial reporting standards and the Companies Act 2006. They 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 2012 comparative financial information has also been prepared on this basis.
These individual financial statements have been prepared on a going concern basis following the assessment made by the Directors as set out on page 57.
The Company has not presented its own profit and loss account as permitted by section 408 of the Companies Act 2006.
The Company has taken advantage of the exemptions in FRS 8 Related Party Disclosures from disclosing transactions with other members of the National Grid plc group of companies.
In accordance with exemptions under FRS 29 Financial Instruments: Disclosures, the Company has not presented the financial instruments disclosures required by the standard, as disclosures which comply with the standard are included in the consolidated financial statements.
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 net realisable value and its value-in-use.
C. Taxation
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 timing 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 timing differences reverse based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the financial statements.
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.
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 Companys accounting policies under UK GAAP, namely FRS 25 Financial Instruments: Presentation, FRS 26 Financial Instruments: Measurement and FRS 29 Financial Instruments: Disclosures, are the same as the Groups accounting policies under IFRS, namely IAS 32 Financial Instruments: Presentation, IAS 39 Financial Instruments: Recognition and Measurement 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 12, 14, 16, 17, 19 and 20 to the consolidated financial statements. The Company is taking the exemption for financial instruments disclosures, because IFRS 7 disclosures are given in notes 30 and 34 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 14 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. In the event of default or non performance by the subsidiary, the Company recognises such guarantees as insurance contracts, at fair value with a corresponding increase in the carrying value of the investment.
H. Share awards to employees of subsidiary undertakings
The issuance by the Company to employees of its subsidiaries of a grant over the Companys 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 grants vesting period. Where payments are subsequently received from subsidiaries, these are accounted for as a return of a capital contribution and credited against the Companys investments in subsidiaries. The Company has no employees.
I. Dividends
Interim dividends are recognised when they are paid to the Companys shareholders. Final dividends are recognised when they are approved by shareholders.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 165 |
Financial Statements
at 31 March
2013 | 2012 | |||||||||||
Notes | £m | £m | ||||||||||
|
||||||||||||
Fixed assets |
||||||||||||
Investments |
1 | 8,177 | 8,157 | |||||||||
|
||||||||||||
Current assets |
||||||||||||
Debtors (amounts falling due within one year) |
2 | 9,636 | 9,557 | |||||||||
Debtors (amounts falling due after more than one year) |
2 | 880 | 1,162 | |||||||||
Investments |
5 | 2,723 | 855 | |||||||||
Cash at bank and in hand |
| 1 | ||||||||||
|
||||||||||||
Total current assets |
13,239 | 11,575 | ||||||||||
Creditors (amounts falling due within one year) |
3 | (9,914 | ) | (9,565) | ||||||||
|
||||||||||||
Net current assets |
3,325 | 2,010 | ||||||||||
|
||||||||||||
Total assets less current liabilities |
11,502 | 10,167 | ||||||||||
Creditors (amounts falling due after more than one year) |
3 | (5,263 | ) | (3,582) | ||||||||
|
||||||||||||
Net assets |
6,239 | 6,585 | ||||||||||
|
||||||||||||
Capital and reserves |
||||||||||||
Called up share capital |
7 | 433 | 422 | |||||||||
Share premium account |
8 | 1,344 | 1,355 | |||||||||
Cash flow hedge reserve |
8 | 12 | 9 | |||||||||
Other equity reserves |
8 | 240 | 220 | |||||||||
Profit and loss account |
8 | 4,210 | 4,579 | |||||||||
|
||||||||||||
Total shareholders funds |
9 | 6,239 | 6,585 | |||||||||
|
The notes on pages 167 to 169 form part of the individual financial statements of the Company, which were approved by the Board of Directors on 15 May 2013 and were signed on its behalf by:
Sir Peter Gershon Chairman
Andrew Bonfield Finance Director
166 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Notes to the Company financial statements
Shares in subsidiary undertakings £m |
||
|
||
At 1 April 2011 |
7,890 | |
Additions |
267 | |
|
||
At 31 March 2012 |
8,157 | |
Additions |
20 | |
|
||
At 31 March 2013 |
8,177 | |
|
During the year there was a capital contribution of £20m (2012: £24m) which represents the fair value of equity instruments granted to subsidiaries employees arising from equity-settled employee share schemes. During the year ended 31 March 2012, the Company also acquired a further 69,242 ordinary shares of £1 each in National Grid (US) Holdings Limited for a total consideration of £243m.
The names of the principal subsidiary undertakings, joint ventures and associates are included in note 33 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.
2013
£m |
2012
£m |
|||||||
|
||||||||
Amounts falling due within one year: |
||||||||
Derivative financial instruments (note 4) |
163 | 207 | ||||||
Amounts owed by subsidiary undertakings |
9,470 | 9,346 | ||||||
Prepayments and accrued income |
3 | 4 | ||||||
|
||||||||
9,636 | 9,557 | |||||||
|
||||||||
Amounts falling due after more than one year: |
||||||||
Derivative financial instruments (note 4) |
585 | 624 | ||||||
Amounts owed by subsidiary undertakings |
295 | 537 | ||||||
Deferred taxation |
| 1 | ||||||
|
||||||||
880 | 1,162 | |||||||
|
2013
£m |
2012
£m |
|||||||
|
||||||||
Amounts falling due within one year: |
||||||||
Borrowings (note 6) |
613 | 897 | ||||||
Derivative financial instruments (note 4) |
228 | 202 | ||||||
Amounts owed to subsidiary undertakings |
9,029 | 8,429 | ||||||
Other creditors |
44 | 37 | ||||||
|
||||||||
9,914 | 9,565 | |||||||
|
||||||||
Amounts falling due after more than one year: |
||||||||
Borrowings (note 6) |
2,762 | 3,119 | ||||||
Derivative financial instruments (note 4) |
458 | 463 | ||||||
Amounts owed to a subsidiary undertaking |
2,042 | | ||||||
Deferred taxation |
1 | | ||||||
|
||||||||
5,263 | 3,582 | |||||||
|
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 167 |
Financial Statements
Notes to the Company financial statements
Continued
4. Derivative financial instruments
The fair values of derivative financial instruments are:
2013 |
2012 |
|||||||||||||||||||||||||
Assets
£m |
Liabilities
£m |
Total
£m |
Assets
£m |
Liabilities
£m |
Total
£m |
|||||||||||||||||||||
Amounts falling due within one year |
163 | (228 | ) | (65 | ) | 207 | (202 | ) | 5 | |||||||||||||||||
Amounts falling due after more than one year |
585 | (458 | ) | 127 | 624 | (463 | ) | 161 | ||||||||||||||||||
748 | (686 | ) | 62 | 831 | (665 | ) | 166 | |||||||||||||||||||
For each class of derivative the notional contract* amounts are as follows:
|
|
|||||||||||||||||||||||||
2013 £m |
2012 £m |
|||||||||||||||||||||||||
Interest rate swaps |
(8,015 | ) | (8,624 | ) | ||||||||||||||||||||||
Cross-currency interest rate swaps |
(5,376 | ) | (3,829 | ) | ||||||||||||||||||||||
Foreign exchange forward contracts |
(9,080 | ) | (9,801 | ) | ||||||||||||||||||||||
Total |
(22,471 | ) | (22,254 | ) | ||||||||||||||||||||||
*The notional contract amounts of derivatives indicate the gross nominal value of transactions outstanding at the balance sheet date
The following table sets out the Companys current asset investments:
|
|
|||||||||||||||||||||||||
2013 £m |
2012 £m |
|||||||||||||||||||||||||
Investments in short-term money funds |
2,113 | 705 | ||||||||||||||||||||||||
Short-term deposits |
438 | 34 | ||||||||||||||||||||||||
Restricted cash balances collateral |
172 | 116 | ||||||||||||||||||||||||
2,723 | 855 | |||||||||||||||||||||||||
The following table analyses the Companys total borrowings:
|
|
|||||||||||||||||||||||||
2013 £m |
2012 £m |
|||||||||||||||||||||||||
Amounts falling due within one year: |
||||||||||||||||||||||||||
Bank loans |
277 | 134 | ||||||||||||||||||||||||
Bonds |
336 | 763 | ||||||||||||||||||||||||
613 | 897 | |||||||||||||||||||||||||
Amounts falling due after more than one year: |
||||||||||||||||||||||||||
Bank loans |
| 125 | ||||||||||||||||||||||||
Bonds |
2,762 | 2,994 | ||||||||||||||||||||||||
2,762 | 3,119 | |||||||||||||||||||||||||
Total borrowings |
3,375 | 4,016 |
The maturity of total borrowings is disclosed in note 35 on page 164 to the consolidated financial statements. There are no differences in the maturities as calculated under IFRS or UK GAAP.
The notional amount of borrowings outstanding as at 31 March 2013 was £3,250m (2012: £3,878m). Further information on significant borrowings can be found on the debt investors section of our website.
The called up share capital amounting to £433m (2012: £422m) consists of 3,794,575,998 (2012: 3,700,949,542) ordinary shares. For further information on share capital, refer to note 24 to the consolidated financial statements.
168 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 169 |
Additional Information
Business information in detail
Our licences, established under the Gas Act 1986 and Electricity Act 1989, as amended (the Acts), require us to develop, maintain and operate economic and efficient networks and to facilitate competition in the supply of gas and electricity in Great Britain. They also give us statutory powers, such as the right to bury our pipes or cables under public highways and the ability to use compulsory powers to purchase land to enable the conduct of our business.
Our networks are regulated by Ofgem, which has established price control mechanisms that set the amount of revenue that can be earned by our regulated businesses. Price control regulation is designed to ensure our interests, as a monopoly, are balanced with those of our customers. Ofgem allows us to charge reasonable, but not excessive, prices giving us a future level of revenue sufficient to meet our statutory duties and licence obligations, and also to make a reasonable return on our investment.
The price control includes a number of mechanisms to achieve its objectives, including financial incentives designed to encourage us to: continuously improve the cost and effectiveness of our services; manage and operate our networks efficiently; deliver high quality services to our customers and wider stakeholder community; and invest in the development of the network in a manner that ensures long-term security of supply.
Our UK Transmission and UK Gas Distribution businesses operate under eight separate price controls in the UK. These comprise two for our UK electricity transmission operations, one covering our role as transmission owner (TO) and the other for our role as system operator (SO); two for our gas transmission operations, again one as TO and one as SO; and one for each of our four regional gas distribution networks. While each of the eight price controls may have differing terms, they are based on a consistent regulatory framework.
In addition to the eight price controls, our LNG storage business has a price control covering some aspects of its operations. There is also a tariff cap price control applied to certain elements of domestic metering and daily meter reading activities undertaken by National Grid Metering.
Price controls up to 31 March 2013
The previous price control mechanisms for our UK Transmission and UK Gas Distribution businesses expired on 31 March 2013 and were consistent with the description provided on page 16.
2012/13 saw another good year of performance, outperforming the allowed returns in each of the three main businesses:
As at 31 March 2013 | RAV |
Allowed
vanilla return |
Achieved
vanilla return |
Achieved
ROE |
||||||||||
Electricity transmission |
£10,145m | 4.75% | 5.4% | 11.8% | ||||||||||
Gas transmission |
£5,340m | 4.75% | 7.5% | 17.2% | ||||||||||
Gas distribution |
£8,330m | 4.94% | 6.0% | 13.5% | ||||||||||
Total |
£23,815m | 4.82% | 6.1% | 13.6% | ||||||||||
170 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
RIIO price controls
Our UK regulator has introduced a new regulatory framework called RIIO (revenue = incentives + innovation + outputs) that became effective on 1 April 2013 and lasts for eight years. The building blocks of the RIIO price control are broadly similar to the historical price controls used in the UK, however there are some significant differences in the mechanics of the calculations.
How is revenue calculated?
Under RIIO the outputs we deliver are clearly articulated and are integrally linked to the calculation of our allowed revenue. These outputs have been determined through an extensive consultation process which has given stakeholders a greater opportunity to input to these decisions. The clarity around outputs should lead to greater transparency of our performance in delivering them.
The six key output categories are:
| Safety: ensuring the provision of a safe energy network |
| Reliability (and availability): promoting networks capable of delivering long-term reliability, as well as minimising the number and duration of interruptions experienced over the price control period, and ensuring adaptation to climate change |
| Environmental impact: encouraging companies to play their role in achieving broader environmental objectives specifically facilitating the reduction of carbon emissions as well as minimising their own carbon footprint |
| Customer and stakeholder satisfaction: maintaining high levels of customer satisfaction and stakeholder engagement, and improving service levels |
| Customer connections: encouraging networks to connect customers quickly and efficiently |
| Social obligations (Gas Distribution only): extending the gas network to communities that are fuel poor where it is efficient to do so and introducing measures to address carbon monoxide poisoning incidents |
Within each of these output categories are a number of primary and secondary deliverables, reflecting what our stakeholders want us to deliver over the coming price control period. The nature and number of these deliverables varies according to the output category, with some being linked directly to our allowed revenue, some linked to legislation, and others having only a reputational impact. Ofgem, using information submitted by us along with independent assessments, determines the efficient level of expected costs necessary to deliver them. Under RIIO this is known as totex, short for total expenditure, and is similar to the sum of controllable opex, capex and repex (for Gas Distribution) under the previous price control.
A number of assumptions are necessary in setting these outputs such as certain prices or the volumes of work that will be needed. As a result, to protect us and our customers from windfall gains and losses, there are a number of uncertainty mechanisms within the RIIO framework that can result in adjustments to totex if actual prices or volumes differ from the assumptions.
Where we under- or over-spend the allowed totex for reasons that are not covered by uncertainty mechanisms, there is a sharing factor, ie the under- or over-spend is shared between us and customers through an adjustment to allowed revenues in a future year. This sharing factor provides an incentive for us to provide the outputs efficiently as we are able to keep a portion of the savings, with the remainder benefiting our customers.
This sharing factor is one of the ways that RIIO has given innovation more prominence. Innovation includes traditional areas such as new technologies, as well as the broader challenge of finding new ways of working to deliver outputs more efficiently. This broader challenge will have an impact on everyone in our business and we have updated our strategy to reflect this new way of thinking.
Totex is then split between fast and slow money, a new concept under RIIO, based on a specified percentage. Fast money represents the amount of totex that we are able to recover in the current year. Slow money is added to our RAV.
In addition to fast money, in each year we are allowed to collect a depreciation of and a return on our RAV. This operates in a similar way to the previous price control, although there have been changes to the asset life (electricity transmission) and depreciation calculation (Gas Distribution) for some of our businesses. We are also allowed to collect additional revenues related to non-controllable costs and incentives.
The incentive mechanisms can increase or decrease our allowed revenue and result from our performance against various measures related to our outputs. RIIO has introduced new incentive mechanisms as a way to provide further incentives to align our objectives with those of our customers and other stakeholders. For example, performance against our customer satisfaction targets can have a positive or negative effect of up to 1% of allowed annual revenues. Incentives will normally affect our revenues two years after the year of performance.
Key financial metrics
Some of the key financial metrics are included below:
Transmission |
Gas Distribution |
|||||||||||||||||
Gas | Electricity | |||||||||||||||||
Cost of equity (post-tax real) |
6.8% | 7.0% | 6.7% | |||||||||||||||
Cost of debt (pre-tax real) |
|
iBoxx 10 year simple trailing
average index (2.92% for 2013/14) |
|
|||||||||||||||
Notional gearing |
62.5% | 60.0% | 65.0% | |||||||||||||||
Implied vanilla WACC* |
4.4% | 4.6% | 4.2% | |||||||||||||||
* | Implied vanilla WACC = cost of debt x gearing + cost of equity x (1 gearing) |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 171 |
Additional Information
Additional information
Business information in detail
Continued
Gas transmission |
Electricity transmission | Gas Distribution | ||||||||||||||||
Transmission Operator |
System
Operator |
Transmission
Operator |
System
Operator |
North West |
East of
England |
West
Midlands |
London | |||||||||||
1 Fast |
Baseline 35.6% |
62.60% | 15.00% | 72.10% | Repex: | Stepped decline from 50% in 2013/14 to 0% in 2020/21 in seven equal instalments of 7.14% per annum | ||||||||||||
Uncertainty 10% |
73.90% | 73.37% | 75.05% | 76.53% | ||||||||||||||
2 Slow |
Baseline 64.4% | 37.40% | 85.00% | 27.90% | Repex: | Stepped increase from 50% in 2013/14 to 100% in 2020/21 in seven equal instalments of 7.14% per annum | ||||||||||||
Uncertainty 90% | 26.10% | 26.63% | 24.95% | 23.47% | ||||||||||||||
3 Sharing |
44.36% | 46.89% | 63.04% | |||||||||||||||
For more information on RIIO, including incentive mechanisms, please see the relevant investor fact sheets on the Investor Relations section of our website.
Regulators
In the US, public utilities retail transactions are regulated by state utility commissions, including the NYPSC, the MADPU and the RIPUC.
Utility commissions serve as economic regulators in approving cost recovery and authorised rates of return. The state commissions establish the retail rates to recover the cost of transmission and distribution services, and focus on services and costs within their jurisdictions. FERC regulates the wholesale transactions of public utilities, such as interstate transmission and electricity generation, and provides for the cost recovery of these services.
Utility commissions are also charged with serving the public interest by ensuring utilities provide safe and reliable service at just and reasonable prices. They establish service standards and approve mergers and acquisitions of public utilities. FERC also regulates public utility holding companies and centralised service companies, including those of our US businesses.
All the states in which we operate have deregulated the commodity or supply component of electricity and gas utility services. Customers in deregulated states have the option to purchase electricity or gas services from competitive suppliers.
Regulatory process
Utilities in the US submit a formal rate filing to the relevant state regulatory body, requesting a revenue adjustment in a proceeding known as a rate case.
The rate case process is conducted in a litigated setting and, in the states in which we operate, it can take six to 13 months for the commission to render a final decision. In all states, the utility is required to prove that its requested rate change is prudent and reasonable. The utility may request a rate plan that can span multiple years. Unlike the state processes, the federal regulator has no specified timeline for adjudicating a rate case, but typically makes a final decision retroactive when the case is completed.
During the rate case process, consumer advocates and other intervening parties scrutinise and often file opposing positions to the utilitys rate request. The rate case decision reflects a weighing of the facts in light of the regulators policy objectives.
During a rate case, the utility, consumer advocates and intervening parties may agree on the resolution of aspects of a case and file
a negotiated settlement with a commission for approval.
Gas and electricity rates are established from a revenue requirement, or cost of service, representing the utilitys total cost of providing distribution or delivery service to its customers. It includes operating expenses, depreciation, taxes and a fair and reasonable return on certain components of the utilitys regulated asset base, typically referred to as its rate base.
The rate of return applied to the rate base is the utilitys weighted average cost of capital. This represents its cost of debt and an allowed ROE intended to provide the utility with an opportunity to attract capital from investors and maintain its financial integrity. The total cost of service is apportioned among different customer classes and categories of service to establish the rates, through a process called rate design, for these classes of customers. The final cost of service and rate design are ultimately approved in the rate case decision.
The revenue requirement is derived from a comprehensive study of the utilitys total costs during a recent 12 month period of operations, referred to as a test year.
Each commission has its own rules and standards for adjustments to the test year. These are intended to arrive at the total costs expected in the first year new rates will be in effect, or the rate year, and may include forecast capital investments in determining rate year rate base. Often, known and measurable adjustments are made to test year data to reflect normal operating conditions. In Massachusetts, only limited adjustments to this test year are allowed, which are required to be both known and measurable. New York and Rhode Island allow more comprehensive adjustments to the test year. In summary, the US regulatory regime is based on a building block approach intended to allow the utility to recover its cost of service and earn a return on its investments.
172 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Our rate plans
We have four sets of electricity rates and six sets of gas rates, covering our electricity distribution operations in upstate New York, Massachusetts, and Rhode Island, and our gas distribution networks in upstate New York, New York City, Long Island, Massachusetts, and Rhode Island. Distribution and transmission electricity services in upstate New York continue to be subject to a combined rate that is billed to end use customers. In New England, retail transmission rates reflect the recovery from our end use customers of wholesale transmission charges assessed to our electricity distribution companies. Wholesale rates for our electricity transmission network in New England and New York and our Long Island generation rates are subject to FERC approval.
Our rate plans are designed to produce a specific allowed ROE, by reference to an allowed operating expense level and rate base. Some rate plans include earnings sharing mechanisms that allow us to retain a proportion of the earnings above our allowed ROE we achieve through improving efficiency, with the balance benefiting customers.
In addition, our performance under certain rate plans is subject to service performance targets. We may be subject to monetary penalties in cases where we do not meet those targets.
Allowed ROE in context
One measure used to monitor the performance of our regulated businesses is a comparison of achieved ROE to allowed ROE, with a target that the achieved should be equal to or above the allowed. This measure cannot be used in isolation, however, as there are a number of factors that may prevent us from achieving that target in any given year:
| Regulatory lag: in the years following the rate year, costs may increase due to inflation or other factors. If the cost increases cannot be offset by productivity gains, the total cost to deliver will be higher as a proportion of revenue and therefore achieved ROE will be lowered. |
| Cost disallowances: a cost disallowance is a decision by the regulator that a certain expense should not be recovered in rates from customers. The regulator may do this for a variety of reasons. We can respond to some disallowances by choosing not to incur those costs; others may be unavoidable. As a result, unless offsetting cost reductions can be found, the achieved ROE will be lowered. |
| Market conditions: if a utility files a new rate case, the new allowed ROE may be below the current allowed ROE as financial market conditions may have changed. As such, a utility that appears to be underperforming the allowed ROE and files a new rate case may not succeed in increasing revenues. |
We work to increase achieved ROEs through: productivity improvements; positive performance against incentives or earned savings mechanisms such as energy efficiency programmes, where available; and, through filing a new rate case when achieved returns are lower than that which the Company could reasonably expect to attain through a new rate case.
Features of our rate plans
We are responsible for billing our customers for their use of electricity and gas services. Customer bills typically comprise a commodity charge, covering the cost of the electricity or gas delivered, and charges covering our delivery service. Depending on the state, delivery rates are either based upon actual sales volumes and costs incurred in an historical test year, or on estimates of sales volumes and costs, and in both cases may differ from actual amounts. A substantial proportion of our costs,
in particular electricity and gas purchases for supply to customers, are pass-through costs, meaning they are fully recoverable from our customers. These pass-through costs are recovered through separate charges to customers that are designed to recover those costs with no profit. Rates are adjusted from time to time to ensure any over- or under-recovery of these costs is returned to, or recovered from, our customers. There can be timing differences between costs being incurred and rates being adjusted.
Revenue for our wholesale transmission businesses in New England and New York is collected from wholesale transmission customers, who are typically other utilities and include our own New England electricity distribution businesses. With the exception of upstate New York, which continues to combine retail transmission and distribution rates to end use customers, these wholesale transmission costs are incurred by distribution utilities on behalf of their customers and are fully recovered as a pass-through from end use customers as approved by each state commission. Our Long Island generation plants sell capacity to LIPA under a power supply agreement, approved by FERC, which provides a similar economic effect to cost of service rate regulation.
US regulatory filings
The objectives of our rate case filings are to ensure we have the right cost of service with the ability to earn a fair and reasonable rate of return, while providing a safe and reliable service to our customers. In order to achieve these objectives and to reduce regulatory lag, we have been requesting structural changes, such as revenue decoupling mechanisms, capital trackers, commodity related bad debt true ups, and pension and other post-employment benefit (OPEB) true ups, separately from base rates. These terms are explained below the table on page 175. The following chart shows the progress we have made on these regulatory principles. We continue to work towards implementing these regulatory principles across our US business.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 173 |
Additional Information
Additional information
Business information in detail
Continued
Although many of our rate plans feature revenue decoupling, in some cases decoupling applies only to some classes of customer. As a result, the proportion of revenues which is decoupled is 92% for our electricity businesses and 64% for our gas businesses for 2012/13. Transmission and generation revenue is effectively decoupled.
Below we summarise significant developments in rate filings during the year.
New York
Upstate New York 2012 rate plan filing
On 27 April 2012, we filed a rate plan filing for our upstate New York electricity and gas businesses. On 31 October, the Company filed a term sheet reflecting the provisions of a proposed three year settlement agreement in respect of new rates. The Commission issued the final written order on 15 March 2013.
The new rate plan provides an increase in electricity delivery revenue of $43.4 million, $51.4 million, and $28.3 million for rate years one to three respectively. For the gas operations, the rate plan provides a decrease in delivery revenue of $3.3 million in rate year one and an increase of $5.9 million and $6.3 million in rate years two and three respectively. The revenue requirements for Niagara Mohawks electricity and gas businesses are based on a ROE of 9.3%, which includes a stay out premium for the three year term, and a capital structure that includes a 48% common equity component. The final agreement also includes annual reconciliation mechanisms for certain non-controllable costs. New rates became effective on 1 April 2013.
Downstate New York rate plan extension
In November 2012, The Brooklyn Union Gas Company (also known as KeySpan Energy Delivery New York or KEDNY) and the staff of the NYPSC entered into confidential discussions around the potential for extending and updating aspects of the five year rate agreement which ended on 31 December 2012.
National Grid and the Department of Public Service Staff filed a term sheet with the Commission on 15 January 2013 and a Joint Proposal formalising the settlement was filed on 22 February 2013. The proposed settlement is not expected to materially affect customer bills or KEDNYs revenues over the period of the rate agreement. The proposed two year agreement for extending and modifying elements of the original KEDNY five year rate plan includes a 9.4% ROE in each of the two years 2013 and 2014, with a 48% equity structure, which is financially equivalent to the terms of the original five year rate plan (9.8% ROE and 45% equity structure). Under the proposed agreement, 80% of any earnings over 9.4% will be allocated to fund recovery of prior environmental deferrals with the remaining 20% being retained by KEDNY. The proposed agreement also includes an increase in capital expenditure allowances to $320.1 million in 2013 and $293.7 million in 2014 as compared with the original rate plan capital allowances of $155.4 million per year. The agreement also proposes updates to various customer service and other performance metrics. Under the proposed agreement, there is no impact on the delivery rates for customers.
Long Island
LIPA power supply agreement (PSA)
National Grid owns and manages a number of power plants on Long Island, with a generation capacity of 3.8 GW. We have been supplying electricity to communities and businesses across Long Island under an agreement with LIPA that was set to expire in May 2013.
On 2 October 2012, National Grid and LIPA agreed to amend and restate their existing PSA for 15 years expiring on 30 April 2028 subject to LIPAs option to terminate the agreement as early as 30 April 2025 upon two years advance notice. The amended and restated PSA was filed on 22 March 2013 with FERC, commencing a 60 day waiting period.
The agreement contains a pricing formula similar to the current PSA, at rates approved by FERC. The agreement resulted in a rate decrease of $27.4 million annually compared with the 1998 PSA. The new agreement sets a ROE of 9.75% and a capital structure with an equity component of 50%. The PSA continues certain annual rate adjustments, such as pension and other post-retirement benefit expenses, property tax true up, adjustments for new plant in service, and certain inflationary increases. The new PSA allows both parties a ROE reopener in contract years four to six and National Grid a one time rate reopener after contract year six.
The new agreement also gives National Grid and LIPA new options for updating and modernising the power plants through retiring, or repowering, existing facilities while reducing energy costs and improving environmental performance.
Rhode Island
Rhode Island 2012 rate plan filing
On 27 April 2012, we filed a new rate plan for our Rhode Island electricity and gas businesses, to take effect from 1 February 2013. At an open meeting on 20 December 2012, RIPUC approved the rate case settlement.
The new rate plans include a 9.5% allowed ROE, a 49% equity portion in the assumed capital structure, pension trackers and increased operating cost allowances compared with the current rate plans. The new rate plans provide for a revenue increase of $20.9 million for electricity operations and $10.9 million for gas operations. They also provide for an annual property tax recovery mechanism included in the Companys annual capital programme that more closely aligns rate recovery and costs related to property tax expenses. A written order was issued by the Commission on 31 January 2013 and new rates became effective on 1 February 2013.
Complaint on transmission allowed ROE
In September 2011 and December 2012 complaints were filed with FERC against certain transmission owners, including our New England transmission business, to lower the base ROE from the FERC approved rate of 11.14% to 9.2% and 8.7% respectively. The transmission owners, including National Grid, have filed a response arguing that the complainants have not proven that the existing rate is unjust and unreasonable and that the 11.14% base ROE should be allowed to continue. The matters are ongoing.
Overland audit
In January 2013, the NYPSC published the results of an audit of National Grids New York state regulated business by Overland, a consultancy commissioned by the NYPSC in 2010/11. The report recommended a number of actions, many of which have already been implemented as a result of the Liberty audit which the Company commissioned at around the same time. National Grid has presented a plan to the NYPSC to address the outstanding recommendations and is analysing the audit findings with the NYPSC to determine any potential impact on historical customer bills.
174 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Revenue decoupling
A mechanism that removes the link between a utilitys revenue and sales volume so that the utility is indifferent to changes in usage. Revenues are reconciled to a revenue target, with differences billed or credited to customers. Allows the utility to support energy efficiency.
Capital tracker
A mechanism that allows for the recovery of the revenue requirement of incremental capital investment above that embedded in base rates, including depreciation, property taxes and a return on the incremental investment.
§ Commodity related bad debt true up
A mechanism that allows a utility to reconcile commodity related bad debt to either actual commodity related bad debt or to a specified commodity related bad debt write-off percentage. For electricity utilities, this mechanism also includes working capital.
¸ Pension/OPEB true up
A mechanism that reconciles the actual non capitalised costs of pension and OPEB and the actual amount recovered in base rates. The difference may be amortised and recovered over a period or deferred for a future rate case.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 175 |
Additional Information
Additional information
Business information in detail
Continued
Our risk management process has identified the following risk factors that could have a material adverse effect on our business, financial condition, results of operations and reputation, as well as the value and liquidity of our securities. Any investment decision regarding our securities and any forward-looking statements made by us should be considered in the light of these risk factors and the cautionary statement set out on the back cover.
Potentially harmful activities
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Aspects of the work we do could potentially harm employees, contractors, members of the public or the environment.
Potentially hazardous activities that arise in connection with our business include the operation and maintenance of electricity generation facilities, electricity lines and substations and the storage, transmission and distribution of gas. We are subject to laws and regulations in the UK and US governing health and safety matters to protect the public and our employees, who could potentially be harmed by these activities. Electricity and gas utilities also typically use and generate hazardous and potentially hazardous products and by-products. In addition, there may be other aspects of our operations that are not currently regarded or proved to have adverse effects but could become so, such as the effects of electric and magnetic fields.
We are subject to laws and regulations relating to pollution, the protection of the environment, and the use and disposal of hazardous substances and waste materials. These expose us to costs and liabilities relating to our operations and properties whether current, including those inherited from predecessor bodies, or formerly owned by us, and sites used for the disposal of our waste. The cost of future environmental remediation obligations is often inherently difficult to estimate and uncertainties can include the extent of contamination, the appropriate corrective actions and our share of the liability. We are increasingly subject to regulation in relation to climate change and are affected by requirements to reduce our own carbon emissions as well as reduction in energy use by our customers.
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We commit significant expenditure to complying with these laws and regulations and to meeting our obligations under negotiated settlements. If more onerous requirements are imposed or our ability to recover these costs under regulatory frameworks changes, this could have a material adverse impact on our businesses, reputation, results of operations and financial position. Furthermore, any breach of our regulatory or contractual obligations or our climate change targets, or even incidents that do not amount to a breach, could materially adversely affect our results of operations and our reputation.
For more information about environmental, climate change and health and safety matters relating to our businesses, see the corporate responsibility section of our website. |
Infrastructure and IT systems
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We may suffer a major network failure or interruption, or may not be able to carry out critical non network operations.
Operational performance could be materially adversely affected by a failure to maintain the health of the system or network, inadequate forecasting of demand, inadequate record keeping or control of data or failure of information systems and supporting technology. This could cause us to fail to meet agreed standards of service, incentive and reliability targets, or be in breach of a licence, approval, regulatory requirement or contractual obligation. Even incidents that do not amount to a breach could result in adverse regulatory and financial consequences, as well as harming our reputation.
In addition to these risks, we may be affected by other potential events that are largely outside our control such as the impact of weather (including as a result of climate change and major storms such as Superstorm Sandy), unlawful or unintentional acts of third parties, insufficient or unreliable supply or force majeure. Weather conditions can affect financial performance and severe weather that causes outages or damages infrastructure together with our actual or perceived response will materially adversely affect operational and potentially business performance and our reputation.
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Malicious attack, sabotage or other intentional acts, including breaches of our cyber security, may also damage our assets or otherwise significantly affect corporate activities and, as a consequence, have a material adverse impact on our business, results of operations and financial condition. Unauthorised access to, or deliberate breaches of, our IT systems may also seek to access and manipulate our proprietary business data or customer information. Unauthorised access to private customer information may make us liable for a violation of data privacy regulations.
Even where we establish business continuity controls and security against threats against our systems, these may not be sufficient. |
176 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Law and regulation
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Changes in law or regulation or decisions by governmental bodies or regulators could materially adversely affect us.
Most of our businesses are utilities or networks subject to regulation by governments and other authorities. Changes in law or regulation or regulatory policy and precedent, including decisions of governmental bodies or regulators, in the countries or states in which we operate could materially adversely affect us.
Decisions or rulings concerning, for example: (i) whether licences, approvals or agreements to operate or supply are granted, amended or renewed, whether consents for construction projects are granted in a timely manner or whether there has been any breach of the terms of a licence, approval or regulatory requirement; and
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(ii) timely recovery of incurred expenditure or obligations, the ability to pass through commodity costs, a decoupling of energy usage and revenue, and other decisions relating to the impact of general economic conditions on us, our markets and customers, implications of climate change, whether aspects of our activities are contestable, the level of permitted revenues and dividend distributions for our businesses and in relation to proposed business development activities, could have a material adverse impact on our results of operations, cash flows, the financial condition of our businesses and the ability to develop those businesses in the future.
For further information see pages 170 to 175 which explain our regulatory environment in detail. |
Business performance
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Current and future business performance may not meet our expectations or those of our shareholders.
Earnings maintenance and growth from our regulated gas and electricity businesses will be affected by our ability to meet or exceed efficiency targets and service quality standards set by, or agreed with, our regulators. In addition, from time to time we publish cost and efficiency savings targets for our businesses. |
If we do not meet these targets and standards, or if we do not implement the transformation projects we are carrying out as envisaged (including the US foundation programme), or are not able to shape our operating model to deliver success under RIIO, we may not achieve the expected benefits, our business may be materially adversely affected and our performance, results of operations and reputation may be materially harmed and we may be in breach of regulatory or contractual obligations.
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Business development activity
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New businesses or activities that we undertake alone or with partners may not deliver target outcomes and may expose us to additional operational and financial risk.
Business development activities, including acquisitions, disposals, joint ventures and organic investment opportunities (including organic investments made as a result of changes to the energy mix), entail a number of risks, including that they may be based on incorrect assumptions or conclusions, failure to realise planned levels of synergy and efficiency savings, the inability to integrate acquired businesses effectively and we may suffer unanticipated costs and liabilities and other unanticipated effects.
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We may also be liable for the past acts, omissions or liabilities of companies or businesses we have acquired, which may be unforeseen or greater than anticipated. In the case of joint ventures, we may have limited control over operations and our joint venture partners may have interests that diverge from our own. The occurrence of any of these events could have a material adverse impact on our results of operations or financial condition, and could also impact our ability to enter into other transactions. |
Cost escalation
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Changes in foreign currency rates, interest rates or commodity prices could materially impact earnings or our financial condition.
We have significant operations in the US and so are subject to the exchange rate risks normally associated with non UK operations, including the need to translate US assets and liabilities, and income and expenses, into sterling, our primary reporting currency. In addition, our results of operations and net debt position may be affected because a significant proportion of our borrowings, derivative financial instruments and
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commodity contracts are affected by changes in interest rates, commodity price indices and exchange rates, in particular the dollar to sterling exchange rate.
Furthermore, our cash flow may be materially affected as a result of settling hedging arrangements entered into to manage our exchange rate, interest rate and commodity price exposure, or by cash collateral movements relating to derivative market values, which also depend on the sterling exchange rate into euro and other currencies. |
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Operating costs may increase faster than revenues.
Income under our price controls in the UK is linked to the RPI. Our operating costs may increase without a corresponding increase in the RPI and therefore without a corresponding increase in UK revenues. Our income under our rate plans in the US is not typically linked to inflation.
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In periods of inflation in the US, our operating costs may increase by more than our revenues. In both the UK and US such increased costs may materially adversely affect our results of operations. |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 177 |
Additional Information
Additional information
Business information in detail
Continued
Cost escalation continued |
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We may be required to make significant contributions to fund pension and other post-retirement benefits.
We participate in a number of pension schemes that together cover substantially all our employees. In both the UK and US, the principal schemes are defined benefit schemes where the scheme assets are held independently of our own financial resources. In the US, we also have other post-retirement benefit schemes. Estimates of the amount and timing of future funding for the UK and US schemes are based on actuarial assumptions and other factors including: the actual and projected market
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performance of the scheme assets, future long-term bond yields, average life expectancies and relevant legal requirements.
Actual performance of scheme assets may be affected by volatility in debt and equity markets, exacerbated by the eurozone crisis. Changes in these assumptions or other factors may require us to make additional contributions to these pension schemes which, to the extent they are not recoverable under our price controls or state rate plans, could materially adversely affect our results of operations and financial condition. |
Financing and liquidity |
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An inability to access capital markets at commercially acceptable interest rates could affect how we maintain and grow our businesses.
Our businesses are financed through cash generated from our ongoing operations, bank lending facilities and the capital markets, particularly the long-term debt capital markets. Some of the debt we issue is rated by credit rating agencies and changes to these ratings may affect both our borrowing capacity and borrowing costs. In addition, restrictions imposed by regulators may also limit how we service the financial requirements of our current businesses or the financing of newly acquired or developing businesses.
Financial markets can be subject to periods of volatility and shortages of liquidity, which may be exacerbated by the eurozone crisis. If we were unable to access the capital markets or other sources of finance at competitive rates for a prolonged period, our cost of financing may increase, the discretionary and uncommitted elements of our proposed capital investment programme may need to be reconsidered and the manner in which we implement our strategy may need to be reassessed.
Such events could have a material adverse impact on our business, results of operations and prospects. |
Some of our regulatory agreements impose lower limits for the long-term senior unsecured debt credit ratings that certain companies within the group must hold or the amount of equity within their capital structures. One of the principal limits requires National Grid plc to hold an investment grade long-term senior unsecured debt credit rating. In addition, some of our regulatory arrangements impose restrictions on the way we can operate. These include regulatory requirements for us to maintain adequate financial resources within certain parts of our operating businesses and may restrict the ability of National Grid plc and some of our subsidiaries to engage in certain transactions, including paying dividends, lending cash and levying charges. The inability to meet such requirements or the occurrence of any such restrictions may have a material adverse impact on our business and financial condition. |
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Our debt agreements and banking facilities contain covenants, including those relating to the periodic and timely provision of financial information by the issuing entity 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 lenders discretion, to require repayment of some of our debt and may restrict our ability to draw upon our facilities or access the capital markets.
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Customers and counterparties |
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Customers and counterparties may not perform their obligations.
Our operations are exposed to the risk that customers, suppliers, financial institutions and others with whom we do business will not satisfy their obligations, which could materially adversely affect our financial position. |
This risk is most significant where our subsidiaries have concentrations of receivables from gas and electricity utilities and their affiliates (such as the Long Island Power Authority), as well as industrial customers and other purchasers, and may also arise where customers are unable to pay us as a result of increasing commodity prices or adverse economic conditions.
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Employees and others |
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We may fail to attract, develop and retain employees with the competencies, values and behaviours required to deliver our strategy and vision and ensure they are engaged to act in our best interests.
Our ability to implement our strategy depends on the capabilities and performance of our employees and leadership. Our ability to implement our strategy and vision may be negatively affected by the loss of key personnel or an inability to attract, develop or retain appropriately qualified personnel (in particular for technical |
positions where availability of appropriately qualified personnel may be limited), or if significant disputes arise with our employees. As a result, there may be a material adverse effect on our business, financial condition, results of operations and prospects.
There is a risk that an employee or someone acting on our behalf may breach our internal controls or internal governance framework or may contravene applicable laws and regulations. This could have an impact on our results of operations, our reputation and our relationship with our regulators and other stakeholders.
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178 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Internal control
The Board considers that it is imperative to have accurate and reliable information to enable informed and timely decisions to be taken that further our objectives. Key elements in managing information assurance risks include education, training and awareness.
These initiatives emphasise the importance of information security, the quality of data collection and the affirmation process that supports our business transactions, evidencing our decisions and actions. All communication channels, including training for doing the right thing , make it clear that the accurate and honest reporting of data and other information must never be compromised. These initiatives are supported by the letter of assurance process in which managers affirm, among other things, they have control frameworks in place to assist in the accurate reporting of data and other information. In line with ongoing transformation initiatives, we continue to monitor and evolve our control processes.
Working with management, including the Chief Executive and Finance Director, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as at 31 March 2013. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, however the effectiveness of any system of disclosure controls and procedures has limitations including the possibility of human error and the circumvention or overriding of the controls and procedures. Even effective disclosure controls and procedures provide only reasonable assurance of achieving their objectives. Based on the evaluation, the Chief Executive and Finance Director concluded that the disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in the reports that we file and submit under the Exchange Act is recorded, processed, summarised and reported as and when required and that such information is accumulated and communicated to our management, including the Chief Executive and Finance Director, as appropriate, to allow timely decisions regarding disclosure.
Internal control over financial reporting
Our management, including the Chief Executive and Finance Director, has carried out an evaluation of our internal control over financial reporting pursuant to the Disclosure and Transparency Rules and Section 404 of the Sarbanes-Oxley Act 2002. As required by Section 404, management is responsible for establishing and maintaining an adequate system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial reporting is 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. 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 risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management evaluation of the effectiveness of the Companys internal control over financial reporting was based on the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as at 31 March 2013.
PricewaterhouseCoopers LLP, which has audited our consolidated financial statements for the year ended 31 March 2013, has also audited the effectiveness of our internal control over financial reporting. Their attestation report can be found on page 95.
Changes to internal control over financial reporting
During November and December 2012 our new US enterprise resource planning system went live, implementing a new platform to replace a number of legacy systems across our US businesses.
The primary reason for the systems change is to provide the US businesses with an integrated platform that allows for process and systems standardisation and efficiencies. The changes were not undertaken in response to any actual or perceived deficiencies in our internal control over financial reporting. The implementation of the new platform, and associated changes to many financial processes across our US businesses, has resulted in material changes to our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).
We regularly review our internal controls over financial reporting as well as our disclosure controls and procedures and make changes, as necessary, to ensure the quality of our financial reporting. Other than the changes related to the new system there have been no changes in internal control over financial reporting during the year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 179 |
Additional Information
Directors Report disclosures
A summary of the material terms of our Articles of Association (the Articles) and applicable English Law is set out on pages 184 and 185.
Sir Peter Gershon CBE FREng, Chairman
Appointment to the Board: August 2011 as Deputy Chairman, Chairman with effect from January 2012
Committee membership: N (ch)
Previous appointments: Chairman of Premier Farnell plc, Chief Executive of the Office of Government Commerce, Managing Director of Marconi Electronic Systems and member of the UK Defence Academy Advisory Board.
External appointments: Chairman of Tate & Lyle plc and member of the HM Government Efficiency and Reform Board and The Sutton Trust Board.
Experience:
| Chairman |
| Engineer |
| Government |
| Partnering/JV/contract management |
| City |
| High tech industry |
| US |
| International |
| General management |
Steve Holliday FREng, Chief Executive
Appointment to the Board: October 2002, appointed to National Grid Group plc 2001, Chief Executive with effect from January 2007
Committee membership: F
Previous appointments: Executive Director of British Borneo Oil and Gas; he also spent 19 years within the Exxon Group, where he held senior positions in the international gas business and managed major operational areas such as refining and shipping. Most recently Chairman of UK Business Council for Sustainable Energy and the Technician Council.
External appointments: Non-executive Director of Marks and Spencer Group plc, Chairman of Crisis UK, the Princes National Ambassador, Trustee Director for Business in the Community and member of Infrastructure UK Advisory Council.
Experience:
| Chief Executive |
| Engineer |
| Government/regulatory |
| Partnering/JV/contract management |
| City |
| Utilities energy |
| Customer |
| Oil and gas |
| US |
| International |
Philip Aiken, Non-executive Director
Appointment to the Board: May 2008
Committee membership: A, N, S (ch)
Previous appointments: Group President of BHP Billitons Energy business, Executive Director of BTR plc, held senior roles in BOC Group plc, senior advisor to Macquarie Capital (Europe) Limited, Chairman of Robert Walters plc and Non-executive Director of Miclyn Express Offshore Limited.
External appointments: Chairman of AVEVA Group plc, Non-executive and Senior Independent Director of Kazakhmys PLC and Essar Energy plc and Non-executive Director of Essar Oil Limited and Newcrest Mining Limited.
Experience:
| Chairman |
| Partnering/JV/contract management |
| Emerging markets |
| Natural resources |
| International |
Andrew Bonfield, Finance Director
Appointment to the Board: November 2010
Committee membership: F
Previous appointments: Chief Financial Officer at Cadbury plc until March 2010; he also spent five years as Executive Vice President & Chief Financial Officer of Bristol-Myers Squibb Company and has previous experience in the energy sector as Finance Director of BG Group plc.
External appointments: Non-executive Director of Kingfisher plc.
Experience:
| Finance Director |
| Accountant |
| Government/regulatory |
| Partnering/JV/contract management |
| City |
| Utilities energy |
| Customer |
| US |
| International |
Nora Mead Brownell, Non-executive Director
Appointment to the Board: 1 June 2012
Committee membership: N, R, S
Previous appointments: Commissioner of the Pennsylvania Public Utility Commission from 1997 to 2001, Commissioner for the Federal Energy Regulatory Commission from 2001 to 2006 and former President of the National Association of Regulatory Utility Commissioners.
External appointments: Board member of Comverge, Inc., Spectra Energy Partners LP and ONCOR Electric Delivery Holding Company LLC and partner in ESPY Energy Solutions, LLC.
Experience:
| US Government/regulatory |
| US utilities energy |
| FERC |
| Various non-executive directorships |
| US |
180 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
Jonathan Dawson, Non-executive Director
Appointment to the Board: 4 March 2013
Committee membership: F, N, R
Previous appointments: Various roles within the Ministry of Defence before joining Lazard where he spent over 20 years. Non-executive Director of Galliford Try plc 2004 to 2008, National Australia Group Europe Limited 2005 to 2012 and Standard Life Investments (Holdings) Limited 2010 to 2013.
External appointments: Non-executive and Senior Independent Director of Next plc, Non-executive Director of Jardine Lloyd Thompson Group plc and co-founding partner in Penfida Partners LLP.
Experience:
| City |
| Corporate finance |
| Banking |
| Pensions |
Paul Golby CBE FREng, Non-executive Director
Appointment to the Board: February 2012
Committee membership: N, R, S
Previous appointments: Executive Director of Clayhithe plc before joining East Midlands Electricity plc in 1998 as Managing Director, Chief Executive of E.ON UK plc in 2002, and later additionally as Chairman, stepping down from the E.ON board in December 2011 and most recently Non-executive Chairman of AEA Technology Group plc.
External appointments: Chairman of EngineeringUK, Chair of the Engineering and Physical Sciences Research Council and a member of the Council for Science and Technology.
Experience:
| Chairman and chief executive |
| Engineer |
| Government/regulatory |
| City |
| Utilities energy |
Ken Harvey CBE, Non-executive Director and Senior Independent Director
Appointment to the Board: October 2002, appointed to Lattice Group plc board in 2000, Senior Independent Director with effect from October 2004
Committee membership: N, R (ch), S
Previous appointments: Engineering Director and then Deputy Chairman of London Electricity and Chairman and Chief Executive of NORWEB plc.
External appointments: Chairman of Pennon Group Plc.
Experience:
| Chairman and chief executive |
| Engineer |
| Government/regulatory |
| City |
| Utilities power and water |
Ruth Kelly, Non-executive Director
Appointment to the Board: October 2011
Committee membership: A, F, N
Previous appointments: Various senior roles in Government from 2001 to 2008, including Secretary of State for Transport, Secretary of State for Communities and Local Government, Secretary of State for Education and Skills and Financial Secretary to the Treasury.
External appointments: Managing Director at HSBC and Governor for the National Institute of Economic and Social Research.
Experience:
| Government/regulatory |
| Partnering/JV/contract management |
| Financial and economic |
| Infrastructure projects |
Tom King, Executive Director, US
Appointment to the Board: August 2007
Previous appointments: President of PG&E Corporation and Chairman and CEO of Pacific Gas and Electric Company from 2003 to 2007, having held a number of senior positions within the PG&E group since joining in 1998. Senior management positions with Kinder Morgan Energy Partners and Enron Corporation.
Experience:
| Government/regulatory |
| Partnering/JV/contract management |
| Utilities energy |
| Customer |
| FERC |
| Generation |
| US |
Maria Richter, Non-executive Director
Appointment to the Board: October 2003
Committee membership: A, F (ch), N
Previous appointments: Morgan Stanley from 1993 to 2002, latterly as Managing Director of its Corporate Finance Retail Group. Vice President of Independent Power Group for Salomon Brothers and Vice President of Prudential Capital Corporation and Power Funding Associates. Most recently Non-executive Director of The Pantry, Inc. and The Vitec Group plc.
External appointments: Non-executive Chairman of Pro Mujer UK and Non-executive Director of The Bessemer Group, Inc.
Experience:
| City |
| Financial services |
| Emerging markets |
| US |
| International |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 181 |
Additional Information
Additional information
Directors Report disclosures
Continued
George Rose, Non-executive Director
Appointment to the Board: October 2002, appointed to Lattice Group plc board in 2000
Committee membership: A (ch), N, R
Previous appointments: Member of the Financial Reporting Review Panel, Non-executive Director of Orange plc and Saab AB and Finance Director of BAE Systems plc.
External appointments: Member of the UK Industrial Development Advisory Board, Non-executive Director of Genel Energy plc, Laing ORourke plc and Experian plc.
Experience:
| Finance director |
| Accountant |
| Government/regulatory |
| Partnering/JV/contract management |
| City |
| Defence industry |
| US |
| International |
Mark Williamson, Non-executive Director
Appointment to the Board: 3 September 2012
Committee membership: A, F, N
Previous appointments: Chief Accountant then Group Financial Controller of Simon Group plc before joining International Power plc as Group Financial Controller in 2000 and appointed as Chief Financial Officer in 2003.
External appointments: Non-executive and Senior Independent Director of Alent plc, Deputy Chairman and Senior Independent Director of Imperial Tobacco Group PLC.
Experience:
| Finance director |
| Accountant |
| Government/regulatory |
| City |
| Utilities energy |
| International |
Nick Winser FREng, Executive Director, UK
Appointment to the Board: April 2003
Previous appointments: Chief Operating Officer of the US transmission business for National Grid Transco plc having joined The National Grid Company plc in 1993, becoming Director of Engineering in 2001. Prior to this, with Powergen since 1991 as principal negotiator on commercial matters. Most recently co-Chair of the Energy Research Partnership.
External appointments: Non-executive Director of Kier Group plc and Chair of CIGRE UK.
Experience:
| Engineer |
| Government/regulatory |
| Partnering/JV/contract management |
| City |
| Utilities energy |
| Customer |
| US |
Key | ||
A | Audit Committee | |
F | Finance Committee | |
N | Nominations Committee | |
R | Remuneration Committee | |
S | Safety, Environment and | |
Health Committee | ||
(ch)
|
chairman of Committee
|
Alison Kay, Group General Counsel & Company Secretary
Appointment as Company Secretary: 24 January 2013
Previous appointments: Various roles since joining National Grid in 1996 including UK General Counsel and Company Secretary from 2000 to 2008 and Commercial Director, UK Transmission from 2008 to 2012.
CGT information relating to National Grid shares for UK resident shareholders can be found on our website under Investors, Shareholder Services. Share prices on specific dates can also be found on our website.
No compensation would be paid for loss of office of Directors on a change of control of the Company. As at 31 March 2013, the Company had undrawn borrowing facilities with a number of its banks of £1.7 billion available to it and a further £1.3 billion of drawn bank loans which, on a change of control of the Company following a takeover bid, may alter or terminate. All the Companys share plans contain provisions relating to a change of control. Outstanding awards and options would normally vest and become exercisable on a change of control, subject to the satisfaction of any performance conditions at that time. In the event of a change of control of the Company a number of governmental and regulatory consents or approvals are likely to be required arising from laws or regulations of the UK, US or the EU.
No other agreements that take effect, alter or terminate upon a change of control of the Company following a takeover bid are considered to be significant in terms of their potential impact on the business as a whole.
During 2012/13, approximately £15 million (2011/12: £16 million; 2010/11: £13 million) was invested in support of community initiatives and relationships focusing on education and skills (£5 million), environment and energy (£7 million) and community development (£3 million). The London Benchmarking Group model was used to assess this overall community investment. Direct donations to charitable organisations amounted to £2 million (2011/12: £4 million; 2010/11: £0.8 million), a proportion of which was donated via our employee community grant schemes which support and encourage employee fundraising and volunteering. In addition to our donations, financial support was provided for our affordable warmth programme, education programme, university research and our young offenders programme.
The Board continues to monitor and note possible conflicts of interest that each Director may have and Directors are reminded of their continuing obligations in relation to conflicts at each Board meeting. Potential conflicts are considered and, if appropriate, approved and noted. During the year ended 31 March 2013, the Board has been advised by the Directors of two situations in relation to which an actual conflict of interest was identified. In both circumstances the Board duly considered and authorised the conflicts in accordance with its powers as set out in the Articles, with the conflicted Director not voting on the matter or being counted in the quorum.
182 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
The Company has arranged, in accordance with the Companies Act 2006 and the Articles, qualifying third party indemnities against financial exposure that Directors may incur in the course of their professional duties. Equivalent qualifying third party indemnities were, and remain, in force for the benefit of those Directors who stood down from the Board during the year ended 31 March 2013. Alongside these indemnities, the Company places Directors and Officers liability insurance cover for each Director.
Events after the reporting period
There have been no material events affecting the Company since the year end.
As at 31 March 2013, National Grid had been notified of the following holdings in voting rights of 3% or more in the issued share capital of the Company:
Number of | % of | |||||||
ordinary shares | voting rights* | |||||||
|
||||||||
The Capital Group Companies, Inc.
|
399,638,038 | 10.905 | ||||||
Black Rock, Inc.
|
182,630,798 | 5.21 | ||||||
Crescent Holding GmbH
|
149,414,285 | 4.18 | ||||||
Legal and General Group plc
|
|
138,503,443
|
|
|
3.99
|
|
* | This number is calculated in relation to the issued share capital at the time the holding was disclosed |
On 5 April 2013, The Capital Group Companies, Inc. notified us of a holding in voting rights of 11.02%, 404,063,006 ordinary shares as at 3 April 2013.
As at 15 May 2013, no further notifications have been received.
The rights attached to ordinary shares are detailed below. All ordinary shares carry the same voting rights.
Policy and practice on payment of creditors
It is National Grids policy to include in contracts or other agreements terms of payment with suppliers. Once agreed, National Grid aims to abide by these payment terms. The average creditor payment period at 31 March 2013 for National Grids principal operations in the UK was 25 days (22 days at 31 March 2012). National Grid is a signatory to the Prompt Payment Code, which can be found at www.promptpaymentcode.org.uk.
Political donations and expenditure
National Grid made no political donations in the UK or EU during the year, including such donations as defined for the purposes of the Political Parties, Elections and Referendums Act 2000. National Grid USA and certain of its subsidiaries made political donations in the US of $73,400 (£46,800) (2011/12: $99,900; 2010/11: $151,000) during the year to affiliated Federal and New York state political action committees (PACs). National Grid USAs affiliated Federal and New York PACs were funded wholly by voluntary employee contributions.
Expenditure on research and development during the year was £15 million (2011/12: £15 million; 2010/11: £16 million). Examples included development of new technologies for enhancing the capacity of the electricity transmission network and research into extending the life and reducing emissions from gas transmission and distribution assets.
The share capital of the Company consists of ordinary shares of 11 17 ⁄ 43 pence nominal value each and ADSs, which represent five ordinary shares.
Authority to purchase shares
Shareholder approval was given at the 2012 AGM to purchase up to 10% of the Companys share capital. The Directors intend to seek shareholder approval to renew this authority at this years AGM. In some circumstances, companies may find it advantageous to purchase their own shares in the market. Repurchased shares may be held as treasury shares by the Company, and resold for cash, cancelled, either immediately or at some point in the future, or used for the purposes of employee share schemes. The Directors believe that it is desirable for the Company to have such additional flexibility in the management of its capital base. The Company will only purchase shares where the Directors believe this would be in the best interests of shareholders generally. The authority will only be used after careful consideration, taking into account market conditions prevailing at the time, other investment opportunities, appropriate gearing levels and the overall financial position of the Company. No shares were repurchased during the year. Of the shares repurchased in prior years and held as treasury shares, 4,515,807 have been transferred to employees under the employee share plans leaving a balance as at the date of this report of 127,142,880 ordinary shares held as treasury shares.
Authority to allot shares
Shareholder approval was given at the 2012 AGM to allot shares of up to 1 ⁄ 3 of the Companys share capital and a further 1 ⁄ 3 in connection with an offer by way of a rights issue. The Directors intend to seek shareholder approval to renew this authority at this years AGM. The Directors currently have no intention of issuing new shares, or of granting rights to subscribe for or convert any security into shares, except in relation to, or in connection with, our scrip dividend scheme and the exercise of options under our share plans. The Directors consider it desirable to have the maximum flexibility permitted by investor guidelines to respond to market developments. No issue of shares will be made which would effectively alter control of the Company without the sanction of shareholders in general meeting.
Rights attached to shares
Ordinary shareholders and ADS holders receive dividends and can vote at general meetings. Treasury shares do not attract a vote or dividends. There are no restrictions on the transfer or sale of ordinary shares. Some of the Companys employee share plans, details of which are contained in the Remuneration Report, include restrictions on the transfer of shares while the shares are subject to the plan. Where, under an employee share plan operated by the Company, participants are the beneficial owners of the shares but not the registered owner, the voting rights may be exercised by the registered owner at the direction of the participant.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 183 |
Additional Information
Other disclosures
The following description is a summary of the material terms of our Articles and applicable English law. The following description is a summary only and is qualified in its entirety by reference to the Articles.
Summary
The Articles set out the internal regulations of the Company and cover such matters as the rights of shareholders and the conduct of the Board and general meetings. Copies are available upon request and are displayed on the Companys website. Amendments to the Articles have to be approved by at least 75% of those voting in person or by proxy at a general meeting of the Company. Subject to company law and the Articles, the Directors may exercise all the powers of the Company, and may delegate authorities to committees and day-to-day management and decision-making to individual Executive Directors. The committee structure is set out on pages 28 and 29.
General
The Company is incorporated under the name National Grid plc and is registered in England and Wales with registered number 4031152. Under the Companies Act, the Companys objects are unrestricted.
Directors
Under the Articles, a Director must disclose any personal interest in a matter and may not vote in respect of that matter, subject to certain limited exceptions. As permitted under the Companies Act, the Articles provide that the non conflicted Directors of the Company may authorise a conflict or potential conflict for a particular matter. In doing so, the non conflicted Directors must act in a way they consider, in good faith, will be most likely to promote the success of the Company for the benefit of the shareholders as a whole.
The Directors (other than a Director acting in an executive capacity) are paid fees for their services, which in total must not exceed £2,000,000 a year or any higher sum as decided by an ordinary resolution at a general meeting of shareholders. In addition, special pay may be awarded to a Director who acts in an executive capacity, serves on a committee, performs services which the Directors consider to extend beyond the ordinary duties of a Director, devotes special attention to the business of National Grid or goes or lives abroad on the Companys behalf. Directors may also receive reimbursement for expenses properly incurred, and may be awarded pensions and other benefits. The compensation awarded to the Executive Directors is determined by the Remuneration Committee and further details of Directors remuneration are set out in the Remuneration Report (see pages 68 to 90).
The Directors are empowered to exercise all the powers of National Grid to borrow money, subject to the limitation that the aggregate principal amount of all borrowings of its group outstanding at any time must not exceed £35 billion or any other amount approved by shareholders by an ordinary resolution at a general meeting.
Directors can be appointed or removed by the Board or shareholders in a general meeting. Directors must stand for election at the first AGM following their appointment to the Board. Each Director must retire at least every three years but will be eligible for re-election. In accordance with best practice introduced by the UK Corporate Governance Code, all Directors wishing to continue in office currently offer themselves for
re-election annually. No person is disqualified from being a Director or is required to vacate that office by reason of attaining a maximum age.
A Director is not required to hold shares in National Grid in order to qualify as a Director.
Rights, preferences and restrictions
(i) Dividend rights
National Grid may not pay any dividend otherwise than out of profits available for distribution under the Companies Act and other applicable provisions of English law. In addition, as a public company, National Grid may only make a distribution if, at the time of the distribution, the amount of its net assets is not less than the aggregate of its called up share capital and undistributable reserves (as defined in the Companies Act) and to the extent that the distribution does not reduce the amount of those assets to less than that aggregate. Subject to the foregoing, shareholders may, by ordinary resolution, declare dividends in accordance with the respective rights of the shareholders, but not exceeding the amount recommended by the Board. The Board may pay interim dividends if it considers that National Grids financial position justifies the payment. Except insofar as the rights attaching to any share otherwise provide, all dividends will be apportioned and paid proportionately to the amounts paid up (otherwise than in advance of calls) on the shares. Any dividend or interest unclaimed for 12 years from the date when it was declared or became due for payment will be forfeited and revert to National Grid.
(ii) Voting rights
Subject to any rights or restrictions attached to any shares and to any other provisions of the Articles, at any general meeting on a show of hands, every shareholder who is present in person will have one vote and on a poll, every shareholder will have one vote for every share which they hold. On a show of hands or poll, shareholders may cast votes either personally or by proxy and a proxy need not be a shareholder. Under the Articles, all substantive resolutions at a general meeting must be decided on a poll, and resolutions of a procedural nature are decided by a show of hands, unless a poll is demanded in accordance with the Articles.
(iii) Liquidation rights
In a winding up, a liquidator may, in each case with the sanction of a special resolution passed by the shareholders and any other sanction required under English law, (a) divide among the shareholders the whole or any part of National Grids assets (whether the assets are of the same kind or not) and may, for this purpose, value any assets and determine how the division should be carried out as between shareholders or different classes of shareholders, or (b) transfer any part of the assets to trustees on trust for the benefit of the shareholders as the liquidator determines, but in neither case will a shareholder be compelled to accept assets upon which there is a liability.
Variation of rights
Subject to applicable provisions of English law, the rights attached to any class of shares of National Grid may be varied or cancelled with the written consent of the holders of three quarters in nominal value of the issued shares of that class, or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of that class.
184 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
General meetings
AGMs must be convened each year within six months of the Companys accounting reference date upon advance written notice of 21 clear days. Any other general meeting may be convened provided at least 14 clear days written notice is given, subject to annual approval of shareholders. In certain limited circumstances, the Company can convene a general meeting by shorter notice. The notice must specify, among other things, the nature of the business to be transacted, the place, the date and the time of the meeting.
Rights of non residents
There are no restrictions under National Grids Articles that would limit the rights of persons not resident in the UK to vote in relation to ordinary shares.
Disclosure of interests
Under the Companies Act, National Grid may by written notice require a person whom it has reasonable cause to believe to be or to have been in the last three years interested in its shares to provide additional information relating to that interest. Under the Articles, failure to provide such information may result in a shareholder losing their rights to attend, vote or exercise any other right in relation to shareholders meetings.
Under the UK Disclosure and Transparency Rules, there is also an obligation on a person who acquires or ceases to have a notifiable interest in shares in National Grid to notify the Company of that fact. The disclosure threshold is 3% and disclosure is required each time the persons direct and indirect holdings reach, exceed or fall below each 1% threshold thereafter.
The UK City Code on Takeovers and Mergers imposes strict disclosure requirements with regard to dealings in the securities of an offeror or offeree company, and also on their respective associates, during the course of an offer period. Other regulators in the UK, US and elsewhere may have, or assert, notification or approval rights over acquisitions or transfers of shares.
In accordance with US legal requirements, the Board has adopted a Code of Ethics for senior financial professionals. This code is available on our website (where any amendments or waivers will also be posted). There were no amendments to, or waivers of, our Code of Ethics during the year.
Corporate governance practices:
differences from New York Stock Exchange (NYSE) listing standards
The Company is listed on the NYSE and is therefore required to disclose differences in its corporate governance practices adopted as a UK listed company, compared with those of a US company.
The corporate governance practices of the Company are primarily based on the requirements of the UK Corporate Governance Code (the Code) but substantially conform to those required of US companies listed on the NYSE. The following is a summary of the significant ways in which the Companys corporate governance practices differ from those followed by US companies under Section 303A Corporate Governance Standards of the NYSE.
| The NYSE rules and the Code apply different tests for the independence of Board members. |
| The NYSE rules require a separate nominating/corporate governance committee composed entirely of independent directors. There is, however, no requirement for a separate corporate governance committee in the UK. Under the Companys corporate governance policies, all Directors on the Board discuss and decide upon governance issues and the Nominations Committee makes recommendations to the Board with regard to certain of the responsibilities of a corporate governance committee. |
| The NYSE rules require listed companies to adopt and disclose corporate governance guidelines. While the Company reports compliance with the Code in each Annual Report and Accounts, the UK requirements do not require the Company to adopt and disclose separate corporate governance guidelines. |
| The NYSE rules require a separate audit committee composed of at least three independent members. While the Companys Audit Committee exceeds the NYSEs minimum independent Non-executive Director membership requirements, it should be noted that the quorum for a meeting of the Audit Committee, of two independent Non-executive Directors, is less than the minimum membership requirements under the NYSE rules. |
| The NYSE rules require a compensation committee composed entirely of independent directors, and prescribe criteria to evaluate the independence of the committees members and its ability to engage external compensation advisors. While the Code prescribes different independence criteria, the Non-executive Directors on the Remuneration Committee have each been deemed independent by the Board under the NYSE rules. Although the evaluation criteria for appointment of external advisors differ under the Code, the Remuneration Committee is solely responsible for appointment, retention and termination of such advisors. |
Depositary payments to the Company
The Depositary has agreed to reimburse the Company for expenses it incurs that are related maintenance expenses of the ADS programme. The Depositary has also agreed to pay the standard out of pocket maintenance costs for the ADSs, which consist of the expenses of postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend cheques, electronic filing of US federal tax information, mailing required tax forms, stationery, postage, facsimile and telephone calls. It has also agreed to reimburse the Company annually for certain investor relationship programmes or special investor relations promotional activities. There are limits on the amount of expenses for which the Depositary will reimburse the Company, but the amount of reimbursement available to the Company is not necessarily tied to the amount of fees the Depositary collects from investors. For the period 1 April 2012 to 15 May 2013, the Company received $200,000 in reimbursements from the Depositary. Going forward, fees that it is proposed be charged on cash dividends, see page 186, will be apportioned between the Depositary and the Company.
Any questions from ADS holders should be directed to The Bank of New York Mellon:
The Bank of New York Mellon
Depositary Receipts
PO Box 43006
Providence, RI 02940-3006
Telephone: 1-800-466-7215 (International +1-201-680-6825)
Email: shrrelations@bnymellon.com
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 185 |
Additional Information
Additional Information
Other disclosures
Continued
Description of securities other than equity securities: depositary fees and charges
The Bank of New York Mellon, as Depositary, collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The Depositary collects fees for making distributions to investors (including, it is expected going forward, in respect of cash dividends) by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The Depositary may generally refuse to provide fee attracting services until its fees for those services are paid.
Persons depositing or withdrawing shares must pay:
|
For:
|
|||
$5.00 per 100 ADSs (or portion of 100 ADSs) |
Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property; cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates; distribution of securities distributed to holders of deposited securities that are distributed by the Depositary to ADS registered holders. |
|||
Registration or transfer fees |
Transfer and registration of shares on our share register to or from the name of the Depositary or its agent when they deposit or withdraw shares.
|
|||
Expenses of the Depositary |
Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement); converting foreign currency to dollars. |
|||
Taxes and other governmental charges the Depositary or the Custodian has to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes
|
As necessary. |
The Company has agreed to amend the deposit agreement under which the ADS representing its ordinary shares are issued to allow a fee of up to $0.05 per ADS to be charged for any cash distribution made to ADS holders, including cash dividends. Subject to Form F-6 on which the amended deposit agreement is filed being declared effective by the SEC, commencing with the final dividend payment payable on 21 August 2013, ADS holders who receive a cash dividend will be charged a fee, which will be deducted by the Depositary from interim and final cash dividends prior to distribution of the cash dividend. The payment of the final dividend is subject to approval by shareholders at the AGM taking place on 29 July 2013.
National Grid is subject to the filing requirements of the Exchange Act, as amended. In accordance with these requirements, we file reports and other information with the SEC. These materials, including this document, may be inspected during normal business hours at our registered office 1-3 Strand, London WC2N 5EH or at the SECs Public Reference Room at 100 F Street, NE, Washington, DC 20549. For further information about the Public Reference Room, please call the SEC at 1-800-SEC-0330. Some of our filings are also available on the SECs website at www.sec.gov.
We negotiate with recognised unions. It is our policy to maintain well developed communications and consultation programmes and there have been no material disruptions to our operations from labour disputes during the past five years. National Grid believes that it can conduct its relationships with trade unions and employees in a satisfactory manner.
There are currently no UK laws, decrees or regulations that restrict the export or import of capital, including, but not limited to, foreign exchange control restrictions, or that affect the remittance of dividends, interest or other payments to non UK resident holders of ordinary shares except as otherwise set out in Taxation below and except in respect of the governments of and/or certain citizens, residents or bodies of certain countries (described in applicable Bank of England Notices or European Union Council Regulations in force as at the date of this document).
The following table shows the history of the exchange rates of one pound sterling to dollars for the periods indicated.
Dollar equivalent of £1 sterling
|
||||||||||
High
|
Low
|
|||||||||
April 2013
|
1.5564 | 1.5128 | ||||||||
March 2013
|
1.5239 | 1.4885 | ||||||||
February 2013
|
1.5837 | 1.5109 | ||||||||
January 2013
|
1.6284 | 1.5709 | ||||||||
December 2012
|
1.627 | 1.6021 | ||||||||
|
Average
|
*
|
||||||||
2012/13
|
1.57 | |||||||||
2011/12
|
1.60 | |||||||||
2010/11
|
1.57 | |||||||||
2009/10
|
1.58 | |||||||||
2008/09
|
|
1.54
|
|
* | The average for each period is calculated by using the average of the exchange rates on the last day of each month during the period |
186 National Grid plc Annual Report and Accounts 2012/13 |
www.nationalgrid.com |
Some of the key dates and actions in the corporate history of National Grid are listed below. The full history goes back much further.
1986 | British Gas (BG) privatisation | |||
|
||||
1990 | Electricity transmission network in England and Wales transferred to National Grid on electricity privatisation | |||
|
||||
1995 | National Grid listed on the London Stock Exchange | |||
|
||||
1997 | Centrica demerged from BG | |||
|
||||
1997 | Energis demerged from National Grid | |||
|
||||
2000 | Lattice Group demerged from BG and listed separately | |||
|
||||
2000 | New England Electric System and Eastern Utilities Associates acquired | |||
|
||||
2002 | Niagara Mohawk Power Corporation merged with National Grid in US | |||
|
||||
2002 | National Grid and Lattice Group merged to form National Grid Transco | |||
|
||||
2004 | UK wireless infrastructure network acquired from Crown Castle International Corp | |||
|
||||
2005 | Four UK regional gas distribution networks sold and National Grid adopted as our name | |||
|
||||
2006 | Rhode Island gas distribution network acquired | |||
|
||||
2007 | UK and US wireless infrastructure operations and the Basslink electricity interconnector in Australia sold | |||
|
||||
2007 | KeySpan Corporation acquired | |||
|
||||
2008 | Ravenswood generation station sold | |||
|
||||
2010 | Rights issue raised £3.2 billion | |||
|
||||
2012
|
New Hampshire electricity and gas distribution businesses sold
|
Each of our Executive Directors has a service agreement and each Non-executive Director has a letter of appointment. No contract (other than contracts entered into in the ordinary course of business) has been entered into by National Grid within the two years immediately preceding the date of this report which is, or may be, material; or which contains any provision under which any member of National Grid has any obligation or entitlement which is material to National Grid at the date of this report.
This information can be found under the heading note 10 property, plant and equipment on page 123, where we operate on page 17 and principal operations on pages 18 to 25.
The following table includes a brief analysis of shareholder numbers and shareholdings as at 31 March 2013.
Size of shareholding |
Number of shareholders |
% of shareholders |
Number of shares |
% of shares |
||||||
|
||||||||||
150
|
179,075 | 17.5557 | 5,231,323 | 0.1378 | ||||||
51100
|
281,501 | 27.5972 | 19,954,907 | 0.5259 | ||||||
101500
|
441,380 | 43.2711 | 92,384,691 | 2.4347 | ||||||
5011,000
|
59,446 | 5.8278 | 41,546,450 | 1.0949 | ||||||
1,00110,000
|
55,507 | 5.4417 | 136,335,171 | 3.5929 | ||||||
10,00150,000
|
2,090 | 0.2049 | 37,264,660 | 0.9821 | ||||||
50,001100,000
|
198 | 0.0194 | 14,264,142 | 0.3759 | ||||||
100,001500,000
|
431 | 0.0423 | 102,310,714 | 2.6962 | ||||||
500,0011,000,000
|
133 | 0.013 | 93,395,541 | 2.4613 | ||||||
1,000,001+
|
274 | 0.0269 | 3,251,888,399 | 85.6983 | ||||||
|
||||||||||
Total |
1,020,035 | 100 | 3,794,575,998 | 100 | ||||||
|
This section discusses certain US federal income tax and UK tax consequences of the ownership of ADSs and ordinary shares by certain beneficial holders thereof. This discussion applies to holders who qualify for benefits under the income tax convention between the US and the UK (the Tax Convention) and are a resident of the US for the purposes of the Tax Convention and are not resident or ordinarily resident in the UK for UK tax purposes at any material time (a US Holder).
US Holders generally will be entitled to benefits under the Tax Convention if they are:
| the beneficial owner of the ADSs or ordinary shares, as applicable, and of any dividends that they receive; |
| an individual resident or citizen of the US, a US corporation, or a US partnership, estate, or trust (but only to the extent the income of the partnership, estate, or trust is subject to US taxation in the hands of a US resident person); and |
| not also a resident of the UK for UK tax purposes. |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 187 |
Additional Information
Additional information
Other disclosures
Continued
If a US Holder holds ADSs or ordinary shares in connection with the conduct of business or the performance of personal services in the UK or otherwise in connection with a branch, agency or permanent establishment in the UK, then the US Holder will not be entitled to benefits under the Tax Convention. Special rules, including a limitation of benefits provision, apply in limited circumstances to ADSs or ordinary shares owned by an investment or holding company. This section does not discuss the treatment of holders described in the preceding two sentences. This section does not purport to be a comprehensive description of all of the tax considerations that may be relevant to any particular investor. National Grid has assumed that shareholders, including US Holders, are familiar with the tax rules applicable to investments in securities generally and with any special rules to which they may be subject. In particular, the discussion deals only with investors that will beneficially hold ADSs or ordinary shares as capital assets and does not address the tax treatment of investors that are subject to special rules, such as banks, insurance companies, dealers in securities or currencies, partnerships or other entities classified as partnerships for US federal income tax purposes, persons that control (directly or indirectly) 10% or more of our voting stock, persons that elect mark-to-market treatment, persons that hold ADSs or ordinary shares as a position in a straddle, conversion transaction, synthetic security, or other integrated financial transaction, persons who are liable for the alternative minimum tax, and persons whose functional currency is not the dollar.
The statements regarding US and UK tax laws and administrative practices set forth below are based on laws, treaties, judicial decisions and regulatory interpretations in effect on the date of this document. These laws and practices are subject to change without notice, possibly with retrospective effect. In addition, the US statements set forth below are based on the representations of The Bank of New York Mellon as depositary (the Depositary). These statements assume that each obligation provided for in, or otherwise contemplated by, the deposit agreement entered into between National Grid Transco plc (now National Grid plc), the Depositary and the registered holders of ADRs, pursuant to which ADSs have been issued, dated as of 21 November 1995 and amended and restated as of 1 August 2005, and any related agreement, will be performed in accordance with its terms. Beneficial owners of ADSs who are residents or citizens of the US will be treated as the owners of the underlying ordinary shares for the purposes of the US Internal Revenue Code.
For the purposes of the Tax Convention, the Estate Tax Convention and UK tax considerations, we have assumed that a holder of ADRs will be treated as the owner of the ordinary shares represented by those ADSs and this section is based on that assumption. Despite a recent ruling by the First-Tier Tax Tribunal in the UK that has cast doubt on this view, HM Revenue & Customs have stated that they will continue to apply their longstanding practice of treating such an ADR holder as holding the beneficial interest in the underlying shares. As such, this is an area of some uncertainty that may be subject to further developments.
A US Holder should consult their own advisor as to the tax consequences of the purchase, ownership and disposition of ADSs or ordinary shares in light of their particular circumstances, including the effect of any state, local or other national laws.
Taxation of dividends
Under the Tax Convention, the UK is allowed to impose a 15% withholding tax on dividends paid to US shareholders controlling less than 10% of the voting capital of National Grid. The UK does not, however, currently impose a withholding tax on such dividends.
Cash distributions received by a US Holder with respect to their ADSs or ordinary shares generally will be treated as foreign source dividend income subject to US federal income taxation as ordinary income, to the extent paid out of National Grids current or accumulated earnings and profits, as determined under US federal income tax principles. The dollar amount of dividends received by certain non corporate US Holders with respect to ADSs or ordinary shares will generally be subject to taxation at a the special reduced rate normally applicable to long-term capital gains, provided National Grid (i) is eligible for the benefits of the Tax Convention and (ii) was not, in the year prior to the year in which the dividend was paid, and is not, in the year in which the dividend is paid, a passive foreign investment company (PFIC).
Based on National Grids audited financial statements and relevant market and shareholder data, National Grid believes that it was not treated as a PFIC for US federal income tax purposes with respect to its taxable years ending 31 March 2012 and 2013. In addition, based on its current expectations regarding the value and nature of its assets, the sources and nature of its income, and relevant market and shareholder data, National Grid does not anticipate becoming a PFIC in the foreseeable future. Dividends paid by National Grid to corporate US Holders will not be eligible for the dividends received deduction generally allowed to corporations.
Taxation of capital gains
US Holders will not be liable for UK taxation on any capital gain realised on the disposal of ADSs or ordinary shares.
Sales or other taxable dispositions of ADSs or ordinary shares by a US Holder generally will give rise to US source capital gain or loss equal to the difference between the dollar value of the amount realised on the disposition and the US Holders dollar basis in the shares or ADSs. Any such capital gain or loss generally will be long-term capital gain or loss, currently subject to taxation at reduced rates for non corporate taxpayers, if the ordinary shares or ADSs were held for more than one year. The deductibility of capital losses is subject to limitations.
UK stamp duty and stamp duty reserve tax (SDRT)
Transfers of ordinary shares SDRT at the rate of 0.5% of the amount of value of the consideration will generally be payable on any agreement to transfer ordinary shares that is not completed by the execution of a duly stamped instrument of transfer to the transferee. Where an instrument of transfer is executed and duly stamped before the expiry of the period of six years beginning with the date on which the agreement is made, the SDRT liability will be cancelled, and, if a claim is made within the specified period, any SDRT which has been paid will be refunded. SDRT is due whether or not the agreement or transfer of such chargeable securities is made or carried out in the UK and whether or not any party to that agreement or transfer is a UK resident. Purchases of ordinary shares completed by execution of a stock transfer form will generally give rise to a liability to UK stamp duty at the rate of 0.5% (rounded up to the nearest $5) of the amount or value of the consideration. Paperless transfers under the
188 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
CREST paperless settlement system will generally be liable to SDRT at the rate of 0.5%, and not stamp duty. SDRT is generally the liability of the purchaser and UK stamp duty is usually paid by the purchaser or transferee.
Transfers of ADSs No UK stamp duty will be payable on the acquisition or transfer of existing ADSs or beneficial ownership of ADSs, provided that any instrument of transfer or written agreement to transfer is executed outside the UK and remains at all times outside the UK. An agreement for the transfer of ADSs in the form of ADRs will not give rise to a liability for SDRT. A charge to stamp duty or SDRT may arise on the transfer of ordinary shares to the Depositary or The Bank of New York Mellon as agent of the Depositary (the Custodian). The rate of stamp duty or SDRT will generally be 1.5% of the value of the consideration or, in some circumstances, the value of the ordinary shares concerned. However, following a recent ruling by the First-Tier Tax Tribunal in the UK, there is no 1.5% SDRT charge on the issue of ordinary shares (or, where it is integral to the raising of new capital, the transfer of ordinary shares) to the Depositary or the Custodian. The Depositary will generally be liable for the stamp duty or SDRT. In accordance with the terms of the Depositary Agreement, the Depositary will charge any tax payable by the Depositary or the Custodian (or their nominees) on the deposit of ordinary shares to the party to whom the ADSs are delivered against such deposits. If the stamp duty is not a multiple of £5, the duty will be rounded up to the nearest multiple of £5.
US information reporting and backup withholding
Dividend payments made to US Holders and proceeds paid from the sale, exchange, redemption or disposal of ADSs or ordinary shares to US Holders may be subject to information reporting to the US Internal Revenue Service (IRS). Such payments may be subject to backup withholding taxes unless the holder (i) is a corporation or other exempt recipient or (ii) provides a taxpayer identification number on a properly completed IRS Form W-9 and certifies that no loss of exemption from backup withholding has occurred.
US Holders should consult their tax advisors regarding these rules and any other reporting obligations that may apply to the ownership or disposition of ADSs or ordinary shares, including reporting requirements related to the holding of certain foreign financial assets.
UK inheritance tax
An individual who is domiciled in the US for the purposes of the Estate Tax Convention and who is not a national of the UK for the purposes of the Estate Tax Convention will generally not be subject to UK inheritance tax in respect of the ADSs or ordinary shares on the individuals death or on a gift of the ADSs or ordinary shares during the individuals lifetime, unless the ADSs or ordinary shares are part of the business property of a permanent establishment of the individual in the UK or pertain to a fixed base in the UK of an individual who performs independent personal services. Special rules apply to ADSs or ordinary shares held in trust. In the exceptional case where the ADSs or shares are subject both to UK inheritance tax and to US federal gift or estate tax, the Estate Tax Convention generally provides for the tax paid in the UK to be credited against tax paid in the US.
Price history
The following table shows the highest and lowest intraday market prices for our ordinary shares and ADSs for the periods indicated.
Ordinary share
(pence) |
ADS ($) | |||||||||||||||
|
|
|||||||||||||||
High | Low | High | Low | |||||||||||||
|
||||||||||||||||
2012/13 |
770.00 | 627.00 | 58.33 | 49.55 | ||||||||||||
2011/12 |
660.50 | 545.50 | 52.18 | 45.80 | ||||||||||||
2010/11* |
666.00 | 474.80 | 51.00 | 36.72 | ||||||||||||
2009/10 |
685.50 | 511.00 | 56.59 | 38.25 | ||||||||||||
2008/09 |
754.00 | 515.00 | 74.89 | 36.64 | ||||||||||||
2012/13 Q4 |
770.00 | 678.00 | 58.33 | 52.81 | ||||||||||||
Q3 |
724.97 | 679.59 | 58.03 | 54.28 | ||||||||||||
Q2 |
706.13 | 635.56 | 56.72 | 49.55 | ||||||||||||
Q1 |
689.50 | 627.00 | 55.00 | 49.85 | ||||||||||||
2011/12 Q4 |
660.50 | 605.50 | 51.86 | 46.85 | ||||||||||||
Q3 |
653.50 | 590.00 | 51.53 | 46.49 | ||||||||||||
Q2 |
650.59 | 545.50 | 51.00 | 45.80 | ||||||||||||
Q1 |
639.00 | 581.50 | 52.18 | 46.93 | ||||||||||||
April 2013 |
820.50 | 765.00 | 63.78 | 57.86 | ||||||||||||
March 2013 |
770.00 | 718.00 | 58.33 | 54.37 | ||||||||||||
February 2013 |
735.00 | 678.00 | 55.64 | 52.81 | ||||||||||||
January 2013 |
713.00 | 678.50 | 58.00 | 54.37 | ||||||||||||
December 2012 |
724.97 | 696.00 | 58.03 | 56.30 | ||||||||||||
|
|
|
|
|
|
|
|
* | On 20 May 2010, we announced a 2 for 5 rights issue of 990,439,017 ordinary shares at 355 pence per share |
There are no unresolved staff comments required to be reported.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 189 |
Additional Information
Definitions and glossary of terms
Our aim is to use plain English in this Annual Report and Accounts. However, where necessary, we do use a number of technical terms and/or abbreviations and we summarise the principal ones below, together with an explanation of their meanings. The descriptions below are not formal legal definitions.
A
American Depositary Shares (ADSs)
Securities of National Grid listed on the New York Stock Exchange, each of which represents five ordinary shares. They are evidenced by American Depositary Receipts or ADRs.
Annual General Meeting (AGM)
Meeting of shareholders of the Company held each year to consider ordinary and special business as provided in the Notice of AGM.
B
Board
The Board of Directors of the Company (for more information see pages 26 to 27 and 180 to 182).
bps
Basis point (bps) is a unit that is equal to 1/100th of 1% and is typically used to denote the movement in a percentage based metric such as interest rates or ROE. A 0.1% change in a percentage represents 10 basis points.
BritNed
BritNed Development Limited.
C
called up share capital
Shares (common stock) that have been issued and have been fully paid for.
carrying value
The amount at which an asset or a liability is recorded in the Groups statement of financial position and the Companys balance sheet.
CF 3 I
Trifluoroiodomethane (also referred to as trifluoromethyl iodide) is a gas containing carbon, fluorine and iodine atoms which is being investigated as a gaseous dielectric medium for high voltage applications as a potential replacement for SF6, but with very much lower global warming potential.
circuit
See route length.
the Company, the Group, National Grid, we, our or us
We use the terms the Company, the Group, National Grid, we, our or us to refer to either National Grid plc itself or to National Grid plc and its subsidiaries collectively, depending on context.
consolidated financial statements
Financial statements that include the results and financial position of the Company and its subsidiaries together as if they were a single entity.
contingent liabilities
Possible obligations or potential liabilities arising from past events for which no provision has been recorded, but for which disclosure in the financial statements is made.
D
DECC
The Department of Energy & Climate Change, the UK Government ministry responsible for energy and climate change.
decoupling
See revenue decoupling.
deferred tax
For most assets and liabilities, deferred tax is the amount of tax that will be payable or receivable in respect of that asset or liability in future tax returns as a result of a difference between the carrying value for accounting purposes in the statement of financial position or balance sheet and the value for tax purposes of the same asset or liability.
Delivery Body
Under the Energy Bill currently being considered by the UK Parliament, National Grids electricity system operator function would provide independent evidence and analysis to the UK Government to inform its decisions on the key rules and parameters to achieve the Governments policy objectives under Electricity Market Reform. As proposed, National Grid would administer the capacity mechanism, including running the annual capacity auctions, managing the allocation of contracts for difference to low carbon generators and reporting to Government annually on performance against the Governments delivery plan. Detailed roles and responsibilities for all market participants, including the Delivery Body, will be finalised within secondary legislation enacted under the Energy Act 2013, due to be in force from summer 2014.
derivative
A financial instrument or other contract where the value is linked to an underlying index, such as exchange rates, interest rates or commodity prices. In most cases, contracts for the sale or purchase of commodities that are used to supply customers or for our own needs are excluded from this definition.
Directors/Executive Directors/Non-executive Directors
The Directors/Executive Directors and Non-executive Directors of the Company whose names are set out on pages 26 and 27 of this document.
dollars or $
Except as otherwise noted all references to dollars or $ in this Annual Report and Accounts relate to the US currency.
190 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
E
earnings per share (EPS)
Profit for the year attributable to equity shareholders of the parent allocated to each ordinary share.
Electricity Market Reform (EMR)
An energy policy initiative, introduced by the Energy Bill currently being considered by the UK Parliament, designed to provide greater financial certainty to investors in low carbon generation by guaranteeing a price for electricity generated.
employee engagement
A key performance indicator, based on the percentage of favourable responses to certain indicator questions repeated in each employee survey, which provides a measure of how employees think, feel and act in relation to National Grid. Research shows that a highly engaged workforce leads to increased productivity and employee retention, therefore we use employee engagement as a measure of organisational health in relation to business performance.
equity
In financial statements, the amount of net assets attributable to shareholders.
Estate Tax Convention
The Estate Tax Convention is the convention between the US and the UK for the avoidance of double taxation with respect to estate and gift taxes.
EU
The European Union, being the economic and political union of 27 member states located in Europe.
Exchange Act
The Securities Exchange Act 1934, as amended.
F
FERC
The US Federal Energy Regulatory Commission.
finance lease
A lease where the asset is treated as if it was owned for the period of the lease and the obligation to pay future rentals is treated as if they were borrowings. Also known as a capital lease.
financial year
For National Grid this is an accounting year ending on 31 March. Also known as a fiscal year.
FRS
A UK Financial Reporting Standard as issued by the UK Financial Reporting Council (FRC). These apply to the Companys individual financial statements on pages 165 to 169, which are prepared in accordance with UK GAAP.
G
Grain LNG
National Grid Grain LNG Limited.
Great Britain
England, Wales and Scotland.
GW
Gigawatt, being an amount of power equal to 1 billion watts (10 9 watts).
H
HMRC
HM Revenue & Customs. The UK tax authority.
HVDC
High voltage, direct current electric power transmission which uses direct current for the bulk transmission of electrical power, in contrast with the more common alternating current systems.
I
IAS or IFRS
An International Accounting Standard or International Financial Reporting Standard, as issued by the International Accounting Standards Board (IASB). IFRS is also used as the term to describe international generally accepted accounting principles as a whole.
individual financial statements
Financial statements of a company on its own, not including its subsidiaries or joint ventures.
ISO 14001
Specifies the requirements for an environmental management system and maps out a framework that an organisation can follow to set up an effective environmental management system. It can provide assurance to company management and employees, as well as external stakeholders, that environmental impact is being measured and improved.
ISO 31000
Published in 2009, it provides a comprehensive set of principles and generic guidelines for the implementation of good practice risk management that can be applied across any organisation. It is not specific to any industry or sector.
J
joint venture
A company or other entity which is controlled jointly with other parties.
K
KeySpan
KeySpan Corporation and its subsidiaries, acquired by National Grid on 24 August 2007.
kV
Kilovolt, being an amount of electric force equal to 1,000 volts.
L
Large Combustion Plant Directive (LCPD 2001/80/EC)
An EU directive which requires member states of the EU to control emissions of acidifying pollutants, particles and ozone precursors from combustion plants with a rated thermal input of 50 MW or greater.
Lifetime Allowance
The Lifetime Allowance is an overall ceiling on the amount of UK tax privileged pension savings that any one individual can draw.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 191 |
Additional Information
Definitions and glossary of terms
Continued
LIPA
The Long Island Power Authority.
LNG
Liquefied natural gas, being natural gas that has been condensed into a liquid form, typically at temperatures at or below -161°C (-258°F).
lost time injury
An incident arising out of National Grids operations which leads to an injury where the employee or contractor normally has time off the following day or shift following the incident. It relates to one specific (acute) identifiable incident which arises as a result of National Grids premises, plant or activities, which was reported to the supervisor at the time and was subject to appropriate investigation.
lost time injury frequency rate (IFR)
The number of lost time injuries per 100,000 hours worked in a 12 month period.
M
MADPU
The Massachusetts Department of Public Utilities.
MW
Megawatt, being an amount of power equal to 1 million watts.
MWh
Megawatt hours, being an amount of energy equivalent to delivering 1 million watts of power for a period of one hour.
N
National Grid Metering (NGM)
National Grid Metering Limited, National Grids UK regulated metering business.
New England
The term refers to a region within the northeastern US that includes the states of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont. National Grids New England operations are primarily in the states of Massachusetts and Rhode Island.
northeastern US
The northeastern region of the US, comprising the states of Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont.
NYPSC
The New York Public Service Commission.
O
Ofgem
The UK Office of Gas and Electricity Markets, part of the UK Gas and Electricity Markets Authority (GEMA), which regulates the energy markets in the UK.
OnStream
Utility Metering Services Limited, an unregulated UK metering business, sold by National Grid on 24 October 2011.
ordinary shares
Voting shares entitling the holder to part ownership of a company. Also known as common stock. National Grids ordinary shares have a nominal value of 11 17 ⁄ 43 pence.
P
Personal Lifetime Allowance
The lifetime allowance applicable to individuals who registered their pre 6 April 2006 UK pension benefits for protection.
price control
The mechanism by which Ofgem sets restrictions on the amounts of revenue we are allowed to collect from customers in our UK businesses. The allowed revenues are intended to cover efficiently incurred operational expenditure, capital expenditure and financing costs, including a return on equity invested.
R
rate base
The base investment on which the utility is authorised to earn a cash return. It includes the original cost of facilities, minus depreciation, an allowance for working capital and other accounts.
rate plan
The term given to the mechanism by which a US utility regulator sets terms and conditions for utility service including, in particular, tariffs and rate schedules. The term can mean a multi-year plan that is approved for a specified period, or an order approving tariffs and rate schedules that remain in effect until changed as a result of future regulatory proceedings. Such proceedings can be commenced through a filing by the utility or on the regulators own initiative.
regulated controllable operating costs
Total operating costs under IFRS less depreciation and certain regulatory costs where, under our regulatory agreements, mechanisms are in place to recover such costs in current or future periods.
regulatory asset value (RAV)
The value ascribed by Ofgem to the capital employed in the relevant licensed business. It is an estimate of the initial market value of the regulated asset base at privatisation, plus subsequent allowed additions at historical cost, less the deduction of annual regulatory depreciation. Deductions are also made to reflect the value realised from the disposal of certain assets that formed part of the regulatory asset base. It is also indexed to the RPI to allow for the effects of inflation.
return on capital employed (RoCE)
Financial metric expressing a measure of post-tax operating profit as a percentage of capital (debt and equity) invested in the business.
return on equity (ROE)
A performance metric measuring returns from the investment of shareholders funds. It is a financial ratio of a measure of earnings divided by an equity base.
revenue decoupling
Revenue decoupling is the term given to the elimination of the dependency of a utilitys revenue on the volume of gas or electricity transported. The purpose of decoupling is to eliminate the disincentive a utility otherwise has to encourage energy efficiency programmes.
RIIO
The revised regulatory framework issued by Ofgem which was implemented in the eight year price controls which started on 1 April 2013.
192 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
RIPUC
The Rhode Island Public Utilities Commission.
route length
The route length of an electricity transmission line is the geographical distance from the start tower to the end tower. In most cases in the UK, and in many cases in the US, the transmission line consists of a double circuit for additional reliability. In such cases, the circuit length is twice the route length.
RPI
The UK retail price index as published by the Office for National Statistics.
S
Scope 1 emissions
Scope 1 emissions are direct greenhouse gas emissions that occur from sources that are owned or controlled by the Company, for example, emissions from combustion in owned or controlled boilers, furnaces, vehicles, etc.
Scope 2 emissions
Scope 2 emissions are greenhouse gas emissions from the generation of purchased electricity consumed by the Company. Purchased electricity is defined as electricity that is purchased or otherwise brought into the organisational boundary of the Company. Scope 2 emissions physically occur at the facility where electricity is generated.
SEC
The US Securities and Exchange Commission, the financial regulator for companies with registered securities in the US, including National Grid and certain of its subsidiaries.
SF 6
Sulphur hexafluoride, an inorganic, colourless, odourless and non-flammable greenhouse gas. SF 6 is used in the electrical industry as a gaseous dielectric medium for high voltage circuit breakers, switchgear and other electrical equipment.
share premium
The difference between the amounts shares are issued for and the nominal value of those shares.
standard cubic metre
A quantity of gas which at 15°C and atmospheric pressure (1.013 bar) occupies the volume of 1m 3 .
stranded cost recoveries
The recovery of historical generation-related costs in the US, related to generation assets that are no longer owned by us.
subsidiary
A company or other entity that is controlled by National Grid.
swaptions
A swaption gives the buyer, in exchange for an option premium, the right, but not the obligation, to enter into an interest rate swap at some specified date in the future. The terms of the swap are specified on the trade date of the swaption.
T
taxes borne
Those taxes that represent a cost to the Company and which are reflected in our results.
taxes collected
Those taxes that are generated by our operations but which do not affect our results; we generate the commercial activity giving rise to these taxes and then collect and administer them on behalf of HMRC.
tonne
A unit of mass equal to 1,000 kilogrammes, equivalent to approximately 2,205 pounds.
tonnes carbon dioxide equivalent (CO 2 e)
A measure of greenhouse gas emissions in terms of the equivalent amount of carbon dioxide.
treasury shares
Shares that have been repurchased but not cancelled. These shares can then be allotted to meet obligations under the Companys employee share schemes.
TWh
Terawatt hours, being an amount of energy equivalent to delivering 1 billion watts of power for a period of 1,000 hours.
U
UK
The United Kingdom, comprising England, Wales, Scotland and Northern Ireland.
UK Corporate Governance Code (the Code)
Guidance, issued by the Financial Reporting Council in 2010, on how companies should be governed, applicable to UK listed companies including National Grid. A new edition of the UK Corporate Governance Code was published in September 2012 (the new Code).
UK GAAP
Generally accepted accounting principles in the UK. These differ from IFRS and from US GAAP.
US
The United States of America, its territories and possessions, any state of the United States and the District of Columbia.
US GAAP
Generally accepted accounting principles in the US. These differ from IFRS and from UK GAAP.
US state regulators (state utility commissions)
In the US, public utilities retail transactions are regulated by state utility commissions, including the New York Public Service Commission (NYPSC), the Massachusetts Department of Public Utilities (MADPU) and the Rhode Island Public Utilities Commission (RIPUC).
V
vanilla return
Metric used by Ofgem to define the allowed rate of return within the price control reviews for our UK regulated businesses. Our calculation uses IFRS business performance operating profit adjusted for various items to reflect the replacement of certain IFRS-based accounting treatments with a regulatory-based treatment. Primarily these items are depreciation, capital costs, pensions and taxation. The adjusted IFRS operating profit is divided by the regulatory asset value inflated to mid year to generate a percentage rate of return.
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 193 |
Additional Information
Summary consolidated financial information
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 2013. It should be read in conjunction with the consolidated financial statements and related notes, together with the Strategic Review. The information presented below for the years ended 31 March 2009, 2010, 2011, 2012 and 2013 has been prepared under IFRS issued by the IASB and as adopted by the EU (i) .
31 March | 31 March | 31 March | 31 March | 31 March | ||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
|
||||||||||||||||||||
Summary income statement |
||||||||||||||||||||
Revenue (ii) |
14,359 | 13,832 | 14,343 | 14,007 | 15,687 | |||||||||||||||
Operating profit |
||||||||||||||||||||
Before exceptional items, remeasurements and stranded cost recoveries |
3,644 | 3,495 | 3,600 | 3,121 | 2,915 | |||||||||||||||
Exceptional items, remeasurements and stranded cost recoveries |
110 | 44 | 145 | 172 | (292) | |||||||||||||||
3,754 | 3,539 | 3,745 | 3,293 | 2,623 | ||||||||||||||||
Profit before tax |
||||||||||||||||||||
Before exceptional items, remeasurements and stranded cost recoveries |
2,742 | 2,585 | 2,473 | 1,974 | 1,770 | |||||||||||||||
Exceptional items, remeasurements and stranded cost recoveries |
178 | (26 | ) | 151 | 219 | (376) | ||||||||||||||
2,920 | 2,559 | 2,624 | 2,193 | 1,394 | ||||||||||||||||
Profit for the year from continuing operations |
2,296 | 2,038 | 2,163 | 1,389 | 922 | |||||||||||||||
Profit for the year |
2,296 | 2,038 | 2,163 | 1,389 | 947 | |||||||||||||||
Profit for the year attributable to equity shareholders |
||||||||||||||||||||
Before exceptional items, remeasurements and stranded cost recoveries |
2,055 | 1,828 | 1,747 | 1,418 | 1,259 | |||||||||||||||
Exceptional items, remeasurements and stranded cost recoveries |
240 | 208 | 412 | (32 | ) | (315) | ||||||||||||||
2,295 | 2,036 | 2,159 | 1,386 | 944 | ||||||||||||||||
|
||||||||||||||||||||
Earnings per share |
||||||||||||||||||||
Basic continuing operations (pence) (iii) |
62.6 | 55.6 | 61.2 | 46.0 | 30.3 | |||||||||||||||
Diluted continuing operations (pence) (iii) |
62.3 | 55.4 | 60.9 | 45.8 | 30.1 | |||||||||||||||
Basic (pence) (iii) |
62.6 | 55.6 | 61.2 | 46.0 | 31.1 | |||||||||||||||
Diluted (pence) (iii) |
62.3 | 55.4 | 60.9 | 45.8 | 31.0 | |||||||||||||||
|
||||||||||||||||||||
Number of shares basic (millions) (iv) |
3,664 | 3,659 | 3,525 | 3,011 | 3,033 | |||||||||||||||
Number of shares diluted (millions) (iv) |
3,682 | 3,678 | 3,544 | 3,024 | 3,050 | |||||||||||||||
|
||||||||||||||||||||
Dividends per ordinary share |
||||||||||||||||||||
Paid during the year (pence) |
39.84 | 37.40 | 37.74 | 36.65 | 33.94 | |||||||||||||||
Approved or proposed during the year (pence) |
40.85 | 39.28 | 36.37 | 38.49 | 35.64 | |||||||||||||||
Paid during the year ($) |
0.633 | 0.599 | 0.592 | 0.579 | 0.523 | |||||||||||||||
Approved or proposed during the year ($) |
0.632 | 0.623 | 0.571 | 0.608 | 0.549 | |||||||||||||||
|
194 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
31 March | 31 March | 31 March | 31 March | 31 March | ||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
|
||||||||||||||||||||
Summary statement of net assets |
||||||||||||||||||||
Non-current assets |
45,129 | 41,684 | 39,787 | 38,488 | 37,712 | |||||||||||||||
Current assets |
9,576 | 5,387 | 6,323 | 5,065 | 6,755 | |||||||||||||||
Assets of businesses held for sale |
| 264 | 290 | | | |||||||||||||||
Total assets |
54,705 | 47,335 | 46,400 | 43,553 | 44,467 | |||||||||||||||
Current liabilities |
(7,445 | ) | (6,004 | ) | (6,826 | ) | (6,559 | ) | (7,026) | |||||||||||
Non-current liabilities |
(37,027 | ) | (31,998 | ) | (30,395 | ) | (32,783 | ) | (33,457) | |||||||||||
Liabilities of businesses held for sale |
| (87 | ) | (110 | ) | | | |||||||||||||
Total liabilities |
(44,472 | ) | (38,089 | ) | (37,331 | ) | (39,342 | ) | (40,483) | |||||||||||
Net assets |
10,233 | 9,246 | 9,069 | 4,211 | 3,984 | |||||||||||||||
|
||||||||||||||||||||
Shareholders equity |
10,228 | 9,239 | 9,060 | 4,199 | 3,970 | |||||||||||||||
|
||||||||||||||||||||
Summary cash flow statement |
||||||||||||||||||||
Cash generated from operations |
||||||||||||||||||||
Continuing operations |
4,037 | 4,487 | 4,854 | 4,372 | 3,564 | |||||||||||||||
Discontinued operations |
| | | | (8) | |||||||||||||||
|
||||||||||||||||||||
4,037 | 4,487 | 4,854 | 4,372 | 3,556 | ||||||||||||||||
Tax (paid)/received |
(287 | ) | (259 | ) | 4 | 144 | (143) | |||||||||||||
|
||||||||||||||||||||
Net cash inflow from operating activities |
3,750 | 4,228 | 4,858 | 4,516 | 3,413 | |||||||||||||||
Net cash flows used in investing activities |
(6,130 | ) | (2,371 | ) | (4,774 | ) | (2,332 | ) | (1,998) | |||||||||||
Net cash flows from/(used in) financing activities |
2,715 | (1,900 | ) | (430 | ) | (2,212 | ) | (877) | ||||||||||||
Net increase/(decrease) in cash and cash equivalents |
335 | (43 | ) | (346 | ) | (28 | ) | 538 | ||||||||||||
|
(i) | Since the implementation of IFRS by the Company, there have been no significant changes in accounting standards, interpretations or policies that have a material financial impact on the selected financial data. |
(ii) | Items previously reported for 2009-2010 separately as other operating income have been included within revenue. |
(iii) | Items previously reported for 2009-2012 have been restated to reflect the impact of the bonus element of the rights issue and the additional shares issued as scrip dividends. |
(iv) | Number of shares previously reported for 2009-2012 have been restated to reflect the impact of the additional shares issued as scrip dividends. |
www.nationalgrid.com | Annual Report and Accounts 2012/13 National Grid plc 195 |
Additional Information
Useful information
Financial calendar
The following dates have been announced or are indicative:
5 June 2013 | Ordinary shares go ex-dividend for 2012/13 | |
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7 June 2013 | Record date for 2012/13 final dividend | |
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12 June 2013 | Scrip reference price announced | |
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24 July 2013 | Scrip election date | |
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29 July 2013 | 2013 Annual General Meeting and interim management statement | |
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21 August 2013 | 2012/13 final dividend paid to qualifying shareholders | |
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21 November 2013 | 2013/14 half year results | |
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4 December 2013 | Ordinary shares go ex-dividend | |
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6 December 2013 | Record date for 2013/14 interim dividend | |
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22 January 2014 | 2013/14 interim dividend paid to qualifying shareholders | |
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January/February 2014 | Interim management statement | |
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May 2014 | 2013/14 preliminary results | |
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Dividends
The Directors are recommending a final dividend of 26.36 pence per ordinary share ($2.0088 per ADS) to be paid on 21 August 2013 to shareholders on the register as at 7 June 2013. Further details in respect of dividend payments can be found on page 48. If you live outside the UK, you may be able to request that your dividend payments be converted into your local currency.
Have your dividends paid directly into your bank or building society account:
| Your dividend reaches your account on the payment day |
| It is more secure cheques do sometimes get lost in the post |
| No more trips to the bank |
Elect to receive your dividends as additional shares:
| Join our scrip dividend scheme |
| No stamp duty or commission to pay |
American Depositary Shares
The Company has agreed to amend the deposit agreement under which the ADS representing its ordinary shares are issued to allow a fee of up to $0.05 per ADS to be charged for any cash distribution made to ADS holders, including cash dividends. Subject to the Form F-6 on which the amended deposit agreement is filed being declared effective by the SEC, commencing with the final dividend payment payable on 21 August 2013, ADS holders who receive a cash dividend will be charged a fee, which will be deducted by the Depositary from interim and final cash dividends prior to distribution of the cash dividend.
Electronic communications
To receive an email notifying you as soon as there is new shareholder information for you to view online, sign up for electronic communications via the National Grid Share Portal www.nationalgridshareholders.com and follow the on screen instructions on the manage your account link to change your communication preferences. It only takes a few minutes to register, just have your 11 digit Investor Code (IVC) to hand.
Want more information or help?
Please use the contact details set out on the back cover to find out more information about your dividend options, for terms and conditions of any of the services offered or for help with any other queries.
|
The National Grid Share Portal is a secure online site where you can:
| View your holdings and get an indicative value |
| View your dividend payment history |
| Get copies of your dividend tax vouchers |
| Update your address details |
| Buy and sell shares |
| Register your AGM proxy votes |
| Sign up for electronic communications |
Share price
The share capital of the Company consists of ordinary shares of 11 17 ⁄ 43 pence nominal value each and ADSs, which represent five ordinary 43 shares. The following graph represents the movement of National Grids share price during 2012/13. A graph showing the total shareholder return over the last five years is available on page 44.
National Grid ordinary shares are listed on the London Stock Exchange under the symbol NG and the ADSs are listed on the New York Stock Exchange under the symbol NGG.
Share dealing
Capita Share Dealing Services offer our European Economic Area resident shareholders a range of quick and easy share dealing services:
| Buy more shares £20 flat fee (plus stamp duty) |
| Sell all your shares by post 1 to 150 shares 10p per share (maximum £10); 151 shares or more £15 flat fee |
| Donate all your shares free of charge to ShareGift |
Visit www.capitadeal.com/nationalgrid or call Capita Share Dealing free on 0800 022 3374 for details and terms and conditions. This is not a recommendation to take any action . High street banks may also offer share dealing services. If you have any doubt as to what action you should take, please contact an authorised financial advisor.
ShareGift: If you only have a small number of shares which would cost more for you to sell than they are worth, you may wish to consider donating them to the charity. ShareGift is a registered charity (no. 1052686) which specialises in accepting such shares as donations. For more information visit www.sharegift.org.uk or contact Capita Registrars.
Individual Savings Accounts (ISAs): Corporate ISAs for National Grid shares are available from Stocktrade. For more information, call Stocktrade on 0131 240 0443, email isa@stocktrade.co.uk or write to Stocktrade, 81 George Street, Edinburgh EH2 3ES.
National Grid plc was incorporated on 11 July 2000. The Company is registered in England and Wales No. 4031152, with its registered office at 1-3 Strand, London WC2N 5EH.
The Companys agent in the United States is National Grid USA, Attn: General Counsel, 40 Sylvan Road, Waltham, MA 02451.
196 National Grid plc Annual Report and Accounts 2012/13 | www.nationalgrid.com |
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Cautionary Statement
This document comprises the Annual Report and Accounts for the year ending 31 March 2013 for National Grid and its subsidiaries. It contains the Directors Report and Financial Statements, together with the Independent Auditors Report thereon, as required by the Companies Act 2006. The Directors Report, comprising pages 06 to 91 and 170 to 189, has been drawn up in accordance with the requirements of English law, and liability in respect thereof is also governed by English law. In particular, the liability of the Directors for these reports is solely to National Grid.
This document contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include information with respect to our financial condition, our results of operations and businesses, strategy, plans and objectives. Words such as anticipates, expects, should, intends, plans, believes, outlook, seeks, estimates, targets, may, will, continue, project and similar expressions, as well as statements in the future tense, identify forward-looking statements. These forward-looking statements are not guarantees of our future performance and are subject to assumptions, risks and uncertainties that could cause actual future results to differ materially from those expressed in or implied by such forward-looking statements. Many of these assumptions, risks and uncertainties relate to factors
that are beyond our ability to control or estimate precisely, such as changes in laws or regulations, announcements from and decisions by governmental bodies or regulators (including the timeliness of consents for construction projects); breaches of, or changes in, environmental, climate change and health and safety laws or regulations, including breaches arising from the potentially harmful nature of our activities; network failure or interruption (and our actual or perceived response thereto), the inability to carry out critical non network operations and damage to infrastructure, due to adverse weather conditions including the impact of Superstorm Sandy and other major storms as well as the results of climate change or due to unauthorised access to or deliberate breaches of our IT systems or otherwise; performance against regulatory targets and standards and against our peers with the aim of delivering stakeholder expectations regarding costs and efficiency savings, including those related to investment programmes and internal transformation projects (including the US foundation programme); and customers and counterparties failing to perform their obligations to the Company. Other factors that could cause actual results to differ materially from those described in this document include fluctuations in exchange rates, interest rates and commodity price indices; restrictions and conditions (including filing requirements) in our borrowing and debt arrangements, funding costs and access to financing; regulatory requirements for us to maintain financial resources in certain parts of our business and restrictions on some subsidiaries transactions such as paying dividends, lending or levying charges;
inflation; the delayed timing of recoveries and payments in our regulated businesses and whether aspects of our activities are contestable; the funding requirements and performance of our pension schemes and other post-retirement benefit schemes; the loss of key personnel or the ability to attract, train or retain qualified personnel and any significant disputes arising with our employees or the breach of laws or regulations by our employees; and incorrect or unforeseen assumptions or conclusions (including financial and tax impacts and other unanticipated effects) relating to business development activity, including assumptions in connection with joint ventures.
For further details regarding these and other assumptions, risks and uncertainties that may affect National Grid, please read the Strategic Review section including the Risk factors on pages 176 to 178 of this document. In addition, new factors emerge from time to time and we cannot assess the potential impact of any such factor on our activities or the extent to which any factor, or combination of factors, may cause actual future results to differ materially from those contained in any forward-looking statement. Except as may be required by law or regulation, the Company undertakes no obligation to update any of its forward-looking statements, which speak only as of the date of this document.
The contents of any website references in this document do not form part of this document.
Further Information
Exchange Rates
The following table sets forth the history of the exchange rates of one pound sterling to US dollars for the periods indicated and as at the latest practicable date, 6 June 2013.
High | Low | |||||||
June 2013* |
1.5392 | 1.5293 | ||||||
May 2013 |
1.5568 | 1.5035 |
* | For the period to 6 June 2013. |
Share ownership
At 6 June 2013, the latest practicable date, none of the directors had an individual beneficial interest amounting to greater than 1% of the Companys shares.
Material interests in shares
The following summarizes the significant changes in the percentage ownership held by our major shareholders during the past three years:
Capital Group Companies, Inc. held 5.04% of our outstanding share capital as at 9 June 2011. Their shareholding increased to 10.02% of our outstanding share capital as at 31 March 2012. As noted on page 183 of the 2012/2013 Annual Report and Accounts, we have been notified that Capital Group Companies, Inc. held 10.91% of our outstanding share capital as at 31 March 2013 and that such holdings increased as at 5 April 2013 to 11.02 % of our outstanding share capital which percentage remains unchanged as at 6 June 2013.
Since 31 March 2013, we have not been notified of any other subsequent significant change in the percentage of shares held by the shareholders, listed on page 183 of the 2012/2013 Annual Report and Accounts.
Price history
The following table sets forth the highest and lowest intraday market prices for our ordinary shares and ADSs for the periods indicated.
Ordinary Share
(Pence) |
ADS ($) | |||||||||||||||
High | Low | High | Low | |||||||||||||
June 2013* |
792.00 | 737.18 | 60.57 | 56.84 | ||||||||||||
May 2013 |
849.50 | 777.50 | 64.56 | 59.45 |
* | For the period to 6 June 2013, the latest practicable date. |
Subsequent Events
| None applicable. |
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 companys 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.
Description |
||||||||
1.1 |
Articles of Association of National Grid plc adopted by Special Resolution passed on 30 July 2012. |
Filed herewith |
||||||
2(a) |
Amended and restated Deposit Agreement dated as of 23 May 2013 among National Grid plc and The Bank of New York Mellon, as Depository, and all Owners and Holders from time to time of American Depositary Shares issued thereunder. (Exhibit 1 to National Grid plc Form F-6 dated 15 May 2013 File No. 333-178045) |
Incorporated by reference |
||||||
2(b).1 |
Amended and Restated Trust Deed dated 26 July 2010 among National Grid plc, National Grid Electricity Transmission plc and the Law Debenture Trust Corporation p.l.c. relating to a 15,000,000,000 Euro Medium Term Note Programme. (Exhibit 2(b).1 to National Grid plc Form 20-F dated 13 June 2011 File No. 1-14958) |
Incorporated by reference |
||||||
2(b).2 |
Amended and Restated Trust Deed dated 18 February 2011 among National Grid Gas plc, National Grid Gas Finance (no 1) plc and the Law Debenture Trust Corporation p.l.c relating to a 10,000,000,000 Euro Medium Term Note Programme. (Exhibit 2(b).2 to National Grid plc Form 20-F dated 13 June 2011 File No. 1-14958) |
Incorporated by reference |
||||||
2(b).3 |
Amended and Restated Trust Deed dated 22 February 2012 among National Grid Gas plc, National Grid Gas Finance (No 1)plc and the Law Debenture Trust Corporation p.l.c. relating to a 10,000,000,000 Euro Medium Term Note Programme. ( Exhibit 2.(b).3 to National Grid plc Form 20-F dated 12 June 2012 File No. 1-14958) |
Incorporated by reference |
||||||
2(b).4 |
Amended and Restated Trust Deed dated 2 August 2011 among National Grid plc, National Grid Electricity Transmission plc and the Law Debenture Trust Corporation p.l.c. relating to a 15,000,000,000 Euro Medium Term Note Programme. Exhibit 2.(b).5 to National Grid plc Form 20-F dated 12 June 2012 File No. 1-14958) |
Incorporated by reference |
||||||
2(b).5 |
Amended and Restated Trust Deed dated 27 March 2013 among National Grid Gas plc, National Grid Gas Finance (No 1)plc and the Law Debenture Trust Corporation p.l.c. relating to a 10,000,000,000 Euro Medium Term Note Programme. |
Filed herewith |
||||||
2(b).6 |
Amended and Restated Trust Deed dated 10 September 2012 among National Grid plc, National Grid Electricity Transmission plc and the Law Debenture Trust Corporation p.l.c. relating to a 15,000,000,000 Euro Medium Term Note Programme. |
Filed herewith |
||||||
4(c).1 |
Service Agreement among The National Grid plc and Steven Holliday dated 1 April 2006. (Exhibit 4.(c).3 to National Grid Transco Form 20-F dated 19 June 2007 File No. 1-14958) |
Incorporated by reference |
||||||
4(c).2 |
Service Agreement among The National Grid plc and Andrew Bonfield dated 1 November 2010. (Exhibit 4(c).20 to National Grid plc Form 20-F dated 13 June 2011 File No 1-14958) |
Incorporated by reference |
||||||
4(c).3 |
Service Agreement among National Grid Transco plc, National Grid Company plc and Nicholas Winser dated 28 April 2003. (Exhibit 4.8 to National Grid Transco Form 20-F dated 16 June 2004 File No. 1-14958) |
Incorporated by reference |
||||||
4(c).4 |
Employment Agreement among National Grid plc, National Grid USA and Thomas King dated 11 July 2007. (Exhibit 4 (c).9 to National Grid plc Form 20-F dated 17 June 2008 File No. 1-14958) |
Incorporated by reference |
||||||
4(c).5 |
Letter of Appointment Linda Adamany. (Exhibit 4 (c).9 to National Grid plc Form 20-F dated 19 June 2007 File No. 1-14958) |
Incorporated by reference |
||||||
4(c).6 |
Letter of Appointment Philip Aiken. (Exhibit 4 (c).11 to National Grid plc Form 20-F dated 17 June 2008 File No. 1-14958) |
Incorporated by reference |
||||||
4(c).7 |
Letter of Appointment Sir Peter Gershon. (Exhibit 4(c).10 to National Grid plc Form 20-F dated 12 June 2012 File No. 1-14958) |
Incorporated by reference |
4(c).8 |
Letter of Appointment Paul Golby. (Exhibit 4(c).11 to National Grid plc Form 20-F dated 12 June 2012 File No. 1-14958) |
Incorporated by reference |
||||||
4(c).9 |
Letter of Appointment Ken Harvey. (Exhibit 4.10 to National Grid Transco Form 20-F dated 16 June 2004 File No. 1-14958) |
Incorporated by reference |
||||||
4(c).10 |
Letter of Appointment Ruth Kelly. (Exhibit 4(c).14 to National Grid plc Form 20-F dated 12 June 2012 File No. 1-14958) |
Incorporated by reference |
||||||
4(c).11 |
Letter of Appointment Maria Richter. (Exhibit 4.14 to National Grid Transco Form 20-F dated 16 June 2004 File No. 1-14958) |
Incorporated by reference |
||||||
4(c).12 |
Letter of Appointment George Rose. (Exhibit 4.15 to National Grid Transco Form 20-F dated 16 June 2004 File No. 1-14958) |
Incorporated by reference |
||||||
4(c).13 |
Letter of Appointment Nora Mead Brownell. |
Filed herewith |
||||||
4(c).14 |
Letter of Appointment Mark Williamson. |
Filed herewith |
||||||
4(c).15 |
Letter of Appointment Jonathan Dawson. |
Filed herewith |
||||||
4(c).16 |
National Grid plc Deferred Share Plan. (Exhibit 4.2 to National Grid plc S-8 dated 28 July 2011 File No. 333-175852) |
Incorporated by reference |
||||||
4(c).17 |
National Grid Executive Share Option Plan 2002. (Exhibit 4 (c) to National Grid Group Form 20-F dated 21 June 2002 File No. 1-14958) |
Incorporated by reference |
||||||
4(c).18 |
National Grid Group Share Matching Plan 2002. (Exhibit 4 (c) to National Grid Group Form 20-F dated 21 June 2002 File No. 1-14958) |
Incorporated by reference |
||||||
4(c).19 |
National Grid Transco Performance Share Plan 2002 (as approved 23 July 2002 by a resolution of the shareholders of National Grid Group plc, adopted 17 October 2002 by a resolution of the Board of National Grid Group plc, amended 26 June 2003 by the Share Schemes Sub-Committee of National Grid Transco plc, and amended 5 May 2004 by the Share Schemes Sub-Committee of National Grid Transco plc). (Exhibit 4.19 to National Grid Transco Form 20-F dated 16 June 2004 File No. 1-14958) |
Incorporated by reference |
||||||
4(c).20 |
National Grid Executive Share Option Scheme. (Exhibit 4D to National Grid Group S-8 dated 26 July 2001 File No. 333-65968) |
Incorporated by reference |
||||||
4(c).21 |
Lattice Group Short Term Incentive Scheme (approved by a resolution of the shareholders of BG Group plc effective 23 October 2000; approved by a resolution of the Board of National Grid Transco plc on 30 April 2004; amended by resolutions of the Board of Lattice Group plc effective on 21 October 2002 and 13 May 2004). (Exhibit 4.23 to National Grid Transco Form 20-F dated 16 June 2004 File No. 1-14958) |
Incorporated by reference |
||||||
4(c).22 |
National Grid USA Companies Defined Contribution Supplemental Executive Retirement Plan. (Exhibit 4.2 to National Grid plc S-8 dated 23 October 2012 File No. 14958) |
Incorporated by reference |
||||||
8 |
List of subsidiaries. |
Filed herewith |
||||||
12.1 |
Certification of Steve Holliday pursuant to Rule 13a-14(a) of the Exchange Act. |
Filed herewith |
||||||
12.2 |
Certification of Andrew Bonfield pursuant to Rule 13a-14(a) of the Exchange Act. |
Filed herewith |
||||||
13.1 |
Certifications of Steve Holliday and Andrew Bonfield furnished pursuant to Rule 13a-14(b) of the Exchange Act (such certifications are not deemed filed for purpose of Section 18 of the Exchange Act and not incorporated by reference in any filing under the Securities Act). |
Filed herewith |
15 |
Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm to National Grid plc. |
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 Bonfield | |||||
Andrew Bonfield | ||||||
Finance Director |
London, England
10 June 2013
EXHIBIT 1.1
Company number: 4031152
The Companies Act 2006
Public company limited by shares
Articles of Association
of
National Grid plc
As amended by special resolution on 30 July 2012
(Incorporated on 11 July 2000)
Introduction
1 |
Default Articles and other standard regulations do not apply |
1.1 |
The regulations in Table A of the Companies (Tables A to F) Regulations 1985 and in the Companies (Model Articles) Regulations 2008, and any other articles or regulations which may apply to companies like us under the Statutes , do not apply to us, unless expressly included in these Articles . |
2 |
The meaning of the Articles |
2.1 |
The following table gives the meaning of certain words and phrases as they are used in these Articles . However, the meaning given in the table does not apply if it is inconsistent with the context in which a word or phrase appears. After the Articles there is a glossary which explains various words and expressions. But the glossary is not part of the Articles and it does not affect their meaning. The words which are explained in the table below, or in specific Articles , are printed in bold and those which are explained in the glossary are printed in italics . |
Words |
Definitions |
|
accounting reference date |
This is 31 March, the date on which our financial year ends. |
|
alternate director |
A person appointed by a Director to act in their place. |
|
Annual General Meeting |
The annual meeting of our shareholders which we hold to comply with these Articles and the law . |
|
Articles |
Our Articles of Association, which set out our companys rules, and any changes made to them. |
|
Auditors |
Our auditors, an independent firm of accountants which examines our records and financial statements. |
A14835747 |
1 |
Words |
Definitions |
|
Board |
Our Board of Directors , or those Directors attending a Directors meeting that has been properly convened (arranged) and which has a quorum. |
|
business day |
A day which is not a Saturday, Sunday, or a public or bank holiday in England. |
|
class meeting |
A meeting of the holders of a relevant class of shares . |
|
clear days |
This period of a notice is the number of days between, but not including, the day when the notice is given or deemed (considered) to be given and the day for which it is given or on which it is to take effect. |
|
committee |
A committee of the Board , appointed with powers delegated in line with Article 84. |
|
Companies Act |
The Companies Act 2006. |
|
Company Communications Provisions |
Sections 1143 to 1148, Section 1168 and Schedules 4 and 5 of the Companies Act . |
|
corporate representative |
A person or persons, authorised by a company which is a shareholder , to act as its corporate representative or corporate representatives at a General Meeting or class meeting which the company is entitled to attend. |
|
CREST Regulations |
The Uncertificated Securities Regulations 2001. |
|
Director |
A Director of NG . |
|
electronic form |
Includes any notice , document or information sent or supplied electronically or through any other medium (including sending by email, posting on a website , sending by fax or by sending a disk by post). |
|
existing shares (of any kind) |
Shares which are in issue at the relevant time. |
|
General Meeting or meeting |
A meeting of our shareholders (including any satellite meeting as set out in Article 32) which is an Annual General Meeting or any other General Meeting, as set out in Article 28. |
|
in writing |
Written by hand or produced by any substitute for writing including anything in electronic form . |
|
Interested Directors |
Directors who have or could have a direct or indirect interest in a matter which conflicts, or could conflict, with our interests. |
|
law |
The Companies Acts , and all other laws and regulations applying to NG (including the UKLAs rules) or our shareholders as the case may be. |
|
London Stock Exchange |
The London Stock Exchange plc. |
A14835747 |
2 |
Words |
Definitions |
|
NG |
National Grid plc. |
|
operator |
Euroclear UK & Ireland Limited or any other operator of a relevant system under the CREST Regulations . |
|
paid up share or other security |
Includes a share or other security which is treated (credited) as paid up. |
|
pay |
Includes any kind of reward or payment for services. |
|
Procedural Resolution |
A resolution at a General Meeting which in the chairmans opinion is of a procedural nature (such as a resolution on the choice of a chairman of the General Meeting , a resolution to adjourn the General Meeting or a resolution to correct an obvious error in a Substantive Resolution ). |
|
Register |
Our register of shareholders . |
|
registered office |
Our registered office. |
|
seal |
Our Common Seal, or any official seal we keep under Section 50 of the Companies Act (called a securities seal ). |
|
shareholder |
A holder of ourshares . |
|
shareholders meeting |
Includes both a General Meeting and a class meeting of NG . |
|
shares |
Our ordinary shares or any other class of our shares which are created. |
|
Statutes |
The Companies Acts , the CREST Regulations and every other law currently in force which concern companies and affect us . |
|
Substantive Resolution |
Any resolution at a General Meeting , other than a Procedural Resolution . |
|
UK Listing Authority or UKLA |
The Financial Services Authority acting in its capacity as the competent authority for the purposes of the Financial Services and Markets Act 2000. |
|
United Kingdom |
Great Britain and Northern Ireland. |
|
we, us, our |
National Grid plc. |
2.2 |
References to a debenture include debenture stock and references to a debenture holder include a debenture stockholder . |
2.3 |
Where the Articles refer to a person who is automatically entitled to a share by law , this includes a person who is entitled to the share as a result of the death, or bankruptcy, of a shareholder . |
2.4 |
Words which refer to a single number also refer to plural numbers, and the other way around. |
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2.5 |
References to a person or people include companies, unincorporated associations and so on. |
2.6 |
Any headings in these Articles are only included for convenience. They do not affect the meaning of the Articles . |
2.7 |
When an Act , or a section of an Act , is referred to, this includes any amendment to the Act or section (before or after the adoption of these Articles ), as well as where it is included in a later Act . |
2.8 |
When an Act or the Articles are referred to, the version which is current at the time will apply. |
2.9 |
Where the Articles give any power or authority to anybody, this power or authority can be used on any number of occasions, unless the way in which power or authority is used does not allow this meaning. |
2.10 |
References to the Companies Acts have the meaning given to them by Section 2 of the Companies Act but will only apply to provisions which are in force at the relevant date. |
2.11 |
Any word which is defined in the Companies Acts or the CREST Regulations means the same in the Articles , unless the Articles define it differently, or the way in which the word is used is inconsistent with the definition given in the Companies Acts or the CREST Regulations . |
2.12 |
Where the Articles say that something can be done by passing an ordinary resolution , this can also be done by passing a special resolution . |
2.13 |
Where the Articles refer to any document being made effective, this means being signed, sealed or executed in some other legally valid way. |
2.14 |
Where the Articles refer to months or years, these are calendar months or years. |
2.15 |
Articles which apply to shares can also apply to stock . References in those Articles to share or shareholder include stock or stockholder. |
2.16 |
Where the Articles refer to shares in certificated form, this means that ownership of the shares can be transferred using a written transfer document (rather than in line with the CREST Regulations ) and that a share certificate is usually issued to the owner. |
2.17 |
Where the Articles refer to shares in uncertificated form, this means that ownership of the shares can be transferred in line with the CREST Regulations without using a written transfer document and that no share certificate is issued to the owner. |
2.18 |
References to officers include Directors and the Company Secretary , but not the Auditors . |
2.19 |
Where the Articles refer to an address, this will include any number or address (including, in the case of any proxy appointment permitted under Article 51.3, an identification number of a participant in the relevant system) used for sending or receiving notices, documents or information electronically or through a website . |
2.20 |
Except where the context requires otherwise, any reference to issued shares of any class (whether of NG or of any other company ) will not include any shares of that class held as treasury shares . |
2.21 |
References to the systems rules will include the rules, regulations, procedures, facilities and requirements of the relevant system concerned. |
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Shares
3 |
Shareholders Liabilities |
Each shareholder s liability (as a shareholder ) is limited to the amount (if any) that is unpaid on the shares that he or she holds.
4 |
Fractions of shares |
4.1 |
If any shares are consolidated or divided, the Directors have the power to deal with any fractions of shares which result. The Directors can sell any shares representing fractions as they think fit and distribute the net proceeds of sale among shareholders in proportion to their fractional entitlements in line with the law , their rights and interests. The Directors can sell to anyone (including us , if the law allows this) and can authorise any person to transfer those shares to the buyer or in line with the buyers instructions. The buyer does not need to check how we used the money and their ownership of the shares will not be affected if the sale was irregular or invalid in any way. |
4.2 |
So far as the law allows, when shares are consolidated or divided, the Directors can treat a shareholders shares which are held in certificated form and in uncertificated form as separate shareholdings. |
4.3 |
The Directors can also arrange for any shares which result from a consolidation or division and which represent rights to fractions of shares to be entered in the Register as shares in certificated form where this makes it easier to sell them. |
5 |
The power to reduce capital |
5.1 |
The shareholders can pass a special resolution to: |
(a) |
reduce our share capital in any way; or |
(b) |
reduce, in any way, any capital redemption reserve , share premium account , or other reserve which cannot be distributed. |
This is subject to any restrictions under the Statutes .
6 |
Buying back shares |
6.1 |
We can buy back, or agree to buy back in the future, any shares of any class (including redeemable shares ), if the law allows this. We can hold such repurchased shares as treasury shares in line with the Companies Act . However, if we have existing shares which are admitted to the official list maintained by the UK Listing Authority and which can be converted into other shares which are equity share s, then we can only buy back equity shares of that class if: |
(a) |
either the terms of issue of the convertible shares permit us to buy back the equity shares ; or |
(b) |
the buy-back or agreement to buy back has been approved by a special resolution passed by the holders of the convertible shares at a separate class meeting . |
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6.2 |
We have the right to: |
(a) |
sell any treasury shares ; |
(b) |
transfer any treasury shares for the purposes of, or to benefit, an employees share scheme; |
(c) |
receive an allotment of shares as fully paid bonus shares in respect of any treasury shares; or |
(d) |
receive any amount payable on redemption of any redeemable treasury shares . |
We cannot exercise any other right in respect of treasury shares we hold, including any right to attend or vote at meetings, to participate in any offer we make to shareholders or to receive any distribution (including in a winding up ).
7 |
The special rights of new shares |
7.1 |
If we issue new shares , the new shares can have rights or restrictions attached to them. The rights can take priority over the rights of existing shares , or existing shares can take priority over the rights of the new shares , or the new shares and the existing shares can rank equally. These rights and restrictions can apply to sharing in our profits or assets . Other rights and restrictions can also apply, for example on the right to vote. The powers conferred by this Article 7.1 are subject to the provisions of Article 7.4. |
7.2 |
The rights and restrictions referred to in Article 7.1 can be decided by an ordinary resolution passed by the shareholders . The Directors can also take these decisions if they do not conflict with any resolution passed by the shareholders . |
7.3 |
If the law allows, the rights of any new shares can include rights for the holder or us (or both the holder and us ) to have them redeemed. The Directors may determine the terms, conditions and manner of redemption of any such shares . |
7.4 |
The ability to attach particular rights and restrictions to new shares can be restricted by special rights previously given to holders of any existing shares . |
8 |
The Directors power to deal with shares |
8.1 |
The Directors can decide how to deal with any new shares . The Directors can: |
(a) |
allot them on any terms, which can include the right to transfer the allotment to another person before any person has been entered on the Register . This is known as the right to renounce the allotment (see also Article 10.1); |
(b) |
grant options to give people a choice to acquire shares in the future; or |
(c) |
dispose of the shares in any other way. |
This Article 8.1 is subject to the provisions of Article 8.3.
8.2 |
The Directors are free to decide who they deal with, when they deal with the shares , and the terms on which they deal. |
8.3 |
The Directors must comply with: |
(a) |
the law relating to authority, pre-emption rights and other matters; and |
(b) |
any resolution of a General Meeting which is passed under the law . |
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9 |
Power to pay commission and brokerage |
9.1 |
We can use all the powers given by the law to pay commission or brokerage to any person who: |
(a) |
applies, or agrees to apply, for any new shares ; or |
(b) |
gets anybody else to apply, or agree to apply, for any new shares . |
9.2 |
The rate per cent or amount of the commission paid, or agreed to be paid, must be disclosed as required by the law . The commission can be paid in either cash or by the allotment of fully paid shares , any combination of the two or in any other way allowed by the law . |
10 |
Renouncing allotted but unissued shares |
10.1 |
Where a share has been allotted to a person but that person has not yet been entered on the Register , the Directors can recognise a transfer (called a renunciation ) by that person of their right to the share in favour of some other person. The ability to renounce allotments only applies if the terms on which the share is allotted are consistent with renunciation . The Directors can impose terms and conditions regulating renunciation rights. |
11 |
No trusts or similar interests recognised |
11.1 |
We will only be affected by, or recognise, a current and absolute right to whole shares . The fact that any share , or any part of a share , may not be owned outright by the registered owner does not concern us , for example if a share is held on any kind of trust . |
11.2 |
The only exception to Article 11.1 is for any right: |
(a) |
which is expressly given by these Articles ; or |
(b) |
which we have a legal duty to recognise. |
Uncertificated shares
12 |
Uncertificated shares |
12.1 |
We can issue shares , and other securities , which do not have certificates . We can also allow existing shares , and other securities , to be held without certificates . Evidence of ownership of these shares and securities does not involve a certificate . We can also allow any shares , or other securities , to be transferred without using a transfer form. All this applies so far as the law allows. |
12.2 |
These shares and other securities can, for example, be transferred by using a relevant system , as defined in the CREST Regulations . Shares transferred in this way are called uncertificated shares . |
12.3 |
Immediately before any shares become uncertificated shares , the Articles will only apply to those shares so far as they are consistent with: |
(a) |
holding those shares as uncertificated shares ; |
(b) |
transferring ownership of those shares by using a relevant system ; and |
(c) |
any of the provisions of the CREST Regulations . |
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12.4 |
The Directors can also lay down regulations which: |
(a) |
govern the issue , holding and transfer, and where appropriate, the mechanics of conversion and redemption , of these shares and securities ; |
(b) |
govern the mechanics for payments involving a relevant system ; and |
(c) |
make any other provisions which they consider are necessary to ensure that these Articles are consistent with the CREST Regulations , and with any rules or guidance of an operator of a relevant system . |
These regulations will, if they say so, apply instead of the other provisions in the Articles relating to certificates , and the transfer, conversion and redemption of shares and other securities , and any other provisions which are not consistent with the CREST Regulations . If the Directors do make any regulations under this Article 12.4, Article 12.3 will still apply to the Articles , read with those regulations.
Share certificates
13 |
Certificates |
13.1 |
Except as otherwise provided in these Articles , when a shareholder is first registered as the holder of any class of shares in certificated form, they are entitled, free of charge, to a separate share certificate for each class of shares they hold in certificated form. |
13.2 |
We must also satisfy any requirements of the CREST Regulations when issuing share certificates . Where the law allows, we do not need to issue share certificates . |
13.3 |
If a shareholder receives more shares in certificated form of any class, they are entitled, without charge, to another certificate for the extra shares . |
13.4 |
If a shareholder transfers part of their shares covered by a certificate , they are entitled, free of charge, to a new certificate for the balance if the balance is also held in certificated form. We will cancel the old certificate . |
13.5 |
We do not have to issue more than one certificate for any share in certificated form, even if that share is held jointly. |
13.6 |
When we deliver a certificate to one joint shareholder holding shares in certificated form, we treat this as delivery to all of the joint shareholders . |
13.7 |
We can deliver a certificate to a broker or agent who is acting for a person who is buying the shares in certificated form, or who is having the shares transferred to them in certificated form. |
13.8 |
The Directors can decide how share certificates are made effective. For example, they can be: |
(a) |
signed by one or more Directors ; |
(b) |
sealed with the Seal (or, in the case of shares on a branch register, an official seal for use in the relevant territory); or |
(c) |
printed, in any way, with a copy of the Seal or with a copy of the signature of one or more Directors . The copy can be made or produced mechanically, electronically or in any other way the Directors approve as long as it complies with the law . |
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13.9 |
A share certificate must state the number and class of shares to which it relates, their nominal value and the amount paid up on those shares . It cannot be for shares of more than one class. |
13.10 |
The time limit for us to provide a share certificate in certificated form is: |
(a) |
one month after the allotment of a new share (or any longer period provided by its terms of issue ); or |
(b) |
five business days after a transfer of shares is presented for registration. |
13.11 |
Share certificates will also be prepared and sent earlier where the UK Listing Authority requires it. |
14 |
Replacement share certificates |
14.1 |
If a shareholder has two or more share certificates for shares of the same class which are in certificated form, they can return the certificates to us , ask us to cancel these and replace them with a single new certificate . We can comply with this request and the Directors can require the shareholder to pay our administrative expenses for doing so. |
14.2 |
A shareholder can ask us to cancel and replace a single share certificate with two or more certificates , for the same total number of shares . We can comply with this request and the Directors can require the shareholder to pay our administrative expenses for doing so. |
14.3 |
A shareholder can ask us for a new certificate if the original is: |
(a) |
damaged or defaced; or |
(b) |
said to be lost, stolen, or destroyed. |
14.4 |
If a certificate has been damaged or defaced, we can ask for the certificate to be returned to us before issuing a replacement. If a certificate is said to be lost, stolen or destroyed, we can ask for satisfactory evidence, and an indemnity , before issuing a replacement. |
14.5 |
The Directors can require the shareholder to pay our administrative expenses for issuing any share certificates under Article 14.3. |
14.6 |
Any one joint shareholder can request replacement certificates under this Article 14 and we can treat an application for a replacement certificate made by one joint shareholder as being made on behalf of all the shareholders concerned. |
Changing share rights
15 |
Changing the special rights of shares |
15.1 |
Whenever our share capital is split into different classes of share , any special rights attached to any of these classes can be varied or cancelled: |
(a) |
in such a way as provided by those rights ; or |
(b) |
if approved by a special resolution ; |
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as long as:
(a) |
the law allows this; and |
(b) |
the Articles or rights attached to any class of share do not say otherwise. |
The special resolution must be passed at a separate meeting of the holders of the relevant class of shares . This is called a class meeting (the provisions governing a class meeting are set out in Article 30). Alternatively, the holders of at least three-quarters of the existing shares of the class (by nominal value ) can give their consent in writing .
15.2 |
The special rights of a class of shares can be varied or cancelled: |
(a) |
while we are a going concern; |
(b) |
while we are being wound up; or |
(c) |
if we are considering being wound up . |
15.3 |
This Article 15 also applies to the variation or cancellation of special rights of shares forming part of a class. Each part of the class which is being treated differently is viewed as a separate class under this Article 15. |
16 |
More about the special rights of shares |
16.1 |
The special rights of existing shares are not regarded as varied, breached or cancelled if: |
(a) |
new shares are created, or issued , which rank equally with or subsequent to any other existing shares in sharing in our profits or assets ; or |
(b) |
we redeem or buy back our own shares . |
But this does not apply if the terms of the existing shares expressly say otherwise.
Transferring shares
17 |
Transfer forms |
17.1 |
Unless the Articles or terms of issue of any shares say otherwise, any shareholder can transfer some or all of their shares to another person. Every transfer of shares in certificated form must be in writing , and either in the usual standard form (known as a stock transfer form), or in any other form approved by the Directors . |
17.2 |
Transfers of uncertificated shares are to be carried out using a relevant system and must comply with the CREST Regulations . |
18 |
Transferring shares in certificated form |
18.1 |
A transfer form for shares in certificated form must be delivered to the office where the Register is kept (or any other place the Directors may decide). The transfer form must have with it: |
(a) |
the share certificate for the shares to be transferred; and |
(b) |
any other evidence which the Directors ask for to prove that the person wanting to make the transfer is entitled to do so. |
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18.2 |
A transfer form for shares in certificated form must be signed, or made effective in some other way, by the person making the transfer. |
18.3 |
The person making a transfer will be treated as continuing to be the shareholder until the name of the person the share is being transferred to is put on the Register for that share . |
18.4 |
If we register a transfer, or if the Directors have any grounds for suspecting fraud, we can keep the transfer form. Otherwise, if the Directors refuse to register a transfer, the transfer form will be returned, when notice of refusal is given, to the person lodging it. |
18.5 |
A transfer form cannot be used to transfer more than one class of shares . Each class of shares needs a separate form. |
18.6 |
We do not charge a fee for transferring shares or registering changes relating to the ownership of shares . |
18.7 |
Transfers cannot be in favour of more than four joint holders. |
18.8 |
A transfer form must be properly stamped by HM Revenue & Customs (or its successor if any) for payment of stamp duty where this is required. |
19 |
Refusing to register certain transfers |
19.1 |
The Directors can refuse to register a transfer of any shares : |
(a) |
if the relevant conditions in Article 18 are not satisfied; |
(b) |
if the transfer is in favour of a minor, a bankrupt, or a person of unsound mind ; or |
(c) |
where the Board is obliged or entitled to refuse to do so as a result of any failure to comply with a notice under Section 793 of the Companies Act (see Article 49). |
19.2 |
The Directors do not have to give any reasons for refusing to register a transfer of any shares , but if any of those shares are admitted to the official list maintained by the UK Listing Authority , the Directors cannot refuse to register a transfer if this would stop dealings in the shares from taking place on an open and proper basis. |
19.3 |
If the Directors decide not to register a transfer of a share, they must notify the person the shares were to be transferred to, in line with Article 18.4. They must do this no later than two months after we receive the transfer form (in the case of a share in certificated form) or the instruction from the operator of the relevant system (in the case of a share in uncertificated form). |
20 |
Overseas branch registers |
20.1 |
We can use all legal powers to keep an overseas branch register. The Directors can make and change any regulations relating to this register, as long as the law allows this. |
21 |
More provisions on uncertificated shares |
21.1 |
Subject to the law and the CREST Regulations , and apart from any class of share which is wholly in uncertificated form, the Directors can decide that any class of shares can be held in uncertificated form and that title to such shares can be transferred by means of a relevant system , or that shares of any class should stop being held and transferred as such. |
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21.2 |
The provisions of these Articles do not apply to shares of any class which are in uncertificated form if these Articles are inconsistent with: |
(a) |
holding shares of that class in uncertificated form; |
(b) |
transferring title to shares of that class by means of a relevant system ; or |
(c) |
any provision of the CREST Regulations . |
People automatically entitled to shares by law
22 |
If a shareholder dies |
22.1 |
If a sole shareholder dies (or a shareholder who is the last survivor of joint shareholders dies), their legal personal representatives will be the only people who we will recognise as being entitled to their shares . |
22.2 |
If a shareholder who is a joint shareholder dies, the remaining joint shareholder or shareholders will be the only people who we will recognise as being entitled to their shares . |
22.3 |
But this Article does not discharge the estate of any shareholder from any liability. |
23 |
Registering personal representatives |
23.1 |
A person who becomes automatically entitled to a share by law can either be registered as the shareholder , or can select some other person to have the share transferred to. The person who is automatically entitled by law must provide any evidence of his entitlement the Directors require. |
24 |
A person who wants to be registered must give notice |
24.1 |
If a person who is automatically entitled to shares by law wants to be registered as a shareholder , and subject (where relevant) to the systems rules , they must deliver or send a notice to us saying that they have made this decision. They must sign this notice, and it must be in the form, and accompanied by any other documents, which the Directors require. This notice will be treated as a transfer form. All of the provisions of these Articles about registering transfers of shares apply to it except that the shares will only be treated as being presented for registration under Article 13.10 when we receive the notice in the form, and accompanied by any other documents, required by the Directors . The Directors have the same power to refuse to register the automatically-entitled person as they would have had in deciding whether to register a transfer by the person who was previously entitled to the shares . |
25 |
Transfers by a person who is automatically entitled to a share by law |
25.1 |
If a person who is automatically entitled to a share by law wants the share to be transferred to another person, they must do the following: |
(a) |
for a share in certificated form, sign a transfer form to the person they have selected; and |
(b) |
for a share in uncertificated form, transfer the share using a relevant system . |
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25.2 |
The Directors have the same power to refuse to register the person selected as they would have had in deciding whether to register a transfer by the person who was previously entitled to the shares . |
26 |
The rights of people automatically entitled to shares by law |
26.1 |
A person who is automatically entitled to a share by law is entitled to any dividends or other money relating to the share , even though they are not registered as the holder of that share . But the Directors can withhold the dividend and other money until a person has been properly registered as the shareholder as laid down in the Articles . They can also withhold the dividend if the person who was previously entitled to the share could have had their dividend withheld. |
26.2 |
Unless and until they are registered as the shareholder , the person automatically entitled to a share by law is not entitled to: |
(a) |
receive notices of meetings; |
(b) |
attend or vote at meetings; or |
(c) |
( subject to Article 26.1) any of the other rights and benefits of being a shareholder . |
Shareholders who cannot be traced
27 |
Shareholders who cannot be traced |
27.1 |
We can sell any shares at the best price we can reasonably obtain if: |
(a) |
during the period of 12 years before the earliest of the advertisements referred to in Article 27.1 (b), at least three dividends have been payable on those shares and none has been claimed, and no payments sent by us in line with these Articles has been cashed; |
(b) |
after this 12-year period, we announce that we intend to sell the shares by placing an advertisement in a national newspaper; and |
(c) |
during this 12-year period, and for three months after the last advertisement appears, we do not hear from the shareholder or any person who is automatically entitled to the shares by law . |
27.2 |
To sell any shares in this way, we can appoint any person to transfer the shares . This transfer will be just as effective as if it had been signed or made effective in some other way by the registered holder of the shares , or by a person who is automatically entitled to the shares by law . The ownership of the person the shares are transferred to will not be affected, even if the sale is irregular or invalid in any way. Nor does the new shareholder need to take any steps to see how any money they may be paying for the shares is used. |
27.3 |
The net sale proceeds belong to us until claimed under this Article 27, but we must pay these to the shareholder who could not be traced before we sold the shares , or to the person who is automatically entitled to their shares by law , if that shareholder , or that other person, asks for it. |
27.4 |
We must record the name of that shareholder , or the person who was automatically entitled to the shares by law , as a creditor for this money in our accounts. The money is not held on trust , and we do not have to pay interest on the money. We can keep any |
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money which we have earned on the net sale proceeds. We can use the money for our business, or we can invest the money in any way that the Directors decide. But the money cannot be invested in our shares , or in the shares of any of our holding companies .
27.5 |
In the case of uncertificated shares held by shareholders who cannot be traced, restrictions under the CREST Regulations will apply. |
General Meetings
28 |
The Annual General Meeting |
28.1 |
Unless the law says otherwise, we will hold an Annual General Meeting each year in addition to any other General Meetings which we hold in the year. The notice calling the meeting must say that the meeting is the Annual General Meeting . We must hold an Annual General Meeting within six months of our accounting reference date . The Directors will decide when and where to hold the Annual General Meeting. They can, in accordance with Article 32, decide to hold an Annual General Meeting or any other General Meeting in more than one location. |
29 |
Notice of General Meetings |
29.1 |
Subject to Article 29.2, we must give at least 21 clear days notice in writing for every Annual General Meeting . For every other General Meeting , other than a General Meeting convened in line with Article 29.2, we must give at least 14 clear days notice in writing . |
29.2 |
We can convene a General Meeting by shorter notice than that specified in Article 29.1, and it will be considered to be properly convened, if: |
(a) |
in the case of an Annual General Meeting , all shareholders , entitled to attend and vote, agree; or |
(b) |
in the case of any other General Meeting , a majority of the shareholders entitled to attend and vote, and who together hold not less than 95 per cent in nominal value of the shares giving that right, agree. |
29.3 |
Any notice of General Meeting must: |
(a) |
say where the meeting is to be held (and, if the meeting will be held at more than one location in accordance with Article 32, state the principal meeting place and any other location under Article 32); |
(b) |
give the date and time of the meeting ; |
(c) |
give the general nature of the business of the meeting ; |
(d) |
say if any resolution will be proposed as a special resolution ; |
(e) |
say that a shareholder who can attend, speak and vote can appoint one or more proxies (who need not be shareholders ) to vote for him or her; |
(f) |
state the address where appointments of proxy are to be delivered; and |
(g) |
state whether the meeting is an Annual General Meeting or any other General Meeting . |
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29.4 |
We must send notices of meetings to the shareholders , except in cases where the Articles or the rights attached to shares state that the holders are not entitled to receive them from us . We must also give notice to the Auditors and Directors . The day we serve the notice , or it is treated as served, and the day of the meeting do not count towards the period of notice . |
29.5 |
In relation to any class of shares , we can decide that only people who are entered on the Register at the close of business on a particular day are entitled to receive such a notice . We will choose that day and it will fall not more than 21 days before we send the notice . |
29.6 |
If we cannot call a General Meeting by sending notices through the post, because the postal service is suspended or restricted in the United Kingdom , the Directors can call the meeting by publishing a notice in at least one United Kingdom national newspaper. Notice published in this way will be treated as being properly served on shareholders who are entitled to receive it. We can still: |
(a) |
make the notice available on our website from the date it appears in the national newspaper until the meeting or any adjourned meeting ends; |
(b) |
serve the notice electronically ; and |
(c) |
if it becomes possible to use the postal service again more than seven days before the meeting , we must send confirmation of the notice through the post to those shareholders who did not receive the notice electronically . |
29.7 |
Unless the Companies Act does not require it, if we receive a request in writing from the number of shareholders specified in the Companies Act and in line with Article 29.8 and the Companies Act , we must send to shareholders : |
(a) |
entitled to receive notice of the next Annual General Meeting , notice of any resolution which can properly be proposed and is intended to be proposed at that meeting ; and |
(b) |
entitled to receive notice of any General Meeting , a statement from the shareholders requesting it of not more than one thousand words about the matter referred to in any proposed resolution or the business to be dealt with at that meeting . |
We will give notice of any resolution and circulate any appropriate statement, to our shareholders who are entitled to have notice of the General Meeting sent to them.
29.8 |
If, before the end of the financial year preceding the next Annual General Meeting , we receive a request (that complies with the requirements of the Companies Act ) to circulate a resolution or statement, and it is in a form acceptable to the Directors , we will send out the resolution or statement without cost to the shareholders requesting it. Otherwise, we may require the shareholders who requested it to deposit or pay a reasonable sum to meet our expenses to circulate the resolution or statement. |
29.9 |
No proceedings at any General Meeting will be invalidated if we accidentally fail to give notice of the meeting or to send an instrument of proxy to any shareholder . |
30 |
Class meetings |
30.1 |
All the Articles relating to General Meetings or meetings apply, with any necessary changes, to a class meeting , but with the following adjustments. |
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(a) |
At least two people who hold (or who act as proxies for) at least one-third of the total nominal value of the existing shares of the class are a quorum . However, if this quorum is not present at an adjourned class meeting, one person who holds shares of the class, or his proxy , is a quorum . |
(b) |
On a poll , the holders of shares will have one vote for every share of the class they hold. |
This is subject to any special rights or restrictions which are attached to any class of shares by the Articles , or when rights are attached to shares in some other way under the Articles .
31 |
Moving a General Meeting at short notice |
31.1 |
If the Directors consider that it is impractical, undesirable or unreasonable, to hold a General Meeting at the place, time or on the date stated in the notice calling the meeting , they can change any or all of these things. If the Directors do this, an announcement of the date, time and place of the rearranged meeting will, if practical, be published in at least one United Kingdom national newspaper and on our website. Notice of the business of the meeting does not need to be given again. The Directors must take reasonable steps to ensure that any shareholder trying to attend the meeting at the original time and place is informed of the new arrangements. If a meeting is rearranged in this way, proxy forms can be delivered, in the way required by Article 51, until 48 hours before the rearranged meeting . The Directors can also move or postpone the rearranged meeting , or both, under this Article 31. |
32 |
Satellite meeting places |
32.1 |
To assist with the organisation and administration of any General Meeting , the Directors may decide that the General Meeting will be held at more than one location. |
32.2 |
For the purposes of these Articles, any General Meeting taking place at two or more locations will be treated as taking place where the chairman of the meeting is in attendance (to be known as the principal meeting place ) and any other location where that meeting takes place is referred to in these Articles as a satellite meeting . |
32.3 |
A shareholder present in person or by proxy at a satellite meeting may be counted in the quorum and can exercise all rights that they would have been able to exercise if they were present at the principal meeting place . |
32.4 |
The Directors can make and change such arrangements as they consider appropriate to: |
32.4.1 |
ensure that all shareholders and proxies for shareholders wanting to attend the meeting can do so; |
32.4.2 |
ensure that all persons attending the meeting are able to take part in the business of the meeting and to see and hear anyone else addressing the meeting ; |
32.4.3 |
ensure the safety of persons attending the meeting and the orderly conduct of the meeting ; and |
32.4.4 |
restrict the numbers of shareholders and proxies at any one location to a number that can be safely and conveniently accommodated there. |
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32.5 |
Whether any shareholder or proxy is entitled to attend a satellite meeting will depend on any arrangements then in force and stated in the notice of meeting or adjourned meeting. |
32.6 |
If the communication equipment fails or if any other arrangements fail for shareholders to take part in the meeting at more than one place, the chairman may adjourn the meeting under Article 38. Such an adjournment will not affect the validity of such meeting , or any business conducted at such meeting up to the point it is adjourned , or any action taken following such a meeting . |
32.7 |
A person (known as a Satellite Chairman ) may be appointed by the Directors to preside at each satellite meeting . Every Satellite Chairman appointed: |
32.7.1 |
will carry out all requests made by the chairman of the General Meeting ; |
32.7.2 |
can take whatever action they think necessary to maintain the proper and orderly conduct of the satellite meeting ; and |
32.7.3 |
will have all powers necessary or desirable to carry out these duties. |
Proceedings at General Meetings
33 |
The chairman of a General Meeting |
33.1 |
The chairman of the Board will be the chairman at every General Meeting , if they are willing and able to take the chair. If the chairman notifies the Directors that they will not attend the General Meeting , the Directors will, in advance of the General Meeting , appoint a Director to chair the meeting . |
33.2 |
Subject to Article 33.1, if we do not have a chairman, or if the chairman is not willing and able to chair the meeting , after waiting 10 minutes from the time that a meeting is due to start, the Directors who are present will choose one of themselves to act as chairman. If there is only one Director present, they will be chairman, if they agree. |
33.3 |
If there is no Director willing and able to be chairman, or if no Director is present within 15 minutes of the time fixed for the meeting , then the shareholders who are personally present at the meeting and entitled to vote will pass an ordinary resolution to decide which one of them is to be chairman. A proxy cannot be appointed as the chairman. |
33.4 |
Any resolution (including any amending resolution) proposed by the chairman of the meeting does not need to be seconded. |
33.5 |
To avoid any doubt, nothing in the Articles restricts or excludes any of the powers or rights of a chairman of a meeting which are given by the general law . |
34 |
Security and other arrangements at General Meetings |
34.1 |
The Directors can put in place any arrangements or restrictions they think necessary to ensure the safety and security of people attending a General Meeting and the orderly conduct of the meeting , including requiring those attending to submit to searches. |
34.2 |
The chairman of a meeting can take any action they consider appropriate for: |
(a) |
the safety of people attending a General Meeting (including searching anyone attending or any other precautions); |
(b) |
proper and orderly conduct at a General Meeting ; or |
(c) |
the meeting to reflect the wishes of the majority. |
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34.3 |
The chairman of the meeting can refuse entry to anyone attending a General Meeting who refuses a security search or will not otherwise comply with any security arrangements or restrictions. |
34.4 |
If anyone has gained entry to a General Meeting and refuses to comply with any security arrangements or restrictions, or disrupts the proper and orderly conduct of the General Meeting , the chairman can at any time, without the consent of the General Meeting , order this person to leave or be removed from the General Meeting . |
34.5 |
The chairman of the meeting can invite any person to attend and speak at the General Meeting who they consider has the knowledge or experience of our business to assist in the deliberations of the meeting . |
34.6 |
The chairmans decision on points of order, matters of procedure or matters arising incidentally out of the business of a General Meeting will be final, as will their decision, acting in good faith, on whether a point or matter is of this nature. |
35 |
Overflow meeting rooms |
35.1 |
The Directors can arrange for any people who cannot be seated in the main meeting room, where the chairman will be, to attend and take part in a General Meeting in an overflow room or rooms. Any overflow room will have appropriate links with the main room as required by the law and will enable audio-visual communication between the meeting rooms throughout the meeting . We will give details of any arrangements under this Article 35 in the notice of the meeting , but if we fail to do this, it will not invalidate the meeting . The Directors can decide how to divide people between the main room and an overflow room. If an overflow room is used, the meeting will be treated as being held, and taking place, in the main room and the meeting will consist of all people who are attending in both the main room and the overflow room. |
36 |
The quorum needed for General Meetings |
36.1 |
Before a General Meeting starts to do business, there must be a quorum present. If there is not, the meeting cannot carry out any business other than appointing a chairman. Unless the Articles say otherwise, a quorum for all purposes is two people who are entitled to attend and vote. |
37 |
The procedure if there is no quorum |
37.1 |
This Article applies if a quorum is not present within 10 minutes of the time fixed for a General Meeting to start or within any longer period of up to one hour which the chairman can decide on or, if during a meeting , a quorum is no longer present. |
37.2 |
If the meeting was called by shareholders , it is dissolved. Any other meeting is adjourned to another day, time and place stated in the notice of meeting . If the notice does not contain these details, the meeting is adjourned to a day, time and place decided by the chairman, not less than 10 days and not more than 28 days later. |
37.3 |
We will give at least 10 clear days notice of any adjourned meeting where the meeting was adjourned due to not being quo rate , and the notice will specify that if two shareholders are present (whatever the number of shares held by them) they will be a quorum . |
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37.4 |
If at the adjourned meeting a quorum (two shareholders ) is not present within five minutes of the time fixed for it, the meeting is dissolved. |
38 |
Adjourning General Meetings |
38.1 |
The chairman of a General Meeting can adjourn the meeting , before or after it has started, and whether or not a quorum is present, if the chairman considers that: |
(a) |
there is not enough room for the number of shareholders who want to attend the meeting ; |
(b) |
the behaviour of the people present prevents, or is likely to prevent, the business of the meeting being carried out in an orderly way; or |
(c) |
an adjournment is necessary for the safety of the people attending the meeting or for any other reason so that the business of the meeting can be properly carried out. |
The chairman does not need the consent of the meeting to adjourn it for any of these reasons. This includes an indefinite adjournment . The adjournment will be to another time, which can be later on the same day or on a new date, and can be to another place. The chairman will decide on these matters.
38.2 |
The chairman of a General Meeting can also adjourn a meeting which has a quorum present, if this is agreed by the meeting . This can be to a time, date and place proposed by the chairman. It includes an indefinite adjournment . The chairman must adjourn the meeting if the meeting directs the chairman to. In these circumstances the meeting will decide how long the adjournment will be, and where it will adjourn to. If a meeting is adjourned indefinitely, the Directors will subsequently fix the time, date and place of the adjourned meeting . |
38.3 |
General Meetings can be adjourned more than once. But if a meeting at which a quorum is present is adjourned for more than 30 days, or indefinitely, we must give at least seven clear days notice for the adjourned meeting in the same way as was required for the original meeting . If a meeting is adjourned for less than 30 days, we do not need to give notice about the adjourned meeting , or about the business to be considered there. Sufficient notice is given if we publish an advertisement in at least one national daily newspaper in the United Kingdom seven clear days before the adjourned meeting . |
38.4 |
An adjourned General Meeting can only deal with business that could have been dealt with at the original meeting before it was adjourned . |
39 |
Amending resolutions |
39.1 |
In the case of a resolution duly proposed as a special resolution , no amendment to that resolution (other than an amendment to correct an obvious error) can be considered or voted on. |
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39.2 |
In the case of a resolution duly proposed as an ordinary resolution , no amendment to that resolution (other than an amendment to correct an obvious error) can be considered or voted on unless: |
(a) |
notice of the terms of the amendment and of the intention to move the amendment have been: |
(i) |
lodged in writing at the registered office ; or |
(ii) |
received electronically , with the notice of meeting , at the address specified for receiving notices in electronic form , |
at least two clear business days before the time appointed for holding the meeting or adjourned meeting at which the resolution is to be proposed; and
(b) |
the chairman of the meeting decides in good faith that it can be considered and voted on. |
39.3 |
If the chairman, acting in good faith, rules an amendment to a resolution out of order, any error in that ruling will not affect the validity of a vote on the original resolution. |
40 |
Proxies, Corporate Representatives and Directors speaking at General Meetings |
40.1 |
Proxies and corporate representatives can speak at a General Meeting . |
40.2 |
A Director who is not a shareholder can still attend and speak at a General Meeting . |
Voting procedures
41 |
All votes decided on a poll |
41.1 |
Substantive Resolutions at a General Meeting will be decided on a poll (whether or not one is demanded) and any Procedural Resolution will be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands ) demanded. |
41.2 |
A poll can be demanded by: |
(a) |
the chairman of the meeting ; |
(b) |
at least five shareholders at the meeting who are entitled to vote (including proxies of shareholders entitled to vote); |
(c) |
one or more shareholders at the meeting who are entitled to vote and who have, between them, at least 10 per cent of the total votes of all shareholders who have the right to vote at the meeting (including proxies for shareholders entitled to vote); or |
(d) |
one or more shareholders who have shares which allow them to vote at the meeting (including proxies of shareholders entitled to vote), where the total amount which has been paid up on these shares is at least 10 per cent of the total sum paid up on all shares which give the right to vote at the meeting . |
41.3 |
A proxy form gives the proxy the authority to demand a poll , or to join others in demanding one. A demand for a poll made by a proxy for a shareholder is treated in the same way as a demand by the shareholder them self. |
41.4 |
A demand for a poll can be withdrawn before the earlier of the time at which the poll is taken and the close of the meeting if the chairman agrees to this. If a poll is demanded, and this demand is then withdrawn, any declaration by the chairman of the result of a vote on that resolution by a show of hands , which was made before the poll was demanded, will stand. If a demand is withdrawn, any other shareholder entitled to demand a poll may do so. |
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42 |
How a poll is taken |
42.1 |
If a poll is taken or demanded in line with the Articles , the chairman of the General Meeting decides where, when and how the poll will be carried out. The result is treated as the decision of the meeting where the poll was taken or demanded, even if the poll is carried out after the meeting . |
42.2 |
The chairman can: |
(a) |
decide that a ballot, voting papers, tickets or electronic means, or any such combination, will be used; |
(b) |
appoint scrutineers (who need not be shareholders ); |
(c) |
adjourn the meeting to a day, time and place which they decide on for the result of the poll to be declared; or |
(d) |
decide a time and place where the result of the poll will be declared. |
42.3 |
On a poll , a shareholder can vote either personally or by his proxy . A shareholder can appoint more than one proxy to attend on the same occasion. If a shareholder votes on a poll , they do not have to use all their votes or cast all their votes in the same way. Unless their appointment provides otherwise, and subject to the Articles , a proxy can vote or not at their discretion on any matter at the meeting . |
42.4 |
A demand for a poll on a Procedural Resolution does not stop a meeting from continuing and dealing with other matters. If a demand for a poll has been withdrawn, the chairman may give such directions as the chairman considers necessary to ensure that the business of the meeting proceeds as if the demand had not been made. |
43 |
Timing of a poll |
43.1 |
A poll can either be taken immediately at the meeting or within 30 days and at a place decided on by the chairman. No notice is required for a poll which is not taken immediately if the time and place it is to be taken are announced at the General Meeting . If the time and place the poll is to be taken are not announced at the meeting , we must give seven clear days notice of the time and place the poll is to be taken. |
44 |
The effect of a declaration by the chairman |
44.1 |
Any declaration by the chairman on a point of order is conclusive. In addition, a corresponding entry in the minute book is conclusive proof of the following declarations by the chairman of the General Meeting : |
(a) |
a resolution has been passed or not passed; or |
(b) |
a resolution has been passed by a particular majority. |
There is no need to prove the validity, number or proportion of votes recorded for or against a resolution.
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Voting rights
45 |
The votes of shareholders |
45.1 |
Subject to Article 45.2 and any special rights or restrictions which are given to any class of shares by, or in line with, the Articles : |
45.1.1 |
When a shareholder is entitled to attend a General Meeting and vote, a shareholder has only one vote on a show of hands . When a duly appointed proxy is entitled to attend a General Meeting and vote, then subject to Article 45.1.2, a duly appointed proxy also has only one vote on a show of hands . |
45.1.2 |
On a show of hands , a duly appointed proxy has one vote for and one vote against a resolution if the proxy has been appointed by more than one shareholder entitled to vote on the resolution, and the proxy has been instructed: |
(i) |
by one or more of those shareholders to vote for the resolution and by one or more other of those shareholders to vote against it; or |
(ii) |
by one or more of those shareholders to vote either for or against the resolution and by one or more other of those shareholders to use his/her discretion as to how to vote. |
45.1.3 |
On a poll, a shareholder has one vote for every share which they hold. On a poll , a duly appointed proxy or a corporate representative who is entitled to be present and to vote, has one vote for every share for which they have been appointed. |
45.2 |
To decide who can attend or vote at a General Meeting and how many votes can be cast, the notice of the meeting must give a time by which people must be entered on the Register in order to be entitled to attend or vote at the meeting . This time must be 48 hours or less before the time fixed for the meeting . In calculating the time periods in this Article 45.2, the Directors can decide to exclude any part of any day which is not a business day . |
46 |
Shareholders who owe us money |
46.1 |
Unless the Articles say otherwise, shareholders who have not paid us all sums relating to their shares which are due at the time of the meeting cannot attend or vote at General Meetings or exercise any other right conferred by being a shareholder in relation to General Meetings . This applies both to attending a meeting personally and to attending by proxy or corporate representative . |
47 |
Votes of shareholders who are of unsound mind |
47.1 |
This Article 47 applies where: |
(a) |
a shareholder is of unsound mind ; and |
(b) |
a court which claims jurisdiction to protect people who are unable to manage their own affairs has made an order detaining a shareholder or appointing a person to manage their property or affairs. |
47.2 |
The person or people appointed to act for the shareholder can vote for the shareholder and exercise other rights at General Meetings . This includes appointing a proxy , voting on a show of hands and voting on a poll . However, this Article 47 only applies if they deliver any evidence which the Directors may require of their authority to do these things to the office where the Register is kept (or at any other place which can be specified in line with these Articles ) at least 48 hours before the relevant meeting (or adjourned meeting ). |
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48 |
The votes of joint holders |
48.1 |
Where a share is held by joint shareholders any one joint shareholder can vote at a General Meeting (either personally or by proxy ). If more than one of the joint shareholders votes (either personally or by proxy ), the only vote which will count is the vote of the person whose name is listed before the other voters on the Register for the share . |
Restrictions on shareholder voting
49 |
Suspending shareholder rights on non-disclosure of interest |
49.1 |
If any shareholder , or any person appearing to be interested in shares held by the shareholder , has been properly served with a notice under Section 793 of the Companies Act which requires information about interests in shares (a Section 793 notice ), and has not supplied us with the information required within 14 days of the date of the notice, then (unless the Directors decide otherwise) this Article 49 will apply. Until they provide the information, the shareholder will not be entitled to attend or vote personally or by proxy or by a corporate representative at a shareholders meeting or to exercise any other right in relation to shareholders meetings as holder of: |
(a) |
the shares covered by the notice (called default shares ); |
(b) |
any further shares which are issued in respect of default shares ; and |
(c) |
any other shares held by the shareholder holding the default shares . |
49.2 |
Any person who acquires shares subject to the restrictions under Article 49.1 is limited by the same restrictions, unless: |
(a) |
the transfer was an approved transfer (see Article 49.9); or |
(b) |
the transfer was by a shareholder who has supplied the information required by the notice under Article 49.1. |
49.3 |
Where the default shares represent 0.25 per cent or more of the existing shares of a class the Directors can, by a notice (a Section 793 Notice ) to the shareholder , direct that: |
(a) |
we retain any dividend or part of a dividend or other money which would otherwise be payable on the default shares (without any liability to pay interest when such money is finally paid to the shareholder ) and the shareholder will not be entitled to elect to receive shares instead of a dividend; and |
(b) |
subject to Article 49.4, no transfer of any of the shares held by the shareholder will be registered unless: |
(i) |
the transfer is an approved transfer (see Article 49.9); or |
(ii) |
the shareholder has supplied the information required and the transfer is of part only of their holding; and |
(iii) |
when presented for registration, the transfer is accompanied by a certificate . This certificate must be in a form satisfactory to the Directors and state that, after due and careful enquiry, the shareholder is satisfied that none of the shares included in the transfer are default shares . |
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49.4 |
Any Section 793 Notice can treat shares of a shareholder in certificated and uncertificated form as separate shareholdings and either apply only to shares in certificated form or to shares in uncertificated form or apply differently to shares in certificated and uncertificated form. In the case of shares in uncertificated form, the Directors can only use their discretion to prevent a transfer if this is allowed by the CREST Regulations . |
49.5 |
We must send a copy of the Section 793 Notice to every person who appears to be interested in the shares covered by the notice, but if we fail to do so, this does not invalidate the notice. |
49.6 |
The effect stated in a Section 793 Notice continues until the information required has been supplied. It ceases to apply when the Directors decide (which they must do within one week of the default being resolved). We must give the shareholder written notice of the Directors decision. |
49.7 |
A Section 793 Notice also ceases to apply to any shares which are transferred by a shareholder in a transfer which would be permitted under Article 49.3 even where a Section 793 Notice restricts transfers. |
49.8 |
For the purposes of this Article 49, a person is treated as appearing to be interested in any shares if the shareholder holding the shares has been served with a notice under Section 793 of the Companies Act and: |
(a) |
the shareholder has named the person as being interested; or |
(b) |
(after taking into account the response of the shareholder to the notice and any other relevant information) we know or have reasonable cause to believe that the person in question is or may be interested in the shares . |
49.9 |
For the purposes of this Article 49, a transfer of shares is an approved transfer if: |
(a) |
it is a transfer of shares to a person offering to buy them or under an acceptance of a take-over offer (as defined in Section 974 of the Companies Act ); or |
(b) |
the Directors are satisfied that the transfer is made following a sale in good faith of the whole of the beneficial ownership of the shares to a party unconnected with the shareholder or with any person appearing to be interested in the shares . This includes a sale made through the London Stock Exchange or any other stock exchange on which the shares are normally traded. For this purpose any associate (as that term is defined in Section 435 of the Insolvency Act 1986) is included among the people who are connected with the shareholder or any person appearing to be interested in the shares . |
49.10 |
For the purposes of this Article 49, interested has the same meaning as in Section 793 of the Companies Act . |
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49.11 |
For the purposes of this Article 49, reference to a person having failed to give us the information required by a Section 793 Notice , or being in default of supplying such information, includes: |
(a) |
their failure or refusal to give all or any part of it; |
(b) |
giving information which they know to be materially false; or |
(c) |
having recklessly given information which is materially false. |
49.12 |
This Article 49 does not restrict in any way the provisions of the Companies Act which apply to failures to comply with notices under Section 793 of the Companies Act . |
Proxies
50 |
Completing proxy forms |
50.1 |
A proxy form can be in any form which is commonly used, or in any other form, which the Directors approve. |
50.2 |
A proxy form must be in writing . A proxy form given by an individual shareholder must be signed by the shareholder appointing the proxy , or by an agent who has been properly appointed in writing or authenticated in line with Article 121. If a proxy is appointed by a company , the form should be either sealed with the companys seal or signed by an officer or an agent who is properly authorised to act for the company or authenticated in line with Article 121. Unless shown otherwise, the Directors are entitled to assume that where a proxy form appears to have been signed by an officer or agent of a company , the officer or agent was authorised to sign by the company , without requiring any further evidence. Signatures or authentication need not be witnessed. |
50.3 |
Subject to the law , all notices convening General Meetings which are sent to shareholders entitled to vote at the General Meeting must be accompanied by a proxy form at our expense. |
50.4 |
If we accidentally fail to send out a proxy form to a shareholder entitled to it (or they do not receive the proxy form ) it will not invalidate any resolution passed or proceedings at the General Meeting to which the proxy form relates. |
50.5 |
A shareholder can appoint more than one proxy to attend, vote and speak at the same meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder . Depositing the proxy form does not prevent a shareholder from attending and voting at the meeting or at any adjournment of it. |
50.6 |
A proxy need not be a shareholder . |
50.7 |
Proxies are appointed for 12 months from the date the proxy form is signed and dated, but the appointment will remain valid after 12 months for the purposes of a poll or an adjourned meeting , if the poll was demanded or the adjournment moved at a meeting held within the 12-month period. |
51 |
Delivering completed proxy forms |
51.1 |
A completed proxy form must be delivered to the place stated in the notice of General Meeting , or in the proxy form , or, if no place is stated, to the office where the Register is kept. If the Directors decide to accept proxies delivered electronically, the proxies must be delivered in the way that the Directors specify. |
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A proxy form must be delivered at least:
(a) |
48 hours before a General Meeting or an adjourned meeting; |
(b) |
24 hours before a poll is taken, if the poll is taken more than 48 hours after it was demanded; or |
(c) |
48 hours before a meeting or an adjourned meeting , if the poll is taken within 48 hours of the meeting or an adjourned meeting . |
In calculating the time periods in this Article 51.1, the Directors can decide to exclude any part of any day which is not a business day .
51.2 |
As far as the law permits, Directors can decide to accept proxies delivered electronically (see Article 51.3), subject to any limitations, restrictions or conditions they decide to apply. We may choose not to apply Articles 51.1 and 51.2 in relation to a proxy form delivered in this way. If a proxy form is signed by an agent, the power of attorney or other authority granted to the agent to sign it, or a copy which has been certified, must be delivered with the proxy form , unless the power of attorney has already been registered with us . |
51.3 |
In relation to any shares in uncertificated form, the Directors can permit a proxy to be appointed electronically in the form of an uncertificated proxy instruction . They can also permit any supplement to, or amendment or withdrawal of, any such instruction by a further uncertificated proxy instruction . The Directors can set out the method of determining when we should consider we received any such instruction. The Directors can treat any such instruction which appears or claims to be sent on behalf of the shareholder as sufficient evidence that the person sending the instruction is authorised to send it on behalf of that shareholder . |
51.4 |
If Article 51 is not met, the proxy will not be able to act for the person who appointed them. |
51.5 |
Where two or more proxy forms are delivered for use by the same shares , we will treat the one which has been delivered last as replacing and revoking the others which have been delivered. |
51.6 |
Unless the proxy form says otherwise, it will be valid at an adjourned General Meeting as well as for the original General Meeting it relates to. |
51.7 |
Once a proxy form relating to more than one meeting (including any adjourned meeting ) has been delivered, it does not need to be delivered for each following meeting it relates to. |
51.8 |
A shareholder can attend and vote at a General Meeting even if they have appointed a proxy to attend, vote and speak at that meeting . However, if they vote in person on a resolution, their appointment of a proxy will not be valid on that resolution. |
52 |
Cancelling a proxys authority |
52.1 |
Any vote cast in the way a proxy form authorises, or any demand for a poll made by a proxy , will be valid even though: |
(a) |
the person who appointed the proxy has died or is of unsound mind ; |
(b) |
the proxy form has been withdrawn; or |
(c) |
the authority of the person who signed the proxy form for the shareholder has been withdrawn. |
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52.2 |
However, this does not apply if notice of the fact has been received at the office where the Register is kept (or at such other place at which the proxy was validly deposited) before: |
(a) |
the General Meeting or adjourned meeting starts; or |
(b) |
the time fixed to take a poll on a later day; |
when the proxy form is used.
53 |
Representatives of companies |
53.1 |
Subject to the Statutes , a company which is a shareholder can authorise one or more persons to act as its representative or representatives at any General Meeting or any class meeting which it is entitled to attend. Each person will be called a corporate representative . |
54 |
Challenging votes |
54.1 |
Any objection to the right of any person to vote must be made at the General Meeting (or adjourned meeting ) at which the vote is cast. This also applies to any objection about the counting of any vote or the failure to count any vote. If a vote is not disallowed at a meeting , it is valid for all purposes. Any objection must be raised with the chairman of the meeting and the chairmans decision is final. |
Directors
55 |
The number of Directors |
55.1 |
There must be at least two Directors (other than alternate directors ). But the shareholders can increase this minimum by passing an ordinary resolution . There is no maximum number of Directors . |
56 |
Qualification to be a Director |
56.1 |
A Director need not be a shareholder . |
57 |
Directors fees |
57.1 |
Under this Article 57.1, each of the Directors , other than a Director acting in an executive capacity , will be paid a fee for their services. The Directors or a committee can decide on the amount, timing and way of paying Directors fees, but the total of the fees paid to all of the Directors (excluding amounts paid as special pay under Article 58, amounts paid as expenses under Article 59 and any payments under Article 60) must not exceed: |
(a) |
£2,000,000 a year; or |
(b) |
any higher sum decided on by an ordinary resolution at a General Meeting . |
57.2 |
The fee will accrue from day to day and any Director holding office as a Director for only part of the period covered by the fee is only entitled to a pro-rata share for that part of the period. |
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58 |
Special pay |
58.1 |
The Directors or any committee can award special pay to any Director who: |
(a) |
acts in an executive capacity ; |
(b) |
serves on any committee ; |
(c) |
performs any other services which the Directors consider to extend beyond the ordinary duties of a Director ; |
(d) |
devotes special attention to the business of NG ; or |
(e) |
goes or lives abroad on our behalf. |
58.2 |
Special pay can take the form of salary, commission or other benefits, or can be paid in some other way (for example by issuing shares ). This is decided on by the Directors or any committee and can be a fixed sum or percentage of profits or otherwise. |
58.3 |
Special pay is additional to fees paid under Article 57.1. |
59 |
Directors expenses |
59.1 |
We can also repay a Directors travelling, hotel and other expenses properly incurred: |
(a) |
to attend and return from shareholders meetings (including any class meetings ); |
(b) |
to attend and return from Directors meetings; |
(c) |
to attend and return from meetings of committees ; or |
(d) |
in other ways in connection with our business. |
60 |
Directors pensions and other benefits |
60.1 |
The Directors or any committee can decide whether to award: |
(a) |
pensions; |
(b) |
annual payments; |
(c) |
gratuities; or |
(d) |
other allowances or benefits |
to any people who are or were Directors , executive officers, officers, or employees of NG or of any subsidiary or former subsidiary of NG , or of any predecessor in business of NG and to any member of their family (including a husband or wife, or former husband or wife) or to any person who is or was dependent on them.
60.2 |
The Directors can decide to contribute (before as well as after they stop receiving a salary or occupy a position for which they receive any form of remuneration) to any scheme, trust or fund or to pay premiums to a third party for these purposes. The Directors can make such payments while the intended beneficiary is a Director of NG or of any of our subsidiaries . They can also make such payments if any intended beneficiary is related to, or depends on (or did depend on), a Director of NG or any of our subsidiaries . |
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60.3 |
The Directors or any committee can arrange for any of these matters to be done by us either alone or working with any other person. |
60.4 |
No Director or former Director is accountable to us or our shareholders for a benefit of any kind given in line with this Article 60. Receiving a benefit of any kind given in line with this Article 60 does not prevent a person from being or becoming a Director . |
61 |
Appointing Directors to various posts |
61.1 |
The Board or any committee can appoint any Director as chairman, or as Chief Executive, or to act in any other executive capacity they decide on. So far as the law allows, they can decide on how long these appointments will be for, and on their terms. Subject to the terms of any of the Directors contracts with us , they can also vary or end their appointments. |
61.2 |
A Director appointed as an executive Director can, in line with Article 58, be paid special pay (by salary, commission, profit sharing or otherwise) in any way the Directors or any committee may decide and either in addition to, or in place of, any fee they receive as a Director under Article 57. |
61.3 |
A Director will automatically stop being chairman or Chief Executive or acting in any other executive capacity if they are no longer a Director . Other executive appointments will only stop if the contract or resolution appointing the Director to a post says so. If a Directors appointment ends under this Article 61.3, this does not prejudice any claim for breach of contract against us which may otherwise apply. |
61.4 |
The Directors can give a Director appointed to an executive post any of the powers which they jointly have as Directors . These powers can be given on terms and conditions decided on by the Directors either in parallel with, or in place of, the powers of the Directors acting jointly. The Directors can change the basis on which such powers are given or withdraw such powers from the executive. |
Changing Directors
62 |
Retiring Directors |
62.1 |
At an Annual General Meeting , any Director who was elected or last re-elected three or more calendar years before the current year will automatically retire from office. |
63 |
Eligibility for re-election |
63.1 |
A retiring Director is eligible for re-election. |
64 |
Re-electing a Director who is retiring |
64.1 |
A Director may be re-elected at the General Meeting at which they retire (as long as they are eligible for re-election and have not told us in writing that they do not want to be re-elected) if the shareholders pass an ordinary resolution to re-elect the Director . |
64.2 |
A Director retiring at a General Meeting retires at the end of that meeting or (if earlier) when a resolution is passed to appoint someone in his place. Where a retiring Director is re-elected the Director continues as a Director without a break. |
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65 |
Electing two or more Directors |
65.1 |
A single resolution for electing two or more Directors is void unless putting the resolution in this form has been approved by an earlier resolution taken at the General Meeting , with no votes cast against. |
66 |
People who can be Directors |
66.1 |
Only the following people can be elected as Directors at a General Meeting : |
(a) |
a Director who is retiring at the meeting ; |
(b) |
a person who is recommended by the Directors ; or |
(c) |
a person who has been proposed by a shareholder (under Article 66.2) who is entitled to attend and vote at the General Meeting . |
66.2 |
A shareholder proposing a Director must deliver to the registered office : |
(a) |
a signed letter stating that they intend to propose another person for election as Director ; and |
(b) |
written confirmation from the person to be proposed that they are willing to be elected. |
These must be delivered at least 14 days before the General Meeting , but not more than 42 days before the meeting (this period includes the date on which the notice is given).
67 |
Filling vacancies and appointing extra Directors |
67.1 |
The Directors can appoint any person as an extra Director or to fill a casual vacancy . Any Director appointed in this way must retire at the first Annual General Meeting after their appointment. At this Annual General Meeting they can be elected by the shareholders as a Director . |
67.2 |
Subject to Article 66, at a General Meeting the shareholders can also pass an ordinary resolution to fill a casual vacancy or to appoint an extra Director . |
67.3 |
Extra Directors can only be appointed under this Article up to the limit (if any) on the total number of Directors under the Articles (or any variation of the limit approved by the shareholders under the Articles ). |
68 |
Removing and appointing Directors by an ordinary resolution |
68.1 |
The shareholders can pass an ordinary resolution to remove a Director , even though their time in office has not ended. This applies whatever else is said in the Articles , or in any agreement between us and the Director concerned. By law , we must be given a special notice of the ordinary resolution . But if a Director is removed in this way, it will not affect any claim for damages for breach of any contract of service they may have. |
68.2 |
Subject to Article 66, the shareholders can pass an ordinary resolution to elect a person to replace a Director who has been removed in this way. If a Director is not appointed under this Article 68.2, the vacancy can be filled under Article 67. |
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69 |
When Directors are disqualified |
69.1 |
Any Director automatically ceases to be a Director in any of the following circumstances. |
(a) |
If a bankruptcy order is made against them. |
(b) |
If they make any arrangement or composition with their creditors or apply for an interim order under Section 253 of the Insolvency Act 1986 in connection with a voluntary arrangement under the Insolvency Act 1986. |
(c) |
If they become of unsound mind . |
(d) |
If they have missed Directors meetings for a continuous period of six months, without permission from the Directors , and the Directors pass a resolution stating that they have ceased to be a Director . |
(e) |
If they cease to be or are banned from being a Director by law . |
(f) |
If they: |
(i) |
give us a letter of resignation; or |
(ii) |
offer to resign and the Directors pass a resolution accepting the offer. |
(g) |
If all the other Directors pass a resolution, or sign a notice, requiring the Director to resign, they will no longer be a Director when the notice is served on them. But if a Director is removed in this way, this will not affect any claim for damages for breach of any contract of service which they may have with us . |
(h) |
If they hold any executive office and this appointment is ended or expires without being renewed within 14 days, and the Directors decide that they should leave their office. |
69.2 |
When a Director stops being a Director for any reason, they will also automatically stop being a member of any committee . Their removal from office will be without prejudice to any claim which they or we might bring over any contract of service between them and us . |
Directors meetings
70 |
Directors meetings |
70.1 |
The Directors can decide when to have meetings and how they will be conducted, and on the quorum . They can also adjourn their meetings. |
71 |
How Directors meetings are called |
71.1 |
Any Director can call a meeting. The Company Secretary must also call a meeting if a Director requests a meeting. |
71.2 |
Meetings are called by serving a notice on all the Directors . This notice can be given to a Director : |
(a) |
personally; |
(b) |
by word of mouth; |
(c) |
by notice in writing (sent to him or her at their last known address); or |
(d) |
in electronic form . |
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71.3 |
Any Director can waive the right to receive notice of any meeting, including one which has already taken place. |
72 |
Quorum |
72.1 |
If no other quorum is fixed, two Directors are a quorum . Subject to these Articles and the law , a meeting at which a quorum is present can exercise all the powers, authorities and discretions of the Directors . |
72.2 |
A person who holds office only as an alternate director will, if the person who appointed them is not present, be counted in the quorum . |
72.3 |
A Director who ceases to be a Director at a Directors meeting can continue to be present and act as a Director and be counted in the quorum until the end of that meeting if no other Director objects and a quorum would not otherwise be present. |
73 |
The chairman of Directors meetings |
73.1 |
If the chairman of the Board is at a meeting, they will chair it. If the chairman notifies the Directors that they will not attend the Directors meeting then the Directors will, in the advance of the Directors meeting, appoint a Director to chair the meeting. |
73.2 |
Subject to Article 73.1, if the chairman of the Board is not present, or if the chairman is not willing to act as chairman, within 10 minutes of the time when the meeting is due to start, the Directors who are present can choose which one of them will chair the meeting. |
74 |
Voting at Directors meetings |
74.1 |
Matters for decision which arise at a Directors meeting will be decided by a majority vote. If votes are equal, the chairman of the meeting has a second, casting vote. Directors can act even if there are vacancies. |
74.2 |
The remaining Directors can continue to act even if one or more of them stops being a Director . But if the number of Directors falls below the minimum which applies under Articles 55 and 72 (including any variation of this minimum which is approved by an ordinary resolution of shareholders ), the remaining Director can only either: |
(a) |
appoint further Directors to make up the shortfall; or |
(b) |
call a General Meeting . |
74.3 |
If no Directors are willing or able to act under this Article 74, any two shareholders can call a General Meeting to appoint extra Directors . |
75 |
Directors meetings by video or web conference and phone |
75.1 |
Any or all of the Directors , or members of a committee , can take part in a meeting of the Directors or of a committee by taking part in a video or web conference or by using a conference phone or similar equipment designed to allow everybody to take part in the Directors meeting. |
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75.2 |
Taking part in this way will be counted as being present at the Directors meeting. A Directors meeting which takes place by way of video or web conference, conference phone or similar equipment will be treated as taking place where most of the participants are. If there is no largest group, Directors meetings will be treated as taking place where the chairman is. |
75.3 |
A Directors meeting held in the way described in Article 75.1 will be valid as long as a quorum is present in one single place, or in places connected by way of video or web conference, telephone conference or similar equipment. |
76 |
Resolutions in writing |
76.1 |
This Article 76 applies to a written resolution which is signed or confirmed electronically by the minimum number of Directors required to make a Directors meeting or a meeting of a committee quo rate . This kind of resolution is just as valid and effective as a resolution passed by those Directors at a meeting or committee meeting which is properly called and held. |
76.2 |
The resolution can be passed using several copies of a document, if each document is signed by one or more Directors , or each Director confirms their agreement electronically . These copies can be sent electronically . A resolution is not adopted unless the minimum number of Directors to make the meeting or committee meeting quo rate have signed it or confirmed their agreement electronically. |
76.3 |
A resolution signed by an alternate director need not also be signed by the person who appointed them. Also, a resolution signed by the person who appointed an alternate director need not also be signed by the alternate director in that capacity. |
76.4 |
A written resolution will be valid when it is signed by the last Director . |
76.5 |
The resolution can be: |
(a) |
in the form of a letter; |
(b) |
in electronic form (as long as it is in writing ); or |
(c) |
in any other way the Directors may approve. |
77 |
The validity of Directors actions |
77.1 |
Everything which is done by: |
(a) |
the Board ; |
(b) |
a committee ; |
(c) |
a Director ; |
(d) |
a person acting as a Director ; or |
(e) |
a member of a committee ; |
will be valid even though it is discovered later that any Director , or person acting as a Director , was not properly appointed.
77.2 |
Article 77.1 also applies if it is discovered later that anyone was disqualified from being a Director , or had stopped being a Director , or was not entitled to vote. |
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77.3 |
In any of the cases set out above, anything done in favour of anyone dealing with us in good faith will be as valid as if there was no defect or irregularity of the kind referred to in this Article 77. |
Directors interests
78 |
Authorising Directors interests |
78.1 |
For the purposes of Section 175 of the Companies Act , the Directors can authorise any matter which: |
(a) |
would or could be a breach of a Directors duty under that section; or |
(b) |
could result in a breach of a Directors duty under that section. |
This authorisation will avoid a situation arising in which the Director has, or could have, a direct or indirect interest that conflicts, or could conflict, with our interests.
78.2 |
For authorisation of a matter under this Article to be effective: |
(a) |
the matter in question must have been proposed in writing for consideration at a Board meeting, in line with the Boards normal procedures or in any other way the Directors may decide; |
(b) |
any quorum requirement at the Board meeting when the matter is considered must be met without counting any Interested Directors ; and |
(c) |
the matter must be agreed without the Interested Directors voting, or would have been agreed if the votes of the Interested Directors had not been counted. |
78.3 |
Any matter authorised under this Article will include any existing or potential conflict of interest which it is reasonable to expect will arise out of the authorised matter. |
78.4 |
Any authorisation of a matter under this Article will be subject to any conditions or limitations that the Board decides. The Board can decide the conditions or limitations at the time authorisation is given, or later on, and can end them at any time. A Director must comply with any obligations the Directors impose on him or her after a matter has been authorised. |
78.5 |
A Director does not have to hand over to us any benefit he or she receives (or a person connected with them receives) as a result of anything the Board has authorised under this Article. No contract, transaction or arrangement of the type described in this Article can be set aside because of any Directors interest or benefit. |
79 |
Directors may have certain interests |
79.1 |
Subject to complying with Article 79.2, a Director can have the following interests. |
(a) |
A Director (or a person connected with them) can be a director, officer or employee of, or have an interest in (including holding shares) any Relevant Company . |
(b) |
A Director (or a person connected with them) can have an interest in any Relevant Company we have an interest in, or be a party to a contract with that company. |
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(c) |
A Director (or a person connected with them, or any firm the Director is a partner, employee or shareholder of) can do professional work for any Relevant Company (other than as an Auditor ) whether or not they are paid for the work. |
(d) |
A Director can have an interest if it is unreasonable to expect that it will result in a conflict of interest. |
(e) |
A Director can have an interest, transaction or arrangement which may result in another interest which they do not know about. |
(f) |
A Director may have an interest in any matter authorised under Article 78. |
(g) |
A Director may have any other interest authorised by ordinary resolution . |
No authorisation under Article 78 is required for any interests under this Article 79.1.
79.2 |
The Director must declare the nature and extent of any interest allowed under Article 79.1, but which does not fall within Article 79.3. They must do this at a Board meeting or by sending notice in writing to other Directors electronically or otherwise. If a Director: |
(a) |
has an interest in a company and is interested in any transaction or arrangement with that company; or |
(b) |
is connected with a person and is interested in a transaction with that person, |
they must declare the nature and extent of any interest and give such notice at a Board meeting.
79.3 |
A Director does not need to declare an interest: |
(a) |
falling within paragraph (d) or (e) or (f) of Article 79.1; |
(b) |
if the other Directors already know about the interest (and for this purpose the other Directors will be treated as knowing about the interest if it is reasonable to expect they know about it); or |
(c) |
if the interest concerns the terms of their service contract (as defined in Section 227 of the Companies Act ) that have been or are to be considered at a Board meeting or at a committee meeting of Directors appointed under these Articles to consider the terms. |
79.4 |
A Director does not have to hand over to us any benefit he or she (or a person connected with them) receives: |
(a) |
from any contract or employment with, or interest in, any Relevant Company ; or |
(b) |
for any payment as referred to in Article 79.1. |
No contract, transaction or arrangement of the type described above can be set aside because of any Directors interest or benefit.
79.5 |
In this Article each of the following is a Relevant Company : |
(a) |
NG ; |
(b) |
a subsidiary of NG ; |
(c) |
any holding company of NG or a subsidiary undertaking of any such holding company ; |
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(d) |
any company promoted by NG ; or |
(e) |
any company in which NG is interested. |
80 |
Restrictions on quorum and voting |
80.1 |
Unless this Article says otherwise, and regardless of whether the interest is one which is authorised under Article 78 or allowed under Article 79, a Director cannot vote (and if he or she does, their vote will not be counted) on a resolution about a contract in which they (or a person connected with them) have an interest. |
80.2 |
A Director cannot be counted in the quorum for a Board meeting in relation to any resolution on which they are not entitled to vote. |
80.3 |
If the law allows, a Director can (unless they have some other interest as well as an interest allowed by this Article) vote and be counted in the quorum on a resolution concerning a contract: |
(a) |
in which the Director has an interest which they do not know about; |
(b) |
in which the Director has an interest which it is unreasonable to expect will result in a conflict of interest; |
(c) |
in which the Director has an interest only because they hold our shares , debentures or other securities , or by reason of any other interest in or through us ; |
(d) |
which involves giving any security, guarantee or indemnity to the Director or any other person for: |
(i) |
money lent or obligations incurred by the Director, or by any other person; |
(ii) |
at our request, or for our benefit or the benefit of any of our subsidiaries ; or |
(iii) |
a debt or other obligation which is owed by us or any of our subsidiaries to that other person if the Director has taken responsibility for all or any part of that debt or obligation by giving a guarantee, security or indemnity ; |
(e) |
where we or any of our subsidiaries are offering any shares, debentures or other securities for subscription or purchase: |
(i) |
to which the Director is or may be entitled as a holder of our securities ; or |
(ii) |
where the Director will be involved in the underwriting or sub-underwriting ; |
(f) |
relating to any other company in which the Director has an interest, directly or indirectly (including holding a position in that company ) or is a shareholder , creditor, employee or is otherwise involved in that company . These rights do not apply if the Director owns one per cent or more of that company or of the voting rights in that company ; |
(g) |
relating to an arrangement for the benefit of our employees or former employees or any of our subsidiaries which only gives the Directors the same benefits that are generally given to the employees or former employees the arrangement relates to; |
(h) |
relating to us buying or renewing insurance for any liability for the benefit of Directors and others; |
(i) |
which gives Directors indemnities ; |
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(j) |
relating to funding expenditure by any Director or Directors : |
(i) |
on defending criminal, civil or regulatory proceedings or actions against the Director or the Directors ; |
(ii) |
in connection with an application to the court for relief; or |
(iii) |
on defending the Director or the Directors in any regulatory investigations; |
(k) |
which enables any Director or Directors to avoid incurring expenditure as described in paragraph (j); and |
(l) |
in which the Directors interest, or the interest of Directors generally, has been authorised by an ordinary resolution . |
80.4 |
This Article 80 applies if the Directors are considering proposals to appoint two or more Directors to positions with us or any company we are interested in. It also applies if the Directors are considering setting or changing the terms of the appointment. These proposals can be split up to deal with each proposed Director separately. If this is done, each proposed Director can vote and be included in the quorum for each resolution, except the one concerning them. |
80.5 |
If any question comes up at a meeting about whether a Director has a material interest or whether they can vote or be counted in the quorum , and the Director does not agree to abstain from voting on the issue or not be counted in the quorum , the question will be referred to the chairman of the meeting . The chairmans ruling about the Director is conclusive, unless the nature or extent of the Directors interests has not been fairly disclosed to the Board . If the chairman is the Director in question, the question will be decided by a resolution of the Board (the chairman will be counted in the quorum but will not vote on the matter) and the resolution will be final unless the nature or extent of the chairmans interest (so far as it is known to them) has not been fairly disclosed to the Board . |
81 |
Confidential information |
81.1 |
Subject to Article 78, if a Director receives information for which he or she owes a duty of confidentiality to a person other than us , and they did not receive the information because of their position as a Director , they will not be required to: |
(a) |
disclose the confidential information to the Board , or to any of Directors , officers or employees; or |
(b) |
use or apply the confidential information in any other way in connection with their duties as a Director . |
81.2 |
A duty of confidentiality may arise when a Director has, or could have, a direct or indirect interest that conflicts, or may conflict, with our interests. This Article 81 will apply only if the conflict arises out of a matter which has been authorised under Article 78 or falls within Article 79. |
81.3 |
This Article does not affect any equitable principle (rules of fairness) or rule of law which may excuse or release the Director from disclosing information, in circumstances where disclosure may otherwise be required under this Article. |
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82 |
Directors interests - general |
82.1 |
For the purposes of Articles 78 to 82: |
(a) |
an interest of a person who is connected with a Director will be treated as an interest of the Director ; and |
(b) |
Section 252 of the Companies Act will determine whether a person is connected with a Director . |
82.2 |
Where a Director has an interest which it is reasonable to expect will result in a conflict of interest, the Director will, if asked to do so by the Board , take any additional steps that are necessary or desirable to manage the conflict of interest. These steps can include complying with any procedures laid down by the Board to manage conflicts of interest generally, or carrying out any specific procedures approved by the Board for managing the situation or matter in question, including (without limitation) the Director : |
(a) |
being absent from any Board meetings where the relevant situation or matter is to be considered; and |
(b) |
not being given access to documents or information made available to the Board generally in relation to such a situation, or arranging for the documents or information to be reviewed by a professional adviser to determine whether it is appropriate for him or her to have access to such documents or information. |
82.3 |
By passing an ordinary resolution , the shareholders can ratify any contract not properly authorised because it breached any of the provisions in Articles 78 to 82. |
Minutes
83 |
Minutes |
83.1 |
The Directors must make sure that minutes are made in the appropriate books: |
(a) |
recording the appointment of officers made by the Directors ; |
(b) |
recording the proceedings of shareholder meetings and meetings of the Directors and committees ; and |
(c) |
recording in each case the names of the Directors present. |
83.2 |
Subject to the law , the minutes will be a sufficient record of the meeting if signed by the chairman. |
Directors committees
84 |
Delegating powers to committees |
84.1 |
The Directors can delegate any of their powers, or discretions, to committees of one or more Directors . This includes powers or discretions relating to Directors pay or giving benefits to Directors . If the Directors have delegated any power or discretion to a committee , any references in these Articles to using that power or discretion include its use by the committee . Any committee must comply with any regulations laid down by the Directors . These regulations can require or allow people who are not Directors to be co-opted onto the committee , and can give voting rights to co-opted members. |
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84.2 |
Unless the Directors decide not to allow this, a committee can sub-delegate powers and discretions to sub-committees. References in these Articles to committees include sub-committees permitted under this Article 84. |
85 |
Committee procedure |
85.1 |
If a committee includes two or more Directors , the Articles which regulate Directors meetings and their procedure will also apply to committee meetings (if they can apply to committee meetings), unless these are inconsistent with any regulations for the committee which have been laid down under Article 84.1. |
Directors powers
86 |
General powers of Directors |
86.1 |
The Directors manage our business and affairs. Subject to the Statutes , these Articles , and any regulation made by special resolution which affects their powers, the Directors will exercise all powers other than those we are required to exercise in a General Meeting . No regulation made by special resolution will invalidate any act previously carried out by the Directors which would have been valid if the regulation had not been made. The general powers granted to the Directors by this Article 86.1 will not be limited or restricted by any special authority or power given to the Directors by any of the other provisions in these Articles . |
87 |
Provision for employees if we cease or transfer our business |
87.1 |
If we cease or transfer to any person the whole or part of the undertaking of NG (or the whole or part of the undertaking of any of our subsidiaries ), the Directors may make provision for the benefit of our employees or former employees (or the employees or former employees of that subsidiary) other than directors, former directors, or shadow directors. |
88 |
The power to appoint attorneys and agents |
88.1 |
The Directors can appoint anyone (including the members of a group which changes over time) as our attorneys or agents by granting a power of attorney or by authorising them in some other way. The attorneys or agents can either be appointed directly by the Directors , or the Directors can give someone else the power to appoint attorneys or agents. The Directors can decide on the purposes, powers, authorities and discretions of attorneys or agents. But they cannot give an attorney or agent any power, authority or discretion which the Directors do not have under these Articles . |
88.2 |
The Directors can decide how long a power of attorney or authority will last for, and they can attach any conditions to it. The power of attorney or authority can also include any provisions which the Directors decide on for the protection and convenience of anybody dealing with the attorney or agent. The power of attorney can also allow the attorney to grant any or all of their power, authority or discretion to any other person. |
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88.3 |
For the purposes of this Article 88 but subject to Article 88.1, an attorney can be appointed by: |
(i) |
two Directors ; or |
(ii) |
a Director and the Company Secretary ; or |
(iii) |
a Director in the presence of a witness who confirms the signature of the Director. |
An agent can be appointed by a Director or the Company Secretary .
89 |
Local boards |
89.1 |
The Directors can establish any local boards or agencies for managing any of our affairs, either in the United Kingdom or elsewhere. |
89.2 |
The Directors can: |
(a) |
appoint members of these local boards, or any managers or agents; |
(b) |
fix their remuneration, and |
(c) |
delegate to any local board, manager or agent any of the Directors powers, authorities and discretions, including the power to sub-delegate. |
89.3 |
The Directors can authorise the members of any local boards to fill any vacancies and to act despite any vacancies. |
89.4 |
Any appointments or delegations can be made under any terms that the Directors think fit. The Directors can remove any person appointed in this way, and end or vary any such delegation. No person dealing in good faith with the local board or agency will be affected if they have not received notice of any termination or variation of the appointment or delegation. |
90 |
Using the title Director |
90.1 |
A person who is employed by, or occupies an office with NG may be given a title which includes the word Director. This does not mean that the person is a Director of NG or that the person can act as a Director of NG or be deemed to be a Director of NG under these Articles . |
91 |
Signatures on cheques |
All cheques, promissory notes, drafts, bills of exchange and other negotiable or transferable instruments , and all receipts for money paid to us , can be signed, drawn, accepted, endorsed or made legally effective in any way the Directors decide by passing a resolution.
92 |
Borrowing powers |
92.1 |
So far as the Companies Acts allow, the Directors can exercise all our powers to: |
(a) |
borrow money; |
(b) |
issue ( subject to the provisions of the Companies Acts dealing with authority to allot debentures convertible into shares ) debentures and other securities ; and |
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(c) |
give any form of: |
(i) |
guarantee; and |
(ii) |
security, either outright or as collateral and over all or any of our undertakings, property and assets ; |
for any or our debts, liabilities or obligations or those of any third party.
93 |
Borrowing restrictions |
93.1 |
The Directors must: |
(a) |
limit our Borrowings ; and |
(b) |
exercise all voting and other rights or powers of control we have over our subsidiary undertakings ; |
to make sure that the total amount of all Borrowings by the Group outstanding at any time (excluding any borrowings owed by one member of the Group to another) will not be more than £35,000,000,000 or any other amount approved by shareholders by an ordinary resolution at a General Meeting .
This limitation on Borrowings will only affect subsidiary undertakings to the extent that the Directors can restrict the Borrowings of the subsidiary undertakings by exercising the rights or powers of control which we have over our subsidiary undertakings . We can consent in advance to exceeding the borrowing limit by passing an ordinary resolution at a General Meeting .
93.2 |
In this Article: |
(a) |
Group means NG , its subsidiaries and subsidiary undertakings , other than those not consolidated in NGs group accounts in line with Section 402 of the Companies Act ; |
(b) |
minority proportion means the proportion of the issued equity share capital of a partly-owned subsidiary which is not, for the time being, beneficially owned within the Group ; and |
(c) |
borrowings means the aggregate amount (combined total) of all liabilities and obligations of the Group which, in line with the accounting bases and principles of the Group , are treated as borrowings in the latest audited consolidated balance sheet (see Article 93.2(d)) of the Group and will include: |
(i) |
money borrowed from outside the Group by a partly-owned subsidiary (less a proportion equal to the minority proportion ); and |
(ii) |
the proportion of money (equal to the minority proportion ) borrowed by a member of the Group from a partly-owned subsidiary of the Group . |
Borrowings do not include:
(i) |
money borrowed by one member of the Group to repay (with or without a premium), within six months of being borrowed, all or part of the outstanding borrowings owed by another member of the Group ; |
(ii) |
for six months from the date on which a company becomes a subsidiary undertaking of the Group , an amount equal to money borrowed by that company , and which is outstanding at the date when it becomes a member of the Group ; |
(iii) |
for six months from the date on which a company is acquired by a member of the Group , an amount secured on an asset of that company, and which is outstanding at the date of acquisition; and |
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(iv) |
money beneficially owned by a member of the Group which is deposited with a person who is not a member of the Group and which must be repaid on, or within three months of, a demand (less, in the case of a partly-owned subsidiary of the Group , a proportion equal to the minority proportion ). |
If the amount of Borrowings is being calculated in connection with a transaction involving a company becoming or ceasing to be a member of the Group , the amount is to be calculated as if the transaction had already occurred.
The aggregate of the following will be credited against the money borrowed:
(i) |
cash in hand of the Group ; |
(ii) |
cash deposits and the balance on each current account of the Group with banks in the United Kingdom (and elsewhere if this applies) if the remittance of the cash to the United Kingdom is not prohibited by any law , regulation, treaty or official directive; |
(iii) |
the amount of all short-term assets that might be included in Investments short-term loans and deposits in a consolidated balance sheet of the Group , prepared on the date of the relevant calculation in line with the principles with which the latest audited balance sheet was produced; and |
(iv) |
the amount of any cash or short-term assets which are securing the repayment of any amount borrowed by the Group deposited or otherwise placed with the trustee or similar entity in respect of the relevant borrowing. |
Where the aggregate principal amount of Borrowings required to be taken into account for the purposes of this Article 93 is being calculated on any particular date, the following will apply:
(i) |
Money borrowed by NG or any subsidiary undertaking expressed or calculated in a currency other than sterling will be converted into sterling using the current rate of exchange, when preparing the audited balance sheet which forms the basis of the calculation of the Borrowings . Or, if the calculation did not involve the relevant currency, the Auditors can refer to the rate of exchange, or approximate rate of exchange, they consider appropriate on the date the audited balance sheet was prepared. |
(ii) |
If, under the terms of any borrowing, the amount of money needed to discharge the principal amount of the borrowing in full if it fell to be repaid (at the option of NG or by reason of default) is less than the amount that would otherwise be taken into account for such borrowing, for the purpose of this Article 93, the amount of the borrowing to be taken into account will be the lesser amount. |
(d) |
Audited consolidated balance sheet means the audited consolidated balance sheet of the Group prepared in line with the law for the relevant financial year. |
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93.3 |
A certificate or report given by a person chosen by the Directors certifying or reporting on the total amount of Borrowings by the Group outstanding at a particular time will be conclusive evidence of that amount. However, the Directors can rely on a good-faith estimate of the total amount of Borrowings at any time and if, as a result, the borrowing limit stated in Article 93.1 is accidentally exceeded, an amount of borrowings equal to the excess can be disregarded until six months after the date on which the Directors became aware that such a situation had or may have arisen. |
93.4 |
No lender or other person dealing with the Group needs to see or enquire if we are observing the borrowing limit imposed by Article 93.1. No debt incurred or security given in excess of this borrowing limit will be invalid or ineffective unless the lender or the recipient of the security was given notice at the time when the debt was incurred or security given, that the limit had been or would be exceeded as a result. |
Alternate directors
94 |
Alternate directors |
94.1 |
Any Director can appoint any person (including another Director ) to act in their place (this person is called an alternate director ). These appointments need the approval of the other Directors , unless the proposed alternate director is another Director . A Director appoints an alternate director by delivering a signed appointment (or in any other way approved by the Directors ) to us . An alternate director need not be a shareholder . |
94.2 |
The appointment of an alternate director ends if the Director appointing them ceases to be a Director , unless that Director retires at a General Meeting at which the Director is re-elected under Article 64. A Director can also remove their alternate director by delivering a signed notice (or in any other way approved by the Directors ) to us . An alternate director can also be removed as an alternate director by a resolution of the Directors . |
94.3 |
An alternate director is entitled to receive notices of Directors meetings once they have given us an address, electronic address or fax number where we can serve notices . They are entitled to attend and vote as a Director at any meeting where the Director appointing them is not present and generally to perform all the functions of the Director appointing them as an alternate director . If the alternate director is a Director or attends any meeting as an alternate for more than one Director , they will have one vote for each Director they act as an alternate for, as well as their own vote as a Director . However, they may not be counted more than once for the purposes of the quorum . If the person who appointed them is temporarily unable to act through ill health or disability, the signature of the alternate director to any resolution in writing of the Directors is as effective as the signature of the person who appointed them. |
94.4 |
If the Directors decide to allow this, Article 94.3 also applies to any meeting of a committee that the person who appointed them is a member of. |
94.5 |
An alternate director will alone be responsible to us for their own actions and mistakes. Except as said in this Article 94, an alternate director : |
(a) |
does not have power to act as a Director ; |
(b) |
is not considered to be a Director for the purposes of the Articles ; |
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(c) |
is not considered to be the agent of the person who appointed them; and |
(d) |
cannot appoint an alternate director . |
94.6 |
If the law allows, an alternate director is entitled to: |
(a) |
contract; |
(b) |
benefit from contracts or arrangements or transactions; |
(c) |
be repaid expenses; and |
(d) |
be indemnified to the same extent as if the alternate director were a Director . |
However, the alternate director is not entitled to receive any pay from us , except for any pay we would otherwise pay to the person who appointed them but which they had told us , in writing , to pay to their alternate or unless we decide otherwise by ordinary resolution .
The Company Secretary
95 |
The Company Secretary |
95.1 |
The Company Secretary is appointed by the Directors . The Directors decide on the terms and period of their appointment as long as the law allows this. The Board can also remove the Company Secretary , but this does not affect any claim for damages against us for breach of any contract of employment they may have. The Directors may appoint two or more people to be joint C ompany Secretaries . One or more deputy and/or assistant Company Secretaries may also be appointed. |
The Seal
96 |
The Seal |
96.1 |
The Directors are responsible for arranging for the Seal and any securities seal to be kept safely. The Seal and any securities seal can only be used with the authority of the Board or a duly-authorised committee of the Board . The securities seal can be used only for sealing securities we issue in certificated form and sealing documents we issue to create or certify securities . |
96.2 |
Subject to the provisions of these Articles and unless the Board or a duly authorised committee of the Board decide otherwise, every document which is sealed using the Seal must be signed personally by: |
(a) |
one Director and the Company Secretary; |
(b) |
two Directors ; or |
(c) |
a Director in the presence of a witness who confirms the signature of the Director . |
96.3 |
A committee duly authorised by the Board for the purposes of this Article 96 can consist entirely or partly of people other than Directors . Other than the provisions of Articles 83.1(a) and (b), Articles 83 and 76 will apply to this committee . |
96.4 |
Where a signature is required to witness the Seal , the Directors can decide that the witness need not sign the document personally but that their signature can be printed on it mechanically, electronically or in any other way the Directors approve. |
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96.5 |
Securities and documents which have the securities seal stamped on them do not need to be signed unless the Directors or the law require this. |
96.6 |
The Directors can use all the powers given by law relating to official seals to be used abroad. |
96.7 |
Our certificates for debentures or other securities may be printed in any way and may be sealed or signed for (or both) in any way allowed by these Articles . |
96.8 |
As long as it is allowed by law , any document we agree to that is signed by: |
(a) |
one Director and the Company Secretary ; |
(b) |
two Directors; or |
(c) |
a Director in the presence of a witness who confirms the signature of the Director, |
(d) |
will be as effective as if the Seal had been used. However, a document intended as a deed must not be signed in this way without the authority of the Directors or of a committee authorised by the Directors to give such authority. |
Authenticating documents
97 |
Establishing that documents are genuine |
97.1 |
Any Director , or the Company Secretary , has power to authenticate any of the following, and to certify copies or extracts from them as true copies or extracts: |
(a) |
any documents relating to our constitution; |
(b) |
any resolutions passed by the shareholders , or by the Directors or by a committee ; and |
(c) |
any books, documents, records or accounts which relate to our business. |
97.2 |
When any books, documents, records and accounts are not kept at the registered office , our officer who holds them is treated as a person who has been authorised by the Directors to authenticate any of them, and to provide certified copies or extracts from them. |
97.3 |
This Article 97.3 applies to a document which appears to be a copy of a resolution or an extract from the minutes of any meeting, and which is certified as a copy or extract as described in Article 97.1 or 97.2. This document is conclusive evidence for anyone who deals with us on the strength of the document that: |
(a) |
the resolution has been properly passed; or |
(b) |
the extract is a true and accurate record of the proceedings of a valid meeting. |
Reserves
98 |
Setting up reserves |
98.1 |
The Directors can set aside any of our profits and hold them in a reserve or use these sums for any legal purpose. Sums held in a reserve can either be used in our business or be invested. The Directors can divide the reserve into separate funds for special purposes and alter the funds the reserve is divided into. The Directors can also carry forward any profits without holding them in a reserve . The Directors must comply with the legal restrictions which relate to reserve funds . |
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Dividends
99 |
Final dividends |
99.1 |
By law , the Directors can recommend the amount of any final dividend . The shareholders can then declare final dividends by passing an ordinary resolution . No dividend can exceed the amount recommended by the Directors . |
100 |
Fixed and interim dividends |
100.1 |
By law , if the Directors consider that our profits justify dividend payments, they can: |
(a) |
pay the fixed dividends on any class of shares carrying a fixed dividend on the dates set down for paying these dividends; and |
(b) |
pay interim dividends on shares of any class of the amounts, and on the dates and for the periods they decide. |
But no interim dividend will be paid on shares which carry deferred or non-preferred rights if, at the time of payment, any preferential dividend is in arrears (on any one of them).
100.2 |
If the Directors act in good faith, they are not liable to any shareholders who suffer a loss because the Directors have paid a lawful dividend under this Article 100 on other shares which rank equally with or behind their shares . |
101 |
Dividends not in cash |
101.1 |
If the Directors recommend this, the shareholders can pass an ordinary resolution to direct all or part of a dividend to be paid by distributing specific assets (and in particular paid-up shares or debentures of any other company ). The Directors will give effect to such a resolution. Where any difficulty arises on distributing or valuing the assets , the Directors can settle it as they decide. In particular, they can: |
(a) |
issue fractional certificates (or ignore fractions); |
(b) |
fix the value of assets for distribution purposes; |
(c) |
subject to the law and, in the case of shares held in uncertificated form, the systems rules , authorise and instruct any person to sell and transfer any fractions; |
(d) |
pay cash of a similar value to adjust the rights of people entitled to the dividend; and |
(e) |
transfer any assets to trustees for people entitled to the dividend. |
102 |
Deducting amounts owing from dividends and other money |
102.1 |
If a shareholder owes any money relating to shares , the Directors can deduct any of this money from: |
(a) |
any dividend on any shares held by the shareholder ; or |
(b) |
any other money payable by us to the shareholder in connection with the shares . |
Money deducted in this way can be used to pay amounts owed to us in connection with the shares .
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103 |
Payments to shareholders |
103.1 |
Any dividend or other money payable in cash (whether in sterling or foreign currency) relating to a share can be paid: |
(a) |
by cheque or warrant or any other similar financial instrument made payable to the shareholder who is entitled to it and sent direct to their registered address. In the case of joint shareholders , the cash will be sent to the shareholder who is first named in the Register and sent direct to their registered address. The cash can also be sent to someone else named in a written instruction from the shareholder (or from all joint shareholders ); |
(b) |
in the case of shares in uncertificated form, by the use of a relevant system (if authorised by the shareholder ); |
(c) |
by inter-bank transfer or other electronic means to an account named in a written instruction from the person receiving the payment; or |
(d) |
in some other way agreed between the shareholder (or all joint shareholders ) and us . |
103.2 |
For joint shareholders , or people jointly and automatically entitled to shares by law , we can rely on a receipt for a dividend or other money paid on shares from any one of the joint shareholders . |
103.3 |
Cheques and warrants are sent, and payment in any other way is made, at the risk of the people who are entitled to the money. We are treated as having paid a dividend if such a cheque or warrant is cleared or if a payment using a relevant system or bank transfer or other electronic means is made in line with our instructions. We will not be responsible for a payment which is lost or delayed. If any cheque or warrant or related tax voucher has been, or is alleged to have been, lost, stolen or destroyed, the Directors may issue a replacement cheque or warrant or related tax voucher if the person entitled to the money requests this and pays our administrative expenses for complying with their request. |
103.4 |
Unless the rights attached to any shares , or the terms of any shares or the Articles say otherwise, a dividend, or any other money payable in respect of a share , can be paid in whatever currency the Directors decide, using an appropriate exchange rate selected by the Directors for any currency conversions. The Directors can also agree how and when the amount to be paid in the other currency will be calculated and paid, and for us or any other person to pay any costs involved. |
103.5 |
No dividend or other sum payable by us on or for our shares carries a right to interest from us unless the rights of the shares provide otherwise. |
103.6 |
If the person entitled to the dividend is one of our employees or one of our subsidiaries , the cheque or warrant may be sent to that person through our internal post system or that of our subsidiary . |
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104 |
Record dates for payments and other matters |
104.1 |
Any dividend or distribution can be paid to the shareholders shown on the Register at the close of business on a particular day. The date must be stated in the resolution passed for payment of the dividend or providing for the distribution. The payment will be based on the number of shares registered on that day. This Article 104 applies whether what is being done is the result of a resolution of the Directors or a resolution passed at a General Meeting . The date stated for payment can be before any relevant resolution was passed. This Article 104 does not affect the rights between past and present shareholders to payments or other benefits. |
105 |
Dividends which are not claimed |
105.1 |
The Directors can invest a dividend or use it in some other way for our benefit if it has not been claimed for one year after the passing of either: |
(a) |
the resolution at a General Meeting declaring that dividend; or |
(b) |
the resolution of the Directors providing for payment of that dividend; |
(whichever is later).
If the Directors decide to pay unclaimed dividends into a separate account, we will not be a trustee of the money and will not be liable to pay any interest on it. Any dividend which has not been claimed for 12 years after the date on which it was declared or became due for payment will be forfeited and belong to us .
105.2 |
We can stop paying dividends or other monies payable by cheque or other payment order if the cheques or other payment orders for two dividends or other monies payable in a row are sent back or not cashed. This also applies if, following one such occasion, reasonable enquiries have failed to establish any new postal or delivery address for the shareholder or appropriate details for making payment in any other way. We can start paying dividends in this way again if the shareholder or a person automatically entitled to the shares by law claims those dividends. |
106 |
Waiving dividends |
106.1 |
We can waive (not pay out) all or any dividend by acting on a document signed by the shareholder (or the person automatically entitled to the shares by law ) and delivered to us . |
Capitalising reserves
107 |
Capitalising reserves |
107.1 |
Taking account of any special rights attaching to any class of shares , the shareholders can pass an ordinary resolution to allow the Directors to change into capital any sum: |
(a) |
which is part of any of our reserves (including premiums received when any shares were issued , capital redemption reserves or other un distributable reserves ); or |
(b) |
which we are holding as undistributed profits. |
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107.2 |
Unless the ordinary resolution states otherwise, the Directors will use the sum which is changed into capital by setting it aside for the shareholders at the close of business on the day the resolution is passed (or another date stated in the resolution). The sum set aside must be used to allot shares and distribute them to shareholders (or as they may direct) as bonus shares in proportion to their holdings of shares at the time. The shares can be ordinary shares or, if the rights of other existing shares allow this, shares of some other class. |
107.3 |
If any difficulty arises distributing shares in line with this Article 107, the Directors , subject to the law and the CREST Regulations , can resolve it in any way they decide. For example, they can deal with entitlements to fractions of a share or any options involving our employee share schemes. They can decide: |
(a) |
that the benefit of share fractions belongs to us ; |
(b) |
that share fractions are ignored; or |
(c) |
deal with fractions in some other way including by cash payment. |
107.4 |
The Directors can appoint any person to sign any contract with us on behalf of those who are entitled to shares under the resolution. Such a contract is binding on all shareholders concerned. |
Scrip dividends
108 |
Shareholders can be offered the right to receive scrip dividends (extra shares instead of cash dividends) |
108.1 |
If the law allows, the Directors can, on any terms they think fit, offer shareholders the right to receive extra shares , instead of some or all of their cash dividend. The shareholders must have passed an ordinary resolution authorising the Directors to make this offer before the Directors can do this. |
108.2 |
The ordinary resolution can apply to a particular dividend or dividends. Or it can apply to some or all of the dividends which can be declared or paid in the period up to and including the Annual General Meeting which is held in the fifth year after the ordinary resolution is passed. |
108.3 |
The Directors can offer shareholders the right to request new shares instead of cash for: |
(a) |
the next dividend; or |
(b) |
all future dividends (if a share alternative is made available), until they tell us that they no longer want to receive new shares or the authority under Article 108.1 is not renewed. |
The Directors can also allow shareholders to choose between these alternatives.
108.4 |
A shareholder is entitled to shares whose total relevant value is as near as possible to, but not greater than, the cash dividend they would have received. The relevant value of a share is a value calculated in the way set out in the ordinary resolution . If the ordinary resolution does not set this out, then the relevant value of a share is the average value of the shares for the five dealing days starting from, and including, the day when the shares are first quoted ex dividend . This is worked out from the average middle-market quotations for the shares on the London Stock Exchange , as published in its Daily Official List. A certificate or report from the Auditor stating the relevant value will be conclusive evidence of that amount. |
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108.5 |
The Directors will only apply this Article 108 if we have enough revenues or reserves which can be capitalised to satisfy the offer. |
108.6 |
After the Directors have decided to apply this Article 108 to a dividend, as soon as reasonably practicable they must, notify eligible shareholders in writing of their right to opt for new shares . This notice should also say how, where and when shareholders must notify us if they want to receive new shares . Where new shares are available and shareholders have already opted to receive new shares in place of all future dividends, we will not notify them of a right to opt for new shares . Instead, we will remind them that they have already opted for new shares and tell them how to tell us if they want to start receiving cash dividends again. |
108.7 |
The Directors can set a minimum number of shares which shareholders can receive under their right to choose new shares . No shareholders will receive a fraction of a share . The Directors can decide how to deal with any fractions left over. We can, if the Directors decide, have the benefit of these left over fractions. |
108.8 |
The Directors can exclude or restrict the right to opt for new shares , or make any other arrangements which they decide are necessary or convenient to deal with any of the following legal or practical problems: |
(a) |
problems relating to laws of any territory; or |
(b) |
problems relating to the requirements of any recognised regulatory body or stock exchange in any territory; or |
(c) |
where special formalities would otherwise apply in connection with the offer of new shares . |
108.9 |
So far as a shareholder opts to receive new shares , no dividend on the shares for which they have opted to receive new shares (called the elected shares ) will be declared or payable. Instead, new shares will be allotted on the basis set out earlier in this Article 108. To do this the Directors will convert into capital the sum equal to the total nominal amount of the new shares to be allotted . They will use this sum to pay up in full the appropriate number of new shares . These will then be allotted and distributed to the holders of the elected shares as set out above. The sum to be converted into capital can be taken from any amount in any reserve or fund (including the share premium account , any capital redemption reserve and the income statement). Article 107 applies to this process, so far as it is consistent with this Article 108. |
108.10 |
Unless the Directors decide otherwise or the CREST Regulations or the rules of a relevant system require otherwise, any new shares which a shareholder has chosen to receive instead of some or all of their cash dividend will be: |
(a) |
shares in uncertificated form if the corresponding elected shares were uncertificated shares on the record date for that dividend; and |
(b) |
shares in certificated form if the corresponding elected shares were shares in certificated form on the record date for that dividend. |
108.11 |
The new shares rank equally in all respects with the existing shares on the record date for the dividend. But, they are not entitled to share in the dividend from which they arose. |
108.12 |
The Directors can decide at their discretion that new shares will not be available in place of any cash dividend. They can decide this at any time before new shares are allotted in place of a cash dividend, whether before or after shareholders have opted to receive new shares . |
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Accounts
109 |
Accounting and other records |
The Directors will make sure that proper accounting records that comply with the law are kept to record and explain our transactions.
110 |
The location and inspection of records |
110.1 |
The accounting records will be kept: |
(a) |
at the registered office ; or |
(b) |
at any other place which the law allows, and the Directors decide on. |
110.2 |
Our officers always have the right to inspect the accounting records. |
110.3 |
Anyone else (including a shareholder ) does not have any right to inspect any of our accounting books or papers unless: |
(a) |
the law or a proper court order or an ordinary resolution passed by us gives them that right; or |
(b) |
the Directors authorise them to do so. |
111 |
Sending copies of accounts and other documents |
111.1 |
This Article 111 applies to every balance sheet and income statement to be laid before the shareholders at a General Meeting with any other document which the law requires to be attached to these, including the Directors and Auditors reports. |
111.2 |
We must send copies of the documents mentioned in Article 111.1 to the Auditors , shareholders and debenture holders and all other people the Articles , or the law , say we must send them to. We must do this at least 21 clear days before the relevant General Meeting . But we do not need to send these documents to: |
(a) |
shareholders who we send summary financial statements to; |
(b) |
more than one joint holder of shares or debentures ; or |
(c) |
any person we do not have a current address for. |
111.3 |
Shareholders or debenture holders who are not sent copies can receive a copy free of charge by applying to us at the registered office . |
Auditors
112 |
Acts of Auditors |
112.1 |
The Directors must appoint Auditors for us . So far as the law allows, the actions of a person acting as an auditor are valid in favour of someone dealing with us in good faith, even if there was some defect in the persons appointment or the person was at any time not qualified to act as an auditor. |
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113 |
Auditors at General Meetings |
113.1 |
An Auditor can attend any General Meeting and should receive all notices of and other communications relating to any General Meeting which any shareholder is entitled to receive. They can speak at General Meetings on any business which is relevant to them as Auditor . |
Communicating with shareholders
114 |
Serving and delivering notices and other documents |
114.1 |
Subject to and in line with the Companies Acts and these Articles , we can send or supply all types of notices , documents or information to shareholders electronically or by making the notices , documents or information available on a website (or we can do both). |
114.2 |
Subject to and in line with Articles 114, 115, 117 and 118, the Company Communications Provisions in the Companies Act govern how we send or receive notices , documents or information. |
115 |
Notices to joint holders |
115.1 |
We will consider anything which needs to be agreed by joint shareholders as agreed when the first joint shareholder who is listed on the Register has agreed. We treat a notice given to the first shareholder in this way as given to all of the joint shareholders . |
115.2 |
When a notice or document is given to joint shareholders, it will be given to the first joint shareholder who is listed on the Register . |
115.3 |
Where this Article 115 relates to joint shareholders , it will take priority over the Company Communications Provisions . |
116 |
Notices for shareholders with foreign addresses |
116.1 |
This Article 116 applies to shareholders (including joint shareholders) whose address on the Register is outside the United Kingdom . Subject to the Statutes , they can give us a United Kingdom address where we can serve notices or documents on them. If they do give us a United Kingdom address, they are entitled to have notices or documents served on them at that address. Otherwise, they are not entitled to receive any notices and documents from us except electronically , subject to all the laws that apply. |
116.2 |
For shareholders registered on a branch register, notices or documents can be posted in the United Kingdom or in the country where the branch register is kept. |
117 |
When notices are served or considered to be served |
117.1 |
If we send a notice or any other kind of document (including a share certificate): |
(a) |
through the post (or internal post for a shareholder who is one of our employees or an employee of one of our subsidiaries ); or |
(b) |
in electronic form but not electronically ; |
we treat it as being properly served or delivered within 24 hours if we used first-class post or 48 hours if we used second-class post (or on the day advised by the post office).
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We can prove that a notice or other document was served by post (or internal post) by showing that:
(a) |
the letter containing the notice or document was properly addressed; and |
(b) |
it was put into the postal system with postage pre-paid (where this applies) or given to a delivery agent. |
117.2 |
We will treat any notice or document which we sent or supplied electronically as being properly sent 24 hours after it was transmitted. Proving delivery of the notice , document or information will be adequate to show it was properly addressed. |
117.3 |
We will treat any notice or document which we send or supply through a website as being properly served when: |
(a) |
the material is first made available on the website; or |
(b) |
the person we sent the notice or document to received (or is treated as having received) notice that the material was available on the website . |
117.4 |
If we serve, deliver personally or leave a notice or any other kind of document at the address for the shareholder on the Register , we treat it as being served or delivered on the day and at the time it was left. |
117.5 |
If a shareholder is present at any shareholders meeting either in person or by proxy or, in the case of a corporate shareholder , by a duly authorised corporate representative , we will consider that they received notice of the meeting and of the reason why it was called. |
117.6 |
Where this Article 117 relates to any notices or documents we treat as having been delivered, it will take priority over the Company Communications Provisions . |
118 |
Serving notices and documents on shareholders who have died, are bankrupt or are of unsound mind |
118.1 |
This Article 118 applies if a shareholder has died, has become of unsound mind or become bankrupt or is in liquidation, but is still registered as a shareholder . It applies whether they are registered as a sole or joint shareholder . A person who is automatically entitled to such shares by law , and who proves this to the reasonable satisfaction of the Directors , can give an address for service of notices and documents. If this is done, notices and documents must be sent to that address. Otherwise, if any notice or other document is served on the shareholder named on the Register , or sent to them in line with the Articles , this will be valid despite their death, unsound mind , bankruptcy or liquidation. This applies even if we knew about these things. If notices or documents are served or sent in line with this Article 118.1, there is no need to send them to, or serve them in any other way, on any other people who may be involved. |
118.2 |
Where this Article relates to a shareholder who has died, has become of unsound mind or become bankrupt or is in liquidation, it will take priority over the Company Communications Provisions . |
119 |
If documents are accidentally not sent |
119.1 |
If any notice or other document relating to any meeting or other proceeding is accidentally not sent, or is not received, the meeting or other proceeding will not be invalid as a result. |
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120 |
When entitlement to notices stops |
120.1 |
This Article 120 applies if, on two consecutive occasions, notices or other communications have been sent by post to a shareholder at their registered address (or, in the case of a shareholder whose registered address is not in the United Kingdom , any address given to us for serving notices ) but have been returned undelivered. The shareholder will not be entitled to receive any more notices or other communication until they have given us a new registered address (or, in the case of a shareholder whose registered address is not within the United Kingdom , a new address for serving of notices ). For the purposes of this Article 120.1, references to a communication include references to any cheque or other method of payment; but nothing in this Article 120.1 will entitle us to stop sending any cheque or other method of payment for any dividend, unless we are also entitled to do so under Article 105.2. |
121 |
Signing or authenticating of documents sent electronically |
121.1 |
If, under these Articles , a notice , information or document needs to be signed or authenticated by a shareholder or other person, we will consider any notice or document in electronic form is sufficiently authenticated if: |
(a) |
we can confirm the identity of the sender; |
(b) |
we have no reason to doubt the identity of the sender; or |
(c) |
it is in any other way approved by the Directors . |
We may specify ways for validating a notice , information or a document, and we will regard any notice , information or document not validated in the way we specify as not having been received by us .
122 |
Statutory requirements for notices |
122.1 |
Nothing in Articles 114 to 121 will affect any legal requirement for serving any offer, notice , information or other document in any particular way. |
Winding up
123 |
Directors power to petition |
123.1 |
The Directors have power in our name and on our behalf to present a petition to the court for NG to be wound up . |
124 |
Distributing assets in kind |
124.1 |
If we are wound up (whether by voluntary liquidation, under supervision of the Court, or by the Court) the liquidator can, with the authority of a special resolution passed by the shareholders and any other sanction required by the law , divide the whole or any part of our assets among our shareholders . This applies whether the assets consist of property of one kind or different kinds. For this purpose, the liquidator can set whatever value they consider fair on any property and decide how to divide it between shareholders or different groups of shareholders . The liquidator can also, with the authority of a special resolution passed by the shareholders and any other sanction required by legislation , transfer any part of the assets to trustees on trusts for the benefit of shareholders as the liquidator decides. The liquidation of NG can then be closed and our company dissolved. However, under this Article 124, no past or present shareholder can be forced to accept any shares or other property which carries a liability . |
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Destroying documents
125 |
Destroying documents |
125.1 |
We can destroy: |
(a) |
all transfer forms for shares , and documents sent to support a transfer, and any other documents which were the basis for making an entry on the Register , six years after the date of registration; |
(b) |
all dividend payment instructions and notifications of a change of address or name, two years after the date these were registered; and |
(c) |
all cancelled share certificates , one year after the date they were cancelled. |
125.2 |
If we destroy a document in line with Article 125.1, it is conclusively treated as having been a valid and effective document in line with our records relating to the document. Any action we took in dealing with the document in line with our terms before it was destroyed is conclusively treated as properly taken. |
125.3 |
This Article 125 only applies to documents which are destroyed in good faith and if we are not on notice of any claim to which the document may be relevant. |
125.4 |
For documents relating to shares in uncertificated form, we must also comply with any rules (as defined in the CREST Regulations ) which limit our ability to destroy these documents. |
125.5 |
We can destroy a document earlier than the dates mentioned in Article 125.1 if we make a permanent record (whether electronically , by microfilm, by digital imaging or by any other means) of that document before we destroy it. |
125.6 |
This Article 125 does not make us liable: |
(a) |
if we destroy a document earlier than referred to in Article 125.1; or |
(b) |
if we would not be liable if this Article 125 did not exist. |
125.7 |
This Article 125 applies whether we destroy a document or dispose of it in some other way. |
Indemnity and insurance
126 |
Indemnity and insurance |
126.1 |
To the fullest extent permitted by law , we will indemnify all our Directors and officers out of our own funds against the following: |
(a) |
Any liability incurred by or attaching to them in connection with any negligence, default, breach of duty or breach of trust by them in relation to NG other than: |
(i) |
any liability to us or any associated company ; and |
(ii) |
any liability of the kind referred to in Section 234(3) of the Companies Act . |
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(b) |
Any other liability incurred by or attaching to them: |
(i) |
in actually or seemingly carrying out their duties; |
(ii) |
in using or seemingly using their powers; and |
(iii) |
in any other activity connected to their duties, powers or office. |
Where a Director or officer is indemnified against any liability in line with this Article 126, the indemnity will cover all costs, charges, losses, expenses and liabilities incurred by them.
126.2 |
As well as the cover provided under Article 126.1 above, the Directors will have power to purchase and maintain insurance for or for the benefit of: |
(a) |
any person who is or was at any time a Director or officer of any relevant company ; or |
(b) |
any person who is or was at any time a trustee of any pension fund or employees share scheme in which employees of any relevant company are interested. |
This includes insurance against any liability incurred by or attaching to them through any act or omission:
(i) |
in actually or seemingly carrying out their duties; |
(ii) |
in using or seemingly using their powers; and |
(iii) |
in any other activity connected to their duties, powers or offices; |
in relation to:
(a) |
any relevant company ; |
(b) |
any pension fund; or |
(c) |
any employees share scheme; |
and all costs, charges, losses, expenses and liabilities incurred by them in relation to any act or omission.
126.3 |
Subject to the law , we will: |
(a) |
provide a Director or officer with funds to meet expenditure they have incurred or may incur in defending any criminal or civil proceedings or in connection with any application under the provisions mentioned in Section 205(5) of the Companies Act ; |
(b) |
provide a Director or officer with funds to meet expenditure they have incurred or may incur in defending an investigation by a regulatory authority or against action proposed by a regulatory authority in connection with any alleged negligence, default, breach of duty or breach of trust by him or her in relation to us ; and |
(c) |
do anything to enable a Director or officer to avoid incurring such expenditure, but any funds we provide or other things we do will be in line with Section 205(5) of the Companies Act . |
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The ADR Depositary
Some of our shares are held in the form of American Depositary Receipts ( ADRs ). These are receipts, administered by American banks, for shares in non-American companies. The American banks role includes collecting and distributing dividends to ADR Holders.
127 |
ADR definitions |
127.1 |
In Articles 127 to 136: |
ADR Depositary |
A bank (custodian), approved by the Board , who holds Depositary Shares under arrangements where they issue ADRs to an ADR Holder. |
|
ADR Holder |
means a person or persons who are registered as holding our ADRs . |
|
ADRs |
American depositary receipts which are issued by the ADR Depositary and represent Depositary Shares . |
|
Appointed Number |
means the number of Depositary Shares which an Appointed Proxy holds. |
|
Appointed Proxy |
means an ADR Holder who is appointed as proxy by the ADR Depositary . |
|
Depositary Shares |
Our shares held by a custodian. |
|
Proxy Register |
The register of names and addresses of all the Appointed Proxies . |
128 |
The ADR Depositary can appoint proxies |
128.1 |
The ADR Depositary can appoint more than one person to be its proxy . As long as the appointment is in line with the requirements in Article 128.2, the appointment can be made in any way and on any terms which the ADR Depositary thinks fit. Each person appointed in this way is called an Appointed Proxy . |
128.2 |
The appointment must set out the number of shares allocated to each Appointed Proxy . This number is called the Appointed Number . When added together, the Appointed Numbers of all Appointed Proxies appointed by the ADR Depositary must not be more than the number of Depositary Shares (as calculated in Article 128.3). |
128.3 |
The Depositary Shares which can be held by the ADR Depositary consist of the total of the number of shares registered in the name of the ADR Depositary . |
129 |
The ADR Depositary must keep a Proxy Register |
129.1 |
The ADR Depositary must keep a register of the names and addresses of all the Appointed Proxies . This is called the Proxy Register . The Proxy Register will also set out the ADRs held by each Appointed Proxy . The Appointed Number of shares can be calculated by multiplying the number of ADRs held by an Appointed Proxy by the number of shares which any one ADR currently represents. |
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129.2 |
The ADR Depositary must let anyone the Directors nominate inspect the Proxy Register during usual business hours on a business day . The ADR Depositary must also provide, as soon as possible, any information contained in the Proxy Register if we or our agents ask for it. |
130 |
Appointed Proxies can only attend General Meetings if properly appointed |
130.1 |
An Appointed Proxy may only attend a General Meeting if they provide us with written evidence of their appointment by the ADR Depositary for that General Meeting . This must be in a form agreed between the Directors and the ADR Depositary . |
131 |
Rights of Appointed Proxies |
131.1 |
Subject to the Companies Act and these Articles, and as long as the Depositary Shares are sufficient to include an Appointed Proxys Appointed Number : |
(a) |
at a General Meeting which an Appointed Proxy is entitled to attend, they are entitled to the same rights and have the same obligations in relation to their Appointed Number of shares as if the ADR Depositary was the registered holder of the shares and they had been validly appointed in line with Articles 50 to 54 by the ADR Depositary as its proxy in relation to those shares ; and |
(b) |
an Appointed Proxy can appoint another person to be their proxy for their Appointed Number of shares , as long as the appointment is made and deposited in line with Articles 50 to 54 and, if it is, the provisions of these Articles will apply to this appointment as though the Appointed Proxy was the registered holder of such shares and the appointment was made by them in that capacity. |
132 |
Sending information to an Appointed Proxy |
132.1 |
We can, if the Directors decide and subject to U.S. and any other legal and regulatory requirements, send all the same documents we send to shareholders to an Appointed Proxy , at their address in the Proxy Register . |
133 |
Paying dividends to an Appointed Proxy |
133.1 |
We can pay to an Appointed Proxy , at their address in the Proxy Register , all dividends or other monies relating to the Appointed Proxys Appointed Number of shares instead of paying this amount to the ADR Depositary . If we do this, we will not have any obligation to make this payment to the ADR Depositary as well. |
134 |
The Proxy Register can be fixed at a certain date |
134.1 |
To determine who is entitled as Appointed Proxies to: |
(a) |
exercise the rights conferred by Article 131; |
(b) |
receive documents sent in line with Article 132; and |
(c) |
be paid dividends in line with to Article 133, |
and the Appointed Number of shares for which a person is to be treated as having been appointed as an Appointed Proxy , the ADR Depositary can determine that the Appointed Proxies are the people entered in the Proxy Register at the close of business on a date (a Record Date ) determined by the ADR Depositary in consultation with us .
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134.2 |
When a Record Date is decided for a particular purpose: |
(a) |
the Appointed Number of shares held by an Appointed Proxy will be treated as the number appearing against their name in the Proxy Register at the close of business on the Record Date ; |
(b) |
this can be shown by multiplying the number of ADRs which each Appointed Proxy holds by the number of shares which any one ADR currently represents; and |
(c) |
changes to entries in the Proxy Register after the close of business on the Record Date will be ignored in determining if a person is entitled for the purpose concerned. |
135 |
The nature of an Appointed Proxys interest |
135.1 |
Except as required by the Companies Act , we will not recognise any Appointed Proxy as holding any interest in shares held in any trust. |
135.2 |
Except for recognising the rights set out in Article 131, we are entitled to treat any person entered in the Proxy Register as an Appointed Proxy for certain shares as the only person (other than the ADR Depositary ) who has any interest in such shares . |
136 |
Validity of the appointment of Appointed Proxies |
136.1 |
If any question arises at a General Meeting about the validity of any appointments to vote (or exercise any other right) in respect of any shares (for example, because the total number of shares recorded against appointments in the Proxy Register is more than the number of Depositary Shares ), the chairman of the General Meeting will decide who can vote (which can include refusing to recognise a particular appointment or appointments as valid) and the chairmans decision will, if made in good faith, be final and binding. |
136.2 |
If a question of the type described in Article 136.1 arises in any circumstances other than at or in relation to a General Meeting , the question will be decided by the Directors . Their decision (which can include refusing to recognise a particular appointment or appointments as valid) will also, if made in good faith, be final and binding. |
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Glossary
About the glossary
This glossary is to help readers understand our Articles . Words are explained as they are used in the Articles , they might mean different things in other documents. The glossary is not legally part of the Articles and it does not affect their meaning. The definitions are intended to be a general guide, they are not precise.
Act An Act of Parliament, including the Companies Act , any statute, statutory instrument, order, rule, regulation or directive.
adjourn When a meeting breaks up, to be continued at a later time or day, at the same or a different place.
allot When new shares are allotted, they are set aside for the person they are intended for. This will normally be after the person has agreed to pay for a new share, or has become entitled to a new share for any other reason. As soon as a share is allotted, that person gets the right to have their name put on the register of shareholders. When they have been registered, the share has also been issued .
asset Anything which is of any value to its owner.
attorney An attorney is a person who has been appointed to act for another person. The person is appointed by a formal document, called a power of attorney .
associated company The meaning of associated company is given in Section 256 of the Companies Act . The term could relate to one of the companys subsidiaries, its holding company or a subsidiary of its holding company .
automatically entitled to a share by law In some situations, a person will be entitled to have shares which are registered in somebody elses name registered in their own name. Or they may want the shares to be transferred to another person. When a shareholder dies, or the sole survivor of joint shareholders dies, their personal representatives have the right to have the shares transferred. If a shareholder is made bankrupt, their trustee in bankruptcy has this right.
beneficial interest (or ownership ) If a trustee holds shares for someone, or for their benefit, that person has a beneficial interest in those shares.
brokerage Commission which is paid to a broker by a company issuing shares, where the brokers clients have applied for shares.
capitalise To convert some or all of the reserves of a company into capital (such as shares).
capital redemption reserve A reserve of funds which a company can set up to maintain its capital base when shares are redeemed or bought back.
casual vacancy A vacancy amongst the Directors which occurs because of the death, resignation or disqualification of a Director , or because an elected Director does not accept their appointment, or for any other reason except the retirement of a Director in line with the Articles .
certificate A certificate includes a share certificate (which is not a valid document of title), a loan capital certificate or certificates for our other securities (other than letters of allotment, scrip certificates or similar documents).
Common Seal A seal used to stamp our documents as evidence that we have executed them.
company Includes any corporate body.
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Company Secretary A person appointed in line with Section 271 of the Companies Act and who has the necessary knowledge and experience to carry out the functions of the secretary of the company and who satisfies the requirements of Section 273 of the Companies Act or, if applicable, a joint, deputy or assistant Company Secretary .
consolidate When shares are consolidated, they are combined with other shares, for example every three shares with a nominal value of £1 might be consolidated into one new share with a nominal value of £3.
debenture A typical debenture is a document recording long-term borrowing by a company . The loan usually has to be repaid at a fixed date in the future, and carries a fixed rate of interest.
declare When a dividend is declared, it becomes due to be paid on the date specified in the Resolution.
dividend arrears This includes any dividends on shares with cumulative rights which could not be paid, but which have been carried forward.
dividend warrant A dividend warrant is a cheque for a dividend.
electronically Any document or information sent or supplied in electronic form , as further defined in Section 1168 of the Companies Act .
equity securities Securities that can be converted to equity shares as further defined in Section 560 of the Companies Act .
equity shares Shares in our capital which are regarded as equity share capital under Section 548 of the Companies Act .
ex dividend When a share goes ex dividend, a person who buys it will not be entitled to the dividend which has been declared shortly before they bought it. However, the seller is entitled to this dividend, even though it will be paid after they have sold their share.
executed A document is executed when it is signed or sealed or made valid in some other way.
executive capacity A role which carries the power of a person responsible for an activity or business.
exercise When a power is exercised, it is put to use.
final dividend The dividend, which is approved by the shareholders and paid following the end of the financial year.
fully paid shares When all of the money due to us for a share has been paid, a share is called a fully paid (or paid up ) share.
holding company A company which controls another company (for example, by owning a majority of its shares) is called the holding company of that other company . The other company is the subsidiary of the holding company .
indemnity If a person gives another person an indemnity, they promise to make good any losses or damage which the other might suffer. The person who gives the indemnity is said to indemnify the person they give it to.
in issue See issue .
instruments Formal legal documents.
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interim dividend A dividend, authorised by the Directors , and paid part way through the financial year.
issue When a share has been issued, everything necessary has been done to make the shareholder the owner of the share. In particular, the shareholders name has been put on the register of shareholders. Existing shares which have been issued are in issue .
liabilities Debts and other obligations.
jointly and severally liable When more than one person is jointly and severally liable it means that any one of them can be sued, or they can all be sued together.
material The Board will determine on a case-by-case basis whether a matter or contract is material, considering its value and significance to our business and the interests of any Director .
negotiable instrument A document such as a cheque, which can be freely transferred from one person to another.
nominal amount or value The value of the share in our accounts. For example, the nominal value of 11 p ordinary shares is 11 p. This value is shown on the share certificate . We can issue new shares for a price which is at a premium to the nominal value. Shares can be bought and sold on the stock market for more, or less, than the nominal value. The nominal value is sometimes also called the par value. The nominal value is not connected to the quoted share price of NG .
notice A formal announcement about a future meeting or event.
non equity securities Securities which are not equity securities .
ordinary resolution A resolution which needs a simple majority. That is, at least 50 per cent of those voting to be in favour.
personal representatives A person who is entitled to deal with the property (the estate) of a person who has died. If the person who has died left a valid will, the will appoints executors who are personal representatives. If the person died without leaving a valid will, the courts will appoint one or more administrators to be the personal representatives.
poll A vote. On a poll vote, the number of votes a shareholder has depends on the number of shares they own. A shareholder has one vote for each share they own. A poll vote is different from a show of hands vote, where each person who is entitled to vote has just one vote, however many shares the person owns.
power of attorney A formal document which legally appoints one or more people to act on behalf of another person.
pre-emption rights The right of shareholders , given by the Companies Act , to be offered a proportion of certain classes of newly issued shares and other securities before they are offered to anyone else. This offer must be made on terms which are at least as favourable as the terms offered to anyone else.
premium If we issue a new share for more than its nominal value (for example, because the market value is more than the nominal value ), the amount above the nominal value is the premium.
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proxy A proxy is a person who is appointed by a shareholder to attend and speak at a meeting and vote for that shareholder . A proxy is appointed by using a proxy form . A proxy does not have to be a shareholder .
proxy form A form which a shareholder uses to appoint a proxy to attend and speak at a meeting and vote for them. The proxy form must be delivered to us before the meeting it relates to.
quorum The minimum number who must be present before a meeting can start. When this number is reached, the meeting is said to be quorate.
rank and ranking When either capital or income is distributed to shareholders , it is paid out according to the rank (or ranking) of the shares . For example, a share which ranks before (or above) another share when our income is distributed is entitled to have its dividends paid first, before any dividends are paid on shares which rank below (or after) it. If there is not enough income to pay dividends on all shares , the available income must be used first to pay dividends on shares which rank first, and then to shares which rank below. The same applies for repayments of capital. Capital must be paid first to shares which rank first in sharing in our capital, and then to shares which rank below.
redeem and redemption When a share is redeemed, it comes back to us in return for a sum of money (the redemption price) which was fixed before the share was issued . This process is called redemption. A share which can be redeemed is called a redeemable share.
relevant company This refers to:
(a) |
us; |
(b) |
any of our holding companies; and |
(c) |
any company (incorporated or not) in which we or any of our holding companies have or have had a direct or indirect interest, or which is associated in any way with us or any of our subsidiaries. |
relevant securities Any shares of a company , except shares held as a result of share schemes for employees (such as profit-sharing schemes) and some shares held by the founders of the company . Also included are any securities which can be converted into shares of this type, or which allow their holders to subscribe for shares of this type.
relevant system This is a term used in the CREST Regulations for a paperless share-dealing computer system which allows shares without share certificates to be transferred without using transfer forms.
renouncing or renunciation Where a share has been allotted , but nobody has been entered on the share register for the share, it can be renounced to another person. This transfers the right to have the share registered to another person.
reserve fund or reserves A fund which has been set aside in the accounts of a company . Profits which are not paid out to shareholders as dividends, or used up in some other way, are held in a reserve fund by the company .
rights or rights of any share The rights attached to the share when it is issued, or afterwards (for example, the right to vote at a meeting or the rights to receive a dividend).
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securities All shares, bonds and other investment instruments issued by a company which entitle the holder to a share in the profits or assets of that company , to receive a cash payment from a company or to subscribe for such a security.
securities seal A seal used to stamp our securities as evidence that we have issued them. Our security seal is like our Common Seal but with the addition of the word securities.
share premium account If we issue a new share for more than its nominal value (because the market value is more than the nominal value ), the amount above the nominal value is the premium, and the total of these premiums is held in a reserve fund (which cannot be used to pay dividends) called the share premium account.
show of hands A vote where each person who is entitled to vote has just one vote, however many shares that person holds.
special notice This term is defined in Section 312 of the Companies Act . Broadly, if special notice of a resolution is required, the resolution is not valid unless we have been told about the intention to propose it at least 28 days before the shareholders meeting at which it is proposed (although in certain circumstances the meeting can be on a date less than 28 days from the date of the notice).
special resolution A decision which needs the votes of at least 75 per cent of those voting to be in favour. Shareholders must be given at least 14 clear days notice of any special resolution.
special rights These are the rights of a particular class of shares, as distinct from rights which apply to all shares generally. Typical examples of special rights are where the shares rank their rights to sharing in income and assets and voting rights.
statutory declaration A formal way of declaring something in writing. Particular words and formalities must be usedthese are laid down by the Statutory Declarations Act of 1835.
stock Shares which have been converted into a single security with a different unit value. For example a shareholding of one hundred £1 shares might be converted into £100 worth of stock.
subdividing shares When shares are subdivided they are split into shares which have a smaller nominal amount . For example, a £1 share might be subdivided into two 50p shares.
subject to Means that something else has priority, or prevails, or must be taken into account. When a statement is subject to another statement the first statement must be read in the light of the other statement, which will prevail if there is any conflict.
subscribe for shares To agree to take new shares in a company (usually for a cash payment).
subsidiary A company which is controlled by another company (for example, because the other company owns a majority of its shares) is called a subsidiary of that company as defined in Section 1159 of the Companies Act .
subsidiary undertaking This is a term defined in the Companies Act . It is a wider definition than subsidiary . Generally speaking it is a company which is controlled by another company because the other company :
(a) |
has a majority of the votes in the company either alone, or acting with others; |
(b) |
is a shareholder who can appoint or remove a majority of the directors; or |
(c) |
can exercise dominant influence over the company because of anything in the companys articles, or because of a certain kind of contract. |
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systems rules The rules of the relevant system .
take-over offer An offer made by one company to the shareholders of another company to buy enough shares to give it control over the other company .
treasury shares Shares which are held by a company as treasury shares in line with Sections 724 to 726 of the Companies Act .
trustees People who hold property of any kind for the benefit of one or more other people under an arrangement which the law treats as a trust. The people whose property is held by the trustees are called the beneficial owners .
UK GAAP UK generally accepted accounting principles.
uncertificated proxy instruction A properly authenticated instruction sent by means of a relevant system , in line with the systems rules , to a person acting on our behalf, on terms decided by the Directors .
unincorporated associations Associations, partnerships, societies and other bodies which the law does not treat as a separate legal person from their members.
unsound mind Not being able to make an informed decision due to lack of awareness and understanding of the nature of a document or situation.
website A collection of web pages on the World Wide Web which contain files belonging to us .
wind up The formal process to put an end to a company . When a company is wound up its assets are distributed. The assets go first to creditors who have supplied property and services, and then to shareholders . Shares which rank first in sharing in our assets will receive any funds which are left over before any shares which rank after (or below) them.
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Table of contents
Article |
Page | |||||
Introduction |
1 | |||||
1 |
Default Articles and other standard regulations do not apply |
1 | ||||
2 |
The meaning of the Articles |
1 | ||||
Shares |
5 | |||||
3 |
Shareholders Liabilities |
5 | ||||
4 |
Fractions of shares |
5 | ||||
5 |
The power to reduce capital |
5 | ||||
6 |
Buying back shares |
5 | ||||
7 |
The special rights of new shares |
6 | ||||
8 |
The Directors power to deal with shares |
6 | ||||
9 |
Power to pay commission and brokerage |
7 | ||||
10 |
Renouncing allotted but unissued shares |
7 | ||||
11 |
No trusts or similar interests recognised |
7 | ||||
Uncertificated shares |
7 | |||||
12 |
Uncertificated shares |
7 | ||||
Share certificates |
8 | |||||
13 |
Certificates |
8 | ||||
14 |
Replacement share certificates |
9 | ||||
Changing share rights |
9 | |||||
15 |
Changing the special rights of shares |
9 | ||||
16 |
More about the special rights of shares |
10 | ||||
Transferring shares |
10 | |||||
17 |
Transfer forms |
10 | ||||
18 |
Transferring shares in certificated form |
10 | ||||
19 |
Refusing to register certain transfers |
11 | ||||
20 |
Overseas branch registers |
11 | ||||
21 |
More provisions on uncertificated shares |
11 |
A14835747 |
i |
People automatically entitled to shares by law |
12 | |||||
22 |
If a shareholder dies |
12 | ||||
23 |
Registering personal representatives |
12 | ||||
24 |
A person who wants to be registered must give notice |
12 | ||||
25 |
Transfers by a person who is automatically entitled to a share by law |
12 | ||||
26 |
The rights of people automatically entitled to shares by law |
13 | ||||
27 |
Shareholders who cannot be traced |
13 | ||||
General Meetings |
14 | |||||
28 |
The Annual General Meeting |
14 | ||||
29 |
Notice of General Meetings |
14 | ||||
30 |
Class meetings |
15 | ||||
31 |
Moving a General Meeting at short notice |
16 | ||||
32 |
Satellite meeting places |
16 | ||||
Proceedings at General Meetings |
17 | |||||
33 |
The chairman of a General Meeting |
17 | ||||
34 |
Security and other arrangements at General Meetings |
17 | ||||
35 |
Overflow meeting rooms |
18 | ||||
36 |
The quorum needed for General Meetings |
18 | ||||
37 |
The procedure if there is no quorum |
18 | ||||
38 |
Adjourning General Meetings |
19 | ||||
39 |
Amending resolutions |
19 | ||||
40 |
Proxies, Corporate Representatives and Directors speaking at General Meetings |
20 | ||||
Voting procedures |
20 | |||||
41 |
All votes decided on a poll |
20 | ||||
42 |
How a poll is taken |
21 | ||||
43 |
Timing of a poll |
21 | ||||
44 |
The effect of a declaration by the chairman |
21 | ||||
Voting rights |
22 | |||||
45 |
The votes of shareholders |
22 |
A14835747 |
ii |
46 |
Shareholders who owe us money |
22 | ||||
47 |
Votes of shareholders who are of unsound mind |
22 | ||||
48 |
The votes of joint holders |
23 | ||||
Restrictions on shareholder voting |
23 | |||||
49 |
Suspending shareholder rights on non-disclosure of interest |
23 | ||||
Proxies |
25 | |||||
50 |
Completing proxy forms |
25 | ||||
51 |
Delivering completed proxy forms |
25 | ||||
52 |
Cancelling a proxys authority |
26 | ||||
53 |
Representatives of companies |
27 | ||||
54 |
Challenging votes |
27 | ||||
Directors |
27 | |||||
55 |
The number of Directors |
27 | ||||
56 |
Qualification to be a Director |
27 | ||||
57 |
Directors fees |
27 | ||||
58 |
Special pay |
28 | ||||
59 |
Directors expenses |
28 | ||||
60 |
Directors pensions and other benefits |
28 | ||||
61 |
Appointing Directors to various posts |
29 | ||||
Changing Directors |
29 | |||||
62 |
Retiring Directors |
29 | ||||
63 |
Eligibility for re-election |
29 | ||||
64 |
Re-electing a Director who is retiring |
29 | ||||
65 |
Electing two or more Directors |
30 | ||||
66 |
People who can be Directors |
30 | ||||
67 |
Filling vacancies and appointing extra Directors |
30 | ||||
68 |
Removing and appointing Directors by an ordinary resolution |
30 | ||||
69 |
When Directors are disqualified |
31 | ||||
70 |
Directors meetings |
31 |
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iii |
71 |
How Directors meetings are called |
31 | ||||
72 |
Quorum |
32 | ||||
73 |
The chairman of Directors meetings |
32 | ||||
74 |
Voting at Directors meetings |
32 | ||||
75 |
Directors meetings by video or web conference and phone |
32 | ||||
76 |
Resolutions in writing |
33 | ||||
77 |
The validity of Directors actions |
33 | ||||
Directors interests |
34 | |||||
78 |
Authorising Directors interests |
34 | ||||
79 |
Directors may have certain interests |
34 | ||||
80 |
Restrictions on quorum and voting |
36 | ||||
81 |
Confidential information |
37 | ||||
82 |
Directors interestsgeneral |
38 | ||||
Minutes |
38 | |||||
83 |
Minutes |
38 | ||||
Directors committees |
38 | |||||
84 |
Delegating powers to committees |
38 | ||||
85 |
Committee procedure |
39 | ||||
Directors powers |
39 | |||||
86 |
General powers of Directors |
39 | ||||
87 |
Provision for employees if we cease or transfer our business |
39 | ||||
88 |
The power to appoint attorneys and agents |
39 | ||||
89 |
Local boards |
40 | ||||
90 |
Using the title Director |
40 | ||||
91 |
Signatures on cheques |
40 | ||||
92 |
Borrowing powers |
40 | ||||
93 |
Borrowing restrictions |
41 | ||||
Alternate directors |
43 | |||||
94 |
Alternate directors |
43 |
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iv |
The Company Secretary |
44 | |||||
95 |
The Company Secretary |
44 | ||||
The Seal |
44 | |||||
96 |
The Seal |
44 | ||||
Authenticating documents |
45 | |||||
97 |
Establishing that documents are genuine |
45 | ||||
Reserves |
45 | |||||
98 |
Setting up reserves |
45 | ||||
Dividends |
46 | |||||
99 |
Final dividends |
46 | ||||
100 |
Fixed and interim dividends |
46 | ||||
101 |
Dividends not in cash |
46 | ||||
102 |
Deducting amounts owing from dividends and other money |
46 | ||||
103 |
Payments to shareholders |
47 | ||||
104 |
Record dates for payments and other matters |
48 | ||||
105 |
Dividends which are not claimed |
48 | ||||
106 |
Waiving dividends |
48 | ||||
Capitalising reserves |
48 | |||||
107 |
Capitalising reserves |
48 | ||||
Scrip dividends |
49 | |||||
108 |
Shareholders can be offered the right to receive scrip dividends (extra shares instead of cash dividends) |
49 | ||||
Accounts |
51 | |||||
109 |
Accounting and other records |
51 | ||||
110 |
The location and inspection of records |
51 | ||||
111 |
Sending copies of accounts and other documents |
51 | ||||
Auditors |
51 | |||||
112 |
Acts of Auditors |
51 | ||||
113 |
Auditors at General Meetings |
52 |
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v |
Communicating with shareholders |
52 | |||||
114 |
Serving and delivering notices and other documents |
52 | ||||
115 |
Notices to joint holders |
52 | ||||
116 |
Notices for shareholders with foreign addresses |
52 | ||||
117 |
When notices are served or considered to be served |
52 | ||||
118 |
Serving notices and documents on shareholders who have died, are bankrupt or are of unsound mind |
53 | ||||
119 |
If documents are accidentally not sent |
53 | ||||
120 |
When entitlement to notices stops |
54 | ||||
121 |
Signing or authenticating of documents sent electronically |
54 | ||||
122 |
Statutory requirements for notices |
54 | ||||
Winding up |
54 | |||||
123 |
Directors power to petition |
54 | ||||
124 |
Distributing assets in kind |
54 | ||||
Destroying documents |
55 | |||||
125 |
Destroying documents |
55 | ||||
Indemnity and insurance |
55 | |||||
126 |
Indemnity and insurance |
55 | ||||
The ADR Depositary |
57 | |||||
127 |
ADR definitions |
57 | ||||
128 |
The ADR Depositary can appoint proxies |
57 | ||||
129 |
The ADR Depositary must keep a Proxy Register |
57 | ||||
130 |
Appointed Proxies can only attend General Meetings if properly appointed |
58 | ||||
131 |
Rights of Appointed Proxies |
58 | ||||
132 |
Sending information to an Appointed Proxy |
58 | ||||
133 |
Paying dividends to an Appointed Proxy |
58 | ||||
134 |
The Proxy Register can be fixed at a certain date |
58 | ||||
135 |
The nature of an Appointed Proxys interest |
59 | ||||
136 |
Validity of the appointment of Appointed Proxies |
59 | ||||
About the glossary |
60 |
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vi |
EXHIBIT 2(b).5
EXECUTION COPY
Dated 27 March 2013
NATIONAL GRID GAS plc
as Issuerand Guarantor
and
NATIONAL GRID GAS FINANCE (NO 1) plc
as Issuer
and
THE LAW DEBENTURE TRUST CORPORATION p.l.c.
as Trustee
arranged by
HSBC BANK plc
AMENDED AND RESTATED TRUST DEED
relating to a
Euro 10,000,000,000
Euro Medium Term Note Programme
Ref: EXM/RR/JR
Linklaters LLP
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 | ||||
4A |
Guarantee and Indemnity |
9 | ||||
5 |
Application of Moneys Received by the Trustee |
12 | ||||
6 |
Covenants |
12 | ||||
7 |
Remuneration and Indemnification of the Trustee |
15 | ||||
8 |
Provisions Supplemental to the Trustee Acts |
16 | ||||
9 |
Trustee Liable for Negligence |
20 | ||||
10 |
Waiver and Proof of Default |
20 | ||||
11 |
Trustee not Precluded from Entering into Contracts |
21 | ||||
12 |
Modification and Substitution |
21 | ||||
13 |
Appointment, Retirement and Removal of The Trustee |
22 | ||||
14 |
Instruments Held in Clearing Systems and Couponholders |
24 | ||||
15 |
Currency Indemnity |
24 | ||||
16 |
Enforcement |
25 | ||||
17 |
Communications |
26 |
i |
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 Instrument |
35 | |||||
Schedule 1 Part C Form of NGN Temporary Global Instrument |
45 | |||||
Schedule 1 Part D Form of NGN Permanent Global Instrument |
51 | |||||
Schedule 2 Part A Form of Definitive Instrument |
58 | |||||
Schedule 2 Part B Terms and Conditions of the Instruments |
62 | |||||
Schedule 2 Part C Form of Coupon |
93 | |||||
Schedule 2 Part D Form of Talon |
95 | |||||
Schedule 3 Provisions for Meetings of Instrumentholders |
97 |
ii |
This Trust Deed is made on 27 March 2013 between :
(1) |
NATIONAL GRID GAS plc ( National Grid Gas ) and NATIONAL GRID GAS FINANCE (NO 1) plc ( National Grid Gas Finance (No 1) ), each an Issuer and together, the Issuers ); |
(2) |
NATIONAL GRID GAS plc as guarantor in respect of Instruments issued by National Grid Gas Finance (No 1) (the Guarantor ); and |
(3) |
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 (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 under this Trust Deed. |
(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 National Grid Gas, National Grid Gas Finance (No 1) and the Trustee entered into an amended and restated trust deed dated 22 February 2012 (the Prior Trust Deed ). |
This Trust 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 27 March 2013 between the Issuers, the Guarantor, the Trustee, The Bank of New York Mellon as Issuing and Paying Agent and the other agents 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.
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.
Clearstream, Luxembourg means Clearstream Banking, société anonyme .
Common Safekeeper means, in relation to a Series, the common safekeeper for Euroclear and Clearstream, Luxembourg appointed in respect of such Instruments.
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
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1 |
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 7 ( Remuneration and Indemnification of the Trustee ), pounds sterling or such other currency as may be agreed between the Issuers, the Guarantor 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 27 March 2013 between the Issuers, the Guarantor, the Arranger, and the dealers named in it.
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.
Euroclear means Euroclear Bank S.A./N.V.
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 Article 5.4 of the Prospectus Directive.
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.
Guarantee means the guarantee and indemnity of the Guarantor in Clause 4A.
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 to be issued by each of the Issuers 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.
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.
A16529343 |
2 |
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 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, the Guarantor (if applicable) or any of its respective 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.
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 from time to time by the relevant Issuer, the Trustee, the Dealers (as defined in the Dealer Agreement) and the Issuing and Paying Agent and which are set out in Schedule 4 (Procedures Memorandum) of the Agency Agreement.
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3 |
Prospectus means the prospectus prepared in connection with the Programme and constituting a base prospectus in respect of each Issuer for the purposes of Article 5.4 of the Prospectus Directive, as revised, supplemented or amended from time to time by the Issuers and the Guarantor (if applicable) 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 Directive means Directive 2003/71/EC of the European Parliament and of the Council.
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 such other or further person as may from time to time be appointed by any of the Issuers or the Guarantor (if applicable) 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 relevant Issuer or the Guarantor or of a Successor in Business of such Issuer or the Guarantor; 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.
A16529343 |
4 |
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.
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 Trustees 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 the Guarantor 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.
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 relevant Issuer and the Guarantor (if applicable), 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.
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5 |
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 |
Amendment and Restatement |
The Prior Trust Deed shall be amended and restated on the terms of this Trust Deed, such amendment and restatement to take effect from the date of this Trust Deed. Any Instruments issued on or after the date of this Trust Deed shall be constituted by, and issued pursuant to, this Trust Deed. This does not affect any Instruments issued prior to the date of this Trust Deed or any other Instrument issued on or after the date of this Trust Deed to be consolidated and form a single series with the Instruments of any series issued prior to the date of this Trust Deed. Subject to such amendment and restatement, the Prior Trust Deed shall continue in full force and effect.
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 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 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 any 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.
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.
A16529343 |
6 |
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 premium and shall (subject to the Conditions and other than in respect of the 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) payment of any sum due in respect of the Instruments made to the Issuing and Paying Agent 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 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.
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, the Guarantor 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, the Guarantor 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, the Guarantor (if applicable) 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 on the terms of the Agency Agreement (with consequential amendments as necessary and except that the Trustees 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, Coupons and Talons and all moneys, documents and records held by them in respect of Instruments, Coupons and Talons to the order of the Trustee; or |
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(ii) |
to deliver all Instruments, Coupons and Talons and all moneys, documents and records held by them in respect of the Instruments, Coupons and Talons to the Trustee or as the Trustee directs in such notice and, |
2.5.2 |
by notice in writing to the relevant Issuer and the Guarantor (if applicable), require such Issuer failing whom, the Guarantor (if applicable) to make all subsequent payments in respect of the Instruments, Coupons and Talons to or to the order of the Trustee and not to the Issuing and Paying Agent and with effect from the receipt of any such notice by such Issuer and the Guarantor (if applicable), 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 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 temporary Global Instruments shall be exchangeable for Definitive Instruments or interests in permanent Global Instruments as set out in each temporary Global Instrument. Interests in permanent Global Instruments shall be exchangeable for Definitive Instruments as set out in each 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, Coupons and Talons shall be signed manually or in facsimile by an authorised signatory of the relevant Issuer and the 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, 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
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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 of the Issuers shall pay any stamp, issue, documentary or other taxes and duties payable in the United Kingdom in respect of the creation, issue and offering of the Instruments, Coupons and Talons by it and the execution or delivery by it of this Trust Deed. Each Issuer shall also indemnify the Trustee, the 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 Instrumentholders or the Couponholders to enforce the relevant Issuers or (if applicable) the Guarantors obligations under this Trust Deed or the Instruments, Coupons or Talons.
4.2 |
Change of Taxing Jurisdiction |
If an Issuer or the Guarantor 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 or, as the case may be, the Guarantor 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 or the Guarantor has become so subject. In such event this Trust Deed and the Instruments, Coupons and Talons shall be read accordingly.
4A |
Guarantee and Indemnity |
4A.1 |
Guarantee |
The Guarantor unconditionally and irrevocably guarantees that if National Grid Gas Finance (No 1) does not pay any sum payable by it under this Trust Deed, the Instruments or the Coupons by the time and on the date specified for such payment (whether on the normal due date, on acceleration or otherwise), the Guarantor shall pay that sum to or to the order of the Trustee, in the manner provided in Clause 2.3 ( Covenant to Pay ) (or if in respect of sums due under Clause 7 ( Remuneration and Indemnification of the Trustee ), in pounds sterling (or such other currency as may be agreed between the Issuers, the Guarantor and the Trustee from time to time) in London in immediately available funds) before close of business on that date in the city to which payment is so to be made.
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Clauses 2.3(a) and 2.3(b) shall apply (with consequential amendments as necessary) to such payments other than those in respect of sums due under Clause 7 ( Remuneration and Indemnification of the Trustee ). All payments under the Guarantee by the Guarantor shall be made subject to Condition 6 and Clause 4.2 ( Change of Taxing Jurisdiction ).
4A.2 |
Guarantor as Principal Debtor |
As between the Guarantor and the Trustee, the Instrumentholders and the Couponholders but without affecting National Grid Gas Finance (No 1)s obligations, the Guarantor shall be liable under this Clause as if it were the sole principal debtor and not merely a surety. Accordingly, it shall not be discharged, nor shall its liability be affected, by anything that would not discharge it or affect its liability if it were the sole principal debtor (including (1) any time, indulgence, waiver or consent at any time given to National Grid Gas Finance (No 1) or any other person, (2) any amendment to any other provisions of this Trust Deed or to the Conditions or to any security or other guarantee or indemnity, (3) the making or absence of any demand on National Grid Gas Finance (No 1) or any other person for payment, (4) the enforcement or absence of enforcement of this Trust Deed, the Instruments or the Coupons or of any security or other guarantee or indemnity, (5) the taking, existence or release of any security, guarantee or indemnity, (6) the dissolution, amalgamation, reconstruction or reorganisation of National Grid Gas Finance (No 1) or any other person or (7) the illegality, invalidity or unenforceability of or any defect in any provision of this Trust Deed, the Instruments or the Coupons or any of National Grid Gas Finance (No 1)s obligations under any of them).
4A.3 |
Guarantors Obligations Continuing |
The Guarantors obligations under this Trust Deed are and shall remain in full force and effect by way of continuing security until no sum remains payable under this Trust Deed, the Instruments or the Coupons. Furthermore, those obligations of the Guarantor are additional to, and not instead of, any security or other guarantee or indemnity at any time existing in favour of any person, whether from the Guarantor or otherwise and may be enforced without first taking proceedings against National Grid Gas Finance (No 1), any other person, any security or any other guarantee or indemnity.
4A.4 |
Exercise of Guarantors Rights |
So long as any sum remains payable by National Grid Gas Finance (No 1) under this Trust Deed, the Instruments or the Coupons:
4A.4.1 |
any right of the Guarantor, by reason of the performance of any of its obligations under this Clause, to be indemnified by National Grid Gas Finance (No 1) or to take the benefit of or to enforce any security or other guarantee or indemnity shall be exercised and enforced by the Guarantor only in such manner and on such terms as the Trustee may require or approve and |
4A.4.2 |
any amount received or recovered by the Guarantor (a) as a result of any exercise of any such right or (b) in the liquidation, dissolution, amalgamation, reconstruction, reorganisation, insolvency, winding-up or analogous proceedings relating to National Grid Gas Finance (No 1) shall be held in trust for the Trustee and immediately paid to the Trustee and the Trustee shall hold it on the trusts set out in Clause 5.1 ( Declaration of Trust ). |
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4A.5 |
Suspense Accounts |
Any amount received or recovered by the Trustee (otherwise than as a result of a payment by National Grid Gas Finance (No 1) to the Trustee in accordance with Clause 2 ( Issue of Instruments and Covenant to Pay )) in respect of any sum payable by National Grid Gas Finance (No 1) under this Trust Deed, the Instruments or the Coupons may be placed in a suspense account and kept there for so long as the Trustee thinks fit.
4A.6 |
Avoidance of Payments |
The Guarantor shall within 5 business days of demand indemnify the Trustee, each Instrumentholder and each Couponholder against any cost, loss, expense or liability sustained or incurred by it as a result of it being required for any reason (including any bankruptcy, insolvency, winding-up, dissolution, or similar law of any jurisdiction) to refund all or part of any amount received or recovered by it in respect of any sum payable by National Grid Gas Finance (No 1) under this Trust Deed, any Instrument or Coupons relating to that Instrument and shall in any event pay to it on demand the amount as refunded by it.
4A.7 |
Debts of National Grid Gas Finance (No 1) |
If any moneys become payable by the Guarantor under this Guarantee, National Grid Gas Finance (No 1) shall not (except in the event of the liquidation of National Grid Gas Finance (No 1)) so long as any such moneys remain unpaid, pay any moneys for the time being due from National Grid Gas Finance (No 1) to the Guarantor.
4A.8 |
Indemnity |
As separate, independent and alternative stipulations, the Guarantor unconditionally and irrevocably agrees (1) that any sum that, although expressed to be payable by National Grid Gas Finance (No 1) under this Trust Deed, the Instruments or Coupons, is for any reason (whether or not now existing and whether or not now known or becoming known to National Grid Gas Finance (No 1), the Guarantor, the Trustee or any Instrumentholder or Couponholder) not recoverable from the Guarantor on the basis of a guarantee shall nevertheless be recoverable from it as if it were the sole principal debtor and shall be paid by it to the Trustee within 5 business days of demand and (2) as a primary obligation to indemnify the Trustee, each Instrumentholder and each Couponholder against any loss suffered by it as a result of any sum expressed to be payable by National Grid Gas Finance (No 1) under this Trust Deed, the Instruments or Coupons not being paid on the date and otherwise in the manner specified in this Trust Deed or any payment obligation of National Grid Gas Finance (No 1) under this Trust Deed, the Instruments or the Coupons being or becoming void, voidable or unenforceable for any reason (whether or not now existing and whether or not now known or becoming known to the Trustee, any Instrumentholder or any Couponholder), the amount of that loss being the amount expressed to be payable by National Grid Gas Finance (No 1) in respect of the relevant sum.
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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 Issuer or the Guarantor (if applicable), 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 reasonably 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 Instruments or Coupons pari passu and rateably; and |
5.1.3 |
thirdly, in payment of any balance to such Issuer for itself or, if any moneys were received from the Guarantor and to the extent of such moneys, the Guarantor. |
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 largest 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 is outstanding, each of the Issuers (in respect of itself only) and the Guarantor shall each:
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, the Guarantor (if applicable) and/or the relevant subsidiary undertaking has no reasonable objection, access to its books of account at all reasonable times during normal business hours.
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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 relevant Issuer, the Guarantor (if applicable) or any parent undertaking of it generally in their capacity as such.
6.5 |
Certificate of Directors |
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 or, as the case may be, the Guarantor signed by a Director or the Company Secretary that, having made all reasonable enquiries, to the best of the knowledge, information and belief of such Issuer or, as the case may be, the Guarantor 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.
6.6 |
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 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 Trustee of any sum due in respect of the Instruments or Coupons made after the due date for such payment.
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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 and subject to the requirements of the Dealer Agreement.
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 (or such other firm of legal advisers as may be agreed between the relevant Issuer, the Guarantor (if applicable) 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 |
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 Guarantor (if applicable), the Trustee, the Instruments, the Certificates, the Coupons, the Talons, 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 an Issuer or Guarantor etc. |
Send to the Trustee as soon as practicable after being so requested by the Trustee a certificate of the relevant Issuer or, as the case may be, the Guarantor 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, as the case may be, the Guarantor or their respective 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.
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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 each of the Issuers (failing whom, the Guarantor, in the case of Instruments issued by National Grid Gas Finance (No 1)) 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 |
In the event of the occurrence of an Event of Default or Potential Event of Default the Issuer (failing whom the Guarantor) hereby agrees that the Trustee shall be entitled to be paid additional remuneration, which may be calculated using the Trustees normal hourly rates in force from time to time. In any other case if the Trustee finds it expedient or necessary or is requested by an Issuer to undertake duties that they both agree to be of an exceptional nature or otherwise outside the scope of the Trustees normal duties under this Trust Deed, such Issuer (failing whom, the Guarantor, in the case of Instruments issued by National Grid Gas Finance (No 1)) shall pay such additional remuneration as they may agree 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 determined by an investment bank (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 investment banks fee shall be shared equally between the Trustee and the relevant Issuer. The determination of such investment bank shall be conclusive and binding on the relevant Issuer, the Guarantor, the Trustee, the Instrumentholders and the Couponholders.
7.3 |
Expenses |
Each of the Issuers, in respect of Instruments issued by it, (failing whom, the Guarantor, in the case of Instruments issued by National Grid Gas Finance (No 1)) shall also on demand by the Trustee pay or discharge all costs, charges, liabilities and expenses reasonably 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 an Issuer or the Guarantor to enforce any provision of this Trust Deed, the 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 Trustees remuneration under this Trust Deed. Such costs, charges, liabilities and expenses shall:
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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 the Trustees 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 Issuers and the Guarantor 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 each of the Issuers and the Guarantor 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 (failing whom, the Guarantor, in the case of Instruments issued by National Grid Gas Finance (No 1)) 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 reasonable costs, charges and expenses paid or incurred in disputing or defending any of the foregoing) which any of them may incur 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.
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 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 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.
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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 or Potential Event of Default 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 and the Guarantor is performing all of its obligations under this Trust Deed, the Instruments, the Coupons and the 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 to have been passed at a meeting of Instrumentholders in respect of which minutes have been made and signed 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 or Couponholders.
8.4 |
Certificate Signed by a Director, 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 Director or the Company Secretary of the relevant Issuer or the Guarantor (if applicable) 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.
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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, the Guarantor (if applicable) or any Instrumentholder or Couponholder by reason of having accepted as valid or not having rejected any Instrument, Certificate, Coupon or Talon 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 or Couponholder any confidential financial or other information made available to the Trustee by the relevant Issuer or the Guarantor (if applicable).
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, the Guarantor (if applicable), the Instrumentholders and the 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 the Instruments, any exchange of Instruments or the delivery of Instruments to the persons entitled to them.
8.15 |
Trustees 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.
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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 or Guarantor etc .)) that no Instruments are for the time being held by or on behalf of the relevant Issuer, the Guarantor (if applicable) or their respective 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 9) materially prejudicial to the interests of Instrumentholders. Any such determination shall be conclusive and binding on the relevant Issuer, the Guarantor (if applicable), the Instrumentholders and the Couponholders.
8.20 |
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.
8.21 |
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.
8.22 |
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.
8.23 |
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.
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8.24 |
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.
9 |
Trustee Liable for Negligence |
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.
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 or the Guarantor 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 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.
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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 any of the Issuers, the Guarantor 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 modification to this Trust Deed which is in its opinion not materially prejudicial to the interests of the Instrumentholders, 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 ). 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 (a) the substitution of National Grid Gass Successor in Business or any subsidiary of National Grid Gas (the Substituted Obligor ) in place of National Grid Gas, as the case may be (or of any previous substitute under this Clause 12) as the principal debtor under this Trust Deed, the Instruments, the Coupons and the Talons; (b) the substitution of any other company (the Substituted Obligor ) in place of National Grid Finance (No 1) (or of any previous substitute under this Clause 12) as the principal debtor under this Trust Deed, the Instruments, the Coupons and the Talons; and (c) the substitution of the Guarantors Successor in Business or any subsidiary of the Guarantor (also a Substituted Obligor ) in place of the Guarantor as the guarantor of Instruments issued by National Grid Gas Finance (No 1), 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, the Instruments, the Coupons and the Talons (with consequential amendments as the Trustee may deem appropriate) as if the Substituted Obligor had been named in this Trust Deed, the Instruments, the Coupons and the Talons as the principal debtor in place of such Issuer or as the guarantor in place of the Guarantor, as the case may be; |
(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 |
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subject generally (the Issuers Territory ) or to which the Guarantor is subject generally (the Guarantors 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 Issuers Territory or the Guarantors Territory, as the case may be, of references to the Substituted Territory whereupon the Trust Deed, the Instruments, the Coupons and the 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 Obligors financial condition, profits or prospects or compare them with those of such Issuer or the Guarantor; |
(iv) |
such Issuer, the Guarantor and the Substituted Obligor comply with such other requirements as the Trustee may direct in the interests of the Instrumentholders; |
(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 or guarantor, as the case may be, in respect of the Instruments in place of such Issuer or the Guarantor, as the case may be (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 Instruments and the Coupons and (iii) such approvals and consents are at the time of substitution in full force and effect; and |
(vi) |
a guarantee is provided in respect of the Instruments, the Coupons and the Talons by the relevant Issuer or the Guarantor, as the case may be (or the Successor in Business) unless the Substituted Obligor is the Successor in Business. |
12.2.2 |
Release of Substituted Issuer : An agreement by the Trustee pursuant to this 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, the Instruments, the Coupons and the 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 this Clause 12.2 ( Substitution ), the Substituted Obligor shall be deemed to be named in this Trust Deed, the Instruments, the Coupons and the Talons as the principal debtor in place of the relevant Issuer (or of any previous substitute) and this Trust Deed, the Instruments, the Coupons and the 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. A trust corporation shall at all times be a Trustee and may be the sole Trustee. Any appointment of a new Trustee shall be notified by the relevant Issuer to the Instrumentholders in accordance with Condition 14 as soon as practicable.
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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 and the Guarantor 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 and the Guarantor 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; |
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, the Guarantor and that person remove that person. At the Trustees request, each Issuer and the Guarantor shall forthwith do all things as may be required to perfect such appointment or removal and it 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 and the Guarantor 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 and the Guarantor 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 Trustees functions provided the majority includes a trust corporation.
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14 |
Instruments Held in Clearing Systems and Couponholders |
14.1 |
Instruments Held in Clearing Systems |
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 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 Global Instrument and may consider such interests on the basis that such accountholders or participants were the holder(s) of such Global 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 Euroclear or Clearstream, Luxembourg 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 its records as the holder of a particular nominal amount of Instruments represented by a Global 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 Euroclears EUCLID or Clearstream, Luxembourgs 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 Euroclear or Clearstream, Luxembourg 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 or the Guarantor 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 any of the Issuers or the Guarantor or otherwise), by the Trustee or any Instrumentholder or Couponholder in
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respect of any sum expressed to be due to it from the relevant Issuer or the Guarantor, shall only discharge such Issuer or the Guarantor 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 it 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 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 or the Guarantor, 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 or the Guarantor unless the Trustee, having become bound to proceed, fails to do so within a reasonable time and such failure is continuing.
16.2 |
Trustees 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 unless it shall be indemnified and/or secured and/or prefunded by the 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, including the cost of its managements time and/or other internal resources, calculated using its normal hourly rates in force from time to time.
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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 any of the Issuers or the Guarantor to enforce any obligations under this Trust Deed:
16.3.1 |
proof in such proceedings that as regards any specified Instrument such Issuer or the Guarantor, as the case may be, 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 or the Guarantor, as the case may be, 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 or the Guarantor, as the case may be, has made default in paying any sum due to the relevant Couponholder shall (unless the contrary be proved) be sufficient evidence that such Issuer or the Guarantor, as the case may be, 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.
17 |
Communications |
17.1 |
Method |
Each communication under this Trust Deed shall be made by 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 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, 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 good receipt is confirmed by the recipient following enquiry by the sender and (if in writing) when delivered, except that a communication received outside normal business hours shall be deemed to be received on the next business day in the city in which the recipient is located.
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.
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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, the Coupons or the Talons and accordingly any legal action or proceedings arising out of or in connection with this Trust Deed, the Instruments, the Coupons or the Talons ( Proceedings ) may be brought in such courts. Each of the Issuers and the Guarantor irrevocably submits to the jurisdiction of such courts and waives any objections to Proceedings in such courts on the ground of venue or on the ground that the Proceedings have been brought in an inconvenient forum. Each such submission is for the benefit of each of the Trustee, the Instrumentholders and
the 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).
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Schedule 1
Part A
Form of CGN Temporary Global Instrument
[NATIONAL GRID GAS plc/NATIONAL GRID GAS FINANCE (NO 1) plc]*
(Incorporated with limited liability in England and Wales
under the Companies Act 1985 with registered number [2006000/5895068]*)
EURO MEDIUM TERM NOTE PROGRAMME
Series No. []
Tranche No. []
[unconditionally and irrevocably guaranteed by
NATIONAL GRID GAS plc]*
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 Gas plc/National Grid Gas Finance (No 1) plc]* (the Issuer ) [and guaranteed by National Grid Gas plc (the Guarantor )]**.
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 27 March 2013 between, inter alios , the Issuer, [the Guarantor] 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.
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 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.
* |
Delete as applicable |
** |
Only applicable where National Grid Gas Finance (No 1) is the Issuer. |
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Promise to Pay
Subject as provided in this temporary Global Instrument, the Issuer, for value received, 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.
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 Agency Agreement to the effect that it has received a certificate or certificates substantially to the effect set out in Schedule 2 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 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.
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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.
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.
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 additional schedule to this temporary Global Instrument (such endorsement being prima facie evidence that the payment in question has been made). Condition 6.4(v) and Condition 7(e)(i) will apply to the Definitive Instruments only.
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 6.6 (Non-business days).
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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.
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.
No provision of this temporary Global Instrument shall alter or impair the obligation of the Issuer [and the Guarantor] + to pay the principal and premium of and interest on the Instruments when due in accordance with the Conditions [and the Guarantee]+.
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 any non-contractual obligations arising out of or in connection with it shall be governed by, and construed in accordance with, English law.
+ |
Only applicable where National Grid Gas Finance (No 1) is the Issuer. |
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31 |
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 GAS plc/NATIONAL GRID GAS FINANCE (NO 1) 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 |
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 |
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32 |
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 |
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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]
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Schedule 1
Part B
Form of CGN Permanent Global Instrument
[NATIONAL GRID GAS plc/NATIONAL GRID GAS FINANCE (NO 1) plc]*
(Incorporated with limited liability in England and Wales
under the Companies Act 1985 with registered number [2006000/5895068]*)
EURO MEDIUM TERM NOTE PROGRAMME
Series No. []
Tranche No. []
[unconditionally and irrevocably guaranteed by
NATIONAL GRID GAS plc]*
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 Gasplc/National Grid Gas Finance (No 1) plc]* (the Issuer ) [and guaranteed by National Grid Gas plc (the Guarantor )]**.
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 27 March 2013 between, inter alios , the Issuer, [the Guarantor] 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.
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
* |
Delete as applicable |
** |
Only applicable where National Grid Gas Finance (No 1) is the Issuer. |
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35 |
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.
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.
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.
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.
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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. Condition 6.4(v) and Condition 7(e)(i) will apply to the Definitive Instruments only.
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 6.6 (Non-business days).
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.
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.
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 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.
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37 |
Purchase
Instruments may only be purchased by the Issuer, [the Guarantor] + or any of [its/their respective] subsidiary undertakings if they are purchased together with the right to receive all future payments of interest on the Instruments being purchased.
Issuers 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.
Instrumentholders Options
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, 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.
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 other 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.
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 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 |
+ |
Only applicable where National Grid Gas Finance (No 1) is the Issuer. |
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(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 [and the Guarantor] + to pay the principal and premium of and interest on the Instruments when due in accordance with the Conditions [and the Guarantee]+.
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 any non-contractual obligations arising out of or in connection with it shall be governed by, and construed in accordance with, English law.
+ |
Only applicable where National Grid Gas Finance (No 1) is the Issuer. |
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39 |
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 GAS plc/NATIONAL GRID GAS FINANCE (NO 1) 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 |
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 |
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40 |
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 the whole or a part of 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 |
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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 |
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42 |
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.]
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43 |
The Fourth Schedule
Exercise of Instrumentholders 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 |
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Schedule 1
Part C
Form of NGN Temporary Global Instrument
[NATIONAL GRID GAS plc/NATIONAL GRID GAS FINANCE (NO 1) plc]*
(Incorporated with limited liability in England and Wales
under the Companies Act 1985 with registered number [2006000/5895068]*)
EURO MEDIUM TERM NOTE PROGRAMME
Series No. []
Tranche No. []
[unconditionally and irrevocably guaranteed by
NATIONAL GRID GAS plc]*
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 Gas plc/National Grid Gas Finance (No 1) plc]* (the Issuer ) [and guaranteed by National Grid Gas plc (the Guarantor )]**.
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 27 March 2013 between, inter alios , the Issuer, [the Guarantor]** 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.
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
* |
Delete as applicable |
** |
Only applicable where National Grid Gas Finance (No 1) is the Issuer. |
A16529343 |
45 |
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 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.
Promise to Pay
Subject as provided in this temporary Global Instrument, the Issuer, for value received, 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.
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 Agency Agreement to the effect that it has received a certificate or certificates substantially to the effect set out in Schedule 2 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.
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46 |
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 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.
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.
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 Issuers 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
A16529343 |
47 |
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). Condition 6.4(v) and Condition 7(e)(i) will apply to the Definitive Instruments only.
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 6.6 (Non-business days).
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.
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.
No provision of this temporary Global Instrument shall alter or impair the obligation of the Issuer [and the Guarantor] + to pay the principal and premium of and interest on the Instruments when due in accordance with the Conditions [and the Guarantee] + .
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 any non-contractual obligations arising out of or in connection with it shall be governed by, and construed in accordance with, English law.
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 GAS plc/NATIONAL GRID GAS FINANCE (NO 1) plc ]*
By: |
+ |
Only applicable where National Grid Gas Finance (No 1) is the Issuer. |
* |
Delete as applicable |
A16529343 |
48 |
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.
A16529343 |
49 |
The Schedule
[Insert the provisions of the relevant Final Terms that relate to the Conditions or the Global Instruments as the Schedule]
A16529343 |
50 |
Schedule 1
Part D
Form of NGN Permanent Global Instrument
[NATIONAL GRID GAS plc/NATIONAL GRID GAS FINANCE (NO 1) plc]*
(Incorporated with limited liability in England and Wales
under the Companies Act 1985 with registered number [2006000/5895068]*)
EURO MEDIUM TERM NOTE PROGRAMME
Series No. []
Tranche No. []
[unconditionally and irrevocably guaranteed by
NATIONAL GRID GAS plc]*
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 Gasplc/National Grid Gas Finance (No 1) plc]* (the Issuer ) [and guaranteed by National Grid Gas plc (the Guarantor )] ++ .
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 27 March 2013 between, inter alios , the Issuer, [the Guarantor]* 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.
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
* |
Delete as applicable |
++ |
Only applicable where National Grid Gas Finance (No 1) is the Issuer. |
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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 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.
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.
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
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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 Schedule to this permanent Global Instrument.
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 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.
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 Issuers 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. Condition 6.4(v) and Condition 7(e)(i) will apply to the Definitive Instruments only.
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 6.6 (Non-business days).
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.
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.
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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.
Purchase
Instruments may only be purchased by the Issuer, [the Guarantor]+ or any of [its/their respective] subsidiary undertakings if they are purchased together with the right to receive all future payments of interest on the Instruments being purchased.
Issuers 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 Notes 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 Notes recorded in the records of the relevant Clearing Systems and represented by this permanent Global Instrument shall be reduced accordingly.
Instrumentholders Options
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.
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 other 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.
+ |
Only applicable where National Grid Gas Finance (No 1) is the Issuer. |
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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 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 [and the Guarantor] + to pay the principal and premium of and interest on the Instruments when due in accordance with the Conditions [and the Guarantee] + .
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 any non-contractual obligations arising out of or in connection with it shall be governed by, and construed in accordance with, English law.
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 GAS plc/NATIONAL GRID GAS FINANCE (NO 1) 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.
+ |
Only applicable where National Grid Gas Finance (No 1) is the Issuer. |
* |
Delete as applicable |
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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.
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The Schedule
[Insert the provisions Part A of the relevant Final Terms that relate to the Conditions or the Global Instruments as the Third Schedule.]
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Schedule 2
Part A
Form of Definitive Instrument
On the front:
[Denomination] | [ISIN] | [Series] | [Certif. No.] |
[Currency and denomination]
[NATIONAL GRID GAS plc/NATIONAL GRID GAS FINANCE (NO 1) plc]*
(Incorporated with limited liability in England and Wales
under the Companies Act 1985 with registered number [2006000/5895068]*)
EURO MEDIUM TERM NOTE PROGRAMME
Series No. []
[Title of issue]
[unconditionally and irrevocably guaranteed by
NATIONAL GRID GAS plc]*
This Instrument forms one of the Series of Instruments referred to above (the Instruments ) of [National Grid Gasplc/National Grid Gas Finance (No 1) plc]* (the Issuer ) [guaranteed by National Grid Gas plc (the Guarantor )] + 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 |
+ |
Only applicable where National Grid Gas Finance (No 1) is the Issuer. |
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In witness of which the Issuer has caused this Instrument to be signed on its behalf.
Dated as of the Issue Date.
[ NATIONAL GRID GAS plc/NATIONAL GRID GAS FINANCE (NO 1) plc ]*
By: |
||
Authorised Signatory |
CERTIFICATE OF AUTHENTICATION OF THE ISSUING AND PAYING AGENT
This Definitive 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.
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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.]
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ISSUING AND PAYING AGENT
THE BANK OF NEW YORK MELLON
One Canada Square
London E14 5AL
PAYING AGENT
KBL EUROPEAN PRIVATE BANKERS S.A.
43 Boulevard Royal
L-2955 Luxembourg
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Schedule 2
Part B
Terms and Conditions of the Instruments
The following is the text of the terms and conditions which, save for the text in italics and subject to completion by Part A of the relevant Final Terms, will be endorsed on the Instruments in definitive form (if any) issued in exchange for the Global Instrument(s) representing each Series. Either (a) the full text of these terms and conditions together with the relevant provisions of Part A of the Final Terms or(b) these terms and conditions as so completed (and subject to simplification by the dis-application of non-applicable provisions), shall be endorsed on such Instruments. All capitalised terms which are not defined in these 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 Definitive Instruments. References in these terms and conditions to Instruments 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. Provisions which are marked with * only apply where National Grid Gas Finance (No 1) is the Issuer.
National Grid Gas pic ( National Grid Gas ) and National Grid Gas Finance (No 1) pic ( National Grid Gas Finance (No 1) ) (each an Issuer and together, the Issuers ) and National Grid Gas pic as guarantor of Instruments issued by National Grid Gas Finance (No 1) (the Guarantor ) have established a Euro Medium Term Note Programme (the Programme ) for the issuance of up to 10,000,000,000 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 27 March 2013 between the Issuers, the Guarantor 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 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 Amended and Restated Agency Agreement (as amended or supplemented from time to time, the Agency Agreement ) dated 27 March 2013 has been entered into in relation to the Instruments between the Issuers, the Guarantor, the Trustee, The Bank of New York Mellon 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) . Copies of the Trust Deed and the Agency Agreement are available for inspection during usual business hours at the registered office of the Trustee (as at 27 March 2013 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 (including the Guarantee) and are deemed to have notice of those provisions of the Agency Agreement applicable to them.
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1 |
Form, Denomination and Title |
The Instruments are issued in bearer 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, 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.
Title to the Instruments and the Coupons and Talons shall pass by delivery and except as ordered by a court of competent jurisdiction or as required by law, the Issuer, the Guarantor (if applicable) 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 this Instrument.
2 |
Status [and Guarantee]* |
2.1 |
Status |
The Instruments and 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 [and of the Guarantor under the Guarantee]* 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 [and the Guarantor respectively]*.
2.2 |
[Guarantee |
The Guarantor has unconditionally and irrevocably guaranteed the due payment of all sums expressed to be payable by the Issuer under the Trust Deed, the Instruments and Coupons. Its obligations in that respect (the Guarantee ) are contained in the Trust Deed.]*
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 3.2.4(d).
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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 onits 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 3.2.4(d). 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 in the relevant Final Terms.
(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: |
(x) |
the Floating Rate Option is as specified in the relevant Final Terms; |
(y) |
the Designated Maturity is a period specified in the relevant Final Terms; and |
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(z) |
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: 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 shall be determined by the Calculation Agent at or about the Relevant Time on the Interest Determination Date in respect of such Interest Accrual Period in accordance with the following: |
(x) |
if the Primary Source for Floating Rate is a Page, subject as provided below, the Rate of Interest shall be: |
(a) |
the Relevant Rate (where such Relevant Rate on such Page is a composite quotation or is customarily supplied by one entity); or |
(b) |
the arithmetic mean of the Relevant Rates of the persons whose Relevant Rates appear on that Page, |
in each case appearing on such Page at the Relevant Time on the Interest Determination Date;
(y) |
if the Primary Source for the Floating Rate is Reference Banks or if sub-paragraph (x) (a) applies and no Relevant Rate appears on the Page at the Relevant Time on the Interest Determination Date or if sub-paragraph (x) (b) above applies and fewer than two Relevant Rates appear on the. Page at the Relevant Time on the Interest Determination Date, subject as provided below, the Rate of Interest shall be the arithmetic mean of the Relevant Rates that each of the Reference Banks is quoting to leading banks in the Relevant Financial Centre at the Relevant Time on the Interest Determination Date, as determined by the Calculation Agent; and |
(z) |
if paragraph (y) above applies and the Calculation Agent determines that fewer than two Reference Banks are so quoting Relevant Rates, subject as provided below, the Rate of Interest shall be the arithmetic mean of the rates per annum (expressed as a percentage) that the Calculation Agent determines to be the rates (being the nearest equivalent to the Benchmark) in respect of a Representative Amount of the Specified Currency that at least two out of five leading banks selected by the Calculation Agent in the principal financial centre of the country of the Specified Currency or, if the Specified Currency is euro in those Member States of the European Union which are participating in European economic and monetary union as selected by the Calculation Agent (the Principal Financial Centre ) are quoting at or about the Relevant Time on the date on which such banks would customarily quote such rates for a period commencing on the Effective Date for a period equivalent to the Specified Duration (I) to leading banks carrying on business in Europe, or (if |
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the Calculation Agent determines that fewer than two of such banks are so quoting to leading banks in Europe) (II) to leading banks carrying on business in the Principal Financial Centre; except that, if fewer than two of such banks are so quoting to leading banks in the Principal Financial Centre, the Rate of Interest shall be the Rate of Interest determined on the previous Interest Determination Date (after readjustment for any difference between any Margin, Rate Multiplier or Maximum or Minimum Rate of Interest applicable to the preceding Interest Accrual Period and to the relevant Interest Accrual Period). |
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.
(a) |
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 (b)).
(b) |
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).
(c) |
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 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 Maximum or Minimum 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 |
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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. |
(d) |
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.
(e) |
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 after the Relevant Time 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 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,[ the Guarantor,]* 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 3.2.2, 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
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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.
(f) |
Determination or Calculation by Trustee |
If the Calculation Agent does not at any time for any reason determine or calculate the Rate of Interest for an Interest Period or any Interest Amount, Final Redemption Amount, Early Redemption Amount or Optional Redemption Amount the Trustee shall do so (or shall appoint an agent on its behalf to do so) and such determination or calculation shall be deemed to have been made by the Calculation Agent. In doing so, the Trustee shall apply the preceding provisions of this Condition, with any necessary consequential amendments, to the extent that, in its opinion, it can do so, and, in all other respects it shall do so in such manner as it shall deem fair and reasonable in all the circumstances. The Trustee shall have no liability to any person in connection with any determination or calculation it is required to make pursuant to this Condition 3.2.4(f).
(g) |
Definitions |
In these Conditions, unless the context otherwise requires, the following defined terms shall have the meanings set out below:
Benchmark means LIBOR, EURIBOR, AUD-BBR-BBSW or CAD-BA-CDOR, as may be specified in the relevant Final Terms.
Business Day means:
(i) |
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: (x) Canadian dollars is Toronto except when the Reference Rate is LIBOR, then the financial centres are London and Toronto; and (y) Australian dollars is Sydney); and/or |
(ii) |
in the case of euro, a day on which the TARGET System is operating (a TARGET Business Day ); and/or |
(iii) |
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. |
Calculation Amount means the amount specified as such in the relevant Final Terms.
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, the Calculation Period ):
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(i) |
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); |
(ii) |
if Actual/365 (Fixed) is specified in the relevant Final Terms, the actual number of days in the Calculation Period divided by 365; |
(iii) |
if Actual/360 is specified in the relevant Final Terms, the actual number of days in the Calculation Period divided by 360; |
(iv) |
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 (Y 2 Y 1 )] + [30 x (M 2 M 1 )]+ (D 2 D 1 ) |
|||
360 |
where:
Y 1 is the year, expressed as a number, in which the first day of the Calculation Period falls;
Y 2 is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
M 1 is the calendar month, expressed as a number, in which, the first day of the Calculation Period falls;
M 2 is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
D 1 is the first calendar day, expressed as a number, of the Calculation Period, unless such number would be 31, in which case D 1 will be 30; and
D 2 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 D 1 is greater than 29, in which case D 2 will be 30 ;
(v) |
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 (Y 2 Y 1 )] + [30 x (M 2 M 1 )]+ (D 2 D 1 ) |
|||
360 |
where:
Y 1 is the year, expressed as a number, in which the first day of the Calculation Period falls;
Y 2 is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
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M 1 is the calendar month, expressed as a number, in which the first day of the Calculation Period falls;
M 2 is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
D 1 is the first calendar day, expressed as a number, of the Calculation Period, unless such number would be 31, in which case D^ will be 30; and
D 2 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 D 2 will be 30;
(vi) |
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 (Y 2 Y 1 )] + [30 x (M 2 M 1 )]+ (D 2 D 1 ) |
|||
360 |
where:
Y 1 is the year, expressed as a number, in which the first day of the Calculation Period falls;
Y 2 is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
M 1 is the calendar month, expressed as a number, in which the first day of the Calculation Period falls;
M 2 is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
D 1 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 D^ will be 30; and
D 2 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;
(vii) |
if Actual/Actual-ICMA is specified in the relevant Final Terms, |
(a) |
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 |
(b) |
if the Calculation Period is longer than one Determination Period, the sum of: |
(x) |
the actual number of days in such Calculation Period falling in the Determination Period in which it begins divided by the product of (1) the actual number of days in such Determination Period and (2) the number of Determination Periods in any year; and |
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(y) |
the actual number of days in such Calculation Period falling in the next Determination Period divided by the product of (1) the actual number of days in such Determination Period and (2) 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;
(viii) |
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: |
(a) |
one divided by the number of Interest Payment Dates in each 12 month period; and |
(b) |
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 |
(ix) |
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 regular semi-annual interest payments, such interest will be calculated on the basis of the actual number of days in the Calculation Period and a year of 365 days. |
Effective Date means, with respect to any Floating Rate to be determined on an Interest Determination Date, the date specified as such in the relevant Final Terms or, if none is so specified, the first day of the Interest Accrual Period to which such Interest Determination Date relates.
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 |
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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, (i) the first day of such Interest Accrual Period if the Specified Currency is Sterling or (ii) 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 (iii) 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.
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 amended or supplemented from time to time.
Page means such page, section, caption, column or other part of a particular information service (including, but not limited to, the Reuters Market 3000 ( Reuters )) as may be specified for the purpose of providing a Relevant Rate, or such other page, section, caption, column or other part as may replace it on that information service or on such other information service, in each case as may be nominated by the person or organisation providing or sponsoring the information appearing there for the purpose of displaying rates or prices comparable to that Relevant Rate.
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.
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Reference Banks means the institutions specified as such in the relevant Final Terms or, if none, five leading banks selected by the Calculation Agent in the interbank market (or, if appropriate, money, swap or over-the-counter index options market) that is most closely connected with the Benchmark (which, if EURIBOR is the relevant Benchmark, shall be Europe, 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).
Relevant Financial Centre means, with respect to any Floating Rate to be determined in accordance with a Screen Rate Determination on an Interest Determination Date, the financial centre as may be specified as such in the relevant Final Terms or, if none is so specified, the financial centre with which the relevant Benchmark is most closely connected (which, in the case of EURIBOR, shall be Europe) or, if none is so connected, London.
Relevant Rate means the Benchmark for a Representative Amount of the Specified Currency for a period (if applicable or appropriate to the Benchmark) equal to the Specified Duration commencing on the Effective Date.
Relevant Time means, with respect to any Interest Determination Date, the local time in the Relevant Financial Centre specified in the relevant Final Terms or, if no time is specified, the local time in the Relevant Financial Centre at which it is customary to determine bid and offered rates in respect of deposits in the Specified Currency in the interbank market in the Relevant Financial Centre or, if no such customary local time exists, 11.00 hours in the Relevant Financial Centre and, for the purpose of this definition local time means, with respect to Europe as a Relevant Financial Centre, Brussels time.
Representative Amount means, with respect to any Floating Rate to be determined in accordance with a Screen Rate Determination on an Interest Determination Date, the amount specified as such in the relevant Final Terms or, if none is specified, an amount that is representative for a single transaction in the relevant market at the time.
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.
Specified Duration means, with respect to any Floating Rate to be determined in accordance with a Screen Rate Determination on an Interest Determination Date, the duration specified in the relevant Final Terms or, if none is specified, a period of time equal to the relevant Interest Accrual Period, ignoring any adjustment pursuant to Condition 3.2.2.
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.
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(h) |
Calculation Agent and Reference Banks |
The Issuer[, failing whom the Guarantor,]* shall procure that there shall at all times be four Reference Banks (or such other number as may be required) with offices in the Relevant Financial Centre and 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. If any Reference Bank (acting through its relevant office) is unable or unwilling to continue to act as a Reference Bank, then the lssuer[ or the Guarantor]* shall (with the prior approval of the Trustee) appoint another Reference Bank with an office in the Relevant Financial Centre to act as such in its place. 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 [or the Guarantor]* 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 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.
4 |
Indexation |
This Condition 4 is applicable only if the relevant Final Terms specifies the Instruments as Index Linked Instruments.
4.1 |
U.K. Retail Prices Index |
Where RPl (as defined below) is specified as the Index or Index Figure (each as defined below) in the relevant Final Terms, Conditions 4.1 to 4.6 will apply. For the purposes of Conditions 4A 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;
Her Majestys Treasury means Her Majestys Treasury or any officially recognised party performing the function of a calculation agent (whatever such partys title), on its or its successors behalf, in respect of the Reference Gilt;
Index or Index Figure means, subject as provided in Condition 4.3(i), the UK Retail Prices Index (for all items) published by the Office for National Statistics (January 1987 = 100) or any comparable index which may replace the UK Retail Prices Index for the purpose of calculating the amount payable on repayment of the Reference Gilt (the RPI). 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 |
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(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 sub-paragraph (ii) above and (y) the Index Figure applicable to the first calendar day of the month following, calculated as specified in sub-paragraph (ii) above and rounded to the nearest fifth decimal place. |
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; and
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 a gilt-edged market maker or other adviser selected by the lssuer [ or the Guarantor]* (an Indexation Adviser ).
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, on which such payment falls to be made and rounded in accordance with Condition 3.2.4(c).
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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 in substitution for January 1987 (or, as the case may be, to such other date or month 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 Index if sub-paragraph (i) of the definition of Index Figure 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, 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 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 Index if sub-paragraph (ii) and/or (iii) of the definition of Index Figure 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, 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 Figure last published (or, if later, the substitute index figure last determined pursuant to Condition 4.3(i)) before the date for payment. |
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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 Index: If notice is published by Her Majestys Treasury, or on its behalf, following a change to the coverage or the basic calculation of the 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 Index; If the Trustee and the Issuer [and the Guarantor]* have been notified by the Calculation Agent that the Index has ceased to be published, or if. Her Majestys Treasury, or a person acting on its behalf, announces that it will no longer continue to publish 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 a successor index has been designated by Her Majestys 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 paragraphs (b) or (c) below; or |
(b) |
if a Successor Index has not been determined under paragraph (a) above, the lssuer [, the Guarantor]* 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 lssuer[; the Guarantor]* and the Instrumentholders in no better and no worse position than they would have been had the Index not ceased to be published; or |
(c) |
if the lssuer[, the Guarantor]* 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 lssuer[, the |
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Guarantor]* 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 lssuer [, the Guarantor]* and the Instrumentholders in no better and no 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 lssuer[, the Guarantor]* and the Trustee in connection with such appointment shall be borne by the lssuer[ or the Guarantor]*.
(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)[, the Guarantor]* 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 lssuer,[ the Guarantor and]* the Trustee and the Instrumentholders, and the Issuer [and the Guarantor]* 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) and the Trustee has been notified by the Calculation Agent that publication of the Index has ceased or (ii) notice is published by Her Majestys 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, and (in either case) no amendment or substitution of the Index shall have been designated by Her Majestys Treasury in respect of the Reference Gilt to the Issuer [and the Guarantor]* 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).
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, Conditions 4.7 to 4.10 will apply. For the purposes of Conditions 4.7 to 4.10, unless the context otherwise requires, the following defined terms shall have the following meanings:
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
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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:
where:
l d 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
q m 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; and
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 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 3.2.4(c).
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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 partys 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 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 |
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partys 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 paragraphs (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 paragraphs (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 paragraphs (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 partys title)) pursuant to the terms and conditions of the Related Instrument to the levels 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. |
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(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 thirty 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 [(or, if the Guarantee were called, the Guarantor)]* 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 subdivision of the United Kingdom or taxing authority in the United Kingdom or any political subdivision 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 [(or the Guarantor, as the case may be)]* taking reasonable measures (such measures not involving any material additional payments by, or expense for, the Issuer [(or the Guarantor, as the case may be)]*), the Issuer may, at its option, on any Interest Payment Date or, if so specified in the relevant Final Terms 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
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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 [(or the Guarantor, as the case may be)]* 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 [(or the Guarantee, as the case may be)]* then due. Prior to the publication of any notice of redemptionpursuant to this Condition 5.2, the Issuer shall deliver to the Trustee a certificate signed by two Directors of the Issuer [(or the Guarantor, as the case may be)]* stating that the requirement referred to above cannot be avoided by the Issuer [(or the Guarantor, as the case may be)]* 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[, the Guarantor]* and any of [its/their] 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: |
(a) |
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. |
(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 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 (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 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. |
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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 above), 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.
5.5 |
Redemption at the Option of the Issuer and Exercise of Issuers Options |
5.5.1 |
Residual Holding Call Option |
If (i) Residual Holding Call Option is specified in the relevant Final Terms as applicable, 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 1 irrevocable notice to the Instrumentholders and the Trustee of any such redemption pursuant to this Condition 5.5.1.
5.5.2 |
Call Option |
If Call Option is specified in the relevant Final Terms as applicable, the Issuer may, 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 Issuers option in relation to, all or, if so provided, some of such Instruments on any Optional Redemption Date 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 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 on this Instrument.
All Instruments in respect of which any such notice is given shall be redeemed, or the Issuers option shall be exercised, on the date specified in such notice in accordance with this Condition.
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In the case of a partial redemption or a partial exercise of an Issuers 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.
5.6 |
Redemption at the Option of Instrumentholders and Exercise of Instrumentholders Options |
If Put Option is specified in the relevant Final Terms as applicable, the Issuer shall, at the option of the holder of any such Instrument, upon the holder of such Instrument 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 relevant 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.
5.7 |
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 [, the Guarantor]* or any of [its/their] subsidiary undertakings may, at the option of the Issuer, be held, resold or surrendered together with all unmatured Coupons and all unexchanged Talons attached to them to a Paying Agent for cancellation. Any Instruments so purchased or otherwise acquired, for so long as they are held by the Issuer [, the Guarantor]* or any of [its/their] respective subsidiary undertakings, 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 will, subject as mentioned below, be made against presentation and surrender of the relevant, Instruments (in the case of all other payments of principal and, in the case of interest, as specified in Condition 6.5.6) or Coupons (in the case of interest, save as specified in Condition 6.5.6), 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.
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6.2 |
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.
6.3 |
Payments subject to Fiscal Laws etc. |
All payments are subject in all cases to any applicable fiscal or other laws, regulations and directives, but without prejudice to the provisions of Condition 7. No commission or expenses shall be charged to the Instrumentholders or Couponholders in respect of such payments.
6.4 |
Appointment of Agents |
The Issuing and Paying Agent, the Paying Agents and the Calculation Agent initially appointed by the Issuer [and the Guarantor]* 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 the Guarantor]* and do not assume any obligation or relationship of agency or trust for or with any holder. The Issuer [and the Guarantor]* reserve[s] 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 (i) an Issuing and Paying Agent, (ii) a Paying Agent having a specified office in a continental European city, (iii) a Calculation Agent where the Conditions so require one, (iv) 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 the relevant stock exchange or other relevant authority and (v) to the extent that the Issuer is able to do so and not provided for by the foregoing provisions of this Condition 6.4, a Paying Agent with a specified office in a European Union Member State that will not be obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the EC.OFIN Council meeting of 26-27 November 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive. 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 [and the Guarantor]* 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 6.2.
Notice of any such change or any change of any specified office shall promptly be given to the Instrumentholders in accordance with Condition 14.
6.5 |
Unmatured Coupons and unexchanged Talons: |
6.5.1 |
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. |
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6.5.2 |
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. |
6.5.3 |
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. |
6.5.4 |
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. |
6.6 |
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:
(i) |
(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 |
(ii) |
(in the case of a payment in euro), which is a TARGET Business Day. |
6.7 |
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 [or the Guarantor]* in respect of the Instruments and the Coupons [or under the Guarantee]* 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 [or, as the case may be, the Guarantor]* will pay such additional amounts of principal and interest as will result in the payment to the Instrumentholders or, as the case may be, the Couponholders of the amounts which would otherwise have been receivable in respect of the
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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 thirtieth day; or |
(d) |
where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive; or |
(e) |
by or on behalf of a holder who would have been able to avoid such withholding or deduction (i) by presenting the relevant Instrument or Coupon to another Paying Agent in a Member State of the European Union; or (ii) by satisfying any statutory or procedural requirements (including, without limitation, the provision of information). |
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 (i) 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, (ii) 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 or pursuant to Condition 6 or any amendment or supplement to it and (iii) 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.
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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, 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 |
(b) |
Breach of Other Obligations : there is default in the performance or observance by the Issuer [or the Guarantor]* 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 [or the Guarantor]* by the Trustee; or |
(c) |
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 [or the Guarantor]* be wound up or dissolved; or |
(d) |
Enforcement Proceedings : attachment is made of the whole or substantially the whole of the assets or undertaking of the Issuer [or the Guarantor]* 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 the Guarantor]* or an administration or similar order is made in relation to the Issuer [or the Guarantor]* and such taking of possession, appointment or order is not released, discharged or cancelled within 90 days; or |
(e) |
Insolvency : the Issuer [or the Guarantor]* 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 |
(f) |
Bankruptcy : the Issuer [or the Guarantor]* 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.
Any such notice by the Trustee to the Issuer shall specify the serial number(s) of the Instrument(s) concerned.
10 |
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 or Couponholder 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.
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11 |
Meetings of Instrumentholders, Modifications and Substitution |
11.1 |
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) and on all Couponholders, except that any Extraordinary Resolution proposed, inter alia, (i) to amend the dates of maturity or redemption of the Instruments or any date for payment of interest on the Instruments, (ii) to reduce or cancel the nominal amount of, or any premium payable on redemption of, the Instruments, (iii) 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, (iv) 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, (v) to vary any method of calculating the Final Redemption Amount, the Early Redemption Amount or the Optional Redemption Amount, (vi) 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 [,or] (vii) to modify the provisions concerning the quorum required at any meeting of Instrumentholders or the majority required to pass the Extraordinary Resolution [or (viii) to modify or cancel the Guarantee]* 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 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 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 |
The Trustee may agree, without the consent of the Instrumentholders or Couponholders, to(i) 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 (ii) 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 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 such other conditions as the Trustee may require, but without the consent of the Instrumentholders or the Couponholders, to the substitution of [a Successor in Business (as defined in the Trust Deed) or any subsidiary/any other
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company]± in place of the Issuer or of any previous substituted company, as principal debtor under the Trust Deed and the Instruments [and the substitution of the Guarantors Successor in Business (as defined in the Trust Deed) or any subsidiary of the Guarantor in place of the Guarantor]*. 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 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 [or the Guarantor]* 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 lssuer[ or the Guarantor]* 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 lssuer[ or the Guarantor]* on demand the amount payable by the lssuer[ or the Guarantor]* in respect of such Instruments, Coupons or further Coupons) and otherwise as the lssuer[ or the Guarantor]* 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 such further instruments forming a single series with Instruments constituted by the Trust Deed or 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.
± |
Where National Grid Gas pic is the Issuer, delete the text any other company. Where National Grid Gas Finance (No 1) is the Issuer, delete the text a Successor in Business (as defined in the Trust Deed) or any subsidiary. |
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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.
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 provisions relieving it from any obligation to take proceedings to enforce repayment unless indemnified to its satisfaction. The Trustee is entitled to enter into business transactions with the lssuer[, the Guarantor]* or any of [its/their] 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 |
(a) |
The Instruments and any non-contractual obligations arising out of or in connection with them shall be governed by, and construed in accordance with, English law. |
(b) |
The courts of England have exclusive jurisdiction to settle any dispute (a Dispute ), arising from or connected with the Instruments. |
(c) |
[Each of the]* /[The] lssuer[, and the Guarantor]* 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. |
(d) |
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. |
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Schedule 2
Part C
Form of Coupon
On the front:
[NATIONAL GRID GAS plc/NATIONAL GRID GAS FINANCE (NO 1) plc]*
Euro Medium Term Note Programme
Series No. []
[Title of issue]
[unconditionally and irrevocably guaranteed by
NATIONAL GRID GAS plc]*
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 GAS plc/NATIONAL GRID GAS FINANCE (NO 1) plc ]*
By:
Authorised Signatory
[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.] |
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On the back:
ISSUING AND PAYING AGENT
The Bank of New York Mellon
One Canada Square
London E14 5AL
PAYING AGENT
KBL European Private Bankers S.A.
43 Boulevard Royal
L-2955 Luxembourg
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Schedule 2
Part D
Form of Talon
On the front:
[NATIONAL GRID GAS plc/NATIONAL GRID GAS FINANCE (NO 1) plc]*
Euro Medium Term Note Programme
Series No. []
[Title of issue]
[unconditionally and irrevocably guaranteed by
NATIONAL GRID GAS plc]*
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 GAS plc/NATIONAL GRID GAS FINANCE (NO 1) plc ]*
By:
Authorised Signatory
[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 due.] |
*** |
[Only required where the Series comprises Instruments of more than one denomination.] |
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On the back:
ISSUING AND PAYING AGENT
The Bank of New York Mellon
One Canada Square
London E14 5AL
PAYING AGENT
KBL European Private Bankers S.A.
43 Boulevard Royal
L-2955 Luxembourg
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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 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 |
block voting instruction means an instruction issued in accordance with paragraphs 8 to 14; |
1.5 |
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; |
1.6 |
voting certificate means a certificate issued in accordance with paragraphs 5, 6, 7 and 14; and |
1.7 |
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. |
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, the Guarantor (if applicable) or the Trustee for any modification, abrogation, variation or compromise of, or arrangement in respect of, the rights of the Instrumentholders and/or the Couponholders against such Issuer or the Guarantor, as the case may be, 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 the Guarantor (if applicable) 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, the Guarantor (if applicable) 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; |
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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 the Guarantor (or any previous substitute) as principal debtor or guarantor 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, the Guarantor (if applicable), 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 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. |
Arrangements for voting
5 |
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. |
6 |
A voting certificate shall: |
6.1 |
be a document in the English language; |
6.2 |
be dated; |
6.3 |
specify the meeting concerned and the serial numbers of the Instruments deposited; and |
6.4 |
entitle, and state that it entitles, its bearer to attend and vote at that meeting in respect of those Instruments. |
7 |
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: |
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7.1 |
the meeting has been concluded; or |
7.2 |
the voting certificate has been surrendered to the Paying Agent. |
8 |
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. |
9 |
A block voting instruction shall: |
9.1 |
be a document in the English language; |
9.2 |
be dated; |
9.3 |
specify the meeting concerned; |
9.4 |
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; |
9.5 |
certify that such list is in accordance with Instruments deposited and directions received as provided in paragraphs 8, 11 and 14; and |
9.6 |
appoint a 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.
10 |
Once a Paying Agent has issued a block voting instruction for a meeting in respect of the votes attributable to any Instruments: |
10.1 |
it shall not release the Instruments, except as provided in paragraph 11, until the meeting has been concluded; and |
10.2 |
the directions to which it gives effect may not be revoked or altered during the 48 hours before the time fixed for the meeting. |
11 |
If the receipt for an Instrument deposited with a Paying Agent in accordance with paragraph 8 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. |
12 |
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 it shall not be valid unless the chairman of the meeting decides otherwise before the meeting proceeds to business. If the Trustee requires, a notarially 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 proxys appointment. |
13 |
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. |
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14 |
No Instrument may be deposited with or to the order of a Paying Agent at the same time for the purposes of both paragraph 5 and paragraph 8 for the same meeting. |
Chairman
15 |
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. 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
16 |
The following may attend and speak at a meeting: |
16.1 |
Instrumentholders and agents; |
16.2 |
the chairman; |
16.3 |
the relevant Issuer, the Guarantor (if applicable) and the Trustee (through their respective representatives) and their respective financial and legal advisers; and |
16.4 |
the Dealers and their advisers. |
No one else may attend or speak.
Quorum and Adjournment
17 |
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. |
18 |
Two or more Instrumentholders or agents present in person shall be a quorum: |
18.1 |
in the cases marked No minimum proportion in the table below, whatever the proportion of the Instruments which they represent; |
18.2 |
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 |
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COLUMN 1 |
COLUMN 2 |
COLUMN 3 |
||
To pass any other Extraordinary Resolution |
A clear majority |
No minimum proportion |
||
Any other purpose |
10 per cent. |
No minimum proportion |
19 |
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. |
20 |
At least 10 days notice 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. |
Voting
21 |
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 Guarantor (if applicable) the Trustee or one or more persons holding one or more Instruments or voting certificates, in each case, representing two per cent. of the Instruments. |
22 |
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. |
23 |
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. |
24 |
A poll demanded on the election of a chairman or on a question of adjournment shall be taken at once. |
25 |
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 nominal amount 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. |
26 |
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
27 |
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. |
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28 |
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 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. Such resolution in writing may be contained in one document or several documents in similar form each signed by or on behalf of one or more of the Instrumentholders. |
Minutes
29 |
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. |
Trustees Power to Prescribe Regulations
30 |
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. |
31 |
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. |
32 |
The above provisions of this Schedule shall have effect subject to the following provisions: |
32.1 |
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. |
32.2 |
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. |
32.3 |
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 25, each Instrumentholder shall have one vote in respect of each 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 ). |
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32.4 |
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. |
32.5 |
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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This Trust Deed is delivered on the date stated at the beginning.
EXECUTED AS A DEED BY AFFIXINGTHE COMMON SEAL of NATIONAL GRID GAS plc AS ISSUER AND GUARANTOR
|
} |
/s/ ALICE MORGAN ALICE MORGAN |
||
in the presence of: |
/s/ HARRIET HILL HARRIET HILL |
|||
EXECUTED AS A DEED BY AFFIXING THE COMMON SEAL of NATIONAL GRID GAS FINANCE (NO 1) plc AS ISSUER |
} |
/s/ ALEXANDRA LEWIS ALEXANDRA LEWIS |
||
in the presence of: |
/s/ HARRIET HILL HARRIET HILL |
|||
EXECUTED AS A DEED BY AFFIXINGTHE COMMON SEAL of THE LAW DEBENTURE TRUST CORPORATION p.l.c. AS TRUSTEE |
} |
/s/ DENYSE ANDERSON DENYSE ANDERSON |
||
in the presence of: |
/s/ CAROL MORRIS CAROL MORRIS |
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EXHIBIT 2(b).6
CONFORMED COPY
Dated 10 September 2012
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: JALB/RR/VGS
Linklaters LLP
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 |
19 | |||
11 Trustee not Precluded from Entering into Contracts |
20 | |||
12 Modification and Substitution |
20 | |||
13 Appointment, Retirement and Removal of the Trustee |
21 | |||
14 Instruments held in Clearing Systems and Couponholders |
22 | |||
15 Currency Indemnity |
23 | |||
16 Enforcement |
24 | |||
17 Communications |
25 | |||
18 Governing Law and Jurisdiction |
25 | |||
Schedule 1 Part A Form of CGN Temporary Global Instrument |
27 | |||
Schedule 1 Part B Form of CGN Permanent Global Instrument |
34 | |||
Schedule 1 Part C Form of NGN Temporary Global Instrument |
44 | |||
Schedule 1 Part D Form of NGN Permanent Global Instrument |
50 | |||
Schedule 2 Part A Form of Definitive Instrument |
57 | |||
Schedule 2 Part B Terms and Conditions of the Instruments |
60 | |||
Schedule 2 Part C Form of Coupon |
105 | |||
Schedule 2 Part D Form of Talon |
107 | |||
Schedule 3 Provisions for Meetings of Instrumentholders |
109 |
i |
This Amended and Restated Trust Deed is made on 10 September 2012 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 2 August 2011 (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 10 September 2012, 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 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 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;
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;
1 |
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;
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;
Clearstream, Luxembourg means Clearstream Banking, société anonyme ;
Common Safekeeper means, in relation to a Series, the common safekeeper for Euroclear and Clearstream, Luxembourg appointed in respect of such Instruments;
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 10 September 2012 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 S.A./N.V.;
2 |
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 Article 5.4 of the Prospectus Directive;
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 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
3 |
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;
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;
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 each Issuer for the purposes of Article 5.4 of the Prospectus Directive 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 Services 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 Directive means Directive 2003/71/EC of the European Parliament and of the Council;
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;
4 |
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; |
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; |
5 |
1.2.4 |
the Trustees 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.
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.
6 |
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 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) payment of any sum due in respect of the Instruments made to the Issuing and Paying Agent 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
7 |
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 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 Trustees 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 |
(ii) |
to deliver all Instruments (other than the Australian Domestic Instruments), Coupons and Talons and all moneys, documents and records held by them inrespect 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 |
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 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. |
8 |
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. Instruments settling in CDS will be signed manually by an authorised signatory of the relevant Issuer and the Instruments shall be authenticated by or on behalf of the Canadian Paying Agent. The Australian Domestic Instruments will be inscribed in a register maintained by the Australian Registrar in accordance with the Australian Agency and Registry Agreement. 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, 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.
9 |
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 Issuers 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 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 reasonably 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 paripassu 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.
10 |
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.
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 |
11 |
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 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.
12 |
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 Clifford Chance 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 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 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 the Deed Poll or the Australian Agency and Registry Agreement; |
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 Certificates, 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. |
13 |
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 al! 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 an Event of Default shall have occurred the relevant Issuer shall pay additional remuneration to the Trustee, which may be calculated using the Trustees normal hourly rates in force from time to time. In any other case if the Trustee finds it expedient or necessary or is requested by an Issuer to undertake duties that they both agree to be of an exceptional nature or otherwise outside the scope of the Trustees normal duties under this Trust Deed, such Issuer shall pay such additional remuneration as they may agree 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 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 institutions 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.
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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 reasonably 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 Trustees 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 Trustees 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 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.
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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 experts 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 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 or NGET Restructuring Event, an Event of Default or Potential Event of Default 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 to have been passed at a meeting of Instrumentholders in respect of which minutes have been made and signed 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 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.
16 |
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.
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.
17 |
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 |
Trustees 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.
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 Trustees 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; |
18 |
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. |
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.
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.
19 |
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). 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 Issuers 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 Issuers 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; |
20 |
(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 Obligors 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 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.
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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; |
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 Trustees 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 Trustees 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. |
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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 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 Euroclears EUCLID or Clearstream, Luxembourgs 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
23 |
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 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 |
Trustees 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 adviser 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.
24 |
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.
17 |
Communications |
17.1 |
Method |
Each communication under this Trust Deed shall be made by 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 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, 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 good receipt is confirmed by the recipient following enquiry by the sender and (if in writing) when received, except that a communication received outside normal business hours shall be deemed to be received on the next business day in the city in which the recipient is located.
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
25 |
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).
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.
26 |
Schedule 1
Part A
Form of CGN 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 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 10 September 2012 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 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.
* |
Delete as applicable. |
27 |
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 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.
28 |
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 additional schedule to this temporary Global Instrument (such endorsement being prima facie evidence that the payment in question has been made). Condition 6.5(e) and Condition 7(e)(i) will apply to the Definitive Instruments only.
29 |
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.
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.
30 |
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 1650) AND 1287(a) OF THE INTERNAL REVENUE CODE .
* |
Delete as applicable. |
31 |
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
|
Reason for decrease in
|
Nominal amount of this
|
Notation made by or on
|
||||
Issue Date |
not applicable |
not applicable |
32 |
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]
33 |
Schedule 1
Part B
Form of CGN Permanent Global Instrument
[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 10 September 2012 between, inter alios , the Issuer and The Law Debenture Trust Corporation p.I.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.
§ |
Only applicable to Instruments which are settling and clearing In CDS. |
* |
Delete as applicable. |
34 |
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 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.]* [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 the Securities Act (Ontario) or a self-regulatory organisation under the Securities Act (Quebec) or other applicable Canadian 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.]*
* |
Delete as applicable. |
35 |
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]* [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 [Euroclear and Clearstream, Luxembourg or, if relevant, the Alternative Clearing System, are]* [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 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 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. Condition 6.5(e) and Condition 7(e)(i) will apply to the Definitive Instruments only.
* |
Delete as applicable. |
36 |
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 Paying Agent]§ [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 |
Issuers 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]§[Canadian Paying Agent]§ within the time limits relating to the deposit of
§ |
Delete as applicable. |
* |
If applicable. |
37 |
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]* [Canadian Paying Agent]*, or to a Paying Agent acting on behalf of the [Issuing and Paying Agent]* [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 Euroclear, Clearstream, Luxembourg [, CDS]* or any Alternative Clearing System) to Euroclear, Clearstream, Luxembourg [, 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.
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 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]* [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.
* |
Delete as applicable. |
38 |
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]* [BNY TRUST COMPANY OF CANADA]*
as [Issuing and Paying Agent]* [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. |
39 |
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/
|
Reason for increase/
|
Nominal amount of this
|
Notation made by or on
|
§ |
Delete as applicable. |
40 |
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
|
41 |
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.]
42 |
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
|
Date on which exercise of such
|
Notation made by or on behalf of
|
* |
If applicable. |
§ |
Delete as applicable. |
43 |
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 10 September 2012 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.
* |
Delete as applicable. |
44 |
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 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.
45 |
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 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.
46 |
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 Issuers 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). Condition 6.5(e) and Condition 7(e)(i) will apply to the Definitive Instruments only.
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.
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.
47 |
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. |
48 |
The Schedule
[Insert the provisions of the relevant Final Terms that relate to the Conditions or the Global Instruments as the Schedule]
49 |
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 10 September 2012 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.
* |
Delete as applicable. |
50 |
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 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
51 |
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 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 Issuers 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. Condition 6.5(e) and Condition 7(e)(i) will apply to the Definitive Instruments only.
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.
52 |
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.
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 |
Issuers 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.
|
If applicable. |
53 |
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 other 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.
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 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.
54 |
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. |
55 |
The Schedule
[Insert the provisions of the relevant Final Terms that relate to the Conditions or the Global Instruments as the Schedule.]
56 |
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. |
57 |
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.
* |
Delete as applicable. |
58 |
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
KBL European Private Bankers S.A.
43 Boulevard Royal
L-2955 Luxembourg
BNY Trust Company of Canada
320 Bay Street, 11th Floor
Toronto, ON
Canada M5H 4A6
59 |
Schedule 2
Part B
Terms and Conditions of the Instruments
The following is the text of the terms and conditions which, save for the text in italics and subject to completion by Part A of the relevant Final Terms, will be endorsed on the Instruments in definitive form (if any) issued in exchange for the Global Instrument(s) representing each Series and incorporated by reference into each Australian Domestic Instrument. Either (a) the full text of these terms and conditions together with the relevant provisions of Part A of the Final Terms or (b) these terms and conditions as so completed (and subject to simplification by the dis-application of non-applicable provisions), shall be endorsed on such definitive Instruments. All capitalised terms which are not defined in these 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 definitive Instruments and incorporated by reference into each Australian Domestic Instrument.
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 10 September 2012 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 10 September 2012 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 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.
60 |
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 10 September 2012 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:
(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 [provided that in the case of any Instruments which are to be admitted to trading on a regulated market within the European Economic Area or offered to the public in a Member State of the European Economic Area in circumstances which require the publication of a prospectus under the Prospectus Directive, the minimum Specified Denomination shall be 100,000 (or its equivalent in any other currency as at the date of issue of the relevant Instruments)*]. 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.
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.
* |
Only applicable where NGET is the Issuer. |
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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 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
62 |
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 transferors 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$5Q0,000 (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 |
(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.
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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 Grids 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.
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 are for the time being, or are intended, with the agreement of the Issuer, to be quoted, listed or ordinarily dealt in on any stock exchange.
64 |
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 3.2.4(d).
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 3.2.4(d). 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
65 |
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 1SDA 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: |
(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.
66 |
(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 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; and |
(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 |
67 |
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, one of the highest) and the lowest 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 |
68 |
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 a.m. 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 a.m. 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.
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.
(a) |
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(b)).
(b) |
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).
(c) |
Margin, Maximum/Minimum Rates of Interest and 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. |
69 |
(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. |
(d) |
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.
(e) |
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
70 |
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.
(f) |
Determination or Calculation by Trustee |
If the Calculation Agent does not at any time for any reason determine or calculate the Rate of Interest for an Interest Accrual Period or any Interest Amount, Final Redemption Amount, Early Redemption Amount or Optional Redemption Amount the Trustee shall do so (or shall appoint an agent on its behalf to do so) and such determination or calculation shall be deemed to have been made by the Calculation Agent. In doing so, the Trustee shall apply the preceding provisions of this Condition, with any necessary consequential amendments, to the extent that, in its opinion, it can do so, and, in all other respects it shall do so in such manner as it shall deem fair and reasonable in all the circumstances.
3.2.5 |
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 |
(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. |
71 |
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: |
where:
Y 1 is the year, expressed as a number, in which the first day of the Calculation Period falls;
Y 2 is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
M 1 is the calendar month, expressed as a number, in which the first day of the Calculation Period falls;
M 2 is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
D 1 is the first calendar day, expressed as a number, of the Calculation Period, unless such number would be 31, in which case D 1 will be 30; and
D 2 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 D 1 is greater than 29, in which case D 2 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: |
where:
Y 1 is the year, expressed as a number, in which the first day of the Calculation Period falls;
72 |
Y 2 is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
M 1 is the calendar month, expressed as a number, in which the first day of the Calculation Period falls;
M 2 is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
D 1 is the first calendar day, expressed as a number, of the Calculation Period, unless such number would be 31, in which case D 1 will be 30; and
D 2 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 D 2 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: |
where:
Y 1 is the year, expressed as a number, in which the first day of the Calculation Period falls;
Y 2 is the year, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
M 1 is the calendar month, expressed as a number, in which the first day of the Calculation Period falls;
M 2 is the calendar month, expressed as a number, in which the day immediately following the last day included in the Calculation Period falls;
D 1 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 D 1 will be 30; and
D 2 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 D 2 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 |
73 |
(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:
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 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. |
(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 regular semi-annual interest payments, 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 |
74 |
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 failing 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 failing 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.
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 Calculation Agent 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.
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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.
3.2.6 |
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 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.
4 |
Indexation |
This Condition 4 is applicable only if the relevant Final Terms specifies the Instruments as Index Linked Instruments.
4.1 |
U.K. Retail Price Index (RPl) |
Where RPI (as defined below) is specified as the Index or Index Figure (each as defined below) in the relevant Final Terms, Conditions 4.1 to 4.6 will apply. For purposes of Conditions 4.1 to 4.6, unless the context otherwise requires, the following defined terms shall have the meanings set out below:
Base Index Figure means (subject to Condition 4.3(i)) the base index figure as specified in the relevant Final Terms;
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Index or Index Figure means, subject as provided in Condition 4.3(i), the U.K. Retail Price Index (RPl) (for all items) published by the Office for National Statistics (January 1987 = 100) or any comparable index which may replace the U.K. Retail Price Index for the purpose of calculating the amount payable on repayment of the Reference Gilt (the RPI ). 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 sub-paragraph (ii) above and (y) the Index Figure applicable to the first calendar day of the month following, calculated as specified in sub-paragraph (ii) above and rounded to the nearest fifth decimal place. |
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; and
Reference Gilt means the Treasury Stock specified as such in the relevant Final Terms for so long as such stock is in issue, and thereafter such issue of index-linked Treasury Stock determined to be appropriate by a gilt-edged market maker or other adviser selected by the Issuer (an Indexation Adviser ).
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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, on which such payment falls to be made and rounded in accordance with Condition 3.2.4(c).
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 in substitution for January 1987 (or, as the case may be, to such other date or month 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 index if sub-paragraph (i) of the definition of Index Figure 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, 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 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 Index if sub-paragraph (ii) and/or (iii) of the definition of Index Figure 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, for the purposes of indexation of payments on the Reference Gilt or, failing such |
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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 |
Cessation of or Fundamental Changes to the Index |
(i) |
If (1) the Trustee has been notified by the Calculation Agent that the Index has ceased to be published or (2) any change is made to the coverage or the basic calculation of the Index which constitutes a fundamental change which would, in the opinion of (A) the Issuer be materially prejudicial to the interests of the Issuer, or (B) the Trustee (acting solely on the advice of the Indexation Adviser), be materially prejudicial to the interests of the Instrumentholders, the Trustee will give written notice of such occurrence to the Issuer in the case of (B), and 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 better and no worse position than they would have been had the Index not ceased to be published or the relevant fundamental change not been made. |
(ii) |
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 (i), 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 |
79 |
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 better and no worse position than they would have been had the Index not ceased to be published or the relevant fundamental change 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.
(iii) |
The Index shall be adjusted or replaced by a substitute index as agreed by the Issuer and the Trustee (acting solely on the advice of the Indexation Adviser) or as determined by the Expert 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. |
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) and the Trustee has been notified by the Calculation Agent that publication of the Index has ceased or (ii) notice is published by Her Majestys 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, and (in either case) no amendment or substitution of the Index shall have been advised by the Indexation Adviser 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 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).
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 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
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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:
where:
l d 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
q m 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 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 3.2.4(c).
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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 partys 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. |
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(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 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 partys 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 paragraphs (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 paragraphs (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 paragraphs (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. |
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(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 partys title)) pursuant to the terms and conditions of the Related Instrument to the levels 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 thirty 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 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
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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 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 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 |
(a) |
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 Instrumentunless otherwise specified in the relevant Final Terms. |
(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 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 (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 7. The |
85 |
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.
5.5 |
Redemption at the Option of the Issuer and Exercise of Issuers 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 Residua! 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, 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 Issuers option in relation to, all or, if so provided, some of such Instruments on any Optional Redemption Date 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 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 hereon and no greater than the maximum nominal amount (if any) permitted to be redeemed specified on this Instrument. |
86 |
All Instruments in respect of which any such notice is given shall be redeemed, or the Issuers 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 Issuers 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.
5.6 |
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:
(a) |
(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 |
(b) |
(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.
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
* |
Only applicable where National Grid is the Issuer. |
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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 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;
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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 (BBBor 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
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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 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 Standard & Poors Ratings Services, a division of The McGraw-Hill Companies, Inc. and its successors or Moodys Investors Service, Inc. 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 (BBBor 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;
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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 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:
(a) |
(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 |
* |
Only applicable where NGET is the Issuer. |
91 |
(b) |
(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 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
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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; or |
(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 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; |
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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 Standard & Poors Ratings Services, a division of The McGraw-Hill Companies, Inc., or any of its Subsidiaries and their successors or Moodys Investors Service, Inc., 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;
Subsidiary means a subsidiary within the meaning of Section 1156 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. |
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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 on this Instrument) redeem such Instrument on the Optional Redemption Date(s) (as specified in the 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 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.
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 other payments of principal and, in the case of interest, as specified in Condition 6.6.4) or Coupons (in the case of interest,
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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 lnstrumentholder(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 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
96 |
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. |
All payments are subject in all cases to any applicable fiscal or other laws, regulations and directives, but without prejudice to the provisions of Condition 7. 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, which shall be London so long as the Instruments are admitted to the Official List of the Financial Services Authority in its capacity as competent authority under the Financial Services and Markets Act 2000 and admitted to trading on the London Stock Exchanges Regulated Market, (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) to the extent that the Issuer is able to do so and not provided for by the foregoing provisions of this Condition 6.5, a Paying Agent with a specified office in a European Union member state that will not be obliged to withhold or deduct tax pursuant to any law implementing European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000. 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.
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. |
97 |
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 payment to the Instrumentholders or, as the case may be, the Couponholders of the amounts which would otherwise have been receivable
98 |
in respect of 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; or |
(d) |
where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to any law implementing European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000; or |
(e) |
by or on behalf of a holder who would have been able to avoid such withholding or deduction (i) by presenting the relevant Instrument or Coupon to another Paying Agent in a Member State of the European Union; or (ii) by satisfying any statutory or procedural requirements (including, without limitation, the provision of information). |
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.
99 |
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, 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 |
(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 £50,000,000, for the period up to 31 March 2017, and thereafter, £100,000,000. |
[For the purposes of this Condition 9, Principal Subsidiary means National Grid Gas plc, NGET 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. 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.]*; 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 |
* |
Only applicable where National Grid is the Issuer. |
100 |
(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.
10 |
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 or Couponholder 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.
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
101 |
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 (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. 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
102 |
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 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.
103 |
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. |
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 lnstrument holders 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. |
104 |
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.] |
[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.]
* |
Delete as applicate. |
105 |
On the back:
ISSUING AND PAYING AGENT
The Bank of New York Mellon
One Canada Square
London E14 5AL
PAYING AGENTS
KBL European Private Bankers S.A.
43 Boulevard Royal
L-2955 Luxembourg
BNY Trust Company of Canada
320 Bay Street, 11th Floor
Toronto, ON
Canada M5H 4A6
106 |
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.] |
[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.]
* |
Delete as applicate. |
107 |
On the back:
ISSUING AND PAYING AGENT
The Bank of New York Mellon
One Canada Square
London E14 5AL
PAYING AGENTS
KBL European Private Bankers S.A.
43 Boulevard Royal
L-2955 Luxembourg
BNY Trust Company of Canada
320 Bay Street, 11 th
Floor Toronto, ON
Canada M5H 4A6
108 |
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 |
block voting instruction means an instruction issued in accordance with paragraphs 8 to 14; |
1.5 |
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; |
1.6 |
voting certificate means a certificate issued in accordance with paragraphs 5, 6, 7 and 14; and |
1.7 |
references to persons re presenting 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. |
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 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; |
109 |
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 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. |
Arrangements for voting
5 |
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. |
6 |
A voting certificate shall: |
6.1 |
be a document in the English language; |
6.2 |
be dated; |
6.3 |
specify the meeting concerned and the serial numbers of the Instruments deposited; and |
6.4 |
entitle, and state that it entitles, its bearer to attend and vote at that meeting in respect of those Instruments. |
110 |
7 |
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: |
7.1 |
the meeting has been concluded; or |
7.2 |
the voting certificate has been surrendered to the Paying Agent. |
8 |
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. |
9 |
A block voting instruction shall: |
9.1 |
be a document in the English language; |
9.2 |
be dated; |
9.3 |
specify the meeting concerned; |
9.4 |
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; |
9.5 |
certify that such list is in accordance with Instruments deposited and directions received as provided in paragraphs 8,11 and 14; and |
9.6 |
appoint a named person (a proxy to vote at that meeting in respect of those Instruments and in accordance with that list. |
9.7 |
A proxy need not be an Instrumentholder. |
10 |
Once a Paying Agent has issued a block voting instruction for a meeting in respect of the votes attributable to any Instruments; |
10.1 |
it shall not release the Instruments, except as provided in paragraph 11, until the meeting has been concluded; and |
10.2 |
the directions to which it gives effect may not be revoked or altered during the 48 hours before the time fixed for the meeting. |
11 |
If the receipt for an Instrument deposited with a Paying Agent in accordance with paragraph 8 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. |
12 |
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 it shall not be valid unless the chairman of the meeting decides otherwise before the meeting proceeds to business. If the Trustee requires, a notarially 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 proxys appointment. |
111 |
13 |
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. |
14 |
No Instrument may be deposited with or to the order of a Paying Agent at the same time for the purposes of both paragraph 5 and paragraph 8 for the same meeting. |
Chairman
15 |
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. 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
16 |
The following may attend and speak at a meeting: |
16.1 |
Instrumentholders and agents; |
16.2 |
the chairman; |
16.3 |
the relevant Issuer and the Trustee (through their respective representatives) and their respective financial and legal advisers; and |
16.4 |
the Dealers and their advisers. |
No one else may attend or speak.
Quorum and Adjournment
17 |
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. |
18 |
Two or more Instrumentholders or agents present in person shall be a quorum: |
18.1 |
in the cases marked No minimum proportion in the table below, whatever the proportion of the Instruments which they represent; and |
112 |
18.2 |
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 |
19 |
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. |
20 |
At least 10 days notice 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. |
Voting
21 |
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 2 per cent. of the Instruments. |
22 |
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. |
23 |
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. |
24 |
A poll demanded on the election of a chairman or on a question of adjournment shall be taken at once. |
25 |
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, |
26 |
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. |
113 |
Effect and Publication of an Extraordinary Resolution
27 |
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. |
28 |
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 and effectual as an Extraordinary Resolution passed at meeting of such Instrumentholders duly convened and held in accordance with the provisions of this Schedule. Such resolution in writing may be contained in one document or several documents in similar form each signed by or on behalf of one or more of the Instrumentholders. |
Minutes
29 |
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. |
Trustees Power to Prescribe Regulations
30 |
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. |
31 |
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. |
32 |
The above provisions of this Schedule shall have effect subject to the following provisions: |
32.1 |
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. |
32.2 |
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. |
114 |
32.3 |
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 ). |
32.4 |
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. |
32.5 |
To all such meetings as previously set out all the preceding provisions of this Schedule shall mutatis mutandis apply as though references there in to Instruments and to Instrumentholders were references to the Instruments and Instrumentholders of the Series concerned. |
115 |
In witness of which this Trust Deed has been executed as a deed on the date stated at the beginning.
EXECUTED BY AFFIXING THE COMMON SEAL of NATIONAL GRID plc |
} |
|||
in the presence of: |
/s/ HARRIET HILL HARRIET HILL |
|||
EXECUTED BY AFFIXING THE COMMON SEAL of NATIONAL GRID ELECTRICITY TRANSMISSION plc |
} |
|||
in the presence of: |
/s/ HEATHER RAYNER HEATHER RAYNER |
|||
EXECUTED AS A DEED BY AFFIXING THE COMMON SEAL of THE LAW DEBENTURE TRUST CORPORATION p.l.c. |
} |
|||
in the presence of: |
/s/ DENYSE ANDERSON DENYSE ANDERSON |
|||
/s/ CAROL MORRIS CAROL MORRIS |
116 |
EXHIBIT 4(c).13
23 April 2012
Ms Nora Mead Brownell
105 Pommander Walk
Alexandria
VA 22314
USA
Dear Nora
Appointment as Non-executive Director
Subject to final approval by the Board of National Grid plc (the Company ) on 3 April 2012, I am delighted to advise your appointment as a Non-executive Director of the Company will be effective from 1 June 2012. This letter sets out the terms of your appointment. It is agreed that this is a contract for services and not a contract of employment.
Appointment
Your appointment, commencing on 1 June 2012, will be subject to your re-election by shareholders at the Companys Annual General Meeting (AGM) in 2012, following which it is expected that you will be subject to annual re-election by shareholders in accordance with our commitment to best practice, unless your appointment is otherwise terminated earlier in accordance with the Companys Articles of Association as amended from time to time (the Articles) or by and at the discretion of either the Board or you upon 1 months written notice. Continuation of your contract of appointment is therefore contingent on satisfactory performance and re-election by shareholders at forthcoming AGMs. 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 and will not be entitled to any other compensation (or payment in lieu of notice). Non-executive Directors are typically expected to serve two three-year terms, subject to the terms of this letter; any extension to this is subject to review by the Nominations Committee (prior to making recommendations to the Board) having regard to corporate governance best practice from time to time.
Time Commitment
Overall we anticipate a time commitment of approximately 2-2 1 / 2 days on average per month, after the induction phase, taking into account reading and preparation time for Board and Committee meetings. This will include attendance at Board meetings (estimated 10 scheduled meetings per yearincluding 2 Board strategy sessionsof which currently 3 are held in the US) plus ad hoc and emergency meetings, Committee meetings, the AGM and any extraordinary general meetings. There will also be site visits on occasions. It is planned that certain Board meetings will be held at the Companys operational sites (in the UK). In addition, you will be expected to devote such other time as is reasonably required to discharge your duties as a Director (for example if the Company is involved in increased activity because it is involved in a major transaction).
1 of 7
Post induction, as a Non-executive Director you will be expected to undertake at least one site visit per year to the business, the location to be agreed with the Chairman or Chief Executive.
If you are unable to attend a meeting, you should notify the Group Company Secretary and General Counsel and prior to the meeting communicate your opinions and comments on the matters to be considered to the Chairman or the relevant Committee Chairman so they can be taken into account at the meeting.
By confirming this appointment, you have agreed that you are able to allocate sufficient time to meet the expectations of your role including appropriate preparation time. The agreement of the Chairman should be sought before accepting additional commitments that might affect the time you are able to devote to your role as a Non-executive Director of the Company.
Role
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 Companys 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.
All directors are expected to comply with the Companys policies, procedures, rules and regulations from time to time in force, including in particular, the Companys Standards of Ethical Business Conduct and its Share Dealing Code.
The Board:
|
provides effective business leadership of the Company within a framework of prudent and effective controls which enable risk to be assessed and managed; |
|
sets the Companys strategic aims, ensures that the necessary financial and human resources are in place for the Company to meet its objectives, and reviews management performance; and |
|
sets the Companys values and standards and ensures that its obligations to its shareholders and others are understood and met. |
In addition to these requirements of all Directors, the role of the Non-executive Director has the following key elements:
|
Strategy: Non-executive Directors should constructively challenge and contribute to the development of strategy; |
|
Performance: Non-executive Directors should scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance; |
|
Risk: Non-executive Directors should satisfy themselves that the financial function of the Company is professionally managed and that financial controls and systems of risk management are robust and defensible; and |
|
People: Non-executive Directors are responsible for determining appropriate levels of remuneration for Executive Directors and have a prime role in appointing, and where necessary removing, senior management, and in succession planning. |
2 of 7
You should also have regard to the Guidance on Board Effectiveness, issued by the Financial Reporting Council (FRC) in March 2011, of which an extract summarising the role of a Non-executive Director is included at Schedule 1 of this letter.
Committees
Initially, you will be invited to serve on the Risk & Responsibility and the Remuneration Committees, this is subject to change from time to time, as determined by the Company.
In addition, all Non-executive Directors are invited to meetings of the Nominations Committee which are held on an ad hoc basis. No fee is paid for Nominations Committee attendance.
This letter refers to your appointment as a Non-executive Director of the Company. Terms of reference of all Board Committees are set out in the Directors Information Pack which will be sent to you shortly.
Fees
This letter sets out the only payments you will receive for performing your duties in accordance with this letter. Accordingly, no other remuneration or benefits will be provided and, in particular, you will not participate in any of the Companys remuneration or benefit programmes, arrangements, schemes or plans.
As a US-based Director, you will be paid £72,000 per annum and you will also be entitled to a Committee membership fee of £8,000 per annum, per committee membership. These payments will be made monthly on or around 15 th day of each month. You will not receive any further fees for membership of, or attendance at, any ad hoc Board or Committee meetings. If, for a reason related to 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.
The Company will reimburse you, in accordance with the Articles and any expenses procedures from time to time in force, for any reasonable expenses properly incurred in performing your duties. All expenses must be properly documented. 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.
The Executive Committee and Board shall review the above fees from time to time and they are therefore subject to change. All fees and payments will be made subject to any tax or other deductions required to be made by the Company.
Outside interests
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 in writing.
In the event that you become aware of any potential conflicts of interest, these should be disclosed to the Chairman and/or Group Company Secretary and General Counsel as soon as apparent. Additionally, if at any time you are considering acquiring any new interest which might give rise to a conflict of interest with the Company or any of its subsidiaries or associate companies, you should raise the matter initially with the Chairman and/or Group Company Secretary and General Counsel. Depending on its nature, the interest may need to be disclosed to the Board and its prior consent obtained.
3 of 7
Independent status
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. If you become aware of anything that may affect, or could appear to affect, this determination of independence, this should be disclosed to the Chairman and/or Group Company Secretary and General Counsel as soon as apparent.
Confidentiality
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.
You will be required to return all papers and other information containing Confidential Information on termination of your appointment.
Your attention is also drawn to the requirements under both legislation and regulation 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 Chairman or Group Company Secretary and General Counsel.
Induction
You will be provided with a comprehensive, formal and tailored induction to the Company and its businesses and detailed information on a variety of areas and in addition will receive a Directors Information Pack. We will also arrange various site visits and meetings with senior and middle management and the Companys auditors. We will also arrange for you to meet major shareholders as appropriate.
Should you feel you require additional information on any area please contact the Group Company Secretary and General Counsel to arrange this.
Review Process
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 Chairman as soon as is appropriate. The Chairman will also regularly review and agree your training and development needs.
4 of 7
Directors Indemnity and Liability Insurance
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 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. 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.
The Company has Directors and Officers liability insurance and currently intends to maintain such cover for the full term of your appointment. A summary of the cover is included in your Directors Information Pack.
Independent Professional Advice
Occasions may arise when you consider that you need independent professional advice in the furtherance of your duties as a Director. Please advise either the Chairman or the Group Company Secretary and General Counsel 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.
Disclosure of interests in transactions and Dealings in Shares
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, he 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.
During the continuance of your appointments you will be expected to comply (and to procure that your spouse and dependant 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, debentures and other securities of the Company. A copy of the Companys Share Dealing Code is provided in the Directors Information Pack.
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 Companys American Depositary Shares being listed on the New York Stock Exchange, as set out in the relevant section of the Directors Information Pack.
The Company currently has no share ownership requirements for its Non-executive Directors.
Companies House formalities
Form AP01, prescribed by the Companies Act 2006, has to be filed at Companies House. A copy is enclosed with this letter, please complete this form and return it to the Group Company Secretary and General Counsel at our registered office address.
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Governing Law
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.
Entire Agreement
This appointment letter represents the entire understanding, and constitutes the whole agreement, in relation to your appointment and supersedes any previous agreement between yourself and the Company with respect thereto.
On a personal level, 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.
Yours sincerely |
/s/ Peter Gershon |
Sir Peter Gershon |
Chairman For and on behalf of National Grid plc |
I hereby acknowledge receipt of and accept the terms set out in this letter.
Signed /s/ Nora Mead Brownell
Nora Mead Brownell
Dated 6/10/12
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Schedule 1
Guidance for Non-Executive Directors
(extracted from the March 2011 FRC Guidance on Board Effectiveness)
A non-executive director should, on appointment, devote time to a comprehensive, formal and tailored induction which should extend beyond the boardroom. Initiatives such as partnering a non-executive director with an executive board member may speed up the process of him or her acquiring an understanding of the main areas of business activity, especially areas involving significant risk. The director should expect to visit, and talk with, senior and middle managers in these areas.
Non-executive directors should devote time to developing and refreshing their knowledge and skills, including those of communication, to ensure that they continue to make a positive contribution to the board. Being well-informed about the company, and having a strong command of the issues relevant to the business, will generate the respect of the other directors.
Non-executive directors need to make sufficient time available to discharge their responsibilities effectively. The letter of appointment should state the minimum time that the non-executive director will be required to spend on the companys business, and seek the individuals confirmation that he or she can devote that amount of time to the role, consistent with other commitments. The letter should also indicate the possibility of additional time commitment when the company is undergoing a period of particularly increased activity, such as an acquisition or takeover, or as a result of some major difficultly with one or more of its operations.
Non-executive directors have a responsibility to uphold high standards of integrity and probity. They should support the chairman and executive directors in instilling the appropriate culture, values and behaviours in the boardroom and beyond.
Non-executive directors should 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. High-quality information is that which is appropriate for making decisions on the issue at hand it should be accurate, clear, comprehensive, up-to-date and timely; contain a summary of the contents of any paper; and inform the director of what is expected of him or her on that issue.
Non-executive directors should take into account the views of shareholders and other stakeholders, because these views may provide different perspectives on the company and its performance.
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EXHIBIT 4(c).14
3 September 2012
Mr Mark Williamson
West Bank
Chart Road
Sutton Valence
KENT
ME17 3AW
Dear Mark
Appointment as Non-executive Director
Subject to final approval by the Board of National Grid plc (the Company ) on 31 August 2012, I am delighted to advise your appointment as a Non-executive Director of the Company will be effective from 3 September 2012. This letter sets out the terms of your appointment. It is agreed that this is a contract for services and not a contract of employment.
Appointment
Your appointment, commencing on 3 September 2012, will be subject to your re-election by shareholders at the Companys Annual General Meeting (AGM) in 2013, following which it is expected that you will be subject to annual re-election by shareholders in accordance with our commitment to best practice, unless your appointment is otherwise terminated earlier in accordance with the Companys Articles of Association as amended from time to time (the Articles) or by and at the discretion of either the Board or you upon 1 months written notice. Continuation of your contract of appointment is therefore contingent on satisfactory performance and re-election by shareholders at forthcoming AGMs.
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 and will not be entitled to any other compensation (or payment in lieu of notice).
Non-executive Directors are typically expected to serve two three-year terms, subject to the terms of this letter; any extension to this is subject to review by the Nominations Committee (prior to making recommendations to the Board) having regard to corporate governance best practice from time to time.
Time Commitment
Overall we anticipate a time commitment of approximately 2-2 1 / 2 days on average per month, after the induction phase, taking into account reading and preparation time for Board and Committee meetings. This will include attendance at Board meetings (estimated 10 scheduled meetings per yearincluding 2 Board strategy sessionsof which currently 3 are held in the US) plus ad hoc and emergency meetings, Committee meetings, the AGM and any extraordinary general meetings. There will also be site visits on occasions. It is planned that certain Board meetings will be held at the Companys operational sites (in the UK).
1 of 7
In addition, you will be expected to devote such other time as is reasonably required to discharge your duties as a Director (for example if the Company is involved in increased activity because it is involved in a major transaction).
Post induction, as a Non-executive Director you will be expected to undertake at least one site visit per year to the business, the location to be agreed with the Chairman or Chief Executive.
If you are unable to attend a meeting, you should notify the Group Company Secretary and prior to the meeting communicate your opinions and comments on the matters to be considered to the Chairman or the relevant Committee Chairman so they can be taken into account at the meeting.
By confirming this appointment, you have agreed that you are able to allocate sufficient time to meet the expectations of your role including appropriate preparation time. The agreement of the Chairman should be sought before accepting additional commitments that might affect the time you are able to devote to your role as a Non-executive Director of the Company.
Role
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 Companys 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.
All directors are expected to comply with the Companys policies, procedures, rules and regulations from time to time in force, including in particular, the Companys Standards of Ethical Business Conduct and its Share Dealing Code.
The Board:
|
provides effective business leadership of the Company within a framework of prudent and effective controls which enable risk to be assessed and managed; |
|
sets the Companys strategic aims, ensures that the necessary financial and human resources are in place for the Company to meet its objectives, and reviews management performance; and |
|
sets the Companys values and standards and ensures that its obligations to its shareholders and others are understood and met. |
In addition to these requirements of all Directors, the role of the Non-executive Director has the following key elements:
|
Strategy: Non-executive Directors should constructively challenge and contribute to the development of strategy; |
|
Performance: Non-executive Directors should scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance; |
|
Risk: Non-executive Directors should satisfy themselves that the financial function of the Company is professionally managed and that financial controls and systems of risk management are robust and defensible; and |
|
People: Non-executive Directors are responsible for determining appropriate levels of remuneration for Executive Directors and have a prime role in appointing, and where necessary removing, senior management, and in succession planning. |
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You should also have regard to the Guidance on Board Effectiveness, issued by the Financial Reporting Council (FRC) in March 2011, of which an extract summarising the role of a Non-executive Director is included at Schedule 1 of this letter.
Committees
Initially, you will be invited to serve on the Audit Committee with the expectation that you will take over chairing this Committee when the current Committee chairman steps down, which is anticipated to be mid 2013, the precise date to be agreed by the Company. You have also been invited to sit on the Finance Committee.
In addition, all Non-executive Directors are invited to meetings of the Nominations Committee which are held on an ad hoc basis. No fee is paid for Nominations Committee attendance.
This letter refers to your appointment as a Non-executive Director of the Company. Terms of reference of all Board Committees are set out in the Directors Information Pack which will be sent to you shortly.
Fees
This letter sets out the only payments you will receive for performing your duties in accordance with this letter. Accordingly, no other remuneration or benefits will be provided and, in particular, you will not participate in any of the Companys remuneration or benefit programmes, arrangements, schemes or plans.
As a UK based Director, you will be paid £60,000 per annum and you will also be entitled to a Committee membership fee of £8,000 per annum, per Committee membership and, as chairman of Audit Committee, an additional fee of £15,000 per annum. NB: The Committee membership fee does not apply to the Nominations Committee which meets on an ad hoc basis. These payments will be made monthly on or around 15 th day of each month. You will not receive any further fees for membership of, or attendance at, any ad hoc Board or Committee meetings. If, for a reason related to 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.
The Company will reimburse you, in accordance with the Articles and any expenses procedures from time to time in force, for any reasonable expenses properly incurred in performing your duties. All expenses must be properly documented. 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.
The Executive Committee and Board shall review the above fees from time to time and they are therefore subject to change. All fees and payments will be made subject to any tax or other deductions required to be made by the Company.
Outside interests
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 in writing.
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In the event that you become aware of any potential conflicts of interest, these should be disclosed to the Chairman and/or Group Company Secretary as soon as apparent. Additionally, 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 initially with the Chairman and/or Group Company Secretary. Where an interest may give rise to a conflict of interest with the Company or any of its subsidiaries or associate companies, the interest may need to be disclosed to the Board and its prior consent obtained.
Independent status
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. If you become aware of anything that may affect, or could appear to affect, this determination of independence, this should be disclosed to the Chairman and/or Group Company Secretary as soon as apparent.
Confidentiality
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.
You will be required to return all papers and other information containing Confidential Information on termination of your appointment.
Your attention is also drawn to the requirements under both legislation and regulation 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 Chairman or Group Company Secretary.
Induction
You will be provided with a comprehensive, formal and tailored induction to the Company and its businesses and detailed information on a variety of areas and in addition will receive a Directors Information Pack. We will also arrange various site visits and meetings with senior and middle management and the Companys auditors. We will also arrange for you to meet major shareholders as appropriate.
Should you feel you require additional information on any area please contact the Group Company Secretary to arrange this.
Review Process
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 Chairman as soon as is appropriate. The Chairman will also regularly review and agree your training and development needs.
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Directors Indemnity and Liability Insurance
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 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. 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.
The Company has Directors and Officers liability insurance and currently intends to maintain such cover for the full term of your appointment. A summary of the cover is included in your Directors Information Pack.
Independent Professional Advice
Occasions may arise when you consider that you need independent professional advice in the furtherance of your duties as a Director. Please advise either the Chairman or the Group 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.
Disclosure of interests in transactions and Dealings in Shares
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, he 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.
During the continuance of your appointments you will be expected to comply (and to procure that your spouse and dependant 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, debentures and other securities of the Company. A copy of the Companys Share Dealing Code is provided in the Directors Information Pack.
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 Companys American Depositary Shares being listed on the New York Stock Exchange, as set out in the relevant section of the Directors Information Pack.
The Company currently has no share ownership requirements for its Non-executive Directors.
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Companies House formalities
The signed Form AP01 completed by you will be filed at Companies House, as prescribed by the Companies Act 2006, in due course.
Governing Law
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.
Entire Agreement
This appointment letter represents the entire understanding, and constitutes the whole agreement, in relation to your appointment and supersedes any previous agreement between yourself and the Company with respect thereto.
On a personal level, 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.
Yours sincerely |
/s/ Peter Gershon |
Sir Peter Gershon |
Chairman For and on behalf of National Grid plc |
I hereby acknowledge receipt of and accept the terms set out in this letter.
Signed /s/ Mark Williamson
Mark David Williamson
Dated 4/9/12
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Schedule 1
Guidance for Non-Executive Directors
(extracted from the March 2011 FRC Guidance on Board Effectiveness)
A non-executive director should, on appointment, devote time to a comprehensive, formal and tailored induction which should extend beyond the boardroom. Initiatives such as partnering a non-executive director with an executive board member may speed up the process of him or her acquiring an understanding of the main areas of business activity, especially areas involving significant risk. The director should expect to visit, and talk with, senior and middle managers in these areas.
Non-executive directors should devote time to developing and refreshing their knowledge and skills, including those of communication, to ensure that they continue to make a positive contribution to the board. Being well-informed about the company, and having a strong command of the issues relevant to the business, will generate the respect of the other directors.
Non-executive directors need to make sufficient time available to discharge their responsibilities effectively. The letter of appointment should state the minimum time that the non-executive director will be required to spend on the companys business, and seek the individuals confirmation that he or she can devote that amount of time to the role, consistent with other commitments. The letter should also indicate the possibility of additional time commitment when the company is undergoing a period of particularly increased activity, such as an acquisition or takeover, or as a result of some major difficultly with one or more of its operations.
Non-executive directors have a responsibility to uphold high standards of integrity and probity. They should support the chairman and executive directors in instilling the appropriate culture, values and behaviours in the boardroom and beyond.
Non-executive directors should 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. High-quality information is that which is appropriate for making decisions on the issue at hand it should be accurate, clear, comprehensive, up-to-date and timely; contain a summary of the contents of any paper; and inform the director of what is expected of him or her on that issue.
Non-executive directors should take into account the views of shareholders and other stakeholders, because these views may provide different perspectives on the company and its performance.
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EXHIBIT 4(c).15
5 March 2013
Mr Jonathan DS Dawson
Town Street Farmhouse
Church Street
Ropley
Alresford
Hampshire
SO24 0DP
Dear Jonathan
Appointment as Non-executive Director
Subject to your agreement to the terms of this letter, I am delighted to advise your appointment as a Non-executive Director of the Company will be for an initial term of three years. This letter sets out the terms of your appointment. It is agreed that this is a contract for services and not a contract of employment.
Appointment
Your appointment, commencing on 4 March 2013, will be subject to your election by shareholders at the Companys Annual General Meeting (AGM) in 2013, following which it is expected that you will be subject to annual re-election by shareholders, unless your appointment is otherwise terminated earlier in accordance with the Companys Articles of Association as amended from time to time (the Articles) or by and at the discretion of either the Board or you upon 1 months written notice. Continuation of your contract of appointment is therefore contingent on satisfactory performance and re-election by shareholders at forthcoming AGMs.
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 and will not be entitled to any other compensation (or payment in lieu of notice).
Non-executive Directors are typically expected to serve two three-year terms, subject to the terms of this letter; any extension to this is subject to review by the Nominations Committee (prior to making recommendations to the Board) having regard to corporate governance best practice from time to time.
Time Commitment
Overall we anticipate a time commitment of approximately 2-2 1 / 2 days on average per month, after the induction phase, taking into account reading and preparation time for Board and Committee meetings. This will include attendance at Board meetings (estimated 10 scheduled meetings per year including 1-2 Board strategy sessionsof which currently 3 are held in the US) plus ad hoc and emergency meetings, Committee meetings, the AGM, any extraordinary general meetings. There will also be site visits on occasions. It is planned that certain Board meetings will be held at the Companys operational sites (in the UK and US).
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Post induction, as a Non-executive Director you will also be expected to undertake at least one site visit per year to the business, the location to be agreed with the Chairman or Chief Executive.
In addition, you will be expected to devote appropriate preparation time ahead of each meeting and such other time as is reasonably required to discharge your duties as a Director (for example if the Company is involved in increased activity because it is involved in a major transaction).
If you are unable to attend a meeting, you should notify the Group General Counsel & Company Secretary and prior to the meeting communicate your opinions and comments on the matters to be considered to the Chairman or the relevant Committee chairman so they can be taken into account at the meeting.
By confirming this appointment, you have agreed that you are able to allocate sufficient time to meet the expectations of your role including appropriate preparation time. The agreement of the Chairman should be sought before accepting additional commitments that might affect the time you are able to devote to your role as a Non-executive Director of the Company.
Role
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 Companys 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.
All directors are expected to comply with the Companys policies, procedures, rules and regulations from time to time in force, including in particular, the Companys Standards of Ethical Business Conduct and its Share Dealing Code.
The Board:
|
provides effective business leadership of the Company within a framework of prudent and effective controls which enable risk to be assessed and managed; |
|
sets the Companys strategic aims, ensures that the necessary financial and human resources are in place for the Company to meet its objectives, and reviews management performance; and |
|
sets the Companys values and standards and ensures that its obligations to its shareholders and others are understood and met. |
In addition to these requirements of all Directors, the role of the Non-executive Director has the following key elements:
|
Strategy: Non-executive Directors should constructively challenge and contribute to the development of strategy; |
|
Performance: Non-executive Directors should scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance; |
2 of 8
|
Risk: Non-executive Directors should satisfy themselves that the financial function of the Company is professionally managed and that financial controls and systems of risk management are robust and defensible; and |
|
People: Non-executive Directors are responsible for determining appropriate levels of remuneration for Executive Directors and have a prime role in appointing, and where necessary removing, senior management, and in succession planning. |
You should also have regard to the Guidance on Board Effectiveness, issued by the Financial Reporting Council in March 2011, of which an extract summarising the role of a Non-executive Director is included at Schedule 1 of this letter.
Committees
Initially, you will be invited to serve on the Remuneration Committee with the expectation that you will take over chairing this Committee when the current Committee chairman steps down, which is anticipated to be mid 2013, the precise date to be agreed by the Company. You have also been invited to sit on the Finance Committee.
In addition, all Non-executive Directors are members of the Nominations Committee, meetings of which are held on an ad hoc basis. No fee is paid for Nominations Committee attendance.
This letter refers to your appointment as a Non-executive Director of the Company. Terms of reference of all Board Committees are set out in the Directors information pack which will be sent to you shortly.
Fees
This letter sets out the only payments you will receive for performing your duties in accordance with this letter. Accordingly, no other remuneration or benefits will be provided and, in particular, you will not participate in any of the Companys remuneration or benefit programmes, arrangements, schemes or plans.
As a UK-based Director, you will be paid £60,000 per annum and you will also be entitled to a Committee membership fee of £8,000 per annum, per Committee membership and, as chairman of the Remuneration Committee, an additional fee of £12,500 per annum. NB: The Committee membership fee does not apply to the Nominations Committee which meets on an ad hoc basis. These payments will be made monthly on or around 15 th day of each month and will be pro-rated from the date of your appointment. You will not receive any further fees for membership of, or attendance at, any ad hoc Board or Committee meetings. If, for a reason related to 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.
The Company will reimburse you, in accordance with the Articles and any expenses procedures from time to time in force, for any reasonable expenses properly incurred in performing your duties. All expenses must be properly documented. 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.
The Executive Committee and Board shall review the above fees from time to time and they are therefore subject to change. All fees and payments will be made subject to any tax or other deductions required to be made by the Company.
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Outside interests
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 in writing.
In the event that you become aware of any potential conflicts of interest, these should be disclosed to the Chairman and/or Group General Counsel & Company Secretary as soon as apparent. Additionally, 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 initially with the Chairman and/or Group General Counsel & Company Secretary. Where an interest may give rise to a conflict of interest with the Company or any of its subsidiaries or associate companies, the interest may need to be disclosed to the Board and its prior consent obtained.
Independent status
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. If you become aware of anything that may affect, or could appear to affect, this determination of independence, this should be disclosed to the Chairman and/or Group General Counsel & Company Secretary as soon as apparent.
Confidentiality
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.
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.
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 Chairman or Group General Counsel & Company Secretary.
Induction
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 Companys 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 Companys auditors. We will also arrange for you to meet major shareholders as appropriate.
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Should you feel you require additional information on any area please contact the Group General Counsel & Company Secretary to arrange this.
Review Process
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 Chairman as soon as is appropriate. The Chairman will also regularly review and agree your training and development needs.
Directors Indemnity and Liability Insurance
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 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. 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.
The Company has Directors and Officers liability insurance and currently intends to maintain such cover for the full term of your appointment. A summary of the cover is included in your Directors information pack.
Independent Professional Advice
Occasions may arise when you consider that you need independent professional advice in the furtherance of your duties as a Director. Please advise either the Chairman 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.
Disclosure of interests in transactions and Dealings in Shares
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, he 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.
During the continuance of your appointments you will be expected to comply (and to procure that your spouse and dependant children comply) where relevant with any rule of law or regulation of any competent authority or of the Company from time to
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time in force in relation to dealings in shares, debentures and other securities of the Company and unpublished price sensitive information affecting the shares, debentures and other securities of the Company. A copy of the Companys Share Dealing Code is provided in the Directors information pack.
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 Companys American Depositary Shares being listed on the New York Stock Exchange, as set out in the relevant section of the Directors information pack.
The Company currently has no share ownership requirements for its non-executive directors.
Companies House formalities
A Form AP01, prescribed by the Companies Act 2006, has to be filed at Companies House. A copy will be separately sent to you, please complete this form and return it to the Group General Counsel & Company Secretary at our registered office address.
Governing Law
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.
Entire Agreement
This appointment letter represents the entire understanding, and constitutes the whole agreement, in relation to your appointment and supersedes any previous agreement between yourself and the Company with respect thereto.
On a personal level, I am delighted that you have agreed to accept this appointment to the Board of the Company and I look forward to working closely with you.
Please acknowledge receipt and acceptance of the above terms by signing and returning the enclosed copy of this letter.
Yours sincerely |
/S/ Peter Gershon |
Sir Peter Gershon |
Chairman For and on behalf of National Grid plc |
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I hereby acknowledge receipt of and accept the terms set out in this letter.
Signed /s/Jonathan Dawson
Jonathan Dawson
Dated 5/3/2013
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Schedule 1
Guidance for Non-Executive Directors
(extracted from the March 2011 FRC Guidance on Board Effectiveness)
A non-executive director should, on appointment, devote time to a comprehensive, formal and tailored induction which should extend beyond the boardroom. Initiatives such as partnering a non-executive director with an executive board member may speed up the process of him or her acquiring an understanding of the main areas of business activity, especially areas involving significant risk. The director should expect to visit, and talk with, senior and middle managers in these areas.
Non-executive directors should devote time to developing and refreshing their knowledge and skills, including those of communication, to ensure that they continue to make a positive contribution to the board. Being well-informed about the company, and having a strong command of the issues relevant to the business, will generate the respect of the other directors.
Non-executive directors need to make sufficient time available to discharge their responsibilities effectively. The letter of appointment should state the minimum time that the non-executive director will be required to spend on the companys business, and seek the individuals confirmation that he or she can devote that amount of time to the role, consistent with other commitments. The letter should also indicate the possibility of additional time commitment when the company is undergoing a period of particularly increased activity, such as an acquisition or takeover, or as a result of some major difficultly with one or more of its operations.
Non-executive directors have a responsibility to uphold high standards of integrity and probity. They should support the chairman and executive directors in instilling the appropriate culture, values and behaviours in the boardroom and beyond.
Non-executive directors should 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. High-quality information is that which is appropriate for making decisions on the issue at hand it should be accurate, clear, comprehensive, up-to-date and timely; contain a summary of the contents of any paper; and inform the director of what is expected of him or her on that issue.
Non-executive directors should take into account the views of shareholders and other stakeholders, because these views may provide different perspectives on the company and its performance.
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Exhibit 8
List of Subsidiaries
As at 31 March 2013
Name |
Country of Incorporation |
|||
1. |
65 WILLIS LANE, INC. |
USA |
||
2. |
ASSETHALL LIMITED |
England & Wales |
||
3. |
BEEGAS NOMINEES LIMITED |
England & Wales |
||
4. |
BIRCH SITES LIMITED |
England & Wales |
||
5. |
BLACKWATER A LIMITED |
England & Wales |
||
6. |
BLACKWATER B LIMITED |
England & Wales |
||
7. |
BLACKWATER C LIMITED |
England & Wales |
||
8. |
BLACKWATER D LIMITED |
England & Wales |
||
9. |
BLACKWATER E LIMITED |
England & Wales |
||
10. |
BLACKWATER H LIMITED |
England & Wales |
||
11. |
BLACKWATER J LIMITED |
England & Wales |
||
12. |
BOSTON GAS COMPANY (incl Essex Gas Company) |
USA |
||
13. |
BRITISH TRANSCO CAPITAL INC |
USA |
||
14. |
BRITISH TRANSCO FINANCE (NO 1) LIMITED |
Cayman Islands |
||
15. |
BRITISH TRANSCO FINANCE (NO 2) LIMITED |
Cayman Islands |
||
16. |
BRITISH TRANSCO FINANCE (NO 3) LIMITED |
England & Wales |
||
17. |
BRITISH TRANSCO FINANCE (NO 5) LIMITED |
England & Wales |
||
18. |
BRITISH TRANSCO FINANCE INC |
USA |
||
19. |
BRITISH TRANSCO INTERNATIONAL FINANCE BV |
The Netherlands |
||
20. |
BRITNED DEVELOPMENT LIMITED (50%) |
England & Wales |
||
21. |
BROKEN BRIDGE CORP. |
USA |
||
22. |
CLEAN LINE ENERGY PARTNERS LLC (approximately 15% holding) |
USA |
||
23. |
COLONIAL GAS COMPANY |
USA |
||
24. |
CONNECTICUT YANKEE ATOMIC POWER COMPANY (19.5%) |
USA |
||
25. |
CORESO SA (22.485%%) |
Belgium |
||
26. |
DIRECT GLOBAL POWER, INC. (26%) |
USA |
||
27. |
ELEXON LIMITED |
England & Wales |
||
28. |
ENERGIS PLC (33.06%) |
England & Wales |
||
29. |
EUA ENERGY INVESTMENT CORPORATION |
USA |
||
30. |
EUA FRC II ENERGY ASSOCIATES |
USA |
||
31. |
EVIONYX, INC. (16%) |
USA |
||
32. |
GRIDAMERICA HOLDINGS INC |
USA |
||
33. |
GRIDCOM LIMITED |
England & Wales |
||
34. |
GREENERU INC (17%) |
USA |
||
35. |
INVERSIONES ABC LTDA (98.84%) |
Chile |
||
36. |
IROQUOIS GAS TRANSMISSION SYSTEM, L.P. (20.4%) |
USA |
||
37. |
IROQUOIS PIPELINE OPERATING COMPANY (effectively 20.4% via Iroquois Gas Transmission System, L.P. 100% ownership) |
USA |
||
38. |
ISLAND ENERGY SERVICES COMPANY, INC. |
USA |
||
39. |
ISLANDER EAST PIPELINE COMPANY, LLC (50%) |
USA |
||
40. |
JOINT RADIO COMPANY LIMITED (50%) |
England & Wales |
||
41. |
JV NOMINEES 2012 LIMITED |
England & Wales |
||
42. |
KEYSPAN (U.K.) |
England & Wales |
||
43. |
KEYSPAN C.I. II, LTD |
Cayman Islands |
||
44. |
KEYSPAN C.I., LTD |
Cayman Islands |
||
45. |
KEYSPAN CI MIDSTREAM LIMITED |
USA |
||
46. |
KEYSPAN CORPORATION |
USA |
||
47. |
KEYSPAN ENERGY CORPORATION |
USA |
||
48. |
KEYSPAN ENERGY DEVELOPMENT CO. |
Canadian (Providence Nova Scotia) |
||
49. |
KEYSPAN ENERGY SERVICES INC. |
USA |
||
50. |
KEYSPAN GAS EAST CORPORATION |
USA |
||
51. |
KEYSPAN INTERNATIONAL CORPORATION |
USA |
||
52. |
KEYSPAN MHK, INC. |
USA |
||
53. |
KEYSPAN MIDSTREAM INC. |
USA |
||
54. |
KEYSPAN PLUMBING SOLUTIONS, INC. |
USA |
||
55. |
KSI CONTRACTING, LLC |
USA |
||
56. |
KSI ELECTRICAL, LLC |
USA |
Exhibit 8
List of Subsidiaries
As at 31 March 2013
Name |
Country of Incorporation |
|||
57. |
KSI MECHANICAL, LLC |
USA |
||
58. |
LAND MANAGEMENT AND DEVELOPMENT, INC |
USA |
||
59. |
LANDRANCH LIMITED |
England & Wales |
||
60. |
LANDWEST, INC |
USA |
||
61. |
LATTICE ENERGY SERVICES LIMITED |
England & Wales |
||
62. |
LATTICE GROUP EMPLOYEE BENEFIT TRUST LIMITED |
England & Wales |
||
63. |
LATTICE GROUP INTERNATIONAL HOLDINGS LIMITED |
England & Wales |
||
64. |
LATTICE GROUP PLC |
England & Wales |
||
65. |
LATTICE GROUP TRUSTEES LIMITED |
England & Wales |
||
66. |
LATTICE OPSCO LIMITED |
England & Wales |
||
67. |
LATTICE TELECOM FINANCE (NO 1) LIMITED |
Isle of Man |
||
68. |
MAINE YANKEE ATOMIC POWER COMPANY (24%) |
USA |
||
69. |
MAINSTREAM FORTY-SEVEN LIMITED |
England & Wales |
||
70. |
MASSACHUSETTS ELECTRIC COMPANY |
USA |
||
71. |
MELMAR LIMITED |
Isle of Man |
||
72. |
METRO ENERGY, L.L.C. |
USA |
||
73. |
METROWEST REALTY LLC |
USA |
||
74. |
MILLENNIUM PIPELINE COMPANY, LLC (26.25%) |
USA |
||
75. |
MYHOMEGATE, INC. |
USA |
||
76. |
MYHOMEKEY.COM, INC. (18.2%) |
USA |
||
77. |
MYSTIC STEAMSHIP CORPORATION |
USA |
||
78. |
NANTUCKET ELECTRIC COMPANY |
USA |
||
79. |
NATGRID FINANCE HOLDINGS LIMITED |
England & Wales |
||
80. |
NATGRID FINANCE LIMITED |
England & Wales |
||
81. |
NATGRID INVESTMENTS LIMITED |
England & Wales |
||
82. |
NATGRID LIMITED |
England & Wales |
||
83. |
NATGRID ONE LIMITED |
England & Wales |
||
84. |
NATGRIDTW1 LIMITED |
England & Wales |
||
85. |
NATIONAL GRID (IOM) UK LTD |
Isle of Man |
||
86. |
NATIONAL GRID (IRELAND) 1 LIMITED |
Republic of Ireland |
||
87. |
NATIONAL GRID (IRELAND) 2 LIMITED |
Republic of Ireland |
||
88. |
NATIONAL GRID (SOUTHALL) GENERAL PARTNER LIMITED |
England & Wales |
||
89. |
NATIONAL GRID (SOUTHALL) LP LIMITED |
England & Wales |
||
90. |
NATIONAL GRID (US) HOLDINGS LIMITED |
England & Wales |
||
91. |
NATIONAL GRID (US) INVESTMENTS |
England & Wales |
||
92. |
NATIONAL GRID (US) INVESTMENTS 2 LIMITED |
England & Wales |
||
93. |
NATIONAL GRID (US) INVESTMENTS 3 |
England & Wales |
||
94. |
NATIONAL GRID (US) INVESTMENTS 4 LIMITED |
England & Wales |
||
95. |
NATIONAL GRID (US) PARTNER 1 LIMITED |
England & Wales |
||
96. |
NATIONAL GRID (US) PARTNER 2 LIMITED |
England & Wales |
||
97. |
NATIONAL GRID AUSTRALIA PTY LIMITED |
Australia |
||
98. |
NATIONAL GRID BELGIUM LIMITED |
England & Wales |
||
99. |
NATIONAL GRID BLUE POWER FINANCE LIMITED |
England & Wales |
||
100. |
NATIONAL GRID BLUE POWER LIMITED |
England & Wales |
||
101. |
NATIONAL GRID BRAZIL B.V. |
The Netherlands |
||
102. |
NATIONAL GRID BRAZIL FINANCE |
England & Wales |
||
103. |
NATIONAL GRID CARBON LIMITED |
England & Wales |
||
104. |
NATIONAL GRID CHILE B.V. |
The Netherlands |
||
105. |
NATIONAL GRID COMMERCIAL HOLDINGS LIMITED |
England & Wales |
||
106. |
NATIONAL GRID DEVELOPMENT HOLDINGS CORP. |
USA |
||
107. |
NATIONAL GRID EIGHT |
England & Wales |
||
108. |
NATIONAL GRID EIGHTEEN LIMITED |
England & Wales |
||
109. |
NATIONAL GRID ELECTRIC SERVICES LLC |
USA |
||
110. |
NATIONAL GRID ELECTRICITY GROUP TRUSTEE LIMITED |
England & Wales |
||
111. |
NATIONAL GRID ELECTRICITY TRANSMISSION PLC |
England & Wales |
||
112. |
NATIONAL GRID ELEVEN |
England & Wales |
Exhibit 8
List of Subsidiaries
As at 31 March 2013
Name |
Country of Incorporation |
|||
113. |
NATIONAL GRID ENERGY MANAGEMENT, LLC |
USA |
||
114. |
NATIONAL GRID ENERGY SERVICES, LLC |
USA |
||
115. |
NATIONAL GRID ENERGY TRADING SERVICES LLC |
USA |
||
116. |
NATIONAL GRID ENGINEERING & SURVEY INC. |
USA |
||
117. |
NATIONAL GRID FIFTEEN LIMITED |
England & Wales |
||
118. |
NATIONAL GRID FINANCE B.V. |
The Netherlands |
||
119. |
NATIONAL GRID FIVE LIMITED |
England & Wales |
||
120. |
NATIONAL GRID FOUR LIMITED |
England & Wales |
||
121. |
NATIONAL GRID FOURTEEN LIMITED |
England & Wales |
||
122. |
NATIONAL GRID GAS FINANCE (NO 1) PLC |
England & Wales |
||
123. |
NATIONAL GRID GAS HOLDINGS LIMITED |
England & Wales |
||
124. |
NATIONAL GRID GAS PLC |
England & Wales |
||
125. |
NATIONAL GRID GENERATION LLC |
USA |
||
126. |
NATIONAL GRID GLENWOOD ENERGY CENTER, LLC |
USA |
||
127. |
NATIONAL GRID GOLD LIMITED |
England & Wales |
||
128. |
NATIONAL GRID GRAIN LNG LIMITED |
England & Wales |
||
129. |
NATIONAL GRID HOLDINGS B.V. |
The Netherlands |
||
130. |
NATIONAL GRID HOLDINGS LIMITED |
England & Wales |
||
131. |
NATIONAL GRID HOLDINGS ONE PLC |
England & Wales |
||
132. |
NATIONAL GRID IGTS CORP. |
USA |
||
133. |
NATIONAL GRID INDIA B.V. |
The Netherlands |
||
134. |
NATIONAL GRID INDUS B.V. |
The Netherlands |
||
135. |
NATIONAL GRID INSURANCE COMPANY (IRELAND) LIMITED |
Republic of Ireland |
||
136. |
NATIONAL GRID INSURANCE COMPANY (ISLE OF MAN) LIMITED |
Isle of Man |
||
137. |
NATIONAL GRID INTERCONNECTOR HOLDINGS LIMITED |
England & Wales |
||
138. |
NATIONAL GRID INTERCONNECTORS LIMITED |
England & Wales |
||
139. |
NATIONAL GRID INTERNATIONAL LIMITED |
England & Wales |
||
140. |
NATIONAL GRID ISLANDER EAST PIPELINE LLC |
USA |
||
141. |
NATIONAL GRID JERSEY HOLDINGS FIVE LIMITED |
Jersey |
||
142. |
NATIONAL GRID JERSEY INVESTMENTS LIMITED |
Jersey |
||
143. |
NATIONAL GRID LAND AND PROPERTIES LIMITED |
England & Wales |
||
144. |
NATIONAL GRID LAND DEVELOPMENTS LIMITED |
England & Wales |
||
145. |
NATIONAL GRID LAND INVESTMENTS LIMITED |
England & Wales |
||
146. |
NATIONAL GRID LNG GP LLC |
USA |
||
147. |
NATIONAL GRID LNG LP |
USA |
||
148. |
NATIONAL GRID LNG LP LLC |
USA |
||
149. |
NATIONAL GRID MANQUEHUE B.V. |
The Netherlands |
||
150. |
NATIONAL GRID METERING LIMITED |
England & Wales |
||
151. |
NATIONAL GRID MIDDLE EAST FZCO |
United Arab Emirates |
||
152. |
NATIONAL GRID MILLENNIUM LLC |
USA |
||
153. |
NATIONAL GRID NE HOLDINGS 2 LLC |
USA |
||
154. |
NATIONAL GRID NEMO LINK LIMITED |
England & Wales |
||
155. |
NATIONAL GRID NETHERLANDS ONE BV |
The Netherlands |
||
156. |
NATIONAL GRID NETHERLANDS THREE BV |
The Netherlands |
||
157. |
NATIONAL GRID NETHERLANDS TWO BV |
The Netherlands |
||
158. |
NATIONAL GRID NINE LIMITED |
England & Wales |
||
159. |
NATIONAL GRID NINETEEN LIMITED |
England & Wales |
||
160. |
NATIONAL GRID NORTH AMERICA INC |
USA |
||
161. |
NATIONAL GRID NORTH EAST VENTURES INC |
USA |
||
162. |
NATIONAL GRID NSN LINK LIMITED |
England & Wales |
||
163. |
NATIONAL GRID OFFSHORE LTD |
England & Wales |
||
164. |
NATIONAL GRID ONE LIMITED |
England & Wales |
||
165. |
NATIONAL GRID OVERSEAS LIMITED |
England & Wales |
||
166. |
NATIONAL GRID OVERSEAS TWO LIMITED |
England & Wales |
||
167. |
NATIONAL GRID PLC |
England & Wales |
||
168. |
NATIONAL GRID POLAND B.V. |
The Netherlands |
Exhibit 8
List of Subsidiaries
As at 31 March 2013
Name |
Country of Incorporation |
|||
169. |
NATIONAL GRID PORT JEFFERSON ENERGY CENTER, LLC |
USA |
||
170. |
NATIONAL GRID PROCUREMENT BV |
The Netherlands |
||
171. |
NATIONAL GRID PROPERTY (HIGH WYCOMBE) LIMITED |
England & Wales |
||
172. |
NATIONAL GRID PROPERTY (NORTHAMPTON) LIMITED |
England & Wales |
||
173. |
NATIONAL GRID PROPERTY (NORTHFLEET) LIMITED |
England & Wales |
||
174. |
NATIONAL GRID PROPERTY (TAUNTON) LIMITED |
England & Wales |
||
175. |
NATIONAL GRID PROPERTY (WARWICK) LIMITED |
England & Wales |
||
176. |
NATIONAL GRID PROPERTY DEVELOPMENTS LIMITED |
England & Wales |
||
177. |
NATIONAL GRID PROPERTY HOLDINGS LIMITED |
England & Wales |
||
178. |
NATIONAL GRID PROPERTY LIMITED |
England & Wales |
||
179. |
NATIONAL GRID SERVICES, INC. |
USA |
||
180. |
NATIONAL GRID SEVEN LIMITED |
England & Wales |
||
181. |
NATIONAL GRID SEVENTEEN LIMITED |
England & Wales |
||
182. |
NATIONAL GRID SIX LIMITED |
England & Wales |
||
183. |
NATIONAL GRID SIXTEEN LIMITED |
England & Wales |
||
184. |
NATIONAL GRID TECHNOLOGIES INC. |
USA |
||
185. |
NATIONAL GRID TEN |
England & Wales |
||
186. |
NATIONAL GRID THIRTY LIMITED |
England & Wales |
||
187. |
NATIONAL GRID THREE LIMITED |
England & Wales |
||
188. |
NATIONAL GRID TRANSMISSION SERVICES CORPORATION |
USA |
||
189. |
NATIONAL GRID TWELVE LIMITED |
England & Wales |
||
190. |
NATIONAL GRID TWENTY EIGHT LIMITED |
England & Wales |
||
191. |
NATIONAL GRID TWENTY FOUR LIMITED |
England & Wales |
||
192. |
NATIONAL GRID TWENTY LIMITED |
England & Wales |
||
193. |
NATIONAL GRID TWENTY NINE LIMITED |
England & Wales |
||
194. |
NATIONAL GRID TWENTY ONE LIMITED |
England & Wales |
||
195. |
NATIONAL GRID TWENTY SEVEN LIMITED |
England & Wales |
||
196. |
NATIONAL GRID TWENTY THREE LIMITED |
England & Wales |
||
197. |
NATIONAL GRID TWENTY-FIVE LIMITED |
England & Wales |
||
198. |
NATIONAL GRID TWENTY-SIX LIMITED |
England & Wales |
||
199. |
NATIONAL GRID TWO LIMITED |
England & Wales |
||
200. |
NATIONAL GRID UK LIMITED |
England & Wales |
||
201. |
NATIONAL GRID UK PENSION SERVICES LIMITED |
England & Wales |
||
202. |
NATIONAL GRID US 6 LLC |
USA |
||
203. |
NATIONAL GRID US 7 INC. |
USA |
||
204. |
NATIONAL GRID US LLC |
USA |
||
205. |
NATIONAL GRID USA |
USA |
||
206. |
NATIONAL GRID USA SERVICE COMPANY, INC. |
USA |
||
207. |
NATIONAL GRID ZAMBIA LIMITED |
England & Wales |
||
208. |
NEES ENERGY, INC. |
USA |
||
209. |
NEW ENGLAND ELECTRIC TRANSMISSION CORPORATION |
USA |
||
210. |
NEW ENGLAND ENERGY INCORPORATED |
USA |
||
211. |
NEW ENGLAND HYDRO FINANCE COMPANY, INC. (53.704%) |
USA |
||
212. |
NEW ENGLAND HYDRO-TRANSMISSION CORPORATION (53.704%) |
USA |
||
213. |
NEW ENGLAND HYDRO-TRANSMISSION ELECTRIC COMPANY, INC. (53.704%) |
USA |
||
214. |
NEW ENGLAND POWER COMPANY |
USA |
||
215. |
NEWPORT AMERICA CORPORATION |
USA |
||
216. |
NG CHICAGO I, LLC |
USA |
||
217. |
NG JERSEY LIMITED |
Jersey |
||
218. |
NG LEASING LIMITED |
England & Wales |
||
219. |
NG LUXEMBOURG 3 SARL |
Luxembourg |
||
220. |
NG LUXEMBOURG 4 SARL |
Luxembourg |
||
221. |
NG LUXEMBOURG 5 SARL |
Luxembourg |
||
222. |
NG LUXEMBOURG HOLDINGS LIMITED |
England & Wales |
||
223. |
NG LUXEMBOURG SA |
Luxembourg |
Exhibit 8
List of Subsidiaries
As at 31 March 2013
Name |
Country of Incorporation |
|||
224. |
NG NOMINEES LIMITED |
England & Wales |
||
225. |
NG PROCUREMENT HOLDINGS LIMITED |
England & Wales |
||
226. |
NG VILLIERS LIMITED PARTNERSHIP |
England & Wales |
||
227. |
NGC EMPLOYEE SHARES TRUSTEE LIMITED |
England & Wales |
||
228. |
NGC INDUS LIMITED |
England & Wales |
||
229. |
NGC TWO LIMITED |
England & Wales |
||
230. |
NGC ZAMBIA LIMITED |
England & Wales |
||
231. |
NGET / SPT UPGRADES LTD (50%) |
England & Wales |
||
232. |
NGG FINANCE (NO 1) LIMITED |
England & Wales |
||
233. |
NGG FINANCE PLC |
England & Wales |
||
234. |
NGG TELECOMS HOLDINGS LIMITED |
England & Wales |
||
235. |
NGG TELECOMS LIMITED |
England & Wales |
||
236. |
NGM1 (GBR) LIMITED |
Gibraltar |
||
237. |
NGNE LLC |
USA |
||
238. |
NGP(IM7S) LIMITED |
Isle of Man |
||
239. |
NGP(IM7S) SUB LIMITED |
England & Wales |
||
240. |
NGRID INTELLECTUAL PROPERTY LIMITED |
England & Wales |
||
241. |
NGT FIVE LIMITED |
Cayman Islands |
||
242. |
NGT FOUR LIMITED |
Cayman Islands |
||
243. |
NGT HOLDING COMPANY (ISLE OF MAN) LIMITED |
Isle of Man |
||
244. |
NGT LUXEMBOURG ONE LIMITED |
England & Wales |
||
245. |
NGT ONE LIMITED |
England & Wales |
||
246. |
NGT TELECOM NO. 1 LIMITED |
England & Wales |
||
247. |
NGT TELECOM NO. 2 LIMITED |
England & Wales |
||
248. |
NGT THREE |
England & Wales |
||
249. |
NGT TWO LIMITED |
England & Wales |
||
250. |
NIAGARA MOHAWK ENERGY, INC. |
USA |
||
251. |
NIAGARA MOHAWK HOLDINGS, INC. |
USA |
||
252. |
NIAGARA MOHAWK POWER CORPORATION |
USA |
||
253. |
NM PROPERTIES, INC. |
USA |
||
254. |
NM URANIUM, INC. |
USA |
||
255. |
NMP LIMITED |
England & Wales |
||
256. |
NORTH EAST TRANSMISSION CO., INC. |
USA |
||
257. |
NYSEARCH RMLD LLC (22.63%) |
USA |
||
258. |
NYSEARCH ROBOTICS LLC (14.59%) |
USA |
||
259. |
OPINAC NORTH AMERICA, INC. |
USA |
||
260. |
PATIENCE REALTY CORP. |
USA |
||
261. |
PCC LAND COMPANY, INC. |
USA |
||
262. |
PHILADELPHIA COKE CO., INC. |
USA |
||
263. |
PORT GREENWICH LIMITED |
England & Wales |
||
264. |
PORT OF THE ISLANDS NORTH LLC |
USA |
||
265. |
PRUDENCE CORPORATION |
USA |
||
266. |
SCC UNO SA |
Chile |
||
267. |
STARGAS NOMINEES LIMITED |
England & Wales |
||
268. |
SUPERGRID ELECTRICITY LIMITED |
England & Wales |
||
269. |
SUPERGRID ENERGY TRANSMISSION LIMITED |
England & Wales |
||
270. |
SUPERGRID LIMITED |
England & Wales |
||
271. |
TELECOM INTERNATIONAL HOLDINGS LIMITED |
England & Wales |
||
272. |
THAMESPORT INTERCHANGE LIMITED |
England & Wales |
||
273. |
THE BROOKLYN UNION GAS COMPANY |
USA |
||
274. |
THE NARRAGANSETT ELECTRIC COMPANY |
USA |
||
275. |
THE NATIONAL GRID GROUP QUEST TRUSTEE COMPANY LTD |
England & Wales |
||
276. |
THE NATIONAL GRID INVESTMENTS COMPANY |
England & Wales |
||
277. |
TRANSCO LIMITED |
England & Wales |
||
278. |
TRANSGAS, INC. |
USA |
||
279. |
UNIT 40 SUBLESSOR LLC |
USA |
||
280. |
UPPER HUDSON DEVELOPMENT INC |
USA |
Exhibit 8
List of Subsidiaries
As at 31 March 2013
Name |
Country of Incorporation |
|||
281. |
VALLEY APPLIANCE AND MERCHANDISING COMPANY |
USA |
||
282. |
VILLIERS FINANCE SA |
Luxembourg |
||
283. |
WAYFINDER GROUP, INC. |
USA |
||
284. |
XOSERVE LIMITED (56.5%) |
England & Wales |
||
285. |
YANKEE ATOMIC ELECTRIC COMPANY (34.5%) |
USA |
Exhibit 12.1
RULE 13a-14(a) CERTIFICATION
I, Steve Holliday, 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 companys 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 companys 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 companys 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 companys internal control over financial reporting; and |
5. |
The companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the companys 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 companys 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 companys internal control over financial reporting. |
Date: 10 June 2013
/s/ Steve Holliday |
Steve Holliday |
Title: Chief Executive |
National Grid plc |
Exhibit 12.2
RULE 13a-14(a) CERTIFICATION
I, Andrew Bonfield, 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 companys 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 companys 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 companys 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 companys internal control over financial reporting; and |
5. |
The companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the companys 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 companys 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 companys internal control over financial reporting. |
Date: 10 June 2013
/s/ Andrew Bonfield |
Andrew Bonfield |
Title: Finance Director |
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 officers knowledge, that:
The Annual Report on Form 20-F for the year ending March 31, 2013 (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: 10 June 2013 |
/s/ Steve Holliday |
|||
Steve Holliday |
||||
Title: Chief Executive |
||||
National Grid plc |
||||
Date: 10 June 2013 |
/s/ Andrew Bonfield |
|||
Andrew Bonfield |
||||
Title: Finance Director |
||||
National Grid plc |
EXHIBIT 15
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-33094, 333-65968, 333-97249, 333-103768, 333-107727, 333-149828, 333-155527, 333-170716, 333-175852 and 333-184558) and form F-3 (No. 333-182769) of National Grid plc of our report dated May 15, 2013 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 20-F.
/s/ PricewaterhouseCoopers LLP |
PricewaterhouseCoopers LLP |
London, UK |
June 10, 2013 |