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Non-regulated businesses and other

• Introduction
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• UK
  Property
• About non–regulated
  businesses and other
• Performance against
  our objectives
• Financial
  performance

Descriptions of our progress against our overall objectives in the areas of responsibility, transformation, operating performance, talent, relationships, environment and financial performance are set out under performance against our objectives. We include below, further information specific to non-regulated businesses and other operations with respect to our transformation, operating performance and financial performance objectives.

Delivering our strategy

• Key areas of focus

  Our objectives during 2007/08 have been: to evaluate whether we can generate more value from our UK Property business through a sale or through retaining the business; to integrate US non-regulated activities acquired with KeySpan; and to benefit from the creation of common processes and systems.

In addition to disposing of non-core businesses, we will also consider selling businesses where we believe we can obtain proceeds in excess of the value we can generate ourselves. During the year, we explored the possibility of selling our UK Property business. However, our conclusion was that we could obtain better value by retaining this business.

We have commenced the process of integrating US non-regulated businesses acquired with KeySpan.

Following the end of the financial year, we have changed management responsibilities for our non-regulated businesses. Grain LNG and BritNed will now report to Nick Winser, Executive Director for Transmission, while National Grid Metering and OnStream will report to Mark Fairbairn, Executive Director for Gas Distribution. UK Property will report to Steve Lucas, Executive Director for Finance & Shared Services.

Operating performance

• Safety, efficiency, reliability and customer service

  Our objectives include zero employee lost time injuries, to operate efficiently and to operate reliably. We also aim to improve the quality of service to our customers.

There was a decrease in the total number of employee lost time injuries in non-regulated businesses and other operations to 2 in 2007/08 compared with 15 in 2006/07 and 12 in 2005/06.

Our non-regulated businesses and other operations operated reliably and efficiently throughout the year.

All 22 National Grid Metering standards of service have been met for the year ended 31 March 2008.

• Capital investment

  Our objective is to deliver on our capital investment programme for non-regulated businesses and other operations.

During the year ended 31 March 2008, we invested £383 million in our non-regulated businesses, £125 million higher than in 2006/07, which had been £21 million lower than capital expenditure in 2005/06.

The primary reason for the increase in 2007/08 related to the construction of Phase II of the Grain LNG import facility, which is anticipated to be completed during 2008.

In addition, we invested an additional £90 million during the year relating to Phase III of the facility, which involves construction of a second unloading jetty, an additional 190,000m³ LNG storage tank and associated processing equipment. Phase III is expected to increase the capacity available at the terminal to 14.8 million tonnes per annum, equivalent to around 20% of anticipated UK gas demand for 2010/11. Long-term contracts have been signed with E.ON, Iberdrola and Centrica.

National Grid Metering and OnStream are investing in technology, such as automated meter reading systems and smart metering respectively, in response to customer requirements. Capital expenditure in our metering businesses was, however, £23 million lower in 2007/08 reflecting market anticipation of the outcome on smart metering discussions.

In addition to the capital expenditure discussed above, we have invested a further £21 million (2006/07: £nil, 2005/06: £nil) in joint venture arrangements. We have entered into a joint venture with the owner and operator of the Dutch electricity transmission network, TenneT Holding, to construct the BritNed electricity interconnector between the UK and the Netherlands. Following the granting of a regulatory exemption order in November 2007 and subject to receiving both environmental consents for BritNed and the necessary Dutch overhead transmission reinforcement project, National Grid expects to invest around £200 million in this project. This will make an important contribution to the UK’s security of supply when it is commissioned towards the end of 2010. Investment began in 2007/08 with total investment to 31 March 2008 of £19 million.

During the year, we also entered into an agreement with Elia to explore the potential for constructing an electricity interconnector with Belgium. This is still at a development stage with further work and approvals required before construction can start.