RNS Number : 5686I
  NGG Finance PLC
  20 November 2008
   

    

    20 November 2008

    National Grid plc
    Half year report for the six months ended 30 September 2008 (unaudited)

    HIGHLIGHTS

    *     Outlook for 2008/09 positive, performing in line with our expectations
    *     Good first half performance
    *     * Operating profit1 up 4%
    *     �934m of operating cash flow2
    *     8% increase in the interim dividend
    *     Delivering on strategy
    *     Good regulatory progress in the US
    *     Share repurchase programme for 2008/09 complete - �594m returned to shareholders
    *     Capital investment of �1.6bn, strong investment pipeline for organic growth
    *     Strong financial position, with growing annual operating cash flows

    FINANCIAL RESULTS FOR CONTINUING OPERATIONS

                                Six months ended 30 September
 (�m, at actual exchange rate)     2008      2007    % change
 Business performance*
 Operating profit                 1,079     1,039           4
 Pre-tax profit                     558       757        (26)
 Earnings                           431       528        (18)
 Earnings per share               17.4p     19.8p        (12)

 Statutory results
 Operating profit                   943     1,187        (21)
 Pre-tax profit                     564       917        (38)
 Earnings                           406       783        (48)
 Earnings per share               16.4p     29.4p        (44)

 Dividend per share              12.64p    11.70p           8

    Steve Holliday, Chief Executive, said:

    "We have delivered a good operating and financial performance this period. Our first half earnings reflect the seasonality of the former
KeySpan businesses and we remain on track to deliver in line with our expectations for the full year.

    "National Grid is well positioned to deliver low risk, organic growth.  We have a strong investment pipeline that we continue to fund
successfully, and a secure, progressive, dividend policy. We remain focused on executing our strategy and have made good progress in this
period, benefiting both shareholders and customers."
      CHIEF EXECUTIVE'S REVIEW

National Grid has continued to deliver its strategy on all fronts. We have again delivered a good operating performance with our financial
results now reflecting a full first half including the former KeySpan businesses. Our outlook for the year is positive, and we are
performing in line with our expectations.
 

    During the period we completed our programme of planned disposals, with the sale of the Ravenswood generating station in New York City
to TransCanada for $2.9bn in cash, closing on 26 August - well within the three year period allowed by the New York Public Service
Commission (NYPSC).  This sale price was significantly ahead of market expectations and rapidly crystallised shareholder value following the
completion of the KeySpan acquisition.

    We are making good progress with the implementation of our global operating model, and are already seeing improvements in customer
service and reliability.  We also maintain our continual focus on improving our safety and environmental performance.  Over time, we expect
that this approach to running our business will create significant shareholder value.  We are on track to achieve our target of $100m of
KeySpan synergy savings by March 2009, announced following the completion of the acquisition in August 2007 - at the end of September we had
delivered savings at a run rate of $56m.

    Investment

    Our organic investment pipeline remains strong.  In the UK electricity and gas markets, investment is being driven by changes in sources
of gas supply and electricity generation, and the need for asset replacement.  In the US electricity and gas markets, investment is being
driven by customer additions, the need for asset replacement, and the emerging need for renewable generation and system reinforcement.

    In the first half we invested �1.6bn, in line with our plans to invest around �3.2bn for the year, which we project will grow our UK
regulatory asset base by over 6% and our US rate base this year by around 4%3. This will earn returns above our cost of capital, and grow
our future earnings. Our plans over the medium term to invest a total of around �3bn per year remain on track, and this investment is
expected to be financed from internal cash flow and borrowings, but will only be made when we have regulatory certainty that it will deliver
appropriate returns.

    Financing

    Our financial position remains strong.  Our business generates strong and growing cash flows4, over �3.1bn on average over each of the
last three years, the majority of which is backed by our 20 main regulatory agreements with the remainder underpinned by long-term
contracts.  Over the nine months to 30 September 2008, we have raised the equivalent of around �3bn5 of long term debt.

    Our financial position is backed by around �3bn of committed bank facilities which more than cover our projected financing needs for the
remainder of this and much of the next financial year.  We maintain five debt shelves across National Grid, enabling swift execution, and on
an opportunistic basis we have utilised these to access the long term markets - since 30 September 2008, we have raised an additional �141m
of long term debt.

    Regulation

    In March, Ofgem announced a review into the regulatory approach for energy networks in the UK, the 'RPI-X @ 20' project.  We believe
that this review affords an opportunity to deliver a stable and reliable regulatory framework that meets the challenges of climate change
and security of supply, and encourages the necessary investment. Steve Holliday has been appointed as a member of Ofgem's 'RPI-X @ 20'
Advisory Panel, and we look forward to working closely with Ofgem through this review.

    In the US we have made good progress, with positive outcomes in a number of recent regulatory decisions. We have established a plan that
responds to the changing regulatory and policy agenda, and significantly increases our regulatory engagement over the coming years.  In our
upstate New York business, we have secured positive decisions from the New York Public Service Commission (NYPSC) on two key issues:
    *     Agreement on the recovery principles for the 2008 portion of our five year capital investment plans
    *     Approval of our upstate New York gas energy efficiency programmes for this winter.

    Our upstate New York, Rhode Island, and New Hampshire gas rate cases are following the normal evidence and hearings processes as
scheduled.  We are updating our evidence and analysis to reflect the implications of the current debt markets and cost of capital conditions
to ensure that regulatory policy makers are knowledgeable before taking decisions in each case. We expect new rates to be implemented in
these businesses in the first half of 2009.

    In Massachusetts, we filed in August with the Massachusetts Department of Public Utilities, a 'notice of intent' setting out our plans
to file a new electricity distribution rate case during summer 2009; and a new gas distribution rate case during spring 2010.

    DIVIDEND AND SHARE REPURCHASE

    We are confident in our positive outlook for the year and reflecting this, the Board has approved an 8% increase in the interim dividend
to 12.64p per ordinary share ($0.9476 per American Depositary Share). This is in line with our policy to target growth in dividends per
ordinary share (expressed in sterling) by 8% in each of the four financial years through to 31 March 2012. The interim dividend is to be
paid on 21 January 2009 to shareholders on the register as at 5 December 2008.

    We have completed the return of �1.8bn of proceeds from the sale of our Wireless business, and the US stranded asset post-tax cash flows
for 2008/09.  Since 1 April 2008, we have repurchased 85.5m shares at a value of �594m.

    OUTLOOK

    Current performance remains in line with our expectations and our outlook for the year remains positive.  We continue to expect a good
performance across the portfolio of our businesses, including higher second half profits in our Non-Regulated businesses offsetting timing
issues in Electricity Distribution and Generation.  Net interest charges are expected to be higher in 2008/09 reflecting a full year of
ownership of KeySpan, compared to only seven months last year, and our full year effective tax rate is expected to be around 28%, lower than
the prior year, mainly due to the reduction in the UK corporation tax rate.

    Overall we are well positioned to deliver another year of solid performance, supporting our progressive dividend policy.
      BASIS OF PRESENTATION

    Unless otherwise stated, all financial commentaries are given on a business performance basis at actual exchange rates. Business
performance represents the results for continuing operations before exceptional items, mark-to-market remeasurements of commodity contracts
and financial instruments that are held for economic hedging purposes but did not achieve hedge accounting, and US stranded cost recoveries.
Commentary provided in respect of results after exceptional items, mark-to-market remeasurements and US stranded cost recoveries is
described as 'statutory'.

    REVIEW OF RESULTS AND FINANCIAL POSITION

    Operating profit was �1,079m, up 4% on the prior period (up 2% on a constant currency basis6). This was primarily driven by a strong
result in our Gas Distribution business, despite our US gas revenues being significantly weighted to the second half of the year.

    Net finance costs were �524m, 86% higher than the prior period, reflecting an additional five months of interest charges relating to the
acquisition of KeySpan, which increased average net debt levels and reduced interest income as cash held on deposit in the same period last
year was utilised in the transaction.  As expected, this, together with the strongly seasonal nature of the former KeySpan gas business, has
resulted in a period on period negative impact on profit before tax, earnings, and earnings per share. Due to the timing of the acquisition,
this negative variance is a feature of this period only; it will be less evident at the full-year, and will not feature in future first half
to first half comparisons.  Profit before tax was down 26% to �558m. The tax charge on profit was �125m, �102m lower than the prior period,
with the first half tax charge calculation under IAS34 reflecting the geographical and seasonal split of our earnings.  For the full year we
expect our effective tax rate to be around 28%.  Earnings were down 18% on the prior period at �431m.  Earnings per share decreased 12% from 19.8p in the first half last year to
17.4p.

    Exceptional items and remeasurements for continuing operations decreased statutory earnings by �118m after tax.  Stranded cost
recoveries, after tax, added �93m to earnings.  After these items and minority interests, statutory earnings for continuing operations
attributable to shareholders were �406m - statutory basic earnings per share from continuing operations were 16.4p. Profit from discontinued
operations was �17m after exceptional items and remeasurements, leading to statutory basic earnings per share of 17.0p.

    Statutory pre-tax cash flows from continuing operations were �934m.  

    Organic investment in our continuing businesses was �1.6bn, in line with our plans for the year.

    Our net debt rose to �19.8bn at 30 September 2008 compared with �17.6bn at 31 March 2008, reflecting increased net finance costs
associated with the acquisition of KeySpan, capital investment, the return of �594m through our share repurchase programme, proceeds from
the $2.9bn sale of our Ravenswood generating station in New York City, and non-cash movements relating to changes in US$ exchange rates7.

    Further information about our principal risks and uncertainties for the next six months of the financial year is provided in Note 16 on
page 26.
      REVIEW OF TRANSMISSION OPERATIONS

 Summary results                          Six months ended 30 September
 (�m)                                         2008     2007    % change
 Revenue and other operating income          1,975    1,545          28
 Operating costs                           (1,188)    (765)          55
 Depreciation and amortisation               (196)    (206)         (5)
 Operating profit - actual exchange rate       591      574           3
 Operating profit - constant currency          591      578           2

 Operating profit by geographical segment  Six months ended 30 September
 (�m, at constant currency)                   2008     2007     % change
 UK                                            508      501            1
 US                                             83       77            8
 Operating profit                              591      578            2

 Capital investment             Six months ended 30 September
 (�m, at actual exchange rate)     2008     2007     % change
 UK                                 684      826         (17)
 US                                  72       44           64
 Capital investment                 756      870         (13)


    Transmission delivered a 3% increase in operating profit to �591m.  We are performing well in the second year of our UK five-year
regulatory price control, which allows baseline revenue increases of RPI+2% and RPI in our electricity and gas transmission owner activities
respectively. While these allowances will be a significant driver of operating profit for the year, in the first half, operating profit from
our UK regulated activities was �11m lower than the prior period - mainly reflecting changes to our gas transmission billing profile which
now biases revenue towards the second half.  Our French interconnector had a very strong first half, with higher than normal demand for
capacity increasing operating profit by �24m - we do not expect to repeat such a strong performance in the second half.  The period on
period movement in exchange rates had a �4m positive benefit on operating profit.

    Capital investment in Transmission decreased by 13% on the prior period to �756m, following the completion of our 316km South Wales gas
transmission pipeline project in January.  However, we have continued to increase investment in our US transmission networks.

    In July, the New York PSC agreed that the 2008 portion of our $1.47bn five year investment plans qualified for partial recovery under
our 'deferral account' - we expect to make further filings for partial recovery of investment in each of the next three years, recovering
the balance as part of our next rate plan from January 2012 at the latest.  Around one third of this investment is in transmission assets.

    On 17 November, the Federal Energy Regulatory Commission (FERC) approved a package of  incentives in relation to the New England
East-West Solution (NEEWS) project - a series of inter-related transmission upgrades in Connecticut, Massachusetts and Rhode Island.  We
expect that our investment in the NEEWS project will total around $650m over the medium term, and will earn an enhanced FERC return on
equity of 12.89%.

      REVIEW OF GAS DISTRIBUTION OPERATIONS

 Summary results                          Six months ended 30 September
 (�m)                                         2008     2007    % change
 Revenue and other operating income          1,863      849         119
 Operating costs                           (1,432)    (569)         152
 Depreciation and amortisation               (157)    (114)          38
 Operating profit - actual exchange rate       274      166          65
 Operating profit - constant currency          274      166          65

 Operating profit by geographical segment  Six months ended 30 September
 (�m, at constant currency)                   2008     2007     % change
 UK                                            264      167           58
 US                                             10      (1)            -
 Operating profit                              274      166           65

 Capital investment             Six months ended 30 September
 (�m, at actual exchange rate)     2008     2007     % change
 UK capex                            72       74          (3)
 UK repex                           207      177           17
 US                                 170       48          254
 Capital investment                 449      299           50


    Following the acquisition of KeySpan on 24 August 2007, our Gas Distribution business has almost doubled in size.  The profitability of
our US gas networks, including the former KeySpan gas businesses, is now heavily weighted to the second half of the year, reflecting the
highly seasonal nature of those operations. In the six months to 30 September 2008, operating profit from Gas Distribution was �274m, up
�108m, mainly as a result of the implementation of new regulatory agreements in the UK and US.  These comprised:
    *     Our new UK five year price control, which came into effect on 1 April 2008. This provided for an above inflation increase in
allowed revenue for the year. It also included changes to our pricing formula, which removed any dependency on delivery volumes, and results
in a greater proportion of our allowed revenue being collected in the first half
    *     Our new gas rate plans in down-state New York, which came into effect on 1 January 2008.
    Due to the geographical split of operating profit in the first half last year, the period on period movement in exchange rates had no
impact on operating profit in this business.

    During the period, together with our gas distribution alliance partnerships in the UK, we have replaced around 1,000km of gas mains,
resulting in total replacement expenditure (repex) of �207m.  In our US operations, we have an additional five months of investment from the
former KeySpan gas businesses in customer connections and network infrastructure projects, which together with new infrastructure in the UK,
resulted in total capital expenditure (including repex) of �449m.

    Our upstate New York, Rhode Island, and New Hampshire gas rate cases are progressing as expected. Following the normal hearings
processes and subsequent decisions we expect new rates to be implemented in these businesses by late spring. In August, the New Hampshire
Public Utilities Commission approved a temporary rate increase, ahead of a final agreement, which is expected by the spring - final rates
will be implemented shortly thereafter.  Also in August, we filed with the Massachusetts Department of Public Utilities a 'notice of intent'
setting out our plans to file a new consolidated gas distribution rate case during spring 2010 - in this rate case we intend to make a
consolidated filing, combining our Boston, Colonial and Essex gas businesses into a single rate plan, greatly simplifying and improving the
transparency of our Massachusetts gas regulatory arrangements.  In September, the NYPSC approved our gas energy efficiency programmes for
upstate New York, these programmes began on 1 October 2008, ahead of the winter heating season.

      REVIEW OF ELECTRICITY DISTRIBUTION AND GENERATION OPERATIONS

 Summary results                          Six months ended 30 September
 (�m)                                         2008      2007   % change
 Revenue and other operating income*         1,854     1,446         28
 Operating costs                           (1,639)   (1,183)         39
 Depreciation and amortisation                (86)      (67)         28
 Operating profit - actual exchange rate       129       196       (34)
 Operating profit - constant currency          129       206       (37)

 Operating profit by principal activities          Six months ended 30 September
 (�m, at constant currency)                           2008     2007     % change
 Electricity distribution                              109      199         (45)
 Long Island transmission and distribution               7        5            -
 services
 Long Island generation                                 13        2            -
 Operating profit                                      129      206         (37)

 Capital investment             Six months ended 30 September
 (�m, at actual exchange rate)     2008     2007     % change
 Electricity distribution           130      114           14
 Long Island generation              13        1            -
 Capital investment                 143      115           24

    * Excludes revenue from stranded cost recoveries.


    During the period, operating profit from Electricity Distribution and Generation decreased by 34% to �129m. As expected, the main
factors affecting results were:
    *     The timing of rate adjustments for pass-through costs, which had a net �38m negative impact on results.  Under-collected amounts
will be recovered through rates in future periods
    *     A non-cash one-off item relating to historic transmission charges, which impacted results by �15m.
    We expect that both these items will continue to be major factors at the full year, resulting in operating profit lower than in 2007/08.
 Service quality penalties, mainly relating to system reliability in upstate New York in 2007, reduced operating profit by �7m - however,
this year to date we have delivered a significant improvement in our upstate New York system reliability performance, consistently beating
our historic average.  Higher bad debts reduced operating profit by �7m compared to the prior period, and other items further impacted
operating profit by �10m - these included higher storm costs and costs associated with our increased investment programme, which more than
offset a positive contribution from our generation and transmission and distribution services activities on Long Island.  Period on period
movement in exchange rates benefited operating profit by �10m.

    We have made good regulatory progress during the period, with positive outcomes in a number of areas. In July, the New York PSC took
positive steps in supporting our five year capital investment plans, agreeing in principle that the 2008 portion qualified for partial
recovery under our 'deferral account'.  We expect to make further filings for partial recovery of investment in each of the next three
years, recovering the balance as part of our next rate plan from January 2012 at the latest.

    In Massachusetts we have made two filings with the Massachusetts Department of Public Utilities (MA DPU), in response to the new
Massachusetts state energy bill which passed into law in July:
    *     In August we filed to expand our existing energy efficiency programme - offering us the opportunity to earn additional incentives,
while helping our customers make savings on their energy bills
    *     In October, we filed our plans to develop and own 5MW of new solar generation, the first utility in the state to do so. In the
coming months we expect to expand our programme up to 50MW - this offers an additional opportunity for growth and is a natural extension of
our existing renewable energy and energy efficiency programmes.
    Also in August, we filed with the MA DPU a 'notice of intent' setting out our plans to file a new electricity distribution rate case
during summer 2009.
      REVIEW OF NON-REGULATED AND OTHER ACTIVITIES

 Summary results                     Six months ended 30 September
 (�m)                                   2008     2007     % change
 Revenue and other operating income      356      382          (7)
 Operating costs                       (194)    (201)          (3)
 Depreciation and amortisation          (77)     (78)          (1)
 Operating profit                         85      103         (17)

 Operating profit by principal activities  Six months ended 30 September
 (�m, at actual exchange rate)                2008     2007     % change
 Metering                                       76       60           27
 Grain LNG                                       4        6         (33)
 Property                                       24       62         (61)
 Sub-total operating profit                    104      128         (19)
 Corporate and other activities               (19)     (25)         (24)
 Operating profit                               85      103         (17)

 Capital investment*            Six months ended 30 September
 (�m, at actual exchange rate)     2008     2007     % change
 Metering                            76       72            6
 Grain LNG                          122       97           26
 Property                             3        5         (40)
 Other                               43        7            -
 Capital investment                 244      181           35

    * Excludes investment in joint ventures.

    Operating profit from our Non-regulated and other activities was 17% lower than the prior period at �85m. This reduction was mainly
driven by sales in our land and property business, which reported an unusual bias towards first half sales last year - this year we expect
sales will be biased towards the second half.

    Metering operating profit was up �16m at �76m, mainly driven by lower costs and depreciation charges. During the period, capital
investment in this business was �76m, with around 300,000 new meters installed. In February 2008, the Gas and Electricity Markets
Authority's (GEMA) issued a decision that National Grid has infringed the Competition Act in relation to a number of domestic metering
contracts entered into with gas suppliers in 2004. We are convinced that the contracts do not infringe competition law and that the fine is
wholly inappropriate. In April 2008, we issued a notice of appeal, and the case is listed to be heard by the Competition Appeal Tribunal in
January.

    Our Grain LNG business delivered an operating profit of �4m in the period. During the period capital investment in this business
increased by 26% to �122m, mainly reflecting the construction of our Phase II capacity extension, which completed in October. We are now in
the process of commissioning Phase II and are on track to be available for commercial operations ahead of the winter. Phase III construction
commenced in July and is planned to complete in 2010. This will add a further LNG tank and a second unloading jetty, increasing the total
annual capacity of the terminal to around 15 million tonnes, representing around 20% of total UK gas demand. These investments are
underpinned by long-term, take-or-pay contracts, which guarantee an index linked revenue stream.

      PRO FORMA FINANCIAL RESULTS FOR CONTINUING OPERATIONS

    On 24 August 2007, we completed the acquisition of KeySpan, significantly growing our footprint in North America and positioning
National Grid as the second largest energy delivery company in the US (by number of customers).

    To provide a transparent view of the continuing underlying first half performance in our business, we have provided comparative results
in the table below that illustrate the impact of the KeySpan acquisition as if it had completed on 1 April 2007.

    These adjustments are included for illustrative purposes only. They are prepared on a business performance basis, representing the
results for continuing operations before exceptional items, remeasurements, and US stranded cost recoveries.  The pro forma adjustments
include amounts to increase net finance costs to reflect the finalisation of the acquisition fair value exercise on KeySpan. In addition,
the taxation adjustment reflects the Group's pro forma effective tax rate based on the geographical weighting of earnings during the six
month period.

                                                Six months ended 30 September
 Business performance                     2007                   2007    2008
 (�m, at actual exchange rate)          actual  adjustment  pro forma  actual
 Transmission                              574           -        574     591
 Gas Distribution                          166          +4        170     274
 Electricity Distribution & Generation     196         +19        215     129
 Non-regulated & other activities          103          +7        110      85
 Operating profit                        1,039         +30      1,069   1,079
 Net finance costs                       (282)       (162)      (444)   (524)
 Share of post-tax joint ventures            -          +3          3       3
 Pre-tax profit                            757       (129)        628     558
 Taxation                                (227)         +49      (178)   (125)
 Minority interests                        (2)           -        (2)     (2)
 Earnings                                  528        (80)        448     431
 Earnings per share                      19.8p      (3.0)p      16.8p   17.4p


    On a pro forma basis, first half operating profit would have been �30m higher in 2007/08 than actually reported had KeySpan been
acquired on 1 April 2007. The main adjustments are in our Gas Distribution and Electricity Distribution and Generation lines of business,
reflecting an additional five months of operations during the summer. In KeySpan's gas businesses, a seasonal bias towards the winter
heating period results in significantly lower revenue recovery during the summer, which only marginally offsets the operating costs incurred
during those months; this would have resulted in 2007/08 Gas Distribution operating profit being �4m higher on a pro forma basis, than
actually reported.  Including the Long Island generation assets and transmission and distribution services activities, Electricity
Distribution and Generation operating profit would have been �19m higher on a pro forma basis, than actually reported. No adjustments have
been made in respect of the sale of the Ravenswood generating station in New York City, as this plant has been classified within discontinued operations since the completion of the acquisition.

    Actual first half results for 2007/08 reflect one month of net finance costs associated with KeySpan related debt, together with
interest income from cash held on deposit due to the pre-funding of the acquisition. An additional five months of acquisition related debt
and the absence of the interest income would together have resulted in 2007/08 first half net finance costs being �162m higher on a pro
forma basis.  The first half tax charge on a pro forma basis would have been �49m lower than actually reported, reflecting the net pro forma
reduction in profit before tax at the US marginal tax rate.

    Together with other minor movements, these factors would have resulted in 2007/08 first half earnings per share being 3.0p lower than
actually reported, at 16.8p on a pro forma basis.
      CONTACTS

    National Grid:

    Investors        
 David Rees       +44 (0)20 7004 3170  +44 (0)7901 511322(m)
 George Laskaris  +1 718 403 2526      +1 917 375 0989(m)
 Richard Smith    +44 (0)20 7004 3172  +44 (0)7747 006321(m)
 Victoria Davies  +44 (0)20 7004 3171  +44 (0)7771 973447(m)

    Media        
 Clive Hawkins  +44 (0)20 7004 3147  +44 (0)7836 357173(m)
 Chris Mostyn   +1 718 403 2747      +1 347 702 3740(m)

 Brunswick: Paul Scott  +44 (0)20 7396 5333  +44 (0)7974 982333(m)

An analyst presentation will be held at the London Stock Exchange, 10 Paternoster Square, London EC4M 7LS at 9:15am (UK time) today.
  
    Live telephone coverage of the analyst presentation - password 'National Grid'
 UK dial in number  +44 (0) 203 023 4488  US dial in number  +1 866 966 5335

    Telephone replay of the analyst presentation (available until 20 December 2008)
 Dial in number  +44 (0) 208 196 1998  Account number  682162�

    A live web cast of the presentation will also be available at www.nationalgrid.com.

    Photographs are available on www.newscast.co.uk.

    You can view or download copies of our latest Annual Report or the Annual Review from our website at
www.nationalgrid.com/corporate/Investor+Relations/ or request a free printed copy by contacting investor.relations@ngrid.com.

    CAUTIONARY STATEMENT

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

 CONSOLIDATED INCOME STATEMENT                      2008               2007*          Year ended  
 for the six months ended 30                                                           31 March   
 September                                                                                2008**  
                                 Notes                �m                  �m                  �m  
                                               =========           =========           =========  
 Revenue                          2a               6,072               4,260              11,423  
 Other operating income                               29                  52                  75  
 Operating costs                                 (5,158)             (3,125)             (8,534)  
                                        ----------------    ----------------    ----------------  
 Operating profit                                                                                 
 - Before exceptional items,      2b               1,079               1,039               2,595  
 remeasurements and stranded                                                                      
 cost recoveries                                                                                  
 - Exceptional items,              3               (136)                 148                 369  
 remeasurements and stranded                                                                      
 cost recoveries                                                                                  
 Total operating profit           2c                 943               1,187               2,964  
                                                                                                  
 Interest income and similar       4                 640                 663               1,275  
 income                                                                                           
 Interest expense and other                                                                       
 finance costs                                                                                    
 - Before exceptional items and                  (1,164)               (945)             (2,045)  
 remeasurements                                                                                   
 - Exceptional items and           3                 142                  12                (16)  
 remeasurements                                                                                   
                                   4             (1,022)               (933)             (2,061)  
                                                                                                  
 Share of post-tax results of                          3                   -                   4  
 joint ventures and associates                                                                    
                                        ----------------    ----------------    ----------------  
 Profit before taxation                                                                           
 - Before exceptional items,                         558                 757               1,829  
 remeasurements and stranded                                                                      
 cost recoveries                                                                                  
 - Exceptional items,              3                   6                 160                 353  
 remeasurements and stranded                                                                      
 cost recoveries                                                                                  
 Total profit before taxation                        564                 917               2,182  
 Taxation                                                                                         
 - Before exceptional items,       5               (125)               (227)               (579)  
 remeasurements and stranded                                                                      
 cost recoveries                                                                                  
 - Exceptional items,              3                (31)                  95                (28)  
 remeasurements and stranded                                                                      
 cost recoveries                                                                                  
 Total taxation                                    (156)               (132)               (607)  
                                        ----------------    ----------------    ----------------  
 Profit from continuing                                                                           
 operations after taxation                                                                        
 - Before exceptional items,                         433                 530               1,250  
 remeasurements and stranded                                                                      
 cost recoveries                                                                                  
 - Exceptional items,              3                (25)                 255                 325  
 remeasurements and stranded                                                                      
 cost recoveries                                                                                  
 Profit for the period from                          408                 785               1,575  
 continuing operations                                                                            
                                                                                                  
 Profit for the period from                                                                       
 discontinued operations                                                                          
 - Before exceptional items and    6                   6                  21                  28  
 remeasurements                                                                                   
 - Exceptional items and           6                  11               1,592               1,590  
 remeasurements                                                                                   
                                                      17               1,613               1,618  
                                        ----------------    ----------------    ----------------  
 Profit for the period                               425               2,398               3,193  
                                               =========           =========           =========  
 Attributable to:                                                                                 
 - Equity shareholders of the                        423               2,396               3,190  
 parent                                                                                           
 - Minority interests                                  2                   2                   3  
                                        ----------------    ----------------    ----------------  
                                                     425               2,398               3,193  
                                               =========           =========           =========  
                                                                                                  
 Earnings per share from                                                                          
 continuing operations                                                                            
 - Basic                          7a               16.4p               29.4p               60.3p  
 - Diluted                        7b               16.3p               29.2p               59.9p  
                                                                                                  
 Earnings per share                                                                               
 - Basic                          7a               17.0p               90.0p              122.3p  
 - Diluted                        7b               16.9p               89.4p              121.6p  
                                               =========           =========           =========  
 Dividends per ordinary share:     8              21.30p              17.80p              29.50p  
 paid during the period                                                                           
 Dividends per ordinary share:                    12.64p              11.70p              33.00p  
 approved or proposed to be                                                                       
 paid                                                                                             
                                               =========           =========           =========  
    * 30 September 2007 comparatives have been adjusted to present items on a basis consistent with the current period classification (see
note 1b)
    ** 31 March 2008 comparatives have been restated for the finalisation of the fair value exercise on the acquisition of KeySpan
Corporation (see note 9)
      
 CONSOLIDATED BALANCE SHEET at                       2008               2007**    At 31 March 2008**  
 30 September                                                                                         
                                 Notes                 �m                   �m                    �m  
                                              ===========          ===========           ===========  
 Non-current assets                                                                                   
 Goodwill                                           4,357                3,787                 3,904  
 Other intangible assets                              314                  272                   271  
 Property, plant and equipment                     26,321               23,059                24,331  
 Pension asset                                      1,055                  617                   846  
 Other non-current assets                             128                  190                   164  
 Financial and other                                  304                  249                   251  
 investments                                                                                          
 Derivative financial assets                          633                  630                 1,063  
                                         ----------------     ----------------      ----------------  
 Total non-current assets                          33,112               28,804                30,830  
                                         ----------------     ----------------      ----------------  
 Current assets                                                                                       
                                                                                                      
 Inventories and current                              860                  672                   438  
 intangible assets                                                                                    
 Trade and other receivables                        2,085                1,558                 2,265  
 Financial and other                                1,265                1,848                 2,095  
 investments                                                                                          
 Derivative financial assets                          291                  220                   463  
 Cash and cash equivalents                            148                  355                   174  
                                        -----------------    -----------------     -----------------  
 Total current assets                               4,649                4,653                 5,435  
                                        -----------------    -----------------     -----------------  
 Assets of businesses held for                          -                1,471                 1,506  
 sale                                                                                                 
                                        -----------------    -----------------     -----------------  
 Total assets                                      37,761               34,928                37,771  
                                        -----------------    -----------------     -----------------  
 Current liabilities                                                                                  
 Borrowings                                       (2,412)              (3,046)               (3,882)  
 Derivative financial                               (317)                 (59)                 (114)  
 liabilities                                                                                          
 Trade and other payables                         (2,391)              (2,237)               (2,480)  
 Current tax liabilities                            (642)                (188)                 (295)  
 Provisions                                         (291)                (150)                 (375)  
                                        -----------------    -----------------     -----------------  
 Total current liabilities                        (6,053)              (5,680)               (7,146)  
                                        -----------------    -----------------     -----------------  
 Non-current liabilities                                                                              
 Borrowings                                      (19,092)             (16,038)              (17,121)  
 Derivative financial                               (272)                (246)                 (319)  
 liabilities                                                                                          
 Other non-current liabilities                    (1,948)              (1,683)               (1,721)  
 Deferred tax liabilities                         (2,883)              (2,975)               (3,259)  
 Pensions and other                               (1,664)              (1,537)               (1,746)  
 post-retirement benefit                                                                              
 obligations                                                                                          
 Provisions                                       (1,124)              (1,124)               (1,022)  
                                        -----------------    -----------------     -----------------  
 Total non-current liabilities                   (26,983)             (23,603)              (25,188)  
                                        -----------------    -----------------     -----------------  
 Liabilities of businesses held                         -                 (72)                  (63)  
 for sale                                                                                             
                                        -----------------    -----------------     -----------------  
 Total liabilities                               (33,036)             (29,355)              (32,397)  
                                        -----------------    -----------------     -----------------  
 Net assets                                         4,725                5,573                 5,374  
                                              ===========          ===========           ===========  
 Equity                                                                                               
 Called up share capital                              294                  298                   294  
 Share premium account                              1,371                1,371                 1,371  
 Retained earnings                                  8,171                9,156                 8,943  
 Other equity reserves                            (5,124)              (5,270)               (5,252)  
                                        -----------------    -----------------     -----------------  
 Total parent company                               4,712                5,555                 5,356  
 shareholders' equity                                                                                 
 Minority interests                                    13                   18                    18  
                                        -----------------    -----------------     -----------------  
 Total equity                     10                4,725                5,573                 5,374  
                                                =========            =========             =========  
    ** Comparatives have been restated for the finalisation of the fair value exercise on the acquisition of KeySpan Corporation (see note
9)
  
 CONSOLIDATED STATEMENT OF                   2008                2007          Year ended  
 RECOGNISED INCOME AND EXPENSE                                                   31 March  
 for the six months ended 30                                                       2008**  
 September                                                                                 
                                               �m                  �m                  �m  
                                        =========           =========           =========  
 Exchange adjustments                         141                (73)                (25)  
 Actuarial net (losses)/gains               (113)                 561                 432  
 Deferred tax on actuarial net                 29               (182)                (98)  
 gains and losses                                                                          
 Net losses taken to equity in               (12)                (33)                (32)  
 respect of cash flow hedges                                                               
 Transferred to profit and loss                 3                 (4)                 (7)  
 on cash flow hedges                                                                       
 Deferred tax on cash flow                      3                   8                   2  
 hedges                                                                                    
 Net (losses)/gains taken to                  (7)                   2                   6  
 equity on available-for-sale                                                              
 investments                                                                               
 Transferred to profit or loss                (2)                   -                   -  
 on sale of available-for-sale                                                             
 investments                                                                               
 Deferred tax on                                1                 (1)                   2  
 available-for-sale investments                                                            
                                 ----------------    ----------------    ----------------  
 Net income recognised directly                43                 278                 280  
 in equity                                                                                 
 Profit for the period                        425               2,398               3,193  
                                 ----------------    ----------------    ----------------  
 Total recognised income and                  468               2,676               3,473  
 expense for the period                                                                    
                                        =========           =========           =========  
 Attributable to:                                                                          
 - Equity shareholders of the                 466               2,675               3,470  
 parent                                                                                    
 - Minority interests                           2                   1                   3  
                                 ----------------    ----------------    ----------------  
                                              468               2,676               3,473  
                                        =========           =========           =========  
    ** 31 March 2008 comparatives have been restated for the finalisation of the fair value exercise on the acquisition of KeySpan
Corporation (see note 9)



 CONSOLIDATED CASH FLOW                          2008                2007*            Year ended  
 STATEMENT                                                                              31 March  
 for the six months ended 30                                                                2008  
 September                                                                                        
                                                   �m                   �m                    �m  
                                            =========            =========             =========  
 Cash flows from operating                                                                        
 activities                                                                                       
 Total operating profit                           943                1,187                 2,964  
 Adjustments for:                                                                                 
 Exceptional items,                               136                (148)                 (369)  
 remeasurements and stranded                                                                      
 cost recoveries                                                                                  
 Depreciation and amortisation                    511                  461                   994  
 Share-based payment charge                        10                    9                    18  
 Changes in working capital and                 (193)                (122)                 (155)  
 provisions                                                                                       
 Changes in pensions and other                  (547)                (195)                 (333)  
 post-retirement benefit                                                                          
 obligations                                                                                      
 Cash flows relating to                          (39)                 (66)                 (132)  
 exceptional items                                                                                
 Cash flows relating to                           113                  130                   278  
 stranded cost recoveries                                                                         
                                     ----------------    -----------------    ------------------  
 Cash flows generated from                        934                1,256                 3,265  
 continuing operations                                                                            
 Cash flows relating to                             1                   11                    10  
 discontinued operations                                                                          
                                     ----------------    -----------------    ------------------  
 Cash generated from operations                   935                1,267                 3,275  
 Tax paid - continuing                          (223)                (136)                 (110)  
 operations                                                                                       
 Tax paid - discontinued                          (6)                    -                     -  
 operations                                                                                       
                                     ----------------    -----------------    ------------------  
 Net cash flow generated from                     706                1,131                 3,165  
 operating activities                                                                             
                                     ----------------    -----------------    ------------------  
 Cash flows from investing                                                                        
 activities                                                                                       
 Acquisition of subsidiaries                     (34)              (3,513)               (3,528)  
 (net of cash acquired) and                                                                       
 other investments                                                                                
 Sale of investments in                             5                   18                    55  
 subsidiaries and other                                                                           
 investments                                                                                      
 Purchases of intangible assets                  (56)                 (20)                  (45)  
 Purchases of property, plant                 (1,535)              (1,369)               (2,832)  
 and equipment                                                                                    
 Disposals of property, plant                      18                   13                    26  
 and equipment                                                                                    
 Interest received                                 61                  148                   206  
 Net movements in financial                       814                  278                    45  
 investments                                                                                      
                                     ----------------    -----------------    ------------------  
 Cash flows used in continuing                  (727)              (4,445)               (6,073)  
 operations - investing                                                                           
 activities                                                                                       
 Cash flows relating to                                                                           
 discontinued operations                                                                          
  - disposal proceeds                           1,600                3,065                 3,064  
  - other investing activities                    (3)                  (2)                  (14)  
                                     ----------------    -----------------    ------------------  
 Net cash flow generated                          870              (1,382)               (3,023)  
 from/(used in) investing                                                                         
 activities                                                                                       
                                     ----------------    -----------------    ------------------  
 Cash flows from financing                                                                        
 activities                                                                                       
 Proceeds from issue of                             8                   13                    23  
 ordinary share capital and                                                                       
 sale of treasury shares                                                                          
 Increase in borrowings and                        17                  647                 1,563  
 related derivatives                                                                              
 Interest paid                                  (468)                (397)                 (900)  
 Dividends paid to shareholders                 (531)                (480)                 (780)  
 Repurchase of share capital                    (623)                (796)               (1,498)  
 and purchase of treasury                                                                         
 shares                                                                                           
                                     ----------------    -----------------    ------------------  
 Net cash flow used in                        (1,597)              (1,013)               (1,592)  
 financing activities                                                                             
                                     ----------------    -----------------    ------------------  
 Net decrease in cash and cash                   (21)              (1,264)               (1,450)  
 equivalents                                                                                      
 Exchange movements                                 5                  (7)                     4  
 Cash included within assets of                     -                   23                    23  
 businesses held for sale                                                                         
 Net cash and cash equivalents                    164                1,587                 1,587  
 at start of period (i)                                                                           
                                   ------------------    -----------------    ------------------  
 Net cash and cash equivalents                    148                  339                   164  
 at end of period  (i)                                                                            
                                         ============          ===========         =============  
    * 30 September 2007 comparatives have been adjusted to present items on a basis consistent with the current period classification (see
note 1b)

    i)   Net of bank overdrafts of �nil, (30September 2007: �16m; 31March 2008: �10m)


      
    NOTES TO THE 2008/09 HALF YEAR FINANCIAL INFORMATION

    1. Basis of preparation and new accounting standards, amendments and interpretations

    a) Basis of preparation
    The half year financial information covers the six month period ended 30 September 2008 and has been prepared under International
Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board (IASB) and IFRS as adopted by the European
Union, in accordance with International Accounting Standard 34 'Interim Financial Reporting' and the Disclosure and Transparency Rules of
the Financial Services Authority. It is unaudited but has been reviewed by the auditors and their report is attached to this document. 

    The following interpretations and amendment, issued by the International Financial Reporting Interpretations Committee (IFRIC) and the
IASB respectively, are effective for the year ending 31 March 2009: 
 
�          IFRIC 12 Service concession arrangements
�          IFRIC 14 Defined benefit assets and minimum funding requirements
�          Amendment to IAS 39 Financial Instruments: Recognition and measurement and IFRS 7 Financial Instruments: Disclosures:
Reclassification of Financial Assets

    These interpretations and amendment have not yet been adopted by the European Union and have therefore not been adopted by the Company.
However our current accounting policies are already aligned with these interpretations. Therefore, irrespective of adoption, there is no
impact on the financial results or position of the Company and its subsidiary undertakings or on the presentation of financial statements
for the six months ended 30 September 2008 or for previous periods.

    The half year financial information does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. It
should be read in conjunction with the statutory accounts for the year ended 31 March 2008, which were prepared in accordance with IFRS as
adopted by the European Union and have been filed with the Registrar of Companies. The auditors' report on these statutory accounts was
unqualified and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985.

    This half year financial information has been prepared on the basis of the accounting policies expected to be applicable for the year
ending 31 March 2009 and are consistent with those that applied in the preparation of our accounts for the year ended 31 March 2008.
Following a review of the useful economic lives of property, plant and equipment, the depreciation periods of certain assets within the
category Gas plant - mains, services and regulating equipment have been amended. This has resulted in a decrease in the depreciation charge
and a corresponding increase in operating profit for the six months ended 30 September 2008 of �19m.


    b) Adjustment to business performance results for the six months ended 30 September 2007
    Following a change in accounting policy during the year ended 31 March 2008, business performance now excludes stranded cost recoveries
and the amortisation of acquisition-related intangibles and cash flows from stranded cost recoveries are reported separately in the cash
flow statement. Stranded cost recoveries represent the recovery of historic generation-related costs in the US related to generation assets
that are no longer owned. Such costs are being recovered from customers as permitted by regulatory agreements. Business performance results
for the six months ended 30 September 2007 have been adjusted to reflect the exclusion of stranded cost recoveries of �190m (�114m net of
tax), consistent with the current year classification. No such adjustment was made for the amortisation of acquisition-related intangibles
as it was not material.

    c) New accounting standards, amendments and interpretations
    The following standards, amendments and interpretations have been issued by the IASB or by the IFRIC, but are not yet effective: 

    *     IFRS 8 Operating segments
    *     Amendment to IAS 23 Borrowing costs
    *     Amendments to IAS 1 Presentation of financial statements
    *     IFRS 3R Business Combinations
    *     IAS 27R Consolidated and separate financial statements
    *     Amendment to IFRS 2 Share based payment: Vesting Conditions and Cancellations
    *     Amendments to IAS 32 Financial instruments: Presentation and IAS 1 Presentation of Financial Statements Puttable Financial
Instruments and Obligations Arising on Liquidation
    *     Amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards and IAS 27 Consolidated and Separate
Financial Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
    *     Improvements to IFRS
    *     IFRIC 13 Customer loyalty programmes
    *     IFRIC 15 Agreements for the construction of real estate
    *     IFRIC 16 Hedges of a net investment in a foreign operation
    *     Amendment to IAS 39 Financial Instruments: Recognition and measurement: Eligible Hedged Items
    Date of approval

    This announcement was approved by the Board of Directors on 19 November 2008.
      2. Segmental analysis  

    The following segmental analysis is presented in accordance with the management responsibilities and economic characteristics, including
consideration of risks and returns, of business activities. The Company assesses the performance of its businesses principally on the basis
of operating profit before exceptional items, remeasurements and stranded cost recoveries. The primary reporting format is by business and
the secondary reporting format is by geographical area. The following table describes the main activities for each business segment:

 Transmission - UK               High voltage electricity transmission networks, the gas
                                 transmission network in the UK, 
                                 UK liquefied natural gas (LNG) storage activities and the
                                 French electricity interconnector
 Transmission - US               High voltage electricity transmission networks in New York and
                                 New England
 Gas Distribution - UK           Four of the eight regional networks of Great Britain's gas
                                 distribution system
 Gas Distribution - US           Gas distribution in New York and New England
 Electricity Distribution and    Electricity distribution in New York and New England and
 Generation - US                 electricity generation in New York

    Other activities primarily relate to non-regulated businesses and other commercial operations not included within the above segments,
including UK-based gas metering activities; UK property management; a UK LNG import terminal; other LNG operations; US unregulated
transmission pipelines; US home services; US gas fields; together with corporate activities, including business development.

    Discontinued operations for the six months ended 30 September 2008 comprise the Ravenswood generation station in New York City, and the
engineering and communications operations in the US acquired as part of the KeySpan acquisition. The Ravenswood generation station was sold
on 26 August 2008, KeySpan Communications was sold on 25 July 2008 and one of our KeySpan engineering companies was sold on 11 July 2008.
For the comparative periods discontinued operations also included our wireless infrastructure and communication operations in the UK and
similar operations in the US, as well as an electricity interconnector in Australia. These operations were sold on 3 April 2007, 15 August
2007, and 31 August 2007 respectively. The results for discontinued operations are disclosed in note 6.

    In line with our management structure, the recovery of stranded costs from US electricity distribution customers as permitted by
regulatory agreement is no longer presented as a separate segment but is reported within the Electricity Distribution & Generation - US
segment. Comparatives for the six month period ended 30 September 2007 have been adjusted to conform with the current period classification.
There is no change from the segments reported in the financial statements for the year ended 31 March 2008.

    Sales between businesses are priced having regard to the regulatory and legal requirements to which the businesses are subject.

    a)  Revenue
 Six months ended 30 September                2008              2007*         Year ended
                                                                           31 March 2008
                                                �m                 �m                 �m
                                         =========          =========           ========
 Business segments - continuing
 operations
   Transmission - UK                         1,799              1,392              2,956
   Transmission - US                           176                153                299
   Gas Distribution - UK                       647                547              1,383
   Gas Distribution - US                     1,216                302              2,845
   Electricity Distribution and              2,011              1,641              3,508
 Generation - US
 Other activities                              327                330                642
 Sales between businesses                    (104)              (105)              (210)
                                 -----------------  -----------------  -----------------
 Revenue                                     6,072              4,260             11,423
                                         =========          =========          =========

 Total excluding stranded cost               5,915              4,065             11,041
 recoveries
 Stranded cost recoveries                      157                195                382
                                 -----------------  -----------------  -----------------
                                             6,072              4,260             11,423
                                         =========          =========          =========
 Geographical segments
 UK                                          2,666              2,182              4,787
 US                                          3,406              2,078              6,636
                                 -----------------  -----------------  -----------------
 Revenue                                     6,072              4,260             11,423
                                         =========          =========           ========
    * 30 September 2007 comparatives have been adjusted to present items on a basis consistent with the current period classification (see
note 1b)

      2. Segmental analysis (continued)

    b)   Operating profit - before exceptional items, remeasurements and stranded cost recoveries
 Six months ended 30 September                2008              2007*                   
                                                                              Year ended
                                                                                31 March
                                                                                    2008
                                                �m                 �m                 �m
                                        ==========         ==========           ========
 Business segments - continuing
 operations
   Transmission - UK                           508                501              1,021
   Transmission - US                            83                 73                128
   Gas Distribution - UK                       264                167                595
   Gas Distribution - US                        10                (1)                392
   Electricity Distribution and                129                196                330
 Generation - US
 Other activities                               85                103                129
                                 -----------------  -----------------  -----------------
 Operating profit before                     1,079              1,039              2,595
 exceptional items,
 remeasurements and stranded
 cost recoveries
                                        ==========         ==========         ==========
 Geographical segments
 UK                                            855                773              1,752
 US                                            224                266                843
                                 -----------------  -----------------  -----------------
 Operating profit before                     1,079              1,039              2,595
 exceptional items
 remeasurements and stranded
 cost recoveries
                                        ==========         ==========         ==========
    * 30 September 2007 comparatives have been adjusted to present items on a basis consistent with the current period classification (see
note 1b)

    c) Operating profit - after exceptional items, remeasurements and stranded cost recoveries

 Six months ended 30 September                2008             2007       Year ended
                                                                            31 March
                                                                                2008
                                                �m               �m               �m
                                        ==========        =========         ========
 Business segments - continuing
 operations
   Transmission - UK                           503              499            1,013
   Transmission - US                            82               67              122
   Gas Distribution - UK                       251              166              574
   Gas Distribution - US                     (205)             (20)              487
   Electricity Distribution and                232              364              696
 Generation - US
 Other activities                               80              111               72
                                 -----------------  ---------------  ---------------
 Operating profit after                        943            1,187            2,964
 exceptional items,
 remeasurements and stranded
 cost recoveries
                                        ==========        =========        =========
 Geographical segments
 UK                                            843              779            1,667
 US                                            100              408            1,297
                                 -----------------  ---------------  ---------------
 Operating profit after                        943            1,187            2,964
 exceptional items,
 remeasurements and stranded
 cost recoveries
                                        ==========        =========         ========


    d) Seasonality

    The Gas Distribution - US segment experiences significant seasonal fluctuations owing to weather conditions and peak delivery volumes
occurring in the second half of the fiscal year. In the UK the pricing methodology for gas distribution has a higher capacity delivery
component and a lower volume component and so is not subject to such significant seasonal fluctuations.



    3. Exceptional items, remeasurements and stranded cost recoveries
      
    Exceptional items, remeasurements and stranded cost recoveries are items of income and expenditure that, in the judgment of management,
should be disclosed separately on the basis that they are material, either by their nature or their size, to an understanding of our
financial performance and significantly distort the comparability of financial performance between periods. 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, material changes in environmental or decommissioning provisions, integration of acquired businesses and
gains or losses on disposals of businesses or investments. 

    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. 

    Stranded cost recoveries represent the recovery of historic generation related costs in the US related to generation assets that are no
longer owned. Such costs can be recovered from customers as permitted by regulatory agreements.
 Six months ended 30 September                2008              2007*         Year ended
                                                                                31 March
                                                                                    2008
                                                �m                 �m                 �m
                                        ==========         ==========          =========
 Exceptional items -                          (39)               (79)              (133)
 restructuring costs (i)
 Exceptional items -                           (9)                  -               (92)
 environmental related
 provisions (ii)
 Exceptional items - gain on                     -                  8                  6
 disposal of subsidiary (iii)
 Exceptional items - other (iv)                (3)                  -               (23)
 Remeasurements - commodity                  (239)                 29                232
 contracts (v)
 Stranded cost recoveries (vi)                 154                190                379
 Total exceptional items,                    (136)                148                369
 remeasurements and stranded
 cost recoveries included
 within operating profit

 Remeasurements - commodity                      2                (6)                (9)
 contracts (v)
 Remeasurements - net                          140                 18                (7)
 gains/(losses) on derivative
 financial instruments (vii) 
 Total exceptional items and                   142                 12               (16)
 remeasurements included within
 finance costs
                                 -----------------  -----------------  -----------------
 Total exceptional items,                        6                160                353
 remeasurements and stranded
 cost recoveries before
 taxation
                                        ==========         ==========         ==========

 Exceptional tax item -                          -                169                170
 deferred tax credit arising
 from reduction in UK tax rate
 (viii)
 Exceptional tax item -                       (40)                  -                  -
 deferred tax charge arising
 from change in UK industrial
 building allowance regime (ix)
 Tax on exceptional items -                     13                 32                 49
 restructuring costs (i)
 Tax on exceptional items -                      4                  -                 20
 environmental related
 provisions (ii)
 Tax on exceptional items -                      -                (3)                (4)
 gain on disposal of subsidiary
 (iii)
 Tax on exceptional items -                      1                  -                  5
 other (iv)
 Tax on remeasurements -                        94               (10)               (90)
 commodity contracts (v)
 Tax on remeasurements -                      (42)               (17)               (28)
 derivative financial
 instruments (vii)
 Tax on stranded cost                         (61)               (76)              (150)
 recoveries (vi) 
                                 -----------------  -----------------  -----------------
 Tax on exceptional items,                    (31)                 95               (28)
 remeasurements and stranded
 cost recoveries
                                        ==========         ==========         ==========
 Total exceptional items,                     (25)                255                325
 remeasurements and stranded
 cost recoveries after taxation
                                        ==========         ==========         ==========

 Total exceptional items after                (73)                127                (2)
 taxation
 Total commodity contract                    (143)                 13                133
 remeasurements after taxation
 Total derivative financial                     98                  1               (35)
 instrument remeasurements
 after taxation
 Total stranded cost recoveries                 93                114                229
 after taxation
                                 -----------------  -----------------  -----------------
 Total exceptional items,                     (25)                255                325
 remeasurements and stranded
 cost recoveries after taxation
                                        ==========         ==========          =========

    * 30 September 2007 comparatives have been adjusted to present items on a basis consistent with the current period classification (see
note 1b)




      3. Exceptional items, remeasurements and stranded cost recoveries (continued)

    *     Restructuring costs relate to planned cost reduction programmes in our UK and US businesses. For the six month period ended 30
September 2008, restructuring costs included pension related costs of �4m arising as a result of redundancies (six months ended 30 September
2007: �77m; year ended 31 March 2008: �83m).
    *     For the six month period ended 30 September 2008 there was an additional environmental charge of �9m relating to legacy KeySpan
sites. For the year ended 31 March 2008, the revision of cost estimates for environmental provisions resulted in a charge in the UK of �44m
and a charge of �48m in the US. Costs incurred with respect to US environmental provisions are substantially recoverable from customers. 
    *     The gain on disposal of subsidiary relates to the sale of Advantica. 
    *     For the six month period ended 30 September 2008 the amortisation charge on acquisition-related intangibles amounted to �3m (six
months ended 30 September 2007: �nil; year ended 31 March 2008: �4m). For the year ended 31 March 2008 there was a cost of �15m incurred
relating to the potential disposal of National Grid's property business which we subsequently decided not to proceed with. In addition,
there was a �4m increase in nuclear decommissioning provisions.
    *     Remeasurements - commodity contracts represent mark-to-market movements on certain physical and financial commodity contract
obligations in the US. These 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 fully recoverable from customers although the timing of recovery may differ from the pattern of costs incurred. These
movements are comprised of those impacting operating profit which are based on the change in the commodity contract liability and those
impacting finance costs as a result of the time value of money.
    *     Stranded cost recoveries capture the recovery of some of our historic 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 1990's. These recoveries are not
considered to be part of our core business. Stranded cost recoveries on a pre-tax basis consist of revenue of �157m (six months ended 30
September 2007: �195m; year ended 31 March 2008: �382m) and operating costs of �3m (six months ended 30 September 2007: �5m; year ended 31
March 2008: �3m).
    *     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 equity or offset by adjustments to the carrying value of debt. At 31 March 2008 these remeasurements included a loss
of �3m relating to pre-tax losses on investment related derivative financial instruments that offset on a post-tax basis. The tax charge in
the year ended 31 March 2008 includes an �11m adjustment in respect of prior years.
    *     The exceptional tax credit in the prior period arose from a reduction in the UK corporation tax rate from 30% to 28% included in
the Finance Act 2007. This resulted in a reduction in deferred tax liabilities.
    *     The exceptional tax charge in the period arose from a change in the UK industrial building allowance regime arising in the 2008
Finance Act. This resulted in an increase in deferred tax liabilities.

    4. Finance income and costs
 Six months ended 30 September                 2008                2007         Year ended
                                                                                  31 March
                                                                                    2008**
                                                 �m                  �m                 �m
                                         ==========          ==========          =========
 Interest income on financial                    54                 152                211
 instruments
 Expected return on pension and                 586                 511              1,064
 other post-retirement benefit
 plan assets (i)
                                 ------------------  ------------------  -----------------
 Interest income and similar                    640                 663              1,275
 income
                                         ==========          ==========         ==========

 Interest expense on financial                (621)               (510)            (1,118)
 instruments
 Interest on pension and other                (588)               (473)            (1,001)
 post-retirement benefit plan
 liabilities (i)
 Unwinding of discounts on                     (26)                (12)               (45)
 provisions
 Less: interest capitalised                      71                  50                119
                                 ------------------  ------------------  -----------------
 Interest expense                           (1,164)               (945)            (2,045)

 Net gains/(losses) on                          142                  12               (16)
 derivative financial
 instruments and commodity
 contracts
                                 ------------------  ------------------  -----------------
 Interest expense and other                 (1,022)               (933)            (2,061)
 finance costs
                                         ==========          ==========         ==========
 Net finance costs                            (382)               (270)              (786)
                                         ==========          ==========         ==========
 Comprising:
 Net finance costs excluding                  (524)               (282)              (770)
 exceptional finance costs and
 remeasurements
 Exceptional items and                          142                  12               (16)
 remeasurements (note 3)
                                 ------------------  ------------------  -----------------
                                              (382)               (270)              (786)
                                         ==========          ==========          =========
    ** 31 March 2008 comparatives have been restated for the finalisation of the fair value exercise on the acquisition of KeySpan
Corporation (see note 9)

    i) The difference between actual and expected investment return on pension assets is reported as an actuarial gain or loss within the
statement of recognised income and expense


      5. Taxation

    The tax charge for the period, excluding tax on exceptional items, remeasurements and stranded cost recoveries is �125m (six months
ended 30 September 2007: �227m; year ended 31 March 2008: �579m). The effective tax rate of 22.4% (six months ended 30 September 2007:
30.0%) for the half year is based on the best estimate of the weighted average annual income tax rate by jurisdiction expected for the full
year. The current period rate reflects a change in geographical weighting and seasonality of earnings due to the KeySpan acquisition. For
the full year we expect the group effective tax rate to be approximately 28%. The actual effective tax rate for the year ended 31 March 2008
was 31.7%.

    6. Discontinued operations

    Discontinued operations are businesses that have been sold, or which are held for sale. Discontinued operations comprise the Ravenswood
generation station in New York City, and the engineering and communications operations in the US acquired as part of the KeySpan
acquisition. The Ravenswood generation station was sold on 26 August 2008, KeySpan Communications was sold on 25 July 2008 and one of our
KeySpan engineering companies was sold on 11 July 2008. For the comparative periods discontinued operations also included our wireless
infrastructure and communication operations in the UK and similar operations in the US, as well as an electricity interconnector in
Australia (Basslink). These operations were sold on 3 April 2007, 15 August 2007, and 31 August 2007 respectively. 

    Results of discontinued operations
    
 Six months ended 30 September                  2008                 2007           Year ended
                                                                                      31 March
                                                                                          2008
                                                  �m                   �m                   �m
                                          ==========           ==========            =========
 Revenue                                          78                   84                  201
 Operating costs                                (67)                 (58)                (166)
                                 -------------------  -------------------  -------------------

 Total operating profit from                      11                   26                   35
 discontinued operations

 Remeasurement finance income                      -                    8                    8
                                   -----------------    -----------------    -----------------
 Profit before tax from                           11                   34                   43
 discontinued operations

 Taxation                                        (5)                  (5)                  (7)
                                 -------------------  -------------------  -------------------
 Profit after tax from                             6                   29                   36
 discontinued operations
                                 -------------------  -------------------  -------------------

 Gain on disposal of Ravenswood                   16                    -                    -
 electricity generation station
 Gain on disposal of Basslink                      -                   80                   80
 Gains on disposals of UK and                      -                1,507                1,506
 US wireless infrastructure
 operations
                                 -------------------  -------------------  -------------------
 Gain on disposal of                              16                1,587                1,586
 discontinued operations before
 tax

 Taxation                                        (5)                  (3)                  (4)
                                 -------------------  -------------------  -------------------
 Gain on disposal of                              11                1,584                1,582
 discontinued operations
                                 -------------------  -------------------  -------------------
 Total profit for the period
 from discontinued operations
  - Before exceptional items                       6                   21                   28
 and remeasurements
  - Exceptional items and                         11                1,592                1,590
 remeasurements
                                                  17                1,613                1,618
                                          ==========           ==========            =========




    7. Earnings per share

    a) Basic earnings per share
                                                                                                           Year ended      Year ended
                                                                                                             31 March        31 March
                                                                                                               2008**          2008**


 Six months ended 30 September            2008                2008          2007*               2007*
                                      Earnings  Earnings per share       Earnings  Earnings per share                        Earnings
                                            �m               pence             �m               pence        Earnings       per share
                                                                                                                 �m             pence
                                       =======             =======        =======             =======         =======        ========
 Adjusted - continuing                     431                17.4            528                19.8           1,247            47.8
 operations
 Exceptional items after                  (73)               (2.9)            127                 4.8             (2)           (0.1)
 taxation
 Commodity contract                      (143)               (5.8)             13                 0.5             133             5.1
 remeasurements after taxation
 Derivative remeasurements                  98                 4.0              1                   -            (35)           (1.3)
 after taxation
 Stranded cost recoveries after             93                 3.7            114                 4.3             229             8.8
 taxation
                                 -------------       -------------  -------------       -------------   -------------  --------------
 Continuing operations                     406                16.4            783                29.4           1,572            60.3
                                       =======             =======        =======             =======         =======        ========
 Adjusted - discontinued                     6                 0.2             21                 0.8              28             1.1
 operations
 Gains on disposal of                       11                 0.4          1,584                59.5           1,582            60.6
 operations after taxation
 Derivative remeasurements                   -                   -              8                 0.3               8             0.3
 after taxation
                                 -------------       -------------  -------------       -------------   -------------  --------------
 Discontinued operations                    17                 0.6          1,613                60.6           1,618            62.0
                                       =======             =======        =======             =======         =======        ========
 Basic                                     423                17.0          2,396                90.0           3,190           122.3
                                       =======             =======        =======             =======         =======        ========
                                                          millions                           millions                        millions
                                                           =======                            =======                        ========
 Weighted average number of                                  2,481                              2,663                           2,609
 shares - basic
                                                          ========                            =======                        ========

    b) Diluted earnings per share

                                                                                                             Year ended      Year ended
                                                                                                               31 March        31 March
                                                                                                                 2008**          2008**


 Six months ended 30 September            2008                2008          2007*               2007*
                                      Earnings  Earnings per share       Earnings  Earnings per share                          Earnings
                                            �m               pence             �m               pence  Earnings      �m       per share
                                                                                                                                  pence
                                       =======             =======        =======             =======           =======         =======
 Adjusted diluted - continuing             431                17.3            528                19.7             1,247            47.5
 operations
 Exceptional items after                  (73)               (2.9)            127                 4.7               (2)           (0.1)
 taxation
 Commodity contract                      (143)               (5.7)             13                 0.5               133             5.1
 remeasurements after taxation
 Derivative remeasurements                  98                 3.9              1                   -              (35)           (1.3)
 after taxation
 Stranded cost recoveries after             93                 3.7            114                 4.3               229             8.7
 taxation 
                                 -------------       -------------  -------------       -------------     -------------   -------------
 Diluted - continuing                      406                16.3            783                29.2             1,572            59.9
 operations
                                       =======             =======        =======             =======           =======         =======
 Adjusted diluted -                          6                 0.2             21                 0.8                28             1.1
 discontinued operations
 Gains on disposal of                       11                 0.4          1,584                59.1             1,582            60.3
 operations after taxation
 Derivative remeasurements                   -                   -              8                 0.3                 8             0.3
 after taxation
                                 -------------       -------------  -------------       -------------     -------------   -------------
 Diluted - discontinued                     17                 0.6          1,613                60.2             1,618            61.7
 operations
                                       =======             =======        =======             =======           =======         =======
 Diluted                                   423                16.9          2,396                89.4             3,190           121.6
                                       =======             =======        =======             =======           =======         =======
                                                          millions                           millions                          millions
                                                           =======                            =======                           =======
 Weighted average number of                                  2,498                              2,679                             2,624
 shares - diluted
                                                           =======                            =======                           =======
    * 30 September 2007 comparatives have been adjusted to present items on a basis consistent with the current period classification (see
note 1b)
    ** 31 March 2008 comparatives restated for the finalisation of the fair value exercise on the acquisition of KeySpan Corporation (see
note 9)
      8. Dividends

    The following table shows the dividends paid to equity shareholders:
                                                                                                               Year ended      Year ended
                                                                                                                 31 March        31 March
                                                                                                                     2008            2008


 Six months ended 30 September                 2008           2008                2007           2007
                                              pence             �m               pence             �m               pence              �m
                                 per ordinary share                 per ordinary share                 per ordinary share
                                            =======        =======             =======        =======             =======        ========
 Ordinary dividends
 Final dividend for the year                      -              -               17.80            480               17.80             480
 ended 31 March 2007
 Interim dividend for the year                    -              -                   -              -               11.70             300
 ended 31 March 2008
 Final dividend for the year                  21.30            531                   -              -                   -               -
 ended 31 March 2008
                                      -------------  -------------       -------------  -------------       -------------  --------------
                                              21.30            531               17.80            480               29.50             780
                                            =======        =======             =======        =======             =======        ========

    The Directors have approved an interim dividend of 12.64p per share that will absorb approximately �307m of shareholders' equity to be
paid in respect of the period ended 30 September 2008.

    9. Acquisitions 

    On 24 August 2007 the acquisition of KeySpan Corporation was completed with 100% of the shares acquired for total cash consideration of
�3.8bn including acquisition costs of �25m. The provisional amount of goodwill recorded on the acquisition was �2.3bn based on the
provisional fair values that were presented in our financial statements for the year ended 31 March 2008. The fair value exercise has now
been completed and the provisional fair values reported in our financial statements for the year ended 31 March 2008 have been updated and
are reported in the table below. As a result of the fair value adjustments the final goodwill arising on the acquisition was �2.4bn.  

    The Ravenswood merchant electricity generation business in New York City was sold on 26 August 2008 for consideration of $2.9bn, KeySpan
Communications was sold on 25 July 2008 for consideration of $35m, and one of our KeySpan engineering companies was sold on 11 July 2008.
The assets and liabilities related to these businesses are included in the 'Assets of businesses held for sale' category in the table below
and the results of these discontinued operations are reported in note 6.

                                                                   Changes
                                     Provisional fair             to fair            Final fair
                                              values                values               values
                                       (as previously
                                            reported)
                                                   �m                   �m                   �m
                                            =========            =========            =========
 Other intangible assets                          135                  (1)                  134
 Property, plant and equipment                  3,282                  (2)                3,280
 Financial and other                              129                    -                  129
 investments - non-current
 Other non-current assets                         271                 (91)                  180
 Inventories and current                          505                 (17)                  488
 intangibles
 Trade and other receivables                      477                  (4)                  473
 Financial and other                               33                    -                   33
 investments - current
 Cash and cash equivalents                        260                    -                  260
 Assets of businesses held for                  1,487                  (2)                1,485
 sale
 Borrowings - current                           (545)                    -                (545)
 Trade and other payables                       (654)                 (35)                (689)
 Current tax liabilities                         (95)                  (1)                 (96)
 Borrowings - non-current                     (1,934)                    -              (1,934)
 Other non-current liabilities                  (169)                    -                (169)
 Deferred tax liabilities                       (591)                  148                (443)
 Pensions and other                             (440)                    -                (440)
 post-retirement benefit
 obligations
 Provisions                                     (643)                 (61)                (704)
 Liabilities of businesses held                  (73)                    -                 (73)
 for sale
 Minority interest                                (8)                    -                  (8)
                                    -----------------    -----------------    -----------------
 Net assets acquired                            1,427                 (66)                1,361

 Goodwill arising on                            2,335                   66                2,401
 acquisition
                                  -------------------  -------------------  -------------------
 Total consideration                            3,762                    -                3,762
                                            =========            =========           ==========
    9. Acquisitions (continued)

    As required under IFRS 3 'Business Combinations' the comparative amounts presented within the half year financial information have been
restated for the finalisation of the fair values.  

    The significant changes made to the comparative balance sheets represent the movements between the provisional fair values in the
consolidated balance sheets at 30 September 2007 and at 31 March 2008 and final fair values, together with any associated reclassification
adjustments. In addition the consolidated income statement for the year ended 31 March 2008 has been adjusted to reflect an increase in
interest expense of �10m and a decrease in taxation of �4m resulting from the finalisation of the fair values. The impact on the
consolidated income statement for the six months ended 30 September 2007 was insignificant and these comparatives have not been restated. 

    10. Reconciliation of movements in total equity

                                                                              Year ended
                                                                                31 March
                                                                                  2008**
 Six months ended 30 September                2008               2007
                                                �m                 �m                 �m
                                         =========          =========          =========
 Opening total equity                        5,374              4,136              4,136

 Changes in total equity for
 the period
 Total recognised income and                   468              2,676              3,473
 expense
 Equity dividends                            (531)              (480)              (780)
 Issue of ordinary share                         -                 13                 13
 capital
 B shares converted to ordinary                  -                 27                 27
 shares
 Repurchase of share capital                 (599)              (808)            (1,522)
 and purchase of treasury
 shares (i)
 Other movements in minority                   (7)                  6                  4
 interests
 Share-based payment                            10                  9                 18
 Issue of treasury shares                        8                  -                 10
 Tax on share-based payment                      2                (6)                (5)
                                 -----------------  -----------------  -----------------
 Closing total equity                        4,725              5,573              5,374
                                         =========          =========          =========
    ** 31 March 2008 comparatives have been restated for the finalisation of the fair value exercise on the acquisition of KeySpan
Corporation (see note 9)

    (i) From 1 April to 30 September 2008, the Company repurchased 85.5 million ordinary shares for an aggregate consideration of �597m (30
September 2007: �808m; 31 March 2008: �1,516m) including transaction costs of �3m. The shares repurchased have a nominal value of 11 17/43
pence each and represented 3% of the ordinary shares in issue as at 30 September 2008. Further purchases of shares relating to employee
share schemes were made for aggregate consideration of �2m (30 September 2007: �nil; 31 March 2008: �6m).

    Included within total equity is a deduction of �1,159m for treasury shares (30 September 2007: �102m; 31 March 2008: �570m).

      11. Reconciliation of net cash flow to movement in net debt 

                                                                              Year ended
                                                                                31 March
                                                                                    2008
 Six months ended 30 September                2008             2007**
                                                �m                 �m                 �m
                                        ==========         ==========         ==========
 Decrease in cash and cash                    (21)            (1,264)            (1,450)
 equivalents
 Decrease in financial                       (814)              (278)               (45)
 investments
 Increase in borrowings and                   (17)              (647)            (1,563)
 related derivatives (i)
 Net interest paid                             407                249                694
                                 -----------------  -----------------  -----------------
 Increase in net debt resulting              (445)            (1,940)            (2,364)
 from cash flows
 Changes in fair value of                  (1,103)                209              (133)
 financial assets and
 liabilities and exchange
 movements
 Net interest charge                         (567)              (358)              (901)
 Borrowings and financial                        -            (2,446)            (2,446)
 investments of subsidiary
 undertaking acquired
 Amounts related to businesses                   -                 17                 17
 held for sale
 Other non-cash movements                        -               (30)               (26)
                                 -----------------  -----------------  -----------------
 Movement in net debt (net of              (2,115)            (4,548)            (5,853)
 related derivative financial
 instruments) in the period
 Net debt at start of period              (17,641)           (11,788)           (11,788)
                                 -----------------  -----------------  -----------------
 Net debt (net of related                 (19,756)           (16,336)           (17,641)
 derivative financial
 instruments) at end of period
                                        ==========         ==========         ==========

    i) The increase in borrowings and related derivatives for the six months ended 30 September 2008 comprises proceeds from loans received
of �2.1bn less payments to repay loans of �1.6bn and movement in short-term borrowings of �0.5bn 

    ** 30 September 2007 comparatives have been restated for the finalisation of the fair value exercise on the acquisition of KeySpan
Corporation (see note 9)

    12. Net debt 

                                                                                31 March
 At 30 September                              2008             2007**               2008
                                                �m                 �m                 �m
                                        ==========         ==========         ==========
 Cash and cash equivalents                     148                355                174
 Bank overdrafts                                 -               (16)               (10)
                                 -----------------  -----------------  -----------------
 Net cash and cash equivalents                 148                339                164
 Financial investments                       1,265              1,848              2,095
 Borrowings (excluding bank               (21,504)           (19,068)           (20,993)
 overdrafts) 
                                 -----------------  -----------------  -----------------
                                          (20,091)           (16,881)           (18,734)

 Net debt related derivative                   924                850              1,526
 financial assets
 Net debt related derivative                 (589)              (305)              (433)
 financial liabilities
                                 -----------------  -----------------  -----------------
 Net debt (net of related                 (19,756)           (16,336)           (17,641)
 derivative financial
 instruments)
                                        ==========         ==========         ==========
    ** 30 September 2007 comparatives have been restated for the finalisation of the fair value exercise on the acquisition of KeySpan
Corporation (see note 9)


      13. Commitments and contingencies

                                                                      31 March
 At 30 September                                   2008        2007       2008
                                                     �m          �m         �m
                                             ==========  ==========  =========
 Future capital expenditure contracted for        1,138       1,160      1,097
 but not provided
 Commitments under non-cancellable                  818         758        737
 operating leases
 Energy purchase commitments (i)                  6,672       5,296      5,136
 Guarantees (ii)                                    603         583        925
 Other commitments and contingencies (iii)          246         114        164
                                             ==========  ==========  =========

    i)    Commodity contracts that do not meet the normal purchase, sale or usage criteria and hence are accounted for as derivative
contracts are recorded at fair value and incorporated in trade and other payables and other non-current liabilities. At 30 September 2008
these amounted to �64m (30 September 2007: �94m; 31 March 2008: �124m).

            ii)    Details of the guarantees entered into by the Company or its subsidiary undertakings at 30 September 2008 are shown
below:

    *     a letter of support of obligations under a shareholders' agreement relating to the interconnector project between Britain and the
Netherlands amounting to approximately �226m. This expires in 2010;
    *     a guarantee amounting to approximately �104m of half of the obligations of the interconnector project between Britain and the
Netherlands. This expires in 2010;
    *     guarantees of certain obligations in respect of the UK Grain LNG Import Terminal amounting to �86m. These run for varying lengths
of time, expiring between 2019 and 2028; 
    *     guarantees of the liabilities of a metering subsidiary under meter operating contracts amounting to �53m. These are ongoing;
    *     an uncapped guarantee, for which the maximum liability is estimated at �40m, to The Crown Estates in support of the transfer of
the interconnector between France and England to National Grid Interconnectors Limited as part of the Licence to Assign Lease. This is
ongoing;
    *     letters of credit in support of gas balancing obligations amounting to �25m, lasting for less than one year; 
    *     guarantees of �18m relating to certain property obligations. The bulk of these expire by December 2025;
    *     collateral of �15m to secure syndicate insurance obligations which are evergreen;
    *     guarantees in respect of a former associate amounting to �14m, the bulk of which relates to its obligations to supply
telecommunications services. These are open-ended; and
    *     other guarantees amounting to �22m arising in the normal course of business and entered into on normal commercial terms. These
guarantees run for varying lengths of time.

    iii)     Includes commitments largely relating to gas purchasing and property remediation of �195m (30 September 2007: �83m; 31 March
2008: �134m).

    For a portion of our customers in New England the Company has entered into fixed price electricity requirement contracts with various
counterparties. The contracts do not contain a determinable notional value as they are dependant on future customer demand. The contracts
range in term from 3 to 15 months with monthly prices per megawatt-hour ranging from $62 to $144.80. These do not represent onerous
contracts as actual prices incurred are recovered from our customers.

    On 25 February 2008 the Gas and Electricity Markets Authority (GEMA) imposed a �41.6m fine on National Grid for infringement of the
Competition Act 1998 in relation to a number of metering contracts entered into with gas suppliers in 2004. We believe that the contracts do
not infringe competition law, they were entered into voluntarily by gas suppliers and Ofgem was consulted throughout the process of contract
development and negotiation. Therefore, we have lodged an appeal with the Competition Appeal Tribunal. GEMA has suspended the fine pending
the outcome of the appeal and no provision has been made in the accounts. We remain convinced that National Grid has not breached the
Competition Act 1998 and that our position will be upheld and the fine reversed on appeal.

    In October 2008 our internal controls identified that operational data for an activity in our UK Gas Distribution business was
misreported as at 31 March 2008, and this is the subject of ongoing investigation. Based on this investigation we do not believe this has
resulted in misstatement of the Group's results. The matter has been reported to our regulators.

    14. Exchange rates

    The consolidated results are affected by the exchange rates used to translate the results of its US operations and US dollar
transactions. The US dollar to pound sterling exchange rates used were:

                                                             31 March
 30 September                              2008       2007       2008
                                      =========  =========  =========
 Closing rate applied at period end        1.78       2.05       1.98
 Average rate applied for the period       1.92       2.02       2.01
                                      =========  =========  =========

    15. Related party transactions

    There were no significant changes in the nature and size of related party transactions for the period to those disclosed in the
financial statements for the year ended 31 March 2008.
      16. Principal risks and uncertainties 

    The principal risks and uncertainties which could affect National Grid for the remaining six months of the financial year are disclosed
in the Annual Report and Accounts 2007/08 ('Annual Report').  A list of the significant risks are provided on page 17 of the Annual Report,
which are then disclosed in more detail on pages 95 to 97, and pages 160 to 166. Our overall risk management process is designed to
identify, manage, and mitigate our business risks, including financial risks. Our assessment of the principal risks and uncertainties and
our risk management processes have not changed since the year end except as noted below.

    The period to 30 September 2008 has seen significant volatility in commodity prices, turbulence in financial markets, and a continuing
shortage in available credit. As a result of these external market factors, National Grid is encountering an increase in commodity price
risk, credit risk and liquidity risk compared with that experienced during the previous financial year. Our risk management approach to
these specific risks is set out on pages 76 to 78, and pages 160 to 166 of the Annual Report and Accounts 2007/08.  

    Changes in inflation have the potential to affect the Group's future revenues and costs, in particular those elements specified in our
regulatory contracts.

    Recent decreases in commodity prices have resulted in significant mark-to-market losses on certain forward gas/electricity contracts.
Our regulatory agreements in the US, enable recovery of our commodity costs, as prices charged to customers reflect the actual price paid.
Therefore, our exposure on commodity volatility is limited to timing issues and the associated financing needs. 

    Recent turmoil within the banking sector has potentially increased the risk of loss associated with a financial counterparty's inability
to discharge their obligations. We continue to monitor the credit limits set with counterparties, use master netting agreements in many
cases and, where possible, net settle payments to manage credit risk. We are proactively reducing credit limits assigned to certain
counterparties where we believe their risk is higher than their current credit rating might indicate. 

    The decrease in the availability of debt finance through the money markets, bank markets and the debt capital markets has made it
increasingly challenging and more expensive to raise finance for our operations. To counter this, we are accessing more sources of funding
than in previous years, including the bank markets.  

    We continue 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 12 month period. This analysis is
being updated more frequently under current conditions than would be the case under normal market conditions so as to provide the best
information possible on liquidity. Based on this analysis National Grid's current facilities are sufficient to meet its current projected
funding requirements for the next 12 months.

    We continue to actively manage all of the above risks in accordance with our financial risk management processes and believe that these
adequately mitigate the identified risks.   
      
    Statement of Directors' Responsibilities

    The half year report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the
half year report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. 

    The Directors' confirm that the financial information has been prepared in accordance with IAS 34 as adopted by the European Union, and
that the half year report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8.

    The Directors of National Grid plc are listed in the National Grid plc Annual Report for the year ended 31 March 2008, with the
exception of Philip Aiken who was appointed to the board on 15th May 2008.

    By order of the Board




    ********..                ********..
    Steve Holliday                         Steve Lucas
    19 November 2008                 19 November 2008

    Chief Executive Officer           Chief Financial Officer        



















      Independent review report to National Grid plc

    Introduction
    We have been engaged by the Company to review the financial information in the half year report for the six months ended 30 September
2008, which comprises the consolidated income statement, balance sheet, statement of recognised income and expense, cash flow statement and
related notes (together the 'condensed set of financial statements'). We have read the other information contained in the half year report
and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of
financial statements.

    Directors' responsibilities
    The half year report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the
half year report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

    As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting
Standards (IFRSs) as issued by the International Accounting Standards Board and IFRSs as adopted by the European Union. The condensed set of
financial statements included in this half year report has been prepared in accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.

    Our responsibility
    Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half year report based
on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and
Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.

    Scope of review
    We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United
Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

    Conclusion
    Based on our review, nothing has come to our attention that causes us to believe that the financial information in the half year report
for the six months ended 30 September 2008 is not prepared, in all material respects, in accordance with International Accounting Standard
34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.




    PricewaterhouseCoopers LLP
    Chartered Accountants
    London
    19 November 2008



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