Notes to the consolidated financial statements – supplementary information
29. Commitments and contingencies
(a) Future capital expenditure
| 2008 £m |
2007 £m |
|
|---|---|---|
| Contracted for but not provided | 1,097 | 1,554 |
(b) Lease commitments
Total commitments under non-cancellable operating leases were as follows:
| 2008 £m |
2007 £m |
|
|---|---|---|
| In one year or less | 83 | 80 |
| In more than one year, but not more than two years | 83 | 76 |
| In more than two years, but not more than three years | 80 | 72 |
| In more than three years, but not more than four years | 69 | 68 |
| In more than four years, but not more than five years | 66 | 64 |
| In more than five years | 356 | 440 |
| 737 | 800 |
The majority of the leases were in respect of properties.
(c) Energy purchase commitments
At 31 March 2008, there were obligations under contracts for the forward purchase of energy. The following table analyses these commitments, excluding commodity contracts carried at fair value.
| 2008 £m |
2007 £m |
|
|---|---|---|
| In one year or less | 1,790 | 1,233 |
| In more than one year, but not more than two years | 900 | 642 |
| In more than two years, but not more than three years | 475 | 476 |
| In more than three years, but not more than four years | 295 | 186 |
| In more than four years, but not more than five years | 130 | 141 |
| In more than five years | 1,163 | 1,053 |
| 4,753 | 3,731 |
Energy commitments relate to contractual commitments to purchase electricity or gas that are used to satisfy physical delivery requirements to our customers or for energy that we use ourselves. Such commitments are for our normal purchase, sale or usage and hence are accounted as ordinary purchase contracts.
Details of commodity contracts that do not meet the normal purchase, sale or usage criteria and hence are accounted for as derivative contracts are shown in note 34.
(d) Other commitments, contingencies and guarantees
The value of other commitments, contingencies and guarantees at 31 March 2008 amounted to £1,387m (2007: £537m), including guarantees amounting to £925m (2007: £229m) and commitments largely relating to gas purchasing and property remediation of £432m (2007: £198m).
Details of the guarantees entered into by the Company or its subsidiary undertakings at 31 March 2008 are shown below:
(i) guarantees of a subsidiary company’s obligations under a membership interest and stock purchase agreement amounting to £282m.
These will expire on closing the agreement;
(ii) a letter of support of obligations under a shareholders’ agreement relating to the interconnector project between Great Britain and The Netherlands amounting to approximately £227m. This expires in 2010;
(iii) a guarantee amounting to approximately £105m of half of the obligations of the interconnector project between Great Britain and The Netherlands. This expires in 2010;
(iv) guarantees of certain obligations in respect of the UK Grain LNG Import Terminal for which the maximum annual liability amounts to £86m. These run for varying lengths of time, expiring between 2019 and 2028;
(v) guarantees of £59m relating to certain property obligations of subsidiary undertakings. The majority of these expire by December 2025;
(vi) a guarantee of £50m in respect of liabilities under a meter operating contract that runs until May 2008;
(vii) 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;
(viii) letters of credit in support of gas balancing obligations amounting to £25m, lasting for less than one year;
(ix) collateral of £15m to secure syndicate insurance obligations which are evergreen;
(x) guarantees in respect of a former associate amounting to £14m, the majority of which relates to its obligations to supply telecommunications services. These are open-ended; and
(xi) 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.
The Company has entered into an agreement with a stockbroker to repurchase the Company’s shares, which is cancellable at any time other than during a close period. The Company entered a close period on 1 April 2008, at which point authority existed for the repurchase of shares up to a maximum value of £248m during the close period. The close period ended following the full year results announcement on 15 May 2008. During the period between 1 April and 14 May 2008, share repurchases amounted to £97.8m.
(e) Amounts receivable under sublease arrangements
The total of future minimum sublease payments expected to be received under non-cancellable subleases is £35m (2007: £32m).
(f) Litigation and claims
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, that our position will be upheld and the fine reversed upon appeal.