Notes to the consolidated financial statements - supplementary information

29. Commitments and contingencies

(a) Future capital expenditure

				2009 £m	2008 £m
Contracted for but not provided				1,493	1,097

(b) Lease commitments

Total commitments under non-cancellable operating leases were as follows:

				2009 £m	2008 £m
In one year or less				82	83
In more than one year, but not more than two years				79	83
In more than two years, but not more than three years				73	80
In more than three years, but not more than four years				72	69
In more than four years, but not more than five years				91	66
In more than five years				549	356
				946	737

The majority of the leases were in respect of properties.

(c) Energy purchase commitments

At 31 March 2009, there were obligations under contracts for the forward purchase of energy. The following table analyses these commitments, excluding commodity contracts carried at fair value.

				2009 £m	2008* £m
In one year or less				990	794
In more than one year, but not more than two years				816	491
In more than two years, but not more than three years				620	380
In more than three years, but not more than four years				412	205
In more than four years, but not more than five years				379	43
In more than five years				428	148
				3,645	2,061

*

Comparatives have been restated to present items on a basis consistent with the current year classification

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 for as ordinary purchase contracts.

Details of commodity contracts that do not meet the normal purchase, sale or usage criteria and hence are accounted for as derivative contracts are shown in note 34.

(d) Other commitments, contingencies and guarantees

The value of other commitments, contingencies and guarantees at 31 March 2009 amounted to £1,666m (2008: £1,387m), including guarantees amounting to £1,022m (2008: £925m) and commitments largely relating to gas purchasing and property remediation of £615m (2008: £432m).

Details of the guarantees entered into by the Company or its subsidiary undertakings at 31 March 2009 are shown below:

(i)

a guarantee in respect of Ravenswood Unit 40 financing amounting to approximately £268m. This expires in 2040;

(ii)

a letter of support of obligations under a shareholders’ agreement relating to the interconnector project between Britain and the Netherlands amounting to approximately £264m. This expires in 2010;

(iii)

guarantees of certain obligations in respect of the UK Grain LNG Import Terminal amounting to approximately £188m. These run for varying lengths of time, expiring between now and 2028;

(iv)

a guarantee amounting to approximately £122m of half of the obligations of the interconnector project between Britain and the Netherlands. This expires in 2010;

(v)

guarantees of the liabilities of a metering subsidiary under meter operating contracts amounting to £53m. These are ongoing;

(vi)

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;

(vii)

letters of credit in support of gas balancing obligations amounting to £21m, lasting for less than one year;

(viii)

guarantees of £15m relating to certain property obligations. The bulk of these expire by December 2025;

(ix)

collateral of £15m to secure syndicate insurance obligations which are evergreen;

(x)

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

(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.

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 dependent on future customer demand. The contracts range in term from 3 to 6 months with monthly prices per megawatt-hour ranging from $58 to $123. These do not represent onerous contracts as actual prices incurred are recovered from our customers.

(e) Amounts receivable under sublease arrangements

The total of future minimum sublease payments expected to be received under non-cancellable subleases is £28m (2008: £35m).

(f) Litigation and claims

In last year’s Annual Report and Accounts we reported a decision by the Gas and Electricity Markets Authority (GEMA) (the ‘Decision’) to levy on us a fine of £41.6m for a breach of the UK Competition Act 1998 in respect of term contracts with gas suppliers entered into by our UK metering services business in 2004. We also noted that we had appealed the Decision to the Competition Appeal Tribunal (the ‘Tribunal’). On 29 April 2009, the Tribunal overturned the Decision in part and reduced the fine to £30m but upheld the original Decision in part.

At the date of signing of these accounts, 13 May 2009, we continue to review the Tribunal’s ruling and are considering our legal position including potential grounds for appeal, together with assessing the potential financial and other impacts of the ruling. As at this date therefore, we remain of the view that an outflow of economic benefits is not probable, and as a result, no provision has been made in these accounts either for the reduced fine of £30m, or for any other possible financial impact of the ruling.

In October 2008, we informed Ofgem that our mains replacement activity carried out within the UK’s West Midlands Alliance partnership may have been misreported. National Grid and Ofgem have jointly appointed Ernst & Young to carry out a full investigation to determine the extent of the issue. At present it is too early to determine the likely outcome of the investigation and any potential consequences.

As previously reported, in May 2007 KeySpan received a civil investigative demand from the Antitrust Division of the United States Department of Justice, requesting the production of documents and information relating to its investigation of competitive issues in the New York City electricity capacity market prior to our acquisition of KeySpan. The civil investigative demand is a request for information in the course of an investigation and does not constitute the commencement of legal proceedings, and no specific allegations have been made against KeySpan. In April 2008, we received a second civil investigative demand in connection with this matter. We believe that KeySpan’s activity in the capacity market has been consistent with all applicable laws and regulations. The investigation is ongoing and we continue to cooperate fully.

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