Notes to the consolidated financial statements - supplementary information
28. Commitments and contingencies
(a) Future capital expenditure
| 2010 £m | 2009* £m |
|
|---|---|---|
| Contracted for but not provided | 1,738 | 1,626 |
- *
- Comparatives have been restated to present items on a basis consistent with the current year classification
(b) Lease commitments
Total commitments under non-cancellable operating leases (the majority of which were in respect of properties) were as follows:
| 2010 £m | 2009* £m |
|
|---|---|---|
| In one year or less | 91 | 96 |
| In more than one year, but not more than two years | 84 | 92 |
| In more than two years, but not more than three years | 79 | 86 |
| In more than three years, but not more than four years | 96 | 85 |
| In more than four years, but not more than five years | 76 | 104 |
| In more than five years | 500 | 622 |
| 926 | 1,085 |
- *
- Comparatives have been restated to present items on a basis consistent with the current year classification
(c) Energy purchase commitments
At 31 March 2010, there were obligations under contracts for the forward purchase of energy. The following table analyses these commitments, excluding commodity contracts carried at fair value.
| 2010 £m | 2009 £m |
|
|---|---|---|
| In one year or less | 1,566 | 990 |
| In more than one year, but not more than two years | 653 | 816 |
| In more than two years, but not more than three years | 411 | 620 |
| In more than three years, but not more than four years | 343 | 412 |
| In more than four years, but not more than five years | 284 | 379 |
| In more than five years | 278 | 428 |
| 3,535 | 3,645 |
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 33.
(d) Other commitments, contingencies and guarantees
The value of other commitments, contingencies and guarantees at 31 March 2010 amounted to £2,119m (2009: £1,846m), including guarantees amounting to £1,189m (2009: £1,202m) and other commitments and contingencies largely relating to gas purchasing and property remediation of £930m (2009: £644m). Details of the guarantees entered into by the Company or its subsidiary undertakings at 31 March 2010 are shown below:
- (i)
- a guarantee in respect of Ravenswood Unit 40 financing amounting to approximately £377m. 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 £254m. This expires on commissioning expected early 2011;
- (iii)
- guarantees of certain obligations in respect of the UK Grain LNG Import Terminal amounting to approximately £164m. These run for varying lengths of time, expiring between now and 2028;
- (iv)
- a guarantee amounting to approximately £120m of half of the obligations of the interconnector project between Britain and The Netherlands. This expires on commissioning expected early 2011;
- (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 £26m, lasting for less than one year;
- (viii)
- guarantees of £14m 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;
- (xi)
- guarantees of the liabilities of our subsidiary, National Grid Carbon Limited, under contracts in connection with work on a carbon capture and storage demonstration project amounting to £20m. These expire on completion of the project expected 2011; and
- (xii)
- other guarantees amounting to £92m arising in the normal course of business and entered into on normal commercial terms. These guarantees run for varying lengths of time.
(e) Amounts receivable under sublease arrangements
The total of future minimum sublease payments expected to be received under non-cancellable subleases is £14m (2009: £28m).
(f) Litigation and claims
We reported in previous Annual Reports and Accounts a decision by the Gas and Electricity Markets Authority (GEMA) to fine National Grid £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. This decision was overturned in part and the fine reduced to £30m by the Competition Appeal Tribunal in April 2009 and the fine was further reduced to £15m by the Court of Appeal in a reserved judgement (not otherwise affecting the Competition Appeal Tribunal’s judgement) issued in February 2010. On 22 March 2010, National Grid applied for leave to appeal the Court of Appeal’s judgement to the Supreme Court.
As at 31 March 2010, we have provided for the fine together with associated costs and have provided against certain trade receivables and other balance sheet items. Without prejudice to our position in relation to appealing the Court of Appeal’s judgement, the £15m fine was paid to GEMA on 1 April 2010.
In October 2008, we informed Ofgem that mains replacement activity carried out by the UK Gas Distribution business may have been misreported. Ofgem’s investigation continues, so that at present it is too early to determine the likely outcome of the investigation and any potential consequences arising from it.
As previously reported, in May 2007, KeySpan received a civil investigative demand from the Antitrust Division of the US Department of Justice (the DOJ) and a further one in April 2008, requesting the production of documents and information relating to its investigation of competitive issues in the New York City electricity capacity market prior to the Company’s acquisition of KeySpan. In February 2010, the DOJ filed a proposed final judgement in the US District Court for the Southern District of New York. Under the terms of the proposed settlement, the DOJ and KeySpan agreed that KeySpan will pay $12m in full and final resolution of the DOJ’s civil investigative demands. This agreement contains no admissions of liability by KeySpan and remains subject to court approval, which is currently anticipated later in 2010.
On 18 March 2010, a putative class action was commenced against KeySpan and Morgan Stanley in the Supreme Court for the State of New York in Bronx County. The complaint alleges that a financial swap transaction between KeySpan and Morgan Stanley in January 2006 caused customers of Consolidated Edison, Inc. to overpay for electricity between May 2006 and February 2008. The complaint seeks compensatory damages of not less than $160m, as well as punitive damages plus legal costs. National Grid’s management believes that the complaint and its allegations are without merit.