EXHIBIT 2(b)(ii)
OFFERING CIRCULAR
[NATIONAL GRID LOGO]
The National Grid Company plc
(incorporated in England and Wales with limited liability under
Registered Number 2366977)
(POUND)200,000,000 3.806 PER CENT. RETAIL PRICE INDEX-LINKED BONDS DUE 2020
Issue Price: 100 per cent.
--------------------------------
(POUND)40,000,000 3.589 PER CENT. LIMITED RETAIL PRICE INDEX-LINKED
BONDS DUE 2030
Issue Price: 100 per cent.
--------------------------------
(POUND)360,000,000 6.50 PER CENT. BONDS DUE 2028
Issue Price: 99.931 per cent.
--------------------------------
Application has been made to the Financial Services Authority in its capacity as
the competent authority under the Financial Services Act 1986 (in such capacity,
the "UK Listing Authority") for the (pound)200,000,000 3.806 per cent. Retail
Price Index-Linked Bonds due 2020 of The National Grid Company plc (the "RPI
Bonds" and the "Issuer", respectively), the (pound)40,000,000 3.589 per
cent. Limited Retail Price Index-Linked Bonds due 2030 of the Issuer (the "LPI
Bonds"), and the (pound)360,000,000 6.50 per cent. Bonds due 2028 of the Issuer
(the "Fixed Rate Bonds" and together with the RPI Bonds and the LPI Bonds, the
"Bonds") to be admitted to the Official List maintained by the UK Listing
Authority (the "Official List") and to the London Stock Exchange plc (the
"London Stock Exchange") for the Bonds to be admitted to trading on the London
Stock Exchange's market for listed securities which, together, will constitute
official listing on the London Stock Exchange. Copies of this document, which
comprises listing particulars prepared in compliance with the listing rules made
under Section 142 of the Financial Services Act 1986, have been delivered to the
Registrar of Companies in England and Wales for registration in accordance with
Section 149 of that Act.
Payments on the Bonds will be made without deduction for or on account of taxes
of the United Kingdom to the extent described under "Conditions of the Bonds -
Taxation". Interest on the RPI Bonds is payable semi-annually in arrear at the
rate of 3.806 per cent. (adjusted for indexation) per annum on 27 January and 27
July in each year, the first payment to be made on 27 January 2002. Interest on
the LPI Bonds is payable semi-annually in arrear at the rate of 3.589 per cent.
(adjusted for indexation) per annum on 27 January and 27 July in each year, the
first payment to be made on 27 January 2002. Interest on the Fixed Rate Bonds is
payable annually in arrear at the rate of 6.50 per cent. per annum on 27 July in
each year, the first payment of interest to be made on 27 July 2002.
The RPI Bonds mature on 27 July 2020, the LPI Bonds mature on 27 July 2030 and
the Fixed Rate Bonds mature on 27 July 2028. Each tranche of Bonds may be
redeemed before then at the option of the Issuer in whole, but not in part, at
their principal amount together with accrued interest (adjusted, in the case of
the RPI Bonds and the LPI Bonds, for indexation) if, at any time, the principal
amount of the relevant tranche of Bonds is 10 per cent. or less of the original
principal amount of such tranche of Bonds and may be redeemed before then at the
option of the relevant holder or (at the option of the Issuer) repurchased by
the Issuer on the occurrence of a Restructuring Event (as defined in each
tranche of Bonds) at their principal amount together with accrued interest (as
adjusted, in the case of the RPI Bonds and the LPI Bonds, for indexation). Each
tranche of Bonds is subject to redemption in whole, but not in part, at their
principal amount together with accrued interest (in each case as adjusted, in
the case of the RPI Bonds and the LPI Bonds, for indexation), at the option of
the Issuer at any time in the event of certain changes affecting taxes of the
United Kingdom. See "Conditions of the Bonds - Redemption and Purchase". The RPI
Bonds and the LPI Bonds are subject to redemption in whole, but not in part, at
their principal amount together with accrued interest (each as adjusted for
indexation) on the occurrence of certain matters relating to the Index (as set
out in the RPI Bond Conditions and the LPI Bond Conditions).
Each tranche of Bonds will initially be represented by a temporary global bond
in bearer form without interest coupons (a "Temporary Global Bond") which will
be deposited with a common depositary for Euroclear Bank S.A./N.V., as operator
of the Euroclear System ("Euroclear") and Clearstream Banking, societe anonyme
("Clearstream, Luxembourg) on or about 27 July 2001. Interests in each Temporary
Global Bond will be exchangeable for interests in a permanent global bond in
bearer form without interest coupons (a "Permanent Global Bond") on or after a
date which is expected to be 4 September 2001 (the "Exchange Date"), upon
certification as to non-US beneficial ownership. Each Permanent Global Bond will
be exchangeable for definitive Bonds in bearer form (the "Definitive Bonds") in
the circumstances set out in it. See "Summary of Provisions relating to the
Bonds while in Global Form".
MORGAN STANLEY THE ROYAL BANK OF SCOTLAND
The date of this Offering Circular is 23 July 2001.
THIS OFFERING CIRCULAR COMPRISES LISTING PARTICULARS GIVEN IN COMPLIANCE
WITH THE LISTING RULES MADE UNDER SECTION 142 OF THE FINANCIAL SERVICES ACT 1986
BY THE UK LISTING AUTHORITY (THE "LISTING RULES") FOR THE PURPOSE OF GIVING
INFORMATION WITH REGARD TO THE ISSUER AND THE ISSUER AND ITS SUBSIDIARIES TAKEN
AS A WHOLE (THE "GROUP"), THE RPI BONDS, THE LPI BONDS AND THE FIXED RATE BONDS.
THE ISSUER ACCEPTS RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS
DOCUMENT. TO THE BEST OF THE KNOWLEDGE AND BELIEF OF THE ISSUER (WHICH HAS TAKEN
ALL REASONABLE CARE TO ENSURE THAT SUCH IS THE CASE), THE INFORMATION CONTAINED
IN THIS DOCUMENT IS IN ACCORDANCE WITH THE FACTS AND DOES NOT OMIT ANYTHING
LIKELY TO AFFECT THE IMPORT OF SUCH INFORMATION. ANY REFERENCE IN THIS DOCUMENT
TO LISTING PARTICULARS MEANS THIS DOCUMENT EXCLUDING ALL INFORMATION
INCORPORATED BY REFERENCE. THE ISSUER HAS CONFIRMED THAT ANY INFORMATION
INCORPORATED BY REFERENCE, INCLUDING ANY SUCH INFORMATION TO WHICH READERS OF
THIS DOCUMENT ARE EXPRESSLY REFERRED, HAS NOT BEEN AND DOES NOT NEED TO BE
INCLUDED IN THE LISTING PARTICULARS TO SATISFY THE REQUIREMENTS OF THE FINANCIAL
SERVICES ACT 1986 OR THE LISTING RULES. THE ISSUER BELIEVES THAT NONE OF THE
INFORMATION INCORPORATED THEREIN BY REFERENCE CONFLICTS IN ANY MATERIAL RESPECT
WITH THE INFORMATION INCLUDED IN THE LISTING PARTICULARS.
THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER OF, OR AN INVITATION
BY OR ON BEHALF OF, THE ISSUER OR THE MANAGERS (AS DEFINED IN "SUBSCRIPTION AND
SALE" BELOW) TO SUBSCRIBE OR PURCHASE, ANY OF THE BONDS. THE DISTRIBUTION OF
THIS OFFERING CIRCULAR AND THE OFFERING OF THE BONDS IN CERTAIN JURISDICTIONS
MAY BE RESTRICTED BY LAW. PERSONS INTO WHOSE POSSESSION THIS OFFERING CIRCULAR
COMES ARE REQUIRED BY THE ISSUER AND THE MANAGERS TO INFORM THEMSELVES ABOUT AND
TO OBSERVE ANY SUCH RESTRICTIONS. FOR A DESCRIPTION OF CERTAIN FURTHER
RESTRICTIONS ON OFFERS AND SALES OF BONDS AND DISTRIBUTION OF THIS OFFERING
CIRCULAR, SEE "SELLING RESTRICTIONS" BELOW.
NO PERSON IS AUTHORISED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS OFFERING CIRCULAR AND ANY INFORMATION OR
REPRESENTATION NOT SO CONTAINED MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORISED BY OR ON BEHALF OF THE ISSUER OR THE MANAGERS. THE DELIVERY OF THIS
OFFERING CIRCULAR AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION CONTAINED IN
IT IS CORRECT AS AT ANY TIME SUBSEQUENT TO ITS DATE.
THE BONDS HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ARE SUBJECT TO
U.S. TAX LAW REQUIREMENTS. SUBJECT TO CERTAIN EXCEPTIONS, BONDS MAY NOT BE
OFFERED, SOLD OR DELIVERED WITHIN THE UNITED STATES OR TO US. PERSONS.
UNLESS OTHERWISE SPECIFIED OR THE CONTEXT REQUIRES, REFERENCES TO
"POUNDS", "POUNDS STERLING", "STERLING", "L", AND "P" ARE TO THE CURRENCY OF THE
UNITED KINGDOM AND TO "US.$" ARE TO THE CURRENCY OF THE UNITED STATES OF
AMERICA.
IN CONNECTION WITH THE ISSUE OF EACH TRANCHE OF BONDS, THE ROYAL BANK OF
SCOTLAND PLC MAY OVER- ALLOT OR EFFECT TRANSACTIONS WHICH STABILISE OR MAINTAIN
THE MARKET PRICE OF SUCH BONDS AT A LEVEL WHICH MIGHT NOT OTHERWISE PREVAIL.
SUCH STABILISING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
TABLE OF CONTENTS
Page
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RPI Bond Conditions............................................................................... 3
Use of Proceeds................................................................................... 15
LPI Bond Conditions............................................................................... 16
Use of Proceeds................................................................................... 28
Fixed Rate Bond Conditions........................................................................ 29
Use of Proceeds................................................................................... 37
Summary of Provisions Relating to the Bonds while in Global Form.................................. 38
Capitalisation of the Group....................................................................... 40
The National Grid Company plc..................................................................... 41
United Kingdom Taxation........................................................................... 46
Subscription and Sale............................................................................. 48
Selling Restrictions.............................................................................. 48
General Information............................................................................... 50
RPI BOND CONDITIONS
The following, subject to alteration and amendment and save for the
paragraphs in italics, are the terms and conditions of the RPI Bonds
substantially in the form which will appear on the RPI Bonds in definitive
form:
The issue of the (pound) 200,000,000 3.806 per cent. Retail Price
Index-Linked Bonds due 2020 (the "Bonds") was authorised pursuant to resolutions
of the Board of Directors of The National Grid Company plc (the "Issuer") passed
on 11 June 2001 and resolutions of a duly authorised committee of the Board of
Directors of the Issuer passed on 18 July 2001. The Bonds are constituted by the
trust deed dated 27 July 2001 (the "Trust Deed") between the Issuer and The Law
Debenture Trust Corporation p.l.c. (the "Trustee", which expression shall
include all persons for the time being the trustee or trustees under the Trust
Deed) as trustee for the holders of the Bonds (the "Bondholders"). The
statements in these Conditions include summaries of, and are subject to, the
detailed provisions of the Trust Deed. The Bondholders and the holders (the
"Couponholders") of the interest coupons relating to the Bonds (the "Coupons")
(whether or not attached to the Bonds) are entitled to the benefit of, are bound
by, and are deemed to have notice of, all the provisions of the Trust Deed and
are deemed to have notice of those provisions applicable to them of the paying
agency agreement dated 27 July 2001 (the "Paying Agency Agreement") relating to
the Bonds between the Issuer, the Trustee, Citibank, N.A. (the "Principal Paying
Agent", which expression shall include any successor as principal paying agent
under the Paying Agency Agreement) and the paying agent referred to below (such
person being referred to together with the Principal Paying Agent as the "Paying
Agents", which expression shall include their successors as paying agents under
the Paying Agency Agreement), copies of each of which are available for
inspection during normal office hours at the registered office for the time
being of the Trustee (being at the date hereof at Filth Floor, 100 Wood Street,
London EC2V 7EX) and at the specified office of each of the Paying Agents.
1 FORM, DENOMINATION AND TITLE
The Bonds are serially numbered and in bearer form in the denominations of
(pound) 1,000, (pound) 10,000 and (pound) 100,000 each with Coupons attached on
issue. Bonds of one denomination may not be exchanged for Bonds of another
denomination.
Title to the Bonds and the Coupons will pass by delivery. In these
Conditions, "Bondholder" and (in relation to a Bond or Coupon) "holder" mean the
bearer of any Bond or Coupon, as the case may be. The holder of any Bond or
Coupon will (except as otherwise required by law or as ordered by a court of
competent jurisdiction) be treated as its absolute owner for all purposes
(whether or not it is overdue and regardless of any notice of ownership, trust
or any interest in it, any writing on it, or its theft or loss) and no person
will be liable for so treating the holder, and the Issuer, the Trustee and the
Paying Agents shall not be required to obtain any proof thereof or as to the
identity of such holder.
The Bonds will be represented initially by a Temporary Global Bond. The
Temporary Global Bond will be issued on 27 July 2001 and will be held by a
common depositary for Euroclear Bank S.A./N.V.,as operator of the Euroclear
System ("Euroclear") and Clearstream Banking, societe anonyme ("Clearstream,
Luxembourg") for credit, against payment, to the accounts designated by the
relevant purchasers with Euroclear and Clearstream, Luxembourg. Interests in the
Temporary Global Bond will be exchangeable on or after a date which is expected
to be 4 September 2001 for interests in a Permanent Global Bond upon
certification that the beneficial owners of the relevant Bonds are not (i)
United States persons or (ii) persons who have acquired such Bonds for resale to
or for the account of any United States person.
The Permanent Global Bond will be exchangeable for Definitive Bonds in
bearer form in the circumstances set out in it. See "Summary of Provisions
relating to the Bonds while in Global Form".
Definitive Bonds and Coupons will bear the following legend: "Any United
States person who holds this obligation will be subject to limitations under the
United States income tax laws, including the limitations provided in Sections
165(j) and 1287(a) of the Internal Revenue Code".
2 STATUS
The Bonds and the Coupons constitute direct, unconditional and unsecured
obligations of the Issuer and rank and will rank pari passu without any
preference among themselves and (save for such exceptions
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as are from time to time applicable under the laws of England and Wales) at
least equally with all other Present and future unsecured and unsubordinated
obligations of the Issuer.
3 DEFINITIONS
"Base Index Figure" means (subject to Condition 8(a)(ii)) 172.1.
"Electricity Act" means the Electricity Act 1989 as amended or re-enacted
from time to time and all subordinate legislation made pursuant thereto.
"Electricity Transmission Licence" means the transmission licence, as
subsequently amended from time to time, originally granted by the Secretary of
State for Energy to the Issuer under the Electricity Act.
"Group" means the Issuer and its Subsidiaries and "member of the Group"
shall be construed Accordingly.
"Index" or "Index Figure" means, subject as provided in Conditions 5(d) and
8, the United Kingdom All Items RPI as published by the Office for National
Statistics (January 1987 = 100) contained in the Monthly Digest of Statistics
(or contained in any official publication substituted therefor) or any
Comparable index which may replace the Index for the purpose of calculating the
amount payable on Repayment of the Reference Gilt.
Any reference to the Index Figure applicable to a particular month shall,
subject as provided in Condition 8, be construed as a reference to the Index
Figure published in the Monthly Digest of Statistics in the seventh month prior
to that particular month and relating to the month before that of publication.
"Index Ratio" means the Index Figure applicable to any month divided by the
Base Index Figure.
"Rated Securities" means (a) the Bonds or (b) such other comparable
unsecured and unsubordinated debt of the Issuer (or of any Subsidiary of the
Issuer and which is guaranteed on an unsecured and unsubordinated basis by the
Issuer) having an initial maturity of five years or more selected by the Issuer
from time to time for the purpose of this definition with the approval of the
Trustee and which possesses an investment grade rating (BBB-/ Baa3, or their
respective equivalents for the time being, or better) by any Rating Agency
(whether at the invitation of the Issuer or by its own volition).
"Rating Agency" means Standard and Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., or any of its Subsidiaries and their successors
or Moody's Investors Service, Inc. or any of its Subsidiaries and their
successors or any rating agency substituted for either of them (or any permitted
substitute of them) by the Issuer from time to time with the prior written
approval of the Trustee.
A "Rating Downgrading" shall, subject as provided in Condition 6@), be
deemed to have occurred in respect of a Restructuring Event if the rating
assigned to the Rated Securities by any Rating Agency which is current
immediately prior to the occurrence of the Restructuring Event (whether provided
by a Rating Agency at the invitation of the Issuer or by its own volition) is
withdrawn or reduced from an investment grade rating (BBB-/Baa3, or their
respective equivalents for the time being, or better) to a non-investment grade
rating (BB+/Ba1, or their respective equivalents for the time being, or worse)
or, if the Rating Agency shall have already rated the Rated Securities below
investment grade (as described above), the rating is lowered one full rating
category (from BB+/Ba1 to BB/Ba2 or such similar lowering).
"Reference Gilt" means the 2.50 per cent. Index-Linked Treasury Stock due
2020 for so long as such stock is in issue, and thereafter such Sterling
obligation of the United Kingdom Government listed on the Official List
maintained by the Financial Services Authority in its capacity as the UK Listing
Authority and traded on the London Stock Exchange's market for listed securities
whose duration most closely matches that of the Bonds on the date which is two
business days prior to the date specified for Redemption in any notice given by
the Issuer as the Trustee may from time to time determine to be appropriate on
the advice of a gilt-edged market maker or other adviser selected by the Issuer
and approved by the Trustee or, in the event that the Issuer fails to appoint
such person within a reasonable period of time, such person as the Trustee in
its sole discretion may determine to be the most appropriate (an "Indexation
Adviser"), and for which purpose duration is calculated on the basis of the
formula set out on page 119 of The Handbook of Fixed Income Securities Second
Edition 1987, published by Dow Jones-Irwin.
"Relevant Date" in respect of any payment means the date on which the
payment becomes due but, if the full amount of the moneys payable has not been
received by the Principal Paying Agent or by the
4
Trustee on or prior to such due date, it means the date on which the full amount
of such moneys has been so received and notice to that effect has been given to
the Bondholders in accordance with Condition 15.
"Restructuring Event" means the occurrence of any one or more of the
following events:
(a) (i) the Secretary of State for Trade and Industry or any official
succeeding to his functions gives the Issuer written notice of revocation
of the Electricity Transmission Licence in accordance with the terms as to
revocation set out in Schedule 2 of the Electricity Transmission Licence,
such revocation to become effective not later than 27 July 2020 or (ii) the
Issuer agrees in writing with the Secretary of State for Trade and Industry
or any official succeeding to his functions to any revocation or surrender
of the Electricity Transmission Licence or (iii) any legislation (whether
primary or subordinate) is enacted terminating or revoking the Electricity
Transmission Licence; or
(b) any modification is made to the terms and conditions of the Electricity
Transmission Licence other than such a modification which the Trustee, in
its opinion, considers to be not materially prejudicial to the interests of
the Bondholders and has so confirmed in writing to the Issuer; or
(c) any legislation (whether primary or subordinate) is enacted removing,
reducing or qualifying the duties or powers of the Secretary of State for
Trade and Industry or any official succeeding to his functions and/or the
Gas and Electricity Markets Authority under Section 3A of the Electricity
Act as compared with those in effect on 27 July 2001 other than such
legislation which the Trustee, in its opinion, considers to be not
materially prejudicial to the interests of the Bondholders and has so
confirmed in writing to the Issuer.
"Restructuring Period" means
(a) if at the time at which the Restructuring Event occurs there are Rated
Securities, the period of 90 days starting from and including the day on
which a Restructuring Event occurs or such longer period in which the Rated
Securities are under consideration (announced publicly within such 90 day
period) for rating review by a Rating Agency; or
(b) if at the time at which a Restructuring Event occurs there are no Rated
Securities, the period starting from and including the day on which a
Restructuring Event occurs and ending on the day 90 days following the date
on which a Negative Certification (as defined in Condition 6(a)) shall have
been given to the Issuer in respect of that Restructuring Event.
"Subsidiary," means a subsidiary within the meaning of Section 736 of the
Companies Act 1985 and "Subsidiaries" shall be construed accordingly.
4 INTEREST
The Bonds bear interest (calculated in accordance with the Actual/Actual
ISMA Day Count Convention) (adjusted for indexation in accordance with Condition
7) on their principal amount outstanding from, and including, 27 July 2001 (the
"Closing Date") at the rate of 3.806 per cent. per annum payable semi-annually
in arrear on 27 January and 27 July in each year (each an "Interest Payment
Date"). Each Bond will cease to bear interest from the due date for redemption
unless, upon due presentation, payment of principal is improperly withheld or
refused. In such event, it shall continue to bear interest at the aforesaid rate
(both before and after judgment) until, but excluding, whichever is the earlier
of (i) the day on which all sums due in respect of such Bond up to that day are
received by or on behalf of the relevant holder and (ii) the seventh day after
the Trustee or the Principal Paying Agent has notified Bondholders in accordance
with Condition 15 of receipt of all sums due in respect of all the Bonds up to
that day (except to the extent that there is a failure in the subsequent payment
to the relevant holders as provided in these Conditions). Where interest is to
be calculated in respect of a period which is shorter than an Interest Period it
shall be calculated on the basis of the actual number of days in the relevant
period from (and including) the first day of such period to (but excluding) the
last day of such period, divided by the number of days in the Interest Period in
which the relevant period falls (including the first such day but excluding the
last). The period beginning on the Closing Date and ending on the first Interest
Payment Date and each successive period beginning on an Interest Payment Date
and ending on the next succeeding Interest Payment Date is called an "Interest
Period".
5 REDEMPTION AND PURCHASE
(a) Final Redemption
Unless previously redeemed or purchased and cancelled, the Bonds will be
redeemed at their principal amount (adjusted for indexation in accordance with
Condition 7) on 27 July 2020.
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(b) Redemption for Taxation Reasons
If, immediately prior to the giving of the notice referred to below, the
Issuer satisfies the Trustee that, as a result of any amendment to or change in
the laws or regulations of the United Kingdom or of any political subdivision
thereof or any authority therein or thereof having power to tax or any change in
the official or generally accepted interpretation or application of such laws or
regulations in each case which becomes effective on or after the Closing Date,
the Issuer has or will on the next Interest Payment Date become obliged to pay
any additional amounts in accordance with Condition 10 (and such amendment or
change has been evidenced by the delivery by the Issuer to the Trustee (who
shall, in the absence of manifest error, accept such certificate and opinion as
sufficient evidence thereof) of (i) a certificate signed by two directors of the
Issuer on behalf of the Issuer stating that such amendment or change has
occurred (irrespective of whether such amendment or change is then effective)
and describing the facts leading thereto and stating that such obligation cannot
be avoided by the Issuer taking reasonable measures available to it and (ii) an
opinion in a form satisfactory to the Trustee of independent legal advisers of
recognised standing to the effect that such amendment or change has occurred
(irrespective of whether such amendment or change is then effective)), the
Issuer may (having given not less than 30 and not more than 90 days' notice to
the Trustee and to the Bondholders in accordance with Condition 15) redeem all,
but not some only, of the Bonds at their principal amount, together with
interest accrued (each as adjusted for indexation as provided in Condition 7) up
to, but excluding, the date fixed for such redemption, provided that no such
notice of redemption shall be given earlier than 90 days prior to the earliest
date on which the Issuer would be required to pay such additional amounts were a
payment in respect of the Bonds then due.
(c) Redemption at the Option of the Issuer
If, at any time, the principal amount outstanding of the Bonds is 10 per
cent. or less of the original principal amount of the Bonds, the Issuer may
(having given not less than 30 and not more than 90 days' notice to the Trustee
and to the Bondholders in accordance with Condition 15) redeem all, but not some
only, of the Bonds at their principal amount, together with interest accrued (in
each case adjusted for indexation as provided in Condition 7) up to, but
excluding, the date fixed for such redemption.
(d) Redemption for Index Reasons
If either (i) the Index Figure for three consecutive months is required to
be determined on the basis of an Index Figure previously published as provided
in Condition 8(b)(ii) and the Trustee has been notified by the Principal Paying
Agent that publication of the Index has ceased or (ii) notice is published by
Her Majesty's Treasury, or on its behalf, following a change in relation to the
Index, offering a right of redemption to holders of the Reference Gilt, and (in
either case) no amendment or substitution of the Index shall have been advised
by the Indexation Adviser (as defined above) to the Issuer and such
circumstances are continuing, having given not more than 60 nor less than 30
days' notice to Bondholders in accordance with Condition 15, the Issuer may
redeem all, but not some only, of the Bonds at their principal amount together
with interest accrued up to and including the date of redemption (in each case
adjusted for indexation as provided in Condition 7), the Index Ratio for this
purpose being that applicable to the month in which redemption takes place.
(e) Purchase
The Issuer or any of its Subsidiaries may, subject to any relevant laws or
regulations, at any time purchase Bonds (with or without all unmatured Coupons
relating thereto being surrendered therewith) at any price in the open market or
by private treaty. If purchases are made by tender, tenders must be available to
all Bondholders alike.
(f) Cancellation
All Bonds redeemed pursuant to any of the foregoing provisions will be
cancelled forthwith together with all unmatured Coupons attached thereto or
surrendered therewith and may not be reissued or resold. Any Bonds purchased
pursuant to Condition 5(e) or Condition 6 may, at the option of the Issuer, be
held or may be surrendered to a Paying Agent for cancellation, but may not be
resold.
6 REDEMPTION AT THE OPTION OF THE BONDHOLDERS
(a) Redemption following a Restructuring Event
If, at any time while any of the Bonds remains outstanding, a Restructuring
Event occurs and, within the Restructuring Period, either:
6
(i) if at the time at which the relevant Restructuring Event occurs there
are Rated Securities, a Rating Downgrading in respect of that
Restructuring Event also occurs; or
(ii) if at such time there are no Rated Securities, the Issuer is unable as
a result of such Restructuring Event to obtain a rating of the Bonds
or of any other comparable unsecured and unsubordinated debt of the
Issuer (or of any Subsidiary of the Issuer and which is guaranteed on
an unsecured and unsubordinated basis by the Issuer) having an initial
maturity of five years or more from a Rating Agency of at least
investment grade (BBB-/Baa3, or their respective equivalents for the
time being) (a "Negative Rating Event"), which rating the Issuer shall
use all reasonable endeavours to obtain,
and in any such case such Restructuring Event is certified in writing by an
independent financial adviser appointed by the Issuer and approved by the
Trustee (or, if the Issuer shall not have appointed such an adviser within
21 days after becoming aware of the occurrence of such Restructuring Event,
appointed by the Trustee (following consultation with the Issuer)) as being
in its opinion materially prejudicial to the interests of the Bondholders
(a "Negative Certification") (that Restructuring Event and the relevant
Rating Downgrading or, as the case may be, Negative Rating Event and, in
each case, the Negative Certification together constituting a "Put Event"),
then (unless at any time the Issuer shall have given a notice under
Condition 5(b)) or 5(c) or 5(d)) the holder of each Bond will have the
right, upon the giving of a Put Event Notice (as defined below), to require
the Issuer to redeem or, at the option of the Issuer, purchase (or procure
the purchase of) that Bond on the Put Date (as defined below) at its
principal amount together with interest (if any) accrued up to, but
excluding, the Put Date (in each case adjusted for indexation as provided
in Condition 7). Any certification by an independent financial adviser as
aforesaid as to whether or not, in its opinion, any Restructuring Event is
materially prejudicial to the interests of the Bondholders shall, in the
absence of manifest error, be conclusive and binding upon the Issuer, the
Trustee, the Bondholders and the Couponholders.
(b) Rating Downgrading or Negative Rating Event
A Rating Downgrading or a Negative Rating Event shall be deemed not to have
occurred in respect of or as a result of a Restructuring Event if the
Rating Agency making the relevant reduction in rating or declining to
assign a rating of at least investment grade as provided in these
Conditions does not announce or publicly confirm or otherwise inform the
Trustee that the reduction or declining was the result, in whole or in
part, of any event or circumstance comprised in or arising as a result of
the applicable Restructuring Event.
(c) Put Event Notice
Promptly upon the Issuer becoming aware that a Put Event has occurred, and
in any event not later than 14 days after the occurrence of a Put Event,
the Issuer shall, and at any time upon the Trustee becoming similarly so
aware the Trustee may, and if so requested by the holders of at least one-
quarter in principal amount of the Bonds then outstanding shall, give
notice (a "Put Event Notice") to the Bondholders in accordance with
Condition 15 specifying the nature of the Put Event and the procedure for
exercising the right described herein.
(d) Procedure
To exercise the right to require redemption or, as the case may be,
purchase by the Issuer or by a purchaser procured by it of a Bond under
this Condition, the Bondholder must deliver such Bond on any business day
(as defined in Condition 9) falling within the period (the "Put Period") of
45 days after the date of a Put Event Notice at the specified office of any
Paying Agent, accompanied by a duly completed and signed notice of exercise
in the form (for the time being current) obtainable from any specified
office of any Paying Agent (a "Put Notice") and in which the holder may
specify a bank account with a bank in London to which payment is to be made
under this Condition. The Paying Agent to which such Bond and Put Notice
are delivered shall issue to the Bondholder concerned a non-transferable
receipt in respect of the Bond so delivered. Payment in respect of any Bond
so delivered shall be made, if the holder duly specified a bank account in
the Put Notice to which payment is to be made, on the day (the "Put Date")
being the fourteenth day after the date of expiry of the Put Period by
transfer to that bank account and in every other case on or after the Put
Date against presentation and surrender or (as the case may be) endorsement
of such receipt at any specified office of any Paying Agent. A Put Notice,
once delivered, shall be irrevocable and the Issuer shall redeem or, as the
case may be, purchase (or procure the purchase
7
of) all Bonds delivered on the applicable Put Date. For the purposes of the
Terms and Conditions and the Trust Deed, receipts issued pursuant to this
Condition shall be treated as if they were Bonds.
(e) Trustee
The Trust Deed provides that the Trustee will not be bound to take any
steps to ascertain whether a Restructuring Event or a Put Event or any
event which could lead to the occurrence of or, together with other events,
constitute a Restructuring Event or a Put Event has occurred and that,
until it shall have express notice to the contrary, the Trustee will be
entitled to assume that no Restructuring Event or Put Event and no such
other event has occurred.
7 INDEXATION
Each payment of principal and interest in respect of the Bonds shall be the
amount provided in or determined in accordance with the foregoing Conditions,
multiplied by the Index Ratio applicable to the month in which such payment
falls to be made and rounded to four decimal places (0.00005 being rounded
upwards).
8 CHANGES IN CIRCUMSTANCES AFFECTING THE INDEX
(a) Change in base
If at any time and from time to time the Index shall be changed by the
substitution of a new base therefor, then with effect from the
calendar month from and including that in which such substitution
takes effect:
(i) the definition of Index and Index Figure in Condition 3 shall be
deemed to refer to the new date or month in substitution for
January 1987 (or, as the case may be, to such other date or month
as may have been substituted therefor); and
(ii) the new Base Index Figure shall be the product of the existing
Base Index Figure (being at the Closing Date 172.1) and the Index
Figure immediately following such substitution, divided by the
Index Figure immediately prior to such substitution.
(b) Delay in publication of Index
If and other than in circumstances which then appear to fall within
Condition 8(c), the Index Figure which is normally published in the
Monthly Digest of Statistics in the seventh month and which relates to
the eighth month (the "relevant month") before the month in which a
payment is due to be made in respect of the Bonds is not published on
or before the fourteenth business day before the date (the "date for
payment") on which such payment is due, the Index Figure applicable to
the month in which the date of payment falls shall be:
(i) such substitute index figure (if any) as the Trustee considers to
have been published by the Bank of England for the purposes of
indexation of payments on the Reference Gilt or, failing such
publication, on any one or more issues of index-linked Treasury
Stock selected by an Indexation Adviser; or
(ii) if a determination of the Index Figure is not determined pursuant
to Condition 8(b)(i), the Index Figure last published (or, if
later, the substitute index figure last determined pursuant to
Condition 8(b)(i)) before the date for payment.
Where the above provisions of this Condition 8(b) apply, any
determination as to the Index Figure applicable to the month in which
the date for payment falls made in accordance with such provisions and
any selection by an Indexation Adviser pursuant to Condition 8(b)(i)
shall be conclusive and binding on the Issuer, the Trustee, the
Bondholders and the Couponholders. If, an Index Figure having been
determined pursuant to Condition 8(b)(i) and applied to the month in
which the date of payment falls, the Index Figure relating to the
relevant month is subsequently published while a Bond is still
outstanding, then:
(i) in relation to a payment of interest in respect of such Bond
other than upon redemption of such Bond the interest next payable
after the date of such subsequent publication shall be increased
or reduced by an amount equal to (respectively) the shortfall or
excess of the amount of the relevant payment made on the basis of
the Index Figure applicable by virtue of Condition 8(b)(ii),
below or above the amount of the relevant payment that
8
would have been due if the Index Figure subsequently published
had been published on or before the fourteenth business day
before the date for payment; and
(ii) in relation to a payment of principal or interest upon redemption
of such Bond, no subsequent adjustment to amounts paid will be
made.
(c) Cessation of or fundamental changes to the Index
(i) If the Trustee has been notified by the Principal Paying Agent
that (a) the Index has ceased to be published or (b) any change
is made to the coverage or the basic calculation of the Index
which constitutes a fundamental change which would, in the
opinion of the Trustee acting solely on the advice of an
Indexation Adviser, be materially prejudicial to the interests of
the Bondholders, the Trustee will give written notice of such
occurrence to the Issuer, and the Issuer and the Trustee together
shall seek to agree for the purpose of the Bonds one or more
adjustments to the Index or a substitute index (with or without
adjustments) with the intention that the same should leave the
Issuer and the Bondholders in no better and no worse a position
than they would have been had the Index not ceased to be
published or the relevant fundamental change not been made.
(ii) If the Issuer and the Trustee fail to reach agreement as
mentioned above within 20 business days following the giving of
notice as mentioned in paragraph (c)(i)(a), a bank or other
person in London shall be appointed by the Issuer with the
approval of the Trustee, or, failing agreement on and the making
of such appointment within 20 business days following the expiry
of the 20 business day period referred to above, by the Trustee
(in each case, such bank or other person so appointed being
referred to as the "Expert"), to determine for the purpose of the
Bonds one or more adjustments to the Index or a substitute index
(with or without adjustments) with the intention that the same
should leave the Issuer and the Bondholders in no better and no
worse a position than they would have been had the Index not
ceased to be published or the relevant fundamental change not
been made. Any Expert so appointed shall act as an expert and not
as an arbitrator and all fees, costs and expenses of the Expert
and of any Indexation Adviser and of the Issuer and the Trustee
in connection with such appointment shall be borne by the Issuer.
In this Condition 8 business day means any day on which
commercial banks and foreign exchange markets are open for
business in London.
(iii) The Index shall be adjusted or replaced by a substitute index as
agreed by the Issuer and the Trustee or as determined by the
Expert pursuant to the foregoing paragraphs, as the case may be,
and references in these Conditions to the Index and to any Index
Figure shall be deemed amended in such manner as the Issuer and
the Trustee agree. Such amendments shall be effective from the
date of such notification and shall be binding upon the Issuer,
the Trustee, the Bondholders and the Couponholders, and the
Issuer shall give notice to the Bondholders in accordance with
Condition 15 of such amendments as promptly as practicable
following such notification.
9 PAYMENTS
(a) Principal and Interest in Respect of the Bonds
Payments of principal and interest in respect of the Bonds will be made
against presentation and surrender (or, in the case of a partial payment,
endorsement) of Bonds or (as the case may be) the appropriate Coupons save
that if the due date for redemption of a Bond is not an Interest Payment
Date, accrued interest will be paid against presentation of the relevant
Bond at the specified office of any Paying Agent by sterling cheque drawn
on, or by transfer to a sterling account maintained by the payee with, a
bank in London. Payments of interest due in respect of any Bond other than
on presentation and surrender of matured Coupons shall be made only against
presentation and either surrender or endorsement (as appropriate) of the
relevant Bond.
(b) Payment Subject to Fiscal Laws
All payments are subject in all cases to any applicable fiscal or other
laws and regulations, but without prejudice to the provisions of Condition
10. No commissions or expenses shall be charged to the Bondholders or
Couponholders in respect of such payments.
9
(c) Payments on Business Days
If the due date for payment of any amount on any Bond or Coupon is not a
business day (as defined below), then the holder thereof will not be
entitled to payment of such amount until the next following business day
and will not be entitled to any further interest or other payment in
respect of such postponement. In these Conditions, "business day" means any
day on which banks are open for business in London and in the place of the
specified office of the Paying Agent at which the Bond or Coupon is
presented for payment.
(d) Paying Agents
The initial Principal Paying Agent is Citibank, N.A. and the other initial
Paying Agent and their respective initial specified offices are set out at
the end of these Conditions. The Issuer may at any time (subject to the
prior approval of the Trustee) vary or terminate the appointment of any
Paying Agent and appoint additional or other Paying Agents, provided that
it will at all times maintain (i) a Principal Paying Agent, (ii) Paying
Agents having specified offices in at least two major European cities
approved by the Trustee (including London, so long as the Notes are listed
on the Official List of the UK Listing Authority and admitted to trading on
the London Stock Exchange's market for listed securities) and (iii) a
Paying Agent with a specified office in a European Union member state that
will not be obliged to withhold or deduct tax pursuant to any European
Union Directive on the taxation of savings implementing the conclusions of
the ECOFIN Council meeting of 26-27 November 2000 or any law implementing
or complying with, or introduced in order to conform to such Directive.
Notice of any such termination or appointment and of any change in the
specified office through which any Paying Agent acts will be given in
accordance with Condition 15.
(e) Surrender of Unmatured Coupons
Each Bond should be presented for redemption (including exercise of the
Bondholders' option pursuant to Condition 6) together with all relative
unmatured Coupons (being Coupons which would otherwise fall due for payment
after the relevant due date for redemption or, as the case may be, the Put
Date) failing which, all unmatured Coupons shall become void.
10 TAXATION
All payments by or on behalf of the Issuer in respect of the Bonds shall be
made without deduction or withholding for, or on account of, any present or
future taxes, duties, assessments or governmental charges of whatever nature
imposed or levied by or on behalf of the United Kingdom or any political
subdivision or authority thereof or therein having power to tax, unless such
deduction or withholding is required by law. In such event the Issuer shall pay
such additional amounts as may be necessary in order that the net amounts
received by the holders of Bonds or Coupons after such deduction or withholding
shall equal the amounts which would have been receivable by them had no such
deduction or withholding been required, except that no additional amounts shall
be payable in respect of any Bond or Coupon presented for payment:
(a) by or on behalf of a holder who is liable to such taxes, duties,
assessments or governmental charges in respect of such Bond or Coupon by
reason of his being connected with the United Kingdom otherwise than merely
by the holding of the Bond or Coupon; or
(b) by or on behalf of a holder who would not be liable or subject to deduction
or withholding by making a declaration of beneficial ownership of the Bond
or Coupon and of non-residence or other similar claim for exemption to the
relevant tax authority or to any relevant person; or
(c) more than 30 days after the Relevant Date except to the extent that the
holder thereof would have been entitled to such additional amounts on
presenting the same for payment on the last day of such period of 30 days
on the assumption, if such is not the case, that such last day was a
business day; or
(d) where such withholding or deduction is imposed on a payment to an
individual and is required to be made pursuant to any European Union
Directive on the taxation of savings implementing the conclusions of the
ECOFIN Council meeting of 26 - 27 November 2000 or any law implementing or
complying with, or introduced in order to conform to, such Directive; or
(e) by or on behalf of a Bondholder or a Couponholder who would have been able
to avoid such withholding or deduction by presenting the relevant Bond or
Coupon to another Paying Agent in a Member State of the European Union.
10
Any reference herein to the principal of and/or interest on the Bonds shall
be deemed to include any additional amounts which may be payable under this
Condition or under any obligations undertaken in addition hereto or in
substitution herefor pursuant to the Trust Deed.
11 PRESCRIPTION
Claims in respect of principal and interest shall be prescribed unless
presentation for payment is made as required by Condition 9 within a period of
12 years in the case of principal and six years in the case of interest from the
appropriate Relevant Date.
12 EVENTS OF DEFAULT
The Trustee at its discretion may, and if so requested in writing by the
holders of at least one-quarter in principal amount of the Bonds then
outstanding or if so directed by an Extraordinary Resolution (as defined in the
Trust Deed) of the Bondholders shall, subject in each case to its being
indemnified to its satisfaction, (but, in the case of the happening of any of
the events mentioned in sub-paragraphs (e) to (g) inclusive, other than default
in the performance or observance of any of the provisions of Conditions 5, 6 and
9 or the appointment of an administrative or other receiver of the whole of the
undertaking or assets of the Issuer, only if the Trustee shall have certified in
writing to the Issuer that such event is, in its opinion, materially prejudicial
to the interests of the Bondholders) give notice to the Issuer that the Bonds
are, and they shall accordingly thereby become, immediately due and repayable at
their principal amount, together with accrued interest (in each case adjusted
for indexation in accordance with Condition 7), the Index Ratio for such purpose
being that applicable to the month in which the Bonds become due and repayable
takes place (as provided in the Trust Deed), if any of the following events
shall occur:
(a) if default is made in the payment of any principal or interest in respect
of the Bonds or any of them and such default continues for 15 days or
more; or
(b) if an order is made or an effective resolution passed for the winding-up
of, or an administration order is made in relation to, the Issuer (except
for the purposes of a reconstruction or amalgamation upon terms and within
such a period as may previously have been approved in writing by the
Trustee); or
(c) if the Issuer stops or threatens to stop payment (except for the purposes
of a reconstruction or amalgamation upon terms and within such a period as
may previously have been approved in writing by the Trustee); or
(d) if (i) any other present or future Relevant Indebtedness of the Issuer
becomes due and payable prior to its stated maturity by reason of any
actual event of default, or (ii) any such Relevant Indebtedness is not paid
when due or, as the case may be, within any applicable grace period,
provided that the aggregate amount of the Relevant Indebtedness in respect
of which one or more of the events mentioned above in this paragraph (d)
have occurred equals or exceeds (pound)40,000,000.
For the purposes of this Condition, "Relevant Indebtedness" means any
present or future indebtedness in the form of, or represented by, bonds,
notes, debentures, loan stock or other securities which are for the time
being, or are capable of being, quoted, listed or ordinarily dealt in on
any stock exchange.
(e) if an encumbrancer takes possession or an administrative or other receiver
is appointed of the whole or any part which in the opinion of the Trustee
is material of the undertaking or assets of the Issuer or if a distress,
execution or any similar proceeding is levied or enforced upon or sued out
against, in the opinion of the Trustee, a substantial part of the chattels
or property of the Issuer and in any such case is not removed, paid out or
discharged within 21 days (or such longer period as the Trustee may
approve); or
(f) if the Issuer is unable to pay its debts as they fall due or has any
voluntary arrangement proposed in relation to it under Section 1 of the
Insolvency Act 1986 or enters into any scheme of arrangement with its
creditors (other than for the purpose of reconstruction or amalgamation
upon terms and within such a period as may previously have been approved in
writing by the Trustee); or
(g) if default is made by the Issuer in the performance or observance of any
obligation, covenant, condition or provision binding on it under the Bonds
or the Trust Deed (other than any obligation for the payment of any
principal or interest in respect of the Bonds) and, except where, in the
opinion of the Trustee, such default is not capable of remedy (in which
case the Bonds will become
11
due and repayable subject to, and immediately upon, the Trustee certifying and
giving notice as aforesaid), such default continues for 45 days (or such longer
period as the Trustee may approve) after written notice by the Trustee to the
Issuer specifying such default and requiring the same to be remedied.
13 ENFORCEMENT
At any time after the Bonds become due and payable, the Trustee may, at its
discretion and without further notice, institute such proceedings against the
Issuer as it may think fit to enforce the provisions of the Trust Deed, the
Bonds and the Coupons, but it shall not be bound to take any such proceedings
unless (i) it shall have been so directed by an Extraordinary Resolution or so
requested in writing by Bondholders holding at least one-quarter in principal
amount of the Bonds then outstanding and (ii) it shall have been indemnified to
its satisfaction. No Bondholder or Couponholder may proceed directly against the
Issuer unless the Trustee, having become bound so to proceed, fails to do so
within a reasonable period and such failure shall be continuing.
14 REPLACEMENT OF BONDS AND COUPONS
If any Bond or Coupon is lost, stolen, mutilated, defaced or destroyed it
may be replaced at the specified office of the Paying Agent in London, subject
to all applicable laws and the requirements of any applicable stock exchange or
other relevant authority, upon payment by the claimant of the expenses incurred
in connection with such replacement and on such terms as to evidence and
indemnity as the Issuer may reasonably require. Mutilated or defaced Bonds or
Coupons must be surrendered before replacements will be issued.
15 NOTICES
Notices to holders of Bonds will be valid if published in an English
language leading daily newspaper having general circulation in the United
Kingdom (which is expected to be the Financial Times) or, if in the opinion of
the Trustee such publication is not practicable, in another English language
leading daily newspaper having general circulation in Europe. Any such notice
shall be deemed to have been given on the date of such publication or, if
published more than once, on the first date on which publication is made.
Couponholders will be deemed for all purposes to have notice of the contents of
any notice given to Bondholders in accordance with this Condition.
16 TRANSFER OF ELECTRICITY TRANSMISSION LICENCE
The Issuer has covenanted in the Trust Deed that it will not transfer or
consent to the transfer of its rights as holder of the Electricity Transmission
Licence to any other person unless (i) that other person guarantees all amounts
payable under the Bonds, the Coupons and the Trust Deed or a trust deed is
executed or some other form of undertaking is given by such other person in form
and manner satisfactory to the Trustee agreeing to be bound by the Bonds, the
Coupons and the Trust Deed; (ii) consequential amendments are made to Conditions
6 and 12 so that the events referred to therein are applicable to such other
person as well as, in the case of Condition 12, to the Issuer; and (iii) the
Trustee is satisfied that the interests of the Bondholders will not be
materially prejudiced thereby.
17 MEETINGS OF BONDHOLDERS, MODIFICATION, WAIVER, REDENOMINATION AND
SUBSTITUTION
The Trust Deed contains provisions for convening meetings of Bondholders to
consider matters affecting their interests, including the modification of any of
these Conditions or any provisions of the Trust Deed. Any such modification may
be made if sanctioned by an Extraordinary Resolution. The quorum for any meeting
convened to consider an Extraordinary Resolution will be one or more persons
present holding or representing a clear majority in principal amount of the
Bonds for the time being outstanding or, at any adjourned meeting, one or more
persons present being or representing Bondholders whatever the principal amount
of the Bonds held or represented, unless the business of such meeting includes
consideration of proposals, inter alia, (i) to postpone the dates for payment of
principal on the Bonds or the dates on which interest is payable in respect of
Bonds, (ii) to reduce or cancel the principal amount of, or interest on, the
Bonds or to alter the method of calculating the amount of any payment in respect
of the Bonds, (iii) to change the currency of payment of the Bonds or the
Coupons (except where the Trustee is exercising its power to facilitate payment
in Euro as set out in the paragraph below) or (iv) to modify the provisions
concerning the quorum required at any meeting of Bondholders or the majority
required to pass an Extraordinary Resolution, in which case the necessary quorum
will be
12
one or more persons present holding or representing not less than two-thirds, or
at any adjourned meeting not less than one-third, in principal amount of the
Bonds for the time being outstanding. Any Extraordinary Resolution duly passed
shall be binding on all Bondholders (whether or not they were present at the
meeting at which such resolution was passed) and on all Couponholders.
The Trustee may agree, without the consent of the Bondholders or
Couponholders, to (i) any modification of any of these Conditions or any
provisions of the Trust Deed which is of a formal, minor or technical nature or
is made to correct a manifest error and (ii) any other modification (except as
mentioned in the Trust Deed) of, and any waiver or authorisation of any breach
or proposed breach of, any of these Conditions or any provisions of the Trust
Deed which is in the opinion of the Trustee not materially prejudicial to the
interests of the Bondholders. The Trustee may agree, without the consent of the
Bondholders or Couponholders, on or after the Specified Date (as defined below),
to such modifications to the Bonds and the Trust Deed in order to facilitate
payment of interest in euro and redemption at the euro equivalent of the
sterling principal amount of the Bonds (including indexation in respect thereof)
and associated reconventioning, renominalisation and related matters as may be
proposed by the Issuer (and confirmed by an independent financial institution
approved by the Trustee to be in conformity with then applicable market
conventions) provided that the Issuer shall be under no obligation to make any
such proposals. For these purposes, "Specified Date" means the date on which the
United Kingdom participates in the third stage of European Economic and Monetary
Union pursuant to the Treaty establishing the European Community or otherwise
participates in European Economic and Monetary Union in a similar manner. Any
such modification, authorisation or waiver shall be binding on the Bondholders
and the Couponholders and, if the Trustee so requires, any modification referred
to above shall be notified by the Issuer to the Bondholders as soon as
practicable in accordance with Condition 15.
The Trustee may, without the consent of the Bondholders or Couponholders,
agree with the Issuer to the substitution in place of the Issuer (or any
previous substitute under this Condition) as the principal debtor under the
Bonds, the Coupons and the Trust Deed of any Subsidiary or any holding company
of the Issuer, subject to (a) the Bonds being unconditionally and irrevocably
guaranteed by the Issuer, (b) the Trustee being satisfied that the interests of
the Bondholders will not be materially prejudiced by the substitution and (c)
certain other conditions set out in the Trust Deed being complied with.
In connection with the exercise of its functions (including but not limited
to those in relation to any proposed modification, waiver, authorisation or
substitution) the Trustee shall not have regard to the consequences of such
exercise for individual Bondholders or Couponholders and the Trustee shall not
be entitled to require, nor shall any Bondholder or Couponholder be entitled to
claim, from the Issuer or any other person, any indemnification or payment in
respect of any tax consequences of any such exercise upon individual Bondholders
or Couponholders.
18 INDEMNIFICATION OF THC TRUSTEE
The Trust Deed contains provisions for the indemnification of the Trustee
and for its relief from responsibility. The Trustee will be entitled to enter
into business transactions with the Issuer and any of its Subsidiaries without
accounting for any profit resulting therefrom.
19 FURTHER ISSUES
The Issuer may from time to time without the consent of the Bondholders or
Couponholders create and issue further bonds or notes either having the same
Conditions as the Bonds in all respects (or in all respects except for the first
payment of interest on them) and so that such further issue shall be
consolidated and form a single series with the outstanding bonds or notes of any
series (including the Bonds) or upon such terms as to interest, premium,
redemption, ranking and otherwise as the Issuer may determine at the time of
their issue. Any further bonds or notes forming a single series with the
outstanding bonds or notes of any series (including the Bonds) constituted by
the Trust Deed or any deed supplemental to it shall, and any other bonds or
notes may (with the consent of the Trustee), be constituted by a deed
supplemental to the Trust Deed. The Trust Deed contains provisions for convening
a single meeting of the Bondholders and the holders of bonds or notes of other
series in certain circumstances where the Trustee so decides. In these
Conditions, unless the context otherwise requires and subject to any provision
to the contrary in the Trust Deed, the expression "Bonds" shall include any
further bonds issued in accordance with this Condition and forming a single
series with the Bonds.
13
20 CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
No person shall have any right to enforce any term or condition of the
Bonds under the Contracts (Rights of Third Parties) Act 1999.
21 GOVERNING LAW
The Trust Deed, the Bonds and the Coupons are governed by, and will be
construed in accordance with, English law.
14
USE OF PROCEEDS
The net proceeds of the issue of the RPI Bonds, which are expected to
amount to approximately (pound)198,680,000, will be used for general corporate
purposes.
15
LPI BOND CONDITIONS
The following, subject to alteration and amendment and save for the
paragraphs in italics, are the terms and conditions of the LPI Bonds
substantially in the form which will appear on the LPI Bonds in definitive form:
The issue of the (pound)40,000,000 3.589 per cent. Limited Retail Price
Index-Linked Bonds due 2030 (the "Bonds") was authorised pursuant to resolutions
of the Board of Directors of The National Grid Company plc (the "Issuer") passed
on 11 June 2001 and resolutions of a duly authorised committee of the Board of
Directors of the Issuer passed on 18 July 2001. The Bonds are constituted by the
trust deed dated 27 July 2001 (the "Trust Deed") between the Issuer and The Law
Debenture Trust Corporation p.l.c. (the "Trustee", which expression shall
include all persons for the time being the trustee or trustees under the Trust
Deed) as trustee for the holders of the Bonds (the "Bondholders"). The
statements in these Conditions include summaries of, and are subject to, the
detailed provisions of the Trust Deed. The Bondholders and the holders (the
"Couponholders") of the interest coupons relating to the Bonds (the "Coupons")
(whether or not attached to the Bonds) are entitled to the benefit of, are bound
by, and are deemed to have notice of, all the provisions of the Trust Deed and
are deemed to have notice of those provisions applicable to them of the paying
agency agreement dated 27 July 2001 (the "Paying Agency Agreement") relating to
the Bonds between the Issuer, the Trustee, Citibank, N.A. (the "Principal Paying
Agent", which expression shall include any successor as principal paying agent
under the Paying Agency Agreement) and the paying agent referred to below (such
person being referred to together with the Principal Paying Agent as the "Paying
Agents", which expression shall include their successors as paying agents under
the Paying Agency Agreement), copies of each of which are available for
inspection during normal office hours at the registered office for the time
being of the Trustee (being at the date hereof at Fifth Floor, 100 Wood Street,
London EC2V 7EX) and at the specified office of each of the Paying Agents.
1 FORM, DENOMINATION AND TITLE
The Bonds are serially numbered and in bearer form in the denominations of
(pound)1,000, (pound)10,000 and (pound)100,000 each with Coupons attached on
issue. Bonds of one denomination may not be exchanged for Bonds of another
denomination.
Title to the Bonds and the Coupons will pass by delivery. In these
Conditions, "Bondholder" and (in relation to a Bond or Coupon) "holder" mean the
bearer of any Bond or Coupon, as the case may be. The holder of any Bond or
Coupon will (except as otherwise required by law or as ordered by a court of
competent jurisdiction) be treated as its absolute owner for all purposes
(whether or not it is overdue and regardless of any notice of ownership, trust
or any interest in it, any writing on it, or its theft or loss) and no person
will be liable for so treating the holder, and the Issuer, the Trustee and the
Paying Agents shall not be required to obtain any proof thereof or as to the
identity of such holder.
The Bonds will be represented initially by a Temporary Global Bond. The
Temporary Global Bond will be issued on 27 July 2001 and will be held by a
common depositary for Euroclear Bank S.A./N.V. as operator of the Euroclear
System ("Euroclear" ) and Clearstream Banking, societe anonyme ("Clearstream
Luxembourg") for credit, against payment, to the accounts designated by the
relevant purchasers with Euroclear and Clearstream, Luxembourg. Interests in the
Temporary Global Bond will be exchangeable on or after a date which is expected
to be 4 September 2001 for interests in a Permanent Global Bond upon
certification that the beneficial owners of the relevant Bonds are not (i)
United States persons or (ii) persons who have acquired such Bonds for resale to
or for the account of any United States person.
The Permanent Global Bond will be exchangeable for Definitive Bonds in
bearer form in the circumstances set out in it. See "Summary of Provisions
relating to the Bonds while in Global Form".
Definitive Bonds and Coupons will bear the following legend: "Any United
States person who holds this obligation will be subject to limitations under the
United States income tax laws, including the limitations provided in Sections
165(j) and 1287(a) of the Internal Revenue Code".
2 STATUS
The Bonds and the Coupons constitute direct, unconditional and unsecured
obligations of the Issuer and rank and will rank pari passu without any
preference among themselves and (save for such exceptions as are from time to
time applicable under the laws of England and Wales) at least equally with all
other present and future unsecured and unsubordinated obligations of the Issuer.
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3 DEFINITIONS
"Base Index Figure" means (subject to Condition 8(a)(ii)) 172.1.
"Electricity Act" means the Electricity Act 1989 as amended or re-enacted
from time to time and all subordinate legislation made pursuant thereto.
"Electricity Transmission Licence" means the transmission licence, as
subsequently amended from time to time, originally granted by the Secretary of
State for Energy to the Issuer under the Electricity Act.
"Group" means the Issuer and its Subsidiaries and "member of the Group"
shall be construed accordingly.
"Index" or "Index Figure" means, subject as provided in Conditions 5(d) and
8, the United Kingdom All Items RPI as published by the Office for National
Statistics (January 1987 = 100) contained in the Monthly Digest of Statistics
(or contained in any official publication substituted therefor) or any
comparable index which may replace the Index for the purpose of calculating the
amount payable on repayment of the Reference Gilt.
Any reference to the Index Figure applicable to a particular month shall,
subject as provided in Condition 8, be construed as a reference to the Index
Figure published in the Monthly Digest of Statistics in the seventh month prior
to that particular month and relating to the month before that of publication.
"Index Ratio" means the Index Figure applicable to any month divided by the
Base Index Figure provided that (i) if such ratio is greater than the Maximum
Index Ratio, it shall be deemed to be equal to the Maximum Index Ratio and (ii)
if such ratio is less than the Minimum Index Ratio, it shall be equal to the
Minimum Index Ratio.
"Maximum Index Ratio" means 5%.
"Minimum Index Ratio" means 0%.
"Rated Securities" means (a) the Bonds or (b) such other comparable
unsecured and unsubordinated debt of the Issuer (or of any Subsidiary of the
Issuer and which is guaranteed on an unsecured and unsubordinated basis by the
Issuer) having an initial maturity of five years or more selected by the Issuer
from time to time for the purpose of this definition with the approval of the
Trustee and which possesses an investment grade rating (BBB-/Baa3, or their
respective equivalents for the time being, or better) by any Rating Agency
(whether at the invitation of the Issuer or by its own volition).
"Rating Agency" means Standard and Poor's Ratings Services, a division of
The McGraw-Hill Companies Inc., or any of its Subsidiaries and their successors
or Moody's Investors Service, Inc. or any of its Subsidiaries and their
successors or any rating agency substituted for either of them (or any permitted
substitute of them) by the Issuer from time to time with the prior written
approval of the Trustee.
A "Rating Downgrading" shall, subject as provided in Condition 6(b), be
deemed to have occurred in respect of a Restructuring Event if the rating
assigned to the Rated Securities by any Rating Agency which is current
immediately prior to the occurrence of the Restructuring Event (whether provided
by a Rating Agency at the invitation of the Issuer or by its own volition) is
withdrawn or reduced from an investment grade rating (BBB-/Baa3, or their
respective equivalents for the time being, or better) to a non-investment grade
rating (BB+/Ba1, or their respective equivalents for the time being, or worse)
or, if the Rating Agency shall have already rated the Rated Securities below
investment grade (as described above), the rating is lowered one full rating
category (from BB+/Ba1 to BB/Ba2 or such similar lowering).
"Reference Gilt" means the 4.125 per cent. Index-Linked Treasury Stock due
2030 for so long as such stock is in issue, and thereafter such Sterling
obligation of the United Kingdom Government listed on the Official List
maintained by the Financial Services Authority in its capacity as the UK Listing
Authority and traded on the London Stock Exchange's market for listed securities
whose duration most closely matches that of the Bonds on the date which is two
business days prior to the date specified for redemption in any notice given by
the Issuer as the Trustee may from time to time determine to be appropriate on
the advice of a gilt-edged market maker or other adviser selected by the Issuer
and approved by the Trustee or, in the event that the Issuer fails to appoint
such person within a reasonable period of time, such person as the Trustee in
its sole discretion may determine to be the most appropriate (an "Indexation
Adviser"), and for which purpose duration is calculated on the basis of the
formula set out on page 119 of The Handbook of Fixed Income Securities Second
Edition 1987, published by Dow Jones-Irwin.
17
"Relevant Date" in respect of any payment means the date on which the
payment becomes due but, if the full amount of the moneys payable has not been
received by the Principal Paying Agent or by the Trustee on or prior to such due
date, it means the date on which the full amount of such moneys has been so
received and notice to that effect has been given to the Bondholders in
accordance with Condition 15.
"Restructuring Event" means the occurrence of any one or more of the
following events:
(a) (i) the Secretary of State for Trade and Industry or any official
succeeding to his functions gives the Issuer written notice of
revocation of the Electricity Transmission Licence in accordance with
the terms as to revocation set out in Schedule 2 of the Electricity
Transmission Licence, such revocation to become effective not later
than 27 July 2030 or (ii) the Issuer agrees in writing with the
Secretary of State for Trade and Industry or any official succeeding
to his functions to any revocation or surrender of the Electricity
Transmission Licence or (iii) any legislation (whether primary or
subordinate) is enacted terminating or revoking the Electricity
Transmission Licence; or
(b) any modification is made to the terms and conditions of the
Electricity Transmission Licence other than such a modification which
the Trustee, in its opinion, considers to be not materially
prejudicial to the interests of the Bondholders and has so confirmed
in writing to the Issuer; or
(c) any legislation (whether primary or subordinate) is enacted removing,
reducing or qualifying the duties or powers of the Secretary of State
for Trade and Industry or any official succeeding to his functions
and/or the Gas and Electricity Markets Authority under Section 3A of
the Electricity Act as compared with those in effect on 27 July 2001
other than such legislation which the Trustee, in its opinion,
considers to be not materially prejudicial to the interests of the
Bondholders and has so confirmed in writing to the Issuer.
"Restructuring Period" means
(a) if at the time at which the Restructuring Event occurs there are Rated
Securities, the period of 90 days starting from and including the day
on which a Restructuring Event occurs or such longer period in which
the Rated Securities are under consideration (announced publicly
within such 90 day period) for rating review by a Rating Agency; or
(b) if at the time at which a Restructuring Event occurs there are no
Rated Securities, the period starting from and including the day on
which a Restructuring Event occurs and ending on the day 90 days
following the date on which a Negative Certification (as defined in
Condition 6(a)) shall have been given to the Issuer in respect of that
Restructuring Event.
"Subsidiary," means a subsidiary within the meaning of Section 736 of the
Companies Act 1985 and "Subsidiaries" shall be construed accordingly.
4 INTEREST
The Bonds bear interest (calculated in accordance with the
Actual/Actual ISMA Day Count Convention) (adjusted for indexation in accordance
with Condition 7) on their principal amount outstanding from, and including, 27
July 2001 (the "Closing Date") at the rate of 3.589 per cent. per annum payable
semi-annually in arrear on 27 January and 27 July in each year (each an
"Interest Payment Date"). Each Bond will cease to bear interest from the due
date for redemption unless, upon due presentation, payment of principal is
improperly withheld or refused. In such event, it shall continue to bear
interest at the aforesaid rate (both before and after judgment) until, but
excluding, whichever is the earlier of (i) the day on which all sums due in
respect of such Bond up to that day are received by or on behalf of the relevant
holder and (ii) the seventh day after the Trustee or the Principal Paying Agent
has notified Bondholders in accordance with Condition 15 of receipt of all sums
due in respect of all the Bonds up to that day (except to the extent that there
is a failure in the subsequent payment to the relevant holders as provided in
these Conditions). Where interest is to be calculated in respect of a period
which is shorter than an Interest Period it shall be calculated on the basis of
the actual number of days in the relevant period from (and including) the first
day of such period to (but excluding) the last day of such period, divided by
the number of days in the Interest Period in which the relevant period falls
(including the first such day but excluding the last). The period beginning on
the Closing Date and ending on the first Interest Payment Date and each
successive period beginning on an Interest Payment Date and ending on the next
succeeding Interest Payment Date is called an "Interest Period".
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5 REDEMPTION AND PURCHASE
(a) Final Redemption
Unless previously redeemed or purchased and cancelled, the Bonds will be
redeemed at their principal amount (adjusted for indexation in accordance with
Condition 7) on 27 July 2030.
(b) Redemption for Taxation Reasons
If, immediately prior to the giving of the notice referred to below, the
Issuer satisfies the Trustee that, as a result of any amendment to or change in
the laws or regulations of the United Kingdom or of any political subdivision
thereof or any authority therein or thereof having power to tax or any change in
the official or generally accepted interpretation or application of such laws or
regulations in each case which becomes effective on or after the Closing Date,
the Issuer has or will on the next Interest Payment Date become obliged to pay
any additional amounts in accordance with Condition 10 (and such amendment or
change has been evidenced by the delivery by the Issuer to the Trustee (who
shall, in the absence of manifest error, accept such certificate and opinion as
sufficient evidence thereof) of (i) a certificate signed by two directors of the
Issuer on behalf of the Issuer stating that such amendment or change has
occurred (irrespective of whether such amendment or change is then effective)
and describing the facts leading thereto and stating that such obligation cannot
be avoided by the Issuer taking reasonable measures available to it and (ii) an
opinion in a form satisfactory to the Trustee of independent legal advisers of
recognised standing to the effect that such amendment or change has occurred
(irrespective of whether such amendment or change is then effective)), the
Issuer may (having given not less than 30 and not more than 90 days' notice to
the Trustee and to the Bondholders in accordance with Condition 15) redeem all,
but not some only, of the Bonds at their principal amount, together with
interest accrued (adjusted for indexation as provided in Condition 7) up to, but
excluding, the date fixed for such redemption, provided that no such notice of
redemption shall be given earlier than 90 days prior to the earliest date on
which the Issuer would be required to pay such additional amounts were a payment
in respect of the Bonds then due.
(c) Redemption at the Option of the Issuer
If, at any time, the principal amount outstanding of the Bonds is 10 per
cent. or less of the original principal amount of the Bonds, the Issuer may
(having given not less than 30 and not more than 90 days' notice to the Trustee
and to the Bondholders in accordance with Condition 15) redeem all, but not some
only, of the Bonds at their principal amount, together with interest accrued (in
each case adjusted for indexation as provided in Condition 7) up to, but
excluding, the date fixed for such redemption.
(d) Redemption for Index Reasons
If either (i) the Index Figure for three consecutive months is required to
be determined on the basis of an Index Figure previously published as provided
in Condition 8(b)(ii) and the Trustee has been notified by the Principal Paying
Agent that publication of the Index has ceased or (ii) notice is published by
Her Majesty's Treasury, or on its behalf, following a change in relation to the
Index, offering a right of redemption to holders of the Reference Gilt, and (in
either case) no amendment or substitution of the Index shall have been advised
by the Indexation Adviser (as defined above) to the Issuer and such
circumstances are continuing, having given not more than 60 nor less than 30
days' notice to Bondholders in accordance with Condition 15 the Issuer may
redeem all, but not some only, of the Bonds at their principal amount together
with interest accrued up to and including the date of redemption (in each case
adjusted for indexation as provided in Condition 7), the Index Ratio for this
purpose being that applicable to the month in which redemption takes place.
(e) Purchase
The Issuer or any of its Subsidiaries may, subject to any relevant laws or
regulations, at any time purchase Bonds (with or without all unmatured Coupons
relating thereto being surrendered therewith) at any price in the open market or
by private treaty. If purchases are made by tender, tenders must be available to
all Bondholders alike.
(f) Cancellation
All Bonds redeemed pursuant to any of the foregoing provisions will be
cancelled forthwith together with all unmatured Coupons attached thereto or
surrendered therewith and may not be reissued or resold. Any Bonds purchased
pursuant to Condition 5(e) or Condition 6 may, at the option of the Issuer, be
held or may be surrendered to a Paying Agent for cancellation, but may not be
resold.
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6 REDEMPTION AT THE OPTION OF THE BONDHOLDERS
(a) Redemption following a Restructuring Event
If, at any time while any of the Bonds remains outstanding, a Restructuring
Event occurs and, within the Restructuring Period, either:
(i) if at the time at which the relevant Restructuring Event occurs there
are Rated Securities, a Rating Downgrading in respect of that
Restructuring Event also occurs; or
(ii) if at such time there are no Rated Securities, the Issuer is unable as
a result of such Restructuring Event to obtain a rating of the Bonds
or of any other comparable unsecured and unsubordinated debt of the
Issuer (or of any Subsidiary of the Issuer and which is guaranteed on
an unsecured and unsubordinated basis by the Issuer) having an initial
maturity of five years or more from a Rating Agency of at least
investment grade (BBB-/Baa3, or their respective equivalents for the
time being) (a "Negative Rating Event"), which rating the Issuer shall
use all reasonable endeavours to obtain,
and in any such case such Restructuring Event is certified in writing by an
independent financial adviser appointed by the Issuer and approved by the
Trustee (or, if the Issuer shall not have appointed such an adviser within
21 days after becoming aware of the occurrence of such Restructuring Event,
appointed by the Trustee (following consultation with the Issuer)) as being
in its opinion materially prejudicial to the interests of the Bondholders
(a "Negative Certification") (that Restructuring Event and the relevant
Rating Downgrading or, as the case may be, Negative Rating Event and, in
each case, the Negative Certification together constituting a "Put Event"),
then (unless at any time the Issuer shall have given a notice under
Condition 5(h) or 5(c) or 5(d)) the holder of each Bond will have the
right, upon the giving of a Put Event Notice (as defined below), to require
the Issuer to redeem or, at the option of the Issuer, purchase (or procure
the purchase of) that Bond on the Put Date (as defined below) at its
principal amount together with interest (if any) accrued up to, but
excluding, the Put Date (in each case adjusted for indexation as provided
in Condition 7). Any certification by an independent financial adviser as
aforesaid as to whether or not, in its opinion, any Restructuring Event is
materially prejudicial to the interests of the Bondholders shall, in the
absence of manifest error, be conclusive and binding upon the Issuer, the
Trustee, the Bondholders and the Couponholders.
(b) Rating Downgrading or Negative Rating Event
A Rating Downgrading or a Negative Rating Event shall be deemed not to have
occurred in respect of or as a result of a Restructuring Event if the
Rating Agency making the relevant reduction in Rating or declining to
assign a rating of at least investment grade as provided in these
Conditions does not announce or publicly confirm or otherwise inform the
Trustee that the reduction or Declining was the result, in whole or in
part, of any event or circumstance comprised in or arising as a result of
the applicable Restructuring Event.
(c) Put Event Notice
Promptly upon the Issuer becoming aware that a Put Event has occurred, and
in any event not later than 14 days after the occurrence of a Put Event,
the Issuer shall, and at any time upon the Trustee becoming similarly so
aware the Trustee may, and if so requested by the holders of at least one-
quarter in principal amount of the Bonds then outstanding shall, give
notice (a "Put Event Notice") to the Bondholders in accordance with
Condition 15 specifying the nature of the Put Event and the Procedure for
exercising the right described herein.
(d) Procedure
To exercise the right to require redemption or, as the case may be,
purchase by the Issuer or by a Purchaser procured by it of a Bond under
this Condition the Bondholder must deliver such Bond on any business day
(as defined in Condition 9) falling within the period (the "Put Period") of
45 days after the date of a Put Event Notice at the specified office of any
Paying Agent, accompanied by a duly completed and signed notice of exercise
in the form (for the time being current) obtainable from any specified
office of any Paying Agent (a "Put Notice") and in which the holder may
specify a bank account with a bank in London to which payment is to be made
under this Condition. The Paying Agent to which such Bond and Put Notice
are delivered shall issue to the Bondholder concerned a non-transferable
receipt in respect of the Bond so delivered. Payment in respect of any
20
Bond so delivered shall be made, if the holder duly specified a bank
account in the Put Notice to which payment is to be made, on the day (the
"Put Date") being the fourteenth day after the date of expiry of the Put
Period by transfer to that bank account and in every other case on or after
the Put Date against presentation and surrender or (as the case may be)
endorsement of such receipt at any specified office of any Paying Agent. A
Put Notice, once delivered, shall be irrevocable and the Issuer shall
redeem or, as the case may be, purchase (or procure the purchase of) all
Bonds delivered on the applicable Put Date. For the purposes of the Terms
and Conditions and the Trust Deed, receipts issued pursuant to this
Condition shall be treated as if they were Bonds.
(e) Trustee
The Trust Deed provides that the Trustee will not be bound to take any
steps to ascertain whether a Restructuring Event or a Put Event or any
event which could lead to the occurrence of or, together with other events,
constitute a Restructuring Event or a Put Event has occurred and that,
until it Shall have express notice to the contrary, the Trustee will be
entitled to assume that no Restructuring Event or Put Event and no such
other event has occurred.
7 INDEXATION
Each payment of principal and interest in respect of the Bonds shall be the
amount provided in or determined in accordance with the foregoing Conditions,
multiplied by the Index Ratio applicable to the month in which such payment
falls to be made and rounded to four decimal places (0.00005 being rounded
upwards).
8 CHANGES IN CIRCUMSTANCES AFFECTING THE INDEX
(a) Change in base
If at any time and from time to time the Index shall be changed by the
substitution of a new base therefor, then with effect from the
calendar month from and including that in which such substitution
takes effect:
(i) the definition of Index and Index Figure in Condition 3 shall be
deemed to refer to the new date or month in substitution for
January 1987 (or, as the case may be, to such other date or month
as may have been substituted therefor); and
(ii) the new Base Index Figure shall be the product of the existing
Base Index Figure (being at the Closing Date 172.1) and the Index
Figure immediately following such substitution, divided by the
Index Figure immediately prior to such substitution.
(b) Delay in publication of Index
If and other than in circumstances which then appear to fall within
Condition 8(c), the Index Figure which is normally published in the
Monthly Digest of Statistics in the seventh month and which relates to
the eighth month (the "relevant month") before the month in which a
payment is due to be made in respect of the Bonds is not published on
or before the fourteenth business day before the date (the "date for
payment") on which such payment is due, the Index Figure applicable to
the month in which the date of payment falls shall be:
(i) such substitute index figure (if any) as the Trustee considers to
have been published by the Bank of England for the purposes of
indexation of payments on the Reference Gilt or, failing such
publication, on any one or more issues of index-linked Treasury
Stock selected by an Indexation Adviser; or
(ii) if a determination of the Index Figure is not determined pursuant
to Condition 8(b)(i), the Index Figure last published (or, if
later, the substitute index figure last determined pursuant to
Condition 8(b)(i)) before the date for payment.
Where the above provisions of this Condition 8(b) apply, any
determination as to the Index Figure applicable to the month in which
the date for payment falls made in accordance with such provisions and
any selection by an Indexation Adviser pursuant to Condition 8(b)(i)
shall be conclusive and binding on the Issuer, the Trustee, the
Bondholders and the Couponholders. If, an Index Figure having been
determined pursuant to Condition 8(b)(i) and applied to the month in
which the date of payment falls, the Index Figure relating to the
relevant month is subsequently published while a Bond is still
outstanding, then:
21
(i) in relation to a payment of interest in respect of such Bond
other than upon redemption of such Bond the interest next payable
after the date of such subsequent publication shall be increased
or reduced by an amount equal to (respectively) the shortfall or
excess of the amount of the relevant payment made on the basis of
the Index Figure applicable by virtue of Condition 8(b)(ii),
below or above the amount of the relevant payment that would have
been due if the Index Figure subsequently published had been
published on or before the fourteenth business day before the
date for payment; and
(ii) in relation to a payment of principal or interest upon redemption
of such Bond, no subsequent adjustment to amounts paid will be
made.
(c) Cessation of or fundamental changes to the Index
(i) If the Trustee has been notified by the Principal Paying Agent
that (a) the Index has ceased to be published or (b) any change
is made to the coverage or the basic calculation of the Index
which constitutes a fundamental change which would, in the
opinion of the Trustee acting solely on the advice of an
Indexation Adviser, be materially prejudicial to the interests of
the Bondholders, the Trustee will give written notice of such
occurrence to the Issuer, and the Issuer and the Trustee together
shall seek to agree for the purpose of the Bonds one or more
adjustments to the Index or a substitute index (with or without
adjustments) with the intention that the same should leave the
Issuer and the Bondholders in no better and no worse a position
than they would have been had the Index not ceased to be
published or the relevant fundamental change not been made.
(ii) If the Issuer and the Trustee fail to reach agreement as
mentioned above within 20 business days following the giving of
notice as mentioned in paragraph (c)(i)(a), a bank or other
person in London shall be appointed by the Issuer with the
approval of the Trustee, or, failing agreement on and the making
of such appointment within 20 business days following the expiry
of the 20 business day period referred to above, by the Trustee
(in each case, such bank or other person so appointed being
referred to as the "Expert"), to determine for the purpose of the
Bonds one or more adjustments to the Index or a substitute index
(with or without adjustments) with the intention that the same
should leave the Issuer and the Bondholders in no better and no
worse a position than they would have been had the Index not
ceased to be published or the relevant fundamental change not
been made. Any Expert so appointed shall act as an expert and not
as an arbitrator and all fees, costs and expenses of the Expert
and of any Indexation Adviser and of the Issuer and the Trustee
in connection with such appointment shall be borne by the Issuer.
In this Condition 8 business day means any day on which
commercial banks and foreign exchange markets are open for
business in London.
(iii) The Index shall be adjusted or replaced by a substitute index as
agreed by the Issuer and the Trustee or as determined by the
Expert pursuant to the foregoing paragraphs, as the case may be,
and references in these Conditions to the Index and to any Index
Figure shall be deemed amended in such manner as the Issuer and
the Trustee agree. Such amendments shall be effective from the
date of such notification and shall be binding upon the Issuer,
the Trustee, the Bondholders and the Couponholders, and the
Issuer shall give notice to the Bondholders in accordance with
Condition 15 of such amendments as promptly as practicable
following such notification.
9 PAYMENTS
(a) Principal and Interest in Respect of the Bonds
Payments of principal and interest in respect of the Bonds will be
made against presentation and surrender (or, in the case of a partial
payment, endorsement) of Bonds or (as the case may be) the appropriate
Coupons save that if the due date for redemption of a Bond is not an
Interest Payment Date, accrued interest will be paid against
presentation of the relevant Bond) at the specified office of any
Paying Agent by sterling cheque drawn on, or by transfer to a sterling
account maintained by the payee with, a bank in London. Payments of
interest due in respect of any Bond other than on presentation and
surrender of matured Coupons shall be made only against presentation
and either surrender or endorsement (as appropriate) of the relevant
Bond.
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(b) Payment Subject to Fiscal Laws
All payments are subject in all cases to any applicable fiscal or other
laws and regulations, but without prejudice to the provisions of Condition
10. No commissions or expenses shall be charged to the Bondholders or
Couponholders in respect of such payments.
(c) Payments on Business Days
If the due date for payment of any amount on any Bond or Coupon is not a
business day (as defined below), then the holder thereof will not be
entitled to payment of such amount until the next following business day
and will not be entitled to any further interest or other payment in
respect of such postponement. In these Conditions, "business day" means any
day on which banks are open for business in London and in the place of the
specified office of the Paying Agent at which the Bond or Coupon is
presented for payment.
(d) Paying Agents
The initial Principal Paying Agent is Citibank, N.A. and the other initial
Paying Agent and their respective initial specified offices are set out at
the end of these Conditions. The Issuer may at any time (subject to the
prior approval of the Trustee) vary or terminate the appointment of any
Paying Agent and appoint additional or other Paying Agents, provided that
it will at all times maintain (i) a Principal Paying Agent, (ii) Paying
Agents having specified offices in at least two major European cities
approved by the Trustee (including London, so long as the Notes are listed
on the Official List of the UK Listing Authority and admitted to trading on
the London Stock Exchange's market for listed securities) and (iii) a
Paying Agent with a specified office in a European Union member state that
will not be obliged to withhold or deduct tax pursuant to any European
Union Directive on the taxation of savings implementing the conclusions of
the ECOFIN Council meeting of 26 - 27 November 2000 or any law implementing
or complying with, or introduced in order to conform to such Directive.
Notice of any such termination or appointment and of any change in the
specified office through which any Paying Agent acts will be given in
accordance with Condition 15.
(e) Surrender of Unmatured Coupons
Each Bond should be presented for redemption (including exercise of the
Bondholders' option pursuant to Condition 6) together with all relative
unmatured Coupons (being Coupons which would otherwise fall due for payment
after the relevant due date for redemption or, as the case may be, the Put
Date) failing which, all unmatured Coupons shall become void.
10 TAXATION
All payments by or on behalf of the Issuer in respect of the Bonds
shall be made without deduction or withholding for, or on account of, any
present or future taxes, duties, assessments or governmental charges of whatever
nature imposed or levied by or on behalf of the United Kingdom or any political
subdivision or authority thereof or therein having power to tax, unless such
deduction or withholding is required by law. In such event the Issuer shall pay
such additional amounts as may be necessary in order that the net amounts
received by the holders of Bonds or Coupons after such deduction or withholding
shall equal the amounts which would have been receivable by them had no such
deduction or withholding been required, except that no additional amounts shall
be payable in respect of any Bond or Coupon presented for payment:
(a) by or on behalf of a holder who is liable to such taxes, duties,
assessments or governmental charges in respect of such Bond or Coupon by
reason of his being connected with the United Kingdom otherwise than merely
by the holding of the Bond or Coupon; or
(b) by or on behalf of a holder who would not be liable or subject to deduction
or withholding by making a declaration of beneficial ownership of the Bond
or Coupon and of non-residence or other similar claim for exemption to the
relevant tax authority or to any relevant person; or
(c) more than 30 days after the Relevant Date except to the extent that the
holder thereof would have been entitled to such additional amounts on
presenting the same for payment on the last day of such period of 30 days
on the assumption, if such is not the case, that such last day was a
business day; or
(d) where such withholding or deduction is imposed on a payment to an
individual and is required to be made pursuant to any European Union
Directive on the taxation of savings implementing the
23
conclusions of the ECOFIN Council meeting of 26 - 27 November 2000 or any
law implementing or complying with, or introduced in order to conform to
such Directive; or
(e) by or on behalf of a Bondholder or a Couponholder who would have been
able to avoid such withholding or deduction by presenting the relevant Bond or
Coupon to another Paying Agent in a Member State of the European Union.
Any reference herein to the principal of and/or interest on the Bonds shall
be deemed to include any additional amounts which may be payable under this
Condition or under any obligations undertaken in addition hereto or in
substitution herefor pursuant to the Trust Deed.
11 PRESCRIPTION
Claims in respect of principal and interest shall be prescribed unless
presentation for payment is made as required by Condition 9 within a period of
12 years in the case of principal and six years in the case of interest from the
appropriate Relevant Date.
12 EVENTS OF DEFAULT
The Trustee at its discretion may, and if so requested in writing by the
holders of at least one-quarter in principal amount of the Bonds then
outstanding or if so directed by an Extraordinary Resolution (as defined in the
Trust Deed) of the Bondholders shall, subject in each case to its being
Indemnified to its satisfaction, (but, in the case of the happening of any of
the events mentioned in sub-paragraphs (e) to (g) inclusive, other than default
in the performance or observance of any of the Provisions of Conditions 5, 6 and
9 or the appointment of an administrative or other receiver of the whole of the
undertaking or assets of the Issuer, only if the Trustee shall have certified in
writing to the Issuer that such event is, in its opinion, materially prejudicial
to the interests of the Bondholders) give notice to the Issuer that the Bonds
are, and they shall accordingly thereby become, immediately due and repayable at
their principal amount, together with accrued interest (in each case adjusted
for indexation in accordance with Condition 7), and the Index Ratio for such
purpose being that applicable to the month in which the Bonds become due and
repayable takes place (as provided in the Trust Deed), if any of the following
events shall occur:
(a) if default is made in the payment of any principal or interest in respect
of the Bonds or any of them and such default continues for 15 days or more;
or
(b) if an order is made or an effective resolution passed for the winding-up
of, or an administration order is made in relation to, the Issuer (except
for the purposes of a reconstruction or amalgamation upon terms and within
such a period as may previously have been approved in writing by the
Trustee); or
(c) if the Issuer stops or threatens to stop payment (except for the purposes
of a reconstruction or amalgamation upon terms and within such a period as
may previously have been approved in writing by the Trustee); or
(d) if (i) any other present or future Relevant Indebtedness of the Issuer
becomes due and payable prior to its stated maturity by reason of any
actual event of default, or (ii) any such Relevant Indebtedness is not paid
when due or, as the case may be, within any applicable grace period,
provided that the aggregate amount of the Relevant Indebtedness in respect
of which one or more of the events mentioned above in this paragraph (d)
have occurred equals or exceeds (pound)40,000,000.
For the purposes of this Condition, "Relevant Indebtedness" means any
present or future indebtedness in the form of, or represented by, bonds,
notes, debentures, loan stock or other securities which are for the time
being, or are capable of being, quoted, listed or ordinarily dealt in on
any stock exchange.
(e) if an encumbrancer takes possession or an administrative or other receiver
is appointed of the whole or any part which in the opinion of the Trustee
is material of the undertaking or assets of the Issuer or if a distress,
execution or any similar proceeding is levied or enforced upon or sued out
against, in the opinion of the Trustee, a substantial part of the chattels
or property of the Issuer and in any such case is not removed, paid out or
discharged within 21 days (or such longer period as the Trustee may
approve); or
(f) if the Issuer is unable to pay its debts as they fall due or has any
voluntary arrangement proposed in relation to it under Section 1 of the
Insolvency Act 1986 or enters into any scheme of arrangement
24
with its creditors (other than for the purpose of reconstruction or
amalgamation upon terms and within such a period as may previously have
been approved in writing by the Trustee); or
(g) if default is made by the Issuer in the performance or observance of any
obligation, covenant, condition or provision binding on it under the Bonds
or the Trust Deed (other than any obligation for the payment of any
principal or interest in respect of the Bonds) and, except where, in the
opinion of the Trustee, such default is not capable of remedy (in which
case the Bonds will become due and repayable subject to, and immediately
upon, the Trustee certifying and giving notice as aforesaid), such default
continues for 45 days (or such longer period as the Trustee may approve)
after written notice by the Trustee to the Issuer specifying such default
and requiring the same to be remedied.
13 ENFORCEMENT
At any time after the Bonds become due and payable, the Trustee may, at its
discretion and without further notice, institute such proceedings against the
Issuer as it may think fit to enforce the provisions of the Trust Deed, the
Bonds and the Coupons, but it shall not be bound to take any such proceedings
unless (i) it shall have been so directed by an Extraordinary Resolution or so
requested in writing by Bondholders holding at least one-quarter in principal
amount of the Bonds then outstanding and (ii) it shall have been indemnified to
its satisfaction. No Bondholder or Couponholder may proceed directly against the
Issuer unless the Trustee, having become bound so to proceed, fails to do so
within a reasonable period and such failure shall be continuing.
14 REPLACEMENT OF BONDS AND COUPONS
If any Bond or Coupon is lost, stolen, mutilated, defaced or destroyed it
may be replaced at the specified office of the Paying Agent in London, subject
to all applicable laws and the requirements of any applicable stock exchange or
other relevant authority, upon payment by the claimant of the expenses incurred
in connection with such replacement and on such terms as to evidence and
indemnity as the Issuer may reasonably require. Mutilated or defaced Bonds or
Coupons must be surrendered before replacements will be issued.
15 NOTICES
Notices to holders of Bonds will be valid if published in an English
language leading daily newspaper having general circulation in the United
Kingdom (which is expected to be the Financial Times) or, if in the opinion of
the Trustee such publication is not practicable, in another English language
leading daily newspaper having general circulation in Europe. Any such notice
shall be deemed to have been given on the date of such publication or, if
published more than once, on the first date on which publication is made.
Couponholders will be deemed for all purposes to have notice of the contents of
any notice given to Bondholders in accordance with this Condition.
16 TRANSFER OF ELECTRICITY TRANSMISSION LICENCE
The Issuer has covenanted in the Trust Deed that it will not transfer or
consent to the transfer of its rights as holder of the Electricity Transmission
Licence to any other person unless (i) that other person guarantees all amounts
payable under the Bonds, the Coupons and the Trust Deed or a trust deed is
executed or some other form of undertaking is given by such other person in form
and manner satisfactory to the Trustee agreeing to be bound by the Bonds, the
Coupons and the Trust Deed; (ii) consequential amendments are made to Conditions
6 and 12 so that the events referred to therein are applicable to such other
person as well as, in the case of Condition 12, to the Issuer; and (iii) the
Trustee is satisfied that the interests of the Bondholders will not be
materially prejudiced thereby.
17 MEETINGS OF BONDHOLDERS, MODIFICATION, WAIVER RE-DENOMINATION AND
SUBSTITUTION
The Trust Deed contains provisions for convening meetings of Bondholders to
consider matters affecting their interests, including the modification of any of
these Conditions or any provisions of the Trust Deed. Any such modification may
be made if sanctioned by an Extraordinary Resolution. The quorum for any meeting
convened to consider an Extraordinary Resolution will be one or more persons
present holding or representing a clear majority in principal amount of the
Bonds for the time being outstanding or, at any adjourned meeting, one or more
persons present being or representing Bondholders whatever the principal amount
of the Bonds held or represented, unless the business of such meeting includes
consideration of proposals, inter alia, (i) to postpone the dates for payment of
principal on the Bonds or the dates on which interest is payable in respect of
Bonds, (ii) to reduce or cancel the
25
principal amount of, or interest on, the Bonds or to alter the method of
calculating the amount of any payment in respect of the Bonds, (iii) to change
the currency of payment of the Bonds or the Coupons (except where the Trustee is
exercising its power to facilitate payment in Euro as set out in the paragraph
below) or (iv) to modify the provisions concerning the quorum required at any
meeting of Bondholders or the majority required to pass an Extraordinary
Resolution, in which case the necessary quorum will be one or more persons
present holding or representing not less than two-thirds, or at any adjourned
meeting not less than one-third, in principal amount of the Bonds for the time
being outstanding. Any Extraordinary Resolution duly passed shall be binding on
all Bondholders (whether or not they were present at the meeting at which such
resolution was passed) and on all Couponholders.
The Trustee may agree, without the consent of the Bondholders or
Couponholders, to (i) any modification of any of these Conditions or any
provisions of the Trust Deed which is of a formal, minor or technical nature or
is made to correct a manifest error and (ii) any other modification (except as
mentioned in the Trust Deed) of, and any waiver or authorisation of any breach
or proposed breach of, any of these Conditions or any provisions of the Trust
Deed which is in the opinion of the Trustee not materially prejudicial to the
interests of the Bondholders. The Trustee may agree, without the consent of the
Bondholders or Couponholders, on or after the Specified Date (as defined below),
to such modifications to the Bonds and the Trust Deed in order to facilitate
payment of interest in euro and redemption at the euro equivalent of the
sterling principal amount of the Bonds (including indexation in respect thereof)
and associated reconventioning, renominalisation and related matters as may be
proposed by the Issuer (and confirmed by an independent financial institution
approved by the Trustee to be in conformity with then applicable market
conventions) provided that the Issuer shall be under no obligation to make any
such proposals. For these purposes, "Specified Date" means the date on which the
United Kingdom participates in the third stage of European Economic and Monetary
Union pursuant to the Treaty establishing the European Community or otherwise
participates in European Economic and Monetary Union in a similar manner. Any
such modification, authorisation or waiver shall be binding on the Bondholders
and the Couponholders and, if the Trustee so requires, any modification referred
to above shall be notified by the Issuer to the Bondholders as soon as
practicable in accordance with Condition 15.
The Trustee may, without the consent of the Bondholders or Couponholders,
agree with the Issuer to the substitution in place of the Issuer (or any
previous substitute under this Condition) as the principal debtor under the
Bonds, the Coupons and the Trust Deed of any Subsidiary or any holding company
of the Issuer, subject to (a) the Bonds being unconditionally and irrevocably
guaranteed by the Issuer, (b) the Trustee being satisfied that the interests of
the Bondholders will not be materially prejudiced by the substitution and (c)
certain other conditions set out in the Trust Deed being complied with. In
connection with the exercise of its functions (including but not limited to
those in relation to any proposed modification, waiver, authorisation or
substitution) the Trustee shall not have regard to the consequences of such
exercise for individual Bondholders or Couponholders and the Trustee shall not
be entitled to require, nor shall any Bondholder or Couponholder be entitled to
claim, from the Issuer or any other person, any indemnification or payment in
respect of any tax consequences of any such exercise upon individual Bondholders
or Couponholders.
18 INDEMNIFICATION OF THE TRUSTEE
The Trust Deed contains provisions for the indemnification of the Trustee
and for its relief from responsibility. The Trustee will be entitled to enter
into business transactions with the Issuer and any of its Subsidiaries without
accounting for any profit resulting therefrom.
19 FURTHER ISSUES
The Issuer may from time to time without the consent of the Bondholders or
Couponholders create and issue further bonds or notes either having the same
Conditions as the Bonds in all respects (or in all respects except for the first
payment of interest on them) and so that such further issue shall be
consolidated and form a single series with the outstanding bonds or notes of any
series (including the Bonds) or upon such terms as to interest, premium,
redemption, ranking and otherwise as the Issuer may determine at the time of
their issue. Any further bonds or notes forming a single series with the
outstanding bonds or notes of any series (including the Bonds) constituted by
the Trust Deed or any deed supplemental to it shall, and any other bonds or
notes may (with the consent of the Trustee), be constituted by a deed
supplemental to the Trust Deed. The Trust Deed contains provisions for convening
a single meeting of the Bondholders and the holders of bonds or notes of other
series in certain circumstances where the Trustee so decides. In these
Conditions, unless the context otherwise requires
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and subject to any provision to the contrary in the Trust Deed, the expression
"Bonds" shall include any further bonds issued in accordance with this Condition
and forming a single series with the Bonds.
20 CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
No person shall have any right to enforce any term or condition of the
Bonds under the Contracts (Rights of Third Parties) Act 1999.
21 GOVERNING LAW
The Trust Deed, the Bonds and the Coupons are governed by, and will be
construed in accordance with, English law.
27
USE OF PROCEEDS
The net proceeds of the issue of the LPI Bonds, which are expected to
amount to approximately (pound)39,750,000, will be used for general corporate
purposes.
28
FIXED RATE BOND CONDITIONS
The following, subject to alteration and amendment and save for the
paragraphs in italics, are the terms and conditions of the Fixed Rate Bonds
substantially in the form which will appear on the Fixed Rate Bonds in
definitive form:
The issue of the (pound)360,000,0006.50 per cent. Bonds due 2028 (the
"Bonds") was authorised pursuant to resolutions of the Board of Directors of The
National Grid Company plc (the "Issuer") passed on 11 June 2001 and resolutions
of a duly authorised committee of the Board of Directors of the Issuer passed on
18 July 2001. The Bonds are constituted by the trust deed dated 27 July 2001
(the "Trust Deed") between the Issuer and The Law Debenture Trust Corporation
p.1.c. (the "Trustee", which expression shall include all persons for the time
being the trustee or trustees under the Trust Deed) as trustee for the holders
of the Bonds (the "Bondholders"). The statements in these Conditions include
summaries of, and are subject to, the detailed provisions of the Trust Deed. The
Bondholders and the holders (the "Couponholders") of the interest coupons
relating to the Bonds (the "Coupons") (whether or not attached to the Bonds) are
entitled to the benefit of, are bound by, and are deemed to have notice of, all
the provisions of the Trust Deed and are deemed to have notice of those
provisions applicable to them of the paying agency agreement dated 27 July 2001
(the "Paying Agency Agreement") relating to the Bonds between the Issuer, the
Trustee, Citibank, N.A. (the "Principal Paying Agent", which expression shall
include any successor as principal paying agent under the Paying Agency
Agreement) and the paying agent referred to below (such person being referred to
together with the Principal Paying Agent as the "Paying Agents", which
expression shall include their successors as paying agents under the Paying
Agency Agreement), copies of each of which are available for inspection during
normal office hours at the registered office for the time being of the Trustee
(being at the date hereof at Fifth Floor, 100 Wood Street, London EC2V 7EX) and
at the specified office of each of the Paying Agents.
1 FORM, DENOMINATION AND TITLE
The Bonds are serially numbered and in bearer form in the denominations of
(pound)1,000,(pound)10,000 and (pound)100,000 each with Coupons attached on
issue. Bonds of one denomination may not be exchanged for Bonds of another
denomination. Title to the Bonds and the Coupons will pass by delivery. In these
Conditions, "Bondholder" and (in relation to a Bond or Coupon) "holder" mean the
bearer of any Bond or Coupon, as the case may be. The holder of any Bond or
Coupon will (except as otherwise required by law or as ordered by a court of
competent jurisdiction) be treated as its absolute owner for all purposes
(whether or not it is overdue and regardless of any notice of ownership, trust
or any interest in it, any writing on it, or its theft or loss) and no person
will be liable for so treating the holder, and the Issuer, the Trustee and the
Paying Agents shall not be required to obtain any proof thereof or as to the
identity of such holder.
The Bonds will be represented initially by a Temporary Global Bond. The
Temporary Global Bond will be issued on 27 July 2001 and will be held by a
common depositary for Euroclear Bank S.A./N. V., as operator of the Euroclear
System ("Euroclear") and Clearstream Banking, societe anonyme ("Clearstream
Luxembourg") for credit, against payment, to the accounts designated by the
relevant purchasers with Euroclear and Clearstream, Luxembourg. Interests in the
Temporary Global Bond will be exchangeable on or after a date which is expected
to be 4 September 2001 for interests in a Permanent Global Bond upon
certification that the beneficial owners of the relevant Bonds are not (i)
United States persons or (ii) persons who have acquired such Bonds for resale to
or for the account of any United States person. The Permanent Global Bond will
be exchangeable for Definitive Bonds in bearer form in the circumstances set out
in it. See "Summary of Provisions relating to the Bonds while in Global Form".
Definitive Bonds and Coupons will bear the following legend: "Any United States
person who holds this obligation will be subject to limitations under the United
States income tax laws, including the limitations provided in Sections 165(j)
and 1287(a) of the Internal Revenue Code".
2 STATUS
The Bonds and the Coupons constitute direct, unconditional and unsecured
obligations of the Issuer and rank and will rank pari passu without any
preference among themselves and (save for such exceptions as are from time to
time applicable under the laws of England and Wales) at least equally with all
other present and future unsecured and unsubordinated obligations of the Issuer.
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3 DEFINITIONS
"Electricity Act" means the Electricity Act 1989 as amended or re-enacted
from time to time and all subordinate legislation made pursuant thereto.
"Electricity Transmission Licence" means the transmission licence, as
subsequently amended from time to time, originally granted by the Secretary of
State for Energy to the Issuer under the Electricity Act.
"Group" means the Issuer and its Subsidiaries and "member of the Group"
shall be construed accordingly.
"Rated Securities" means (a) the Bonds or (b) such other comparable
unsecured and unsubordinated debt of the Issuer (or of any Subsidiary of the
Issuer and which is guaranteed on an unsecured and unsubordinated basis by the
Issuer) having an initial maturity of five years or more selected by the Issuer
from time to time for the purpose of this definition with the approval of the
Trustee and which possesses an investment grade rating (BBB-/ Baa3, or their
respective equivalents for the time being, or better) by any Rating Agency
(whether at the invitation of the Issuer or by its own volition).
"Rating Agency" means Standard and Poor's Ratings Services, a division of
The McGraw-Hill Companies Inc., or any of its Subsidiaries and their successors
or Moody's Investors Service, Inc. or any of its Subsidiaries and their
successors or any rating agency substituted for either of them (or any permitted
substitute of them) by the Issuer from time to time with the prior written
approval of the Trustee.
A "Rating Downgrading" shall, subject as provided in Condition 6(b), be
deemed to have occurred in respect of a Restructuring Event if the rating
assigned to the Rated Securities by any Rating Agency which is current
immediately prior to the occurrence of the Restructuring Event (whether provided
by a Rating Agency at the invitation of the Issuer or by its own volition) is
withdrawn or reduced from an investment grade rating (BBB-/Baa3, or their
respective equivalents for the time being, or better) to a non-investment grade
rating (BB+/ Bal, or their respective equivalents for the time being, or worse)
or, if the Rating Agency shall have already rated the Rated Securities below
investment grade (as described above), the rating is lowered one full rating
category (from BB+/Bal to BB/Ba2 or such similar lowering).
"Relevant Date" in respect of any payment means the date on which the
payment becomes due but, if the full amount of the moneys payable has not been
received by the Principal Paying Agent or by the Trustee on or prior to such due
date, it means the date on which the full amount of such moneys has been so
received and notice to that effect has been given to the Bondholders in
accordance with Condition 13.
"Restructuring Event" means the occurrence of any one or more of the
following events:
(a) (i) the Secretary of State for Trade and Industry or any official
succeeding to his functions gives the Issuer written notice of revocation
of the Electricity Transmission Licence in accordance with the terms as to
revocation set out in Schedule 2 of the Electricity Transmission Licence,
such revocation to become effective not later than 27 July 2028 or (ii) the
Issuer agrees in writing with the Secretary of State for Trade and Industry
or any official succeeding to his functions to any revocation or surrender
of the Electricity Transmission Licence or (iii) any legislation (whether
primary or subordinate) is enacted terminating or revoking the Electricity
Transmission Licence; or
(b) any modification is made to the terms and conditions of the Electricity
Transmission Licence other than such a modification which the Trustee, in
its opinion, considers to be not materially prejudicial to the interests of
the Bondholders and has so confirmed in writing to the Issuer; or
(c) any legislation (whether primary or subordinate) is enacted removing,
reducing or qualifying the duties or powers of the Secretary of State for
Trade and Industry or any official succeeding to his functions and/or the
Gas and Electricity Markets Authority under Section 3A of the Electricity
Act as compared with those in effect on 27 July 2001 other than such
legislation which the Trustee, in its opinion, considers to be not
materially prejudicial to the interests of the Bondholders and has so
confirmed in writing to the Issuer.
"Restructuring Period" means
(a) if at the time at which the Restructuring Event occurs there are Rated
Securities, the period of 90 days starting from and including the day on
which a Restructuring Event occurs or such longer period in which the Rated
Securities are under consideration (announced publicly within such 90 day
period) for rating review by a Rating Agency; or
30
(b) if at the time at which a Restructuring Event occurs there are no Rated
Securities, the period starting from and including the day on which a
Restructuring Event occurs and ending on the day 90 days following the date
on which a Negative Certification (as defined in Condition 6(a)) shall have
been given to the Issuer in respect of that Restructuring Event.
"Subsidiary," means a subsidiary within the meaning of Section 736 of the
Companies Act 1985 and "Subsidiaries" shall be construed accordingly.
4 INTEREST
The Bonds bear interest (calculated in accordance with the Actual/Actual
ISMA Day Count Convention) on their principal amount outstanding from, and
including, 27 July 2001 (the "Closing Date") at the rate of 6.50 per cent. per
annum payable annually in arrear on 27 July in each year (each an "Interest
Payment Date"). Each Bond will cease to bear interest from the due date for
redemption unless, upon due presentation, payment of principal is improperly
withheld or refused. In such event, it shall continue to bear interest at the
aforesaid rate (both before and after judgment) until, but excluding, whichever
is the earlier of (i) the day on which all sums due in respect of such Bond up
to that day are received by or on behalf of the relevant holder and (ii) the
seventh day after the Trustee or the Principal Paying Agent has notified
Bondholders in accordance with Condition 13 of receipt of all sums due in
respect of all the Bonds up to that day (except to the extent that there is a
failure in the subsequent payment to the relevant holders as provided in these
Conditions). Where interest is to be calculated in respect of a period which is
shorter than an Interest Period it shall be calculated on the basis of the
actual number of days in the relevant period from (and including) the first day
of such period to (but excluding) the last day of such period, divided by the
number of days in the Interest Period in which the relevant period falls
(including the first such day but excluding the last). The period beginning on
the Closing Date and ending on the first Interest Payment Date and each
successive period beginning on an Interest Payment Date and ending on the next
succeeding Interest Payment Date is called an "Interest Period".
5 REDEMPTION AND PURCHASE
(a) Final Redemption
Unless previously redeemed or purchased and cancelled, the Bonds will be
redeemed at their principal amount on 27 July 2028.
(b) Redemption for Taxation Reasons
If, immediately prior to the giving of the notice referred to below, the
Issuer satisfies the Trustee that, as a result of any amendment to or change in
the laws or regulations of the United Kingdom or of any political subdivision
thereof or any authority therein or thereof having power to tax or any change in
the official or generally accepted interpretation or application of such laws or
regulations in each case which becomes effective on or after the Closing Date,
the Issuer has or will on the next Interest Payment Date become obliged to pay
any additional amounts in accordance with Condition 8 (and such amendment or
change has been evidenced by the delivery by the Issuer to the Trustee (who
shall, in the absence of manifest error, accept such certificate and opinion as
sufficient evidence thereof) of (i) a certificate signed by two directors of the
Issuer on behalf of the Issuer stating that such amendment or change has
occurred (irrespective of whether such amendment or change is then effective)
and describing the facts leading thereto and stating that such obligation cannot
be avoided by the Issuer taking reasonable measures available to it and (ii) an
opinion in a form satisfactory to the Trustee of independent legal advisers of
recognised standing to the effect that such amendment or change has occurred
(irrespective of whether such amendment or change is then effective)), the
Issuer may (having given not less than 30 and not more than 90 days' notice to
the Trustee and to the Bondholders in accordance with Condition 13) redeem all,
but not some only, of the Bonds at their principal amount, together with
interest accrued up to, but excluding, the date fixed for such redemption,
provided that no such notice of redemption shall be given earlier than 90 days
prior to the earliest date on which the Issuer would be required to pay such
additional amounts were a payment in respect of the Bonds then due.
(c) Redemption at the Option of the Issuer
If, at any time, the principal amount outstanding of the Bonds is 10 per
cent. or less of the original principal amount of the Bonds, the Issuer may
(having given not less than 30 and not more than 90 days' notice to the Trustee
and to the Bondholders in accordance with Condition 13) redeem all, but not some
only, of the Bonds at their principal amount, together with interest accrued up
to, but excluding, the date fixed for such redemption.
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(d) Purchase
The Issuer or any of its Subsidiaries may, subject to any relevant laws or
regulations, at any time Purchase Bonds (with or without all unmatured Coupons
relating thereto being surrendered therewith) at Any price in the open market or
by private treaty. If purchases are made by tender, tenders must be available to
all Bondholders alike.
(e) Cancellation
All Bonds redeemed pursuant to any of the foregoing provisions will be
cancelled forthwith together with all unmatured Coupons attached thereto or
surrendered therewith and may not be reissued or resold. Any Bonds purchased
pursuant to Condition 5(d) or Condition 6 may, at the option of the Issuer, be
held or may be surrendered to a Paying Agent for cancellation, but may not be
resold.
6 REDEMPTION AT THE OPTION OF THE BONDHOLDERS
(a) Redemption following a Restructuring Event
If, at any time while any of the Bonds remains outstanding, a Restructuring
Event occurs and, within the Restructuring Period, either:
(i) if at the time at which the relevant Restructuring Event occurs there
are Rated Securities, a Rating Downgrading in respect of that
Restructuring Event also occurs; or
(ii) if at such time there are no Rated Securities, the Issuer is unable as
a result of such Restructuring Event to obtain a rating of the Bonds
or of any other comparable unsecured and unsubordinated debt of the
Issuer (or of any Subsidiary of the Issuer and which is guaranteed on
an unsecured and unsubordinated basis by the Issuer) having an initial
maturity of five years or more from a Rating Agency of at least
investment grade (BBB-/Baa3, or their respective equivalents for the
time being) (a "Negative Rating Event"), which rating the Issuer shall
use all reasonable endeavours to obtain,
and in any such case such Restructuring Event is certified in writing by an
independent financial adviser appointed by the Issuer and approved by the
Trustee (or, if the Issuer shall not have appointed such an adviser within
21 days after becoming aware of the occurrence of such Restructuring Event,
appointed by the Trustee (following consultation with the Issuer)) as being
in its opinion materially prejudicial to the interests of the Bondholders
(a "Negative Certification") (that Restructuring Event and the relevant
Rating Downgrading or, as the case may be, Negative Rating Event and, in
each case, the Negative Certification together constituting a "Put Event"),
then (unless at any time the Issuer shall have given a notice under
Condition 5(b)) or 5(c)) the holder of each Bond will have the right, upon
the giving of a Put Event Notice (as defined below), to require the Issuer
to redeem or, at the option of the Issuer, purchase (or procure the
purchase of) that Bond on the Put Date (as defined below) at its principal
amount together with interest (if any) accrued up to, but excluding, the
Put Date. Any certification by an independent financial adviser as
aforesaid as to whether or not, in its opinion, any Restructuring Event is
materially prejudicial to the interests of the Bondholders shall, in the
absence of manifest error, be conclusive and binding upon the Issuer, the
Trustee, the Bondholders and the Couponholders.
(b) Rating Downgrading or Negative Rating Event
A Rating Downgrading or a Negative Rating Event shall be deemed not to have
occurred in respect of or as a result of a Restructuring Event if the
Rating Agency making the relevant reduction in rating or declining to
assign a rating of at least investment grade as provided in these
Conditions does not announce or publicly confirm or otherwise inform the
Trustee that the reduction or declining was the result, in whole or in
part, of any event or circumstance comprised in or arising as a result of
the applicable Restructuring Event.
(c) Put Event Notice
Promptly upon the Issuer becoming aware that a Put Event has occurred, and
in any event not later than 14 days after the occurrence of a Put Event,
the Issuer shall, and at any time upon the Trustee becoming similarly so
aware the Trustee may, and if so requested by the holders of at least one-
quarter in principal amount of the Bonds then outstanding shall, give
notice (a "Put Event Notice") to the Bondholders in accordance with
Condition 13 specifying the nature of the Put Event and the procedure for
exercising the right described herein.
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(d) Procedure
To exercise the right to require redemption or, as the case may be,
purchase by the Issuer or by a purchaser procured by it of a Bond under
this Condition the Bondholder must deliver such Bond on any business day
(as defined in Condition 7) falling within the period (the "Put Period") of
45 days after the date of a Put Event Notice at the specified office of any
Paying Agent, accompanied by a duly completed and signed notice of exercise
in the form (for the time being current) obtainable from any specified
office of any Paying Agent (a "Put Notice") and in which the holder may
specify a bank account with a bank in London to which payment is to be made
under this Condition. The Paying Agent to which such Bond and Put Notice
are delivered shall issue to the Bondholder concerned a non-transferable
receipt in respect of the Bond so delivered. Payment in respect of any Bond
so delivered shall be made, if the holder duly specified a bank account in
the Put Notice to which payment is to be made, on the day (the "Put Date")
being the fourteenth day after the date of expiry of the Put Period by
transfer to that bank account and in every other case on or after the Put
Date against presentation and surrender or (as the case may be) endorsement
of such receipt at any specified office of any Paying Agent. A Put Notice,
once delivered, shall be irrevocable and the Issuer shall redeem or, as the
case may be, purchase (or procure the purchase of) all Bonds delivered on
the applicable Put Date. For the purposes of the Terms and Conditions and
the Trust Deed, receipts issued pursuant to this Condition shall be treated
as if they were Bonds.
(e) Trustee
The Trust Deed provides that the Trustee will not be bound to take any
steps to ascertain whether a Restructuring Event or a Put Event or any
event which could lead to the occurrence of or, together with other events,
constitute a Restructuring Event or a Put Event has occurred and that,
until it shall have express notice to the contrary, the Trustee will be
entitled to assume that no Restructuring Event or Put Event and no such
other event has occurred.
7 PAYMENTS
(a) Principal and Interest in Respect of the Bonds
Payments of principal and interest in respect of the Bonds will be made
against presentation and surrender (or, in the case of a partial payment,
endorsement) of Bonds or (as the case may be) the appropriate Coupons save
that if the due date for redemption of a Bond is not an Interest Payment
Date, accrued interest will be paid against presentation of the relevant
Bond at the specified office of any Paying Agent by sterling cheque drawn
on, or by transfer to a sterling account maintained by the payee with, a
bank in London. Payments of interest due in respect of any Bond other than
on presentation and surrender of matured Coupons shall be made only against
presentation and either surrender or endorsement (as appropriate) of the
relevant Bond.
(b) Payment Subject to Fiscal Laws
All payments are subject in all cases to any applicable fiscal or other
laws and regulations, but without prejudice to the provisions of Condition
8. No commissions or expenses shall be charged to the Bondholders or
Couponholders in respect of such payments.
(c) Payments on Business Days
If the due date for payment of any amount on any Bond or Coupon is not a
business day (as defined below), then the holder thereof will not be
entitled to payment of such amount until the next following business day
and will not be entitled to any further interest or other payment in
respect of such postponement. In these Conditions, "business day" means any
day on which banks are open for business in London and in the place of the
specified office of the Paying Agent at which the Bond or Coupon is
presented for payment.
(d) Paying Agents
The initial Principal Paying Agent is Citibank, N.A. and the other initial
Paying Agent and their respective initial specified offices are set out at
the end of these Conditions. The Issuer may at any time (subject to the
prior approval of the Trustee) vary or terminate the appointment of any
Paying Agent and appoint additional or other Paying Agents, provided that
it will at all times maintain (i) a Principal Paying Agent, (ii) Paying
Agents having specified offices in at least two major European cities
approved by the Trustee (including London, so long as the Notes are listed
on the Official List of the UK Listing Authority and admitted to trading on
the London Stock Exchange's market for
33
listed securities) and (iii) a Paying Agent with a specified office in a
European Union member state that will not be obliged to withhold or deduct
tax pursuant to any European Union Directive on the taxation of savings
implementing the conclusions of the ECOFIN Council meeting of 26-27
November 2000 or any law implementing or complying with, or introduced in
order to conform to, such Directive. Notice of any such termination or
appointment and of any change in the specified office through which any
Paying Agent acts will be given in accordance with Condition 13.
(e) Surrender of Unmatured Coupons
Each Bond should be presented for redemption (including exercise of the
Bondholders' option pursuant to Condition 6) together with all relative
unmatured Coupons (being Coupons which would otherwise fall due for payment
after the relevant due date for redemption or, as the case may be, the Put
Date), failing which all unmatured Coupons shall become void.
8 TAXATION
All payments by or on behalf of the Issuer in respect of the Bonds shall be
made without deduction or withholding for, or on account of, any present or
future taxes, duties, assessments or governmental charges of whatever nature
imposed or levied by or on behalf of the United Kingdom or any political
subdivision or authority thereof or therein having power to tax, unless such
deduction or withholding is required by law. In such event the Issuer shall pay
such additional amounts as may be necessary in order that the net amounts
received by the holders of Bonds or Coupons after such deduction or withholding
shall equal the amounts which would have been receivable by them had no such
deduction or withholding been required, except that no additional amounts shall
be payable in respect of any Bond or Coupon presented for payment:
(a) by or on behalf of a holder who is liable to such taxes, duties,
assessments or governmental charges in respect of such Bond or Coupon by
reason of his being connected with the United Kingdom otherwise than merely
by the holding of the Bond or Coupon; or
(b) by or on behalf of a holder who would not be liable or subject to deduction
or withholding by making a declaration of beneficial ownership of the Bond
or Coupon and of non-residence or other similar claim for exemption to the
relevant tax authority or to any relevant person; or
(c) more than 30 days after the Relevant Date except to the extent that the
holder thereof would have been entitled to such additional amounts on
presenting the same for payment on the last day of such period of 30 days
on the assumption, if such is not the case, that such last day was a
business day; or
(d) where such withholding or deduction is imposed on a payment to an
individual and is required to be made pursuant to any European Union
Directive on the taxation of savings implementing the conclusions of the
ECOFIN Council meeting of 26 - 27 November 2000 or any law implementing or
complying with, or introduced in order to conform to, such Directive; or
(e) by or on behalf of a Bondholder or a Couponholder who would have been able
to avoid such withholding or deduction by presenting the relevant Bond or
Coupon to another Paying Agent in a Member State of the European Union.
Any reference herein to the principal of and/or interest on the Bonds
shall be deemed to include any additional amounts which may be payable under
this Condition or under any obligations undertaken in addition hereto or in
substitution herefor pursuant to the Trust Deed.
9 PRESCRIPTION
Claims in respect of principal and interest shall be prescribed unless
presentation for payment is made as required by Condition 7 within a period of
12 years in the case of principal and six years in the case of interest from the
appropriate Relevant Date.
10 EVENTS OF DEFAULT
The Trustee at its discretion may, and if so requested in writing by the
holders of at least one-quarter in principal amount of the Bonds then
outstanding or if so directed by an Extraordinary Resolution (as defined in the
Trust Deed) of the Bondholders shall, subject in each case to its being
indemnified to its satisfaction, (but, in the case of the happening of any of
the events mentioned in sub- paragraphs (e) to (g) inclusive, other than default
in the performance or observance of any of the provisions of Conditions 5,6 and
7 or the appointment of an administrative or other receiver of the whole of the
undertaking or assets of the Issuer, only if the Trustee shall have certified in
writing to the Issuer
34
that such event is, in its opinion, materially prejudicial to the interests of
the Bondholders) give notice to the Issuer that the Bonds are, and they shall
accordingly thereby become, immediately due and repayable at their principal
amount, together with accrued interest (as provided in the Trust Deed), if any
of the following events shall occur:
(a) if default is made in the payment of any principal or interest in respect
of the Bonds or any of them and such default continues for 1.5 days or
more; or
(b) if an order is made or an effective resolution passed for the winding-up
of, or an administration Order is made in relation to, the Issuer (except
for the purposes of a reconstruction or amalgamation upon terms and within
such a period as may previously have been approved in writing by the
Trustee); or
(c) if the Issuer stops or threatens to stop payment (except for the purposes
of a reconstruction or amalgamation upon terms and within such a period as
may previously have been approved in writing by the Trustee); or
(d) if (i) any other present or future Relevant Indebtedness of the Issuer
becomes due and payable prior to Its stated maturity by reason of any
actual event of default, or (ii) any such Relevant Indebtedness is not paid
when due or, as the case may be, within any applicable grace period,
provided that the aggregate amount of the Relevant indebtedness in respect
of which one or more of the events mentioned above in this paragraph (d)
have occurred equals or exceeds (pound)40,000,000.
For the purposes of this Condition, "Relevant Indebtedness" means any
present or future indebtedness in the form of, or represented by, bonds,
notes, debentures, loan stock or other securities which are for the time
being, or are capable of being, quoted, listed or ordinarily dealt in on
any stock exchange.
(e) if an encumbrancer takes possession or an administrative or other receiver
is appointed of the whole or any part which in the opinion of the Trustee
is material of the undertaking or assets of the Issuer or if a distress,
execution or any similar proceeding is levied or enforced upon or sued out
against, in the opinion of the Trustee, a substantial part of the chattels
or property of the Issuer and in any such case is not removed, paid out or
discharged within 21 days (or such longer period as the Trustee may
approve); or
(f) if the Issuer is unable to pay its debts as they fall due or has any
voluntary arrangement proposed in relation to it under Section 1 of the
Insolvency Act 1986 or enters into any scheme of arrangement with its
creditors (other than for the purpose of reconstruction or amalgamation
upon terms and within such a period as may previously have been approved in
writing by the Trustee); or
(g) if default is made by the Issuer in the performance or observance of any
obligation, covenant, condition or provision binding on it under the Bonds
or the Trust Deed (other than any obligation for the payment of any
principal or interest in respect of the Bonds) and, except where, in the
opinion of the Trustee, such default is not capable of remedy (in which
case the Bonds will become due and repayable subject to, and immediately
upon, the Trustee certifying and giving notice as aforesaid), such default
continues for 4.5 days (or such longer period as the Trustee may approve)
after written notice by the Trustee to the Issuer specifying such default
and requiring the same to be remedied.
11 ENFORCEMENT
At any time after the Bonds become due and payable, the Trustee may, at its
discretion and without further notice, institute such proceedings against the
Issuer as it may think fit to enforce the provisions of The Trust Deed, the
Bonds and the Coupons, but it shall not be bound to take any such proceedings
unless (i) it shall have been so directed by an Extraordinary Resolution or so
requested in writing by Bondholders holding at least one-quarter in principal
amount of the Bonds then outstanding and (ii) it shall have been indemnified to
its satisfaction. No Bondholder or Couponholder may proceed directly against the
Issuer unless the Trustee, having become bound so to proceed, fails to do so
within a reasonable period and such failure shall be continuing.
12 REPLACEMENT OF BONDS AND COUPONS
If any Bond or Coupon is lost, stolen, mutilated, defaced or destroyed it
may be replaced at the specified office of the Paying Agent in London, subject
to all applicable laws and the requirements of any applicable stock exchange or
other relevant authority, upon payment by the claimant of the expenses
35
incurred in connection with such replacement and on such terms as to evidence
and indemnity as the Issuer may reasonably require. Mutilated or defaced Bonds
or Coupons must be surrendered before replacements will be issued.
13 NOTICES
Notices to holders of Bonds will be valid if published in an English
language leading daily newspaper having general circulation in the United
Kingdom (which is expected to be the Financial Times) or, if in the opinion of
the Trustee such publication is not practicable, in another English language
leading daily newspaper having general circulation in Europe. Any such notice
shall be deemed to have been given on the date of such publication or, if
published more than once, on the first date on which publication is made.
Couponholders will be deemed for all purposes to have notice of the contents of
any notice given to Bondholders in accordance with this Condition.
14 TRANSFER OF ELECTRICITY TRANSMISSION LICENCE
The Issuer has covenanted in the Trust Deed that it will not transfer or
consent to the transfer of its Rights as holder of the Electricity Transmission
Licence to any other person unless (i) that other person guarantees all amounts
payable under the Bonds, the Coupons and the Trust Deed or a trust deed is
executed or some other form of undertaking is given by such other person in form
and manner satisfactory to the Trustee agreeing to be bound by the Bonds, the
Coupons and the Trust Deed; (ii) consequential amendments are made to Conditions
6 and 10 so that the events referred to therein are applicable to such other
person as well as, in the case of Condition 10,to the Issuer; and (iii) the
Trustee is satisfied that the interests of the Bondholders will not be
materially prejudiced thereby.
15 MEETINGS OF BONDHOLDERS, MODIFICATION, WAIVER, REDENOMINATION AND
SUBSTITUTION
The Trust Deed contains provisions for convening meetings of Bondholders to
consider matters affecting their interests, including the modification of any of
these Conditions or any provisions of the Trust Deed. Any such modification may
be made if sanctioned by an Extraordinary Resolution. The quorum for any meeting
convened to consider an Extraordinary Resolution will be one or more persons
present holding or representing a clear majority in principal amount of the
Bonds for the time being outstanding or, at any adjourned meeting, one or more
persons present being or representing Bondholders whatever the principal amount
of the Bonds held or represented, unless the business of such meeting includes
consideration of proposals, inter alia, (i) to postpone the dates for payment of
principal On the Bonds or the dates on which interest is payable in respect of
Bonds, (ii) to reduce or cancel the principal amount of, or interest on, the
Bonds, (iii) to change the currency of payment of the Bonds or the Coupons
(except where the Trustee is exercising its power to facilitate payment in Euro
as set out in the paragraph below) or (iv) to modify the provisions concerning
the quorum required at any meeting of Bondholders or the majority required to
pass an Extraordinary Resolution, in which case the necessary quorum will be one
or more persons present holding or representing not less than two-thirds, or at
any adjourned meeting not less than one-third, in principal amount of the Bonds
for the time being outstanding. Any Extraordinary Resolution duly passed shall
be binding on all Bondholders (whether or not they were present at the meeting
at which such resolution was passed) and on all Couponholders.
The Trustee may agree, without the consent of the Bondholders or
Couponholders, to (i) any modification of any of these Conditions or any
provisions of the Trust Deed which is of a formal, minor or technical nature or
is made to correct a manifest error and (ii) any other modification (except as
mentioned in the Trust Deed) of, and any waiver or authorisation of any breach
or proposed breach of, any of these Conditions or any provisions of the Trust
Deed which is in the opinion of the Trustee not materially prejudicial to the
interests of the Bondholders. The Trustee may agree, without the consent of The
Bondholders or Couponholders, on or after the Specified Date (as defined below),
to such modifications to the Bonds and the Trust Deed in order to facilitate
payment of interest in euro and Redemption at the euro equivalent of the
sterling principal amount of the Bonds (including indexation in respect thereof)
and associated reconventioning, renominalisation and related matters as may be
proposed by the Issuer (and confirmed by an independent financial institution
approved by the Trustee to be in conformity with then applicable market
conventions) provided that the Issuer shall be under no obligation to make any
such proposals. For these purposes, "Specified Date" means the date on which The
United Kingdom participates in the third stage of European Economic and Monetary
Union pursuant to the Treaty establishing the European Community or otherwise
participates in European Economic and Monetary Union in a similar manner. Any
such modification, authorisation or waiver shall be binding on The Bondholders
and the Couponholders and, if the Trustee so requires, any modification referred
to
36
above shall be notified by the Issuer to the Bondholders as soon as practicable
in accordance with Condition 13.
The Trustee may, without the consent of the Bondholders or Couponholders,
agree with the Issuer To the substitution in place of the Issuer (or any
previous substitute under this Condition) as the principal debtor under the
Bonds, the Coupons and the Trust Deed of any Subsidiary or any holding company
of the Issuer, subject to (a) the Bonds being unconditionally and irrevocably
guaranteed by the Issuer, (b) the Trustee being satisfied that the interests of
the Bondholders will not be materially prejudiced by the substitution and (c)
certain other conditions set out in the Trust Deed being complied with.
In connection with the exercise of its functions (including but not limited
to those in relation to any proposed modification, waiver, authorisation or
substitution) the Trustee shall not have regard to the consequences of such
exercise for individual Bondholders or Couponholders and the Trustee shall not
be entitled to require, nor shall any Bondholder or Couponholder be entitled to
claim, from the Issuer or any other person, any indemnification or payment in
respect of any tax consequences of any such exercise upon individual Bondholders
or Couponholders.
16 INDEMNIFICATION OF THE TRUSTEE
The Trust Deed contains provisions for the indemnification of the Trustee
and for its relief from responsibility. The Trustee will be entitled to enter
into business transactions with the Issuer and any of its Subsidiaries without
accounting for any profit resulting therefrom.
17 FURTHER ISSUES
The Issuer may from time to time without the consent of the Bondholders or
Couponholders create and issue further bonds or notes either having the same
Conditions as the Bonds in all respects (or in all respects except for the first
payment of interest on them) and so that such further issue shall be
consolidated and form a single series with the outstanding bonds or notes of any
series (including the Bonds) or upon such terms as to interest, premium,
redemption, ranking and otherwise as the Issuer may determine at the time of
their issue. Any further bonds or notes forming a single series with the
outstanding bonds or notes of any series (including the Bonds) constituted by
the Trust Deed or any deed supplemental to it shall, and any other bonds or
notes may (with the consent of the Trustee), be constituted by a deed
supplemental to the Trust Deed. The Trust Deed contains provisions for convening
a single meeting of the Bondholders and the holders of bonds or notes of other
series in certain circumstances where the Trustee so decides. In these
Conditions, unless the context otherwise requires and subject to any provision
to the contrary in the Trust Deed, the expression "Bonds" shall include any
further bonds issued in accordance with this Condition and forming a single
series with the Bonds.
18 CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
No person shall have any right to enforce any term or condition of the
Bonds under the Contracts (Rights of Third Parties) Act 1999.
19 GOVERNING LAW
The Trust Deed, the Bonds and the Coupons are governed by, and will be
construed in accordance with, English law.
USE OF PROCEEDS
The net proceeds of the issue of the Fixed Rate Bonds, which are expected
to amount to approximately (pound)3,57,501,600, will be used for general
corporate purposes.
37
SUMMARY OF PROVISIONS RELATING TO THE
BONDS WHILE IN GLOBAL FORM
Each Temporary Global Bond and each Permanent Global Bond contain
provisions which apply to the Bonds while they are in global form, some of which
modify the effect of the terms and conditions of the Bonds set out in this
document. The following is a summary of certain of those provisions. References
to a particular Condition are to a Condition of the relevant Bonds.
1 EXCHANGE
Each Temporary Global Bond is exchangeable in whole or in part (free of
charge to the holder) for interests in a Permanent Global Bond on or after a
date which is expected to be 4 September 2001 upon certification as to non-U.S.
beneficial ownership in the form set out in such Temporary Global Bond. Each
Permanent Global Bond is exchangeable in whole but not in part (free of charge
to the holder) for The Definitive Bonds described below (i) if such a Permanent
Global Bond is held on behalf of Euroclear Or Clearstream, Luxembourg or an
alternative approved clearing system and such clearing system is closed for
business for a continuous period of 14 days (other than by reason of holidays,
statutory or otherwise) or announces an intention permanently to cease business
or does in fact do so by such holder giving notice to the Principal Paying Agent
or (ii) if the Issuer would suffer a disadvantage in respect of the Bonds as a
result of a change in laws or regulations (taxation or otherwise) of any
jurisdiction referred to in Condition 10 of the RPI Bonds and the LPI Bonds and
Condition 8 of the Fixed Rate Bonds or as a result of a change in the practice
of Euroclear or Clearstream, Luxembourg or an alternative approved clearing
system which would not be suffered were the Bonds represented by such Permanent
Global Bond in definitive form and a certificate to such effect signed by two
Directors of the Issuer is delivered to the Trustee by the Issuer giving notice
to the Principal Paying Agent and the Bondholders of its intention to exchange
such Permanent Global Bond for Definitive Bonds on or after the Exchange Date
specified in the notice.
On or after the Exchange Date (as defined below) relating to a Permanent
Global Bond the holder of such Permanent Global Bond may (in the case of (i)
above) and shall (in the case of (ii) above) surrender such Permanent Global
Bond to or to the order of the Principal Paying Agent. In exchange for such
Permanent Global Bond, the Issuer will deliver, or procure the delivery of, an
equal aggregate principal amount of duly executed and authenticated Definitive
Bonds (having attached to them all Coupons in respect of interest which has not
already been paid on such Permanent Global Bond), security printed in accordance
with any applicable legal and stock exchange or other relevant authority
requirements and in or substantially in the form set out in Schedule 3 to the
relevant Trust Deed.
"Exchange Date" means a day falling not less than 60 days after that on
which the notice requiring exchange is given and on which banks are open for
business in the city in which the specified office of the Principal Paying Agent
is located and, except in the case of exchange pursuant to (i) above, in the
cities in which the relevant clearing system is located.
2 PAYMENTS
No payment will be made on a Temporary Global Bond unless exchange for an
interest in the relevant Permanent Global Bond is improperly withheld or refused
by or on behalf of the Issuer. Payments of principal and interest in respect of
Bonds represented by a Permanent Global Bond will be made against presentation
for endorsement and, if no further payment falls to be made in respect of such
Bonds, surrender of such Permanent Global Bond to or to the order of the
Principal Paying Agent or such other Paying Agent as shall have been notified to
Bondholders for such purpose. A record of each payment so made will be endorsed
in the appropriate schedule to such Permanent Global Bond, which endorsement
will be prima facie evidence that such payment has been made in respect of the
Bonds represented by such Permanent Global Bond. No person shall be entitled to
receive any payment on a Permanent Global Bond falling due after the Exchange
Date in respect thereof unless exchange of such Permanent Global Bond for
Definitive Bonds is improperly withheld or refused by or on behalf of the
Issuer. Condition l0(e) of the RPI Bonds and the LPI Bonds and Condition 8(e) of
the Fixed Rate Bonds will apply to Definitive Bonds only.
3 NOTICES
So long as Bonds are represented by a Permanent Global Bond and such
Permanent Global Bond is held on behalf of Euroclear or Clearstream, Luxembourg
or an alternative approved clearing system, notices to Bondholders may be given
by delivery of the relevant notice to that clearing system for communication by
it to entitled accountholders in substitution for notification as required by
the
38
Conditions; except that so long as the Bonds are listed on the Official List of
the UK Listing Authority and are admitted to trading on the London Stock
Exchange's market for listed securities and the rules of the UK Listing
Authority or the London Stock Exchange, as the case may be, so requires notices
shall be published in a leading English language daily newspaper having general
circulation in the United Kingdom (which is expected to be the Financial Times)
any such Notice given only by delivery as aforesaid shall be deemed to have been
given on the seventh day after that on which such notice is delivered to
Clearstream, Luxembourg and/or Euroclear, as the case may be, as aforesaid.
4 PRESCRIPTION
Any claims against the Issuer in respect of principal and interest on Bonds
represented by a Permanent Global Bond will become void unless it is presented
for payment within a period of 12 years (in the case of principal) and six years
(in the case of interest) from the appropriate Relevant Date (as defined in
Condition 3).
5 MEETINGS
The holder of a Permanent Global Bond will be treated as being one person
for the purposes of any quorum requirements of, or the right to demand a poll
at, a meeting of Bondholders and, at any such meeting, as having one vote in
respect of each (pound)1,000 principal amount of Bonds for which such Permanent
Global Bond may be exchanged.
6 CANCELLATION
Cancellation of any Bond represented by a Permanent Global Bond required by
the Conditions to be cancelled following its redemption or purchase will be
effected by reduction in the principal amount of such Permanent Global Bond.
7 TRUSTEE'S POWERS
In considering the interests of Bondholders while a Permanent Global Bond
is held on behalf of Euroclear or Clearstream, Luxembourg and/or an alternative
approved clearing system the Trustee may have regard to any information provided
to it by such clearing system or its operator as to the identity (either
individually or by category) of its accountholders with entitlements to the
Bonds represented by such Permanent Global Bond and may consider such interests
as if such accountholders were the holder of such Permanent Global Bond.
8 PUT OPTION
The Bondholders' put option in Condition 6 may be exercised by the holder
of a Permanent Global Bond giving notice to the Principal Paying Agent of the
principal amount of Bonds represented by such Permanent Global Bond in respect
of which the option is exercised and presenting the Permanent Global Bond for
endorsement of exercise within the time limits specified in Condition 6.
39
CAPITALISATION OF THE GROUP
The following is a summary of the historic cost capital and reserves as at
31 March 2001 and indebtedness as at 31 March 2001 of the Issuer and its
subsidiaries:
CAPITAL AND RESERVES AT 31 MARCH 2001
(POUND)
MILLION
-------
Authorised 200,000,000 ordinary shares of (pound)l each ............... 200.0
Authorised 74,803,600 preference shares of (pound)1 each .............. 74.8
-------
Issued, allotted, called up and fully paid 6,374 ordinary shares ...... --
Issued, allotted, called up and fully paid 43,406,000 preference shares 43.4
Share premium account ................................................. 454.1
Capital redemption reserve ............................................ 0.1
Profit and loss account ............................................... 638.1
-------
1,135.7
=======
INDEBTEDNESS AT 31 MARCH 2001
Amounts due within one year
Bank loans and overdrafts ............................................. 69.9
Commercial paper ...................................................... 107.3
Current portion of long term loans .................................... --
Amounts due after more than one year
Repayable wholly within five years .................................... 663.6
Repayable after five years ............................................ 923.9
-------
Total Indebtedness .................................................... 1,764.7
=======
CONTINGENT LIABILITIES AND GUARANTEES AT 31 MARCH 2001
-------
Performance bonds and guarantees ...................................... 36.2
=======
- -----------------
Notes:
1 The table does not include indebtedness in respect of the Bonds now being
issued.
2 The Issuer's distributable reserves at 31 March 2001 amounted to (pound)4.7
million.
3 The preference shares are held by the immediate parent undertaking, The
National Grid Holdings Limited.
4 There has been no change in the authorised and issued share capital of the
Issuer and no material adverse change in the reserves of the Issuer.
5 Save for the Bonds now being issued, there has been no material change in
the indebtedness or contingent liabilities and guarantees of the Issuer
since 31 March 2001.
6 At 31 March 2001, the Issuer had cash and deposits amounting to (pound)29.3
million and net receivables due from other companies within the National
Grid Group plc group of companies of (pound)145.5 million.
7 The information contained in this Statement is extracted from the Issuer's
audited consolidated financial statements as at 31 March 2001.
8 All of the indebtedness in the above table is unsecured and unguaranteed.
40
THE NATIONAL GRID COMPANY PLC
GENERAL
The Issuer is the owner and operator of the electricity transmission system
(the "Transmission System") in England and Wales and is the sole holder of a
transmission licence (the "Transmission Licence") in England and Wales. The
Issuer is required by the Electricity Act 1989 (the "Electricity Act") to
develop and maintain an efficient, co-ordinated and economical system of
electricity transmission and to facilitate competition in the supply and
generation of electricity. Since the introduction of the new electricity trading
arrangements ("NETA") on 27 March 2001, under the Electricity Act, the Issuer is
also obliged to operate an efficient co-ordinated market and an economical
transmission system. The Issuer is also responsible for reinforcing, renewing
and maintaining the Transmission System to meet the requirements of customers
and to ensure continued compliance with the security standards set out in the
Transmission Licence. The Issuer derives the vast majority of its turnover and
profits from charges for services provided by its transmission business (the
"Transmission Business") to, inter alia, generators, interconnected parties,
distributors, suppliers and directly-connected customers. Its other businesses
include the procurement of balancing services and the operation of the
interconnectors with Scotland, France and the Isle of Man. The Issuer is a
wholly-owned subsidiary of National Grid Group plc ("NGG"). NGG's shares were
admitted to the Official List of the London Stock Exchange on 11 December 1995
and its American Depositary Shares were listed on the New York Stock Exchange on
7 October 1999. The Issuer has three wholly-owned trading subsidiaries, Elexon
Limited, NGC Leasing Limited and NGC Properties Limited.
THE BUSINESS OF THE ISSUER
TRANSMISSION BUSINESS
PHYSICAL ASSETS
The Transmission Business comprises the planning, development,
construction, maintenance and operation of the Transmission System in England
and Wales, operating predominantly at voltages of 400kV and 275kV and includes
the provision of connections to the Transmission System. The Issuer owns and
operates the Transmission System which consists of approximately 4,400 miles of
overhead lines and approximately 400 miles of underground cable, together with
substations at over 300 sites.
OPERATIONS OF THE TRANSMISSION SYSTEM
NETA
The Department of Trade and Industry ("DTI") and the Office of the Gas and
Electricity Markets Authority ("Ofgem") undertook an extensive review of, and
wide-ranging consultation on, the proposed arrangements for a new wholesale
electricity market for England and Wales to replace the Electricity Pool of
England and Wales. Details of NETA were published jointly by the DTI and Ofgem
in a document dated 21 October 1999 and the document formed the basis of the new
arrangements to be implemented by participants across the electricity industry.
NETA was introduced on 27 March 2001. Certain aspects of NETA are now dealt with
in the Utilities Act 2000.
The Issuer made a considerable contribution to the development of NETA and
played a significant role in its implementation. NETA has had significant
operational implications for the Issuer and implications for the manner in which
it contracts for the provision of ancillary services, which form part of
balancing services. NETA represents a fundamental shift to trading arrangements
based on bilateral contracts, similar to other commodity markets. However, NETA
has not had significant financial implications for the Issuer.
TRANSMISSION REVENUE
Amongst its other provisions, the Transmission Licence separates the
Issuer's Transmission Business activities into the two distinct roles of
transmission asset owner ("TO") and system operator ("SO") and sets limits on
its annual revenue from each of these.
Transmission asset owner activity
As TO, the Issuer is responsible for the development, operation and
maintenance of the transmission network and recovers its costs, including a
return on capital employed, through charges to generators, distributors and
suppliers of electricity for use of and connection to the Transmission System.
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Under the revenue restriction condition set out in the Transmission
Licence, the Issuer's revenue from charges for use of the Transmission System
and for connections made before March 1990 is permitted to increase each year in
line with the Retail Price Index ("RPI"), minus an efficiency factor, X. In the
current revenue restriction, which was introduced on 1 April 2001, X has been
set at 1.5 from April 2002. The revenue restriction is revenue from time to time
by the Gas and Electricity Markets Authority. The current revenue restriction is
expected to remain in force until March 2006.
The Issuer is permitted by the Transmission Licence to set charges for
connections to the Transmission System made since March 2000 to recover the cost
directly or indirectly incurred in providing connection, together with a
reasonable rate of return on such costs.
System operator activity
As SO, the Issuer is responsible for the control of the transmission
system, including:
- -- the procurement of the ancillary services required to ensure network
stability and security; and
- -- the provision of balancing services, comprising the acceptance by the
Issuer of "bids" (proposed trades to decrease generation or increase
demand) or "offers" (proposed trades to increase generation or decrease
demand) as necessary to enable it to balance generation and demand for
electricity in real time throughout the day.
The Issuer is permitted by the Transmission Licence to recover the costs it
incurs in procuring ancillary services, together with a small profit margin.
The Issuer recovers the costs incurred in the balancing services activity
through balancing services use of system charges. Its revenue from these charges
is regulated by means of a Balancing Services Incentive Scheme ("BSIS") set out
in the Transmission Licence. The BSIS was introduced on 27 March 2001 and sets a
target for the costs incurred by the Issuer in balancing the system in the
period up to March 2002. If costs are below (pound)471 million, the Issuer will
retain 40 per cent. of the savings up to a maximum potential income of 545
million. If costs are more than 5500 million, the Issuer will bear 12 per cent.
of the excess up to a maximum potential liability of 525 million.
INTERCONNECTORS
The Issuer derives income from charges for the use of its interconnectors
with Scotland, France and the Isle of Man. Under the terms of the Transmission
Licence, the Issuer is at present required to set its charges for the use of its
interconnectors with Scotland and France at a level designed to recover no more
than a reasonable rate of return on the capital represented by the
interconnectors. The interconnector with the Isle of Man is unlicensed and not
subject to this restriction.
In February 2000, NGG was selected by the Basslink Development Board in
Australia to build, own and operate an interconnector between the island of
Tasmania and the State of Victoria on the Australian mainland, across the Bass
Strait. Construction is expected to commence at the end of 2001 and the project
is expected to be completed by the end of 2003.
REGULATION
The Electricity Act makes it an offence to generate, transmit or supply
electricity unless authorised to do so by licence or exemption. Other principal
regulatory provisions relating to electricity transmission are set out in the
Electricity Act, in regulations or orders made under or pursuant to the
Electricity Act and in the Transmission Licence. The Electricity Act is being
amended by the Utilities Act 2000, with the amendments being introduced over a
period of time. Once the Utilities Act is fully in force, distribution will also
become a licensable activity. Other changes introduced by the Utilities Act
include standard conditions being introduced in the Issuer's Transmission
Licence, new duties for Ofgem and new powers regarding the enforcement of
licences, together with the establishment of Ofgem.
The Secretary of State and Ofgem each have a principal statutory objective
under the Electricity Act to carry out their functions to protect the interest
of consumers of electricity (where appropriate by promoting competition in the
electricity industry) having regard to the need to ensure that all reasonable
demands for electricity are met and the need to ensure that licence holders are
able to finance activities which are the subject of obligations imposed by Part
I of the Electricity Act or the Utilities Act 2000.
The Transmission Licence came into effect on vesting and, unless revoked,
will continue in force until determined by not less than 25 years' notice by the
Secretary of State. The Transmission Licence may be revoked by the Secretary of
State in specified circumstances, including non-payment of fees,
42
insolvency, change in the control of the Issuer, cessation of the Transmission
Business and non-compliance with enforcement orders made by Ofgem and
non-compliance with orders issued by the Secretary of State under certain
provisions of general competition legislation.
The Issuer is prohibited by the Transmission Licence from purchasing or
otherwise acquiring electricity on its own account for the purpose of sale to
third parties. Since the introduction of NETA, the exceptions to the prohibition
will change to except the procurement or use of balancing services or the
purchase or acquisition where such purchase or acquisition is with the consent
of Ofgem.
The Transmission Licence contains restrictions on the Issuer's total
revenue derived from its transmission network services and its transmission
services activities. The Issuer is required to use its best endeavours to ensure
that its total revenue from these sources in any one year does not exceed the
aggregate of its permitted maximum revenue from these activities under the
Transmission Licence.
ENVIRONMENTAL LAW AND REGULATION
In the United Kingdom, the Issuer is subject to environmental legislation
and regulation. The Water Resources Act 1991 and the Environmental Protection
Act 1990, as amended by the Environment Act 1995, constitute the primary
environmental legislation affecting the activities of the Issuer. Under these
statutes, it is an offence to pollute the environment.
Electric and magnetic fields ("EMFs") arise from, among other sources, the
transmission, distribution and use of electricity. Concerns have been raised
about the possible health effects of EMFs and research into this issue has been
in progress in many countries for several years. The Issuer carries out its
operations in line with guidance on EMFs issued by the National Radiological
Protection Board, an independent statutory body, which has stated that it does
not consider that the results of published studies provide a basis for any
additional restriction on human exposure to EMFs. This position is supported by
the results of the United Kingdom Childhood Cancer study published in December
1999.
A European Union recommendation (the "Recommendation") on limitation of
exposure of the general public to EMFs has been adopted by the European Union's
Council of Ministers. The Recommendation is based on guidelines issued in 1998
by the International Commission on Non-Ionising Radiation Protection and
recommends certain public exposure levels subject to qualifications contained in
the Recommendation. The Recommendation is addressed to European Union member
governments and not to individual companies. The United Kingdom Government is
considering how the qualifications should be interpreted and therefore how the
Recommendation should be implemented in the United Kingdom and it is not yet
possible to assess the cost (if any) to the Issuer of compliance with the
Recommendation.
PRICE CONTROLS
In determining the price controls applicable to the Issuer, Ofgem assumes
an allowed rate of return on equity and an efficient capital structure as to the
levels of debt and equity. The Issuer intends to match the gearing levels
assumed by Ofgem by increasing its borrowings and making dividend distributions
and reorganising its share capital and reserves as necessary. The Transmission
Licence contains certain regulatory constraints which must be complied with
prior to the declaration of dividends.
THE NGG GROUP
In April 1990, the Issuer became a wholly-owned subsidiary of NGG (then
named "The National Grid Holding plc"). NGGs shares were admitted to the
Official List of the London Stock Exchange on 11 December 1995 and its American
Depositary Shares were listed on the New York Stock Exchange on 7 October 1999.
ENERGIS
In 1993, the NGG group established Energis plc ("Energis"), a subsidiary of
NGG which was granted a public telecommunications operator's licence to provide
telecoms services using a long-distance telecommunications network constructed
predominantly on the electricity transmission network. By 1997, the business of
Energis had grown significantly, and application was made for its shares to be
admitted to the official list of the London Stock Exchange, which was effected
in December 1997. As part of this process, NGG disposed of just over 25 per
cent. of its shareholding in Energis by way of a placing to institutional
investors.
On 22 January 1999, NGG offered for sale 60 million ordinary shares in
Energis in an offering of ordinary shares and simultaneously offered Equity Plus
Income Convertible Securities which were
43
mandatorily exchangeable into up to 14.7 million Energis shares. The value of
the combined offerings was approximately (pound)1.2 billion. On 9 February 2000,
NGG disposed of a further 28.9 million ordinary shares of Energis for
(pound)0.95 billion. As at 31 March 2001, NGG retains voting rights over 32.8
per cent. of the total Energis shares in issue. NGG has indicated that it
intends to sell its stake in Energis in the short to medium term.
NEES AND EUA
On 22 March 2000, NGG acquired New England Electricity System ("NEES"), an
electricity transmission and distribution business operating in north-eastern
USA at a cost of US$3,217 million. NEES, renamed National Grid USA is now a
wholly-owned subsidiary of NGG. On 19 April 2000, National Grid USA acquired
Eastern Utilities Associates, an electricity transmission and distribution
business operating in Massachusetts and Rhode Island, adjacent to National Grid
USA's existing service territories, at a cost of US$520 million.
ACQUISITION OF NIAGARA MOHAWK
On 5 September 2000, NGG and Niagara Mohawk Holdings, Inc. ("Niagara
Mohawk"), the second largest combined electricity and gas utility in New York
State (by customer numbers), announced that NGG had agreed to acquire Niagara
Mohawk (the "Acquisition"). The shareholders of Niagara Mohawk and of NGG voted
in favour of the Acquisition at shareholder meetings held on 19 January 2001 and
29 January 2001 respectively. The expected acquisition cost at the time of
announcement was US$3.0 billion. The shareholders of Niagara Mohawk will receive
consideration of US$19.00 per Niagara Mohawk share, subject to adjustment to
reflect the price of NGG's shares during a specified period shortly before
completion of the Acquisition and will be able to elect to receive their
consideration in cash, shares in a new holding company of NGG or a combination
thereof. NGG expects to meet approximately half of the acquisition cost in cash.
The Acquisition is subject to a number of conditions, including regulatory and
other consents and approvals in the U.S. and is expected to be completed by late
2001.
AUCTION OF NIAGARA MOHAWK'S NUCLEAR ASSETS
On 12 December 2000, Niagara Mohawk announced an agreement to sell its
nuclear assets, comprising 100 per cent. of Nine Mile Point Nuclear Station Unit
No. 1 and 41 per cent. of Nine Mile Point Nuclear Station Unit No. 2, to
Constellation Nuclear, a wholly-owned subsidiary of Constellation Energy Group
Inc., for a total consideration of U.S.$610 million (subject to adjustment). In
addition, Niagara Mohawk will transfer to Constellation Nuclear its existing
decommissioning funding and Niagara Mohawk will have no further funding
obligation relating to decommissioning. The asset sale agreement is subject to
various regulatory approvals including those of the Nuclear Regulatory
Commission, FERC and the NYPSC. The sale is targeted to close in mid 2001.
RECENT DEVELOPMENTS
DISPOSAL OF ESIS, EPFAL AND DATUM
On 1 February 2001, NGG completed the sale of two of its subsidiary
companies, Energy Settlements and Information Services Limited ("ESIS") and
Energy Pool Funds Administration Limited ("EPFAL") for an aggregate net
consideration of approximately (pound)38 million in cash. ESIS ran the former
settlement system of the Electricity Pool of England and Wales and provided
consultancy services for customers in the electricity market. EPFAL acted as the
financial clearing house for the wholesale trading of electricity in England and
Wales. On 7 February 2001, NGG completed the sale of another of its
subsidiaries, Datum Solutions Limited ("Datum"), to Siemens Metering Limited,
for approximately (pound)3 million in cash plus further consideration payable in
accordance with the terms of an earn-out. Datum had operated NGG's metering
business. These disposals are in accordance with NGG's strategy of focusing on
electricity and telecoms networks.
RELATIONSHIP WITH UK GOVERNMENT
The Secretary of State retains a special share in NGG, which is a special
rights non-voting redeemable preference share of (pound)l. Certain provisions in
the articles of association of NGG cannot be altered or removed without the
prior written consent of the holder of the Special Share. One such provision
prevents any person, with limited exceptions, from having an interest in 15 per
cent. or more, and the holder of a licence under the Electricity Act (or any
affiliate) or any group of companies of which
44
a Regional Electricity Company ("REC") is a member, from having an interest of
1 per cent. or more, in the voting share capital of NGG. In accordance with the
articles of association of NGG, none of the RECs now has an interest of 1 per
cent. or more of the voting share capital of NGG.
DIRECTORS
The Directors of the Issuer, their functions and principal directorships
outside the NGG group, are as follows:
Roger Urwin Chairman Non-executive Director of Energis,
The Special Utilities Investment
Trust PLC and TotalFinaElf
Exploration UK plc
Steven Holliday Chief Executive
Stephen Box Non-Executive Director Non-executive Director of Energis
and Michael Page International
PLC
Charles Davies Commercial Director
Colin Buck Finance Director
The business address of each of the above is National Grid House, Kirby
Corner Road, Coventry CV4 8JY.
45
UNITED KINGDOM TAXATION
The comments below are of a general nature based on the Issuer's
understanding of current United Kingdom law and practice. They do not
necessarily apply where the income is deemed for tax purposes to be the income
of any other person. They relate only to the position of persons who are the
absolute beneficial owners of their Bonds and Coupons and may not apply to
certain classes of persons such as dealers or certain professional investors.
Any holders of Bonds or Coupons who are in doubt as to their own tax position
should consult their professional advisers.
1. INTEREST
While the Bonds continue to be listed on a recognised stock exchange within
the meaning of section 841 Income and Corporation Taxes Act 1988, payments
of interest may be made without withholding or deduction for or on account
of income tax.
Persons in the United Kingdom paying interest to or receiving interest on
behalf of another person may be required to provide certain information to
the United Kingdom Inland Revenue regarding the identity of the payee or
person entitled to the interest and, in certain circumstances, such
information may be exchanged with tax authorities in other countries.
If the Bonds cease to be listed interest will generally be paid under
deduction of income tax at the lower rate (currently 20 per cent.) subject
to any direction to the contrary from the Inland Revenue in respect of such
relief as may be available pursuant to the provisions of any applicable
double taxation treaty.
The interest has a United Kingdom source and accordingly may be chargeable
to United Kingdom tax by direct assessment. Where the interest is paid
without withholding or deduction, the interest will not be assessed to
United Kingdom tax in the hands of holders of the Bonds who are not
resident in the United Kingdom, except where such persons carry on a trade,
profession or vocation in the United Kingdom through a United Kingdom
branch or agency in connection with which the interest is received or to
which the Bonds are attributable, in which case (subject to exemptions for
interest received by certain categories of agent) tax may be levied on the
United Kingdom branch or agency.
If interest were paid under deduction of United Kingdom income tax (e.g. if
the Bonds lost their listing), Bondholders who are not resident in the
United Kingdom may be able to recover all or part of the tax deducted if
there is an appropriate provision in an applicable double taxation treaty.
Bondholders should note that the provisions relating to additional amounts
referred to in "RPI Bond Conditions-taxation", "LPI Bond Conditions-
taxation", "Fixed Rate Bond Conditions-taxation", as the case may be, above
would not apply if the Inland Revenue sought to assess directly the person
entitled to the relevant interest to United Kingdom tax. However exemption
from, or reduction of, such United Kingdom tax liability might be available
under an applicable double taxation treaty.
2. PROPOSED EU DIRECTIVE ON THE TAXATION OF SAVINGS INCOME
The European Union is currently considering proposals for a new directive
regarding the taxation of savings income. Subject to a number of important
conditions being met, it is proposed that Member States will be required to
provide to the tax authorities of another Member State details of payments
of interest or other similar income paid by a person within its
jurisdiction to an individual resident in that other Member State, subject
to the right of certain Member States to opt instead for a withholding
system for a transitional period in relation to such payments.
3. DISPOSAL (INCLUDING REDEMPTION)
3.1 Corporate Bondholders
Bondholders within the charge to United Kingdom corporation tax will be
subject to tax as income on all profits and gains arising from, and from
fluctuations in the value of, the Bonds broadly in accordance with their
statutory accounting treatment. Such holders will generally be charged in
each accounting period by reference to interest and any profit or loss
which in accordance with such Bondholder's authorised accounting method, is
applicable to that period. Fluctuations in value relating to foreign
exchange gains and losses in respect of the Bonds will be brought into
account as income.
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3.2 Other Bondholders
The Bonds should constitute "qualifying corporate bonds" within the meaning
of Section 117 of the Taxation of Chargeable Gains Act 1992 (although,
because the Trustee has the power to consent to payment of interest and
redemption in euro on or after the date on which the United Kingdom
participates in the third stage of European economic and monetary union,
the Inland Revenue have indicated that this is not correct in their view).
Accordingly, a disposal by a Bondholder (or a redemption of the Bonds) will
not give rise to a chargeable gain or an allowable loss for the purposes of
the UK taxation of chargeable gains. (If the Inland Revenue's view is
correct, disposals of the Bonds could give rise to chargeable gains or
allowable losses for the purposes of the UK taxation of chargeable gains).
A transfer of a RPI Bond or Fixed Rate Bond by a holder resident or
ordinarily resident for tax purposes in the United Kingdom or who carries
on a trade in the United Kingdom through a branch or agency to which the
RPI or Fixed Rate Bond is attributable may give rise to a charge to tax on
income in respect of an amount representing interest on the RPI Bond or
Fixed Rate Bond which has accrued since the preceding interest payment
date.
The LPI Bonds are likely to be regarded by the Inland Revenue as
"variable rate securities". Accordingly, a transfer of a LPI Bond by a
holder resident or ordinarily resident in the United Kingdom or a holder
who carries on a trade in the United Kingdom through a branch or agency to
which the LPI Bond is attributable, may give rise to a charge to tax on
income in respect of interest on the LPI Bond which has accrued since the
preceding interest payment date in such an amount as the Inland Revenue
deem just and reasonable. A transferee of LPI Bonds with accrued interest
will not be entitled to any corresponding allowance under the Accrued
Income Scheme.
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SUBSCRIPTION AND SALE
The Royal Bank of Scotland plc and Morgan Stanley & Co. International Limited
(together, the "Managers") have, (a) pursuant to a subscription agreement dated
23 July 2001 (the "RPI Subscription Agreement"), jointly and severally agreed
with the Issuer, subject to the satisfaction of certain conditions, to subscribe
and pay for the RPI Bonds at 100 per cent. of their principal amount less a
combined management and underwriting commission of 0.625 per cent. of their
principal amount; (b) pursuant to a subscription agreement dated 23 July 2001
(the "LPI Subscription Agreement"), jointly and severally agreed with the
Issuer, subject to the satisfaction of certain conditions, to subscribe and pay
for the LPI Bonds at 100 per cent. of their principal amount less a combined
management and underwriting commission of 0.625 per cent. of their principal
amount; and (c) pursuant to a subscription agreement dated 23 July 2001 (the
"Fixed Rate Bonds Subscription Agreement"), jointly and severally agreed with
the Issuer, subject to the satisfaction of certain conditions, to subscribe and
pay for the Fixed Rate Bonds at 99.931 per cent. of their principal amount less
a combined management and underwriting commission of 0.625 per cent. of their
principal amount. In addition the Issuer has agreed to reimburse the Managers
for certain expenses incurred by them in connection with the issue of the Bonds.
Each of the RPI Subscription Agreement, the LPI Subscription Agreement and the
Fixed Rate Bonds Subscription Agreement entitles the Managers to be released and
discharged from their obligations in respect of the subscription of the RPI
Bonds, the LPI Bonds or the Fixed Rate Bonds, as the case may be in certain
circumstances prior to the payment to the Issuer.
SELLING RESTRICTIONS
1 UNITED STATES
The Bonds have not been and will not be registered under the U.S.
Securities Act of 1933, as amended, (the "Securities Act") and may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except in certain transactions exempt from the registration
requirements of the Securities Act. Terms used in this paragraph have the
meanings given to them by Regulation S under the Securities Act.
Each Manager has agreed that, except as permitted by the Subscription
Agreement, it will not offer, sell or deliver the Bonds (i) as part of their
distribution at any time or (ii) otherwise until 40 days after the later of the
commencement of the offering and the closing date, within the United States or
to, or for the account or benefit of, U.S. persons, and it will have sent to
each dealer to which it sells Bonds during the restricted period a confirmation
or other notice setting forth the restrictions on offers and sales of the Bonds
within the United States or to, or for the account or benefit of, U.S. persons.
The Bonds are subject to US. tax law requirements and may not be offered,
sold or delivered within the United States or its possessions or to a United
States person, except in certain transactions permitted by US. tax regulations.
Terms used in this paragraph have the meanings given to them by the U.S.
Internal Revenue Code and regulations thereunder.
In addition, until 40 days after the commencement of the offering, an offer
or sale of Bonds within the United States by a dealer that is not participating
in the offering may violate the registration requirements of the Securities Act.
2 UNITED KINGDOM
Each Manager has represented and agreed that (i) it has not offered or sold
and will not offer or sell any Bonds to persons in the United Kingdom prior to
admission of the Bonds to listing in accordance with Part IV of the Financial
Services Act 1986 (the "Act") except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995 or the Act, (ii) it has complied and will comply
with all applicable provisions of the Act with respect to anything done by it in
relation to the Bonds in, from or otherwise involving the United Kingdom and
(iii) it has only issued or passed on, and will only issue or pass on, in the
United Kingdom any document received by it in connection with the issue of the
Bonds, other than any document which consists of or any part of listing
particulars, supplementary listing particulars or any other document required or
permitted to be published by listing rules under Part IV of the Act, to a person
who is of a kind described in Article ll (3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom the
document may otherwise lawfully be issued or passed on.
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3 GENERAL
Neither the Issuer nor any Manager represent that the Bonds may at any time
lawfully be sold in or horn any jurisdiction (other than in or from Great
Britain) in compliance with any applicable registration requirements pursuant to
an exemption available thereunder or assumes any responsibility for facilitating
such sales.
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GENERAL INFORMATION
LISTING
The listing of the Bonds on the Official List will be expressed as a
percentage of their principal amount. Transactions will be effected for
settlement in sterling, and under current practice, for delivery on the third
business day in London after the date of the transaction. It is expected that
listing of the Bonds on the Official List and admission to trading of the Bonds
on the London Stock Exchange's Market for Listed Securities will be granted on
27 July 2001 subject only to the issue of the relevant Temporary Global Bonds.
Prior to official listing, however, dealings in the Bonds will be permitted by
the London Stock Exchange in accordance with its rules.
CLEARING SYSTEMS
The RPI Bonds, the LPI Bonds and the Fixed Rate Bonds have each been
accepted for clearance through Euroclear and Clearstream, Luxembourg under
Common Code 13273502, 13273448 and 13273537, respectively. The ISIN for the RPI
Bonds, the LPI Bonds and the Fixed Rate Bonds is XS0132735027, XS0132734483, and
XS0132735373, respectively.
The Bonds will bear a legend as follows: "Any United States person who
holds this obligation will be subject to limitations under the United States
income tax law, including the limitations provided in Section 165(j) and 1287(a)
of the Internal Revenue Code".
INCORPORATION
The Issuer was incorporated in England and Wales on 1 April 1989 under the
Companies Act 1985 as a public limited company with registered number 2366977.
ANNUAL ACCOUNTS
Audited annual consolidated accounts have been prepared in respect of the
Issuer's three financial years ended on 31 March 2001. No audited financial
statements have been prepared for any period subsequent to 31 March 2001.
AUDITORS
Coopers & Lybrand (Chartered Accountants and Registered Auditors) have
audited and rendered unqualified audit reports on the consolidated accounts of
the Issuer for the year ended 31 March 1998. PricewaterhouseCoopers, have
audited and rendered unqualified audit reports on the consolidated accounts of
the Issuer for the three years ended 31 March 2001.
FINANCIAL AND TRADING POSITION AND PROSPECTS
There has been no significant change in the financial or trading position
of the issuer or the Group, and no material adverse change in the financial
position or prospects of the Issuer or the Group, since 31 March 2001.
LITIGATION
There are no, nor have there been any legal or arbitration proceedings
(including any such proceedings which are pending or threatened of which the
Issuer is aware) which may have or have had during the 12 months preceding the
date of this document a significant effect on the Group's financial position.
APPROVALS AND AUTHORISATIONS
The issue of the Bonds was authorised by resolutions of the Board of
Directors of the Issuer passed on 11 June 2001 and resolutions of a duly
authorised committee of the Board of Directors of the Issuer passed on 18 July
2001.
The Bonds constitute longer term debt securities issued in accordance with
regulations made under Section 4 of the Banking Act 1987. The Issuer is not an
authorised institution or a European authorised institution (as such terms are
defined in the Banking Act 1987 (Exempt Transactions) Regulations 1997).
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