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+44 (0)20 7232 3090 Traded on

AIM, London
Fax +44 (0)20 7232 3099 Stock Exchange Regulated and

LSE: IIR authorised by

National Grid PLC 10 July 2008

Update Report – FY 2008 Results

KeySpan acquisition to drive top-line growth

Common HOLD Fundamental research indicates a 6% upside in the common stock over the next 6-24 months. We
Direct access
have calculated theto theprice
target fullbased
report free of charge
on fundamental at a weighted average of target
factors using
prices obtained by using DCF and comparative valuation methodologies.

Ticker: NG.L
Target price: GBp720.69
We reiterate the common stock a BUY with a 6-24 months target price of GBp720.69.
Current price: GBp679.00

ADR BUY The ADR is expected to appreciate by approximately 21% over the next 6-24 months as the
fundamental upside further augmented by the 15 percentage points upside attributable purely to the
anticipated appreciation of the GBP against the US dollar over the long term.

Ticker: NGG
Target price: US$81.08 We reiterate the ADR (1 ADR= 5 common shares) a BUY with a 6-24 month target price of US$81.08.
Current price: US$66.83

Supervisor: Nirav Shah

Analyst: Kavita Jogani Investment horizon - short term actionable trading strategies
Editor: Matthew Bridle This report addresses the needs of strategic investors with a long term investment horizon of 6-24 months. If
Global Research Director: Satish this report is provided to you by your broker under the Global Settlement, you may now also access (free of
Betadpur, CFA charge) the short term trading outlook that we publish from time to time for this issuer, looking at the coming
5-30 days for readers with a shorter trading horizon. These are available online only at
Next news due:
1H 09 results, 20 November
2008 Report summary

National Grid PLC (National Grid) registered strong top-line growth in FY 2008 marginally above our
expectation for the period, reflecting healthy growth witnessed across all of its segments. Margins were
however, impacted by rising operating, finance and tax expenses. Going forward, we are encouraged by
the company’s efforts to expand its business and cut costs through a number of organic and inorganic
measures. The company has recently completed the disposal of its UK and the US wireless business as
well as its Basslink interconnector in order to reduce operating costs in its non-core businesses. In
addition, the company has reached an agreement to sell Ravenswood, a prerequisite for the
completion of its KeySpan acquisition, which has allowed National Grid to become the second largest
electricity and gas company in the US in terms of customer base. Furthermore, the company has an
impressive capital expenditure plan of GBP3.0 bn per year over the next four years, which is largely
directed toward building new electricity and gas transmission infrastructure, the replacement of ageing
assets, and to increase its share of renewable energy in the company’s portfolio. However, we expect
the company’s margins to remain under pressure in the medium term given rising fuel prices. Given
that we have revised our estimates and target price downwards, we view the National Grid’s common
stock as fairly valued and do not anticipate a significant upside from current levels.

Currency impact for US investors

The impact by itself of the anticipated currency movements on the ADR (now US$66.83), without
considering changes in the share price, is broadly positive and is expected to be:

Over 6 months: US$64.51

Over 12 months: US$74.69

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