National Grid Transco Form 20-F
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended March 31, 2004
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 001-14958
NATIONAL GRID TRANSCO PLC
(Exact name of Registrant as specified in its charter)
England and Wales
(Jurisdiction of incorporation or organization)
1-3 Strand, London WC2N 5EH, England
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class |
Name of each exchange on which registered |
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| Ordinary
Shares of 10 pence each |
The New York Stock Exchange* |
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American Depositary Shares, each representing five
Ordinary Shares of 10 pence each |
The New York Stock Exchange |
* Not for trading, but only in connection with the registration of American Depositary Shares representing Ordinary Shares pursuant to the requirements of the
Securities and Exchange Commission.
Securities registered or to be registered pursuant to Section 12(g) of the Act: None.
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None.
Indicate
the number of outstanding shares of each of the issuer’s classes of
capital or common stock as of the close of the period covered by the annual
report.
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Ordinary Shares of 10 pence each |
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3,076,903,379 |
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Special
Rights Redeemable Preference Share of £1 |
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1 |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days:
Yes No
Indicate by check mark which financial statement item the registrant has elected to follow:
Item 17 Item
18
Cautionary Statement
This Annual
Report on Form 20-F contains certain statements that are neither reported
financial results nor
other historical information. These statements are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. Because
these forward-looking statements are subject to assumptions, risks and uncertainties,
actual future results may differ materially from those expressed in or implied
by such statements. Many of these assumptions, risks and uncertainties relate
to factors that are beyond National Grid Transco’s ability to control or estimate precisely, such as delays in obtaining or adverse conditions contained in regulatory
approvals; competition and industry restructuring; changes in economic conditions; currency fluctuations; changes in interest and tax rates; changes in energy market prices; changes in historical weather patterns; changes in laws; regulations or regulatory policies; developments in legal or public policy doctrines; technological developments; the failure to retain key management; the availability of new acquisition opportunities; or the timing and success of future acquisition opportunities. Other factors that could cause actual results to differ materially from those described in this document include the ability to continue to integrate the US and UK businesses acquired by or merged with the Group or to realise expected synergies from such integrations, the failure to achieve reductions
in costs or to achieve operational efficiencies, unseasonable weather impacting on demand for electricity and gas, the behaviour of UK electricity market participants on system balancing, the timing of amendments in prices to shippers in the UK gas market, the performance of National Grid Transco’s pension schemes and the regulatory treatment of pension costs, the impact of any potential separation and disposal by National Grid Transco of any of its UK gas distribution networks and any adverse consequences arising from outages on or otherwise affecting energy networks owned and/or operated by National Grid Transco. For a more detailed description of these assumptions, risks and uncertainties, together with any other risk factors, please see Items 3 and 5 of this report (and in
particular ”Risk factors” under Item 3). Readers are cautioned not
to place undue reliance on these forward-looking statements, which speak only
as of the date of this report. National Grid Transco does not undertake any obligation
to revise these forward-looking statements to reflect events or circumstances
after the date of this report.
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not
applicable.
Item 2. Offer Statistics and Expected Timetable
Not
applicable.
Item 3. Key Information
Item 4. Information on the Company
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The Company’s
agent in the US is Lawrence J. Reilly, Senior Vice President and General
Counsel,
National Grid USA, 25 Research Drive, Westborough, MA 01582. |
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Property, plants and equipment |
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National
Grid Transco’s
Corporate Centre operates principally from offices at 1-3 Strand, London
(leasehold) and 130 Jermyn Street, London (leasehold). |
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UK
gas distribution. The gas network in Britain comprises approximately
170,000 miles of distribution pipelines and approximately 4,200 miles
of high pressure national transmission pipelines. Agreements with landowners
or occupiers are only required for those pipes that cross private land.
These agreements largely comprise perpetual easements in England and
Wales and deeds of servitude in Scotland. Any land issues impacting
on normal agricultural activity local to pipelines and their associated
easement or servitude are covered by national agreements with the National
Farmers Union, the Country Land and Business Association of England
and Wales and the Scottish Landowners Association. |
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Through
Transco plc, we own the freeholds of the substantial majority of the
operational sites where there are larger operational plant and gas storage
facilities used in our UK Gas Distribution business. The vast majority
of office buildings, depots and stores used by UK Gas Distribution are
leased from another Group company, SecondSite Property. |
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UK
electricity and gas transmission. In England and Wales, the Group,
through Transco, owns the freehold of the majority of all sites associated
with its UK Transmission business. The remainder are held on long-term
leaseholds. In Scotland the majority are owned outright through a disposition
purchase. The remainder are owned through a feudal disposition where
purchase was subject to various rights retained by the previous owner,
for example mineral or forestry rights. In addition, Transco has three
Commercial Lettings, at St Fergus to Shell and Mobil, and at Theddlethorpe
to ConocoPhillips. |
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Agreements
with landowners or occupiers are required for the overhead lines and
underground cables which make up our electricity network in England and
Wales. The majority of agreements are in the form of terminable wayleaves.
The remainder are in the form of perpetual easements under which rights
have been granted in perpetuity in return for a lump sum payment. The
sites at which we have electricity substations are split between freehold
and leasehold. Of the leasehold sites, the large majority are substations
located on the premises of generators and are held on long-term leases
for nominal rental payments. Of the remaining sites, most are held as
ground rents (market price payable for land only) from the respective
landlords, who include electricity distribution companies. |
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The
Group, through National Grid Company, also owns the freehold of its control
centre in Berkshire and the learning and development centre at Eakring
in Nottinghamshire. It has major offices in Warwick (leasehold) and Leeds
(freehold). |
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The
National Grid USA companies own in fee the office buildings that comprise
their principal business premises in Westborough and Northborough, Massachusetts
and in Syracuse, Albany and Buffalo, New York. Substantially all of the
Group’s US properties and franchises are subject to the liens of
mortgage indentures and deeds of trust under which mortgage bonds have
been issued. At present, environmental issues are not preventing the
companies from utilising any material operating assets in the course
of their business. |
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US
electricity transmission. The Group’s US Transmission systems
are comprised of approximately 14,000 circuit miles of transmission
and sub-transmission lines located within right-of-way corridors that
traverse both public and private property. Statutory authority, legislative
charters and municipal franchise grants generally provide the National
Grid USA companies with the rights required to locate transmission
and sub-transmission facilities within and across public ways. Right-of-way
corridors that cross privately owned land have generally been acquired
in fee ownership (freehold) or pursuant to grants of perpetual easements.
Transmission and sub-transmission substation facilities are principally
located on properties that are owned in fee. |
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|
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US
electricity distribution and US gas distribution. The Group’s
US distribution systems are comprised of approximately 62,000 circuit
miles of electric distribution lines located on rights-of-way in New
England and New York, and approximately 8,000 miles of gas distribution
pipelines located on rights-of-way in New York. Statutory authority,
legislative charters and municipal franchise grants generally provide
the National Grid USA companies with the rights required to locate
distribution facilities within and across public ways. Right-of-way
corridors that cross privately owned land have principally been acquired
in fee ownership or pursuant to grants of perpetual easements. Electric
distribution substations and gas distribution regulator stations are
principally located on properties owned in fee. |
Item 5. Operating and Financial Review and Prospects
Item 6. Directors, Senior Management and Employees
Item 7. Major Shareholders and Related Party Transactions
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As at 11 June 2004, National Grid Transco had been notified of beneficial interests in 3% or more of its issued share capital by the following companies: |
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% of issued
share capital |
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Number of
ordinary shares |
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|
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The Capital Group Companies, Inc. |
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9.97 |
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308,024,616 |
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Legal and General Investment Management Ltd |
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3.6 |
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111,143,102 |
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|
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Barclays plc |
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3.1 |
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95,005,274 |
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Franklin Resources, Inc. |
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3.0 |
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93,240,377 |
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The percentages
and numbers of ordinary shares set forth above are as of the date of notification
by the respective company. The Capital Group Companies, Inc. holding was
first disclosed to National Grid Group plc as 3.0% in July 2001. From this
point it steadily increased to 8.0% in January 2002, at which point the holding
was diluted following the issuance of shares in relation to the acquisition
of Niagara Mohawk. From a restated holding of 7.3% in February 2002 the holding
again steadily increased to 10.0% in October 2002, when the holding was again
diluted following the issuance of shares in respect of the merger with Lattice
Group plc. The holding then increased steadily from 5.7% to 10.0%, and in
June 2004 was reduced to the level disclosed above. |
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All ordinary
shares have the same voting rights. The only other class of share in the
Company is the Special
Share (one special rights non-voting redeemable preference share of £1)
which is no longer in issue, having been redeemed on 5 May 2004. |
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Item 8. Financial Information
Item 9. The Offer and Listing
Item 10. Additional Information
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Memorandum and Articles of Association |
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The following
description is a summary of the material terms of National Grid Transco’s Memorandum and Articles of Association (the ‘Articles’).
The following description is a summary only and is qualified in its entirety
by reference to the Articles, which are listed as an exhibit to this report. |
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National
Grid Transco is incorporated under the name National Grid Transco plc and
is registered in England and
Wales with registered number 4031152. The Company’s objects are set
forth in the fourth clause of its Memorandum of Association and cover a wide
range of activities, including the following: |
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carrying on the business of a holding company; |
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employing the funds of the Company to develop and expand its business; and |
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carrying on any other activity supplemental to the foregoing or
capable of enhancing the Company’s profitability. |
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The Memorandum of Association grants National Grid Transco a broad range of corporate powers to effect these objectives. |
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Under the Articles, a Director must disclose any personal interest in a contract and may not vote in respect of that contract, subject to certain limited exceptions. |
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The compensation
awarded to the Executive Directors is decided by the Remuneration Committee
(see details
on pages 53 and 54 of the Company’s Annual Report and Accounts 2003/04
contained in Exhibit 14.1), which consists entirely of Non-executive Directors.
The fees of the Non-executive Directors are determined by the Executive Directors
with the guidance of the Chairman and after taking appropriate external advice. |
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The Directors
are empowered to exercise all the powers of National Grid Transco to borrow
money, subject
to the limitation that the aggregate principal amount outstanding of all
borrowings shall not exceed an amount equal to four times National Grid Transco’s share capital and aggregate reserves, calculated in the manner described in the Articles, unless sanctioned by an ordinary resolution of the Company’s
shareholders. |
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There is no specific requirement for a director to retire when he/she reaches the age of 70. However, upon appointment or retirement by rotation, the age of a person aged 70 or over must be declared in the notice convening the relevant shareholder meeting, or in any document accompanying the notice. |
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A Director is not required to hold shares of National Grid Transco in order to qualify as a Director. |
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The Special
Share is a redeemable non-voting preference share of £1. Its ownership is restricted to certain persons who must be ministers of the Crown (eg a Secretary of State or another person acting on behalf of the Crown) (the “Special Shareholder”). In summary, the rights of the Special Shareholder ensure that it can control certain actions carried out by the Company in respect of (i) itself; (ii) National Grid Company (as the holder of the Transmission Licence); and (iii) Transco, as well as prohibiting changes to various provisions in the Company’s
Articles including a provision which sets out certain limitations on the
number of voting shares in the Company which a person can hold. |
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However,
on 5 May 2004, the Special Shareholder exercised its right of redemption,
following which the
Special Share was redeemed for its par value of £1. Resolutions will be tabled at the Annual General Meeting to amend the Articles to remove references to the Special Share, those provisions which are no longer appropriate for inclusion in the Company’s Articles in view of the redemption of the Special Share (including the control on certain actions and limitation on shareholdings provisions), and to cancel the Special Share from being comprised within the Company’s
authorised share capital. |
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Rights, preferences and restrictions: |
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National
Grid Transco may not pay any dividend otherwise than out of profits available
for distribution
under the Companies Act and the other applicable provisions of English law.
In addition, as a public company, National Grid Transco may make a distribution
only if and to the extent that, at the time of the distribution, the amount
of its net assets is not less than the aggregate of its called-up share capital
and undistributable reserves (as defined in the Companies Act). Subject to
the foregoing, National Grid Transco may, by ordinary resolution, declare
dividends in accordance with the respective rights of the shareholders but
not exceeding the amount recommended by the Board of Directors. The Board
of Directors may pay interim dividends if the Board of Directors considers
that National Grid Transco’s financial position justifies the payment. |
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Except insofar as the rights attaching to any share otherwise provide, all dividends will be apportioned and paid proportionately to the amounts paid up (otherwise than in advance of calls) on the shares. |
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All dividends or other sums payable unclaimed for one year after having been declared may be invested or otherwise made use of by the Board of Directors for the benefit of National Grid Transco until claimed. Any dividend or interest unclaimed for 12 years from the date when it was declared or became due for payment will be forfeited and revert to National Grid Transco. |
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Subject to any rights or restrictions attached to any shares and to any other provisions of the Articles, at any general meeting on a show of hands every shareholder who is present in person will have one vote and on a poll every shareholder will have one vote for every share which he holds. On a poll, shareholders may cast votes either personally or by proxy and a proxy need not be a shareholder. Under the Articles all special and extraordinary resolutions must be decided on a poll. |
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Directors must stand for reappointment at the first Annual General Meeting following their appointment to the Board. Each Director must stand for reappointment at least every three years and each year one-third of the Board will stand for reappointment. |
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In a winding-up,
a liquidator may, with the sanction of a special resolution of National Grid
Transco and
any other sanction required by applicable provisions of English law, (a)
divide among the shareholders the whole or any part of National Grid Transco’s
assets (whether the assets are of the same kind or not) and may for this
purpose value any assets and determine how the division should be carried
out as between different shareholders or different classes of shareholders
or otherwise as the resolution may provide, or (b) vest the whole or any
part of the assets in trustees upon such trusts for the benefit of the contributories
as the liquidator, with the sanction of a special resolution, determines,
but in neither case will a shareholder be compelled to accept assets upon
which there is a liability. |
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Subject to applicable provisions of English law and the rights attached to any specific class of shares, the rights attached to any class of shares of National Grid Transco may be varied with the written consent of the holders of three-fourths in nominal value of the issued shares of that class, or with the sanction of an extraordinary resolution passed at a separate meeting of the holders of the shares of that class. |
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Annual General Meetings must be convened upon advance written notice of 21 clear days. An Extraordinary General Meeting must be convened upon advance written notice of 21 clear days for the passing of a special resolution and 14 clear days for any other resolution. The notice must specify the nature of the business to be transacted. The notice must also specify the place, the day and the time of the meeting. |
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There are
no restrictions under National Grid Transco’s Memorandum and Articles
of Association that would limit the rights of persons not resident in the
UK, as such, to vote
ordinary shares. |
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A shareholder may lose the right to vote his shares if he or any other person appearing to be interested in those shares fails to comply within a prescribed period of time with a request by National Grid Transco under the Companies Act to give the required information with respect to past or present ownership or interests in those shares. In the case of holders of more than 0.25% in nominal amount of any class of the share capital of National Grid Transco, in addition to disenfranchisement, the sanctions that may be applied by National Grid Transco include withholding of the right to receive payment of dividends and other monies payable on shares, and restrictions on transfers of the shares. |
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The Companies
Act provides that a person (including a company and other legal entities)
that acquires
an interest of 3% or more in any class of shares constituting an English
public company’s ‘relevant share capital’ (ie National Grid Transco’s
issued share capital carrying the right to vote in all circumstances at a
general meeting of National Grid Transco) is required to notify the company
of its interest within two business days following the day on which the obligation
arises. After the 3% level is exceeded, similar notifications must be made
in respect of increases or decreases of 1% or more. |
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For purposes
of the notification obligation, the interest of a person in shares means
any kind of interest
in shares including interests in any shares (a) in which a spouse, or child
or stepchild under the age of 18 is interested, (b) in which a corporate
body is interested and either (i) that corporate body or its directors generally
act in accordance with that person’s directions or instructions or (ii) that person controls one-third or more of the voting power of that corporate body or (c) in which another party is interested and the person and that other party are parties to a ‘concert party’ agreement. A concert party agreement is one which provides for one or more parties to acquire interests in shares of a particular
company and imposes obligations or restrictions on any one of the parties as to the use, retention or disposal of such interests acquired under the agreement, and any interest in the company’s shares is in fact acquired by any of the parties under the agreement. Some of the interests (eg those held by certain investment fund managers) may be disregarded for the purposes of calculating the 3% threshold, but the obligations of disclosure will still apply where those interests exceed 10% or more of any class of the company’s
relevant share capital and to increases or decreases of 1% or more thereafter. |
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In addition,
section 212 of the Companies Act provides that a public company may send
a written notice
to a person whom the company knows or has reasonable cause to believe to
be, or to have been at any time during the three years immediately preceding
the date on which the notice is issued, interested in shares constituting
the company’s ‘relevant share capital’. The notice may
require that person to state whether he has an interest in the shares, and
in case that person holds or had held an interest in those shares, to give
additional information relating to that interest and any other interest in
the shares of which that person is aware. |
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Where a company serves notice under the provisions described above on a person who is or was interested in shares of the company and that person fails to give the company any information required by the notice within the time specified in the notice, the company may apply to an English court for an order directing that the shares in question be subject to restrictions prohibiting, among other things, any transfer of those shares, the taking up of rights in respect of those shares and, other than in a liquidation, payments in respect of those shares. |
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A person who fails to fulfil the obligations imposed by those provisions of the Companies Act described above is subject to criminal penalties. |
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Material
contracts |
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Save for the contracts described below, no contracts (other than contracts entered into in the ordinary course of business) have been entered into by the Group within the two years immediately preceding the date of this document which are, or may be material; or which contain any provision under which any member of the Group has any obligation or entitlement which is material to the Group at the date of this document. |
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(a) Credit agreement dated 18 November 2003 between National Grid Transco plc; HSBC Bank plc (the facility agent); HSBC USA (the swingline agent); and certain banks and financial institutions (the banks) which provides a $1.485 billion 364-day multi-currency revolving credit facility with 12-month term-out option. |
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(b) Offering
circular issued by NGG Finance plc on 20 August 2001 summarising the trust
deeds, subscription
agreements and paying agency agreements relating to the € 1,250,000,000 5.25% guaranteed bonds due 2006 and the € 750,000,000
6.125% guaranteed bonds due 2011 issued by NGG Finance plc and guaranteed
by National Grid Transco. |
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There are
currently no UK laws, decrees or regulations that restrict the export or
import of capital, including,
but not limited to, foreign exchange control restrictions, or that affect
the remittance of dividends, interest or other payments to non-UK resident
holders of ordinary shares except as otherwise set out in ‘Taxation’ below
and except in respect of the governments of and/or certain citizens, residents
or bodies of certain countries (described in applicable Bank of England Notices
or European Union Council Regulations in force as at the date of this document). |
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The following
summary describes the principal US Federal income and UK tax consequences
to beneficial owners
of ADSs or ordinary shares who are residents of the United States. The summary
is not a complete analysis or listing of all the possible tax consequences
of ownership and does not discuss special tax rules that may be applicable
to certain classes of investors including banks, insurance companies, securities
dealers, investors with a ‘functional currency’ other than the US dollar and any corporation which alone, or together with one or more corporations which are treated as associated for the purposes of the US/UK taxation convention relating to income and capital gains (the ‘Income Tax Convention’), directly or
indirectly controls 10% or more of the voting share capital of National Grid Transco. The statements regarding US Federal tax laws set out below are based (i) on the US Internal Revenue Code of 1986, as amended (the ‘Code’) and regulations issued thereunder, all of which are subject to change, possibly with retroactive effect and (ii) in part on representation of The Bank of New York as depositary (the ‘Depositary’) and assume that each obligation provided for in or otherwise contemplated by the deposit agreement entered into by and among National Grid Transco, the Depositary and the registered holders of ADRs pursuant to which ADRs have been issued dated as of 21 November 1995 and amended and restated as of 31 January 2002 (the ‘Deposit Agreement’)
and any related agreement will be performed in accordance with its terms. The
statements regarding UK tax set out below are based on what is understood to
be the practice of the UK Inland Revenue as at such date and are subject to any
change therein (including any change having retroactive effect). Beneficial owners
of ADSs who are residents or citizens of the United States will be treated as
the owners of the underlying ordinary shares for the purposes of the Code. |
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The US and
UK signed a new convention for the avoidance of double taxation with respect
to income and
capital gains on 24 July 2001 (the ‘New Treaty’). The New Treaty
entered into force following the exchange of instruments of ratification
on 31 March 2003 and is effective for withholding taxes beginning 1 May 2003.
This summary notes the changes to the treatment of distributions and disposals
as a result of the entry into force of the New Treaty, which affects distributions
and disposals in National Grid Transco's taxable year 31 March 2004. |
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For the
purposes of this discussion, the term ‘US Holder’ refers to a beneficial
owner of ADSs or ordinary shares who is a resident of the United States for
US Federal income tax purposes and, as to the description under ‘Taxation
of dividends’ and ‘Taxation of capital gains’ below,
is also a resident of the United States for the purposes of the 1975 Income
Tax Convention (the ‘Old Treaty’). |
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Under the terms of the Old Treaty, effective for withholding tax purposes through to 30 April 2003, dividends paid to US corporate shareholders controlling less than 10% of the voting capital of National Grid Transco and dividends paid to all US non-corporate shareholders were not subject to withholding taxes in the United Kingdom. The Old Treaty nominally allowed such US shareholders to claim the refundable tax credit for dividends which was available to UK shareholders for UK income tax purposes. The amount of such credit, however, was 10% of the sum of the dividend and the credit, reduced by 15% of the sum of the dividend and the credit, resulting in no net refundable credit for US shareholders. |
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Under the
terms of the New Treaty, effective for withholding
tax purposes
beginning on 1 May 2003, the United Kingdom is allowed to impose a 15% withholding
tax on dividends paid to US shareholders controlling less than 10% of the
voting capital of National Grid Transco. The United Kingdom does not, however,
currently impose a withholding tax on such dividends. If it were to impose
such a tax, the treaty provides for an exemption from withholding taxes for
dividends paid on shares held through a tax exempt pension fund, 401(k) plan,
or similar ‘pension scheme’. The New Treaty eliminates the refundable
tax credit provision found in the Old Treaty. To obtain benefits under the
New Treaty, a US holder must otherwise satisfy the requirements of the limitations
on benefits article of the New Treaty. |
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Dividends paid by National Grid Transco to US shareholders are subject to tax in the United States. Such dividends may qualify for the reduced tax rate of 15% if the US shareholder has held the National Grid Transco ADSs or ordinary shares for the requisite holding period. |
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Taxation of capital gains: |
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Under the Old Treaty, a US Holder who was not resident or ordinarily resident for UK tax purposes in the UK was not liable for UK taxation on capital gains realized or accrued on the sale or other disposal of ADSs or ordinary shares unless the US Holder carried on a trade, profession or vocation in the UK through a branch or agency and such ADSs or ordinary shares were used, held or acquired for the purposes of such trade, profession or vocation or such branch or agency. A US Holder was, however, liable for US Federal income tax on gains on the sale of ADSs or ordinary shares to the same extent as on any other gains from sales of stock. Gain, if any, was generally US source. |
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Under the
Old Treaty, a US citizen who was resident or ordinarily resident in the UK,
a US corporation which was resident in the UK by reason of its business being
managed and controlled in the UK or a US citizen who, or a US corporation
which, was trading or carrying on a profession or vocation in the UK through
a branch or agency and used, held or acquired ADSs or ordinary shares for
the purpose of such trade, profession or vocation or such branch or agency,
was possibly liable for both UK and US tax on a capital gain recognized on
the disposal of ADSs or ordinary shares. Such holder, however, was generally
entitled to foreign tax credit, subject to certain limitations, against any
US Federal tax liability for the amount of any UK tax (namely capital gains
tax in the case of an individual and corporation tax on chargeable gains
in the case of a corporation) which was paid in respect of such gain. |
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A US Holder
who became resident in the UK after a period of ‘temporary’ non-residence
(of up to five years) following an earlier period of residence in the UK
was also
potentially liable to UK capital gains tax under the Old Treaty. |
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The taxation of capital gains remains broadly unchanged under the New Treaty. However, a US Holder must comply with the limitation on benefits article in the New Treaty in order to obtain treaty benefits. |
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UK stamp
duty and stamp duty reserve tax (‘SDRT’): |
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Transfers
of ordinary shares – Generally speaking SDRT at the rate of 0.5% of the amount or value of the consideration paid is payable where an agreement to transfer ordinary shares is not completed by a duly stamped transfer to the transferee. Where an instrument of transfer is executed and duly stamped before the expiry of the period of six years beginning with such date, the SDRT liability will be cancelled, and any SDRT which has been paid will be refunded. SDRT is due whether or not the agreement or transfer of such chargeable securities is made or carried out in the UK and whether or not any party to that agreement or transfer is a UK resident. Purchases of ordinary shares completed by execution of a stock transfer form will generally
give rise to a liability to UK stamp duty at the rate of 0.5% (rounded up to the nearest £5) of the actual consideration paid. Paperless transfers under the CREST paperless settlement system will generally be liable to SDRT at the rate of 0.5%, and not stamp duty. The transfer of ordinary shares where there is no change of beneficial ownership will generally attract fixed rate stamp duty of £5
per transfer. SDRT is generally the liability of the purchaser and UK stamp duty
is usually paid by the purchaser or transferee. |
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Transfer
of ADSs – No UK stamp duty will be payable on the acquisition or transfer of existing ADSs or beneficial ownership of ADSs, provided that any instrument of transfer or written agreement to transfer is executed outside the UK and remains at all times outside the UK. An agreement for the transfer of ADSs in the form of ADRs will not give rise to a liability for SDRT. On a transfer of ordinary shares from the London, England office of The Bank of New York as agent of the Depositary (the ‘Custodian’) to a holder of ADSs upon cancellation of the ADSs, only a fixed stamp duty fee of £5 per instrument of transfer will be payable. Any transfer for value of the underlying ordinary shares represented by ADSs may give rise
to a liability on the transferee to UK stamp duty or SDRT. A charge to stamp duty or SDRT may arise on the issue or transfer of ordinary shares to the Depositary or the Custodian. The rate of stamp duty or SDRT will generally be 1.5% of either (i) in the case of an issue of ordinary shares, the issue price of the ordinary shares concerned, or (ii) in the case of a transfer of ordinary shares, the value of the consideration or, in some circumstances, the value of the ordinary shares concerned. The Depositary will generally be liable for the stamp duty or SDRT. In accordance with the terms of the Depositary Agreement, the Depositary will charge any tax payable by the Depositary or the Custodian (or their nominees) on the deposit of ordinary shares to the party to whom the ADSs are delivered
against such deposits. If the stamp duty is not already a multiple of £5, the duty will be rounded up to the nearest multiple of £5. |
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US information reporting and backup withholding: |
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A US resident Holder who holds ADSs may in certain circumstances be subject to information reporting to the IRS and possible US backup withholding at a rate of 30% with respect to dividends on ADSs and proceeds from the sale or other disposition of ADSs unless such holder furnishes a correct taxpayer identification number or is otherwise exempt. |
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An individual
who is domiciled in the US for the purposes of the convention between the
US and the UK for
the avoidance of double taxation with respect to estate and gift taxes (the ‘Estate Tax Convention’) and who is not a national of the UK for the purposes of the Estate Tax Convention will generally not be subject to UK inheritance tax in respect of the ADSs on the individual’s death or on a gift of the ADSs during the individual’s
lifetime, unless the ADSs are part of the business property of a permanent
establishment of the individual in the UK or pertain to a fixed base in the
UK of an individual who performs independent personal services. Special rules
apply to ADSs held in trust. In the exceptional case where the shares are
subject both to UK inheritance tax and to US Federal gift or estate tax,
the Estate Tax Convention generally provides for the tax paid in the UK to
be credited against tax paid in the US. |
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The information
set forth under the headings “Documents on display” on page 134 of the Company’s
Annual Report and Accounts 2003/04 contained in Exhibit 14.1 is incorporated
herein by reference. |
Item 11. Quantitative and Qualitative Disclosures about Market Risk
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The information
set forth under the heading “Treasury Policy” on pages 43 to 46 of the Company’s
Annual Report and Accounts 2003/04 contained in Exhibit 14.1 is incorporated
herein by reference. |
Item 12. Description of Securities Other than Equity Securities
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
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There has been no material default in the payment of principal, interest, a sinking or purchase fund installment or any other material default with respect to the indebtedness for or in respect of monies borrowed or raised by whatever means of the Company or any of its significant subsidiaries. There have been no arrears in the payment of dividends on, and no material delinquency with respect to, any class of preferred stock of any significant subsidiary of the Company. |
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Item 15. Controls and Procedures
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The Company
has carried out an evaluation under the supervision and with the participation
of its management,
including the Group Chief Executive and Group Finance Director, of the effectiveness
of the design and operation of the Group’s disclosure controls and
procedures as of the end of the period covered by this report. Based upon
and as of that evaluation, the Group Chief Executive and Group Finance Director
concluded that the disclosure controls and procedures are effective in all
material respects to ensure that the information required to be disclosed
in the reports that National Grid Transco files and submits under the US
Securities Exchange Act of 1934, as amended, is recorded, processed, summarised
and reported as and when
required. |
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During the
period covered by this report, there were no changes in the Company’s
internal control over financial reporting that could materially affect internal
control over
financial reporting. |
Item 16. [Reserved]
Item 16A. Audit committee financial expert
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The Board
of Directors has determined that George Rose, chairman of the Company’s
Audit Committee, is an audit committee financial expert. A brief listing
of Mr. Rose’s
relevant experience is included as part of Item 6. |
Item 16B. Code of Ethics
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The Company
has adopted a code of ethics that applies to its principal executive officer,
principal financial
officer and principal accounting officer. This code is available on the Company’s
website at www.ngtgroup.com/about/mn_corp_govern.html, where any amendments or waivers will also be posted. |
Item 16C. Principal Accountant Fees and Services
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PricewaterhouseCoopers LLP, independent registered public accounting firm, served as auditors of the Company for the fiscal year ended 31 March 2004. |
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|
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The aggregate
fees billed by PricewaterhouseCoopers LLP for the audit of the Company’s financial statements and regulatory reporting for the fiscal year ended 31 March 2004, and the review of interim financial statements for the sixth months ended 30 September 2004 were £5 million. Fees billed by PricewaterhouseCoopers for the audit of the Company’s financial statements and regulatory reporting for the fiscal year ended March 31, 2003, and the review of interim financial statements for the sixth months ended 30 September 2003 were £4
million. |
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The aggregate
fees billed by PricewaterhouseCoopers LLP for assurance and related services
that were reasonably
related to the performance of the audit or review of the Company’s financial statements and are not disclosed under “Audit Fees” above were £2 million in fiscal 2003/04, and £3 million in fiscal 2002/03. Services comprising these fees included £1.5 million in fiscal 2003/04 of assurance services associated with the separation of UK based gas distribution networks, and £2
million in fiscal 2002/03 relating to the merger of National Grid and Lattice.
The remaining amounts, in both years, relate to services provided on bond
programs, audit of pension schemes and the provision of accounting
advice. |
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Aggregate
fees billed by PricewaterhouseCoopers LLP for tax compliance, tax advice
and tax planning were £1 million in fiscal 2003/04, and £3
million during fiscal 2002/03. |
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Aggregate
fees billed by PricewaterhouseCoopers LLP for all other services in fiscal
2003/04 were £2 million, which related to vendor due diligence work associated with the proposed disposal of UK-based gas distribution networks. Aggregate fees billed by PricewaterhouseCoopers LLP for all other services in fiscal 2002/03 were £3
million, which largely related to services supplied by the consulting business
unit of PricewaterhouseCoopers LLP which was sold to IBM United Kingdom Limited
on 30 September 2002. |
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Subject
to the Company’s Articles of Association, the Audit Committee is solely and directly responsible for the approval of the appointment, re-appointment, compensation and oversight of the Company’s
independent auditors. The Audit Committee must approve in advance all non-audit
work to be performed by the independent auditors. |
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During fiscal 2003/04, all of the audit, audit-related and non-audit services provided by PricewaterhouseCoopers were pre-approved by the Audit Committee. |
Item 16D. Exemptions from the Listing Standards for Audit Committees
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Not
applicable.
PART III
Item 17. Financial Statements
The
Company has responded to Item 18 in lieu of this Item.
Item 18. Financial Statements
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Report of Independent Registered Public Accounting Firm |
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To the Board of Directors and Shareholders of National Grid Transco plc |
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|
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In our opinion,
the accompanying consolidated Balance Sheets and related consolidated Profit
and Loss Account,
Cash Flow Statement, Statement of Total Recognised Gains and Losses and the
related notes present fairly, in all material respects, the financial position
of National Grid Transco plc and its subsidiaries at 31 March 2004 and 2003,
and the results of their operations and their cash flows for each of the
three years in the period ended 31 March 2004, in conformity with accounting
principles generally accepted in the United Kingdom. These accounts are the
responsibility of the Company’s Directors and management. Our responsibility
is to express an opinion on these accounts based on our audits. We conducted
our audits of these accounts in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the accounts are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the accounts,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall accounts presentation. We believe
that our audits provide a reasonable basis for our opinion. |
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As described in Note 1 to the accounts, the Company has changed its accounting policy for treasury stock during the year ended 31 March 2004. |
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Accounting principles generally accepted in the United Kingdom vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 32, as restated, to the consolidated accounts. |
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/s/ PricewaterhouseCoopers
LLP |
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PricewaterhouseCoopers LLP |
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Chartered Accountants and Registered Auditors |
Item 19.
Exhibits
| 4.2 |
|
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Offering
circular issued by NGG Finance plc on 20 August 2001 summarising the
trust deeds, subscription agreements and paying agency agreements relating
to the €1,250,000,000 5.25% guaranteed bonds due 2006 and the €750,000,000
6.125% guaranteed bonds due 2011 issued by NGG Finance plc and guaranteed
by National Grid Transco plc. (Exhibit 2(b)(ii) to National Grid Group
Form 20-F dated 21 June 2002 File No. 1-14958). |
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Incorporated
by reference |
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| 4.3 |
|
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Service
Agreement among The National Grid Group plc, National Grid Company plc
and Edward Astle dated 27 July 2001. |
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Filed
herewith |
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| 4.4 |
|
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Service
Agreement among The National Grid Group plc, National Grid Company plc
and Steven Holliday dated 6 March 2001. |
|
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Filed
herewith |
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| 4.5 |
|
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Service
Agreement among National Grid Group plc, National Grid Company plc and
Steve Lucas dated 13 June 2002. |
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Filed
herewith |
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| 4.6 |
|
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Employment
Agreement among The National Grid Group plc, New England Electric System
and Richard P. Sergel dated 22 March 2000. |
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Filed
herewith |
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| 4.7 |
|
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Service
Agreement among The National Grid Group plc, National Grid Company plc
and Roger J. Urwin dated as of 17 November 1995. |
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Filed
herewith |
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| 4.8 |
|
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Service
Agreement among National Grid Transco plc, National Grid Company plc
and Nicholas Winser dated 28 April 2003. |
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Filed
herewith |
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| 4.9 |
|
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Letter
of Appointment – John Grant. |
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Filed
herewith |
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| 4.10 |
|
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Letter
of Appointment – Ken Harvey. |
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Filed
herewith |
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| 4.11 |
|
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Letter
of Appointment – Paul Joskow. |
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Filed
herewith |
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| 4.12 |
|
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Letter
of Appointment – Sir John Parker. |
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Filed
herewith |
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| 4.13 |
|
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Letter
of Appointment – Stephen Pettit. |
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Filed
herewith |
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| 4.14 |
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Letter
of Appointment – Maria Richter. |
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Filed
herewith |
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| 4.15 |
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Letter
of Appointment – George Rose. |
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Filed
herewith |
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| 4.16 |
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Letter
of Appointment – James Ross. |
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Filed
herewith |
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| 4.17 |
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National
Grid Executive Share Option Plan 2002 (Exhibit 4(c) to National Grid
Group Form 20-F dated 21 June 2002 File No. 1-14958). |
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Incorporated
by reference |
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| 4.18 |
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National
Grid Group Share Matching Plan 2002 (Exhibit 4(c) to National Grid Group
Form 20-F dated 21 June 2002 File No. 1-14958). |
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Incorporated
by reference |
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| 4.19 |
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National
Grid Transco Performance Share Plan 2002 (as approved 23 July 2002 by
a resolution of the shareholders of National Grid Group plc, adopted
17 October 2002 by a resolution of the Board of National Grid
Group plc, amended 26 June 2003 by the Share Schemes Sub-Committee of
National Grid Transco plc, and amended 5 May 2004 by the Share Schemes
Sub-Committee of National Grid Transco plc). |
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Filed
herewith |
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| 4.20 |
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National
Grid Executive Share Option Plan 2000 (Exhibit 4C to National Grid Group
S-8 dated 26 July 2001 File No. 333-65968). |
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Incorporated
by reference |
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| 4.21 |
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National
Grid Executive Share Option Scheme (Exhibit 4D to National Grid Group
S-8 dated 26 July 2001 File No. 333-65968). |
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Incorporated
by reference |
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SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
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NATIONAL GRID TRANSCO PLC |
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By: |
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/s/ Stephen
Lucas |
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Stephen Lucas
Group Finance Director |
London, England
June 16, 2004