Further re gas network sales

National Grid Transco PLC
31 August 2004


Embargoed until 0700 31 August 2004

                   SALE OF FOUR GAS DISTRIBUTION NETWORKS AND
         PROPOSED £2 BILLION ONE OFF RETURN OF CAPITAL TO SHAREHOLDERS

   •Four gas distribution networks sold for £5.8 billion in cash plus c.
    £130m of assumed liabilities:-
       •20 % premium to March 2004 Ofgem RAV*
       •14 % premium to NGT's estimated March 2005 RAV
   •£2 billion one off return of capital, equivalent to 65p / share
   •20% increase in ordinary dividend for the current year - thereafter 
    targeting growth of 7% per annum until 2008

National Grid Transco plc ('NGT') today announces that it has reached agreement
on the sale of four of its regional gas distribution networks ('distribution
networks') (the 'Transactions'). The total cash consideration is £5.8 billion.
In addition, the purchasers are assuming certain environmental and other
liabilities amounting to some £130m. The total enterprise value represents a 20%
premium over the end March 2004 regulatory asset value of the distribution
networks being sold and a 14% premium over NGT's estimate of their regulatory
asset value as at 31 March 2005.

Sir John Parker, Chairman of National Grid Transco, said:

'We are delighted with the outcome of our sales process. Having secured premium
values, the Board has no hesitation in announcing a substantial return of
capital and a further increase in the dividend. The fact that these sales will
also bring customer benefits makes this a positive outcome for all parties.'

Roger Urwin, Chief Executive of National Grid Transco, said:

'These sales represent a further major step in the process of value creation
from the National Grid and Lattice merger. We have already delivered operational
and financial out-performance in our gas distribution networks and today have
convincingly demonstrated they are worth a substantial premium. We will remain
by far the largest UK gas distributor and the reshaped business will enable us
to achieve the targeted reduction in controllable costs more effectively. Today
National Grid Transco is in even better shape to deliver its growth strategy and
superior value.'

*Ofgem's Regulatory Asset Value as at 31 March 2004 as derived from the
assumptions within both Ofgem's letter titled 'Gas Distribution Price Controls'
published on 16 March 2004 and Ofgem's June 2003 'Separation of Transco's
distribution price control: Final Proposals', and inflated to nominal prices.

The North of England distribution network is to be sold to a consortium led by
Cheung Kong Infrastructure Holdings Limited and including United Utilities PLC
for a cash consideration of £1.4 billion; the Wales & the West distribution
network is to be sold to a consortium led by the Macquarie European
Infrastructure Fund (a wholesale fund managed by a member of the Macquarie Bank
Group), for a cash consideration of £1.2 billion; and the South of England and
Scotland distribution networks are to be sold to a consortium comprising
Scottish and Southern Energy plc, Borealis Infrastructure Management Inc and
Ontario Teachers Pension Plan for a cash consideration of £3.2 billion.

In addition to West Midlands, London and East of England, NGT will retain the
North West distribution network. With approximately 11 million business and home
consumers, NGT will have by far the largest gas distribution business in the UK.
This business will, on a proforma basis, have a combined estimated regulatory
asset value of £5.6 billion at March 2005. The reshaped business will more
effectively achieve the 35% real reduction in controllable costs targeted by
2006/07.

Subject to completion of the Transactions, NGT will:

   •deliver a one-off return of capital to shareholders of £2.0 billion (with
    associated share consolidation), representing approximately 14% of NGT's
    current market capitalisation and equivalent to 65p per share;
   •recommend a 20% increase in the ordinary dividend for the current year,
    to 23.7p per ordinary share, as well as maintaining its target of increasing
    ordinary dividends per share by 7% per year until 31 March 2008 from this
    new base; and
   •retire or repay around £2.3 billion of Transco's indebtedness giving a
    projected gearing level for Transco of around 50% debt to regulatory asset
    value.

It is estimated that NGT's earnings per share will be enhanced immediately
following completion of the Transactions and the return of capital.

The Transactions are subject to certain regulatory consents and approvals
including from the Gas and Electricity Markets Authority, the Department for
Trade and Industry and the Health and Safety Executive. Ofgem has issued a
detailed timetable, which outlines the consent and approvals process and NGT is
targeting completion of the Transactions in April 2005. Completion of the
Transactions is also subject to termination rights, exercisable by each of NGT
and the purchasers, in the event of defined circumstances arising which would
have a material adverse impact on the distribution networks being sold. In
certain of these circumstances break fees would be payable by either NGT or the
purchasers.

The purchasers of the distribution networks have confirmed that all existing
employee rights including pension terms will be safeguarded.

Rothschild and Morgan Stanley acted as joint financial advisers to NGT on the
Transactions. In addition, Cazenove and JP Morgan provided advice to the Board
in relation to the Transactions.

Contact details
National Grid Transco:
Investors
Alexandra Lewis          [phone]
Terry McCormick          [phone]    [phone](m)
Louise Clamp             [phone]    [phone](m)

Media
Clive Hawkins            [phone]    [phone](m)

Citigate Dewe
Rogerson
Anthony Carlisle         [phone]    [phone](m)

An analyst presentation will be held at 8.45am for 9am (UK time) at JP Morgan,
10 Aldermanbury, London EC2V 7RF. A live audio webcast of the presentation will
be available at www.ngtgroup.com. Alternatively, interested parties can listen
to the live briefing via telephone by dialling [phone].

A recording will be available for one week by dialling [phone]
followed by the PIN number: 749494. Your recording ID is 7994205.

Additional Information

UK Gas Distribution Networks

National Grid Transco's eight UK gas distribution networks take gas from NGT's
high pressure National Transmission System and transport it through 275,000
kilometres of pipelines to some 21 million business and home consumers. The
distribution networks are very largely discrete networks which are connected to
the National Transmission System, and have a small number of connections between
the individual distribution networks.

For the year ended 31 March 2004, the four distribution networks to be sold
generated operating profit (Note 1) of £346 million on revenues of £1,052
million and as at 31 March 2004 had total assets of £2,747 million.

This is broken down according to the separate purchasers as shown below:
                                                          For year to 31
                                                            March 2004
                                       -------------      --------------
Networks                                Operating         Total assets(2)
------------------                      Profit (1)
                                       -------------      --------------

Scotland & South of England           £185 million       £1,369 million

North of England                       £94 million        £537 million

Wales & the West                       £67 million        £841 million

Note 1 Operating profit before interest and tax
Note 2 Total assets is fixed assets plus current assets, but excluding cash

The distribution networks being sold comprise the current Transco pipeline
network downstream of the National Transmission System and land, property and
fleet assets, together with the distribution networks' management teams and
operations, maintenance, repair, replacement and emergency workforces.
Contracts, intellectual property, policies, procedures and licences are also
included in the sale.

Transition Process

To facilitate the smooth and safe transfer of ownership and separation of the
distribution networks, there are a number of interim service agreements being
provided by National Grid Transco to the new owners, covering key business
support services, such as Systems Operation, and Front Office Systems. Other
corporate centre activities, such as Human Resources, will no longer be provided
by NGT to the distribution networks being sold.

Regulatory Process

The Transactions are subject to certain regulatory consents and approvals from
the Gas and Electricity Markets Authority, The Secretary of State for Trade and
Industry and the Health and Safety Executive. The Gas and Electricity Markets
Authority ('the Authority'), as the regulator for Britain's gas and electricity
industries, in its role of promoting choice and value for all customers, will
take its decision on whether distribution network sales should proceed in
November, based on its assessment of whether the sale of the distribution
networks will protect the interests of customers.

The development of the new licences and changes to Transco's existing licence
will be the subject of an informal consultation document that the Authority
intends to release in early September, followed by a formal 28 days
consultation. During this period the Authority will meet to determine whether it
wishes to consent to the disposal by Transco of distribution network assets to
distribution network companies that are wholly owned by NGT. The Authority will
then issue directions to bring into effect the modifications to Transco's
existing licence and the new distribution network licences, after which Transco
will apply for the new distribution network licences to be transferred to the
distribution network Companies that are wholly owned by NGT. From receipt of
this application, expected by the Authority to be in December 2004 there will
then be a two-month formal consultation under the Gas Act relating to the
transfer, which will allow the consultation and subsequent transfer to be
completed by 1 March 2005 subject to the responses received to the consultation
process.

Cautionary statement

This announcement 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 announcement include the ability to integrate the US and UK
businesses acquired by or merged with National Grid Transco or to continue to
realise the expected synergies from such integrations, the failure for any
reason 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 UK gas distribution network(s) 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 National Grid Transco's filings with the United States Securities and
Exchange Commission (and in particular the Directors' Operating and Financial
Review section filed with its most recent Annual Report on Form 20-F).
Recipients are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this announcement. National Grid
Transco does not undertake any obligation to publicly release any revisions to
these forward-looking statements to reflect events or circumstances after the
date of this announcement.




                      This information is provided by RNS
            The company news service from the London Stock Exchange