Half Yearly Report

The following regulated information, disseminated pursuant to DTR 6.3.5, comprises the Half-Yearly Financial Report of Northern Electric plc for the six months ended 30 June 2013.

Pursuant to LR 14.3.6, the document has been submitted to the National Storage Mechanism and will shortly be available for inspection at:

www.hemscott.com/nsm.do

The Half-Yearly Financial Report for the six months ended 30 June 2013 is also available on the website

www.northernpowergrid.com

Enquiries:

John Elliott 0191 223 5103

NORTHERN ELECTRIC plc

HALF-YEARLY FINANCIAL REPORT

SIX MONTHS ENDED 30 JUNE 2013

NORTHERN ELECTRIC plc:

CONTENTS OF THE HALF YEARLY REPORT FOR THE SIX MONTHS

ENDED 30 JUNE 2013

NORTHERN ELECTRIC plc:

INTERIM MANAGEMENT REPORT

Registered Number: 2366942

Registered Office: Lloyds Court, 78 Grey Street, Newcastle upon Tyne, NE1 6AF

Cautionary Statement

This interim management report has been prepared solely to provide additional information to shareholders to assess the strategies of Northern Electric plc (the "Company") and its subsidiaries (the "Group") and the potential for those strategies to succeed and should not be relied on by any other party or for any other purpose.

Operations

The Company is part of the Northern Powergrid Holdings Company group of companies (the "Northern Powergrid Group") and its principal activity during the six months to 30 June 2013 was to act as a holding company, with its main operating subsidiaries being Northern Powergrid (Northeast) Limited ("Northern Powergrid") and Integrated Utility Services Limited ("IUS"). Northern Powergrid holds an electricity distribution licence and serves an area of approximately 14,400 square kilometres in the northeast of England. Northern Powergrid's distribution system of transformers, switchgear and overhead and underground cables receives electricity from generators connected to it and from the National Grid's transmission system and distributes that electricity to approximately 1.6 million customers at voltages of up to 132kV. Northern Powergrid is an authorised distributor under the Electricity Act 1989 and is subject to regulation by the Gas and Electricity Markets Authority, which acts through the Office of Gas and Electricity Markets ("Ofgem").IUS provides engineering contracting services to various clients.

During the six months to 30 June 2013, Northern Powergrid distributed electricity to customers in its distribution service area and continued to target its investment strategy at delivering improvements in the overall performance of its electricity distribution network in an efficient and cost-effective manner. Northern Powergrid ended the regulatory year to 31 March 2013 (the "Regulatory Year") having delivered the largest ever capital expenditure programme, compared to other regulatory years, investing £190.6 million in the distribution network. This expenditure represented a £51.1 million (37%) increase on the £139.5 million recorded in the regulatory year to 31 March 2012 and was a significant achievement in the context of the outputs Northern Powergrid intends to deliver by the end of the Distribution Price Control 5 period ("DPCR5").

Northern Powergrid's investment in its distribution network includes activities to refurbish, replace and construct assets such as substations, transformers, switchgear, overhead and underground cables and associated equipment. That investment strategy is targeted at delivering improvements in an efficient and cost-effective manner in order to improve the network's resilience by seeking to minimise the number of power cuts that occur, reducing the average number of customers affected by a power cut and providing a quicker restoration service in the event of a power cut.

Northern Powergrid's priorities during the six-month period to June 2013 continued to include improving customer service by implementing initiatives to improve the quality of service provided to customers, with the first year of the new regulatory incentive known as the Broad Measure of Customer Satisfaction concluding on 31 March 2013.

NORTHERN ELECTRIC plc:

REGISTERED NUMBER: 2366942

INTERIM MANAGEMENT REPORT (CONTINUED)

Those improvements included the enhancement of the Northern Powergrid Group's website and the continued development of internet-based services, particularly in the area of new connections to the network.

Operations

Although confirmation of certain adjustments due to weather-related incidents is awaited as at the date of this half-yearly report, Northern Powergrid's reported performance for the Regulatory Year in respect of its key customer service performance indicators of customer interruptions ("CI") and customer minutes lost ("CML") was as follows:

In respect of these key customer service performance indicators, the goal is to achieve performance that is below Ofgem's target number.

In respect of the Broad Measure of Customer Satisfaction, an independent market research company, Accent, carries out telephone surveys with Northern Powergrid's customers to find out how satisfied they are with the services provided. Those surveys are undertaken with a number of customers who had contacted Northern Powergrid regarding an unplanned or a planned power cut, had requested a price quotation and a subsequent connection or had a general enquiry where a service had been provided or a job completed. Northern Powergrid recorded an overall satisfaction score of 77.9% for the Regulatory Year and work, which began during the Regulatory Year to develop the Company's customer service improvement plan, continued in the six months to 30 June 2013. That improvement plan includes a range of process and technology initiatives in order to integrate Northern Powergrid's various customer facing processes more effectively, with the aim of improving the services provided to customers and so increase the satisfaction rating year-on-year.

The Regulatory Year was the first year that a financial incentive had been available under the Ofgem Discretionary Reward for Stakeholder Engagement in the current price control period. Building on the good performance in its stakeholder engagement over the Regulatory Year, Northern Powergrid put forward a submission for consideration by Ofgem's panel, which achieved a score of 78.5%. As a result, Northern Powergrid, together with its affiliate Northern Powergrid (Yorkshire) plc, was rankedas the third placedDNO group and secured a reward which totalled some £940,000 for the Northern Powergrid Group.

The safety of its employees continued to be of paramount importance to the Group, with the on-going focus being on the goal that no employees should be injured during their working time. The Group intends to build incrementally on its existing strong safety record, remain a leading safety performer and ensure that safety considerations are always a part of its investment decisions and appraisals.

NORTHERN ELECTRIC plc:

REGISTERED NUMBER: 2366942

INTERIM MANAGEMENT REPORT (CONTINUED)

Operations (continued)

In this respect, during the first quarter of 2013, the Northern Powergrid Group issued innovative protective work wear clothing to its operational employees on conclusion of an extensive project to research, design and produce clothing that provides protection for those employees against the effects of events such as electrical flashovers.

During the six months to 30 June 2013, the Group did not experience any lost time accidents (six months to 30 June 2012: 2), against an annual target of two for the Northern Powergrid Group, but incurred seven preventable vehicle accidents (six months to 30 June 2012: 5) against an annual target of 26 for the Northern Powergrid Group. The Group's performance in respect of lost time accidents was encouraging and, although more preventable vehicle accidents occurred than in the same period in 2012, none of those incidents resulted in serious injuries to the employees concerned. Nevertheless, work continues to reduce the accident rates, with the lessons learned from such incidents being incorporated into the Northern Powergrid Group's safety and health improvement plan and road risk management programme.

In 2013 Northern Powergrid received a President's Award from the Royal Society for the Prevention of Accidents for achieving twelve consecutive Gold Awards, which have been presented in recognition of achievements in 2012 and continued or improving standards of health and safety over a sustained period. Northern Powergrid also continued to maintain its occupational health and safety management system and retained its OHSAS 18001 certification.

IUS continued to operate its engineering contracting business, including the provision of connections services to electricity distribution networks.

Although IUS continued to experience challenging trading conditions in the six-month period to June 2013 with the prevailing economic environment meaning that there was strong competition for the available opportunities, IUS successfully secured a number of new contracts for the provision of engineering services and continued to deliver on the largest such contract secured for a number of years.

NORTHERN ELECTRIC plc:

REGISTERED NUMBER: 2366942

INTERIM MANAGEMENT REPORT (CONTINUED)

Results for the six months ended 30 June 2013

The half-yearly accounts for the six months ended 30 June 2013 consolidate the results of the Company and its subsidiaries and are prepared under International Financial Reporting Standards. The half-yearly accounts do not comprise statutory accounts required to be delivered to the Registrar of Companies under the Companies Act 2006 and have not been subject to audit or review by the Group's auditor. The Group will deliver its statutory accounts for the current financial year ending on 31 December 2013 to the Registrar of Companies by 30 April 2014.

The Group delivered a satisfactory performance for the six months ended 30 June 2013, mainly due to increased revenue as a result of higher distribution tariffs and continued good cost control. A summary of the key financial results is set out below:

Key financials

Revenue

Revenue at £177.2m was £15.1m higher than for the six months ended 30 June 2012 mainly due to higher distribution tariffs.

Cash flow

Cash and cash equivalents as at 30 June 2013 were £127.3m, representing a reduction of £22.7m when compared with the position at 31 December 2012.

The Group has access to short-term borrowing facilities provided by Yorkshire Electricity Group plc, a related party, and to committed revolving credit facilities of £75.0m provided by Lloyds TSB Bank plc, Royal Bank of Scotland plc and Abbey National Treasury Services plc. In addition, the Group has access to a £22.0m committed overdraft facility provided by Lloyds TSB Bank plc.

Financial position

Profit before tax at £82.0m was £8.5m higher than the six months ended 30 June 2012 mainly as a result of increased revenues.

Dividends

No ordinary dividends were paid in the period resulting in £62.3m being transferred to reserves.

Related party transactions

The Company provides certain corporate functions to the Northern Powergrid Group, including financial accounting, financial planning, treasury, taxation, pensions, internal audit, legal advice, insurance management, claims handling and litigation services. Further details of the related party transactions entered into by the Group and the Company and changes therein are included in Note 4 to this half-yearly financial report.

NORTHERN ELECTRIC plc:

REGISTERED NUMBER: 2366942

INTERIM MANAGEMENT REPORT (CONTINUED)

Risks and uncertainties

Regulation

One of the principal risks facing Northern Powergrid relates to possible changes in its allowed income as a result of modifications to the price control formulae that are set out within the special conditions of the electricity distribution licence. However, all of the changes to those special conditions required to give effect to Ofgem's final proposals in respect of DPCR5 were agreed and implemented with effect from 1 April 2010 for the five-year period ending on 31 March 2015. Given the regulatory environment in which Northern Powergrid operates, the financial risks to Northern Powergrid during DPCR5 are that changes in most categories of cost incurred by Northern Powergrid will have a direct impact on its financial results.

On 28 June 2013, Northern Powergrid submitted its well-justified business plan required by Ofgem as part of the next price control review process, which is known as RIIO-ED1 and will set the distribution price control for the period of eight years through to 2023 as opposed to the five year periods previously used.

The well-justified business plan was based on a significant stakeholder engagement exercise, during which Northern Powergrid listened and responded to various customers and other stakeholders in order to inform its content. The well-justified business plan includes several proposed improvements such as the response to a power cut being 20% quicker, the number of power cuts experienced reducing by 8% and a reduction of 30% in the accident rate and in the time it takes to make new connections to the network. Northern Powergrid has proposed an average price reduction of 11% in real terms to take effect immediately in the first year of the new price control period to 31 March 2016, followed by flat prices for the remainder of the period.

Northern Powergrid will work with Ofgem during the second half of 2013 as part of the process of reviewing its well-justified business plan and Ofgem's initial decision as to whether the well-justified business plan is "fast-tracked" is expected in November 2013. Achieving "fast-track" status for its well-justified business plan would mean that Northern Powergrid would not have to undertake any further substantive engagement with Ofgem during the remainder of the RIIO-ED1 process in respect of that plan and will be able to prepare for the new price control period well in advance of its commencement on 1 April 2015.

Financial

The principal risks associated with the regulatory environment, within which Northern Powergrid operates are mentioned above. As IUS' business is primarily in the competitive engineering contracting market, it continues to be subject to the issues created by the general economic environment and associated trading conditions. Consequently, demand for IUS' services has varied more significantly recently than in previous years and there continues to be an enhanced risk of counter-party default, with the associated increase in the potential for IUS to be exposed to bad debt. It is anticpated that these conditions will continue for the remainder of 2013.

NORTHERN ELECTRIC plc:

REGISTERED NUMBER: 2366942

INTERIM MANAGEMENT REPORT (CONTINUED)

Risks and uncertainties (continued)

The Group addresses interest rate risk by having a policy of providing a stable, low cost of financing over time whilst observing approved risk parameters being financed by long-term borrowings at fixed rates and having access to short-term borrowing facilities at floating rates of interest.

As at 30 June 2013, 100% of the Group's long-term borrowings were at fixed rates and the average maturity for these borrowings was 16 years. Despite this position, the Group remains mindful of the current economic climate and the associated potential impact on the cost of short-term borrowing. No material currency risks are faced by the Group and it is policy that no trading in financial instruments should be undertaken.

Further information on the principal long-term risks and uncertainties and the internal control system are included in the Company's latest annual report for the year to 31 December 2012, which is available at www.northernpowergrid.com.

Going concern

In the Company's latest annual report and accounts for the year to 31 December 2012 the directors set out a number of factors they took into account when they considered continuing to adopt the going concern basis in preparing those annual report and accounts and would confirm that no events have occurred during the six months to 30 June 2013 to alter the view expressed in the annual report and accounts.

Future strategy and objectives

The Company will continue to develop its business as a holding company in a manner that concentrates on the Group's core skills of electricity distribution and engineering contracting.

Northern Powergrid's well-justified business plan is available at www.yourpowergridplan.com

and sets out what are considered to be the priorities for and the outputs it intends to deliver during the next price control period, which will last for the eight years until March 2023. Those priorities include Northern Powergrid's plans for investment and where in the asset base that investment is likely to take place, how it intends to deliver service improvements in a cost-effective way and how it plans to approach adapting its network to support the move towards a low-carbon economy. Building on that plan, Northern Powergrid will continue to operate its business with the goal of out-performing the allowances in the distribution price control, while efficiently investing in its electricity distribution system with the aim of improving the quality of supply and service provided to its customers. The majority of Northern Powergrid's distribution revenues for the period to 31 March 2015 have been set by Ofgem.

IUS will look to develop further its engineering contracting business by delivering a high standard of service to its existing clients and pursuing opportunities in other sectors.

NORTHERN ELECTRIC plc:

REGISTERED NUMBER: 2366942

INTERIM MANAGEMENT REPORT (CONTINUED)

Responsibility Statement

We confirm that to the best of our knowledge:

(a) the condensed set of finanical statements has been prepared in accordance with IAS 34, "Interim Financial Reporting", and gives a true and fair view of the assets, liabilities, financial position and profit of the Group for the six months to 30 June 2013;

(b) the interim management report contains a fair review of the information required by DTR 4.2.7 (indication of important events during the first six months of the year and description of the principal risks and uncertainties for the remaining six months of the year); and

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

By order of the board

P A Jones

Director

16 August 2013

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2013

CONSOLIDATED INCOME STATEMENT

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2013

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2013

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2013

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

The interim financial statements were approved by the board of directors and authorised for issue on 16 August 2013 and were signed on its behalf by:

P A Jones

Director

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2013

CONSOLIDATED CASH FLOW STATEMENT

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

The Group's accounting policies are the same as the accounting policies which are described in the Group's latest annual report and accounts for the year to 31 December 2012, with the exception of the adoption of the 2011 revision of IAS 19, Employee Benefits, which came into force for all accounting periods beginning on or after 1 January 2013.

Prior to the revision of this Standard, the Group had elected to adopt the corridor approach for the purposes of accounting for its defined benefit pension scheme, thereby deferring the recognition of actuarial gains and losses.

The adoption of the revised IAS 19 removes the option to apply the corridor approach and requires the recognition of changes in the defined benefit obligation and in plan assets when those changes occur.

The revised Standard is effective for periods beginning on or after 1 January 2013 and is to be applied retrospectively. Accordingly, comparative information within these interim financial statements has been restated to reflect the accounting policy change.

In the case of the Group, the revised accounting standard increases pension costs chargeable to operating costs for the six months ended June 2012 by £2.3m and by £4.6m for the year to 31 December 2012. In addition, the amount of capitalised pension costs increases by £0.7m for the six months ended 30 June 2012 (£1.3m for the year to 31 December 2012) and the Group's total equity reduces by £215.3m to £666.7m as at 31 December 2012.

The following tables show the impact of the restatement on the Group's consolidated income statement for the six months ended 30 June 2012 and on its consolidated statements of financial position as at 1 January 2012 and 31 December 2102.

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

1. ACCOUNTING POLICIES (CONTINUED)

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

1. ACCOUNTING POLICIES (CONTINUED)

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

1. ACCOUNTING POLICIES (CONTINUED)

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SEGMENTAL ANALYSIS

The Group operates in the principal area of activity of the distribution of electricity in the United Kingdom.

The accounting policies of the reportable segments are the same as the Group's accounting policies which are described in the Group's latest annual financial statements. The segment results represent the profit earned by each segment without allocation of the share of profits of joint ventures, finance income and finance costs and income tax expense.

Six Months Ended 30 June 2013 (Unaudited)

"Other" comprises Engineering Contracting and business support units such as head office overheads.

Sales and purchases between the different segments are made at commercial prices.

External sales to RWE Npower plc of £47.0m are included within the Distribution Segment.

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SEGMENTAL ANALYSIS (CONTINUED)

"Other" comprises Engineering Contracting and business support units.

Sales and purchases between the different segments are made at commercial prices.

External sales to RWE Npower plc of £45.9m are included within the Distribution Segment.

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. SEGMENTAL ANALYSIS (CONTINUED)

Segment assets in "Other" include investments held by Northern Electric plc in its subsidiary companies totalling £203.1m (December 2012: £203.1m), which are eliminated in Consolidation Adjustments.

Consolidation Adjustments also include a £17.6m credit to operating profit (December 2012: £44.0m), the recognition of the £50.9m retirement benefit liability (December 2012: £36.5m liability) and a £31.0m reduction in cumulative capitalised costs (December 2012: £30.1m) as a consequence of the Distribution segment accounting for retirement benefits on a cash accrued basis.

Unallocated net corporate liabilities include cash and cash equivalents, borrowings and taxation.

2. INCOME TAX EXPENSE

The underlying tax for the interim period is calculated by applying the effective average tax rate of 23.25% (2012: 24.50%) on profit before preference dividends accrued.

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

3. RELATED PARTY TRANSACTIONS

GROUP

Details of transactions between the Group and other related parties are disclosed below.

Loans

The Group has made loans repayable on demand to companies in the Northern Powergrid Group. The total interest included in finance income in the income statement for the six months ended 30 June 2013 was £0.8m (six month ended 30 June 2012: £0.9m). Included within cash and cash equivalents is £127.3m as at 30 June 2013 (31 December 2012: £150.0m) in respect of these loans.

The Group has received loans from other companies in the Northern Powergrid Group. The total interest included in finance costs in the income statement for the six months ended 30 June 2013 was £2.8m (six months ended 30 June 2012: £2.8m). Included within borrowings is £101.5m as at 30 June 2013 (31 December 2012: £101.3m) in respect of these loans.

Interest on loans to/from Group companies is charged at a commercial rate of interest.

Trading transactions

During the year, Group entities entered into the following trading transactions with related parties that are not members of the Group:

Sales and purchases from related parties were made at commercial prices.

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

4. RELATED PARTY TRANSACTIONS (CONTINUED)

GROUP (CONTINUED)

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of amounts owed by related parties.

During 2012, 3 directors (30 June 2012: 3) and 8 key personnel (30 June 2012: 8) utilised the services provided by Northern Transport Finance Limited, a company in the Group.