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 2012.

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 2012 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 2012

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 principal activity of the Company during the six months to 30 June 2012 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 north east of England. The Company's distribution system of transformers, switchgear and overhead and underground cablesreceives electricity from generators connected to its electricity distribution network and from the National Grid's transmission system and distributes it to approximately 1.6 million customers at voltages of up to 132kV. Northern Powergrid 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 a range of clients.

During the six months to 30 June 2012, Northern Powergrid distributed electricity to customers in its distribution services 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's capital expenditure programme included activities to refurbish, replace and construct assets such as substations, transformers, switchgear, overhead and underground cables and associated equipment. IUS continued to operate its engineering contracting business, including the provision of connections services to electricity distribution networks.

Northern Powergrid's priorities during the six-month period to June 2012 continued to include improving customer service by taking action aimed at improving performance in its contact centre services, web services and stakeholder engagement, customer service competencies and complaints handling processes. In addition, Northern Powergrid's investment strategy delivered 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.

Although IUS continued to experience challenging trading conditions in the six-month period to June 2012 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, including the largest such contract secured for a number of years.

NORTHERN ELECTRIC plc:

REGISTERED NUMBER: 2366942

INTERIM MANAGEMENT REPORT (CONTINUED)

Operations (continued)

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 ended 31 March 2012 in respect of its key customer service performance indicators of customer interruptions ("CI"), customer minutes lost ("CML") and customer satisfaction targets 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 CML and CI and more than the target number in respect of customer satisfaction.

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.

In this respect, during the six months to 30 June 2012, the Group experienced two lost time accidents (six months to 30 June 2011: 2), against an annual target of three for the Northern Powergrid Holdings Company group of companies (the "Northern Powergrid Group") and five preventable vehicle accidents (six months to 30 June 2011: 6) against an annual target of 26 for the Northern Powergrid Group. Although that performance was similar to the same period in 2011, it was encouraging to note that the incidents experienced did not result 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 2012 Northern Powergrid received a President's Award from the Royal Society for the Prevention of Accidents for achieving eleven consecutive Gold Awards, which have been presented in recognition of achievements in 2011 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.

NORTHERN ELECTRIC plc:

REGISTERED NUMBER: 2366942

INTERIM MANAGEMENT REPORT (CONTINUED)

Results for the six months ended 30 June 2012

The half-yearly accounts for the six months ended 30 June 2012 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 auditors. The Group will deliver its statutory accounts for the current financial year ending on 31 December 2012 to the Registrar of Companies by 30 April 2013.

The Group delivered a pleasing performance for the six months ended 30 June 2012, 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 £162.1m was £15.1m higher than for the six months ended 30 June 2011 mainly due to higher distribution tariffs.

Cash flow

Cash and cash equivalents as at 30 June 2012 were £224.2m, representing a reduction of £5.4m when compared with the position at 31 December 2011.

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.

Financial position

Profit before tax at £75.8m was £14.4m higher than the six months ended 30 June 2011 mainly as a result of increased revenues.

Dividends

No ordinary dividends were paid in the period resulting in £62.4m being transferred to reserves.

Related party transactions

The Company provides certain corporate functions to the Northern Powergrid Group, including financial and management accounting, financial planning, treasury, taxation, procurement, 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 3 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 the Distribution Price Control Review 5 period 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 the term of the price control, are that changes in most categories of cost incurred by Northern Powergrid will have a direct impact on its financial results.

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 contnues to be subject to the issues created by the general economic downturn 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 2012.

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 2012, 100% of the Group's long-term borrowings were at fixed rates and the average maturity for these borrowings was 17 years. Despite this position, the Group remains mindful of the current economic climate and the associated potential impact on the cost of its short-term borrowings. 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 2011, which is available at www.northernpowergrid.com.

NORTHERN ELECTRIC plc:

REGISTERED NUMBER: 2366942

INTERIM MANAGEMENT REPORT (CONTINUED)

Risks and uncertainties (continued)

Going concern

In the Company's latest annual report and accounts for the year to 31 December 2011 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 2012 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 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.

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 2012;

(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

T E Fielden

Director

17 August 2012

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2012

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - SIX MONTHS ENDED 30 JUNE 2012

There is no other comprehensive income for the Group for the six months to 30 June 2012, the comparative six month period in 2011 or the year ended 31 December 2011, other than the profits reported above.NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2012

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2012

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

The interim accounts were approved by the board of directors and authorised for issue on 17 August 2012 and were signed on its behalf by:

T E Fielden

Director

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2012

CONSOLIDATED CASH FLOW STATEMENT

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2012

NOTES TO THE ACCOUNTS

1. REVENUE AND SEGMENTAL ANALYSIS

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

6 Months Ended 30 June 2012 (Unaudited)

"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 £45.9 m are included within the Distribution Segment.

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2012

NOTES TO THE ACCOUNTS (CONTINUED)

1. REVENUE AND SEGMENTAL ANALYSIS (CONTINUED)

6 Months Ended 30 June 2011 (Unaudited)

"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 £40.9m are included within the Distribution Segment.

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2012

NOTES TO THE ACCOUNTS (CONTINUED)

1. REVENUE AND SEGMENTAL ANALYSIS (CONTINUED)

Year ended 31 December 2011(Audited)

"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 £77.6m are included within the Distribution segment.

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2012

NOTES TO THE ACCOUNTS (CONTINUED)

1. REVENUE AND SEGMENTAL ANALYSIS (CONTINUED)

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. This is the measure reported to the Group's President and Chief Executive Officer for the purposes of assessment of segment performance.

Segment assets in "Other" include investments held by Northern Electric plc in its subsidiary companies totaling £203.1m (June 2011: £203.1m, December 2011: £203.1m), which are eliminated in Consolidation Adjustments.

Consolidation Adjustments also include a £17.5m credit to operating profit (June 2011: £15.8m, December 2011: £41.6m), the recognition of the £221.3m retirement benefit asset (June 2011: £175.2m, December 2011: £201.8m) and a £28.4m reduction in cumulative capitalised costs (June 2011: £23.8m, December 2011: £25.8m) as a consequence of the Distribution division accounting for retirement benefits on a cash accrued basis.

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

For the purposes of monitoring segment performance and allocating resources between segments, the Group's President and Chief Executive Officer monitors the tangible, intangible and financial assets attributable to each segment. All assets and liabilities are allocated to reportable segments with the exception of long-term and short-term borrowings and current and deferred tax balances.

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2012

NOTES TO THE ACCOUNTS (CONTINUED)

2. INCOME TAX EXPENSE

The underlying tax for the interim period is calculated by applying the effective average tax rate of 25% on profit before preference dividends accrued.

The Finance Act 2012 includes a provision that the standard rate of corporation tax in the United Kingdom will reduce from 25% to 24% from April 2012. Accordingly, this rate has been applied when calculating deferred tax assets and liabilities throughout the Group as at 30 June 2012.

3. RELATED PARTY TRANSACTIONS

GROUP

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

Loans

The Group has made loans 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 2012 was £0.9m (six month ended 30 June 2011: £0.8m, year ended 31 December 2011: £1.5m). Included within cash and cash equivalents is £224.2m as at 30 June 2012 (30 June 2011: £231.5m, 31 December 2011: £229.6m) in respect of these loans.

The Group has received loans from companies in the Northern Powergrid Group. The total interest included in finance costs in the income statement for the six months ended 30 June 2012 was £2.8m (six months ended 30 June 2011: £5.9m, year ended 31 December 2011: £6.4m). Included within borrowings is £102.9m as at 30 June 2012 (30 June 2011: £102.9m, 31 December 2011: £104.3m) in respect of these loans.

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

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2012

NOTES TO THE ACCOUNTS (CONTINUED)

3. RELATED PARTY TRANSACTIONS (CONTINUED)

GROUP (CONTINUED)

Trading transactions

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

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2012

NOTES TO THE ACCOUNTS (CONTINUED)

3. RELATED PARTY TRANSACTIONS (CONTINUED)

GROUP (CONTINUED)

Trading transactions (Continued)

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

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 2011: 3, 31 December 2011: 3) and 8 key personnel (30 June 2011: 8, 31 December 2011: 8) utilised the services provided by Northern Transport Finance Limited, a company in the Group.

The amounts included in finance lease receivables owed by these directors and key personnel total £0.1m (30 June 2011: £0.1m, 31 December 2011: £0.1m) in respect of non-current receivables and £0.1m (30 June 2011: £0.1m, 31 December 2011: £0.1m) in respect of current receivables.

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2012

NOTES TO THE ACCOUNTS (CONTINUED)

3. RELATED PARTY TRANSACTIONS (CONTINUED)

COMPANY

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

Loans

The Company has made loans to companies in the Northern Powergrid Group. The total interest included in finance income in the income statement for the period ended 30 June 2012 was £0.4m (six months ended 30 June 2011: £0.4m, year ended 31 December 2011: £1.0m). Included within cash and cash equivalents is £224.2m as at 30 June 2012 (30 June 2011: £231.5m, 31 December 2011: £229.6m) in respect of these loans.

The Company has received loans from companies in the Northern Powergrid Group. The total interest included in finance costs in the income statement for the period ended 30 June 2012 was £nil (six months ended 30 June 2011: £nil, year ended 31 December 2011: £0.6m). Included within borrowings is £nil as at 30 June 2012 (30 June 2011: £nil, 31 December 2011: £nil) 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, the Company entered into the following trading transactions with other members of the Northern Powergrid Group:

NORTHERN ELECTRIC plc

REGISTERED NUMBER: 2366942

CONDENSED FINANCIAL STATEMENTS - SIX MONTHS ENDED 30 JUNE 2012

NOTES TO THE ACCOUNTS (CONTINUED)

3. RELATED PARTY TRANSACTIONS (CONTINUED)

COMPANY (CONTINUED)

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

There are no amounts outstanding to other members of the Northern Powergrid Group.

No dividends were received from Integrated Utility Services Limited in the period to June 2012.

4. 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 2011.