Acquisition - Part 3

National Grid Group PLC
5 September 2000

PART 3
                       APPENDIX I
                            
           SUMMARY OF PRINCIPAL CONDITIONS OF
                  THE MERGER AGREEMENT


1.   Introduction

The Merger Agreement sets out the conditions to
Completion.  It also contains certain termination 
rights, mutual representations and warranties and 
various covenants, including certain limitations on
the operation of the business of Niagara Mohawk in the
period prior to Completion.

2.   Principal Conditions

The principal conditions to Completion that must be
satisfied or waived include the receipt by National Grid
of approval of its shareholders for both the Scheme of
Arrangement and the Acquisition and receipt by Niagara
Mohawk of approval of its shareholders for the
Acquisition, as well as receipt of certain regulatory
approvals and the absence of any governmental order
prohibiting Completion.  The principal regulatory
approvals required in the US include approval by the New
York Public Service Commission, the SEC under the Public
Utility Holding Company Act of 1935, the Federal Energy
Regulatory Commission under the Federal Power Act and
the Federal Communications Commission.  The Acquisition
also requires clearance under US antitrust laws.  In the
UK, the Scheme of Arrangement must be sanctioned by 
the High Court.

The Agreement requires that prior to Completion, Niagara
Mohawk's nuclear generation interests shall have been
sold, and that sale itself requires approval of the New
York Public Service Commission and the US Nuclear
Regulatory Commission.  If it appears that the sale of
Niagara Mohawk's nuclear generation interests may be
delayed beyond the term of the Agreement, but is likely 
to occur, National Grid and Niagara Mohawk agree to 
consider alternative arrangements for the Niagara
Mohawk nuclear generation interests in order to permit
Completion.

It is a condition to Completion that the required
regulatory approvals, including the approvals of the sale
of Niagara Mohawk's nuclear generation interests or other
arrangement and a determination of the level of allowed
recovery of stranded costs from such sale, do not have a
material adverse effect on Niagara Mohawk.

3.   Termination Rights

National Grid and Niagara Mohawk can jointly agree to
terminate the Merger Agreement at any time.  The Merger
Agreement requires National Grid and Niagara Mohawk to
complete the Acquisition unless any one of the conditions
to Completion is not satisfied or waived by 31 December
2001.  This date may be extended to 31 March 2002, if on
31 December 2001, the only conditions to Completion are
the receipt of certain regulatory approvals and the
completion of the sale of Niagara Mohawk's nuclear
generation interests provided that in the latter case,
Niagara Mohawk must have entered into a definitive
agreement with a third party relating to such sale.  The
date may then be further extended to 31 August 2002 if 
the only unsatisfied conditions to Completion are the
receipt of regulatory approvals for, and the closing of,
the sale of Niagara Mohawk's nuclear generation interests.

The Merger Agreement may also be terminated by either
National Grid or Niagara Mohawk (i) as a result of
material breach of the Merger Agreement by the other
party, (ii) if either of such parties fails to obtain
approval of its shareholders, (iii) if the Board of
Directors of the other party withdraws its recommendation
with  respect to the Acquisition or (iv) if a court of
competent jurisdiction issues an order preventing or
prohibiting the Acquisition.

In addition to these termination  rights, the Merger
Agreement may be terminated by Niagara Mohawk prior to
obtaining the approval of its shareholders if its Board
of Directors determines, in certain circumstances, that
its fiduciary obligations require Niagara Mohawk to
terminate the Agreement as a result of a more favorable
acquisition proposal from a third party.

4.   Effect of Termination in Certain Circumstances

Niagara Mohawk is required to make a payment to National
Grid in the amount of $150 million plus National Grid's
out-of-pocket expenses up to $10 million as National 
Grid's exclusive remedy if the Merger Agreement is terminated
for any of the following reasons:

-   Niagara Mohawk terminates the Merger Agreement prior
    to obtaining Niagara Mohawk shareholder approval of
    the Acquisition because its Board of Directors has
    determined that Niagara Mohawk's fiduciary
    obligations require it to accept an alternative
    acquisition proposal;
    
-   the Niagara Mohawk Board of Directors withdraws its
    recommendation for approval of the Acquisition prior
    to obtaining Niagara Mohawk shareholder approval of
    the Acquisition;
    
-   Niagara Mohawk shareholders fail to approve the
    Acquisition while an alternative acquisition
    proposal is outstanding and Niagara Mohawk enters
    into a definitive agreement with respect to the
    alternative acquisition proposal within two years;
    
-   National Grid terminates the Merger Agreement
    because Niagara Mohawk has materially breached a
    representation, warranty or covenant of the Merger
    Agreement while an alternative acquisition proposal
    is outstanding and Niagara Mohawk enters into a
    definitive agreement with respect to the alternative
    acquisition proposal within two years; and
    
-   Niagara Mohawk terminates the Merger Agreement
    because Completion has not occurred by 31 December
    2001, subject to any extensions made in the manner
    described above, and at the time of such termination
    an alternative acquisition proposal is outstanding
    and Niagara Mohawk enters into a definitive
    agreement with respect to the alternative
    acquisition proposal within two years (provided that
    if the failure to close while an alternative
    acquisition  proposal is outstanding is solely the
    result of failure to complete the sale of Niagara
    Mohawk's nuclear generation interests, the fee will
    become payable if Niagara Mohawk enters into a
    definitive agreement regarding the alternative
    acquisition proposal within one year).
    
National Grid is required to make a payment to Niagara
Mohawk in the amount of $150 million plus Niagara Mohawk's
out-of-pocket expenses up to $10 million as Niagara
Mohawk's exclusive remedy if the National Grid Board of
Directors withdraws its recommendation for the
Acquisition prior to obtaining the National Grid 
shareholder approval for the Acquisition.

In the event of a wilful breach of the Merger Agreement by 
one party, the breaching party may also be liable for 
damages for breach of contract.


     

                       APPENDIX II
                            
              INFORMATION ON NATIONAL GRID

Business description

National Grid's principal business is the transmission of
electricity.  It owns, operates and maintains the high
voltage network in England and Wales, which connects
generators  with major customers and regional electricity
companies.  National Grid also owns and operates
interconnectors which enable electricity to be
transferred between the England and Wales market and
Scotland and France.  National Grid is listed on the
London and New York Stock Exchanges with a current market
capitalisation of £8.3 billion ($12.1 billion).
National Grid ordinary shares are tradeable on the New 
York Stock Exchange in the form of ADSs, each of which 
represents five National Grid ordinary shares.

In  addition, National Grid holds a 36 per cent. economic
interest in Energis, which operates a national
telecommunications network and provides a range of
communications and information services.  Energis has a
current market capitalisation of £10.5 billion ($15.3
billion).

As the liberalisation of international electricity and
telecommunications industries continues, National Grid
has sought investment opportunities overseas where it can
utilise its existing assets, skills  and  resources to
improve returns for shareholders.

On 22 March 2000 National Grid completed the acquisition
of NEES.  This acquisition provided National Grid with a
regional  platform for growth in the US and was followed
on 19 April 2000 with the completion of the acquisition
of EUA,  together forming National Grid USA.  National
Grid USA now delivers electricity to approximately  1.7
million residential, commercial, industrial and municipal
customers in Massachusetts, Rhode Island and New
Hampshire.  National Grid USA's subsidiaries own and
operate approximately 3,000 miles of transmission lines
and 28,000 miles of distribution lines in New England.

National Grid has a 42.5 per cent. interest in a joint
venture which has a majority stake in the principal
Argentine transmission system.  In another joint venture,
National  Grid supplies electricity to the mines  of  the
Zambian Copperbelt.  In Brazil, National Grid owns 50 per
cent. of Intelig, Brazil's second national and
international telecommunications service provider.
National Grid also owns a telecommunications company in
the US, NEESCom, and is working with  Energis in the
creation of an alternative national telecommunications
network in Poland.  National Grid has a shareholding in
Manquehue net, a telecommunications company based in
Santiago, Chile.  National Grid also has a 50 per cent.
shareholding in Southern Cone Communications which is
developing a telecommunications network in Argentina with
a spur to Chile.

The following information is extracted from National Grid's
annual report for the year ended 31 March 2000:



      Group historical cost profit and loss account
                        (UK GAAP)

                                        Year     Year     Year
                                       ended    ended    ended
                                          31       31       31
                                       March    March    March
                                        1998     1999     2000
                                    (restated)(restated)
                                         £'m      £'m      £'m
Group turnover                                                
- Continuing operations              1,519.3  1,514.2  1,578.5
- Discontinued operations                           -        -
                                        90.1
- Acquisition                              -        -     36.2
                                     1,609.4  1,514.2  1,614.7
Operating costs                     (1,074.9)  (937.5) (1,042.6) 
Operating profit/(loss)                                       
- Continuing operations                562.9    576.7    569.4
- Discontinued operations                           -        -
                                       (28.4)
- Acquisition                              -        -      2.7
                                       534.5    576.7    572.1
Share of joint ventures' and             1.3      0.7   (33.5)
associate's operating profit/(loss)      
                                                              
Total operating profit                 535.8    577.4    538.6
                                                              
Exceptional items                      107.1    839.2  1,027.3
Net interest                           (61.7)  (118.5)   (64.9)
Profit on ordinary activities          581.2  1,298.1  1,501.0
before taxation
Taxation                                                      
- Excluding exceptional items        (133.5)  (120.3)  (123.1)
- Exceptional items                        -  (162.8)  (229.5)
                                     (133.5)  (283.1)  (352.6)
Profit on ordinary activities after   447.7  1,015.0  1,148.4
taxation
Dividends                                                     
- Ordinary                           (189.2)  (192.0)  (205.5)
- Special                            (768.6)       -        -
                                     
                                     (957.8)  (192.0)  (205.5)
                                     
Retained profit / (loss)             (510.1)   823.0    942.9
                                                              
Basic earnings per ordinary share                             
-excluding exceptional items and       20.2p    23.3p    24.3p
goodwill amortisation                                         
-excluding exceptional items,          20.6p    24.6p    28.3p
goodwill amortisation and telecom
start-up losses


       Summary group historical cost balance sheet
                        (UK GAAP)

                                               At 31      At 31
                                               March      March
                                                1999       2000
                                           (restated)
                                                 £'m        £'m
Fixed assets                                                   
Intangible assets                               15.1      844.7
Tangible assets                              3,099.4    4,938.3
Investments                                    233.1      519.0
                                             3,347.6    6,302.0
                                                               
Current assets                               1,746.3    2,464.8
Creditors (amounts falling  due             (1,414.9)  (1,861.1)
within one year)
Net current assets                             331.4      603.7
                                                               
Total assets less current liabilities        3,679.0    6,905.7
Creditors (amounts falling due              (1,680.9)  (3,500.2)
after more than one year)
Provisions for liabilities and charges         (45.6)    (461.4)
                                                               
Net assets employed                          1,952.5    2,944.1
                                                               
Capital and reserves                                           
Called up share capital                        173.9      174.7
Share premium account                          246.5      274.7
Profit and loss account                      1,532.1    2,459.6
Shareholders  funds                          1,952.5    2,909.0
Minority interests                                 -       35.1
                                             1,952.5    2,944.1
                                                               


                      APPENDIX III
                            
              INFORMATION ON NIAGARA MOHAWK

Business description

Niagara Mohawk is an exempt holding company whose
principal subsidiary, Niagara Mohawk Power Corporation,
is a regulated electricity and gas utility serving more
than 1.5 million electricity customers and over 0.5
million gas customers in the areas of central, northern
and western New York State.  Niagara Mohawk's electricity
system consists of over 9,000 miles of transmission lines
and 118,000 miles of distribution networks.

The company has sold or has agreements to sell all of its
non-nuclear generation capacity in the US and is
currently in the process of selling its nuclear
generation interests.  Niagara Mohawk owns Nine Mile
Point Nuclear Station Units 1 (100 per cent. ownership)
and 2 (41 per cent. ownership).

The company has opened its market to retail competition
and has reached an agreement with the New York Public 
Service Commission for the recovery of the vast majority
of its stranded costs.

Niagara Mohawk is also the third largest gas local
distribution company in New York State serving over
540,000 residential and business customers on a retail
basis as well as a growing number of customers for whom
Niagara Mohawk transports gas that they purchase directly
from suppliers.

In addition, Niagara Mohawk has investments in
telecommunications (Telergy), energy-related and services
businesses and a 50 per cent. interest in Canadian
Niagara Power, an Ontario based utility.

For the year ended 31 December 1999, Niagara Mohawk
reported  earnings before interest, tax and depreciation
of $1.3 billion on revenues of $4.1 billion.  As at 31
December 1999 Niagara Mohawk had audited net assets of
$3.0 billion.


The following financial information is extracted from
Niagara Mohawk's annual report for the year ended
31 December 1999; it is not considered indicative of
Niagara Mohawk's expected contribution to National Grid's
earnings post Completion:

        Summary Statements of Consolidated Income
                        (US GAAP)

                                       Year      Year      Year
                                      ended     ended     ended
                                         31        31        31
                                   December  December  December
                                       1997      1998      1999
                                        $'m       $'m       $'m
Operating revenues                                             
Electric                              3,396     3,390     3,465
Gas                                     681       601       611
Other                                     2         1         8
                                      4,079     3,992     4,084
Operating expenses                                             
Electricity purchased                 1,323     1,138     1,013
Fuel for electric generation            179       240       190
Gas purchased                           372       308       298
Other operation and maintenance         846       948       911
PowerChoice charge                        -       263         -
Amortisation of the MRA                   -       129       386
regulatory asset
Depreciation and amortisation           340       356       345
Other taxes                             472       461       415
Total operating expenses              3,532     3,843     3,558
Operating income                        547       149       526
Other income                             37        61         4
Income before interest charges          584       210       530
Interest charges and preferred          274       397       485
dividends
Preferred dividend requirement of        37        37        37
subsidiary
Income (loss) before federal  and       273     (224)         8
foreign income taxes
Federal and foreign income taxes        127      (67)        19
Income (loss) before                    146     (157)      (11)
extraordinary item
Extraordinary item                        -         -      (24)
Net income (loss)                       146     (157)      (35)
                                                               
Earnings per average common share                              
before extraordinary item             $1.01   $(0.95)   $(0.06)


           Summary consolidated balance sheet
                        (US GAAP)

                                            At 31       At 31
                                         December    December
                                             1998        1999
                                              $'m         $'m
Assets                                                       
Net utility plant                           6,878       5,888
Other property and investments                411         485
Current assets                                970         674
Regulatory assets                           5,468       5,518
Other assets                                  134         105
Total assets                               13,861      12,670
                                                             
Liabilities and capitalisation
Capitalisation                                               
Common stockholders equity                  3,170       2,976
Preferred stock of subsidiary:
Not subject to mandatory redemption           440         440
Subject to mandatory redemption                69          61
Long-term debt                              6,417       5,043
Total capitalisation                       10,096       8,520
Current liabilities                           843       1,118
Regulatory and other liabilities            2,702       2,792
Commitments and contingencies                 220         240
Total liabilities and capitalisation       13,861      12,670



                       APPENDIX IV
                            
                       DEFINITIONS
                            
The following definitions apply throughout this press
release unless the context requires otherwise:

'Acquisition'           the acquisition of Niagara
                        Mohawk by National Grid pursuant
                        to the Merger Agreement
                        
'Completion'            the closing of the Acquisition
                        following satisfaction or waiver
                        of the conditions attaching to
                        the Acquisition and the delivery
                        of a certificate of merger for
                        filing with the Department of
                        State of the State of New York
                        and the Secretary of State of
                        the State of Delaware
                        
'EGM'                   the extraordinary general
                        meeting of National Grid to be
                        convened for the purpose of
                        seeking approval for the
                        Acquisition
                        
'Energis'               Energis plc, an associate of
                        National Grid involved in the
                        provision of telecommunications
                        services
                        
'EUA'                   Eastern Utilities Associates
                        
'London Stock Exchange' London Stock Exchange plc
                        
'Merger Agreement'      the Agreement and Plan of Merger
                        and Scheme of Arrangement dated
                        4 September 2000 entered into
                        between National Grid, New
                        National Grid, Grid Delaware,
                        Inc., a direct wholly owned
                        subsidiary of New National Grid,
                        and Niagara Mohawk
                        
'National Grid'         National Grid Group plc
                        
'NEES'                  New England Electric System
                        
'New National Grid'     New National Grid Limited, which
                        will re-register as a public
                        limited company and following
                        implementation of the Scheme of
                        Arrangement will be the new
                        holding company of National Grid
                        
'New National Grid      new ordinary shares issued by
Shares'                 New National Grid in the form of
                        American Depositary Shares of
                        New National Grid ('ADSs'), each
                        of which will represent five
                        ordinary shares in New National
                        Grid.  Such ADSs will be
                        evidenced by American Depositary
                        Receipts of New National Grid,
                        each representing any number of
                        underlying ADSs
                        
'Niagara Mohawk'        Niagara Mohawk Holdings, Inc.
                        
'Niagara Mohawk         holders of Niagara Mohawk Shares
shareholders'            
 
'Niagara Mohawk Shares' shares of Niagara Mohawk
                        
'Rothschild'            N M Rothschild & Sons Limited
                        and Rothschild Inc.
                        
'Scheme of Arrangement' a scheme of arrangement pursuant
                        to section 425 of the Companies
                        Act 1985
                        
'SEC'                   the US Securities and Exchange
                        Commission
                        
'UK'                    the United Kingdom
                        
'US'                    the United States of America,
                        its territories and possessions,
                        any state of the United States
                        of America and the District of
                        Columbia, and all other areas
                        subject to its jurisdiction
                        
'$'                     US dollar