Glasgow, Scotland, Nov. 10, 2004 (PRIMEZONE) --
SCOTTISH POWER plc 2004/05 HALF YEAR RESULTS including 2nd Quarter to 30 September 2004 Highlights - Financial performance - Earnings per share* of 17.5 pence, up 12% - Dividend per share of 4.95 pence for the quarter, up 4.2% - Confident in the outlook for the group for the full year - Improving operational performance - UK customer numbers up 460,000 to over 4.7 million - PacifiCorp had a disappointing first half - Further efficiencies of GBP22 million - Investing for growth - GBP791 million invested, including GBP544 million (69%) for growth - Addition of 1,000 MW of UK CCGT plant
Quarter 2 Half Year
2004/05 2003/04 GBP million 2004/05 2003/04
1,573 1,280 Turnover 3,054 2,525
252 220 Operating profit 472 452
282 253 Operating profit
excluding 532 519
goodwill
212 156 Profit before tax 382 327
241 189 Profit before tax excluding 442 393
goodwill
7.9 5.7 Earnings per share (pence) 14.2 11.9
9.5 7.5 Earnings per share excluding 17.5 15.6
goodwill
(pence)
4.95 4.75 Dividends per share (pence) 9.90 9.50
Note: Items marked * are excluding goodwill amortisation. ScottishPower assesses the performance of its businesses by adjusting UK GAAP statutory results to exclude items it considers to be non-recurring or non-operational. In the periods reviewed, goodwill amortisation has been excluded. We have, therefore, focused our presentation of business performance on the results excluding goodwill amortisation. Unless otherwise stated "half year" relates to the six months to 30 September 2004, and "quarter" relates to the three months to 30 September 2004.
Ian Russell, ScottishPower Chief Executive, said:
"Overall the group has delivered a good set of results for the first half of the year. Pre-tax profit* and earnings per share* have grown by 12%. Our strategy is working, as our investment for growth starts to deliver.
In the UK, we continue to win customers in large numbers, adding a further 460,000 in the six months which, together with the purchase of 1,000 MW of very attractively priced generation, has increased profit strongly. PacifiCorp had a disappointing first half caused by lower temperatures and plant availability and as a result is likely to fall short of its full year profit target.
With strong first half results from our UK based divisions and PPM in the US, together with lower interest costs, we are confident in the outlook for the group for the full year."
CHIEF EXECUTIVE'S REVIEW
I believe this is a good set of results, with earnings per share* up 12%. Our UK Division has kept up its excellent rate of customer growth which, together with new generation plant, has delivered a substantial increase in profit. Profit was also up in our Infrastructure Division mainly due to higher revenues. PacifiCorp's profit was affected by lower than normal temperatures and plant availability. Also included within PacifiCorp's profit for the half year was the release of an environmental provision of $56 million. PPM continues to grow well through its investments in wind power and gas storage. Our interest rate and hedging strategy continues to deliver significant benefits.
With strong first half results from our UK based divisions and PPM in the US, together with lower interest costs, we are confident in the outlook for the group for the full year.
Looking to the medium-term, we believe the group's businesses will deliver competitive advantage and sustained shareholder value. Our strategy of improving operational performance and investing for organic growth is firmly established, working well and set to continue.
In our UK Division, in the medium-term we are aiming to grow our customer base to between five and six million energy customers. This is expected to deliver increased earnings via higher revenues and a reduction in our average cost to serve. We will support this growth in customer numbers with further investment in generation and gas storage and aim to invest approximately GBP1.4 billion of capital to 2010. This includes the continued expansion of our windfarm portfolio, where we aim to invest GBP1 billion by 2010, and plan a GBP100 million investment in the Byley gas store. Some 75% of UK Division's capital expenditure is expected to support growth, with targeted returns for new investments of at least 300 basis points above the Division's weighted average cost of capital.
PacifiCorp is also growing, with load expected to increase by 2.5% per annum. This requires capital investment of some GBP3 billion by 2010 of which 35% will be for growth, mainly on generation plant and network assets. We anticipate this investment will increase our ratebase from just over $7 billion to over $9 billion by 2010. We aim to improve further our return on equity by building on an increasingly constructive regulatory environment by introducing measures such as forward test periods and power cost adjustment mechanisms. Further, the roll out of the Multi-State Process is expected to deliver improved cost recovery. In spite of these improvements, PacifiCorp is now expected to deliver operating profit over the next two years broadly in line with the current lower view of performance for the year to March 2005. This is due to reduced synfuel revenues, a change in retail sales mix, increased costs and investment to support load growth and a revised schedule of likely rate cases. Operating profit is expected to grow strongly again from 2007 reflecting the expected increase in ratebase value.
In the medium-term, the context for profitability in our Infrastructure Division will be set by the outcomes of the Distribution Price Control Review ("DPCR"), the Transmission Price Review and the arrangements for the Renewable Energy Transmission Study. We anticipate approximately 40% of the forecast total capital expenditure of some GBP1.7 billion to 2010 to be invested for growth at the allowed regulatory returns, including renewable infrastructure investment of approximately GBP260 million.
At PPM we expect to see continued strong growth in the medium-term coming from our investments in windfarms and gas storage. Approximately GBP1.4 billion of capital is expected to be invested to 2010, almost all for growth, including GBP950 million for new wind capacity, taking our total to some 2,300 MW and GBP460 million in the same period to increase our gas storage capacity to 125 BCF. Returns are expected immediately following completion.
In summary, we anticipate more growth in customers and revenue and improved cost efficiency. We have clear and disciplined investment criteria for the average of GBP1.5 billion a year we expect to invest in the medium-term. In our regulated businesses we aim to achieve at least the allowed regulatory returns. In our competitive businesses we expect returns of at least 300 basis points above the divisions' weighted average cost of capital. We will continue to seek to maintain our A- credit rating and we expect to grow our dividend broadly in line with earnings.
INVESTING FOR GROWTH
Our net capital investment for the half year was GBP791 million, of which GBP247 million was invested in refurbishment, upgrade and other projects. Group investment for growth totalled GBP544 million (69%). This included the GBP320 million acquisition of the 800 MW Damhead Creek CCGT power plant in Kent, our recent GBP72 million investment to acquire the remaining 50% of the 400 MW Brighton CCGT power plant and GBP43 million invested in building phase one of the 525 MW Currant Creek CCGT power plant in Utah.
PacifiCorp's net capital investment was GBP203 million, with GBP92 million (45%) invested for organic growth. In addition to GBP43 million invested in Currant Creek, new connections, network reinforcement and other spend was GBP49 million and included our ongoing network expansion project along the Wasatch Front in Utah.
Infrastructure Division's net capital investment was GBP126 million, with GBP36 million (29%) invested for organic growth, including spend on new windfarm and customer connections.
UK Division's net capital investment was GBP456 million, of which GBP414 million (91%) was invested for growth. The purchases of Damhead Creek and Brighton power plants bring the UK Division's generating capacity to 6.2 GW. Other organic growth spend consisted primarily of investment in the Black Law windfarm where construction work is progressing well and we expect generation to begin in the spring of 2005.
PPM's net capital investment was GBP6 million, with GBP2 million (33%) invested for growth, including preliminary investment in the Waha gas storage facility in West Texas. PPM's wind development activities continue to focus on the pipeline of wind generation projects, following renewal of the US federal Production Tax Credit in October.
In summary, we expect our net capital investment to be approximately GBP1.5 billion in the full year, with some 60% for growth.
OPERATIONAL PERFORMANCE
PacifiCorp
PacifiCorp's operating profit, excluding goodwill amortisation, for the second quarter was GBP151 million, an increase of GBP2 million on the second quarter of last year. For the half year, operating profit, excluding goodwill amortisation, was GBP268 million compared to GBP318 million ($430 million compared to $490 million) at September 2003. The GBP50 million reduction includes a GBP17 million adverse impact of the weaker US dollar net of hedging benefits from the forward sale of US dollars.
Retail revenues increased by $16 million in the half year, due to rate increases of $51 million, partly offset by lower other regulatory recoveries of $13 million and, as expected, a reduction in deferred power cost recoveries of $27 million to $23 million. Customer numbers increased by 2% compared to September 2003 and this growth, together with more favourable retail pricing levels, contributed an additional $35 million to retail revenues. This more than offset the $30 million adverse effect on retail revenues of lower temperatures, which also contributed to an 8% reduction in average residential consumption, half year on half year. In July, PacifiCorp was named best for overall customer satisfaction in a nation-wide survey of commercial and industrial electricity customers by TQS Research, an improvement from third-place last year.
A higher level of planned and unplanned outages compared to last year reduced output at PacifiCorp's thermal plants by 4% and impacted PacifiCorp's results for the half year by $40 million. Other net power costs increased by $30 million as contracts expired and market prices were higher in general; this was after efficiency savings of $9 million from delivering our energy management activities more effectively. Other gross margin items improved by $2 million.
Operating efficiency initiatives delivered a further $23 million of benefits in the half year. Other net costs increased by $61 million, including higher maintenance and major plant repair expenditure and higher employee and servicing costs associated with growth in the customer base. Depreciation costs increased by $5 million. The results included the release of a $56 million environmental liability provision following completion of a detailed environmental exposure study. The previous half year included $21 million of provisions and miscellaneous income that was not repeated in the current half year.
Effective from 15 September, regulators in Wyoming granted PacifiCorp $9.25 million additional revenue per year to recover increases in net wholesale purchased power costs. On 27 October, Washington state regulators granted recovery totalling $15 million for increased costs, with new rates to be implemented from 16 November. In the ongoing $111 million general rate case in Utah, regulators have approved our request to use a forward looking test period. The case is expected to be resolved by April 2005.
Separately, progress continues to be made in our Multi-State Process. In October, the regulatory commissions in Wyoming and Washington approved settlement agreements in their respective states. Settlement has also been reached with parties in Utah and Oregon, and a settlement has been reached, in principle, with parties in Idaho. Orders in these states are anticipated by the end of December.
In summary, despite a number of positive achievements, PacifiCorp had a disappointing first half with, in particular, lower temperatures and reduced plant availability affecting its profit. As a result PacifiCorp is likely to fall short of its full year profit target.
Infrastructure Division
Infrastructure Division's operating profit was higher by GBP3 million in the quarter, with operating profit for the half year improved by GBP14 million to GBP193 million, mainly as a result of increased regulated revenues. For the six months, regulated revenues improved by GBP10 million, due to favourable transmission prices and distribution sales volumes, and net costs reduced by GBP8 million, which more than offset higher rates and depreciation costs of GBP4 million.
We continue to discuss with Ofgem all of the key issues in the lead up to the final DPCR proposals at the end of November. Areas of focus include seeking additional capital expenditure allowances to address specific network safety issues and for investment to improve supplies to our "worst" served customers. We are also continuing to press strongly for an allowed cost of capital figure of at least 5% post tax, consistent with the upper end of the Ofgem range.
We are also engaged in constructive discussions with Ofgem on their proposals for the extension of the price controls for SP Transmission to run for two years from 1 April 2005. Final proposals are scheduled for the end of November. Our position on cost of capital is the same as on the DPCR.
UK Division
The UK Division performed very strongly with operating profit, excluding goodwill amortisation, for the quarter higher by GBP18 million at GBP23 million. For the half year, operating profit, excluding goodwill amortisation, increased substantially by GBP40 million to GBP47 million. We added a further 460,000 customers in the half year bringing the total to over 4.7 million. Electricity and gas margins improved by GBP77 million due to continued customer growth, higher prices and the value from our integrated generation and supply operations, and a GBP21 million contribution from the newly acquired Damhead Creek. These gains were partly offset by increases in our energy efficiency, customer capture and service costs of GBP24 million. Other net costs increased by GBP13 million, including GBP8 million of Damhead Creek operating costs. The UK Division's strong performance is expected to continue in the second half of the year.
Since September 2003, customer numbers have risen by some 800,000 (21%) mainly within our second tier markets. A recent customer satisfaction survey by J.D. Power placed ScottishPower joint first in the UK gas market. Business electricity customer numbers have also risen with ScottishPower coming top for customer satisfaction in Datamonitor's annual survey of Industrial and Commercial customers which polled 1,500 major energy users in the UK. Datamonitor's report recognises our 6 Sigma transformation programme and comments that we are a leader in the provision of metering. The 6 Sigma programme, which aims to improve customer handling processes, delivered further revenue and cost benefits of GBP2 million for the half year.
Our efficient and flexible fleet of generation plant and our rolling, forward purchasing strategy for gas and coal significantly mitigates our exposure to wholesale market price variations. We are substantially hedged over the coming winter and have significant coverage for the next 24 months. Our coverage secures average costs well below current market rates and, as a consequence, we were able to limit our recent price increases to some 9% for domestic electricity customers and 11.8% for domestic gas customers.
We are preparing our generation plant for the EU emissions scheme, due to start on 1 January 2005 and to take advantage of BETTA, the GB-wide transmission and trading regime, due to be implemented in April 2005.
Construction of approximately 100 MW of the Black Law windfarm, the largest consented onshore windfarm in the UK, is well underway and in August we received local authority approval for our Beinn Tharsuinn windfarm, with a generating capacity of approximately 30 MW. We are also working with Ocean Power Delivery and Amec to establish the feasibility of a wave power machine now under testing off Orkney.
PPM
PPM's operating profit, excluding goodwill amortisation, rose by GBP6 million to GBP15 million for the quarter and by GBP9 million to GBP24 million (by $12 million to $36 million) for the half year. Energy management activities around our assets and long-term contracts including benefits from transmission and contract delivery flexibility, decisions on how plants are operated and the selling or storing of displaced gas, contributed an additional $12 million. Renewable energy profit improved by $9 million, primarily due to last year's investment in new windfarms delivering substantial volume growth. Gas storage profits were in line with the six month period last year, when we had a very favourable gas storage performance and we expect continued strong performance during the second half of the year. Net operating costs required to support increased business activities and infrastructure were higher by $9 million.
Following the renewal of the Production Tax Credit in October, PPM announced plans to add 175 MW of new windpower. Both fully permitted, the 75 MW Klondike II project in Oregon and the 100 MW Trimont project in Minnesota are expected to be earnings enhancing once completed in autumn 2005. The capital invested in these two projects is expected to be approximately $200 million. PPM has signed a 15-year power purchase agreement with Great River Energy for all the output of the Trimont windfarm and negotiations are ongoing to finalise the long-term power sales agreement from Klondike II.
FINANCIAL REVIEW
Group turnover to September 2004 increased by GBP529 million to GBP3,054 million. The weaker US dollar reduced sterling revenues of PacifiCorp and PPM by GBP128 million, which was mitigated by the favourable effect of the weaker dollar on costs and by our hedging strategy at an earnings level. PacifiCorp's dollar turnover increased by 5%, primarily due to higher wholesale revenues and Infrastructure Division's turnover increased by 12% due to higher regulated and new connections business revenues. The UK Division's turnover increased by 47% from a combination of increased energy balancing activities, improved retail electricity and gas sales reflecting the increased customer base and higher prices, and the acquisition of Damhead Creek. PPM's dollar turnover was higher by 86% due to increased energy management revenues from optimisation of storage assets and sales of natural gas and added revenues from new wind facilities.
Group operating profit improved by GBP32 million in the quarter, and, excluding goodwill amortisation, was higher by GBP29 million at GBP282 million. Group operating profit for the half year improved by GBP20 million to GBP472 million and, excluding goodwill amortisation, was GBP13 million higher at GBP532 million. These results reflect a strong performance in our UK operations and good growth in PPM, which together have more than offset PacifiCorp's performance which has been affected by lower temperatures and plant availability.
The net interest charge reduced by GBP34 million to GBP91 million at the half year, including a GBP10 million translation benefit from the weaker US dollar and an additional GBP13 million benefit to interest from the UK/US interest rate differential arising from our dollar balance sheet hedging strategy, which we have locked into for periods of up to two years. The charge also benefited from GBP9 million net interest receipts following the settlement of outstanding tax claims.
Profit before tax for the half year was GBP382 million, GBP55 million ahead of September 2003. Excluding goodwill amortisation, profit before tax improved by GBP48 million to GBP442 million, with the impact of PacifiCorp's results being more than offset by operating profit improvements in our other businesses and the lower interest charge. A foreign exchange hedge benefit of approximately GBP35 million (September 2003: GBP14 million) was delivered from selling forward our forecast dollar earnings at a favourable rate compared to the average rate for the period. This helps protect group profit from the effect of the weaker US dollar. We expect our earnings for the remainder of the financial year to continue to benefit from our hedging programme, with an expected hedge translation rate for the year in the range $1.50 - $1.55.
In line with last year's results, the effective rate of tax, excluding goodwill amortisation, has remained at 27%. The tax rate benefited from the release of provisions relating to prior years following agreement of specific items with tax authorities, the group's financing arrangements and tax credits from US wind generation. The effective rate of tax on profit before tax was 31%, marginally lower than the equivalent period last year. Earnings per share improved by 2.26 pence to 7.91 pence for the quarter and by 2.29 pence to 14.20 pence for the half year. Excluding goodwill amortisation, earnings per share improved by 2.06 pence to 9.54 pence for the quarter and by 1.91 pence to 17.47 pence for the half year.
Cash flows from operating activities reduced compared to the prior half year by GBP257 million to GBP433 million, mainly due to the lower operating profit in PacifiCorp, provision movements, an increase in working capital requirements in PPM, which will benefit performance later in the year, and higher coal stocks in UK Division. Interest, tax and dividend payments totalled GBP227 million, with the tax and interest payments substantially lower than last year due to the settlement of outstanding tax claims and cash benefits associated with our hedging strategy. Other net inflows which impact net debt, other than net investment in assets and acquisitions, were GBP99 million, mainly as a result of a GBP95 million cash receipt arising on the maturing of net investment hedging derivatives. Net capital investment cash spend including Damhead Creek was GBP714 million. After non-cash movements of GBP162 million relating to the adverse effect of foreign exchange and the acquisition of debt following the purchase of the remaining 50% of Brighton power plant, net debt at 30 September 2004 was GBP4,296 million, GBP571 million higher than at 31 March 2004. Gearing (net debt/equity shareholders' funds) was 90%, compared to 79% as at 31 March 2004.
The group remains committed to maintaining its A- credit rating for its principal operating subsidiaries and, on 18 August 2004, Standard & Poor's favourably revised its ScottishPower rating by removing the previous negative outlook.
The dividend for the second quarter of 2004/05 will be 4.95 pence per share, an increase of 4.2% on the prior year, payable on 29 December 2004. The ADS dividend rate will be confirmed in a separate announcement today. The dividend for each of the first three quarters of 2004/05 is set at 4.95 pence per share with the balance of the total dividend to be set in the fourth quarter. We remain committed to our aim to grow dividends broadly in line with earnings.
We remain on track to commence reporting our consolidated Accounts in accordance with International Financial Reporting Standards with effect from 1 April 2005.
INVESTOR TIMETABLE
Key investor dates going forward are as follows:
17 November 2004 Shares go ex-dividend for the second quarter
19 November 2004 Last date for registering transfers to receive
the second quarter dividend
29 December 2004 Second quarter dividend payable
10 February 2005 Announcement of results for the third quarter
March 2005 Third quarter dividend payable
24 May 2005 Announcement of results for the fourth quarter
and full year ending 31 March 2005
June 2005 Fourth quarter dividend payable
Safe Harbor
Some statements contained herein may include statements regarding our assumptions, projections, expectations or beliefs about future events. These statements are intended as "Forward-Looking Statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements with respect to us, our corporate plans, future financial condition, future results of operations, future business plans, strategies, objectives and beliefs and other statements that are not historical facts are forward looking. Statements containing the words "may", "will", "expect", "anticipate", "believe", "intend", "estimate", "continue", "plan", "project", "target", "on track to", "strategy", "aim", "seek", "will meet" or other similar words are also forward looking. These statements are based on our management's assumptions and beliefs in light of the information available to us. These assumptions involve risks and uncertainties which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
We wish to caution readers, and others to whom forward-looking statements are addressed, that any such forward-looking statements are not guarantees of future performance and that actual results may differ materially from estimates in the forward-looking statements. We undertake no obligation to revise these forward-looking statements to reflect events or circumstances after the date hereof. Important factors that may cause results to differ from expectations include, for example:
- any regulatory changes (including changes in environmental
regulations)that may increase the operating costs of the group,
may require the group to make unforeseen capital expenditures or
may prevent the regulated business of the group from achieving
acceptable returns;
- future levels of industry generation and supply, demand and
pricing, political stability, competition and economic growth
in the relevant areas in which the group has operations;
- the availability of acceptable fuel at favorable prices;
weather and weather related impacts;
- the availability of operational capacity of plants;
- the success of reorganizational and cost-saving efforts; and
- development and use of technology, the actions of competitors,
natural disasters and other changes to business conditions.
Further Information:
Andrew Jamieson Head of Investor Relations 0141 636 4527 David Ross Investor Relations Manager 0141 566 4853 Colin McSeveny Group Media Relations Manager 0141 636 4515
Group Profit and Loss Account
Three months ended Six months ended
30 September 30 September
2004 2003 2004 2003
Notes GBPm GBPm GBPm GBPm
-------------- ----- -------- -------- ------- --------
Turnover: 1,581.8 1,287.7 3,074.6 2,540.4
group and
share of
joint
ventures and
associates
Less: share (8.8) (7.8) (20.0) (14.9)
of turnover
in joint
ventures
Less: share (0.2) (0.1) (0.5) (0.3)
of turnover
in associates
-------------- ----- -------- -------- ------- --------
Group 2 1,572.8 1,279.8 3,054.1 2,525.2
turnover
Cost of (1,038.3) (785.8) (2,000.7) (1,527.5)
sales
-------------- ----- -------- -------- ------- --------
Gross profit 534.5 494.0 1,053.4 997.7
Transmission (147.1) (128.5) (296.0) (251.3)
and
distribution
costs
Administrative (140.3) (149.1) (296.6) (305.9)
expenses
(including
goodwill
amortisation)
Other 4.8 3.2 11.0 11.6
operating
income
-------------- ----- -------- -------- ------- --------
Operating 281.7 253.1 531.6 518.9
profit
before
goodwill
amortisation
Goodwill (29.8) (33.5) (59.8) (66.8)
amortisation
-------------- ----- -------- -------- ------- --------
Operating 2 251.9 219.6 471.8 452.1
profit
Share of 0.7 (0.4) 0.9 (0.5)
operating
profit
/(loss) in
joint
ventures
Share of (0.1) - 0.1 0.1
operating
(loss)/profit
in associates
-------------- ----- -------- -------- ------- --------
Profit on 252.5 219.2 472.8 451.7
ordinary
activities
before
interest
Net interest
and similar
charges
- Group (39.3) (62.0) (87.5) (122.5)
- Joint (1.7) (1.3) (3.4) (2.6)
ventures
-------------- ----- -------- -------- ------- --------
(41.0) (63.3) (90.9) (125.1)
-------------- ----- -------- -------- ------- --------
Profit on 241.3 189.4 441.7 393.4
ordinary
activities
before
goodwill
amortisation
and taxation
Goodwill (29.8) (33.5) (59.8) (66.8)
amortisation
-------------- ----- -------- -------- ------- --------
Profit on 211.5 155.9 381.9 326.6
ordinary
activities
before
taxation
Taxation 3 (65.2) (51.1) (119.3) (106.2)
-------------- ----- -------- -------- ------- --------
Profit after 146.3 104.8 262.6 220.4
taxation
Minority (1.6) (1.6) (2.6) (2.6)
interests
(including
non-equity)
-------------- ----- -------- -------- ------- --------
Profit for 144.7 103.2 260.0 217.8
the period
Dividends 5 (91.0) (87.4) (182.1) (174.9)
-------------- ----- -------- -------- ------- --------
Profit 53.7 15.8 77.9 42.9
retained
-------------- ----- -------- -------- ------- --------
Earnings per 4 7.91p 5.65p 14.20p 11.91p
ordinary
share
Adjusting 1.63p 1.83p 3.27p 3.65p
item -
goodwill
amortisation
-------------- ----- -------- -------- ------- --------
Earnings per 4 9.54p 7.48p 17.47p 15.56p
ordinary
share before
goodwill
amortisation
-------------- ----- -------- -------- ------- --------
Diluted 4 7.67p 5.58p 13.82p 11.83p
earnings per
ordinary
share
Adjusting 1.55p 1.79p 3.10p 3.60p
item -
goodwill
amortisation
-------------- ----- -------- -------- ------- --------
Diluted 4 9.22p 7.37p 16.92p 15.43p
earnings per
ordinary
share before
goodwill
amortisation
-------------- ----- -------- -------- ------- --------
Dividends 5 4.95p 4.75p 9.90p 9.50p
per ordinary
share
-------------- ----- -------- -------- ------- --------
The above results relate to continuing operations.
The Notes on pages X to X form part of these Accounts.
Statement of Total Recognised Gains and Losses
for the six months ended 30 September 2004
Six months ended
30 September
2004 2003
GBPm GBPm
--------------------------------------------- ------ -------
Profit for the period 260.0 217.8
Exchange movement on translation of overseas 56.9 (177.3)
results and net assets
Translation differences on foreign currency (55.8) 152.9
hedging
Tax on translation differences on foreign 4.0 -
currency hedging
Revaluation reserve arising on the purchase 6.3 -
of the remaining 50% of the Brighton Power
Station
--------------------------------------------- ------ -------
Total recognised gains and losses for the 271.4 193.4
financial period
--------------------------------------------- ------ -------
Reconciliation of Movements in Shareholders' Funds
for the six months ended 30 September 2004
Six months ended
30 September
2003
(As restated
2004 -Note 1)
GBPm GBPm
--------------------------------------- ------- ------------
Profit for the period 260.0 217.8
Dividends (182.1) (174.9)
--------------------------------------- ------- ------------
Profit retained 77.9 42.9
Exchange movement on translation of 56.9 (177.3)
overseas results and net assets
Translation differences on foreign (55.8) 152.9
currency hedging
Tax on translation differences on 4.0 -
foreign currency hedging
Revaluation reserve arising on the 6.3 -
purchase of the remaining 50% of the
Brighton Power Station
Share capital issued 14.6 5.4
Consideration paid in respect of (28.5) (27.5)
purchase of own shares held under trust
Credit in respect of employee share awards 4.9 3.6
Consideration received in respect of 6.1 0.2
sale of own shares held under trust
--------------------------------------- ------- ------------
Net movement in shareholders' funds 86.4 0.2
Opening shareholders' funds (as 4,690.9 4,554.9
restated for implementation of UITF
38 'Accounting for
ESOP Trusts')
--------------------------------------- ------- ------------
Closing shareholders' funds 4,777.3 4,555.1
--------------------------------------- ------- ------------
The Notes on pages X to X form part of these Accounts.
Group Cash Flow Statement
for the six months ended 30 September 2004
Six months ended
30 September
2003
(As restated
2004 - Note 1)
Notes GBPm GBPm
-------------------------------- ------ ------- ------------
Cash inflow from operating 6 433.3 690.4
activities
Dividends received from joint 1.6 0.2
ventures
Returns on investments and (26.5) (128.5)
servicing of finance
Taxation 1.4 (96.8)
-------------------------------- ------ ------- ------------
Free cash flow 409.8 465.3
Capital expenditure and (378.6) (360.4)
financial investment
-------------------------------- ------ ------- ------------
Cash flow before acquisitions 31.2 104.9
and disposals
Acquisitions and disposals (319.6) (3.5)
Equity dividends paid (204.0) (219.7)
-------------------------------- ------ ------- ------------
Cash outflow before use of (492.4) (118.3)
liquid resources and
financing
Management of liquid 7 (71.8) (40.8)
resources
Financing
- Issue of ordinary share 14.6 5.4
capital
- Redemption of preferred (4.1) (4.6)
stock of PacifiCorp
- Maturity of net investment 95.4 -
hedging derivatives
- Cancellation of swaps - 76.1
- Net purchase of own shares (22.4) (27.3)
held under trust
- Increase in debt 7 15.8 421.5
-------------------------------- ------ ------- ------------
99.3 471.1
-------------------------------- ------ ------- ------------
(Decrease)/increase in cash 7 (464.9) 312.0
in period
-------------------------------- ------ ------- ------------
Free cash flow represents cash flow from operating activities after adjusting for dividends received from joint ventures, returns on investments and servicing of finance and taxation.
Reconciliation of Net Cash Flow to Movement in Net Debt
for the six months ended 30 September 2004
Six months ended
30 September
2004 2003
Note GBPm GBPm
-------------------------------- ------ ------- --------
(Decrease)/increase in cash in (464.9) 312.0
period
Cash inflow from increase in (15.8) (421.5)
debt
Cash outflow from movement in 71.8 40.8
liquid resources
-------------------------------- ------ ------- --------
Change in net debt resulting (408.9) (68.7)
from cash flows
Net debt acquired (116.1) -
Foreign exchange movement (37.9) 115.6
Other non-cash movements (8.2) (5.9)
-------------------------------- ------ ------- --------
Movement in net debt in period (571.1) 41.0
Net debt at end of previous (3,724.5) (4,321.0)
period
-------------------------------- ------ ------- --------
Net debt at end of period 7 (4,295.6) (4,280.0)
-------------------------------- ------ ------- --------
The Notes on pages X to X form part of these Accounts.
Group Balance Sheet
as at 30 September 2004
30
September
2003
30 (As
September restated 31 March
2004 - Note 1) 2004
Notes GBPm GBPm GBPm
----------------- ----- -------- --------- --------
Fixed assets
Intangible 1,932.6 2,109.9 1,855.9
assets
Tangible assets 9,476.1 8,984.9 8,756.6
Investments
- Investments
in joint
ventures:
Share of gross 72.2 108.4 180.8
assets
Share of gross (50.8) (108.3) (157.3)
liabilities
-------- --------- --------
21.4 0.1 23.5
- Loans to 12.5 38.2 38.8
joint ventures
-------- --------- --------
33.9 38.3 62.3
- Investments 2.3 2.8 2.7
in associates
- Other 123.0 145.2 129.8
investments
-------- --------- --------
159.2 186.3 194.8
-------- --------- --------
11,567.9 11,281.1 10,807.3
-------- --------- --------
Current assets
Stocks 322.5 225.5 185.5
Debtors
- Gross debtors 1,401.7 1,528.5 1,576.2
- Less non- (108.7) (139.8) (109.5)
recourse
financing
-------- --------- --------
1,293.0 1,388.7 1,466.7
Short-term bank 977.1 1,007.4 1,347.3
and other
deposits
-------- --------- --------
2,592.6 2,621.6 2,999.5
-------- --------- --------
Creditors:
amounts falling
due within one
year
Loans and other (443.6) (304.4) (410.7)
borrowings
Other creditors (1,632.4) (1,542.4) (1,658.7)
-------- --------- --------
(2,076.0) (1,846.8) (2,069.4)
-------- --------- --------
Net current 516.6 774.8 930.1
assets
-------- --------- --------
Total assets 12,084.5 12,055.9 11,737.4
less current
liabilities
Creditors:
amounts falling
due after more
than one year
Loans and other (4,829.1) (4,983.0) (4,661.1)
borrowings
(including
convertible
bonds)
Provisions for
liabilities and
charges
- Deferred tax (1,313.8) (1,292.7) (1,242.2)
- Other (510.0) (585.3) (504.5)
provisions
-------- --------- --------
(1,823.8) (1,878.0) (1,746.7)
Deferred income (595.8) (573.6) (577.8)
-------- --------- --------
Net assets 2 4,835.8 4,621.3 4,751.8
-------- --------- --------
Called up share 931.7 928.7 929.8
capital
Share premium 2,288.4 2,269.1 2,275.7
Revaluation 47.0 42.6 41.6
reserve
Capital 18.3 18.3 18.3
redemption
reserve
Merger reserve 406.4 406.4 406.4
Profit and loss 1,085.5 890.0 1,019.1
account
-------- --------- --------
Equity 4,777.3 4,555.1 4,690.9
shareholders'
funds
Minority 58.5 66.2 60.9
interests
(including
non-equity)
-------- --------- --------
Capital 4,835.8 4,621.3 4,751.8
employed
-------- --------- --------
Net asset value 4 261.0p 249.1p 256.2p
per ordinary
share
-------- --------- --------
The Notes on pages X to X form part of these Accounts.
Approved by the Board on 10 November 2004 and signed on its
behalf by
Charles Miller Smith David Nish
Chairman Finance Director
Notes to the Interim Accounts
for the six months ended 30 September 2004
1 Basis of preparation
(a) These interim Accounts have been prepared on the basis of
accounting policies consistent with those set out in the 2003/04
Annual Report and Accounts.
(b) The interim Accounts are unaudited but have been formally
reviewed by the auditors and their report to the company is set
out on page X. The information shown for the year ended 31 March
2004 does not constitute statutory Accounts within the meaning of
Section 240 of the Companies Act 1985 and has been extracted from
the full Accounts for the year ended 31 March 2004 filed with the
Registrar of Companies. The report of the auditors on these
Accounts was unqualified and did not contain a Statement under
either Section 237(2) or Section 237(3) of the Companies Act 1985.
(c) The group implemented UITF Abstract 38 'Accounting for ESOP
trusts' ("UITF 38") in the financial year ended 31 March 2004.
UITF 38 requires own shares held under trust to be deducted in
arriving at shareholders' funds. Previously own shares held under
trust were presented as fixed asset investments. Consequential
adjustments were also made to Other creditors and Other
provisions. Comparative figures for the six month period to 30
September 2003 have been restated in the Balance Sheet, Cash Flow
Statement and related Notes.
The effect of UITF 38 on the group's previously reported net
assets is as follows:
As at 30 September 2003
Fixed asset Other Other Net
investments creditors provisions assets
GBPm GBPm GBPm GBPm
-------------- ----------- --------- ---------- -------
As 310.7 1,553.0 592.0 4,728.4
previously
reported
Effect of (124.4) (10.6) (6.7) (107.1)
implementing
new
accounting
policy
-------------- ----------- --------- ---------- -------
As restated 186.3 1,542.4 585.3 4,621.3
-------------- ----------- --------- ---------- -------
(d) The relevant exchange rates applied in the preparation of
these interim Accounts are detailed in Note 11.
2 Segmental information
(a) Turnover by segment Three months ended 30 September
Total turn Inter-segment External turnover
over turnover
2004 2003 2004 2003 2004 2003
Notes GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ----- ----- ---- ----- ------ ----- ------
United
Kingdom
UK Division
- Integrated
Generation
and Supply (i) 763.1 509.6 (7.2) (8.4) 755.9 501.2
Infrastructure 171.1 156.2 (80.0) (77.9) 91.1 78.3
Division -
Power
Systems
----- ---- ----- ------ ----- ------
United 847.0 579.5
Kingdom
total
----- ---- ----- ------ ----- ------
United
States
PacifiCorp 623.7 625.8 (0.4) (0.5) 623.3 625.3
PPM 104.9 77.7 (2.4) (2.7) 102.5 75.0
----- ---- ----- ------ ----- ------
United 725.8 700.3
States total
----- ---- ----- ------ ----- ------
Total (ii) 1,572.8 1,279.8
----- ---- ----- ------ ----- ------
Six months ended 30 September
Total turnover Inter-segment External
turnover turnover
2004 2003 2004 2003 2004 2003
Notes GBPm GBPm GBPm GBPm GBPm GBPm
------------ ----- ------ ----- ----- ----- ----- -----
United
Kingdom
UK Division
- Integrated
Generation
and Supply (i) 1,490.2 1,018.4 (13.9) (16.3) 1,476.3 1,002.1
Infrastructure 340.0 316.9 (162.1) (158.6) 177.9 158.3
Division
- Power
Systems
------ ----- ----- ----- ----- -----
United 1,654.2 1,160.4
Kingdom
total
------ ----- ----- ----- ----- -----
United
States
PacifiCorp 1,161.1 1,222.9 (1.6) (1.1) 1,159.5 1,221.8
PPM 245.2 148.3 (4.8) (5.3) 240.4 143.0
------ ----- ----- ----- ----- -----
United 1,399.9 1,364.8
States
total
------ ----- ----- ----- ----- -----
Total (ii) 3,054.1 2,525.2
------ ----- ----- ----- ----- -----
(b) Operating profit by segment
Three months ended 30 September
Before Before
goodwill Goodwill goodwill Goodwill
amorti amorti amorti amorti
-sation -sation -sation -sation
2004 2004 2004 2003 2003 2003
Note GBPm GBPm GBPm GBPm GBPm GBPm
------------ ---- ------- -------- ----- ------- -------- ------
United
Kingdom
UK Division
- Integrated
Generation
and Supply (i) 23.0 (1.2) 21.8 4.9 (1.2) 3.7
Infrastructure 92.0 - 92.0 88.6 - 88.6
Division
- Power
Systems
United 115.0 (1.2) 113.8 93.5 (1.2) 92.3
Kingdom
total
United
States
PacifiCorp 151.3 (28.5) 122.8 149.7 (32.1) 117.6
PPM 15.4 (0.1) 15.3 9.9 (0.2) 9.7
------- -------- ----- ------- -------- ------
United 166.7 (28.6) 138.1 159.6 (32.3) 127.3
States
total
------- -------- ----- ------- -------- ------
Total 281.7 (29.8) 251.9 253.1 (33.5) 219.6
------- -------- ----- ------- -------- ------
Six months ended 30 September
Before Before
goodwill Goodwill goodwill Goodwill
amorti amorti amorti amorti
-sation -sation -sation -sation
2004 2004 2004 2003 2003 2003
Note GBPm GBPm GBPm GBPm GBPm GBPm
------------ ---- ------- -------- ----- ------- -------- ------
United
Kingdom
UK Division
- Integrated
Generation
and Supply (i) 46.6 (2.4) 44.2 7.0 (2.4) 4.6
Infrastructure 193.1 - 193.1 178.6 - 178.6
Division
- Power
Systems
------- -------- ----- ------- -------- ------
United 239.7 (2.4) 237.3 185.6 (2.4) 183.2
Kingdom
total
------- -------- ----- ------- -------- ------
United
States
PacifiCorp 268.0 (57.1) 210.9 318.2 (64.1) 254.1
PPM 23.9 (0.3) 23.6 15.1 (0.3) 14.8
------- -------- ----- ------- -------- ------
United 291.9 (57.4) 234.5 333.3 (64.4) 268.9
States
total
------- -------- ----- ------- -------- ------
Total 531.6 (59.8) 471.8 518.9 (66.8) 452.1
------- -------- ----- ------- -------- ------
(i) UK Division - Integrated Generation and Supply completed the acquisition of the Damhead Creek CCGT power plant and associated contracts on 1 June 2004 and completed the purchase of the remaining 50% of the Brighton Power Station CCGT power plant and associated contracts on 28 September 2004. The post acquisition results of the acquired businesses amounted to turnover of GBP46.1 million and GBP59.8 million and operating profit of GBP9.3 million and GBP12.5 million for the three months and six months to September 2004, respectively.
(ii) In the segmental analysis turnover is shown by geographical origin. Turnover analysed by geographical destination is not materially different.
(c) Net assets by segment
30 Sept
2003
30 Sept (As restated 31 March
2004 - Note 1) 2004
Note GBPm GBPm GBPm
--------------- ---- --------- ------- --------
United Kingdom
UK Division - 1,500.7 845.7 1,022.5
Integrated
Generation and
Supply
Infrastructure 2,413.3 2,248.5 2,337.4
Division - Power
Systems
--------- ------- --------
United Kingdom 3,914.0 3,094.2 3,359.9
total
--------- ------- --------
United States
PacifiCorp 6,142.7 6,539.2 5,935.8
PPM 628.4 423.5 439.0
--------- ------- --------
United States 6,771.1 6,962.7 6,374.8
total
--------- ------- --------
Total 10,685.1 10,056.9 9,734.7
--------- ------- --------
Unallocated net (i) (5,849.3) (5,435.6) (4,982.9)
liabilities
--------- ------- --------
Total 4,835.8 4,621.3 4,751.8
--------- ------- --------
(i) Unallocated net liabilities include net debt, dividends payable, tax liabilities and investments.
3 Taxation
The charge for taxation, including deferred tax, for the six month period ended 30 September 2004 reflects the anticipated effective rate for the year ending 31 March 2005 of 27% (year ended 31 March 2004 27%) on the profit before goodwill amortisation and taxation as detailed below:
Six months ended
30 September
2004 2003
GBPm GBPm
--------------------------------------------- ----- ------
Profit on ordinary activities before taxation 381.9 326.6
Adjusting item - goodwill amortisation 59.8 66.8
--------------------------------------------- ----- ------
Profit on ordinary activities before goodwill 441.7 393.4
amortisation and taxation
--------------------------------------------- ----- ------
4 Earnings and net asset value per ordinary share
(a) Earnings per ordinary share have been calculated for all periods by dividing the profit for the period by the weighted average number of ordinary shares in issue during the period, based on the following information:
Three months ended Six months ended
30 September 30 September
2004 2003 2004 2003
---------------------- --------- -------- ------- -------
Basic earnings per
share
Profit for the period 144.7 103.2 260.0 217.8
(GBP million)
Weighted average 1,829.1 1,828.5 1,830.5 1,829.5
share capital (number
of shares, million)
---------------------- --------- -------- ------- -------
Diluted earnings per
share
Profit for the period 147.8 104.7 266.0 219.3
(GBP million)
Weighted average 1,926.6 1,874.0 1,925.2 1,854.4
share capital (number
of shares, million)
---------------------- --------- -------- ------- -------
The difference between the basic and the diluted weighted average share capital is wholly attributable to outstanding share options and shares held in trust for the group's employee share schemes and the convertible bonds.
(b) The calculation of earnings per ordinary share, on a basis which excludes goodwill amortisation, is based on the following adjusted earnings:
Three months ended Six months ended
30 September 30 September
2004 2003 2004 2003
GBPm GBPm GBPm GBPm
------------------------------- ------ ------- ------- ------
Profit for the period 144.7 103.2 260.0 217.8
Adjusting item - goodwill 29.8 33.5 59.8 66.8
amortisation
------------------------------- ------ ------- ------- ------
Adjusted earnings 174.5 136.7 319.8 284.6
------------------------------- ------ ------- ------- ------
ScottishPower assesses the performance of the group by adjusting earnings per share, calculated in accordance with FRS 14, to exclude items it considers to be non-recurring or non-operational in nature and believes that the exclusion of such items provides a better comparison of business performance. Consequently, an adjusted earnings per share figure is presented for all periods.
(c) Net asset value per ordinary share has been calculated based on the net assets (after adjusting for minority interests) and the number of shares in issue (after adjusting for the effect of shares held in trust) at the end of the respective financial periods:
30 Sept
2003
30 Sept (As restated 31 March
2004 - Note 1) 2004
------------------------------- ------ ------- -------
Net assets (as adjusted) 4,777.3 4,555.1 4,690.9
(GBP million)
Number of ordinary shares 1,830.1 1,828.7 1,830.6
in issue at the period end
(as adjusted)(number of
shares, million)
------------------------------- ------ ------- -------
5 Dividends per ordinary share
The second interim dividend of 4.95 pence per ordinary share is payable on 29 December 2004 to shareholders on the register at 19 November 2004. This dividend, together with the first interim dividend for the quarter ended 30 June 2004 of 4.95 pence per ordinary share, represents total dividends of 9.90 pence per ordinary share for the first half of the financial year. In the previous year, a second interim dividend of 4.75 pence was declared for the quarter ended 30 September 2003, representing total dividends of 9.50 pence per ordinary share for the first half of the financial year.
6 Reconciliation of operating profit to net cash inflow from operating activities
Six months ended
30 September
2003
(As restated
2004 -Note 1)
GBPm GBPm
Operating profit 471.8 452.1
Depreciation and amortisation 281.3 286.0
Profit on sale of tangible fixed assets (1.5) (5.2)
Amortisation of share scheme costs 4.9 3.6
Release of deferred income (9.9) (10.0)
Movements in provisions for liabilities (93.3) (34.5)
and charges
Increase in stocks (130.4) (76.5)
Decrease in debtors 25.6 200.8
Decrease in creditors (115.2) (125.9)
----------------------------------------- ------- -------
Net cash inflow from operating activities 433.3 690.4
----------------------------------------- ------- -------
7 Analysis of net debt
At Acquisitions
1 (excl. Other At
April cash & non-cash 30 Sept
2004 Cash flow overdrafts) Exchange changes 2004
GBPm GBPm GBPm GBPm GBPm GBPm
Cash at 758.9 (444.7) - 2.7 - 316.9
bank
Over (20.1) (20.2) - (0.4) - (40.7)
drafts
------- ------ ------- ----------- ----- ------- -------
(464.9)
------- ------ ------- ----------- ----- ------- -------
Debt (4,646.1) (216.2) (116.1) (38.0) 202.5 (4,813.9)
due
after 1
year
Debt (390.6) 200.4 - (2.0) (210.7) (402.9)
due
within
1 year
Finance (15.0) - - (0.2) - (15.2)
leases
------- ------ ------- ----------- ----- ------- -------
(15.8)
------- ------ ------- ----------- ----- ------- -------
Other 588.4 71.8 - - - 660.2
deposits
------- ------ ------- ----------- ----- ------- -------
Total (3,724.5) (408.9) (116.1) (37.9) (8.2) (4,295.6)
------- ------ ------- ----------- ----- ------- -------
'Other non-cash changes' to net debt represents the movement in debt of GBP210.7 million due after one year to due within one year, amortisation of finance costs of GBP4.5 million and finance costs of GBP3.7 million representing the effects of the RPI on bonds carrying an RPI coupon.
8 Summary of differences between UK and US Generally Accepted Accounting Principles ('GAAP')
The consolidated Accounts of the group are prepared in accordance with UK GAAP which differs in certain significant respects from US GAAP. The effect of the US GAAP adjustments to profit for the financial period and equity shareholders' funds are set out in the tables below.
Six months ended
30 September
2004 2003
(a)Reconciliation of profit for the GBPm GBPm
financial period to US GAAP:
------------------------------------------ ------ ------
Profit for the financial period under UK 260.0 217.8
GAAP
US GAAP adjustments:
Amortisation of goodwill 59.8 66.8
US regulatory net assets (21.8) (45.3)
Pensions 4.9 4.3
Depreciation on revaluation uplift 0.9 0.9
Decommissioning and mine reclamation (35.8) (4.9)
PacifiCorp Transition Plan costs (4.2) (22.7)
FAS 133 (30.7) 67.1
Other (4.7) (0.2)
------------------------------------------ ------ ------
228.4 283.8
Deferred tax effect of US GAAP adjustments 27.4 21.6
------------------------------------------ ------ ------
Profit for the period under US GAAP before
cumulative adjustment for FAS 143 255.8 305.4
Cumulative adjustment for FAS 143 - (0.6)
------------------------------------------ ------ ------
Profit for the period under US GAAP 255.8 304.8
------------------------------------------ ------ ------
Earnings per share under US GAAP 13.97p 16.66p
------------------------------------------ ------ ------
Diluted earnings per share under US GAAP 13.94p 16.52p
------------------------------------------ ------ ------
The adjustment described as 'FAS 133' comprises FAS 133 and subsequent revising standards, FAS 138 and FAS 149, together with guidance issued by the Derivatives Implementation Group ('DIG').
The cumulative adjustment to the profit under US GAAP for the six months ended 30 September 2003 of GBP(0.6) million (net of tax) represented the cumulative effect on US GAAP earnings of adopting FAS 143 'Accounting for Asset Retirement Obligations' effective from 1 April 2003.
30 Sept
2003
30 Sept (As restated 31 March
(b) Effect on equity 2004 - Note 1) 2004
shareholders' funds of
differences between UK
GAAP and US GAAP: GBPm GBPm GBPm
----------------------- -------- -------- -------
Equity shareholders' 4,777.3 4,555.1 4,690.9
funds under UK GAAP
US GAAP djustments:
Goodwill 572.3 572.3 572.3
Business combinations (199.0) (215.9) (196.1)
Amortisation of goodwill 213.3 109.5 150.0
US regulatory net assets 653.7 967.9 724.7
Pensions (16.0) (400.5) (18.9)
Dividends 91.0 87.4 112.9
Revaluation (60.3) (54.0) (54.0)
Depreciation on 13.3 11.4 12.4
revaluation uplift
Decommissioning and mine (52.6) (7.2) (14.9)
reclamation
PacifiCorp Transition 18.4 31.3 22.2
Plan costs
FAS 133 29.1 (57.4) 2.2
ESOP shares held in trust - 77.0 -
Other 13.9 (7.1) (12.9)
Deferred tax:
Effect of US GAAP (259.5) (135.1) (275.0)
adjustments
Effect of differences in 13.9 (23.3) 14.5
methodology
----------------------- -------- -------- -------
Equity shareholders' 5,808.8 5,511.4 5,730.3
funds under US GAAP
----------------------- -------- -------- -------
The FAS 133 adjustment represents the difference between accounting for derivatives under UK and US GAAP. FAS 133 requires all derivatives, as defined by the standard, to be marked to market value, except those which qualify for specific exemption under the standard or associated DIG guidance, for example those defined as normal purchases and normal sales. The derivatives which are marked to market value in accordance with FAS 133 include only certain of the group's commercial contractual arrangements as many of these arrangements are outside the scope of FAS 133. In addition, the effect of these changes in the fair value of certain long-term contracts entered into to hedge PacifiCorp's future retail energy resource requirements, which are being marked to market value in accordance with FAS 133, are subject to regulation in the US and are therefore deferred as regulatory assets or liabilities pursuant to FAS 71 'Accounting for the Effects of Certain Types of Regulation'. The FAS 133 adjustment included within equity shareholders' funds at 30 September 2004 of GBP29.1 million includes a net liability of GBP178.9 million which is subject to regulation and is therefore offset by a US regulatory asset of GBP178.9 million included within 'US regulatory net assets' above.
9 Acquisitions
On 1 June 2004, ScottishPower completed the acquisition of the 800 MW Damhead Creek CCGT power plant and associated contracts, including the benefit of a long-term gas supply agreement, from its creditor banks for a cash consideration of GBP313 million excluding expenses. On 28 September 2004, ScottishPower completed the purchase of the remaining 50% of the 400 MW Brighton Power Station CCGT power plant and associated contracts, including the benefit of a long-term gas supply agreement, for a cash consideration of GBP26 million excluding expenses. Provisional fair values have been attributed to the assets and liabilities acquired in respect of both acquisitions. No goodwill is required to be recognised in respect of these acquisitions.
10 Contingent liabilities
There have been no material changes to the group's contingent liabilities disclosed in the 2003/04 Annual Report and Accounts.
11 Exchange rates
The exchange rates applied in the preparation of the interim Accounts were as follows:
Six months ended
30 September
2004 2003
--------------------------------- --------- ---------
Average rate for quarters ended
30 June $1.81/GBP $1.62/GBP
30 September $1.82/GBP $1.61/GBP
--------------------------------- --------- ---------
Closing rate as at 30 September $1.81/GBP $1.66/GBP
--------------------------------- --------- ---------
The closing rate for 31 March 2004 was $1.84/GBP.
Independent Review Report
to Scottish Power plc
Introduction
We have been instructed by the company to review the financial information, contained in the interim report, which comprises the Group Profit and Loss Account, the Statement of Total Recognised Gains and Losses, the Reconciliation of Movements in Shareholders' Funds, the Group Cash Flow Statement, the Reconciliation of Net Cash Flow to Movement in Net Debt, the Group Balance Sheet and the related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Listing Rules of the Finanical Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the three months ended 30 September 2004 and for the six months ended 30 September 2004.
PricewaterhouseCoopers LLP
Chartered Accountants
Glasgow
10 November 2004
This information is provided by RNS
The company news service from the London Stock Exchange