SECURITIES AND EXCHANGE COMMISSIONS
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15a-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of July 2002
SCOTTISH POWER PLC
(Translation of Registrant's Name Into English)
CORPORATE OFFICE, 1 ATLANTIC QUAY, GLASGOW, G2 8SP
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F ___
---
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes ___ No X
---
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-_____.)
FORM 6-K: TABLE OF CONTENTS
1. Scottish Power plc first quarter results to June 30, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
/s/ Scottish Power plc
-----------------------------
(Registrant)
Date: July 25, 2002 By: /s/ Alan McCulloch
--------------------- ------------------
Alan McCulloch
Assistant Company Secretary
1
Scottish Power plc
2002/03 1/st/ Quarter Results
1 April - 30 June 2002
.. Earnings per share of 6.21 pence, an increase of 27% year-on-year
.. Dividend per share of 7.177 pence, up 5%
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Full Year Quarter to Quarter to
to 31 March 02 30 June 01 30 June 02
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6,314.1 Turnover ((Pounds)million) 1,684.6 1,237.6
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944.1 Operating profit ((Pounds)million) 200.3 223.1
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567.1 Profit before tax ((Pounds)million) 105.3 152.1
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26.12 Earnings per share (pence) 4.90 6.21
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27.34* Dividends per share (pence) 6.835 7.177
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The figures above, and in the narrative below, are before the impact of goodwill
amortisation and, in the prior year, exceptional items unless otherwise stated.
* Excludes Thus dividend in specie arising on its demerger
Ian Russell, Chief Executive, said, "I am pleased to report another quarter of
improved operational performance giving ScottishPower earnings per share of 6.21
pence, an increase of 27% compared with the first quarter of last year".
FINANCIAL OVERVIEW
ScottishPower's improved first quarter performance was led by PacifiCorp, our US
regulated business, reflecting lower power costs, increased regulatory
recoveries and continued progress in delivering Transition Plan cost savings.
The reduced contribution from the UK Division due to lower wholesale prices was
more than offset by operating profit improvement at both PacifiCorp and
PacifiCorp Power Marketing (PPM) and by increased regulatory revenues and
operating cost reductions in the Infrastructure Division.
Group turnover in the quarter fell to (Pounds)1,238 million, (Pounds)447 million
(27%) lower than the first quarter of the previous year. Of this decrease,
(Pounds)204 million relates to discontinued operations in the UK, principally
Southern Water, and (Pounds)243 million relates to continuing operations. In the
US, PacifiCorp's revenues decreased by (Pounds)258 million (29%) due to
reductions in wholesale prices in the western US, offset in part by favourable
volumes and increased regulatory recoveries. PPM's revenues increased by
(Pounds)43 million as a result of the development of its renewable and thermal
generation and gas storage businesses. In the UK, turnover in our Infrastructure
Division has increased by (Pounds)17 million mainly as a result of increased
regulatory income from higher external sales, and in the UK
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Division the fall of (Pounds)45 million reflects the impact of lower UK
wholesale prices and competition in our supply home areas.
Group operating profit increased by (Pounds)23 million (11%) to (Pounds)223
million with operating profit from continuing operations up (Pounds)35 million
(20%) at (Pounds)209 million. PacifiCorp reported operating profit of
(Pounds)134 million, an increase of (Pounds)44 million (48%) on the first
quarter of the previous year, and PPM reported operating profit of (Pounds)4
million, (Pounds)2 million higher than the corresponding period last year. This,
together with the increase of (Pounds)2 million in the Infrastructure Division,
more than offset the decrease of (Pounds)13 million in the contribution to
operating profit from the UK Division and the (Pounds)12 million reduction from
discontinued operations, mainly attributable to Southern Water.
The net interest charge in the quarter decreased by (Pounds)27 million to
(Pounds)69 million. This was due to the reduction in net debt following the
finalisation of the sale of Southern Water, which realised gross proceeds of
(Pounds)2,050 million, including debt assumed by the purchaser.
Profit before tax increased by (Pounds)47 million to (Pounds)152 million and the
tax charge of (Pounds)37 million represents an effective tax rate of 24%,
increased from the prior year rate of 22.5% on profits before goodwill
amortisation and exceptional item. Earnings per share were 6.21 pence, an
increase of 1.31 pence (27%) on the equivalent period last year. Continuing
operations contributed earnings per share of 5.80 pence compared with 3.88 pence
for the first quarter of the previous year, an increase of 49%.
Operating cash flow increased by (Pounds)101 million in the quarter to
(Pounds)253 million principally due to the increase in operating profit and
lower volatility in market prices in the US. Investment in capital projects was
(Pounds)179 million, a decrease of (Pounds)58 million, including a decrease of
(Pounds)63 million in discontinued operations and an increase of (Pounds)5
million in continuing operations. The (Pounds)179 million of capital spend
comprised (Pounds)94 million in PacifiCorp, (Pounds)5 million in PPM, (Pounds)48
million in the Infrastructure Division, (Pounds)17 million in UK Division and
(Pounds)15 million in Southern Water. Net cash inflows from disposals of
(Pounds)1,946 million mainly represent the proceeds from sale of Southern Water,
being the sale price of (Pounds)2,050 million less debt of approximately
(Pounds)100 million assumed by the purchaser. Net debt as at 30 June 2002 of
(Pounds)4,158 million was (Pounds)2,050 million lower than at 31 March 2002,
after the benefit of a weaker dollar reducing the sterling value of debt.
Gearing (net debt/shareholders' funds) decreased to 89%, from 131% at 31 March
2002.
As part of a long term hedge programme we have substantially hedged, at below
current market rates, the translation of dollar earnings from PacifiCorp for the
year to 31 March 2003 and approximately 80% of our US dollar net assets. We
continue to enter into hedging arrangements to minimise the impact on reported
earnings from volatility in exchange rates.
The first quarter dividend of 7.177 pence per share payable on 16 September 2002
is consistent with our stated aim of a 5% annual increase in dividends to March
2003. The ADS dividend rate is $0.4472 which has been determined by the
directors with reference
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to the sterling / dollar exchange rate ruling in London on 24 July 2002, the
last business day preceding the dividend announcement.
PACIFICORP
PacifiCorp is our regulated US business and its strategic priorities are to:
.. Achieve 11% return on equity target by 2004/05 through:
- recovery via general rate cases of costs incurred
- operating efficiencies through the Transition Plan
.. Manage risk and reward balance
.. Deliver excellent customer service
PacifiCorp demonstrated another quarter of improving financial performance,
consistent with its goal of increasing operating profit over the next three
years to approximately $1 billion. PacifiCorp is targeting to achieve its
authorised return on equity, currently approximately 11%, through a combination
of operating efficiencies, investments and rate filings. PacifiCorp is presently
earning approximately half its authorised rate of return and is seeking to
recover costs prudently incurred but not yet in rates.
Operating profit in PacifiCorp was (Pounds)134 million, an increase of
(Pounds)44 million (48%). This improved financial performance was mainly as a
result of regulatory rate increases of (Pounds)17 million, rate recoveries of
excess power costs of (Pounds)15 million, lower power costs of (Pounds)57
million and continued progress with the Transition Plan cost savings of
(Pounds)9 million. These contributions to operating profit were partly offset by
(Pounds)12 million in reduced transmission revenues due to lower transmission
volumes, planned additional costs, primarily risk mitigation initiatives, of
(Pounds)16 million and depreciation arising from new investment activities
amounting to (Pounds)8 million. The previous year's results included a gain on a
loan receivable, previously partially provided against, of (pound)18 million
which was not recurring in this year.
Capital spend in the quarter was (Pounds)94 million, an increase of (Pounds)12
million compared to the equivalent period last year, and comprised new
generation spend of (Pounds)11 million, including construction of the Gadsby
gas-fired generation peaking plant, network growth of (Pounds)26 million,
refurbishment of (Pounds)49 million and other capital projects of (Pounds)8
million.
Under UK GAAP, all of PacifiCorp's net power costs are charged to the profit and
loss account when incurred. The regulatory recovery of deferred excess power
costs charged to the profit and loss account is recognised as income under UK
GAAP when billed to customers.
PacifiCorp continues to seek regulatory recovery for costs incurred on behalf of
customers. Filings include general rate cases, deferred accounting requests, and
other filings as needed. Details of expected hearing dates for these and other
regulatory actions are set out in an appendix to this announcement.
4
General Rate Cases: To maximise regulatory returns, on 7 May 2002 PacifiCorp
filed with Wyoming regulators for a $30.7 million general rate case,
representing an increase of 9.8% in revenues from customers within the state. On
20 May 2002, Oregon regulators made a one-off award of $15.4 million one off
principally related to excess power costs to be incurred this summer. On 27 June
2002, California regulators approved an interim rate increase of approximately
9%, or $4.7 million in annual revenues. The increase is subject to review as
part of the permanent general rate case filing pending before the California
Public Utilities Commission. PacifiCorp is considering making general rate case
filings in other states during the current financial year.
Deferred Cost Recovery: To recover costs incurred on behalf of customers,
regulators awarded recovery of approximately $147 million in deferred power
costs in Utah on 1 May 2002, and in Idaho a further $25 million was awarded on 7
June 2002, both at a recovery level of approximately 70% of amounts deferred or
requested. In Oregon our request to recover $136.5 million in deferred excess
power costs was approved by the Oregon Public Utility Commission (OPUC) on 18
July 2002. PacifiCorp expects to file a request in August 2002 with the OPUC to
raise the annual surcharge level to recover these costs to 6% from the 3%
currently being received. In Wyoming, in conjunction with the general rate case
in that state discussed above, PacifiCorp has requested recovery of $91 million
in deferred excess power costs, including the costs of the Hunter outage, to be
recovered through two surcharges over three years.
Transition Plan: To help the regulated US business reach its financial goal, a
further $13 million in Transition Plan cost savings were realised during the
quarter toward the overall target of $300 million savings by 2004/05. Cumulative
annual savings now total approximately $130 million, and the programme remains
on track. Reflecting PacifiCorp's strong operational focus, the quarter also
included a generation maintenance programme designed to ensure a high level of
plant availability during the summer period and implementation of a fuel mix
strategy that optimises fuel content for each plant to ensure peak operating
performance. Increased costs resulted from these risk mitigation initiatives, as
well as upward pressure on various insurance premiums and employee medical
benefits which are also being experienced by many other US companies.
Energy markets: The western US energy markets were stable in the first quarter
with adequate capacity. The fill level of hydro-electric dams is also back to
normal historic levels. Although demand has increased in the western US,
PacifiCorp is well positioned for this summer and beyond through a combination
of its flexible generation fleet, and the risk management steps implemented over
the past 12-18 months. Physical additions of peaking plant to meet summer demand
- such as the 120 MW Gadsby gas-fired peaking plant in Utah, scheduled to come
on-line in late summer 2002, and the lease from PPM of a 200 MW peaking plant in
Utah, 160 MW of which are now operational, and other flexible physical hedge
products, will help maintain PacifiCorp's balanced net energy position through
this financial year.
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Risk mitigation: In addition to adding new plant, financial hedge instruments
such as temperature and weather-related hedges are expected to provide
protection against abnormal events. Longer-term initiatives on resource planning
continue with regulators and we continue to progress options with other parties.
Customer Service: PacifiCorp continues to focus on delivering improved customer
service levels. Plans have been prepared to gain further efficiencies from the
call centre technologies implemented last year. The goal of these technology
enhancements, combined with ongoing investment in training, is to handle calls
more quickly and efficiently. We continue to answer 80% of customer calls in 20
seconds or less, with an emphasis on improving quality. Further improvements are
targeted at customer self-service options as well as improvements for handling
network faults. In the past few months, PacifiCorp experienced a number of
unplanned outages in Utah as a result of higher than normal temperatures,
continuing customer growth and increasing demand for electricity. In targeting
these problem areas of the network, PacifiCorp had planned and is investing more
than $34 million this year along the Wasatch Front in Utah to upgrade lines, add
substations and increase the capacity of the distribution system.
Other investments to provide for long-term system reliability, stability and
growth are being considered by PacifiCorp as part of various strategic and
regulatory initiatives. These projects are designed to address the challenges
faced by PacifiCorp as a multi-state utility and to anticipate and plan for
long-term transmission and generation requirements. Resulting investments
through participation in the Multi State Process, the Integrated Resource Plan,
hydro-electric relicensing, new air quality standards, and participation in a
Regional Transmission Organization will seek to meet system and customer needs,
while assuring full recovery of prudently incurred new costs.
During the quarter, PacifiCorp responded to data requests from the Federal
Energy Regulatory Commission (FERC) regarding trading practices connected with
the California power crisis of 2000 and 2001. We were able to confirm positively
that PacifiCorp did not engage in any trading practices intended to manipulate
the market as described in FERC's request.
PacifiCorp Power Marketing, Inc.
The strategic priorities of PPM, our competitive US energy business, are to:
.. Grow its renewable/thermal energy portfolio and gas storage/hub services
.. Optimise returns through integration of assets, trading and commercial
activities
PPM is growing its renewable/thermal energy portfolio and gas storage/hub
services businesses through a regional approach with selective investments. PPM
reported an operating profit of (Pounds)4 million, an increase of (Pounds)2
million, with sales up (Pounds)43 million (197%) to (Pounds)65 million, which
included revenues from our 40% share of the gas storage and hub services
facility in Alberta, Canada, acquired in January 2002.
6
Net capital expenditure in PPM was (Pounds)5 million, a decrease of (Pounds)22
million, to expand its energy portfolio, with spend of (Pounds)4 million on the
West Valley City gas turbine plant in Utah, as well as gas storage assets and
business control systems.
As part of its development of thermal generation, PPM brought on-line in June
2002 two new combustion gas turbine facilities, the 100 MW gas-fired Klamath
expansion plant adjacent to the existing 484 MW Klamath Cogeneration Plant in
Oregon and the first 160 MW of the 200 MW gas-fired West Valley Generation Plant
near Salt Lake City, Utah, which is providing electricity to PacifiCorp under a
lease of up to 15 years.
To continue growing its renewable generation business, PPM signed a 25-year
transaction on 11 May 2002 to sell 25 MW of wind power to the Eugene Water &
Electric Board (EWEB) in Oregon. The $93 million EWEB contract is similar to
recent sales to Seattle City Light and the Bonneville Power Administration,
locking in long-term value from PPM's output of the Stateline windfarm in Oregon
and Washington. In June 2002, the American Wind Energy Association named PPM
national "Market Maker" of the year for 2002 for helping build a market for wind
in the US.
PPM continues to develop power generating and supply arrangements and has under
consideration 15-20 mostly wind opportunities in strategic locations in the
western and midwestern US. PPM expects to approve about 300 MW of new wind
projects this year. Similarly, PPM is developing a number of gas storage assets
in key locations.
During the quarter, PPM responded to data requests from the FERC regarding
trading practices connected with the California power crisis of 2000 and 2001.
We were able to confirm positively that PPM did not engage in any trading
practices intended to manipulate the market as described in FERC's request.
UK Division
In the UK Division, our competitive generation, trading and retail business, our
strategic priorities are to:
.. Enhance margins through our integrated operations
.. Grow customer numbers and improve customer service
.. Make selective investments using proven knowledge and skills
The UK Division reported an operating loss of (Pounds)8 million, compared to a
(Pounds)4 million profit in the previous year. In what is seasonally a poor
quarter for UK performance, there has been increased supply profitability of
(Pounds)20 million arising from improved margins primarily due to lower
wholesale electricity prices. Home and out of area electricity profits increased
by (PoundS)4 million and (Pounds)15 million respectively due to lower wholesale
prices whilst gas margins improved by (Pounds)1 million as a result of customer
growth. However, this improvement has been more than offset by a decrease in
margins from generation of (Pounds)32 million, where wholesale prices have
fallen by approximately 24% year-on-year. Our integrated approach to management
of the energy value chain
7
helps protect us from some aspects of falling wholesale prices, but sales out of
Scotland, and sales to other suppliers in Scotland, are subject to market
conditions.
On 15 July 2002 we agreed revised terms to the Nuclear Energy Agreement (NEA)
with British Energy and Scottish and Southern Energy. The revised terms are
subject to regulatory approval but legal proceedings have been suspended. We
will purchase electricity from British Energy under arrangements much more
closely linked to market prices and terms for base load energy in England and
Wales. The amended NEA will continue in operation until the introduction of the
British Electricity Transmission and Trading Arrangements (BETTA) or, if
earlier, 1 April 2006. Beyond that date we have an option to purchase reduced
volumes from British Energy after BETTA up to 2011. Prudently, the financial
benefit of the revised terms will not be recognised in our accounts until
regulatory approval of the contract is given. The settlement is satisfactory to
all sides and the companies believe it represents a fair and reasonable basis on
which to resolve the dispute between them.
Net capital expenditure in UK Division was (Pounds)17 million, a decrease of
(Pounds)10 million and included (Pounds)9 million on coal and gas-fired
generation assets.
In our Generation business, working in partnership with trade unions, a
programme is in place that will see approximately 95, (13%), of staff leaving
the business on a phased basis over the next nine months, with new structures in
place to reflect the changing business environment.
Customer numbers remain at 3.5 million, however, we are seeing modest monthly
growth reflecting continuing lower levels of churn and improved sales
performance. We were pleased to receive a World Billing Award in April 2002 in
the "Best Billing Implementation - Utilities" category, following our successful
migration to a single billing platform. Process improvement and cost reduction
projects are underway and are expected to improve our cost to serve in the
second half of the year.
In terms of our priority to make selective investments, we continued during the
quarter with our ambitious programme of windfarm developments. We secured
planning consent for a 29 MW installation located in Cowal, Argyll and submitted
planning applications for a further three windfarms comprising 134 MW at Black
Law in South Lanarkshire, 29 MW at Beinn Tharsuinn and 18 MW at Dounreay, both
in Highland Region. The proposed 240 MW windfarm at Whitelee near Eaglesham has
received planning recommendations from all three local authorities involved in
the planning process. The proposal is now with the Scottish Executive for final
approval.
Our trading strategy has focused on reducing our exposure to falling wholesale
electricity prices and on benefiting from the flexibility of our generation
assets. In our opinion, we continue to be one of the leaders in the Balancing
Mechanism despite intensifying competition, and we estimate we achieved the
highest contribution per Balancing Mechanism Unit for the first quarter of
2002/03 as well as for the year ended 31 March
8
2002. Our flexible generation plant is working well under the new one-hour NETA
gate closure period which started on 2 July 2002.
Infrastructure Division
In the Infrastructure Division, our regulated UK wires business, our strategic
priorities are to:
.. Be at or near the regulatory frontier
- outperform operating cost targets
- achieve better than planned output from capex
.. Achieve high standards of customer service
.. Invest consistently to add value
The Infrastructure Division reported operating profit of (Pounds)79 million,
(Pounds)2 million higher than the equivalent period last year. The ongoing
restructuring programme contributed cost reductions of (Pounds)3 million. These,
together with increased regulatory revenues due to a higher percentage of sales
to external suppliers, were in part offset by increased depreciation from
capital investment and higher insurance premiums.
Capital investment for the quarter increased by (Pounds)24 million to (Pounds)48
million, of which (Pounds)33 million related to upgrading and renewing the
network, (Pounds)10 million related to new infrastructure to increase the
capacity of the system and (Pounds)5 million related to other capital projects.
We remain firmly on target to deliver (Pounds)75 million of cash cost savings by
March 2003, having achieved (Pounds)73 million to date, and to make progress
toward the further (Pounds)33 million of operating cost reductions in the
Infrastructure Division by March 2004, as previously announced. Savings are
being targeted in areas such as procurement, metering and transport as well as
operating practice efficiencies.
We are supporting Ofgem's BETTA project and are involved with industry working
groups examining the assignment of responsibilities between the System Operator
and the Transmission Owner.
We are focused on driving down customer minutes lost and customer interruptions
to achieve higher standards of customer service. To achieve these improvements,
and consistent with our strategy, we will also make investments in our
Regulatory Asset Base that contribute value. Our investment programme involves
substantial upgrading in the Scottish Borders area and our Urban Automation
Project commenced in the first quarter. Both projects are aimed at providing our
customers with a better and more secure supply and at improving our performance.
In respect of our Scottish Borders scheme, (Pounds)4 million of investment has
been made to date, (Pounds)2 million in the quarter, on construction of overhead
line and a number of packaged substations. The Urban Automation Project
9
involves the installation of new 11 kV switchgear equipped with modern
protection aimed at benefiting customers.
Discontinued operations
Operating profit from discontinued operations of (Pounds)14 million represents
the operating profit of Southern Water to 23 April 2002, when its sale to First
Aqua Limited was finalised. This represents a decrease of (Pounds)12 million,
over the first quarter of the previous year, which included a full quarter's
results for Southern Water as well as the results of UK Appliance Retailing and
Thus.
Corporate Social Responsibility
Our track record in the area of health and safety is generally good but we have
set an ambitious target for this year to reduce by 25% the accident total for
last year. All of our businesses were on course to achieve this target at the
end of the first quarter. In spite of our track record and progress in this
area, we are saddened to report the deaths of two colleagues in fatal accidents
in July 2002, one in the US and one in the UK.
In July 2002 ScottishPower won the Best Company of the Year Award by Business in
the Community (BitC). BitC is a leading organisation that promotes social
responsibility and facilitates sustainability and social improvement efforts
between the Government, UK corporations and the not-for-profit community.
We were also honoured with the Award for Excellence for ScottishPower Learning's
SkillSeekers Programme, which assists unemployed young people find jobs in the
community. In addition, we received a highly commended citation for our work on
having a positive environmental impact.
In the US, PacifiCorp was named a 2002 Winter Games Environmental Champion and
received a Spirit of the Land Award for excellence in environmental education.
PacifiCorp was also awarded the National Family Volunteer Award for Community
Volunteering and National Service, a national award received from the Points of
Light Foundation.
Investor Calendar
26 July 2002 Annual General Meeting
31 July 2002 Ordinary and American Depositary Shares go ex-dividend for
the 1/st/ quarter
2 August 2002 Last date for registering transfers to receive 1/st/ quarter
dividend
16 September 2002 1/st/ quarter dividend payable
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5 November 2002 2/nd/ quarter results
16 December 2002 2/nd/ quarter dividend payable
5 February 2003 3/rd/ quarter results
14 March 2003 3/rd/ quarter dividend payable
7 May 2003 Full year results
16 June 2003 4/th/ quarter dividend payable
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APPENDIX - RECENT US RATE FILINGS AND SCHEDULE DATES
General Filings
Since 31 March 2002, activity on general rate cases has comprised of the
following:
.. Wyoming
On 7 May 2002, PacifiCorp filed a general rate case in Wyoming for $30.7 million
in ongoing general rate case relief. This filing also requested $91 million of
deferred excess net power costs described under the deferred costs section that
follows.
.. Oregon
On 20 May 2002, the Oregon Public Utilities Commission (OPUC) awarded $18.7
million related to excess power costs to be incurred this summer. Combined with
other rate case issues, the net impact in Oregon is $15.4 million.
.. California
On 27 June 2002 the California Public Utilities Commission (CPUC) granted
PacifiCorp's request for an interim increase in its prices of approximately $4.7
million. The increase is subject to review as part of a general rate increase
request PacifiCorp filed late in 2001 with the CPUC. No decision is expected on
this request until later in 2002.
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Deferred Excess Power Costs
Under US GAAP, excess net power costs, where approved by regulators, are
initially deferred as regulatory assets and recovery is sought through
subsequent rate filings. Allowable excess net power costs are only charged to
income under US GAAP when regulatory mechanisms for recovery have been
established. There is therefore a time lag between the recognition of allowable
excess power costs under UK GAAP compared to US GAAP, which will benefit future
UK GAAP reported earnings.
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At 30 June 2002
31 March 2002 Other 30 June 2002
Amounts Quarter 1 Quarter 1 Amounts
$m Deferred Collection Movement Deferred
--------------------------------- -------------- -------------- --------------- --------------
Deferred Excess Power Costs
Oregon 154.8 (5.6) (12.1) 137.1
Utah 109.1 (4.1) (46.9) 58.1
Wyoming 91.0 - 1.1 92.1
Idaho 37.4 (0.7) (14.7) 22.0
California - - - -
Washington - - - -
-------------- -------------- --------------- --------------
Subtotal 392.3 (10.4) (72.6) 309.3
Other Deferred Costs
All States - Trail Mountain
(investment & mine closure
costs) (1) - - 34.8 34.8
Oregon (SB 1149 costs) (2) 22.6 (0.8) 1.6 23.4
-------------- -------------- --------------- --------------
Total 414.9 (11.2) (36.2) 367.5
(1) At 31 March 2002, PacifiCorp had no amounts deferred for Trail Mountain
investment and mine closure costs. During Quarter 1, PacifiCorp deferred
the full closure costs of the Trail Mountain mine of $46.4 million and
amortised $11.6 million, resulting in a deferral at 30 June 2002 of $34.8
million.
(2) At 31 March 2002, PacifiCorp had $22.6 million deferred for SB 1149 costs
incurred in Oregon. During Quarter 1, PacifiCorp collected $0.8 million of
these costs, deferred an additional $1.2 million in costs and added $0.4
million in carrying charges, resulting in a deferral remaining to be
collected at 30 June 2002 of $23.4 million.
--------------------------------------------------------------------------------
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At 30 June 2002, PacifiCorp had $367.5 million of amounts deferred, $47.4
million lower than at 31 March 2002 due to collecting $11.2 million of revenues
and $36.2 million of other movements and disallowances. Total excess net power
cost amounts awarded to PacifiCorp to 30 June 2002 were $206.6 million, with a
further $192.9 million under consideration. Further excess net power cost
information is described below concerning deferred accounts, as well as recovery
requests and awards.
In Oregon, PacifiCorp has deferred $137.1 million including carrying charges,
net of costs recovered through amortisation. A change from the $154.8 million
deferred at 31 March 2002 resulted from amounts collected in the first quarter
of $5.6 million and adjustments based on calculations under the deferral
mechanism of $15.3 million, offset by carrying charges of $3.2 million. On 18
July 2002, the OPUC approved recovery of $136.5 million. PacifiCorp is currently
receiving $22.8 million per year of this amount pursuant to a 3% surcharge. A
total of $29.9 million has been recovered to date. In August 2002, PacifiCorp
plans to request the surcharge be increased to a 6% annual rate, or $45.0
million per year, which is the current maximum recovery level allowed in Oregon.
In Utah, PacifiCorp has a net deferral of $58.1 million at 30 June 2002, a
change from the $109.1 million deferred at 31 March 2002. PacifiCorp requested
recovery of $205 million in costs related to excess net power costs from the
Utah Public Service Commission (UPSC) and on 1 May 2002, the UPSC approved a
settlement among PacifiCorp, utility regulators and consumer groups totaling
approximately $147 million that resolved outstanding power cost issues related
to the Hunter power station outage and summer 2001 excess net power costs. As a
result of the order, PacifiCorp will not be required to credit customer bills
for the remaining Utah proceeds from the sale of its Centralia Plant, or the
merger credits in Utah, which results in a total benefit to PacifiCorp of $46.9
million. During the quarter, PacifiCorp collected $4.1 million of these costs.
In Wyoming, on 7 May 2002, PacifiCorp filed a case with the Wyoming Public
Service Commission requesting recovery of $91.0 million of deferred excess net
power costs, including the Hunter plant outage-related costs. PacifiCorp has a
net deferral of $92.1 million at 30 June 2002, a change from the $91.0 million
deferred at 31 March 2002 resulting from the addition of $1.1 million in
carrying charges.
In Idaho, PacifiCorp had a net deferral of $37.4 million at 31 March 2002. On 7
June 2002, the Idaho Public Utilities Commission approved an agreement for
PacifiCorp to recover $25.0 million of excess net power costs, which resulted in
a write off of $12.4 million. Also as a result of this approval, PacifiCorp will
not be required to credit customer bills for merger credits in Idaho, which
results in a benefit of $2.3 million During the quarter, PacifiCorp collected
$0.7 million of these costs, resulting in a net deferral of $22.0 million at 30
June 2002.
14
Other Filings
A request to defer excess power costs for one year beginning 1 June 2002 in
Washington was filed on 5 April 2002. Under these mechanisms, if granted by the
commissions, all or part of actual power costs above or below the level in rates
will be shared with customers.
Safe Harbor
Cautionary Statement Regarding Forward Looking Statements
Certain statements contained herein are forward-looking statements within the
meaning of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements in this document include, but are
not limited to, statements in: "PacifiCorp" relating to PacifiCorp's aim to
achieve 11% return on equity by 2004/05, make additional general rate case
filings, file a request with the Oregon Public Utility Commission to recover
additional deferred excess power costs, take risk management steps to protect
against abnormal events, improve customer service levels and invest to provide
for long-term system reliability, stability and growth; "PacifiCorp Power
Marketing, Inc." relating to growing a thermal/renewable energy portfolio and
gas storage/hub services and integrating assets, trading and commercial
activities; "UK Division" relating to process improvement and cost-reduction
projects, continuing the windfarm development programme, improving customer
service and making selective investments; "Infrastructure Division" relating to
delivering (Pounds)75 million of cash cost savings by March 2003, making
progress toward the further (Pounds)33 million of operating cost reductions to
the Infrastructure Division by March 2004 and investing in our Regulatory Asset
Base that contribute value.
ScottishPower wishes 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. ScottishPower undertakes no
obligation to revise these forward-looking statements to reflect events or
circumstances after the date hereof. In addition to the important factors
described elsewhere in this document, the following important factors, among
others, could affect the group's actual future:
- 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;
15
- the success of reorganizational and cost-saving efforts;
- 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
Colin McSeveny Group Media Relations Manager 0141 636 4515
Group Profit and Loss Account
for the three months ended 30 June 2002
Three months ended 30 June 2002
Continuing Discontinued
operations operations Total
2002 2002 2002
Notes (Pounds)m (Pounds)m (Pounds)m
-----------------------------------------------------------------------------------------------------------------------------------
Turnover: group and share of joint ventures and associates 1,214.6 26.7 1,241.3
Less: share of turnover in joint ventures (3.6) - (3.6)
Less: share of turnover in associates (0.1) - (0.1)
-------------------------------------------------------------------------------------- ---------- ----------- ---------
Group turnover 2 1,210.9 26.7 1,237.6
Cost of sales (749.4) (11.4) (760.8)
-------------------------------------------------------------------------------------- ---------- ----------- ---------
Gross profit 461.5 15.3 476.8
Transmission and distribution costs (118.7) - (118.7)
Administrative expenses (including goodwill amortisation) (175.7) (1.3) (177.0)
Other operating income 5.3 - 5.3
-------------------------------------------------------------------------------------- ---------- ----------- ---------
------------------------------------------------------------------------------------------------------------------------------------
Operating profit before goodwill amortisation 209.1 14.0 223.1
Goodwill amortisation (36.7) - (36.7)
------------------------------------------------------------------------------------------------------------------------------------
Operating profit 2 172.4 14.0 186.4
Share of operating loss in joint ventures (1.8) - (1.8)
-------------------------------------------------------------------------------------- ---------- ----------- ---------
Profit on ordinary activities before interest 170.6 14.0 184.6
----------- ------------ ----------
Net interest and similar charges
- Group (64.7) (3.0) (67.7)
- Joint ventures (1.5) - (1.5)
----------- ------------ ----------
(66.2) (3.0) (69.2)
-------------------------------------------------------------------------------------- ---------- ----------- ---------
------------------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before goodwill amortisation and taxation 141.1 11.0 152.1
Goodwill amortisation (36.7) - (36.7)
------------------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before taxation 104.4 11.0 115.4
Taxation 4 (33.1) (3.4) (36.5)
-------------------------------------------------------------------------------------- ---------- ----------- ---------
Profit after taxation 71.3 7.6 78.9
Minority interests (1.2) - (1.2)
-------------------------------------------------------------------------------------- ---------- ----------- ---------
Profit for the period 70.1 7.6 77.7
Cash dividends (132.5) - (132.5)
-------------------------------------------------------------------------------------- ---------- ----------- ---------
Loss retained (62.4) 7.6 (54.8)
====================================================================================== ========== =========== =========
Earnings per ordinary share 5 3.81p 0.41p 4.22p
Adjusting item - goodwill amortisation 1.99p - 1.99p
-------------------------------------------------------------------------------------- ---------- ----------- ---------
Earnings per ordinary share before goodwill amortisation 5 5.80p 0.41p 6.21p
====================================================================================== ========== =========== =========
Diluted earnings per ordinary share 5 4.21p
Adjusting item - goodwill amortisation 1.99p
-------------------------------------------------------------------------------------- ---------
Diluted earnings per ordinary share before goodwill amortisation 5 6.20p
====================================================================================== =========
Cash dividend per ordinary share 6 7.177p
====================================================================================== =========
The Notes on pages 20 to 23 form part of these Accounts.
Scottish Power 2002/03 1st Quarter Results 16
Group Profit and Loss Account
for the three months ended 30 June 2001
Three months ended 30 June 2001
Exceptional
item
-discontinued
Continuing Discontinued operations
operations operations (Note 3)
2001 2001 2001
Notes (Pounds)m (Pounds)m (Pounds)m
------------------------------------------------------------------------------------------------------------------------
Turnover: group and share of joint ventures and associates 1,458.3 230.4 -
Less: share of turnover in joint ventures (4.0) - -
Less: share of turnover in associates (0.1) - -
----------------------------------------------------------------------------- ----------- ------------ ------------
Group turnover 2 1,454.2 230.4 -
Cost of sales (1,088.5) (146.2) -
----------------------------------------------------------------------------- ----------- ------------ ------------
Gross profit 365.7 84.2 -
Transmission and distribution costs (137.0) (8.1) -
Administrative expenses (including goodwill amortisation) (102.4) (50.7) -
Other operating income 10.8 0.3 -
----------------------------------------------------------------------------- ----------- ------------ ------------
------------------------------------------------------------------------------------------------------------------------
Operating profit before goodwill amortisation 174.0 26.3 -
Goodwill amortisation (36.9) (0.6) -
------------------------------------------------------------------------------------------------------------------------
Operating profit 2 137.1 25.7 -
Share of operating profit in joint ventures 1.1 - -
----------------------------------------------------------------------------- ----------- ------------ ------------
138.2 25.7 -
------------------------------------------------------------------------------------------------------------------------
Provision for loss on disposal of and withdrawal from
Appliance Retailing before goodwill write back - - (105.0)
Goodwill write back - - (15.1)
------------------------------------------------------------------------------------------------------------------------
Provision for loss on disposal of and withdrawal from
Appliance Retailing - - (120.1)
----------------------------------------------------------------------------- ----------- ------------ ------------
Profit on ordinary activities before interest 138.2 25.7 (120.1)
----------- ------------ ------------
Net interest and similar charges
- Group (84.2) (10.1) -
- Joint ventures (1.8) - -
----------- ------------ ------------
(86.0) (10.1) -
----------------------------------------------------------------------------- ----------- ------------ ------------
------------------------------------------------------------------------------------------------------------------------
Profit/(loss) on ordinary activities before goodwill amortisation and
taxation 89.1 16.2 (120.1)
Goodwill amortisation (36.9) (0.6) -
------------------------------------------------------------------------------------------------------------------------
Profit/(loss) on ordinary activities before taxation 52.2 15.6 (120.1)
Taxation 4 (15.3) (8.4) 21.0
----------------------------------------------------------------------------- ----------- ------------ ------------
Profit/(loss) after taxation 36.9 7.2 (99.1)
Minority interests (2.7) 11.0 -
----------------------------------------------------------------------------- ----------- ------------ ------------
Profit/(loss) for the period 34.2 18.2 (99.1)
Cash dividends (125.4) - -
----------------------------------------------------------------------------- ----------- ------------ ------------
Loss retained (91.2) 18.2 (99.1)
============================================================================= =========== ============ ============
Earnings/(loss) per ordinary share 5 1.87p 0.99p (5.41)p
Adjusting items - exceptional item - - 5.41p
- goodwill amortisation 2.01p 0.03p -
----------------------------------------------------------------------------- ----------- ------------ ------------
Earnings per ordinary share before exceptional item
and goodwill amortisation 5 3.88p 1.02p -
============================================================================= =========== ============ ============
Diluted loss per ordinary share 5
Adjusting items - exceptional item
- goodwill amortisation
-----------------------------------------------------------------------------
Diluted earnings per ordinary share before exceptional item
and goodwill amortisation 5
=============================================================================
Cash dividend per ordinary share 6
=============================================================================
Total
discontinued
operations Total
2001 2001
(Pounds)m (Pounds)m
-------------------------------------------------------------------------------------------------------
Turnover: group and share of joint ventures and associates 230.4 1,688.7
Less: share of turnover in joint ventures - (4.0)
Less: share of turnover in associates - (0.1)
--------------------------------------------------------------------- ------------- ---------
Group turnover 230.4 1,684.6
Cost of sales (146.2) (1,234.7)
--------------------------------------------------------------------- ------------- ---------
Gross profit 84.2 449.9
Transmission and distribution costs (8.1) (145.1)
Administrative expenses (including goodwill amortisation) (50.7) (153.1)
Other operating income 0.3 11.1
--------------------------------------------------------------------- ------------- ---------
-------------------------------------------------------------------------------------------------------
Operating profit before goodwill amortisation 26.3 200.3
Goodwill amortisation (0.6) (37.5)
-------------------------------------------------------------------------------------------------------
Operating profit 25.7 162.8
Share of operating profit in joint ventures - 1.1
--------------------------------------------------------------------- ------------- ---------
25.7 163.9
-------------------------------------------------------------------------------------------------------
Provision for loss on disposal of and withdrawal from
Appliance Retailing before goodwill write back (105.0) (105.0)
Goodwill write back (15.1) (15.1)
-------------------------------------------------------------------------------------------------------
Provision for loss on disposal of and withdrawal from
Appliance Retailing (120.1) (120.1)
--------------------------------------------------------------------- ------------- ---------
Profit on ordinary activities before interest (94.4) 43.8
------------- ---------
Net interest and similar charges
- Group (10.1) (94.3)
- Joint ventures - (1.8)
------------- ---------
(10.1) (96.1)
--------------------------------------------------------------------- ------------- ---------
-------------------------------------------------------------------------------------------------------
Profit/(loss) on ordinary activities before goodwill amortisation and
taxation (103.9) (14.8)
Goodwill amortisation (0.6) (37.5)
-------------------------------------------------------------------------------------------------------
Profit/(loss) on ordinary activities before taxation (104.5) (52.3)
Taxation 12.6 (2.7)
--------------------------------------------------------------------- ------------- ---------
Profit/(loss) after taxation (91.9) (55.0)
Minority interests 11.0 8.3
--------------------------------------------------------------------- ------------- ---------
Profit/(loss) for the period (80.9) (46.7)
Cash dividends - (125.4)
--------------------------------------------------------------------- ------------- ---------
Loss retained (80.9) (172.1)
===================================================================== ============= =========
Earnings/(loss) per ordinary share (4.42)p (2.55)p
Adjusting items - exceptional item 5.41p 5.41p
- goodwill amortisation 0.03p 2.04p
--------------------------------------------------------------------- ------------- ---------
Earnings per ordinary share before exceptional item
and goodwill amortisation 1.02p 4.90p
===================================================================== ============= =========
Diluted loss per ordinary share (2.54)p
Adjusting items - exceptional item 5.39p
- goodwill amortisation 2.04p
--------------------------------------------------------------------- ---------
Diluted earnings per ordinary share before exceptional item
and goodwill amortisation 4.89p
===================================================================== =========
Cash dividend per ordinary share 6.835p
===================================================================== =========
The Notes on pages 20 to 23 form part of these Accounts.
ScottishPower 2002/03 1st Quarter Results 17
Group Cash Flow Statement
for the three months ended 30 June 2002
Three months
ended 30 June
2002 2001
(Pounds)m (pounds)m
------------------------------------------------------------------------------------------------------------
Cash inflow from operating activities 252.7 152.2
Returns on investments and servicing of finance (81.5) (82.1)
Taxation (36.0) (7.5)
--------------------------------------------------------------------------------- ------------ -----------
Free cash flow 135.2 62.6
Capital expenditure and financial investment (194.1) (311.1)
--------------------------------------------------------------------------------- ------------ -----------
Cash flow before acquisitions and disposals (58.9) (248.5)
Acquisitions and disposals 1,946.5 150.1
Equity dividends paid (126.1) (119.4)
--------------------------------------------------------------------------------- ------------ -----------
Cash inflow/(outflow) before use of liquid resources and financing 1,761.5 (217.8)
Management of liquid resources (847.0) (3.2)
Financing ------------ -----------
- Issue of ordinary share capital 3.5 3.9
- Redemption of preferred stock of PacifiCorp (5.1) -
- (Decrease)/increase in debt (708.5) 277.1
------------ -----------
(710.1) 281.0
--------------------------------------------------------------------------------- ------------ -----------
Increase in cash in period 204.4 60.0
================================================================================= ============ ===========
Free cash flow represents cash flow from operating activities after adjusting
for returns on investments and servicing of finance and taxation.
Reconciliation of Net Cash Flow to Movement in Net Debt
for the three months ended 30 June 2002
Three months
ended 30 June
2002 2001
(Pounds)m (Pounds)m
Increase in cash in period 204.4 60.0
Cash outflow/(inflow) from decrease/(increase) in debt 708.5 (277.1)
Cash outflow from movement in liquid resources 847.0 3.2
--------------------------------------------------------------------------------- ------------ -----------
Change in net debt resulting from cash flows 1,759.9 (213.9)
Net debt disposed 100.0 -
Exchange 190.3 (9.9)
Other non-cash movements (0.2) (0.9)
--------------------------------------------------------------------------------- ------------ -----------
Movement in net debt in period 2,050.0 (224.7)
Net debt at end of previous period (6,208.4) (5,285.1)
--------------------------------------------------------------------------------- ------------ -----------
Net debt at end of period (4,158.4) (5,509.8)
================================================================================= ============ ===========
The Notes on pages 20 to 23 form part of these Accounts.
ScottishPower 2002/03 1st Quarter Results 18
Group Balance Sheet
as at 30 June 2002
30 June 30 June 31 March
2002 2001 2002
Notes (Pounds)m (Pounds)m (Pounds)m
-----------------------------------------------------------------------------------------------------------------------
Fixed assets
Intangible assets - goodwill 2,455.2 2,814.6 2,658.9
Tangible assets 8,877.0 12,036.7 11,652.3
Investments
- Investments in joint ventures: ----------- ---------- ----------
Share of gross assets 110.6 113.6 119.3
Share of gross liabilities (71.7) (70.6) (82.4)
----------- ---------- ----------
38.9 43.0 36.9
- Investments in associates 3.4 5.0 5.2
- Other investments 264.1 253.5 223.5
----------- ---------- ----------
306.4 301.5 265.6
------------------------------------------------------------------------------- ----------- ---------- ----------
11,638.6 15,152.8 14,576.8
------------------------------------------------------------------------------- ----------- ---------- ----------
Current assets
Stocks 171.4 209.3 167.0
Debtors ----------- ---------- ----------
- Gross debtors 1,476.4 1,667.7 1,448.2
- Less non-recourse financing (239.7) (273.8) (257.4)
----------- ---------- ----------
1,236.7 1,393.9 1,190.8
Short-term bank and other deposits 1,405.8 319.9 380.8
------------------------------------------------------------------------------- ----------- ---------- ----------
2,813.9 1,923.1 1,738.6
------------------------------------------------------------------------------- ----------- ---------- ----------
Creditors: amounts falling due within one year
Loans and other borrowings (547.4) (812.4) (1,226.8)
Other creditors (1,678.4) (2,251.7) (1,951.9)
------------------------------------------------------------------------------- ----------- ---------- ----------
(2,225.8) (3,064.1) (3,178.7)
------------------------------------------------------------------------------- ----------- ---------- ----------
Net current assets/(liabilities) 588.1 (1,141.0) (1,440.1)
------------------------------------------------------------------------------- ----------- ---------- ----------
Total assets less current liabilities 12,226.7 14,011.8 13,136.7
Creditors: amounts falling due after more than one year
Loans and other borrowings (5,016.8) (5,017.3) (5,362.4)
Provisions for liabilities and charges ----------- ---------- ----------
- Deferred tax (1,280.5) (1,632.9) (1,691.2)
- Other provisions (679.6) (822.0) (713.8)
----------- ---------- ----------
(1,960.1) (2,454.9) (2,405.0)
Deferred income (518.7) (519.2) (551.2)
------------------------------------------------------------------------------- ----------- ---------- ----------
Net assets 2 4,731.1 6,020.4 4,818.1
=============================================================================== =========== ========== ==========
Called up share capital 926.8 924.9 926.3
Share premium 2,257.1 3,743.2 2,254.1
Revaluation reserve 45.0 216.3 45.5
Capital redemption reserve 18.3 18.3 18.3
Merger reserve 406.4 406.4 406.4
Profit and loss account 1,001.5 437.6 1,080.8
------------------------------------------------------------------------------- ----------- ---------- ----------
Equity shareholders' funds 4,655.1 5,746.7 4,731.4
Minority interests (including non-equity) 76.0 273.7 86.7
------------------------------------------------------------------------------- ----------- ---------- ----------
Capital employed 4,731.1 6,020.4 4,818.1
=============================================================================== =========== ========== ==========
Net asset value per ordinary share 5 250.5p 310.5p 254.8p
=============================================================================== =========== ========== ==========
The Notes on pages 20 to 23 form part of these Accounts.
Approved by the Board on 25 July 2002 and signed on its behalf by
Charles Miller Smith David Nish
Chairman Finance Director
ScottishPower 2002/03 1st Quarter Results 19
Notes to the Quarterly Accounts
for the three months ended 30 June 2002
1 Basis of preparation
(a) These quarterly Accounts have been prepared on the basis of accounting
policies consistent with those set out in the Directors' Report and Accounts for
the year ended 31 March 2002.
(b) The quarterly Accounts are unaudited but have been formally reviewed by the
auditors and their report to the company is set out on page 24. The information
shown for the year ended 31 March 2002 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 2002 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 relevant exchange rates applied in the preparation of these quarterly
Accounts were $1.46/(Pounds) (average for the three month period to 30 June
2002), $1.52/(Pounds) (closing rate as at 30 June 2002), $1.42/(Pounds) (average
for the three month period to 30 June 2001), $1.42/(Pounds) (closing rate as at
30 June 2001) and $1.42/(Pounds) (closing rate as at 31 March 2002).
2 Segmental information
(a) Turnover by segment Three months ended 30 June
Total turnover Inter-segment turnover External turnover
2002 2001 2002 2001 2002 2001
Notes (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
United Kingdom - continuing operations
UK Division - Generation, Trading and Supply 434.8 481.5 8.3 9.9 426.5 471.6
Infrastructure Division - Power Systems 157.3 151.8 84.1 95.6 73.2 56.2
---------------------------------------------------------------------------------------------------------- ------ -------
United Kingdom total - continuing operations 499.7 527.8
========================================================================================================== ====== =======
United States - continuing operations
US Division
PacifiCorp (i) 646.5 904.4 0.7 - 645.8 904.4
PacifiCorp Power Marketing (i) 65.8 22.0 0.4 - 65.4 22.0
---------------------------------------------------------------------------------------------------------- ------ -------
United States total - continuing operations 711.2 926.4
========================================================================================================== ====== =======
Total continuing operations 1,210.9 1,454.2
========================================================================================================== ====== =======
United Kingdom - discontinued operations
Southern Water 26.7 105.8 - 0.4 26.7 105.4
Thus - 67.0 - 8.0 - 59.0
Appliance Retailing - 67.1 - 1.1 - 66.0
---------------------------------------------------------------------------------------------------------- ------ -------
United Kingdom total - discontinued operations 26.7 230.4
========================================================================================================== ====== =======
Total (ii) 1,237.6 1,684.6
========================================================================================================== ====== =======
(b) Operating profit/(loss) by segment Three months ended 30 June
Before Before
goodwill Goodwill goodwill Goodwill
amortisation amortisation amortisation amortisation
2002 2002 2002 2001 2001 2001
Note (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
United Kingdom - continuing operations
UK Division - Generation, Trading and Supply (8.4) (1.3) (9.7) 4.2 (1.2) 3.0
Infrastructure Division - Power Systems 79.0 - 79.0 77.1 - 77.1
-------------------------------------------------------- ------- ------ ------ ------ ------ ------
United Kingdom total - continuing operations 70.6 (1.3) 69.3 81.3 (1.2) 80.1
======================================================== ======= ====== ====== ====== ====== ======
United States - continuing operations
US Division
PacifiCorp (i) 134.1 (35.4) 98.7 90.5 (35.7) 54.8
PacifiCorp Power Marketing (i) 4.4 - 4.4 2.2 - 2.2
-------------------------------------------------------- ------- ------ ------ ------ ------ ------
United States total - continuing operations 138.5 (35.4) 103.1 92.7 (35.7) 57.0
======================================================== ======= ====== ====== ====== ====== ======
Total continuing operations 209.1 (36.7) 172.4 174.0 (36.9) 137.1
======================================================== ======= ====== ====== ====== ====== ======
United Kingdom - discontinued operations
Southern Water 14.0 - 14.0 51.9 - 51.9
Thus - - - (16.6) (0.6) (17.2)
Appliance Retailing - - - (9.0) - (9.0)
-------------------------------------------------------- ------- ------ ------ ------ ------ ------
United Kingdom total - discontinued operations 14.0 - 14.0 26.3 (0.6) 25.7
======================================================== ======= ====== ====== ====== ====== ======
Total 223.1 (36.7) 186.4 200.3 (37.5) 162.8
======================================================== ======= ====== ====== ====== ====== ======
Scottish Power 2002/03 1/st/ Quarter Results 20
Notes to the Quarterly Accounts
for the three months ended 30 June 2002 continued
2 Segmental information continued
------------------------------------------------------------------------------------------------------------------------
(c) Net assets by segment 30 June 30 June 31 March
2002 2001 2002
Notes (Pounds)m (Pounds)m (Pounds)m
United Kingdom - continuing operations
UK Division - Generation, Trading and Supply (iii) 866.2 744.2 873.4
Infrastructure Division - Power Systems (iii) 2,092.6 1,981.4 2,070.7
--------------------------------------------------------------------------------- --------- --------- ---------
United Kingdom total - continuing operations 2,958.8 2,725.6 2,944.1
================================================================================= ========= ========= =========
United States - continuing operations
US Division
PacifiCorp (i), (iii) 7,048.9 7,528.2 7,521.9
PacifiCorp Power Marketing (i), (iii) 252.9 123.4 254.1
--------------------------------------------------------------------------------- --------- --------- ---------
United States total - continuing operations 7,301.8 7,651.6 7,776.0
================================================================================= ========= ========= =========
Total continuing operations 10,260.6 10,377.2 10,720.1
================================================================================= ========= ========= =========
United Kingdom - discontinued operations
Southern Water (iii) - 2,639.7 2,347.6
Thus (iii) - 485.7 -
Appliance Retailing (iii) - (44.0) -
--------------------------------------------------------------------------------- --------- --------- ---------
United Kingdom total - discontinued operations - 3,081.4 2,347.6
================================================================================= ========= ========= =========
Unallocated net liabilities (iv) (5,529.5) (7,438.2) (8,249.6)
================================================================================= ========= ========= =========
Total 4,731.1 6,020.4 4,818.1
================================================================================= ========= ========= =========
(i) The former 'PacifiCorp' segment has been separated into two reporting
segments, PacifiCorp, the US regulated business and PacifiCorp Power Marketing,
the competitive US energy business, which commenced substantive operations
during 2001.
(ii) In the segmental analysis turnover is shown by geographical origin.
Turnover analysed by geographical destination is not materially different.
(iii) The net assets by segment figures for 30 June 2001 have been restated in
line with the revised basis of presentation adopted in the 2001/02 Annual Report
and Accounts.
(iv) Unallocated net liabilities include net debt, dividends payable, tax
liabilities and investments.
3 Exceptional item
An exceptional charge of (Pounds)120.1 million in the three months ended 30 June
2001, recognised after operating profit, related to the provision for loss on
disposal of and withdrawal from the group's Appliance Retailing operations. This
charge included (Pounds)15.1 million of goodwill previously written off to
reserves.
4 Taxation
The charge for taxation, including deferred tax, for the period ended 30 June
2002 reflects the anticipated effective rate for the year ending 31 March 2003
of 24% on the profit before goodwill amortisation and taxation. The charge for
the three months ended 30 June 2001 reflected the anticipated effective rate for
the year ending 31 March 2002 of 22.5% on the profit before goodwill
amortisation, exceptional item and taxation as detailed below:
Three months
ended 30 June
2002 2001
(Pounds)m (Pounds)m
------------------------------------------------------------------------------------------------------------------------
Profit/(loss) on ordinary activities before taxation 115.4 (52.3)
Adjusting items - exceptional item before taxation - 120.1
- goodwill amortisation 36.7 37.5
----------------------------------------------------------------------------------------------- --------- --------
Profit on ordinary activities before goodwill amortisation, exceptional item and taxation 152.1 105.3
=============================================================================================== ========= ========
ScottishPower 2002/03 1st Quarter Results 21
Notes to the Quarterly Accounts
for the three months ended 30 June 2002 continued
5 Earnings/(loss) and net asset value per ordinary share
(a) Earnings/(loss) per ordinary share have been calculated for all periods by
dividing the profit/(loss) for the period by the weighted average number of
ordinary shares in issue during the period, based on the following information:
Three months
ended 30 June
2002 2001
-------------------------------------------------------------------------------------------------
Profit/(loss) for the period ((Pounds) million) 77.7 (46.7)
Basic weighted average share capital (number of shares, million) 1,842.2 1,833.4
Diluted weighted average share capital (number of shares, million) 1,845.6 1,838.6
=========================================================================== ======= =======
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 Ownership Plan. These share options are dilutive by
reference to continuing operations and accordingly a diluted EPS has been
calculated which has the impact of reducing the net earnings/(loss) per ordinary
share.
(b) The calculation of earnings/(loss) per ordinary share, on a basis which
excludes the exceptional item and goodwill amortisation, is based on the
following adjusted earnings:
Three months ended 30 June
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
2002 2002 2002 2001 2001 2001
(Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
------------------------------------------------------------------------------------------------------------------------------------
Profit/(loss) for the period 70.1 7.6 77.7 34.2 (80.9) (46.7)
Adjusting items - exceptional item (net of attributable taxation) - - - - 99.1 99.1
- goodwill amortisation 36.7 - 36.7 36.9 0.6 37.5
---------------------------------------------------------------- ---------- ------------ --------- ---------- ---------- --------
Adjusted earnings 106.8 7.6 114.4 71.1 18.8 89.9
================================================================ ========== ============ ========= ========== ========== ========
Adjusted earnings per share has been presented in addition to earnings per share
calculated in accordance with FRS 14 in order that more meaningful comparisons
of financial performance can be made.
(c) Net asset value per ordinary share has been calculated based on the
following net assets and the number of shares in issue at the end of the
respective financial periods (after adjusting for the effect of shares held in
trust for the group's Sharesave Schemes and Employee Share Ownership Plan):
30 June 30 June 31 March
2002 2001 2002
----------------------------------------------------------------------------------------------------------------------------------
Net assets (as adjusted) ((Pounds) million) 4,615.0 5,694.3 4,692.5
Number of ordinary shares in issue at the period end (as adjusted) (number of shares, million) 1,842.4 1,833.7 1,841.9
================================================================================================ ======= ======= =======
6 Dividend per ordinary share
The first interim dividend of 7.177 pence per ordinary share is payable on 16
September 2002 to shareholders on the register at 2 August 2002. A first interim
dividend of 6.835 pence per share was declared in respect of the three months
ended 30 June 2001.
7 Statement of total recognised gains and losses
Three months
ended 30 June
2002 2001
(Pounds)m (Pounds)m
--------------------------------------------------------------------------------------------------------
Profit/(loss) for the period 77.7 (46.7)
Exchange movement on translation of overseas results and net assets (242.6) 6.6
Currency translation differences on foreign currency hedging 217.6 -
--------------------------------------------------------------------------- --------- ---------
Total recognised gains and losses for the period 52.7 (40.1)
=========================================================================== ========= =========
8 Southern Water
On 23 April 2002, the group completed the sale of Aspen 4 Limited (the holding
company of Southern Water plc) to First Aqua Limited for a total consideration,
before expenses, of (Pounds)2.05 billion including repayment and acquisition of
intra-group non-trading indebtedness and assumption by First Aqua Limited of
Southern Water's non-trading debt due to third parties. In the group's Accounts
for the year ended 31 March 2002, an exceptional impairment provision was made
to reduce the carrying value of Southern Water's net assets to their recoverable
amount. In addition, a further exceptional charge was recognised representing
the goodwill on the acquisition of Southern Water previously written off to
reserves. As a consequence of these charges to profits in the year ended 31
March 2002, there is no further gain or loss required to be recognised on
completion of the sale in the group's Accounts for the quarter ended 30 June
2002.
Scottish Power 2002/03 1st Quarter Results 22
Notes to the Quarterly Accounts
for the three months ended 30 June 2002 continued
9 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/(loss) for the period and equity shareholders' funds
are set out in the tables below.
Three months
ended 30 June
2002 2001
(Pounds)m (Pounds)m
(a) Reconciliation of profit/(loss) for the financial period to US GAAP:
-----------------------------------------------------------------------------------------------------------
Profit/(loss) for the financial period under UK GAAP 77.7 (46.7)
US GAAP adjustments:
Amortisation of goodwill 36.7 (5.9)
US regulatory net assets (30.0) 24.3
Pensions (14.5) (0.1)
Depreciation on revaluation uplift 0.5 0.9
Decommissioning and mine reclamation liabilities 2.6 (6.3)
PacifiCorp Transition Plan costs (4.4) (5.2)
FAS 133 adjustment 116.3 48.0
Other (5.0) (0.5)
-------------------------------------------------------------------------------- ---------- ---------
179.9 8.5
Deferred tax effect of US GAAP adjustments (9.0) (10.0)
-------------------------------------------------------------------------------- ---------- ----------
Profit/(loss) for the period under US GAAP before cumulative adjustment for C15
and C16 (2001 FAS 133) 170.9 (1.5)
Cumulative adjustment for C15 and C16 (2001 FAS 133) 141.1 (61.6)
================================================================================ ========== =========
Profit/(loss) for the period under US GAAP 312.0 (63.1)
================================================================================ ========== =========
Earnings/(loss) per share under US GAAP 16.94p (3.44)p
================================================================================ ========== =========
Diluted earnings/(loss) per share under US GAAP 16.91p (3.44)p
================================================================================ ========== =========
The cumulative adjustment to the loss under US GAAP for the three months ended
30 June 2001 of (Pounds)61.6 million (net of tax) represented the cumulative
effect on US GAAP earnings of adopting FAS 133 'Accounting for Derivative
Instruments and Hedging Activities' at 1 April 2001. The cumulative adjustment
to profit under US GAAP for the three months ended 30 June 2002 of (Pounds)141.1
million (net of tax) represents the cumulative effect on US GAAP earnings of
adopting revised FAS 133 guidance effective from 1 April 2002 issued by the
Derivatives Implementation Group ('DIG') under Issue C15 'Normal Purchase and
Normal Sales Exception for Certain Option-Type Contracts and Forward Contracts
in Electricity' and Issue C16 'Applying the Normal Purchases and Normal Sales
Exception to Contracts that Combine a Forward Contract and Purchased Option
Contract'.
FAS 142 'Goodwill and Other Intangible Assets' was effective for the group from
1 April 2002. This statement prohibits the amortisation of goodwill under US
GAAP and requires that goodwill be tested for impairment. The adjustment within
'Amortisation of goodwill' for the three months ended 30 June 2002 represents
the reversal of amortisation of goodwill charged under UK GAAP.
30 June 30 June 31 March
2002 2001 2002
(b) Effect on equity shareholders' funds of differences between UK GAAP and US GAAP: (Pounds)m (Pounds)m (Pounds)m
---------------------------------------------------------------------------------------------------------------------------------
Equity shareholders' funds under UK GAAP 4,655.1 5,746.7 4,731.4
US GAAP adjustments:
Goodwill 572.3 1,334.8 572.3
Business combinations (163.5) (189.1) (174.2)
Amortisation of goodwill (49.4) (175.6) (84.2)
ESOP shares held in trust (40.1) (52.4) (38.9)
US regulatory net assets 979.0 998.2 1,042.8
Pensions 210.8 244.8 222.9
Cash dividends 132.5 125.4 126.1
Revaluation of fixed assets (54.0) (229.0) (54.0)
Depreciation on revaluation uplift 9.0 12.8 8.5
Decommissioning and mine reclamation liabilities 42.9 76.5 60.7
PacifiCorp Transition Plan costs 73.5 112.5 86.9
FAS 133 adjustment (61.8) (476.3) (308.2)
Other (7.1) 10.1 (3.4)
Deferred tax:
Effect of US GAAP adjustments (403.5) (303.0) (316.9)
Effect of differences in methodology (24.9) (14.0) (21.3)
----------------------------------------------------------------------------------------- -------- -------- --------
Equity shareholders' funds under US GAAP 5,870.8 7,222.4 5,850.5
========================================================================================= ======== ======== ========
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 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 regulatory liabilities pursuant to FAS 71
'Accounting for the Effects of Certain Types of Regulation'. The total FAS 133
adjustment included within equity shareholders' funds at 30 June 2002 of
(Pounds)61.8 million is offset by a US regulatory net asset of (Pounds)313.2
million included within `US regulatory net assets' above.
10 Contingent liabilities
--------------------------------------------------------------------------------
There have been no material changes to the group's contingent liabilities
disclosed in the 2001/02 Annual Report and Accounts.
ScottishPower 2002/03 1st Quarter Results 23
Independent review report
to Scottish Power plc
Introduction
We have been instructed by the company to review the financial information,
contained in the quarterly report, which comprises the Group Profit and Loss
Accounts, 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 quarterly report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
Directors' responsibilities
The quarterly report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The Listing Rules
of the Financial Services Authority require that the accounting policies and
presentation applied to the quarterly 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.
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 June 2002.
PricewaterhouseCoopers
Chartered Accountants
Glasgow
25 July 2002
ScottishPower 2002/03 1st Quarter Results 24