ML20196G453
| ML20196G453 | |
| Person / Time | |
|---|---|
| Site: | Three Mile Island  |
| Issue date: | 12/31/1997 |
| From: | Robb J AFFILIATION NOT ASSIGNED |
| To: | |
| Shared Package | |
| ML20138L963 | List: |
| References | |
| NUDOCS 9812080014 | |
| Download: ML20196G453 (60) | |
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l i nHighlights i l 1 i v T
.9
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I I t. , i' l l + High safety standards maintained i l + 0utput up by 6 TWh to 67.2 TWh I. i + 0perating profit up 1177m to 1307m 5 (e j + Profit before tax 161m (1995/96 loss of L155m)
< + Earnings per share 5.1p (1995/96 loss of 22.1p) l [ + Net debt down 1417m to 1262m
+
,, Total dividend of 13.7p per share, in line with Prospectus l
(
)j output TWh Unit Operating Cast p/liWh Productivity per Employee Operating Profit /(Loss) im 6
CWh/ employee i 4 h :~ i i i l , ( \- \i . L \ The pro forma figures shown above and, wtwre appropriate, en the text have been prepared on the bassa referred to en note 1 to the Accounts. !1 o -. _ ._ . - . -_ . .
i } [ About British Energy c
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h t 1 i ! Our Vision: " British Energy aims to be a world class energy company expanding from its UK nuclear i generation base by building a portfolio of UK and , l international energy related businesses." i I-
/ '
l ' s; 4, \ s ,* : .~ ! l . j % ". i , g Hartlepool A twin Advanced Gas cooled Reactor (AGR) station of 1205 MW capacity situated 30 moes ! Location of British Energy's power stations and offices south of Newcastle. The station commenced
- AGR = Advanced gas-cooled reactor operation in August 1983. It achieved 81% load
- PWR = Pressurlsed water reactor factor in 1996/97 - up from 69% the previous 1 year - despite one reactor having a statutory 3 ' maintenance and inspection outage.
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n.r.n.m s A twin AGR station of 1060 MW capacity [ s ua e n casWe M N Hinkley Point B (AGR) .~ Oungeness B (AGR) j W Morecambe. Similar design to Hartlepool. The station commenced operation in July 1983. With no significant outages in 1996/97, the ) i station broke its output record. generating j 8.19TWh at a load factor of 81%.
. 3 Bretan Eueyy Arrival Report and Accounts 19%/97 I. - - .
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[x a j British Energy Head Office \ \
- Situated m Edinburgh in a new busmess park N
l* on the western outskirts of the city. British , Energy's head othee was offecially opened on g i 14 August 1996 t*y Mr George Kynoch. the then Miruster for industry at The Scottesh Offce All '( , magot group functens are Irrated thr se 1 4 .. . . . . . i 4 W. 1 ; x,, 4 .e e,
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] .. l . j formess Hunterston B $4:ewell B l A twin AGR station of 1210 MW capacity A twm AGR station of 1195 MW capacity A 1200 MW single Pressunsed Water Reactor j situated on the east coast of Scotland near situated on the west coast of Scotland an station - Britain s first. It is situated on the j Dunbar. East Lothian. The station commenced Ayrshire it costunenred operation m 1976 Suffolk coast are was completed m 1995 l operation in May 1988 in 1996/97 Torness Despite shutdowns on both reactors for 1996/97 saw 6ts first complete year of j had a record year achieving a load factor replacement of steam pipes earty m the year, commercial operation. dunng which il actueved j of 881 11 acheeved a load factor m1996/97 of 77% a load factor of 81% overall. this sncluder! a Cleared dunng 1996 by the Nuclear installations statutor y 55 day outage. without whch the inad insonctorate (Nill to operate for a further 10 years factor would have teen 97%
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. A Heysham 2 Hinkley Poirrt B DungenessB A tem AGR station of 1340 MW capacdy A twm AGR station of 1270 MW capacsty A twm AGR station of 1120 MW capanty situatad nest to Heysham 1 on the Larrashire situated on the sou'h west of England near $stuated on the Kent coast at Rornney Marsh.
cDast A 68 ster station to Tomess. It is the Budgwater, $onerset A sister station to 11 Commer'.ced operation m 1983 After a major youngest of the AGRs. commericing operation Huntersion. It also commenced operation in refurbishment programr < to rectify long term in July 1988 in 1996,97.orie reactor had a 1976 in 1996,97 like HuriterstDn. It had a problems in1995/96.11 returned to full pcmer statutory mamtenarne and mspectKin outage. Shutdown fof steam pipe reptauernent and operation m 19%/97, generatmg ris best year s but Heysham 2 still achieved an 82% 6oad factor returned a load factor of 74A 11 was a'bo output to date - 6 687Wh gemg a load tactor cleared by Nil to opeiste for a further 10 years of 67%
.-. ---_..n.-- . _ _ - - - . --.-- -
4 British Energy Annual fletut and Accounts 1996/9r
- ~ a I
Clairman's S:a:ement i l i 1 I am pleased to report that ltritish I origyi fini year as a hsin! O,mpany has Iven a successful one. We have some 350,000 shareholders and as at the date of this statement we rank as the 120th largest lintish company as measured by w market capitahsation. p A]v
. gl h The prisatisation procns was conducted %'y withm ad extremely demandmg ,
timetable - and our staff had to e contribute sigmficant levels of additional '
- cffort to ensure the Government's targer w as met. I should hke to place on record j the l\oard's appreciation for this commendable achievernent. .ik
.F ,
J 15ntish Energy's financial performance ik' l improved sigmficantly in the year ended k 0 31 March 1997. Profit before tax was j 161m compared to a loss before tax (' , ) { in the previous year of f155m. Cash / A l flow was strong with net debt being reduced by 1417m to f262m. Earnings j per share were 5.lp in 1996/97 ! ~~ compared with a loss per share of 22.1p in 1995/96. This strong financial reduced substantially by our move to to profitabihty will result from the result was due, m large measure, to an smaller premises later this month. implementation of new contracts with inacase of 10*4, in electncity output ). 11NH, our most sigmficant suppher, j f rom our eight power stations and a Whilst high standards of safety were which were signed on 3 June 1997 reduction of 11% in the cost of each maintained the Company continues to umt of electricity. pursue initiatives m order to improve A prmtipallong term goal for the the efficiency of the business. We are Company is to invest our surplus cash m l lintish Energy's head offite has been implementing a programme, which was proiccts which will ensure the contmued neabbshed m Idmburgh and we have announced in Ooober 1996, to reduce viabihty of firitish Energy beyond the created more t' nan 100 new jobs m our staffmg levels by 24% by the end time when our existing stations cease r l scotland - exceedmg our commitment of the century. When complete this genernoon. We have focused our j to Gosernment before pnvatisation. is expected to save 15ntn h Energy investment strategy in the Umted The cost of the Inndon offwe is being f 50m per year. A further improvement Kingdom on improvmg the balance 1 )a I k 4 k
s sniu annsdnnus msart ans acwunts em
" British Energy's financial performance improved '
significantly in the year ended 31 March 1997. Profit before tax was 161rn compared to a loss before tax in the previous year of 1155m. Cash flow was strong with net debt reduced to L262m. This strong financial result was due, in large measure, to an increase of 10% in electricity output and a reduction of 11% in the cost of each unit of electricity." of Bruish I nergy's generatum mix. The of emr staff and we plan to encourage company committed to continuing inveument we made in Aptd i997 in employer ihare partaipation further by to improve i hareholders' return on Humirr Power 1.imited whsh owns and graniing share opoons to all levels in ihnr investment. operates a gas-fired plant is a first step the Company, in this direction. We have also sought to strengthen our position in the UK The year ahead wdl be one of change for electricity market. the electricity sector.1998 will see the introduction of full retail compernion in internationally, we have idenofwd a the UK. The change of Government may John Robb number of opportumtics to invest in see new pohcies and priorities impactmg Chairman generating plant. Already our consultancy the energy sector. Pool prices may well 3 June 1997 ( teams are givmg advice in a number of he affected by these changes in 1997/98. wuntries on safety practice and industry The impact,if any, of the Government
- structure. Our success in operating proposed windfall tax on British Energy miclear power stations leaves us well is unclear and will be assessed when the '
placed to add value through direct nature and scope of the tax is pubhshed. investment in nuclear and conventional In this challenging environment, British plants overseas. However, the Board wdl Energy will be vigorously implementing only sanction such investments when its cost saving efforts and efficiency shareholder value is enhanced. improvements during the year ahead and will continue to manage income risk. Motivating our employees to improve our performance in all aspects of the in November 1996, our Board was business is e priority 'or British Energy. strengthened by the appointment of The Gainshare schemes in place across Peter Warry, Chief Executive of Nuclear , the Group allow all employees to share Electric. I was dehghted to welcome in the Company's improved returns Peter, who brmgs his wide experience of where it exceeds demandmg safety, industry and Whitehall.
- emironmental and performance targets. ):
Intentive plans for managers and in the hght of the strong all round Executive Directors are simdarly performance in 19%/97 Sour Board is dependem on achieving a tange of pleased to recommend a final duidend challenging performance targets and of 9.1p per share payable on 28 July meetmg safety and environmental 1997. This makes a total dividend for priorities. An encouragmg 72% of staff the year of IL7p per share, as forecast now participate in our Sharesave scheme in our Prospectus. designed to increase employee share ownership. Our long term success Your Board knks forward with depends on the quahty and commitment confidence to as semnd year as a Inted 6 I 9 i
8 Settmh Energy Annual Neport a,4 Accounts 174/97
.~. ~ e C1ief Executive's Review if ' f., .
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7 Ortush Energy Annuai Report seul Accounts 1996/97
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4 4a y\. .g . g g 4 y . . hh *s4 X Int rot ltictiott powluted eucllent s.ifer) results agamst Atmove left: sirewen 8 s bnk to the Naponal s hallengmg 1.it get s. Gruf The stainin generales etulugh ciertncity tot the whole of East Anglia. Alsove: Protecting in hne with the detnandmg objet'tnes set the environment. comprehenswe checks carned on prlVJenJtion,15ritish 1.nergy produced All our power statums aim to beat out at an our saw statens enclude er sampung sucti as this. a strong performante in 1996/97 stnngent targets for safety performance
%gmficant improvements were athieved and measure their performance against m our operanng and financial results international benthmarks. During the and we succeeded in bying the year there was no incident at any firitish founJanons for our UK and internanonal Energy power station rated alwne level bouncu development strategies. I lprocedural varutionsi on the seven pomt international Nuticar ITent scale.
. We mcreased output and reduced used to measure the sigmficance of
! operating costs, escludmg electrieny intidents at nuclear plants. purchases to sansfy direct sales. As a result umt operarmg costs fell II". to 2.llp/kWh and operating Six linnsh Energy AGR sianons nceived gold awards for industnal safety from VMeS profits mcreawd by i177m to 1307m the Royal Society for the Presention l on enrnoser of l'i,870m, up 1216m. of Acadents (RosPAl reficaing their Safety first l Operatmg tash flow on a hke for hLe contmuing improsement in mdustrial ! hasn row by ilH2m to f 404m. safety. lleysham 2 achiesed its $ nth Proht through progress ! suuesshe RosPA gold award whde T!us strong performante is an kortish Nuclear receised the prestigious Respect and recognition entouragmg start to hfe in the pnvate electncity sector award and rnore sector and n mamly due to the efforts of recently became the first workplate Professional and personal integnty our highly mornated and professional to win a Gold Award for kotland's 5 staff. As a Group we work to a set of licalth at Work scheme. Openness annmon salues: safety above all else, a determmation to improve all our Safety dittares our whole approach to a businesses and their profitabihty, respect managmg our plant at all nmedit o for those we work wnh and recognition reflected m meticulous attennon to of shievements, integrity in our detail in plannmg and implementation drahngs and openness in explammg by all our staff and contractors. what we do. Lifety wrilaluuys be our number t ne Safety First enonry. Safer > is, and alw ays m di be, lintish Profit Through Progress 1.ncrgyi top priority. Our commercial future depends on our safety record and Our aim is to enhance shareholder salery sulture. Throughout the year we value by madmning profit and i
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Chief Executive's Review "All our power stations aim to beat stringent targets for safety performance and measure their performance against international benchmarks.
, f'.
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__ . . _ . . . _ _ . . . _ _ __ _ _ _ _ _ _ _ ____ _ -._._._. _ . _ _ _ _ _ . . ~_m..-_..___. e arltlsh knergy Annual Report and Accounts 1996/97
, j
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l) me.sse ama o 2 a s 8 to Hartlepool Heystuwn i Heysharn 2
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- 8 opposite: Safety dotates our whole approach to managing our plant at all times. It 6s reflected I4
- 1. Huntersion e M In metculous attention to detail.
Suewelle M Centre: The operating floor of an AGR. Preparing to refuel the reactor 14 metres tielow.
. ~, . .d I0' ness Left: An excellent effort from all our power , e , , , stahnns - total electicity sales.
I, , , , , , , Below Safety brst RoSPA gold medal awarded to Heysham 2 for industrial safety. prtidently espandmg our Imsinchs. Jnd reunnmissieming. The outage was in 199t,/97 we made sigmtione uimpleted in H day * - a very advances towards these goals. commendable performance reflectmg great cretht on all concerned. We increased our output by 6 TWh to 67.2 TWh, underlming an excellent effort Our two oldest AGR stations, from all eight of our power stations. 1-lunterston B and Hinkley point B. The seven AGR stations exceeded their returned to full power after extended previous record set in 1994/95. Three outages and both completed the first AGR stations - Torness, lleysham I phase of a turbine upgrade programme and Dungeness B - set individual annual designed to enhance potential output. production records. Sizewell B, the UK's Both stations received clearance from (~ only PWR station, completed its first the nil to operate for a further ten years full commercial year of operation and to at least 2006. coninbuted RA TWh. In all, the average , load f actor of Bntish Energy stations Onload refuellmg - when stations refuel " - improved from 72% to 79%. without shutting down - has been D routine at Hunterston B and Hmkley -
.n 4 l A number of factors lay behind this Point B. After engineering modifications GQLQp .
improvement. Efficiency improved all Heysham 2 has recommenced onload Jf round.There were fewer statutory refuelling and Torness will follow ^fD/W outages for maintenance - four shortly. December saw the introduction compared to seven in 1995/96 - of oxygen injection at Torness, with refletting the Nuclear Installations promising results. Oxygen iniection is Inspectorate's (Nil) approval to move designed to alleviate the problem of to statutory outages every three years carbrm deposition which can adversely at several stations. Dungeness B returned affect a station's output, to full power at the start of 1996/97
- following a maior overhaul. A 14% rise in the time weighte[ pool price in England and Wales for the first Torness received clearance to move from six months of the year was followed two-year to three-year intervals between by a reduction of 10% m the second outages, bringing to five the number of half, which in output terms is a more Bruish Energy AGR stations able to sigmficant period. Over the year the time operate this way, weighted pool price was down 1%
,, (or 3% in real terms), at 2.37p/kWh.
Sirewell B operated at a load factor of British Energy's achieved price was 81% over the year or 97% cxcludmg 2.54p/kWh, down by 1% on last year its first statutory maintenance outage but stdl representing a premium of 7% f ( 4
10 Odtish Enero and Regrt ano Accounts 1996/97 l I i i j Chief Executive's Review 1 b- l I "We increased output by 6 TWh to 67.2 TWh, underlining I an excellent effort from all eight of our power stations." l over pml prke. The premium arises in March the Gmernment announced year perimi to March 2000 there wdl luause of omtract mver, othcr knigmg that the proposed Nires Rock he a 24% rethiction in group-wide arrangements and the mucentration of Characterisanon Facihty at Sellafield had numbers to below 5,000. When planned outages in the summer months not been granted planning permission, completed this is expected to save when prices are lower. Contracts for This has set back the Government's f 50m per year in staff costs. Differences (Cl Ds) and other contracts timetable for underground dispsal of were uwd to hedge price risk in 1996/97 intermediate level waste but the decision New contracts for fuel services worth to a greater extent than before, gising should not have a material fmancial around it.Shn at current pnces were increawd confidence at the time of impact on British Energy. We will be recently concluded wah BNI L, ne flotation in the average price that would working with the rest of the nuclear contracts cover the extension of fuel be achieved. industry and Government to identify the manufacturing services from 2000 to best way to safely and prudemly store 2006 for Nuclear Elecinc's AGR stations ' We have mntinued to work with other and dispose of the relatively small and the provison of reprocessing and
~
members of the England and Wales Poid anmunes of intermediate and high level storage services for all spent fuel ansing to ensure that this u holesale market waste produced by our operanons. from these stanons, over and above the operates effwiemly. We have actively Our accounts make prudent provision existing contracts. The Scottish Nuclear . supported the efforts of OITER and the for a range of possible kmg term contracts for similar services agreed in Pool to introduce full and fair competition solutions based upon a deep geohigical 1995 have also been revised. The to the retail electrkity market. repository. Our contractual obligation mntracts put in place fixed price to fund 8.4% of Nirex's expenditure arrangements, sulyct to Rpl indexation, Bniish Energy found innovarne ways in 199u97 amounted to f3m. for the maior part of spent fuel services of securing its electricity sales, offwetmg required by Ennsh Energy's seven AGR the downward trend in pml prices. Our straregic prianties for the business power stations. The contracts mil see We managed income risk and will remain as before. In the short term we savings in fuel costs of some i10m in continue to do so. The IS-year alliance are driving to improve the financial 1997/98 and very competitive prices uhich has been agreed in principle with performance of our existing assets for fuel discharged from around , Southern Electric will alksw us to hedge end to strengthen our posinon in the 2004 onwards. our pool price nsk and to strengthen our electricity market in Great Britain. position in the market. Our direct sales la Longer term we are looking to broaden . grew 96% to (147m with customers Cost reduction mntinues to be a key our fuel and plant mix in the UK tyhich included the Bank of England, goal for British Energy. Initiatives through direct investment and to invest Blue Circle and Nasan. pursued during 1996/97 included in generation projects in international reducing staff numbers and contract markets, but only if they wdl enhance Arrangemems for managing long term negotiations with BNFL 6hareholder value. habdmes remain a Ley factor.The segregated demmmissioning fund set up in October we announced a programme Since the year end we acquired a 12.5% G during privatisation to meet the majority which carries forward plans in place stake in fiumber Power Ltd, which is of power station decommissioning costs before privatisation at Nuclear Electric buildmg and operatmg a combined is now well established. and Scottish Nuclear. Over the three- cycle gas turbine station on South I'q 8 l 1
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11 Bettish Energy Annual Retxwt and Accounts 1W36.97 a~~ neem a 4
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12 Settish Energy Annual fleport erxl Acoure l'7E/97 Chief Executive's Review
" British Energy is strongly committed to protecting and enhancing the environment. We are also committed to sharing best practice both in the UK and internationally."
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13 Brit 6th Energy Annuai Report and Accourits1996/97 e =m .m f
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, Far left: Power to the turtmies . high pressure steam drives an AGR's generators.
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'" oetailed analysis of our procedures.
. Left: Power for the next generation - each of
- Our power stations produces enough electncaty for more than 2 melhon homes.
Ilumberside. To date ilumber power Integrity hanommiwinnni 7W MW of plant , and a further 310 MW CCGT is duc Wur ik>ard places great weight on its to be commissioned in 1999. We also duty to ensure the Group is managed reached agreement with pt CO Energy resynsibly and in accordance with best of pennsylvania - a major US energy practice in Corporate Governance. It is utihty - to pursue possible joint ventures also the duty of all our staff to enhane-in the US nuclear and non-nuclear safety, quahty and concern for the generation sectors. environment throughout the Group. Respect and Recognition All Bntish Energy power stations i operate to quahty management systems Our values are designed to ensure based on BS 5882, the demandmg that we work effectively as a team. Nuclear Quahry Assurance Standard. This is particularly important as our During the year, Torness became the first subsidiaries, notwithstandmg their UK power station to gain independent differing ongins, are working more certification to this standard after an closely together. Our aim is to encourage exacting series of external audits, and motivate all our employees to All Nuclear Electric's power stations achiese their full potential. This are certified for BS 7750, the British phik> sophy is at the heart of our plans to Standard for Environment Management reward our staff through Gainshare and Systems and the Scottish power stations the granting of share options at all levels. operate on a similar basis. British Energy is fortunate in having More generally, British Energy is , a highly skilled and professional strongly committed to protecting and workfone created through the foresight enhancing the environment. Throughour of our predecessors. The emphasis on the Group we are dedicated to: skill enhancement and competence p begun by Nuclear Electric and Scottish - complying with all mandatory Wclear will continue under British requirements for environmental I.ncrgy. Initiatives to develop and protection. Where appropriate we will educate our staff and to create the exceed these standards. opportunities for them to excel, together with effective appraisal and career - encouraging our staff, shareholders, development programmes, are essential supphers, customers and the pubhc durmg a period of change if the Group to have a clear understandmg of is to flourish. the environmental issues related to our business. 3 F 1
14 Brittsli Energy Anual Report aral accour.2s 1996/97 l Chief Executive's Review
" British Energy is pledged to a culture of openness.
We produce full information programmes for our key stakeholders and audiences...we desire to - maintain and broaden our involvement with the wider community." 1
- pubbshmg reports caih year on Openness Conclusion pril.mn.nne and psogrew on our I stated environnwntal ob tectives. The internally and externally, Bntish Energy This has been an encouragmg start to Nuclear ilectric and Scottish Nuclear is pledged to a culture of openness. our hfe in the private sector. As to the safety and environment reports for We produce full information programmes future, we are fully committed to 1096/97 will be pubbshed shortly. for our key stakcholders and audiences growth, to addmg shareholder value and includmg frequent station newsletters to being widely recognised as a company - improving our environmental and monthly output updates and hald characterised by its quahties - safe, performance on a continuous basis. res,ular meetings with local community prof table, progressive and open in and regulatory bodies. Both Scottish its approach.
In practne, our total quahty approach to Nuclear and Nuclear Llectric organise the ensironment covers everythmg from visitor centre and exhibition programmes '- energy sasing inioatises to minimising at all our power stations. Last year the [ "
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pollution and waste and to positise total number of nsitors rose to a l enhancement of environmemal record 310,000. . awareness at our power stations Dr Robert Hawley through community imriatives and Durmg the year our two operating Chief Executive nature awareness programmes developed subsidiaries went live on the Internet. 3 June 1997 with hxal and education authorities. Now a new British Energy web-site is operational at uww.bntub-energy.com l We are also committed to sharing and i encourage you to " surf" your way best practice both in the UK and through it. internat onally. For example, at 11cysham 2 a two-year programme of Our ongoing spcmsorship programme waste reduction - part of a drive to reflects British Energy's desire to achiese the environmental standard maintain and broaden our involvement . BS 7750 - led to a substantial decrease with the wider community. To emphasisc in the number of low lesel radioactn e our interest in the young, we became the waste drums produced for disposal. first sp<msors of the new Scour)lR badge - We have since shared the results of and supported the 6rst international this work and our wider expenence in festival of youth rugby which invoked
- achievmg BS 7750 certification with about 6,000 players from 12 nations, many companics. In turn we learn from culminating in a 6nals day at l others' experience through peer reviews Murrayfield Stadium.
of our stations by UK and international teams and by participating in similar P. _ benchmarking programmes in the UK and abroad, t 9-*
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- As a result of the changes to the capital 1
- structure and the other changes related j to pnvatisation (includmg the endmg i of the nuclear levy), both the 1996/97 j accounts and the comparative figures j for 1995/96 contain a number of non-recurrmg items. To enable a meaningful companson to be made, pro forma j figures base been prepared and thew form the basis of the 6narcial review. '
- lhe pro forma figures exclude 1 exceptional and non-recurrmg items on i o.
a similar basis to the pro forma 6gures 7 included in the Prospectus issued in June ' 1996 and m the half year results for the (h six months ended 30 September 1996. 'i l'inancial Highlights I 1997 19 % e ( ii ' im im Y Turnover 1,870 1,654 *~ Operatmg profit 307 130 \ % Profit /(loss) before tax 61 (155) s \ b Net debt at year end (262) (679)
- The henc6ts of our increased output reduced costs.
l were partly offset by a fall of 1% in our
- Turnover average achieved w!hng pnce,) tom Operatmg costs, excludmg electricity l 2.57pAWh to 2.54p/kWh. The time- purchases, were down f 33m to i Turnover comprises generation sales, weighted average pool price - the price fl,415m. The principal reductions were direst supply sales and miscellaneous which is most relevant for a base-load a fall of f 40m in matemals and services income. Generanon sales of f1,706m generator - fell from 2.39p/kWh to and a fall of f 34m in the depreciation acsunnctd for 91% of turnover in 2.37p/kWh. a fall of 3% in real terms. charge following last year's asset write 19%/97 and increased by 8% over dow n. There w as an increase of f 31m 1995/96. The increase was due to the good performance of our power stations Operating Costs in back end fuel costs reflecting the b increase m output.
whose output at 67.2 TWh was up Operating costs per unit of electricity
} by 10%. Direct supply sales to large generated fell by 11% to 2.11p/kWh, Staff numbers at the year end were 5,940, j customers increawd by 172m to (147m. reflecting leth higher output and a reduction of 484 durmg the year with i
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*0perating profit increased by L177m to L307m. Profit l after tax was 136m compared with a loss of L155m i in 1995/96. The recommended final dividend of 9,1p per share brings the total dividend for 1996/97 to ,
13.7p per share." average staffmg numiwrs in 1996/97 Insluded unhin interest payable was an 1(arnings and Dividends i Iwmg 6,166. ptmhntmty measured m f xm (harge relaimg to the repurshase l terms of electriary output per employee of bonds as esplamed below. Net profit af ter tax was f 36m compared rose 13% to 10.6 GWh/cmployee. interest was covered six nmes by with a loss of f155m in 1995/96 operatmg profit. representing an imprmernent of Electricity purchases increased by 172m fl91m. Earnings per share for the I to f14Wm in ime wnh the growth in our Taxation 3 car were 5.jp. l direct supply business. I There was a taxanon charge for the year The recommended final dividend of ) Operating Profit of f25m, an effective tax rate of 41%. 9.lp per share brings the total dividend l The higher effecove tax rate results for 1996/97 to 13.7p per share, i As a result of the improvements outhned from a portion of the Group's costs, The dividend is uncovered by profits l above u e increased operatmg profit by parncularly those relating to station after tax wich a cover ratio of 0.4 and i177m to (307m. Our operating margin decommissioning, being disallowed for covered 3.7 times by free cash flow. now represents mer leo. of turnover, tax purposes. compared with 8% m the previous year. Cash Flows and Net Debt Proposals for accounnng for deferred Financing Costs taxation in the UK are under reuew. After net capital expenditure of f106m. I The Group supports the current net operating cash flow was f473m, up l Fmancing charges, comprising accmmting standard 55AP 15, w hich f 664m. Ilowever, a number of large ! revalorisation and net interest, were requires provision to be made only for non-recurring flows in both 1995/96 down f 39m to f246m. that amount of deferred taxation that is and 1996/97 contnbuted to the considered hLely to become payahic in improvement. In particular, 1995/96 Revalorisation arises because nuticar the foreseeable future. As a result, some outflows were increased by f 345m of l habihnes are stated in the balance sheet f 562m of deferred taxation has not backhig payments to BNFl. and (83m
, at current pnce levels, discounted at been prmided in the Group's accounts for the final construction costs of 1 3% per year from the eventual payment at 31 March 1997 on the basis that Suewell 11, while 1996/97 inflows were dates. The reulonsation charge is the timmg dif ferences, which mamly relate increawd by L87m from the sale of adiustment that results from restating to accelerated capital allowances) uranic stocks to BNIL Excludmg such these habdities to take into account the are not expected to reverse in the non-recurring items, operarmg cash flow effect of inflanon in the year and to foreseeable future. in 1996/97 was f 404m, giving a hke-for.
remme the effect of one year's discount hke increase of 1182m over 1995/96. as the eventual dates of payment become in the event that the rules change to one year closer. The revalonsation require full provision for deferred tax, Net debt at 31 March 1997 was charge for the year at fl96m was our view is that such provision should f262m compared with f679m at the Ilam lower based on an inflation rate be discounted m ime with Innush end of 1995/96. The gearing rano at of 2.6%. Toergy's long term nuclear liabihties. 31 March 1997 was 17%. If our full potennalliability at 31 March ( Net mierest fell by L21m to f 50m, 1997 was dntoumed, the total provision ! reflectmg the lower average net debt level. would be in the region of (200m. I 1 5 i
--.- - - - - - - - _ . - - ~ - - _ - . --- ---- - _
j is snu.h E. orgy AnnuaHiqiart mW Accounts 199eV97 1 - __ - 3 4 2 Financial Review 1.r...., nii
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l nw. w u { w em a tw~.. w 1444m j
.e.a I w 1196m w
, Em $"f** i m .o . . ,, 1 i j ocht at she 3 car end uimpn ed 1448m mananenwm of spent tuct and waste, Treasory Management bonds .md 1225m mnhum arrm bank nisc 1".. to 11,7X6m at 11 March 1997. { i loans. In h1 arch the Company drew 1 hese habihnes increase annually due to The management of cash resources, i down 1225m of its medmm term bank fuel used in our power stations during debt 6 nance and Gnancial risks is the loan f acihty leaving undrawn facihties of the year,inflanon and the removal of responsbahry of a tentrahsed treasury j 1275m at the year end. one year's discount, and are reduced by function operating within pohcies and i cash payments made dunng the year. In pnicedures approved by the Board on l ! The bonds, whnh mature between 2001 1996/97 these pay ments totalled i146m. the advice of the Treasury Commutec l and 2016, were "re-set" on 26 hlarch (a sub-committee of the Ibard). 'Ihe under an agreement wnh Hht Treasury A segregated decommissioning fund treasury function is authorised to use made uhen they were issued in June was set up on privatisation to cmer appropnate instruments, within speci6cd 1996.1 he re-set involved the wupons the long term post ilosure costs of linuts,in order to manage Gnancial risks ' on the bonds bemg reduced to prevaihng decommissionmg Bntish Energy's power but is not permined to take speculative, l gdi yields wah a correspondmg increase stanons. The fund is admmistered by open pounons. m their principal vahws. At the same trustees who are independent of Bniish nme the mupons were reduced further Energy. I ollowmg an imtial endowment The maionty of Brinsh Energy's inmme i to reflect the investment grade ratmg of 1228m made in July 1996 Bntish and expendnure is denominated in ) l accorded to the bonds by Standard & Energy makes annual contnbutions sterkng, the main exception being l poors and Moody's. Iollowing the re- currently 6xed at f16m Isubject to Rpl uranic matenals and sertnes whith are l set, the interest rates on the bonds range mdexanonb The adequacy of funding purchased m foreign currencies. l from 8.2% to 8.9% with a ue ghted and of future contribution rates are principally US dollars. British Energy j average of 8.6%, a reducnon of 1%. reviewed by the trustees every 6te years: hedges 100% of such comnutments j There was a f17m increase in principal the next review is due in March 2001. through appropriare forward penods ! values whnh wdl be amortised over the to lessen risk and prmide certainty of remaining hfetime of the txmds. Other Provisions costs. Consequently, once a hedgmg contract has been entered into, the . l An agreement was reached in hiarch During 1996/97 Bntish Energy Group neither loses from adverse 1997 wah IIM Treasury for f105m of unlised L33m of its brought forward exchange rate movements nor gains ! the 8.9% innds due in 20!6 to be restructurmg provision. The adnunts from favourable movements. i i repurchased on I Arnl 1997 for a charged against the provision comprised premium of Om. The f 8m excess of payments for severance costs of I-undmg is managed through long term l the repurthase et over the onginal emphiyces who left during the year. debt and short term bank facihties - pnntipal value, fl00m,is included m pnividons remamir g at the year end comnutted and uncommined. The Ibard 6nancing msts. compnse i16im in respect of sescrance requires that a mmunum of 50% of net ( { and restrutturing, indudmg enhanced debt is at 6xed interest rates. To enable j Nudcar Lubilities and Segregated pension msts, and i14m for insurance. this obicetive to be achieved Bnosh l Dewmmissioning fund E further prmisions were made er are Energy enters into interest rate s vars J j expected to be made in respect of the wnh banks to 6x the interest rates on a Accrued nusicar habihnes,in respect of manpower reduction programme portion of its variable rate borrowings. 4 power station demmmissmmng and the announced in October 1996. After taking into account the impact of l
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19 Bettish Energy Annual Report and Accounts 1996/97
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[ micic=t rate sw.q% at il Manh IW7 Appraisal of new mvestnwne opportumtics N M,. ul total luurow mgs werc as tales annunt of the sariation m eisks Sted rates. awsiated with different projects and geographical h> cations. Accordingly an British Energy protects its electricity sales appropriate " hurdle rate", reflecting the income against fluctuanons in Pool pnces minimum required rate of return,is set by entering into Contracts for Defferences for the evaluation of each proposal. (Cilh) and similar instruments with a range of counterparties. Under the terms Conclusion of CIDs British Energy receives payments from the counterparties when the Pool British Energy's first year as a quoted j' price falls below the contract strike pnce company has been a financial success. I and manes payrnents when the Pool We moved from loss into pro 6t, achieved l prxe exceeds the strike price. our dividend forecast and significantly improved our cash flow. CFDs normally cover periods of six I to eighteen months. Some of the other mstruments run for periods of up to 10 years or longer. British Energy does mit use CFDs to take speculative positions in the electricity market, restricting their use to covering up to an M2ke Kirwan I agreed portion of tts electricity output. l'inance Director 3 June 1997 Capital investment ,. 1 l British Energy's primary financial objective I is to create value for its shareholders. In order to meet that objecove allinvestment la proposals are subject to detailed appraiul. The capital expenditure pohey for existmg assets is designed to ensure that each investment is either economically l l h2nc6cial or is necessary to protect l safety or the ensironment. Following j the completion of Sirewell B in 1995/96, British Energy's investment in its existing infrastructure fell by fl19m to fl10m m 1996/97 i I I
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21 entleh Energy Annual Reprat arid Accounts $996/97
~~ == s i
i ('* I i 1. John Robb (61) " Chairman l I Appointed Chairman in 1995. Also Charman of Logitron iloidings ple i 8 and Non-Executive Director of
., 3 , Allied Domecq plc, Unigate plc and ;
Therapeutic Antibodies Inc. lie is 5 8 7 deputy Chairman of the llorserace a e to Betting Levy Jkurd. Formerly Chairman j of Wellcome plc. l
- 2. Eelwert Newley DSc FEng FITS.- 3. Sir Noel Detles (63) " 4. Robin Jeffrey FEng (58) gw): Deputy Chanman Deputy CNurman Chief Executive - Appomted Non-Executive Deputy Appointed Deputy Chairman in 1995.
! Appointed Chief Executive in 1995. Chairman in 1995. Currently Chairman Chief Executive of British Energy's Chief Executive of Nuclear Electric ple of Powell Duffr>n plc, Non-Executive subsidiary Scottish Nuclear Limited ! l from 1992-1995. Chairman of Rotork Director of Ricardo and Chairman of since 1992 and also its Chairman since ! l plc, INBIS Group plc and Non. British Energy's subsidiary Nuclear 1995. Non-Executive Director of Executive Director of WS Atkins plc Electric Limited, lie was formerly Chief London Transport Limited and London and Tricorder Technohmy plc. Currently Executive of VSEL plc. Underground Limited. Vaiting Professor i President of the Institution of Electrical in Electrical Power Engineering at i
, Engineers. S. Peter Worry (47) t Strathdyde University.
I
, Executtve Director l 7
S. M6chool Kirwen (56) *t Appointed Executive Director in 1996. 7. John selleck (63) '" i Finance Director Previously Director of Norcros plc until Nonhecutive Director A Ppointed Finance Director in 1995. 1994. Executive Director, Commercial Appointed a Non-Executive Director A chartered accountant, he was of Nuclear Electric pic t1995-96) and in 1995. Currently a Non-Executive previously a management ccmsultancy appointed Chief Executive of British Director of Kingfisher ple and More j partner of Deloitte liaskins & Sells Energy's subsidiary Nuclear Ucetric Group plc. Also a Non-Executive
- before becoming Executive Director, Dmited in 1996. Also a Non-Executive Director of Nuclear Electric Limited Emance of Nuclear Electric plc in 1990. Director of PTS Group plc and an and previously on the Ikurd of the Industrial Professor at the University UK Atomic Energy Authority.
C. Sir Rehen Siggem (58) " of Warwick. NorvExecutive Director 10. Peter Steveneen (50) *"t s ! Appointed a Non Executive Director s. Juele Welsh (48) o NorvExecutive Director j in 1996. Chairman of the Independent NorvExecutive Director Appointed a Non-Executive Director Television Commission and Fairey Appointed Non-Executive Director in 1995. Chairman of Mackays Stores Group pk and a Non-Executive Director in 1996. Chairman of AVL lioldmgs (lioldmgs) PLC. Ah.o a Non-Executive , of British Aerospace plc, Redland plc Umited and Non-Executive Director Director of Scottish Nuclear Limited L and Foreign & Cohmial German of Southalls Umited and Davidp Hall since 1990. l . Investment Trust PLC. Umited. Formerly Chief Executde l of ADAS.
- . ae,mes me,*e, or ine Aust co,,mee 5
- aenoies meiveer at the nemone enon committee
- Genotes mtvnbe# of the Pensions Supefvisory Committee
+ Oenotes member at the Treasury Committee f
as memsk saway Annuas Report ena amoums 39s/97
% =
Corporate Governance For the year ended 31 March 1997 , i ne threctors omsider that during the year the Company Remuneration Committee comphed wuh all aspects of the Cadbury Oimmittee's Gide , of Best practice. A separate report from The Remuneration Committee appears on pages 24 to 27 The Board Treasury Committee De Board comprises John Robb (Non-Executive Chairman), l four Executive Directors and five Non-Executive Directors as l ne Treasury Committee is chaired by Dr Robert Hawley and set out on page 21. consists of certain Directors and senior managers of British Energy. It monitors performance and risk management The Non-Executive Directors. all of whom hold or have particularly in the areas of ciectricity trading, treasury and held senior positions in other major UK and Internarional insurance and advises the Board on such matters. L organisations, bring a wide range of experience to the Board ' and par 6cipate in decisions on key issues facing the Group. Internal Financial Control ~ The Board meets monthly and considers a number of matters specifically reserved to it, includmg appropriate strategic, The Directors are responsible for the maintenance of a system (mancial and organisational issues. In appropriate circumstances, of internal financial controls. The Board is respcmsible for all directors are entitled to obtain independent professional identifying key business risks, evaluating their 6nancial advice at the expense of the Company. A number of matters implications and estabhshing policies for managing those are delegated to Board Committees. Board membership of ri,ks. However any such system of controls can only provide these committees is identi6ed on page 21. reasonable and not absolute assurance against material mis-statement or kiss. Audit Committee . The Audit Committee has reviewed the effectiveness of The Audit Committee consists solely of Non-Executive the Group's system of internal 6nancial controls. The key Directors and is chaired by John Bullock. It reviews the procedures which are designed to provide effective internal adequacy and effectiveness of internal control and comphance Gnancial control are summarised as follows: procedures within British Energy and the principles, pohcies and practices adopted in the preparation of the British Energy - Organisational structure - British Energy has a well denned j accounts to con 6rta they comply with all statutory organisatirmal structure with clear hnes of accountabihty. ' requirements. The committee discusses with the external British fnergy has strict authorisation, approval and control ; auditors matters arising from their work and encourages and procedfres wnhin which senior management operate. Each ; monitors adoption of best practice in corporate governance. subsidiary has its own senior management team which is I resp <msible for internal 6nancial controls within that compar'y. Pensions Supervisory Committee The subsidiaries' management teams operate within an overall framework which is determined by the reard. The pensions Supervisory Onnnurice is chaired by peter Stevenum and consists of certain Directors and senior managers -Investment approval - the approval of capital and revenue , of British Energy. It monitors the management of the pension schemes above certam hmits is reserved to the Board. Other ,> schemes of Nwlear Electric and Scottish Nuclear and the investment decisions are delegated for approvalin accordance policies bemg adopted by the trustees of these schemes and with authority hmits. Comprehensive appraisal and monitoring advacs the Boatd on all matters relating to those schemes. procedures are apphed to all major investment decisions. s e i
'4 q l
as Denkh tans > annuai a:pcet and accounts 1996/97 .i l 1 i 4 1
- Itusuwss pl.nmmg - lintnh l'ncrgy undertakes a 1(cport liy the Auslitors to )
unnprrhrnsive busmess pl.uuung and budgeting pensess cash liritish l'.netp,y ple ott Corporate Gmernance Maisets l year to establish plans and targets against wluch performance l is monitored on an ongoing basis. Key business risks are in eddition to our audit of the Gnancial statements, we have ! identi6ed dunng the business planning process and are reviewed the Directors' statements on pages 22 and 23 reviewed regularly during the year. The Board receives concerning the Company's comphance with the paragraphs monthly reports and management accounts and reviews the of the Cadbury Code of Best Practice specified for our review overall Group performance against budget and the latest by he London Stock Exchange and their adornon of the forecasts for the current year. Subsidiary company going concern basis in preparing the Snancial statements. management teams meet regularly to monitor performance. The objective of our review is to draw attention to non-compliance with Listing Rules 12.43(il and 12.43(v).
- Internal comphance - Bntish Energy monitors compliance with its internal Snancial controls through management We carried out our review in accordance with guidance issued reviews and self<crnfication reports from the chief executive by the Auditing Practices Board. nat guidance does not and finance director of each of the key subsidiaries. In require us to perform the additional work necessary to, and we addition, the Group's internal audit department reviews the do not, express any opinion on the effectiveness of either the performance of the internal Gnancial control systems and Company's system of internal 6nancial control or its corporate computer operations and reports regularly to the Audit governance procedures nor on the ability of the Company and Committee. De internal audit work is focused on the areas Group to continue in operational existence.
of highest risk. Opinion Going Concern With respect to the Directors' statements on internal 6nancial The Directors con 6rm that they have a reasonable expectat on control on pages 22 and 23 and going concern on page 23, that the Company and Group have adequate resources to in our opinion the Directors have provided the disclosures continue in operational existence for the foreseeable future. required by the Listing Rules referred to above and such The Directors accordingly continue to adopt the going concern statements are no: inconsistent with the information of which basis in preparing the Company's Consolidated Accounts. we are aware from our audit work on the financial statements. Based on enquiry of certam directors and officers of the company)pnd exam; nation of relevant documents,in our opinion the Directors' statement on page 22 appropriately reflects the Company's compliance with the other aspects of the Code specified for our review by Listing Rule 12.43(j). John Cobb Cluirman w \L hg MyQgg 3 June 1997 l Binder Hamlyn Price Waterhouse Chartered Accountants Chartered Accountants 3 June 1997 s 4 . t
24 teninh Energy crwraat Reprt arts Accourcs 19E3/97 Remuneration Committee Report For the year ended 31 March 1997 .
%e Directors consider that during the year the Company has returns for shareholders. It targets total remuneranon at the .
somphed fully wnh the best practice provisions contained middle market level of its comparator companies. within the Greenbury code and as set out in Section A of the Annex to The London Stock Exchange Listing Rules. It is the pohcy of the Remuneration Committee that: Remuneration Committec - a s gni6 cant proportion of Executive Directors' remuneration should be variable and hnked to performance The Retnuneration Committee is concerned primarily with cn vetnent n basic pay of directors and senior managers the pay and conditi<ms of E.xecutive Directors, but retams an wd. l be broadly m line with pay increases offered to other staff interest in the pay and bene 6ts of other senior staff, to ensure
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senior posts within British Energy. sustained pro 6 growth, and on forg ng strong links between g Terms of reference for the Committee empower it to . recommend the appointment of Executive Directors; establish #*'"I" # *""#'# I *" the remuneration pohcies and practices for Executive Directors in the lead up to privatisation, the Remuneration Committee and certain other directors and senior employees; design and implement long term incentive schemes; determine the da . d h was d s e eh individual remuneration packages of the Executive Directors it was a me by external consdtants who were comrnissioned and other selected senior cmployees, including pension to estabhsh external market levels of remuneration using provision; and authorise the annual performance incentive 'IE' E' " # * ""I'"T*"'" plan targets for Executive Directors. It may obtain external professional advice and expertise necessary for the A process for review has been established, utilising both performance of its duties. dh Winaris-WWd b mal @sid drm a a Ab@ Mis as The Committee is chaired by John Robb. Its other members, a wide range of organisations both inside and outside the identi6ed on page 21, are all Non-Executive Directors. utihties sector. John Kennedy, director, human resources acts as Secretary The following paragraphs detail the current remuneration to the Comminee. structure for Executive Directors. Executive Remuneration Policy . (a) Bas) Salary In establishing its pohey, the Remuneration Commatee gives full consideration to the best practice provisions set out S WW b d de in % % in Section B of the Annex to The london Stock Exchange into account the recommendations of the external advisers. The Committee aims to maintain individual executive salaries
"'""E N "I at close to market median.
In setting the remuneration package for individual dacciors, Levels are reviewed annually .m April and take into account ',. the Committee aims to ensure that the total package, inc'uding .. . benc6ts, is competitive with companin of a similar size, activity ""I '"8"'"* "*'"E" " ' ' ' ' * * ** ' " ' ' and complexity and that as a consequence the Company will r mamtam verall competitiveness in the marketplace, attract and retain Executive Directors with the skills and experience both to develop the business and to maximhc 8 og 9 4
as edue ca.nty i.nnuai nw wid accomes sum l I === = .. l l t (b) Annual Performance incentive Plan its shareholders. As a consequence, it plans to introduce two Sharc Option 5 themes in 1997:(il an Approved Share ; The performance-related elements of the remuneration package Option Scheme;(ii) an Unapproved Sharc Option Scheme, j are designed to provide objective measures of corporate and to which invitations will be extended to senior employees. individual success. Individual payments need toIc imth j reahstic and justdiable. To satisfy these aims under current The rules of the schemes conform to the details given in < conditions, the Comnuttee has focused on a single annual the Prospectus and comply with the undertaking that the incentive plan with common measures for each director. Company would delay the introduction of schemes until 12 months have elapsed since Admission. Both schemes
)
In the plan, payments are determined by performance against will require the satisfactory achievement of challenging . a range of challenging targets underpinned by the safety and performance criteria prior to exercise. The Committee environmental priorities necessitated by the nature of the will determine the allocation to each Executive Director. Company's principal activity. Except for the all employee Sharesave Scheme, detailed in i i) Executive Directors can be awarded cash payments of up to the Prospectus, the Company has not operated any long term 40% of basic salary, depending on achievement against pre-set incentive arrangements during the year. l financial and safety measures. In 1996/97, cash flow, earnings l and specific safety targets provided the main components of a (c) Retirement Benefits multi-factor scheme. Dr Jeffrey is the only Executive Director to participate in one l ii) the Committee has the discretion to make crth awards of the Company's Pension Schemes. fie is a member of the of up to a further 10% of salary, subject to performance Scottish Nuclear Pension Scheme which has a normal against a range of personal factors. retirement age of 63; provides benefits of wth of final pensionable salary for each year of pensionable service; in 1996/97, the payments under the plan amounted to between requires contributions of 5% of pensionable salary from 43% and 46% of salary for each of the Executive Directors. its members; provides a capital sum of 4 times pensionable incentive payments are not pensionable. salary on death in service, together with a spouse's pension
. of %2sth of pensionable salary for each year of service, (c) Other Cash Bonuses including prospective service; provides a spouse's pension of 50% of the member's pre commutation pension for death in The privatisation process for British Energy imposed retiremeg and provides pension increments in hne with RPl.
considerable pressures on a number of employees for much of 'Ihe Company may restrict such increases to 10% Past 1996. In recognition of the contribution made by the Directors practice has been to pay increases in line with Rpl. to the success of the process whilst ensuring maintenance cf ongoing operations, the Committee confirmed special one-off The following sets out the relevant figures for Dr Jeffrey: bonuses of 15% of salary to Dr l{awley, Dr Jeffrey and Mr Kirwan. Payments were made in the Autumn of 1996 and are Age at 31 March 1997: 58 not pensionabt Years of service at 31 March 1997: 22, includmg service (d) Share Option Schemes credits from a previous transfer into the scheme Additional Pension earned during the year L14,715 ! The Commatee regards share options as an important Accrued entitlement at 31 March 1997 454.560 (f39,845 means of abgning the interests of employees with those of at 31 March 1996)
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1 M Settleh Energy Artnual Recrt aal Accosts 1996/e7 I 1 l l 1 Remuneration Committee Report continued ' i Dr llawley, Mr Kirwan and Mr Warry are not members of Service Contracts , any of the Gimpany Pensiim Schemes. However, they received l annual allowarnes in 1996/97 towards their own pensi<m and in accordance with arrangements made prior to privatisation. hfe assurance arrangements as follows: l Executive Directors were given 6xed two year contracts, i reducing over time to contracts for a rollmg 12 months. c=re.y 14. Pseuan Aenerence con =n=non conukuon. Non. Executive Directors i i The remuneration of Non-F.xecutive Directors is determined by , Dr Hawley 28,770 3,016 the Board, without the participation of the directors concerned. l Mr Kirwan 22,912 2,033 They do not have service contracts, are not chgible for a Mr Warry 8,201 726 grnsion ihmugh any of the Company schemes and do not participate in any incentive or share schemes. Remuneration (i) Dr Hawley and Mr Warry participate in a personal pension levels are detailed in full on page 27. ! plan into whi'.h the Company makes the maximum Inland Revenue age related contributions. The amounts shown for Mr Warry are for ihr part of the year from his date of appointment to the British Energy Board (7 November 1996). The Company has recently agreed to provide a guaranteed level of pension for Dr Hawley equivalent to a ynsion I based on an accrual of Wth for each year of service with British Energy plc. Provision of this pension will be unfunded and will be included as a provision in the 1997/98 Balance Sheet. This pension guarantee will be inclusive of the benefit accrued within his personal pension plan. (ii) the contribution for Mr Kirwan is as a taxable supplement to salary,
- (6 Other Benefits ),
Other bene 6ts are available to Executive Directors. These differ by individual and will comprise a selection from the following:
- a Company car and fuel - medical, PHI and dental insurance - reimbursement of telephone rentals an.d a mobile telephone , .- - subscriptions to professional bodies ' - cligibihty for the Company Sharesave Scheme.
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! 27 Saltish Energy Annual Report enti Accoqu2819Qi97 I w ~ a l l Directors' Itemuneration and Intercits (i) Individual Remuneration The remuneration of Directors was as follows: Accewnmodatumt Total Emulanwnts Pennon
$slacy and tres Ekmus Relmatum Other Benefits escludmg Pensam Contributens leer ended 31 March 1997 1996 1997 1996 199' 1996 1997 1996 199' 1996 1995 1996 j Robp' 100,000 30.769 - - - - - - 100,000 30,769 - -
Dr R Hawlev 207.000 190,483 122,730 47,793 31,914 - 22,522 19,964 384.166 258.242 28,770 25,626 kr Noell)svars' 91.000 43,359 - - - - 6,469 1,193 101,469 44,546 - -
. Dr R Jeferey 147,212 111,360 87,082 44,600 - - 6,606 4,281 240,900 160,241 21,354 18,819 M bruan 162,491 110,303 97,968 37,711 10.686 - 15,606 18,323 286,7$5 206.339 22,912 21,193 P Uarry 66,248 - 30.401 - - - 3,211 - 99,904 -
8.201 - br Robin thr, gam
- 20,000 - - - - - - - 20,000 - - -
J Bullak* 30,000 18,732 - - - - - - 30,000 18,732 - - P $tevenum' 30,000 10,9 4 - - - - - - 30,000 10,9 4 - - Ib j Walsh' 20,000 - - - - - - - 20,000 - - - TtWal knWlumenel 8?7,95% 551.972 318.181 830,104 42,600 - $4.458 43,763 1,311.194 729.839 81,417 65,638 i in Mr Warry was appointed to the Board wah effste from 7 Newember 1996 and the emolumeurs and henrnes shown are cakulated from that date. th) 'Demmes Nim E secutwe threchw. l 1 (ii) Shares The beneficialinterests of Directors in Ordmary Shares of the Company together with options to subwribe for Ordinary Shares as et 31 March 1997 are as follows: Ordmary $haresare
+ Name % hares Optums
[ J Row 20,000 - Dr R Hawiry 43,094 141,'8 1 br Nial Darws* 420 - Dr R Jeffrey 5.476 6.093 M broen 20,155 6,093 P Terry 1,460 6.091 kr Rohn ikggam* 10,000 . j Bullock
- 10,000 -
j i P %crenson* 3,930 - I th j Uchh' -
- D) Dr Hawiry) $haresave opewes are excrusable wahm ses months of i $ july 2001 at an escrow price of 11.60 per share. All the Sharesare opimns bekt by the swher Dm1.ws are escrusable wetbn ses raumths of 15 July 1999 at an encruse price of 11.60 per share.
04 'Denoses Noel snutwe thrector. 1 l l I t
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l 38 88Misti Engy Onnual R'gart and Acopunts 1996/97 l- . t L Directors' Report For the year ended 31 March 1997 m
. i i
Fmancial statements Substantial shareholdings . The Directorn present their annual report and the audited The following have noti 6cd the Company of an interest in 3% Group 6nancial statemenn for the year ended 31 March 1997. or more of the ordinary share capital: i , In addition pro forma information has been prepared on the ' g, basia set out in note 1 on page 34. m,,,, sw, w,,,, wy l Principal activities and review of the business Tempkton Investment Management 1 acting on behalf of i- The Group's principal activity is the generation and sale of Franklin Resources Inc. 77,720,800 11.1 electricity. The Chief Executive's Review and the Financial . SBC Brinson Holdings Inc. 24,416,000 3.5 Review on pages 6 to 19 summarise the Group's business '
. prformance during the Gnancial year and its outlook. The Group publishes separate Health & Safety and Environment Research and development l Reports each year which are available from the Company
) Secretary. The Group invested (20m in research and development. This is primarily continuing scientinc and engineering Privatisation research activity which is directed towards securing further ' improvements in the reliability, performance and safety of its ; i ~ On 21 June 1996 the Company increated its authorised share generating business. t l . capital to 1875m by the creation of 875 million ordinary chares of 11 each. 700 million of these ordinary shares were Directors j allotted to the Secretary of State for Trade and Industry in part satisfaction of the repayment ofit,745m of non-interest Information required under the provisions of the Companies bearing debt to the Secretary of State. Acts regarding the remuneration and share options of Directors, the interests of the Directors and their families in the On 15 July 1996 the interim rights in the Company's ordinary share capital of the Company stid Directors' service contracts shares were admitted to the Official List of The landon Stock is detailed in the Remuneration Committee Report on pages 24 . Exchange. to 27. j.- . Results and Dividends Policy tp payment of creditors i The consohdated results for the Group are set out in the The Company supports the Prompt payers' Code of the , Group Pro 6 and less Account on page 31. The Dircctors are Confederation of British Industry. The Company's policy is recommending a nnal dividend of 9.1p payable on 28 July 1997 to settle the terms of payment with suppliers when agreeing . to shareholders on the register on 20 June 1997, making a the terms of each transaction, to ensure that suppliers are total dividend for the year of 13.7p per ordinary share. made aware of these terms and to abide by the agreed terms. The Company has no trade creditors at 31 March 1997. s, Post Italance Sheet Event At 31 March 1997 the Group had f36m of trade creditors 4 which equates to 21 days value of supplier purchases for the On 3 June 1997 the Group concluded new and revised Gnancial year. The suppher purchases exclude payments to the contracts with BNFl. for the supply of fuel services. Further Group's principal supplier which are made against an agreed
- details are included in note 35 on page 54. long-term contract pro 6tc.
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29 Benteli Enugy Anwel Report and Accounts 1996/97
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l 1 l Charitable and political omtributium in preparing the financial statements, the Directors are , required to: . I The Group made charitable donations of 4220,000. - select suitable accounting policies and then apply them i No pohtical donations were made. , Employees - make judgements and estimates that are reasonable and prudent; The Group is 6rmly committed to a policy of communication - state whether applicable accounting standards have been and consultation with staff at alllevels. Information is regularly followed, subject to any material departures disclosed and provided to all employees through bric6ngs, a staff newspaper, explam.ed in the Gnancial statements; and conferences and formal consultation procedures.
- prepare the Gnancial statements on the going concern basis The Group's pohey is to promote training and career unless it is inappropriate to presume that the Group will development for all employees and to give full and fair continue in business.
consideration to any suitable person, including disabled persons, for all vacancies and opportunities. The Group The Directors are responsible for maintaining proper operates an equal opportunities policy. accounting records which disclose with reasonable accuracy at any time the Gnancial position of the Group and to enable Auditors them to ensure that the Gnancial statements comply with the Companies Act 1985. They are also responsible for l A resolution proposing that Binder Hamlyn and price safeguarding the assets of the Group and hence for taking Waterhouse be re-appointed as auditors of the Company will reasonable steps for the prevention and detection of fraud and be put to the Annual General Meeting. other irregularities. ; i Annual General Meeting This report was approved by the Bosrd of Directors on 3 June 1997 and signed on its behalf by: The Annual General Meeting will be held at 11 am on Friday ) 1 18 July 1997 at the Edmburgh international Conference Centre. Notice of the business to be considered at the meeting accompanies this Annual Report. j Statement of Directors' responsibilities Company law requires the Directors to prepare Gnancial %. statements for each Snancial period which give a true and fair i view of the state of affairs of the Group and the Company, and !~ of the results of the Group, for that period. A statement on Corporate Governance matters is set out in a separate re}~.. Robert Armour on pages 22 to 23, Company Secretary 1 1 N
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30 edtleti Energy Annual R2 rat and Accounts 1996/97 I l Report by t1e Auditors to ths members of British Energy plc l l l We have andned the finan6ial statements on pages 31 to 54 We planned and performed our audit so as to obtain all the . w hich have lwen prepared under the historical cost convention information and explanations which we considerrd necessary and or. the basis of the accounting pohcies set out on pages 34 in order to provide us with suf6cient evidence to give to 37. We have also examined the information speci6ed for our reasonable assurance that the fir'ancial statements are free review by The London Stock Exchange which is included in from material mis-statement, whether caused by fraud or other the report to shareholders by the Remuneration Committee on irregularity or error, in forming our opinion we also evaluated pages 24 to 27, the overall adequacy of the presentation of information in the 6nancial staternents. llespective responsibilities of Directors and auditors Opinion As desenhed on page 29, the Company's Directors are responsible for the preparation of Gnancial statements. It is our In our opinion the financial statements give a true and fair responsibihty to form an independent opinion, based on our view of the state of affairs of the Company and of the Group sudit, on those statements and to report our opinion to you. as at 31 March 1997 and of the profit and cash flows of the Group for the year then ended and have ban properly Basis of opinion prepared in accordance with the Compani"., Act 1985. We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audir includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and kW \ h bCC MNh5C- l I judgements made by the Directors in the preparation of the 81nder Hamlyn Price Waterhouse financial statements, and of whether the accounting pohcies Chartered Accountants Chartered Accountants are appropriate to the circumstances of the Company and of and Registered Auditors and Registered Auditors the Group, consistently apphed and adequately disclosed. 3 June 1997 I l' 1 4 , 9 l l t j , I , n
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1mm -. 31 ra, %. a.- j l i'
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l Group Profit and Loss Account - for the year ended 31 March 1997 f 1 s._ I Pro forme l 1997 1996 1997 1996 , Na4es Em im $m im I , Turnover excluding nuclear premium a 1,670 1,654 1,670 1,654 I Nuclest premium 4 - - 26 899 f' ! Total turnover: continuing activities 1,870 1,654 1,896 2,553
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! Operating costs before exceptional items s (1,563) (1,524) (1,563) (1.524) .i Exceptional ttoms s - - - (1,9%) ! Operating costs after exceptumal items s (1,563) (1,524) (1,563) (3,520) ' j Operstlng profit /(loss): continuing activities 307 130 333 (967) ! r Financtng (charges)/ credits ! ! - rzvatorisation a (196) (214) (196) (228) ! j - net interest (payable)/ receivable s (50) (71) (50) 21 !
- exceptional items a - - 445 1,304 )
l Profit /(lose) on ordinary activities before taxation 61 (155) 532 130 i l T xation: [
- on profit /(loss) on ordinary activities e (25) -
(35) - {
- exceptional items 9 - - -
(100) . l Profit /(loos) for the financial year 36 (155) 497 30 ! Dividends 11 (96) - (96) - l Retained (loss)/ profit for the year 27 (60) (155) 401 30 ; i ? l Dividend per share (p) 11 13.7 - 13,7 - I-Ecrnings/(loss) per share (p) 12 5.1 (22.1) 71.0 4.3 1 The G oup had no recognised gains or losses other than the profits for the years. The basis of preparation of the pro forma information included in the financial statements is set out in note 1. The pro forma profit End loss figures exclude the nuclear premium and exceptional items and reflect the capital structure following privitisation ( (Es if it Sad been in existence throughout the year). l. l The notes on pages 34 to 54 form part of these financial statements. I a l l e J n f
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s3 andah Gmeesy Annust R: port and Accounts 1996/97 Balance Shects cs at 31 March 1997 i
?*
x,a Group company Pro forme 1st? 1996 1996 1997 199S Notes im im im &m im
- Flued aseets Tary,,6ble assets 13 5,158 5,348 5.348 1 -
investments 14 . 10 9
^
9 5,188 5.348 5,348 15 9 Current assets Segregated decommissioning fund 16 254 226 - - - Stocks to 815 762 762 - - Debtors 17 221 186 186 1,855 1,901 Investments- term deposits 239 - - 219 - Cash at bank and in hand 192 17 243 192 - 1,501 1,191 1,191 2,066 1,901 Creditors: amounts falling due within one year - borrowings as (108) (256) (1,833) (1,745) (108) - others 20 (884) (576) (576) (105) (15) (792) (832) (2,409) (213) (1,760) Not current aseste/(Itatdlities) 709 359 (1,218) 1,853 141 Total amoets less corrent liabilities 5.877 5,707 4,130 1,863 150 Creditors amounts falling due after more than one year - borrowings is (565) (440) (8) (565) - - others 20 (2,063) (2,046) (2,046) - - Prevlolons for liabilities and chargas 21 (1,751) (1,679) (1,679) - - Not aseets 1,498 1,542 397 1,298 150 Capital and reserves Cilled up share capital 2e 700 700 - 700 - Profit and loss account 27 798 842 397 598 150 Equity Shareholders' funds 2s 1,498 1,542 397 1,298 150 The financist statements on pages 31 to $4 were approved by the Board of Directors on 3 June 1997 and signed on its behalf by: 1
)s
) b %. M ( John Robb Mike Kirwan Ch:Arman Finance Director The notes on pages 34 to 54 form part of these financial statements. 9, g
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38 aceh seway AnnuW Report WW Accowds 1996/$7 Group Cash Flow Statement for the year ended 31 March 1997 t 1997 1996 footes Em Em
., Not cash inflow from operating activities (encluding nuclear premium) 29 579 Nuctar premtum income 33 26 899 Movement in nuclear premium debtor 13 301 Not cash inflow from operating activttles 618 1,233 Interest paII (62) (20)
Int rest received 19 12 Returns on investmente and servir:Ing of finance (43) (8) Payments to acquire tangible fixed ascets
- Construction of Sizewell B -
- Other (83)
(110) (141) Recolpts from sales of tangible fixed assets 4 - Investments acquired by t.ochside insurance i (10) - J Capital expenditure and financialinvestment (116) (224) Equity dividende paid (32) - Increase in term deposits (219) - I Management of liquid resources so (219) - RIpayment of amounts borrowed (256) (98) New medium term loan 225 - Tran1fers of cash to the magnon business of Magnox Electric - (665) Scottish Nuclear magnou nuclear liabilities discharged - (59) Financing so (31) -(822) inttiIl endowment of segregated decommissioning fund (228) - (Decrease)/ increase in cash 30 (51) 179 Cash allocated to segregated decommissioning fund in the pro forma balance sheet at 31 March 1990 226 - Incriate in cash from the pro forma balance sheet at 31 March 1996 30 175 179 The notes on pages 34 to 54 form part of these financial statements.
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9
. _, s4 adleh smorgy AnnuW Rer. ort and kx:ounts 1990M-
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i i Notes to the Financial Statements k
- for the year ended 31 March 1997 L
6 i l a- w, ' 1 ^ 1 M
- 1. PRO FORMA INFORMAfl0N British Energy's ordinary shares were admitted to the Official Ust of The London Stock Exchange on 15 July 1996 fo%owin I
HM Govemment's public offering. As a result of changes to the Group's capital structure on flotation and other changes related i ,,
- to privatisat6on (including the ending of the nuclear premium) the results for the year ended 31 March 1997 are ret directly comparable with the results to 31 March 1996. To assist shareholders to compare the underlying financial performance of the Group, pro forma profit and loss account figures have been prepared which illustrate the offect that the exclusion of the nuclear j przmium and exceptional items, and the capital structure on privatisation would have had if they had been etfective from ;
. 1 April 1995. , l A pro forma consohdated balance sheet as at 31 March 1996 has also been prepared to reflect the capital structure on privatisation by adjusting for the following: . j a ' 1 (t) cssh at bank and in hand of 1226m has been allocated to the segregated decommissioning fund representing the etfect of ) endowing the segregated decommissioning fund which was set up on flotation; j- (b) unsecured loans of1700m have been capitalised and are included as share capital; ! j I ' (c) the profit and loss account has been incrcased by 1445m and unsecured loans have been reduced by 1445m, reflecting the net effeet of the debt reorganisation on reserves. + 1 j The pro forma figures do not form part of the statutory accounts, e The notes below apply to both the actual and pro forma results, except where otherwise indicated. j- 2. ACCOUNilNG POLICIES j (i) Basis of accounting l I { ' The financial statements are prepared under the historical cost convention and in accordance with applicable accounting standards. The income recognised by the Group in respect of the long term rate of retum of the segregated decommissioning fund is unrealised and its recognition is a departure from one of the accounting principles set out in Schedule 4 of the { Companies Act 1985. An explanation of this departure is given in note 2 (xvi) below. j (ii) Seels of consolidation ! British Energy plc acquired the entire share capital of Nuclear Electric Umsted and Scottish Nuclear Limited on 31 March 1996, j The combination of Nuclear Electric and Scottish Nuclear was accounted for as a merger, i k The Group financial statements consohdate the financial statements of British Energy and allits subsidiary undertakings. Intiri:ompany profits and transactions are eliminated on consohdation, , (lit) Turnover
- Tumover represents amounts receivable for sales of electricity including net income arising from Contracts for Differences, j' revenue from direct sales contracts and sales of other related goods and services, net of value added tax. The Directors
{ consider there to be one class of business and one geographical market, tfht of the UK. 4 3 (iv) Fuel costs - front end
- Advanced See Cooled Reactors (*AGR*)
Front end fuel costs consist of the costs of procurement of uranium, conversion and enrichment services and fuel element l fabric tion. Fabrication costs comprise fixed and variable elements. The fixed element is charged to the profit and loss account
. Es incurred and the variable element, other than for unburnt fuel at shutdown, is charged to the profit and loss account in
. proportion to the amount of fuel bumt. . .
~
Proesurteed Water Reactor (*PWR")
/Ji front end fuel costs are variable and other than for unbumt fuel at shutdown are charged to the profit and loss account in proportion to the amount of fuel bumt.
1 I l
. l m,
6
- __ _ m _ _. ._. . . _ _ _ _ _ _.._ __ _ _-_. . __
! soam m ,a.m.a - .,m - onem Notes to the Financial Statements for the year ended 31 March 1997 e 1 i
- 2. ACCOUNTING PouCIES continued I (v) Fuel costs - back end -
( AIR l l j Spent fuel extracted from the reactors is sent for reprocessing and/or long term storage and eventual disposal of resulting waste l products. Back end fuel costs comprise the estimated cost of this process at current prices discounted back to current value in l j respect of both the amount of irradiated fuel bumt during the year and an appropriate proportion of unburnt fuel which will remain in the reactors at the end of their lives. All back end fuel costs, other than for unbumt fuel at shutdown, are charged to l the profit and loss account in proportion to the amount of fuel bumt.- l PWR I Bacli end fuel costs are based on wet storage in station ponds followed by dry storage and subsequent direct disposal of fuel. ] Back end fuel costs comprise the estimated cost of this process at current prices discounted back to current value. All back ! end fuel costs, other than for unbumt fuel at shutdown, are charged to the profit and loss account in proportion to the amount f of fuel burnt. (v0 Unbumt fuel at shutdown Due to the nature of the fuet process there will be some unbumt fuel in the reactors at station closure. The front end and back end costs of this fuel are provided for over the estimated usefullife of each station on a straight line basis. l (vii) Rateerch and development f Research and development expenditure is charged to the profit and loss account as incurred. l lviii) P;nsions costs . Contributions to the Group's defined benefit pension schemes are assessed by quellfied actuaries and are charged to the profit , and loss account so as to spread the cost of pensions over employees' working lives with the Group. The capital cost of ex gratia [ and supplementary pensions is charged to the profit and loss account, to the extent that the arrangements are not covered by : tha surplus in schemes, in the accounting period in which they are granted. Differerses between the amounts funded and the j gmounts charged to the profit and loss account are included in the balance sheet. I j (la) Fctrian currencies Transactions in foreign currencies are recorded at the rate of exchange at the date of the transactJon or,if hedged forward. ! Et the rate of exchange under the related forward currency contract. Assets and liabilities denominated in foreign currencies t tre trsnslated into sterling at the rate of exchange ruling at the date of the balance sheet. All differences are taken to the profit , end loss account.
- i (a) Tangible fixed assets and depreciatlon, including decommissioning costs ;
Fixed Essets comprise assets acquired or constructed by the Group. Expenditure incurred to improve operational performance or l P to improve safety in order to meet increased regulatory standards is also capitalised. Other expenditure, including that incurred on I ! preliminary studies and on the initiation of new technologies not yet adopted, is charged to the profit and loss account as incurred. [ Fixed assets (other than assets in the course of construction) are stated in tje balance sheet at cost less accumulated ! depreciation. Accumulated depreciation includes additional charges made where necessary to reduce net book value to , economic value. Economic value is based on the discounted estimated future cash flows of each power station. Assets in the , course of construction are stated at cost and not depreciated until brought into commission. The charge for depreciation of fixed assets is based on the straight line method so as to write off the costs of assets, after takirq into account exceptional provisions for diminution in value, over the estimated useful Ilves. Depreciation starts frorn the i year following the year of expenditure except for power stations which are depreciated from the date of commissioning. t The Esset lives adopted are subject to regular review and are currently l AGR power stations 25 - 30 years j PWR power station 40 years Other buildings 40 years 5 years ! 1 Other essets i i . , . = g h s , i l l l :
~, ,
se erlHan Energy Armual rieport and Accounts 1996,97 l
- . 1 Notes to the Financial Statements for the year ended 31 March 1997
,~
2.1CCoONTING PouCEs continued The estimated cosis for decommissioning the Group's power stations are provided for when stations begin operating ! commercially, are capitalised as part of the cost of construction and are depreciated over the same lives as the stations. I J Thise estimated costs are discounted having regard to the timescale whereby work will take place over many years after station closure. The estimated costs include the demohtion and site clearance of the stations' radioactive facilities and the management of waste. * (at)l'ined asset investments investments 6n subsidianes are stated at the nominal value of shares allotted. Fixed asset investments are stated at cost less I provisions for diminution in value. (nii) Leases Assets held under finance leases, wh6ch result in substantially all the nsks and rewards of ownership being transferred to the Group, are capitalised and included in tangible fixed assets. The amount capitaksed is the present value of the minimum lease p?yments. Each asset is depreciated over the shorter of the lease term or its useful hfe. ] The obligations relating to finance leases net of financing charges in respect of future periods are included within creditors (due l within or after one year). The interest element of the rental oblfgation is allocated to accounting periods during the lease term to r:flect a constant rate of interest on the remaining balance of the obhgation for each accounting penod.
)
( All other leases are treated as operating leases and the rentals are charged to the profit and loss account. (xiii) Stocks of nuclear fuel, stores and spares ' Stccks of nuclear fuel, stores and spares are valued at the lower of cost and net realisable value. The nuclear fuel stock is reduced by the provision for unburnt fuel at shutdown relating to front end fuel costs (note 2 (vi)). (utv) Deferred taxation DefIrred taxation anses in respect of items where there is a timing difference between their treatment for accounting purposes and their treatment for taxation purposes. Provision for deferred taxat60n, using the liability method, is made to the extent that it is probable that the liabihty or aiset will crystalhse in the foreseeable future. (av) Nuclear liabilities in matching the costs of generating electricity against the income from sales, accruals are made in respect of the following: (a) fuelcosts - back end 1 The treatment of back end fuel costs in the profit and loss account has been dealt with in (v) and (vi) above. These accruals cover reprocessing and storage of spent nuclear fuel and the long term storage, treatment and eventual disposal of nuclear wiste. They are based, as appropriate, on contractual arrangements or the latest technical assessments of the processes i End methods likely to be used to deal with these obhgations ander the current regulatory regime. Where accruals are based on contractual arrangements they are included within creditors. Other accruals are based on long term cost forecasts which Ere reviewed regularly and adjusted where necessary, and are included with provisions. (b) decommtssioning of nuclear power stations The financial statements include provision for the full cost of decommissioning the Group's nuclear power stations. Provision is made on the basis of the latest technical assessments of the processes and methods likely to be used for decommissioning under the current regulatory regime. The technical assessments are rev6ewed regularly and the estimates of decommissioning costs are updated accordingly. The provision estabhshed at the commencement of a power station's operating hfe is capitalised as part of the costs of y the station. 1 1i., 1
- l
. e. I
37 Dettish Energy Annual himrt end Accounts 1996/97 I l
- - 4 Notes to the Financial Statements for the year ended 31 March 1997 IV
- 2. s.CCoVNTING POLICIES continued Accrulls and provisions for back end fuel costs and decommissloning are stated in the balance sheet at current pnce levels, I discounted at a long term real rate of interest of 3 per cent per annum to take account of the timing of payments. Each year the
! firencirg charges in the profit and loss account include the revalortsation of liabilities required to discharge one year's discount from provisions made in prior years and restate these provisions to current pnce levels. inva) Scgregated decommissioning fund l The Group makes contributions into an independently administered fund to cover all costs of decommissioning nuclear power strtions, excert de-fu?lling costs. The Group's annual contributions to the fund are assessed by qualified actuanes, taking into I account the amount and timing of expected decommissioning costs and the periods until station closures. The value of the asset in the balance sheet represents the contnbutions made by the Group, together with an estimated actuanally determined long. ttrm rzte of return on the fund. The change in value arising from applying the estimated long term rate of return is taken to the profit End toss account and dtsclosed as part of revalorisation. The rev lonsation ohe segregated decommissioning fund, which has been taken through the profit and loss account, is not a ratirsed profit for the purposes of the Companies Act 1985 because the income is unrealised until the Group receives the
<$litId ctsh from the fund to reimburse decommissioning expenditure. The inclusion of this profit in the profit and loss account is a departure from the requirements of the Companies Act 1985. Revalonsation of the accrued decommissioning provision is chirged to the profit and loss account each year and accordingly, in the opinion of the Directors, it is necessary to include the j estimited annual long-term rate of return of the fund in the Group's profit and loss account in order for the financial statements to give a true and fair view.
( f The effect of the departure is to increase the reported profit for the year and net assets by 110m (1996:Init). l (xvn) TIrm deposits l Cash which is placed on term deposits which mature more than one day after the end of the financial year is classified under l Current asset investments in the balance sheet and the movement in term deposits is disclosed under management of hauid resources in the cash flow statement. (nvui) Fin +ncial Instruments and derivatives i i FinIncist instruments and derivatives are used to hedge interest rate, foreign exchange and trading risks. Profits and losses on finInciti instruments and derivatives are reported in the profit and loss account in the period to which they relate, I
- 3. TU NOVER EXCLUDING NUCLEAR PREMlUM
{ 1997 1996 I 7wh TWh
]
r Output
- Engtznd and Wales 49.5 43.6 1 - Scotirnd 17,7 17.6
[ 67.2 61.2 l sm Lm !
-em,m j Electricity generation l
! - England and Wales 1,248 1,097 i
- Scotland 458 476 1,706 1,573
( Direct supply sales 147 75 i Miscellaneous income 17 6 1,870 1.654 i i l 9
= anu.s a,u o m - w .199 w Notes to the Financial Statements for the year ended 31 March 1997 g ..
- 3. TURNOVER ENCLUDING NUCLEAR PREMfUM continued Electrictty generation represents the sale of electricity generated through the Pool for Nuclear Electric and to Scottish Power plc and Scottish Hydro Electric plc for Scottish Nuclear. The amounts reflect sums payable or receivable under Contracts for Differences.
Direct supply sales represent the income generated from sales contracts with industrial and commercia. 7%omers.
- 4. NUCLEAR PREMtUM The Group ceased to be el6gible for a premium for nuclear power generation in England and Wales with effect from 1 April 1996.
A similar premium which was receivable by the Group in Scotland ceased with effect from the admission of British Energy Ordinary Shares to the Of fetal List of The London Stock Exchange on 15 July 1996.
- 5. OPERATING COSTS 1997 1996 sm tm Operating costs before exceptional items:
Fuel - front end 249 252 - back end 196 165 Miterials and services 444 484 Stiff costs (note 6) 230 217 Depreciation 296 330 1.415 1,448 Electricity purchases for direct supply sales 146 76 1.563 1,524 Exctptional items: M:ttrials and services - 18 Staff costs (note 6) - (8) Depreciation - asset write downs - 1.986 1.996 Operating costs after exceptional items 1,563 3.520 Operating costs are stated after charging: Res3 arch and development 20 22 L'ooo l'ooo Auditors' remureration J. - stItutory audit (Company; f.86,000) 310 210 - other services - Blnder Hamlyn 65 1,562
- Price Waterhouse 461 1,994 4
'. g i
1
30 Osttish snergy knual fleport and Accounts 1996/97
' Notes to the Financial Statements l
' for the year ended 31 March 1997
( .- e
- 5. EMPLOYEE INFORMATION (t) Staff costs see7 1996
- se im .i Salzries 204 195 p Social secunty custs 17 17 I Pension costs (note 25) 21 18 !
Amounts capitalised (12) (13) ; 230 217 f Enceptional chargtes/ tomtits): ' l
-~ Credit in respect of pension provision -
(9) ; Redundancy and severance costs in respect of restructunng . 1 j 230 209 l I (t) Employee numbers
. Average number of employees during the year 6,366 6.572 f Average number of full time equivalent employees by category during the year were:
l seumber Nunter ! Managerial 157 123 Engineering 2,638 2.634 ' industrial 2,471 2,540 Administrative 1,071 1,131 l Trainees 73 88 ) 6,310 6.516 ? J
- 7.
SUMMARY
OF DIRECTOR $' EMOLUMENTS I 1997 1996 ! s coo 1000 J Total emoluments, including pens 6on contributions As directors 301 105 For management services:
- Satanes and other benefits 674 494
. performance related bonuses 338 130
- pension contributions 81 66
). 1,394 795 Full details of the remuneration and share interests of the directors are set out in the Remuneration Committee Report on pages 24 to 27.
,, j 9
m , l { . i 9 I
<eunas~a ~ um m .1mm L
L Notes to the Financial Statements for the year ended 31 March 1997 , 9 v (
- 8. F18tAleCONG CHAa9ES/(CREDITS)
Pro forma (- 1997 1996 1997 1996 ' Em im im im R3valorisation of nuclear liabilities:
- changes in price levels M 113 96 113. .
- - discharge of one year's discount 110 115 110 115-l 208 228 206 228 Revalorisation of segregated decommissioning fund (10) (14) (10) -
- Revalorisation charge 196 214 196 228 '
interest: I Inttrest on amounts repayabie within five years E l
- on amounts owed to BNFL 7 13 7 13 l
- on other borrowings 24 9 24 19 Bond re-set and redemption costs 8 - 8 -
! Inttrest on loans repayable in five years or more 32 61 32 1 r Interest receivable on magnox expenditure - - - (42) Intsreet receivable (21) (12) (21) (12) Net interest payable /(receivable) 80 71 50 (21b l l Exceptionalitems: Waiver of restructuring debts owed to the Secretary of State - - (445) (2,020) Cancellation of HM Government grant receivaole - - - 716 Exczptional items - - (445) (1,304) The pro forma net interest charge of 171m in the year ended 31 March 1996 is based on the Group's capital structure on privatisation (see note 1). i i
- 9. TAXATION ON PROFn,(LCSS) ON ORDINARY ACTIVnlE5 i
j Pro forme l 1997 1996 1997 1996 Km Lm $m im United Kingdom corporation tax at 33 per cent - - - - Defrrred taxation (note 24) 25 - 35 - Exceptional deferred tax charge - - - 100 le 25 - 35 100 ( There is no charge for UK corporat6on tax in the year because of the utilisation of capital allowances and tax losses, arising in the ! year and brought forward from prior years. The exceptional credit of 1445m arising from the walver of the restructuring debt by the Secretary of State is not taxable. The pro forma tax charge in the year excludes the tax charge relating to nuclear premium. 1 ..
*+ .
g N sE t
- 1 4 +
.s a.a sa e,annomin.m.nd woonts amm l :
Notes to the Financial Statements for the year ended 31 March 1997 . k i' , l 1
- 10. PROFif 0F THE COMPANY j The profit of the Group includes 1544m (1996: 1150m) attributable to the Company. As permitted under Section 230 of the Companies Act 1985 the Company has not published a separate profit and loss account. )
i 11, plVIDENDS 1 ! iss7 1996 l l sm im t dividend per ordinary share i int? rim paid 4.6p (1996: nil) 32 - Fitcl proposed 9.ip (1996: nil) 64 - l 96 -
- 12. EAR 9HNSS/(LOSS) PER SHARE The scrnings per share for the year have been calculated on the basis of the profit on ordinary actMties after taxation of 1497m f
. (1993: profit of 130m); and by reference to 700 million ordinary shares wh6ch were issued on privatisation. For the purposes of the cilculation it has been assumed that the number of ordinary shares were in issue throughout the period from i April 1995 to
- 31 March 1997. The pro forma earnings per share were based on a profit after tax of 136m (1996: loss of 1155m). !
5 13.TJ.NGiBLE FlXED ASSETS > Group other other piani . Power land and and F statens twdinss aquummi total 1 im Im im im i Cost As st i April 1996 9.602 47 215 9,864 ; Additions 97 1 12 110 l Disposals (5) (5) (12) (22) As at 31 March 1997 9,894 43 215 9,952
. Depreciation As at i April 1996 4,372 17 127 4,516 ,
Chirge for the year 270 5 21 296 : Dispostis (4) (1) (13) (18) ! As at 31 March 1997 4,638 21 135 4,794 , Not book value i As at 31 March 1997 _ 5,056 22 80 5,158 As at 31 March 1996 h 5.230 30 88 5.348 j included within accumulated depreciation are exceptional charges of 11,986m made in the year ended 31 March 1996. l The net book value of tangible fixed assets includes the fol!owing amounts in respect of freehold land and buildings: i-
- De7 1996
&m im i.
i - Cost 2,223 2.226 i Net book value 1,358 1,491 i Company l During the year the Company acquired other land and buildings of 11m. l l i i \
- , -1 i
i l l l
' ~ ' " - - ---~ - ~ "- ~ ~~ -^ - ~~ ~~ ~
m a.i. r.,iata,ipo,(.nnisou,ssmy ~
~ ~ .
I i Notes to the Financial Statements for the year ended 31 March 1997 g* I
~
l i
- 14. FlXED ASSET INVESTMENTS Gmup company im Lm Coot As Et i April 1996 35 9 Additons !
- _ - 13 -
i As at 31 March 1997 48 9 ! Provision for diminution in value 1 As at i April 1996 35 - Chaege for the year 3 As at 31 March 1997 _._- ) 38 -
)
Not book value ' i i As Lt 31 March 1997 10 9 { As Et 31 March 1996 - 9 i I Loans of 138m have been made to United Kingdom Nirex Limited to fund development expenditure for building an intermediate i level nuclear waste repository These loans have been fully provided against in the Group's financial statements. During the year the Company's insurance subsidiary, Lochside insurance Umited, acquired investments of 110m. ' Dettils of British Energy's principal subsidiary undertakings and other holdings of more than 10 per cent are as follows: i Countty of t registration Group Company I and Class of share shes. ' operation shme hosdeng holdmg Pmepal actwity I
% % 6
. Suheldlary undertakings Nuclear Electric Limited UK Ordinary 100 100 Generation and - , e sale of electricity '
Scottish Nuclear Umited UK ' Ordinary 100 100 Generation and sale of electricity Lochside insurance Limited Guernsey Ordinary 100 10u Insurance Other holdings of more than 10 por cent - Unit d Kingdom Nirex Umited* UK Ordinary 10.8 - Disposal of nuclear waste
- Investment held by Nuclear Electric Limited and Scottish Nuclear Limited, i
i l
, e.
o *\ i$ + 9
- 6.
q
a - s-,, w w w uu om. 29ser ! Notes to the Financial Statements l for the year ended 31 March 1997 b.
- 15. $EGREGATED DECOMMIS$10NING FUND Goup )
im I l As at 31 March 1996 (pro forma) 226 interrst accrued 2 l initial endowment on 15 July 1996 228 Regular contributions 16 Revatonsaton (see note 8) 10 As at 31 March 1997 254 The s gregated decommissioning fund asset in the balance sheet represents the contributions made by the Group, together with i g.n estimated actuanally determined long term rate of return on the fund. The change in value arising from applying the estimated long term rate of retum is taken to the profft and loss account as a revalorisation credit. The segregated decommissioning fund asEt is receivable in more than one year. I is. Stocks Group 1997 1996 tm in Nuclest fuel
- unburnt fuel in the reactors 244 257
- otler 237 366 Storea 134 139 615 762 1
- 17. DCTORS Group company 1997 1996 1997 1996 La Lm Le im i
Trade debtors 181 154 - - 1 I f4uclear premium debtors - 13 - - Other debtors 10 7 26 - Prepryments 30 12 2 - Amounts due from subsidiary undertakings - - 1,627 1.901 221 186 1,655 1.901 !
)* I l
l s j l ~ j 's
- e maa. s eno.w.na uoonis 29. ear i i
ma em a f
' Notes to the Financial Statements f for the year ended 31 March 1997 4
?*
[ w l i i I
+
l t is, soneowmes The year end txMTowings are included in the balance sheet as follows: , Group i Company s Proforma h 1997 1996 1996 1997 1996 Sm im Lm im Lm , Creditors ' i
~
- amounts falling due within one year 108 256 1,833 t 108 .1.745
( - amounts falling due after more than one year 565 440 8 565 - I 873 696 1,841 473 1,745 - I I 4
. The movement in the Group's borrowings is summarised below. !
5 Group t l HM Loan from Meedm I Gowemment secretary term ' Term Loan or state aonds Debentures bank loan Total ' La Lm im Lm im in s As at 1 April 1996 96 1,745 - - - 1.841 l Conversion into equ!ty shares - (700) - - - (700) Cor. version into bonds and debentures - (600) 440 160 - - l Waiver of loan on restructurtng - (445) - i (445) . l Pro forma as at i April 1996 96 440 160 i 696 t Repayments in year (96) - [ (160) - (256) : Bond re set and redemption costs 8 8 ! !. New loan - - - - 225 225 !t As at 31 March 1997 - - 448 - 226 673 Through a series of transactions entered into in June 1996, the loan from the Secretary of State of 11,745m was converted f' into 1700m of Ordinary Shares,1440m of bonds and 1160m of debentures. The balance of 1445m was waived and has been recognised in the profit and loss account. j j ' ( The Group's borrowings are all unsecured. All borrowings were held directly by the Company except the HM Government Term Loan of 196m, which was held and repaid by a subsidiary on 12 July 1996. The debentures were repaid on 16 July 1996 (160m) and 14 March 1997 (1100m).
~
I b
+.
4 W a ., f I I m 1 a I V ' 4 g ' ' i- , 9 , , . _ . . .. - -.
l[ es Ostlieli Gamgy AnrrJai caport ard Acco mts 1996/97 l
- Notes to the Financial Statements - !'
for the year ended 31 March 1997 l t
- 18. 80Rfl0 WINGS continued I l
On 25 March 1991 the bonds were re-set with HM Treasury resulting in reductions in interest coupon rates with corresponding , , incrasses in principal of 117m, as follows: r i Pnot to 2s March 1997 At 31 March 1997 Coupon Coupon 5 rate Pntripal rate Principal !
% La %. im }
Dond 2003 9.122 100 8.194 102 ( Bond 2006 9.493 140 8.461 144 l l Bond 2016 9.936 200 8.883 211 440 457 l .. t On 26 March 1997 the Company entered into an agreement with HM Treasury to redeem on 1 April 19971105m of the 8.883% f j bonds due 2016 for a total consideration of 1108m. The change in the value of principal on these bonds of 15m, together with a f i redemption premium of L3m, are included in finance costs in 19%/97 (see note 8). The balance of the change in principal of L12m, which has not been included in finance costs during the year, will be accrued over the remaining lifetime of the bonds as ! the benefits of the lower coupon rate are received. On 27 March 1997 the Group utilised its medium term bank loan facility by drawing down a loan of 1225m. The loan attracts ! - interest at LIBOR plus 0.35% and is repayable in four equal annual instalments commencing 9 June 1998. Maturity of Borrowings Pro forms 1997 1996 1996 sm im im ! Within one year . 108 256 1,833 Between 1 and 2 years 58 - - ! Betweso 2 and 5 years 189 - - Over S .r ,ars 340 440 8 , j Total 873 696 1,841 i ( l 19. FINA90CIAL INSTRUlWIENTS AND DERNATIVES l The policies followed by the Group to manage its treasury and trading risks are detailed in the Financial Review on pages 16 to 19. f I interest Rate and Currency of Borrowings I L The Group had no foreign currency borrowirts at 31 March 1997. l Interest rate swaps with a notional principal amount of 1108m are held to fix a portion of variable rate borrowings. The weighted I everage interest rate for fixed rate borrowings, after taking hedging agreeme s into account is 8.374%. The weighted average ! . duration of these fixed rate borrowings is 11 years. The interest exposure o the Group's borrowings at 31 March 1997, after
- l. ..taking into account the interest rate swap, is:
Totat Variath Fmed im Lm tm Borrowings 873 117 568 l 4 1* ,,
'l g 6
f S
40 aritish Emeray Annual Report end Accounts 1996,97 - Notes to the Financial Statements . for the year ended 31 March 1997
.v
- 19. FMANCIAL MSTRUGAENTS ANO DERIMTIVES sentinued The summary below of derivauve instruments at 31 March 1997 does not necessarily represent the amounts exchanged or the exposure to the Group.
Contract prmcipal Carymg raw amounts value value im im Lm
- Foreign exchange forward contracts 239 nli (20)
Interest rate swaps 108 nit nil As noted in the Dnancial Review on page 18, the Group enters 6nto forward exchange contracts to fix its foreign currency exposure. Consequently the Group does not suffer loss from adverse exchange movements not gain benefit from favourable movements. The outstanding forwerd exchange contracts mature between 1 April 1997 and 30 November 2000.
- 20. OTHER CREDITORS Group company 2897 1996 3997 .1996 La Lm La Lm Amounts is;2ng due within one year Nuclear liabilities (note 22) 282 333 - -
Trade creditors 36 23 - - Ritentions 9 8 - - Other taxes and social security 103 9 24 - Pensions 2 1 - - Accruals 188 202 17 15 Proposed dividends 64 - 64 -. 584 576 105 15 Amounts falling due after more than one year Nuclear liabilities (note 22) 2,039 2,029 Petentions 2 2 Pensions 22 15 2,063 2,046
)>
e a I
?
N'
47 Settish snergy Annual Heport and Accounts 199s/97
~ -
l l l l I Notes to the Financial Statements for the year ended 31 March 1997 l
- 21. PROVISIONS FOR MAtluTIES AND CHARGES Group 1997 199s La Lm
- Nucleu liabilities (note 22) 1,465 1,371 P- Other provisions (note 23) 175 208 Deferred taxation (note 24) 111 100 1,751 1.679 I
2'2. NUCLEAR UA80UTIES Bach end sack end fuse costs fuel costs Decom. 1997 1996 contracted uncontracted rmssening Total Total La Lm La sa Km As at 1 April 1996 2,362 614 757 3.733 3.889 Charged to profit and loss account
- operating costs 176 17 - 193 179
- revalorisation 129 33 44 206 241 )
Estabhshment of Sizewell B decommissioning liability - - - - 66
- Pryments in the year (346) - -
(346) (642)
- As at 31 March 1997 2.321 664 801 3,786 3.733 The year end balances of nuclear liabihties are included in the balance sheet as follows:
1997 1996 km Lm
- Creditors:
- Emounts falling due within one year 282 333
- amounts falling due after more than one year 2,039 2,029 Provisions for liabilities and charges 1,485 1.371 3,798 3,733 Fuel costs - back end
' Accrurls for AGR fuel services relating to spent AGR fuel are based on the terms of contracts with BNFL, most of which include
. fixed pnces subject to indexation or the Group's estimates where no contracts exist. Provisions for services relating to the disposal of nuclear waste are based on cost estimates dertved from the latest technical assessments.
Decommissioning ! The costs of decommissioning the power stations have been e amated on tne basis of technical assessments of the processes l End methods likely to be used for decoturnissioning under the current regulatory regime. The estnTiates are designed to ! reflect the costs of making the sites of the power stations available for afternative use in accordance with the Group's j decommissvoning strategy. I l l I o I i
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,: q w g g g g g g - - - --- - - - - - - - - - - - Notes to the Financial Statements for the year ended 31 March 1997 l. ( 22. NUCLEAR LIAtiUTIES continued Projected perment detaine Based on current estimates of station lives and lifetime output profections, the following table shows, in current prices, the likely undiscounted payments, the equivalent sums discounted at 3 per cent to the balance sheet date and the amounts accrued to date. ! Ba-k end Bach end Steup orcup J luel costs fuel costs Decern 1997 1996 l contracted uncontracted rmsserwqt Total total Ltm Ltm Ltm ibn Lbn Undiscounted 4.3 5.4 4.3 14.0 14.0 Discounted 3.0 1.8 0.8 5.6 5.6 Accrued to date 2.3 0.7 0.8 3.8 3.7 The def ferences between the undiscounted and discounted amounts reflect the fact that the costs concerned will not fall due for payment for a number of years. The differences between the discounted amounts and those accrued to date will be charged to the profit and loss account over the remaining station lives since they relate to future use of fuel Under the terms of the contracts with BNFL referred to above and in accordance with the projected pattern of payments for decommissioning and other liabilities, taking account of the segregated decommissioning fund arrangements described in note 2 (xel), the undiscounted payments in current prtces are expected to become payable as follows: Bach end Bach end Group orcup fuel costs fuel costs Decom. 1997 1996 contracted utrontracted mensonmg 1stal total Lm Lm Lm im Lm Within one year 280 8 16 304 589 2 - 5 years 1,144 60 64 1,268 1.231 10 years 1,049 384 97 1,530 1,449 11 - 25 years 1.116 1,296 433 2,845 3,042
- l. 26 - 50 years 320 949 61 1,330 1,199 '
51 years and over 428 2,737 3,165
- 3,197
!- 4,337 5,434 671 10,442 10,707 I The amounts expected to become payable between 2 and 5 years, referred to above, are as follows: ! I sack end Bach end Group fuel costs fuel costs Decom. 1997 contracted uncontracted massionmg Total \ im Lm
- Lm tm 1 April 1998 to 31 MarA 1999 291 12 16 319 1 April 1999 to 31 March 2000 291 12 16 319 .
j 1 April 2000 to 31 March 2001 2d5 17 16 318 l
' 1 April 2001 to 31 March 2002 277 19 16 312 l
1,144 60 64 1,268 The above information presents the position at 31 March 1997 and does not reflect the post balance sheet event detailed in note 35 l I i l 1 3'
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q r 5 _ , , - - - , _ , - , - _.
l 49 attelsh Energy Annual ASort and Accounts 1996/97 l
-- ~ .
l l Notes to the Financial Statements
- for the year ended 31 March 1997 l(% .
- 23. OTHER PROVISIONS Group 1997 1996 Restructuring losurante Total Tolal im im &m irm As Et 1 April 1996 194 14 208 259 ,
Credited to proht and loss account
- ogxnating costs - - -
(32) l Payments in the year (33) - (33) (19) As at 31 March 1997 161 14 175 208 The restructuring provision is a provision for future redundancy and severance costs,6ncluding provisions for the cost of enhinced pensions on early retirement.
- 24. DEFERRED TAXATION Group l 1997 1996 Full L abatty/ Full LsatHhty/
Potential Amounts (Asset) Potential Amourits (Asset 1 Laabdity Unprowded Recogmsed Laatwhty Onprovided Recognised Lm im im im Lm Lm ! Accelerated capital allowances 1,064 502 (562) 986 (566) 420 Other long term timing differences (56) (56) (53) - (53) Short trrm timing differences (62) (62) (69) - (69) Corporation tax losses (249) - (249) (198) - (198) 697 (562) 135 666 (566) 100 ! ACT recoverable offset (24) - i j 111 100 1 i, 1 oroup 1997 sm As at 1 April 19% 100 Charge for the year ) 35 l ACT recoverable of fset I (24) As at 31 March 1997 111 The Company does not have a deferred tax liability at 31 March 1997 (19% -inii). I i 4 3 l l l l 1 l
. - - . . - -- . .~. - - . ..= _ -. -. . , . ~ . - -
so sritish S&ergy Armuel Report and Accounts 1996S7 Notes to the Financial Statements for the year ended 31 March 1997 e l 2s. PE^NsioN OBUGATIONS ! Details of the Group's two principal schemes are as follows: l (i) Scottish Nuclear established the Scottish Nuclear Pension Scheme with etfect from 1 April 1993. The scheme is a funded arringement which provides defined benefits based on final pensionable salary. The assets of the scheme are held separately from those of Scottish Nuclear in an independently administered trust fund. The most recent valuation of the Scottish Nuclear Pension Scheme was carned out at 31 March 1996 by an independent actuary using the projected unit method. The principal assumptions adopted in the valuation were that, over the long term, the investment rate of return would be 9 per cent per annum, the rate of salary increase would be 7 per cent per annum and the rate of pension increase would be 5 per cent per annum. The actuanal value of assets of the Scottish Nuclear Pension Scheme at 31 March 1996 was L210m. This represents 109 per cent of the benefits that had accrued to members after allowing for expected future increases in earnings. The contribution of Scottish Nuclear and contributing members are 14 per cent and 5 per cent of pensionable earnings respectively. (ii) Nuclear Electric partscipates in the Electricity Supply Pension Scheme (ESPS) through the Nuclear Electric Pension Group, whH;h was established with ef fect from 1 July 1996. The ESPS is a defined benefit scheme, extemally funded and subject to triennial actuarial valuations. The Pension Groups are financially independent of each other. Any deficiency disclosed in the Nuclear Electric Pension Group following an actuarial valuation has to be made good by Nuclear Electric. The most recent actuarial valuation of the ESPS scheme was carried out as at 31 March 1995 using the projected unit method. j The principal assumptions adopted in the valuation were that, over the long term, the investment rate of return would be [ 9 per cent per annum, the rate of salary increase would be 6.5 per cent per annum and the rate of pension increase would be ! 5 per cent per annum. l Pnor to 1 July 1996 Nuclear Electric's employees participated in ESPS through the Magnox Electric Pension Group. At the date l of the valuation the actuarial value of the ESPS scheme assets that relate to Magnox Electric (including amounts attributable to Nuclear Electric) was estimated at 11,590m. This represents 103.5 per cent of the benefits that had accrued to members after allowing for expected future increases in eamings. The assets transferred from the Magnox Electric Pension Group to the Nuclear Ebctric Pension Group on 1 October 1996 represented 53 per cent of the Magnox Electric Pension Group assets, being a " share of fund" calculated in proportion to the liabilities transferred to the Nuclear Electric Pension Group and, therefore, included a proportionate share of surplus. The cuntributions of Nuclear Electric and contributing members remain at 12 per cent and 6 per cent of pensionable earnings respectively. (iii) British Energy's pension costs for the year to 31 March 1997 were 121m. At that date there was a prepaymerit to the Scottish Nuclear Pension Scheme of 111m and a creditor to the Nuclear Electric Pension Group of 124m.
~
(iv) A ruling has been made by the Pensions Ombudsman against National Grid Group relating to the use of the ESPS surplus by National Grid Group to offset the costs of providing enhanced pensions on early retirement resulting from reorganisation or redundancy. Under this ruling the Pensions Ombudsman has directed Nat oyal Gnd Group to pay into ESPS the amount of surplus used in the manner outlined, plus interest. The ruling is currently Deing challenged through the courts. If the ruling i is not successfully challenged the Group may have to make additional payments into ESPS. Existing provis6ons for enhanced pensions are considered suf ficient to meet any likely payment. l
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f1 Drftleh tavegy Armusi Report and Accounft 1996/97
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Notes to the Financial Statements for the year ended 31 March 1997 t s
- 26. CALLED UP SHARE CAPffAL 1997 1996 homtser i Number i Luthorised 11 Ordinary shares 875.000,000 875.000.000 100,001 100,001 11 Special oghts redeemable preference share 1 1 - -
875.000,001 875.000.001 100.001 100,001 Allotted called up and fully paid 11 Ordinary shares fully paid 700.000,000 700,000.000 103 103 11 Ordinary shares partly paid - - 49.998 12,499 11 Special nghts redeemable preference share 1 1 - - 700.000,001 700,000.001 50,101 12,602 On 21 June 1996 the authonsed share capital of the Company was increased to 1875.000,001 by the creation of an additional 874.900.000 ordinary shares of 11 each (* ordinary shares"). On 21 June 1996 699.949.899 ordinary shares were allotted to the Secretary of State in part satisfaction of the repayment of 11,745m of non-interest bearing debt to the Secretary of State (see note 18). On the same date the Company allotted the special rights redeemable preference shave of11 to the Secretary of State for Trade and industry and Secretary of State for Scotland jointly and paid up in full the partly paid ordinary shares held by the Secretary of State for Scotland. On 15 July 19% the Company's ordinary shares of 11 each were admitted to the Officlaf List of The London Stock Exchange. The special nghts redeemable preference share is redeemable at par at any time after 30 September 2006 at the option of the Secretary of State, after consulting the Company. This share, which may only be held by a Minister of the Crown or other person acting on behalf of HM Government, does not carry any rights to vote at general meetings, but entitles the holder to attend and speak at such meetings. The special share confers no right to participate in the capital or profits of the Company beyond its nominil value. Certain et,stters, in particular, the alteration of specific sections of the Articles of Association of the Company (including the Article relating to hmitations that prevent a person having the right to have an interest in 15 per cent or more of the voting share Capital), require the prior written consent of the holder of the special share. Options outstanding at 31 March 1997, together with their exercise prices and dates of exercise, are as follows: per s at Ene cise i date 1997 1996 British Energy Sharesave Scheme 1.60 1999 7,256,314 - 1.60 2001 11.274,962 -
)s
- 27. PROFIT AND LO5s ACCOUNT Group comparn 1997 1996 1997 1996 La Lm im Lm As ct i April 1996 397 237 150 -
Rettined profit for the year 401 30 448 150 t Trsnsf:r of Nuclear Electric pre <ombination loss - 136 - - Distribution in specie made by Scottish Nuclear before combinat#on - (6) - - A3 at 31 March 1997 798 397 598 150 The profit and loss account of the Group at 31 March 1997 includes 110m of unrealised profits (see note 2 (rvi))(1996: Onll). J 8 3 i N
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.., sm,,. m,. a.,on -. imm Notes to the Financial Statements for the year ended 31 March 1997 i .
- 27. PROFIT ANO LOSS ACCOUNT continued I A reconciliation of the profit and loss account to the pro forma flgures is set out below.
Em tm ( As tt 1 April 1996 397 . ) Waiver of restructuring debt (note 1) 445 Pro forma as at 1 April 1996 842 Pro forma loss for the year (60) Itrms not included in the pro forma profit and loss account in 1996/97: L - Nuclear premium 26
- - RIlsted taxatlon (10)
- 16 l As at 31 March 1997 798 l.
l
- 20. RECONCIWATICN OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS I
Gmup 1997 1996 sm 1.n j As et 1 April 1996 397 367 Shirss issued 700 - Profit for the financial year 497 30 Di'ddends . (96) - As at 31 March 1997 1.498 397 l
- 29. RECONCILIATION OF OPERATING PROFIT /(LOSS) TO OPERATING leet CASH FLOWS t
G<oup 1997 1996 Sm im Opertting profit /(loss) 333 I (967) Nucliar premium (26) (899) Exceptional operating costs - 1.996 . Pro forma operating profit 307 130 Caperciation charges 296 330 l Nuclest liabihties charged to opera;ing costs ja 193 179 - Nuclett liabilities discharged (346) (642)
- ~ Other provisions credited to operating costs -
(32) l Other provisions discharged (33) (19) Regular contributions to segregated decommissioning fund (16) - Decrsase in stocks 147 67 incretse in other debtors (48) (4) ; l Increase in other creditors 79 24 - I l l Not cash inflow from operating actMtles (excluding nuclear premium) 579 33 ( Pnments to ac0uire ta'igible fixed assets inet of disposal receipts) (106) (224) i Not cash im%w/(outflow) from operating actMtles not of capital exponallture 473 (191) 4 4
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. Notes to the Financial Statements , !
for the year ended 31 March 1997 ; , ( .. . I 1
- 30. RECONCauATION OF NET CASH PLOW TO MOVEMENT m NET DEST l
see7 - > Pro sesen see7 !
- m. m
[ Increrse/(decrease) in cash in the year 175 (51) ! Increase in liquid resources 219 '219 f Repayments of amounts borrowed, net of new loan 31 31 : Restructunng (note 18) - 1,145 I
. -Bond re. set and redemption costs - - .
(S) (9) f Movement in net debt in the year 417 1,336 f Net debt at 1 April 1996 (679) (1,598) f Not debt at 31 March 1997 (262) (282) k
- 31. ANALYSa8 0F NET DEST l
Cash et Dem Debt bank due due after and in Term wthe enere than hand deposits one year one year Het debt l im im Em im im As st i April 1996 243 - (1,833) ' (8) (1,598) , Restructuring (note 18) - - 1,577 (432) ' 1,145 [ Allocation to segregated decommissioning fund (note 15) (226) - -- - (226) Pro forma as at 1 April 1996 17 - (256) (440) (679) f Bond re-set and redemption costs - - (8) - (8) Changs in maturity - - (100) - 100 - l Cash flows ~ 175 219 256 (225) 425 i As at 31 March 1997 192 219 (108) (565) (282) '
)
- 32. RELATED PARTY TRANSACTIONS
- The Company was owned by HM Government up until its flotation on 15 July 1996. During the year ended 31 March 1997 the Group entered into the following aggregated transactions with other parties owned directly or indirectly by HM Government. !
All transactions were undertaken on normal trading terms. I het debtor / dereditor) i balance at : 31 March I , income Espenditure 1997 l im Lm Lm b
-).
BNFL - 483 (2,321) I Magnox Electnc 32 19 1 ! Nires - loans (fully provided against) (note 14) - 3 38 ! In addition to the above transactions 1445m of restructunng debt was waived by the Secretary of State prior to the flotation of the Company (see note 1). I i l I
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s4 British Energy Annual Raport and Accounts 199fv97
-.- ~
Notes to the Financial Statements j for the year ended 31 March 1997 B 4 l
- 33. CONTINGENT LIABILITIES HM Government has announced that it will impose a one-off windfall tax on the privatised utilities. Until the details have been i confirmed it is not possible to predict whether it will have an impact on the Group's assets and reserves.
1 in Eddition to the above, the Group is involved in a number of claims and disputes ansing in the ordinary course of business ~ which are not expected to have a material effeet on the Group's financial position. The Company gives certain indemnities and guarantees in respect of its subsidiary undertakings in the ordinary course of business. These indemnities and guarantees are not considered to be matenal and no losses are anticipated to arise. l St FINANCIAL COMMITMENTS 1997 1996 sm Em Capital expenditure contracted but not provided 14 29 8n addrtion to the reprocessing commitments there are commrtments for fuel purchases totalhng 1941m, at current prices, over the next 10 years.
- 35. POST BALANCE SHEET EVENT !
On 3 June 1997 Nuclear Electne concluded new fuel services contracts with BNFL, with a total value of around 11.5 bilhon at
)
current pnces. The new Nuclear Electric contracts cover the extension of AGR fuel fabrication services from 2000 to 2006 and the provision of reprocessing and storage services in respect of spent fuel arising frori its stations not covered by its existing contracts. At the same time minor amendments have been made in the terms of existing contracts of Nuclear Electric and Scottish Nuclear with BNFL regarding the fuel services provided for ail AGR power stations. ! Following the signing of these new contracts the Group now has fixed pnce contracts (subject to RPl indexation) covering the bulk of spant fuel services for the whole of the remaining lives of its existing AGR power stations. The new contracts combined with the revisions to existing contracts wlil result in a saving ln fuel costs of some 110m in 1997/98. l l l S
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l Shareholder Information ( For the year ended 31 March 1997 L l'inandal Calendar hhareholtier l'.nquiries 1997 Ex dividend date for 1996/97 fiaal dividend
" **"'"' '"I'"9" " ' * * ' ' '
- 16 June Annual General Meetmg certificate, dividend payments, or to notify a change of 18 July Payment of 1996/97 final dividend * ' " ' '" "" * ' ' " ' "T* "I b"'"
28 July to shareholders registered on 20 June '' " I'E' ' l Date of postmg instalment notice 22 August , g g p last date for dealmgs in intenm rights 5 September final instalment of 98 pence per share payable 16 September . Shareholders who do not currently have their dividend paid ! Announcement of 1997/98 interin results 12 November "I' ' '" '" "8 I""" *
- Ex-dividend date for 1997/98 interim dividend 15 December
- (
- to do so should complete the mandate instruction form 1998 accompanying your next dividend notification. Alternatively you should contact the Company's registrars who will provide Payment of 1997/98 interim dividend to 28 January you with the relevant form. Notification of the dividend to be l shareholders registered on 19 December 1997 paid and tax vouchers will still be sent to the shareholder's l registered address under this arrangement. 1 Analysis of ordinary shareholders at 31 March 1997 Low Cost Share Dealing I Numher of Iloare Govett Corporate Finnce Limited provides a low cost, "E execution only, postal share dealing service which enables sm fhums .h . % x %
investors to buy or sell shares in British Energy in a simple and ins than 1,000 346.181 97.49 141,642 20.4 economic manner. Commission is 1% with a minimum charge 1,000 '9,999 7,964 2.24 21.165 3.1 of LIO. Further details may be obtained from floare Govett g 10,000 - 49,999 455 0.13 9,139 1.3 Corporate Finance Limited,4 Broadgate, London EC2M 7LE. 50,000 - 99,999 104 0.03 7.413 1.1 Tel: 01716010101.
- l. 100,000 - 999,999 285 0.08 94,i10 13.6
- i. 1,000,000 and over 90 0.03 4I8,700 60.5 Share Pri/r information 355,079 100 692,169 100 British Energy's share price is broadcast on BBC Ceefax, page j in addition 7,831,000 shares are held by the Royal Bank of 224, and on Channel 4 Teletext, page 516. It atuo appears in l Scentand plc and British Energy Trustees Limited in respect the financial cohimns of the national press and on the Companyt l of free, matching and bcnus shares granted to employees at web site.
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f i a 0 n 4 [ b 1 f k Internet Directors Auditors ( , jolm Robb (Chairman) Binder llamlyn C British Energy's web site on the internet www. british- Robert flawley 20 Old Bailey {" energy.com contains information on its activities as well Sir Noel Davies fondon EC4M 7Bli . as financial information. ' Robin Jeffrey Michael Kirwan Price Waterhouse ( CREST Peter Warry Albany flouse a Sir Robin Biggam 58 Albany Street i As indicated in the Notice which accompanied the Half John Bullock Edmburgh Elli 3QR ,
~ Year Review 1996, the Company s Ordinary Shares have Peter Stevenson h been entered into the CREST system for settling share julia Walsh solicitors I purchases and sales. British Energy is considering Clifford Chance 1 establishing arrangements with its Registrar, the Royal I Company secretary 200 Aldersgate Street i Bank of Scotland, to offer a special CREST service for British Energy shareholders which will allow them to Robert Armour . London ECI A 4]J {l hold shares through CREST while still receiving Registered Office MacRoberts ,
. company information. Further details about this service 10 lochside Place 152 Bath Street j ,
will be provided to shareholders when the service . Edinburgh EHl2 9DF Glasgow G2 4TB becomes available. Additionalinformation on CREST can be obtained from CrestCo Limited, Trinity Tower, Financial Adviser Bankers 91homas More Street, london E19YN. Lazard Brothers & Co. Limited Royal Bank of Scotland plc 21 Moor 6cids Drummond flouse London EC2P 2HT 1 Redheughs Avenue b' f Edinburgh Elll2 9jN Brokers ( ' s 11oare Govett Registrars G 4 Broadgate Royal Bank of Scotland plc tondon EC2M 7LE PO Box 435 ' la Owen flouse HSBC/ James Capel 8 Bankhead Crossway North Thames Exchange Edinburgh Ellll 4BR y 10 Queen Street Place N[y a fondon EC4R 1BL I
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