ML20210K839
| ML20210K839 | |
| Person / Time | |
|---|---|
| Site: | Clinton  |
| Issue date: | 05/11/1999 |
| From: | Robb J AFFILIATION NOT ASSIGNED |
| To: | |
| Shared Package | |
| ML20137Z618 | List: |
| References | |
| NUDOCS 9908060236 | |
| Download: ML20210K839 (110) | |
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1 Our Strategy Update Energy to grow Strategy Action and Progress Opportunities Ahead Following the announcement of our The changing UK electncity market potential acquisition of Three Mile is expected to produce attractive To create shareholder value through Island 1, good progress has been opportunities for acquisition and commercial success and continued made by AmerGen our US joint venture investment. Our focus will be firmly growth. company. Due diligence has been or. developments which broaden undertaken on further US nuclear plants. our customer base combined with attacking costs. We made a carefully considered bid to To continually improve safety; maximise acquire London Electricity. We could not in North America we see considerable output; be the lowest cost generator; justify increasing our final bid in terrns of potential. AmerGen continues to build secure revenues; reward and invest in returns to Bntish Energy's shareholders. its portfolio of modern US nuclear plants. our staff. However, our investment in the bid initially targeting the North East and Mid process stands us in good st: cad for West. We are also investigating further future potential UK acquisi6ons. opportunities where competitive markets are being established in both the US To acquire a UK supply business that Our core UK generatior. business and Canada. gets us closer to end customers; to has successfully increased output by invest in flexible generation capability 4% Our trading ter.m has achieved The European energy scene is set to in the UK; to acquire nuclear power satisfactory retur.ts for output sold develop with opportunities in generation stations overseas as a first step in and our direct rales business to major and cross border trading. developing wider energy interests. customers ha', developed well. We also created a sin 11e generating division. Ontish Energy is actively moving the sustainability agenda forward, by promoting the benefits of nuclear generation in mitigating global warming and acid rain.
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l From the Chairman ' i 4 k' "/ till .it Ltleip\ h h\s ini h flici oii' !. : ng opio.itilig ,ual lalionhhii results u n !!ie ye,u erided 31 Rucli l *
- Re. o n! , m ituin w i t.ue ,dhmed o :espn i of output at GR 1 TWh profit i in m f. n ,i! ! ' N:t ,o .i ,o* , r g ; ei o .s i t, p i , i' ?9 D n) 62 '
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.n. ,ih 'a infeh i mnum i he m.' 101) Ot tor i! . We I)<ir tit ulat h wit .e the co" hu' i n : t h it le l h ha \li N Op. v o ,l g v th 1) ,it t uch of Our p&/.et StatlOn5 anit fi e supp " t ist v o Miiti .svi 'u noi:, in 9,Rwtwh mit higing Change u t out businU55.
l The Board is recommendmg an increase in so that we can compete effectively in the $snce the year end a Select Committee of I the final cividend to 10 7p maaing a totai of changing UK electricity market the House of Lords has recommended a l 16.00 per share for the year, an increase of 9% way forward on the Issue of nuclear waste Out annual omdend will be covered 1.8 times internationally. increasing liberaksation management. We weicome the opportunity by earnings encluding eaceptional items. of the electacity markets is creating further that its report creates to seek a solution to ! warthwhile opportunities A'merGen, our US this important issue We recognise that any We are now at an important stage in the joint venture with PECO Energy. pioneered new soiution requires Government. the industry ; Company's development and our long term ground in obtaining regulatory approvals for the and interested organisations to work towards prospects depend on how successfully our acquisition of the Three Mile Island 1 nuclear a consensus and welcome the fresh start this l substantial cash flows are deployed Last power station. We expect to complete the report offers. We at Bntish Energy intend to year we said we would consider returmng acquisition this summer. earlier than espected, play our full part in trying to find an acceptacle cash to shareholders if it was not required subject to necessary las clearances In way forward. for the espansion and long term development february we announced that AmerGen had of the Company. We believe that there wilt be started due diligence on the Vermont Yankee This year there will be a number of changes to opportumties in future which will rneet our nuclear plant. Since the yearend a further the Board Sir Noel Davies and John Bullock are strategic objectives but the Board also proposed acquisition - the Clinton nuclear retinng from the Board. Together they played considers it now appropnate to return to plant - has been announced. We expect a key role in the successful privatisation of (N shareholders cash which is not required to make attractive investment returns by the Company and its subseouent outstanding ! ) immediateiv for acquisition purposes . enhancing the performance of these plants financial performance. We will rniss them and l
# Accordingly we are proposing to return f 432m using our operational empertise in conjunction I take this opportunity of wishing them woli in equivalent to 600 per share The deta.ls are with that of PECO the future.
set out in the enclosed circular. We are positioning ourselves to take advantage We are delighted to welcome Sir Robert Hill Bntish Energy operates m a sector which is of opportunities ansing throughout North as a new independent Director bnngeng his changing tapidly both in the UK and overseas Amenca. whether they be in nuclear operations entensive nuclear power expenence Sir Robert The past year has seen further vertical or more broadly based utilities will take a particular interest in safety issues integrahon in the UK and increasingly the gas and chair our Board Safety. Health and and electncity markets are conung together. Last year i emphasised the need to tackle the Environment Committee. At the AGM i will The regulator for both gas and electricity has causes of climate change and global warming be proposing the election of Mike Low to the made clear his determmation to reform trading highhghted at Kyoto. In our business we have main Board reflecting the importance of the arrangements and increase competition both made significant efforts to operate within the UK Generating Omsson to the overail in generation and suppsy These trends concept of sustainahie development - meeting Cumpany performance reinforce our belief that there will be a smarier the needs of the present without compromising , number of maior companies in the sectoe in the abihty of future generahons to meet ihm The hmd work of our staff has produced thes" - tne medium term in order to compete own needs Nuclear energy releases virtually encelient results On your beharf I wish to successfully in a market where electncity no CO. and last year oui stations avoided the place on record our thanks to them for inmr I pnces are likely to fart. it is imperabve that, reicase of 52m tonnes of CO compared to contnbution and errorts i am particulanv management conhnues to enercise stringent the equivalent generation from fossil fired peased that employees at all levels can j cost control in all aspects of the business plant. I am heartened to see the Government share n the Company s success through l
, A substant al reduchon in unit costs has heen settrng demanding targets for the reduction of our promotion of staff share save and option j a key factor in our success since pnvahsation greenhouse gas emissions. although perpicted schemes 11 is important that then, efforts I ano continued vigilance in this important that the climate change levy. Which is intended which contnbute so much to the Company s aspect of our husmess will he maintamers to reduce CO. t y only 1 Sm tonnes. is hkely be suuess are recognised in a tanginie form in future he apphed to nuclear and renewable generated j electncity which is virtually carbon f ree if wr' j in looking after shareholders interesis it are to achieve our Kyoto commitmenis and is important that we avoid overpaying for sustain that performance, the Government wili ,e acquisitions This was the reason why we have to encourage a switch to climate t enign ,
f did not acquire London Electncity However, energy providers and recognise that untish
\s We believe inere wiii ne opporiun, ties to cnergy piays an essentiai part in assishng ini- junn Rohn ;
f further develop our business in future and ii is un to meet its targets Cnairman {
' important that these are pursued successtuiiy iiuay1999 l
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s ri...re eiwer - m,. is ,
Review of the Year O Adapting Change The challenge facing our core UK business is clear- with competition and regulation combining to drive prices down, we must respond by driving down our own cost base. During the year, we have taken significant steps towards greater efficiency, integrating our operating subsidiaries into a single generating division and maximising the potential from our eight power stations. Last year their total output reached a new record and by careful management of future station maintenance, refuelling programmes and a reduction in unplanned generation losses we continue to l seek improvements. We have a clear objective: to be a world< lass nuclear operator, and the lowest cost UK generator. The UK electricity sector is facing major changes. Vertical integration and increasing competition are combining to produce fewer players. The review of the , electricity trading arrangements in England and Wales will be followed by a similar review in Scotland. The end result will be a market which requires generators and supplicrs to tailor products to better satisfy customer needs. With increasing concern over the effects of global warming and climate change, British Energy took steps to move the sustainable energy agenda forward. We played a leading role in promoting the case for nuclear power at the World Environment Summit in Buenos Aires. We are promoting the case for tradeable carbon permits as an instrument which can make a real difference to both the environment and British Energy's future commercial success. With a new, integrated generation division and a clearly defined strategy we go into the new millennium O as a major UK-based ' international energy company.
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j Review by the Chief Executive l Successfu y managing . i clange anc integration I aCrOSS Our business I i 1 arf,j Underpinning everything else is the performance of our core Generation
% business. Our power stations produce over a fifth of 8ntain's electricity.
Three stations recorded best ever annual outputs. This provides the t . ,,, base for the commercial success of our trading team, and for our new
-**M business development.
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'[ Operations With an overall load factor of 81E our eight integration We have created a single generation division l
)
UK nuclear power stations completed an dunng the year by integrating our two operating j outstanding year. Three stations - sizewell B. subsidiaries. This has produced clear g l Heysham 2 and Hunterston B - achieved their advantages for the future - single operations, !
; best ever output totals. engineenng and health and safety departments l ' with direct accountabihties. We also launched l We continue to seek opportunities to maximise a full review of our business support units. The I . . the output from our stations. A carefully result of all this work should be a rationalised g controlled scheduled outage programme business support structure operating at i ; . ensures the stations operate at times when maximum efficiency and addressing the future ! demand - and pnces - are higher. Investment challenges of the market.
I for the future included upgrading turbine ( equipment at Hartlepool, increasing its output Year 2000 by some 19 MW on one turbine, with the other our phased three year plan to address Year due for upgrade this year. Following clearance 2000 computer issues (the millennium bug') from the Nil to operate Hunterston B's reactors is firmly on track. We have now confirmed 99% 4 .a . 'lII for three years instead of two between outages. of our essential and business enticalitems
,I-l=
. \
gt ,,g we now have a total of six stations cleared to operate this way. as fully compliant. We have undertaken an extensive programme to ensure our non<.ritical f ' %' support and information systems a,e adequate
.,j Extending the life of our AGR stations offers to support our business needs. The work T- -
major benefits. Dunng the year. we confirmed was reviewed by the electricity and nuclear g q- .p4 five year accounting hfe extensions to the first regulators, we are working with key suppliers i j two AGR's. Hunterston B and Hinkley Point B. to ensure their systems are also adequate to I A considerable amount of work was done on support our requirements. l the next two stations in the programme - Heysham 2 and Torness. This allowed us to Top; sign er ene T4 .. in itia m . e .- nnemin, l confirm in May this year that we are also able i s a .s i..ines ,i. , . . ii.v.s,. . .... i. , . . i .nne ..,
. m.idete Middle, setow and Bottom: worMng to extend their accounting lives by five years to Together,9.11. enw en nos . % u,o i..pcit.r, 35 years This is wortn some 125m per year
- o. n. mi ar i. .r.,s . .ei.. r .. eni ei . . . . i,. iiire u si .is in additional profit.
l 9 s,m.nso.,s,4.s o .i .. .w. ~ iw= %
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, Review of the Year l l
e - . l l l l Vloving to maximise 0 3 3Or"U nities =or m
"uture grown The success of our core business gives us both cash and the confidence ,
to use 11 in a range of developing opportun'i ties. The year has been ' marked by the launch of our North American acquisition programme and a broadening of our UK customer base. We are confident British Energy ; will emerge as one of the UK's major international energy companies yi going into the next century, f international UK Business it is clear that reviews of the UK's electncity j format procedures for transfer of the operating ,
; licence of Three Mile Island 1 to AmerGen are market arrangements will mean that a new l now complete. This 790 MW Pressunsed Water structure will emerge. We are contnbuting to
. Reactor is espected to change hands in the these reviews and have taken steps to widen i summer of 1999, subject to tax clearances. our own customer base. our direct sales our share of the acquisition is some 130m over business, which increased 16% to 1219m, -
five years. Further potential acquisitions have includes Customefs such as the Bank of since treen announced - Clinton, a modern England, Ford Motor Company the BoC Group . 930 MW boshng water reactor (BWR) in lilinois and Kellogg S. and Vermont Yankee, a 510 MW BWR, These i plants wil! form the first AmerGen " family
- of As a baseload generator. Ontish Energy does commercial nuclear stations. not set prices in the electncity pooi. In scotland we receive.through the Nuclear Energy Bntish Energy continues to look at future Agreement, a price in line with achieved opportunities in North Amenca where competitive average pnces in England and Wales. We electncity markets are developing. Elsewhere. continue to use a vanety of instruments to ,
we continue to monitor the opening up of manage financial risk for the majority of ,
' our output.
European electncity markets and our offices in Brussels and Kiev tracia developmerits throughout the areas of Europe which we British Energy will pursue vertical integration believe offer potential for partnerships, through enlarging our supply business to acquisitions and consultancy work. include a domestic customer base or acquinng %
! o regional electricity company. We also seek to acquire more flexible generation plant. Although our recent efforts to acquire coal fired plant from PowerGen met with regulatory opposition.
we do not believe the issues raised should l i impact on future potential investments. I p Top: Technetegy Jn AcfJon. An o., out, m. . , routine check in a turtune hail ihn.v. M.ih.,n% v. ..i 4 l tecord outnut Hus year Middle: Teshng in Actson. l A software enginece eneh with an ,,.h.ne.<t e . .p. g Control rotwn test he. n. i of rius conferiu.o inc , en high safet, standsds Selow: TrmJnJng in Actfon. staff fecetwe tegular On site 18asnifir thrt)uVh :=s "stulyr BA%e' p'Ogramme Gottem: Teamwork sa defden, t sfrtr"% ns%r te%% lter le s a O'- '
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Review of the Year
)Sa~e y w.ll a ways i
- l Je Britisl Energy's t03 3riority m
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WEE k
.* O Safety is clearly our top priority. We continue to invest significantly _
in upgrading our plant to enhance safety. Our new group structure -=~~e-reinforces safety as a key priority at Board level , g , 3: y . }i.Q l . t. Nuclear Safety While it is satisfying to achieve further awards Industrial Safety Once again, our power stations had a good N ~ $. ' j ' ' ,"
~
k ( for safety and health at work, we had two record with eight Gold enards from th', incidents rated 2 on the 7 point international Royal Society for the Prevention of Accidents. .. '
- nuclear event scale (*lNES*)- the first for We launched the annual s&fety awareness week some yers. Level 2 is defined as "an incident throughout the Group with the aid of TV stars with potential safety consequences on site but from Gladiators. London's Buming and Top with sufficient safety defences remaining". The Gear. But the Senous business of safety December storms caused a number of continues to focus on reducing our accident problems. One reactor at each of Heysham 1 frequency rate even further. our target is to and Heysham 2 lost connections to the gnd achieve an injury free workplace.
and were safely shut down, returning to power , within two days. At Hunterston B both reactors Our occupational health programme continues suffered loss of god connection twice within a to promote health at work as a pnonty, and day. On the second occasion, not all automatic once again Bntish Energy achieved new awards safety systems had been reset, and this had to in the Scottish Health At Work Scheme for both be done manually by the power station staff. Scottish power stations and - for the first time i l This incident was rated 2 on the INES. BecE use - our corporate headquarters in Edinburgh. of our defence in depth approach, neither event put people or plant at nsk. Nuclear Waste Bntish Energy continues to treat, store and The other incident at Sizewell B involved a dispose of its waste in accordance with winng error. Both events have caused us ta Government policy. Spent fuel is transported reeramine our procedures, learning lessons safely to BNFL's Sellafield plant for for the future. reprocessing or storage. The House of Lords recently published its review of future nuclear A recent ma;or study of radiation workers waste policy. This report advocates a new throughout the UK confirmed that Bntish independent commission to implement a policy Energy's workforce shows significantly lower of long term deep geological disposal whsist rates of cancer than the UK population as a recognising that surface storage provides a Tee: safety nrse. M tia iau<< o ed ~n c<oup ** whole. We operate to self emposed standards safe intenm option. Bntisn Energy actively s,,,, 4, A...,e.., m wm p, ,. ., non a ,s .. s ,o,n. .,i i ., which are much mo(e stnngent than required by participated in the review and supports this f..o r, ar s t+v Wson Middie: OrMng the Atessage v regulation. No Bntish Energy station exceeded key recommendation. Heme. % .4, n sac < s imni, ivc <i o . . ,,. i av rune its authonsed radioactive discharge limits. n-nc <iisin, im"is .a 2.< in.."< s'e su.s seio= end Bottom: safety aj the Workplace. Ar. enginece o.vars perster vn e rintwnv as arican o nvaoneno ni
- s. r.=h ttif (di es f #Fl u s ut fit r . et fees f rt' t'sh d IP e g 4 g gf Ii dj' 41 8 # g hM99A n$$) kflEllJeti si.'{p sfI <triel Ar < <eisnes tVA 7e e .
Valuing People and the Community j t Sla 3ing up wit, l community cha enges ! anc are3aring t1e grounc ~or le ~uture British Energy recognises its responsibilities to its staff and the wider
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- community. We are committed to investors In People, to the Equal ( , 1 I
Opportunities Leadership Challenge, and to active involvement in the j , communities where we work. Last yeer, over 11.25m was spent on our community programmes.
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Human Resources our power stations pursue local community our positive commitment to our people, and programmes with particular emphasis on their response to this commitment has resulted education. A new sponsorship and chanties in aimost alt Bntish Energy locations now being committee is explonng innovative ways to take accredited investors in People. Comprehensive our corporate community involvement programme p training and management succession forward. The work portrayed in this annual report programmes were reviewed and enhanced. from some of Britain's bnght young designers is We have signed on to the Equal opportunities a good example of commitment to excellence. Leadership Challenge and are committed to improving our performance in the employment The Wider Community il of ethnic minonty groups. Retaining the trust of the wider community is vital to Bntish Energy. some 300 000 visitors 4 i We have refreshed the pool of speciahst talent expenenced the "Come and See* programme g[ jj in the Company's workforce througn substantial at our power stations and information centrer. l graduate recruitment. The positive support of Education programmes knked to new curncula ! our staff to change to meet the demands of the m both England and scotland are currently l competitive tradmg environment and the being developed. I i co operation of unions has played a major part in delivering improved effectiveness. During the Communication , year we reached a three year agreement with a Communication is a high priority in support number of trade unions creating a platform for of our shareholoer programme and to wider . further improvement. audiences in the UK and in other countnes
,f, where we aim to develop dur business. Our " h.. .E sponsorship and Chanty Work web site (www. british-energy.com) has achieved i Bntish Energy supports a wide range of considerable success - recognised by a number activities in hne with our Company values of Intemet reviewers as one of the best of its with the emphasis on safety. the environment. kind. Continuing irwestment in the web site will ,
teamwork and the next generation. Our enable us to achieve our wider communication fep: Generating inforest. Ctutoren as a Britse t ia .n , sponsorship programme includes support for and business target. Bntish Energy was the first ,,sou, ceni,, ,,,m,n, ,,nd generation a 'eni *.ii.ie the Second International Festival of Youth recipient of the Excellence in Communications ene,r, ivoiect we are supporting on tiic ii.ie ne u,o Rugby. the world beating Hartlepool Dragon award in the new Scotland plc Corporate Awards. en scuit.ind W4dle: A Ciman EnWrenment. Cli.6,inen sureid from the educational nature traits arou,wi our Boat Team. Northern Ballet.our *Bodyhammer" , l**" filations Below: Power for the Nest i team in BBC TV's Robot Wars and the first Generaffen. Anden Row. a lunvor inosan,% inie, ; Giobat Safety Conference on the internet. supported by Bntish [nergy competing en ti e Br.ist, t champeanships Sottom: Nemete Centrol.. ha i Bntisn Energy team wtuch deogns hern irts' " mo" mondnnne anaf handling equ'imw-ni iu .o e'... 14 Bett6th Energy Aediual Re p#t a#ws 44 e eme*t l'r9M 49 d "" # # d "" "' I U ' I' '
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and environment agenda through a programme of initiatives including sustainable development research and support for tradeable carbon permits. Our health, safety and environme.nt report provides a detailed account of our record against challenging targets. l Globat Environment Operational Environment Environment Policy l At the World Environment Summit in Buenos All our power stations work to the new Bntish Energy recognises it Aires. Bntish Energy played a leading role in international Environment Standard ISO 14001. has a duty to the communaty i promoting the case of nuclear power as a key We actively work with our customers, as a whole to care for the I ptrt of the answer to the problem of global regulators, contractors and staff to audit environment and will seek warming. Our power stations do not produce environmental performance and achieve best to improve its environmental carbon dioxide, and are a major factor in practice. At Dungeness B. we were prosecuted information by: achieving environmental balance. We are for leakage of oil from storage tanks into the wng me enwoneal very much part of the solution. ground. The Envwonment Agency, however, drew ah@s M a attention to the " exemplary" way in which we last year we effectively avoided the equivalent approached the subseauent ciean up and ""c**"""'"'"**
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I of the carbon dioxide produced by over half reclamation programme. our future pnonty is l of Bntain's road vehicles. Without the key to redouble our efforts to ensure prevention ! l contnbution being rnet by our nuclear power rather than mitigation of any future problems. i stations. the UK Government could not meet its Promoting the eftcient uw l international commitments on global warming. Future Enwronment of energy.
! A major report by the House of Commons Trade Continued deveiopmeni Our new environment strategy unit is and Industry Select Committee cunng the year of awareness of our estabbshing hnks with other major energy and urged the Government to consider future environmental responso ' es environment organisations and the Government ,
potential investment in nuclear power for among staff and contra o n to move the agenda forward. One pnonty is to environmental reasons British Energy supports promote the Case for tradeable carbon permits. this and aims to maintain the option of Openly reporting pertoi" ~e which can make a matenal difference to the investing in nuclear stations of environment against stringent way in which electricity is generated. Voluntary pohcies eventually ensure a level commercial environmental tmRA agreements. Carbon taxes and the Climate playing field. We will also work with our UK I change levy all have a part to play in combating nuclear industry partners to promote the global warming. However. the Government's environmental benefits of nuclear power l current propcsals to levy nuclear. renewable and an a balanced energy supply system. I hydroflectricity are inconsistent with the real ; objective of reducing Carbon dioxide emissions. Top: 2 0.000 Trees... Itu m ei ..I , l i e i w w w i. p .i i s , epo si' pe - V insi iso a sW sns g ., ,si ih d .e it f i.e n o Meddie b e r s -as the standard. Henit!'n .innt siir e, < i nagu " iam n,<< inineir ,si ei s.,' aettom: Protecting the Endrenment s . . . . . . 17 smi.a e=g, a%. a,.,,,,,r ,,,, an t-n t v.m vi
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lessessedseassamme sales: amourters to tien in sospect of NEA prices unproved sidput and teuer insation. Excluems -due to higier auted for 1987-98. esseptional Rems pragt befase tas increased to (99.1 TWh. 4% gl 58 1293rn from 1191m in me amuseus year. with -due to tilper presos(1% ap) 13 ( . eemirgs after tes g tem 1120m to 1201m. -due to seenspeceve agusernent ttaf operatingeasts,emcluergelocutcety purssiases for our chect sales business. M SceDand 13 Essept estese estenuine inspcated, me more 11.377m. W 4%. This mas ennementary messe sessrs to me musiness Isossessleessessses esses 37 eergeir due to an incsesse in and portensance* sesults shch eactude to impact ligassene h duost supply testones 31 services esses to1454m. et ===ra==ias noms. sessessetoadseensassesesses (5) a correinamen er facters incsueng stam easts sulaurs to the Meer 2000 pregamme astof hoseenele teesser 113 and other IT syneses work, and tusmees nrneuer inomesse by en to 12.067m. seeinsy - - -- - - devensamera egenehme er tiden. Rset easts ese to emed belig 45 hiper men me preneus The Wmeesipted average pool price for the totaAnd 1418m. an increase of E28m. seesent year. eenemed meh an incsesse in our seect . year ses 2.4Ep. 3% down. Homover. sneirdy hiper output and kdanenanhed centact supply musiness. tocasse et prices ettened ereign CIDs and prises. Staff aests more w ESm to 1227m. amor instruments. eresh Energy, average Stas nunters fee to 5.129 and produceMty achieved seerg price mes sess then 1% w en imseemed my 10% to 12.9 GupVemployee. Isot year at 2.64p/kWh. Tlas mes desaite a seducuen in to pnce sessived by our Scomeh wie announeed east year, as e poet talance stagens under sie Nuclear Energy Agnement shoist euert. eur decssion to endend Sie NEA: due to the endogin efach 1998 af the accoundrqtwasof tenkley p oint8and eesseeched eenances in Ervand and awes Huniormen a by aw years no 35 yessisen medch unta een had fausurans, annuenced ersect tem 1 Apre 199s. ThW meubed in a the DEA pricirg termula. seduction of 113rn in depectauen and else SS esseexage annusi esemes one aseewes toss se g
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, .- 1 gave nse to exceptional credits of 159m rate outturnmg at a lower rate (21%) than our The employee share option charge is a result ;
referred to below: internal forecast (3 5 3 of issuing 19 5m shares to the British [nergy ' Quam,q Employee Share Trust in 1997 95 to satisfy the exercise of options granted to Operating profit encreased by 8% from 1437m The tan charge was 197m. an effecbve rate of er$oyees urder the Sharesave Scherne The j ,' to 1473m The operating margin was up shghtiy 33 A compared with 34% in the previous year costs are being charged over a five year periodp at 23% The reduction reflects the effect of higher ending in 2002. There 15122m to be Charged profitabihty which dilutes the empact of . -over the remaining three years disallowable costs , Financing charges comprus.ng nWoosanon The exceptional financing charge of 166)n and interest totatted 1175rn a reduction of Proposals for accountmg lot , deterred tan m anses from the renegotiation of the terms and . 171m of 29 s The revalons e an charge at the UM remain under review in the event that conditions of the Group s bonds held by HM il14m was 150m lower a6most r ntarch as fuH provision for deferred tan is required we Treasury The charge reflects the encrease in the a result of the reduction m the int;ation rate continue to support the view that such principal value of the bonds as a consequence from 3 5% in March 1998 to 2 i t in provision should be discounted in, kne with of their coupons being reduced to current March 1999 our long term nuclear liabihties if the Group's market rates. so as to make the bonds more full potential hatnhty at 31 March 1999 was marketable The Government h announced Net mterest payable feu from 122m to i1m discounted the tntal provision would be m the its intention to seu the bonds CMd)1999 as a result of the improved net funds posetion region of 1400m Although the reset adystrnent is neutral in economic terms oser the full hves of the bonds. the lov.er interest coupons well reduce the Prof.t twtare tan ana esceptiones was i?9Bm There was a ne' esceptional charge of i??m an int re ase of I107m over the previous year Group s annual interest costs by 15m with , [ before tan composing (15m in respect of effect from 1999 2000 11 was also an improvement of 128m over the empiayee share options and'I66m in respect f aret ast of not s than 1270m that we of the bond veset. less a iS9m credit ansing announced in Fets uary 1999 inis emprovenu nt frorn asset life i itens oris v.as a'Ntut#Ce to the March 1939 inflat on i 19 enii. man g,a ..., m gon,,% a.< e s w*s m
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95 96 97 98 99 96 Turnover Profit /(Loss) After Tax im im Earnings and Dividends Debt at 31 March 1999 compnsed bonds with Cv.tal investment Profit after tax but before exceptionals increased a principal value of 1408m. The bonds mature Bntish Energy's pnmary financial objective as by 175m to L201m. The corresponding between 2003 and 2016 and have fixed regards capital investment is to create value for earnings per share before exceptionals were interest rates ranging between 5.9% and 6.2% its shareholders. Detailed appraisals are carned 29.3p compared with 18.1p in the previous The terms of the bonds were renegotiated with out for allinvestment proposals to evaluate year. After exceptionals, profit after tax and HM Treasury on 25 March 1999 The carrying prospective returns and potential risks. earnings per share were 1186m and 27.10 value of the bonds therefore reflects their fair respectively. value to the business at 31 March 1999. Capital expenditure on the existing UK nuclear in addition the Group has unutilised revolving infrastructure was 185m. sl.ghtly higher than The Board is recommending a final dividend of credit facilities totalling 1335m. the 178m spent in the previous year. Despite 10.70 per share, bnnging the total dividend for Ontish Energy pursuing a number of potential the year to 16.00 per share. This represents Nuclear Liabilities and Decommissioning Fund acquisitions dunng 1998-99, no tranbactions l an increase of 9% over the previous year. The Accrued nuclear liabilities at 31 March 1999 were concluded and there was consequently proposed annual dividend is covered 1.8 times decreased by 128m to 13.762m. The liabilities no capital investment on non core activities. by profit after tax before exceptionals. increase each year due to the additional fuel burnt in our power stations, inflation and the Treasury Management The Board is also recommending a return of removal of one yeafs discount; and they are Cash resources, debt finance and financial 1432m to shareholders The key features are reduced by cash payments made dunng the risks are managed by the centralised trecsury that we will return 600 per ordinary share and we year. In 1998 99 these cash payments function operating within policies and proceccres will be consolidating our share capital by a factor totalled 1332m. approved by the Board on the advice of the 1 of 43 for 48 to reflect the proportion of our Treasury Committee. The Treasury function l market capitalisation returned to our investors Post 4efuelling decommissioning costs are uses appropriate instruments within specified covered by the Nuclear Decommissioning Fund. limits to manage financial risks but is not Cash Flows and Funding to which British Energy currently makes annual permitted to take speculative, open positions. Net operating cash flow after capital expenditure contnbutions of 117m and which had a (178m) and nuclear liability payments (1332m) carrying value of 1323m at 31 March. Foreign currency commitments relating to the was I479m, an increase of L18m. purchase of fuel are no longer hedged. but Other Provisions existing hedging contracts are expected to At 31 March 1999. Bntish Energy held net 128m of brought forward restructunng be ref $d to matunty Matenal currency funds of 1176m. including deposits av provisions were utilised in the year to fund commitments on non-fuel contracts will commercial paper. This represents an the costs of severance and early retirement. continue to be hedged. improvement of 1166m over the 110m held Provisions at 31 March 1999 compnsed 198m at the end of the previous year. reflecting the in respect of severance and restructunng. Market Risk Management Group's strong cash inflow in the year. This including 152m for enhanced pension costs, Financial risks associated with electricity improvement was achieved despite the payment and 114m for uninsured latent disease trading are managed by the Group's Power and of a supplementary dividend of 169m dunng compensation claims. No additional provisions Energs Trading function which operates within l the year and the noncash increase of 166m were created policies and procedures approved by the Board l in the principal value of the bonds, on the advice of the Treasury Committee. 20 orete tae<s7A r.+ i r+ = < > + i ^" -". 1 * * *
** 33% Matenais & Services 1454m es 20% Depreciation 1278m
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Net Operating Cash Flow Operating Cost Analysis im % The Power and Energy Trading function uses European Economic and Monetary Union direct sales and CfDs to hmat the Group's Although the majority of British Energy's income exposure to Pool pnce fluctuations in England and expenditure is denominated in sterhng, tnd Wales. The pnce received by Bntish Energy it recognises that European Economic and under the NEA for sales in Scotland are linked Monetary Union (EMU) could have a significant to the onces paid by Pubhc Electricity Suppliers impact on its commercial actnnties in the long in England and Wales, which are themselves term. The Group has developed an appropnate
,m substantially hedged by CfDs. strategy to deal with the impact of EMU on its business in the short term.
[V) The use of CfDs and similar instruments resutts in Bntish Energy receiving payments from Post Balance Sheet Event - Life Extensions counterparties when the Pool pnce falls below On 11 May 1999 the Board decided to extend the contract strike once and making payments the accounting lives for Heysham 2 and Torness l when the Pool pnce exceeds the strike pnce. from 30 years to 35 years with effect from j CfDs set out stnke pnces in L/MWh for each 1 Apnl 1999. As a result there will be an l individual half hout penod over the contract's ongoing improvement in profit before tax of i duration, and generally cover one to 24 month some L25m from 1999-2000. There will also penods. The Group has entered into some be a one-off exceptional credit in 1999-2000 of other longer term CfDs which together effectively some L15m to reduce existing fuel provisions. ! represent net purchases by Bntish Energy of l mid ment and peak cover. These contracts run for penods up to 15 years and represent less than 5% of the Group's annual sales. The Group generally aims to Cover between 45% to 60% of its annual output by the use of CfDs. Although this may, from time totime, Mike Kirwan entail some contract purchases. Bntish Energy Finance Director has not taken signif, cant exposed positions. 11 May 1999 The majority of CfD cover is built up on a rolhng annual basis poor to the start of the financial year against the Group's generation forecast. Further " topping up' and building for the subsequent year takes place on a continuous basis. At the end of the financial year some 30% to 50% of the following year's output would normany be covered by CfDs. At 31 March 1999 the Group's position was in line with this pohcy.
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t John Robb (63)+
- Peter Holline (51)t# Sir Noel Daylos (65)+'# Robin Jeffrey (60) Michael Kirwan (57f f Appointed independent Appointed Chief Executive Appointed Independent Appointed Deputy Chairman Appointed Finance Director Chairman in 1995. Also in 1998. From 1992 until Deputy Chairman in 1995 in 1995 and Brttish Energy's in 1995. A chartered Chairman of Hewden Stuart
- 1998 he was B' oard Director end currency serGr Egbcutive Director, North accountant, he was pic and independent Director responsible for the Polymers independent Director. Also America based in Toronto. previously a partner of of Unigate plc. He is deputy Division of European en independent Director of Foimerly Chairman / Chief Deloitte Haskins & Seus Chairman of the Horserace Vinyls Corporation the generation division. Executive of Brttish Energy's before becorning Emutive ,
Betung Levy Board and was (EVC Intemational NY). Chairman of Powell Duffryn Scottish generating Director. Finance of Nuclear l formerty Chairman of Also an independert Director pic and FScardo pic. He was subsidiary. He is e Fellow Electric pic in 1990 ) Wellcome pic. He is of Smrths industries plc. He formerty Chlef Executhe of of the Royal Academyof j i chairman of the is chairman of the Treasury VSEL plc. Sir Noet is due to Engineering Remunersoon and . , , Commat . . .redre from the Bond at the ., , , , , , , . Nominsuons Committee 1999 AGM. t ' q: M'
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Sir Robert Hill (62)+ + # John Bullock (65)+" Sir Robin Biggarn (60)+
- Peter Stevenson (52)+"t Jutta Walsh (50)+
- 1 Appointed an independent Appointed an Independent Appointed an Independent Appointed an Independent Appointed an Independent Director on 1 January 1999. Director in 1995. Currenth Director in 1996. Chairman Director in 1991 Chairman of Director in 1996. Chairman 1 Previously held sen+or posts an independent Director of of the Independent Mackays Stores (Holdings) PLC. of AVL Holdings Umsted.
I with nuclear safety Kirgisher plc. Formerly joint Television Commission, He is chairman of the Pensions A Director of SS Alum responsibilities in the Senior Partner of Coopers Electnum Umited and Committee. Limited and Intervascular Royal Naq Sir Robert is & LArand. Chairman of Fairey Group pie and an Research Umited. j chairman of the Safety. the Audit Committee until Independent Director of i Health and Environment May 1999. He is due to Bntish Aerospace plc He will l Commmee and an retire from the Board at succeed Sir Noel Davies as independent Director of the the 1999 AGM. senior independent Director generation division. following the AGM and is , , chairman of the Audit l Commmee.
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. Corporate Governance for the year ended 31 March 1999 The Directors consider that dunng the year the Company has complied with the requirements of the Combined Code incorporating the pnnciples of good govemance and Code of Best Practice, The Board John Robb has continued as Independent Chairman throughout the year. He is supported by three Executive Directors and six Independent Directors as set out on pages 22 and 23. Peter Hollins has continued in the role of Chief Executive throughout the year. The Directors are satisfied that the Company complies with those sections of the Combined Code conceming the balance of the Board and the dmslon of responsibilities between the Chairrnan ana the Chef Executive. At each annual general meeting any Director who has been appointed by the Board since the previous annual general rneeting is required to seek reelection together with one third of the other Directors for the time being, All of the Independent Directors serving on the Board have held senior positions in other major organisations, both within the UK or intemationally.
Each of them is involved in decision making on key issues facing the Group and bnng a wide range of expenence to the Board. In accordance with the requirements of the Combined Code the Board has a number of matters reserved to it, including appropnate strategic, financial and organishtional matters. These are considered at the Board's monthly meetings. The Board receives reports covenng operational. financial, safety risk management and regulatory performance and identifytng key issues for the business on a regular and timely basis. All Directors may obtain independent professional advice at the Company's expense. Where appropnate, matters have been delegated to Board Committees. Individual Directors. their roles and membership of the separate committees is identifed on pages 22 and 23. Audit Committee The Audit Committee is comprised entirely of Independent Directors and is chaired by Sir Robin Biggam who succeeded John Bullock as committee chairman in May 1999. The Committee is responsible for the review of the adequacy and effectiveness of internal control and compliance procedures within Bntish Energy and ensunng that all statutory requirements in relation to the pnnernles, policies and practices adopted in the preparation of the f financial statements are compted with. The Committee seeks the advice of both extemal and intemal auditors in relation to matters ansing from their work and is also responsible for encouraging and monitonng the adoption of best practice throughout the Group. Pensions Committee This Committee, which monitors the management of the Pension Schemes of Bntish Energy Generation Limited and Bntish Energy Generation (UK) Limited is chaired by Peter Stevenson, it also comonses certain other Directors and senior managers of the Company The Committee is responsible for supervising the policies being adopted by the Trustees of these schemes and for advising the Board on all matters relating to those schemes. Remuneration and Nominations Committee A separate Remuneration Report appears on pages 26-29. Treasury Committee Peter Hollins chairs this Committee wh6Ch is made up of several Directors and senior managers of Bntish Energy. It is responsible for monstonng performance and nsk management throughout the Group, and in particular in the areas of power and energy trading, treasury and insurance. The ! Committee advises the Board on appropnate policies and procedures. Safety. Health and Environment Committee The Committee advises the Board in relation to the health and safety of staff, contractors, visitors and the general public, plant safety and the environmental performance of Bntish Energy. It is chaired by Sir Robert Hill and also includes certain other Directors and senior managers of ; the Company. - Internal Financial Control l The Directors are responsible for ensunng that a system of intemal financial controls is maintained. The identification of key business risks, the evaluation of their financial empirCations and formulating policies to manage such nsks is the responsibility of the Board. However, any such system of controls can only provide reasonable and not absolute assurance against matenal misstatement or loss. ! 24 se.n war Ai+ ... w e. rra w
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Whilst the final outcome of the Turnbull Committee as regards the Directors' review of all internal controls is outstanding. the Audit Committee has oniy reported un its review of the effectiveness of internal financial control of the Company in line with the dispensation allowed by The L.ondon Stock Enchange c The Audet Committee has resiewed the effectiveness of the system of internal financial controls operated by the Group throughout the year. The key procedures which are designed to provide effective internal contro? are summansed as follows:
- Organisational structure - There are clearly defined hnes of accountability throughout Bntish Energy. This includes stnct authonsation approval and control procedures within which senior management operate. Similarly the senior management team within each subsidiary or division is responsible for its internal financial controls. Those management teams operate within an overall framework determined by the Board.
- Investment approval - The approval of capital and revenue schemes above certain limits is reserved to the Board. Other investment decisions are delegated for approval in accordance with authonty limits. The Group has comprehensive appraisal and monitonng procedures which apply to all major investment decisions.
- Business planning - A Comprehensive business planning and budgeting process to establish plans and targets, against which performance is regularly monitored is undertaken each year. Key business nsks identified dunng the planning process are reviewed regularly throughout the year. The Board receives monthly reports and management accounts and reviews the overall Group performance against budget and the latest forecasts for the current year. Similarly, each subsidiary and divisional management team meets regularly to monitor performance.
-Intemal compliance - Management reviews and selfcertification reports from the Managing Director and Finance Director of each of the key subsidianes or divisions are used to monitor compliance with the Group's internal financial controls. The Group's internal audit function is responsible for reviewing the performance of the internal financial control system and computer operations and reports regularly to the Audit Committee. Internal audit work is focused on the areas of highest risk.
[mj oing Concern Ahe Directors confirm that they base a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. The Directors accordingly continue to adopt the going concem basis in prepanng the Company's Consolidated financial statements. r% John Robb Chairman 11 Me 1999 V(% as . sis,so, 4.i.... o.~,m. .,
F-Remuneration Report for the year ended 31 March 1999 The Directors consider that dunng tne year, the Company has complied fully with the relevant principles of good govemance and code of best practice (the Combined Code), embracing the pnnciples contained in the Cadbury. Greenbury and Hampel Reports. Bntish Energy retains a single Committee to cover the requirements of both Nominations and Remuneratiort Remuneration and Nominations Committee The Committee is concerned pnmanly with the pay and conditions of f recutrve Directors and confirms that full consideration has been given to Pnnciple B.1 of the Combined Code. In addition, at retains an interest in the pay and benefits of other sensor staff, to ensure reasonable consistency. It also considers appointments for senior posts within Bntish Energy. Terms of Reference for the Committee ernpower it to:
- Recommend the appointmer t of Executive Directors.
- Establish the remuneration pchcies and pracuces for Executive Directors and certain other senior employees.
- Design and implement longterm incentive schemes.
- Determine and review the individual remuneration packages of the Executive Directors and other selected senior employees, including pension provision.
- Authonse the arnual performance incentive plan for Executive Directors.
- Obtain cxtemal professional advice and expertise necessary for the performance of its duties.
The Commsttee is made up of independent Directors identified on pages 22 and 23 and is chaired by Mr Robb. Mr Holkns is in attendance and Mrs Sally Smedley, HR Director. acts as Secretary. Executive Remuneration Policy In setting the remuneration package for individual Directors, the Committee aims to ensure that the total package. including benefits. is competitive with
' b companies of a similar size, activity and complexity and that as a consequence. the Company can attract and retain Executive Directors with the skills and expenence both to develop the business and to maximise the retums to shareholders. It targets total remuneration at the middle market level of its comparator companies. It is Bntish Energy's policy that:
- A significant proportion of the Executive Dweetors' remuneration should be vanable and linked to performance.
- The movement in base pay of Dwectors and Senior Managers will be broadly in kne with pay increases offered to other staff.
- in structunng base and vanable pay, the Committee focuses on the Comparr(s commitment to safety, the environment and sustained profit growth and on forging strong links between reward and performance against agreed targets.
Elements of Remuneration The remuneration package composes five elements. Each is reviewed against the market and a balance of elements is taken recognising the commercial and operational needs of the business and the pohcies outhned above. The process for review draws compansons on a jot >twob basis across a wide range of organisabons, both inside and outside the energy sector. It utilises both external professional advisers and commercially available remuneration data and takes into account the specific demands of our core business. (a) Base Salary The Committee aims to maintain individual satanes at close to market rned:an, taking into account expenence and level,s of responsibility. Analysis Indicated that salanes were Close to target levels in 1998-99. As a consequence, executive base pay increases in Apnl 1998 were set at the same level as for other employees. l l C ( l 26 emien sams, annus e.pwo.e.uen wm w
O (b) Annual Performance incentive Plan The performance related elements of the remuneration package are designed to recognise both corporate and individual success. The Committee reviewed the operation of the Annual Irtentive Plan and took the view that a single scheme with common measures for eacn Director provided the rnost appropnate incentive structure for 1998-99. In this plan, bonus payments are determined by performance against a range of challenging targets, underpinned by the safety and environmental pnontses necessitated by the nature of the Company's pnncipal activity.
, (1) Decutive Directors can be awarded cash payments of up to 40% of salary, depending on achievement against predetermined financial and other rneasures. In 1998 99 output, operating profit, unit operating costs and specific safety targets provided the main components of the scheme.
(ii) The Committee has the discretion to make cash awards of up to a further 10% of satcry, subject to performance against a range of personal factors. In 1998-99,the payments under the plan ranged between 30% and 31% for each of tt,e Decutive Directors against a range of 46.5% to'47.5% in 1997-98. Bonus payments are normensionable. l
]
(c) Share Option Schemes in accordance with the Rules of the No. 2 (Unapproved) Share Option Scheme, opbon grants were made to Dr Jeffrey and Mr Kirwan, raising the number of shares on option to three times salary. Dercise of these opt ons is conditional on the achtesement of an average annual growth in earnings per share of 3% per year ahead cf inflation over three consecutive years, Deept for the above Scheme and participation in the alkmployee Sharesave Scheme. l no other long term incentrve schemes are available to Decutive Directors. (d) Rethement Benefits Decutive Directors have individually tailored retirement benefits as described below. t k Pension arrargements for Mr Holhns provide for a pension equivalent to % final salary. taking into account pensions from all other sources, payable from age 62, his normal retirement age. A widow's pension of M of that available to Mr Hollins forms part of that arrangement.
)
Mr Holkns has ber efits accrued in previous employment. He is a member of the Scottish Nuclear Pension Scheme which provides him with 4 of l pensionable salary for each year of service up to his normal retirement date. He contnbutes 5% of salary up to inland Revenue limits. The Company will pay the balance of pension which is equrvalent to % final salary (from age 62), less the pension provided from these other sources. Provision 'or this j to(>up pension is part$lly unfunded. The following sets out the relevant figures for Mr Hoflins: Age at 31 March 1999 51 YIars of service at 31 March 1999 1 Additional annual pension camed dunng the year 19,414
]
Accrued annual entitlement at 31 March 1999 , 111,021(L1,574 at 31 March 1998) , Dr Jeffrey is a member of the Scottish Nuclear Pension Scheme, which provides 4 of base salary for each eligible year of service up to the normal retirement age of 63 and which includes widow's pension provision of M of that available to Dr Jeffrey. In accordance with the scheme rules he contnMvs 5% of salary. Due to the date he joined the Scheme, Dr Jeffrey's pension is not capped. The following sets out the relevant' figures for Dr Jeffrey: Age at 31 March 1999 60 Years of service at 31 March 1999 24, including service credits from a transfer into the Scherne Add *tional annual pension eamed dunng the year 14,025 Accrued annual entstlement at 31 March 1999 167,820 (162.483 at 31 March 1998) 27 emien sa sy annu.i a on n .no accouan 199S 99
}
Remuneration Report cononuea Mr Kirwan it not a member of any of the Company Pension Schemes. However, he received an annual allowance in 1998-99 of Company pension contribution !L24.710) and life assurance contnbution in accordance with a previously agreed schedule. Mr Kirwan receives his contnbution as a taxable j supplement to salary. Mr Warry participated in a personal pension plan into which the Company made the maximum Inland Revenue age related contnbutions. The amount paid dunng 1998-99 until his date of leaving was 110.950. (e) Other Benefits ) Other benefits are available to Executive Directors. These differ by individual and compnte a selection from the following: f I l I
- A Company car and fuel - Medical, permanent health and dental insurance - Reimbursement of telephone rental and a mobile phone - Subsenption to professional bodies . - Eligibility for the Company Sharesave Scheme Service Contracts' All Executive Directors have a twelve months rolling contract. The service contract of Mr Warry was terminated on 30 September 1998. His termination package compnsed:
(i) Compensation of 1253.092 compnsing twelve months salary and benefits, plus the bonus accrued to his date of departure. D (ii) The ability to exercise options on 132.307 shares in the Company executive share option scheme at 12.60 per share; exercisable from i October g 1998 on which date th6 mid-market pnce was 565p. (iii) The ability to exercise options on 5.029 shares under the company SAYE Sharesave Scheme at 11.60 per share; exercisable by 31 March 1999. Independent Directors i The remuneration of Independent Directors is determined by the Board witnout the participation of the Directors concerned. They do not have Service Contracts. They are not ehgible for any of the Company Share Schemes and do not receive any pension provision from the Company. Levels of fees paid dunng the year are given on page 29. l Shares and Share Options Ordinary Shares 1999 1998 31.94$ 26.387 JRoeo 2.612 - P Hones 840 42o ser %el omies 6.255 5.969 or R jerire, 25.998 25.497 4: Kirwan ' 20.o00 20.000 ser Robm Beggam 1o.000 10.000 J Bunock 1.ooo 1.o00 ser Robeti Hiii 3.93o 3 93o p gi,wngon Dr J waish
%ne of the Detectors has a non beneficial mierest m aar snares of ine Company.
28 enie Eneegy Annuai Report and Accounr% WM 'r's
[h V Enscutive Share Options ai n oei.on o.ie eram ai t moni u. ca e rew .aen twa r ei o a .m=o tw9 mo iti .. ouote s.o.rv ome P Hollms 108 051 108.051 4 72 05/02/2001 04/02/2005 6.355 - 6.355 4 72 05/02/2001 04/02/2008 114.406 - - 114 406 Dr R Jeffrey 113.846 113.846 2 60 12/08/2000 11/08/2004 11.538 - - 11.538 2 60 12/08/2000 11/08/2007 35.990 - 35.990 5 08 30/06/2001 30/06/2005 125.384 35.990 - 161.374 M Marwan 118.077 118.077 2 60 12/08/2000 11/08/2004 11.538 - - 11.538 2 60 12/08/2000 11/08/200'
- 37.192 -
37.192 5 08 30/06/2001 30/06/2005 129.615 37.192 - 166.807 Shafesave Scheme Dr R Jeffrey 6.093 - - 6.093 1 60 01/09/1999 29/02/20X) M Newan 6.093 - - 6.093 1 60 01/09/1999 29/02/2000 With the BACeptiori of Sharesave opbons all share ophon grants were at med market price on the date of grant. All Sharesave options were granted at a discount of 20% to market once. 8ntish Energy a share pnce m the year from 1 Apnt 1998 to 31 March 1999 was m the range of 507p to 1400 No independent D* rectors have been granted snare optes. Individual Remuneration (n g' 1990 saiary and Fees 1994 1999 Boews 1998 accommodalion and 1999 Reiocat.on - 1998 1999 Other Beaerits few Emoluments eiclucas Peasson Pims.on Contreusens 1998 1999 1998 1999 1998 l vear encee 31 March 5 i s I g i s i t g i 1 JRobb 125.000 178 957 - - - - - - 125.000 178.957 - - P Hones 270.000 45.000 83.545 21.375 3.892 23 692 15.254 2.218 372.713 92.285 11.760 1.960 j Sw Noet Davies 98.400 98.400 - - - - 6.802 6.530 105.202 104 930 - - Dr R Jeffrey 184.636 163.000 51.628 75,795 53.706 - 17.184 6,900 307.158 245.695 23.737 22.820 $ M Newan 175.250 168.500 53.364 80.038 - 63.976 13.338 15.523 241.952 328.037 24,710 23.759 j Sv Robm Siggam 25.000 20.700 - - - - - - 25.000 20.700 - - J Bullock 35.000 31,100 - - - - - - 35.000 31.100 - - Sw Robert Mdt 12.500 - - - - - - 12.500 - - - P Stevenson 35.000 31.100 - - - - - - 35.000 31.100 - - Dr J Walsh 25.000 20.700 - - - - - - 25.000 20.700 - - Total Emoluments for current Owectors 945.784 757.457 188.557 177.208 57.598 87.668 52.584 31.171 1.284.525 1.053.504 40.207 48 539 P Warry 89.500 172.000 - 81.700 - - 4,936 7.046 94.436 260.746 10.950 . 21.000 Or R Hawiev - 53.625 - - - 8.267 - 10.527 - 12.419 - 29.400 Total Emoluments 1.075.284 983.082 148.557 258.908 57.598 95 935 57.520 48.744 1.378.941 1.386.669 71.157 98.939 Compensation for loss of office P Worry - - - - . .- - - 253.092 - - -
. Or R Hawley - - - - - - - - - 470.626 - -
D) Mr Robb s basic fee for 1997-98 was 1103.600 He was awarded an additional fee of 110.000 per month durmg the penod from 1 July 1997 to 16 February 1998 when he undertook an eneCutrue role m the absence of a Chief Esecuteve. lN) Mr Holkns fooned the Company on 1 February 1998. The salary. bonus and other benefits shown for 1998 is for the two months to 31 March 1998 the salary shown equates to en annual saaery of 1270.000. ul Dr Jeffrey relocated to North America durmg1998 99.His salary for that year mcludes an overseas allowance of 115.086.Pensson and bonus Calculabons esclude this allowance e) s., Robe,m., was 3 n.ed as an onder4 On, ecto, with e,,eef,. na-.,,1999 the ,ees s.n fo, i999 a,e ,o, a p.,t .ea, oe., a., eoeste io a,mu., f.s o,150.0* gb) Ihe accommodation and relocation Costs mclude tas and nahonal insurance payable by the Company as follows. Mr Hollms 11 (w) The payments to $ar Noel Dawies. J Buhock. Sw Robert Hill and P Stevenson renect additional duties by these independent Directors m setting on subsidiary boards. l 29 ereinah anergy Annuai Reno,t and Accou,ies 199 99 l l t
Directors' Report for the year ended 31 Mscn 1999 Financial Statements The Directors present their annual report and the audited Group financial statements for the year ended 31 March 1999. Pnncipal Activities and Review of the Business The Group's pnncipal activity is the generation and sale of electncity. The Review of the Year and Financial Review on pages 6 to 21 review the Group's business performance dunng the financial year and its future prospects. The Group publishes a separate Health, Safety and Environment Report which is available from the Company Secretary. Share Capital
' Details of shares allotted by the Company dunng the year are included in note 25 on page 53. Details of Bntish Energy shares purchased by employee share trusts, which are sponsored by the Company, are included in note 13 on page 45.
Results and Dividends The consolidated results for the Group are set out in the Group Profit and Loss Account on page 33. The Directors are recommending a final dividend of 10.7p, payable on 28 July 1999 to shareholders on the register on 28 May 1999, making a total dividend for the year of 16.Op per ordinary share. The retained profit for the year of 176m was transferred to reserves. , Post Balance Sheet Events On 11 May 1999 the Directors decided to extend the accounting trves of two of the Group's power stations by five years. Further details are included
'in note 34 on page 56.
I Following their meeting on 11 May 1999 the Directors are proposing to retum 1432m of cash to shareholders. Further details are given on page 20 l of the Financial Review. Substantial Shareholdings As at 11 May 1999 the Company had not been notified of any shareholding of 3% or more in the issued ordinary share capital of the Company. Research and Development Dunng the year the Group invested 121m in research and development (1998: 122m). This is pnmanly scientific and engineering research activity which is drected towards secunng further improvements in the reliability, performance and safety of its generating business and related activities. Directors information requwed under the provisions of the Companies Acts regarding the remuneration and share optN)ns of Directors, the interests of the Directors and their families in the share capital of the Company and Directors' service contracts is detailed in the Remuneration Report on pages 26 to 29. Policy on Payment of Creditors The Company supports the Prompt Payers' Code of the Confederaton of Bntish industry. The Company's pohcy is to settle the terms of payment with supphers when agreeing the terms of each transaction, to ensure that supphers are made aware of these terms and to abide by the agreed terms. The Company has no trade creditors at 31 March 1999. At 31 March 1999 the Group had 121m of trade creditors which equates to 30 days value of suppher purchases for the financial year. The supplier purchases exclude payments to BNFL the Group's pnncipal suppher, which are made against an agreed contract profile. Charitab'e and Political Contributions The Group made chantable donations of 1249.000 (1998: 1217,000). No political donations were made, Employees
. The Group is committed to involving employees in the business through a pohey of Communication and consultation. Arrangements have been estabhshed b for the regular provis on of information to all employees through briefings, staff conferences and welfestablished formal consultation procedures.
30 assie n sases, armum pecori ano accounis 1998 99
A The Group is committed to its equal opportunities pohcies, which includes promoting training and career development for all employees. Full and fair consideration for all vacancies and opportunities will be given to men and women, people with disabilities and those from ethnic minonties, regardless of mantal status. age, rehgion or sexual onentation. The pohcy is supported by a Code of Practice on harassment which recognises that all employees have the nght to be treated with dignity and respect. Auditors Our auditors Prce Waterhouse, merged with Coopers & Lybrand on 1 July 1998 and the Directors appointed the new firm PncewaterhouseCoopers on 6 August 1998. A resolution proposing the re-appointment of PncewaterhouseCoopers will be put to the forthcoming Annual General Meeting. Annual and Extraordinary General Meetings The Company's Annual General Meeting will be held at 11 am on Thursday 15 July 1999 at the Edinburgh international Conference Centre. A letter from the Chairman detaihng the business to be considered at the meeting together with a Notice of Meeting, accompanies this Annual Report. An Extraordinary General Meeting will be held immediately after the AGM to consider the retum of value to shareholders and other appropriate business. Statement of Directors' Responsibilities Company law requires the Directors to prepare financial statements for each financial penod which grve a true and fair view of the state of affairs of the Group and the Company, and of the results of the Group, for that penod. A statement by the Directors on Corporate Govemance matters is set out in a separate report on pages 24 to 25. In prepanng the financial statements, the Directors are required to
- select surtable accounting pohcies and then apply them Consistenth; v- make judgements and estimates that are reasonable and prudent;
- state wtiether apphcable accounting standards have been followed. subject to any matenal departures disclosed and explained in the financial statements: and
- prepare the financial statements on the going concern basis unless it is inappropnate to presume that the Group will continue in business.
The Directors are responsible for maintaining proper accounting records which oisclose with reasonabic accuracy at any time tne financial position of the Group and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are aise responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularties. This report was approved by the Board of Directors on 11 May 1999 and signed on its behalf by:
\
/ l u.
I Cobert Armour Company Secretary ( 31 se n sa gr we wu,i a~s ut. n mm %
Report of the Auditors to the members or entesn Energy pic We have audited the financial statements on pages 33 to 56. We have also examined the information specified for our review by The London Stock Exchange which is included in the Remuneration Report on pages 26 to 29. Respective Responsibilities of Directors and Auditors The Directors are responsible for preparing the Annual Report including, as described on page 31, the financial statements. Our responsibilities, as independent auditors, are established by statute, the Auditing Practices Board, the Listing Rules of the London Stock Exchange and our profession's ethical guidance. We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act. We also report to you if,in our opinion, the Directors' report is not consistent with the financial statements, if the Company has not kept proper accounting records,if we have not received all the information and explanations we require for our audrt, or if information specified by law or the Usting Rules regarding Directors' remuneration and transactions is not disclosed. I We read the other information contained in the Annual Report and consider the implications for i our report if we become aware of any apparent misstatements or matenal inconsistencies with the financial staternents. We review whether the statement on pages 24 and 25 reflects the Company's compliance with O' those provisions of the Combined Code specified for our review by the London Stock Exchange, and we report if it does not. We are not required to form an opinion on the effectiveness of the Company's or Group's corporate governance procedures or its intemal controls. Basis of Audit Opinion We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit 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 judgements made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropnate to the Company's circumstances. consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from matenat misstatement, whether caused by fraud or other irregulanty or error, in forming our opinion we also evaluated the overall adequacy of tre presentation of information in the financial statements. Opinion in our opinion the financial statements give a true and fair view of the state of affairs ot " . Company and the Group at 31 March 1999 and of the profit and cash flows of the Grow i 4 " e year then ended and have been property prepared in accordance with the Companies A t : m PricewaterhouseCoopers l
- Chartered Accountants k and Registered Auditors Edinburgh i 11 May 1999 I
as s u.n aa sonnw aciut .no ammnis e n
l l Grcup Profit and Loss Account i for the year ended 31 March 1999 v suein im iw t= mow 1999 items ausensee Buses # ems 199H v.no u. si e m.as. u .. iw u w
%es La La in Lm sv Dn Turnover: continuing actMtles i 2.067 - 2,067 1.954 -
1.954 Operating costs a (1.586) 8 (1.594) (1,517) 85 t1.4321 Operating proftt: continuing actMties 481 8 473 437 85 522 Financing (charges)/ credits
- revalonsation r (138) 36 (174) (224) -
(224)
-interest payable and simdar charges 1 (67) (66) (1) (22) -
(22) Proftt on ordinary activities before taxation 276 (22) 298 191 85 276 TIxation on profit on ordinary activities . (90) 7 (97) (65) (26) (91) Proftt for the financial year 186 (15) 201 126 59 185 Dmdends ,
- annual io (110) (102)
- special supplementary io -
(69) , Cetained proftt for the year at 76 14 i i Eamings per share (p) l - basic is 27.1 29.3 18.1 26.6
- diluted si 26.1 28.2 17.8 26.1 Dmdends per share (p)
- annual no 16.0 14.7
- special supplementary io - 10.0 The Group had no recognised gains or losses other than the profits for the years.
Notes 1 to 34 form part of these financial statements. o O e 'oO 33 sauen an=sy arum.i Repori no scwas le ve
Balance Sheets as at 31 March 1999 %d Goup cm 1999 1996 1999 1998 we. se am sai g. Fixed assets Tangible assets u 4.743 4.945 1 1 Investments a 139 126 29 25 4,882 5.071 30 26 Current assets Decommissioning fund u 323 289 - - Stocks a 558 566 - - Debtors is 214 227 3,170 1,488 investments - liquid funds n 582 350 582 350 Cash at bank and in hand 2 1 - 1 1,679 1.433 3,752 1.839 Creditors: amounts falling due wtthin one year n (637) (768) (100) (196) Not current assets 1.042 665 3,652 1,643 Total aseets less current liabihties 5,924 5.736 3,682 1.669 Creditors: amounts failing due after more than one year
- borrowings is (408) (341) (408) (341) - others u (2,059) (2.116) - -
Prowlsions for liabi# ties and charges ao (1.773) (1,672) - - D Not assets 1.684 1.607 3.274 1,328 Capital and reservos Called up share capital n 720 720 720 720 Share premium n 76 75 76 75 Profit and loss account v 888 812 2,478 533 Equity Shareholders' funds n 1.684 1.607 3,274 1,328 The financial statements were approved by the Board of Directors on 11 May 1999 and signed on its behalf by: i
%w John Robb Mike Kirwan Chairman Anance Director Notes 1 to 34 form part of these financial statements.
O O M sdHeal Enwgy Annudi Rotwirt and Actounit 1994 99
1 Group Cash Flow Statement N the year ended 31 March 1999 1999 1998 Notes Emi im Not cash inflow from operating activities a 557 S42 Interest paid (33) (45) Interest received 32 26 Returns on investments and servicing of finance (1) (19) Tastion paid (33) <?4) Payments to acquire tangible fixed assets (78) (81) f Payments to acquire financial investments (5) (18) Purchase of own shares (25) (30) , l Capital expenditum and financial investment (108) (129) 1 Equity dividends paid (173 4 (98) j l increase in term deposits n (232) (131) j Management of liquid resources m (232) (131) Issue of new shares 1 1 R: payment of amounts borrowed, net of new loans - 1333) 1 Financing m 1 (332) increase /(decrease) in cash w 1 (191) I}}