Northern Ireland Electricity Limited's Unaudited Interim Report and Accounts
for the six months ended 30 September 2012 (non statutory) have been submitted to
the National Storage Mechanism and will shortly be available for inspection at:
www.Hemscott.com/nsm.do and are also available on Northern Ireland Electricity
Limited's website at:
www.nie.co.uk/About-NIE/financial-information
Contact for enquiries:
NIE Corporate Communications - telephone 0845 300 3556
The full unaudited interim report follows:-
INTERIM MANAGEMENT REPORT
The directors of Northern Ireland Electricity Limited (NIE) present their
unaudited interim report and accounts for the six months ended 30 September
2012. The interim accounts have been prepared in accordance with International
Accounting Standard (IAS) 34 "Interim Financial Reporting" and the Disclosure
and Transparency Rules of the Financial Services Authority. The interim
accounts consolidate the results of NIE and its subsidiary undertakings (the
Group).
Results and Dividends
The results for the six month period ended 30 September 2012 show a profit after tax of
£34.4m (2011 - £33.4m). No dividends were paid during the period
(2011 - dividends paid £nil). A financial review is set out
below.
Background Information
The Group's principal activity is the transmission and distribution of
electricity in Northern Ireland. NIE holds a transmission licence covering its
roles as owner of the transmission and distribution assets and distribution
system operator in Northern Ireland. NIE is responsible for the planning,
development, construction and maintenance of the transmission and distribution
network and for the operation of the distribution network.
The transmission and distribution network comprises a number of interconnected
networks of overhead lines and underground cables which are used for the
transfer of electricity to c840,000 consumers via a number of substations.
There are 2,200km (circuit length) of the transmission system, 43,500km of the
distribution system and approximately 250 major substations. NIE's transmission
system is connected to that of the Republic of Ireland (RoI) through 275kV and
110kV interconnectors and to that in Scotland via the Moyle Interconnector.
The Group derives its revenue principally through charges for use of the
distribution system and Public Service Obligation (PSO) charges levied on
electricity suppliers and charges for transmission services (mainly for use of
the transmission system) levied on the electricity transmission system operator
in Northern Ireland (SONI).
NIE is regulated by the Northern Ireland Authority for Utility
Regulation (the Utility Regulator) and the Department of
Enterprise, Trade and Investment (DETI). Each is given specific
powers, duties and functions under relevant legislation. As a
transmission licensee and electricity distributor, NIE is required
to develop and maintain an efficient, co-ordinated and economical
system of:
- electricity transmission - the bulk transfer of electricity
across its high
voltage network of overhead lines, underground cables and
associated equipment
mainly operating at 275kV and 110kV; and
- electricity distribution - the transfer of electricity from
the high voltage
transmission system and its delivery to consumers across a
network of overhead
lines and underground cables operating at 33kV, 11kV and lower
voltages.
NIE is subject to a price control, defined in a formula set out in its licence,
which limits the revenue it may earn and the prices it may charge. The
principles of price regulation employed in the licence conditions reflect the
general duties of the Utility Regulator and DETI under relevant legislation.
These include having regard for the need to ensure that NIE is able to finance
its authorised activities.
Directors
The directors who held office during the period were as
follows:
Stephen Kingon CBE (independent
non-executive Chairman) Rotha Johnston
CBE (independent non-executive director) Ronnie Mercer (independent non-executive
director) Joe O'Mahony (Managing
Director) Peter Ewing (Deputy
Managing Director and Director of Regulation)
Business Overview
Key achievements during the period included:
- Successful implementation of new billing and market IT systems
that have
facilitated full retail competition in the Northern Ireland electricity market
for consumers wishing to change electricity supplier and have
allowed
harmonisation of market processes with the RoI, thereby creating
the first
harmonised retail market scheme between two jurisdictions in
Europe. The
project has been shortlisted for the Utility Industry
Achievement Awards IT
initiative of the year;
- Successful management of a change in network connection
charges, following a
decision by the Utility Regulator in April 2012 to remove subsidies which had
been in place since before privatisation, resulting in an
updated statement of
charges for connection to the NIE distribution system approved
by the Utility
Regulator;
- Continued investment in the Northern
Ireland electricity infrastructure: to
replace worn assets; service increased customer demand;
facilitate connection
of renewable generation and maintain safety and security of
supply;
- Financial results in line with expectations under the
framework of the RP4
price control extension;
- Significant effort made by NIE to support its fifth five year
price control
(RP5) review; and
- Continued contribution of approximately £120m per annum into
the Northern
Ireland economy through
employment and contracts with local businesses.
Financial Review
Financial KPIs
The directors have determined that the Group's financial key
performance indicators (KPIs) are Group pro-forma operating profit
and pro-forma Funds From Operations (FFO) interest cover.
As explained above, NIE is subject to a price control which limits the revenue
it may earn and the prices it may charge. If the amount of revenue recovered in
any one year exceeds or falls short of the amount allowed by the price control
formula a regulatory correction factor operates in the following year to give
back any surplus with interest, or to recover any deficit with interest, as
appropriate. A surplus is referred to as an over-recovery and a deficit as an
under-recovery.
The results reported in the accounts for the six month period ended 30
September 2012 include an over-recovery correction factor of £15.0m, compared
to an over-recovery of £13.3m during the six month period ended 30 September
2011, which has resulted in an increase in revenue and operating profits of £
1.7m. The over-recoveries during the period ended 30 September 2012 and the
year ended 31 March 2012 largely reflect a correction of under-recoveries of £
29.6m during the year ended 31 March 2011.
The directors consider that pro-forma revenue and operating profits (based on
regulated entitlement as allowed by NIE's price control) as shown in note 2 to
the accounts, give a more meaningful measure of performance than revenue and
operating profits reported in the Group Income Statement.
The calculation of Group pro-forma operating profit is shown
below:
Six months ended Year
30 September ended
31 March
2012 2011 2012
£m £m £m
Group operating profit 63.5 59.1 107.0
Deduct regulatory correction factor (15.0) (13.3)
(14.4)
---- ----
----
Group pro-forma operating profit 48.5 45.8
92.6
---- ----
----
The Group's pro-forma operating profit increased from £45.8m to
£48.5m, primarily reflecting an increase in regulated income due to
growth in NIE's regulatory asset base (RAB) offset by higher
depreciation and amortisation charges.
Pro-forma FFO interest cover is calculated as pro-forma funds from operations
divided by net interest charged to the income statement. Pro-forma FFO interest
cover decreased from 4.0 times to 3.6 times primarily due to higher interest
payable on borrowings.
Financial Results
A summary of the financial results for the period reported in the accounts is
shown below. The results reported in the accounts include regulatory correction
factors as explained above.
30 September 31 March
2012 2011 2012
£m £m £m
Revenue 136.6 122.7 253.3
Operating profit 63.5 59.1 107.0
Profit after tax 34.4 33.4 58.8
Net debt 540.0 547.7 547.9
Net assets 191.5 177.3 192.5
Income Statement
- Revenue of £136.6m (2011 - £122.7m) largely comprises revenue
in respect of
use of the transmission and distribution systems and PSO levies.
The increase
in revenue reflects higher revenue in respect of PSO pass
through costs and
growth in the RAB.
- Operating costs have increased from £63.6m to £73.1m largely
reflecting
higher PSO pass through costs and higher depreciation and
amortisation charges.
- Operating profit was £63.5m (2011 - £59.1m) largely reflecting
an increase in
regulated income due to growth in the RAB offset by higher
depreciation and
amortisation charges.
- Net finance costs have increased from £16.2m to £20.4m. Net
finance costs in
the period primarily comprise £18.8m in respect of bond interest
charges and
net pension scheme interest charge of £2.1m. The increase in
finance charges
from 2011 reflects increased interest charges following a £400m
bond issue in
June 2011.
- Tax charge for the period was £8.7m (2011 - £9.5m): the
decrease primarily
reflects a reduction in the corporation tax rate.
- Profit after tax for the period was £34.4m (2011 - £33.4m)
largely reflecting
increased operating profit and a reduced tax charge offset by
higher net
finance costs.
Balance Sheet
- Non-current assets at 30 September
2012 were £1,626.7m (31 March
2012 -
£1,611.9m). The increase reflects capital expenditure during the
period offset
by the movement in the mark-to-market value of RPI interest rate
swap assets.
- Current assets at 30 September
2012 were £98.6m (31 March
2012 - £95.0m)
primarily reflecting increased trade and other receivables due
to higher
revenue, offset by reduced cash balances.
- Current liabilities of £133.4m (31
March 2012 - £137.1m) mainly reflect lower
financial liabilities due to timing of interest payments offset
by increased
trade and other payables and increased current tax payable.
- Non-current liabilities at 30 September
2012 were £1,400.4m (31 March
2012 -
£1,377.3m). The increase largely reflects a movement in the IAS
19 pension
liability to £146.7m (31 March
2012 - £105.8m) due to lower investment returns
and a reduction in the discount rate: an analysis of the pension
liability is
shown in note 8 to the accounts. The movement in the
mark-to-market value of
RPI interest rate swap liabilities included within non-current
liabilities is
offset by the movement in RPI interest rate swap asset values
included within
non-current assets.
Cash flow
- Net cash flows from operating activities were £48.4m (2011 -
£60.5m), the
decrease reflecting timing of interest payments on bonds offset
by movements in
working capital.
- Cash flows in respect of investing activities decreased to
£59.3m (2011 -
£65.2m) largely reflecting lower expenditure in relation to IT
systems following
implementation during the period of new billing and market IT systems.
- There were no financing activities during the period. The
proceeds of a £400m
bond issued during the period to 30
September 2011 were primarily used to
replace short-term variable debt with longer term debt repayable
in 2026.
Operational Review
Operational KPIs
The directors have determined that the following KPIs are the most effective
measures of progress towards achieving the Group's operational objectives:
- performance against the overall and guaranteed standards set
by the Utility
Regulator, the majority of which apply to services provided by
NIE (e.g. the
timely restoration of consumers' supplies following an
interruption and
prescribed times for responding to consumers' voltage
complaints);
- the number of complaints which the Consumer Council for
Northern Ireland
(Consumer Council) takes up on behalf of consumers (Stage 2
Complaints); and
- the average number of minutes lost per consumer per annum
through
distribution fault interruptions, excluding the effect of major storms (CML).
Six months ended Year
30 September ended
31 March
2012 2011 2012
Overall standards - defaults None None None
Guaranteed standards - defaults None None
None
Stage 2 complaints to the Consumer Council 1 1
2
CML 25 25 53
A key priority for NIE is to consistently provide the highest
standards in customer service and network performance. During the
six month period all the overall standards were achieved and there
were no defaults against the guaranteed standards (2011 -
none).
NIE's continued strong focus on service failure analysis limits the number of
instances when consumers are dissatisfied to the extent that they refer a
complaint to the Consumer Council. The number of Stage 2 Complaints in the six
month period was 1 (2011 - 1).
The number of CML was 25 minutes (2011 - 25). This performance is better than
the target range agreed with the Utility Regulator for the regulatory period
2007 - 2012 (RP4).
NIE continues to improve incrementally its emergency response
capabilities during severe weather events in order to effectively
restore supply to all consumers. The significant commitment of its
frontline staff helps to ensure that NIE effectively manages this
very important aspect of its business.
RP5 Price Control
RP5 was due to commence in April 2012. The Utility Regulator announced in
October 2011 that RP5 would be introduced from 1 October 2012 rather than 1
April 2012 and that an extension of the RP4 price control would be implemented
during the six month period from April to September 2012. In August 2012 the
Utility Regulator notified NIE that the RP4 price control was extended further
to 31 December 2012 with RP5 now due to commence on 1 January 2013.
In April 2012 the Utility Regulator published for consultation its draft
determination for RP5. NIE's response in July 2012 stated that: the proposed
price control would not serve customers' best interests; customers would be
left with an aged and unreliable network, which would need substantial
investment in future price control periods; NIE would be unable to finance such
investments efficiently; NIE would not have been able to take the measures
needed to replenish its skilled workforce by training apprentices and graduates
to be the skilled engineers of the future; and NIE would be unable to develop
its network to serve industry and commerce in Northern Ireland, to the
detriment of all Northern Ireland's population.
The Utility Regulator's final determination was published in October 2012 and
NIE responded on 20 November 2012, advising the Utility Regulator that
regrettably it is unable to accept the Utility Regulator's proposed terms for
the RP5 price control.
NIE has not taken this decision lightly. It has worked diligently throughout
the price review process, which has been ongoing for over two years, in order
to provide a robust business plan with extensive and detailed supporting
information to facilitate the Utility Regulator to determine a price control
that will enable NIE to provide an adequate service to its customers over RP5
and for the foreseeable future, and to finance its activities efficiently.
The allowances proposed by the Utility Regulator fall substantially short of
the amounts required to enable NIE to meet its statutory and licence
obligations and to carry out the necessary programme of work for RP5 to deliver
the level of service customers expect.
Moreover, the Utility Regulator's proposals rely on regulatory
arrangements which depart from the well-established system of
regulation for network utilities that applies in the rest of the
UK, notably in respect of their emphasis on ex post assessments and
retrospective adjustments.
Since both NIE and the Utility Regulator consider that the
present price control requires modification, NIE now expects the
Utility Regulator to refer the matter to the Competition
Commission.
A copy of NIE's response is available on the NIE website.
Investment
NIE's strategy is to continue to grow and maintain a secure and
sustainable electricity network to meet the demands of the
Northern Ireland electricity
market, including the requirement to facilitate development of
renewable generation connections and support the Northern Ireland
Assembly in reaching its targets in respect of electricity
consumption from renewable sources.
During the period NIE has continued to invest in its infrastructure to replace
worn network assets, to accommodate increasing load and new consumer
connections and to meet requirements in respect of the connection of renewable
generation. In addition, a new billing and market IT system to facilitate full
retail competition in the Northern Ireland electricity market was successfully
implemented in May 2012.
In its business plan submission to the Utility Regulator for RP5 NIE proposed
that the level of investment would need to increase significantly, with the
focus of investment driven by: the need to replace worn network assets
installed as part of significant network development during the 1950s and
1960s; an increasing need for large transmission related projects; and meeting
the requirements of new legislation. As outlined above, the allowances proposed
by the Utility Regulator fall substantially short of the amounts required to
enable NIE to meet its statutory and licence obligations and to carry out the
necessary programme of work for RP5 to deliver the level of service customers
expect.
NIE has been working jointly with EirGrid regarding the development of the
400kV Tyrone-Cavan interconnector to strengthen further the interconnection of
the electricity networks of Northern Ireland and the RoI. A public inquiry by
the Planning Appeals Commission in respect of NIE's planning application
commenced in March 2012. The public inquiry has been adjourned following a
request from the Planning Appeals Commission for the planning application to be
re-advertised and for relevant environmental statements to be modified. No date
has been set for re-commencement of the public inquiry.
EU Legislation
In January 2012 NIE submitted its application for certification of transmission
arrangements between NIE and SONI under Article 9(9) of Directive 2009/72/EC
(the IME3 Directive) to the Utility Regulator. The IME3 Directive includes
measures which aim to ensure the effective separation of networks from
generation and supply activities. The Utility Regulator has exercised its power
to extend the relevant date for certification set out in the legislation (3
March 2012) to 31 December 2012. The certification process requires the Single
Electricity Market (SEM) Committee to make a preliminary decision on behalf of
the Utility Regulator which must be referred to the European Commission for
verification.
Principal Risks and Uncertainties
NIE operates a structured and disciplined approach to the
management of risk overseen by the NIE Board and Audit
Committee.
NIE's risk management framework comprises: - appropriate
structures in place to support risk management; - formal assignment
of risk responsibilities to facilitate managing and
reporting on individual risks and to ensure specific risks are understood;
- procedures and systems for risk identification, assessment and reporting; and
- ongoing monitoring of the effectiveness of risk mitigation actions and
controls.
The internal audit function provides independent assurance on
the adequacy of NIE's risk management arrangements.
NIE's Risk Management Committee, comprising a number of senior
managers and chaired by the Finance Director, is responsible for
co-ordinating the development of the overall risk management
framework for NIE including the policies, standards and procedures,
organisational arrangements and reporting requirements to NIE's
Executive Committee, Audit Committee and Board.
The principal risks and uncertainties facing NIE for the
remainder of the financial year, which are managed under NIE's risk
management framework, are:
- an unsatisfactory outcome from the RP5 price control review given the Utility
Regulator's final determination for RP5;
- the failure of the NIE Health and Safety Management System
with exposure of
employees, contractors and the general public to risk of injury
and the
associated potential liability and/or loss of reputation for
NIE;
- widespread and prolonged failure of the transmission or
distribution network
and failing to respond adequately following damage to the
network from adverse
weather conditions;
- inability to recruit and retain employees with the necessary
knowledge and
skills; and
- other operational, financial and reputational risks arising
from failing to
meet consumer service standards or business continuity, IT Security and Data
Protection issues.
GROUP INCOME STATEMENT
Six months ended Year ended
30 September March
Note Unaudited Unaudited Audited
2012 2011 2012
£m £m £m
Continuing operations
Revenue 2 136.6 122.7 253.3
Operating costs (73.1) (63.6) (146.3)
----- ----- -----
OPERATING PROFIT 2 63.5 59.1 107.0
----- ----- -----
Finance revenue 0.2 0.2 0.3
Finance costs (18.5) (15.7) (33.4)
Net pension scheme interest (2.1) (0.7) (1.3)
----- ----- -----
Net finance costs 3 (20.4) (16.2) (34.4)
----- ----- -----
PROFIT BEFORE TAX 43.1 42.9 72.6
Tax charge 4 (8.7) (9.5) (13.8)
----- ----- -----
PROFIT FOR THE PERIOD ATTRIBUTABLE 34.4 33.4
58.8
TO THE EQUITY HOLDERS OF THE PARENT COMPANY ===== =====
=====
GROUP STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year ended
30 September 31 March
Unaudited Unaudited Audited
2012 2011 2012
£m £m £m
Profit for the financial period 34.4 33.4
58.8
----- -----
-----
Other comprehensive income/(expense):
Actuarial loss on pension scheme (46.6) (66.0)
(78.0)
assets and liabilities
Tax credit relating to actuarial 11.2 16.5
19.6
loss on pension scheme assets and
liabilities ----- -----
-----
Net other comprehensive expense (35.4) (49.5)
(58.4)
for the period ----- -----
-----
Total net comprehensive income/(expense)
for the period (1.0) (16.1) 0.4
===== ===== =====
GROUP BALANCE SHEET
As at 30 September As at 31
March
Note Unaudited Unaudited Audited
2012 2011 2012
£m £m £m
Non-current assets
Property, plant and equipment 5 1,212.9 1,148.1 1,186.4
Intangible assets 5 47.4 49.4 47.8
Derivative financial assets 366.4 350.9 377.7
------ ------ ------
1,626.7 1,548.4 1,611.9
------ ------ ------
Current assets
Inventories 6.1 6.0 5.2
Trade and other receivables 43.4 39.8 32.1
Derivative financial assets 8.6 7.1 6.3
Other financial assets - 0.1 -
Cash and cash equivalents 40.5 32.7 51.4
------ ------ ------
98.6 85.7 95.0
------ ------ ------
TOTAL ASSETS 1,725.3 1,634.1 1,706.9
------ ------ ------
Current liabilities
Trade and other payables 86.9 80.4 82.1
Current tax payable 19.0 7.8 11.3
Deferred income 9.1 8.5 8.8
Financial liabilities:
Derivative financial liabilities 8.6 7.1
6.3
Other financial liabilities 8.8 8.8
27.6
Provisions 1.0 1.5 1.0
------ ------ ------
133.4 114.1 137.1
------ ------ ------
Non-current liabilities
Deferred tax liabilities 57.7 72.3 68.4
Deferred income 249.5 239.1 245.4
Financial liabilities:
Derivative financial liabilities 366.4 350.9
377.7
Other financial liabilities 571.7 571.6
571.7
Provisions 8.4 8.1 8.3
Pension liability 8 146.7 100.7 105.8
------ ------ ------
1,400.4 1,342.7 1,377.3
------ ------ ------
TOTAL LIABILITIES 1,533.8 1,456.8 1,514.4
------ ------ ------
NET ASSETS 191.5 177.3 192.5
====== ====== ======
Equity
Share capital 36.4 36.4 36.4
Share premium 24.4 24.4 24.4
Capital redemption reserve 6.1 6.1 6.1
Accumulated profits 124.6 110.4 125.6
------ ------ ------
TOTAL EQUITY 191.5 177.3 192.5
====== ====== ======
The accounts were approved by the Board of directors and signed
on its behalf by:
Joe O'Mahony
Managing Director
Date: 27 November 2012
GROUP STATEMENT OF CHANGES IN EQUITY
Capital
Share Share redemption Accumulated Total
capital premium reserve profits
£m £m £m £m £m
At 1 April 2011 36.4 24.4 6.1 126.5 193.4
---- ---- ---- ---- ----
Profit for the period - - - 58.8 58.8
Net other comprehensive - - - (58.4) (58.4)
expense for the period ---- ---- ---- ---- ----
Total net comprehensive - - - 0.4 0.4
income for the period
Deferred tax charges relating - - - (1.3) (1.3)
to items charged in changes
in equity ---- ---- ---- ---- ----
At 1 April 2012 36.4 24.4 6.1 125.6 192.5
---- ---- ---- ---- ----
Profit for the period - - - 34.4 34.4
Net other comprehensive - - - (35.4) (35.4)
expense for the period ---- ---- ---- ---- ----
Total net comprehensive - - - (1.0) (1.0)
income for the period ---- ---- ---- ---- ----
At 30 September 2012 36.4 24.4 6.1 124.6 191.5
==== ==== ==== ==== ====
Capital
Share Share redemption Accumulated Total
capital premium reserve profits
£m £m £m £m £m
At 1 April 2011 36.4 24.4 6.1 126.5 193.4
---- ---- ---- ---- ----
Profit for the period - - - 33.4 33.4
Net other comprehensive - - - (49.5) (49.5)
expense for the period ---- ---- ---- ---- ----
Total net comprehensive - - - (16.1) (16.1)
expense for the period ---- ---- ---- ---- ----
At 30 September 2011 36.4 24.4 6.1 110.4 177.3
==== ==== ==== ==== ====
GROUP CASH FLOW STATEMENT
Six months ended Year ended
30 September 31 March
Unaudited Unaudited Audited
2012 2011 2012
£m £m £m
Cash flows from operating activities
Profit for the period 34.4 33.4 58.8
Adjustments for:
Tax charge - continuing operations 8.7 9.5
13.8
Net finance costs - continuing operations 20.4 16.2 34.4
Depreciation of property, plant and equipment 23.7 22.4 45.2
Release of customers' contributions (4.5) (4.3)
(8.8)
and grants
Amortisation of intangible assets 8.1 5.6
13.7
Contributions in respect of property, 8.7 12.6
23.7
plant and equipment
Defined benefit pension charge less (7.8) (6.6)
(13.4)
contributions paid
Net gain on transfer of pension assets and - -
(0.7)
liabilities relating to former employees
Net movement in provisions 0.1 0.1
(0.2)
---- ----
----
Operating cash flows before movement in
working capital 91.8 88.9 166.5
Increase in working capital (5.4) (14.9) (6.1)
---- ---- ----
Cash generated from operations 86.4 74.0 160.4
Interest received 0.2 - 0.3
Interest paid (37.6) (13.5) (13.6)
Current taxes paid (0.6) - (2.9)
---- ---- ----
Net cash flows from operating activities 48.4 60.5 144.2
---- ----
----
Cash flows from investing activities
Purchase of property, plant and equipment (50.3) (56.7) (110.7)
Purchase of intangible assets (9.0) (8.5) (19.4)
---- ---- ----
Net cash flows used in investing activities (59.3) (65.2)
(130.1)
---- ----
----
Cash flows from financing activities
Proceeds from borrowings - 400.0 399.6
£400m bond issue costs - (2.1) (1.7)
Repayment of borrowings - (361.1) (361.2)
---- ---- ----
Net cash flows from financing activities - 36.8
36.7
---- ----
----
Net (decrease)/increase in cash and cash (10.9) 32.1 50.8
equivalents
Cash and cash equivalents at beginning of 51.4 0.6 0.6
period ---- ----
----
Cash and cash equivalents at end of period 40.5 32.7 51.4
==== ====
====
For the purposes of the cash flow statement, cash and cash
equivalents comprise cash at bank and in hand, short-term bank
deposits and bank overdrafts.
NOTES TO THE INTERIM ACCOUNTS
1. Basis of Preparation
The interim accounts for the six months ended 30 September 2012 have been
prepared in accordance with International Accounting Standard (IAS) 34 "Interim
Financial Reporting" and the Disclosure and Transparency Rules of the Financial
Services Authority.
The interim accounts consolidate the results of Northern Ireland
Electricity Limited and its subsidiary undertakings (the
Group).
The interim accounts have been prepared on the basis of the
accounting policies set out in the accounts for the year ended
31 March 2012. The following
amendments to existing standards and interpretations were effective
for the current period but did not have a material impact on the
accounts:
IAS 12 Income Taxes: Limited scope amendment (recovery of
underlying assets)
(effective for accounting periods beginning on or after
1 January 2012)
IFRS 7 (revised) Disclosures - Transfers of financial assets;
Offsetting of
financial assets and financial liabilities; and Initial
application of
IFRS 9 (effective at various dates beginning on or after
1 July 2011)
The interim accounts have been prepared on the going concern
basis as the directors, having considered available relevant
information, have a reasonable expectation that the Group has
adequate financial resources to continue in operational existence
for the next 12 months.
The interim accounts have not been audited or reviewed by
auditors pursuant to the Auditing Practices Board guidance on
"Review of Interim Financial Information performed by the
Independent Auditor of the Entity".
The information shown for the year ended 31 March 2012 does not constitute
statutory accounts within the meaning of Section 434 of the Companies Act 2006
and has been extracted from the Group's annual report for the year ended 31
March 2012, which has been filed with the Registrar of Companies. The report of
the auditors on the accounts contained within the Group's annual report for the
year ended 31 March 2012 was unqualified and did not contain a statement under
either Section 498(2) or Section 498(3) of the Companies Act 2006 regarding
inadequate accounting records or a failure to obtain necessary information and
explanations.
2. Revenue and Operating Profit
Six months ended Year ended
30 September 31 March
2012 2011 2012
£m £m £m
Revenue:
Based on regulated entitlement 121.6 109.4
238.9
Adjustment for regulatory correction factor 15.0 13.3 14.4
----- ----- -----
136.6 122.7 253.3
Interest receivable 0.2 0.2 0.3
----- ----- -----
136.8 122.9 253.6
===== ===== =====
Operating Profit:
Based on regulated entitlement 48.5 45.8
92.6
Adjustment for over-recovery 15.0 13.3 14.4
---- ---- ----
63.5 59.1 107.0
==== ==== ====
The regulatory correction factor represents the amount by which the amount of
revenue recovered in the period exceeds or falls short of the amount allowed by
the Group's price control formula.
The Group's operating activities, which are described in the
interim management report, comprise one operating segment.
3. Net Finance Costs
Six months ended Year ended
30 September 31 March
2012 2011 2012
£m £m £m
Interest receivable:
Interest receivable 0.2 0.2 0.3
---- ---- ----
Interest payable:
£175m bond (6.0) (6.0) (12.0)
£400m bond (12.8) (8.4) (21.2)
Amounts owed to ESB group undertakings - (1.7) (1.6)
Interest rate swaps - - -
---- ---- ----
(18.8) (16.1) (34.8)
Less: capitalised interest 0.4 0.5 1.6
---- ---- ----
Total interest charged to the income statement (18.4) (15.6)
(33.2)
---- ----
----
Other finance costs:
Amortisation of financing charges (0.1) (0.1) (0.2)
---- ---- ----
Total finance costs (18.5) (15.7) (33.4)
---- ---- ----
Net pension scheme interest:
Expected return on pension scheme assets 17.2 19.8
39.7
Interest on pension scheme liabilities (19.3) (20.5) (41.0)
---- ---- ----
(2.1) (0.7) (1.3)
---- ---- ----
Net finance costs (20.4) (16.2) (34.4)
==== ==== ====
4. Tax Charge
Six months ended Year ended
30 September 31 March
2012 2011 2012
£m £m £m
Current tax charge
UK corporation tax at 24% (2011 - 26%) 8.3 6.5
11.8
Corporation tax under provided in previous periods - - 1.1
---- ---- ----
Total current tax 8.3 6.5 12.9
---- ---- ----
Deferred tax charge
Origination and reversal of temporary differences 0.4 3.0
7.1
in current period
Origination and reversal of temporary differences - - (6.2)
relating to prior periods ---- ---- ----
Total deferred tax charge 0.4 3.0 0.9
---- ---- ----
Total tax charge 8.7 9.5 13.8
==== ==== ====
5. Capital Expenditure
Six months ended Year ended
30 September 31 March
2012 2011 2012
£m £m £m
Property, plant and equipment 50.1 53.1 111.1
Intangible assets - computer software 7.8 9.6
19.2
---- ---- ----
57.9 62.7 130.3
==== ==== ====
No assets were disposed of by the Group during the period (2011
- £nil).
6.Capital Commitments
At 30 September 2012 the Group had
contracted future capital expenditure in respect of property, plant
and equipment of £5.8m (2011 - £9.8m) and computer software assets
of £1.0m (2011 - £7.7m).
7. Net Debt
As at As at
30 September 31 March
2012 2011 2012
£m £m £m
Cash at bank and in hand 40.5 32.7 51.4
---- ---- ----
Debt due before 1 year:
Interest payable on £175m bond (0.4) (0.4)
(6.4)
Interest payable on £400m bond (8.4) (8.4) (21.2)
---- ---- ----
(8.8) (8.8) (27.6)
Debt due after 1 year:
Amounts owed to ESB group undertakings -
£175m bond (173.8) (173.7) (173.8)
£400m bond (397.9) (397.9) (397.9)
----- ----- -----
(571.7) (571.6) (571.7)
Total net debt ----- ----- -----
(540.0) (547.7) (547.9)
===== ===== =====
8. Pension Commitments
As at As at
30 September 31 March
2012 2011 2012
£m £m £m
Market value of assets 699.9 687.4 720.5
Actuarial value of liabilities (846.6) (788.1) (826.3)
----- ----- -----
Net pension liability (146.7) (100.7) (105.8)
===== ===== =====
Changes in the market value of assets
As at As at
30 September 31 March
2012 2011 2012
£m £m £m
Market value of assets at 1 April 720.5 705.5 705.5
Expected return 17.2 19.8 39.7
Contributions from employer 9.0 7.5 15.6
Contributions from scheme members 0.1 0.1
0.2
Benefits paid (22.5) (22.2) (44.6)
Actuarial (loss)/gain (24.4) (23.3) 3.4
Net transfer of assets in respect of - -
0.7
former employees ----- -----
-----
Market value of assets at period end 699.9 687.4
720.5
===== =====
=====
Changes in the actuarial value of liabilities As at As at
30 September 31 March
2012 2011 2012
£m £m £m
Actuarial value of liabilities at 1 April 826.3 746.1 746.1
Interest cost 19.3 20.5 41.0
Current service cost 1.2 0.9 2.0
Curtailment loss - - 0.2
Contributions from scheme members 0.1 0.1
0.2
Benefits paid (22.5) (22.2) (44.6)
Actuarial loss 22.2 42.7 81.4
----- ----- -----
Actuarial value of liabilities at period end 846.6 788.1
826.3
===== =====
=====
9. Related Party Transactions
During the six months ended 30 September
2012, the Group contributed £9.3m (2011 - £7.5m) to the
Northern Ireland Electricity Pension Scheme.
The immediate parent undertaking of the Group and the ultimate parent company
in the UK is ESBNI Limited (ESBNI). The ultimate parent undertaking and
controlling party of the Group and the parent of the smallest and largest group
of which NIE is a member and for which group accounts are prepared is
Electricity Supply Board (ESB), a statutory corporation established under the
Electricity (Supply) Act 1927 domiciled in the Republic of Ireland. A copy of
ESB's accounts is available from 27 Lower Fitzwilliam Street, Dublin 2.
Principal subsidiaries of ESB are related parties of the Group.
Transactions between the Group and related parties are disclosed
below:
Interest Other Amounts Amounts
Payable Revenue Charges trans- owed by owed to
to from from actions related related
related related related with parties at parties at
parties parties parties related period period
parties end end
£m £m £m £m £m £m
6 months to 30 September 2012
ESBNI - - - 0.8 - -
Other ESB subsidiaries - 10.1 (30.1) - 2.2 8.0
--- ---- ---- --- --- ---
- 10.1 (30.1) 0.8 2.2 8.0
=== ==== ==== === === ===
6 months to 30 September 2011
ESBNI (1.7) - - 358.0 - -
Other ESB subsidiarieis - 8.8 (28.1) - 1.5 5.6
--- --- ---- ---- --- ---
(1.7) 8.8 (28.1) 358.0 1.5 5.6
=== === ==== ==== === ===
Year to 31 March 2012
ESBNI (1.6) - - (359.7) - -
Other ESB subsidiaries - 23.5 (59.3) - 1.6 7.3
--- ---- ---- ---- --- ---
(1.6) 23.5 (59.3) (359.7) 1.6 7.3
=== ==== ==== ==== === ===
The directors confirm, that to the best of their knowledge:
(i) the interim accounts have been prepared in accordance with
IAS 34 as
adopted by the European Union and the Disclosure and
Transparency Rules of the
Financial Services Authority; and
(ii) the interim management report includes a fair review of the
information
required by DTR 4.2.7R of the Disclosure and Transparency
Rules.
By order of the Board
Joe O'Mahony
Managing Director
27 November 2012