REG - ENW Finance plc - Half-year Report
29/11/2021 15:45
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RNS Number : 9234T ENW Finance plc 29 November 2021
ENW Finance Plc (the "Company") is pleased to announce its Half Year Financial
Report for the period ended 30 September 2021.
The Half Year Report is available to view on the Company's website:
https://www.enwl.co.uk/about-us/news/stock-exchange-announcements
(https://www.enwl.co.uk/about-us/news/stock-exchange-announcements) .
For further information please contact Electricity North West's press office
on 0844 209 1957 or email pressoffice@enwl.co.uk
(mailto:pressoffice@enwl.co.uk) .
Company Registration No. 06845434
ENW FINANCE PLC
Half Year Condensed Financial Statements
for the period ended 30 September 2021
Contents
Interim Management
Report.........................................................................................................
1
Condensed Profit and Loss
Account..............................................................................................
4
Condensed Balanced
Sheet...........................................................................................................
5
Condensed Statement of Changes in
Equity...................................................................................
6
Notes to the Condensed Financial
Statements...............................................................................
7
Interim Management Report
Cautionary statement
This interim management report contains certain forward-looking statements
with respect to the financial condition and business of ENW Finance plc ("the
Company"). Statements or forecasts relating to events in the future
necessarily involve risk and uncertainty and are made by the Directors in good
faith based on the information available at the date of signature of this
report, with no obligation to update these forward-looking statements.
Nothing in this unaudited interim management report should be construed as a
profit forecast nor should past performance be relied upon as a guide to
future performance.
Financial statements
The Annual Report and Consolidated Financial Statements of the Company can be
found at www.enwl.co.uk (http://www.enwl.co.uk) .
Operations
The Company acts as a financing company within the North West Electricity
Networks (Jersey) Limited ("NWEN (Jersey)") group of companies ("the
Group").
During the period, the Company had a £200m 6.125% 2021 bond and a £300m
1.415% 2030 bond in issue, both listed on the London Stock Exchange.
Following the issue of this debt, the Company lent the net proceeds to a
fellow group subsidiary, Electricity North West Limited ("ENWL").
The £200m 6.125% 2021 bond, and the associated inter-company loan asset,
matured and were repaid during the period.
There have been no other significant changes to the activity of the Company in
the current period.
Results
The results for the period are included in the Condensed Profit and Loss
Account on page 4.
Other than the repayment of the bond and associated inter-company loan, there
have been no significant events in the 6 months ended 30 September 2021 in
respect of the Company.
Principal risks and uncertainties
As the Company's obligations in respect of the listed debt are met via income
receivable from ENWL, the Board considers the principal risks and
uncertainties facing the Company to be those that affect ENWL and the larger
Group.
The principal trade and activities of the Group are carried out in ENWL and a
comprehensive review of the strategy and operating model, the regulatory
environment, the resources and principal risks and uncertainties facing that
company, and ultimately the Group, are outlined in the Strategic Report of the
ENWL Annual Report and Consolidated Financial Statements for the year ended 31
March 2021, which are available on the website, www.enwl.co.uk
(http://www.enwl.co.uk) .
An assessment of the change in risk has been carried out and the principal
risks are deemed comparable to those at the last annual report, except for the
refinancing risk in the Company. The £200m listed bonds, and associated
inter-company loan asset, matured and were repaid in July 2021, thus
eliminating the refinancing risk of this debt.
The Company has exposure to interest rate risk and inflation risk; the company
inter-company index-linked swap and hybrid asset are exposed to a risk of
change in fair value arising from a change of future cash flows due to changes
in market interest rates and inflation rates. This exposure is limited as
the impact on the inter-company index-linked swap (liability) is largely
offset by an opposite impact on the embedded derivative (asset) element of the
hybrid asset.
Interim Management Report (continued)
Going concern
When considering whether to continue to adopt the going concern basis in
preparing these condensed financial statements, the Directors have taken into
account a number of factors, including the financial position of the Company
and the Group in which it operates.
The Company is ultimately a subsidiary of NWEN (Jersey); the key trading
subsidiary in the Group is ENWL. As the Company's obligations in respect of
the listed debt are met via income receivable from ENWL, the Board considers
the principal risks and uncertainties facing the Company to be those that
affect ENWL and the larger Group. The 2021 bonds, and the associated
inter-company loan asset, matured and were repaid during the period.
In consideration of this, the Directors of this Company are cognisant of the
going concern disclosure in the Half Year Condensed Consolidated Financial
Statements of ENWL. Disclosure of the considerations made by the Directors
in terms of the ENWL cash flows, liquidity position, borrowing facilities and
covenant compliance can be found in the ENWL Half Year Condensed Consolidated
Financial Statements available on the website, www.enwl.co.uk
(http://www.enwl.co.uk) .
The Board has given detailed consideration to the principal risks and
uncertainties affecting the Group and Company, as referred to above, and all
other factors which could impact on the Group and the Company's ability to
remain a going concern.
Consequently, after making appropriate enquiries, the Directors have a
reasonable expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they continue
to adopt the going concern basis in preparing the Half Year Condensed
Financial Statements.
The going concern basis has been adopted by the Directors, with consideration
of the guidance published by the Financial Reporting Council.
Ultimate parent undertaking and controlling party
The immediate parent undertaking is North West Electricity Networks plc ("NWEN
plc"), a company incorporated and registered in the United Kingdom. The
ultimate parent undertaking is NWEN (Jersey), a company incorporated and
registered in Jersey.
The ownership of the shares in NWEN (Jersey) and, therefore, the ultimate
controlling parties of the Company are:
· KDM Power Limited (40.0%);
· Equitix ENW 6 Limited (25.0%);
· Equitix MA North HoldCo Limited (15.0%); and
· Swingford Holdings Corporation Limited (20.0%).
Interim Management Report (continued)
Directors
The Directors who held office during the period are given below. Directors
served for the whole six-months, and to the date of this report, except where
otherwise indicated.
Executive Directors
· P Emery
· D Brocksom
Non-executive Directors
· R Holden
· S Jones
· P O'Flaherty
· G Pan
· S Sumitomo
· T Tanaka
Alternate Directors
· A Bhuwania
· K Fukushima
· F Kumura
· H Yu
Responsibility statement
We confirm that to the best of our knowledge:
· the condensed set of financial statements, which has been prepared in
accordance with the applicable set of accounting standards, gives a true and
fair view of the assets, liabilities, financial position and profit or loss of
the issuer as required by DTR 4.2.4R;
· the interim management report includes a fair review of the
information required by DTR 4.2.7R; and
· the condensed set of financial statements has been prepared in
accordance with FRS104 'Interim Financial Reporting'.
Registered address
ENW Finance plc
Borron Street
Stockport
Cheshire
SK1 2JD
Approved by the Board of Directors and signed on its behalf:
D Brocksom
Chief Financial Officer
29 November 2021
Condensed Profit and Loss Account
For the period ended 30 September 2021
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 2021 30 Sept 2020 31 Mar 2021 £000
Note £000 £000
Operating result - - -
Interest receivable from group companies 4 5,897 4,498 10,412
Net interest payable and similar charges 5 (5,813) (6,860) (17,281)
Profit/(loss) before taxation 84 (2,362) (6,869)
Taxation 6 (114) 365 1,138
Profit/(loss) for the period attributable to equity shareholders of the (30) (1,997) (5,731)
Company
All the results for the current and prior periods are derived from continuing
operations.
There were no other items of comprehensive income, other than the results
shown above, therefore no separate Statement of Comprehensive Income has been
presented.
Condensed Balance Sheet
As at 30 September 2021
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 2021 30 Sept 2020 31 Mar 2021 £000
Note £000 £000
ASSETS
Non-current assets
Loans to group undertakings 7 723,612 913,032 665,861
Current assets
Loans to group undertakings 7 - - 223,838
Amounts due from group undertakings 8 6,322 5,931 8,168
Cash and cash equivalents 12 12 12
6,334 5,943 232,018
Total assets 729,946 918,975 897,879
LIABILITIES
Current liabilities
Borrowings 9 - (199,851) (199,934)
Accrued interest (715) (3,109) (5,228)
Amounts due to group undertaking (5,166) (4,816) (4,989)
(5,881) (207,776) (210,151)
Net current liabilities 453 (201,833) (21,867)
Total assets less current liabilities 724,065 711,199 687,728
Non-current liabilities
Borrowings 9 (299,272) (299,189) (299,230)
Derivative financial instruments 10 (404,031) (386,475) (367,643)
Deferred tax (2,830) (3,839) (2,893)
(706,133) (689,503) (669,766)
Total liabilities (712,014) (897,279) (879,917)
Total net assets 17,932 21,696 17,692
CAPITAL AND RESERVES
Called up share capital 13 13 13
Profit and loss account 17,919 21,683 17,949
Total shareholders' funds 17,932 21,696 17,962
Approved by the Board of Directors on 29 November 2021 and signed on its
behalf by:
D Brocksom
Director
Condensed Statement of Changes in Equity
For the period ended 30 September 2021
Called up share capital Profit and loss account Total
equity
£000 £000 £000
At 31 March 2020 (audited) 13 23,680 23,693
Loss for the period - (1,997) (1,997)
At 30 September 2020 (unaudited) 13 21,683 21,696
At 31 March 2020 (audited) 13 23,680 23,693
Loss for the year - (5,731) (5,731)
At 31 March 2021 (audited) 13 17,949 17,962
Profit for the period - (30) (30)
At 30 September 2021 (unaudited) 13 17,919 17,932
Notes to the Condensed Financial Statements
1. General Information
ENW Finance plc is a company incorporated in the United Kingdom, and
registered in England and Wales, under the Companies Act 2006.
The financial information for the six-month period ended 30 September 2021 and
similarly the six-month period ended 30 September 2020, has not been audited
or reviewed by the auditor. The financial information for the year ended 31
March 2021 has been based on information in the audited financial statements
for that year.
The financial information for the year ended 31 March 2021 does not constitute
the statutory financial statements for that year (as defined in s434 of the
Companies Act 2006), but is derived from those financial statements.
Statutory financial statements for 31 March 2021 have been delivered to the
Registrar of Companies. The auditor reported on those financial statements:
their report was unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under s498(2) or s498(3) of the
Companies Act 2006.
2. Significant accounting policies
Basis of preparation
The Company has adopted Financial Reporting Standard 101 'Reduced Disclosure
Framework' (FRS 101) on the basis that it meets the definition of a qualifying
entity under FRS 100 'Application of Financial Reporting Requirements'. The
Annual Report and Financial Statements have, therefore, been prepared in
accordance with FRS 101, as issued by the Financial Reporting Council. The
Half Year Condensed Financial Statements of the Company, have been prepared in
accordance with FRS 104 'Interim Financial Reporting'.
As permitted by FRS 101 and FRS 104, for all periods presented, the Company
has taken advantage of the disclosure exemptions available under FRS 101 in
relation to financial instruments, capital management, presentation of cash
flow statement, standards not yet effective and related party transactions
with other wholly-owned members of the Group.
The results for the period ended 30 September 2021 have been prepared using
the same method of computation and the same accounting policies set out in the
Annual Report and Financial Statements of ENW Finance plc for the year ended
31 March 2021.
The Directors do not believe that the Company is affected by seasonal factors
which would have a material effect on the performance of the Company when
comparing the interim results to those expected to be achieved in the second
half of the year.
These condensed financial statements are prepared on the going concern
basis. Further detail on the going concern assessment is contained in the
Interim Management Report.
These condensed financial statements are presented in sterling, the functional
currency of the Company. All values are stated in thousand pounds (£'000)
unless otherwise indicated.
Changes in accounting policy
There are no accounting policies and standards adopted for the six-month
period ended 30 September 2021, or for the remainder of the year to 31 March
2022, that have a significant impact on the Company.
Notes to the Condensed Financial Statements (continued)
3. Critical accounting judgements and key sources of estimation
uncertainty
In the application of the Company's accounting policies the directors are
required to make judgements (other than those involving estimations) that have
a significant impact on the amounts recognised and to make estimates and
assumptions about the carrying amounts of assets and liabilities that are not
readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
Such estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period; or in the period
of the revision and future periods if the revision affects both current and
future periods.
The Directors do not deem there to be any critical accounting judgements that
affect the Company.
Key sources of estimation uncertainty
Financial instruments at fair value through profit or loss (FVTPL)
In estimating the fair value of derivative financial instruments, the Company
uses market-observable data (Level 1 and 2 inputs) to the extent it is
available. Where such data is not available, certain estimates (Level 3
inputs) regarding inputs to the valuation are required to be made. Level 3
inputs form a significant part of the fair value of the financial instruments
held by the Group. Information about the valuation techniques and inputs
used are disclosed in Note 10.
4. Interest receivable from group companies
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 2021 30 Sept 2020 31 Mar 2021 £000
£000 £000
From parent company on loan at amortised cost 180 195 376
From group undertaking on hybrid loan asset at FVTPL 3,557 3,557 2,912
From group undertaking on loan at amortised cost 2,160 746 7,124
Interest receivable from group companies 5,897 4,498 10,412
Notes to the Condensed Financial Statements (continued)
5. Net interest payable and similar charges
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 2021 30 Sept 2020 31 Mar 2021 £000
£000 £000
Interest payable:
On borrowings held at amortised cost 5,965 6,984 15,351
Net receipts on inter-company derivatives (2,568) (2,568) (5,136)
Impairment of inter-company loan (Note 7) 100 156 77
Reimbursement of inter-company loan impairment (Note 7) (100) (156) (77)
Total interest expense 3,397 4,416 10,215
Fair value movements on financial instruments:
On inter-company hybrid asset at FVTPL (33,972) (42,728) (19,274)
On inter-company derivatives 36,388 45,172 26,340
Total fair value movements (Note 10) 2,416 2,444 7,066
Net interest payable and similar charges 5,813 6,860 17,281
6. Taxation
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 2021 30 Sept 2020 31 Mar 2021 £000
£000 £000
Corporation tax:
Current period 177 167 340
Deferred tax:
Current period (651) (532) (1,478)
Impact of change in future tax rates 588 (532) (1,478)
Tax credit for the period 114 (365) (1,138)
Corporation tax is calculated at 19% (30 Sept 2020: 19%, 31 Mar 2020: 19%) of
the estimated assessable profit for the period.
The tax charge in future periods will be affected by the announcement on 3
March 2021 that the corporation tax rate will be increased to 25% from 1 April
2023. This was substantively enacted on 24 May 2021.
Deferred tax is calculated using the rate at which it is expected to
reverse. Accordingly, the deferred tax has been calculated on the basis that
it will reverse in future at the 25% (2020: 19%) rate, except where it is
known that it will reverse before 1 April 2023 when the 19% rate has been
used.
Notes to the Condensed Financial Statements (continued)
7. Loans to group undertakings
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 2021 30 Sept 2020 31 Mar 2021 £000
£000 £000
Non-current:
Loan to parent company at amortised cost 20,500 20,500 -
Impairment of loan (12) (11) -
Hybrid loan to group undertaking at FVTPL (Note 10) 404,031 593,513 366,716
Loan to group undertaking at amortised cost 299,272 299,189 299,230
Impairment of loan (179) (811) (85)
Total 723,612 913,032 665,861
Current:
Loan to parent company at amortised cost - - 20,500
Impairment of loan - - (6)
Hybrid loan to group undertaking at FVTPL (Note 10) - - 203,344
Total - - 223,838
Interest due on loans to Group undertakings 6,322 5,931 8,168
On 21 July 2009, the Company lent £20.5m to the immediate parent company,
NWEN plc; this inter-company loan is measured at amortised cost and was due
for repayment in July 2021, but at that time was extended to July 2030.
On 21 July 2009, the Company lent ENWL £198.2m net proceeds of the £200.0m
6.125% fixed rate bond maturing in 2021, on terms aligned to the terms of the
external bond (see Note 09) and associated intercompany hedging arrangements,
which formed an embedded derivative. The entire hybrid asset is required to
be measured at fair value through profit or loss (see Note 10). This
inter-company loan matures in July 2038, with a £200.0m principal payment
linked to the loan element paid in July 2021.
On 30 July 2020, the Company lent ENWL £299.2m net proceeds of the £300m
1.415% fixed rate bond maturing in 2030, on terms aligned to the terms of the
external bond (see Note 8). This inter-company loan is measured at amortised
cost and is due for repayment in July 2030.
Notes to the Condensed Financial Statements (continued)
7. Loans to group undertakings (continued)
Impairment
Financial assets measured at amortised cost are subject to impairment. The
credit risk of the inter-company loan at amortised cost has been assessed as
low. Accordingly, any loss allowance is measured at an amount equal to
12-month expected credit loss (ECL). In determining the ECL for this asset,
the directors of the Company have taken into account the historical default
experience, the financial position of the counterparty, as well as the future
prospects of the industry, as appropriate, in estimating the probability of
default and loss upon default.
In accordance with provisions within the inter-company loan agreement, the
Company has requested the reimbursement of the impairment charges incurred to
date (Note 5).
No impairment assessment is required for financial assets held at FVTPL.
8. Amounts due from group undertakings
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 2021 30 Sept 2020 31 Mar 2021 £000
£000 £000
Accrued interest due from parent company 5,280 4,915 5,103
Accrued interest due from group undertaking 851 845 2,973
Reimbursement of impairment due from parent company 12 11 7
Reimbursement of impairment due from group undertaking 179 160 85
Amounts due from group undertakings 6,322 5,931 8,168
9. Borrowings
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 2021 30 Sept 2020 31 Mar 2021 £000
£000 £000
Borrowings due in less than one year:
Bonds held at amortised cost - 199,851 199,934
Borrowings due in more than one year:
Bonds held at amortised cost 299,272 299,189 299,230
At 30 Sept 2021, the Company had a £300m 1.415% fixed rate bond in issue,
maturing in July 2030 and guaranteed by ENWL (30 Sept 2020: same, 31 Mar 2021:
same).
During the period ended 30 Sept 2021 the Company repaid a £200m 6.125% fixed
rate bond on maturity, in July 2021. This bond was guaranteed by ENWL (30
Sept 2019: same, 31 Mar 2020: same).
Notes to the Condensed Financial Statements (continued)
10. Financial instruments
Fair values
All of the fair value measurements recognised in the balance sheet for the
Company occur on a recurring basis.
Where available, market values have been used to determine fair values (Level
1 inputs).
Where market values are not available, fair values have been calculated by
discounting future cash flows at prevailing interest and RPI rates sourced
from market data (Level 2 inputs). In accordance with IFRS 13, an adjustment
for non-performance risk has then been made to give the fair value.
The non-performance risk has been quantified by calculating either a credit
valuation adjustment (CVA) based on the credit risk profile of the
counterparty, or a debit valuation adjustment (DVA) based on the credit risk
profile of the relevant group entity, using market-available data.
Whilst the majority of the inputs to the CVA and DVA calculations meet the
criteria for Level 2 inputs, certain inputs regarding the Group's credit risk
are deemed to be Level 3 inputs, due to the lack of market-available data.
The credit risk profile of the Group has been built using the few
market-available data points, e.g. credit spreads on the listed bonds, and
then extrapolated over the term of the derivatives. It is this extrapolation
that is deemed to be Level 3. All other inputs to both the underlying
valuation and the CVA and DVA calculations are Level 2 inputs.
The Level 3 inputs form a significant part of the fair value and, as such,
these financial instruments are disclosed as Level 3.
The adjustment for non-performance risk as at 30 September 2021 is £33.2m, on
each of the hybrid asset and derivative liability (30 September 2020: £45.3m,
31 March 2021: £36.7m), all of which (30 September 2020: same, 31 March 2021:
same) is classed as Level 3.
On entering certain derivatives, the valuation technique used resulted in a
fair value gain on the hybrid asset and a fair loss on the derivative
liability. As this, however, was neither evidenced by a quoted price nor
based on a valuation technique using only data from observable markets, this
loss on initial recognition was not recognised. This was supported by the
transaction price of nil. This difference is being recognised in profit or
loss on a straight-line basis over the life of the derivatives. The
aggregate difference yet to be recognised in profit or loss is £22.5m (30
September 2020: £25.7m, 31 March 2021: £24.1m) on the hybrid asset and
£22.5m (30 September 2020: £23.9m, 31 March 2021: £23.2m) on the derivative
liability. The movement in the period all relates to the straight-line
release to profit or loss.
There were no transfers between levels during the current period (30 September
2020: same, 31 March 2020: same).
Notes to the Condensed Financial Statements (continued)
10. Financial instruments (continued)
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 2021 30 Sept 2020 31 Mar 2021 £000
£000 £000
FV of hybrid asset pre IFRS 13 adjustment 459,716 664,514 630,851
CVA/ DVA (33,159) (45,282) (36,667)
Day 1 adjustments (22,526) (25,719) (24,125)
IFRS 13 FV of hybrid asset (Note 7) 404,031 593,513 570,059
FV of derivative liability pre IFRS 13 adjustment (459,716) (455,622) (427,507)
CVA/ DVA 33,159 45,282 36,667
Day 1 adjustments 22,526 23,865 23,197
IFRS 13 FV of derivative liability (404,031) (386,475) (367,643)
Categories of financial instruments at FVTPL
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 2021 30 Sept 2020 31 Mar 2021 £000
£000 £000
Hybrid loan to affiliated company at FVTPL (Note 7) 404,031 593,513 570,060
Inter-company derivative financial liabilities (404,031) (386,475) (367,643)
Profit or loss for the period has been derived after charging/ (crediting) the
following fair value movements:
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 2021 30 Sept 2020 31 Mar 2021 £000
£000 £000
Hybrid loan to affiliated company at FVTPL (33,972) (42,728) (19,274)
Inter-company derivative financial liabilities 36,388 45,172 26,340
Net charge to Profit and Loss Account (Note 5) 2,416 2,444 7,066
For cash and cash equivalents, trade and other receivables and trade and other
payables the book values approximate to the fair values because of their
short-term nature.
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