REG - SSE Plc - Preliminary results for the year to 31 March 2015 <Origin Href="QuoteRef">SSE.L</Origin> - Part 5
15/07/2015 18:29
- Part 5: For the preceding part double click ID:nRST7125Nd
(709.6) (47.9) (757.5)
Provisions (395.7) (52.0) (447.7)
Other balance sheet items (6,599.4) 31.7 (6,567.7)
Net assets 5,119.5 - 5,119.5
Extract of Consolidated Cash Flow Statement Year ended 31 March 2014
Reported IFRS 11 Restated
£m £m £m
Cash generated from operations 2,408.1 131.7 2,539.8
Dividends received from joint ventures and associates 364.3 (260.2) 104.1
Other items (344.0) 0.2 (343.8)
Net cash from operating activities 2,428.4 (128.3) 2,300.1
Purchase of property, plant and equipment (1,432.3) (42.8) (1,475.1)
Proceeds from sale of property, plant and equipment - 158.6 158.6
Other items (578.2) - (578.2)
Net cash flows from investing activities (2,010.5) 115.8 (1,894.7)
Net cash flows from financing activities (514.4) - (514.4)
Net decrease in cash and cash equivalents (96.5) (12.5) (109.0)
Cash and cash equivalents at start of the year 538.7 28.9 567.6
Net decrease in cash and cash equivalents (96.5) (12.5) (109.0)
Cash and cash equivalents at the end of the year 442.2 16.4 458.6
Notes to the Preliminary Statement
for the year ended 31 March 2015
3. Standards, amendments and interpretations effective in 2015 (continued)
(iii) Other amendments effective in the financial year
The Group has also adopted a number of amendments to IFRSs as issued by the IASB in the financial year. These amendments
included amended disclosures and requirements in relation to IAS 32, IAS 36 and IAS 39. There was no material impact on
the Group's financial statements arising from the adoption of these amendments.
3.2 Effective in financial year ended 31 March 2016 and in future
At the date of authorisation of these financial statements, there are no other IFRSs or IFRIC interpretations that are
effective for the first time for the financial year ended 31 March 2015 that have had a material impact on the Group. The
Group has not early adopted any standard, interpretation or amendments that have been issued, but are not yet effective.
IFRS 15 'Revenue from contracts with customers' is effective on 1 January 2017 at the earliest, subject to European Union
(EU) endorsement; the amendments to IFRS 11 'Accounting for acquisitions of interests in joint operations', which are
effective on 1 January 2016, subject to EU endorsement; IFRS 9: 'Financial instruments', which will be effective on 1
January 2018, subject to EU endorsement, and a number of disclosure and requirement changes, including recommendations from
the IASB's Annual Improvement Projects.
The Group has not fully assessed the impact of adopting IFRS 9 and IFRS 15 and it is not practicable to provide a
quantified assessment of the effect of these standards in these financial statements. The Group will provide this
assessment of the financial impact in future financial statements.
4. Change of Reportable Segments
4.1 Establishment of Enterprise segment
Following changes to the structure of the Group's internal organisation, and subsequent changes to the way in which
financial and management information is presented to both the Board and the Executive Committee, the composition of the
Group's Reportable Segments changed in the financial year ended 31 March 2015.
The change to the Group's organisation structure was the establishment of the Enterprise business in order to bring
together a number of activities under single leadership. The change allows the energy and related needs of the Group's
industrial and commercial customers in competitive markets to be better met through an integrated approach. The services
being provided to these customers include electrical contracting, private energy networks, lighting services and telecoms
capacity and bandwidth.
As a result of this change, activities previously reported under Other Networks have been combined with electrical
contracting, previously reported under Energy-related Services, to derive the reported revenue and operating profit of the
Enterprise segment. As these are customer-facing businesses in competitive markets, these results are reported as part of
the Retail business. In the year to 31 March 2014, this Enterprise segment delivered adjusted operating profit of £56.8m.
The remaining part of the Energy-related Services segment (metering, home services and other products), which will also
continue to be reported separately under Retail, delivered adjusted operating profit of £24.1m in the year to 31 March
2014.
The changes to reported segments can be summarised as follows:
The Revenue by segment disclosure note for the year to March 2014 will be amended as follows:
(i) Revenue by segment
Year ended 31 March 2014
Total Revenue Reported Adjustment Restated
£m £m £m
Networks
Other Networks 346.1 (346.1) -
Retail
Enterprise - 594.7 594.7
Energy-related Services 467.1 (248.6) 218.5
467.1 346.1 813.2
Other segments unchanged 35,226. 1 - 35,226.1
Total 36,039.3 - 36,039.3
Notes to the Preliminary Statement
for the year ended 31 March 2015
4. Change of Reportable Segments (continued)
(ii) Operating profit by segment 1
Year ended 31 March 2014
Reported Adjustment Restated
£m £m £m
Networks
Other Networks 2.1 (2.1) -
Retail
Enterprise - 14.4 14.4
Energy-related Services (12.1) (12.3) (24.4)
(12.1) 2.1 (10.0)
Other segments unchanged 886.4 - 886.4
Total 876.4 - 876.4
1 Operating profit including exceptional items and certain re-measurements and share of joint venture and associate
interest and tax and after restatements in Note 3.1(ii).
4.2 Change in measurement basis
The Group announced in March 2014 that it intended to reorganise its activities so that there were separately auditable
legal entities responsible for its Energy Supply, Energy Portfolio Management (EPM) and Electricity Generation activities.
This change had been made in order to enhance the transparency of the measurement and reporting of the performance of these
activities.
As a result of the changes announced and subsequently implemented, the Group's basis of inter-segmental pricing and
consequential internal reporting has been changed in the year to 31 March 2015. The revised methodology ensures greater
market reflectivity, closer alignment with the operational decision-making in the respective businesses and has been
informed by the Group's engagement with the Competition and Markets Authority during the financial year. The Group will
provide comprehensive detail on the basis of the composition of the Great Britain components of these segments in its
Consolidated Segmental Statement (CSS), an audited mandatory regulatory document produced in accordance with Standard
Licence Condition 16B of Electricity Generation Licences and Standard Licence Condition 19A of the Electricity and Gas
Supply Licences. The CSS will be published by 31 July 2015.
The activities conducted in EPM and Electricity Generation will continue to be reported to the Board as a single reportable
operating segment.
Notes to the Preliminary Statement
for the year ended 31 March 2015
5. Critical accounting judgements and key sources of estimation uncertainty
In the process of applying the Group's accounting policies, management necessarily makes judgements and estimates that have
a significant effect on the amounts recognised in the financial statements. Changes in the assumptions underlying the
estimates could result in a significant impact to the financial statements. The Group's key accounting judgement and
estimation areas are noted with the most Significant Financial Judgement areas as specifically discussed by the Audit
Committee being highlighted separately.
5.1 Significant Financial Judgements
The Financial Statements have been prepared considering the following Significant Financial Judgements which include areas
of estimation uncertainty and accounting judgement:
(i) Revenue recognition - Estimation Uncertainty
Revenue from Retail energy supply activities includes an estimate of the value of electricity or gas supplied to customers
between the date of the last meter reading and the year end. This estimation will comprise of values for billed revenue in
relation to consumption from unread meters based on estimated consumption taking account of various factors including usage
patterns and weather trends (disclosed as trade receivables) and for unbilled revenue (disclosed as accrued income). The
volume of unbilled electricity or gas is calculated by assessing a number of factors such as externally notified volumes
supplied to customers, amounts billed to customers and other adjustments. Unbilled income is calculated by applying the
tariffs relevant to the customer type to the calculated volume of electricity or gas. This estimation methodology is
subject to an internal corroboration process that provides support for the judgements made by management. This process
requires the comparison of calculated unbilled volumes to a benchmark measure of unbilled volumes which is derived using
independently verified data and by assessing historical weather-adjusted consumption patterns and actual meter data that is
used in industry reconciliation processes for total consumption by supplier. This aspect of the corroboration process,
which requires a comparison of the estimated supplied quantity of gas and electricity that is deemed to have been delivered
to customers and the aggregate supplied quantity of gas and electricity applicable to the Group's customers that is
measured by industry system operators, is a key judgement. The experience of the Group is that following the
reconciliation procedures the industry deemed supplied quantities in gas have historically been higher than actual metered
supply. As a result, and through a continuous process of investigation into root cause, the Group applies a further
judgement being a percentage reduction to unbilled consumption volumes to the measurement of its unbilled revenue in the
financial statements.
(ii) Valuation of trade receivables - Estimation Uncertainty
The basis of determining the provisions for bad and doubtful debts are considered to be appropriate. Changes in estimation
basis or in economic conditions could lead to a change in the level of provisions recorded and consequently on the charge
or credit to the income statement.
(iii) Impairment testing and valuation of certain Non-Current Assets - Estimation Uncertainty
The Group reviews the carrying amounts of its goodwill, other intangible assets and property, plant and equipment to
determine whether there is any indication that the value of those assets is impaired. In conducting the reviews, the Group
makes judgements and estimates in considering the recoverable amount of the respective assets or cash-generating units
(CGUs). The key assets under review are goodwill, thermal power generation assets, wind farm CGUs and specific assets, gas
storage assets and exploration and production (E&P) assets. Changes to the estimates and assumptions on factors such as
regulation and legislation change, power, gas, carbon and other commodity prices, volatility of gas prices, plant running
regimes and load factors, expected 2P reserves, discount rates and other inputs could impact the assessed recoverable value
of assets and CGUs and consequently impact the Group's income statement and balance sheet.
(iv) Treatment of disputes and claims - Accounting Judgement
The Group is exposed to the risk of litigation and contractual disputes through the course of its normal operations. The
Group considers each instance separately in accordance with legal advice and will provide or disclose information as deemed
appropriate. Changes in the assumptions around the likelihood of an outflow of economic resources or the estimation of any
obligation would change the values recognised in the financial statements.
(v) Retirement benefits - Estimation Uncertainty
The assumptions in relation to the cost of providing post-retirement benefits during the period are based on the Group's
best estimates and are set after consultation with qualified actuaries. While these assumptions are believed to be
appropriate, a change in these assumptions would impact the level of the retirement benefit obligation recorded and the
cost to the Group of administering the schemes. The value of scheme assets are impacted by the asset ceiling test which
(a) restricts the surplus that can be recognised to assets that can be recovered fully through refunds and (b) may increase
the value of scheme liabilities where there are minimum funding liabilities in relation to agreed contributions.
5.2 Other key accounting judgements
Other key judgements and policy decisions applied in the preparation of these Financial Statements include the following:
Notes to the Preliminary Statement
for the year ended 31 March 2015
5. Critical accounting judgements and key sources of estimation uncertainty (continued)
5.2 Other key accounting judgements
Other key judgements and policy decisions applied in the preparation of these Financial Statements include the following:
(i) Exceptional items and certain re-measurements
As permitted by IAS 1 'Presentation of financial statements', the Group has disclosed additional information in respect of
joint ventures and associates, exceptional items and certain re-measurements on the face of the income statement to aid
understanding of the Group's financial performance.
An item is treated as exceptional if it is considered unusual by nature and scale and of such significance that separate
disclosure is required for the financial statements to be properly understood. These items will be non-recurring and may
include items such as asset or CGU impairment charges, restructuring costs or contractual settlements. Certain
re-measurements are re-measurements arising on certain commodity, interest rate and currency contracts which are accounted
for as held for trading or as fair value hedges in accordance with the Group's policy for such financial instruments. This
excludes commodity contracts not treated as financial instruments under IAS 39 where held for the Group's own use
requirements.
(ii) Adjusted measures
The Directors assess the performance of the reportable segments ('Operating profit/(loss) by segment', note 6) based on an
'adjusted profit before interest and tax' measure. This is the basis used for internal performance management and is
believed to be appropriate for explaining underlying performance. The adjusted profit before interest and tax is
reconciled to reported profit before interest and tax by adding back exceptional items, the net interest costs associated
with defined benefit schemes, remeasurements arising from IAS 39 and after the removal of taxation on profits from joint
ventures and associates. In addition, adjusted profit after tax will be reported on a basis consistent with this change.
The Directors also present details of an 'adjusted earnings per share' measure, which is based on basic earnings per share
before exceptional items, the net interest costs associated with defined benefit schemes, remeasurements arising from IAS
39 and after the removal of deferred taxation. The adjusted measures are considered more reflective of the Group's
underlying performance, are consistent with way the Group is managed and avoids volatility arising from IAS 39 fair value
measurements. This measure is also deemed the most useful for the ordinary shareholders of the Group.
The financial statements also include an 'adjusted net debt and hybrid capital' measure. This presents the information on
the basis used for internal liquidity risk management. This measure, which excludes obligations due under finance leases,
represents the capital owed to investors, lenders and equity holders other than the ordinary shareholders. As with
'adjusted earnings per share', this measure is considered to be of particular relevance to the ordinary shareholders of the
Group as well as other stakeholders and interested parties.
(iii) Business Combinations and acquisitions
Business combinations and acquisitions require a fair value exercise to be undertaken to allocate the purchase price to the
fair value of the identifiable assets acquired and the liabilities assumed. The determination of the fair value of the
assets and liabilities is based, to a considerable extent, on management's judgement. The amount of goodwill initially
recognised as a result of a business combination is dependent on the allocation of this purchase price to the identifiable
assets and liabilities with any unallocated portion being recorded as goodwill.
(iv) Energy Company Obligation (ECO) costs
The Energy Company Obligation ('ECO') legislation, in force since 1 January 2013, requires qualifying energy suppliers to
meet defined targets by providing measures to improve the energy efficiency of, and level of carbon emissions from, UK
domestic households. The targets for the Group's Energy Supply business are set based on historic customer information,
with delivery of the measures being required by 31 March 2017. The Group believes it is not technically obligated to
provide those measures until the end of the delivery period. As a consequence, and applying applicable accounting
standards, the costs of ECO are recorded when measures are delivered or other qualifying expenditure has been incurred.
5.3 Other areas of estimation uncertainty
(i) Provisions and contingencies
The assessments undertaken in recognising provisions and contingencies have been made in accordance with IAS 37.
Provisions are calculated based on estimations. The evaluation of the likelihood of the contingent events has required
best judgement by management regarding the probability of exposure to potential loss. Should circumstances change
following unforeseeable developments this likelihood could alter.
(ii) Decommissioning costs
The estimated costs of decommissioning at the end of the useful lives of the assets are reviewed periodically.
Decommissioning costs in relation to gas exploration and production assets are based on expected lives of the fields and
costs of decommissioning and are currently expected to be incurred predominantly between 2017 and 2030.
Notes to the Preliminary Statement
for the year ended 31 March 2015
5. Critical accounting judgements and key sources of estimation uncertainty (continued)
5.3 Other areas of estimation and uncertainty (continued)
(iii) Gas and liquids reserves
The volume of proven and probable gas and liquids reserves is an estimate that affects the unit of production depreciation
of producing gas and liquids property, plant and equipment. This is also a significant input estimate to the associated
impairment and decommissioning calculations. The impact of a change in estimated proven and probable reserves is dealt
with prospectively by depreciating the remaining book value of producing assets over the expected future production. If
proven and probable reserves estimates are revised downwards, earnings could be affected by higher depreciation expense or
an immediate write-down (impairment) of the asset's book value.
6. Segmental information
The Group's operating segments are those used internally by the Board to run the business and make strategic decisions.
The Group's main businesses and operating segments are the Networks business, compromising Electricity Distribution,
Electricity Transmission and Gas Distribution; the Retail business, compromising Energy Supply, Enterprise and
Energy-related Services; and Wholesale, comprising Energy Portfolio Management and Electricity Generation, Gas Storage and
Gas Production.
The types of products and services from which each reportable segment derives its revenues are:
Business Area Reported Segments Description
Networks Electricity Distribution The economically regulated lower voltage distribution of electricity to customer premises in the North of Scotland and the South of England
Electricity Transmission The economically regulated high voltage transmission of electricity from generating plant to the distribution network in the North of Scotland
Gas Distribution SSE's share of Scotia Gas Networks, which operates two economically regulated gas distribution networks in Scotland and the South of England
Retail Energy Supply The supply of electricity and gas to residential and business customers in the UK and Ireland
Enterprise The integrated provision of services in competitive markets for industrial and commercial customers including electrical contracting, private energy networks, lighting services and telecoms capacity and bandwidth
Energy-related Services The provision of energy-related goods and services to customers in the UK including meter reading and installation, boiler maintenance and installation and domestic telecoms and broadband services
Wholesale Energy Portfolio Management and Electricity Generation The generation of power from renewable and thermal plant in the UK, Ireland and Europe and the optimisation of SSE's power and gas and other commodity requirements
Gas Storage The operation of gas storage facilities in the UK
Gas Production The production and processing of gas and oil from North Sea fields
As noted in Note 5 Critical accounting judgements and key sources of estimation uncertainty, the internal measure of profit
used by the Board is 'adjusted profit before interest and tax' or 'adjusted operating profit' which is arrived at before
exceptional items, the impact of financial instruments measured under IAS 39, the net interest costs associated with
defined benefit pension schemes and after the removal of taxation and interest on profits from joint ventures and
associates.
Analysis of revenue, operating profit, assets and other items by segment is provided below. All revenue and profit before
taxation arise from operations within the United Kingdom and Ireland.
Notes to the Preliminary Statement
for the year ended 31 March 2015
6. Segmental information (continued)
a) Revenue by segment
External revenue Intra-segment revenue Total revenue External revenue Intra-segment revenue, restated (I) Total revenue,restated
(I)
2015£m 2015£m 2015£m 2014£m 2014£m 2014£m
Networks
Electricity Distribution 735.6 288.0 1,023.6 704.1 311.7 1,015.8
Electricity Transmission 246.7 0.2 246.9 185.2 - 185.2
982.3 288.2 1,270.5 889.3 311.7 1,201.0
Retail
Energy Supply 7,961.2 30.3 7,991.5 8,465.0 26.7 8,491.7
Enterprise 495.7 155.4 651.1 451.1 143.6 594.7
Energy-related Services 112.6 97.3 209.9 106.5 112.0 218.5
8,569.5 283.0 8,852.5 9,022.6 282.3 9,304.9
Wholesale
Energy Portfolio Management and Electricity Generation 22,023.7 4,015.4 26,039.1 20,608.5 4,246.0 24,854.5
Gas Storage 9.7 211.8 221.5 9.0 82.6 91.6
Gas Production 1.3 177.5 178.8 7.8 255.7 263.5
22,034.7 4,404.7 26,439.4 20,625.3 4,584.3 25,209.6
Corporate unallocated 67.9 225.8 293.7 47.8 276.0 323.8
Total 31,654.4 5,201.7 36,856.1 30,585.0 5,454.3 36,039.3
I. Significant intra-segment revenue is derived from use of system income received by the Electricity
Distribution business from Energy Supply; Energy Supply provides internal heat and light power supplies to other Group
companies; Enterprise provides electrical contracting services and telecoms infrastructure charges to other Group
companies; Energy-related Services provides metering and other services to other Group companies; Energy Portfolio
Management and Electricity Generation provides power, gas and other commodities to the Energy Supply segment; Gas Storage
provides the use of Gas Storage facilities to Energy Portfolio Management; Gas Production sells gas from producing North
Sea fields to the Electricity Generation and Energy Portfolio Management segment. Corporate unallocated provides corporate
and infrastructure services to the operating businesses. All are provided at arm's length basis.
Revenue within Energy Portfolio Management and Electricity Generation includes revenues from generation plant output and
the gross value of all wholesale commodity sales including settled physical and financial trades. These are entered into
to optimise the performance of the generation plants and to manage the Group's commodity risk exposure. Purchase trades
are included in cost of sales.
Revenue from the Group's investment in Scotia Gas Networks (SSE share being: 2015 - £541.3m; 2014 - £535.0m) is not
recorded in the revenue line in the income statement.
Revenue by geographical location is as follows:
2015 2014
£m £m
UK 30,923.3 29,727.9
Ireland 731.1 857.1
31,654.4 30,585.0
Notes to the Preliminary Statement
for the year ended 31 March 2015
6. Segmental information (continued)
b) Operating profit/(loss) by segment
2015
Adjusted operating profit reported to the Board JV / Associate share of interest and tax (I) Before exceptional items and certain re-measurements Exceptional items andcertain re-measurements Total
£m £m £m £m £m
Networks
Electricity Distribution 467.7 - 467.7 - 467.7
Electricity Transmission 184.1 - 184.1 - 184.1
Gas Distribution 285.0 (137.1) 147.9 5.3 153.2
936.8 (137.1) 799.7 5.3 805.0
Retail
Energy Supply 368.7 - 368.7 (34.2) 334.5
Enterprise 70.4 - 70.4 30.3 100.7
Energy-related Services 17.7 - 17.7 15.6 33.3
456.8 - 456.8 11.7 468.5
Wholesale
Energy Portfolio Management and Electricity Generation 433.3 (21.3) 412.0 (483.8) (71.8)
Gas Storage 3.9 - 3.9 (163.9) (160.0)
Gas Production 36.6 - 36.6 (106.0) (69.4)
473.8 (21.3) 452.5 (753.7) (301.2)
Corporate unallocated 14.0 - 14.0 (0.4) 13.6
Total 1,881.4 (158.4) 1,723.0 (737.1) 985.9
2014
Restated (note 4.1(ii)) Adjusted operating profit reported to the Board JV / Associate share of interest and tax (I) Before exceptional items and certain re-measurements Exceptional items and certain re-measurements Total
£m £m £m £m £m
Networks
Electricity Distribution 507.0 - 507.0 (7.1) 499.9
Electricity Transmission 136.7 - 136.7 (1.0) 135.7
Gas Distribution 276.6 (163.1) 113.5 68.9 182.4
920.3 (163.1) 757.2 60.8 818.0
Retail
Energy Supply 246.2 - 246.2 (43.2) 203.0
Enterprise 56.8 (0.1) 56.7 (42.3) 14.4
Energy-related Services 24.1 - 24.1 (48.5) (24.4)
327.1 (0.1) 327.0 (134.0) 193.0
Wholesale
Energy Portfolio Management and Electricity Generation 496.1 (8.1) 488.0 (607.4) (119.4)
Gas Storage 8.3 - 8.3 (137.7) (129.4)
Gas Production 130.2 - 130.2 - 130.2
634.6 (8.1) 626.5 (745.1) (118.6)
Corporate unallocated (1.9) - (1.9) (14.1) (16.0)
Total 1,880.1 (171.3) 1,708.8 (832.4) 876.4
I. The adjusted operating profit of the Group is reported after removal of the Group's share of interest, fair
value movements on financing derivatives and tax from joint ventures and associates and after adjusting for exceptional
items (see Note 7). The share of Scotia Gas Networks Limited interest includes loan stock interest payable to the
consortium shareholders (included in Gas Distribution). The Group has accounted for its 50% share of this, £33.3m (2014 -
£33.3m), as finance income (Note 8).
The Group's share of operating profit from joint ventures and associates has been recognised in the Energy Portfolio
Management and Electricity Generation segment other than that for Scotia Gas Networks Limited, which is recorded in Gas
Distribution, and PriDE (South East Regional Prime), which is recognised in Enterprise (£0.7m before tax; 2014 - £0.6m
before tax).
Notes to the Preliminary Statement
for the year ended 31 March 2015
7. Exceptional items and certain re-measurements
2015£m 2014£m
Exceptional items (i)
Asset impairments and related charges (667.5) (574.9)
Provisions for restructuring and other liabilities (56.0) (137.4)
Net gains on disposals of businesses and other assets 74.8 -
(648.7) (712.3)
Impairment of investments in joint ventures and associates (share of result) (25.9) (34.9)
(674.6) (747.2)
Share of effect of change in UK corporation tax on deferred tax liabilities and assets of associate and joint venture investments - 63.3
(674.6) (683.9)
Certain re-measurements (ii)
Movement on operating derivatives (note 17) (67.8) (150.9)
Movement on financing derivatives (note 17) (44.2) (64.2)
Share of movement on derivatives in jointly controlled entities (net of tax) 5.3 2.4
(106.7) (212.7)
Exceptional items before taxation (781.3) (896.6)
Taxation (iii)
Effect of change in UK corporation tax rate on deferred tax liabilities and assets 15.6 59.8
Taxation on other exceptional items 145.6 137.3
161.2 197.1
Taxation on certain re-measurements 39.2 63.7
Taxation 200.4 260.8
Exceptional items after taxation (580.9) (635.8)
Exceptional items categorised as: 2015£m 2014£m
Property, plant and equipment impairments (478.8) (370.3)
Intangible asset and goodwill impairments (95.6) (122.9)
Joint venture and associate investment impairments (25.9) (34.9)
Provisions (56.0) (105.3)
Net gains on disposals of businesses and assets 74.8 -
Other impairments and charges (93.1) (113.8)
Total before taxation (674.6) (747.2)
Notes to the Preliminary Statement
for the year ended 31 March 2015
7. Exceptional items and certain re-measurements (continued)
Exceptional items are disclosed across the following categories within the income statement:
2015£m 2014£m
Cost of sales:
Exceptional charges relating to Ferrybridge and Fiddler's Ferry (313.5) (238.4)
Other impairments relating to Generation assets (51.5) -
Exceptional charges relating to wind impairments - (125.4)
Exceptional charges relating to contractual settlements - (45.5)
Movement on operating derivatives (note 17) (67.8) (150.9)
(432.8) (560.2)
Operating costs:
All other exceptional charges (358.5) (303.0)
Operating income:
Net gains on disposals of businesses and other assets 74.8 -
Joint ventures and associates:
Impairment of investments (25.9) (34.9)
Share of movement on derivatives in jointly controlled entities (net of tax) 5.3 65.7
(20.6) 30.8
Operating loss (737.1) (832.4)
Finance costs
Movement on financing derivatives (note 17) (44.2) (64.2)
Loss before taxation (781.3) (896.6)
(i) Exceptional items
In the year to 31 March 2015, the Group recognised asset impairment and related charges totalling £667.5m and provisions of
£56.0m. These consisted of impairments and charges in relation to the Group's coal-fired plants at Ferrybridge and
Fiddler's Ferry (£313.5m), the Aldbrough gas storage facility (£163.9m), the North Sea gas production assets (£106.1m) and
certain other assets. The valuation of the Ferrybridge power station was impacted by the 31 July 2014 fire and both coal
plants have been subject to increasingly difficult economic conditions which was also reflected by the inability of both
units at Ferrybridge and one unit at Fiddler's Ferry to secure an agreement to provide capacity from October 2018 to
September 2019 in the first of the capacity auction run by DECC in December 2014. The North Sea gas production assets have
been impaired predominately due to declining wholesale gas prices and the gas storage facilities have been impacted by
reduced short term price volatility in the wholesale gas market and the announcement in March 2015 of redundancies at the
facilities. In addition to these charges, the Group recognised exceptional charges in relation to the impairment of
certain thermal generation development assets including the Abernedd gas-fired generation development in South Wales, which
also did not secure a capacity agreement for winter 2018 in the December 2014 auction. Other exceptional charges were
recognised in relation to the impairment of investments in thermal power generation joint ventures and associates
(£25.9m).
The Group benefitted from the recognition of £74.8m of exceptional credits in relation to the disposal of businesses and
assets that were held for sale at 31 March 2014, before recognition of associated provisions. This included gains in
relation to the seven street lighting PFIs sold to Equitix in November and the Group's share of the dividend from the
Environment Energy Fund's disposal of its stake in Anesco. Details of the disposals in the year are included at Note 13.
In the previous financial year, the Group recognised exceptional charges arising from and related to asset impairments
amounting to £574.9m. This consisted of impairment charges in respect of thermal and renewable generation plant of £363.9m
which included the impact of the decision to scale back the Group's involvement in certain offshore wind developments. The
total also included impairment charges against gas storage facilities of £137.7m and charges of £73.3m in relation to
recognition of losses and costs arising from the decision to exit from certain non-core businesses following the
announcement of its restructuring and disposal programme on 26 March 2014. This latter item also includes impairment
charges of £36.2m in relation to system and software development across the energy supply and metering businesses.
Other exceptional charges of £137.4m were recognised in the previous financial year. This included charges of £91.0m in
relation to the March 2014 restructuring announcement, including a restructuring provision primarily relating to the scheme
of employee voluntary early release of £52.9m and provisions associated with business closures and contractual disputes of
£84.5m.
Notes to the Preliminary Statement
for the year ended 31 March 2015
7. Exceptional items and certain re-measurements (continued)
(ii) Certain re-measurements
Certain re-measurements arising from IAS 39 are disclosed separately to aid understanding of the underlying performance of
the Group. This category includes the movement on derivatives (and hedged items) as described in note 17. Only certain of
the Group's energy commodity contracts are deemed to constitute financial instruments under IAS 39. As a result, while the
Group manages the commodity price risk associated with both financial and non-financial commodity contracts, it is only
commodity contracts that are designated as financial instruments under IAS 39 that are accounted for on a fair value basis
with changes in fair value reflected in the income statement (as part of 'certain re-measurements') or in other
comprehensive income. Conversely, commodity contracts that are not financial instruments under IAS 39 are accounted for as
'own use' contracts.
(iii) Change in UK corporation tax rates
Finance Act 2015, which received royal assent on 26 March 2015, announced that the rate of Supplementary Charge (SCT) was
reduced to 20% (previously 32%), with effect from 1 January 2015. This results in a hybrid SCT rate of 29% for the Group's
upstream oil and gas operations for the year to 31 March 2015 (2014 - 32%). Finance Act 2015 also enacted a reduction in
the rate of Petroleum Revenue Tax (PRT) to 35% from 1 January 2016 from the current 50%. As these changes have been
substantively enacted they have the effect of reducing the Group's deferred tax liabilities by £15.6m.
The Group has also separately recognised the tax effect of the exceptional items and certain re-measurements summarised
above.
8. Finance income and costs
2015 2014
Before Exceptional items and certain re-measurements £m Exceptional items and certain re-measurements £m Total£m Before Exceptional items and certain re-measurements (restated)£m Exceptional items and certain re-measure ments (restated)£m Total (restated, note 3) £m
Finance income:
Interest income from short term deposits 1.1 - 1.1 1.7 - 1.7
Foreign exchange translation of monetary assets and liabilities - - - 19.3 - 19.3
Other interest receivable:
Scotia Gas Networks loan stock 33.3 - 33.3 33.3 - 33.3
Other joint ventures and associates 14.8 - 14.8 11.7 - 11.7
Other receivable 46.7 - 46.7 56.7 - 56.7
94.8 - 94.8 101.7 - 101.7
Total finance income 95.9 - 95.9 122.7 - 122.7
- More to follow, for following part double click ID:nRST7125NfRecent news on SSE
See all newsREG - SSE Plc - Director/PDMR Shareholding
AnnouncementREG - SSE Plc - Holding(s) in Company
AnnouncementREG - SSE Plc - Result of AGM
AnnouncementREG - SSE Plc - Q1 Trading Statement
AnnouncementREG - SSE Plc - Director/PDMR Shareholding
Announcement