TIDMBC39
RNS Number : 1411J
Yorkshire Electricity Distribution
24 March 2010
The following regulated information, disseminated pursuant to DTR 6.3.5,
comprises the Annual Report and Accounts of Yorkshire Electricity Distribution
plc for the year ended 31 December 2009.
Pursuant to LR 9.6.1, two copies of the document have been submitted to the UK
Listing Authority and will shortly be available for inspection at the UK Listing
Authority's Document Viewing Facility, which is situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS
Tel. No. 020 7066 8224
The 2009 Annual Report and Accounts are also available on the website
www.ce-electricuk.com
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
REPORT & ACCOUNTS
TO 31 DECEMBER 2009
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
REPORT AND ACCOUNTS TO 31 DECEMBER 2009
CONTENTS
Directors' Report
1
Business Review
2
Review of the Year
2
Strategic Objectives
3
Principal Risks and Uncertainties
3
Internal Control
6
Financial Strength
7
Customer Service
11
Operational Excellence
12
Employee Commitment
15
Environmental Respect
17
Regulatory Integrity
19
Corporate Governance Statement
23
Responsibility Statement of the Directors in respect of the Annual Report and
Accounts 29
Independent Auditors' Report to the Members of Yorkshire Electricity
Distribution plc 30
Income Statement
32
Statement of Comprehensive Income
32
Statement of Changes in Equity
33
Balance Sheet
34
Cash Flow Statement
35
Notes to the Accounts
36
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
Registered Office: Lloyds Court, 78 Grey Street, Newcastle upon Tyne, NE1 6AF
DIRECTORS' REPORT
Cautionary statement regarding forward-looking statements
This annual report has been prepared for the members of the Company only. The
Company, its directors, employees or agents do not accept or assume
responsibility to any other person in connection with this document and any such
responsibility or liability is expressly disclaimed. This annual report contains
certain forward-looking statements, which can be identified by the fact that
they do not relate only to historical or current facts. In particular, all
statements that express forecasts, expectations and projections with respect to
future matters, including trends in results of operations, business prospects,
the availability of financing to the Company and anticipated cost savings are
forward-looking statements.
By their nature, these statements and forecasts involve risk and uncertainty
because they relate to events and depend on circumstances that may or may not
occur in the future. There are a number of factors that could cause actual
results or developments to differ materially from those expressed or implied by
these forward-looking statements and forecasts. The forward-looking statements
reflect the knowledge and information available at the date of preparation of
this annual report and will not be updated during the year. Nothing in this
annual report should be construed as a profit forecast.
The directors present the annual report and accounts of Yorkshire Electricity
Distribution plc (the "Company") for the year ended 31 December 2009, which
includes the business review and audited financial statements for that year.
Pages 1 to 28 inclusive of this annual report comprise a directors' report that
has been drawn up and presented in accordance with the Companies Act 2006.
PRINCIPAL ACTIVITIES
The Company is part of the CE Electric UK Funding Company group of companies
(the "CE Group") and its principal activity during the year was to distribute
electricity to customers connected to its electricity distribution network.
The Company serves an area of approximately 10,700 sq. km encompassing the
counties of West Yorkshire, East Yorkshire and almost all of South Yorkshire,
together with parts of North Yorkshire, Derbyshire, Nottinghamshire,
Lincolnshire and Lancashire, receives electricity from the National Grid's
transmission system and distributes it to approximately 2.2 million customers
connected to its electricity distribution network of transformers, switchgear
and overhead and underground cables, at voltages of up to 132kV. The Company is
an authorised distributor under the Electricity Act 1989 and holds an
electricity distribution licence granted by the Secretary of State. During the
year, the Company distributed electricity to customers in its distribution
services area and continued to improve the overall performance of its
distribution network through its investment strategy being targeted at
delivering improvements in an efficient and cost-effective manner.
In common with the CE Group, the Company operates a business model and strategy
based on its six core principles (the "Core Principles"), which remain
consistent and are:
+---------------+----------------------------+----------------------+
| Principle | Strategy | Indicator |
| | | |
+---------------+----------------------------+----------------------+
| Financial | Effective stewardship of | Profitability. |
| strength | the Company's financial | Cash flow. |
| | resources, investing in | Maintenance of |
| | assets and focusing on | investment grade |
| | long term opportunities, | credit ratings. |
| | which contribute to the | |
| | Company's future strength. | |
| | | |
+---------------+----------------------------+----------------------+
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
PRINCIPAL ACTIVITIES (continued)
+---------------+----------------------------+----------------------+
| Principle | Strategy | Indicator |
+---------------+----------------------------+----------------------+
| Customer | Delivering reliability, | Improving network |
| service | fair prices and | resilience and |
| | exceptional service. | performance, |
| | | measured by: |
| | | Customer minutes |
| | | lost; |
| | | Customer |
| | | interruptions; and |
| | | Customer |
| | | satisfaction. |
+---------------+----------------------------+----------------------+
| Operational | Setting high standards for | Effective asset |
| excellence | the Company's operations | management. |
| | and system investment, | Managing commercial |
| | operation and maintenance. | risk. |
| | | Improving network |
| | | resilience and |
| | | performance. |
| | | |
+---------------+----------------------------+----------------------+
| Employee | Equipping employees with | Leading safety |
| commitment | the resources and skills | performer. |
| | they need to operate | Engaging employees. |
| | successfully and in a safe | Effective |
| | and rewarding environment. | leadership. |
| | | |
+---------------+----------------------------+----------------------+
| Environmental | Using natural resources | Reducing |
| respect | wisely and effectively | environmental |
| | protecting the | impact. |
| | environment, where it is | Promoting and |
| | impacted by the Company's | pursuing long term |
| | operations. | sustainability. |
| | | |
+---------------+----------------------------+----------------------+
| Regulatory | Adhering to a policy of | Strong internal |
| integrity | strict compliance with | controls. |
| | appropriate standards, | Regulatory |
| | policies and legislation. | engagement. |
| | | Industry influence. |
+---------------+----------------------------+----------------------+
The Company continues to put plans in place to deliver its objectives against
the strategy based on the Core Principles, executes on those plans across a
range of activities, measures its progress and introduces corrective action
wherever required. Adherence to its strategy and Core Principles enabled the
Company to deliver a pleasing financial performance against the challenging
economic environment, which persisted throughout 2009 and which included the
highest reduction in the number of units distributed across its network for a
number of years.
BUSINESS REVIEW
Review of the year
The Company continued to make good progress in many areas of its business during
the year, with financial performance meeting the challenges of the year,
assisted by a strong cost control and mitigation exercise, customer service
performance improving in the call centre with the introduction of a new
inter-active voice recognition system and a significant reduction being achieved
in relation to the work in progress to repair faults on the distribution
network. Disappointingly, those incidents classified by the Company as
preventable vehicle accidents increased during the year and the Company failed
to meet its targets in respect of operational incidents.
During 2009, the Company was fully engaged with the Office of Gas and
Electricity Markets ("Ofgem") in the Distribution Price Control 5 ("DPCR5")
process, which culminated on 7 December 2009 with Ofgem publishing its final
proposals in respect of the price control formula that will take effect for the
five-year period commencing 1 April 2010. That process involved submission of
the Company's detailed business plans in February 2009, the publication by Ofgem
of an initial set of proposals on 3 August 2009 and continuing subsequent
dialogue between the Company and Ofgem throughout the remainder of the year.
Following detailed analysis, the Company advised Ofgem, on 23 December 2009,
that it was accepting its final proposals.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Review of the year (continued)
Under its final proposals for DPCR5, Ofgem set a 4.7 per cent 'vanilla' weighted
average cost of capital, which equates to 5.6 per cent pre-tax, in order to
allow the Company to fund its cost of debt and equity. The Company was
disappointed at the low level of the return on capital allowed but pleased that
Ofgem recognised the Company as one of the more efficient distribution network
operators ("DNOs").
The Company was also pleased to see the focus in DPCR5 on rewarding DNOs for
delivering high standards of customer service and providing the opportunity for
outperforming Ofgem's baseline expenditure and performance targets. In addition,
Ofgem has set out the "outputs" it expects the Company to achieve and, as an
incentive to provide better customer service, will introduce new, statutory
guaranteed standards of performance in respect of connections to the Company's
network, more challenging targets for network reliability and a new measure of
customer satisfaction with the service provided.
The Company's charges based on the DPCR5 final proposals, together with a
rebalancing of distribution charges between customer groups, mean that, on 1
April 2010, the Company's charges made in relation to the distribution of
electricity to domestic customers will increase by about 2.8%, or equivalent to
about 0.4% on their electricity bills. Changes to the charges made in relation
to non-domestic customers will vary more widely between different types of
non-domestic customers..
Strategic objectives
As part of the CE Group, the Company's strategic objectives remain based on its
core principles and are to build a business, which:
· continues to generate value over the long-term, in keeping with the
nature of that business;
· invests in and manages its electricity distribution network in an
efficient and effective manner;
· provides its customers with an excellent standard of service;
· engages with its employees so that they feel rewarded and recognised
as part of a team that sets and achieves increasingly high standards of
performance; and
· is viewed as being a leader in terms of shaping the future direction
of the electricity distribution network sector in the United Kingdom.
As part of its strategy, the Company continues to be committed to putting safety
first, respecting its customers, their time and property, doing a quality job,
responding effectively in times of severe weather (when it is needed most) and
caring for its local environment.
Principal risks and uncertainties
There are a number of potential risks and uncertainties, which could have an
impact on the Company, its financial position and its operations and may cause
actual results to vary materially from those expected or historically
experienced. The principal risks are outlined as follows:
Financial strength:
As a holder of an electricity distribution licence, the Company is subject to
regulation by the Gas and Electricity Markets Authority ("GEMA"), which acts
through Ofgem.
Most of the revenue of the electricity distribution licence holders is
controlled by a distribution price control formula set out in the electricity
distribution licence. The price control formula does not constrain profits from
year to year but is a control on revenue that operates independently of most of
the electricity distribution licence holder's costs.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Principal risks and uncertainties (continued)
Financial strength (continued):
It has been the practice of Ofgem to review and reset the formula at five-year
intervals, although the formula has been, and may be, reviewed at other times at
the discretion of Ofgem. The current five-year price control period became
effective on 1 April 2005 and has set the Company's revenue through to 31 March
2010. A resetting of the formula requires the consent of the electricity
distribution licence holder but licence modifications may be unilaterally
imposed by Ofgem without such consent following review by the Competition
Commission. During the term of the price control, changes in costs incurred will
have a direct impact on the financial results of the Company.
The other financial strength risks facing the Company are outlined in the
Treasury section on page 9 below.
Operational risk:
The principal risks facing the Company in respect of the other core principles
include:
+------------------+-------------------------+-----------------------+
| Risk | Issue | Mitigation |
+------------------+-------------------------+-----------------------+
| Counter-party | A counter-party with | The treasury function |
| security | which the Company | has strict controls |
| (Financial | trades may go bankrupt | in respect of the |
| Strength) | causing loss of | counter-parties with |
| | invested funds or | which it deals, |
| | amounts owing. | including the use of |
| | | credit ratings and |
| | | appropriate limits. |
| | | Credit cover |
| | | arrangements are in |
| | | place with the |
| | | electricity |
| | | suppliers, which |
| | | would allow recovery |
| | | of defaulted payments |
| | | through the price |
| | | control mechanism, if |
| | | good debt control |
| | | practices continue to |
| | | be followed. |
| | | |
+------------------+-------------------------+-----------------------+
| Potential | Recent weather patterns | A robust major |
| flooding and | suggest a heightened | incident management |
| other weather | risk of flooding of 'at | plan is in place. The |
| related events. | risk areas' and the | Company's critical |
| (Operational | potential for increased | property unit plan |
| Excellence and | occurrence of damage to | assesses those |
| Customer | the overhead network. | properties most at |
| service) | | risk and a flood |
| | | mitigation plan is in |
| | | place, including the |
| | | erection of permanent |
| | | and temporary |
| | | defences. |
| | | |
+------------------+-------------------------+-----------------------+
| BT ESP Analogue | Potential withdrawal of | The Company is |
| Circuits | service puts existing | represented on the |
| (Operational | communication | Energy Networks |
| Excellence) | arrangements at risk. | Association's working |
| | | group, which is |
| | | working with BT, the |
| | | Cabinet Office, Ofgem |
| | | and Ofcom to consider |
| | | the issues. Options |
| | | include retaining the |
| | | equivalent service, |
| | | potentially at higher |
| | | than current cost or |
| | | utilising an |
| | | alternative solution. |
| | | |
+------------------+-------------------------+-----------------------+
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Principal risks and uncertainties (continued)
Operational risk (continued):
+--------------------+------------------------+-----------------------+
| Risk | Issue | Mitigation |
+--------------------+------------------------+-----------------------+
| | | |
+--------------------+------------------------+-----------------------+
| Network risk in | Should the 132kV | Completion of a |
| the Bradford area | infeeds fail, the main | number of the key |
| (Operational | supply point would be | deliverables has gone |
| Excellence) | lost and result in | some way towards |
| | substantial cost | reducing the overall |
| | impact to restore the | risk and a programme |
| | customers via the use | of major replacement, |
| | of generating units or | reinforcement and |
| | through potential | refurbishment works |
| | guaranteed standards | runs through to 2015. |
| | failures and incentive | |
| | penalties. | |
| | | |
+--------------------+------------------------+-----------------------+
| Motor accident | Any significant road | The inclusion of road |
| management | traffic accident | risk related issues |
| (Employee | involving a Company | in the CE Group's |
| Commitment and | vehicle may create a | Safety Improvement |
| Regulatory | liability, which the | Plan and the |
| Integrity) | Company has to meet, | appointment of a |
| | and involve injury to | dedicated road risk |
| | employees and/or third | manager, together |
| | parties. | with improved |
| | | reporting routines, |
| | | has increased the |
| | | focus on road safety. |
| | | |
+--------------------+------------------------+-----------------------+
| Electricity | The regulations impose | A full site |
| Safety, Quality | various statutory | inspection and risk |
| and Continuity | obligations, | assessment regime is |
| Regulations 2002 | non-compliance with | in place designed to |
| (Employee | which could lead to | ensure compliance. |
| Commitment and | incidents, prosecution | |
| Regulatory | and claims. | |
| Integrity) | | |
| | | |
+--------------------+------------------------+-----------------------+
| Shortage of supply | The global demand for | Improved and more |
| and increased | copper has impacted | efficient procurement |
| demand for copper | the availability and | processes have been |
| (Operational | cost of a number of | introduced and |
| Excellence) | core products and | security at all sites |
| | increased the risk of | where copper products |
| | theft. | are stored has been |
| | | reviewed and enhanced |
| | | where required. |
| | | |
+--------------------+------------------------+-----------------------+
| Influenza pandemic | A pandemic may occur, | A pandemic group was |
| (Employee | substantially | established and an |
| Commitment and | impacting on normal | action plan |
| Operational | business operations. | incorporated into the |
| Excellence) | | Company's existing |
| | | crisis management and |
| | | business continuity |
| | | plans, which included |
| | | information and |
| | | practice obtained |
| | | from liaison with |
| | | government agencies, |
| | | health professionals |
| | | and occupational |
| | | health experts. |
+--------------------+------------------------+-----------------------+
A Compliance Assurance Programme Steering Group ("CAPSG") is in place,
consisting of certain directors and senior managers of the CE Group, in order to
provide oversight at a strategic level and steering of the CE Group's
performance in respect of governance and its key facets of compliance and risk
management.
The Company operates a structured and disciplined approach to the management of
risk, as part of the overall risk management approach of the CE Group. Those
risks assessed to be significantly high are logged within a risk register that
is reviewed regularly by the CAPSG and key indicators track the number of
significant risks actively monitored by the CAPSG at any one time.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Operational risk (continued):
Risks are assessed with due regard to probability and impact and the risk
environment is reviewed continually in order that new or emerging potential
risks are identified. Risk mitigation and loss control plans are prepared in
response to strategic risks in order that the directors can be assured that
appropriate mitigating actions are in place and being implemented. These plans
are monitored through to implementation and reviewed to determine whether the
level of residual, mitigated risk is within an acceptable level of tolerance.
The CE Group's strategy is to follow an appropriate risk policy, which is
intended to effectively manage exposures related to the achievement of its
business objectives. The CE Group identifies and assesses risks associated with
the achievement of its strategic objectives, including those of an environmental
and social nature. Any key actions needed to further enhance the control
environment are identified, along with the person responsible for the management
of the specific risk. A regular review of the key risks, controls and action
plans is undertaken. The Governance and Risk Section co-ordinates the risk and
compliance activity, emphasising the CE Group's commitment to maintaining an
appropriate risk and governance framework across the business.
The use of a well-defined risk management methodology allows a consistent and
co-ordinated approach to risk reporting and mitigation.
A key element and requirement of the risk management process is that a written
certificate is provided by the President and Chief Operating Officer of the CE
Group confirming that the effectiveness of the system of internal controls has
been reviewed during the year. A self-certification process is in place, in
support of this review, whereby senior managers are required to confirm that the
system of internal control in their area of the business is operating
effectively.
Internal control
A rigorous internal control environment exists within the CE Group based on
regular reporting, a series of operational and financial policy statements,
investigations undertaken by internal audit and a stringent process for ensuring
the implementation of any recommendations. MidAmerican Energy Holdings Company
("MidAmerican"), a parent company of the Company, requires a quarterly control
risk self-assessment to be undertaken by all senior managers as part of its
programme for compliance with the requirements of the Sarbanes-Oxley Act. During
the year, the annual, extensive programme to review the company-wide controls
was completed and opportunities to enhance control arrangements, identified by
that review, have been implemented.
The CE Group is committed to proper business conduct and, in common with the
other affiliates of MidAmerican, has adopted a code of business ethics that
emphasises the requirement for all staff to manage their activities to achieve
the highest level of ethical conduct.
The CE Group has a "speaking up" policy in place for staff to raise any
instances of unethical acts, malpractice or impropriety. An additional process
is also available to all staff via an international, anonymous help line
operated by an independent company.
Human resource policies focus on skills, motivation and excellence and the
promotion of high standards of probity among staff. In addition, the appropriate
organisational structure has been developed to control business units and to
delegate authority and accountability, having regard to acceptable levels of
risk.
The Company has appropriate controls in place directed at ensuring compliance
with the conditions in its licence requiring any payments made to, or received
from, affiliates or related undertakings in respect of goods and services
provided or supplied to be on an arm's length basis and on normal commercial
terms.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Internal control (continued)
Other key features of the internal control system are:
· Comprehensive business planning and financial reporting procedures,
including the annual preparation of detailed operational budgets for the year
ahead and projections for subsequent years;
· Regular review of key performance indicators to assess progress
towards objectives;
· A range of policies, codes of practice and more detailed
instructions that define the processes to be followed;
· A strong internal audit function to provide independent scrutiny of
internal control systems and risk management procedures, including the standards
required by the Sarbanes-Oxley Act;
· On-going health and safety performance reviews carried out by
in-house safety professionals in addition to the regime of routine health and
safety risk assessment and management processes carried out within each of the
operating units;
· Processes and procedures to operate under the Occupational Health
and Safety Assessment Series ("OHSAS") standard OHSAS 18001, which is subject to
external certification and regular assessment;
· An external obligations programme, which provides a robust approach
to, and compliance with, financial, legal and regulatory obligations;
· Centralised treasury operations that operate within defined limits
and are subject to regular reporting requirements and audit reviews; and
· Established procedures for planning, approving and monitoring major
capital expenditure, major projects and the development of new business which
includes short and long-term budgets, risk evaluation, detailed appraisal and
review procedures, defined authority levels and post-investment performance
reviews.
Financial strength
During 2009, the Company continued to improve its management of routine
financial performance, implemented tighter expenditure controls through a
wide-ranging cost mitigation exercise, enhanced the reporting of management
information and embedded the culture of continuous financial improvement in all
areas of its operations.
In addition, representations were made to Ofgem, in accordance with the
provisions set out in the electricity distribution licence, regarding certain
categories of cost not fully taken into account when the current price control
was set, effective from 1 April 2005, due to uncertainties at that time
regarding the amount and materiality of those costs. After a due process of
review Ofgem generally accepted those representations and agreed that the
Company was able to recover approximately GBP34m, in addition to the otherwise
agreed principles for calculating its allowed revenue, over the three regulatory
years starting on 1 April 2009 and ending on 31 March 2012. The price control
was adjusted accordingly to enable recovery of the GBP34 millionin future
periods.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Financial strength (continued)
The Company remains very aware of the impact that the general economic climate
has had and may continue to have for the forseeable future on it and its
customers. In that respect, procedures are in place to more closely monitor and
manage the issues that may impact on the Company's business more significantly
than others, including a reduction in overall demand for electricity leading to
less units being distributed through the Company's network, lower activity in
terms of new connections required to the network and the potential for higher
debt write-off, if the economic downturn further affects the Company's
customers.
Key aspects of financial performance for the year were as follows:
Revenue
Revenue at GBP287.6m was GBP0.6m higher than the previous year as a result of a
tariff increase in the year, partly offset by a reduction in units distributed
over the network.
Operating profit
Operating profit at GBP139.7m was broadly in line with the previous year,
reflecting stable income and costs.
Finance costs
Finance costs at GBP33.9m were GBP4.7m lower than the previous year reflecting
lower balances owed to group undertakings throughout the year and a lower rate
of interest compared to 2008.
Taxation
The effective tax rate in the current year is 27.3%. The Company's taxation
charge in 2008 was affected by changes in tax legislation. Details are provided
in Note 9 to the accounts.
Results and dividends
The Company made a profit after tax for the year of GBP77.4m. An interim
dividend of GBP40m was paid during the year and the directors recommend that no
final dividend be paid in respect of the year.
Share capital and debt structures
There were no changes to the Company's share capital or debt structure during
the year.
Dividend policy
The Company's dividend policy is that dividends will be paid only after having
due regard to available distributable reserves, available liquid funds and the
financial resources and facilities needed to enable the Company to carry on its
business for at least the next year. In addition, the level of dividends is set
to maintain sufficient equity in the Company so as not to jeopardise its
investment grade issuer credit rating.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Financial strength (continued)
Cash flow
The Company aims to collect from customers and pay suppliers within contracted
terms. Any surplus cash is remitted to Yorkshire Electricity Group plc ("YEG"),
a fellow company in the CE Group, and invested accordingly, generating a market
rate of return for the Company.
Movements in cash flows were as follows:
* Operating activities: Cash flow from operating activities at GBP121.3m was
GBP7.2m lower than 2008, mainly due to adverse variances on working capital of
GBP16.0m, offset by reductions in tax and interest paid of GBP7.9m and an
increase in cash profits of GBP1.3m.
* Investing activities: Net cash used in investing activities at GBP144.2m was
GBP207.6m higher than the previous year, mainly reflecting the sale of GBP200.0m
of short-term securities in 2008.
* Financing activities: The net cash generated by financing activities at
GBP15.9m was GBP200.8m higher than the prior year reflecting an increase in the
level of borrowings in the year, compared to a decrease in 2008.
Treasury
The Company's short-term financial objective is to ensure that it has access to
sufficient liquidity to enable it to meet its obligations as they fall due and
to provide adequately for contingencies. The long-term objective is to provide a
stable, low cost of financing over time whilst observing approved risk
parameters.
The main risks are liquidity and interest rate risk.
Liquidity risk
The Company has access to short-term borrowing facilities provided by YEG and a
GBP50m committed revolving credit facility provided by Lloyds TSB Bank plc and
Royal Bank of Scotland plc. Although the revolving credit facility is due to
expire in April 2010, the Company has commitments in place to increase those
facilities to GBP75m withLloyds TSB Bank plc, Royal Bank of Scotland plc and
Abbey National Treasury Services plc, part of the Banco Santander group, for a
three year period. An additional overdraft facility of GBP2m is provided by
Lloyds TSB Bank plc, which is renewed on an annual basis.
Interest rate risk
The Company is financed by long-term borrowings at fixed rates and has access to
short-term borrowing facilities at floating rates of interest. As at 31
December 2009, 73% of the Company's borrowings were at fixed rates and the
average maturity for these borrowings was 19 years.
Currency risk
No material currency risks are faced by the Company.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Financial strength (continued)
Treasury (continued)
Trading risk
Throughout the year under review, the Company's policy was that no trading in
financial instruments should be undertaken.
Financial derivatives
As at 31 December 2009 and during the year it was the Company's policy not to
hold any derivative financial instruments.
Pensions
The Company is a participating employer in the Northern Electric Group of the
Electricity Supply Pension Scheme (the "Scheme"), a defined benefit scheme. Full
details of the Company's commitments to the Scheme and the associated deficit
repair payments are provided in Note 23 to the accounts. During 2010, Northern
Electric plc, a fellow company in the CE Group and the Principal Employer of the
Scheme, will be engaged with the Group Trustees in the triennial actuarial
valuation process, which is to take place as at 31 March 2010, in order to
determine the funding position of the Scheme and the associated deficit repair
arrangements.
Ofgem recognises that pensions, particularly with respect to the current deficit
positions of various schemes, represent a significant cost to the DNOs and, as
part of the DPCR5 process, undertook a review of the pension principles it
established in 2003. That review included the issue of three consultation
documents and the holding of three seminars for interested parties and, as a
result, Ofgem confirmed that the DNOs would be allowed to recover the full value
of the deficits attributable to the licensee's distribution business that were
in existence as at 31 March 2010, via their regulated revenues. However, given
the regulated nature of the DNOs' businesses, Ofgem took the view that there is
not the same risk or urgency as in other sectors of the economy to ensure that
those deficits are repaired as soon as possible and, therefore, set a notional
repair period of 15 years for the purpose of assessing the DNOs' allowed
revenues in respect of pension costs over the DPCR5 period. As the actual repair
period for each scheme is a matter for the trustees of that scheme to agree with
its sponsoring employer, Ofgem recognised that there is the potential for there
to be a difference between the repair period so agreed and the 15 year notional
repair period used in DPCR5. Noting this position, Ofgem commented in the DPCR5
final proposals that, should shorter deficit repair periods be agreed between
trustees and sponsoring employers, the DNOs allowed revenues over the remaining
portion of the 15 years will be adjusted so that the DNOs suffer no detriment on
a net present value basis.
The Company also participates in the Yorkshire Electricity Pension Plan and the
Northern Electric Money Purchase Scheme, which are defined contribution schemes.
Insurance
As part of its insurance and risk strategy, the CE Group has put in place a
range of insurance policies covering it against risks, including damage to
property and employer's, third party motor and public liability. The CE Group
carries appropriate excesses on those policies and is effectively self-insured
up to the level of those excesses. Consequently, the risk management and health
and safety programmes in place are viewed as extremely important elements of the
business, given the contribution they make to the elimination or reduction of
exposure to such risks.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Customer service
During the year, the Company distributed electricity to customers in its
distribution services area and continued to improve the overall performance of
its distribution network through its investment strategy being targeted at
delivering improvements in an efficient and cost-effective manner. The Company
is focused on delivering a reliable and dependable supply of electricity and a
high standard of service to its customers. During the year, a significant number
of tangible improvements have been identified and delivered as part of the
overall goal to improve customer satisfaction with the service provided,
including:
· implementing a new interactive voice response system into the Company's
front line call centre, which takes advantage of the latest developments in
automatic messaging, in order to assist in the handling of customer loss of
supply calls;
· improving the accuracy of network fault estimated restoration times
inputted to the trouble management system and, consequently, communicated to
customers;
· implementing a new complaint handling process to ensure robust
compliance with the Gas and Electricity (Consumer Complaints Handling Standards)
Regulations 2008 and to meet the target of in excess of 90% of complaints being
resolved at the initial point of contact;
· continuing to improve under-performing parts of the distribution system
by identifying "hot spots" and taking specific action to address the issues in
those areas;
· extending the priority services register so that the Company is aware
of people with disabilities or special needs, who may be affected by
interruptions to the electricity supply and can take appropriate action to
assist those people in such circumstances; and
· undertaking a programme to reduce the number of instances by 5%, in
which the Company fails to meet an electricity guaranteed standard of
performance.
The Company's customer service satisfaction scores continued to show an
improving trend through the year and in excess of 97% of complaints were
resolved at the first time of asking. In that respect, developing the new
telephony system for other customer facing processes will form a significant
part of the customer service improvement plan in order to meet the target of a
customer satisfaction score of greater than 90%.
Ofgem has established an incentive scheme for quality of service, by which DNOs,
such as the Company, are provided with financial incentives based upon targets
set by Ofgem for each of the DNOs with regard to their performance in the
following areas:
· The number of interruptions to supply;
· The duration of interruptions to supply; and
· Customer satisfaction.
Customer minutes lost ("CML") and customer interruptions ("CI") are the key
performance indicators used by the Company to measure the quality of supply and
system performance. CML measure the average number of supply minutes lost for
every connected customer due to faults and planned outages that last for three
minutes or longer. CI measure the average number of supply interruptions for
every 100 connected customers due to faults and planned outages that last for
three minutes or longer. DNOs' performance against guaranteed standards, set for
activities such as restoring supplies after unplanned interruptions, provides a
measure of the level of customer service. Performance against these measures
forms part of the Company's regular reporting to Ofgem.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Customer service (continued)
In respect of the key customer service performance indicators, the Company did
not perform particularly acceptably for the regulatory year ended 31 March 2009,
as it failed to achieve the targets, as follows:
+---------------+--------------------+--------------------+
| | Actual | Target |
+---------------+--------------------+--------------------+
| CML: | 73.1 (2008: 75.0) | 63.4 (2008: 65.1) |
+---------------+--------------------+--------------------+
| CI: | 76.4 (2008: 75.7) | 68.5 (2008: 68.5) |
+---------------+--------------------+--------------------+
| Customer | 88.2% (2008: | 90% (2008: 90%) |
|satisfaction: | 86.8%) | |
+---------------+--------------------+--------------------+
At the time the above targets were set, no account was taken of the customer
service impact arising from additional vegetation management obligations, which
were not allowed for in the distribution price control 4 settlement. The
customer service targets were not adjusted to take account of the effects of the
representations made by the Company and accepted by Ofgem, which are noted on
page 7. Instead, the benefits arising from that decision were reflected in a
favourable adjustment to the Company's base allowed revenue. That position will
continue until 31 March 2010.
Operational excellence
The Company's core service continues to be providing and maintaining an
efficient distribution network that delivers electricity effectively. During the
year, GBP170.2m was invested in the improvement of the distribution system,
including the replacement of assets and continuing network improvements intended
to increase the quality of the electricity supply provided to customers.
Operational activity
The investment strategy is designed to deliver improvements in an efficient and
cost-effective manner by minimising the number of faults that occur, reducing
the average number of customers affected by a fault and providing a quicker
restoration service in the event of a fault. Such actions are expected to have a
positive impact on future CI and CML performance. The focus in 2009 was on
delivering the core operational programmes, in particular the installation of
remote control units, and improving the lead times for fault repair
work-in-progress.
That focus was designed to support the Company's goals in the area of
operational excellence and to ensure that the distribution network is operated
as well as possible. To that end, the Company's priorities are to deliver an
underlying improvement in the network's resilience, deal appropriately with any
risks as and when they arise, plan its operational activity so as to operate
within the planning assumptions for pre-arranged system unavailability and,
while doing so, to pay close attention to the underlying cost. Consequently, the
Company has established five targets to enhance its performance in terms of
operational excellence:
· Deliver enhancements to the network by adding intelligent
reconfiguration capability, which includes the commissioning of additional rural
and urban remote control units on the high voltage system and
auto-sectionalisers in rural area;
· Minimise abnormal running arrangements by maintaining a routine
service level for fault repair work-in-progress on the high voltage network,
building on the success in that respect during 2009;
· Minimise the impact on costs and customer service by pursuing a
"fix-first-time" approach on the low voltage network, which will further improve
the level of fault repair work-in-progress;
· Enhance the operational availability of the installed remote control
units by improving the level of work-in-progress of failure investigations,
which will have a consequential benefit in respect of the successful operation
of those units; and
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Operational excellence (continued)
Operational activity (continued)
· Complete the capital and maintenance work programmes, along with
repair, connection and diversion work, within the pre-arranged interruption
target.
The major projects undertaken in support of those targets and as part of the
investment strategy included:
· Commencement of the major asset replacement of 132kV open terminal
substations with indoor gas insulated switchgear in the Wakefield and Hull
areas;
· Completion of major replacement of 33kV oil-filled cables in the
Leeds area;
· Continuation of major replacement of 33kV oil-filled cables in the
Dewsbury area;
· Completion of reinforcement of the Kirkstall - Horsforth 132kV &
33kV infrastructure;
· Completion of the construction of 33/11kV substations to provide
increased capacity to the Scunthorpe, Knottingley, and Selby areas;
· Continuation of the construction of a 33/11kV substation to provide
increased capacity to the Snaith area;
· Continuation of a major 66kV asset replacement scheme at
Ferrybridge;
· Continuation of three 66/11kV substation replacement schemes in the
South Yorkshire area;
· Completion of a major protection upgrade scheme in the Bradford
area;
· Refurbishment of 12km of 132kV overhead line;
· Replacement of 7 units of high voltage outdoor switchgear;
· Replacement of 68 high voltage distribution substations;
· Replacement of 68 units of high voltage indoor switchgear;
· Refurbishment or rebuilding of 70km of high voltage overhead line;
· Refurbishment or rebuilding of 18km of low voltage overhead line;
· The upgrade and reinforcement of 26.8km of overhead line to address
the quality of supply performance issues relating to those circuits; and
· The installation and commissioning of 449 new remote control units.
In order to deliver its investment strategy, the Company used a mix of its own
staff and contractors, including Integrated Utility Services Limited, a company
registered in the Republic of Ireland and part of the CE Group, to undertake its
activities.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Operational excellence (continued)
Enduring operating model
During the year, a significant project was undertaken by the senior Field
Operations team to reorganise the operating structure within that area of the
Company's business in order to provide the best possible foundation for optimum
operational performance into the future. The management structure within Field
Operations is based on seven individual business units, as follows:
* Network Operations provides the day-to-day and reactive management of the
distribution network at all voltages and includes activities such as network
performance, emergency planning and restoration activities associated with
network faults;
* Service Delivery has responsibility for the control and management of the
craft-based staff, direct labour and the provision of this resource to the other
business units and is structured across three geographic zones;
* Network Repairs focuses on core repair activities and significant cost
control initiatives in respect of expenditure on the repair of faulted assets;
* Connections Delivery undertakes non-discretionary, customer-driven work and
is structured across three geographic zones;
* Programme Delivery has a functional bias to its activities and includes
primary engineering projects, overhead programme delivery, asset programme
delivery and protection and technical services;
* Operational Services includes contract management, business controls and
administration and supply chain management; and
* Field Standards provides training, quality assurance, services standards and
health and safety services across Field Operations.
Commercial risk
Managing commercial risk in the context of the difficult economic and financial
trading conditions, which continued throughout 2009, was and will continue to be
of key importance to the Company's operations. In that respect, the Company has,
throughout the year, focused on ensuring strict adherence to the CE Group's
policies for credit checking, payment terms, payment performance tracking and
debt management.
During 2009, the CE Group completed the process of putting in place contracts in
the commercially significant areas of IT facilities management and cable
engineering services. A number of major IT suppliers responded to the tender for
IT facilities management services and, following an extensive evaluation
process, the new contract was awarded to Logica and will be effective from 1
April 2010 until 31 March 2015.
Following a similar tender exercise, contracts for the provision of cable
engineering services were awarded to Balfour Beatty Utility Solutions, Clancy
Docwra, the Freedom group of companies, J Murphy & Sons, Morrison Utility
Services and Murphy Limited and are effective for the five year period to June
2014.
The Company's relationship with its main customers is governed by a distribution
connection and use of system agreement ("DCUSA"), which is place with each of
those customers. Those customers are the electricity suppliers who, under the
terms of the DCUSA with the Company, pay charges for the use of the distribution
network, in respect of which it is necessary to ensure that the credit cover
arrangements in line with Ofgem's guidance remain in place. The principal
electricity suppliers that use the Company's network are RWE Npower, British
Gas, EdF Energy, E.on, Scottish and Southern Energy and Scottish Power.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Employee commitment
Health and safety
During the year, the focus on health and safety continued to be of paramount
importance for the directors, as it is for all employees. Providing and
maintaining a safe working environment is the first objective of the Company.
There is a continuous drive for improvement in safety performance through the
setting of challenging goals and the pursuit of a programme of on-site safety
audits, whichreflect the Company's fundamental objectives that none of its staff
should go home injured and all employees should commit to behaving safely all of
the time. The Company makes no compromise in respect of its health and safety
obligations and centres its safety plans and systems on the principles found in
companies with world class safety performance.
The Company received a first Gold Medal from the Royal Society for the
Prevention of Accidents for occupational health and safety performance and
provision, to recognise the achievement of continued or improving standards of
health and safety over a sustained period. The Gold Award is the highest
achievement award and the Gold Medal is presented for receiving five or more
successive Gold Awards. The Company continued to maintain its OHSAS 18001
certification.
The main key performance indicators used by the Company to monitor safety
performance are as follows:
+--------------------+----------+-----------+-----------+-----------+
| | 2009 | 2008 |
+--------------------+----------------------+-----------------------+
| | Target | Actual | Target | Actual |
+--------------------+----------+-----------+-----------+-----------+
| Lost time | 1 | 1 | 1 | 4 |
| accidents | | | | |
+--------------------+----------+-----------+-----------+-----------+
| Medical treatment | 3 | 3 | 4 | 1 |
| accidents | | | | |
+--------------------+----------+-----------+-----------+-----------+
| Operational | 4 | 5 | 4 | 7 |
| incidents | | | | |
+--------------------+----------+-----------+-----------+-----------+
| Preventable | 13 | 19 | 12 | 17 |
| vehicle accidents | | | | |
+--------------------+----------+-----------+-----------+-----------+
Although safety performance against target was disappointing in certain areas
during 2009, the Company is not complacent and continues to rigorously
implement, review and adjust the safety improvement plan accordingly to deliver
continuous improvement. In terms of preventable vehicle accidents, the
performance has been unacceptable and focus continues heavily on this area with
implementation of a robust assessment and training plan aimed at changing
behaviour and improving concentration skills. It is expected that this, together
with the zero tolerance approach, should continue to deliver improvements in
safety performance.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Management structure
The CE Group has a clearly defined leadership team, in which specific roles are
identified, so allowing more effective management of the CE Group's business and
response to any control weaknesses that may become apparent, with single units
being in place for field operations, customer operations, asset management,
performance and innovation and health, safety and environment. The business
systems, human resources, procurement and finance functions are centralised in
order to provide those services across the CE Group.
Employees
2009 was a particularly challenging year. The external economic environment and
a tougher than expected DPCR5 final settlement have driven tight controls on a
number of key activity programmes. Internal programmes of cost containment have
been a key theme across the business and these have extended to the control of
headcount and salary cost allocation with improved management processes being
introduced in the first quarter of the year. Those improvements included
enhanced control over external recruitment, the targeting of that recruitment
at key hires and all such appointments being subject to the approval of the
President and Chief Operating Officer of the CE Group.
The Company has and will continue to place significant emphasis on the
importance and application of high standards of management and performance in
pursuit of its Core Principles and ensures that a level of consistency is
adopted in doing so. In respect of emloyee relations, the CE Group and the
trades unions continue to build a constructive relationship.
Given the demographics of the Company's workforce, the increasing investment in
the distribution network and in order to encourage investment in a sustainable
workforce, Ofgem provided an allowance, in its DPCR5 final proposals, in order
to fund the Company's plans for workforce renewal across the DPCR5 period. Ofgem
has stated that the allowance is on a "use it or lose it" basis and the Company
will need to demonstrate that it has used that allowance appropriately and
efficiently to recruit and train new staff or for other means of renewing its
workforce and report annually on its progress in that respect.
The Company employed 1,102 staff at the end of December 2009 at various
locations throughout its distribution services area (2008: 1,116).
Disabled employees
The Company is an equal opportunities employer and is committed to the criteria
underpinning the Employment Service disability symbol. It is the Company's
policy to provide disabled people with equal opportunities for employment,
training, career development and promotion, having regard to their aptitudes and
abilities. Should any member of staff become disabled during their employment,
that member of staff would be retrained and redeployed, wherever possible.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Employee commitment (continued)
Employee consultation
The Company has a constitutional framework in place and has agreed that
framework with trade union representatives. In addition, the Company
communicates directly, and through the management structure, with personal
contract holders and keeps them informed and involved as appropriate in any
developments that may impact on them now or in the future.
The Company is committed to maintaining and improving effective communication
with employees, principally through regular staff briefs on current issues,
meetings with staff and their representatives and the issue of an employee
publication. During 2009, the Company introduced an additional means of
communication in the form of regular broadcast briefings by the President and
Chief Operating Officer of the CE Group using telephone conference call
facilities. The broadcast briefings were used to provide employees with updates
such as on the performance of the Company and the CE Group, progress in respect
of DPCR5, organisational restructures and safety issues and performance.
Environmental respect
The Company's approach to environmental compliance is governed by its
environmental policy and the MidAmerican policy of Environmental RESPECT
(Responsibility, Efficiency, Stewardship, Performance, Evaluation, Communication
and Training). These policies and their subordinate operational control
procedures and systems address legal compliance, pollution prevention and
continual improvement and also the promotion of environmental awareness and best
practice amongst the Company's staff and contractors.
The Company has operated a United Kingdom Accreditation Service accredited
scheme to the environmental management systems ("EMS") standard ISO 14001 since
the late 1990s that is subject to regular six-monthly assessments by an external
certification body in order to retain that status. The 2009 asessment was
carried out by Lloyd's Register Quality Assurance in September with no major or
significant non-conformances raised. The report concluded that a sound approach
to the implementation, maintenance and improvement of a mature EMS had been
demonstrated.
The Company delivered its targeted improvement in the key area of fluid-filled
cable leakage, was compliant against the required streetworks performance
standards under the Traffic Management Act and was fully compliant with all
required Environmental Agency reporting obligations.
Improvements in support of the CE Group's environmental policy objectives during
the year included:
· A programme to enhance secondary containment provision for primary
transformer sites to prevent oil leakage;
· A programme to enhance emergency response provision for primary
transformer sites to mitigate oil leakage;
· Replacement of oil-filled circuit breakers with vacuum and sulphur
hexafluoride (SF6) gas filled units at outdoor substations to reduce gas
leakage;
· Improved monitoring and response measures with regard to the
management of fluid-filled underground cable networks and the reduction of
leakages;
· Installation of additional engineering controls where required to
improve pollution prevention at strategic sites;
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Environmental respect (continued)
· Installation of underground cables using trenchless technology as
opposed to open-cut excavations; and
· Environmental awareness training for all new start personnel and
contractors, complemented by periodic refresher training for all staff.
Sustainability
The Company takes its responsibilities towards reducing the impact of global
warming seriously, both in its capacity as a major participant in the UK energy
industry and in terms of its own carbon footprint. Through its involvement in
industry groups and its interactions with government and regulators, it is
contributing to the target of transforming the UK electricity industry into a
low carbon emitter. The Company also works with customers to assist in solving
issues raised by the introduction of low carbon generation and products and
their implications for the planning and operation of the electricity
distribution network.
The Company measures and publishes its own carbon footprint and has set a target
of a reduction in its carbon footprint of 20 per cent by 2020. Actions taken
during the course of the year to assist in meeting this target include fitting
speed limiters to about a third of its vehicle fleet, the procurement of
building energy management systems for its major office sites and a pilot
project to recycle office waste at one of its non-operational sites.
In addition, Ofgem will be looking to the Company to contribute to the
sustainability agenda through more detailed reporting on the carbon footprint of
its business, considering the use of better demand side management techniques to
address network constraints and by the provision of simpler information to those
parties interested in connecting local, embedded generation to the network.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Regulatory integrity
The Company manages its business to the highest behavioural standards and
adheres to a policy of strict compliance with all relevant standards,
legislation and regulatory conditions. The CAPSG continued to monitor and manage
performance in risk-related and compliance areas and met on three occasions
during the year.
As has been the case for some years, breaches by a DNO of its licence conditions
could lead to financial penalties, which Ofgem has stated "will have a
proportionate impact on shareholder returns". In order to assure compliance with
its licence and other regulatory obligations, the Company operates a regulatory
compliance affirmation process, under which ownership of the approximately 1,170
regulatory obligations contained within the compliance database is currently
assigned to some 49 owners in the CE Group. Those owners are required, on a
quarterly basis, to review compliance with their relevant obligations and report
on any perceived risks to the compliance process, which are then addressed. The
Company's Regulation Manager reports to the board of directors on the outcome of
each quarter's exercise.
The regulatory framework across the energy industry in the UK is undergoing a
wholesale review, which could result in fundamental changes to the way the
industry is regulated in the future. A significant part of that process is
Ofgem's "RPI-X@20" project, which is specifically considering the way in which
energy networks are regulated. The Company has and will continue to take an
active part in the debate, which is ranging from the potential for new
technologies, such as "smart" metering, and the increased use of micro and
distributed generation to the low carbon agenda insofar as it applies to
electricity distribution networks.
Other directors' report requirements
Corporate social responsibility
The Company values its relationship with its customers and their communities,
recognising the importance of a secure power supply to the local communities and
economy, and aims to enhance its relationship through a wider involvement in the
activities of and dialogue with the communities it serves.
As part of its customer service strategy, the Company engages directly with the
communities it serves to create a dialogue on quality of supply issues, actions
and investment planned to improve quality of supply, environmental and social
implications of its operations and other opportunities to assist and engage in
the life of the community. Where appropriate, this may include financial support
for community projects. The Company has a targeted donations programme, focusing
on its key priorities of support for youth, education and the environment.
The CE Group is an active member of Business in the Community.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Charitable and political donations
During the year, charitable donations of GBP50,301 were made (2008: GBP34,649),
principally to local charities serving the communities in which the Company
operates. No contributions were made to political organisations (2008: nil).
Research and development
The Company supports a programme of research that is expected to contribute to
higher standards of performance and a more cost-effective operation of its
business. The main areas of activity during the year were:
· Active participation in programmes of national significance in
collaboration with other DNOs and academic institutions to make significant
technological progress for utilisation by the industry as a whole;
· Continuing to support collaboration with other DNOs, both through
industry associations and on a multilateral basis, on a range of incremental
improvements to tools and equipment that, if successful, will further add to
overall efficiency improvements;
· Contributing to the ongoing development of eligibility for and
governance of the new Low Carbon Networks Fund, initiated by Ofgem, as a part of
DPCR5. The Low Carbon Networks Fund is intended to encourage innovation in terms
of the technology used and the commercial and operational environments, in which
the DNOs undertake their activities in order to contribute towards achieving a
low or zero carbon position in the industry. The Company will, therefore, be
looking to develop its programme of research and development in order to provide
opportunities to access that fund;
· Initial field trials of newly developed superconducting fault
limiters have been successfully undertaken;
· The network deployment of a fault passage indicator system, reducing
reaction time to network faults and minimising customer impact;
· Further developing a suite of health indices, for improved asset
management, completing EHV cables and commencing work on poles and substations;
and
· Continuing to support a project at Durham University to assess
electrical network risk with the objective of improving decision making on
network reinforcement and operation. A follow up project, investigating demand
side management impacts on network risk, has also been developed.
Supplier payment policy
The Company complies with the Better Payment Practice Code for the prompt
payment of suppliers in accordance with the normal terms of trade. It is CE
Group policy with respect to its suppliers to settle the terms of payment with
those suppliers when agreeing the terms of each transaction, to ensure that
those suppliers are aware of the terms of payment and to pay in accordance with
the CE Group's contractual and other legal obligations. The number of days
purchases in trade creditors for the Company at 31 December 2009 was 9 (2008:
8).
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Future developments
The financial position of the Company, as at the year end, is shown in the
balance sheet on page 34. There have been no significant events since the year
end and the directors intend to develop the business in a manner that
concentrates on its core skills of electricity distribution by continuing to
operate its business with the goal of out-performing the allowances in the
distribution price control, while efficiently investing in the electricity
distribution system with the aim of improving the quality of supply provided to
its customers.
Directors
The directors who served during the year and since the year end were as follows:
G E Abel resigned 16 October 2009
P E Connor resigned 16 October 2009
R Dixon Non-Executive Director, appointed 16 October 2009
T E Fielden Finance Director, CE Electric UK, appointed 16
October 2009
J M France Regulation Director, CE Electric UK
N M Gill Field Operations Director, CE Electric UK
P A Jones President and Chief Operating Officer, CE Electric
UK
K Linge resigned 16 October 2009
Details of the directors' emoluments are included in note 8 to the accounts.
Auditors
A resolution to reappoint Deloitte LLP, as auditors, and to authorise the
directors to determine their remuneration will be proposed at the Annual General
Meeting.
Going Concern
The Company's business activities, together with details regarding its future
development, performance and position are set out in the Business Review in the
Directors' Report. In addition, the Company's objectives, policies and processes
for managing its capital, its financial risk management objectives, details of
its financial instruments and hedging activities and its exposures to credit
risk and liquidity risk are included in the Directors' Report and the
appropriate notes to the accounts.
When considering continuing to adopt the going concern basis in preparing the
annual report and accounts, the directors have taken into account a number of
factors, including the following:
a) The Company is a stable electricity distribution business operating
an essential public service and is regulated by GEMA. In carrying out its
functions, GEMA has a statutory duty under the Electricity Act 1989 to have
regard to the need to secure that licence holders are able to finance their
activities,which are the subject of obligations under Part 1 of the Electricity
Act 1989 (including the obligations imposed by the electricity distribution
licence) or by the Utilities Act 2000;
b) The Company is profitable with strong underlying cash flows and has
investment grade credit ratings; and
c) The Company has considerable financial resources, in the form of
short-term borrowings made available by YEG and committed revolving credit
facilities from Lloyds TSB Bank plc and Royal Bank of Scotland plc. Those
facilities have recently been renewed and will be provided by Lloyds TSB Bank
plc, Royal Bank of Scotland plc and Abbey National Treasury Services plc, part
of the Banco Santander group, for a three year period.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Going Concern (continued)
Consequently, after making 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 annual report and accounts.
Audit of the accounts
Each of the directors, who is a director of the Company as at the date of this
report, confirms that:
a) so far as he is aware, there is no relevant audit information of which
the Company's auditors are unaware; and
b) he has taken all the steps he ought to have taken as a director in
order to make himself aware of any relevant audit information and to establish
that the auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with the
provisions of S418 of the Companies Act 2006.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Corporate Governance Statement
The Financial Reporting Council issued a revised version of the Combined Code on
Corporate Governance (the "Combined Code") in June 2008. The Disclosure and
Transparency Rules ("DTR") require an issuer, to which section 7.2 of the DTR
applies, to provide, in its annual directors' report, a corporate governance
statement. That statement set out how the issuer has applied the main principles
in the Combined Code and, to the extent that it departs from the Combined Code,
the issuer is required to explain from which parts of the Combined Code it
departs and the reasons for doing so.
A Directors
Principle A1: The Board:
The board of directors is responsible for the overall management of the Company
and its system of internal controls. The directors have agreed a quarterly
schedule of board meetings at which they review performance, strategy and
operational and risk-related issues. Regular items on the agenda for
consideration at board meetings are general business performance, internal
control, key business activities and projects and the regulatory compliance
process.
In addition, the President and Chief Operating Officer of the CE Group
participates in weekly performance review meetings with the President of
MidAmerican and other senior managers of the MidAmerican group, including the
Senior Vice President and Chief Financial Officer. At those weekly meetings, the
views of the President of MidAmerican and the senior management team regarding
the key, current issues facing the Company are discussed.
The President of MidAmerican also receives weekly, monthly and quarterly reports
on the Company's performance from the CE Group's President and Chief Operating
Officer. MidAmerican's Senior Vice President and Chief Financial Officer and
General Counsel also hold similar weekly review meetings in respect of
MidAmerican's financial and legal functions, at which the Company's Finance
Director and General Counsel present their respective weekly reports.
The board meets quarterly and as required to consider relevant issues and met on
seven occasions in total during the year ended 31 December 2009, with the
attendance of those directors, who were directors as at 31 December 2009, being
as follows:
R Dixon Non-Executive Director
2 (of 2 held following appointment)
T E Fielden Finance Director, CE Electric UK
2 (of 2 held following appointment)
J M France Regulation Director, CE Electric UK
6
N M Gill Field Operations Director, CE Electric UK
6
P A Jones President and Chief Operating Officer, CE Electric UK 6
Mr Dixon attended the five board meetings held prior to his appointment as a
non-executive director of the Company in his capacity as an independent
non-executive director of CE Electric UK Funding Company, the Company's ultimate
parent company in the United Kingdom.
Operational management of the Company's business (and that of its affiliate,
Northern Electric Distribution Limited) is delegated to a single senior
management team, with specific functional responsibilities. That senior
management team meets monthly with the senior management of the CE Group to
monitor performance and address issues of policy across all areas of the
business and holds weekly conference calls to report on and consider performance
related issues for that week.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Corporate Governance Statement (continued)
Principle A1: The Board (continued):
The directors have overall responsibilty for the internal control environment,
which, within the CE Group, is based on regular reporting, a series of
operational and financial policy statements, investigations undertaken by
internal audit and a stringent process for ensuring the implementation of any
recommendations. In addition, MidAmerican requires a quarterly control risk
self-assessment to be undertaken by all senior managers as part of its programme
for compliance with the requirements of the Sarbanes-Oxley Act. A review is
undertaken of the company-wide controls in place on an annual basis and the
review carried out in 2009, while not identifying any areas of significant
weakness, resulted in the implementation of various recommended improvements.
The key features of the CE Group's internal control system and the issues
addressed by the Company and the CE Group during the year can be found in the
business review of the year.
Details of the management structure of the CE Group are provided in the
directors' report. A schedule of key delegations of authority has been approved
by the board, which delegates authority for decision-making to senior and other
managers in respect of issues such as capital expenditure, procurement,
contractual, human resource and payment matters and for the conduct of claims
and litigation. That schedule reserves decision-making to the directors above
certain financial limits. During the year, there were a number of committees in
operation, acting under delegated terms of reference, which oversee CE Group
and, therefore, Company policy. As part of the approved terms of reference,
those committees report regularly to the board on their activities. The
committees in operation during the year were as follows:
Health and Safety Management Committee
The board of CE Electric UK Funding Company has established the CE Group Health
and Safety Management Committee with delegated powers to manage the health and
safety policy and performance of the CE Group. Membership of the committee
comprises:
T E Fielden Finance Director, CE Electric UK
J M France Regulation Director, CE Electric UK
N M Gill Field Operations Director, CE Electric UK
P A Jones President and Chief Operating Officer, CE Electric
UK
A J MacLennan Managing Director, IUSL and
P McCormick Director of Health, Safety and Environment, CE
Electric UK
The committee meets on a regular basis in order to oversee implementation of
health and safety policy, review and agree strategy for the management of health
and safety issues, monitor health and safety performance across the CE Group,
establish goals and targets, review the effectiveness of the health and safety
policies and the health and safety management system and consider
recommendations for changes in CE Group policy due to changes in appropriate
legislation, codes of practice or guidance or due to recommendations arising
from significant incidents.
Treasury Committee
The Treasury Committee oversees and implements the treasury policies outlined in
the business review of the year in the directors' report and comprises:
G E Abel President, MidAmerican
P Ainsley Financial Controller, CE Electric UK
D Brady Treasurer, CE Electric UK
T E Fielden Finance Director, CE Electric UK
P J Goodman: Senior Vice President and Chief Financial Officer,
MidAmerican
P A Jones President and Chief Operating Officer, CE Electric
UK
R D McHaddan Assistant Treasurer, CE Electric UK and
O Sutherland Investor Reporting Manager, CE Electric UK.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Corporate Governance Statement (continued)
A Directors (continued)
Principle A1: The Board (continued):
Pensions Committee
The Pensions Committee oversees the CE Group's approach to the pension schemes
to which it contributes and comprises:
P Ainsley Financial Controller, CE Electric UK
T E Fielden Finance Director, CE Electric UK
J M France Regulation Director, CE Electric UK
K A Mawson Head of Finance Development and Systems, CE Electric
UK
A J Patterson Director of Human Resources, CE Electric UK
N Dawson Pensions Manager, CE Electric UK and
L Taylor Director of Business Systems, CE Electric UK.
Compliance Assurance Programme Steering Group ("CAPSG")
As mentioned in the business review of the year, the CAPSG is the principal
management forum in the CE Group with regard to corporate governance. Its
purpose is to ensure that CE Group companies apply and maintain appropriate
arrangements to deliver sound corporate governance and comply with the overall
strategy, framework and supporting policies. The CAPSG monitors and reviews the
strategic risk environment, ensuring the continued suitability, adequacy and
effectiveness of risk management arrangements. The CAPSG comprises:
J P Barnett Director of Customer Operations CE Electric UK
R Dixon Non-Executive Director, CE Electric UK Funding
Company
M Drye Director of Asset Management CE Electric UK
J Elliott Company Secretary, CE Electric UK
T E Fielden Finance Director, CE Electric UK
J M France Regulation Director, CE Electric UK
N M Gill Field Operations Director, CE Electric UK and
L Taylor Director of Business Systems, CE Electric UK.
The risk management framework was monitored regularly during the year to ensure
that all strategic risks, including those relating to environmental and social
issues, were being addressed. Risk management policies and procedures were
reviewed and updated to ensure a robust and clear approach was maintained. Mr
Dixon attends meetings of the CAPSG to provide an independent view in respect of
the matters discussed.
Asset risk continued to be a strong focus through the Asset Risk Management
Executive Review Group and comprehensive plans continued to be in place to
manage risks affecting all critical property assets and to strengthen the
arrangements for crisis management and business continuity planning.
Further details of the CE Group's approach to corporate governance and the
management of internal controls can be found in the business review of the year
in the directors' report.
As explained in Principles A4 and B1, the Company does not have a remuneration
committee or a nomination committee.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Corporate Governance Statement (continued)
A Directors (continued)
Principle A2: Chairman and Chief Executive
The Company does not have a formally appointed Chairman or Chief Executive.
However, the President and Chief Operating Officer of the CE Group chairs the
board meetings and is responsible for the operation and management of the CE
Group.
Principle A3: Board balance and independence
The board comprises four executive directors who, collectively, bring a range of
skills and experience to the board. Consequently, the board believes that it
possesses the skills and experience necessary to provide effective leadership,
stewardship and control of the Company. During the year Mr Abel, Mr Connor and
Mr Linge resigned and Mr Dixon and Mr Fielden were appointed as directors of the
Company. The directors of the Company, as at the date of approval of the annual
accounts, were as follows:
R Dixon Non-Executive Director;
T E Fielden Finance Director, CE Electric UK
J M France Regulation Director, CE Electric UK
N M Gill Field Operations Director, CE Electric UK and
P A Jones President and Chief Operating Officer, CE Electric
UK.
Principle A4: Appointments to the Board
The CE Group does not have a nomination committee. Appointments to the board are
made by MidAmerican, in conjunction with the President and Chief Operating
Officer of the CE Group.
Principle A5: Information and professional development
Directors receive monthly reports outlining progress against the Company's goals
and targets, enabling financial performance against budget and operational
performance against a number of indicators to be reviewed, and also participate
in weekly meetings, which consider the key issues of that week in some detail.
The directors are able to utilise the advice and services of the Company
Secretary, in respect of their duties and responsibilities as directors and any
new legislation that may affect those duties and responsibilities. A briefing
programme continued to run throughout the year for the directors in respect of
the changes introduced by the phased implementation of the Companies Act 2006
including the procedural requirements in respect of the authorisation of
potential conflicts of interest. The directors also have access to external
legal advice, should they feel it necessary. Interim briefings are provided to
the non-executive director, as appropriate.
Mr Fielden joined the CE Group on 27 July 2009 and was appointed a director of
the Company on 16 October 2009. During that period Mr Fielden worked closely
with the previous Finance Director and the senior management team of the CE
Group as part of his induction as a director, which included exposure to all
aspects of the operation of the CE Group's business.
Principle A6: Performance evaluation
As part of their approved terms of reference, the committees report regularly on
their activities, enabling the directors to evaluate the activities of those
committees. However, the board does not have a process of evaluation of its own
performance or the performance of individual directors in their capacity as
directors. The CE Group has a performance appraisal and development scheme in
place, under which each senior manager of the CE Group is subject to a formal
annual appraisal of performance against his individual and the CE Group's goals.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Corporate Governance Statement (continued)
A Directors (continued)
Principle A7: Re-election
The Company's articles of association do not require periodic retirement and
re-election of directors.
B Remuneration
Principle B1: The level and make-up of remuneration
The CE Group does not have a remuneration committee. Annual remuneration awards
for senior management of the CE Group are subject to the performance appraisal
and development scheme process and consideration by the President of MidAmerican
and the CE Group's President and Chief Operating Officer. The Company has only
debt securities listed on the London Stock Exchange. Accordingly, it has availed
itself of the exemption from the requirements to make directors' remuneration
disclosures and for auditor review thereof.
Principle B2: Procedure
As mentioned under Principle B1, the annual remuneration awards for senior
management of the CE Group are subject to the performance appraisal and
development scheme process and consideration by the President of MidAmerican and
the CE Group's President and Chief Operating Officer. Other than Mr Dixon, the
directors of the Company are subject to the performance appraisal and
development scheme process in their capacity as senior managers of the CE Group
and not, specifically, in their capacity as board directors. No director is
involved in deciding his own remuneration.
C Accountability and Audit
Principle C1: Financial Reporting
The board believes that the directors' report and business review of the year
included in the annual accounts provides a balanced and understandable
assessment of the Company's position and prospects. The directors have
explained, at page 29, their responsibility for preparing the annual accounts,
reported, at page 21 in the directors' report that the Company is a going
concern and included the independent accountant's report to the members of the
Company at page 30 of the annual accounts.
Principle C2: Internal control
The principal risks and uncertainties facing the Company and the key features of
the CE Group's internal control system, together with details of the issues
addressed by the Company and the CE Group during the year, can be found at pages
3 to 7 of the business review of the year in the directors' report.
Principle C3: Audit committee and auditors
CE Electric UK Funding Company has established an audit committee for the CE
Group under delegated terms of reference, which include monitoring of the
financial reporting process, the effectiveness of the internal control, internal
audit and risk management systems, the statutory audit of the accounts, the
independence of and the provision of additional services by the auditor and
receiving an annual report from the CE Group's Head of Internal Audit on the
work of the Internal Audit Section during the year and the audit plan for the
following year. DTR 7 requires an audit committee to have at least one
independent member and a member with competence in accounting and/or auditing,
although these requirements could be satisfied by one and the same person.
However, code provision C.3.1 states that the board should establish an audit
committee of at least three independent non-executive directors and should
satisfy itself that at least one member has recent relevant financial
experience. Given that Mr Dixon is the CE Group's sole independent non-executive
director, the Audit Committee comprises:
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
Corporate Governance Statement (continued)
Principle C3: Audit committee and auditors (continued)
R Dixon Non-Executive Director; and
T E Fielden Finance Director, CE Electric UK.
The CE Group also operates under the oversight of the MidAmerican Audit
Committee, which is comprised of Mr. Marc D. Hamburg who, the MidAmerican board
of directors has determined, qualifies as an "audit committee financial expert,"
as defined by the rules of the Securities and Exchange Commission, based on his
education, experience and background. The MidAmerican Audit Committee is
attended, from time to time, by the Senior Vice President and Chief Financial
Officer and the Vice President and Chief Accounting Officer of MidAmerican, the
Director of Internal Auditing of Berkshire Hathaway, Inc. and the Heads of
Internal Audit of the various MidAmerican business platforms.
The directors confirm that no fees were payable by the Company to Deloitte LLP
in relation to non-audit services during the year.
The internal control section on page 6 of the directors' report contains details
of the CE Group's "speaking up" policy.
D Relations with shareholders
Principle D1: Dialogue with Institutional Shareholders
This principle of the Combined Code is not applicable to the Company, as it is a
wholly-owned subsidiary of a privately held group of companies and, therefore,
has no institutional shareholders.
Principle D2: Constructive use of the AGM
This principle of the Combined Code is not applicable to the Company, as it is a
wholly-owned subsidiary of a privately held group of companies.
Compliance statement
Set out above and in the business review of the year in the directors' report
are the areas in which the Company adopts and complies with the principles of
the Combined Code. The Company has not complied with certain principles of the
Combined Code, including the principles A2, A3, A4, A6, A7, B1, B2, C3, D1 and
D2. The directors confirm that such non-compliance was of a continuing nature
throughout the year but consider the governance framework in place to be
appropriate to the Company's circumstances, given that it includes regular
reporting to and meetings with the President and senior management of
MidAmerican, the presence of an independent non-executive director and astrong
internal control environment designed to meet the standards required by the
Sarbanes-Oxley Act.
The intention of the Combined Code is that companies should be able to explain
their governance policies in light of the principles contained in the Combined
Code, including any special circumstances applying to them, which have led to a
particular approach. The directors are of the opinion that, in the instances
where the Company does not comply with certain provisions of the Combined Code,
this approach is justifiable, given the ownership structure of the Company.
By order of the board
John Elliott
Company Secretary
19 March 2010
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
DIRECTORS' REPORT (CONTINUED)
RESPONSIBILITY OF DIRECTORS FOR THE PREPARATION OF THE REPORT AND ACCOUNTS
The directors are responsible for preparing the Annual Report and the financial
statements and are required to prepare financial statements for the Company in
accordance with International Financial Reporting Standards ("IFRS"), as adopted
by the European Union. Company law requires the directors to prepare such
financial statements in accordance with IFRS, the Companies Act 2006 and Article
4 of the IAS Regulation.
International Accounting Standard 1 requires that financial statements present
fairly for each financial year the Company's financial position, financial
performance and cash flows. This requires the faithful representation of the
effects of transactions, other events and conditions in accordance with the
definitions and recognition criteria for assets, liabilities, income and
expenses set out in the International Accounting Standards Board's 'Framework
for the Preparation and Presentation of Financial Statements'. In virtually all
circumstances, a fair presentation will be achieved by compliance with all
applicable International Financial Reporting Standards.
Directors are also required to:
· Properly select and apply accounting policies;
· Present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information; and
· Provide additional disclosures when compliance with the specific
requirements in IFRS is insufficient to enable users to understand the impact of
particular transactions, other events and conditions on the entity's financial
position and financial performance.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company, for safeguarding the assets, for taking reasonable steps for the
prevention and detection of fraud and other irregularities and for
the preparation of a directors' report which complies with the requirements of
the Companies Act 2006. The directors are responsible for the maintenance and
integrity of the Company website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL REPORT AND
ACCOUNTS
Each of the directors as at the date of the Annual Report, whose names and
functions are set out on page 21 of the Directors' Report confirms that, to the
best of their knowledge:
a) the Company accounts, prepared in accordance with applicable UK law
and in conformity with IFRS, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company; and
b) the Management Report (which is comprised of the Directors' Report
and the Business Review) includes a fair review of the development and
performance of the business and the position of the Company, together with a
description of the principal risks and uncertainties it faces.
This responsibility statement was approved by the Board of Directors on 19 March
2010 and signed on its behalf by:
P A Jones
President and Chief Operating Officer
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF YORKSHIRE ELECTRICITY
DISTRIBUTION PLC
We have audited the financial statements of Yorkshire Electricity Distribution
plc (the "Company") for the year ended 31 December 2009 which comprise the
Income Statement, the Statement of Comprehensive Income, the Statement of
Changes in Equity, the Balance Sheet and the Cash Flow Statement and the related
notes 1 to 26. The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
This report is made solely to the Company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company's members those matters we are
required to state to them in an auditors' report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directors' Responsibilities Statement, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view. Our responsibility is
to audit the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards require
us to comply with the Auditing Practices Board's (APB's) Ethical Standards for
Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or
error. This includes an assessment of: whether the accounting policies are
appropriate to the company's circumstances and have been consistently applied
and adequately disclosed; the reasonableness of significant accounting estimates
made by the directors; and the overall presentation of the financial statements.
Opinion on financial statements
In our opinion the financial statements:
· give a true and fair view of the state of the Company's affairs
as at 31 December 2009 and of its profit for the year then ended;
· have been properly prepared in accordance with IFRSs as adopted
by the European Union; and
· have been prepared in accordance with the requirements of the
Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors' Report for the financial
year for which the financial statements are prepared is consistent with the
financial statements.
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF YORKSHIRE ELECTRICITY
DISTRIBUTION plc (CONTINUED)
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the
Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not visited by us;
or
· the financial statements are not in agreement with the accounting
records and returns; or
· certain disclosures of directors' remuneration specified by law
are not made; or
· we have not received all the information and explanations we
require for our audit.
John Charlton
(Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditors
Newcastle upon Tyne England
23 March 2010
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2009
+----------------------------------------------+-------+----------+--------+----------+--------+
| |Notes | | 2009 | | 2008 |
+----------------------------------------------+-------+----------+--------+----------+--------+
| | | | GBPm | | GBPm |
+----------------------------------------------+-------+----------+--------+----------+--------+
| | | | | | |
+----------------------------------------------+-------+----------+--------+----------+--------+
| Revenue | 3 | | 287.6 | | 287.0 |
+----------------------------------------------+-------+----------+--------+----------+--------+
| Cost of sales | | | (11.2) | | (11.5) |
+----------------------------------------------+-------+----------+--------+----------+--------+
| | | | | | |
+----------------------------------------------+-------+----------+--------+----------+--------+
| Gross profit | | | 276.4 | | 275.5 |
+----------------------------------------------+-------+----------+--------+----------+--------+
| | | | | | |
+----------------------------------------------+-------+----------+--------+----------+--------+
| Distribution costs | | | (94.2) | | (91.4) |
+----------------------------------------------+-------+----------+--------+----------+--------+
| Administrative expenses | | | (42.5) | | (43.4) |
+----------------------------------------------+-------+----------+--------+----------+--------+
| | | | | | |
+----------------------------------------------+-------+----------+--------+----------+--------+
| Operating profit | 6 | | 139.7 | | 140.7 |
+----------------------------------------------+-------+----------+--------+----------+--------+
| | | | | | |
+----------------------------------------------+-------+----------+--------+----------+--------+
| Profit on disposal of property, plant and | | | 0.7 | | 0.2 |
| equipment | | | | | |
+----------------------------------------------+-------+----------+--------+----------+--------+
| Investment income | 4 | | - | | 1.8 |
+----------------------------------------------+-------+----------+--------+----------+--------+
| Finance costs | 5 | | (33.9) | | (38.6) |
+----------------------------------------------+-------+----------+--------+----------+--------+
| | | | | | |
+----------------------------------------------+-------+----------+--------+----------+--------+
| Profit before tax | | | 106.5 | | 104.1 |
+----------------------------------------------+-------+----------+--------+----------+--------+
| | | | | | |
+----------------------------------------------+-------+----------+--------+----------+--------+
| Income tax expense | 9 | | (29.1) | | (41.1) |
+----------------------------------------------+-------+----------+--------+----------+--------+
| | | | | | |
+----------------------------------------------+-------+----------+--------+----------+--------+
| Profit for the financial year | | | 77.4 | | 63.0 |
+----------------------------------------------+-------+----------+--------+----------+--------+
| | | | | | |
+----------------------------------------------+-------+----------+--------+----------+--------+
All activities relate to continuing operations.
There has been no other income or expense for the Company other than the profits
reported above in the current or the prior year.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2009
+------------------------------------+---------+----------+----------+----------+---------+
| | | | | | |
| | Share | |Retained | | |
| |Capital | |Reserves | | Total |
| | | | | | Equity |
+------------------------------------+---------+----------+----------+----------+---------+
| | GBPm | | GBPm | | GBPm |
+------------------------------------+---------+----------+----------+----------+---------+
| | | | | | |
+------------------------------------+---------+----------+----------+----------+---------+
| At 1 January 2008 | 290.0 | | 182.7 | | 472.7 |
+------------------------------------+---------+----------+----------+----------+---------+
| Comprehensive income for the year | - | | 63.0 | | 63.0 |
+------------------------------------+---------+----------+----------+----------+---------+
| Dividends paid | - | | (40.0) | | (40.0) |
+------------------------------------+---------+----------+----------+----------+---------+
| | | | | | |
+------------------------------------+---------+----------+----------+----------+---------+
| At 31 December 2008 | 290.0 | | 205.7 | | 495.7 |
+------------------------------------+---------+----------+----------+----------+---------+
| Comprehensive income for the year | - | | 77.4 | | 77.4 |
+------------------------------------+---------+----------+----------+----------+---------+
| Dividends paid | - | | (40.0) | | (40.0) |
+------------------------------------+---------+----------+----------+----------+---------+
| | | | | | |
+------------------------------------+---------+----------+----------+----------+---------+
| At 31 December 2009 | 290.0 | | 243.1 | | 533.1 |
+------------------------------------+---------+----------+----------+----------+---------+
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
BALANCE SHEET AS AT 31 DECEMBER 2009
+------------------------------------------------+-------+-----------+----------+-----------+
| |Notes | 2009 | | 2008 |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | GBPm | | GBPm |
+------------------------------------------------+-------+-----------+----------+-----------+
| Non-current assets | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| Property, plant and equipment | 11 | 2,006.9 | | 1,897.4 |
+------------------------------------------------+-------+-----------+----------+-----------+
| Intangibles | 12 | 6.1 | | 8.3 |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | 2,013.0 | | 1,905.7 |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| Current assets | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| Inventories | 14 | 0.5 | | 0.5 |
+------------------------------------------------+-------+-----------+----------+-----------+
| Trade and other receivables | 15 | 61.7 | | 49.1 |
+------------------------------------------------+-------+-----------+----------+-----------+
| Cash and cash equivalents | 15 | - | | 7.0 |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | 62.2 | | 56.6 |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| Total assets | | 2,075.2 | | 1,962.3 |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| Current liabilities | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| Trade and other payables | 16 | (45.9) | | (44.4) |
+------------------------------------------------+-------+-----------+----------+-----------+
| Current income tax liabilities | 16 | (13.2) | | (11.6) |
+------------------------------------------------+-------+-----------+----------+-----------+
| Deferred revenue | 19 | (18.8) | | (16.9) |
+------------------------------------------------+-------+-----------+----------+-----------+
| Borrowings | 17 | (201.2) | | (145.4) |
+------------------------------------------------+-------+-----------+----------+-----------+
| Provisions | 20 | (1.2) | | (1.2) |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | (280.3) | | (219.5) |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| Net current liabilities | | (218.1) | | (162.9) |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| Non-current liabilities | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| Borrowings | 17 | (449.4) | | (449.2) |
+------------------------------------------------+-------+-----------+----------+-----------+
| Deferred income tax liabilities | 18 | (218.5) | | (218.6) |
+------------------------------------------------+-------+-----------+----------+-----------+
| Deferred revenue | 19 | (593.2) | | (578.6) |
+------------------------------------------------+-------+-----------+----------+-----------+
| Provisions | 20 | (0.7) | | (0.7) |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | (1,261.8) | | (1,247.1) |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| Total liabilities | | (1,542.1) | | (1,466.6) |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| Net assets | | 533.1 | | 495.7 |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| Equity | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| Share capital | 21 | 290.0 | | 290.0 |
+------------------------------------------------+-------+-----------+----------+-----------+
| Retained earnings | | 243.1 | | 205.7 |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
| Total equity | | 533.1 | | 495.7 |
+------------------------------------------------+-------+-----------+----------+-----------+
| | | | | |
+------------------------------------------------+-------+-----------+----------+-----------+
The financial statements were approved by the board of directors and authorised
for issue on 19 March 2010 and were signed on its behalf by:
P A Jones
Director
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2009
+------------------------------------------------+-------+---------+----------+---------+
| |Notes | 2009 | | 2008 |
+------------------------------------------------+-------+---------+----------+---------+
| | | GBPm | | GBPm |
+------------------------------------------------+-------+---------+----------+---------+
| | | | | |
+------------------------------------------------+-------+---------+----------+---------+
| Net cash from operating activities | 22 | 121.3 | | 128.5 |
+------------------------------------------------+-------+---------+----------+---------+
| | | | | |
+------------------------------------------------+-------+---------+----------+---------+
| Investing activities | | | | |
+------------------------------------------------+-------+---------+----------+---------+
| Proceeds from disposal of property, plant and | | 0.7 | | 2.8 |
| equipment | | | | |
+------------------------------------------------+-------+---------+----------+---------+
| Purchases of property, plant and equipment | | (179.9) | | (195.3) |
+------------------------------------------------+-------+---------+----------+---------+
| Receipt of customer contributions | | 35.0 | | 55.9 |
+------------------------------------------------+-------+---------+----------+---------+
| Sale of short-term securities | | - | | 200.0 |
+------------------------------------------------+-------+---------+----------+---------+
| | | | | |
+------------------------------------------------+-------+---------+----------+---------+
| Net cash (used in)/generated by investing | | (144.2) | | 63.4 |
| activities | | | | |
+------------------------------------------------+-------+---------+----------+---------+
| | | | | |
+------------------------------------------------+-------+---------+----------+---------+
| Financing activities | | | | |
+------------------------------------------------+-------+---------+----------+---------+
| Equity dividends paid | | (40.0) | | (40.0) |
+------------------------------------------------+-------+---------+----------+---------+
| Movement in loans from Group undertaking | | 34.2 | | (158.9) |
+------------------------------------------------+-------+---------+----------+---------+
| New borrowings | | 21.7 | | 14.0 |
+------------------------------------------------+-------+---------+----------+---------+
| | | | | |
+------------------------------------------------+-------+---------+----------+---------+
| Net cash generated by/(used in) financing | | 15.9 | | (184.9) |
| activities | | | | |
+------------------------------------------------+-------+---------+----------+---------+
| | | | | |
+------------------------------------------------+-------+---------+----------+---------+
| Net (decrease)/increase in cash and cash | | (7.0) | | 7.0 |
| equivalents | | | | |
+------------------------------------------------+-------+---------+----------+---------+
| | | | | |
+------------------------------------------------+-------+---------+----------+---------+
| Cash and cash equivalents at beginning of year | | 7.0 | | - |
+------------------------------------------------+-------+---------+----------+---------+
| | | | | |
+------------------------------------------------+-------+---------+----------+---------+
| Cash and cash equivalents at end of year | | - | | 7.0 |
+------------------------------------------------+-------+---------+----------+---------+
| | | | | |
+------------------------------------------------+-------+---------+----------+---------+
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009
1 GENERAL INFORMATION
Yorkshire Electricity Distribution plc is a company originally incorporated in
England and Wales under the Companies Act 1985. The address of the registered
office is Lloyds Court, 78 Grey Street, Newcastle-upon-Tyne, NE1 6AF.
The nature of the Company's operations and its principal activities are set out
in the Business Review in the Director's Report and in Note 3.
2 ACCOUNTING POLICIES
The financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS"). The financial statements have also been
prepared in accordance with IFRSs adopted by the European Union and therefore
comply with Article 4 of the EU IAS Regulation and with those parts of the
Companies Act 1985 (the "Act") that are applicable to companies reporting under
IFRS.
The accounts have been prepared under the historical cost convention.
Going Concern
The directors have, at the time of approving the financial statements, a
reasonable expectation that the Company has adequate resources to continue
existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the financial statements. Further detail is
contained within the Directors Report on page 21.
Judgments in applying accounting policies and key sources of estimation
uncertainty
Many of the amounts included in the financial statements involve the use of
judgment and/or estimation. These judgments and estimates are based on
management's best knowledge of the relevant facts and circumstances, having
regard to previous experience, but actual results may differ from the amounts
included in the financial statements. Information about such judgments and
estimates is contained in the accounting policies and/or the notes to the
financial statements, and the key areas are summarised below.
Areas of judgment and estimation which have the most significant effect on the
amounts recognised in the financial statements are:
· The estimation of useful economic lives for property, plant and
equipment;
· The split of operating and capital expenditure and the allocation of
overheads to capital projects; and
· Impairment reviews carried out to evaluate the carrying value of assets
held at the balance sheet date.
Critical accounting policies
The critical accounting policies adopted by the directors relate to property,
plant and equipment, taxation, pensions and revenue and are described below. The
accounting policies have been applied consistently throughout the year and the
preceding year.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
2 ACCOUNTING POLICIES (CONTINUED)
Adoption of new or revised standards
In the current year, the following new and revised Standards and Interpretations
have been adopted and have affected the amounts reported in the financial
statements.
Standards affecting presentation and disclosure
IAS 1 Presentation of Financial Statements - Amendments to IAS 1
IFRS 8 Operating Segments
IFRS 7 Financial Instrument Disclosure - Amendment to IFRS 7
IAS 1 has introduced a number of changes in the format of the financial
statements. No third balance sheet has been presented in these financial
statements as no changes in accounting policy have been adopted retrospectively.
IFRS 8 is a disclosure Standard that redefines the process for measuring
segmental information in the notes to the accounts. In practice however, the
adoption of this Standard has not led to any change in the disclosures contained
within these financial statements. Further detail can be found in note 3 to the
accounts.
The amendments to IFRS 7 expand the disclosures required in respect of fair
value measurement and liquidity risk. In practice these amendments have had no
material impact on these financial statements.
Standards affecting the reported results and the financial position
IAS 23 Borrowing Costs - Amendments to IAS 23
The principal change to IAS 23 was to eliminate the option to expense all
borrowing costs when incurred. From 1 January 2009, all borrowing costs relating
to qualifying assets have therefore been capitalised. The impact on these
financial statements has been less than GBP0.1m.
Standards and Interpretations approved by not yet effective
At the date of authorisation of these financial statements there were a number
of Standards and Interpretations in issue but not yet effective, which have
therefore not yet been applied. The directors consider that the adoption of the
following Interpretation may be relevant to the Company in future periods.
IFRIC 18 Transfer of Assets from Customers
The directors anticipate that the Company will adopt this Interpretation on the
date on which it is endorsed by the European Union. The directors are currently
considering the impact of the adoption of this Interpretation, which is still
unclear.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
2 ACCOUNTING POLICIES (CONTINUED)
Revenue
Revenue is only recognised when the risks and rewards of ownership have been
transferred to a third party. No revenue is recognised where there are
significant uncertainties regarding the consideration to be received or the
costs associated with the transaction.
Revenue represents charges for the use of the Company's distribution network,
amortisation of customer contributions, recharge of costs incurred on behalf of
related parties and the invoiced value of other goods sold and services
provided, exclusive of value added tax.
Revenues from charges to end customers for the use of the Company's distribution
network include estimates of the units distributed. The estimated usage is based
on historic data, judgment and assumptions. Revenues are gradually adjusted to
reflect actual usage in the period during which actual meter readings are
obtained.
Any under or over recovery of allowed distribution network revenues as
prescribed by Ofgem is not provided for in the financial statements and will be
recovered/repaid through future tariffs.
Customer contributions towards distribution system assets are included in
deferred revenue. The Company's policy is to credit the customer contribution to
revenue over 45 years on a straight-line basis, in line with the useful life of
the distribution system assets.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable.
Dividend income from investments is recognised when the shareholders' rights to
receive payment have been established.
Research costs
Expenditure on research activities is written off to the income statement in the
year in which it is incurred.
Operating profit
Operating profit is stated before investment income and finance costs.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Company's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted at the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of assets
and liabilities in the financial statements and the corresponding tax bases used
in the computation of taxable profit, and is accounted for using the balance
sheet liability method. Deferred tax liabilities are generally recognised for
all taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
2 ACCOUNTING POLICIES (CONTINUED)
Taxation (continued)
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
year when the liability is settled or asset realised, based on tax rates and tax
legislation enacted or substantively enacted at the balance sheet date.
Property, plant and equipment and depreciation
Property, plant and equipment is stated at cost. Cost includes the purchase
price of the asset and any costs, including internal employee and other costs,
directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by
management.
The charge for depreciation is calculated to write off assets to their residual
values over their estimated useful lives using the straight-line basis:
Distribution system
assets.........................................................................
........45 years
Metering equipment included in distribution system
assets.................................up to 15 years
Information Technology equipment included in distribution system
assets..............up to 10 years
Non-operational assets:
Buildings -
freehold.......................................................................
.... ...up to 60 years
Buildings -
leasehold.....................................................lower of lease
period or 60 years
Fixtures and equipment......
....................................................................up to 10
years
Software development costs
........................................................................up to 15
years
Freehold land is not depreciated.
Assets in the course of construction are carried at cost. Depreciation on these
assets, on the same basis as other assets, commences when the assets are
commissioned.
The estimated useful economic lives of property, plant and equipment are based
on management's judgment and experience. When management identifies that actual
useful lives differ materially from the estimates used to calculate
depreciation, that charge is adjusted prospectively. Due to the significance of
the Company's investment in property, plant and equipment, variations between
actual and estimated useful lives could impact operating results both positively
and negatively.
The Company is required to evaluate the carrying values of property, plant and
equipment for impairment whenever circumstances indicate, in management's
judgment, that the carrying value of such assets may not be recoverable. An
impairment review requires management to make judgments concerning the cash
flows, growth rates and discount rates for the cash-generating units under
review.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
2 ACCOUNTING POLICIES (CONTINUED)
Software development costs
Costs in respect of major developments are capitalised and amortised over the
expected life of the software. Capitalised software costs that are not an
integral part of the related hardware are included in intangible assets on the
balance sheet and amortised over the expected life of the software of up to 15
years.
Investments
Fixed asset investments are stated at cost less provision for impairment in
value.
Inventories
Inventories are stated at the lower of cost and net realisable value as follows:
Work in progress is valued at the cost of direct materials and labour plus
attributable overheads based on the normal level of activity less progress
payments.
Net realisable value is based on estimated selling price less further costs
expected to be incurred to completion and disposal.
Provisions
Provisions are recognised when the Company has a present obligation as a result
of a past event and it is probable that the Company will be required to settle
that obligation. Provisions are measured at the directors' best estimate of the
expenditure required to settle the obligation at the balance sheet date.
Reasonable estimates involve judgments made by management after considering
information including notifications, settlements, estimates performed by
independent parties and legal counsel, available facts, identification of other
potentially responsible parties and their ability to contribute and prior
experience.
Where the effect is significant, provisions in respect of material future
liabilities are stated at their net present value and arrived at by discounting
the anticipated future costs, at the market rate at the balance sheet date.
Leases
Leases are classified as finance leases wherever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other
leases are classified as operating leases.
Operating lease rentals are charged to the income statement in equal annual
amounts over the lease term.
Trade receivables
Trade receivables are measured at initial recognition at fair value.
Appropriate allowances for estimated irrecoverable amounts are recognised in the
income statement when there is objective evidence that the asset is impaired.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
2 ACCOUNTING POLICIES (CONTINUED)
Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
Borrowings
Borrowings are classified as other financial liabilities at amortised cost. They
are recorded at the proceeds received, net of direct issue costs. Finance
charges, including premiums payable on settlement for redemption and direct
issue costs, are accounted for on an accruals basis in the income statement
using the effective interest rate method. They are added to the carrying amount
of the instruments to the extent that they are not settled in the period in
which they arise.
Financial instruments
Financial assets and financial liabilities are recognised on the balance sheet
when the Company becomes a party to the contractual provisions on the
instrument.
Financial assets are assessed for indicators of impairment at each balance sheet
date. Financial assets are impaired where there is objective evidence that, as a
result of one or more events that occurred after the initial recognition of the
financial asset, the estimated future cash flows of the investment have been
impacted.
For certain categories of financial assets, such as trade receivables, assets
that are assessed not to be impaired individually are subsequently assessed for
impairment on a collective basis. Objective evidence of impairment for a
portfolio of receivables could include the Company's past experience of
collecting payments, an increase in the number of delayed payments in the
portfolio past the average credit period of 30 days, as well as observable
changes in national or local economic conditions that correlate with default on
receivables.
The carrying amount of the financial asset is reduced by the impairment loss
directly for all financial assets with the exception of trade receivables, where
the carrying amount is reduced through the use of an allowance account. When a
trade receivable is considered uncollectable, it is written off against the
allowance account. Subsequent recoveries of amounts previously written off are
credited against the allowance account. Changes in the carrying amount of the
allowance account are recognised in the income statement.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
2 ACCOUNTING POLICIES (CONTINUED)
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangement entered into. An equity instrument is
any contract that evidences a residual interest in the assets of the Company
after deducting all of its liabilities.
Pensions
The Company contributes to the Northern Electric Group of the Electricity Supply
Pension Scheme ("the Northern Electric Group of the ESPS"). The Northern
Electric Group of the ESPS is a defined benefit plan that shares risk between
various entities under common control. There is no contractual agreement or
stated policy for charging the net defined benefit cost for the plan as a whole
to individual group entities and accordingly the Company accounts for the
Northern Electric Group of the ESPS as if it were a defined contribution scheme.
Contributions to the Northern Electric Group of the ESPS are charged to the
income statement or capitalised as appropriate. The capital costs of ex-gratia
and supplementary pensions are normally charged to the income statement in the
period in which they are granted.
The Company also participates in the Northern Electric Money Purchase Scheme
("NEMPS") and contributes to the Yorkshire Electricity Pension Plan ("YEPP"),
which are defined contribution schemes. Contributions payable to the defined
contribution schemes are charged to the income statement in the year.
Differences between contributions payable in the year and contributions actually
paid are shown as either accruals or prepayments in the balance sheet.
The Company has adopted IFRS 8, Operating Segments, with effect from 1 January
2009. IFRS 8 requires operating segments to be identified on the basis of
internal reports about components of the Company that are regularly reviewed by
the President and Chief Operating Officer of the CE Electric UK Funding Company
group of companies (the "CE Group") to allocate resources to these segments and
to assess their performance.
In practice, the President and Chief Operating Officer allocates resources and
assesses performance based upon the aggregate results of the Company and
Northern Electric Distribution Limited, another distribution network operator in
the CE Group, suggesting that no segmental reporting is required. Therefore, the
adoption of IFRS 8 does not impact these financial statements.
Revenue, profit before tax and net assets are attributable to electricity
distribution. Revenue is all in respect of sales to United Kingdom customers.
Revenue represents charges made to customers for use of the distribution system,
the recharge of costs incurred on behalf of related parties, amortisation of
customer contributions and other services and is included net of value added
tax.
+------------------------------------------------+------+----------+------+
| |2009 | |2008 |
+------------------------------------------------+------+----------+------+
| |GBPm | |GBPm |
+------------------------------------------------+------+----------+------+
| | | | |
+------------------------------------------------+------+----------+------+
| Interest receivable on loans to Group | - | | 0.4 |
| undertaking | | | |
+------------------------------------------------+------+----------+------+
| Dividends receivable | - | | 0.1 |
+------------------------------------------------+------+----------+------+
| Interest receivable on non-current investments | - | | 1.3 |
+------------------------------------------------+------+----------+------+
| | | | |
+------------------------------------------------+------+----------+------+
| Total investment income | - | | 1.8 |
+------------------------------------------------+------+----------+------+
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
+------------------------------------------------+------+----------+------+
| |2009 | |2008 |
+------------------------------------------------+------+----------+------+
| |GBPm | |GBPm |
+------------------------------------------------+------+----------+------+
| | | | |
+------------------------------------------------+------+----------+------+
| Interest payable on loans from Group | 4.1 | | 8.5 |
| undertakings | | | |
+------------------------------------------------+------+----------+------+
| Interest payable on other loans | 29.8 | | 30.1 |
+------------------------------------------------+------+----------+------+
| | | | |
+------------------------------------------------+------+----------+------+
| Total finance costs | 33.9 | | 38.6 |
+------------------------------------------------+------+----------+------+
6 OPERATING PROFIT
+------------------------------------------------+--------+----------+--------+
| | 2009 | | 2008 |
+------------------------------------------------+--------+----------+--------+
| | GBPm | | GBPm |
+------------------------------------------------+--------+----------+--------+
| This is stated after charging/(crediting): | | | |
+------------------------------------------------+--------+----------+--------+
| Staff costs (Note 7) | 21.3 | | 26.1 |
+------------------------------------------------+--------+----------+--------+
| Research costs | 0.4 | | 0.5 |
+------------------------------------------------+--------+----------+--------+
| Depreciation of property, plant and equipment | 61.8 | | 58.9 |
+------------------------------------------------+--------+----------+--------+
| Amortisation of deferred revenue | (16.1) | | (15.3) |
+------------------------------------------------+--------+----------+--------+
| Amortisation of intangibles | 2.2 | | 2.3 |
+------------------------------------------------+--------+----------+--------+
| Impairment loss on trade and other receivables | 0.3 | | 0.3 |
+------------------------------------------------+--------+----------+--------+
| | | | |
+------------------------------------------------+--------+----------+--------+
| Analysis of auditors' remuneration is as | | | |
| follows: | | | |
+------------------------------------------------+--------+----------+--------+
| | 2009 | | 2008 |
+------------------------------------------------+--------+----------+--------+
| | GBP000 | | GBP000 |
+------------------------------------------------+--------+----------+--------+
| | | | |
+------------------------------------------------+--------+----------+--------+
| Fees payable to the Company's auditors for the | | | |
| audit of the Company's annual accounts | 105 | | 111 |
+------------------------------------------------+--------+----------+--------+
There were no fees payable in relation to non-audit services in 2009 or 2008.
+------------------------------------------------+--------+-+--------+
| | 2009 | | 2008 |
+------------------------------------------------+--------+-+--------+
| | GBPm | | GBPm |
+------------------------------------------------+--------+-+--------+
| | | | |
+------------------------------------------------+--------+-+--------+
| Salaries | 44.3 | | 44.4 |
+------------------------------------------------+--------+-+--------+
| Social security costs | 4.0 | | 3.9 |
+------------------------------------------------+--------+-+--------+
| Defined contribution pension costs | 0.1 | | 0.1 |
+------------------------------------------------+--------+-+--------+
| Defined benefit pension costs | 13.2 | | 13.8 |
+------------------------------------------------+--------+-+--------+
| | | | |
+------------------------------------------------+--------+-+--------+
| | 61.6 | | 62.2 |
+------------------------------------------------+--------+-+--------+
| Less charged to property, plant and equipment | (40.3) | | (36.1) |
+------------------------------------------------+--------+-+--------+
| | | | |
+------------------------------------------------+--------+-+--------+
| | 21.3 | | 26.1 |
+------------------------------------------------+--------+-+--------+
The majority of the Company's employees are members of the Northern Electric
Group of the ESPS, details of which are given in Note 23.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
+------------------------------------------------+-------+----------+-------+
| The average monthly number of employees | | | |
| during the year was: | | | |
+------------------------------------------------+-------+----------+-------+
| | 2009 | | 2008 |
+------------------------------------------------+-------+----------+-------+
| | No. | | No. |
+------------------------------------------------+-------+----------+-------+
| | | | |
+------------------------------------------------+-------+----------+-------+
| Technical | 266 | | 271 |
+------------------------------------------------+-------+----------+-------+
| Industrial | 626 | | 633 |
+------------------------------------------------+-------+----------+-------+
| Administration | 123 | | 130 |
+------------------------------------------------+-------+----------+-------+
| Other | 94 | | 86 |
+------------------------------------------------+-------+----------+-------+
| | | | |
+------------------------------------------------+-------+----------+-------+
| | 1,109 | | 1,120 |
+------------------------------------------------+-------+----------+-------+
+-------------------------------------------------+----------------+----------+------------+
| DIRECTORS' REMUNERATION | 2009 | | 2008 |
+-------------------------------------------------+----------------+----------+------------+
| | | | GBP |
| | GBP | | |
+-------------------------------------------------+----------------+----------+------------+
| Highest Paid | | | |
+-------------------------------------------------+----------------+----------+------------+
| Short-term employee benefits | 130,745 | | 103,612 |
+-------------------------------------------------+----------------+----------+------------+
| Post employment benefits | 10,570 | | 9,767 |
+-------------------------------------------------+----------------+----------+------------+
| Other long-term benefits | 59,454 | | 101,707 |
+-------------------------------------------------+----------------+----------+------------+
| | 200,769 | | 215,086 |
+-------------------------------------------------+----------------+----------+------------+
| | | | |
+-------------------------------------------------+----------------+----------+------------+
| Total | | | |
+-------------------------------------------------+----------------+----------+------------+
| Short-term employee benefits | 430,541 | | 396,464 |
+-------------------------------------------------+----------------+----------+------------+
| Post employment benefits | 106,934 | | 117,051 |
+-------------------------------------------------+----------------+----------+------------+
| Other long-term benefits | 153,903 | | 325,208 |
+-------------------------------------------------+----------------+----------+------------+
| | | | |
+-------------------------------------------------+----------------+----------+------------+
| | 691,378 | | 838,723 |
+-------------------------------------------------+----------------+----------+------------+
| | | | |
+-------------------------------------------------+----------------+----------+------------+
| Directors who are members of the defined | 3 | | 5 |
| benefit scheme | | | |
+-------------------------------------------------+----------------+----------+------------+
| | | | |
+-------------------------------------------------+----------------+----------+------------+
| Accrued pension benefit relating to highest | - | | - |
| paid director | | | |
+-------------------------------------------------+----------------+----------+------------+
+-------------------------------------------------+---------+----------+---------+
| OTHER KEY PERSONNEL REMUNERATION | 2009 | | 2008 |
+-------------------------------------------------+---------+----------+---------+
| | | | GBP |
| | GBP | | |
+-------------------------------------------------+---------+----------+---------+
| Total | | | |
+-------------------------------------------------+---------+----------+---------+
| Short-term employee benefits | 283,483 | | 293,907 |
+-------------------------------------------------+---------+----------+---------+
| Post employment benefits | 75,737 | | 72,182 |
+-------------------------------------------------+---------+----------+---------+
| Other long-term benefits | 25,706 | | 91,917 |
+-------------------------------------------------+---------+----------+---------+
| | | | |
+-------------------------------------------------+---------+----------+---------+
| | 384,926 | | 458,006 |
+-------------------------------------------------+---------+----------+---------+
Other key personnel includes a number of senior functional managers who, whilst
not board directors, have authority and responsibility for planning, directing
and controlling the activities of the Company.
The directors and key personnel are remunerated for their services to the CE
Group, of which the Company is a subsidiary. The figures above represent the
share of the costs borne by the Company.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| | 2009 | | 2008 |
+--------------------------------+--------------------------+----------+--------------------------+
| | GBPm | | GBPm | | GBPm | | GBPm |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| Tax expense comprises: | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| Current tax expense: | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| Corporation tax charge for the | 29.1 | | | | 30.3 | | |
| year | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| Under provision for prior | 0.1 | | | | 0.1 | | |
| years | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| Total current tax charge | | | 29.2 | | | | 30.4 |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| Deferred tax: | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| Deferred tax expense relating | | | | | | | |
| to the origination and | (0.1) | | | | (1.0) | | |
| reversal of temporary | | | | | | | |
| differences | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| Effect of changes in | - | | | | 11.7 | | |
| legislation | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| Total deferred tax | | | (0.1) | | | | 10.7 |
| (credit)/charge | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| Tax on profit before tax | | | 29.1 | | | | 41.1 |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| The total charge can be | | | | | | | |
| reconciled to the accounting | | | | | | | |
| profit as follows: | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| Profit before tax | | | 106.5 | | | | 104.1 |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| Tax on profit before tax at | | | 29.8 | | | | |
| standard rate of corporation | | | | | | | |
| tax in United Kingdom of 28% | | | | | | | 29.7 |
| (2008: 28.5%) | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| Effect of changes in | | | - | | | | 11.7 |
| legislation | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| Disposals | | | (0.3) | | | | - |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| Over provision for prior years | | | (0.4) | | | | (0.3) |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| | | | | | | | |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
| Tax on profit before tax | | | 29.1 | | | | 41.1 |
+--------------------------------+-------+----------+-------+----------+-------+----------+-------+
The tax rates used are the UK corporate rate of 30% until 31 March 2008 and 28%
from 1 April 2008, time apportioned for 2008.
There was an increase in the deferred tax liability in 2008 due to the cessation
of capital allowances on qualifying industrial buildings from 2011, as a result
of changes in legislation introduced by the Finance Act 2008.
+-----------------------------+-------+----------+-------+----------+------+----------+-------+
| | 2009 | | 2008 | |2009 | | 2008 |
+-----------------------------+-------+----------+-------+----------+------+----------+-------+
| |Pence | |Pence | |GBPm | | GBPm |
| | per | | per | | | | |
| |share | |share | | | | |
+-----------------------------+-------+----------+-------+----------+------+----------+-------+
| | | | | | | | |
+-----------------------------+-------+----------+-------+----------+------+----------+-------+
| Dividend paid | 13.79 | | 13.79 | | 40.0 | | 40.0 |
+-----------------------------+-------+----------+-------+----------+------+----------+-------+
| | | | | | | | |
+-----------------------------+-------+----------+-------+----------+------+----------+-------+
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| | | |Non-operational | | | | |
| | | | land & | | Fixtures | | |
| |Distribution | | buildings | | and | | |
| | | | | |equipment | | Total |
| | system | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| | GBPm | | GBPm | | GBPm | | GBPm |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| COST | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| At 1 January | 2,004.9 | | 6.0 | | 11.3 | | 2,022.2 |
| 2008 | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| Additions | 193.0 | | - | | 2.0 | | 195.0 |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| Disposals | (6.3) | | - | | (0.2) | | (6.5) |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| At 31 December | 2,191.6 | | 6.0 | | 13.1 | | 2,210.7 |
| 2008 | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| Additions | 170.2 | | - | | 1.7 | | 171.9 |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| Disposals | (4.3) | | (2.4) | | (0.1) | | (6.8) |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| At 31 December | 2,357.5 | | 3.6 | | 14.7 | | 2,375.8 |
| 2009 | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| ACCUMULATED DEPRECIATION | | | | | | |
+---------------------------------+----------+-----------------+----------+-----------+----------+---------+
| At 1 January | 251.6 | | 2.6 | | 6.7 | | 260.9 |
| 2008 | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| Charge for the | 55.1 | | 0.2 | | 3.6 | | 58.9 |
| year | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| Disposals | (6.3) | | - | | (0.2) | | (6.5) |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| At 31 December | 300.4 | | 2.8 | | 10.1 | | 313.3 |
| 2008 | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| Charge for the | 59.8 | | 0.2 | | 1.8 | | 61.8 |
| year | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| Disposals | (4.3) | | (1.8) | | (0.1) | | (6.2) |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| At 31 December | 355.9 | | 1.2 | | 11.8 | | 368.9 |
| 2009 | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| Net book value | 2,001.6 | | 2.4 | | 2.9 | | 2,006.9 |
| at 31 December | | | | | | | |
| 2009 | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| Net book value | 1,891.2 | | 3.2 | | 3.0 | | 1,897.4 |
| at 31 December | | | | | | | |
| 2008 | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| Assets in the | | | | | | | |
| course of | | | | | | | |
| construction | | | | | | | |
| included above: | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| At 1 January | 134.6 | | - | | - | | 134.6 |
| 2008 | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| Additions | 193.0 | | - | | - | | 193.0 |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| Available for | (207.4) | | - | | - | | (207.4) |
| use | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| At 31 December | 120.2 | | - | | - | | 120.2 |
| 2008 | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| Additions | 170.2 | | | | 1.7 | | 171.9 |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| Available for | (215.8) | | - | | (1.7) | | (217.5) |
| use | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| At 31 December | 74.6 | | - | | - | | 74.6 |
| 2009 | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
| | | | | | | | |
+------------------+--------------+----------+-----------------+----------+-----------+----------+---------+
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
The net book value of non-operational land and buildings comprises:
+------------------------------------------------+------+----------+------+
| |2009 | |2008 |
+------------------------------------------------+------+----------+------+
| |GBPm | |GBPm |
+------------------------------------------------+------+----------+------+
| | | | |
+------------------------------------------------+------+----------+------+
| Freehold | 1.4 | | 1.6 |
+------------------------------------------------+------+----------+------+
| Long leasehold | 1.0 | | 1.6 |
+------------------------------------------------+------+----------+------+
| | | | |
+------------------------------------------------+------+----------+------+
| | 2.4 | | 3.2 |
+------------------------------------------------+------+----------+------+
The Company has entered into contractual commitments in relation to the future
acquisition of property, plant and equipment of GBP27.3m (2008: GBP9.8m).
12 INTANGIBLES
+-------------------------------------------------------+--------------------+
| | Software |
| | Development |
| | Costs |
+-------------------------------------------------------+--------------------+
| | GBPm |
+-------------------------------------------------------+--------------------+
| COST | |
+-------------------------------------------------------+--------------------+
| At 1 January 2008, 31 December 2008 and 31 December | 29.5 |
| 2009 | |
+-------------------------------------------------------+--------------------+
| | |
+-------------------------------------------------------+--------------------+
| AMORTISATION | |
+-------------------------------------------------------+--------------------+
| At 1 January 2008 | 18.9 |
+-------------------------------------------------------+--------------------+
| Charge for the year | 2.3 |
+-------------------------------------------------------+--------------------+
| | |
+-------------------------------------------------------+--------------------+
| At 31 December 2008 | 21.2 |
+-------------------------------------------------------+--------------------+
| Charge for the year | 2.2 |
+-------------------------------------------------------+--------------------+
| | |
+-------------------------------------------------------+--------------------+
| At 31 December 2009 | 23.4 |
+-------------------------------------------------------+--------------------+
| | |
+-------------------------------------------------------+--------------------+
| Net book value at 31 December 2009 | 6.1 |
+-------------------------------------------------------+--------------------+
| | |
+-------------------------------------------------------+--------------------+
| Net book value at 31 December 2008 | 8.3 |
+-------------------------------------------------------+--------------------+
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
13 INVESTMENTS
Details of the principal investments of the Company at 31 December 2009 are
listed below:
+-------------+--------------+-----------+------------+----------------+
| | Country of | Holding | | Nature of |
| Name of |Registration | of |Proportion | Business |
| Company | | Ordinary | | |
| | | Shares | | |
+-------------+--------------+-----------+------------+----------------+
| | | | | |
| Electralink | England | 717 at | 7.8% | Data transfer |
| Limited | and Wales | 10p | | network |
| | | | | operator |
+-------------+--------------+-----------+------------+----------------+
| MRA | England |1 at GBP1 | 1.0% | Governance of |
| Service | and Wales | | | the |
| Company | | | | electricity |
| Limited | | | | industry's |
| | | | | Master |
| | | | | Registration |
| | | | | Agreement |
+-------------+--------------+-----------+------------+----------------+
| DCUSA | England |1 at GBP1 | 2.0% | Management and |
| Limited | and Wales | | | governance of |
| | | | | the |
| | | | | Distribution |
| | | | | Connection and |
| | | | | Use of System |
| | | | | Agreement |
+-------------+--------------+-----------+------------+----------------+
The above investments are unlisted. The cost and net book value of the
investments are Electralink Limited GBP72 (2008: GBP72), MRA Service Company
Limited GBP1 (2008: GBP1) and DCUSA Limited GBP1 (2008: GBP1).
14 INVENTORIES
+-------------------------------------------------+------+----------+------+
| |2009 | |2008 |
+-------------------------------------------------+------+----------+------+
| |GBPm | |GBPm |
+-------------------------------------------------+------+----------+------+
| | | | |
+-------------------------------------------------+------+----------+------+
| Work in progress | 0.5 | | 0.5 |
+-------------------------------------------------+------+----------+------+
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
15 OTHER FINANCIAL ASSETS
Trade and other receivables
+-------------------------------------------------+------+----------+------+
| |2009 | |2008 |
+-------------------------------------------------+------+----------+------+
| | | | |
+-------------------------------------------------+------+----------+------+
| |GBPm | |GBPm |
+-------------------------------------------------+------+----------+------+
| | | | |
+-------------------------------------------------+------+----------+------+
| Distribution use of system receivables | 45.3 | | 35.6 |
+-------------------------------------------------+------+----------+------+
| Amounts receivable from sale of goods and | 12.0 | | 7.9 |
| services | | | |
+-------------------------------------------------+------+----------+------+
| Prepayments and accrued income | 4.4 | | 5.6 |
+-------------------------------------------------+------+----------+------+
| | | | |
+-------------------------------------------------+------+----------+------+
| | 61.7 | | 49.1 |
+-------------------------------------------------+------+----------+------+
The directors consider that the carrying amount of trade and other receivables
approximate their fair value calculated by discounting the future cash flows at
the market rate at the balance sheet date. The maximum exposure to risk to the
Company is the book value of these receivables less any provisions for
impairment.
Distribution use of system receivables
The customers served by the Company's distribution network are supplied
predominantly by a small number of electricity supply businesses with RWE NPower
plc accounting for approximately 34% of distribution revenues in 2008 (2008:
36%). Ofgem has determined a framework which sets credit limits for each supply
business based on its credit rating or payment history and requires them to
provide credit cover if their value at risk (measured as being equivalent to 45
days usage) exceeds the credit limit. Acceptable credit typically is provided
in the form of a parent company guarantee, letter of credit or an escrow
account. Included within other payables are customer deposits of GBP1.8m as at
December 2009 (2008: GBP1.8m).
Ofgem has indicated that, provided the Company has implemented credit control,
billing and collection processes in line with best practice guidelines and can
demonstrate compliance with the guidelines or is able to satisfactorily explain
departure from the guidelines, any bad debt losses arising from supplier default
will be recovered through an increase in future allowed income. Losses incurred
to date have not been material. Included within the Company's use of system
("UoS") receivables are no debtors which have been placed into administration
and provided for in full at the year end (2008: GBP0.4m).
Amounts receivable from sale of goods and services
Sales of goods and services comprise all income streams which are not classified
as UoS income. Examples of non-UoS income streams would be customer
contributions in relation to distribution system assets and recovery of amounts
for damage caused by third parties to the distribution system.
The average credit period on sales of goods and services is 30 days. Interest
is not generally charged on the trade receivables paid after the due date. An
allowance for doubtful debts is made for debts past their due date based on
estimated irrecoverable amounts from the sale of goods and services, determined
by reference to past default experience.
Included in the Company's amounts receivable for goods and services balance are
debtors with a carrying amount of GBP0.8m (2008: GBP0.7m) which are past due at
the reporting date and for which the Company has provided an irrecoverable
amount of GBP0.2m (2008: GBP0.3m) based on past experience. The Company does
not hold any collateral over these balances. The average age of these
receivables is 303 days (2008: 568 days).
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
15 OTHER FINANCIAL ASSETS (CONTINUED)
Amounts receivable from sale of goods and services (continued)
Included in the Company's amounts receivable for goods and services balance are
debtors with a carrying amount of GBP0.8m (2008: GBP1.8m). These amounts are
past due at the reporting date and the Company has not provided for any amounts
as not being recoverable because there has not been a significant change in
credit quality and the amounts are still considered recoverable. The Company
does not hold any collateral over these balances. The average age of these
receivables is 99 days (2008: 87).
Ageing of past due but not impaired receivables
+-------------------------------------------------+------+----------+------+
| |2009 | |2008 |
+-------------------------------------------------+------+----------+------+
| |GBPm | |GBPm |
+-------------------------------------------------+------+----------+------+
| | | | |
+-------------------------------------------------+------+----------+------+
| 30-60 days | 0.4 | | 0.6 |
+-------------------------------------------------+------+----------+------+
| 60-120 days | 0.3 | | 0.6 |
+-------------------------------------------------+------+----------+------+
| 120-210 days | 0.1 | | 0.6 |
+-------------------------------------------------+------+----------+------+
| | | | |
+-------------------------------------------------+------+----------+------+
| Total | 0.8 | | 1.8 |
+-------------------------------------------------+------+----------+------+
Movement in the allowance for doubtful debts
+-------------------------------------------------+------+----------+-------+
| | | | GBPm |
+-------------------------------------------------+------+----------+-------+
| | | | |
+-------------------------------------------------+------+----------+-------+
| At 1 January 2009 | | | 0.7 |
+-------------------------------------------------+------+----------+-------+
| Amounts recognised in income statement | | | 0.3 |
+-------------------------------------------------+------+----------+-------+
| Amounts utilised/written off in the period | | | (0.8) |
+-------------------------------------------------+------+----------+-------+
| | | | |
+-------------------------------------------------+------+----------+-------+
| At 31 December 2009 | | | 0.2 |
+-------------------------------------------------+------+----------+-------+
In determining the recoverability of the trade and other receivables, the
Company considers any change in the credit quality of the trade and other
receivable from the date credit was initially granted up to the reporting date.
The concentration of credit risk, other than in relation to UoS receivables, is
limited due to the customer base being large and unrelated. Accordingly, the
directors believe that there is no further credit provision required in excess
of the allowance for doubtful debts.
Included in the allowance for doubtful debts are specific trade receivables with
a balance of GBP0.1m (2008: GBP0.4m) for the Company, which have been placed
into administration. The impairment represents the difference between the
carrying amount of the specific trade receivable and the present value of the
expected liquidation dividend.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances held at bank. The fair value of
cash and cash equivalents is equal to their book value.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
15 OTHER FINANCIAL ASSETS (CONTINUED)
Categories of financial assets
+------------------------------+----------+----------+----------+----------+------+----------+---------+----------+---------+
| | | | |
+------------------------------+--------------------------------------------------+----------+------------------------------+
| | | | | | | | 2009 | | 2008 |
+------------------------------+----------+----------+----------+----------+------+----------+---------+----------+---------+
| | | | | | | | GBPm | | GBPm |
+------------------------------+----------+----------+----------+----------+------+----------+---------+----------+---------+
| | | | | | | | | | |
+------------------------------+----------+----------+----------+----------+------+----------+---------+----------+---------+
| Cash and bank balances | | | | | | | - | | 7.0 |
+------------------------------+----------+----------+----------+----------+------+----------+---------+----------+---------+
| Loans and receivables | | | | | | | 57.3 | | 43.5 |
+------------------------------+----------+----------+----------+----------+------+----------+---------+----------+---------+
| | | | | | | | | | |
+------------------------------+----------+----------+----------+----------+------+----------+---------+----------+---------+
| Total financial assets | | | | | | | 57.3 | | 50.5 |
+------------------------------+----------+----------+----------+----------+------+----------+---------+----------+---------+
| | | | | | | | | | |
+------------------------------+----------+----------+----------+----------+------+----------+---------+----------+---------+
| | | | | | | | | | |
+------------------------------+----------+----------+----------+----------+------+----------+---------+----------+---------+
| Non current assets | | | | | | | 2,013.0 | | 1,905.7 |
+------------------------------+----------+----------+----------+----------+------+----------+---------+----------+---------+
| Inventories | | | | | | | 0.5 | | 0.5 |
+------------------------------+----------+----------+----------+----------+------+----------+---------+----------+---------+
| Prepayments and accrued | | | | | | | 4.4 | | 5.6 |
| income | | | | | | | | | |
+------------------------------+----------+----------+----------+----------+------+----------+---------+----------+---------+
| | | | | | | | | | |
+------------------------------+----------+----------+----------+----------+------+----------+---------+----------+---------+
| Total non-financial assets | | | | | | | 2,017.9 | | 1,911.8 |
+------------------------------+----------+----------+----------+----------+------+----------+---------+----------+---------+
| | | | | | | | | | |
+------------------------------+----------+----------+----------+----------+------+----------+---------+----------+---------+
| Total Assets | | | | | | | 2,075.2 | | 1,962.3 |
+------------------------------+----------+----------+----------+----------+------+----------+---------+----------+---------+
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
16 OTHER FINANCIAL LIABILITIES
Trade and other payables
+------------------------------------------------+-------------------+----------+------+
| | 2009 | |2008 |
+------------------------------------------------+-------------------+----------+------+
| | | | |
+------------------------------------------------+-------------------+----------+------+
| | GBPm | |GBPm |
+------------------------------------------------+-------------------+----------+------+
| | | | |
+------------------------------------------------+-------------------+----------+------+
| Payments received on account | 16.2 | | 12.8 |
+------------------------------------------------+-------------------+----------+------+
| Trade payables | 2.5 | | 3.1 |
+------------------------------------------------+-------------------+----------+------+
| Amounts owed to Group undertakings | 0.4 | | 0.2 |
+------------------------------------------------+-------------------+----------+------+
| Other taxes and social security costs | 4.6 | | 3.5 |
+------------------------------------------------+-------------------+----------+------+
| Other payables | 2.2 | | 2.8 |
+------------------------------------------------+-------------------+----------+------+
| Accruals | 20.0 | | 22.0 |
+------------------------------------------------+-------------------+----------+------+
| | | | |
+------------------------------------------------+-------------------+----------+------+
| | 45.9 | | 44.4 |
+------------------------------------------------+-------------------+----------+------+
Current income tax liabilities
+------------------------------------------------+------+----------+------+
| |2009 | |2008 |
+------------------------------------------------+------+----------+------+
| |GBPm | |GBPm |
+------------------------------------------------+------+----------+------+
| | | | |
+------------------------------------------------+------+----------+------+
| Corporation tax | 13.2 | | 9.4 |
+------------------------------------------------+------+----------+------+
| Group relief | - | | 2.2 |
+------------------------------------------------+------+----------+------+
| | | | |
+------------------------------------------------+------+----------+------+
| | 13.2 | | 11.6 |
+------------------------------------------------+------+----------+------+
The directors consider that the carrying amount of other financial liabilities
approximates their fair value, calculated by discounting future cash flows at
market rate at the balance sheet date. Trade creditors and accruals principally
comprise amounts outstanding for trade purchases and ongoing costs. Invoices are
paid at the end of the month following the date of the invoice. The Company has
financial risk management policies in place to ensure that all payables are paid
within the credit timeframe.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
16 OTHER FINANCIAL LIABILITIES (CONTINUED)
The following tables detail the remaining contractual maturities for the
non-derivative financial liabilities included in Notes 16 and 17. The tables
have been drawn up based on the undiscounted cash flows of financial liabilities
based on the earliest possible date on which the Company can be required to pay.
The tables include both interest and principal cash flows.
+-----------------+--------+--+--------+----------+-------+----------+-------+----------+----------+
| | Less | | 3 | | 1 to | | 5+ | | |
| | than | |months | | 5 | | | | |
+-----------------+--------+--+--------+----------+-------+----------+-------+----------+----------+
| | 3 | | To 1 | |years | |Years | | Total |
| |months | | year | | | | | | |
+-----------------+--------+--+--------+----------+-------+----------+-------+----------+----------+
| | GBPm | | GBPm | | GBPm | | GBPm | | GBPm |
+-----------------+--------+--+--------+----------+-------+----------+-------+----------+----------+
| | | | | | | | | | |
+-----------------+--------+--+--------+----------+-------+----------+-------+----------+----------+
| 2009: | | | | | | | | | |
+-----------------+--------+--+--------+----------+-------+----------+-------+----------+----------+
| Non-interest | 29.7 | | - | | - | | - | | 29.7 |
| bearing | | | | | | | | | |
+-----------------+--------+--+--------+----------+-------+----------+-------+----------+----------+
| Variable | 176.1 | | - | | - | | - | | 176.1 |
| interest rate | | | | | | | | | |
| liability | | | | | | | | | |
+-----------------+--------+--+--------+----------+-------+----------+-------+----------+----------+
| Fixed interest | 18.5 | | 13.8 | |129.1 | |787.5 | | 948.9 |
| rate liability | | | | | | | | | |
+-----------------+--------+--+--------+----------+-------+----------+-------+----------+----------+
| | | | | | | | | | |
+-----------------+--------+--+--------+----------+-------+----------+-------+----------+----------+
| | 224.3 | | 13.8 | |129.1 | |787.5 | | 1,154.7 |
+-----------------+--------+--+--------+----------+-------+----------+-------+----------+----------+
| | | | | | | | | | |
+-----------------+--------+--+--------+----------+-------+----------+-------+----------+----------+
| 2008: | | | | | | | | | |
+-----------------+--------+--+--------+----------+-------+----------+-------+----------+----------+
| Non-interest | 32.4 | | - | | - | | - | | 32.4 |
| bearing | | | | | | | | | |
+-----------------+--------+--+--------+----------+-------+----------+-------+----------+----------+
| Variable | | | | | | | | | |
| interest rate | 120.2 | | - | | - | | - | | 120.2 |
| liability | | | | | | | | | |
+-----------------+--------+--+--------+----------+-------+----------+-------+----------+----------+
| Fixed interest | 18.5 | | 13.8 | |129.1 | |819.8 | | 981.2 |
| rate liability | | | | | | | | | |
+-----------------+--------+--+--------+----------+-------+----------+-------+----------+----------+
| | | | | | | | | | |
+-----------------+--------+--+--------+----------+-------+----------+-------+----------+----------+
| | 171.1 | | 13.8 | |129.1 | |819.8 | | 1,133.8 |
+-----------------+--------+--+--------+----------+-------+----------+-------+----------+----------+
Categories of financial liabilities
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
| | | | |
+-----------------------------+------------------------------------------+----------+-------------------------------+
| | | | | | | | 2009 | | 2008 |
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
| | | | | | | | GBPm | | GBPm |
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
| | | | | | | | | | |
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
| Loans and payables | | | | | | | 655.7 | | 600.7 |
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
| | | | | | | | | | |
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
| Total financial liabilities | | | | | | | 655.7 | | 600.7 |
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
| | | | | | | | | | |
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
| | | | | | | | | | |
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
| Payments received on | | | | | | | 16.2 | | 12.8 |
| account | | | | | | | | | |
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
| Income tax liabilities | | | | | | | 231.7 | | 230.2 |
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
| Other taxes and social | | | | | | | 4.6 | | 3.5 |
| security | | | | | | | | | |
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
| Accruals | | | | | | | 20.0 | | 22.0 |
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
| Deferred Revenue | | | | | | | 612.0 | | 595.5 |
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
| Provisions | | | | | | | 1.9 | | 1.9 |
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
| | | | | | | | | | |
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
| Total non-financial | | | | | | | 886.4 | | 865.9 |
| liabilities | | | | | | | | | |
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
| | | | | | | | | | |
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
| Total liabilities | | | | | | | 1,542.1 | | 1,466.6 |
+-----------------------------+----------+----------+--+----------+------+----------+----------+----------+---------+
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
17 BORROWINGS
The Directors consideration of liquidity, interest rate and foreign currency
risk are described in detail in the Directors Report on page 9.
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| | Book value | | Fair value |
+----------------------------+--------------------------+----------+--------------------------+
| | 2009 | | 2008 | | 2009 | | 2008 |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| | GBPm | | GBPm | | GBPm | | GBPm |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| Loans | 466.2 | | 444.4 | | 501.2 | | 456.5 |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| Amounts owed to Group | 184.4 | | 150.2 | | 190.0 | | 152.5 |
| undertakings | | | | | | | |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| | | | | | | | |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| | 650.6 | | 594.6 | | 691.2 | | 609.0 |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| | | | | | | | |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| The borrowings are repayable as follows: |
+---------------------------------------------------------------------------------------------+
| On demand or within one | 201.2 | | 145.4 | | 201.2 | | 145.4 |
| year | | | | | | | |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| After five years | 449.4 | | 449.2 | | 490.0 | | 463.6 |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| | | | | | | | |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| | 650.6 | | 594.6 | | 691.2 | | 609.0 |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| | | | | | | | |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| Analysis of borrowings: |
+---------------------------------------------------------------------------------------------+
| | | | | | | | |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| Short-term loan | 46.5 | | 25.2 | | 46.5 | | 25.2 |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| Inter-company short term | 129.6 | | 95.2 | | 129.6 | | 95.2 |
| loan | | | | | | | |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| Yorkshire Electricity | 54.8 | | 55.0 | | 60.8 | | 57.3 |
| Group plc 2016 (6.5%) | | | | | | | |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| Eurobond due 2020 (9.25%) | 216.2 | | 215.9 | | 270.2 | | 261.8 |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| Bond due 2035 (5.125%) | 203.5 | | 203.3 | | 184.1 | | 169.5 |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| | | | | | | | |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
| | 650.6 | | 594.6 | | 691.2 | | 609.0 |
+----------------------------+-------+----------+-------+----------+-------+----------+-------+
The fair value of the 2020 and 2035 bonds are determined with reference to
quoted market prices. The directors' estimates of the fair value of internal
borrowings are determined in accordance with generally accepted pricing models
based on discounted cash flow analysis using prices from observable current
market transactions or dealer quotes for similar instruments. The fair value of
short-term borrowings is equal to their book value. All loans are non-secured
and are denominated in sterling.
Interest on the inter-company short term loans is charged at the base rate and
interest on short-term loans is charged at a floating rate of LIBOR plus 0.25%,
thus exposing the Company to cash flow interest rate risk. A 1% movement in
interest rates would subject the Company to an approximate change in interest
costs of GBP1.7m per year. This is considered to be an acceptable level of risk.
All other loans are at fixed interest rates and expose the Company to fair value
interest rate risk.
The covenants associated with the 2035 bonds issued by the Company include
restrictions on the issuance of new indebtedness and the making of distributions
dependent on the scale of the ratio of Senior Total Net Debt to Regulatory Asset
Value ("RAV"). The definition of Senior Total Net Debt excludes any
subordinated debt and any debt incurred on a non-recourse basis. In addition,
it excludes interest payable, any fair value adjustments and unamortised issue
costs.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
17 BORROWINGS (CONTINUED)
The Company's Senior Total Net Debt as at 31 December 2009 totalled GBP630.3m.
Using the RAV value as at March 2010, as outlined by Ofgem in its Final
Proposals for Distribution Prices published in December 2009, and up rating for
the effects of movements in the value of the Retail Price Index gives an
approximation for the RAV value as at December 2009 of GBP1,107.3m. The Senior
Total Net Debt to RAV ratio for the Company is therefore estimated at 57%.
At 31 December 2009, the Company had available GBP6.7m (2008: GBP28.0m) of
undrawn committed borrowing facilities in respect of which all conditions
precedent had been met.
+------------------+--------------+----------+------------+----------+-------+----------+-------+
| | Accelerated | | | | | | |
| | Tax | | Holdover | | | | |
| |Depreciation | | Relief | |Other | |Total |
+------------------+--------------+----------+------------+----------+-------+----------+-------+
| | GBPm | | GBPm | | GBPm | | GBPm |
+------------------+--------------+----------+------------+----------+-------+----------+-------+
| | | | | | | | |
+------------------+--------------+----------+------------+----------+-------+----------+-------+
| At 1 January | 207.0 | | 1.8 | | (0.9) | | 207.9 |
| 2008 | | | | | | | |
+------------------+--------------+----------+------------+----------+-------+----------+-------+
| (Credit)/charge | 12.1 | | (1.4) | | - | | 10.7 |
| to income | | | | | | | |
| statement | | | | | | | |
+------------------+--------------+----------+------------+----------+-------+----------+-------+
| | | | | | | | |
+------------------+--------------+----------+------------+----------+-------+----------+-------+
| At 31 December | 219.1 | | 0.4 | | (0.9) | | 218.6 |
| 2008 | | | | | | | |
+------------------+--------------+----------+------------+----------+-------+----------+-------+
| (Credit)/charge | (0.4) | | | | 0.3 | | (0.1) |
| to income | | | - | | | | |
| statement | | | | | | | |
+------------------+--------------+----------+------------+----------+-------+----------+-------+
| | | | | | | | |
+------------------+--------------+----------+------------+----------+-------+----------+-------+
| At 31 December | 218.7 | | 0.4 | | (0.6) | | 218.5 |
| 2009 | | | | | | | |
+------------------+--------------+----------+------------+----------+-------+----------+-------+
| | | | | | | | |
+------------------+--------------+----------+------------+----------+-------+----------+-------+
Other comprises provisions and employee expenses deductible for tax on a paid
basis.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
19 DEFERRED REVENUE
+---------------------------------------------------+---------+
| | |
+---------------------------------------------------+---------+
| | GBPm |
+---------------------------------------------------+---------+
| | |
+---------------------------------------------------+---------+
| At 1 January 2008 | 553.0 |
+---------------------------------------------------+---------+
| Additions | 57.8 |
+---------------------------------------------------+---------+
| Amortisation | (15.3) |
+---------------------------------------------------+---------+
| | |
+---------------------------------------------------+---------+
| At 31 December 2008 | 595.5 |
+---------------------------------------------------+---------+
| Additions | 32.6 |
+---------------------------------------------------+---------+
| Amortisation | (16.1) |
+---------------------------------------------------+---------+
| | |
+---------------------------------------------------+---------+
| At 31 December 2009 | 612.0 |
+---------------------------------------------------+---------+
+-------------------------------------+----------+----------+---------+
| | 2009 | | 2008 |
+-------------------------------------+----------+----------+---------+
| | GBPm | | GBPm |
+-------------------------------------+----------+----------+---------+
| | | | |
+-------------------------------------+----------+----------+---------+
| Included in current liabilities | 18.8 | | 16.9 |
+-------------------------------------+----------+----------+---------+
| Included in non-current liabilities | 593.2 | | 578.6 |
+-------------------------------------+----------+----------+---------+
| | | | |
+-------------------------------------+----------+----------+---------+
| | 612.0 | | 595.5 |
+-------------------------------------+----------+----------+---------+
Deferred revenue represents contributions from customers made in advance towards
distribution system assets. This income is released to the income statement over
45 years on a straight line basis, in line with the useful economic life of the
distribution system assets.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
+---------------------------------+--------+----------+-------+----------+--------------+
| |Claims | |Other | | Total |
+---------------------------------+--------+----------+-------+----------+--------------+
| | GBPm | | GBPm | | GBPm |
+---------------------------------+--------+----------+-------+----------+--------------+
| | | | | | |
+---------------------------------+--------+----------+-------+----------+--------------+
| At 1 January 2009 | 0.8 | | 1.1 | | 1.9 |
+---------------------------------+--------+----------+-------+----------+--------------+
| Utilised/paid in the year | (0.7) | | (0.2) | 874. | (0.9) |
+---------------------------------+--------+----------+-------+----------+--------------+
| Charged to the income statement | 0.7 | | 0.2 | | 0.9 |
+---------------------------------+--------+----------+-------+----------+--------------+
| | | | | | |
+---------------------------------+--------+----------+-------+----------+--------------+
| At 31 December 2009 | 0.8 | | 1.1 | | 1.9 |
+---------------------------------+--------+----------+-------+----------+--------------+
+-------------------------------------------+-------+----------+------+
| | 2009 | |2008 |
+-------------------------------------------+-------+----------+------+
| | GBPm | |GBPm |
+-------------------------------------------+-------+----------+------+
| | | | |
+-------------------------------------------+-------+----------+------+
| Included in current liabilities | 1.2 | | 1.2 |
+-------------------------------------------+-------+----------+------+
| Included in non-current liabilities | 0.7 | | 0.7 |
+-------------------------------------------+-------+----------+------+
| | | | |
+-------------------------------------------+-------+----------+------+
| | 1.9 | | 1.9 |
+-------------------------------------------+-------+----------+------+
Claims: Provision has been made to cover costs arising
from actual claims, which are not externally insured. Settlement is expected
substantially within 12 months.
Other: Primarily consists of a provision for future
safe disposal of transformers which contain oil contaminated with
Polychlorinated Biphenyls (PCBs) and for an amount to cover claims made under
Section 74 of the New Road and Street Works Act 1991. Costs are expected to be
incurred over the next 20 years.
21 SHARE CAPITAL
+-------------------------------------+-------------+----------+--------------+
| | 2009 | | 2008 |
+-------------------------------------+-------------+----------+--------------+
| | No./GBP | | No./GBP |
+-------------------------------------+-------------+----------+--------------+
| Ordinary shares of GBP1 each | | | |
+-------------------------------------+-------------+----------+--------------+
| Authorised |400,000,000 | |400,000,000 |
+-------------------------------------+-------------+----------+--------------+
| Allotted, called up and fully |290,000,000 | |290,000,000 |
| paid | | | |
+-------------------------------------+-------------+----------+--------------+
The Company has one class of ordinary shares which carries no right
to fixed income.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
22 NET CASH FROM OPERATING ACTIVITIES
+---------------------------------------------+--------+----------+--------+
| | 2009 | | 2008 |
+---------------------------------------------+--------+----------+--------+
| | GBPm | | GBPm |
+---------------------------------------------+--------+----------+--------+
| | | | |
+---------------------------------------------+--------+----------+--------+
| Operating profit | 139.7 | | 140.7 |
+---------------------------------------------+--------+----------+--------+
| Depreciation and amortisation | 64.0 | | 61.2 |
+---------------------------------------------+--------+----------+--------+
| Amortisation of deferred revenue | (16.1) | | (15.3) |
+---------------------------------------------+--------+----------+--------+
| Decrease in provisions | - | | (0.3) |
+---------------------------------------------+--------+----------+--------+
| | | | |
+---------------------------------------------+--------+----------+--------+
| Operating cash flows before movements in | 187.6 | | 186.3 |
| working capital | | | |
+---------------------------------------------+--------+----------+--------+
| | | | |
+---------------------------------------------+--------+----------+--------+
| Decrease in inventories | - | | 0.5 |
+---------------------------------------------+--------+----------+--------+
| (Increase)/decrease in receivables | (5.1) | | 13.8 |
+---------------------------------------------+--------+----------+--------+
| Increase/(decrease) in payables | - | | (3.4) |
+---------------------------------------------+--------+----------+--------+
| | | | |
+---------------------------------------------+--------+----------+--------+
| Cash generated by operations | 182.5 | | 197.2 |
+---------------------------------------------+--------+----------+--------+
| | | | |
+---------------------------------------------+--------+----------+--------+
| Income taxes paid | (25.4) | | (26.8) |
+---------------------------------------------+--------+----------+--------+
| Group relief paid | (2.2) | | (8.1) |
+---------------------------------------------+--------+----------+--------+
| Dividends received | - | | 0.1 |
+---------------------------------------------+--------+----------+--------+
| Interest received | - | | 7.9 |
+---------------------------------------------+--------+----------+--------+
| Interest paid | (33.6) | | (41.8) |
+---------------------------------------------+--------+----------+--------+
| | | | |
+---------------------------------------------+--------+----------+--------+
| Net cash from operating activities | 121.3 | | 128.5 |
+---------------------------------------------+--------+----------+--------+
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
23 PENSION COMMITMENTS
The Company has three retirement benefit schemes.
The Northern Electric Group of the ESPS is a defined benefit scheme for
directors and employees, which provides pension and other related benefits based
on final pensionable pay. The assets of the Northern Electric Group of the
ESPS, which was closed to staff commencing employment on or after 23 July 1997,
are held in a separate trustee-administered fund. NEMPS and YEPP are made
available to new employees.
The Northern Electric Group of the ESPS, NEMPS and YEPP are operated by Northern
Electric plc on behalf of the participating companies within the CE Group.
The last full actuarial valuation of the Northern Electric Group of the ESPS was
carried out by the Group Trustees' actuarial advisors, Hewitt Associates, as at
31 March 2007. The projected unit method was used for the valuation. The
principal actuarial assumptions were that pre retirement investment returns
would exceed salary increases by 1.8% per annum (inclusive of merit awards) and
post retirement returns would exceed future pension increases by 1.8% per annum.
The total market value of the assets of the Northern Electric Group of the ESPS,
at the date of the actuarial valuation, was GBP926.7m.
For the Northern Electric Group of the ESPS, the actuarial valuation showed that
the value of the assets represented 90.7% of the actuarial value of the accrued
benefits. This represents a shortfall of assets compared to the value of accrued
benefits of GBP95.1m. The accrued benefits include all benefits for pensioners
and other former members, as well as benefits based on service completed to date
for active members, and allows for an estimate of future salary increases.
The CE Group reached agreement during March 2008 with the Group Trustees to
repair this deficit. The agreement comprises monthly cash payments of GBP2.4m
(GBP28.4m per annum) backdated to commence in April 2007 in addition to the
normal employer contributions. Of these annual payments, GBP5.7m will be paid
by the Company. These payments aim to remove the shortfall of GBP95.1m by
December 2010 subject to the actuarial assumptions adopted for the triennial
valuation as at 31 March 2007 being borne out in practice.
The Northern Electric Group of the ESPS is a defined benefit plan that shares
the risk between various entities under common control. There is no contractual
agreement or stated policy for charging the net defined benefit cost for the
plan as a whole to individual group entities and accordingly the Company
accounts for the scheme as if it were a defined contribution scheme.
The contribution rates to the Northern Electric Group of the ESPS, in addition
to the deficit repair contributions mentioned above, for 2009 were 44.7% for
certain senior management and 26.3% for other employees. These rates will remain
in place until such a time as a new schedule of contributions is agreed between
the trustees of the Northern Electric Group of the ESPS and the Company as part
of the triennial valuation process..
The money purchase pension schemes are also accounted for as defined
contribution schemes.
The Company's pension cost for the year ended 31 December 2009 was GBP13.3m
(2008: GBP13.9m).
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
23 PENSION COMMITMENTS (CONTINUED)
Disclosures in relation to the Northern Electric Group of the ESPS are:
Principal assumptions:
+-----------------------------+-----------------+--------------+
| | 2009 | 2008 |
+-----------------------------+-----------------+--------------+
| Valuation method | Projected unit | Projected |
| | | unit |
+-----------------------------+-----------------+--------------+
| Discount rate | 5.70% | 6.40% |
+-----------------------------+-----------------+--------------+
| Inflation rate | 3.20% | 3.00% |
+-----------------------------+-----------------+--------------+
| Increase to pensions | 3.20% | 3.00% |
+-----------------------------+-----------------+--------------+
| Increase to deferred | 3.20% | 3.00% |
| benefits | | |
+-----------------------------+-----------------+--------------+
| Salary increases | 2.75%* | 3.25% |
+-----------------------------+-----------------+--------------+
* 2.75% per annum for ten years then 3.0% thereafter
The mortality assumptions are based on the recent actual mortality experience of
members within the CE Group and the assumptions also allow for future mortality
improvements. The assumption is that a member currently aged 60 will live for a
further 26 years, if he is male, and for a further 27 years, if she is female.
Life expectancy at age 60 for non-pensioners (currently aged 45) is assumed to
be 28 years, if they are male, and 28 years, if they are female.
For closed schemes, such as the Northern Electric Group of the ESPS, under the
projected unit method the current service cost will increase as the members of
the scheme approach retirement.
Changes in present value of the defined benefit obligation are as follows:
+-----------------------------------+---------+----------+--------+
| | 2009 | | 2008 |
+-----------------------------------+---------+----------+--------+
| | GBPm | | GBPm |
+-----------------------------------+---------+----------+--------+
| | | | |
+-----------------------------------+---------+----------+--------+
| Opening defined benefit | 855.3 | | 917.2 |
| obligation | | | |
+-----------------------------------+---------+----------+--------+
| Current service cost | 7.5 | | 10.3 |
+-----------------------------------+---------+----------+--------+
| Interest cost | 53.7 | | 53.0 |
+-----------------------------------+---------+----------+--------+
| Contributions from employees | 3.0 | | 3.1 |
+-----------------------------------+---------+----------+--------+
| Actuarial gains | 145.7 | | (87.3) |
+-----------------------------------+---------+----------+--------+
| Benefits paid | (43.3) | | (41.0) |
+-----------------------------------+---------+----------+--------+
| | | | |
+-----------------------------------+---------+----------+--------+
| Closing defined benefit | 1,021.9 | | 855.3 |
| obligation | | | |
+-----------------------------------+---------+----------+--------+
Changes in the fair value of the plan assets are as follows:
+----------------------------------+---------+----------+---------+
| | 2009 | | 2008 |
+----------------------------------+---------+----------+---------+
| | GBPm | | GBPm |
+----------------------------------+---------+----------+---------+
| | | | |
+----------------------------------+---------+----------+---------+
| Opening fair value of plan | 801.4 | | 956.6 |
| assets | | | |
+----------------------------------+---------+----------+---------+
| Expected returns | 54.6 | | 66.2 |
+----------------------------------+---------+----------+---------+
| Actuarial losses | 78.6 | | (231.4) |
+----------------------------------+---------+----------+---------+
| Contributions by employer | 44.1 | | 47.9 |
+----------------------------------+---------+----------+---------+
| Contribution from employees | 3.0 | | 3.1 |
+----------------------------------+---------+----------+---------+
| Benefits paid | (43.3) | | (41.0) |
+----------------------------------+---------+----------+---------+
| | | | |
+----------------------------------+---------+----------+---------+
| Closing fair value of plan | 938.4 | | 801.4 |
| assets | | | |
+----------------------------------+---------+----------+---------+
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
23 PENSION COMMITMENTS (CONTINUED)
The fair value of the plan assets at the balance sheet date is analysed below:
+----------------------+------+----------+------+----------+-------+----------+-------+
| | Long term rates of | |
| | return expected at | Value |
+----------------------+------------------------+-------------------------------------+
| | 2009 | | 2008 | | 2009 | | 2008 |
+----------------------+------+----------+------+----------+-------+----------+-------+
| | % | | % | | GBPm | | |
| | | | | | | | GBPm |
+----------------------+------+----------+------+----------+-------+----------+-------+
| | | | | | | | |
+----------------------+------+----------+------+----------+-------+----------+-------+
| Equities | 8.50 | | 8.90 | | 340.5 | | 322.2 |
+----------------------+------+----------+------+----------+-------+----------+-------+
| Gilts | 5.10 | | 5.35 | | 516.0 | | 404.7 |
+----------------------+------+----------+------+----------+-------+----------+-------+
| Cash | 4.50 | | 3.25 | | 0.5 | | (4.8) |
+----------------------+------+----------+------+----------+-------+----------+-------+
| Property | 8.50 | | 7.90 | | 81.4 | | 79.3 |
+----------------------+------+----------+------+----------+-------+----------+-------+
| | | | | | | | |
+----------------------+------+----------+------+----------+-------+----------+-------+
| Total fair value of | | | | | 938.4 | | 801.4 |
| scheme assets | | | | | | | |
+----------------------+------+----------+------+----------+-------+----------+-------+
The CE Group employs a building block approach in determining the long-term rate
of return on pension plan assets. Historical markets are studied and assets with
higher volatility are assumed to generate higher returns consistent with widely
accepted capital market principles. The assumed long-term rates of return on
each asset class are set out within these disclosures. The overall expected rate
of return on assets is then derived by aggregating the expected return for each
asset class over the actual asset allocation for the Northern Electric Group of
the ESPS.
The CE Group expects to contribute approximately GBP44.6m to its defined benefit
plan in 2010, including GBP28.4m of pension deficit repair costs.
24 OPERATING LEASE ARRANGEMENTS
+------------------------------------------------+------+----------+------+
| |2009 | |2008 |
+------------------------------------------------+------+----------+------+
| |GBPm | |GBPm |
+------------------------------------------------+------+----------+------+
| | | | |
+------------------------------------------------+------+----------+------+
| Minimum lease payments under operating leases | 3.7 | | 4.7 |
| recognised in the year | | | |
+------------------------------------------------+------+----------+------+
At the balance sheet date, the Company had outstanding commitments for future
minimum lease payments under non-cancelable operating leases, which fall due as
follows:
+------------------------------------------------+------------+----------+---------+
| | 2009 | | 2008 |
+------------------------------------------------+------------+----------+---------+
| | GBPm | | GBPm |
+------------------------------------------------+------------+----------+---------+
| | | | |
+------------------------------------------------+------------+----------+---------+
| Within one year | 2.4 | | 2.3 |
+------------------------------------------------+------------+----------+---------+
| In the second to fifth year inclusive | 4.7 | | 4.2 |
+------------------------------------------------+------------+----------+---------+
| After five years | 0.9 | | 3.3 |
+------------------------------------------------+------------+----------+---------+
| | | | |
+------------------------------------------------+------------+----------+---------+
| | 8.0 | | 9.8 |
+------------------------------------------------+------------+----------+---------+
Leases consist of rent payable in respect of vehicle leases from a related party
and property.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
25 RELATED PARTY TRANSACTIONS
The Company has advanced/received loans to/from companies in the CE Group. The
total interest included in investment income in the income statement for the
year ended 31 December 2009 was GBPnil (2008: GBP0.4m). The total interest
included in finance costs in the income statement for the year ended 31 December
2009 was GBP4.1m (2008: GBP8.5m). Included within borrowings is GBP184.4m as at
31 December 2009 (2008: GBP150.2m) in respect of these loans.
Interest on loans from CE Group companies is charged at a commercial rate.
The Company entered into transactions, in the ordinary course of business, with
affiliated companies. Transactions entered into and trading balances outstanding
at the year end were as follows:
+------------------------------+---------+----------+-----------+----------+----------+----------+
| | | |Purchases | | | |
| | Sales | | from | | | Amounts |
| | to | | Related | | | Owed to |
| Related Party |Related | | Party | | | Related |
| | Party | | | | | Party |
+------------------------------+---------+----------+-----------+----------+----------+----------+
| | | | | | | (Note |
| | | | | | | 16) |
+------------------------------+---------+----------+-----------+----------+----------+----------+
| | GBPm | | GBPm | | | GBPm |
+------------------------------+---------+----------+-----------+----------+----------+----------+
| | | | | | | |
+------------------------------+---------+----------+-----------+----------+----------+----------+
| 2009: | | | | | | |
+------------------------------+---------+----------+-----------+----------+----------+----------+
| CE Insurance Services | - | | 1.0 | | | - |
| Limited | | | | | | |
+------------------------------+---------+----------+-----------+----------+----------+----------+
| Northern Electric plc | - | | 4.1 | | | - |
+------------------------------+---------+----------+-----------+----------+----------+----------+
| Northern Electric | 7.9 | | 12.7 | | | - |
| Distribution Limited | | | | | | |
+------------------------------+---------+----------+-----------+----------+----------+----------+
| Vehicle Lease and Service | - | | 3.5 | | | 0.4 |
| Limited | | | | | | |
+------------------------------+---------+----------+-----------+----------+----------+----------+
| | | | | | | |
+------------------------------+---------+----------+-----------+----------+----------+----------+
| 2008: | | | | | | |
+------------------------------+---------+----------+-----------+----------+----------+----------+
| CE Insurance Services | - | | 1.0 | | | - |
| Limited | | | | | | |
+------------------------------+---------+----------+-----------+----------+----------+----------+
| Northern Electric plc | - | | 3.6 | | | - |
+------------------------------+---------+----------+-----------+----------+----------+----------+
| Northern Electric | 6.1 | | | | | |
| Distribution Limited | | | 9.8 | | | - |
+------------------------------+---------+----------+-----------+----------+----------+----------+
| Vehicle Lease and Service | | | | | | |
| Limited | - | | 3.0 | | | 0.2 |
+------------------------------+---------+----------+-----------+----------+----------+----------+
Sales and purchases from related parties were made at commercial prices.
The amounts outstanding are unsecured and will be settled in cash. No guarantees
have been given or received. No provisions have been made for doubtful debts in
respect of amounts owed by related parties.
YORKSHIRE ELECTRICITY DISTRIBUTION plc
REGISTERED NUMBER 4112320
NOTES TO THE ACCOUNTS - 31 DECEMBER 2009 (CONTINUED)
26 IMMEDIATE PARENT UNDERTAKING AND CONTROLLING PARTY
The immediate parent undertaking of Yorkshire Electricity Distribution plc is
Yorkshire Electricity Group plc. The ultimate controlling party and ultimate
parent undertaking of Yorkshire Electricity Group plc is Berkshire Hathaway,
Inc., a company incorporated in the United States of America.
Copies of the group accounts of Berkshire Hathaway, Inc (the parent undertaking
of the largest group preparing group accounts) which include Yorkshire
Electricity Distribution plc and the group accounts of CE Electric UK Funding
Company, the smallest parent undertaking to prepare group accounts in the UK,
can both be obtained from the Company Secretary, CE Electric UK Funding Company,
Lloyds Court, 78 Grey Street, Newcastle upon Tyne, NE1 6AF.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SEAFWLFSSESD
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