-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OBIHK3IV+3sx18o1303Uymkkcbeqs0CTlwpeYFSdsYprONhnhSUkWk/ybL5adZNY 8Ce1estm29NjLUEe39QDHw== 0000065984-97-000025.txt : 19970423 0000065984-97-000025.hdr.sgml : 19970423 ACCESSION NUMBER: 0000065984-97-000025 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970207 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970421 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY CORP /DE/ CENTRAL INDEX KEY: 0000065984 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 135550175 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-11299 FILM NUMBER: 97584212 BUSINESS ADDRESS: STREET 1: 639 LOYOLA AVE CITY: NEW ORLEANS STATE: LA ZIP: 70113 BUSINESS PHONE: 5045295262 FORMER COMPANY: FORMER CONFORMED NAME: ENTERGY GSU HOLDINGS INC /DE/ DATE OF NAME CHANGE: 19940329 FORMER COMPANY: FORMER CONFORMED NAME: ENTERGY CORP /FL/ DATE OF NAME CHANGE: 19940329 FORMER COMPANY: FORMER CONFORMED NAME: MIDDLE SOUTH UTILITIES INC DATE OF NAME CHANGE: 19890521 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/Amendment CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date earliest event reported) February 7, 1997 Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address and Telephone Number Identification No. 1-11299 ENTERGY CORPORATION 72-1229752 (a Delaware corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 529-5262 Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits (a) Financial Statements of Businesses Acquired In connection with the acquisition of London Electricity plc. (London), described in Item 2., the financial statements required by Regulation S-X, Rule 3-05(b) are provided herein pursuant to Item 7(a) of Form 8-K. The financial statements are prepared in accordance with accounting principles generally accepted in the United Kingdom and are expressed in British Pounds. London Electricity plc Annual Report & Accounts 1995/6 Report of the Auditors to the members of London Electricity plc We have audited the accompanying consolidated balance sheets of London Electricity plc and subsidiaries as of March 31, 1996 and 1995 and the related consolidated profit and loss accounts, statements of cash flows, statements of total recognised gains and losses, note of historical cost group profits and losses and reconciliation of movement in shareholders' funds, together with notes 1 to 33 to the financial statements. Respective responsibilities of directors and auditors The Company's directors are responsible for the preparation of the financial statements. It is our responsibility to form an independent opinion, based on our audit, on those statements and to report our opinion to you. Basis of opinion We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board in the United Kingdom, which are similar to those followed in the United States. An audit includes examination, on a test basis, of evidence relevant to the amounts the disclosures in the financial statements, and of whether the accounting policies are appropriate to the Group's circumstances, consistently applied and adequately disclosed. We planned and performed our audit as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group at 31 March 1996 and of the profit, total recognised gains and cashflows of the Group for the year then ended and have been properly prepared in accordance with the Companies Act 1985. COOPERS & LYBRAND Coopers & Lybrand Chartered Accountants and Registered Auditors London 18 June 1996 Statement of Accounting Policies The financial statements have been prepared in accordance with applicable Accounting Standards in the United Kingdom. A summary of the more important Group accounting policies, which have been applied consistently, is set out below. Basis of accounting These financial statements have been prepared under the historical cost accounting convention, modified to include the investment in The National Grid Group at November 1995 valuation. Basis of consolidation The Group financial statements incorporate the financial statements of the Company and all subsidiary undertakings after eliminating intercompany transactions for the financial year. No profit and loss account is presented for London Electricity plc in accordance with the exemptions allowed by Section 230 of the Companies Act 1985. Acquisitions of subsidiary undertakings and other businesses The results of subsidiary undertakings and other businesses acquired during the year are included in the Group profit and loss account from the date that control passes. In accordance with FRS 6 and 7, on acquisition of a business, including an interest in an associated undertaking, fair values are attributed to the Group's share of the identifiable assets and liabilities existing at the date of acquisition and reflecting the conditions at that date. Goodwill arising on the acquisition is written off immediately against reserves. Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired. Associated undertakings An associated undertaking is one where the Group exercises significant influence and has a long term interest. The consolidated profit and loss account includes the Group's share of the profits less losses and taxation of associated undertakings and the Group balance sheet includes the investment in these companies at the Group's share of their net assets other than goodwill. Turnover Turnover represents the value of electricity consumption during the year, including an estimate of the sales value of units supplied to consumers between the date of the last meter reading and the year end, rents and the invoice value of other goods sold and services provided, exclusive of value added tax. Operating leases Rental costs under operating leases are charged to the profit and loss account in the period in which they are incurred. Pensions The cost of providing pensions in respect of defined benefit pension schemes is charged to the profit and loss account so as to spread the cost of pensions over employees' working lives. Pension surpluses and deficits arising are allocated over the estimated average remaining service lives of current employees. Differences between the amounts charged in the profit and loss account and payments made to the schemes are treated as assets or liabilities in the balance sheet. The pension cost is assessed in accordance with the advice of qualified actuaries. The capital costs of ex-gratia and supplementary pensions are charged to the profit and loss account in the accounting period in which they are granted. Tangible fixed assets Tangible fixed assets are stated at cost less amounts provided to write off assets over their useful economic life. Cost includes staff costs where employees of the Group participate directly in the construction of assets. Fixed assets are depreciated from the date of commissioning and are written off over their expected useful lives. No allowance is made for residual values. The lives of each major class of depreciable assets are as follows: Years Network Assets - (Depreciation is charged at 40 3% for 20 years followed by 2% for the remaining 20 years). Freehold land Not depreciated Other buildings - freehold Up to 60 Other buildings - leasehold Lower of lease period or 60 Vehicles and mobile plant 5-10 Fixtures and equipment including computer hardware and software 3-5 Major systems development software costs are capitalised during the development phase and depreciated from the date of commissioning over a maximum period of 5 years. Consumers' contributions are credited to the profit and loss account over a 40 year period at a rate of 3% for the first 20 years followed by 2% for the remaining 20 years. No allowance is made for residual values. Fixed asset investments Fixed asset investments are stated in the Group balance sheet at cost less any provision for permanent dimimution in value, except in the case of the Group's residual interest in the National Grid Group, which is included in the Balance Sheet at a November 1995 valuation. Current asset investments Current asset investments are stated at the lower of cost and net realisable value. Stocks Stocks are stated at the lower of cost and net realisable value. The valuation of work in progress is based on the cost of labour and materials. The cost elements of progress invoices are deducted in arriving at the amounts stated. Profit is taken on contracts whilst the contract is in progress, having regard to the proportion of the total contract which has been completed at the balance sheet date. Provision is made for all foreseeable future losses. Deferred taxation Deferred taxation arises in respect of items where there is a timing difference between their treatment for accounting purposes and their treatment for taxation purposes. Provision is made for deferred taxation using the liability method only where it is anticipated that the item will crystallise within the foreseeable future. Price control Charges for distribution of electricity and supply to customers with a maximum demand under 100Kwh are subject to a price control formula set out in the Company's Public Supply Licence which allows a maximum charge per unit of electricity. Differences in the charges, or in the purchase cost of electricity, can result in the under or over recovery of revenues in a particular year. Where there is an over recovery of supply or distribution business revenues against the regulated maximum allowable amount, revenues are deferred equivalent to the over recovered amount. The deferred amount is deducted from turnover and included in provisions. Where there is an under recovery, no anticipation of any potential future recovery is made. Property clawback Arrangements have been implemented which entitle HM Government to a proportion of certain property gains accruing to London Electricity plc as a result of disposals or events treated as disposals occurring after 31 March 1990 of properties held at that date. These arrangements will continue until 31 March 2000. A provision for clawback in respect of property disposals is made only to the extent that it is probable that a liability will crystallise. Employee Ownership Trust (ESOP) The accounts include the assets (money market investments and shares in NGG) of the ESOP. Currency References L, p and m denote UK pounds sterling, UK pence and millions, respectively. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRACTICES The audited consolidated annual financial statements of the Group are prepared in conformity with generally accepted accounting practice in the United Kingdom ("UK GAAP"). UK GAAP differs in certain material respects from generally accepted accounting practice in the United States ("US GAAP"). Set out below are certain examples of significant differences, which may relate to the Group, between UK GAAP and US GAAP. This is not an exhaustive list since it is not considered practicable to set out a detailed and complete comparison between UK GAAP and US GAAP. Consolidated annual financial statements presentation The basic consolidated annual financial statements of a group as presented in UK and the United States are generally the same although the format, classification and sometimes the content of the consolidated annual financial statements are different. In the UK, consolidated profit and loss accounts ("income statements"), consolidated balance sheets and consolidated cash flow statements are required as primary statements, together with appropriate notes, which are formatted under specific headings and sub-headings. In the United States, consolidated income statements, consolidated balance sheets and consolidated cash flow statements, together with consolidated statements of changes in shareholders' funds, are required as primary statements, together with appropriate notes, which are formatted under specific headings and sub-headings and are different headings to those required in the UK. Goodwill Under UK GAAP, the Company writes off goodwill on acquisition immediately to reserves. Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired. If an acquired business is subsequently sold, the full amount of the original purchased goodwill is charged against income in determining the gain or loss on disposal. Under US GAAP, goodwill is capitalised and recorded in the consolidated balance sheets and amortised by charges against income over its estimated useful life or a period not to exceed 40 years. Any unamortised goodwill relating to a business sold in the year is charged against income in determining the gain or loss on disposal. Deferred taxation Under UK GAAP, deferred taxation is provided using the liability method where in the opinion of the directors a liability will become payable in the foreseeable future. Under US GAAP, deferred taxation is provided on the full liability basis. A net deferred taxation asset can be recognised, but should be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion of all the deferred tax assets will not be realised. Fixed assets Under UK GAAP, tangible fixed assets are carried at cost or at a valuation. Certain land and buildings may be revalued. Any surplus on the revaluation of land and buildings is taken directly to non-distributable reserves. There is no definitive guidance on criteria for the recognition of the impairment of long-lived assets. Under US GAAP, such revaluations are not allowable, except in connection with the accounting requirements of business combinations. Accordingly, land and buildings would be recorded at historical cost and depreciation charged against income based on the carrying value of buildings. Long-lived assets and certain intangibles must be reviewed for impairment whenever events or a change in circumstances indicates that the carrying amount of an asset may not be recoverable. When the carrying amount exceeds future cash flows an impairment is recognised. Pensions and other post-retirement benefits Under UK GAAP, the cost of pensions is charged against income so as to spread the cost of pensions over employees' working lives. Surpluses and deficits are allocated over the average remaining service lives of employees. The Company does not have significant post-retirement benefit obligations other than pensions. Under US GAAP, contributions for defined contribution pension plans are charged against income as incurred, whilst contributions for defined benefit pension plans are charged against income on an accruals basis at a consistent rate which makes full provision for the expected cost of the benefits over the anticipated services lives of employees. For post-retirement benefits other than pensions, the present value of the benefits should be fully accrued for by the date the employee is fully eligible to receive the benefits. The cost of providing the benefits would therefore also be recognised over the anticipated services lives of employees. Dividends Under UK GAAP, final ordinary dividends and the related UK advance corporation tax are provided for in the financial year in respect of which they are recommended by the board of directors for approval by shareholders. Under US GAAP, such dividends and tax are not provided for until formally declared by the board of directors and approved by the shareholders. London Electricity plc Group Profit and Loss for the year ended 31 March 1996 Excluding National National Grid Group Grid Group transactions transactions Total 1995/96 1995/96 1995/96 1994/95 Note Lm Lm Lm Lm Turnover Continuing operations 2,3 1,278.6 (90.9) 1,187.7 1,209.4 Cost of sales 2 (842.8) 8.3 (834.5) (740.1) ------- ----- ------- ------- Gross profit 435.8 (82.6) 353.2 469.3 Net operating expenses 1,2 (253.9) (14.4) (268.3) (273.8) Exceptional cost of restructuring 1 (20.0) (20.0) (33.0) Less: use of prior year provision 1 8.3 - 8.3 - ------- ----- ------- ------- Operating Profit continuing operations 3,4 170.2 (97.0) 73.2 162.5 Share of losses of associated undertakings (2.2) - (2.2) (0.7) Exceptional provision for losses in associated undertaking 3 (4.5) - (4.5) - Exceptional profit on sale of investment in pumped storage business 2 - 70.1 70.1 - ------- ----- ------- ------- Profit on ordinary activities before interest 163.5 (26.9) 136.6 161.8 ------- ----- ------- ------- Income from investment in National Grid Group 7 - 144.4 144.4 21.2 Net interest payable 8 (4.9) - (4.9) (1.1) Exceptional item - premium on redemption of Government debt 9 - - - (9.5) ------- ----- ------- ------- Profit on ordinary activities before taxation 158.6 117.5 276.1 172.4 Taxation on profit on ordinary activities 10 (36.0) (53.4) (89.4) (22.5) ------- ----- ------- ------- Profit on ordinary activities after taxation 122.6 64.1 186.7 149.9 Dividends - Distribution in specie 12 - (350.4) (350.4) .- - Special 12 (198.7) - (198.7) - - Interim 12 (22.9) - (22.9) (19.4) - Final proposed 12 (47.3) - (47.3) (38.6) ------- ----- ------- ------- Retained (loss)/profit for the financial year (146.3) (286.3) (432.6) 91.9 ======= ====== ====== ====== Earnings per share 13 109.7p 83.3p Dividends per share 38.5p 29.0p London Electricity plc Balance Sheets as at 31 March 1996 Group Company 1996 1995 1996 1995 Note Lm Lm Lm Lm Fixed Assets Tangible assets 14 783.6 730.2 720.3 673.6 Investments 15 10.6 93.4 114.6 191.7 ------ ------ ------ ------ 794.2 823.6 834.9 865.3 Current assets Stocks 19 7.4 4.3 3.6 3.3 Debtors: amounts falling due: Within one year 20 388.8 263.0 387.2 266.0 After more than one year 20 29.4 20.5 35.3 20.5 Investments 21 29.3 49.3 19.2 40.7 Cash at bank and in hand 0.4 0.7 1.2 - ------ ------ ------ ------ 455.3 337.8 446.5 330.5 Creditors: amounts falling due within one year Borrowings 22 (96.1) (59.2) (96.1) (59.2) Other creditors 23 (388.5) (284.0) (386.9) (284.9) ------ ------ ------ ------ Net current liabilities (29.3) (5.4) (36.5) (13.6) Total assets less current liabilities 764.9 818.2 798.4 851.7 Creditors: amounts falling due after more than one year Borrowings 22 (197.7) (98.6) (197.7) (98.6) Other creditors 23 (13.3) (16.1) (9.3) (11.6) ------ ------ ------ ------ (211.0) (114.7) (207.0) (110.2) Provisions for liabilities and charges 24 (54.2) (45.7) (49.9) (42.6) ------ ------ ------ ------ Net assets 499.7 657.8 541.5 698.9 ====== ====== ====== ====== Capital and reserves Called up share capital 25 101.7 98.8 101.7 98.8 Share premium account 27 9.6 2.9 9.6 2.9 Capital redemption reserve 27 11.0 11.0 11.0 11.0 Revaluation reserve 27 7.6 81.9 7.6 81.9 Profit and loss account 27 369.8 463.2 411.6 504.3 ------ ------ ------ ------ Equity shareholders' funds 499.7 657.8 541.5 698.9 ====== ====== ====== ====== The financial statements were approved by the Board of Directors on 18 June 1996 and were signed on its behalf by: Sir Bob Reid Chairman Alan Towers Finance Director London Electricity plc Group Cash Flow Statement for the year ended at 31 March 1996 1995/96 1994/95 Note Lm Lm Net Cash Inflow From Operating Activities 28 102.6 155.1 Returns On Investments And Servicing Of Finance Interest received 12.3 14.4 Interest paid (12.4) (13.8) Exceptional item - premium on redemption of Government debt - (9.5) Dividends received from fixed asset investments 130.9 16.4 Dividends paid (260.3) (52.5) ----- ------ Net cash outflow from returns on investments and servicing of finance (129.5) (45.0) ----- ------ Taxation UK Corporation tax paid (77.0) (43.0) ----- ------ Investing Activities Purchase of tangible fixed assets (111.8) (105.0) Consumer contributions received 14.0 17.4 Proceeds from sale of tangible fixed assets 3.8 4.6 Investment in associated undertakings (2.8) (1.7) Repayment of loan from other investment - 0.5 Purchase of subsidiary (net of cash acquired) 29a (0.6) - Exceptional proceeds from sale of pumped storage business 60.1 - Loan to associated undertaking (4.6) - Purchase of fixed asset investments (19.1) (2.6) Decrease in fixed term deposits greater than 3 months 14.6 112.7 ----- ------ Net cash (outflow)/inflow from investing activities (46.4) 25.9 ----- ------ Net cash (outflow)/inflow before financing (150.3) 93.0 Financing Bond issue 100.9 - Expenses paid in connection with bond issue (2.0) - Repayment of Government debt - (70.0) Shares issued under option schemes 9.6 1.2 Purchase of own shares (0.8) (150.4) ----- ------ Net cash inflow/(outflow) from financing 107.7 (219.2) ----- ------ Decrease in cash and cash equivalents 29b (42.6) (126.2) ===== ====== London Electricity plc Statement of Total Recognised Gains and losses for the year ended at 31 March 1996 1995/96 1994/95 Lm Lm Profit on ordinary activities after taxation 186.7 149.9 Other net gains recognised in reserves: Surplus on revaluation of NGG investment 266.2 - ----- ----- Total recognized gains relating to the year 452.9 149.9 ===== ===== Note of Historical Cost Profits and losses 1995/96 1994/95 Lm Lm Profit on ordinary activities before taxation 276.1 172.4 Realisation of revaluation surpluses on NGG investment 340.5 - ------ ------ Historical profit on ordinary activities before taxation 616.6 172.4 ====== ====== Historical cost (loss)/profit for the period retained after taxation and dividends (92.1) 91.9 ====== ====== Reconciliation of Movement in Shareholders' Funds 1995/96 1994/95 Lm Lm Profit on ordinary activities after taxation 186.7 149.9 Dividends 12 (619.3) (58.0) ------ ------ Retained (loss)/earnings (432.6) 91.9 Shares issued under option schemes 9.6 1.2 Shares repurchased and cancelled (0.8) (150.4) Goodwill on acquisition deducted from reserves (0.5) (1.6) Other net recognised gains relating to the year 266.2 - ------ ------ Net decrease in equity shareholders' funds (158.1) (58.9) Equity shareholders' funds at start of year 657.8 716.7 ------ ------ Closing equity shareholders' funds 499.7 657.8 ====== ====== London Electricity plc Notes to the Accounts for the year ending 31 March 1996 1 Analysis of Net Operating Expenses NGG Total 1995/96 1995/96 1995/96 1994/95 Lm Lm Lm Lm Distribution 115.2 2.8 118.0 114.2 Distribution: exceptional cost of 4.2 - 4.2 6.8 restructuring Less: use of prior year provision (1.7) - (1.7) - Administrative 138.7 11.6 150.3 159.6 Administrative: exceptional cost of 15.8 - 15.8 26.2 restructuring Less: use of prior year provision (6.6) - (6.6) - ----- ---- ----- ----- 265.6 14.4 280.0 306.8 ===== ==== ===== ===== Operating expenses Distribution costs Distribution costs are the cost of maintaining the network including appropriate depreciation, rates and NGG exit charges. Other charges from NGG are included in cost of sales. Administrative expenses Administrative expenses include all other operating costs. Exceptional cost of restructuring The charge of L20m is in respect of the continuing restructuring of the electricity business. Of the L18.7m brought forward, L8.3m has been utilized. A provision of L30.4m is carried forward in the balance sheet. Exceptional provision for losses in associated undertaking A provision has been made for losses on gas contracts for the period up to 31 March 1998. 2 Analysis of NGG Transactions Turnover This relates to a L50 discount given to residential customers who had a point of supply as at 31 December 1995 and was part of the agreement with HM Government following the capital reorganization of NGG. Cost of sales This is in respect of the fossil fuel levy saved as a result of the customer discount. Operating expenses These are exceptional costs in respect of the ESOP (L13.1m) and professional fees for NGG transactions (L1.3m). The ESOP was set up to purchase NGG shares to be transferred to option holders as compensation for the loss in value of the London Electricity shares under option. The ESOP Trustee is funded by London Electricity to purchase from London Electricity the appropriate number of NGG shares required in relation to unexercised options. Funding of the ESOP is by way of interest-free limited recourse loans by the Company. Exceptional profit on sale of investment in pumped storage business As part of the changes in the capital structure of NGG, prior to listing, the pumped storage business (First Hydro Limited) was demerged and sold to Mission Energy. The amount shown represents London Electricity's share of the sale proceeds. 3 Analysis of Turnover, Operating Profit and Net Assets
Turnover Operating profit Net assets 1995/96 1994/95 1995/96 1994/95 1995/96 1994/95 Class of business Lm Lm Lm Lm Lm Lm Distribution 357.1 379.1 147.5 136.0 686.8 621.9 Supply 1,188.9 1,113.6 9.2 13.9 44.0 37.7 Private electrical 15.9 14.8 12.0 11.0 56.1 52.8 distribution systems Other 43.2 29.6 3.0 1.6 11.5 (1.0) NGG items (90.9) - (97.0) - - - ------- ------- ----- ----- ------ ----- 1,514.2 1,537.1 74.7 162.5 798.4 711.4 Less: Inter business (326.5) (327.7) (1.5) - - - transactions Unallocated net - - - - (298.7) (53.6) liabilities ------- ------- ----- ----- ------ ----- Continuing operations 1,187.7 1,209.4 73.2 162.5 499.7 657.8 ======= ======= ===== ===== ====== =====
Cost of Operating Analysis of NGG items by Turnover sales costs Total class of business Lm Lm Lm Lm Distribution - - 9.9 9.9 Supply 90.9 (8.3) 2.3 84.9 Other - - 2.2 2.2 ---- ---- ---- ---- 90.9 (8.3) 14.4 97.0 ==== ==== ==== ==== The exceptional cost of restructuring the business has been charged to the Distribution business L15m (1994/95 L30m), and to the Supply business L5m (1994/95 L3m). The exceptional provision for losses in associated undertaking of L4.5m has been charged to the Other class of business. Explanation of terminology used in the profit and loss account Distribution business This is the transfer of electricity from the points where it is received in bulk across the distribution systems and its delivery to consumers. Supply business This is the buying and selling of electricity as suppliers. Private electrical distribution systems This is the operation, maintenance and expansion of private electrical distribution systems. Other businesses This includes the operation of contracting, generation, building energy management systems, transport, property and insurance activities. Allocation of turnover and costs Wherever possible turnover and costs are allocated specifically to the business to which they relate. However, because of the integrated nature of the Group's activities, it is necessary to recharge or apportion certain costs. Allocation of assets and liabilities Operating assets and liabilities are allocated or apportioned to the business to which they relate. Net operating assets consist of non interest bearing operating assets (fixed assets, stocks and debtors) less non interest bearing operating liabilities (creditors and provisions) arising on operating activities. Unallocated net liabilities includes other fixed asset investments, cash, borrowings, dividends receivable and payable and taxation. Geographical analysis Turnover arises entirely in the United Kingdom. 4 Operating Profit Operating profit is stated after charging: 1995/96 1994/95 Lm Lm Staff costs (Note 5) 85.3 110.5 Depreciation (Note 14) 41.1 38.3 Operating lease rentals: Land and buildings 6.6 6.5 Plant and machinery 1.3 0.7 Amounts paid to Coopers & Lybrand: Remuneration as Group auditors 0.2 0.2 Fees for other services in the 1.1 0.7 United Kingdom and after crediting: Rental income 2.5 3.2 Profit on disposal of fixed assets 2.6 0.8 5 Staff Costs 1995/96 1994/95 Lm Lm Wages and salaries 97.7 104.1 Social security costs 8.1 8.5 Other pension costs (Note 31) 1.3 16.9 ----- ----- 107.1 129.5 Less: charged as capital expenditure (21.8) (19.0) ----- ----- Charged to the profit and loss account 85.3 110.5 ----- ----- The average number of employees (including executive directors) during the year was: Staff grades 2,925 3,059 Industrial staff grades 1,479 1,849 ----- ----- 4,404 4,908 ===== ===== 6 Directors' Emoluments The total emoluments of the directors, including pension contributions paid, were as follows: 1995/96 1994/95 L L Fees to non-executive directors 148,000 154,493 Executive directors: fixed remuneration 554,738 610,287 annual bonus payments 66,313 106,285 pension contributions 237,954 255,079 benefits in kind 48,471 51,754 --------- --------- 1,055,476 1,177,898 ========= ========= The remainder of the information required by the Companies Act and the London Stock Exchange Listing Rules is contained in the Report of the Remuneration Committee. 7 Income From Investment In NGG 1995/96 1994/95 Lm Lm Interim dividend 9.2 7.1 Final dividend 0.3 14.1 NGG special dividend 113.9 - NGG second dividend 18.0 - NGG rights dividend 3.0 - ----- ---- 144.4 21.2 ===== ==== 8 Net Interest Payable 1995/96 1994/95 Lm Lm Interest receivable and similar income 11.8 13.0 Interest payable and similar charges: Bank loans and overdraft (4.7) (2.4) Bonds (12.0) (11.7) ----- ----- (16.7) (14.1) ----- ----- Net interest payable (4.9) (1.1) ===== ===== 9 Exceptional Item - Premium On Redemption of Government Debt 1995/96 1994/95 Lm Lm 12.661% Bonds due 1999 repaid 23 - (9.5) August 1994 ===== ==== 10 Taxation on Profit on Ordinary Activities 1995/96 1994/95 United Kingdom Corporation tax at 33% Lm Lm (1994/95 33%) Current taxation on ordinary activities 43.7 46.9 Tax on exceptional restructuring costs (4.6) (4.7) Deferred tax on exceptional restructuring (2.0) (6.2) costs Deferred tax on other provisions (1.1) (1.7) Tax over-provided in prior years - (16.0) ----- ----- 36.0 18.3 ----- ----- Corporation tax reduction relating to (27.3) - customer discount Tax credit on NGG special dividend 22.8 - Tax credit on NGG ordinary dividends 1.8 4.2 Corporation tax in relation to exceptional (3.6) - ESOP costs Corporation tax charge arising from 59.7 distribution in specie ----- ----- 53.4 4.2 ----- ----- 89.4 22.5 ===== ===== The taxation charge has been reduced by L12.8m (1994/95 L14.2m) as a result of timing differences, principally capital allowances and certain provisions. No deferred taxation adjustment is considered necessary in respect of these timing differences except as shown above. 11 Profit on Ordinary Activities After Taxation The profit for the financial year is made 1995/96 1994/95 up as follows: Lm Lm Dealt with in the accounts of the holding 186.9 147.4 company Retained by subsidiary undertakings 6.7 3.4 Retained by associated undertakings (6.9) (0.9) ----- ----- 186.7 149.9 ===== ===== 12 Dividends 1995/96 1994/95 Lm Lm Interim dividend of 11.5p per 50p ordinary share 22.9 19.4 (1994/95 9.5p; 11.lp on an equivalent basis) Final proposed of 27.0p per consolidated ordinary share 47.3 38.6 (1994/95 19.5p; 22.8p on an equivalent basis) ----- ----- 70.2 58.0 Distribution of NGG shares by way of specie dividend 350.4 - Special dividend of l00p per 50p ordinary share 198.7 - ----- ----- 619.3 58.0 ===== ===== 13 Earnings Per Share (EPS) 1995/96 1994/95 This is calculated on: weighted average number of shares 170,208,893 180,029,001 profit on ordinary activities after taxation L186.7m L149.9m resulting in EPS of (p) 109.7 83.3 The 1994/95 weighted average number of shares has been restated for the 6 for 7 share consolidation in January 1996. 14 Tangible Fixed Assets
Other Fixtures Vehicles Deduct Network land and and & mobile Consumers' assets buildings equipment plant contributions Total Group Lm Lm Lm Lm Lm Lm Cost At 1 April 1995 1,151.0 74.7 105.2 16.3 (189.3) 1,157.9 Subsidiary on acquisition - - 5.4 - - 5.4 Additions 91.6 2.9 10.0 1.8 (14.9) 91.4 Disposals (1.2) (0.6) (1.8) (2.2) - (5.8) ------- ---- ----- ---- ------ ------- At 31 March 1996 1,241.4 77.0 118.8 15.9 (204.2) 1,248.9 ------- ---- ----- ---- ------ ------- Depreciation At 1 April 1995 386.4 18.2 60.2 9.1 (46.2) 427.7 Subsidiary on acquisition - - 1.1 - - 1.1 Charge for the 30.8 1.6 11.5 2.6 (5.4) 41.1 year Disposals (0.9) (0.1) (1.7) (1.9) - (4.6) ------- ---- ----- ---- ------ ------- At 31 March 1996 416.3 19.7 71.1 9.8 (51.6) 465.3 ------- ---- ----- ---- ------ ------- Net book amounts At 31 March 1996 825.1 57.3 47.7 6.1 (152.6) 783.6 ------- ---- ----- ---- ------ ------- At 31 March 1995 764.6 56.5 45.0 7.2 (143.1) (730.2) ------- ---- ----- ---- ------ ------- Other Fixtures Vehicles Deduct Network land and and & mobile Consumers' assets buildings equipment plant contributions Total Company: Lm Lm Lm Lm Lm Lm Cost At 1 April 1995 1,100.6 74.2 103.8 - (189.3) 1,089.3 Additions 86.3 2.9 9.5 - (14.9) 83.8 Disposals (0.9) (0.6) (1.6) - - (3.1) ------- ---- ----- ---- ------ ------- At 31 March 1996 1,186.0 76.5 111.7 - (204.2) 1,170.0 ------- ---- ----- ---- ------ ------- Depreciation: At 1 April 1995 384.0 18.1 59.8 - (46.2) 415.7 Charge for the year 29.3 1.7 11.0 - (5.4) 36.6 Disposals (0.9) (0.1) (1.6) - - (2.6) ------- ---- ----- ---- ------ ------- At 31 March 1996 412.4 19.7 69.2 - (51.6) 449.7 ------- ---- ----- ---- ------ ------- Net book amounts: At 31 March 1996 773.6 56.8 42.5 - (152.6) 720.3 ------- ---- ----- ---- ------ ------- At 31 March 1995 716.6 56.1 44.0 - (143.1) 673.6 ------- ---- ----- ---- ------ -------
Group Company 1996 1995 1996 1995 Lm Lm Lm Lm Capital commitments Contracted for but 91.8 58.1 83.3 57.1 not provided for ==== ==== ==== ==== The net book amount of other land and buildings comprises: Group Company 1996 1995 1996 1995 Lm Lm Lm Lm Freehold 35.8 36.5 35.3 36.1 Long leasehold (over 50 9.3 9.2 9.3 9.2 years) Short leasehold (50 12.2 10.8 12.2 10.8 years or less) ---- ---- ---- ---- 57.3 56.5 56.8 56.1 ==== ==== ==== ==== Tangible fixed assets include the following: Group Company 1996 1995 1996 1995 Lm Lm Lm Lm Assets in the course of 82.3 76.5 75.2 74.1 construction Land not depreciated 16.2 16.2 16.2 16.2 ---- ---- ---- ---- 98.5 92.7 91.4 90.3 ==== ==== ==== ==== 15 Fixed Asset Investments Group Company 1996 1995 1996 1995 Lm Lm Lm Lm Subsidiary undertakings (Note 16) - - 103.6 108.9 Associated undertakings (Note 17) 1.4 1.4 2.9 0.7 Other investments (Note 18) 9.2 92.0 8.1 82.1 ---- ---- ----- ----- 10.6 93.4 114.6 191.7 ==== ==== ===== ===== Other investments include 3.8 million shares in NGG which are stated at a valuation of L7.9m and are listed on the London Stock Exchange with a market value of L7.4m at 31 March 1996. All other investments are unlisted. 16 Subsidiary Undertakings Company Shares Loans Total Lm Lm Lm At 1 April 1995 16.9 92.0 108.9 Additions.- - 7.5 7.5 Transfer to amounts owed by - (12.8) (12.8) subsidiary undertakings. ---- ----- ----- At 31 March 1996 16.9 86.7 103.6 ==== ===== ===== The principal operating subsidiaries included in the consolidated accounts are listed below:
Description of Proportion of shares nominal Name of undertaking held value of shares Principal held activities Investment in The London Power electricity Company Ltd. Ordinary L1 100% generation London Power Insurance Ltd. Ordinary L1 100% Insurance Berkeley Environmental Building energy Systems Plc Ordinary 5p 100% management systems London Electricity Electricity distribution Services Ltd. Ordinary L1 100% projects London Electricity Electrical Contracting Ltd. Ordinary L1 100% contracting London Electricity Provision and supply of Transport Services Ltd. Ordinary L1 100% transport services Combined Power Systems Supply of combined (Southern) Ltd. Ordinary L1 100% heat and power units Knight Debt Recovery Debt collection and Services Ltd. Ordinary L1 100% tracing
17 Interests In Associated Undertakings Share of post Group acquisition Shares Loans reserves Total Lm Lm Lm Lm At 1 April 1995 1.7 0.7 (1.0) 1.4 Additions 2.8 5.0 - 7.8 Transfer to subsidiary (0.7) - 0.2 (0.5) undertakings Transfer to debtors: amounts due - (0.4) - (0.4) within one year Share of retained losses in year - - (6.9) (6.9) ---- ---- ---- ---- At 31 March 1996 3.8 5.3 (7.7) 1.4 ==== ==== ==== ==== Shares Loans Totals Company Lm Lm Lm At 1 April 1995 - 0.7 0.7 Additions 1.9 0.3 2.2 --- --- --- At 31 March 1996 1.9 1.0 2.9 === === === Proportion Description of nominal of shares value of Name of undertaking held shares held Principal activities London Total Gas Ltd. Ordinary L1 50% Gas supply Combined Power Ordinary L1 30.83% Supply of combined Systems Ltd. Preference L1 33.33% heat and power units Thames Valley Power Ordinary L1 50.0% Generation and Ltd. supply London Total Energy Ordinary L1 50.0% Gas supply Ltd. 18 Other Investments Shares Loans Total Group Lm Lm Lm At 1 April 1995 82.1 9.9 92.0 Additions at cost 19.1 - 19.1 Transfer to other debtors - (9.9) (9.9) Net movement in respect of distribution in specie and transfer to ESOP of NGG shares (92.0) - (92.0) ----- ---- ----- At 31 March 1996 9.2 - 9.2 ===== ==== ===== Shares Loans Total Company Lm Lm Lm At 1 April 1995 82.1 - 82.1 Additions at cost 18.0 - 18.0 Net movement in respect of distribution in specie and transfer to ESOP of NGG shares (92.0) - (92.0) ----- ---- ----- At 31 March 1996 8.1 - 8.1 ===== ==== ===== Details of unlisted investments in which the Group and Company hold more than a 10% interest: Proportion Description of nominal of shares value of Name of undertaking held shares held Barking Power Ltd Ordinary L1 13.5% 19 Stocks Group Company 1996 1995 1996 1995 Lm Lm Lm Lm Raw materials and consumables 1.4 1.8 1.3 1.6 Work in progress 6.0 2.4 2.3 1.7 Finished goods and goods for resale - 0.1 - - --- --- --- --- 7.4 4.3 3.6 3.3 === === === === 20 Debtors Group Company 1996 1995 1996 1995 Amounts due within one year: Lm Lm Lm Lm Trade debtors 113.5 106.1 111.1 103.8 Unbilled consumption 77.2 68.8 77.2 68.8 Amounts owed by subsidiary undertakings - - 16.0 6.3 Amounts owed by associated undertakings 0.7 0.4 0.1 0.5 Other debtors 52.9 21.1 38.7 20.6 Prepayments and accrued income 8.1 3.7 7.8 3.2 Advance corporation tax recoverable 125.1 43.6 125.1 43.6 Deferred taxation recoverable (Note 24) 11.0 7.9 10.9 7.8 Dividends receivable 0.3 11.4 0.3 11.4 ----- ----- ----- ----- 388.8 263.0 387.2 266.0 ===== ===== ===== ===== Amounts due after more than one year: Advance corporation tax recoverable 10.0 6.7 10.0 6.7 Pension scheme prepayment 19.4 9.2 19.4 9.2 Amounts owed by subsidiary undertakings - - 5.9 - Amounts owed by associated undertakings - 4.6 - 4.6 ---- ---- ---- ---- 29.4 20.5 35.3 20.5 ==== ==== ==== ==== 21 Current Asset Investments Group Company 1996 1995 1996 1995 Listed Lm Lm Lm Lm UK investments 1.2 2.5 - - Overseas investments 2.9 0.4 - - ---- ---- ---- ---- 4.1 2.9 - - ---- ---- ---- ---- Unlisted Money market investments 23.2 46.4 19.2 40.7 Tax certificates of deposit 2.0 - - - ---- ---- ---- ---- 25.2 46.4 19.2 40.7 ---- ---- ---- ---- 29.3 49.3 19.2 40.7 ==== ==== ==== ==== Market value at 31 March was: Listed investments 4.1 3.0 - - Unlisted investments 25.2 46.4 19.2 40.7 22 Borrowings Group Company 1996 1995 1996 1995 Amounts falling due within one year:Lm Lm Lm Lm Short term borrowings 96.1 59.2 96.1 59.2 ==== ==== ==== ==== Amounts falling due after more than one year: 8% Eurobonds repayable 28 March 2003 98.9 98.6 98.9 98.6 8 5/8% Eurobonds repayable 26 October 2005 98.8 - 98.8 - ----- ---- ----- ---- 197.7 98.6 197.7 98.6 ===== ==== ===== ==== The 8% Eurobonds may not be redeemed prior to 28 March 2003 except upon the occurrence of certain events. In addition, the 8 5/8% Eurobonds may be redeemed in full together with accrued interest by either the 'Issuer' or 'Bondholders' upon the occurrence of certain events. Borrowing facilities The Group had at 31 March 1996 bilateral committed borrowing facilities of L230m of varying maturities up to seven years. The other facilities available to the Group were short term unsecured, uncommitted facilities of L228m and the Company has a L150m Sterling Commercial Paper programme. 23 Creditors Group Company 1996 1995 1996 1995 Amounts falling due within one year: Lm Lm Lm Lm Payments received on account 11.4 7.5 7.5 6.1 Amounts owing for purchase of electricity 73.5 66.5 73.5 66.5 Amounts owed to subsidiary undertakings - - 12.5 7.6 Other trade creditors 32.6 38.1 30.9 36.9 Corporation tax 86.9 55.4 83.9 54.1 Advance corporation tax 64.6 20.9 64.6 20.9 Other taxation and social security 3.6 3.8 3.3 3.4 Other creditors 43.3 20.8 40.4 20.4 Advance payments on extension of VAT 5.2 14.5 5.2 14.5 Accruals and deferred income 20.1 17.9 17.8 15.9 Proposed dividends 47.3 38.6 47.3 38.6 ----- ----- ----- ----- 388.5 284.0 386.9 284.9 ===== ===== ===== ===== Amounts falling due after more than one year: Trade creditors - 1.0 - 1.0 Other creditors 11.1 8.4 7.1 8.4 Accruals and deferred income 0.1 4.6 0.1 0.1 Advance payments on extension of VAT 2.1 2.1 2.1 2.1 ----- ----- ---- ---- 13.3 16.1 9.3 11.6 ===== ===== ==== ==== 24 Provisions For Liabilities & Charges Restructuring Group Insurance costs Other Total At 1 April 1995 16.3 18.7 10.7 45.7 Utilised in the year (0.6) (8.3) (2.6) (11.5) Transferred from profit and loss account 0.3 20.0 (0.3) 20.0 ---- ---- ---- ---- At 31 March 1996 16.0 30.4 7.8 54.2 ==== ==== ==== ==== Restructuring Company Insurance costs Other Total At 1 April 1995 13.7 18.7 10.2 42.6 Utilised in the year (0.6) (8.3) (2.6) (11.5) Transferred from profit and loss account (0.8) 20.0 (0.4) 18.8 ---- ---- ---- ---- At 31 March 1996 12.3 30.4 7.2 49.9 ==== ==== ==== ==== Deferred taxation The amount provided for deferred taxation and the amounts for which provision has not been made are as follows: Group Company 1996 1995 1996 1995 Provided in accounts: Lm Lm Lm Lm At 1 April (7.9) - (7.8) - Transfer from profit and loss (3.1) (7.9) (3.1) (7.8) ----- ---- ----- ---- At 31 March (11.0) (7.9) (l0.9) (7.8) ===== ==== ===== ==== Provided in accounts: Accelerated capital allowances - - - - Other timing differences (11.0) (7.9) (10.9) (7.8) ----- ---- ----- ---- (11.0) (7.9) (10.9) (7.8) ===== ==== ===== ==== Group Company Potential liability 1996 1995 1996 1995 not provided: Lm Lm Lm Lm Accelerated capital allowances 184.1 173.5 177.6 169.5 Other timing differences (6.5) (11.2) (6.4) (11.6) ----- ----- ----- ----- 177.6 162.3 171.2 157.9 ===== ===== ===== ===== Total potential deferred taxation liability is computed at a Corporation tax rate of 33% (31 March 1995 33%). The Directors do not consider that any deferred taxation provision is required in respect of the revaluation of NGG shares. 25 Share Capital Group and Company 1996 1995 Lm Lm Authorised 257,142,857 ordinary shares of 58 1/3p each (1994/95 300,000,000 ordinary shares 150.0 150.0 of 50p each) ===== ===== Allotted, called up and fully paid 174,290,836 ordinary shares of 58 1/3p each (1994/95 197,695,699 ordinary shares 101.7 98.8 of 50p each) ===== ===== Share options During the year options were exercised on 5,104,982 (1994/95, 513,399) ordinary shares at L4.83, L3.03, L3.00, L2.61 and L1.75 for a total consideration of L9.6m (1994/95 L1.2m). Share repurchase The following share repurchase took place during the year: On 18 January 1996, 839,573 shares with a nominal value of 8 1/3p at a price of L1.00. These fractional shares were subsequently cancelled and resulted in a decrease of less than L0.lm in share capital which was transferred to the capital redemption reserve. They arose from the share consolidation of every seven existing ordinary shares into six new ordinary shares and represented the fractional element. The total repurchase cost was L0.8m which has been charged against profit and loss reserves. Special Rights Redeemable Preference Share The Special Rights Redeemable Preference Share was redeemed at par on 31 March 1995 and converted, following the resolution passed at the Annual General Meeting held on 4 August 1995, into two ordinary shares of 50 pence each. This share, which could only be held by the Secretary of State for Energy or another person acting on behalf of HM Government, did not carry any rights to vote at general meetings but entitled the holder to attend and speak at such meetings. 26 Share Options (a) The Executive Share Option Scheme An approved share option scheme for executive directors and senior executives whereby an option to purchase the shares of the Company is issued and may be exercised between the third and tenth anniversaries of the date of grant. Options have been granted to eligible employees and executive directors to subscribe for ordinary shares in the Company in accordance with the rules of the scheme. (b) The Sharesave Scheme An approved share option scheme where the options to purchase the shares of the Company are linked to a five year savings contract. All staff who met a qualifying period of employment prior to the Grant Date were eligible to participate. The rules of the Executive Share Option Scheme and Sharesave Scheme include provisions for early exercise of the options in certain circumstances.
Number of shares for which rights are Date Subscription exercisable Options granted and outstanding at options price per Period within which 1996 1995 31 March 1996 were: granted share options are exercisable L L Executive share option scheme 1 Jan. 1991 2.61 17/1/94-17/1/2001 30,000 280,000 2 Jan. 1992 3.00 14/1/95-14/1/2002 129,000 356,000 3 July 1993 4.83 20/7/96-20/7/2003 475,800 512,800 4 Mar. 1994 5.71 28/3/97-28/3/2004 22,767 22,767 5 April 1995 5.92 3/4/98-3/4/2005 75,077 - 6 April 1995 6.04 13/4/98-13/4/2005 14,551 - Sharesave 1 Dec. 1990 1.75 1/3/96-1/9/96 161,115 4,896,557 2 Sept. 1992 3.03 30/12/97-30/6/98 892,282 992,658
27 Retained Profit And Reserves Group Company Lm Lm Share premium account At 1 April 1995 2.9 2.9 Premium on options exercised 6.7 6.7 --- --- At 31 March 1996 9.6 9.6 --- --- Capital redemption reserve At 1 April 1995 11.0 11.0 Nominal value of shares repurchased - - ---- ---- At 31 March 1996 11.0 11.0 ==== ==== Revaluation reserve At 1 April 1995 81.9 81.9 Revaluation surplus on NGG 266.2 266.2 Revaluation surplus transferred to profit and loss account in respect of NGG: Distribution in specie (333.2) (333.2) Sale of shares to ESOP (7.3) (7.3) ------ ------ At 31 March 1996 7.6 7.6 ====== ====== Profit and loss account At 1 April 1995 463.2 504.3 Revaluation surplus realised on NGG: Distribution in specie 333.2 333.2 Sale of shares to ESOP 7.3 7.3 Shares repurchase (0.8) (0.8) Goodwill written off on investment in associated undertaking (0.5) - Retained loss for the year (432.6) (432.4) ------ ------ At 31 March 1996 369.8 411.6 ====== ====== Total reserves at 31 March 1996 398.0 439.8 ====== ====== The cumulative amount of goodwill charged to reserves is L48.6m (1994/95 L48.1m). The revaluation reserve is in respect of the NGG investment which is included in other investments in Note 18. 28 Reconciliation Of Profit On Ordinary Activities Before Interest to Net Cash Inflow from Operating Activities 1995/96 1994/95 Lm Lm Profit on ordinary activities before interest 136.6 161.8 Depreciation 41.1 38.3 Increase/(decrease) in provisions and liabilities 8.4 (4.4) Gain on sale of tangible fixed assets (2.6) (0.8) Exceptional profit on sale of investment in pumped storage business (70.1) - Share of loss of associated undertakings 6.7 0.7 Increase in pension fund prepayment (10.1) (2.4) ESOP 7.9 - ----- ----- 117.9 193.2 ===== ===== Movements in working capital Decrease/(increase) in stocks (2.6) 0.3 Increase in trade debtors (15.5) (20.3) Increase in other debtors (17.0) (5.2) Increase/(decrease) in trade creditors 5.7 (4.9) Increase/(decrease) in other creditors 16.2 (19.3) Increase/(decrease) in other taxation and social security (0.2) 0.1 Increase/(decrease in accruals and deferred income (1.9) 11.2 ----- ----- Total working capital movements (15.3) (38.1) ===== ===== Net cash inflow from operating activities 102.6 155.1 29a Purchase Of Subsidiary Undertaking ===== ===== Net assets acquired on acquisition of Combined Power System (Southern) Ltd were L0.9m including cash of L0.1m. Goodwill arising on the acquisition is L0.5m. Cash consideration in aggregate was L1.4m. 29b Analysis Of Cash And Cash Equivalents 1995/96 1994/95 1995/96 1994/95 1993/94 Movements Movement Lm Lm Lm Lm Lm Cash at bank and in hand 0.4 0.7 10.5 (0.3) (9.8) Current asset investments 29.3 49.3 224.9 (20.0) (175.6) Less: Tax certificates of deposit - - (2 8) - 2.8 Short term investments greater than 3 months (16.7) (31.3) (144.0) 14.6 112.7 Short term borrowings (96.1) (59.2) (2.9) (36.9) (56.3) ----- ----- ------ ----- ------ (83.1) (40.5) 85.7 (42.6) (126.2) ===== ===== ====== ===== ====== The movement in current asset investments excludes items of greater than 3 months duration. 30 Analysis Of Changes In Financing Share Capital Share premium redemption Cash capital account reserve inflow Lm Lm Lm Lm At 1 April 1995 98.8 2.9 11.0 - Nominal values of shares repurchased and cancelled - - - - Shares issued under option scheme 2.9 6.7 - 9.6 ----- --- ---- --- At 31 March 1996 101.7 9.6 11.0 9.6 ===== === ==== === Cash flow movements Shares were issued under option schemes for a total consideration of L9.6m (1994/95 L1.2m). Shares were repurchased for a total cost of L0.8m (1994/95 L150.4m). Borrowings 1995/96 1994/95 1995/96 1994/95 1993/94 Movement Movement Lm Lm Lm Lm Lm 12.661% Bonds due 1999 - - 70.0 0.0 (70.0) 8% Eurobonds due 2003 98.8 98.6 98.4 0.2 0.2 8 5/8% Bonds due 2005 100.9 - - 100.9 - Expenses of Bond issue (2.0) - - (2.0) - Issue costs amortised (0.6) (0.4) (0.2) (0.2) (0.2) ----- ---- ----- ---- ----- 197.1 98.2 168.2 98.9 (70.0) ===== ==== ===== ==== ===== 31 Pension Commitments The principal pension scheme available to employees of London Electricity plc has been the Electricity Supply Pension Scheme (ESPS). Since April 1994 new employees have been offered membership of a defined contribution scheme. The ESPS provides pensions and related benefits based on the final pensionable pay of employees throughout the electricity supply industry. The assets of the scheme are held in a separate trustee administered fund. The scheme was unitised with effect from 31 March 1989 and an actuarial valuation carried out at that date apportioned the assets of the ESPS between the various participating employers (Groups). The most recent formal actuarial valuation of the London Electricity Group for the purpose of determining contribution rates was carried out at 31 March 1995 by Bacon & Woodrow, consulting actuaries. The valuation method adopted was the attained age method. The principal assumptions were that the investment return would exceed salary increases by 3.0% and exceed future pension increases by 4.5% per annum. At the valuation date, the actuarial value of the assets relating to London Electricity Group was L672.8 million, which represented 108.1% of the actuarial value of the accrued benefits. Accrued benefits include all benefits for pensioners and former members as well as benefits based on service to date for active members, allowing for future salary rises. The resultant surplus is being used to increase benefits to members and to facilitate reductions in employer and employee contributions. In order to calculate the pension charge in accordance with the Group's accounting policy, a separate actuarial valuation was prepared by Bacon & Woodrow, consulting actuaries. This valuation was determined using the projected unit credit method, and resulted in a regular annual pension charge of 10.2% of pensionable pay. This regular cost has been reduced by the benefit of an actuarial surplus arising using this method, which is being spread over 10 years, being the average remaining service life of employees. The resulting net charge to profit in the year was Lnil (1994-95 L8.5 million). A prepayment of L19.4 million (31 March 1995 L9.2 million) is included in debtors greater than one year, as a result of spreading the surplus. Executive directors and certain senior employees are also entitled to join the London Electricity Executives pension scheme from which further benefits based on final pensionable pay are available. Under the Company's defined contribution scheme the charge to profit is the contribution paid by the Company for the year. The amount paid is not yet material. The total net charge for pension schemes in the accounts is L0.3 million (1994-95 L8.8 million). Contributions payable by the Company arising from ex-gratia pensions and early retirement were L1 million (1994-95 L8.1 million). 32 Lease Obligations The annual commitments of the Group under non-cancellable operating leases are as follows: Land and 1996 Land and 1995 buildings Other buildings Other Lm Lm Lm Lm Expiring within One year 0.4 0.4 - 0.2 Two to five years inclusive 0.2 1.1 0.1 0.5 Over five years 6.5 - 5.7 - --- --- --- --- 7.1 1.5 5.8 0.7 === === === === 33 Contingent Liabilities The Group has an interest in a joint venture, Barking Power Ltd., a company formed to build and operate a gas fired power station. The Group is committed to contributing up to L1.9m over a period of one year for subordinated loan stock and equity. Since the year end, the Group has subscribed L5m for a 11.3% stake in London & Continental Railway and paid L5.6m to purchase the private distribution networks at North Pole International depot, Waterloo International station and Manchester International depot from European Passenger Services Ltd. The Group expects to invest, over the next seven years, between L50m and L75m in infrastructure costs for the Channel Tunnel Rail link. We may be called upon to subscribe up to a further L5m for equity during the next few years. Other than those noted above, there were no other material contingent liabilities or guarantees apart from those given in respect of certain subsidiaries in the ordinary course of business. (b) Pro Forma Financial Information The accompanying unaudited pro forma condensed consolidated financial information has been prepared in accordance with generally accepted accounting principles in the United States. Amounts are expressed in U.S. dollars. The purchase price allocation for London Electricity plc is based on preliminary information. The unaudited pro forma financial information should be read in conjunction with the related notes thereto. The accompanying unaudited pro forma condensed statement of consolidated income for the year ended December 31, 1996 has been prepared assuming the acquisition of London Electricity plc occurred on January 1, 1996. The pro forma condensed statement of consolidated income has been prepared for comparative purposes only and does not purport to be indicative of the results of operations that would have resulted had the combination been in effect on the date indicated, that have resulted since the date of acquisition or that may result in the future. Entergy Corporation Pro Forma Condensed Statement of Consolidated Income For the year ended December 31, 1996 (in thousands, except share data) Pro-Forma Entergy Corp. London Adjustments and Subsidiaries Historical (Note 1) (Note 2) Pro Forma Operating Revenues $7,163,526 $2,110,085 $9,273,611 Operating Expenses 5,484,805 1,875,408 53,109 (a) 7,413,322 --------------------------------------------------- Operating Income 1,678,721 234,677 (53,109) 1,860,289 Other Income (46,964) (19,889) (66,853) (Deductions) Interest Charges 790,571 28,176 137,673 (b) 956,420 --------------------------------------------------- Income Before 841,186 186,612 (190,782) 837,016 Income Taxes Income Taxes 421,159 49,345 (50,722) (c) 419,782 --------------------------------------------------- Net Income $420,027 $137,267 ($140,060) $417,234 =================================================== Earnings from continuing operations per average common share $1.83 $1.82 Average number of common shares outstanding 229,084,241 229,084,241 =========== =========== 1. On February 21, 1997, the Company acquired London Electricity plc, for approximately $2.1 billion. The acquisition was financed with $1.7 billion of debt that is non-recourse to Entergy Corporation, and $392 million provided by Entergy Corporation. The Company has accounted for this acquisition using the purchase method of accounting whereby the purchase price is allocated to assets and liabilities based on fair market value, with the remainder allocated to the distribution license of London Electricity plc which is an identifiable intangible asset. 2. The pro forma condensed statement of consolidated income reflects the following adjustments in order to present the historical results of operations of London Electricity plc for the period prior to its inclusion in the consolidated financial statements: a) primarily an increase in depreciation and amortization expense resulting from applying the purchase method of accounting to the London Electricity plc fixed assets and distribution license; b) primarily additional interest expense associated with debt incurred to purchase London Electricity plc at an average interest rate of 7.2%; c) adjustment to income tax expense to provide for a 33% United Kingdom statutory income tax rate for the twelve months ended December 31, 1996. The following unaudited pro forma condensed consolidated balance sheet as of December 31, 1996 has been prepared assuming the acquisition of London Electricity plc occurred on December 31, 1996. Entergy Corporation Pro Forma Condensed Consolidated Balance Sheet December 31, 1996 (in thousands) Pro Forma Entergy Adjustments Corp. Assets Historical London (Note 1) Pro Forma Current Assets $2,362,533 $618,056 ($100,000) (a) $2,880,589 Other Property and Investments 930,073 26,574 956,647 Utility Plant, net 16,223,123 1,417,445 865,647 (b) 18,506,215 Deferred Debits and Other Assets 3,450,565 - 1,565,478 (b) 5,016,043 --------------------------------------------------- Total Assets $22,966,294 $2,062,075 $2,331,125 $27,359,494 =================================================== Liabilities and Shareholders' Equity Current Liabilities $1,882,567 $640,108 ($42,823) (c) $2,479,852 Deferred Credits and Other Liabilities 5,924,067 153,939 1,232,544 (d) 7,310,550 Long Term Debt 7,590,804 339,145 2,070,287 (e) 10,000,236 Preferred Securities 927,941 - 927,941 Common Shareholders' Equity 6,640,915 928,883 (928,883) (f) 6,640,915 --------------------------------------------------- Total Liabilities and $22,966,294 $2,062,075 $2,331,125 $27,359,494 Shareholders' Equity =================================================== 1. The pro forma condensed consolidated balance sheet reflects the following adjustments in order to present the historical financial position of London Electricity plc prior to its inclusion in the consolidated financial statements: (a) To record cash portion of purchase price. (b) Primarily allocation of purchase price to assets and liabilities based on fair market value, in accordance with purchase accounting principles. (c) Adjustment of London Electricity plc's accounting policies and presentations to that of the Company. (d) Primarily the deferred tax effect of the step-ups to fair market value. (e) To record acquisition indebtedness. (f) To eliminate shareholder's equity in London Electricity plc. Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits, continued (c) Exhibits 23.1 Consent of Coopers & Lybrand, Chartered Accountants and Registered Auditors. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ENTERGY CORPORATION By: /s/Louis E. Buck Louis E. Buck Vice President and Chief Accounting Officer Dated: April 21, 1997 EX-23 2 Exhibit 23.1 Consent of independent accountants We consent to the incorporation by reference in Post- Effective Amendment Nos. 2, 3,4A and 5A on Form S-8 and the related Prospectuses to the registration statement of Entergy Corporation on Form S-4 (File Numbers 33-54298) and on Form S-3 (File Numbers 333-02503 and 333-22007) of our report dated June 18, 1996, on our audits of the consolidated financial statements of London Electricity plc, as of March 31, 1996 and March 31, 1995 and for the each of the two years in the period ended March 31, 1996, which report is included in this Report on Form 8-K. Yours faithfully COOPERS & LYBRAND Coopers & Lybrand London England April 14, 1997 -----END PRIVACY-ENHANCED MESSAGE-----