Preliminary results 200102

1
Preliminary results 2001/02
1 May 2002
2
Safe Harbor Statement
Cautionary Statement Regarding Forward Looking
Statements Forward-looking information is
subject to risk and uncertainty. Certain
statements made in this presentation may
constitute "forward-looking statements" as
defined by U.S. federal law. These include
statements concerning our expectations and other
statements that are not historical facts.
Although the Company believes any such statements
are based on reasonable assumptions, there is no
assurance that actual outcomes will not be
materially different. Any such statements are
made in reliance on the "safe harbor" protections
provided under the Private Securities Litigation
Reform Act of 1995. Additional information about
the issues that could lead to material changes in
performance is contained under the caption
Quantitative and Qualitative Disclosures about
Market Risk in the Company's annual report on
Form 20F filed with the Securities and Exchange
Commission.
3
Ian Russell chief executive
4
Summary

• Second half earnings per share 45 higher than
  previous year
• Good recovery underway, particularly driven by
  improved US performance
• Full year profit before tax 567 million, down
  61 million
• Exceptional items of 1.3 billion including
  goodwill write back of 753 million
• A firm programme for continuing improvement in
  operational performance
• Disposals completed clear strategy to become a
  leading international energy company

Before goodwill amortisation and exceptional
items
5
Agenda

• Financial Review - David Nish
• Business Review - Ian Russell
• Strategy Update - Ian Russell

6
David Nish finance director
7
Financial Summary

• Earnings per share down 1.7p at 26.1p
• 2nd half earnings per share up 45 on last year
• Southern Water, Appliance Retailing and
  reorganisation exceptional charges of 1,318m
• Dividends per share up 5
• Dividend in specie of 437m on demerger of Thus

Year on Year EPS by Quarter
2001/02
2000/01
(p)
14
12
10
8
6
4
2
0
-2
Q1
Q2
Q3
Q4
Before goodwill amortisation and exceptional
items
Twelve months to 31 March 2002
8
Summary Profit and Loss
March
March
2002
2001
Change
m
m
m
Turnover
6,314.1
6,349.3
(35.2)
Operating Profit
944.1
970.2
(26.1)
Interest
379.4
332.9
(46.5)
Profit Before Tax
567.1
628.0
(60.9)
Effective Tax Rate
21.5
22.5
1.0
Before goodwill amortisation and exceptional
items
Twelve months to 31 March 2002
9
Exceptional Items
Full Year
m
Appliance Retailing (includes 15.1m goodwill
write back)
120.1
Southern Water (738.2m goodwill write back,
449.3m loss on sale)
1,187.5
Restructuring of debt portfolio
30.8
Reorganisation costs
18.5
Tax impact of exceptional items
(38.8)
Total exceptionals
1,318.1
Twelve months to 31 March 2002
10
Operating Profit
2000/01
2001/02
2001/02
2001/02
1st Half
2nd Half
Full Year
Full Year
Continuing Operations
m
m
m
m
UK Division
0.4
78.3
78.7
122.7
Infrastructure Division - Power Systems
162.8
192.1
354.9
341.3
US Division
20.4
346.5
366.9
351.3
183.6
616.9
800.5
815.3
Discontinued Operations
Infrastructure Division - Southern Water
105.2
111.1
216.3
221.6
Thus
(32.8)
(30.9)
(63.7)
(58.0)
Appliance Retailing
(9.0)
-
(9.0)
(8.7)
Group Total
247.0
697.1
944.1
970.2
Before goodwill amortisation and exceptional
items Thus quoted pre minority interests
Twelve months to 31 March 2002
11
Operating Profit - UK Division
1st Half
2nd Half
Full Year
m
m
m
2000/01
13
110
123
NETA systems error
(10)
-
(10)
Reduced generation margins
(4)
(59)
(63)
Investment in customer acquisition
(5)
(3)
(8)
Home area supply margins
(3)
18
15
Gas out of area supply margins
9
13
22
2001/02
-
79
79
Before goodwill amortisation and exceptional
items
Twelve months to 31 March 2002
12
Operating Profit Infrastructure Division
1st Half
2nd Half
Full Year
Power Systems
m
m
m
2000/01
161
180
341
Disposal Contracting business
(15)
(3)
(18)
146
177
323
Operating cost reductions increased overhead
recovery
20
19
39
Regulatory revenues, depreciation other
(2)
(5)
(7)
2001/02
163
192
355
Twelve months to 31 March 2002
13
Operating Profit - US Division
1st Half
2nd Half
Full Year
m
m
m
2000/01
206
145
351
Rate increases and other revenue
40
32
72
Depreciation on regulated assets
(7)
(18)
(25)
Net power costs
(245)
208
(37)
Transition Plan savings
19
5
24
Strategic and risk initiatives
(12)
(33)
(45)
Non-recurring income
14
7
21
PacifiCorp Power Marketing
(4)
(4)
(8)
Foreign exchange
9
5
14
2001/02
20
347
367
Before goodwill amortisation and exceptional
items
Twelve months to 31 March 2002
14
Capital Expenditure

• Continuing Operations
• US Division
• Systems expansion refurbishment
• New regulated non regulated generation
• Power Systems
• Systems expansion refurbishment
• UK Division
• Includes wind farms
• Discontinued Operations
• Thus
• Infrastructure business growth
• Southern Water
• Delivering OFWAT targets

PacifiCorp (excl. new generation) 340m
US - new generation 233m
PacifiCorp 31m
PPM 202m
Thus 78m
Power Systems 192m
Southern Water 267m
UK Division 104m
Other 14m
Capital Expenditure (net) 1,228m
Twelve months to 31 March 2002
15
Net Debt Movement
2001/02
2000/01
m
m
Opening Net Debt
5,285
4,842
Operating cash flow
(1,249)
(1,414)
Capital expenditure
1,249
1,081
Interest, dividends taxation
960
997
Redemption of PacifiCorp preferred stock
70
-
Disposals other movements
(113)
(486)
Net Debt pre foreign exchange
6,202
5,020
Foreign exchange impact
6
265
Closing Net Debt
6,208
5,285
Twelve months to 31 March 2002
16
Financial Ratios
March
March
Pro Forma
2002
2001
March 2002
Net debt
6.2bn
5.3bn
4.2bn
Gearing
131
90
89
(1)
Interest cover
2.5x
3.0x
(2)
Dividend cover
1.0x
1.1x
(2)
(1) Net debt / Shareholders' funds (2) Before
goodwill amortisation and exceptional items
Twelve months to 31 March 2002
17
Financial Summary

• UK Division impacted by lower wholesale prices
  and NEA burden
• Infrastructure Division delivering cost savings
• US Division improved performance with a good set
  of results in the second half of the year
• Dividends increased by 5 consistent with aim
• Focus on energy
• Thus demerger and exit from Appliance Retailing
  successfully completed
• 2bn Southern Water proceeds reduces net debt

Twelve months to 31 March 2002
18
Agenda

• Financial Review
• Business Review
• Strategy Update

19
UK Division Management Priorities 2001/02

• Maximising the value of our generation and supply
  assets through our commercial and asset backed
  trading activities
• Improving customer service and reducing cost to
  acquire and serve customers
• Adding new generation to our portfolio, at value
  creating prices

20
UK Division Transformation 2001/02
April 2001
April 2002

• Loss making Appliance Retailing
• Customer numbers unstable
• Embryonic trading
• Inconsistent plant performance
• Multiple billing systems
• Poor service levels
• Separate businesses

Disposal of business Customer numbers
restored Best in class balancing
performance Among most flexible UK fleets Single
scaleable billing platform Service levels
restored to target and JD Power Award Integrated
generation, trading and supply
21
Maximising value through asset backed commercial
and trading

• Improved operating performance at Longannet
• Despatch accuracy improved 30
• Notice of load change down to 2 minutes
• 3 improvement in efficiency
• Best in class trading contribution from a
  tough market
• Balancing mechanism
• Arbitrage
• Gas Trading

22
Customer Service and Generation Investment

• Improving customer service reduces churn
• Customer numbers held against the trend
• Churn reduced by 4 percentage points
• Renewable portfolio extended
• 30 MW completed in the year - Beinn an Tuirc
• 294 MW planning submitted in the year - e.g.
  Whitelee
• Further 250 MW under assessment - e.g. Black Law
• UKs 2nd largest wind operator

23
Infrastructure Division Management Priorities
2001/02

• Improving relative cost performance in the sector
• Outperforming allowed regulatory returns
• Releasing capital from Southern Water

24
Cost Efficiency and Southern Water

• Improving relative performance
• Savings on target, 70m out of 75m
• 33m to come by 2004
• Outperforming target regulatory returns
• Releasing capital from Southern Water
• Sold Southern Water for 2.05 bn
• 300m more than proposed refinancing

25
US Division Management Priorities 2001/02

• Achieving the target return on equity of 11 by
  2004/05 through delivering the Transition Plan
  and by General Rate Cases
• Maximising recovery of costs through the
  regulatory process
• Reducing commodity price exposure
• Growing an unregulated energy business,
  PacifiCorp Power Marketing

26
Operational Performance Improvements

• Transition Plan ahead of 113m year two target at
  117m
• Significant fuel savings through Transition Plan
• Improved performance recognised by regulators
• Service level commitments achieved

Transition Plan Savings
m
all values in
350
2000 money
300
117m (March 2002)
250
Actual
200
Year end
150
Transition
100
Plan target
50
0
1999
2000/1
2001/2
2002/3
2003/4
2004/5
Complaints to regulators
Source Public Utility Commission Data
27
Rate Cases

• General rate cases
• Achieved 125 million
• Filed and pending 30 million
• 31 million to be filed in Wyoming (May 2002)
• Deferred accounts for power costs
• 23 million awarded
• Stipulations for over 280 million
• 91 million to be filed in Wyoming (May 2002)

28
Reducing Commodity Price Exposure

• Risk mitigation process adding stability
• Investment of 531m in the regulatory asset base
  helped to provide system growth reliability
• New generation adding value, reducing risk

29
Growing PPM

• Growing a competitive energy business
• Leading wholesaler of renewable power products
• Two signature projects completed on schedule - no
  capex
• Long-term sales - gt800 MW, 5-25 year contracts
• Pipeline of 15-20 new development opportunities

30
Agenda

• Financial Review
• Business Review
• Strategy Update

31
Delivery of a Clear Strategy

• A leading international energy company
• Managing regulated and competitive businesses
• Serving electricity and gas customers
• Investing only where we can deploy proven skills
• Creating shareholder value

32
Business Objectives

• Regulated businesses
• Provide a base for steady growth
• Consistent investment in asset base
• Excellent operational and regulatory management
• Competitive businesses
• Selective investment
• Enhance margins
• Best in class operations

33
Strategic Priorities - PacifiCorp

• Achieve 11 ROE target by 2004/05
• Recovery via rate cases of costs incurred
• Operating efficiencies through Transition Plan
• Manage risk and reward balance
• Deliver excellent customer services

34
Strategic Priorities- Infrastructure

• Be at or near the regulatory frontier
• Outperform operating cost targets
• Achieve better than planned output from capex
• Achieve high standards of customer service
• Invest consistently to add value

35
Strategic Priorities- UK Division

• Enhance margins through our integrated
  operations
• Grow customer numbers and improve customer
  service
• Selective investment using knowledge and skills,
  for example, meeting 10 renewables target by
  2010

36
Strategic Priorities- PPM

• Grow thermal/renewable generation and gas
  storage/hub services
• Regional approach
• Selective investment
• Capex not extensive
• Optimise returns through integration of assets,
  trading and commercial

37
Strategic Overview
UK
US
How we create Value
UK Division

• Carefully selected high return investments where
  we have knowledge advantages
• Strong commercial, trading and risk management
  skills
• Consistent investment in asset base for steady
  growth
• Outperformance from operational and regulatory
  management skills

PPM
Competitive

• Transferable operational management skills
• Deep knowledge of local UK and US markets

Infrastructure
PacifiCorp
Regulated
Investing in all our businesses to maximise
shareholder value
38
Summary

• Second half earnings per share 45 higher than
  previous year
• Good recovery underway, particularly driven by
  improved US performance
• Full year profit before tax 567 million, down
  61 million
• Exceptional items of 1.3 billion including
  goodwill write back of 753 million
• A firm programme for continuing improvement in
  operational performance
• Disposals completed clear strategy to become a
  leading international energy company

Before goodwill amortisation and exceptional
items
39
Preliminary results 2001/02
1 May 2002