28 February 2002

1
US Division Management Presentation London
28 February 2002
Delivering shareholder value
2
Safe harbor
This presentation may contain forward-looking
statements within the meaning of Section 21E of
the United States Securities Exchange Act of
1934. Forward-looking statements should be read
with the cautionary comments and important
factors included about forward-looking statements
in ScottishPowers Annual Report and Form 20-F
for the year ended March 31, 2001 under the title
Cautionary Statement for the Purposes of the
Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995.
Forward-looking statements are all statements
other than statements of historical fact,
including without limitation those that are
identified by the use of the words estimates,
expects, believes, anticipates and similar
expressions.
3
Ian Russell Chief Executive
4
Strategic context
ScottishPower
UK
US
Infrastructure

• Reshape and improve existing businesses
• Focused expansion across energy value chain
• Transform and integrate new businesses

Focus on value creation
5
US division structure
US Division
PacifiCorp
PacifiCorp Power Marketing Inc.
(Regulated Business)
(Non-Regulated Business)
Judi Johansen
Terry Hudgens
6
Purpose of meeting

• Meet the US management team
• Review divisional focus
• Address the challenges
• Recognize significant progress
• Opportunity for questions

7
Agenda

• PacifiCorp- PacifiCorp strategy achieving the
  allowed ROE - Judi Johansen- Regulatory overview
  - Don Furman- Managing risk - Bob Klein, Ariel
  Salama- Getting to the allowed ROE - Matthew
  Wright
• PacifiCorp Power Marketing, Inc.- Growing an
  unregulated energy business - Terry Hudgens

8
PacifiCorp Management FocusJudi Johansen CEO
PacifiCorp
9
US Division - Scope Scale

• Among 3 largest western IOUs- 1.5m
  customers- Six state territory (the UK fits
  inside Oregon by itself)- 15,000 miles of
  transmission- 8 GW of generation
• 72 of revenues from Oregon, Utah

10
PacifiCorp Organization
JUDI JOHANSEN President CEO PacifiCorp
JEFF HUGGINS Vice President Finance, Regulated
Business
BILL LANDELS Executive Vice President Customer
Services Community Economic Development
ANDY MACRITCHIE Executive Vice President
Strategy, Planning Major Issues
MATTHEW WRIGHT Executive Vice President Power
Delivery
BOB KLEIN Senior Vice President Commercial
Trading
DEE JENSE Vice President Mining
RICHARD WALJE Senior Vice President Corporate
Business Services
BARRY CUNNINGHAM Senior Vice President Generation
DON FURMAN Senior Vice President Regulation
Government Affairs
11
US Division -PacifiCorp Management Focus

• Maximising recovery of costs through
  theregulatory process- Don Furman
• Reducing commodity price exposure - Bob Klein,
  Ariel Salama
• Achieving the allowed return on equity - Matthew
  Wright

Strong Management Team in Place
12
Agenda

• PacifiCorp strategy
• Current market scene
• Where we are today
• How we will deliver results
• PacifiCorp conclusions

A proactive strategy
13
PacifiCorp strategy

• Increase revenues through rate filings
• Strip out costs regulators disallow
• Align business practices with regulatory rules
• Deliver operational efficiencies balanced with
  customer service, reliability, safety
• Complete long-term projects
• Reach allowable ROE by 2004/05

Achieve allowed returns maintain commitments
14
Current market scene -Where we are today

• US recession impacts
• Power surplus in Western US
• Pacific Northwest hydro-electric availability
  close to normal
• Natural gas prices low
• Wholesale electric price volatility has returned
  to more historic levels

15
Wholesale power markets

• Requirement to serve customers predominates
  regulated business
• Power resources cover 80-90 of load on average
  at PacifiCorp
• Risk mitigation and management processes in place
• Significant future load growth anticipated

Obligation to serve customers
16
Major strategic projects underway

• Structural Realignment Proposal
• RTO West
• California strategy

Adding value, addressing issues
17
A long-term solution -Structural Realignment
Proposal (SRP)

• Resolves issues related to existing future
  generation
• Seeks to resolve cost allocation issues
• Multi-state process
• Enables each state to pursue independent energy
  policies
• Preserves system reliability, efficiency and
  safety

Addressing inter-jurisdictional issues
18
RTO West structure

• State-chartered non-profit organization- Goal to
  promote efficiency in wholesale
  markets- Includes western investor-owned
  utilities, Bonneville Power Administration- Gov
  erned by an independent board- Goal to be
  operational in 2004

Western Interconnection Structure
RTO West
CAISO
Desert Star
Resolving regional transmission challenges
19
California

• Serve 42,000 mainly rural customers
• Proposed sale to Nor-Cal Electric Authority -
  Good support from most parties
• 16 million general rate case filed- Decision
  requested by late summer
• State dealing with major issues, challenges

Fixing California through rate case or sale
20
Improving efficiencies

• Transition Plan on target
• Efficiencies being delivered company wide
• Goal to reach top 10

21
Achieving the allowed ROE - Transition Plan

• Over 155 initiatives commenced
• Q3 workforce reductions - 639 FTE
• 110m of Transition Plan savings delivered
• On track for year 2 target of 113m
• 5 year plan targets in place- 300m opex
  savings from 1998 levels- 250m capex savings
  from 1998 levels- 1,600 headcount reduction
  from 1998

employees
all values in 2000 money
FTE
8500
Actual
7900
6,416FTE (Dec. 2001)
Year end Transition Plan target
7300
6700
6100
5500
1998
1999
00/1
01/2
02/3
03/4
04/5
net operating cost savings
m
350
300
110m (Dec. 2001)
250
200
150
100
50
0
1999
00/1
01/2
02/3
03/4
04/5
Delivering improvements and efficiencies
22
PacifiCorp perspective

• Significant size and scope
• Reshaping underway
• Working to achieve the allowed ROE
• Delivering on our strategy

23
Maximising recovery of costs through the
regulatory processDon Furman SVP Regulation
External Affairs
24
Regulation agenda

• Optimizing allowable recovery
• Overview of rate cases
• Deferred accounting filings
• Power cost adjustments (PCAs)
• General rate cases timeline
• Other issues

25
Maximising recovery of coststhrough the
regulatory process

• 407m in deferred costs
• 278m requested to date
• 95m request to be filed in Wyoming
• Seeking further deferral of 109m in Utah related
  to excess power costs 46m in mine closure costs

Potential earnings upside
26
Deferred excess power costs
Deferred Net Power Costs Nov 00 - Dec 01
Recovery
To be
Already
Carrying
m
Requested
Requested
Awarded
Charges
Total
Oregon
136.5
-
23.9
7.6
168.0
Utah
103.5
-
-
4.0
107.5
Wyoming
-
95.0
-
(0.4)
94.6
Idaho
38.0
-
-
(0.6)
37.4
California
-
-
-
-
-
Washington
-
-
-
-
-
278.0
95.0
23.9
10.6
407.5
27
Power Cost Adjustments (PCAs)

• Filed in Oregon, Utah, Idaho and California
• To be filed in Wyoming in April
• Reduce residual risk of commodity price swings-
  More typical with gas utilities
• Ultimate form likely to vary by state- May
  involve sharing mechanisms
• Commissions link with generation resource plans

A method of reducing risk
28
Achieving the allowed ROE -Recent filings

• 132m additional revenues
• Further 70m of general rate case requests
• Future cases filed as needed

Pursuing cost recovery
29
Regulatory timeline of key dates
Date
State
Event
Requested Amount
March 2002
Oregon
New electric restructuring cost recovery tariff
effective
18.3 million
April 2002
Wyoming
General rate case andpower cost recovery filed
gt95 million
May 2002
Oregon
Order on level of excess power cost recovery
(historical)
137 million(_at_45m/yr)
June 2002
Oregon
Order on new level of (future) power costs
34.4 million
July 2002
Utah
Order regarding level of Hunter power cost
recovery
103 million
October 2002
Utah
109 million
Order regarding excess power costs for summer 2001
30
Other issues

• Oregon Electric Restructuring- Implemented in
  March 2002- Cost-of-service option for all
  customers until July 2003- Recovery of
  implementation costs interest- No major
  impacts expected
• 2001 FERC price mitigation order- Regional
  wholesale price mitigation- Extended price
  limits to western spot sales- Recent FERC report
  update

Deregulation moving cautiously
31
Regulation -Conclusions

• Maximise recovery of allowable costs
• Implement PCAs IRP
• Achieve allowable ROE

Maximising recovery earning our allowable ROE
32
Reducing commodity price exposureRobert Klein
SVP Commercial Trading
33
Commercial Trading agenda

• Overview
• Typical trading profile
• Risk management
• Reducing commodity risk exposure
• Long-term generation planning (IRP)
• Conclusion

34
Commercial and Trading

• Expanded group over past 12 months
• Enhanced risk mitigation processes
• Portfolio of instruments to hedge risks
• Transact to shape system demand
• Regulated obligation to serve
• Risk mitigation today and tomorrow

Transacting to shape system requirements
35
Typical load and resource profile -Indicative
Summer Day
36
Risk management overview
Fuel
Weather
Water Environmental
Gas/Oil Coal
Hydro
Renewable
Outages
Outages
Wholesale Trading
Wind
Weather
Transmission
Balancing
Outage
PacifiCorp Risk
Weather Economy DSM
Load
OMAG
37
Reducing commodity price exposure

• Gadsby peakers (Utah)
• Shaped generation resources
• Physically settled call options
• Temperature contingent hedges
• Hydro hedges
• Integrated Resource Plan
• Power cost adjustment mechanisms requested

Mitigation against commodity prices and imbalances
38
Temperature contingent instrumentFinancial
Safeguards
LOAD HEDGED
Price Increasing
Load Increasing
Fixed Strike Price
Unhedged Load
Expected Load
LOAD
Temperature Threshold
Temperature Increasing
39
Hydro Hedge -Financial safeguards
Maximum streamflow
PacifiCorp pays Counterparty over this range
during wet years
Median streamflow
Counterparty pays PacifiCorp over this range
during dry years
Minimum streamflow
40
Risk management conclusions

• Markets stable
• New tools and increased resources further reduce
  commodity risk
• IRP will help provide long-range plan
• Operating as a hedger and balancer, not a trader
• Integrated approach to risk management

Reducing commodity risk today and tomorrow
41
Ariel Salama Group Energy Risk Director
42
Philosophy of risk management

• Proactive approach to risk management
• Eliminate unnecessary risks
• Consistent methodology
• A portfolio approach
• Demand adequate returns for shareholders and
  customers
• Goal is to be a leader in risk management-
  Predominantly conservative and safe

To be a leader in risk management
43
Group risk governance cycle
ScottishPower Board and Executive Team
GROUP RISK GOVERNANCE CYCLE
Group Risk Management Committee
ScottishPower Audit Committee
GroupBusiness Assurance
BUSINESS RISKS

• Combined business unit-Group oversight
• Provide stewardship, prioritise risks

44
Value and risk relationships
Transmission and Transportation
Fuel Procurement and Transportation
Wholesale Trading
Generation
Distribution
Retail Sales
High-Voltage Lines
Electricity
Distribution System
Power Plants
Gas Pipelines
Gas
Risks
Distribution costs Regulatory Recovery
Retail Price Forecast
Commodity Price Price Volatility Location
Basis Time Spread
Spark Spread Price Volatility Time
Spread Interest Rates
Location Basis
Commodity Price Price Volatility Location
Basis Time Spread Spark Spread Season
45
Reducing earnings volatility
Group Risk Management Objectives
Earnings
Upper Band
Acceptable Risk Level
Lower Band
Starting Point
Time
46
Group actions to reduce volatility

• Allocate lower than requested limits
• Review and follow up on existing exceptions to
  limits
• Continually search for better risk management
  products in the market to better hedge our
  positions
• Drive to improve our measurement capability
• Demand high capital charge on existing and new
  initiatives

47
Risk management - Approval process

• Establishment of local, divisional and Group risk
  management review teams forums
• Approvals based on the Value at Risk (VaR)
  methodology for portfolio impact of individual
  transactions
• Approval levels vary according to size -
  conservative trading levels

Conservative, proactive processes in place
48
Energy risk management organization
Oversight and advice
Board of Directors
Executive Team
Group portfolio management and asset allocation
Group Risk Management
Committee
Performance measurement, resources and liability
management compliance
Risk Forum U.S.
Risk Forum U.K.
Risk Assessment
Risk Assessment
Tactical allocation
Committee
Committee
1. Senior group executives 2. Tactical business
heads 3. Senior Trading / Origination heads
Risk Updates
Risk Updates
49
Global Credit Risk Management

• Zero tolerance for credit losses
• Every credit exposure reviewed and approved
• Use of sophisticated tools credit scoring and
  simulations
• Develop a global view of counterparty credit risk
  and a centralized database for all credit
  agreements

50
Risk management -Conclusion

• Continually seek out products to better hedge
  our position and support divisional goals
• Improving measurement capabilities
• Installing company-wide risk culture in line with
  strategic objectives

Group emphasis on risk management
51
Achieving the allowed Return on Equity Matthew
Wright EVP Power Delivery
52
Agenda

• Power Delivery overview
• Merger commitments progress
• Delivering the Transition Plan in Power Delivery

53
Power Delivery - Size and Scale
Power Delivery
Power Systems
US
UK
Customers
1.5 million
3.1 million
Franchise area
135,219 miles2
21,969 miles2
Transmission network miles
15,000 miles
2,456 miles
Distribution network miles
- Underground
11,000 miles
40, 379 miles
- Overground
43,000 miles
28,597 miles
System maximum demand
8,056 MW
7,410 MW
Significant scale, similar issues
54
PacifiCorp Overview -Merger Commitments

• Established c. 450 merger commitments in total -
  87 being delivered already rest on schedule
• Adopt new performance standards and customer
  guarantees - done
• Network reliability improvements - on schedule
• Acquire 50 MW of renewables within 5 years - done
• Donate 5 million to PacifiCorp Foundation - done
• Deliver low-income customer initiatives and
  environmental commitments - done

Delivering on merger commitments
55
Power Delivery - Transition Plan Progress

• 120 out of 200 Transition Plan initiatives in
  Power Delivery
• Significant organizational and operational
  changes
• Workforce reductions while overall performance
  maintained
• Strong controls for business performance in place
• Introduction of new technology- Customer Contact
  Centers - Project Discovery- Distribution
  Systems Integration Program - DSIP
• c30 million of savings achieved to date

On track to deliver
56
Power Delivery -Customer Services Organization

• Two centers of excellence created March 2001-
  Customer Contact Center- Customer Credit Center
• Refocus introduces efficiencies through -
  Quicker resolution of inquiries - Improved
  coordination - Decrease in net write-offs-
  Improved cash flow
• Service levels maintained during the transition

Initiatives delivered and providing benefits
57
Power Delivery -Operating Efficiencies
Distribution

• Reduction in management layers
• Consolidation of engineering, administrative
  functions
• Operation center consolidation/closures - 20
  centers closed to date
• Improved work practices- Introduction of new
  crew scheduling system - Meter reader
  reroutes- Site agent

Initiatives delivered and providing benefits
58
Power Delivery -Other initiatives

• Delivering improved service levels- JD Power
  survey moved from 11th to 7th place
• Employee safety program
• New technical employee training centers opened
• Union negotiations

A balanced approach
59
Power Delivery - Conclusion

• Merger commitments being met
• Transition Plan initiatives on schedule
• Balanced approach- Cost savings- Service
  improvements- Investment

Solid, sustainable improvements
60
Judi Johansen CEO PacifiCorp
61
US Division PacifiCorp Management Focus

• Maximising recovery of costs through
  theregulatory process
• Reducing commodity price exposure
• Achieving the allowed return on equity

Accomplishing objectives
62
Growing an unregulated energy business Terry
Hudgens CEO PacifiCorp Power Marketing Inc.
63
PPM agenda

• Overview
• PPM Business Strategy
• Market Opportunities
• Thermal Generation Strategy
• Renewable Energy Strategy
• Gas Storage/Hub Services Strategy
• Conclusions

64
PPM overview

• Two major projects completed on schedule - no
  capex
• Asset-backed energy company
• Leading wholesaler of renewable power products
• Long-term sales - gt800MW of capacity
• Long-term contracts - 5-25 years locked-in
  margins
• Staff reaching critical mass - proven track
  record
• Pipeline of new development opportunities

An asset-backed structure
65
PPM business strategy

• Value growth achieved within an unregulated
  energy platform
• Growth strategy built around thermal generation,
  renewable generation and gas storage and hub
  services
• Strong trading and risk management capability
• A balanced business portfolio
• Investment in projects with trading flexibility,
  expansion capability and arbitrage opportunities

Platform for growth
66
PPM market opportunities
Gas Storage Hubs
Gas Generation Assets
Renewable Generation Assets
Key Customers
Hub market flows (Alberta)

• Initial asset customer base located in US West
• Focused within western region (WSCC)
• Renewable development opportunities expanding
  beyond WSCC into Midwest
• Gas Storage/Hub Services seen as a North American
  market

67
Thermal generation strategy

• Three supply sources, eight long-term contracts
• Growth plans impacted by current prices
• Potential opportunities- Leverage strategic
  value of Klamath Falls site
• Other options

Focus on quality, location and timing
68
Renewable generation strategy

• Control generation in robust wind energy
  markets- One supply source, three long-term
  contracts
• Grow from 264 MW - Targeting 10 states, 15-20
  projects
• Create value through development merchant
  skills
• Federal tax credit - market stimulus

Regional leader in renewable energy
69
Gas storage strategy

• Develop/acquire assets in key trading areas
• Provide synergies across organization
• Serve a market need for additional storage
• Greenfield opportunities

Gas storage opportunities
70
Conclusions - PPM

• Strong portfolio of assets and power contracts
• Leader in renewable energy - first in the West
• Flexible business model and strategy
• PPM goals consistent with Group strategy

Delivering on the strategy
71
Ian Russell Chief Executive
72
Agenda

• PacifiCorp- PacifiCorp strategy- Regulatory
  overview- Managing risk- Getting to the allowed
  ROE
• PacifiCorp Power Marketing, Inc.- Growing an
  unregulated energy business

73
US Division Management Presentation London
28 February 2002
Delivering shareholder value