Preliminary Results 199900

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Preliminary Results 1999-00
Delivering Strategic Aims
May 2000
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Highlights
PacifiCorp completion Transition plan beating our
expectations Thus flotation Succeeding in UK
competitive energy Significant e-business
progress
Uniquely positioned in utility sector
3
Agenda
Value from PacifiCorp Alan Richardson Financial
Results David Nish Business Update Ian Robinson
4
Transition plan

• Intensive five-month process
• Over 200 change initiatives
• Will radically transform PacifiCorp

PacifiCorp to be a top ten US utility by 2004
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PacifiCorp stretch goal for 2004

• Annual operating cost savings of 300mfrom 1998
  level
• Annual capital expenditure reduction of
  250mfrom 1998 level
• Employee reductions of 1600, costing circa 185m
• Training and Technology investment of 150mover
  5 years
• Customer commitment investment of up to 55m

Value exceeds pre-merger expectations
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Generation mining
Over 20 initiatives including

• Save on fuel contracts
• Transfer responsibility for fuel handling
• Reduce overtime
• Negotiate introduction of multi-skilling
• Combine management teams at Hunter and Huntington

PacifiCorp stretch goal workforce reduction of
350 by 2004
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Transmission distribution
Over 80 initiatives including

• Reduce layers of management from 5 to 3
• Centralize Head Office departments
• Reduce number of depot offices by 40
• Negotiate the introduction of home start for
  meter readers
• Implement a targeted sourcing program for
  materials

PacifiCorp stretch goal workforce reduction of
740 by 2004
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Customer service
Over 20 initiatives including

• Establish separate Customer Service function
• Improve productivity through new call scripting
  technology
• Implement real-time credit checking system
• Focus Marketing on promoting efficientservice
  delivery
• Create new Community andEconomic Development
  group

PacifiCorp stretch goal workforce reduction of
150 by 2004
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Corporate
Over 90 initiatives including

• Eliminate executive positions
• Sell corporate jets
• Realize synergies in Audit, Tax and Treasury
• Create Shared Services Business Unit
• Outsource mainframe activities

PacifiCorp stretch goal workforce reduction of
320 by 2004
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PacifiCorp stretch goalachieving top ten
Non Generation Cost / Customer
1998 Ranking
1998
2004
1
173
5
186
10
228
30
270
50
292
200
75
PacifiCorp
352

• Deliver enhanced Customer Service and System
  Performance
• Meet merger commitments

SourceFERC Form 1 1998 (Non generation costs
exclude bad debt customer informational
expenses) Transition Plan estimate
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Summary of savings PacifiCorp stretch goal
m
FTE
Net Operating Cost Savings
Employees

• 22 operating cost reduction from 1998
• 20 workforce reduction from current levels

All values in 2000 money Transition Plan
estimate
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Investment
m

• Capex savings
• - Procurement
• - Contractor management
• - Focusing expenditure
• Investment required over 5-year period includes
• - Training and Development 50m - New
  Technology 70m - Information Systems 30m TOTA
  L 150m - Customer Commitments 55m

Net Capex
Transition Plan estimate. 2000 money
PacifiCorp stretch goal 44 reduction in capital
expenditure from 1998
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Re-focusing the organization
CEO President
General Counsel
SVP Human Resources
Executive VP(based in Utah)
VP Business Development
SVP Power Supply
SVP Regulation External Affairs
SVP Power Delivery
SVP Business Services
CFO

• Transmission
• Distribution
• Customer Service

• Generation
• Mining
• Trading

• IT
• Shared Services

• Clear accountabilities and balanced
  responsibilities
• Consistent business drivers ensuring focus
• Commercial discipline driving decisions

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Implementation

• Working pro-actively with the Unions - Attrition
  is occurring - Early retirement plan in
  place - Severance will follow
• Managing the political and regulatory
  stakeholders - Rate cases ongoing - Proactive
  communications - Advisory Board
  support - Support for re-establishing PacifiCorp
  as a leader

Confident of delivery
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Summary

• Very pleased with what weve found
• Creating disciplined and focused business
  operations
• Significant savings opportunities identified -
  300m opex - 250m capex - 1600 employees
• Presents a strong platform for growth

Value exceeds pre-merger expectations
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Agenda
Value from PacifiCorp Alan Richardson Financial
Results David Nish Business Update Ian Robinson
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Financial highlights

• Turnover up by 873m to 4,115m
• Operating profit 157m higher at 961m
• Profit before tax up 91m to 736m
• Net exceptional gain of 454m pre-tax
• Earnings per share 2.6 down at 41.4p
• Dividend per share up by 10.2 to 24.8p

Before goodwill amortisation and exceptional
items
Twelve months ended 31 March
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Operating profit
2000 1999 m m
Generation 106.8 115.3 Power Systems 361.2 350.6
Energy Supply 50.6 56.7 Southern
Water 286.5 262.2 Telecoms
(9.5 11.5 Other 14.1 7.7 UK Total 809.7 804.0 Pac
ifiCorp 151.7 - Group Total 961.4 804.0
)
Before goodwill amortisation Excludes
exceptional items
Twelve months ended 31 March
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Investment to create value

• Competition in energy markets - Customer capture
  programme - Brand advertising
• Investment by Thus continues - Network extension
  and internet capabilities - Costs to capture
  serve increased
• Investment in e-commerce - Customer JV with
  Royal Bank of Scotland

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Exceptional items
1999/00 m
Gain on partial disposal of Thus 787 FRA and
mobile (55 Restructuring costs (55 Asset
impairment (100 Energy contracts
(107 Interest (16 Net exceptional gain
(pre-tax) 454
)
)
)
)
)
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PacifiCorp - financial performance

• Consolidated for 4 months - impact mildly
  dilutive
• PacifiCorp performance in line with expectations
• Goodwill of 1.6bn following fair value exercise
• Provision for Transition Plan costs in Q1 2000-01
• Powercor treated as asset held for disposal

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Seasonality of profits
UK US
Quarter 1 15-25 15-25 Quarter
2 15-25 20-30 Quarter 3 20-30 25-35 Quarter
4 30-40 20-30
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Capital expenditure
Southern Water - Delivering targets agreed
with OFWAT Power Systems and Manweb - Systems
expansion and refurbishment Energy Supply - IT
systems CHP projects Thus - Network expansion
- Internet Interactive PacifiCorp - Syste
ms expansion and refurbishment
1999-00
Power Systems 175
PacifiCorp 94
Energy Supply 41
Other 20
Thus 161
Generation 42
Southern Water 353
Capital Expenditure (net) 886m
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Financial ratios
2000 1999
Gearing(1) 76 124 Net Debt 4.8bn 2.4bn Interes
t Cover(2) 4.2x 5.0x Dividend Cover(2) 1.7x 1.9x
(1) Net debt / Shareholders funds (2) Before
exceptional items and goodwill amortisation
Twelve months ended 31 March
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Financial summary

• Regulatory determinations rebased UK profits
• PacifiCorp will enhance earnings
• UK efficiencies better ongoing regulatory
  challenge
• Investing to deliver greater value from 5.5m homes

Future Profit Drivers
Underpins 5 nominal dividend growth aim
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Agenda
Value from PacifiCorp Alan Richardson Financial
Results David Nish Business Update Ian Robinson
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Core operationscontinued efficiency improvements

• Generation - Cost reduction programme to
  offset competition - 400 MW Brighton CCGT
  commissioning winter
• Infrastructure businesses - Beating cost of
  capital - Power Systems - 75m cash savings
  over 3 years - Southern Water - 67m cash
  savings over 3 years
• Continuing re-engineering processes and targeting
  investment

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Maximising value from the customer

• Thus - Strong revenue growth - Network
  extended by 40 to over 5,200 route km - Next
  generation services to launch in second half
• Energy Supply - Retained 87 of customers -
  now 3.7m accounts - Increasing volumes through
  new channels - Targeting the e-customer

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E-customer

• Innovative package of services for home and SME
• Targeting 16 million joint customer base
• Agreement - Jointly owned ScottishPower / Royal
  Bank of Scotland - Banking licence
  application - Exclusivity of utility-financial
  services JV
• Staffing - Staff complement of over
  60 - Extensive outsourcing to parents and
  partners - Recruiting new CEO

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Development programme
HOME
SME

• Complete
• Complete
• In Build
• In Build
• In Build
• In Build
• In Build
• To Commence
• Being Finalised

Complete Complete In Build In Test In
Test Training In Test To Commence Being Finalised
Tasks Proposition development Internet creative
work Internal business systems Partner systems
integration Web hosting systems Call centre (1st
line) Operational processes Market
Testing Branding and marketing
On target for summer launch
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E-procurement

• Procurement Consortium
• - Exploit benefits of scale
• - Share warehousing and strategic spares
• - Enhance efficiency
• - Harmonise procurement standards
• Utility B2B European Internet Portal
• - Supply chain management cost reduction
• - Reduce transaction costs
• - Reduce purchasing costs
• - Added value services
• - Equity business benefits

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Strategy for 2000s
UK
US
International
Post PUHCA?
National
Grow assets and customer base selectively
Electricity and convergence opportunities
West
UK
Drive for world-classperformance in all
activities
Maximise value from 5.5 million homes
Reshape corebusiness and exploitexisting assets
PacifiCorp Territory
Multi-Utility
Multi-Utility
Electricity
Multi-Utility
Electricity
Utility-Related
Platform for growth
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Unique industry position

• Top 12 global utility
• Constituent in major international indices
• Strong market position in UK and US
• Core competencies in electricity, gas, water,
  telecoms and Internet
• Consistently led industry development - first
  mover

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Summary

• Delivering additional value with PacifiCorp
  transition plan
• Beating regulatory returns and cost of capital
• Leveraging value from a growing customer base
• Exploiting e-business opportunities
• Platform for further growth

Focused on delivering shareholder value
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