TIDM56WD
RNS Number : 0569Q
Northern Electric Finance PLC
02 April 2009
The following regulated information, disseminated pursuant to DTR 6.3.5,
comprises the Annual Report and Accounts of Northern Electric Finance plc for
the year ended 31 December 2008.
Pursuant to LR 9.6.1, two copies of the document have been submitted to the UK
Listing Authority and will shortly be available for inspection at the UK Listing
Authority's Document Viewing Facility, which is situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS
Tel. No. 020 7066 8333
The 2008 Annual Report and Accounts are also available on the website
www.ce-electricuk.com
NORTHERN ELECTRIC FINANCE plc
Registered Number: 3070482
Registered Office: Lloyds Court, 78 Grey Street, Newcastle upon Tyne, NE1 6AF
DIRECTORS' REPORT
Cautionary statement regarding forward-looking statements
This annual report has been prepared for the members of the Company only. The
Company, its directors, employees or agents do not accept or assume
responsibility to any other person in connection with this document and any such
responsibility or liability is expressly disclaimed. This annual report contains
certain forward-looking statements, which can be identified by the fact that
they do not relate only to historical or current facts. In particular, all
statements that express forecasts, expectations and projections with respect to
future matters, including trends in results of operations, business prospects,
the availability of financing to the Company and anticipated cost savings are
forward-looking statements.
By their nature, these statements and forecasts involve risk and uncertainty
because they relate to events and depend on circumstances that may or may not
occur in the future. There are a number of factors that could cause actual
results or developments to differ materially from those expressed or implied by
these forward-looking statements and forecasts. The forward-looking statements
reflect the knowledge and information available at the date of preparation of
this annual report, and will not be updated during the year. Nothing in this
annual report should be construed as a profit forecast.
The directors present the annual report and accounts of Northern Electric
Finance plc (the "Company") for the year ended 31 December 2008, which includes
the business review and audited financial statements for that year. Pages 1 to 4
inclusive of this annual report comprise a directors' report that has been drawn
up and presented in accordance with the Companies Act 1985.
BUSINESS REVIEW
Principal activities
The Company is a subsidiary of Northern Electric Distribution Limited, part of
the CE Electric UK Funding Company group of companies (the "CE Group"), and was
established in August 1995 to raise finance, including the issue of long-term
bonds, on behalf of the Northern Electric group of companies, which is also part
of the CE Group. During the year, the Company continued to be the issuer of
long-term bonds.
Given that the sole purpose of the Company is to raise finance on behalf of
Northern Electric Distribution Limited ("NEDL"), the objective of the Company is
to ensure that it has sufficient funds to cover its interest charges as they
fall due. Details of key performance indicators used in the CE Group can be
found in the Business Review in the CE Electric UK Funding Company directors'
report.
Details of the key risks faced by the Company in respect of its borrowings can
be found in Notes 2 and 9 to the accounts.
Financial review
Results and dividends
The Company made a loss after tax for the year of GBP0.1m (2007: loss GBP0.1m).
No dividends were paid during the year and the directors recommend that no final
dividend be paid in respect of the year.
Share capital
There were no changes to the Company's share capital during the year.
Dividend policy
The Company's dividend policy is that dividends will be paid only after having
due regard to available distributable reserves, available liquid funds and the
financial resources and facilities needed to enable the Company to carry on its
business for at least the next year.
NORTHERN ELECTRIC FINANCE plc
REGISTERED NUMBER 3070482
DIRECTORS' REPORT (CONTINUED)
Financial review (continued)
Taxation
Full details of the Company's taxation charge are provided in Note 6 to the
accounts.
Income statement commentary
The loss before tax at GBP0.1m was comparable with the prior year.
Net cash inflow from operating activities
The net cash inflow from operating activities at GBP0.3m was GBP2.6m lower than
the prior year mainly due to lower interest received.
Principal risks and uncertainties facing the Company
Liquidity risk
The principal risk facing the Company is not having sufficient liquidity to
enable the Company to meet its liabilities as they fall due and to provide
adequately for contingencies. In this respect, borrowing facilities are made
available to the Company by other companies in the CE Group, if required. The
Company continues to maintain its investment grade issuer credit rating.
Interest rate risk
The Company is financed by long-term borrowings at fixed rates and has access to
short-term borrowing facilities at floating rates of interest. As at 31 December
2008, 100% of the Company's borrowings were at fixed rates and the average
maturity for these borrowings was 21 years.
Currency risk
No material currency risks are faced by the Company.
Trading risk
Throughout the year under review, the Company's policy was that no trading in
financial derivatives should be undertaken.
Financial derivatives
As at 31 December 2008 and during the year it was the Company's policy not to
hold any derivative financial instruments.
Research and development
Given that the sole purpose of the Company is to raise finance on behalf of
NEDL, the Company does not undertake research and development.
Future developments
The financial position of the Company, as at the year end, is shown in the
balance sheet on page 8. There have been no significant events since the year
end and it is the intention of the directors that the Company will continue to
raise finance, as required, in the future.
NORTHERN ELECTRIC FINANCE plc
REGISTERED NUMBER 3070482
DIRECTORS' REPORT (CONTINUED)
DIRECTORS
The directors who served during the year and since the year end were:
G E Abel President, MidAmerican Energy Holdings Company
P Ainsley Financial Controller, CE Electric UK
P E Connor Senior Vice President and Chief Procurement Officer, MidAmerican
Energy Holdings Company
K Linge Finance Director, CE Electric UK
Throughout the year, none of the directors was materially interested in any
contract in relation to the business of the Company.
AUDITORS
On 1 December 2008 Deloitte & Touche LLP changed its name to Deloitte LLP.
Accordingly, a resolution to re-appoint Deloitte LLP as the Company's auditors
and authorise the directors to determine their remuneration will be proposed at
the Annual General Meeting.
Going concern
The Company's business activities, together with details regarding its future
development, performance and position are set out in the Business Review in the
Directors' Report. In addition, the Company's objectives, policies and processes
for managing its capital, its financial risk management objectives, details of
its financial instruments and hedging activities and its exposures to credit
risk and liquidity risk are included in the Business Review in the Directors'
Report and the appropriate notes to the accounts.
When considering continuing to adopt the going concern basis in preparing the
annual report and accounts, the directors have taken account of a number of
factors that arise due to the Company being a wholly-owned subsidiary of NEDL,
including the following:
* In accordance with standard condition 31 of NEDL's electricity distribution
licence, Berkshire Hathaway, Inc., the ultimate controlling party of the
Company, has provided an undertaking that it will and it will procure that any
person (including a corporate body), which is a subsidiary of or is controlled
by it, will refrain from any action, which would cause NEDL to breach any of its
obligations under the Electricity Act 1989 or under its electricity distribution
licence. NEDL's electricity distribution licence includes the obligation in
standard condition 40 to maintain an investment grade issuer credit rating;
* Explicit support has been made available to MidAmerican Energy Holdings Company
(a parent company of the CE Group) by Berkshire Hathaway Inc., which consists of
a $3.5 billion equity commitment that expires on 28 February 2011 and to which
NEDL has access, if necessary. No amounts were outstanding on that facility as
of the date of approval of the Company's accounts to 31 December 2008;
* As part of a review of electricity distribution licensees' financing
requirements, on 15 January 2009 Ofgem issued an information request to all such
licensees under standard licence condition 6 relating to the financial resources
each licensee has available in the 24 months ended 31 December 2009. After
making enquiries and taking account of several factors, the directors of NEDL
approved the submission to Ofgem of a certificate confirming their reasonable
expectation that NEDL has, or will have available to it, sufficient financial
resources and/or financial facilities to enable NEDL to carry on its regulated
business for a period of two years since the date of the last statutory
accounts; and
NORTHERN ELECTRIC FINANCE plc
REGISTERED NUMBER 3070482
DIRECTORS' REPORT (CONTINUED)
Going concern (continued)
* Under section 3A of the Electricity Act 1989, the Gas and Electricity Markets
Authority has a duty, in carrying out its functions, to have regard to the need
to secure that licence holders are able to finance the activities, which are the
subject of obligations imposed by or under Part 1 of the Electricity Act 1989 or
the Utilities Act 2000.
Consequently, after making enquiries, the directors have a reasonable
expectation that the Company has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the annual report and accounts.
Audit of the accounts
Each of the directors, who is a director of the Company as at the date of this
report, confirms that:
* so far as he is aware, there is no relevant audit information of which the
Company's auditors are unaware; and
* he has taken all the steps he ought to have taken as a director in order to make
himself aware of any relevant audit information and to establish that the
auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with the
provisions of s234ZA of the Companies Act 1985.
By order of the board
John Elliott
Company Secretary
31 March 2009
RESPONSIBILITY OF DIRECTORS FOR THE PREPARATION OF THE REPORT AND ACCOUNTS
The directors are responsible for preparing the Annual Report and the financial
statements. The directors are required to prepare financial statements in
accordance with International Financial Reporting Standards ("IFRS") and have
also elected to prepare financial statements for the Company in accordance with
IFRS. Company law requires the directors to prepare such financial statements
in accordance with IFRS, the Companies Act 1985 and Article 4 of the IAS
Regulation.
International Accounting Standard 1 requires that financial statements present
fairly for each financial year the Company's financial position, financial
performance and cash flows. This requires the faithful representation of the
effects of transactions, other events and conditions in accordance with the
definitions and recognition criteria for assets, liabilities, income and
expenses set out in the International Accounting Standards Board's 'Framework
for the Preparation and Presentation of Financial Statements'. In virtually all
circumstances, a fair presentation will be achieved by compliance with all
applicable International Financial Reporting Standards.
Directors are also required to:
* Properly select and apply accounting policies;
* Present information, including accounting policies, in a manner that provides
relevant, reliable, comparable and understandable information; and
* Provide additional disclosures when compliance with the specific requirements in
IFRS is insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the entity's financial position and
financial performance.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company, for safeguarding the assets, for taking reasonable steps for the
prevention and detection of fraud and other irregularities and for
the preparation of a directors' report which complies with the requirements of
the Companies Act 1985. The directors are responsible for the maintenance and
integrity of the Company website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL REPORT AND
ACCOUNTS
Each of the directors as at the date of the Annual Report, whose names and
functions are set out on page 3 of the Directors' Report confirms that, to the
best of their knowledge:
* the Company accounts, prepared in accordance with applicable UK law and in
conformity with IFRS, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
* the Management Report (which is comprised of the Director's Report and the
Business Review) includes a fair review of the development and performance of
the business and the position of the Company, together with a description of the
principal risks and uncertainties it faces.
This responsibility statement was approved by the Board of Directors on 31 March
2009 and signed on its behalf by:
P Ainsley
Director
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF NORTHERN ELECTRIC FINANCE plc
We have audited the financial statements of Northern Electric Finance plc (the
'Company') for the year ended 31 December 2008 which comprise the Income
Statement, the Statement of Recognised Income and Expense, the Balance Sheet and
the Cash Flow Statement and the related notes 1 to 15. These financial
statements have been prepared under the accounting policies set out therein.
This report is made solely to the Company's members, as a body, in accordance
with section 235 of the Companies Act 1985. Our audit work has been undertaken
so that we might state to the Company's members those matters we are required to
state to them in an auditors' report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company's members as a body, for our audit work,
for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Annual Report and the
financial statements in accordance with applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union are set
out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with the Companies Act
1985. We also report to you whether in our opinion the information given in the
Directors' Report is consistent with the financial statements.
In addition we report to you if, in our opinion, the Company has not kept proper
accounting records, if we have not received all the information and explanations
we require for our audit, or if information specified by law regarding
directors' remuneration and other transactions is not disclosed.
We read the other information contained in the Annual Report and consider
whether it is consistent with the audited financial statements. We consider the
implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the financial statements. Our responsibilities do
not extend to any further information outside the Annual Report.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgments made by the directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so 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.
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF NORTHERN ELECTRIC FINANCE plc
(CONTINUED)
Opinion
In our opinion:
the financial statements give a true and fair view, in accordance with IFRSs as
adopted by the European Union, of the state of the Company's affairs as at 31
December 2008 and of its loss for the year then ended;
the financial statements have been properly prepared in accordance with the
Companies Act 1985; and
the information given in the Directors' Report is consistent with the financial
statements.
Deloitte LLP
Chartered Accountants and Registered Auditors
Newcastle, United Kingdom
31 March 2009
NORTHERN ELECTRIC FINANCE plc
REGISTERED NUMBER 3070482
INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2008
+---------------------------------------------------------+-------+--+--------+--+--------+
| |Notes | | 2008 | | 2007 |
+---------------------------------------------------------+-------+--+--------+--+--------+
| | | | GBPm | | GBPm |
+---------------------------------------------------------+-------+--+--------+--+--------+
| | | | | | |
+---------------------------------------------------------+-------+--+--------+--+--------+
| Investment income | 4 | | 17.1 | | 16.7 |
+---------------------------------------------------------+-------+--+--------+--+--------+
| Finance costs | 5 | | (17.2) | | (16.9) |
+---------------------------------------------------------+-------+--+--------+--+--------+
| | | | | | |
+---------------------------------------------------------+-------+--+--------+--+--------+
| Loss before tax | | | (0.1) | | (0.2) |
+---------------------------------------------------------+-------+--+--------+--+--------+
| | | | | | |
+---------------------------------------------------------+-------+--+--------+--+--------+
| Income tax credit | 6 | | - | | 0.1 |
+---------------------------------------------------------+-------+--+--------+--+--------+
| | | | | | |
+---------------------------------------------------------+-------+--+--------+--+--------+
| Loss for the financial year | 12 | | (0.1) | | (0.1) |
+---------------------------------------------------------+-------+--+--------+--+--------+
| | | | | | |
+---------------------------------------------------------+-------+--+--------+--+--------+
All activities relate to continuing operations.
STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 31 DECEMBER 2008
There has been no other income or expense for the Company other than the losses
reported above in the current or the prior year.
NORTHERN ELECTRIC FINANCE plc
REGISTERED NUMBER 3070482
BALANCE SHEET AS AT 31 DECEMBER 2008
+-----------------------------------------------------+--------+----------+--+----------+
| | Notes | 2008 | | 2007 |
+-----------------------------------------------------+--------+----------+--+----------+
| | | | | As |
| | | | |restated |
| | | | |(Note 2) |
+-----------------------------------------------------+--------+----------+--+----------+
| | | GBPm | | GBPm |
+-----------------------------------------------------+--------+----------+--+----------+
| | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| Non-current assets | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| Trade and other receivables | 7 | 247.5 | | 247.4 |
+-----------------------------------------------------+--------+----------+--+----------+
| | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| | | 247.5 | | 247.4 |
+-----------------------------------------------------+--------+----------+--+----------+
| | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| Current assets | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| Trade and other receivables | 7 | 3.5 | | 3.9 |
+-----------------------------------------------------+--------+----------+--+----------+
| Cash and cash equivalents | | 1.7 | | 1.4 |
+-----------------------------------------------------+--------+----------+--+----------+
| | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| | | 5.2 | | 5.3 |
+-----------------------------------------------------+--------+----------+--+----------+
| | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| Total assets | | 252.7 | | 252.7 |
+-----------------------------------------------------+--------+----------+--+----------+
| | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| Current liabilities | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| Borrowings | 9 | (6.9) | | (6.9) |
+-----------------------------------------------------+--------+----------+--+----------+
| | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| | | (6.9) | | (6.9) |
+-----------------------------------------------------+--------+----------+--+----------+
| | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| Net current liabilities | | (1.7) | | (1.6) |
+-----------------------------------------------------+--------+----------+--+----------+
| | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| Non-current liabilities | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| Borrowings | 9 | (246.0) | | (245.9) |
+-----------------------------------------------------+--------+----------+--+----------+
| Deferred tax | 10 | (0.4) | | (0.4) |
+-----------------------------------------------------+--------+----------+--+----------+
| | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| | | (246.4) | | (246.3) |
+-----------------------------------------------------+--------+----------+--+----------+
| | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| Total liabilities | | (253.3) | | (253.2) |
+-----------------------------------------------------+--------+----------+--+----------+
| | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| Net liabilities | | (0.6) | | (0.5) |
+-----------------------------------------------------+--------+----------+--+----------+
| | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| Equity | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| Share capital | 11 | - | | - |
+-----------------------------------------------------+--------+----------+--+----------+
| Retained earnings | 12 | (0.6) | | (0.5) |
+-----------------------------------------------------+--------+----------+--+----------+
| | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
| Total deficit | 12 | (0.6) | | (0.5) |
+-----------------------------------------------------+--------+----------+--+----------+
| | | | | |
+-----------------------------------------------------+--------+----------+--+----------+
The financial statements were approved by the board of directors and authorised
for issue on 31 March 2009 and were signed on its behalf by:
P Ainsley
Director
NORTHERN ELECTRIC FINANCE plc
REGISTERED NUMBER 3070482
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2008
+-------------------------------------------------------+-------+---------+--+---------+
| |Notes | 2008 | | 2007 |
+-------------------------------------------------------+-------+---------+--+---------+
| | | GBPm | | GBPm |
+-------------------------------------------------------+-------+---------+--+---------+
| | | | | |
+-------------------------------------------------------+-------+---------+--+---------+
| Net cash from operating activities | 13 | 0.3 | | 2.9 |
+-------------------------------------------------------+-------+---------+--+---------+
| | | | | |
+-------------------------------------------------------+-------+---------+--+---------+
| Investing activities | | | | |
+-------------------------------------------------------+-------+---------+--+---------+
| Purchase of long-term securities | | - | | (100.0) |
+-------------------------------------------------------+-------+---------+--+---------+
| Maturity of short-term securities | | - | | 100.0 |
+-------------------------------------------------------+-------+---------+--+---------+
| | | | | |
+-------------------------------------------------------+-------+---------+--+---------+
| Net cash used in investing activities | | - | | - |
+-------------------------------------------------------+-------+---------+--+---------+
| | | | | |
+-------------------------------------------------------+-------+---------+--+---------+
| Financing activities | | | | |
+-------------------------------------------------------+-------+---------+--+---------+
| Movement in loans from Group undertakings | | - | | (1.5) |
+-------------------------------------------------------+-------+---------+--+---------+
| | | | | |
+-------------------------------------------------------+-------+---------+--+---------+
| Net cash used in financing activities | | - | | (1.5) |
+-------------------------------------------------------+-------+---------+--+---------+
| | | | | |
+-------------------------------------------------------+-------+---------+--+---------+
| Net increase in cash and cash equivalents | | 0.3 | | 1.4 |
+-------------------------------------------------------+-------+---------+--+---------+
| | | | | |
+-------------------------------------------------------+-------+---------+--+---------+
| Cash and cash equivalents at beginning of year | | 1.4 | | - |
+-------------------------------------------------------+-------+---------+--+---------+
| | | | | |
+-------------------------------------------------------+-------+---------+--+---------+
| Cash and cash equivalents at end of year | | 1.7 | | 1.4 |
+-------------------------------------------------------+-------+---------+--+---------+
| | | | | |
+-------------------------------------------------------+-------+---------+--+---------+
NORTHERN ELECTRIC FINANCE plc
REGISTERED NUMBER 3070482
NOTES TO THE ACCOUNTS - 31 DECEMBER 2008
1. GENERAL INFORMATION
Northern Electric Finance plc is a company incorporated in England and Wales
under the Companies Act 1985 (the "Act"). The address of the registered office
is Lloyds Court, 78 Grey Street, Newcastle-upon-Tyne, NE1 6AF.
The nature of the Company's operations and its principal activities are set out
in the Business Review in the directors' report on page 1.
1. ACCOUNTING POLICIES
Accounting convention and basis of preparation
The financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS"). The financial statements have also been
prepared in accordance with IFRSs adopted by the European Union and therefore
comply with Article 4 of the EU IAS Regulation and with those parts of the Act
that are applicable to companies reporting under IFRS.
The accounts have been prepared under the historical cost convention.
Going Concern
The Company's business activities, together with details regarding its future
development, performance and position are set out in the Business Review in the
Directors' Report. In addition, the Company's objectives, policies and processes
for managing its capital, its financial risk management objectives, details of
its financial instruments and hedging activities and its exposures to credit
risk and liquidity risk are included in the Business Review in the Directors'
Report and the appropriate notes to the accounts.
When considering continuing to adopt the going concern basis in preparing the
annual report and accounts, the directors have taken account of a number of
factors that arise due to the Company being a wholly-owned subsidiary of NEDL,
including the following:
a)In accordance with standard condition 31 of NEDL's electricity distribution
licence, Berkshire Hathaway, Inc., the ultimate controlling party of the
Company, has provided an undertaking that it will and it will procure that any
person (including a corporate body), which is a subsidiary of or is controlled
by it, will refrain from any action, which would cause NEDL to breach any of its
obligations under the Electricity Act 1989 or under its electricity distribution
licence. NEDL's electricity distribution licence includes the obligation in
standard condition 40 to maintain an investment grade issuer credit rating;
b)Explicit support has been made available to MidAmerican Energy Holdings
Company (a parent company of the CE Group) by Berkshire Hathaway Inc., which
consists of a $3.5 billion equity commitment that expires on 28 February 2011
and to which NEDL has access, if necessary. No amounts were outstanding on that
facility as of the date of approval of the Company's accounts to 31 December
2008;
c)As part of a review of electricity distribution licensees' financing
requirements, on 15 January 2009 Ofgem issued an information request to all such
licensees under standard licence condition 6 relating to the financial resources
each licensee has available in the 24 months ended 31 December 2009. After
making enquiries and taking account of several factors, the directors of NEDL
approved the submission to Ofgem of a certificate confirming their reasonable
expectation that NEDL has, or will have available to it, sufficient financial
resources and/or financial facilities to enable NEDL to carry on its regulated
business for a period of two years since the date of the last statutory
accounts; and
NORTHERN ELECTRIC FINANCE plc
REGISTERED NUMBER 3070482
NOTES TO THE ACCOUNTS - 31 DECEMBER 2008 (CONTINUED)
2ACCOUNTING POLICIES (CONTINUED)
Going Concern (continued)
d)Under section 3A of the Electricity Act 1989, the Gas and Electricity Markets
Authority has a duty, in carrying out its functions, to have regard to the need
to secure that licence holders are able to finance the activities, which are the
subject of obligations imposed by or under Part 1 of the Electricity Act 1989 or
the Utilities Act 2000.
Consequently, after making enquiries, the directors have a reasonable
expectation that the Company has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the annual report and accounts.
Critical accounting policies
The particular policies adopted by the directors are described below. The
accounting policies have been applied consistently throughout the year and the
preceding year, with the exception of interest on borrowings, as highlighted
below.
Adoption of new or revised standards
In the current year, the Company has adopted the following interpretation:
IFRS 7 Financial Instruments: Disclosures - "Amendments to IFRS 7"
The amendments to IFRS 7 require enhanced disclosures about fair value
measurement and liquidity risk, which are illustrated in notes 14 to 16 to the
accounts.
At the date of authorisation of these financial statements there were a number
of Standards and Interpretations in issue but not yet effective, which have not
yet been applied in these financial statements. The directors consider that the
following may be relevant to the Company in future periods.
IAS 1 Presentation of Financial Statements - "Amendments to IAS 1"
The directors anticipate that the adoption of this Standard in future periods
will have no material impact on the financial statements of the Company.
The IASB project "2008 Annual Amendments to IFRSs" was published on 22 May 2008.
This project will require presentational changes in the financial statements of
the Company for annual periods beginning on or after 1 January 2009.
The directors anticipate that the Company will adopt these Standards on their
effective dates.
Revenue
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred
tax.
NORTHERN ELECTRIC FINANCE plc
REGISTERED NUMBER 3070482
NOTES TO THE ACCOUNTS - 31 DECEMBER 2008 (CONTINUED)
2ACCOUNTING POLICIES (CONTINUED)
Taxation (continued)
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Company's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted at the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of assets
and liabilities in the financial statements and the corresponding tax bases used
in computation of taxable profit, and is accounted for using the balance sheet
liability method. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
year when the liability is settled or asset realised, based on tax rates and tax
legislation enacted or substantively enacted at the balance sheet date.
Borrowings
Borrowings are classified as other financial liabilities at amortised cost. They
are recorded at the proceeds received, net of direct issue costs. Finance
charges, including premiums payable on settlement for redemption and direct
issue costs, are accounted for on an accruals basis in the income statement
using the effective interest rate method. They are added to the carrying amount
of the instruments to the extent that they are not settled in the period in
which they arise.
Prior year restatement
A prior year restatement has been made in respect of accrued interest on
borrowings. These balances have been reclassified from trade and other payables
to short term borrowings on the face of the balance sheet and in the related
notes to the accounts in line with IAS 39 "Financial Instruments: Recognition
and Measurement". The effect of this adjustment is to increase borrowings in
the prior year by GBP6.9m and to decrease trade and other payables by GBP6.9m.
The adjustment has no impact on the prior year profit.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
Cash and cash equivalents
Loans advanced to the parent company are included within cash and cash
equivalents, having a maturity of less than three months on the basis that they
are readily convertible to known amounts of cash and are subject to
insignificant risk of changes in value.
NORTHERN ELECTRIC FINANCE plc
REGISTERED NUMBER 3070482
NOTES TO THE ACCOUNTS - 31 DECEMBER 2008 (CONTINUED)
2ACCOUNTING POLICIES (CONTINUED)
Financial instruments
Financial assets and financial liabilities are recognised on the balance sheet
when the Company becomes a party to the contractual provisions on the
instrument.
Financial assets are assessed for indicators of impairment at each balance sheet
date. Financial assets are impaired where there is objective evidence that, as a
result of one or more events that occurred after the initial recognition of the
financial asset, the estimated future cash flows of the investment have been
impacted.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangement entered into. An equity instrument is
any contract that evidences a residual interest in the assets of the Company
after deducting all of its liabilities.
3DIRECTORS', KEY PERSONNEL AND AUDITORS' REMUNERATION
No directors' or key personnel remuneration was charged for the year (2007:
GBPnil). There are no directors' emoluments that are required to be disclosed
under the Act (2007: GBPnil). There were no employees of the Company during the
year (2007: nil).
Auditors' remuneration of GBP6,000 was charged to the Company for the year
(2007: GBP6,000) in relation to the audit of the Company. There was no fees
payable in relation to non-audit services in 2008 or 2007.
4 INVESTMENT INCOME
+--------------------------------------------------------+------------+--+--------+
| | 2008 | | 2007 |
+--------------------------------------------------------+------------+--+--------+
| | GBPm | | GBPm |
+--------------------------------------------------------+------------+--+--------+
| | | | |
+--------------------------------------------------------+------------+--+--------+
| Interest receivable on loans to Group undertakings | 17.1 | | 12.0 |
+--------------------------------------------------------+------------+--+--------+
| Interest receivable on securities | - | | 4.7 |
+--------------------------------------------------------+------------+--+--------+
| | | | |
+--------------------------------------------------------+------------+--+--------+
| Total investment income | 17.1 | | 16.7 |
+--------------------------------------------------------+------------+--+--------+
5 FINANCE COSTS
+--------------------------------------------------------+--------+--+--------+
| | 2008 | | 2007 |
+--------------------------------------------------------+--------+--+--------+
| | GBPm | | GBPm |
+--------------------------------------------------------+--------+--+--------+
| | | | |
+--------------------------------------------------------+--------+--+--------+
| Interest payable on loans from Group undertakings | 0.1 | | 0.1 |
+--------------------------------------------------------+--------+--+--------+
| Interest payable on other loans | 17.1 | | 16.8 |
+--------------------------------------------------------+--------+--+--------+
| | | | |
+--------------------------------------------------------+--------+--+--------+
| Total finance costs | 17.2 | | 16.9 |
+--------------------------------------------------------+--------+--+--------+
NORTHERN ELECTRIC FINANCE plc
REGISTERED NUMBER 3070482
NOTES TO THE ACCOUNTS - 31 DECEMBER 2008 (CONTINUED)
6INCOME TAX CREDIT
+--------------------------------------------------------+--------+--+--------+
| | GBPm | | GBPm |
+--------------------------------------------------------+--------+--+--------+
| Income tax credit comprises: | | | |
+--------------------------------------------------------+--------+--+--------+
| | | | |
+--------------------------------------------------------+--------+--+--------+
| Deferred tax credit relating to the origination or | - | | 0.1 |
| reversal of temporary differences | | | |
+--------------------------------------------------------+--------+--+--------+
| | | | |
+--------------------------------------------------------+--------+--+--------+
| Tax on loss before tax | - | | 0.1 |
+--------------------------------------------------------+--------+--+--------+
| | | | |
+--------------------------------------------------------+--------+--+--------+
| The total credit can be reconciled to the accounting | | | |
| loss as follows: | | | |
+--------------------------------------------------------+--------+--+--------+
| | | | |
+--------------------------------------------------------+--------+--+--------+
| Loss on ordinary activities before tax | (0.1) | | (0.2) |
+--------------------------------------------------------+--------+--+--------+
| | | | |
+--------------------------------------------------------+--------+--+--------+
| Tax on loss before tax at standard rate of corporation | - | | 0.1 |
| tax in United Kingdom of 28.5% (2007: 30%) | | | |
+--------------------------------------------------------+--------+--+--------+
| | | | |
+--------------------------------------------------------+--------+--+--------+
The tax rates used are the UK corporate rate of 30% until 31 March 2008 and 28%
from 1 April 2008, time apportioned for 2008.
7OTHER FINANCIAL ASSETS
Trade and other receivables
+-----------------------------------+--------+--+--------+--+--------+--+--------+
| | Book value | | Fair value |
+-----------------------------------+--------------------+--+--------------------+
| | 2008 | | 2007 | | 2008 | | 2007 |
+-----------------------------------+--------+--+--------+--+--------+--+--------+
| | GBPm | | GBPm | | GBPm | | GBPm |
+-----------------------------------+--------+--+--------+--+--------+--+--------+
| | | | | | | | |
+-----------------------------------+--------+--+--------+--+--------+--+--------+
| Non-current: | | | | | | | |
+-----------------------------------+--------+--+--------+--+--------+--+--------+
| Amounts owed by | 247.5 | | 247.4 | | 246.7 | | 268.3 |
| Group | | | | | | | |
| undertakings | | | | | | | |
+-----------------------------------+--------+--+--------+--+--------+--+--------+
| | | | | | | | |
+-----------------------------------+--------+--+--------+--+--------+--+--------+
| Current: | | | | | | | |
+-----------------------------------+--------+--+--------+--+--------+--+--------+
| Amounts owed by | 3.5 | | 3.9 | | 3.5 | | 3.9 |
| Group | | | | | | | |
| undertakings | | | | | | | |
+-----------------------------------+--------+--+--------+--+--------+--+--------+
The directors' estimate of the fair value is calculated by discounting the
future cash flows at the market rate at the balance sheet date.
Loans to Group undertakings are made to Northern Electric Distribution Limited,
the Company's immediate parent, and are at fixed rates of interest. The maximum
exposure to risk to the Company is the book value of these loans.
Cash and cash equivalents
Cash and cash equivalents represent amounts owed from Yorkshire Electricity
Group plc, a company within the CE Electric UK Funding Company Group, which have
a maturity date of less than three months and which are subject to an
insignificant risk of changes in value. The fair value of cash and cash
equivalents is equal to their book value.
NORTHERN ELECTRIC FINANCE plc
REGISTERED NUMBER 3070482
NOTES TO THE ACCOUNTS - 31 DECEMBER 2008 (CONTINUED)
8OTHER FINANCIAL LIABILITIES
The following tables detail the remaining contractual maturities for the
non-derivative financial liabilities included in Notes 9. The tables have been
drawn up based on the undiscounted cash flows of financial liabilities based on
the earliest possible date on which the Group or Company can be required to pay.
The tables include both interest and principal cash flows.
+---------------------+----------+----+-----------+--+--------+--+-------+--+---------+
| | Less | | 3 months | |1 to 5 | | 5+ | | |
| | than | | | | | | | | |
+---------------------+----------+----+-----------+--+--------+--+-------+--+---------+
| |3 months | |To 1 year | | Years | |Years | | Total |
+---------------------+----------+----+-----------+--+--------+--+-------+--+---------+
| | GBPm | | GBPm | | GBPm | | GBPm | | GBPm |
+---------------------+----------+----+-----------+--+--------+--+-------+--+---------+
| | | | | | | | | | |
+---------------------+----------+----+-----------+--+--------+--+-------+--+---------+
| 2008: | | | | | | | | | |
+---------------------+----------+----+-----------+--+--------+--+-------+--+---------+
| Fixed interest rate | - | | 16.6 | | 66.3 | |491.5 | | 574.4 |
| liability | | | | | | | | | |
+---------------------+----------+----+-----------+--+--------+--+-------+--+---------+
| | | | | | | | | | |
+---------------------+----------+----+-----------+--+--------+--+-------+--+---------+
| 2007: | | | | | | | | | |
+---------------------+----------+----+-----------+--+--------+--+-------+--+---------+
| Fixed interest rate | - | | 16.6 | | 66.3 | |497.8 | | 580.7 |
| liability | | | | | | | | | |
+---------------------+----------+----+-----------+--+--------+--+-------+--+---------+
9BORROWINGS
+-----------------------------------+--------+--+-------+----------+--+--------+--+--------+
| | Book value | | Fair value |
+-----------------------------------+------------------------------+--+--------------------+
| | 2008 | | 2007 | | 2008 | | 2007 |
+-----------------------------------+--------+----------+----------+--+--------+--+--------+
| | | | As | | | | |
| | | |restated | | | | |
| | | |(note 2) | | | | |
+-----------------------------------+--------+----------+----------+--+--------+--+--------+
| | GBPm | | GBPm | | GBPm | | GBPm |
+-----------------------------------+--------+----------+----------+--+--------+--+--------+
| | | | | | | | |
+-----------------------------------+--------+----------+----------+--+--------+--+--------+
| The borrowings are repayable as | | | | | | | |
| follows: | | | | | | | |
+-----------------------------------+--------+----------+----------+--+--------+--+--------+
| On demand or within one year | 6.9 | | 6.9 | | 6.9 | | 6.9 |
+-----------------------------------+--------+----------+----------+--+--------+--+--------+
| After five years | 246.0 | | 245.9 | | 246.4 | | 261.5 |
+-----------------------------------+--------+----------+----------+--+--------+--+--------+
| | | | | | | | |
+-----------------------------------+--------+----------+----------+--+--------+--+--------+
| | 252.9 | | 252.8 | | 253.3 | | 268.4 |
+-----------------------------------+--------+----------+----------+--+--------+--+--------+
| | | | | | | | |
+-----------------------------------+--------+----------+----------+--+--------+--+--------+
| Analysis of borrowings: |
+------------------------------------------------------------------------------------------+
| | | | | | | | |
+-----------------------------------+--------+--+------------------+--+--------+--+--------+
| 2035 - 5.125% | 152.6 | | 152.6 | | 127.4 | | 140.9 |
+-----------------------------------+--------+--+------------------+--+--------+--+--------+
| 2020 - 8.875% | 100.3 | | 100.2 | | 125.9 | | 127.5 |
+-----------------------------------+--------+--+------------------+--+--------+--+--------+
| | | | | | | | |
+-----------------------------------+--------+--+------------------+--+--------+--+--------+
| | 252.9 | | 252.8 | | 253.3 | | 268.4 |
+-----------------------------------+--------+--+-------+----------+--+--------+--+--------+
The directors' estimates of the fair value of the Company's borrowings are
calculated by discounting their future cash flows at the market rate at the
balance sheet date.
All loans are at fixed interest rates and expose the Company to fair value
interest rate risk.
The Company's loans are guaranteed by Northern Electric Distribution Limited,
its parent company.
The covenants associated with the 2035 bonds issued by the Company include
restrictions on the issuance of new indebtedness and the making of distributions
dependent on the scale of the ratio of Senior Total Net Debt to Regulatory Asset
Value ("RAV") of Northern Electric Distribution Limited. The definition of
Senior Total Net Debt excludes any subordinated debt and any debt incurred on a
non-recourse basis. In addition, it excludes interest payable, any fair value
adjustments and unamortised issue costs.
All borrowings are denominated in sterling. The Company has no undrawn committed
borrowing facilities.
NORTHERN ELECTRIC FINANCE plc
REGISTERED NUMBER 3070482
NOTES TO THE ACCOUNTS - 31 DECEMBER 2008 (CONTINUED)
10DEFERRED TAX
+-----------------------------------------------------------------+----------+
| | GBPm |
+-----------------------------------------------------------------+----------+
| | |
+-----------------------------------------------------------------+----------+
| At 31 December 2006 | 0.5 |
+-----------------------------------------------------------------+----------+
| Credit to income | (0.1) |
+-----------------------------------------------------------------+----------+
| | |
+-----------------------------------------------------------------+----------+
| At 31 December 2007 and 31 December 2008 | 0.4 |
+-----------------------------------------------------------------+----------+
The balance represents deferred tax on unamortised debt issue costs.
11SHARE CAPITAL
+-----------------------------------------------------+----------+--+----------+
| | 2008 | | 2007 |
+-----------------------------------------------------+----------+--+----------+
| | GBP | | GBP |
+-----------------------------------------------------+----------+--+----------+
| Authorised | | | |
+-----------------------------------------------------+----------+--+----------+
| 50,000 ordinary shares of GBP1 each | 50,000 | | 50,000 |
+-----------------------------------------------------+----------+--+----------+
| Issued and fully paid | | | |
+-----------------------------------------------------+----------+--+----------+
| 50,000 ordinary shares of GBP1 each fully paid | 50,000 | | 50,000 |
+-----------------------------------------------------+----------+--+----------+
The Company has one class of ordinary shares which carries no right to fixed
income.
12MOVEMENT ON RESERVES AND RECONCILIATION OF MOVEMENTS IN TOTAL EQUITY
+----------------------------------------+---------+--+----------+--+-------------+
| | Share | |Retained | | Total |
| |Capital | |Reserves | | Equity |
+----------------------------------------+---------+--+----------+--+-------------+
| | GBPm | | GBPm | | GBPm |
+----------------------------------------+---------+--+----------+--+-------------+
| | | | | | |
+----------------------------------------+---------+--+----------+--+-------------+
| At 1 January 2007 | - | | (0.4) | | (0.4) |
+----------------------------------------+---------+--+----------+--+-------------+
| Loss for the year | - | | (0.1) | | (0.1) |
+----------------------------------------+---------+--+----------+--+-------------+
| | | | | | |
+----------------------------------------+---------+--+----------+--+-------------+
| At 31 December 2007 | - | | (0.5) | | (0.5) |
+----------------------------------------+---------+--+----------+--+-------------+
| Loss for the year | - | | (0.1) | | (0.1) |
+----------------------------------------+---------+--+----------+--+-------------+
| | | | | | |
+----------------------------------------+---------+--+----------+--+-------------+
| At 31 December 2008 | - | | (0.6) | | (0.6) |
+----------------------------------------+---------+--+----------+--+-------------+
NORTHERN ELECTRIC FINANCE plc
REGISTERED NUMBER 3070482
NOTES TO THE ACCOUNTS - 31 DECEMBER 2008 (CONTINUED)
1. NET CASH FROM OPERATING ACTIVITIES
+--------------------------------------------------------+--------+--+--------+
| | 2008 | | 2007 |
+--------------------------------------------------------+--------+--+--------+
| | GBPm | | GBPm |
+--------------------------------------------------------+--------+--+--------+
| | | | |
+--------------------------------------------------------+--------+--+--------+
| Interest received | 17.5 | | 19.8 |
+--------------------------------------------------------+--------+--+--------+
| Interest paid |(17.2) | |(16.9) |
+--------------------------------------------------------+--------+--+--------+
| | | | |
+--------------------------------------------------------+--------+--+--------+
| Net cash from operating activities | 0.3 | | 2.9 |
+--------------------------------------------------------+--------+--+--------+
14RELATED PARTY TRANSACTIONS
The Company has advanced loans to Northern Electric Distribution Limited, its
immediate parent company. The total interest included in investment income for
the year ended 31 December 2008 was GBP17.1m (2007: GBP12.0m). Included within
trade and other receivables is GBP251.0m as at 31 December 2008 (2007:
GBP251.3m) in respect of these loans.
The Company has received loans from other companies in the CE Electric UK
Funding Company Group. The total interest included in finance costs in the
income statement for the year ended 31 December 2008 was GBP0.1m (2007:
GBP0.1m). Included within borrowings is GBPnil as at 31 December 2008 (2007:
GBPnil) in respect of these loans.
Interest on loans to/from group companies is charged at a commercial rate.
15IMMEDIATE PARENT UNDERTAKING AND CONTROLLING PARTY
The immediate parent undertaking of Northern Electric Finance plc is Northern
Electric Distribution Limited. The ultimate controlling party and ultimate
parent undertaking of Northern Electric Distribution Limited is Berkshire
Hathaway, Inc., a company incorporated in the United States of America.
Copies of the group accounts of Berkshire Hathaway, Inc., (the parent
undertaking of the largest group preparing group accounts) which include
Northern Electric Finance plc and the group accounts of Northern Electric plc,
the smallest parent undertaking to prepare group accounts in the UK, can both be
obtained from the Company Secretary, CE Electric UK Funding Company, Lloyds
Court, 78 Grey Street, Newcastle upon Tyne, NE1 6AF.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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