TIDM56WD
RNS Number : 2705M
Northern Electric Finance PLC
26 April 2018
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 2017.
Pursuant to LR 17.3.1, the document has been submitted to the
National Storage Mechanism and will shortly be available for
inspection at:
www.hemscott.com/nsm.do
The 2017 Annual Report and Accounts are also available on the
website
http://www.northernpowergrid.com/document-library/financial
Enquiries:
Jenny Riley 01977 605155
REGISTERED NUMBER: 03070482 (England and Wales)
STRATEGIC REPORT, REPORT OF THE DIRECTORS AND
FINANCIAL STATEMENTS FOR THE YEARED 31 DECEMBER 2017
FOR
NORTHERN ELECTRIC FINANCE PLC
NORTHERN ELECTRIC FINANCE PLC
CONTENTS OF THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2017
Page
Company Information 1
Strategic Report 2
Report of the Directors 3
Report of the Independent
Auditor 6
Statement of Profit or Loss 10
Statement of Profit or Loss
and Other Comprehensive Income 11
Statement of Financial Position 12
Statement of Changes in Equity 13
Statement of Cash Flows 14
Notes to the Financial Statements 15
NORTHERN ELECTRIC FINANCE PLC
COMPANY INFORMATION
FOR THE YEARED 31 DECEMBER 2017
DIRECTORS: P A Jones
T E Fielden
S J Lockwood
T H France
COMPANY SECRETARY: J C Riley
REGISTERED OFFICE: Lloyds Court
78 Grey Street
Newcastle upon Tyne
NE1 6AF
REGISTERED NUMBER: 03070482 (England and Wales)
AUDITOR: Deloitte LLP
Statutory Auditor
Newcastle upon Tyne
United Kingdom
NORTHERN ELECTRIC FINANCE PLC
STRATEGIC REPORT
FOR THE YEARED 31 DECEMBER 2017
The directors present their strategic report for the year ended
31 December 2017.
PRINCIPAL ACTIVITY AND RESULT FOR THE YEAR
The Company is part of the Northern Powergrid Holdings Company
group of companies (the "Group") and acts as a financing company.
The Company's sole activity during the year was to meet its
obligations to make the interest payments required by the 2020
8.875% bonds and the 2035 5.125% bonds. Those payments were made on
16 October 2017 and 4 May 2017 respectively.
The Company made a loss after tax for the year of GBP140,000
(2016: loss GBP123,000) mainly due to interest expenses exceeding
interest income.
KEY PERFORMANCE INDICATORS
The directors manage the Company's operations on a group basis.
The development, performance and position of Northern Powergrid
Holdings Company, which include those of the Company, are discussed
in the annual report and financial statements of Northern Powergrid
Holdings Company.
BUSINESS REVIEW
The principal risks and uncertainties are integrated with the
principal risks of the group and are not managed separately.
Accordingly, the principal risks and uncertainties, which include
those of this Company, are discussed in the annual report and
financial statements of Northern Powergrid Holdings Company.
Details of financial risks can be found on page 3 of the Report of
the Directors.
ON BEHALF OF THE BOARD:
P A Jones
Director
24 April 2018
NORTHERN ELECTRIC FINANCE PLC
REPORT OF THE DIRECTORS
FOR THE YEARED 31 DECEMBER 2017
The directors present their report together with the audited
financial statements of the Company for the financial year ended 31
December 2017.
DIVIDS
No dividends were paid during the year (2016: GBPnil) and the
directors recommend that no final dividend be paid in respect of
the year (2016: GBPnil). 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. In addition, the level of
dividends is set to maintain sufficient equity in the Company so as
not to jeopardise its investment grade issuer credit rating.
RESEARCH AND DEVELOPMENT
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 Statement of Financial Position on page 13. There have
been no significant events since the year end and there are no
future developments planned.
DIRECTORS
The directors who held office during the year under review and
to the date of signing were:
T E Fielden
P A Jones
T H France
S J Lockwood
During and as at the end of the year, none of the directors had
interests in any contract, which was significant in relation to the
business of the Company.
During the financial year and up to the date of approval of the
Report of the Directors, an indemnity contained in the Company's
Articles of Association was in force for the benefit of the
directors of the Company and as directors of associated companies,
which was a qualifying indemnity provision for the purposes of the
Companies Act 2006.
FINANCIAL RISK MANAGEMENT
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. In this respect, borrowing facilities are made available
to the Company by other companies in the Northern Powergrid 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 2017, 100% of the Company's
borrowings were at fixed rates and the average maturity of these
borrowings was 12 years.
Trading risk
Throughout the year under review, the Company's policy was that
no trading in financial instruments should be undertaken.
Credit risk
The Company and those that it provide finance to it are
supported by the Northern Powergrid Group which maintains an
investment grade credit rating.
Financial derivatives
As at 31 December 2017 and during the year it was the Company's
policy not to hold any derivative financial instruments (2016:
GBPnil).
NORTHERN ELECTRIC FINANCE PLC
REPORT OF THE DIRECTORS
FOR THE YEARED 31 DECEMBER 2017
POLITICAL DONATIONS
During the year, no contributions were made to political
organisations (2016: GBPnil).
CORPORATE GOVERNANCE STATEMENT
The directors have elected to apply the exception set out in
Section 1B.1.6R of the Disclosure and Transparency Rules
("DTR").
AUDIT COMMITTEE
The board of Northern Powergrid Holdings Company has established
an audit committee for the Northern Powergrid Group under delegated
terms of reference which carries out the functions required by DTR
7.1.3 R.
Committee members:
R Dixon Non-Executive Director (retired 26
October 2017)
J Reynolds Non-Executive Director (appointed
T E Fielden as Chairman on 26 October 2017)
Finance Director
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Strategic
Report, the Report of the Directors and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law, the directors
have elected to prepare the financial statements in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union. Under company law, the directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that
period.
In preparing these financial statements, International
Accounting Standard 1 requires the directors to:
- Properly select and apply accounting policies;
- Present information, including accounting policies,
in a manner that provides relevant, reliable,
comparable and understandable information;
- Provide additional disclosures when compliance
with the specific requirements in IFRSs are insufficient
to enable users to understand the impact of particular
transactions, other events and conditions on the
Company's financial position and financial performance;
and
- Make an assessment of the Company's ability to
continue as a going concern.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions, disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities. The directors are responsible
for the maintenance and integrity of any corporate and financial
information relating to the Company, which is included on the
Northern Powergrid Group's website. Legislation in the United
Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
NORTHERN ELECTRIC FINANCE PLC
REPORT OF THE DIRECTORS
FOR THE YEARED 31 DECEMBER 2017
GOING CONCERN
The Company's business activities, together with details
regarding its future development, performance and position are set
out in the Strategic Report and in the Report of the Directors. In
addition, the Company's objectives, policies and processes for
managing its capital, its financial risk management objectives,
details of its financial instruments and its exposures to credit
risk and liquidity risk are included in the Financial Risk
Management section of the Report of the Directors 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 Northern Powergrid (Northeast)
Limited, including the following:
a) Northern Powergrid (Northeast) Limited, is a
stable electricity distribution business operating
an essential public service and is regulated
by the Gas and Electricity Markets Authority
("GEMA"). In carrying out its functions, GEMA
has a statutory duty under the Electricity Act
1989 to have regard to the need to secure that
licence holders are able to finance their activities,
which are the subject of obligations under Part
1 of the Electricity Act 1989 (including the
obligations imposed by the electricity distribution
licence) or by the Utilities Act 2000;
b) Northern Powergrid (Northeast) Limited, is profitable
with strong underlying cash flows resulting in
low gearing and holds investment grade credit
ratings; and
c) Northern Powergrid (Northeast) Limited, has access
to considerable financial resources, in the form
of short-term borrowings made available by Yorkshire
Electricity Group plc, a fellow company in the
Northern Powergrid Group, and an overdraft facility
provided by Lloyds Bank plc which is reviewed
annually. In addition, Northern Powergrid (Northeast)
Limited, has committed revolving credit facilities
in place from Lloyds Bank plc, Royal Bank of
Scotland plc and Abbey National Treasury Services
plc until 30 April 2020.
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.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS
Each of the directors, who is a director of the Company as at
the date of this report, confirms that:
a) so far as he is aware, there is no relevant audit
information of which the Company's auditor is
unaware; and
b) 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 auditor is aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the Companies Act
2006.
AUDITOR
A resolution to re-appoint Deloitte LLP as the Company's auditor
and authorise the directors to determine their remuneration will be
proposed at the Annual General Meeting.
ON BEHALF OF THE BOARD:
P A Jones
Director
24 April 2018
REPORT OF THE INDEPENT AUDITOR TO THE MEMBERS OF
NORTHERN ELECTRIC FINANCE PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion on financial statements
In our opinion the financial statements:
- give a true and fair view of the state of the
company's affairs as at 31 December 2017 and of
its loss for the year then ended;
- have been properly prepared in accordance with
International Financial Reporting Standards (IFRSs)
as adopted by the European Union and IFRSs; and
- have been prepared in accordance with the requirements
of the Companies Act 2006.
We have audited the financial statements of Northern Electric
Finance plc (the 'company') which comprise:
- the statement of profit or loss;
- the statement of profit or loss and other comprehensive
income;
- the statement of financial position;
- the statement of changes in equity;
- the statement of cash flows; and
- the notes to the financial statements.
The financial reporting framework that has been applied in their
preparation is applicable law and IFRSs as adopted by the European
Union.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
auditor's responsibilities for the audit of the financial
statements section of our report.
We are independent of the company in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the FRC's Ethical Standard as
applied to public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements. We confirm that the non-audit services prohibited by
the FRC's Ethical Standard were not provided to the company.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Summary of audit approach
- Key audit The key audit matter that we identified
matter in the current year was Management override
of controls.
- Materiality The materiality that we used in the current
year was GBP265,660 which was determined
on the basis of 1.56% of interest receivable
as at 31 December 2017.
Conclusions relating to going concern
We are required by ISAs (UK) to report in respect of the
following matters where:
- the directors' use of the going concern basis
of accounting in preparation of the financial
statements is not appropriate; or
- the directors have not disclosed in the financial
statements any identified material uncertainties
that may cast significant doubt about the company's
ability to continue to adopt the going concern
basis of accounting for a period of at least twelve
months from the date when the financial statements
are authorised for issue.
We have nothing to report in respect of these matters.
REPORT OF THE INDEPENT AUDITOR TO THE MEMBERS OF
NORTHERN ELECTRIC FINANCE PLC - continued
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS - continued
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had
the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the
engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Management override of controls
Key audit matter The risk of management override of controls
description due to fraud is a pervasive risk of
material misstatement in the financial
statements. It includes the potential
for management to use their judgement
to influence the financial statements
as well as the potential to override
the Company's controls.
The key area of risk for the Company
included the posting of inappropriate
journal entries or other adjustments.
How the scope We identified journal entries recorded
of the audit in the general ledger during the year,
responded to and other adjustments made in the preparation
the key audit of financial reporting, exhibiting characteristics
matter with an increased risk of fraud or which
were unexpected based on the nature
of the business. The journals were identified
with the use of data analytics and were
tested by obtaining supporting documentation.
We have evaluated the design and implementation
of key controls around the financial
reporting process.
Key observations No matters were noted during the course
of our testing that warranted reporting
to those charged with governance.
Our application of materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality both in planning the scope of our
audit work and in evaluating the results of our work
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Materiality GBP265,660 (2016: GBP265,660)
Basis for determining 1.56% of interest income as at the
materiality 31 December 2017.
Rationale for the The company's primary activity is
benchmark applied to borrow funds to lend to other
group companies. Therefore the interest
income balance is considered to
be a key driver of company activity.
REPORT OF THE INDEPENT AUDITOR TO THE MEMBERS OF
NORTHERN ELECTRIC FINANCE PLC - continued
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS - continued
Our application of materiality - continued
We agreed with the Board of Directors that we would report to
the Board all audit differences in excess of GBP5,310 (2016:
GBP5,310), as well as differences below that threshold that, in our
view, warranted reporting on qualitative grounds. We also report to
the Board of Directors on disclosure matters that we identified
when assessing the overall presentation of the financial
statements.
An overview of the scope of our audit
Northern Electric Finance PLC is a wholly owned subsidiary of
Northern Powergrid Holdings Company. The primary purpose of the
entity is to obtain external finance to be provided to the
remainder of the group. Audit work to respond to the risks of
material misstatement was performed directly by the audit
engagement team.
The focus of our audit work is to test the borrowing and lending
activities of the company and associated interest, and to consider
the risk of management override and control. There have been no
changes to our audit scope from the prior year.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report including the Strategic Report and Report of the Directors,
other than the financial statements and our auditor's report
thereon.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether there
is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
We have nothing to report in respect of these matters.
Responsibilities of directors
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor's report.
REPORT OF THE INDEPENT AUDITOR TO THE MEMBERS OF
NORTHERN ELECTRIC FINANCE PLC - continued
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS - continued
Use of our report
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
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 auditor's 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.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
- the information given in the strategic report
and the directors' report for the financial year
for which the financial statements are prepared
is consistent with the financial statements; and
- the strategic report and the directors' report
have been prepared in accordance with applicable
legal requirements.
In the light of the knowledge and understanding of the company
and its environment obtained in the course of the audit, we have
not identified any material misstatements in the strategic report
or the directors' report.
Matters on which we are required to report by exception
Adequacy of Under the Companies Act 2006 We have nothing
explanations we are required to report to report in
received and to you if, in our opinion: respect of
accounting * we have not received all the information and these matters.
records explanations we require for our audit; or
* adequate accounting records have not been kept, or
returns adequate for our audit have not been received
from branches not visited by us; or
* the financial statements are not in agreement with
the accounting records and returns.
Directors' Under the Companies Act 2006 We have nothing
remuneration we are also required to report to report in
if in our opinion certain respect of
disclosures of directors' these matters.
remuneration have not been
made.
Other Matters
Auditor tenure Following the recommendation of the
audit committee, we were appointed by
the board of Northern Powergrid Holdings
Company in 1998 to audit the financial
statements for the year ending 31 December
1998 and subsequent financial periods.
The period of total uninterrupted engagement
including previous renewals and reappointments
of the firm is 19 years, covering the
years ending 31 December 1998 to 31
December 2017.
Consistency of Our audit opinion is consistent with
the audit report the additional report to the Board of
with the additional Directors we are required to provide
report to the in accordance with ISAs (UK).
Board of Directors
David M Johnson FCA (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
Newcastle upon Tyne
United Kingdom
24 April 2018
NORTHERN ELECTRIC FINANCE PLC
STATEMENT OF PROFIT OR LOSS
FOR THE YEARED 31 DECEMBER 2017
2017 2016
Notes GBP'000 GBP'000
CONTINUING OPERATIONS
Revenue - -
Administrative expenses (9) (8)
OPERATING LOSS (9) (8)
Finance costs 3 (17,195) (17,182)
Finance income 3 17,030 17,030
LOSS BEFORE INCOME
TAX 5(174) (160)
Income tax 6 30 37
LOSS FOR THE YEAR (144) (123)
NORTHERN ELECTRIC FINANCE PLC
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2017
2017 2016
GBP'000 GBP'000
LOSS FOR THE YEAR (144) (123)
OTHER COMPREHENSIVE INCOME - -
TOTAL COMPREHENSIVE LOSS FOR
THE YEAR (144) (123)
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 03070482)
STATEMENT OF FINANCIAL POSITION
31 DECEMBER 2017
2017 2016
Notes GBP'000 GBP'000
ASSETS
NON-CURRENT ASSETS
Trade and other receivables 7 248,100 248,024
CURRENT ASSETS
Trade and other receivables 7 3,419 3,419
Tax receivable 34 34
Cash and cash equivalents 8 1,503 1,521
4,956 4,974
TOTAL ASSETS 253,056 252,998
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital 9 50 50
Retained earnings 10 (1,459) (1,315)
TOTAL EQUITY (1,409) (1,265)
LIABILITIES
NON-CURRENT LIABILITIES
Interest bearing loans
and borrowings 11 247,600 247,372
Deferred tax 12 86 112
247,686 247,484
CURRENT LIABILITIES
Interest bearing loans
and borrowings 11 6,779 6,779
TOTAL LIABILITIES 254,465 254,263
TOTAL EQUITY AND LIABILITIES 253,056 252,998
The financial statements were approved by the Board of Directors
on 24 April 2018 and were signed on its behalf by:
P A Jones
Director
NORTHERN ELECTRIC FINANCE PLC
STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2017
Called up
share Retained Total
capital earnings equity
GBP'000 GBP'000 GBP'000
Balance at 1 January 2016 50 (1,192) (1,142)
Changes in equity
Total comprehensive loss - (123) (123)
Balance at 31 December 2016 50 (1,315) (1,265)
Changes in equity
Total comprehensive loss - (144) (144)
Balance at 31 December 2017 50 (1,459) (1,409)
NORTHERN ELECTRIC FINANCE PLC
STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2017
2017 2016
Notes GBP'000 GBP'000
Cash flows used in operating activities
Cash used in operations 14 (85) (81)
Interest paid (16,967) (16,968)
Interest received 17,030 17,030
Tax received 4 4
Net cash used in operating activities (18) (15)
Decrease in cash and cash equivalents (18) (15)
Cash and cash equivalents
at beginning of year 1,521 1,536
Cash and cash equivalents
at end of year 1,503 1,521
NORTHERN ELECTRIC FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2017
1. GENERAL INFORMATION
Northern Electric Finance plc (the "Company") is a private
company limited by shares incorporated in England and Wales and is
part of the Northern Powergrid Holdings Company group of companies
(the "Northern Powergrid Group"). The address of the registered
office is Lloyds Court, 78 Grey Street, Newcastle-upon-Tyne, NE1
6AF.
The nature of the Company's business model, strategic
objectives, operations and activities are set out in the Strategic
Report.
2. ACCOUNTING POLICIES
Accounting convention and basis of preparation
These financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS"). These
financial statements have also been prepared in accordance with
IFRSs as adopted by the European Union, and with those parts of the
Companies Act 2006 (the "Act") that are applicable to companies
reporting under IFRS.
The financial statements have been prepared under the historical
cost convention.
Historical cost is generally based on the fair value of the
consideration given in exchange for goods and services at the time
of acquisition.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether
that price is directly observable or estimated using another
valuation technique. In estimating the fair value of an asset or a
liability, the Company takes into account the characteristics of
the asset or liability if market participants would take those
characteristics into account when pricing the asset or liability at
the measurement date. Fair value for measurement and/or disclosure
purposes in these consolidated financial statements is determined
on such a basis, except for leasing transactions which are in the
scope of IAS 17, and measurements that have some similarities to
fair value but are not fair value, such as net realisable value in
IAS 2 or value in use in IAS 36.
In addition, for financial reporting purposes, fair value
measurements are categorised into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are
observable and the significance of the inputs to the fair value
measurement in its entirety, which are described as follows:
- Level 1 inputs are quoted prices (unadjusted)
in active markets for identical assets or liabilities
that the entity can access at the measurement
date;
- Level 2 inputs are inputs, other than quoted
prices included within Level 1, that are observable
for the asset or liability, either directly
or indirectly; and
- Level 3 inputs are unobservable inputs for the
asset or liability.
The principal accounting policies are set out below.
Critical judgements in applying accounting policies
There were no critical judgements, apart from those involving
estimations, that the directors have made in the process of
applying the Group's accounting policies and that have the most
significant effect on amounts recognised in the financial
statements.
Key sources of estimation uncertainty
There are no key assumptions concerning the future and other key
sources of estimation uncertainty at the end of the reporting
period that may have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year.
NORTHERN ELECTRIC FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
2. ACCOUNTING POLICIES- continued
Adoption of new or revised standards
Amendments to IFRSs made by the International Accounting
Standards Board ("IASB") that are effective mandatorily for an
accounting period that begins on or after 1 January 2017:
- Annual Improvements to IFRSs 2014-2016 Cycle.
The Annual Improvements to IFRSs 2014-2016 Cycle include a
number of amendments to various IFRSs. The application of these
amendments has had no material impact on the Company's financial
statements.
The Company has not applied the new and revised IFRSs that have
been issued but are not yet effective for the year ending 31
December 2017, the directors of the Company do not anticipate that
the application of the new and revised IFRSs will have significant
impact on the Company's financial statements
Financial instruments
Financial assets and financial liabilities are recognised on the
statement of financial position when the Company becomes a party to
the contractual provisions of the instrument.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities are added to or deducted from the fair value
of the financial assets or financial liabilities, as appropriate,
on initial recognition.
Taxation
The income tax expense represents the sum of the tax currently
payable and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from 'profit before tax' as reported
in the statement of profit or loss because of items of income or
expense that are taxable or deductible in other years and items
that are never taxable or deductible. The Company's current tax is
calculated using tax rates that have been enacted or substantively
enacted by the end of the reporting period.
Current and deferred tax are recognised in profit or loss,
except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case, the
current and deferred tax are also recognised in other comprehensive
income or directly in equity respectively.
Deferred tax is recognised on temporary differences between the
carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation
of taxable profit. Deferred tax liabilities are generally
recognised for all taxable temporary differences. Deferred tax
assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits
will be available against which those deductible temporary
differences can be utilised. Such deferred tax assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition of assets and liabilities in a
transaction that affects neither the taxable profit nor the
accounting profit. In addition, deferred tax liabilities are not
recognised if the temporary difference arises from the initial
recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at each
reporting period and reduced to the extent that that it is no
longer probable that sufficient taxable profits will be available
to allow all or part of the asset to be recovered.
NORTHERN ELECTRIC FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
2. ACCOUNTING POLICIES - continued
Financial assets
Financial assets, including trade and other receivables and cash
and cash equivalents, are classified as loans and receivables.
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. Loans and receivables are measured at amortised cost using
the effective interest method, less any impairment.
The effective interest method is a method of calculating the
amortised cost of an instrument and of allocating income over the
relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash receipts through the
expected life of the instrument to the net carrying amount on
initial recognition.
Interest income is recognised by applying the effective interest
rate, except for short-term receivables when the effect of
discounting is immaterial.
Cash and cash equivalents (which are presented as a single class
of assets on the face of the statement of financial position)
comprise loans advanced to the parent company, 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.
Financial assets are assessed for indicators of impairment at
the end of each reporting period. Financial assets are considered
to be 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 affected.
For certain categories of financial assets, such as trade
receivables, assets are assessed for impairment on a collective
basis even if they were assessed not to be impaired individually.
Objective evidence of impairment for a portfolio of receivables
could include the Company's past experience of collecting payments,
an increase in the number of delayed payments in the portfolio past
the average credit period of 30 days, as well as observable changes
in national or local economic conditions that correlate with
default on receivables.
The carrying amount of the financial asset is reduced by the
impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is
reduced through the use of an allowance account. When a trade
receivable is considered uncollectible, it is written off against
the allowance account. Subsequent recoveries of amounts previously
written off are credited against the allowance account. Changes in
the carrying amount of the allowance account are recognised in the
statement of profit or loss.
Going concern
The directors have, at the time of approving the financial
statements, 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 financial statements. Further detail is contained
within the Going Concern Statement in the Report of the
Directors.
Capital management
The Group manages its capital centrally to ensure that entities
in the Group will be able to continue as going concerns while
maximising the return to stakeholders through the optimisation of
the debt and equity balance. The Group's overall strategy remains
unchanged from 2016.
The capital structure of the Company consists of net debt
(borrowings as detailed in note 11 offset by cash and cash
equivalents (detailed in note 8) and equity of the Company
(comprising issued capital, reserves and retained earnings as
detailed in notes 9 and 10).
The Company is not subject to externally imposed capital
requirements.
NORTHERN ELECTRIC FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
3. NET FINANCE COSTS
2017 2016
GBP'000 GBP'000
Finance income:
Interest receivable on loans
to Group undertakings 17,030 17,030
2017 2016
GBP'000 GBP'000
Finance costs:
Interest payable on other loans 17,181 17,167
Interest payable on loans from Group
Undertakings 14 15
17,195 17,182
Net finance costs 165 152
4. EMPLOYEES AND DIRECTORS
No directors' or key personnel remuneration was charged for the
year (2016: GBPnil). There were no employees during the year (2016:
GBPnil).
At 31 December 2017 no directors accrued benefits under a
defined benefit scheme (2016: one).
5. LOSS BEFORE INCOME TAX
Loss before income tax is stated after charging the following
items:
2017 2016
GBP'000 GBP'000
Fees payable to the Company's auditor
for the audit of the Company's annual
accounts 87
6. INCOME TAX
Analysis of tax income
2017 2016
GBP'000 GBP'000
Current tax (4) (5)
Deferred tax (26) (32)
Total tax income in statement of
profit or loss (30) (37)
NORTHERN ELECTRIC FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
6. INCOME TAX - continued
Factors affecting the tax expense
The tax assessed for the year is lower than the standard rate of
corporation tax in the UK. The difference is explained below:
2017 2016
GBP'000 GBP'000
Loss before income tax (174) (160)
Loss multiplied by the standard
rate of corporation tax in the (33) (32)
UK of 19.25% (2016 - 20.00%)
Effects of:
Changes in legislation -(6)
Other 3 1
Tax income (30) (37)
2017 2016
GBP'000 GBP'000
Tax expense comprises:
Current tax expense:
Corporation tax charge for the year (4) (5)
Total current tax charge (4) (5)
Deferred tax:
Deferred tax expenses relating to
the origination and reversal of (26) (26)
temporary differences
Effect of changes in legislation - (6)
Total deferred tax charge (26) (32)
Tax on profit before tax (30) (37)
The Finance No2 Act 2015 reduced the rate of corporation tax to
19% effective from 1 April 2017 and to 18% effective from 1 April
2020. The Finance Act 2016, which was substantively enacted on 6
September, 2016 further reduced the rate of corporation tax
effective from 1 April 2020 to 17%. Accordingly deferred tax assets
and liabilities have been calculated at the tax rates which will be
in force when the underlying temporary differences are expected to
reverse.
7. TRADE AND OTHER RECEIVABLES
2017 2016
GBP'000 GBP'000
Current:
Prepayments and accrued income 3,419 3,419
Non-current:
Amounts due from group undertakings 248,100 248,024
Aggregate amounts 251,519 251,443
NORTHERN ELECTRIC FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
7. TRADE AND OTHER RECEIVABLES - continued
The fair value of the trade and other receivables as at 31
December 2017 is estimated to be GBP330 million (2016: GBP337
million), determined in accordance with generally accepted pricing
models based on discounted cash flow analysis using prices from
observable market transactions or dealer quotes for similar
instruments.
Amounts due from group undertakings represent the value of loans
made to Northern Powergrid (Northeast) Limited, the Company's
immediate parent, and are at fixed rates of interest. Northern
Powergrid (Northeast) Limited maintains an investment grade credit
rating. Prepayments and accrued income represent the accrued
interest due on these loans. The maximum exposure to risk to the
Company is the book value of these loans.
8. CASH AND CASH EQUIVALENTS
2017 2016
GBP'000 GBP'000
Cash in hand 1,503 1,521
Cash and cash equivalents represent amounts owed by companies
within the Northern Powergrid Group (see related party disclosures
note), 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.
9. CALLED UP SHARE CAPITAL
Allotted, issued and fully paid:
Number: Class: Nominal 2017 2016
value: GBP GBP
50,000 Ordinary shares GBP1 50,000 50,000
10. RESERVES
Retained
earnings
GBP'000
At 1 January 2017 (1,315)
Deficit for the year (144)
At 31 December 2017 (1,459)
Retained
earnings
GBP'000
At 1 January 2016 (1,192)
Deficit for the year (123)
At 31 December 2016 (1,315)
NORTHERN ELECTRIC FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
11. BORROWINGS
The directors' consideration of liquidity, interest rate and
foreign currency risk are described in the Report of the
Directors.
Book Value Fair Value
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
Loans 254,379 254,151 330,029 337,781
254,379 254,151 330,029 337,781
The borrowings are repayable as follows:
On demand or within
one year 6,779 6,779 6,779 6,779
Between one and five
years 99,496 99,343 120,942 128,427
After five years 148,104 148,029 202,308 202,575
254,379 254,151 330,029 337,781
Analysis of borrowings:
2020 - 8.875% bonds 101,345 101,192 122,791 130,276
2035 - 5.125% bonds 153,034 152,959 207,238 207,505
254,379 254,151 330,029 337,781
The fair value of the external borrowings is determined with
reference to quoted market prices.
The fair valuation of the borrowings is based on Level 1
inputs.
The Company's 8.875% 2020 bonds are guaranteed by Northern
Powergrid (Northeast) Limited, its immediate parent company, and
Northern Electric plc. The Company's 5.125% 2035 bonds are
guaranteed by Northern Powergrid (Northeast) Limited and AMBAC
Assurance UK Limited. Borrowings are measured at amortised cost
using the effective interest method.
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 Powergrid (Northeast) 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.
The liquidity risk, credit risk, and market risk associated with
these borrowings, and the management thereof, is covered within
Financial Risk Management on page 3 of these financial
statements.
At 31 December 2017, the Company had no undrawn committed
borrowing facilities.
NORTHERN ELECTRIC FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
11. BORROWINGS
The following tables detail the remaining contractual maturities
for the non-derivative financial liabilities. The tables have been
drawn up based on the discounted cash flows of financial
liabilities based on the earliest possible date on which the
Company can be required to pay. The tables include both interest
and principal cash flows.
Less than 3 months
3 months to 1 year 1 to 5+ years Total
5 years
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2017:
Fixed interest
rate liability -16,563 148,500 249,937 415,000
- 16,563 148,500 249,937 415,000
2016:
Fixed interest
rate liability -16,563 157,375 257,625 431,563
- 16,563 157,375 257,625 431,563
12. DEFERRED TAX
Total
GBP'000
At 1 January 2017 112
Credit to statement of profit
or loss (26)
At 31 December 2017 86
Total
GBP'000
At 1 January 2016 144
Credit to statement of profit
or loss (32)
At 31 December 2016 112
The balance represents deferred tax on unamortised loan issue
costs.
NORTHERN ELECTRIC FINANCE PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
13. RELATED PARTY DISCLOSURES
Transactions entered into and balances outstanding at the year
end were as follows:
Interest Interest Amounts
received paid to owed (to)/
from related related from related
parties parties parties
GBP'000 GBP'000 GBP'000
Related Party
2017:
Northern Powergrid
(Northeast) Limited 17,028 - 251,443
Yorkshire Electricity
Group plc 2 14 1,503
17,030 14 252,946
2016:
Northern Powergrid
(Northeast) Limited 17,027 - 251,443
Yorkshire Electricity
Group plc 3 15 1,520
17,030 15 252,963
14. RECONCILIATION OF LOSS BEFORE INCOME TAX TO
CASH USED IN OPERATIONS
2017 2016
GBP'000 GBP'000
Loss before income tax (174) (160)
Finance costs 17,195 17,182
Finance income (17,030) (17,030)
(9) (8)
Increase in trade and other receivables (76) (73)
Cash used in operations (85) (81)
15. ULTIMATE CONTROLLING PARTY
The immediate parent undertaking of the Company is Northern
Powergrid (Northeast) Limited. The ultimate controlling party and
ultimate parent undertaking of Northern Powergrid (Northeast)
Limited is Berkshire Hathaway, Inc., a company incorporated in the
United States of America.
Copies of the group accounts of Berkshire Hathaway, Inc. (3555
Farnam Street, Omaha, Nebraska 68131) (the parent undertaking of
the largest group preparing group accounts) which include the
Company 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, Northern Powergrid
Holdings 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
FR SESFDMFASESL
(END) Dow Jones Newswires
April 26, 2018 09:09 ET (13:09 GMT)
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