TIDMBD49
RNS Number : 9230T
Electricity North West Limited
29 November 2021
Electricity North West Limited (the "Company") is pleased to
announce its Half Year Financial Report for the period ended 30
September 2021.
The Half Year Report is available to view on the Company's
website:
https://www.enwl.co.uk/about-us/news/stock-exchange-announcements
.
For further information please contact Electricity North West's
press office on 0844 209 1957 or email pressoffice@enwl.co.uk .
Company Registration No. 02366949
ELECTRICITY NORTH WEST LIMITED
Half Year Condensed Consolidated Financial Statements
for the period ended 30 September 2021
Contents
Interim Management
Report.........................................................................................................
1
Condensed Consolidated Statement of Comprehensive
Income..................................................... 5
Condensed Consolidated Statement of Financial
Position...............................................................
6
Condensed Consolidated Statement of Changes in
Equity..............................................................
7
Condensed Consolidated Statement of Cash
Flows........................................................................
8
Notes to the Condensed Consolidated Financial
Statements...........................................................
9
Notes to the Condensed Consolidated Financial
Statements.........................................................
10
Interim Management Report
Cautionary statement
This interim management report contains certain forward-looking
statements with respect to the consolidated financial condition and
business of Electricity North West Limited ("ENWL" or "the
Company") and its subsidiaries (together referred to as "the
Group"). Statements or forecasts relating to events in the future
necessarily involve risk and uncertainty and are made by the
Directors in good faith based on the information available at the
date of signature of this report, with no obligation to update
these forward-looking statements. Nothing in this unaudited interim
management report should be construed as a profit forecast nor
should past performance be relied upon as a guide to future
performance.
Financial statements
The Annual Report and Consolidated Financial Statements of the
Company can be found at www.enwl.co.uk.
Operations
The Group's principal activity is the operation of electricity
distribution assets owned by ENWL. The distribution of electricity
is regulated by the terms of ENWL's Electricity Distribution
Licence granted under the Electricity Act 1989 and monitored by the
Gas and Electricity Markets Authority.
Consolidated results
6 months 6 months Year
ended ended ended
30 Sep 30 Sep 31 Mar
2021 2020 2021
------------------ ---------- ---------- ----------
Revenue GBP216m GBP204m GBP450m
Operating profit GBP82m GBP71m GBP176m
Profit before GBP47m GBP41m GBP123m
tax and fair
value movements
Net cash flow GBP(1)m GBP27m GBP31m
before financing
activities
Net debt GBP1,173m GBP1,121m GBP1,150m
------------------ ---------- ---------- ----------
Revenue
Our revenues are collected, in-part, based on the demand over
the network. To the extent that we do not collect all our allowed
revenues in this year, the regulatory framework adjusts collections
in future years, and therefore this will not have a lasting
economic impact on the Group.
Revenue was GBP12m higher in the six months to 30 September 2021
compared to the same period in the prior year. This is mainly due
to the easing of the COVID-19 restrictions and the associated
increase in electricity demand.
The revenue for the six months to 31 March 2022 is expected to
be higher than that in the six months to 30 September 2021, due to
the seasonally higher volumes of electricity units distributed over
the winter period. The expectation is that they will also be higher
than the equivalent period in the prior year due to the impact of
the easing of COVID-19 restrictions.
Operating profit
Operating profit was GBP11m higher than the six months to
September 2020. This is primarily due to the GBP12m higher
revenue.
Interim Management Report (continued)
Profit before tax and fair value movements
The profit before tax and fair value movements was GBP6m higher
than the same period in the prior year. This is due to the net
effect of the GBP12m higher revenue and GBP6m higher interest
expense (see Note 6).
Net cash flow before financing activities
There was a net cash outflow before financing activities of
GBP1m in the six-months to 30 September 2021, compared to a net
cash inflow of GBP27m in the same period in the prior year, despite
the GBP11m higher operating profit. This was primarily due to a
GBP23m higher working capital cash outflow (Sept21 GBP18m outflow
compared to Sept20 GBP5m inflow), plus GBP3m higher interest
payments and GBP8m higher tax payments.
Net Debt
Net debt increased by GBP23m over the six-months to 30 September
2021. This is due to an GBP8m increase in the index-linked debt
arising from RPI increases (Note 6), and a lower cash balance,
resulting from the net cash outflow before financing activities of
GBP1m, plus the dividend payment of GBP16m.
There was a total of GBP204m repayment of debt in the period,
but this had a zero impact on net debt, reducing both debt and cash
correspondingly.
Dividends
Dividends of GBP16m were declared for the year ended 31 March
2021 and have been paid in the period. The Directors have proposed
an interim dividend of GBP56m for the year ended 31 March 2022.
More details on dividends are given in Note 8.
Retirement benefit scheme
The retirement benefit obligation over the six-month period to
30 September 2021, has decreased from GBP67m to GBP41m. The main
reason for the decrease was primarily due to the higher than
assumed asset returns over the period and the impact of the
Guaranteed Minimum Pensions (GMP) conversion and Pension Increase
Exchange (PIE) exercises, slightly offset by market movements,
specifically an increase of 15 basis points to implied inflation
(see Note 13).
Principal risks and uncertainties
The principal trade and activities of the Group are carried out
in ENWL and a comprehensive review of the strategy and operating
model, the regulatory environment, the resources and principal
risks and uncertainties facing the Company, and ultimately the
Group, are outlined in the Strategic Report of the ENWL Annual
Report and Consolidated Financial Statements for the year ended 31
March 2021, which are available on the website, www.enwl.co.uk.
An assessment of the change in risk has been carried out and the
principal risks are deemed comparable to those at the last annual
report.
Going concern
When considering whether to continue to adopt the going concern
basis in preparing these condensed financial statements, the
Directors have taken into account a number of factors, including
the following:
-- The Company's electricity distribution licence includes the
obligation in standard licence condition 40 to maintain an
investment grade issuer credit rating, which has been met.
-- 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 their activities, which are the subject
of obligations imposed by or under Part 1 of the Electricity Act
1989 or the Utilities Act 2000.
Interim Management Report (continued)
Going concern (continued)
-- Management has prepared, and the Directors have reviewed, the
approved Group budgets for the year ending 31 March 2022 and
forecasts covering the period to the end of the current price
review, at 31 March 2023. These forecasts include projections and
cash flow forecasts, including covenant compliance considerations.
Inherent in forecasting is an element of uncertainty and forecasts
have been sensitised for possible changes in the key assumptions,
including RPI and over/under recoveries of allowed revenue. This
analysis demonstrates that there is sufficient headroom on key
covenants and that sufficient resources are available to the Group
within the forecast period.
-- Assessment of the significance and ongoing development of the COVID-19 pandemic.
-- Assessment of the likely impact on profit and cash from the
increased numbers of energy suppliers entering administration
including the associated bad debt expense and Supplier of Last
Resort (SoLR) payments. While future SoLR payments are likely to be
material, they are matched to associated revenue recovery such that
the net impact on cash flows is minimal (see Note 17).
-- Short-term liquidity requirements are forecast to be met from
the Group's operating cash flow and short-term deposit balances. A
further GBP50m of committed undrawn bank facilities are available
from lenders; these have a maturity of less than one year;.
-- Whilst the utilisation of these facilities is subject to
gearing covenant restrictions, projections to 31 March 2022 and
2023 indicate there is significant headroom on these covenants.
The Board has given detailed consideration to the principal
risks and uncertainties affecting the Group and Company, as
referred to above, and all other known factors which could impact
on the Group and the Company's ability to remain a going
concern.
Consequently, after making appropriate enquiries, the Directors
have a reasonable expectation that the Company and Group have
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis in preparing the Half Year Condensed Consolidated
Financial Statements.
The going concern basis has been adopted by the Directors, with
consideration of the guidance published by the Financial Reporting
Council.
The Board continues to monitor the situation closely, with
flexible plans in place to support short-term liquidity and
long-term stability of the Company.
Ultimate parent undertaking and controlling party
The immediate parent undertaking is North West Electricity
Networks plc ("NWEN plc"), a company incorporated and registered in
the United Kingdom. The ultimate parent undertaking is North West
Electricity Networks (Jersey) Limited ("NWEN (Jersey"), a company
incorporated and registered in Jersey.
The ownership of the shares in NWEN (Jersey) and, therefore, the
ultimate controlling parties of the Company:
-- KDM Power Limited (40.0%);
-- Equitix ENW 6 Limited (25.0%);
-- Equitix MA North HoldCo Limited (15.0%); and
-- Swingford Holdings Corporation Limited (20.0%).
Interim Management Report (continued)
Directors
The Directors who held office during the period are given below.
Directors served for the whole six-months, and to the date of this
report, except where otherwise indicated.
Executive Directors
-- P Emery
-- D Brocksom
Non-executive Directors
-- A Baldock
-- A Buchanan
-- S Cooklin
-- R Holden
-- S Jones
-- P O'Flaherty
-- G Pan
-- S Sumitomo
-- T Tanaka
Alternate Directors during the six-months were:
-- A Bhuwania
-- K Fukushima
-- F Kumura
-- H Yu
Sion Jones, Takeshi Tanaka, Shinichiro Sumitomo and Genping Pan
are shareholder appointed directors and have appointed alternate
directors during their time as Board members. Sion Jones's
alternate is Achal Bhuwania. Takeshi Tanaka's alternate is Kaoru
Fukushima and Shinichiro Sumitomo's alternate is Fukashi Kumura.
Hailin Yu is the alternate to Genping Pan.
Responsibility statement
We confirm that to the best of our knowledge:
-- the condensed set of consolidated financial statements, which
has been prepared in accordance with the applicable set of
accounting standards, gives a true and fair view of the assets,
liabilities, financial position and profit or loss of the issuer,
and the undertakings included in the consolidation as a whole as
required by DTR 4.2.4R;
-- the interim management report includes a fair review of the
information required by DTR 4.2.7R; and
-- the condensed set of consolidated financial statements has
been prepared in accordance with IAS 34 'Interim Financial
Reporting'.
Registered address
Electricity North West Limited
Borron Street
Stockport
Cheshire
SK1 2JD
Approved by the Board of Directors and signed on its behalf:
D Brocksom
Chief Financial Officer
29 November 2021
Consolidated and Company Statement of Profit or Loss and Other
Comprehensive Income
For the period ended 30 September 2021
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2021
Note 2021 2020 GBPm
GBPm GBPm
============================================= ====== ============= ============= ============
Revenue 4 216.2 204.1 449.8
============================================= ====== ============= ============= ============
Employee costs (24.6) (32.8) (59.1)
Depreciation and amortisation expense (62.9) (62.4) (125.9)
Other operating costs (46.4) (38.4) (88.7)
============================================= ====== ============= ============= ============
Total operating expenses (133.9) (133.6) (273.7)
============================================= ====== ============= ============= ============
Operating profit 82.3 70.5 176.1
Investment income 5 0.3 0.4 0.9
Finance expense 6 (95.3) (96.5) (112.2)
============================================= ====== ============= ============= ============
(Loss) / Profit before taxation (12.7) (25.6) 64.8
Taxation 7 (46.2) 5.2 (11.4)
============================================= ====== ============= ============= ============
(Loss)/profit for the year attributable
to equity shareholders of the Company (58.9) (20.4) 53.4
Other comprehensive income/(expense):
Items that will not be reclassified
subsequently to profit or loss:
Re-measurement of net defined benefit
scheme 9.9 (77.0) (55.7)
Deferred tax on remeasurement of
defined benefit scheme (2.5) 14.6 10.6
Adjustment of brought forward deferred
tax due to change in future tax
rates 12.9 - -
Other comprehensive income/(expense)
for the period 20.3 (62.4) (45.1)
============================================= ====== ============= ============= ============
Total comprehensive (expense)/ income
for the period attributable to shareholders (38.6) (82.8) 8.3
============================================= ====== ============= ============= ============
All the results for the current and prior periods are derived
from continuing operations.
Condensed Consolidated Statement of Financial Position
As at 30 September 2021
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2021
Note 2021 2020 GBPm
GBPm GBPm
================================= ====== ============= ============= ============
ASSETS
Non-current assets
Intangible assets and goodwill 60.9 57.2 59.5
Property, plant and equipment 9 3,463.4 3,391.8 3,431.5
3,524.3 3,449.0 3,491.0
================================= ====== ============= ============= ============
Current assets
Inventories 15.2 12.8 14.0
Trade and other receivables 73.6 62.9 75.3
Cash and cash equivalents 101.5 352.8 322.4
190.3 428.5 411.7
================================= ====== ============= ============= ============
Total assets 3,714.6 3,877.5 3,902.7
================================= ====== ============= ============= ============
LIABILITIES
Current liabilities
Trade and other payables (145.7) (154.9) (142.7)
Borrowings 10 (8.9) (208.1) (208.2)
Current tax liabilities (1.5) (4.2) (9.0)
Provisions 14 - (0.1) (0.4)
(156.1) (367.3) (360.3)
================================= ====== ============= ============= ============
Net current assets 34.2 61.2 51.4
Non-current liabilities
Borrowings 10 (1,265.2) (1,266.1) (1,264.1)
Derivative financial instruments 12 (534.5) (483.3) (474.9)
Retirement benefit obligation 13 (41.0) (96.8) (68.6)
Deferred tax (164.0) (129.5) (135.8)
Customer contributions (676.8) (663.3) (667.8)
Provisions 14 (1.6) (1.7) (1.3)
(2,683.1) (2,640.7) (2,612.5)
================================= ====== ============= ============= ============
Total liabilities (2,839.2) (3,008.0) (2,972.8)
================================= ====== ============= ============= ============
Total net assets 875.4 869.5 929.9
================================= ====== ============= ============= ============
EQUITY
Called up share capital 238.4 238.4 238.4
Share premium account 4.4 4.4 4.4
Revaluation reserve 75.1 83.0 81.9
Capital redemption reserve 8.6 8.6 8.6
Retained earnings 548.9 535.1 596.6
================================= ====== ============= ============= ============
Total equity 875.4 869.5 929.9
================================= ====== ============= ============= ============
Approved by the Board of Directors on 29 November 2021 and
signed on its behalf by:
D Brocksom
Director
Condensed Consolidated Statement of Changes in Equity
For the period ended 30 September 2021
Called Share Capital
up share premium Revaluation redemption Retained Total
capital account reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
========================================== ========== ========= ============ ============ ========== ========
At 31 March 2020 (audited) 238.4 4.4 84.1 8.6 616.8 952.3
Loss for the period - - - - (20.4) (20.4)
Other comprehensive expense for the
period - - - - (62.4) (62.4)
Transfer from revaluation reserve - - (1.1) - 1.1 -
Total comprehensive expense for the
period - - - - (81.7) (81.7)
========================================== ========== ========= ============ ============ ========== ========
Equity dividends (Note 8) - - - - - -
========================================== ========== ========= ============ ============ ========== ========
At 30 September 2020 (unaudited) 238.4 4.4 83.0 8.6 535.1 869.5
========================================== ========== ========= ============ ============ ========== ========
At 31 March 2020 (audited) 238.4 4.4 84.1 8.6 616.8 952.3
Profit for the year - - - - 53.4 53.4
Other comprehensive expense for the
year - - - - (45.1) (45.1)
Transfer from revaluation reserve - - (2.2) - 2.2 -
Total comprehensive income/(expense)
for the year - - (2.2) - 10.5 8.3
========================================== ========== ========= ============ ============ ========== ========
Equity dividends (Note 8) - - - - (30.7) (30.7)
========================================== ========== ========= ============ ============ ========== ========
At 31 March 2021 (audited) 238.4 4.4 81.9 8.6 596.6 929.9
========================================== ========== ========= ============ ============ ========== ========
Loss for the period - - - - (58.9) (58.9)
Other comprehensive income for the period - - - - 20.3 20.3
Transfer from revaluation reserve - - (6.8) - 6.8 -
Total comprehensive expense for the
period - - - - (31.8) (38.6)
========================================== ========== ========= ============ ============ ========== ========
Equity dividends (Note 8) - - - (15.9) (15.9)
========================================== ========== ========= ============ ============ ========== ========
At 30 September 2021 (unaudited) 238.4 4.4 75.1 8.6 548.9 875.4
========================================== ========== ========= ============ ============ ========== ========
Condensed Consolidated Statement of Cash Flows
For the period ended 30 September 2021
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2021
Note 2021 2020 GBPm
GBPm GBPm
========================================== ====== ============= ============= ============
Operating activities
Cash generated from operations 16 100.5 117.0 256.4
Interest paid (13.7) (10.6) (51.2)
Tax paid (15.1) (7.2) (16.6)
------------------------------------------ ------ ------------- ------------- ------------
Net cash generated from operating
activities 71.7 99.2 188.6
Investing activities
Interest received and similar income 0.4 0.2 0.8
Purchase of property, plant and
equipment (94.4) (88.0) (185.3)
Purchase of intangible assets (4.1) (3.1) (8.6)
Customer contributions received 25.4 18.5 35.0
Proceeds from sale of property,
plant and equipment 0.3 - 0.1
========================================== ====== ============= ============= ============
Net cash used in investing activities (72.4) (72.4) (158.0)
========================================== ====== ============= ============= ============
Net cash flow before financing activities (0.7) 26.8 30.6
Financing activities
Repayment of external borrowings (3.6) (33.5) (37.0)
Repayment of lease liabilities (0.7) (0.8) (1.5)
Movement of inter-company loan from
parent - 4.1 4.8
Movement of inter-company loan from
group undertaking - 300.0 300.0
Outflow from inter-company loans (200.0) - -
Dividends paid 8 (15.9) - (30.7)
Net cash used in financing activities (220.2) 269.8 (235.6)
========================================== ====== ============= ============= ============
Net (decrease)/increase in cash and
cash equivalents (220.9) 0.9 266.2
-------------------------------------------------- ------------- ------------- ------------
Cash and cash equivalents at beginning
of period 322.4 56.2 56.2
========================================== ====== ============= ============= ============
Cash and cash equivalents at end
of period 101.5 352.8 322.4
========================================== ====== ============= ============= ============
Notes to the Condensed Consolidated Financial Statements
1. General Information
Electricity North West Ltd is a company incorporated in the
United Kingdom, and registered in England and Wales, under the
Companies Act 2006.
The financial information for the six-month period ended 30
September 2021, and similarly the six-month period ended 30
September 2020, has not been audited or reviewed by the auditor.
The financial information for the year ended 31 March 2021 has been
based on information in the audited financial statements for that
year.
The financial information for the year ended 31 March 2021 does
not constitute the statutory financial statements for that year (as
defined in s434 of the Companies Act 2006), but is derived from
those financial statements. Statutory financial statements for 31
March 2021 have been delivered to the Registrar of Companies. The
auditor reported on those financial statements: their report was
unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under s498(2) or s498(3)
of the Companies Act 2006.
2. Significant accounting policies
Basis of preparation
The Annual Report and Consolidated Financial Statements have
been prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006. The
Half Year Condensed Consolidated Financial Statements of the Group
which are unaudited, have been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting'
(IAS 34).
The results for the period ended 30 September 2021 have been
prepared using the same method of computation and the same
accounting policies set out in the Annual Report and Consolidated
Financial Statements of ENWL for the year ended 31 March 2021.
Although some of the Group's operations may be affected by
seasonal factors such as general weather conditions, the Directors
do not feel that this has a material effect on the performance of
the Group, beyond the expected impact on revenue outlined on page
1, when comparing the interim results to those expected to be
achieved in the second half of the year.
These condensed financial statements are prepared on the going
concern basis. Further detail on the going concern assessment is
contained in the Interim Management Report.
These condensed financial statements are presented in sterling,
the functional currency of the Company. All values are stated in
million pounds (GBP'm) unless otherwise indicated.
Changes in accounting policy
There are no accounting policies and standards adopted for the
six-month period ended 30 September 2021, or for the remainder of
the year to 31 March 2022, that have a significant impact on the
Company.
Notes to the Condensed Consolidated Financial Statements
3. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies the
directors are required to make judgements (other than those
involving estimations) that have a significant impact on the
amounts recognised and to make estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors
that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period; or in the period of the revision and future
periods if the revision affects both current and future
periods.
Critical judgements in applying the group's accounting
policies
The following are the critical judgements, apart from those
involving estimations (which are presented separately below), that
the directors have made in applying the Group's accounting policies
and that have the most significant effect on the amounts recognised
in the financial statements.
Property, Plant and Equipment
The Group recognises infrastructure assets where the
expenditures incurred enhance or increase the capacity of the
network, whereas any expenditure classed as maintenance is expensed
in the period it is incurred. Capital projects often contain a
combination of enhancement and maintenance activity which are not
distinct and, therefore, the allocation of costs between capital
and operating expenditure is inherently judgemental. The costs
capitalised include an allocation of overhead costs, relating to
the proportion of time spent by support function staff, which is
also inherently judgemental.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources
of estimation uncertainty that may have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are outlined below.
Impairment of tangible and intangible assets (including
goodwill)
Management assesses the recoverability of tangible and
intangible assets on an annual basis. Determining whether any of
those assets are impaired requires an estimation of the value in
use of the asset to the Group. This value in use calculation
requires the Group to estimate the future cash flows expected to
arise from the asset and a suitable discount rate in order to
calculate present value for the asset and compare that to its
carrying value. This concluded that no impairment loss is required
against those assets.
Notes to the Condensed Consolidated Financial Statements
3. Critical accounting judgements and key sources of estimation uncertainty (continued)
Fair values of derivative financial instruments
In estimating the fair value of derivative financial
instruments, the Group uses market-observable data (Level 1 and 2
inputs) to the extent it is available. Where such data is not
available, certain estimates (Level 3 inputs) regarding inputs to
the valuation are required to be made. Level 3 inputs form a
significant part of the fair value of the financial instruments
held by the Group. Information about the valuation techniques and
inputs used are disclosed in Note 12.
Retirement benefit schemes
The Group's defined benefit obligation is derived using various
assumptions, as disclosed in Note 13. Results can be affected
significantly by the assumptions used, which management decide
based on advice by a firm of actuaries.
Where available, market data is used to value assets, however
for some less liquid assets, up-to-date data is not available,
certain estimates regarding inputs to the valuation are required to
be made, as disclosed in Note 13.
4. Operating segments
Predominantly all Group operations arise from electricity
distribution in the North West of England and associated
activities. Only one operating segment is, therefore, regularly
reviewed by the Chief Executive Officer and Executive Leadership
Team.
The geographical origin and destination of revenue is all within
the United Kingdom. In addition, whilst revenue can fluctuate with
weather conditions, revenues are not affected significantly by
seasonal trends.
Notes to the Condensed Consolidated Financial Statements
(continued)
5. Investment income
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2021
2021 2020 GBPm
GBPm GBPm
======================================= ============= ============= ============
Interest receivable on short-term bank
deposits 0.3 0.4 0.9
======================================= ============= ============= ============
6. Finance expense
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2021
2021 2020 GBPm
GBPm GBPm
=============================================== ============= ============= ============
Interest expense:
Interest on Group borrowings 7.0 8.2 17.5
Interest on borrowings held at amortised
cost 20.2 19.9 40.9
Net interest settlements on derivatives (0.2) (0.3) (9.5)
Indexation of index-linked debt 8.2 2.1 5.7
Reimbursement of impairment on inter-company
loan liability 0.1 0.1 0.1
Interest payable on leases 0.1 0.1 0.2
Net interest on pension plan obligations 0.6 0.3 0.3
Capitalisation of borrowing costs under
IAS 23 (Note 9) (0.3) (0.3) (0.9)
----------------------------------------------- ------------- ------------- ------------
Total interest expense 35.7 30.1 54.3
Fair value movements on financial instruments:
Fair value losses/(gains) on derivatives
(Note 12) 59.6 66.4 57.9
=============================================== ============= ============= ============
Total finance expense 95.3 96.5 112.2
=============================================== ============= ============= ============
Notes to the Condensed Consolidated Financial Statements
(continued)
7. Taxation
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2021
2021 2020 GBPm
Group GBPm GBPm
======================================= ============= ============= ============
Corporation tax:
Current period 7.6 6.5 21.6
Adjustments in respect of prior period - - (0.9)
======================================= ============= ============= ============
7.6 6.5 20.8
======================================= ============= ============= ============
Deferred tax:
Current period (17.1) (11.7) (10.2)
Adjustments in respect of prior period - - 0.8
Impact of change in future tax rates 55.7 - -
38.6 (11.7) (9.4)
======================================= ============= ============= ============
Tax charge/ (credit) for the period 46.2 (5.2) 11.4
======================================= ============= ============= ============
Corporation tax is calculated at 19% (30 Sept 2020: 19%, 31 Mar
2021: 19%) of the estimated assessable profit for the period.
The tax charge in future periods will be affected by the
announcement on 3 March 2021 that the corporation tax rate will be
increased to 25% from 1 April 2023. This was substantively enacted
on 24 May 2021.
Deferred tax is calculated using the rate at which it is
expected to reverse. Accordingly, the deferred tax has been
calculated on the basis that it will reverse in future at the 25%
(2020: 19%) rate, except where it is known that it will reverse
before 1 April 2023 when the 19% rate has been used.
8. Dividends
Amounts recognised as distributions to equity holders in the
year comprise:
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2021
2021 2020 GBPm
GBPm GBPm
======================================= ============= ============= ============
Interim dividends for the year ended
31 March 2021 of 6.44 pence per share - - 30.7
Final dividends for the year ended
31 March 2021 of 3.33 pence per share 15.9 - -
Dividends for the period (Note 15) 15.9 - 30.7
======================================= ============= ============= ============
At the Board meeting in November 2021 the Directors proposed an
interim dividend of GBP56.2m for the year ending 31 March 2022,
subject to approval by equity holders of the Company. This is not
shown as a liability in the financial statements at 30 September
2021.
Notes to the Condensed Consolidated Financial Statements
(continued)
9. Property, plant and equipment
During the period, the Group spent GBP99.8m (30 Sept 2020:
GBP99.2m, 31 Mar 2021: GBP192.9m) on additions to property, plant
and equipment as part of its capital programme for its operating
network. Included in this figure is capitalised interest of GBP0.3m
(30 Sept 2020: GBP0.3m, 31 Mar 2021: GBP0.9m), in accordance with
IAS 23 (see Note 6).
The Company has recognised incremental right of use assets of
GBP4.0m (30 Sept 2020: GBP4.9m, 31 Mar 2021: GBP0.6), in accordance
with IFRS 16 (see Note 11).
10. Borrowings
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2021
2021 2020 GBPm
GBPm GBPm
======================================== ============= ============= ============
Current liabilities:
Bank and other term borrowings 7.4 7.1 7.1
Lease liabilities (Note 11) 1.5 1.4 1.3
Amounts owed to group undertaking (Note
12, 15) - 199.6 199.8
======================================== ============= ============= ============
8.9 208.1 208.2
Non-current liabilities:
Bonds (Note 12) 629.2 632.2 631.9
Bank and other term borrowings 252.3 250.0 248.2
Lease liabilities (Note 11) 2.9 3.7 3.3
Amounts owed to parent undertaking
(Note 15) 82.2 81.5 82.2
Amounts owed to group undertaking (Note
12, 15) 298.6 298.7 298.5
---------------------------------------- ------------- ------------- ------------
1,265.2 1,266.1 1,264.1
======================================== ------------- ------------- ============
Total borrowings 1,274.1 1,474.2 1,472.3
======================================== ============= ============= ============
As at 30 Sept 2021 the Group had GBP50.0m of unutilised
committed bank facilities (30 Sept 2020: GBP50.0m, 31 Mar 2021:
GBP50.0m).
The Group's debt facilities expire between 2022 and 2046.
Notes to the Condensed Consolidated Financial Statements
(continued)
11. Leases
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2021
2021 GBPm 2020 GBPm GBPm
================================== ============= ============= ============
Lease assets:
Land and buildings 2.1 2.5 2.3
Telecom 0.1 0.2 0.1
Vehicles 1.8 2.2 1.9
---------------------------------- ------------- ------------- ------------
Total assets 4.0 4.9 4.3
---------------------------------- ------------- ------------- ------------
Lease liabilities:
Land and buildings 2.4 2.7 2.6
Telecom 0.1 0.2 0.1
Vehicles 1.9 2.2 1.9
---------------------------------- ------------- ------------- ------------
Total liabilities (Note 10) 4.4 5.1 4.6
================================== ============= ============= ============
The lease liabilities have been discounted at 5% for land and
buildings and telecoms, and 6% for vehicles.
Notes to the Condensed Consolidated Financial Statements
(continued)
12. Financial instruments
Fair values
All of the fair value measurements recognised in the statement
of financial position for the Group and Company occur on a
recurring basis.
Where available, market values have been used to determine fair
values (see Level 1 in the fair value hierarchy overleaf).
Where market values are not available, fair values have been
calculated by discounting future cash flows at prevailing interest
and RPI rates sourced from market data (see Level 2 in the fair
value hierarchy overleaf). In accordance with IFRS 13, an
adjustment for non-performance risk has then been made to give the
fair value.
The non-performance risk has been quantified by calculating
either a credit valuation adjustment (CVA) based on the credit risk
profile of the counterparty, or a debit valuation adjustment (DVA)
based on the credit risk profile of the relevant group entity,
using market-available data.
Whilst the majority of the inputs to the CVA and DVA
calculations meet the criteria for Level 2 inputs, certain inputs
regarding the Group's credit risk are deemed to be Level 3 inputs,
due to the lack of market-available data. The credit risk profile
of the Group has been built using the few market-available data
points, e.g. credit spreads on the listed bonds, and then
extrapolated over the term of the derivatives. It is this
extrapolation that is deemed to be Level 3. All other inputs to
both the underlying valuation and the CVA and DVA calculations are
Level 2 inputs.
For certain derivatives, the Level 3 inputs form an
insignificant part of the fair value and, as such, these
derivatives are disclosed as Level 2. Otherwise, the derivatives
are disclosed as Level 3.
The adjustment for non-performance risk as at 30 Sept 2021 is
GBP72.3m (30 Sept 2020: GBP88.2m, 31 Mar 2021: GBP76.4m), of which
GBP51.9m (30 Sept 2020: GBP87.9m, 31 Mar 2021: GBP73.4m) is classed
as Level 3.
The following table shows the sensitivity of the fair values of
derivatives disclosed as Level 3 to the Level 3 inputs, determined
by applying a 10bps shift to the credit curve used to calculate the
DVA.
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 2021 30 Sept 2020 31 Mar 2021
-10bps +10bps -10bps +10bps -10bps +10bps
GBPm GBPm GBPm GBPm GBPm GBPm
============ ======= ====== ======= ====== ====== ======
Derivatives (3.6) 4.1 (5.9) 5.7 (2.1) 12.0
============ ======= ====== ======= ====== ====== ======
On entering certain derivatives, the valuation technique used
resulted in a fair value loss. As this, however, was neither
evidenced by a quoted price nor based on a valuation technique
using only data from observable markets, this loss on initial
recognition was not recognised. This was supported by the
transaction price of nil. This difference is being recognised in
profit or loss on a straight-line basis over the life of the
derivatives. The aggregate difference yet to be recognised in
profit or loss is GBP50.9m (30 Sept 2020: GBP55.1m, 31 Mar 2021:
GBP53.0m). The movement in the period all relates to the
straight-line release to profit or loss.
Notes to the Condensed Consolidated Financial Statements
(continued)
12. Financial instruments (continued)
Fair values (continued)
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2021
2021 2020 GBPm
GBPm GBPm
========================================= ============= ============= ============
FV of derivatives pre IFRS 13 adjustment (657.6) (626.6) (604.3)
CVA/ DVA 72.3 88.2 76.4
Day 1 adjustments 50.9 55.1 53.0
----------------------------------------- ------------- ------------- ------------
IFRS 13 FV of derivatives (534.4) (483.3) (474.9)
========================================= ============= ============= ============
The value of derivatives is disclosed gross of any collateral
held. At 30 September 2021, the Group held GBPnil (30 Sept 2020:
GBPnil, 31 Mar 2021: GBPnil) as collateral in relation to
derivative financial instruments, included within current
liabilities. The cash collateral does not meet the offsetting
criteria in IAS 32: 42, but it can be set off against the net
amount of the derivatives in the case of default and insolvency or
bankruptcy, in accordance with associated collateral
arrangements.
The following table provides an analysis of the Group's
financial instruments that are measured subsequent to initial
recognition at fair value, grouped into Levels 1 to 3 based on the
degree to which the fair value is observable:
-- Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
-- Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
-- Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2021
2021 2020 GBPm
GBPm GBPm
================================== ============= ============= ============
Derivative financial liabilities;
Level 1 - - -
Level 2 (261.7) (56.0) (59.9)
Level 3 (272.7) (427.3) (415.0)
---------------------------------- ------------- ------------- ------------
(534.4) (483.3) (474.9)
================================== ============= ============= ============
Notes to the Condensed Consolidated Financial Statements
(continued)
12. Financial instruments (continued)
During the six-months to 30 September 2021, swaps with fair
value of GBP182.6m were transferred from Level 3 to Level 2 (30
Sept 2020: GBP40.7m, 31 Mar 2021: GBP33.1m); swaps with fair value
of GBP4.6m were transferred from Level 2 to Level 3 (30 Sept 2020:
GBPnil, 31 Mar 2021: GBPnil). The transfers were principally due to
a change in the significance of the unobservable inputs used to
derive the Group's credit curve for the DVA, as described in this
section above. Any transfers between levels are determined and
recognised at the end of the reporting period.
The following table provides a reconciliation of the fair value
amounts disclosed as Level 3.
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2021
2021 2020 GBPm
GBPm GBPm
======================================= ============= ============= ============
Opening balance (415.0) (404.3) (404.3)
On new instruments in the period - (1.6) -
Transfers from Level 3 into Level 2 182.6 40.7 33.1
Transfers from Level 2 into Level 3 (4.6) - -
Total gains or losses in profit or
loss:
-On instruments carried forward in
Level 3 (35.7) (62.1) (43.8)
======================================= ============= ============= ============
Closing balance (272.7) (427.3) (415.0)
======================================= ============= ============= ============
For cash and cash equivalents, trade and other receivables and
trade and other payables the book values approximate to the fair
values because of their short-term nature.
Except as detailed in the following table, the carrying amounts
of financial assets and financial liabilities recorded at amortised
cost in the financial statements are approximately equal to their
fair values. The fair values shown in the table below are derived
from market values and, therefore, meet the Level 1 criteria.
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2021
2021 2020 GBPm
GBPm GBPm
=========================================== ============= ============= ============
Carrying value:
Bonds held at amortised cost (Note
10) (629.2) (632.2) (631.9)
Amounts owed to affiliated undertaking
(Note 10) (298.6) (498.3) (498.3)
Fair value:
Bonds held at amortised cost (Note
10) (867.7) (896.3) (1,181.1)
Amounts owed to affiliated undertaking
(Note 10) (290.1) (513.7) (493.5)
=========================================== ============= ============= ============
Notes to the Condensed Consolidated Financial Statements
(continued)
13. Retirement benefit schemes
Defined benefit schemes
The defined benefit surplus/obligation is calculated using the
latest actuarial valuation as at 31 March 2019 and has been
projected forward by an independent actuary to take account of the
requirements of IAS 19 'Employee Benefits' in order to assess the
position at 30 September 2021 for the purpose of these financial
statements. The present value of the defined benefit
surplus/obligation, the related current service cost and the past
service cost were measured using the projected unit credit method.
The defined benefit plan assets have been updated to reflect their
market value as at 30 September 2021. Differences between the
expected return on assets and the actual return on assets have been
recognised as an actuarial gain or loss in the statement of
comprehensive income in accordance with the Group's accounting
policy.
The decrease in the defined benefit obligation over the
six-month period to 30 September 2021 to GBP41.0m (30 Sept 2020:
GBP96.8m, 31 Mar 2021: GBP68.6m ), was primarily due to the higher
than assumed asset returns over the period and the impact of the
GMP conversion/ Pension Increase Exchange (PIE) exercises, slightly
offset by market movements, specifically an increase of 15 basis
points to implied inflation.
14. Provisions
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2021
2021 2020 GBPm
GBPm GBPm
================================ ============= ============= ============
Opening Balance 1.7 1.8 1.8
Charged to the income statement - - 0,.1
Utilisation of provision (0.1) - (0.2)
================================ ============= ============= ============
Closing balance 1.6 1.8 1.7
================================ ============= ============= ============
Current - 0.1 0.4
Non-current 1.6 1.7 1.3
================================ ============= ============= ============
Closing balance 1.6 1.8 1.7
================================ ============= ============= ============
The Company is part of a Covenanter Group (CG) which is party to
a Deed of Covenant under which certain guarantees over the benefits
of members of the EATL Group of the Electricity Supply Pension
Scheme have been given. The Company has recognised a GBP1.6m
provision on a discounted basis at 30 Sept 2021 (30 Sept 2020:
GBP1.7m, 31 Mar 2021: GBP1.5m) relating to the Company's 6.7% share
of the liabilities.
Notes to the Condensed Consolidated Financial Statements
(continued)
15. Related party transactions
Loans are made between companies in the North West Electricity
Networks (Jersey) Group on which varying rates of interest are
chargeable. Transactions between the Company and its subsidiaries,
which are related parties, have been eliminated on consolidation
and are not disclosed in this note. During the period, the
Electricity North West Ltd Group companies entered into the
following transactions with related parties who are not members of
that Group:
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2021
2021 2020 GBPm
GBPm GBPm
============================================== ============= ============= ============
Recharges to:
Electricity North West (Construction
and Maintenance) Ltd (0.2) 0.5 1.7
Electricity North West Services Ltd 1.2 0.8 1.2
Recharges from:
Electricity North West (Construction
and Maintenance) Ltd - (0.4) (0.4)
Electricity North West Services Ltd - (2.1) (5.0)
Interest payable to:
North West Electricity Networks plc (1.1) (1.0) (2.0)
ENW Finance plc (5.9) (7.2) (15.5)
---------------------------------------------- ------------- ------------- ------------
Interest on group borrowings (Note 6) (7.0) (8.2) (17.5)
---------------------------------------------- ------------- ------------- ------------
Reimbursement on intercompany loan impairment
ENW Finance plc - (0.1) -
Dividends paid to North West Electricity
Networks plc (Note 8) (15.9) - (30.7)
Directors' remuneration (1.2) (1.1) (2.3)
============================================== ============= ============= ============
Notes to the Condensed Consolidated Financial Statements
(continued)
15. Related party transactions (continued)
Amounts outstanding between the Group and other companies within
the North West Electricity Networks (Jersey) Limited Group:
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2021
2021 2020 GBPm
GBPm GBPm
=========================================== ============= ============= ============
Amounts owed by:
North West Electricity Networks plc 3.4 3.4 3.4
Electricity North West (Construction
and Maintenance) Ltd 0.3 0.5 1.1
Electricity North West Services Ltd 0.3 0.7 0.4
Electricity North West Property Ltd 0.1 0.1 0.1
North West Electricity Networks (Jersey)
Ltd 0.9 0.9 0.9
North West Electricity Networks (Holdings)
Ltd 0.2 0.2 0.2
------------------------------------------- ------------- ------------- ------------
Total 5.2 5.8 6.1
------------------------------------------- ------------- ------------- ------------
Amounts owed to:
Electricity North West Services Ltd (0.3) (0.5) (0.7)
North West Electricity Networks (Holdings)
Ltd - - (0.1)
North West Electricity Networks (Jersey)
Ltd - - (0.1)
Interest payable to:
North West Electricity Networks plc (0.6) (0.6) (0.6)
ENW Finance plc (0.7) (3.2) (5.5)
Reimbursement on intercompany loan
impairment ENW Finance Plc - (0.1)
Borrowings payable to (Note 10):
North West Electricity Networks plc (82.2) (81.5) (82.2)
ENW Finance plc (298.6) (498.3) (498.3)
Group tax relief to:
North West Electricity Networks plc (5.5) - (8.7)
The loan from North West Electricity Networks plc accrues
weighted average interest at 2.53% per annum (30 Sept 2020: 2.54%,
31 Mar 2021: 2.53%) and is repayable in March 2023.
The loan from ENW Finance plc accrues interest at a fixed rate
of 1.415% and is repayable in July 2030. During the six-months to
30 September 2021 a GBP200m loan at a fixed rate of 6.125% was
repaid on maturity, in July 2021.
Notes to the Condensed Consolidated Financial Statements
(continued)
16. Cash generated from operations
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 Sept 30 Sept 31 Mar 2021
2021 2020 GBPm
GBPm GBPm
=========================================== ============= ============= ============
Operating profit 82.3 70.5 176.1
Adjustments for:
Depreciation of property, plant and
equipment 60.3 62.4 120.0
Amortisation of intangible assets 2.6 - 5.9
Amortisation of customer contributions (9.7) (9.3) (18.9)
Profit on disposal of property, plant
and equipment - - (0.1)
Cash contributions in excess of pension
charge to operating profit (17.3) (11.3) (20.7)
=========================================== ============= ============= ============
Operating cash flows before movement
in working capital 118.2 112.3 262.3
Changes in working capital:
(Increase)/decrease in inventories (1.2) (2.0) (3.2)
Decrease/(increase) in trade and other
receivables 1.7 (0.9) (11.8)
(Decrease)/increase in provisions and
payables (18.2) 7.6 9.1
=========================================== ============= ============= ============
Cash generated from operations 100.5 117.0 256.4
=========================================== ============= ============= ============
17. Contingent liability
Following significant price increases in the wholesale energy
markets in the Autumn of 2021, several energy suppliers, from whom
ENWL collects revenue associated with the use of its distribution
network, have entered administration. As at 30 September 2021,
there was a bad debt expense in relation to these supplier
administrations of GBP1.1m, which has been reflected in the income
statement in these interim financial statements. This bad debt
expense will be recovered through increased use of system charges
in future periods.
The supplier administration process, managed by the industry
regulator Ofgem, appoints a Supplier of Last Resort (SoLR) in the
event of an energy supplier entering administration, is designed to
protect the consumer. There are certain costs associated with
taking on these customers that the appointed SoLR can recover.
These costs are referred to as a SoLR levy and are paid for by the
distribution networks at the same time as such costs are also
collected through the network companies' distribution charges. As
such the payment and subsequent recovery of SoLR claims will impact
the income and expense of the Company in future periods. As at the
balance sheet date, No valid claims had been recorded and there was
no liability recorded for such claims, nor were any claims payable
in the period to 30 September 2021. It is expected that a
significant value will be claimed by the suppliers through the SoLR
process and as a consequence there will be an equivalent increase
in revenues for the corresponding period, with a neutral cash
impact. The total value of the claims, and associated recovery, is
currently uncertain and cannot be reliably estimated.
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END
IR ZKLFLFFLXFBK
(END) Dow Jones Newswires
November 29, 2021 09:44 ET (14:44 GMT)
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