This announcement is in respect of NIE Finance PLC’s bonds
- £350,000,000 2.5 per cent Guaranteed Notes due 2025
(ISIN XS1820002308); and
- £400,000,000 6.375 per cent Guaranteed Notes due 2026
(ISIN XS0633547087)
each unconditionally and irrevocably guaranteed by Northern
Ireland Electricity Networks Limited.
Northern Ireland Electricity Networks Limited’s Unaudited
Interim Report and Financial Statements for the six months ended
30 June 2021 (non statutory) have
been submitted to the National Storage Mechanism and will shortly
be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism and are
available on Northern Ireland Electricity Networks Limited’s
website at
http://www.nienetworks.co.uk/about-us/investor-relations
Contact for enquiries: NIE Networks Corporate Communications –
telephone 0845 300 3356
The report and financial statements follow below.
INTERIM MANAGEMENT REPORT six months
to 30 June 2021
The directors present their interim management report for
Northern Ireland Electricity Networks Limited (NIE Networks or the
Company) and its subsidiary undertakings (the Group) for the six
months ended 30 June 2021.
This interim financial report does not include all the notes of
the type normally included in an annual financial report.
Accordingly, this report should be read in conjunction with the
annual report for the year ended 31 December
2020.
NIE Networks is part of the Electricity Supply Board (ESB), the
vertically integrated energy group based in the Republic of
Ireland. NIE Networks is an independent business within ESB
with its own Board of Directors, management and staff.
Directors who held office during the period and to the date
of approving this report are: Dame Rotha
Johnston (independent non-executive Chair of the Board),
Alan Bryce (independent
non-executive Director), Keith Jess
(independent non-executive Director), Paul
Stapleton (Managing Director) and Gordon Parkes (Human Resources Director).
NIE Networks is the owner of the electricity transmission and
distribution networks in Northern
Ireland and is the electricity distribution network
operator, serving around 895,000 customers connected to the
network.
The Group's principal activities are:
- constructing and maintaining the electricity
transmission and distribution networks in Northern Ireland and operating the
distribution network;
- connecting demand and renewable generation customers to
the transmission and distribution networks; and
- providing electricity meters in Northern Ireland and providing metering data
to suppliers and market operators to enable wholesale and retail
settlement.
Business Update
Price Control
NIE Networks is regulated by the Northern Ireland Authority for
Utility Regulation (the Utility Regulator) and is subject to
periodic reviews in respect of the prices it may charge for use of
the transmission and distribution networks in Northern
Ireland.
Regulatory Period 6 (RP6)
commenced on 1 October 2017 and will
apply for the period to 31 March
2024.
The RP6 price control set ex-ante
allowances of £745 million for capital investment and £487
million in respect of operating costs (2020-21 prices). The
allowances in respect of major transmission load growth
projects are considered on a case-by-case basis, for example, the
North-South Interconnector. The allowances will be adjusted to
reflect 50% of the difference between the allowances and
actual costs incurred. NIE Networks’ Connections business is
largely outside the scope of the RP6
price control following the introduction of contestability.
The RP6 baseline rate of return of
3.14% plus inflation (weighted average cost of capital based on
pre-tax cost of debt and post-tax cost of equity) will be adjusted
to reflect the cost of new debt raised in RP6. This mechanism was introduced at the start
of RP6, departing from the former
approach of setting an ex-ante allowance, and will align the cost
of debt component of the return more closely with prevailing market
conditions at the time of drawdown of new debt.
Covid-19
NIE Networks’ Crisis Management Team and Executive Committee
continue to co-ordinate the Company’s response to addressing the
challenges posed by the ongoing Covid-19 pandemic in line with
Government guidance, restrictions and safety protocols. At the
onset of the pandemic in 2020, the Company identified three main
priorities:
- protect the safety, health and wellbeing of our
employees and customers;
- maintain a reliable electricity supply to our customers
across Northern Ireland; and
- protect our business to safeguard employment and enable
a successful return to normal operations.
The steps taken by the Company and its staff in adapting its
working environments to deal with the challenges posed by Covid-19
have ensured that the Company has been able to deliver planned work
programmes and maintain a reliable electricity service to its
customers. Management continues to monitor the ongoing impact of
the pandemic and has taken steps to mitigate the operational and
financial impacts on the Company and ensure the health, safety and
wellbeing of its employees.
Financial
results
Operating Profit
The Group’s operating profit for the six-month period decreased
from £67.9m to £60.7m. Group revenue of £146.5m has decreased by
£9.3m primarily reflecting an £18.0m decrease in revenues
associated with the Public Service Obligation (PSO); offset by a
£7.6m increase in Distribution Use of System (DUoS) revenue.
Higher DUoS revenue is reflective of
an increase in the Group’s investment in its Regulated Asset Base.
Group operating costs of £85.8m have decreased by £2.1m,
predominantly due to the non-recurrence of additional operational
costs incurred in the prior period when restrictions on capital
work programmes resulted in higher net payroll costs being charged
to the Income Statement.
PSO revenue allows NIE Networks to recover the net cost of
supporting industry programmes such as the Northern Ireland
Sustainable Energy Programme. PSO revenue is earned over time in
line with the use of system by suppliers under the schedule of
entitlement set by the Utility Regulator for each tariff period.
Over time, PSO related income and costs net to nil, albeit there
are timing differences between the receipt of revenue and payment
of costs. The net PSO expense included in operating profit in the
current period is £7.1m (2020: net PSO income £11.2m).
Tax Charge
In March 2021 the UK Government
announced that future Corporation Tax rates would increase from the
current rate of 19% to 25%, effective from 1
April 2023. The effect of the increase in the expected
future Corporation Tax rate has resulted in a one-off charge to the
Income Statement of £35.8m in the current period.
FFO Interest Cover
The ratio of Funds from Operations (FFO) to interest paid
decreased to 3.3 times for the period (six months to 30 June 2020 - 3.5 times), reflecting a decrease
in funds from operations during the period.
Net Assets
The Group's net assets of £499.2m have increased by £74.2m in
the six months to 30 June 2021
reflecting re-measurement gains (net of tax) on pension scheme
liabilities of £65.6m and a deferred tax credit recognised in
equity relating to the change in future tax rate of £11.0m; offset
by a loss after tax of £2.4m.
Cash Flow
Cash and cash equivalents decreased by £1.7m in the period
reflecting net cash inflows from operating activities of £50.6m,
investing activity outflows of £50.7m reflecting the Group’s
continued investment in the network and financing activity outflows
of £1.6m. The Group’s Revolving Credit Facility (RCF) was not
utilised during the period.
Operations
Key Performance Indicators (KPIs) are used to measure progress
towards achieving operational objectives. Performance during
the period is summarised below:
| KPIs |
Six
months ended |
Year ended |
|
30 June |
31 December |
|
2021 |
2020 |
2020 |
Health and
Safety:
Fatality
Lost time incidents (number of) |
None
None |
None
None |
1
2 |
Network Performance: |
|
|
|
Customer Minutes Lost (CML):
- Planned CML (minutes)
- Fault CML (minutes) |
18
16 |
12
22 |
33
41 |
| Customer Service: |
|
|
|
| Overall standards – failures
(number of) |
1 |
None |
None |
| Guaranteed standards – defaults
(number of) |
None |
None |
None |
| Stage 2 complaints to the Consumer
Council |
None |
None |
2 |
|
|
|
|
| Connections: |
|
|
|
| Customer demand connections
completed including non-recoverable alterations (number
of) |
2,293 |
1,829 |
4,051 |
Sustainability: |
|
|
|
| Reduction in non-network carbon
emissions |
5.9% |
18.7% |
11.0% |
| Waste recycling rate (%) |
97.3% |
97.0% |
92.7% |
|
|
|
|
| Staffing: |
|
|
|
| Headcount (at 30 June/31
December) |
1,205 |
1,202 |
1,200 |
| Absenteeism (%) |
3.21% |
3.11% |
2.86% |
Health and Safety
Ensuring the safety of employees, contractors and the general
public continued to be the number one value at the core of all NIE
Networks' business operations. The aim is to provide a zero
harm working environment where risks to health and safety are
assessed and controlled. There were no lost time incidents during
the period (2020 – None).
The Company’s “Safer Together – Our Pathway to Zero Harm” plan
was developed as an enabling action plan to improve adherence to
our safety value, reduce the risk of harm and improve the wellbeing
of our staff within the organisation. It was developed using
feedback from safety focus groups held in October 2020 and the wider organisation learning
arising from inquiries into a number of serious incidents and a
fatal incident at Drumnakelly Main substation in August 2020.
The Safer Together Programme aims to refocus our commitment to
our safety value, through promoting an open and proactive safety
culture with the full involvement of all. This is being reinforced
through strong and visible leadership and the development of a
series of safety improvements.
A significant number of initiatives have been identified across
the Company, with the majority of these expected to be completed
and implemented by the end of 2021.
Network Performance
The average number of minutes lost per consumer through
pre-arranged shutdowns for maintenance and construction (Planned
CML) increased from 12 to 18 minutes from the same period last
year, primarily due to reduced work programmes in 2020 as a result
of Covid-19 restrictions which resulted in fewer outages for
customers. CML through distribution fault interruptions (Fault CML)
decreased from 22 minutes in the prior period to 16 minutes in the
current period.
Customer Service
The Utility Regulator sets overall and guaranteed standards for
NIE Networks' performance. There were no defaults against the
guaranteed standards for customer service activities during the
period (2020 – none) and the overall standards were achieved with
the exception of one standard in relation to obtaining customer
meter readings which was impacted by Covid-19 restrictions. As a
result of Covid-19 restrictions, the number of visits to customer
properties to obtain a meter reading reduced, however additional
interventions including increased use of online and mobile text
messaging for customers to submit meter readings were introduced,
resulting in obtaining a meter reading for 99.1% of customers
against an overall target of 99.5%. There were no Stage 2
complaints taken up by the Consumer Council during the period (2020
– none).
Connections
The number of customer demand connections completed during the
period increased compared with the prior period due to fewer
Covid-19 related restrictions on work programmes in the six months
to June 2021.
A significant milestone in Northern Ireland’s energy history was
reached during 2019 when the long-term target of ‘40% of
electricity consumption being produced from renewable sources by
2020’ was achieved. The latest statistics show that over 45% of
annual electricity consumption in Northern Ireland for the twelve months to
30 June 2021 was generated from
renewable sources. This has been supported through the connection
of approximately 1.7GW of renewable capacity to the network by NIE
Networks and with a further 0.3GW capacity committed to be
connected, the total connected renewable capacity is expected to
reach nearly 2.0GW by 2023.
NIE Networks has continued to participate in the Connections
Innovation Working Group to consider and progress appropriate
solutions which facilitate the connection of further Distributed
Energy Resources in Northern
Ireland.
Sustainability
The Company has reduced its non-network carbon emissions by 5.9%
during the current period against the 2019 baseline year. The
Company has achieved this through a range of measures including
improving the energy efficiency of work locations and reducing
business travel.
The recycling rate for all hazardous and non-hazardous waste
(excluding excavation from roads and footpaths, civil projects
excavation and asbestos removal) continued at a high level with
97.3% of waste recycled during the period.
Staffing
The total number of staff employed by the Company remained
broadly consistent with the prior period. Absenteeism levels,
including absences attributable to Covid-19, have also remained
broadly consistent at 3.21% (2020: 3.11%).
Principal Risks and Uncertainties
The principal risks and uncertainties facing NIE Networks for
the remainder of the financial year, which are managed under NIE
Networks' risk management framework, are as set out in the Group's
latest annual report for the year to 31
December 2020 which is available at
www.nienetworks.co.uk.
Related parties
Related party disclosures are given in note 9.
GROUP INCOME STATEMENT
|
|
Six months ended
30
June |
|
Year ended
31 December |
|
Note |
2021
Unaudited
£m |
|
2020
Unaudited
£m |
|
2020
Audited
£m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue |
2 |
146.5 |
|
155.8 |
|
302.2 |
|
|
|
|
|
|
|
| Operating costs |
|
(85.8) |
|
(87.9) |
|
(172.5) |
|
|
-------------- |
|
-------------- |
|
-------------- |
| OPERATING PROFIT |
|
60.7 |
|
67.9 |
|
129.7 |
|
|
-------------- |
|
-------------- |
|
-------------- |
Finance revenue
Finance costs |
|
-
(17.5) |
|
-
(17.5) |
|
0.1
(35.3) |
| Net pension scheme interest |
|
(0.6) |
|
(1.0) |
|
(1.8) |
|
|
-------------- |
|
-------------- |
|
-------------- |
| Net finance costs |
|
(18.1) |
|
(18.5) |
|
(37.0) |
|
|
-------------- |
|
-------------- |
|
-------------- |
| PROFIT BEFORE TAX |
|
42.6 |
|
49.4 |
|
92.7 |
|
|
|
|
|
|
|
| Tax charge |
3 |
(45.0) |
|
(21.3) |
|
(29.3) |
|
|
-------------- |
|
-------------- |
|
-------------- |
| (LOSS) / PROFIT FOR THE PERIOD /
YEAR ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT
COMPANY |
|
(2.4)
======== |
|
28.1
======== |
|
63.4
======== |
| GROUP
STATEMENT OF COMPREHENSIVE INCOME |
|
|
Six months ended
30
June |
|
Year ended
31 December |
|
|
2021
Unaudited
£m |
|
2020
Unaudited
£m |
|
2020
Audited
£m |
|
|
|
|
|
|
|
| (Loss) / profit for the financial
period / year |
|
(2.4) |
|
28.1 |
|
63.4 |
|
|
-------------- |
|
-------------- |
|
-------------- |
| Other comprehensive income /
(expense): |
|
|
|
|
|
|
| Re-measurement gains / (losses) on
pension scheme assets and liabilities |
|
87.4 |
|
(75.3) |
|
(17.8) |
| Deferred tax (charge) / credit
relating to components of other comprehensive income |
|
(21.8) |
|
14.3 |
|
3.4 |
| Change in deferred tax rate relating
to components of other comprehensive income |
|
11.0 |
|
3.3 |
|
3.3 |
|
|
-------------- |
|
-------------- |
|
-------------- |
| Net other comprehensive income /
(expense) for the period / year |
|
76.6 |
|
(57.7) |
|
(11.1) |
Total net comprehensive income / (expense) for the period /
year |
|
--------------
74.2
======== |
|
--------------
(29.6)
======== |
|
--------------
52.3
======== |
GROUP BALANCE SHEET
|
|
|
As at |
|
As at |
|
|
|
30 June |
|
31 December |
|
Note |
|
2021
Unaudited
£m |
|
2020
Unaudited
£m |
|
2020
Audited
£m |
| Non-current assets |
|
|
|
|
|
|
|
| Property, plant and equipment |
4 |
|
1,917.7 |
|
1,862.2 |
|
1,888.3 |
| Intangible assets |
4 |
|
17.4 |
|
18.0 |
|
17.8 |
| Right of use leased assets |
4 |
|
10.5 |
|
12.0 |
|
11.7 |
| Derivative financial assets |
6 |
|
530.0 |
|
530.6 |
|
513.0 |
|
|
|
-------------- |
|
-------------- |
|
-------------- |
|
|
|
2,475.6 |
|
2,422.8 |
|
2,430.8 |
|
|
|
-------------- |
|
-------------- |
|
-------------- |
| Current assets |
|
|
|
|
|
|
|
| Inventories |
|
|
17.2 |
|
17.3 |
|
18.3 |
| Trade and other receivables |
|
|
42.5 |
|
47.9 |
|
60.6 |
| Current tax asset |
|
|
2.0 |
|
1.9 |
|
- |
| Derivative financial assets |
6 |
|
22.9 |
|
17.0 |
|
19.0 |
| Cash and cash equivalents |
|
|
19.8 |
|
30.4 |
|
21.5 |
|
|
|
-------------- |
|
-------------- |
|
-------------- |
|
|
|
104.4 |
|
114.5 |
|
119.4 |
|
|
|
-------------- |
|
-------------- |
|
-------------- |
| TOTAL ASSETS |
|
|
2,580.0 |
|
2,537.3 |
|
2,550.2 |
|
|
|
-------------- |
|
-------------- |
|
-------------- |
| Current liabilities |
|
|
|
|
|
|
|
| Trade and other payables |
|
|
69.0 |
|
79.0 |
|
84.6 |
| Current tax payable |
|
|
- |
|
2.8 |
|
2.7 |
| Deferred income |
|
|
20.3 |
|
19.2 |
|
21.3 |
| Financial liabilities: |
|
|
|
|
|
|
|
| Derivative financial
liabilities |
6 |
|
22.9 |
|
17.0 |
|
19.0 |
| Lease financial
liabilities |
6, 7 |
|
2.1 |
|
2.7 |
|
2.4 |
| Other financial
liabilities |
6, 7 |
|
7.9 |
|
7.9 |
|
16.4 |
| Provisions |
|
|
2.9 |
|
3.3 |
|
2.9 |
|
|
|
-------------- |
|
-------------- |
|
-------------- |
|
|
|
125.1 |
|
131.9 |
|
149.3 |
|
|
|
-------------- |
|
-------------- |
|
-------------- |
| Non-current liabilities |
|
|
|
|
|
|
|
| Deferred tax liabilities |
|
|
126.7 |
|
66.2 |
|
78.5 |
| Deferred income |
|
|
529.5 |
|
516.5 |
|
518.7 |
| Financial liabilities: |
|
|
|
|
|
|
|
| Derivative financial
liabilities |
6 |
|
530.0 |
|
530.6 |
|
513.0 |
| Lease financial
liabilities |
6, 7 |
|
8.6 |
|
9.4 |
|
9.5 |
| Other financial
liabilities |
6, 7 |
|
747.8 |
|
747.4 |
|
747.6 |
| Provisions |
|
|
3.8 |
|
3.7 |
|
3.7 |
| Pension liability |
8 |
|
9.3 |
|
170.5 |
|
104.9 |
|
|
|
-------------- |
|
-------------- |
|
-------------- |
|
|
|
1,955.7 |
|
2,044.3 |
|
1,975.9 |
|
|
|
-------------- |
|
-------------- |
|
-------------- |
| TOTAL LIABILITIES |
|
|
2,080.8 |
|
2,176.2 |
|
2,125.2 |
|
|
|
-------------- |
|
-------------- |
|
-------------- |
| NET ASSETS |
|
|
499.2 |
|
361.1 |
|
425.0 |
|
|
|
======== |
|
======== |
|
======== |
| Equity |
|
|
|
|
|
|
|
| Share capital |
|
|
36.4 |
|
36.4 |
|
36.4 |
| Share premium |
|
|
24.4 |
|
24.4 |
|
24.4 |
| Capital redemption reserve |
|
|
6.1 |
|
6.1 |
|
6.1 |
| Accumulated profits |
|
|
432.3 |
|
294.2 |
|
358.1 |
|
|
|
-------------- |
|
-------------- |
|
-------------- |
| TOTAL EQUITY |
|
|
499.2
======== |
|
361.1
======== |
|
425.0
======== |
|
|
|
|
|
|
|
|
|
The financial statements were approved by the Board of directors
and signed on its behalf by:
Paul Stapleton
Director
16 September 2021
GROUP STATEMENT OF CHANGES IN
EQUITY
|
Share
capital |
|
Share
premium |
|
Capital redemption
reserve |
|
Accumulated
profits |
|
Total |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
|
|
|
|
|
|
|
|
|
| At 1 January 2020 |
36.4 |
|
24.4 |
|
6.1 |
|
323.8 |
|
390.7 |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
| Profit for the year |
- |
|
- |
|
- |
|
63.4 |
|
63.4 |
| Net other comprehensive expense for
the year |
- |
|
- |
|
- |
|
(11.1) |
|
(11.1) |
Total net comprehensive income for the year |
----------
- |
|
----------
- |
|
----------
- |
|
----------
52.3 |
|
----------
52.3 |
| Dividends to the shareholder |
- |
|
- |
|
- |
|
(18.0) |
|
(18.0) |
|
|
|
|
|
|
|
|
|
|
|
---------- |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
| At 1 January 2021 |
36.4 |
|
24.4 |
|
6.1 |
|
358.1 |
|
425.0 |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
| (Loss) for the period |
- |
|
- |
|
- |
|
(2.4) |
|
(2.4) |
| Net other comprehensive income for
the period |
- |
|
- |
|
- |
|
76.6 |
|
76.6 |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
| Total net comprehensive income for
the period |
- |
|
- |
|
- |
|
74.2 |
|
74.2 |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
| At 30 June 2021 |
36.4 |
|
24.4 |
|
6.1 |
|
432.3 |
|
499.2 |
|
===== |
|
======= |
|
======= |
|
======= |
|
====== |
|
Share
Capital |
|
Share
premium |
|
Capital redemption
reserve |
|
Accumulated
profits |
|
Total |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At 1 January 2020 |
36.4 |
|
24.4 |
|
6.1 |
|
323.8 |
|
390.7 |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
| Profit for the period |
- |
|
- |
|
- |
|
28.1 |
|
28.1 |
| Net other comprehensive expense for
the period |
- |
|
- |
|
- |
|
(57.7) |
|
(57.7) |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
| Total net comprehensive expense for
the period |
- |
|
- |
|
- |
|
(29.6) |
|
(29.6) |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
|
---------- |
| At 30 June 2020 |
36.4
===== |
|
24.4
====== |
|
6.1
====== |
|
294.2
====== |
|
361.1
====== |
GROUP CASH FLOW STATEMENT
|
|
Six months ended
30 June |
|
Year ended
31 December |
|
|
2021
Unaudited
£m |
|
2020
Unaudited
£m |
|
2020
Audited
£m |
|
|
|
|
|
|
|
| Cash flows from operating
activities |
|
|
|
|
|
|
| (Loss) / profit for the
period/year |
|
(2.4) |
|
28.1 |
|
63.4 |
| Adjustments for: |
|
|
|
|
|
|
| Tax charge |
|
45.0 |
|
21.3 |
|
29.3 |
| Net finance costs |
|
18.1 |
|
18.5 |
|
37.0 |
| Depreciation of
property, plant and equipment |
|
40.4 |
|
38.7 |
|
80.2 |
| Depreciation of right
of use leased assets |
|
1.6 |
|
1.5 |
|
3.2 |
| Release of customers'
contributions and grants |
|
(9.8) |
|
(9.3) |
|
(20.6) |
| Amortisation of
intangible assets |
|
2.9 |
|
2.6 |
|
5.2 |
| Defined benefit pension
charge less contributions paid |
|
(8.8) |
|
(9.7) |
|
(18.6) |
| Net movement in provisions |
|
0.1
---------- |
|
(0.2)
---------- |
|
(0.7)
---------- |
| Operating cash flows before movement
in working capital |
|
87.1 |
|
91.5 |
|
178.4 |
|
|
|
|
|
|
|
| (Increase)/Decrease in working
capital |
|
(4.4) |
|
10.5 |
|
(5.6) |
|
|
---------- |
|
---------- |
|
---------- |
| Cash generated from
operations |
|
82.7 |
|
102.0 |
|
172.8 |
|
|
|
|
|
|
|
| Interest received |
|
- |
|
- |
|
0.1 |
| Interest paid |
|
(25.6) |
|
(25.6) |
|
(34.6) |
| Lease interest paid |
|
(0.2) |
|
(0.2) |
|
(0.3) |
| Current taxes
received/(paid) |
|
(6.3) |
|
(1.8) |
|
(2.7) |
|
|
---------- |
|
---------- |
|
---------- |
| Net cash flows from operating
activities |
|
50.6 |
|
74.4 |
|
135.3 |
|
|
---------- |
|
---------- |
|
---------- |
| Cash flows used in investing
activities |
|
|
|
|
|
|
| Purchase of property, plant and
equipment |
|
(67.8) |
|
(55.4) |
|
(118.8) |
| Customers’ cash contributions |
|
19.6 |
|
10.1 |
|
25.6 |
| Purchase of intangible assets |
|
(2.5) |
|
(1.3) |
|
(3.7) |
|
|
---------- |
|
---------- |
|
---------- |
| Net cash flows used in investing
activities |
|
(50.7) |
|
(46.6) |
|
(96.9) |
|
|
---------- |
|
---------- |
|
---------- |
| Cash flows (used in) / from
financing activities |
|
|
|
|
|
|
| Dividends paid to shareholder |
|
- |
|
- |
|
(18.0) |
| Payments in respect of lease
liabilities |
|
(1.6) |
|
(1.4) |
|
(2.9) |
| Amounts received from group
undertakings |
|
- |
|
8.0 |
|
8.0 |
| Amounts repaid to group
undertakings |
|
- |
|
(13.0) |
|
(13.0) |
|
|
---------- |
|
---------- |
|
---------- |
| Net cash flows (used in)
financing activities |
|
(1.6) |
|
(6.4) |
|
(25.9) |
|
|
---------- |
|
---------- |
|
---------- |
| Net increase/(decrease) in cash and
cash equivalents |
|
(1.7) |
|
21.4 |
|
12.5 |
| Cash and cash equivalents at
beginning of period / year |
|
21.5 |
|
9.0 |
|
9.0 |
|
|
---------- |
|
---------- |
|
---------- |
| Cash and cash equivalents at end
of period / year |
|
19.8
====== |
|
30.4
====== |
|
21.5
====== |
For the purposes of the cash flow statement, cash and cash
equivalents comprise cash at bank and in hand, short-term bank
deposits and bank overdrafts.
NOTES TO THE CONDENSED INTERIM
FINANCIAL STATEMENTS
1. Basis of Preparation
On 31 December 2020, IFRS as
adopted by the European Union at that date was brought into UK law
and became UK-adopted International Accounting Standards, with
future changes being subject to endorsement by the UK Endorsement
Board. Northern Ireland Electricity Networks Limited transitioned
to UK-adopted International Accounting Standards in its
consolidated financial statements on 1
January 2021. This change constitutes a change in accounting
framework. However, there is no impact on recognition, measurement
or disclosure in the period reported as a result of the change in
framework.
The condensed interim financial statements for the period ended
30 June 2021 have been prepared in
accordance with the UK-adopted International Accounting Standard
(IAS) 34 “Interim Financial Reporting” and the Disclosure Guidance
and Transparency Rules sourcebook of the UK’s Financial Conduct
Authority.
The condensed interim financial statements consolidate the
results of Northern Ireland Electricity Networks Limited (NIE
Networks or the Company) and its subsidiary undertakings, NIE
Networks Services Limited and NIE Finance PLC (the
Group).
The condensed interim financial statements have been prepared on
the basis of the accounting policies set out in the financial
statements for the year ended 31 December
2020.
On the basis of their assessment of the Group’s financial
position, which included a review of the Group’s projected funding
requirements for a period of at least 12 months from the date of
approval of the condensed interim financial statements, along with
potential downside sensitivities, the directors have a reasonable
expectation that the Group will have adequate financial resources
for the 12-month period. While the Covid-19 pandemic continues to
impact both the Group and the wider economy, the directors have
considered the possible financial impact on the Group’s financial
position and are of the opinion that the Group has adequate
financial resources for the 12-month period. Accordingly, the
directors continue to adopt the going concern basis in preparing
the condensed interim financial statements.
The condensed interim financial statements have not been audited
or reviewed by auditors pursuant to the Auditing Practices Board
guidance on “Review of Interim Financial Information performed by
the Independent Auditor of the Entity”.
The condensed interim financial statements for the period ended
30 June 2021 do not constitute
statutory financial statements within the meaning of Section 434 of
the Companies Act 2006. The report of the auditors on the financial
statements contained within the Group's annual report for the year
ended 31 December 2020 was unmodified
and did not contain a statement under either Section 498(2) or
Section 498(3) of the Companies Act 2006 regarding inadequate
accounting records or a failure to obtain necessary information and
explanations. This report should be read in conjunction with the
annual report for the year ended 31 December
2020.
New and revised accounting standards,
amendments and interpretations not yet adopted
No new standards, amendments or interpretations, effective for
the first time during the period, have had a material impact on
these condensed interim financial statements.
A number of new standards and amendments to standards and
interpretations are effective for annual periods beginning after
1 January 2021 and have not been
applied in preparing these condensed interim financial statements.
None of these are expected to have a significant effect on the
financial statements of the Group.
2. Revenue
|
Six months ended
30
June |
|
Year ended
31 December |
|
2021
Unaudited
£m |
|
2020
Unaudited
£m |
|
2020
Audited
£m |
|
|
|
|
|
|
| Revenue: |
|
|
|
|
|
| Sales revenue |
136.9 |
|
146.7 |
|
282.0 |
| Amortisation of customer
contributions from deferred income |
9.6 |
|
9.1 |
|
20.2 |
|
----------
146.5 |
|
----------
155.8 |
|
----------
302.2 |
|
====== |
|
====== |
|
====== |
The Group's operating activities, which are described in the
interim management report, comprise one operating segment. Sales
revenue consists largely of income from regulated tariffs.
3. Tax Charge
|
Six months
ended
30
June |
|
Year ended
31 December |
|
2021
Unaudited
£m |
|
2020
Unaudited
£m |
|
2020
Audited
£m |
| Current tax charge |
|
|
|
|
|
| UK corporation tax at 19.0% (2019 –
19.0%) |
7.6 |
|
8.6 |
|
15.5 |
| Adjustments in respect of prior
periods |
- |
|
- |
|
(0.2) |
Total current tax |
----------
7.6 |
|
----------
8.6 |
|
----------
15.3 |
|
---------- |
|
---------- |
|
---------- |
| Deferred tax charge |
|
|
|
|
|
| Origination and reversal of
temporary differences in current period |
1.6 |
|
1.0 |
|
2.4 |
| Origination and
reversal of temporary differences in prior period |
- |
|
- |
|
(0.1) |
| Effect of increase in
tax rate on opening liability |
35.8 |
|
11.7 |
|
11.7 |
Total deferred tax charge |
---------
37.4 |
|
---------
12.7 |
|
---------
14.0 |
|
--------- |
|
--------- |
|
--------- |
| Total tax charge |
45.0
====== |
|
21.3
====== |
|
29.3
====== |
4. Capital Additions
|
Six
months ended
30
June |
|
Year ended
31 December |
|
2021
Unaudited
£m |
|
2020
Unaudited
£m |
|
2020
Audited
£m |
|
|
|
|
|
|
| Property, plant and equipment |
69.8 |
|
51.6 |
|
119.2 |
| Intangibles assets - computer
software |
2.5 |
|
1.2 |
|
3.7 |
| Right of use leased assets |
0.7 |
|
1.6 |
|
3.0 |
|
--------- |
|
--------- |
|
--------- |
|
73.0
====== |
|
54.4
====== |
|
125.9
====== |
Depreciation of £44.9m (30 June
2020 - £42.8m) was charged in the period.
5. Capital Commitments
At 30 June 2021 the Group had
contracted future capital expenditure in respect of property, plant
and equipment of £23.5m (June 2020 -
£11.2m) and computer software assets of £3.4m (June 2020 - £3.5m).
6. Financial Instruments
An overview of financial instruments, other than cash,
short-term deposits, prepayments and tax and social security costs
held by the Group as at 30 June 2021
is as follows:
As at 30 June
2021
Financial assets: |
Held at amortised
cost
Unaudited
£m |
|
Fair value
profit or loss
Unaudited
£m |
|
|
|
|
| Trade and other receivables |
39.6 |
|
- |
| Interest rate swaps |
-
--------- |
|
22.9
--------- |
| Total current |
39.6 |
|
22.9 |
|
--------- |
|
--------- |
| Interest rate swaps |
-
--------- |
|
530.0
--------- |
| Total non-current |
- |
|
530.0 |
|
--------- |
|
--------- |
| Total financial assets |
39.6 |
|
552.9 |
|
====== |
|
====== |
| Financial liabilities: |
|
|
|
|
|
|
|
| Trade and other payables |
64.8 |
|
- |
| Interest rate swaps |
- |
|
22.9 |
| Lease liabilities |
2.1 |
|
- |
| Interest bearing loans and
borrowings |
7.9
--------- |
|
-
--------- |
| Total current |
74.8 |
|
22.9 |
|
--------- |
|
--------- |
| Interest rate swaps |
- |
|
530.0 |
| Lease liabilities |
8.6 |
|
- |
| Interest bearing loans and
borrowings |
747.8
--------- |
|
-
--------- |
Total non-current |
---------
756.4 |
|
---------
530.0 |
|
--------- |
|
--------- |
| Total financial
liabilities |
831.2 |
|
552.9 |
|
====== |
|
====== |
The directors consider that the carrying amount of financial
instruments equals fair value.
NIE Networks has held a £550m portfolio of inflation linked
interest rate swaps since December 2010. The fair value of
inflation linked interest rate swaps is affected by relative
movements in interest rates and market expectations of future
retail price index (RPI) movements.
The RPI swaps were originally put in place by the Viridian Group
(the Group’s previous parent undertaking) in 2006 to better match
NIE Networks’ debt and related interest payments with its
inflation-linked regulated assets and associated revenue – in the
nature of economic hedge. As part of the acquisition of NIE
Networks by ESB in 2010, the swaps were novated to NIE
Networks.
In 2011, following the novation of the swaps to NIE Networks,
the Company entered into back-to-back RPI linked interest rate swap
arrangements with ESBNI Limited, the immediate parent undertaking
of the Company, which had identical matching terms to the
swaps. The back-to-back matching swaps with ESBNI Limited
ensures that there is no net effect on the financial statements of
the Company and that any risk to financial exposure is borne by
ESBNI Limited.
During 2021 the Company and its counterparty banks agreed a
further restructuring of the swaps, including amendments to certain
critical terms. These changes included an extension of the
mandatory break period from 2022 to 2025 for the swaps maturing in
2036 and the removal of mandatory breaks for the swaps maturing in
2026 to 2031. It also included amendments to the fixed interest
rate element of the swaps and a change to the number of swap
counterparties. Future accretion payments are now scheduled to
occur every five years from December
2023, with remaining accretion paid at maturity. In line
with the restructuring with the counterparty banks, the Company’s
back-to-back matching swaps with ESBNI Limited were also
restructured to ensure that there is no effect on the financial
statements of the Company and that any risk to financial exposure
is borne by ESBNI Limited.
Negative fair value movements (including interest and finance
charges) of £32.8m arose on the swaps in the six months ended
30 June 2021 (June 2020: negative fair value movements of
£37.0m) and were recognised within finance costs in the income
statement, as hedge accounting was not available. Given the
back-to-back arrangements with ESBNI Limited, there is a matching
positive fair value movement of £32.8m in the period (June 2020: matching positive fair value movements
of £37.0m).
In the six months to June 2021,
the Company made swap interest payments of £11.8m (2020: £6.9m).
Due to the back-to-back arrangements with ESBNI Limited, the
Company had matching swap interest receipts of £11.8m (2020:
£6.9m). No net swap interest cost arises on these transactions and
therefore they have been netted in finance costs.
The fair value of interest rate swaps has been valued by
calculating the present value of future cash flows, estimated using
forward rates from third party market price quotations. The
Company uses the hierarchy as set out in IFRS 13 Fair Value
Measurement. All assets and liabilities for which fair value is
disclosed are categorised within the fair value hierarchy described
as follows:
Level 1: quoted (unadjusted) market prices in active
markets for identical assets or liabilities;
Level 2: valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable; and
Level 3: valuation techniques for which the lowest level input
that is significant to the fair value measurement is not
observable.
The fair value of interest rate swaps as at 30 June 2021 is considered by the Company to fall
within the level 2 fair value hierarchy. The Company
determines whether transfers have occurred between levels in the
hierarchy by re-assessing categorisation (based on the lowest level
input that is significant to the fair value measurement as a whole)
at the end of each reporting period. There have been no transfers
between level 1 or 3 of the hierarchy during the period.
7. Net Debt
|
30 June |
|
30 June |
|
31 December |
|
2021
Unaudited
£m |
|
2020
Unaudited
£m |
|
2020
Audited
£m |
|
|
|
|
|
|
| Cash at bank and in hand |
19.8 |
|
30.4 |
|
21.5 |
|
----------- |
|
----------- |
|
----------- |
| Debt due before 1 year: |
|
|
|
|
|
| Interest payable on £350m bond |
(5.9) |
|
(5.9) |
|
(1.6) |
| Interest payable on £400m bond |
(2.0) |
|
(2.0) |
|
(14.8) |
| Interest payable to parent
undertaking |
(0.1) |
|
(0.1) |
|
(0.1) |
| Lease liability |
(2.1) |
|
(2.7) |
|
(2.4) |
| Amounts owed to parent
undertaking |
- |
|
- |
|
- |
|
----------- |
|
----------- |
|
----------- |
|
(10.1) |
|
(10.7) |
|
(18.9) |
| Debt due after 1 year: |
----------- |
|
----------- |
|
----------- |
| £350m bond |
(348.8) |
|
(348.5) |
|
(348.6) |
| £400m bond |
(399.0) |
|
(398.9) |
|
(399.0) |
| Lease liability |
(8.6) |
|
(9.4) |
|
(9.5) |
|
-----------
(756.4) |
|
-----------
(756.8) |
|
-----------
(757.1) |
Total net debt |
-----------
(746.7)
----------- |
|
-----------
(737.1)
----------- |
|
-----------
(754.5)
----------- |
8. Pension Commitments
Most employees of the Group are members of the Northern Ireland
Electricity Pension Scheme (NIEPS or the scheme). The scheme
has two sections: ‘Options’ which is a money purchase arrangement
whereby the Group generally matches the members’ contributions up
to a maximum of 8% of salary and ‘Focus’ which provides benefits
based on pensionable salary at retirement or earlier exit from
service. The assets of the scheme are held under trust and
invested by the trustees on the advice of professional investment
managers. The trustees are required by law to act in the
interest of all relevant beneficiaries and are responsible for the
investment policy with regard to the assets and the day-to-day
administration of the benefits of the scheme.
As the benefits paid to members of the Options section of the
scheme are directly related to the value of assets for Options,
there are no funding issues with this section of the scheme. The
remainder of this note is therefore in respect of the Focus section
of the scheme.
|
30 June |
|
30 June |
|
31 December |
|
2021
Unaudited
£m |
|
2020
Unaudited
£m |
|
2020
Audited
£m |
|
|
|
|
|
|
| Market value of assets |
1,219.1 |
|
1,143.3 |
|
1,204.0 |
| Actuarial value of liabilities |
(1,228.4) |
|
(1,313.8) |
|
(1,308.9) |
|
----------- |
|
----------- |
|
----------- |
| Net pension liability |
(9.3)
====== |
|
(170.5)
====== |
|
(104.9)
====== |
Changes in the market value of
assets
|
30 June |
|
30 June |
|
31 December |
|
2021
Unaudited |
|
2020
Unaudited |
|
2020
Audited |
|
£m |
|
£m |
|
£m |
Market value of assets at beginning of the period / year |
1,204.0 |
|
1,127.0 |
|
1,127.0 |
| Interest income on scheme
assets |
7.8 |
|
11.1 |
|
22.1 |
| Contributions from employer |
12.5 |
|
12.4 |
|
25.1 |
| Contributions from scheme
members |
0.1 |
|
0.1 |
|
0.3 |
| Benefits paid |
(30.9) |
|
(36.4) |
|
(66.5) |
| Administration expenses paid |
(0.6) |
|
(1.4) |
|
(2.2) |
| Re-measurement gains on scheme
assets |
26.2 |
|
30.5 |
|
98.2 |
|
----------- |
|
----------- |
|
----------- |
| Market value of assets at end of the
period / year |
1,219.1
====== |
|
1,143.3
====== |
|
1,204.0
====== |
|
|
|
|
Changes in the actuarial value of
liabilities
|
30 June |
|
30 June |
|
31 December |
|
2021
Unaudited |
|
2020
Unaudited |
|
2020
Audited |
|
£m |
|
£m |
|
£m |
|
|
|
|
|
|
| Actuarial value of liabilities at
beginning of the period / year |
1,308.9 |
|
1,230.9 |
|
1,230.9 |
| Interest expense on pension
liability |
8.4 |
|
12.1 |
|
23.9 |
| Current service cost |
3.0 |
|
2.8 |
|
5.4 |
| Curtailment costs |
0.1 |
|
0.1 |
|
0.2 |
| Past service credit |
- |
|
(1.6) |
|
(1.3) |
| Contributions from scheme
members |
0.1 |
|
0.1 |
|
0.3 |
| Benefits paid |
(30.9) |
|
(36.4) |
|
(66.5) |
| Effects of changes in
demographic assumptions |
- |
|
- |
|
5.1 |
| Effect of changes in financial
assumptions |
(61.2) |
|
105.8 |
|
136.1 |
| Effect of experience
adjustments |
- |
|
- |
|
(25.2) |
|
----------- |
|
----------- |
|
----------- |
| Actuarial value of liabilities at
end of the period / year |
1,228.4
====== |
|
1,313.8
====== |
|
1,308.9
====== |
9. Related Party
Transactions
The immediate parent undertaking of the Group and the ultimate
parent company in the UK is ESBNI Limited (ESBNI). The
ultimate parent undertaking and controlling party of the Group and
the parent of the smallest and largest group of which NIE Networks
is a member and for which group financial statements are prepared
is Electricity Supply Board (ESB), a statutory corporation
established under the Electricity (Supply) Act 1927 domiciled in
the Republic of Ireland. A copy of ESB's financial statements
is available from ESB's registered office at Two Gateway, East Wall
Road, Dublin 3, DOA A995.
Principal subsidiaries of ESB are related parties of the
Group. Transactions between the Group and related parties are
disclosed below:
|
Interest charges
Unaudited |
Revenue
from
related
party
Unaudited |
Charges
from
related
party
Unaudited |
Amounts
owed by
related
party at
period end
Unaudited |
Amounts
owed to
related
party at
period end
Unaudited |
|
£m |
£m |
£m |
£m |
£m |
Six months
ended
30 June 2021 |
|
|
|
|
|
| ESB |
(0.2) |
- |
- |
- |
(0.1) |
| ESB subsidiaries |
-
----------- |
22.9
----------- |
(1.3)
----------- |
3.1
----------- |
(3.2)
----------- |
|
(0.2)
====== |
22.9
====== |
(1.3)
====== |
3.1
====== |
(3.3)
====== |
|
|
|
|
|
|
Six months
ended
30 June 2020 |
|
|
|
|
|
| ESB |
(0.2) |
- |
- |
- |
(0.1) |
| ESB subsidiaries |
-
----------- |
17.4
----------- |
(1.3)
----------- |
2.8
----------- |
(2.9)
----------- |
|
(0.2)
====== |
17.4
====== |
(1.3)
====== |
2.8
====== |
(3.0)
====== |
During the period ended 30 June
2021, the Group contributed £16.3m (2020 - £16.0m) to the
Northern Ireland Electricity Pension Scheme in respect of Focus and
Options employer contributions, including an element of deficit
repair contributions in respect of Focus.
10. Contingent Liabilities
In the normal course of business, the Group has contingent
liabilities arising from claims made by third parties and
employees. Provision for a liability is made when the
directors believe that it is probable that an outflow of funds will
be required to settle the obligation where it arises from an event
prior to the period end.
STATEMENT OF DIRECTORS’
RESPONSIBILITIES
Each of the directors, named on page 1, confirms that to the
best of their knowledge:
(i) the condensed interim financial statements have been
prepared in accordance with IAS 34 “Interim Financial Reporting”
and give a true and fair view of the assets, liabilities, financial
position and loss of the Group for the six months to 30 June 2021; and
(ii) the interim management report includes a fair review
of the information required by DTR 4.2.7R of the Disclosure and
Transparency Rules.
By order of the Board
Paul Stapleton
Director
16 September 2021