TIDM56WD
RNS Number : 3696Z
Northern Electric Finance PLC
14 March 2012
The following regulated information, disseminated pursuant to
DTR 6.3.5, comprises the Annual Report and Accounts of Northern
Electric Finance plc for the year ended 31 December 2011.
Pursuant to LR 17.3.1, the document has been submitted to the
National Storage Mechanism and will shortly be available for
inspection at:
www.hemscott.com/nsm.do
The 2011 Annual Report and Accounts are also available on the
website
www.northernpowergrid.com
Enquiries:
John Elliott 0191 223 5103
REPORT OF THE DIRECTORS AND
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011
FOR
NORTHERN ELECTRIC FINANCE PLC
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
CONTENTS OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Page
Company Information 1
Report of the Directors 2
Report of the Independent Auditor 8
Income Statement 9
Statement of Comprehensive Income 10
Statement of Financial Position 11
Statement of Changes in Equity 12
Statement of Cash Flows 13
Notes to the Financial Statements 14
NORTHERN ELECTRIC FINANCE PLC
COMPANY INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2011
DIRECTORS: G E Abel
P Ainsley
P A Jones
T E Fielden
SECRETARY: J Elliott
REGISTERED OFFICE: Lloyds Court
78 Grey Street
Newcastle Upon Tyne
NE1 6AF
REGISTERED NUMBER: 3070482 (England and Wales)
AUDITORS: Deloitte LLP
Newcastle upon Tyne
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 DECEMBER 2011
The directors present the annual report and accounts of Northern
Electric Finance plc (the "Company") for the year ended 31 December
2011, which includes the business review and audited financial
statements for that year. Pages 2 to 6 inclusive of this annual
report comprise a directors' report that has been drawn up and
presented in accordance with the Companies Act 2006.
Cautionary statement regarding forward-looking statements
This annual report has been prepared for the members of the
Company only. The Company, its directors, employees or agents do
not accept or assume responsibility to any other person in
connection with this document and any such responsibility or
liability is expressly disclaimed. This annual report contains
certain forward-looking statements, which can be identified by the
fact that they do not relate only to historical or current facts.
In particular, all statements that express forecasts, expectations
and projections with respect to future matters, including trends in
results of operations, business prospects, the availability of
financing to the Company and anticipated cost savings are
forward-looking statements.
By their nature, these statements and forecasts involve risk and
uncertainty because they relate to events and depend on
circumstances that may or may not occur in the future. There are a
number of factors that could cause actual results or developments
to differ materially from those expressed or implied by these
forward-looking statements and forecasts. The forward-looking
statements reflect the knowledge and information available at the
date of preparation of this annual report and will not be updated
during the year. Nothing in this annual report should be construed
as a profit forecast.
PRINCIPAL ACTIVITY
The Company is a subsidiary of Northern Powergrid (Northeast)
Limited ("Northern Powergrid"), which was previously called
Northern Electric Distribution Limited, is part of the Northern
Powergrid Holdings Company group of companies (the "Northern
Powergrid Group"), and was established in August 1995 to raise
finance, including the issue of long-term bonds, on behalf of the
Northern Electric group of companies, which is also part of the
Northern Powergrid Group. During the year, the Company continued to
be the issuer of long-term bonds.
Given that the sole purpose of the Company is to raise finance
on behalf of Northern Powergrid, its immediate parent company, the
objective of the Company is to ensure that it has sufficient funds
to cover its interest charges as they fall due. Details of key
performance indicators used in the Northern Powergrid Group can be
found in the Business Review in the Northern Powergrid Holdings
Company directors' report.
Details of the key risks faced by the Company in respect of its
borrowings can be found on page 4 of this directors' report and in
Note 10 to the accounts.
REVIEW OF BUSINESS
FINANCIAL REVIEW
Results and dividends
The Company made a loss after tax for the year of GBP83,000
(2010: loss GBP33,000). No dividends were paid during the year and
the directors recommend that no final dividend be paid in respect
of the year.
Share capital
There were no changes to the Company's share capital during the
year.
Taxation
Full details of the Company's taxation charge are provided in
Note 5 to the accounts.
Net cash inflow from operating activities
The net cash outflow from operating activities was GBP46,000
(2010: GBP7,000) reflecting a reduction in interest received and an
increase in interest paid compared to the prior year.
DIVIDENDS
The Company's dividend policy is that dividends will be paid
only after having due regard to available distributable reserves,
available liquid funds and the financial resources and facilities
needed to enable the Company to carry on its business for at least
the next year.
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
REPORT OF THE DIRECTORS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2011
RESEARCH AND DEVELOPMENT
Given that the sole purpose of the Company is to raise finance
on behalf of Northern Powergrid, the Company does not undertake
research and development.
FUTURE DEVELOPMENTS
The financial position of the Company, as at the year end, is
shown in the statement of financial position on page 11. There have
been no significant events since the year end and it is the
intention of the directors that the Company will continue to raise
finance on behalf of the Northern Powergrid Group, if required, in
the future.
DIRECTORS
The directors shown below have held office during the whole of
the period from 1 January 2011 to the date of this report.
G E Abel Chairman
P Ainsley Financial Controller
T E Fielden Finance Director
P A Jones President and Chief Executive Officer
GOING CONCERN
The Company's business activities, together with details
regarding its future development, performance and position are set
out in the Review of Business in the Directors' Report. In
addition, the Company's objectives, policies and processes for
managing its capital, its financial risk management objectives,
details of its financial instruments and hedging activities and its
exposures to credit risk and liquidity risk are included in the
Principal Risks and Uncertainties section of the Directors' Report
and the appropriate notes to the accounts.
When considering continuing to adopt the going concern basis in
preparing the annual report and accounts, the directors have taken
account of a number of factors that arise due to the Company being
a wholly-owned subsidiary of Northern Powergrid, including the
following:
a) Northern Powergrid is a stable electricity distribution
business operating an essential public service and is regulated by
the Gas and Electricity Markets Authority ("GEMA"). In carrying out
its functions, GEMA has a statutory duty under the Electricity Act
1989 to have regard to the need to secure that licence holders are
able to finance their activities, which are the subject of
obligations under Part 1 of the Electricity Act 1989 (including the
obligations imposed by the electricity distribution licence) or by
the Utilities Act 2000;
b) Northern Powergrid is profitable with strong underlying cash
flows resulting in low gearing and holds investment grade credit
ratings; and
c) Northern Powergrid has access to considerable financial
resources, in the form of short-term borrowings made available by
Yorkshire Electricity Group plc, a fellow company in the Northern
Powergrid Group, and also has committed revolving credit facilities
in place from Lloyds TSB Bank plc, Royal Bank of Scotland plc and
Abbey National Treasury Services plc until 31 March 2013.
Consequently, after making enquiries, the directors have a
reasonable expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the annual report and accounts.
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
REPORT OF THE DIRECTORS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2011
PRINCIPAL RISKS AND UNCERTAINTIES
Liquidity risk
The principal risk facing the Company is not having sufficient
liquidity to enable the Company to meet its liabilities as they
fall due and to provide adequately for contingencies. In this
respect, borrowing facilities are made available to the Company by
other companies in the Northern Powergrid Group, if required. The
Company continues to maintain its investment grade issuer credit
rating.
Interest rate risk
The Company is financed by long-term borrowings at fixed rates
and has access to short-term borrowing facilities at floating rates
of interest. As at 31 December 2011, 100 % of the Company's
borrowings were at fixed rates and the average maturity of these
borrowing was 18 years.
Currency risk
No material currency risks are faced by the Company.
Trading risk
Throughout the year under review, the Company's policy was that
no trading in financial derivatives should be undertaken.
Financial derivatives
As at 31 December 2011 and during the year it was the Company's
policy not to hold any derivative financial instruments.
CORPORATE GOVERNANCE STATEMENT
Section 1B.1.5R of the Disclosure and Transparency Rules ("DTR")
requires an issuer, whose transferable securities are admitted to
trading, to provide, in its annual directors' report, a corporate
governance statement. However, DTR 1B.1.6R provides that the rules
in DTR 7.2.2R, 7.2.3R and 7.2.7R do not apply to an issuer, which
has not issued shares, which are admitted to trading. Accordingly,
as the Company has no shares admitted to trading, it is eligible
for the exemption provided by DTR 1B.1.6R.
Main features of the internal control risk and management
systems
The Northern Powergrid Group's principal management forum with
regard to corporate governance is the Governance and Risk
Management Group ("GRMG"). Its purpose is to ensure that Northern
Powergrid Group companies apply and maintain appropriate
arrangements to deliver sound corporate governance and comply with
the overall strategy, framework and supporting policies. The GRMG
monitors and reviews the strategic risk environment, ensuring the
continued suitability, adequacy and effectiveness of risk
management arrangements.
The risk management framework was monitored regularly during the
year to ensure that all strategic risks, including those relating
to environmental and social issues, were being addressed. Risk
management policies and procedures were reviewed and updated to
ensure a robust and clear approach was maintained. Mr R Dixon, an
independent non-executive director of both Northern Powergrid
Holdings Company and Northern Powergrid, attends meetings of the
GRMG to provide an independent view in respect of the matters
discussed.
The Northern Powergrid Group is committed to preventing
corruption in all its forms and continues to have a zero-tolerance
approach to corruption in its business or by those with whom it
does business. During 2011, the board of Northern Powergrid
Holdings Company addressed the risks introduced by the Bribery Act
2010 through a new compliance policy, changes to contractual terms,
training and other staff awareness measures. The introduction of
annual risk assessments and enhanced due diligence in respect of
new business transactions has further assisted in ensuring
compliance. The Northern Powergrid Group requires staff, suppliers
of services and business partners to comply with the Bribery Act.
Its policies encourage an employee who has any suspicion of bribery
or other form of corruption within or related to the Northern
Powergrid Group to report the suspicion to a manager.
The Northern Powergrid Group operates a structured and
disciplined approach to the management of risk, as part of the
overall risk management approach. Those risks assessed to be
significantly high are logged within a risk register that is
reviewed regularly by the GRMG and key indicators track the number
of significant risks actively monitored by the GRMG at any one
time.
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
REPORT OF THE DIRECTORS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2011
Risks are assessed with due regard to probability and impact and
the risk environment is reviewed continually in order that new or
emerging potential risks are identified. Risk mitigation and loss
control plans are prepared in response to strategic risks in order
that the directors can be assured that appropriate mitigating
actions are in place and being implemented. These plans are
monitored through to implementation and reviewed to determine
whether the level of residual, mitigated risk is within an
acceptable level of tolerance.
A rigorous internal control environment exists within the
Northern Powergrid Group based on regular reporting, a series of
operational and financial policy statements, investigations
undertaken by internal audit and a stringent process for ensuring
the implementation of any recommendations. MidAmerican Energy
Holdings Company, a parent company of the Company, requires a
quarterly control risk self-assessment to be undertaken by all
senior managers as part of its programme for compliance with the
requirements of the Sarbanes-Oxley Act. During the year, the
Northern Powergrid Group completed the annual, extensive programme
to review its company-wide controls and opportunities to enhance
control arrangements, identified by that review, have been
implemented.
Other key features of the Northern Powergrid Group's internal
control system are:
- Comprehensive business planning and financial reporting
procedures, including the annual preparation of detailed
operational budgets for the year ahead and projections for
subsequent years;
- Regular review of key performance indicators to assess progress towards objectives;
- A range of policies, codes of practice and more detailed
instructions that define the processes to be followed;
- A strong internal audit function to provide independent
scrutiny of internal control systems and risk management
procedures, including the standards required by the Sarbanes-Oxley
Act;
- Centralised treasury operations that operate within defined
limits and are subject to regular reporting requirements and audit
reviews; and
- Established procedures for planning, approving and monitoring
major capital expenditure, major projects and the development of
new business which includes short and long-term budgets, risk
evaluation, detailed appraisal and review procedures, defined
authority levels and post-investment performance reviews.
Details of other financial risks faced by the Company can be
found on page 4 of the Directors' Report.
Northern Powergrid Holdings Company has established an audit
committee for the Northern Powergrid Group under delegated terms of
reference, which include monitoring of the financial reporting
process, the effectiveness of the internal control, internal audit
and risk management systems, the statutory audit of the accounts
and the independence of and the provision of additional services by
the statutory auditor. DTR 7 requires an audit committee to have at
least one independent member and a member with competence in
accounting and/or auditing, although these requirements could be
satisfied by one and the same person. Given that Mr Dixon is an
independent non-executive director of Northern Powergrid Holdings
Company and Northern Powergrid, the Audit Committee comprises:
R Dixon Non-Executive Director
T E Fielden Finance Director
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
REPORT OF THE DIRECTORS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2011
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Report of the
Directors and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have elected to prepare the financial statements in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
in the European Union. Under company law the directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
Company and of its profit or loss for that period. In preparing
these financial statements, International Accounting Standard 1
requires the directors to:
-- Properly select and apply accounting policies;
-- Present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- Provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the Company's financial position and financial
performance; and
-- Make an assessment of the Company's ability to continue as a
going concern.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS
Each of the directors, who is a director of the Company as at
the date of this report, confirms that:
a) so far as he is aware, there is no relevant audit information
of which the Company's auditors are unaware; and
b) he has taken all the steps he ought to have taken as a
director in order to make himself aware of any relevant audit
information and to establish that the auditors are aware of that
information.
This confirmation is given and should be interpreted in
accordance with the provisions of S418 of the Companies Act
2006.
AUDITORS
A resolution to re-appoint Deloitte LLP as the Company's
auditors and authorise the directors to determine their
remuneration will be proposed at the Annual General Meeting.
ON BEHALF OF THE BOARD:
J Elliott
Secretary
2 March 2012
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE
ANNUAL REPORT AND ACCOUNTS
Each of the directors as at the date of the Annual Report, whose
names and functions are set out on page 3 of the Report of the
Directors confirms that, to the best of their knowledge:
a) the Company accounts, prepared in accordance with applicable
UK law and in conformity with IFRS, give a true and fair view of
the assets, liabilities, financial position and profit or loss of
the Company; and
b) the Report of the Directors includes a fair review of the
development and performance of the business and the position of the
Company, together with a description of the principal risks and
uncertainties it faces.
The responsibility statement was approved by the Board of
Directors on 2 March 2012 and signed by:
P A Jones
President and Chief Executive Officer
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF
NORTHERN ELECTRIC FINANCE PLC
We have audited the financial statements of Northern Electric
Finance plc (the "Company") for the year ended 31 December 2011
which comprise the Income Statement, the Statement of Comprehensive
Income, the Statement of Financial Position, the Statement of
Changes in Equity, the Statement of Cash Flows and the related
notes 1 to 14. The financial reporting framework that has been
applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European
Union.
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
a Report of the Auditors and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company's members as a
body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Statement of Directors'
Responsibilities set out on page six, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view. Our responsibility
is to audit and express an opinion on the financial statements in
accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply
with the Auditing Practices Board's Ethical Standards for
Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Company's circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we
read all the financial and non-financial information in the annual
report to identify material inconsistencies with the audited
financial statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
Opinion on financial statements
In our opinion the financial statements:
- give a true and fair view of the state of the Company's affairs
as at 31 December 2011 and of its loss for the year then ended;
- have been properly prepared in accordance with IFRSs as adopted
by the European Union; and
- have been prepared in accordance with the requirements of the Companies
Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Report of the
Directors for the financial year for which the financial statements
are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
- adequate accounting records have not been kept, or returns adequate
for our audit have not been received from branches not visited by
us; or
- the financial statements are not in agreement with the accounting
records and returns; or
- certain disclosures of directors' remuneration specified by law
are not made; or
- we have not received all the information and explanations we require
for our audit.
Christopher Powell FCA (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Newcastle upon Tyne
9 March 2012
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2011
2011 2010
Notes GBP'000 GBP'000
CONTINUING OPERATIONS
Administrative expenses (6) (6)
OPERATING LOSS (6) (6)
Finance costs 4 (17,173) (17,101)
Finance income 4 17,031 17,043
LOSS BEFORE INCOME TAX (148) (64)
Income tax 5 65 31
LOSS FOR THE YEAR (83) (33)
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2011
2011 2010
GBP'000 GBP'000
LOSS FOR THE YEAR (83) (33)
OTHER COMPREHENSIVE INCOME - -
TOTAL COMPREHENSIVE INCOME FOR THE YEAR (83) (33)
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
STATEMENT OF FINANCIAL POSITION
31 DECEMBER 2011
2011 2010
Notes GBP'000 GBP'000
ASSETS
NON-CURRENT ASSETS
Trade and other receivables 6 247,686 247,619
CURRENT ASSETS
Trade and other receivables 6 3,550 3,538
Tax receivable 3 -
Cash and cash equivalents 7 1,674 1,720
5,227 5,258
TOTAL ASSETS 252,913 252,877
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital 8 50 50
Retained earnings 9 (792) (709)
TOTAL EQUITY (742) (659)
LIABILITIES
NON-CURRENT LIABILITIES
Borrowings 10 246,433 246,280
Deferred tax 11 313 362
246,746 246,642
CURRENT LIABILITIES
Borrowings 10 6,909 6,886
Tax payable - 8
6,909 6,894
TOTAL LIABILITIES 253,655 253,536
TOTAL EQUITY AND LIABILITIES 252,913 252,877
The financial statements were approved by the Board of Directors
on 2 March 2012 and were signed on its behalf by:
P A Jones
Director
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2011
Called up Retained Total
share earnings equity
capital
GBP'000 GBP'000 GBP'000
Balance at 1 January 2010 50 (676) (626)
Changes in equity
Total comprehensive income - (33) (33)
Balance at 31 December 2010 50 (709) (659)
Changes in equity
Total comprehensive income - (83) (83)
Balance at 31 December 2011 50 (792) (742)
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2011
2011 2010
Note GBP'000 GBP'000
Cash flows from operating activities
Cash generated from operations 14 80 79
Interest paid (17,158) (17,140)
Interest received 17,019 17,059
Tax credit/(paid) 13 (5)
Net cash from operating activities (46) (7)
Decrease in cash and cash equivalents (46) (7)
Cash and cash equivalents
at beginning of year 1,720 1,727
Cash and cash equivalents
at end of year 1,674 1,720
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
1. GENERAL INFORMATION
Northern Electric Finance plc is a company originally
incorporated in England and Wales under the Companies Act 1985. The
address of the registered office is Lloyds Court, 78 Grey Street,
Newcastle-upon-Tyne, NE1 6AF.
The nature of the Company's operations and its principal
activities are set out in the Business Review, in the Director's
Report on page 2.
2. ACCOUNTING POLICIES
Accounting convention and basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS"). The financial
statements have also been prepared in accordance with IFRSs adopted
by the European Union and therefore comply with Article 4 of the EU
IAS Regulation and with those parts of the Companies Act 2006 (the
"Act") that are applicable to companies reporting under IFRS.
The accounts have been prepared under the historical cost
convention.
Going concern
The directors have, at the time of approving the financial
statements, a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going concern basis
in preparing the financial statements. Further detail is contained
within the Directors Report.
Critical accounting policies
The particular policies adopted by the directors are described
below. The accounting policies have been applied consistently
throughout the year and the preceding year.
Adoption of new or revised standards
In the current year, the directors are not aware of any new or
revised Standards or Interpretations which have impacted these
financial statements.
Finance Income
Interest income is accrued on a time basis by reference to the
principal outstanding and at the effective interest rate
applicable.
Financial instruments
Financial assets and financial liabilities are recognised on the
balance sheet when the Company becomes a party to the contractual
provisions on the instrument.
Financial assets are assessed for indicators of impairment at
each balance sheet date. Financial assets are impaired where there
is objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the
estimated future cash flows of the investment have been
impacted.
Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangement entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Company after deducting all
of its liabilities.
Cash and cash equivalents
Loans advanced to the parent company are included within cash
and cash equivalents, having a maturity of less than three months
on the basis that they are readily convertible to known amounts of
cash and are subject to insignificant risk of changes in value.
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2011
2. ACCOUNTING POLICIES - continued
Taxation
Income tax expense represents the sum of the tax currently
payable and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit as reported in the income
statement because it excludes items of income or expense that are
taxable or deductible in other years and it further excludes items
that are never taxable or deductible. The Company's liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted at the balance sheet date.
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial statements, and
the corresponding tax bases used in the computation of taxable
profit and is accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the year when the liability is settled or asset realised,
based on tax rates and tax legislation enacted or substantively
enacted at the balance sheet date.
Borrowings
Borrowings are classified as other financial liabilities at
amortised cost. They are recorded at the proceeds received, net of
direct issue costs. Finance charges, including premiums payable on
settlement for redemption and direct issue costs, are accounted for
on an accruals basis in the income statement using the effective
interest rate method. They are added to the carrying amount of the
instruments to the extent that they are not settled in the period
in which they arise.
3. EMPLOYEES', DIRECTORS' AND AUDITOR'S REMUNERATION
No directors' or key personnel remuneration was charged for the
year (2010: GBPnil). There are no directors' emoluments that are
required to be disclosed under the Act (2010: GBPnil). There were
no employees of the Company during the year (2010: nil).
Auditor's remuneration of GBP6,000 was charged to the Company
for the year (2010: GBP6,000) in relation to the audit of the
Company. There was no fees payable in relation to non-audit
services in 2011 or 2010.
4. NET FINANCE COSTS
2011 2010
GBP'000 GBP'000
Finance income:
Interest receivable on loans
to Group undertakings 17,031 17,043
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2011
4. NET FINANCE COSTS - continued
2011 2010
GBP'000 GBP'000
Finance costs:
Interest payable on other borrowings 17,130 17,064
Interest payable on loans
from Group undertakings 43 37
17,173 17,101
Net finance costs 142 58
5. INCOME TAX
Analysis of the tax credit
2011 2010
GBP'000 GBP'000
Current tax:
Tax (16) 6
Deferred tax (49) (37)
Total tax credit in income statement (65) (31)
Factors affecting the tax charge
The credit for the year can be reconciled to the loss per the
income statement as follows:
2011 2010
GBP'000 GBP'000
Loss on ordinary activities before tax (148) (64)
Loss on ordinary activities
multiplied by the standard rate of corporation tax
in the UK of 26.5% (2010 - 28%) (39) (18)
Effects of:
change in legislation (26) (13)
Total income tax (65) (31)
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2011
5. INCOME TAX - continued
2011 2010
Tax expense comprises: GBP'000 GBP'000
Current tax expense:
Payment for use of group losses 16 6
Total current tax charge 16 6
Deferred tax:
Deferred tax expenses relating to the origination (23) (24)
and reversal of temporary differences
Effect of changes in tax rate (26) (13)
Total deferred tax charge (49) (37)
Tax on profit before tax (31) (31)
The Finance Act 2011 includes a provision that the standard rate
of corporation tax in the United Kingdom will reduce from 26% to
25% from April 2012. Accordingly, this rate has been applied when
calculating deferred tax assets and liabilities throughout the
Northern Powergrid Group as at 31 December 2011. The Government has
announced that the standard rate of corporation tax will reduce
further to 24% from April 2013 and to 23% from April 2014.
6. TRADE AND OTHER RECEIVABLES
2011 2010
GBP'000 GBP'000
Current:
Amounts owed by Group undertakings 3,550 3,538
Non-current:
Amounts owed by Group undertakings 247,686 247,619
The fair value of the Trade and Other Receivables as at 31
December 2011 is estimated to be GBP299m (2010: GBP276m),
determined in accordance with generally accepted pricing models
based on discounted cash flow analysis using prices from observable
current market transactions or dealer quotes for similar
instruments.
Loans to Group undertakings are made to Northern Powergrid
(Northeast) Limited, the Company's immediate parent, and are at
fixed rates of interest. The maximum exposure to risk to the
Company is the book value of these loans.
7. CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent amounts owed from Yorkshire
Electricity Group plc, a company within the Northern Powergrid
Group, which have a maturity date of less than three months and
which are subject to an insignificant risk of changes in value. The
fair value of cash and cash equivalents is equal to their book
value.
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2011
8. CALLED UP SHARE CAPITAL
2011 2010
No./GBP No./GBP
Ordinary shares of GBP1 each;
Authorised 50,000 50,000
Allotted, called up and fully paid 50,000 50,000
The Company has one class of ordinary shares which carries no
right to fixed income.
9. RESERVES
Retained
earnings
GBP'000
At 1 January 2011 (709)
Deficit for the year (83)
At 31 December 2011 (792)
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2011
10. BORROWINGS
The Directors' consideration of liquidity, interest rate and
foreign currency risk is described in detail in the Directors'
Report.
Fair
Book Value Value
2011 2010 2011 2010
GBP'000 GBP'000 GBP'000 GBP'000
The borrowings are repayable as follows:
On demand or within one
year 6,797 6,886 6,797 6,886
After five years 246,545 246,280 295,564 274,014
253,342 253,166 302,361 280,900
Analysis of borrowings:
2035 - 5.125% 152,744 152,683 161,544 147,651
2020 - 8.875% 100,598 100,483 140,817 133,249
253,342 253,166 302,361 280,900
The fair value of the Company's borrowings is determined with
reference to quoted market prices.
All loans are at fixed interest rates and expose the Company to
fair value interest rate risk.
The Company's loans are guaranteed by Northern Powergrid
(Northeast) Limited, its parent company.
The covenants associated with the 2035 bonds issued by the
Company include restrictions on the issuance of new indebtedness
and the making of distributions dependent on the scale of the ratio
of Senior Total Net Debt to Regulatory Asset Value ("RAV") of
Northern Powergrid (Northeast) Limited. The definition of Senior
Total Net Debt excludes any subordinated debt and any debt incurred
on a non-recourse basis. In addition, it excludes interest payable,
any fair value adjustments and unamortised issue costs.
All borrowings are denominated in sterling. The Company has no
undrawn committed borrowing facilities.
The following tables detail the remaining contractual maturities
for non-derivative financial liabilities. The tables have been
drawn up based on the discounted cash flows of financial
liabilities based on the earliest possible date on which the
Company can be required to pay. The tables include both interest
and principal cash flows.
Less than 3 months
3 months to 1 year 1 to 5 5+ years Total
years
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2011:
Fixed interest
rate liability - 16,563 66,250 431,563 514,375
- 16,563 66,250 431,563 514,375
2010:
Fixed interest
rate liability -16,563 66,250 458,375 541,188
- 16,563 66,250 458,375 541,188
NORTHERN ELECTRIC FINANCE PLC (REGISTERED NUMBER: 3070482)
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2011
11. DEFERRED TAX
GBP'000
At 1 January 2011 362
Credit to income statement (49)
At 31 December 2011 313
The balance represents deferred tax on unamortised issue
costs.
12. RELATED PARTY DISCLOSURES
The Company has advanced loans to Northern Powergrid (Northeast)
Limited, its immediate parent company. The total interest included
in investment income for the year ended 31 December 2011 was
GBP17,031,000 (2010: GBP17,043,000). Included within trade and
other receivables is GBP251,236,000 as at 31 December 2011 (2010:
GBP251,157,000) in respect of these loans. Included within cash and
cash equivalents is GBP1,674,000 (2010: GBP1,720,000) in respect of
these loans.
The Company has received loans from other companies in the
Northern Powergrid Group. The total interest included in finance
costs in the income statement for the year ended 31 December 2011
was GBP43,000 (2010: GBP37,000). Included within borrowings is
GBPnil as at 31 December 2011 (2010: GBPnil) in respect of these
loans.
Interest on loans to/from group companies is charged at a
commercial rate.
13. ULTIMATE CONTROLLING PARTY
The immediate parent undertaking of Northern Electric Finance
plc is Northern Powergrid (Northeast) Limited. The ultimate
controlling party and ultimate parent undertaking of Northern
Powergrid (Northeast) Limited is Berkshire Hathaway, Inc., a
company incorporated in the United States of America.
Copies of the group accounts of Berkshire Hathaway, Inc. (the
parent undertaking of the largest group preparing group accounts)
which include Northern Electric Finance plc and the group accounts
of Northern Electric plc, the smallest parent undertaking to
prepare group accounts in the UK, can both be obtained from the
Company Secretary, Northern Powergrid Holdings Company, Lloyds
Court, 78 Grey Street, Newcastle upon Tyne, NE1 6AF.
14. RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH GENERATED FROM
OPERATIONS
2011 2010
GBP'000 GBP'000
Loss before income tax (148) (64)
Finance costs 17,173 17,101
Finance income (17,031) (17,043)
(6) (6)
Increase in trade and other receivables (67) (60)
Increase in trade and other payables 153 145
Cash generated from operations 80 79
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFLFMLFESELD
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