Northern Ireland Electricity Limited's Report and Accounts for the year ended 31 December 2013 have
been submitted to the National Storage Mechanism and will shortly be available for inspection at:
www.Hemscott.com/nsm.do and are available on Northern Ireland Electricity Limited's website at:
www.nie.co.uk/About-NIE/financial-information
Contact for enquiries:
NIE Corporate Communications - telephone 0845 300 3556
The full report and accounts follow:-
GROUP STRATEGIC REPORT
The directors present the Group Strategic Report for Northern Ireland Electricity Limited (NIE or the
Company) for the year ended 31 December 2013.
The Group Strategic Report and the Accounts consolidate the results of NIE and its subsidiary undertakings
(the Group). The Group's operating subsidiary companies are NIE, NIE Networks Services Limited and NIE
Finance PLC. NIE Networks Services Limited (previously named NIE Powerteam Limited), which provides
electrical infrastructure construction and refurbishment and other managed services to NIE, became a wholly
owned subsidiary company of NIE during the year. NIE Finance PLC is the issuer of listed debt on behalf of NIE.
NIE is part of the ESB Group.
Operating Environment
The Group's principal activities are the construction and maintenance of the transmission and distribution
networks in Northern Ireland and the operation of the distribution network.
NIE derives its revenue principally through charges for use of the distribution system and Public Service
Obligation (PSO) charges levied on electricity suppliers and charges for transmission services (mainly for use
of the transmission system) levied on SONI, the transmission system operator in Northern Ireland.
NIE is regulated by the Northern Ireland Authority for Utility Regulation (the Utility Regulator) and the
Department of Enterprise Trade and Investment (DETI). Under its Transmission and Distribution licences the
Company is required to develop, maintain, and in the case of the distribution system, operate an efficient,
co-ordinated and economical system of:
- electricity transmission - the bulk transfer of electricity across its high voltage network of overhead
lines, underground cables and associated equipment mainly operating at 275kV and 110kV; and
- electricity distribution - the transfer of electricity from the high voltage transmission system and its
delivery to consumers across a network of overhead lines and underground cables operating at 33kV, 11kV
and lower voltages.
NIE is subject to a price control, defined in a formula set out in the Company's Licences, which limits the
revenue it may earn and the prices it may charge. NIE's price control in respect of the period from 1 April
2012 to 30 September 2017 was referred to the Competition Commission on 30 April 2013. The statutory deadline
for the Competition Competition's determination is 30 April 2014. NIE's tariffs have been set for the period
up to 30 September 2014. To the extent that there is any over or under-recovery in respect of NIE's
regulated entitlement during the period 1 April 2012 to 30 September 2014 this will be addressed in the
Competition Commission's determination.
The transmission and distribution networks comprise a number of interconnected networks of overhead lines
and underground cables which are used for the transfer of electricity to c840,000 consumers via a number of
substations. During the year an estimated 8.1TWh of electricity was distributed to consumers. There are
2,200km of transmission circuits, approximately 45,000km of distribution circuits and 258 major substations.
NIE's transmission system is connected to that of the Republic of Ireland (RoI) through a 275kV interconnector
and to that in Scotland via the Moyle Interconnector. There are also two standby 110kV connections to RoI.
Business Overview
The focus for the business during the year has been to continue to concentrate on the key areas of safety,
network reliability, customer service and business efficiency despite the uncertainty caused by the delay in
settling the fifth five-year (RP5) price control which was referred to the Competition Commission in April.
Key achievements during the year included:
- Continued strong focus on managing health and safety evidenced by the low number of lost time incidents;
- Successfully reconnecting 150,000 consumers within 48 hours following the severe snow storm in March;
- Continued investment in Northern Ireland's electricity infrastructure to: replace worn assets; service
increased customer demand; facilitate connection of renewable generation and maintain safety and security
of supply. It is expected that the level of investment will increase following the Competition Commission's
determination;
- Achievement of the British Standards Institute's 'PAS 55' certification - an internationally recognised
asset management standard; and
- Contribution of £140m into the Northern Ireland economy through the employment of approximately 1,300
employees and payments to local businesses and authorities.
Financial Review
During the prior period, NIE changed its accounting reference date from 31 March to 31 December. Therefore
the results for the reported period are for the year to 31 December 2013 whereas the results for the comparative
period are for the nine month period to 31 December 2012. The accounts for the period to 31 December 2012 have
been restated to reflect the adoption of IAS 19 (revised) 'Employee Benefits'. Further details are disclosed in
Note 2 to the accounts.
Financial KPIs
The directors have determined that the Group's financial key performance indicators (KPIs) are Group pro-forma
operating profit and pro-forma Funds From Operations (FFO) interest cover based on regulated entitlement
determined by the Company's price control.
However, as NIE has had no agreed price control during the year, the financial KPIs cannot currently be
calculated based on regulated entitlement as this will not be known until the Competition Commission makes its
final determination.
The financial KPIs in this report have therefore been calculated based on revenues reported in the accounts,
without any adjustment for the over or under-recovery in respect of regulated entitlement.
On this basis, the Group's operating profit as reported in the accounts was £112.4m for the year to 31 December
2013 compared to £84.7m for the nine months to 31 December 2012. On an annualised basis operating profit is
largely in line with the prior year.
FFO interest cover is calculated as FFO divided by interest paid. FFO is defined as operating profit adjusted
for depreciation, amortisation and release of customer contributions, less defined benefit pension charge less
contributions paid (as reported in the Cash Flow Statement) and tax paid. FFO interest cover was 3.6 times for
the year compared to 3.1 times for the nine months to 31 December 2012.
A summary of the financial results for the period as reported in the accounts is shown below.
12 months ended / 9 months ended 31 December 31 December
2013 2012
£m £m
(restated)
Revenue 258.0 201.9
Operating profit 112.4 84.7
Profit after tax 65.2 44.2
Net debt 558.5 551.5
Net assets 274.0 202.8
Income Statement
- Revenue for the year of £258.0m (9 months ended 31 December 2012 - £201.9m)principally comprises
revenue in respect of use of the transmission and distribution systems and PSO levies. On an
annualised basis revenue has decreased compared to the prior period due to lower PSO levies partly
offset by higher use of system revenues.
- Operating costs for the year were £145.6m compared to prior period operating costs of £117.2m (restated).
On an annualised basis operating costs have decreased due to lower PSO costs in 2013 non-recurring
accelerated depreciation in the prior period.
- Operating profit for the year was £112.4m compared to £84.7m (restated) in the prior period. On an
annualised basis operating profit is largely in line with the prior period.
- Net finance costs of £42.4m for the year largely comprised £37.5m (9 months ended 31 December 2012 - £28.2m)
in respect of bond interest charges and pension scheme interest of £5.3m (9 months ended 31 December 2012 -
£3.5m restated).
- Tax charge for the year was £4.8m (9 months ended 31 December 2012 - £9.3m restated) and is net of a
deferred tax credit reflecting the impact of a 3% reduction in future corporation tax rates (2012 - 1%).
- Profit after tax for the year was £65.2m (9 ended 31 December 2012 - £44.2m restated). On an annualised
basis profit after tax is higher in 2013 largely due to a lower tax charge.
Balance Sheet
- Non-current assets at 31 December 2013 were £1,703.3m (2012 - £1,664.3m), reflecting an increase of £59.9m
in property, plant and equipment and intangible assets during the year offset by a decrease of £20.9m in the
mark-to-market value of RPI interest rate swaps.
- Current assets have decreased by £3.3m to £104.3m largely reflecting lower cash balances partly offset by
higher trade and other receivables.
- Current liabilities were £133.5m (2012 - £137.3m). The decrease mainly reflects lower tax payable partly
offset by increased trade and other payables due to higher payments in advance received in relation to new
connections to the network.
- Non-current liabilities at 31 December 2013 were £1,400.1m (2012 - £1,431.8m). The movement reflects decreases
of £20.9m in the mark-to-market value of RPI interest rate swap liabilities and £48.6m in the IAS 19 pension
liability offset by increases of £18.2m in the deferred tax liability and £18.6m in deferred income. The
pension liability in the Group's defined benefit scheme decreased to £91.6m (2012 - £140.2m) primarily
reflecting the net pension assets of the newly acquired subsidiary, NIE Networks Services Limited
and, contributions made to the scheme during the year.
Cash Flow
- Cash and cash equivalents decreased by £6.8m during the year due to net cash flows from operating activities
of £132.1m (9 months ended 31 December 2012 - £74.3m) offset by cash out flows in respect of investing
activities of £116.2m (9 months ended 31 December 2012 - £87.1m) and cash used in financing
activities of £22.7m (9 months ended 31 December 2012 - £nil). Cash flows used in financing activities
during the year reflect the repayment of borrowings to the parent company following the acquisition of NIE
Networks Services Limited.
Financial Risk Management
The main financial risks faced by the Group relate to liquidity, funding,investment and financial risk, including
interest rate and counterparty credit risk. The Group's objective is to manage financial risks at optimum cost.
The Group employs a continuous forecasting and monitoring process to manage risk.
Capital management and liquidity risk
The Group is financed through a combination of equity and debt finance. Details in respect of the Group's equity
are shown in the Statement of Changes in Equity and in note 22 to the accounts. The Group's debt finance at 31
December 2013 comprised bonds of £174.0m and £398.1m (net of issue costs) which are due to mature in September 2018
and June 2026 respectively.
The Group's liquidity risk is managed through the preparation of cash flow forecasts. The Group's policy is to
have sufficient funds in place to meet capital expenditure funding requirements for the next 12 - 18 months. The
Group has committed undrawn intercompany loan facilities in place of £60m.
The Company's policy in relation to equity is to finance equity dividends from accumulated profits. In relation
to debt finance, the Company's policy is to maintain a prudent level of gearing. As noted above FFO interest
cover is a KPI.
The Company's licences contain various financial conditions which relate principally to the availability of
financial resources, borrowings on an arm's length basis, restrictions on granting security over the Company's
assets and the payment of dividends. The Company is in compliance with these conditions.
The Company has maintained an investment grade credit rating from Standard & Poor's and Fitch during the year.
Interest rate risk
The £175m and £400m bonds are denominated in sterling and carry fixed interest rates of 6.875% and 6.375%
respectively and therefore the Group is not exposed to changes in interest rates.
The Company holds a £550m portfolio of RPI interest rate swaps which have maturity dates between 2026 and 2036
and have a mandatory break date on 22 December 2015. The Company also holds a portfolio of RPI interest rate
swaps with identical matching terms which hedge the Company's exposure in respect of these swaps. Further
details of the swaps are disclosed in note 16 to the accounts.
Credit risk
The Group's principal financial assets are cash and cash equivalents, trade and other receivables (excluding
prepayments and accrued income) and other financial assets as outlined in the table below:
2013 2012
£m £m
Cash and cash equivalents 31.8 38.6
Trade and other receivables (excluding prepayments and accrued income) 51.5 46.0
Other financial assets - current and non-current 388.2 408.9
----- -----
471.5 493.5
----- -----
The Group's credit risk in respect of trade receivables from licensed electricity suppliers is mitigated by
appropriate policies with security received in the form of cash deposits, letters of credit or parent company
guarantees. With the exception of public bodies, payments in relation to new connections or alterations are
received in advance of the work being carried out. Payments received on account are disclosed in note 14 to
the accounts.
Other financial assets comprise RPI interest rate swap arrangements entered into with ESBNI Limited (ESBNI),
an ESB group company. The counterparty risk from ESBNI is not considered significant given ESB's investment
in the Company and ESB's strong investment grade credit rating.
The Group may be exposed to credit-related loss in the event of non-performance by bank counterparties.
This risk is managed through conducting business only with approved counterparties which meet the criteria
outlined in the Group's treasury policy.
Further information on financial instruments is set out in the notes to the accounts in compliance with
IFRS 7 Financial Instruments: Disclosures.
Going Concern
The Group's business activities, together with the principal risks and uncertainties likely to affect its
future performance, are described in this Group Strategic Report. As noted in the section on capital
management and liquidity risk, the Group is financed through a combination of equity and debt finance.
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 12 months from the date of approval of the accounts, the
directors have a reasonable expectation that the Group will have adequate financial resources for the 12
month period and accordingly continue to adopt the going concern basis in preparing the annual report and
accounts.
Operational Review
Asset Management
Asset management is at the core of NIE's business. Good stewardship of the transmission and distribution
networks delivers long term value for electricity customers throughout Northern Ireland. During the year
NIE published its Asset Management Strategy setting out the path that will lead NIE towards best asset
management practice within the electricity industry (which can be found on NIE's website at
nie.co.uk/asset_mgmt_strategy).
The strategy, which links the Company's corporate objectives and asset management policy to the detailed
plans that define how NIE specifies, procures, constructs, operates and maintains its asset base, included
the validation of the asset management system through an internationally recognised certification. In
September, following an extensive organisation wide programme, 'Route 55', NIE achieved the British
Standards Institute's 'PAS 55' certification, an internationally recognised asset management standard for
the optimised management of physical assets. Going forward, NIE will benchmark its asset management
processes and performance against industry leaders and best practice to establish where improvements
should be made. The Asset Management Strategy will be continually reviewed to ensure that assets are
managed in an efficient way, integrated with risk, health and safety, environmental and quality management
systems, whilst reflecting the evolving needs of consumers and stakeholders.
Responsibility for transmission network planning is expected to be transferred to SONI in April 2014 in
accordance with the European Commission decision in respect of the transmission arrangements in Northern
Ireland under the IME 3 Directive. NIE will continue to be responsible for the construction, maintenance
and ownership of the transmission network.
During the year NIE invested £79m (net of customer contributions) in its transmission and distribution
networks. This level of investment was consistent with the annual average rate of investment undertaken
during recent years. This investment was largely dedicated to ensuring compliance with NIE's statutory
and licence obligations, being focused on the replacement or refurbishment of age expired network assets,
as well as developments to increase the capacity of the distribution network.
This capital investment programme included £10m to facilitate the connection to the network of more
renewable generation consistent with NIE's Medium Term Plan. Projects advanced during 2013 as part of
the Medium Term Plan included:
- phase two of the development of the existing 275/110kV substation at
Tamnamore to facilitate the flow of power from renewable generation in the west
to the demand centres in the east of Northern Ireland;
- uprating of the Kells to Coleraine 110kV circuit by installing higher
capacity conductors at critical spans; and
- pre-construction activity in support of a proposed new 110kV circuit between
Omagh and Tamnamore.
Interconnection
In order to further strengthen the interconnection of the electricity networks of Northern Ireland and
the RoI and ensure long-term security of supply in Northern Ireland, NIE continued to work with EirGrid
on the development of the critical 400kV North-South interconnector project between Tyrone and Cavan.
In April 2013 NIE resubmitted extensively revised and detailed planning applications following the
Planning Appeals Commission's (PAC) request for relevant environmental statements to be modified. The
timing for reconvening the public inquiry by the PAC is dependent on progress in the RoI and the
continuing delay in the corresponding EirGrid process in the RoI will further extend the timescale
for overall project consents. Following the transfer of the transmission network planning function
to SONI in April 2014 SONI will have responsibility for the development of the interconnector.
Severe Weather Events
NIE continues to improve incrementally its emergency response capabilities during severe weather
events in order to effectively restore supply to all consumers. The significant commitment of its
frontline staff helps to ensure that NIE effectively manages this very important aspect of its business.
This was tested in March 2013 when a severe snow storm resulted in widespread damage to the network and
the loss of supply to around 150,000 consumers. NIE's emergency plan was fully implemented with the
mobilisation of employees and external contractors including additional resources from the RoI.
Helicopters were deployed to assist in locating and assessing damage and delivering equipment and
crew to locations otherwise inaccessible due to heavy snow. Supplies of electricity were restored
to 99% of the affected consumers within 48 hours.
Throughout December 2013 there were several periods of severe weather resulting in a total of 96,000
customer interruptions in supply. Supplies of electricity to all but 600 affected consumers were
restored within 24 hours.
Following the severe storms in October 2013, a team of 46 overhead line workers and tree cutters
travelled to Kent to assist UK Power Networks restore power supplies.
Operational KPIs
The directors have determined that the following KPIs are the most effective measures of progress
towards achieving the Group's operational objectives. Performance during the 12 months ended 31
December 2013 is provided together with the comparative previous 12 month period.
KPIs Year to Year to
31 December 31 December
2013 2012
Number Number
Customer Minutes Lost (CML)
- Planned CML (minutes) 50 minutes 56 minutes
- Fault CML (minutes) 56 minutes 46 minutes
Overall standards - defaults None None
Guaranteed standards - defaults 1 None
Stage 2 complaints to the Consumer Council 3 2
Applications for customer demand connections 8,700 9,900
Renewable generation connected
- Small scale (Less than 2 MW) 31MW 4MW
- Large scale (Greater than 2MW) 60MW 71MW
Lost time incidents 2 2
Waste recycling rate (%) 97% 95%
CML
Planned CML is the average number of minutes lost per consumer for the period
through pre arranged shutdowns for maintenance and construction: the number of
planned CML for the year to 31 December 2013 reduced to 50 minutes reflecting a
reduced outage programme associated with the capital investment programme (year
ended 31 December 2012 - 56 minutes).
Fault CML is the average number of minutes lost per consumer for the period
through distribution fault interruptions, excluding the effect of major storms:
the number of CML in the year remained low at 56 minutes (year ended 31
December 2012 - 46 minutes). The previous year's exceptionally low fault CML
reflected abnormally favourable weather conditions.
Overall and guaranteed standards
Performance against the overall and guaranteed standards set by the Utility
Regulator, the majority of which apply to services provided by NIE (e.g. the
timely restoration of consumers' supplies following an interruption and
prescribed times for responding to consumers' voltage complaints): a key
priority for NIE is to consistently provide the highest standards in customer
service and network performance. During the year all the overall standards
were achieved and there was one default against the guaranteed standards (year
ended 31 December 2012 - none).
Stage 2 Complaints to the Consumer Council
Stage 2 Complaints to the Consumer Council is the number of complaints which
the Consumer Council for Northern Ireland takes up on behalf of consumers: the
Company's continued strong focus on service failure analysis limits the number
of instances when consumers are dissatisfied to the extent that they refer a
complaint to the Consumer Council. The number of Stage 2 Complaints during the
year remained low, at three (year ended 31 December 2012 - two complaints).
Individual complaints received by NIE are analysed and assessed, based on the
individual specific circumstances, as to whether or not the complaint was
avoidable and details reported each month to the Executive Committee.
Applications for customer demand connections
The number of applications for customer demand connections reduced by c10% to
8,700 applications during the year reflecting the continued challenges facing
the construction industry in Northern Ireland (year ended 31 December 2012 -
9,900 applications).
Renewable generation connected
Since DETI's introduction of increased Renewable Obligation Certificate (ROC)
incentives for small scale renewable generation projects in April 2010, there
has been a large influx in the rate of applications for connections of
renewable generators in the range 3kW to 500kW. Throughout 2013 the rate of
applications for the connection of small-scale generation continued to increase
significantly. During the year 31MW of small scale renewable generation
comprising single wind turbines, anaerobic digestors, hydro turbines and
domestic solar PV microgeneration projects were connected to the network: the
comparable figure for 2012 was 4MW connected. This high level of activity has
led to serious congestion on the distribution network, particularly in the west
of Northern Ireland. This has resulted in very costly connection offers to
developers where there is significant 11kV reinforcement required. Parts of
the 33kV network also require reinforcement, investments for which will be
subject to agreement with the Utility Regulator. Connections during 2014 will
increase further as a large number of connection offers accepted in 2013 will
be connected. In addition, 60MW of large scale renewable generation (typically
over 2MW in size), comprising three wind farms, was connected to the network
(year ended 31 December 2012 - 71MW connected).
Lost time incidents
The number of lost time incidents: ensuring the safety of employees is a key
priority for NIE and the target for lost time incidents continues to be set at
zero. NIE's sound record continued with only two lost time incidents during
the year (year ended 31 December 2012 - two incidents).
Waste recycling rate
The recycling rate for all hazardous and non-hazardous waste (excluding
excavation from roads and footpaths): performance continued to improve during
the year with a rate of 97% (year ended 31 December 2012 - 95%).
Looking Forward
NIE's key priorities for 2014 are:
- Safety - Ensuring the health and safety of employees, contractors and the
general public will continue to be NIE's top priority;
- Electricity Infrastructure - Continuing to grow and maintain a secure and
sustainable electricity network to meet the demands of Northern Ireland's
electricity market, including the connection of renewable generation to support
the Northern Ireland Assembly in reaching its targets in respect of electricity
consumption from renewable sources;
- RP5 price control - Implementing the Competition Commission's final
determination on RP5 and adopting the associated licence modifications;
- Customer service - Remaining committed to meeting all customer service
expectations;
- Competitive cost base - Maintaining NIE as an efficient and highly
competitive company requiring value for money in all its endeavours;
- People - Continuing investment in employees to enhance the organisation's
capability, through: further employee development programmes, increased
employee engagement and extended educational outreach initiatives;
- Stakeholders - Engaging effectively with key stakeholders including the
regulators, renewables industry groups, CBI and large energy users.
Corporate Social Responsibility (CSR)
NIE provides a vital service to every home, farm and business in Northern
Ireland as part of its day to day work in delivering electricity supplies.
Through our mainstream business activities and various specific initiatives we
seek to make a positive impact on the communities in which we operate. We
arecommitted to operating in a socially, environmentally and ethically
responsible manner.
Initiatives undertaken during the year to support our principal CSR themes and
priorities are described below.
People
Health and safety
Ensuring the safety of employees, contractors and the general public continued
to be the number one value at the heart of all our business operations. The
aim is to provide a zero harm working environment where risks to health and
safety are assessed and controlled. This is achieved by the promotion of a
positive health and safety culture and adherence to legislation and recognised
safety standards. The health and safety management system is based on best
practice guidance from the Health and Safety Executive for Northern Ireland
(HSENI) and the Institute of Directors. Our staff continue to engage with the
Energy Networks Association, other utilities and relevant statutory
organisations to review and improve safety performance and learning.
The benefit of staff reporting 'near miss' incidents is key to improving safety
performance. The quality of 'near miss' incidents reported improved during the
year enabling weaknesses in operational procedures to be identified and
addressed.
The programme of safety training continued throughout the year with appropriate
staff attending a wide range of courses including NIE Safety Rules,
Construction Design and Management Regulations workshops and certificate
courses in Construction, Health and Safety provided by the National Examination
Board in Occupational Safety and Health (NEBOSH). The regular programme of
departmental safety seminars continued for operational staff and, in addition,
during 2013 the majority of non-operational staff attended a safety seminar.
Instructions and guidance to support NIE's Safety Rules were revised and
communicated to operational staff regularly. There are comprehensive
contractor management arrangements in place to ensure that contractors adhere
to the same safety rules and requirements as employees.
The site safety inspection programme continued throughout the year with over
270 trained staff, from the Managing Director to the first line manager, in
addition to five full time safety engineers, conducting over 4,300 audits and
inspections.
During European Safety Week health checks and healthy lifestyle talks were
offered to employees via Northern Ireland Chest, Heart and Stroke, Action
Cancer and our occupational health advisers.
Employment
Employees are the most important asset in the business. We aim to attract,
develop and retain highly skilled people through graduate schemes,
apprenticeships and other trainee and sponsorship programmes. We are committed
to a working environment which enables employees to realise their maximum
potential and to be appropriately challenged and fully engaged in the business,
with opportunities for skills enhancement and personal development. Human
Resources policies are aligned with key business drivers including: performance
and productivity improvement; clearly defined values and behaviours; a robust
performance management process; and a strong commitment to employee
development.
We aim to maintain a highly ethical approach to regulatory responsibilities,
licence obligations and public positioning and to be transparent and ethical in
all our dealings with third parties. During the year a new Employee Code of
Business Ethics provided clear guidance on the high standards of ethical
behaviour expected in conducting every aspect of NIE's work.
To ensure a highly skilled, multi-disciplined workforce, a multi-skilled
approach has been taken to vocational training schemes and for the second year
in succession the Education and Training Inspectorate assessed the quality of
training provided by NIE's apprenticeship training programme as 'Outstanding'.
During the year a new initiative, the 'Apprentice to Graduate' scheme was
launched, with a fully trained NIE apprentice going to university to study
electrical engineering.
The focus on succession management and leadership development continued with
over 250 management and technical leadership roles involved from senior
executive to first line managers. The development programme during the year
included role changes, role enhancement, skills development, formal
qualifications, team development initiatives, coaching and mentoring. There
was extensive training across the organisation on HR policies and procedures
and customer service.
Our policy is that the pro-active management of absenteeism is to the mutual
benefit of the organisation and its employees. An employee health and
well-being policy covering stress management is in place with specific policies
on mental health, alcohol and drug-related problems and non-smoking. External
occupational health and counselling services are available for employees.
Sickness absence during the year was 2.95% (nine month period ended 31 December
2013 - 2.80%), remaining lower than the UK national average of 3.3%.
Significant emphasis is placed on employee participation and communications.
There is a formal induction programme for all new starts including meeting with
senior management. During the year employees were kept informed of NIE's aims,
objectives, plans, financial and operational performances and their effect on
them as employees through the monthly newsletter and monthly team briefings.
In addition, a series of road show presentations by the Managing Director
ensured that all employees are briefed on major developments. Formal meetings
are held regularly between senior managers and representatives of employees and
their unions to discuss matters of common interest. Employee relations are
positive and constructive with approximately 66% of employees being union
members.
Following on from the employee engagement survey conducted in late 2012,
throughout the year around 130 employees were involved in focus groups as part
of a significant employee engagement programme to address issues raised in the
survey.
NIE is accredited by the UK Commission for Employment and Skills with the
Investors in People (IIP) Standard, which tests ongoing investment in people to
improve business performance.
Equality and diversity
We are pro-active in implementing human resource policies and procedures to
ensure compliance with fair employment, sex discrimination, equal pay,
disability discrimination, race discrimination, sexual orientation and age
discrimination legislation. As set out in our Equal Opportunities Policy, we
are committed to providing equality of opportunity for all employees and job
applicants. There is ongoing monitoring of actions taken to promote compliance
with legislation and to ensure that we provide equality of opportunity in all
our employment practices.
In order to ensure diversity and inclusion in the workplace we introduced new
arrangements for 'Respect and Dignity in the Workplace' in line with best
practice with all staff trained on their personal responsibilities in
respecting differences. HR staff received specific training on 'Sexual
Orientation and LGB (Lesbian, Gay and Bisexual) Employment Equality'.
Our policy is to provide people with disabilities equal opportunities for
employment, training and career development, having regard to aptitude and
ability. Any member of staff who becomes disabled during employment is given
assistance and re-training where possible.
Sustainability
Policy and objectives
Our environmental policy commits to protecting the environment and is designed
to ensure compliance with all relevant legislative and regulatory
requirements. Where practical and economically viable, we seek to develop
standards in excess of such requirements. Areas of particular focus include
the responsible management of waste and recycling, measures to protect against
oil pollution and the promotion of energy efficiency. There is a full-time
environmental compliance officer and designated auditors in relevant business
operations.
During the year our environmental management system retained its certificate to
ISO 14001:2004 standard. In the 2013 environmental management survey conducted
by ARENA Network in Northern Ireland, NIE achieved a first quintile position
significantly out-performing both the Northern Ireland average and the
utilities sector average.
Electric vehicles
During the year NIE installed 130 electric vehicle charge posts as part of the
Office for Low Emission Vehicles 'Plugged in Places Infrastructure Framework',
providing comprehensive coverage for electric vehicle travel across Northern
Ireland. This 'E-car' project, managed by the Department of Regional
Development and the Department of the Environment, and part funded by NIE, won
the Outstanding Work in the Renewable Sector award at the 2013 Action
Renewables Association Awards.
Research & development
The 'Shift & Save' Smart grid trial continued during the year. The trial,
involving 200 homes in the Coleraine area, investigates how Smart meters and
Smart grid technology could change homeowners' energy usage patterns,
particularly at times of peak demand in the early evening, to reduce and
flatten demands on the network. Smart meters were installed in participants'
homes and Smart monitoring equipment installed at the substations supplying
these homes. Following an initial technology monitoring phase, customer
behaviour is now being monitored via in-home displays and the application of a
multi-rate 'shadow tariff'. Initial analysis suggests that consumers are
making changes to shift some of their energy use away from the peak period.
The trial will run to June 2014.
Sponsorship
We continued to support Conservation Volunteers Northern Ireland by providing a
vehicle to its team working with primary schools to establish wooded and other
natural habitats to improve local biodiversity.
Community
We estimate that more than 200 days of company time are dedicated each year to
community initiatives to promote safety around electricity, skills and careers
advice and guidance. In 2013 we set a specific target to give an additional
2,000 expert volunteer hours to charity (1,000 hours of NIE time and 1,000
hours of employees' personal time) by nominating around 30 employees for
appointment to the boards of local voluntary, community and social enterprise
organisations through Business in the Community's 'Business on Board' project.
The various boards are benefiting from the skills and expertise of our
employees with the participants gaining from the development of new skills,
especially on financial and strategic issues which can help their development
within NIE.
Customer care
We aim to deliver electricity safely and reliably to consumers and to respond
quickly and efficiently should a power cut unexpectedly occur. Proactive
campaigns to communicate to key consumer and government bodies and elected
representatives how we repair network faults are run annually through a series
of open days. During 2013 we restored 89% of consumers' electricity supply
within three hours against our regulatory target of 87%. During a severe storm
or emergency situation, each employee has a specific role, which may be totally
different to his/her normal role.
We have engaged with Councils, emergency planners and other agencies, such as
the health trusts and the Red Cross, to develop protocols to respond to wider
community needs in the event of consumers being without electricity for an
extended period of time due to severe weather or emergency situation.
Together with our utility partners, Northern Ireland Water, BT and Phoenix
Natural Gas, we developed plans to provide mutual support, for example by
sharing resources and equipment, so that consumers' utility supplies can be
restored more quickly during periods of severe weather or other emergency
situations. In March the plan was implemented for the first time when NIE lent
BT equipment and manpower to help repair the telecoms network following severe
weather. The group published a 'cut out and keep' Winter Preparation Contact
List for consumers.
We have special arrangements in place to assist more vulnerable members of the
community with a critical care information service to consumers who rely on
electricity for their healthcare needs. The service is promoted through
targeted customer groups, health care trusts and specific equipment
manufacturers. A specific team is dedicated to communicating with these 4,500
consumers during planned or unplanned power cuts.
NIE's website has been developed further to provide a more service-based
experience for consumers contacting us via an internet enabled phone or tablet
device. Consumers can submit meter readings, apply for connections to the
electricity network and report power cuts online. Consumers can also
communicate with NIE via Twitter @NIElectricity.
Meter readers continued to deliver leaflets to households on the Police Service
of Northern Ireland's (PSNI) Quick Check scheme to encourage homeowners to
check the identification of callers.
Safety advice
We aim to continually heighten the awareness of the general public to the
dangers of electricity and the risks of coming into contact with the
electricity network by running a major safety outreach programme involving
employees at all levels.
During 2013, over 15,000 farmers and contractors received safety advice from
NIE at farm safety events and through the issue of 'Farm Risk Assessment' and
other safety material through the Ulster Farmers Union. NIE assisted HSENI in
issuing safety advice for contractors working near the low voltage network.
Together with other organisations, we assisted the PSNI to develop a Risk
Avoidance and Danger Awareness Resource (RADAR), a dedicated safety training
facility for children and young people to become operational during 2014.
Our 'Kidzsafe' programme was relaunched during 2013, with over 19,000
schoolchildren participating in the interactive programme to educate and raise
awareness of the dangers of electricity network in an effort to reduce
incidences of vandalism and electricity-related injuries.
We continued to work with the PSNI and other utilities to address the dangerous
issue of metal theft. Thieves targeting electrical installations endanger
themselves, NIE staff and the wider public. During the year a voluntary Code
of Conduct was adopted by some local scrap metal dealers and NIE is supporting
the introduction of legislation to control scrap metal trading.
NIE's safety advice is supplemented by a proactive media campaign, social media
campaign and information available on our website at nie.co.uk/safety.
Charitable giving
We promote charitable giving among our employees through the NIE Staff and
Pensioners Charity Fund. The fund is promoted and managed by a nominated
internal committee and each contributing member can nominate a charity to
receive donations. During the year the Company also contributed £14,000 to the
fund. In 2013 £69,000 was donated to local charities and a special donation of
over £16,000 was made to the Philippines Disaster Appeal.
A team of NIE employees participated in the 'CARES' charity shop challenge
raising over £6,000 for Action Cancer. The challenge also enabled the
employees to demonstrate their communications and management skills and ability
to engage employees across all business units to donate sellable items and
organise fundraising events.
Work Experience and educational outreach
Working on electricity networks requires highly specialised skills. With fewer
students choosing science and technology subjects, coupled with the need to
invest heavily in network renewal and investment projects, the electricity
industry faces significant skills shortage in the future. NIE therefore
continues to engage proactively with students to consider engineering as a
career. During the year we provided valuable work experience opportunities to
GCSE and A-Level pupils. Four weeks of research and development experience for
two A-Level students was provided via the Nuffield Bursary scholarship.
Many employees continued to be involved in furthering our links with over 60
schools, most of the further educational colleges and the two universities to
promote the opportunities from taking Science, Technology, Engineering and
Maths (STEM) subjects and promoting careers in the electricity industry through
a wide range of educational outreach initiatives including careers guidance,
mentoring, work experience for STEM teachers, interview skills, electrical
engineering scholarships, and sponsoring energy projects. For example, during
the year NIE:
- sponsored the First Lego League, a global robotics programme for children
providing a cross-curricular approach to teaching STEM subjects;
- continued to provide mentoring services to school children participating in
the Institute of Engineering and Technology (IET) 'SMART Energy' project and
'Team R&D', a research and development project in conjunction with Sentinus, a
government charity working with schools and colleges throughout Northern
Ireland to deliver programmes promoting STEM learning;
- sponsored the Young Innovators award for Innovation with Electricity;
- continued its outreach to attract females into the industry by providing a
two day 'Insight into Engineering' placements for 10 key stage 4 and 5
students;
- provided three further NIE Electrical Engineering scholarships at Queen's
University Belfast and sponsored a further two Electrical and Electronic
Engineering students through their studies as part of the IET Power Academy
Council that works alongside seven UK universities to encourage students into
power engineering. In total we have 16 scholarship students at Queen's
University; and
- continued to support Queen's University, Belfast's DeLorean car project for
students to convert to electric-powered and for use by both NIE and Queen's
University in educational outreach work.
In addition, work placements of up to 12 months were provided to a number of
young unemployed people through the Youth Employment Scheme in conjunction with
the Department of Employment and Learning, the Skills Development Programme and
the Enhanced Employer Subsidy programme.
Sponsorship
NIE was the main financial sponsor of the 'Lumiere' art and light show, one of
the key events in Derry/Londonderry's year as UK City of Culture.
Procurement
We recognise that we have an opportunity to encourage suppliers of materials
and services to deliver good environmental and safety performance and to
maintain responsible practices towards their employees and the communities in
which they operate. NIE subscribes to the Achilles utilities vendor database
which acts as an aid to pre-qualify potential suppliers for major contracts on
a fair and equal basis; this assessment includes environmental and health and
safety practices. In addition NIE assesses suppliers' ethical practices
through pre-tender questionnaires.
Risk Management
Risk Management Policy and Framework
The Board has overall responsibility for NIE's risks. Recognising that risk is
an active element of the environment within which NIE operates, the Board is
committed to successfully managing exposure to risk and to minimising the
impact of risk on the achievement of business objectives.
NIE's Risk Management Policy requires that risk management be integrated into
normal management processes. In support of the policy, the Board has
established an overall risk management framework that provides for the
continuous identification, evaluation and management of NIE's significant risks
and includes appropriate structures to support risk management and the formal
assignment of risk responsibilities to facilitate managing and reporting on
individual risks.
The Risk Management Policy is reviewed annually by the Board. NIE's Risk
Management Committee (RMC) oversees and directs risk management in accordance
with the approved policy. The RMC comprises a number of Executive Committee
members and senior managers and is chaired by the Finance Director. The RMC
considers risk assessments carried out by each business unit and the risk
status and mitigation strategies are reviewed quarterly. The RMC reports on
its activities to the Executive Committee, Audit & Risk Committee and the Board
during the year.
The internal audit function is independent of the risk management process and
has provided independent assurance on the adequacy and effectiveness of NIE's
risk management arrangements.
Principal Risks and Uncertainties
The principal risks and uncertainties that affect the Group, as identified by
the RMC, along with the main mitigating strategies deployed are outlined
below.
Risk Risk Description Mitigating Strategies
Category
HEALTH AND SAFETY RISKS
Failure to Exposure of employees, A comprehensive annual Health, Safety and
manage contractors and the general Risk Plan approved by the NIE Board setting
health and public to risk of injury and out detailed targets for the management of
safety the associated potential health and safety.
obligations liability and/or loss of
reputation for NIE.
Comprehensive safety rules, policies,
procedures and guidance reviewed and
communicated regularly and compliance
monitored on an ongoing basis.
A strong focus on the inspection of work
sites and the reporting, reviewing and
communication of near miss incidents.
Ongoing programmes to increase public
awareness of the risks and dangers.
REGULATORY RISKS
Price Inadequate allowances from NIE manages regulatory risks through the
controls price control reviews. Director of Regulation, the Regulatory
Affairs team and relevant senior managers
across the organisation with specialist
external advice. Regulatory submissions are
evidence based.
Licence Fail to comply with The Compliance Manager within the Regulatory
compliance regulatory licence affairs team co-ordinates and monitors
obligations. compliance with all regulatory licence
obligations and reporting to the Utility
Regulator on financial and other regulatory
matters.
FINANCIAL RISKS
Funding and Continuing ability to secure NIE employs a continuous forecasting and
liquidity adequate funding at monitoring process to manage risk of
appropriate cost for planned inadequate funding.
investments and to
maintaining NIE's credit
metrics within rating
targets.
Exposure to financial NIE's detailed Treasury Policy and
counterparty risk. procedures are regularly reviewed, revised
and approved by the Board as appropriate.
NIE's credit risk in respect of receivables
from licensed electricity suppliers is
mitigated by appropriate policies with
security received in the form of cash
deposits, letters of credit or parent
company guarantees.
Pensions Increase in the deficit in 'Focus' has been closed to new entrants
the defined benefit section since 1998. Since then new members have
of the Northern Ireland joined the money purchase section of the
Electricity Pension Scheme NIEPS ('Options').
(NIEPS) ('Focus').
The NIEPS trustees seek the advice of
professional investment managers regarding
the scheme's investments.
A deficit repair plan was implemented
following the last actuarial review as at 31
March 2011. The next actuarial review will
be conducted as at 31 March 2014.
MARKET RISKS
Consumer Fail to meet standards for Stretching consumer service standards are
service consumer service resulting in approved by the NIE Board. Performance
damage to reputation. against these standards is monitored and
reported on a monthly basis.
Connection Failure to meet standards for Procedures are in place to manage connection
of the connection of renewable applications in accordance with NIE's
renewable generation due to the high regulatory obligations.
generation level of applications, with
resulting damage to
reputation.
NIE continues to liaise with the Utility
Regulator, relevant government departments
and industry representatives to facilitate a
co-ordinated and structured approach to
addressing, and communicating on, renewable
connections.
OPERATIONAL RISKS
Network Widespread and prolonged The risk is minimised through ongoing
reliability failure of the transmission assessment of the network condition and
or distribution network. development of asset management techniques
to inform maintenance and replacement
strategies and priorities. NIE's asset
management practices are certified to
British Standards Institute's PAS 55, the
internationally recognised standard for
asset management.
The network is strengthened through appropriate
investment, a reliability-centred approach to
maintenance and a systematic overhead line
refurbishment and tree cutting programme. NIE's
strategy is to continue to maintain and develop a
safe and secure network to meet the market
demands.
Response to Failing to respond adequately System risk assessments are completed
emergency following damage to the regularly and weather forecasts actively
situations electricity network from monitored daily.
adverse weather conditions.
There is a comprehensive Emergency Plan and
Storm Action plan in place, each reviewed
and tested regularly with emergency
simulations carried out at least annually.
Duty incident teams provide cover 365 days a
year with arrangements in place for access
to external utility resources if required.
Business NIE could sustain a greater NIE maintains business continuity plans
Continuity than necessary financial incorporating an IT disaster recovery and
impact through inability to relocation plans which are reviewed and
carry on its operations, tested annually.
either for a short or
prolonged period.
Comprehensive business continuity and
disaster recovery plans are maintained for
important outsourced ICT, business process
and telecommunications services.
IT Security Loss of data through NIE's IT Security Forum ensures the
and Data malicious attack on IT maintenance of adequate IT security
Protection systems or employee policies. Robust ICT standards, policies
negligence impacting on and procedures for system access are in
operational performance or place and communicated across the
reputation. organisation.
NIE's Data Protection Forum implements and
monitors compliance with data protection
policy and procedures.
PEOPLE RISKS
Knowledge Inadequate resources with the NIE's strategy is to attract, recruit and
and skills necessary knowledge and develop highly skilled people through
and skills. graduate, apprenticeship, trainee and
succession sponsorship programmes to ensure that
management appropriate resources are in place to meet
NIE's regulatory obligations.
Failure to develop and People development is a key priority for the
retain staff Company with continued investment in staff
training, skills development and ongoing
performance improvement. Focused management
development programmes are in place to
maximise the potential of staff and ensure
adequate succession planning.
By order of the Board
Joe O'Mahony
Managing Director
Northern Ireland Electricity Limited
Registered Office
120 Malone Road
Belfast BT9 5HT
Registered Number: NI 26041
Date: 13 March 2014
Board Members
STEPHEN KINGON CBE was appointed independent non-executive Chairman of the
Board in March 2011. He is Chairman of the NI Centre for Competitiveness,
Balcas Group and Lagan Group (Holdings) Limited. He is Honorary Treasurer at
Queen's University Belfast, a member of Belfast Harbour Commissioners and a
non-executive director of Mivan Ltd, AIB Group (UK) plc, Anderson Spratt
(Holdings) Ltd and Baird Group Ltd. He was formerly Chairman of Invest
Northern Ireland and Managing Partner of PricewaterhouseCoopers in NI.
ROTHA JOHNSTON CBE was appointed as an independent non-executive director in
March 2011. She is Pro-Chancellor of Queen's University Belfast and
Chairperson of Northern Ireland Screen. She is a member of Belfast Harbour
Commissioners and an independent board member at the Department of Justice for
Northern Ireland. She was formerly National Trustee for Northern Ireland for
the BBC Trust. Ms Johnston chairs the Audit Committee.
RONNIE MERCER CBE was appointed as an independent non-executive director in
March 2011. He has been Chairman of Scottish Water since 2006 and in 2013 was
awarded the CBE for his services to Scottish Water. He has extensive relevant
experience and knowledge of the energy sector as he formerly held senior
executive positions at Scottish Power including Group Director, Infrastructure
and Executive Vice President, Operations of the PacifiCorp subsidiary.
JOE O'MAHONY joined the Board in March 2011. He was appointed Managing
Director in July 2011. He has held a number of senior executive positions in
ESB including Head of Wind Development and Head of Network Projects. Prior to
this he held senior roles in ESB Human Resources, Commercial Management and
with ESB International. He is a non-executive director of the National Roads
Authority of Ireland.
PETER EWING was appointed NIE's Deputy Managing Director and Director of
Regulation in December 2010 on ESB's acquisition of the Company and joined the
Board in July 2011. He joined NIE in 1998 as Finance Director and was
appointed General Manager Viridian Group Finance in 2003. In 2007 he was
appointed to the Viridian Group Board as Group Finance Director. He is a
fellow of Chartered Accountants Ireland and was formerly Finance Director of
the Moy Park Group.
Executive Committee Members
The Executive Committee is chaired by the Managing Director. Its other members
are the Deputy Managing Director and Director of Regulation, Asset Management
Director, Construction Director, Operations Director, Finance Director, and HR
Director.
ROBERT WASSON was appointed as Asset Management Director in January 2012
following joining NIE in January 2011. Previously he has led KPMG's
organisational restructuring and performance improvement practice and
Watershed, a consulting and interim management company, both based in the RoI.
Prior to that he held various technical and managerial roles in ESB's
Transmission and Distribution function and with ESB International.
CON FEENEY was appointed as Construction Director in January 2012. Prior to that he
was Director of Operations. He joined NIE in 1996 as a graduate engineer and has progressed
through various management roles in Lines and Cables, Customer Operations and
Plant and Technical.
ROGER HENDERSON was appointed Operations Director in January 2012. He joined
NIE as a graduate engineer in 1991 and has progressed through various
management roles in Power Networks, Major Projects and Plant and Technical.
MARY COLLINS was appointed Finance Director of NIE and a member of the
Executive Committee in January 2011. She has held a number of senior
commercial and financial positions throughout the ESB Group including Group
Financial Controller from 2004 - 2009. Prior to joining NIE she managed ESB's
Corporate Performance Improvement Project. A fellow of the Institute of
Chartered Accountants, Mary qualified with KPMG and worked in their Irish, US
and UK practices.
GORDON PARKES was appointed as NIE's HR Director and member of the Executive
Committee in January 2011. He joined NIE Networks Services as HR Director in
2000 and was also appointed HR Director of NIE in 2002. From 2004 to 2010 he
was General Manager Group HR for the Viridian Group. Previously he held HR
director roles in the textiles, pharmaceutical and manufacturing sectors.
DIRECTORS' REPORT
Basis of Preparation
The directors of Northern Ireland Electricity Limited (NIE or the Company)
present their report and the Group accounts for the year ended 31 December
2013. The accounts consolidate the results of NIE and its subsidiary
undertakings (the Group). The operating companies in the Group comprise NIE,
NIE Networks Services Limited and NIE Finance PLC. NIE Networks Services
Limited (previously named NIE Powerteam Limited), which provides electrical
infrastructure construction and refurbishment and other managed services to
NIE, became a wholly owned subsidiary company of NIE during the year. NIE
Finance PLC is the issuer of listed debt on behalf of NIE.
The accounts have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union (EU) and applied in
accordance with the provisions of the Companies Act 2006.
The ultimate parent undertaking of the Company is Electricity Supply Board
(ESB), a statutory corporation established under the Electricity (Supply) Act
1927 domiciled in the Republic of Ireland.
The accounts presented are for the year ended 31 December 2013 with the
comparative period reported being the nine months ended 31 December 2012.
Results and Dividends
The results for the year ended 31 December 2013 show a profit after tax of £65.2m
(nine months ended 31 December 2012 - £44.2m restated). The Company did not pay any
dividends during the year (nine months ended 31 December 2012 - £nil). The business
and financial review, together with future business developments, is provided in the
Group Strategic Report.
Corporate Governance
The Board of NIE believes that effective corporate governance is a fundamental
aspect of a well-run business and is committed to achieving the highest
standards of corporate governance, corporate responsibility and risk management
in directing and controlling the business.NIE's regulatory licences require it to
establish, and at all times maintain, full managerial and operational independence
within the ESB Group.
NIE's Board comprises two executive directors and three independent
non-executive directors. Stephen Kingon CBE chairs the Board. Rotha Johnston
CBE and Ronnie Mercer CBE are the Board's other independent non-executive
directors. Joe O'Mahony, Managing Director NIE and Peter Ewing, Deputy
Managing Director and Director of Regulation are the executive directors.
There were no changes to the composition of the Board during the period. The
Board meets at least quarterly and also meets on other occasions as necessary:
it met eight times during the year with all members attending each meeting.
The Board has a formal schedule of matters specifically reserved to it
including:
- approval of the annual financial plan;
- approval of annual statutory, interim and regulatory accounts;
- approval of major capital expenditure;
- approval of major regulatory submissions and certain annual regulatory
reports;
- approval of key corporate policies;
- approval of the annual Health & Safety Plan;
- review of financial and operational performance; and
- review of internal control and risk management.
During the year the Board conducted a review of its performance, and that of
the Audit & Risk Committee, in order to identify ways to improve
effectiveness.
The Board has overall responsibility for the long term success and management
of the Company. The Board has delegated authority to the Executive Committee
of the Board, within pre-defined authority limits, to undertake much of the
day-to-day business and management and operation of NIE. It meets monthly and
on other occasions as necessary and reports on its activities to each Board
meeting.
Audit & Risk Committee
The Audit & Risk Committee is a formally constituted committee of the Board
with responsibility for overseeing the Group's financial reporting process and
internal control and risk management systems. During the year its terms of
reference were revised to reflect the committee's role in overseeing risk
management and it was renamed the Audit & Risk Committee. Its terms of
reference can be found on NIE's website at www.nie.co.uk/About-NIE/
NIE-Board-Executive.
The Audit & Risk Committee comprises the three independent non-executive
directors and is chaired by Rotha Johnston. The Board is satisfied that at
least one member of the Committee has recent and relevant financial
experience. The Committee had six meetings during the period with all members
attending each meeting.
During the period the Committee reviewed:
- NIE's Risk Management Policy, risk management framework, key risks facing
NIE, key risks facing each business unit and mitigating actions being taken and
Risk Management Plan for 2014;
- the internal audit plan, with updates on audit reports and issues arising
being considered at most meetings;
- the effectiveness of internal controls and the risk management system;
- terms of engagement of internal auditors;
- NIE's interim, annual and regulatory accounts and NIE Finance PLC's annual
accounts, considering the appropriateness of accounting policies, whether the
accounts give a true and fair view and the appropriateness of the going concern
assumption and reviewing the significant issues and judgements;
- the external auditor's plan for the scope of the audit of the statutory
accounts;
- reports from the external auditor on its audit of the annual and regulatory
accounts, recommendations made by the auditor and management's response and its
review of NIE's interim report and accounts;
- a report on the effectiveness and independence of the external auditors;
- various regulatory submissions;
- a new Employee Code of Business Ethics, Policy on fraud and related
unlawful activities and arrangements for 'whistleblowing';
- its own terms of reference to ensure they were up to date and in line with
best practice; and
- its own effectiveness as part of the Board and Committees' performance
evaluation.
The Committee makes recommendations to the Board on the appointment of the
external auditors and their remuneration and determines their terms of
engagement. The current external auditors, Ernst & Young, were re-appointed in
2012 following a re-tendering exercise.
There is a policy in place regarding the provision of non-audit services by the
external auditor, whereby, other than as specifically approved by the
Committee, such services should be limited to advice in relation to accounting,
taxation and compliance issues.
The internal and external auditors have full access to the Audit & Risk
Committee. During the year the Committee met separately with each of the
internal and external auditors without management present.
Internal Control Framework
The directors acknowledge that they have responsibility for the Group's systems
of internal control and risk management and monitoring their effectiveness.
The purpose of these systems is to manage, rather than eliminate, the risk of
failure to achieve business objectives, to provide reasonable assurance as to
the quality of management information and to maintain proper control over the
income, expenditure, assets and liabilities of the Group. Strong financial and
business controls are necessary to ensure the integrity and reliability of
financial information on which the Group relies for day-to-day operations,
external reporting and for longer term planning.
The Group has in place a strong internal control framework which includes:
- a code of business ethics that requires all Board members and employees to
maintain the highest ethical standards in conducting business;
- a clearly defined organisational structure with defined authority limits
and reporting mechanisms;
- a risk management framework including the maintenance of risk registers and
ongoing monitoring of key risk and mitigating actions;
- a comprehensive set of policies and procedures relating to financial and
operational controls including health and safety, regulation, HR, asset
management, risk management and capital expenditure;
- appropriately qualified and experienced personnel;
- comprehensive budgeting and business planning processes with an annual
budget approved by the Board;
- an integrated accounting system with a comprehensive system of management
and financial reporting. Cumulative monthly actual results are reported
against budget and considered by the Executive Committee and the Board members
on a monthly basis. Any significant changes and adverse variances are
questioned and remedial action taken where appropriate;
- key managers formally evaluating, and the internal auditors testing, the
satisfactory and effective operation of financial and operational controls; and
- external auditors providing advice on specific accounting and tax issues.
The Board, supported by the Audit & Risk Committee, has reviewed the
effectiveness of the system of internal control.
Directors' Insurance
The Company purchased and maintained directors' and officers' liability
insurance throughout the year.
Disclosure of Information to the Auditors
So far as each person who was a director at the date of approving this report
is aware, there is no relevant audit information, being information needed by
the auditors in connection with preparing their report, of which the auditors
are unaware. Having made enquiries of fellow directors and the Group's
auditors, each director has taken all the steps that he/she is obliged to take
as a director in order to make himself/herself aware of any relevant audit
information and to establish that the auditors are aware of that information.
Re-appointment of Auditors
In accordance with Section 487 of the Companies Act 2006, Ernst & Young LLP is
deemed to be reappointed as external auditors of the Company.
Financial Risk Management
Details of the Group's objectives and policies for financial risk management
(including liquidity risk and credit risk) are provided in the Financial Review
section of the Group Strategic Report.
Disability
Information on the Group's policies with regard to disabled employees are
provided in the Corporate Social Responsibility section of the Group Strategic
Report.
Employee Participation
Details of the various arrangements in place to encourage employees to be
involved in and participate in the affairs of the Group are provided in the
Corporate Social Responsibility section of the Group Strategic Report.
Research and Development
Details of the 'Shift and Save' smart grid trial are provided in the Corporate
Social Responsibility section of the Group Strategic Report.
Statement of Directors' Responsibilities
The directors are responsible for preparing the annual report and accounts in
accordance with applicable United Kingdom law and those IFRS as adopted by the
EU.
Company law requires the directors to prepare accounts for each financial
period. Under company law the directors must not approve the accounts unless
they are satisfied that they give a true and fair view of the assets,
liabilities, financial position and profit and loss of the Group and the
Company for that period.
In preparing those accounts the directors are required to:
- present fairly the financial position, financial performance and cash flows
of the Group and the Company;
- select suitable accounting policies and then apply them consistently;
- present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
- make judgements that are reasonable;
- provide additional disclosures when compliance with the specific
requirements of IFRS as adopted by the EU is insufficient to enable users to
understand the impact of particular transactions, other events and conditions
on the Group and the Company's financial position and financial performance,
and disclose and explain any departure from IFRS as adopted by the EU where,
in their view, compliance would be so misleading as to conflict with a fair
presentation; and
- state that (except for any such departure) the accounts have been prepared
in accordance with IFRS as adopted by the EU.
The directors are responsible for keeping proper accounting records that are
sufficient to show and explain the Group's transactions and disclose with
reasonable accuracy at any time the financial position of the Group and the
Company and enable them to ensure that the Group and Company accounts comply
with the Companies Act 2006 and, in the case of the Group accounts, Article 4
of the International Accounting Standards (IAS) Regulation. They are also
responsible for safeguarding the assets of the Group and the Company and hence
for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
As required under the UK Listing Authority's Disclosure and Transparency Rules,
each of the directors as detailed on page 20 confirms that to the best of his/
her knowledge:
- the accounts, prepared in accordance with IFRS as adopted by the EU, give a
true and fair view of the assets, liabilities, financial position and profit of
the Company and the undertakings included in the consolidation taken as a
whole; and
- the Group Strategic Report includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
By order of the Board
Joe O'Mahony
Managing Director
Northern Ireland Electricity Limited
Registered Office
120 Malone Road
Belfast BT9 5HT
Registered Number: NI 26041
Date: 13 March 2014
INDEPENDENT AUDITOR'S REPORT
To the members of Northern Ireland Electricity Limited
We have audited the accounts of Northern Ireland Electricity Limited for the
year ended 31 December 2013 which comprise the Group Income Statement, the
Group and Company Statements of Comprehensive Income, the Group and Company
Balance Sheets, the Group and Company Statements of Changes in Equity, the
Group and Company Cash Flow Statements and the related notes 1 to 26. The
financial reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards (IFRS) as
adopted by the European Union (EU) and, as regards the Company accounts, as
applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the Company's members as a body in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company's members those matters we are
required to state to them in an auditor's report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company's members as a body for our
audit work, for this report or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Statement of Directors' Responsibilities set out
on page 22 the directors are responsible for the preparation of the accounts
and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the accounts in accordance
with applicable law and International Standards on Auditing (ISA) (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 accounts
An audit involves obtaining evidence about the amounts and disclosures in the
accounts sufficient to give reasonable assurance that the accounts are free
from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the Group's
and 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 accounts. In addition, we read
all the financial and non-financial information in the Annual Report and
Accounts to identify material inconsistencies with the audited accounts and to
identify any information that is apparently materially incorrect based on, or
materially inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for our report.
Opinion on the accounts
In our opinion:
- the accounts give a true and fair view of the state of the Group's and
Company's affairs as at 31 December 2013 and of the Group's profit for the year
then ended;
- the Group accounts have been properly prepared in accordance with IFRS as
adopted by the EU;
- the Company accounts have been properly prepared in accordance with IFRS as
adopted by the EU and as applied in accordance with the provisions of the
Companies Act 2006; and
- the accounts have been prepared in accordance with the requirements of the
Companies Act 2006 and as regards the Group accounts, Article 4 of the IAS
Regulation.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Group Strategic Report and the
Directors' Report for the financial period for which the accounts are prepared
is consistent with the accounts.
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 by the Company, or returns
adequate for our audit have not been received from branches not visited by us;
or
- the Company accounts 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.
David Galbraith (Senior Statutory Auditor)
For and on behalf of Ernst & Young LLP, Statutory Auditor
Belfast
Date: 13 March 2014
- The maintenance and integrity of the Northern Ireland Electricity Limited web
site is the responsibility of the Directors; the work carried out by the
auditors does not involve consideration of these matters and, accordingly, the
auditors accept no responsibility for any changes that may have occurred to the
financial statements since they were initially presented on the web site.
- Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
GROUP INCOME STATEMENT
For the year ended 31 December 2013
12 months 9 months
ended ended
31 31
Note December December
2013 2012
£m £m
restated
Revenue 3 258.0 201.9
Operating costs 4 (145.6) (117.2)
----- -----
OPERATING PROFIT 112.4 84.7
----- -----
Finance revenue 6 0.3 0.2
Finance costs 6 (37.4) (27.9)
Net pension scheme interest 6 (5.3) (3.5)
----- -----
Net finance costs 6 (42.4) (31.2)
----- -----
PROFIT BEFORE TAX 70.0 53.5
Tax charge 7 (4.8) (9.3)
----- -----
PROFIT FOR THE YEAR / PERIOD ATTRIBUTABLE TO THE EQUITY
HOLDERS OF THE PARENT COMPANY 65.2 44.2
===== =====
STATEMENTS OF COMPREHENSIVE INCOME
for the year ended 31 December 2013
Group Company
12 months 9 months 12 months 9 months
ended ended ended ended
Note 31 December 31 December 31 December 31 December
2013 2012 2013 2013
£m £m £m £m
restated restated
Profit for the financial year / period 65.2 44.2 63.7 44.2
---- ---- ---- ----
Other comprehensive expense:
Items not to be reclassified to profit
or loss in subsequent periods:
Remeasurement gains / (losses) on
pension scheme assets and liabilities 21 1.2 (42.5) (1.3) (42.5)
Deferred tax (charge) / credit relating
to components of other comprehensive
income 7 (2.8) 9.4 (2.0) 9.4
---- ---- ---- ----
Net other comprehensive expense for the
year / period (1.6) (33.1) (3.3) (33.1)
Total comprehensive income for the year ---- ---- ---- ----
/ period attributable to the equity
holders of the parent company 63.6 11.1 60.4 11.1
---- ---- ---- ----
BALANCE SHEETS
as at 31 December 2013
Group Company
31 December 31 December 31 December 31 December
Note 2013 2012 2013 2012
£m £m £m £m
Non-current assets
Property, plant and equipment 9 1,287.7 1,226.5 1,285.2 1,226.5
Intangible assets 10 38.7 40.0 38.7 40.0
Trade and other receivables 12 - - 22.0 -
Derivative financial assets 16 376.9 397.8 376.9 397.8
Investments 17 - - 7.9 0.1
------- ------- ------- -------
1,703.3 1,664.3 1,730.7 1,664.4
------- ------- ------- -------
Current assets
Inventories 11 6.3 6.3 6.3 6.3
Trade and other receivables 12 54.9 51.6 52.2 51.6
Derivative financial assets 16 11.3 11.1 11.3 11.1
Cash and cash equivalents 13 31.8 38.6 31.8 38.5
------- ------- ------- -------
104.3 107.6 101.6 107.5
------- ------- ------- -------
TOTAL ASSETS 1,807.6 1,771.9 1,832.3 1,771.9
------- ------- ------- -------
Current liabilities
Trade and other payables 14 84.5 74.4 85.5 74.4
Current tax payable 7.9 22.6 8.1 22.6
Deferred income 15 9.8 9.1 9.8 9.1
Financial liabilities:
Derivative financial liabilities 16 11.3 11.1 11.3 11.1
Other financial liabilities 18 18.2 18.3 18.2 18.3
Provisions 20 1.8 1.8 1.3 1.8
------- ------- ------- -------
133.5 137.3 134.2 137.3
Non-current liabilities ------- ------- ------- -------
Deferred tax liabilities 7 75.4 57.2 69.3 57.2
Deferred income 15 275.9 257.3 275.9 257.3
Financial liabilities:
Derivative financial liabilities 16 376.9 397.8 376.9 397.8
Other financial liabilities 18 572.1 571.8 572.1 571.8
Provisions 20 8.2 7.5 8.1 7.5
Pension liability 21 91.6 140.2 125.0 140.2
------- ------- ------- -------
1,400.1 1,431.8 1,427.3 1,431.8
------- ------- ------- -------
TOTAL LIABILITIES 1,533.6 1,569.1 1,561.5 1,569.1
------- ------- ------- -------
NET ASSETS 274.0 202.8 270.8 202.8
======= ======= ======= =======
Equity
Share capital 22 36.4 36.4 36.4 36.4
Share premium 22 24.4 24.4 24.4 24.4
Capital redemption reserve 22 6.1 6.1 6.1 6.1
Accumulated profits 22 207.1 135.9 203.9 135.9
------- ------- ------- -------
TOTAL EQUITY 274.0 202.8 270.8 202.8
======= ======= ======= =======
The accounts were approved by the Board of directors and authorised for issue
on 13 March 2014. They were signed on its behalf by:
Joe O'Mahony
Director
Date: 13 March 2014
STATEMENTS OF CHANGES IN EQUITY
for the year ended 31 December 2013
Group
Capital
Share Share redemption Accumulated
Note capital premium reserve profits Total
£m £m £m £m £m
restated restated
At 1 April 2012 36.4 24.4 6.1 125.6 192.5
Profit for the period - - - 44.2 44.2
Net other comprehensive
income for the period
- - - (33.1) (33.1)
Total comprehensive ---- ---- ---- ---- ----
income for the period - - - 11.1 11.1
Deferred tax relating to
items charged in changes
in equity 7 - - - (0.8) (0.8)
---- ---- ---- ---- ----
At 1 January 2013 36.4 24.4 6.1 135.9 202.8
Profit for the year - - - 65.2 65.2
Net other comprehensive
expense for the year - - - (1.6) (1.6)
Total comprehensive ---- ---- ---- ---- ----
income for the year 63.6 63.6
Gain on reapportionment
of exiting pension scheme
participant's assets 21 - - - 7.4 7.4
Deferred tax relating to
gain on reapportionment
of pension assets 7 - - - (1.5) (1.5)
Current tax relating to
RPI index-linked swaps in
prior years 7 - - - 16.2 16.2
Deferred tax relating to
RPI index-linked swaps in
prior years 7 - - - (14.5) (14.5)
---- ---- ---- ---- ----
At 31 December 2013 36.4 24.4 6.1 207.1 274.0
==== ==== ==== ==== ====
Company
Capital
Share Share redemption Accumulated
Note capital Premium reserve profits Total
£m £m £m £m £m
restated restated
At 1 April 2012 36.4 24.4 6.1 125.6 192.5
Profit for the period - - - 44.2 44.2
Net other comprehensive
income for the period
- - - (33.1) (33.1)
Total comprehensive ---- ---- ---- ---- ----
income for the period 11.1 11.1
Deferred tax relating to
items charged in changes
in equity 7 - - - (0.8) (0.8)
---- ---- ---- ---- ----
At 1 January 2013 36.4 24.4 6.1 135.9 202.8
Profit for the year - - - 63.7 63.7
Net other comprehensive
expense for the year
Total comprehensive
income for the year - - - 60.4 60.4
Gain on reapportionment
of exiting pension scheme
participant's assets 21 - - - 7.4 7.4
Deferred tax relating to
gain on reapportionment
of pension assets 7 - - - (1.5) (1.5)
Current tax relating to
RPI index-linked swaps in
prior years 7 - - - 16.2 16.2
Deferred tax relating to
RPI index-linked swaps in
prior years 7 - - - (14.5) (14.5)
---- ---- ---- ----- -----
At 31 December 2013 36.4 24.4 6.1 203.9 270.8
==== ==== ==== ===== =====
CASH FLOW STATEMENTS
for the year ended 31 December 2013
Group Company
31 31 31 31
December December December December
2013 2012 2013 2012
Note £m £m £m £m
restated restated
Cash flows from operating activities
Profit for the year / period 65.2 44.2 63.7 44.2
Adjustments for:
Tax charge 4.8 9.3 5.8 9.3
Net finance costs 6 42.4 31.2 42.7 31.2
Depreciation of property, plant and
equipment 9 50.0 35.8 49.8 35.8
Release of customers' contributions
and grants 15 (9.8) (6.9) (9.8) (6.9)
Amortisation of intangible assets 10 4.4 15.7 4.4 15.7
Contributions in respect of property,
plant and equipment 15 29.1 19.1 29.1 19.1
Defined benefit pension charge less
contributions paid 21 (15.0) (11.5) (14.9) (11.5)
Net movement in provisions (0.1) - 0.2 -
Operating cash flows before movement in ---- ---- ---- ----
working capital 171.0 136.9 171.0 136.9
Increase in inventories - (1.1) - (1.1)
Increase in trade and other receivables (0.7) (19.5) (0.6) (19.5)
Increase / (decrease) in trade and other
payables 8.7 (4.1) 8.5 (4.1)
---- ---- ---- ----
Increase in working capital 8.0 (24.7) 7.9 (24.7)
---- ---- ---- ----
Cash generated from operations 179.0 112.2 178.9 112.2
Interest received 0.3 0.2 0.3 0.2
Interest paid (37.5) (37.5) (37.5) (37.5)
Current taxes paid (9.7) (0.6) (10.0) (0.6)
Net cash flows from operating activities ---- ---- ---- ----
132.1 74.3 131.7 74.3
---- ---- ---- ----
Cash flows used in investing activities
Purchase of property, plant and equipment (105.7) (77.7) (105.5) (77.7)
Purchase of intangible assets (3.1) (9.4) (3.1) (9.4)
Loan made to subsidiary company - - (22.0) -
Purchase of investment in subsidiary, net of
cash acquired 17 (7.4) - (7.8) (0.1)
---- ---- ---- ----
Net cash flows used in investing activities (116.2) (87.1) (138.4) (87.2)
---- ---- ---- ----
Cash flows used in financing activities
Repayment of borrowings (22.7) - - -
---- ---- ---- ----
Net cash flows used in financing activities (22.7) - - -
---- ---- ---- ----
Net decrease in cash and cash equivalents (6.8) (12.8) (6.7) (12.9)
Cash and cash equivalents at beginning of year /
period 38.6 51.4 38.5 51.4
Cash and cash equivalents at end of year / ---- ---- ---- ----
period 13 31.8 38.6 31.8 38.5
==== ==== ==== ====
For the purposes of the cash flow statements, cash and cash equivalents comprise cash at
bank and in hand, short-term bank deposits and bank overdrafts.
NOTES TO THE ACCOUNTS
1. General Information
Northern Ireland Electricity Limited (NIE or the Company) is a limited company
incorporated and domiciled in Northern Ireland. The Company's registered
office address is 120 Malone Road, Belfast, BT9 5HT. The principal activities
of the Company are described in the Operating Environment section of the Group
Strategic Report.
On 1 October 2013, NIE acquired 100% of the share capital of NIE Powerteam
Limited. On 16 December 2013, NIE Powerteam Limited changed its name to NIE
Networks Services Limited. The Company has chosen to consolidate the newly
acquired entity in 2013, NIE Networks Services Limited, using the pooling of
interests method from the date of acquisition with no restatement of prior
period comparatives.
The accounts have been prepared in accordance with IFRS as adopted by the EU
and applied in accordance with the provisions of the Companies Act 2006. The
accounts also reflect the adoption of new standards and interpretations
effective for the year. The prior period has been restated for the impact of
the retrospective application of IAS 19 Employee Benefits (revised 2011) as
outlined in note 2. The accounts are presented in Sterling (£) with all values
rounded to the nearest £100,000 except where otherwise indicated.
2. Accounting Policies
Adoption of new and revised accounting standards and interpretations
The following amendments to existing standards and interpretations, effective
from 1 January 2013, which have had an impact on the Group's accounts are
outlined below:
IAS 19 Employee Benefits (revised 2011)
The revision to IAS19 requires recognition of interest income on scheme assets
calculated by applying the discount rate to the scheme assets at the opening
balance sheet date. This calculation of interest income replaces expected
return on scheme assets which was calculated by applying expected rates of
return during the period to the scheme assets at the opening balance sheet
date. The revised standard has also required pension scheme administration
charges, which were previously recognised within net interest on defined
benefit liability, to be recognised within operating costs.
This standard has been applied retrospectively as prescribed by the revised
standard. The impact of the application of the revised standard on the current
year and prior period is shown in the table below:
12 months ended 9 months ended
31 December 31 December
2013 2012
£m £m
Changes to Group Income Statement:
Increase in operating costs (1.2) (0.4)
Increase in net interest on defined benefit liability (3.6) (0.2)
Decrease in tax charge 1.0 0.2
---- ----
Decrease in profit for the year / period (3.8) (0.4)
---- ----
Changes to Group Statement of Comprehensive Income:
Increase in remeasurements 4.8 0.6
Increase in tax charge relating to remeasurements (1.0) (0.2)
---- ----
Net other comprehensive income for the year / period 3.8 0.4
---- ----
Total net comprehensive income for the year / period - -
==== ====
The application of the revised standard has no impact on total equity or on the
pension liability reported in the balance sheet. As a result, the Group has not
included comparative information in respect of the opening statement of balance
sheet position as at 1 January 2012.
IFRS 13 Fair Value Measurement
IFRS 13 provides guidance on how to measure fair value of financial assets and
liabilities and outlines specific disclosure requirements. The standard has
not impacted the fair value measurements but has resulted in additional
disclosures on fair value which are provided in note 16 to accounts.
IAS 1 Presentation of Items of Other Comprehensive Income - amendments to IAS 1
The amendment to IAS 1 requires grouping of items presented in the Group
Statement of Other Comprehensive Income specifically with respect to whether
items may be reclassified to the income statement in subsequent periods. The
amendment to the standard has affected presentation only in the accounts.
The following amendments to existing standards and interpretations were
effective for the period, but did not have a material impact on the Group's
accounts:
IFRS 1 (amendment) First time adoption for government loans (effective for accounting
periods beginning on or after 1 January 2013)
IFRS 7 (amendments) Offsetting of financial assets and financial liabilities (effective for
accounting periods beginning on or after 1 January 2013)
IFRIC 20 Production phase stripping costs of a surface mine (effective for accounting
periods beginning on or after 1 January 2013)
Improvements to
IFRSs 2009-2011 (effective for accounting periods beginning on or after 1 January 2013)
At the date of authorisation of these accounts, the following standards and interpretations,
which have not been applied in the accounts, were in issue but not yet effective:
IFRS 10 Consolidated Financial Statements (effective for accounting periods beginning
on or after 1 January 2014)
IFRS 11 Joint Arrangements (effective for accounting periods beginning on or after
1 January 2014)
IFRS 12 Disclosure of Interests in Other Entities (effective for accounting periods
beginning on or after 1 January 2014)
IAS 27 (revised) Reissued as Separate Financial Statements (as amended 2011) (effective for
accounting periods beginning on or after 1 January 2014)
IAS 28 Reissued as Investments in Associates and Joint Ventures (as amended 2011)
(effective for accounting periods beginning on or after 1 January 2014)
IAS 32 Offsetting Financial Assets and Financial Liabilities (effective for accounting
periods beginning on or after 1 January 2014)
IAS 36 Impairment of Assets - recoverable amount disclosures for non-financial assets
(amendments) (effective for accounting periods beginning on or after 1 January 2014)
IAS 39 Financial Instruments: Recognition and Measurement - Novation of derivatives and
Continuation of Hedge Accounting (amendments)(effective for accounting periods
beginning on or after 1 January 2014)
Investment entities (Amendments to IFRS 10, IFRS 12, IAS 27) (effective for accounting periods beginning
on or after 1 January 2014)
None of the standards listed above are expected to have a material impact on the accounts.
The principal accounting policies are set out below.
Basis of Preparation - Going Concern
The Group's business activities including financial risk management along with
the factors likely to affect its future development are set out within the
Financial Review and Operational Review sections of the Group Strategic Report.
As described in the Group Strategic Report, 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 12 months from the date of
approval of the accounts, the directors have a reasonable expectation that the
Group will have adequate financial resources for the 12 month period and
accordingly continue to adopt the going concern basis in preparing the report
and accounts.
Basis of consolidation
The Group accounts consolidate the accounts of Northern Ireland Electricity
Limited (the Company) and entities controlled by the Company (its subsidiaries)
including the newly acquired subsidiary, NIE Networks Services Limited.
Subsidiaries are consolidated from the day on which control is transferred to
the Group and cease to be consolidated from the date on which control is
transferred out of the Group. The Company has chosen to consolidate the
accounts of NIE Networks Services Limited under the pooling of interests method
from the date of acquisition with no restatement of prior period comparatives.
All intra-Group transactions, balances, income and expenses are eliminated on
consolidation.
Purchases of controlling interests in subsidiaries from entities under common control
Purchases of controlling interests in subsidiaries from entities under common control
are accounted for using the pooling of interests method from the date of acquisition.
Accordingly, financial information in the accounts for the periods prior to pooling under
common control is not restated.
The assets and liabilities of the subsidiary transferred under common control
are recorded in these accounts at the historical cost of the controlling entity
(the 'predecessor') or at the carrying values reported in the subsidiary's own
accounts where appropriate. Related goodwill inherent in the predecessor's
original acquisition is also recorded in the accounts. Any difference between
the total book value of net assets, including the predecessor's goodwill, and
the consideration paid is accounted for in the consolidated accounts as an
adjustment to equity.
Company's investments in subsidiaries
The Company recognises its investments in subsidiaries at cost less any
recognised impairment loss. Dividends received from subsidiaries are recognised
in the income statement. The carrying values of investments in subsidiaries
are reviewed annually for any indications of impairment, including whether the
carrying value is impaired as a result of the receipt of dividends.
Foreign currency translation
The functional and presentational currency of the Group and its subsidiaries is
sterling (£).
Foreign currency transactions are translated into the functional currency at
the rates of exchange prevailing on the dates of the transactions. Foreign
exchange gains and losses resulting from settlement of such transactions and
from the translation of monetary assets and liabilities denominated in foreign
currencies at the exchange rates prevailing at the balance sheet date are
recognised in the income statement.
Property, plant and equipment
Property, plant and equipment are included in the balance sheet at cost, less
accumulated depreciation and any recognised impairment loss. The cost of
self-constructed assets includes the cost of materials, direct labour and an
appropriate portion of overheads. Interest on funding attributable to
significant capital projects is capitalised during the period of construction
provided it meets the recognition criteria in IAS 23 and is written off as part
of the total cost of the asset.
Freehold land is not depreciated. Other property, plant and equipment are
depreciated on a straight-line basis so as to write off the cost, less
estimated residual values, over their estimated useful economic lives as
follows:
Infrastructure assets - up to 40 years
Non-operational buildings - freehold and long leasehold - up to 50 years
Fixtures and equipment - up to 25 years
Vehicles and mobile plant - up to 5 years
The carrying values of property, plant and equipment are reviewed for
impairment when events or changes in circumstances indicate the carrying value
may not be recoverable. Where the carrying value exceeds the estimated
recoverable amount, the asset is written down to its recoverable amount.
The recoverable amount of property, plant and equipment is the greater of net
selling price and value in use. In assessing value in use, estimated future
cash flows are discounted to their present value using a pre tax discount rate
that reflects current market assessments of the time value of money and the
risks specific to the asset. For an asset that does not generate largely
independent cash flows, the recoverable amount is determined for the cash
generating unit to which the asset belongs. Impairment losses are recognised
in the income statement.
An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected to arise from its continued use. The
gain or loss arising on the disposal or retirement of an asset is determined as
the difference between the net selling price and the carrying amount of the
asset.
Computer software
The cost of acquiring computer software is capitalised and amortised on a
straight-line basis over its estimated useful economic life which is between
three and ten years. Costs include direct labour relating to software
development and an appropriate portion of directly attributable overheads.
Interest on funding attributable to significant capital projects is capitalised
during the period of construction provided it meets the recognition criteria in
IAS 23 and is written off as part of the total cost of the asset.
The carrying value of computer software is reviewed for impairment annually
when the asset is not yet in use and subsequently when events or changes in
circumstances indicate that the carrying value may not be recoverable.
Gains or losses arising from derecognition of computer software are measured as
the difference between the net selling price and the carrying amount of the
asset.
Inventories
Inventories are stated at the lower of average purchase price and net
realisable value. Net realisable value is the estimated selling price in the
ordinary course of business less the estimate costs of completion and the
estimated costs necessary to make the sale.
Financial instruments
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and short-term
deposits with maturities of three months or less.
Loans and receivables
Loans and receivables are initially recorded at fair value. After initial
recognition, loans and receivables are measured at amortised cost using the
effective interest method.
Interest bearing loans and overdrafts
Interest bearing loans and overdrafts are initially recorded at fair value,
being the proceeds received net of direct issue costs. After initial
recognition, interest bearing loans are subsequently measured at amortised cost
using the effective interest method.
Trade and other receivables
Trade receivables do not carry any interest and are recognised and carried at
the lower of their original invoiced value and recoverable amount. Provision
is made when there is objective evidence that the asset is impaired. Balances
are written off when the probability of recovery is assessed as being remote.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
Derivative financial instruments
Derivatives that are not designated as hedging instruments are accounted for at
'fair value through profit or loss'. These derivatives are carried in the
balance sheet at fair value, with changes in fair value recognised in net
finance costs in the income statement.
Borrowing costs
Borrowing costs attributable to significant capital projects are capitalised as
part of the cost of the respective assets. All other borrowing costs are
expensed in the period they occur. Borrowing costs consist of interest and
other costs that an entity incurs in connection with the borrowing of funds.
Operating lease contracts
Leases are classified as operating lease contracts whenever the terms of the
lease do not transfer substantially all the risks and benefits of ownership to
the lessee.
Rentals payable under operating leases are charged to the income statement on a
straight-line basis over the lease term.
Revenue
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured.
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services provided in
the normal course of business, exclusive of value added tax and other sales
related taxes.
The following specific recognition criteria must also be met before revenue is recognised:
Interest receivable
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount.
Use of System and PSO revenue
Revenue is recognised on the basis of units distributed during the period.
Revenue includes an assessment of the volume of electricity distributed,
estimated using historical consumption patterns.
Transmission service revenue
Revenue is recognised in accordance with the schedule of entitlement set by the
Utility Regulator for each tariff period.
Customer contributions
Customer contributions received in respect of property, plant and equipment are
deferred and released to revenue in the income statement by instalments over
the estimated useful economic lives of the related assets.
Government grants
Government grants received in respect of property, plant and equipment are
deferred and released to operating costs in the income statement by instalments
over the estimated useful economic lives of the related assets. Grants
received in respect of expenditure charged to the income statement during the
period are included in the income statement.
Tax
The tax charge represents the sum of tax currently payable and deferred tax.
Tax is charged or credited in the income statement, except when it relates to
items charged or credited directly to equity, in which case the tax is also
dealt with in equity.
Tax currently payable is based on taxable profit for the period. Taxable
profit differs from net profit as reported in the income statement because it
excludes both items of income or expense that are taxable or deductible in
other years as well as items that are never taxable or deductible. The Company
and Group's liability for current tax is calculated using tax rates (and tax
laws) that have been enacted or substantially enacted by the balance sheet
date.
Deferred tax is the tax payable or recoverable on differences between the
carrying amount of assets and liabilities in the accounts 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.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interests in joint
ventures, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future.
Deferred tax is not recognised on temporary differences where they arise from
the initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination that at the time of the
transaction affects neither accounting nor taxable profit nor loss.
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 deferred tax
asset to be recovered.
Deferred tax assets and liabilities are calculated at the tax rates that are
expected to apply to the period when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantially enacted by the balance sheet date.
Provisions
Provisions are recognised when (i) the Group has a present obligation (legal or
constructive) as a result of a past event (ii) it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and (iii) a reliable estimate can be made of the amount of the
obligation. Where the Group expects a provision to be reimbursed, the
reimbursement is recognised as a separate asset but only when the reimbursement
is virtually certain. If the effect of the time value of money is material,
provisions are determined by discounting the expected future cash flows at a
pre tax rate that reflects current market assessments of the time value of
money and, where appropriate, the risks specific to the liability. Where
discounting is used, the increase in the provision due to the passage of time
is included within finance costs.
Pensions and other post-retirement benefits
Employees of the Group are entitled to membership of the Northern Ireland
Electricity Pension Scheme (NIEPS) which has both defined benefit and defined
contribution pension arrangements. The amount recognised in the balance sheet
in respect of liabilities represents the present value of the obligations
offset by the fair value of assets.
Pension scheme assets are measured at fair value and liabilities are measured
using the projected unit credit method and discounted at a rate equivalent to
the current rate of return on a high quality corporate bond of equivalent
currency and term to the liabilities. Full actuarial valuations are obtained
at least triennially and updated at each balance sheet date. Remeasurements
comprising of actuarial gains and losses and return on plan assets are
recognised immediately in the period in which they occur are recognised outside
the income statement, presented in the statement of comprehensive income.
Remeasurements are not reclassified to profit or loss in subsequent periods.
The cost of providing benefits under the defined benefit scheme is charged to
the income statement over the periods benefiting from employees' service.
These costs comprise current service costs, past service costs, gains or losses
on curtailments and non-routine settlements, all of which are recognised in
operating costs. Past service costs are recognised immediately to the extent
that the benefits are already vested. Curtailment losses are recognised in the
income statement in the period they occur.
Net pension interest on net pension scheme liabilities is included within net
finance costs. Net interest is calculated by applying the discount rate to the
net pension asset or liability.
Pension costs in respect of defined contribution arrangements are charged to
the income statement as they become payable.
The Group has adopted the exemption allowed in IFRS 1 to recognise all
cumulative actuarial gains and losses at the transition date in reserves.
Exceptional items
The Group presents as exceptional items on the face of the income statement
those material items of income and expense which, because of the nature and
expected infrequency of the events giving rise to them, merit separate
presentation to allow shareholders to understand better the elements of
financial performance in the period, so as to facilitate comparison with prior
periods and to assess better trends in financial performance.
Critical accounting judgements and key sources of estimation uncertainty
Pensions and other post employment benefits
Employees of the Group are entitled to membership of NIEPS which has both
defined benefit and defined contribution arrangements. The cost of providing
benefits under the defined benefit scheme is determined using the projected
unit credit method. The key assumptions used for the actuarial valuation are
based on the Group's best estimate of the variables that will determine the
ultimate cost of providing post-employment benefits, on which further detail is
provided in note 21.
Unbilled debt
Revenue includes an assessment of the volume of electricity distributed,
estimated using historical consumption patterns. A corresponding receivable in
respect of unbilled consumption is recognised within trade receivables.
Fair value measurement
The measurement of the Group's derivative financial instruments are based on a
number of judgmental factors and assumptions which by necessity are not based
on observable inputs. These have been classified as Level 2 financial
instruments in accordance with IFRS13. Further detail is provided in note 16.
3. Revenue and Operating Profit
The Group's operating activities, which comprise one operating segment, are
described in the Group Strategic Report. Financial information is reported to
the Executive Committee and the Board on a consolidated basis and is not
segmented.
12 months ended 9 months ended
31 December 31 December
2013 2012
£m £m
restated
Revenue:
Sales revenue 248.7 195.4
Release of customer contributions from deferred income 9.3 6.5
---- ----
258.0 201.9
Interest receivable 0.3 0.2
---- ----
258.3 202.1
==== ====
During the year, two customers accounted for sales revenue totalling £152.1m (9 months
ended 31 December 2012 - one customer accounted for £84.4m).
Geographical information
The following table provides an analysis of the Group's external revenue based on the
location of customers.
12 months ended 9 months ended
31 December 2013 31 December 2012
UK RoI Total UK RoI Total
£m £m £m £m £m £m
238.9 19.1 258.0 187.3 14.6 201.9
===== ===== ===== ===== ===== =====
The majority of Republic of Ireland (RoI) revenue relates to use of system charges to suppliers
based in the RoI which supply energy to customers based in Northern Ireland.
The Group's assets are all located within the United Kingdom.
4. Operating Costs
Operating costs are analysed as follows:
12 months ended 9 months ended
31 December 31 December
2013 2012
£m £m
restated
Employee costs (note 5) 14.6 9.6
Depreciation and amortisation 54.4 51.5
Other operating charges 76.6 56.1
----- -----
145.6 117.2
===== =====
Operating costs include:
Depreciation charge on property, plant and equipment 50.0 35.8
Amortisation of intangible assets 4.4 15.7
Minimum payments due under operating leases 0.4 0.5
Cost of inventories recognised as an expense 1.4 0.9
12 months ended 9 months ended
Operating costs include: 31 December 31 December
2013 2012
Auditors remuneration £'000 £'000
Fees payable to the Group and Company auditors for the audit of the 26 26
accounts
Fees payable to the Group and Company auditors for other services:
The audit of the company's subsidiaries pursuant to legislation 13 3
Audit related assurance services 46 14
Tax compliance services 3 3
Tax advisory services 1 1
5. Employees
Employee costs 12 months ended 9 months ended
31 December 31 December
2013 2012
£m £m
Salaries 14.5 10.5
Social security costs 1.4 1.0
Pension costs
- defined contribution plans 0.7 0.4
- defined benefit plans 4.0 1.9
---- ----
20.6 13.8
Less: amounts capitalised to property, plant and equipment (6.0) (4.2)
and intangible assets ---- ----
Charged to the income statement 14.6 9.6
==== ====
Average during the year / period Actual headcount as at
12 months ended 9 months ended
31 December 31 December 31 December 31 December
2013 2012 2013 2012
Number Number Number Number
Management, administration and
support 205 191 307 186
Electrical services 342 110 978 110
---- ---- ---- ----
Employee numbers 547 301 1,285 296
==== ==== ==== ====
The employee numbers stated above include NIE Networks Services Limited's employees for the year
to 31 December 2013 (see note 17).
Directors' emoluments
The remuneration of the directors paid by the Company was as follows:
12 months ended 9 months ended
31 December 31 December
2013 2012
£m £m
Emoluments in respect of qualifying services 0.5 0.4
No amounts were paid to directors in respect of long term incentive plans. The Company
does not operate any share schemes, therefore no directors exercised share options or
received shares under long-term incentive schemes during the year or the previous period.
The remuneration in respect of the highest paid director was as follows:
12 months ended 9 months ended
31 December 31 December
2013 2012
£'000 £'000
Emoluments (for the 12 months ended / 9 months ended 273 215
Total accrued pension at 31 December (per annum) - -
12 months ended 9 months ended
31 December 31 December
2013 2012
Number Number
Members of a defined benefit pension scheme 1 1
Members of a defined contribution scheme 1 1
Aggregate contributions by the Company to defined contribution pension schemes in respect
of the directors during the year was £55,000 (9 months ended 31 December 2012 - £41,000).
6. Net Finance Costs
12 months ended 9 months ended
31 December 31 December
2013 2012
£m £m
restated
Interest receivable:
Bank interest receivable 0.3 0.2
---- ----
Interest payable:
£175m bond (12.0) (9.1)
£400m bond (25.5) (19.1)
Interest rate swaps - -
---- ----
(37.5) (28.2)
Less: capitalised interest 0.3 0.4
---- ----
Total interest charged to the income statement (37.2) (27.8)
---- ----
Other finance costs:
Amortisation of financing charges (0.2) (0.1)
Net loss on financial assets and liabilities at fair
value charged to the income statement - -
---- ----
Total finance costs (37.4) (27.9)
---- ----
Net pension interest cost (5.3) (3.5)
---- ----
Net finance costs (42.4) (31.2)
==== ====
Interest charged to the balance sheet during the period was capitalised using a weighted average
interest rate of 6.63% (12 months ended 31 December 2012 - 6.63%).
7. Tax Charge
(i) Analysis of charge during the year / period
12 months ended 9 months ended
31 December 31 December
2013 2012
£m £m
Group Income Statement
Current tax charge
UK corporation tax at 23.25% (2012 - 24%) 11.9 11.9
Corporation tax overprovided in previous years (0.5) -
---- ----
Total current income tax 11.4 11.9
---- ----
Deferred tax credit
Origination and reversal of temporary differences in 4.3 1.2
current year / period
Origination and reversal of temporary differences relating 2.2 -
to prior years
Effect of decreased tax rate on opening liability (13.1) (3.8)
---- ----
Total deferred tax credit (6.6) (2.6)
---- ----
Total tax charge 4.8 9.3
==== ====
Tax relating to items charged in other comprehensive income
Deferred tax
Deferred tax charge / (credit) relating to components of other
comprehensive income 0.2 (9.7)
Effect of decreased tax rate on opening asset 2.6 0.3
---- ----
2.8 (9.4)
==== ====
Tax relating to items charged / (credited) to changes in equity
Deferred tax
Effect of decreased tax rate on opening asset - 0.8
Charge relating to gain on reapportionment of pension assets 1.5 -
(see note 21)
Charge relating to RPI index-linked swaps 14.5 -
Current tax
Credit relating to RPI index-linked swaps (16.2) -
---- ----
(0.2) 0.8
==== ====
The deferred tax charge and current tax credit relating to RPI index-linked swaps taken to changes
in equity result from the immediate crystallisation of losses on swaps recognised in March 2011
treated as deductible for corporation tax purposes in prior years.
(ii) Reconciliation of total tax charge
The tax charge in the Group Income Statement for the year is lower than the standard rate of
corporation tax in the UK of 23.25% (2012 - 24%). The differences are reconciled below:
12 months ended 9 months ended
31 December 31 December
2013 2012
£m £m
restated
Accounting profit before tax charge 70.0 53.5
Accounting profit multiplied by the UK standard rate of
corporation tax of 23.25% (2012 - 24%) 16.3 12.8
Tax effect of:
Impact of deferred tax at 20% (2012 - 23%) (13.6) (3.9)
Other permanent differences 0.4 0.4
Tax underprovided in previous years 1.7 -
---- ----
Tax charge for the year / period 4.8 9.3
==== ====
(iii) Deferred tax
The deferred tax included in the Group and Company Balance Sheet is as follows:
Group Company
2013 2012 2013 2012
£m £m £m £m
Deferred tax assets
Pension liability 18.3 32.2 25.0 32.2
Interest rate swaps - 47.0 - 47.0
Other temporary differences 1.3 1.3 0.9 1.3
---- ---- ---- ----
19.6 80.5 25.9 80.5
---- ---- ---- ----
Deferred tax liabilities
Accelerated capital allowances (94.1) (106.3) (94.3) (106.3)
Interest rate swaps - (30.3) - (30.3)
Held-over gains on property disposals (0.9) (1.1) (0.9) (1.1)
---- ---- ---- ---
(95.0) (137.7) (95.2) (137.7)
---- ---- ---- ----
Net deferred tax liability (75.4) (57.2) (69.3) (57.2)
==== ==== ==== ====
Deferred tax has been calculated at 20% as at 31 December 2013 reflecting future reductions
in the corporation tax rate enacted at the balance sheet date.
The movement in the deferred tax liability during the year includes deferred tax liabilities
transferred on the acquisition of NIE Networks Services Limited (see note 17).
The deferred tax included in the Group Income Statement is as follows:
12 months ended 9 months ended
31 December 31 December
2013 2012
£m £m
restated
Accelerated capital allowances (12.2) (5.9)
Interest rate swaps 2.2 1.4
Temporary differences in respect of pensions 2.8 1.8
Other temporary differences 0.6 0.1
---- ----
Deferred tax credit (6.6) (2.6)
==== ====
8. Profit for the Financial Period
The profit dealt with in the accounts of the Company is £63.7m (9 months ended 31 December 2012
- £44.2m restated). No separate income statement is presented for the Company as permitted by
Section 408 of the Companies Act 2006.
9. Property, Plant and Equipment
Group Non-operational Fixtures Vehicles
land and and and mobile
Infrastructure buildings equipment plant Total
assets £m £m £m £m
£m
Cost:
At 1 April 2012 1,824.1 5.1 52.0 - 1,881.2
Additions 74.1 - 1.8 - 75.9
------- ---- ---- ---- -------
At 31 December 2012 1,898.2 5.1 53.8 - 1,957.1
Additions 103.6 - 4.4 0.7 108.7
Acquisition of subsidiary under
common control (see note 17) - - 5.5 7.1 12.6
------- ---- ---- ---- -------
At 31 December 2013 2,001.8 5.1 63.7 7.8 2,078.4
------- ---- ---- ---- -------
Depreciation:
At 1 April 2012 652.3 1.3 41.2 - 694.8
Charge for the period 33.6 0.1 2.1 - 35.8
------- ---- ---- ---- -------
At 31 December 2012 685.9 1.4 43.3 - 730.6
Acquisition of subsidiary under
common control (see note 17) - - 4.8 5.3 10.1
Charge for the year 46.9 0.1 2.9 0.1 50.0
------- ---- ---- ---- -------
At 31 December 2013 732.8 1.5 51.0 5.4 790.7
------- ---- ---- ---- -------
Net book value:
At 31 March 2012 1,171.8 3.8 10.8 - 1,186.4
======= ==== ==== ==== =======
At 31 December 2012 1,212.3 3.7 10.5 - 1,226.5
======= ==== ==== ==== =======
At 31 December 2013 1,269.0 3.6 12.7 2.4 1,287.7
======= ==== ==== ==== =======
Infrastructure assets include amounts in respect of assets under construction of £30.8m
(2012 - £30.5m). The net book value of fixtures and equipment include amounts in respect
of assets under construction of £0.9m (2012 - £nil).
Company
Non-operational Fixtures
Infrastructure land and and
assets buildings equipment Total
£m £m £m £m
Cost:
At 1 April 2012 1,824.1 5.1 52.0 1,881.2
Additions 74.1 - 1.8 75.9
------- ---- ---- -------
At 31 December 2012 1,898.2 5.1 53.8 1,957.1
Additions 104.2 - 4.3 108.5
------- ---- ---- -------
At 31 December 2013 2,002.4 5.1 58.1 2,065.6
------- ---- ---- -------
Depreciation:
At 1 April 2012 652.3 1.3 41.2 694.8
Charge for the period 33.6 0.1 2.1 35.8
------- ---- ---- -------
At 31 December 2012 685.9 1.4 43.3 730.6
Charge for the year 46.9 0.1 2.8 49.8
------- ---- ---- -------
At 31 December 2013 732.8 1.5 46.1 780.4
------- ---- ---- -------
Net book value:
At 31 March 2012 1,171.8 3.8 10.8 1,186.4
======= ==== ==== =======
At 31 December 2012 1,212.3 3.7 10.5 1,226.5
======= ==== ==== =======
At 31 December 2013 1,269.6 3.6 12.0 1,285.2
======= ==== ==== =======
Infrastructure assets include amounts in respect of assets under construction of £30.8m
(2012 - £30.5m). The net book value of fixtures and equipment include amounts in respect
of assets under construction of £0.9m (2012 - £nil).
10. Intangible Assets
Computer software Group Company
2013 2012 2013 2012
£m £m £m £m
Cost:
At the beginning of the year / period 98.7 90.8 98.7 90.8
Acquisition of subsidiary under common control (see note 17) 0.1 - - -
Additions acquired externally 3.1 7.9 3.1 7.9
---- ---- ---- ----
At the end of the year / period 101.9 98.7 101.8 98.7
---- ---- ---- ----
Amortisation / impairment:
At the beginning of the year / period 58.7 43.0 58.7 43.0
Acquisition of subsidiary under common control (see note 17) 0.1 - - -
Amortisation charge for the year / period 4.4 15.7 4.4 15.7
---- ---- ---- ----
At the end of the year / period 63.2 58.7 63.1 58.7
---- ---- ---- ----
Net book value:
At the beginning of the year / period 40.0 47.8 40.0 47.8
==== ==== ==== ====
At the end of the year / period 38.7 40.0 38.7 40.0
==== ==== ==== ====
Software assets include amounts in respect of assets under construction amounting to £3.9m
(2012 - £0.9m).
The amortisation charge during the period to 31 December 2012 included £9.8m in relation to
accelerated charges to fully write down old IT systems replaced by new systems during 2012.
11. Inventories
Group and Company 2013 2012
£m £m
Materials and consumables 5.3 5.5
Work-in-progress 1.0 0.8
---- ----
6.3 6.3
==== ====
12. Trade and Other Receivables
Group Company
2013 2012 2013 2012
£m £m £m £m
Current
Trade receivables (including unbilled consumption) 47.6 42.0 45.5 42.0
Other receivables 0.6 0.8 0.6 0.8
Amounts owed by group undertakings 3.3 3.2 3.3 3.2
Prepayments and accrued income 3.4 5.6 2.8 5.6
---- ---- ---- ----
54.9 51.6 52.2 51.6
Non-current ==== ==== ==== ====
Amounts owed by group undertakings - - 22.0 -
==== ==== ==== ====
Non-current amounts owed by group undertakings to the Company reflect a loan made to NIE
Networks Services Limited during the year. The loan, maturing on 30 April 2015, carries
interest at LIBOR plus a margin of 1.2%.
The largest trade receivable at the year end, due from one customer, is £10.0m
(2012 - £10.6m).
Trade receivables are stated net of a provision of £0.6m (2012 - £0.5m) for estimated
irrecoverable amounts based on past default experience.
Group and Company 2013 2012
£m £m
At the beginning of the year / period 0.5 0.5
Increase in provision 0.2 -
Bad debts written off (0.1) -
---- ----
At the end of the year / period 0.6 0.5
==== ====
The above provision includes £0.4m (2012 - £0.2m) in respect of individual balances
impaired based on the age of debt and past default experience. There are no provisions
for estimated irrecoverable amounts included in 'amounts owed by group undertakings'
which are all within credit terms. Further details on credit risk are included in the
Financial Risk Management section in the Group Strategic Report.
The following shows an aged analysis of current trade receivables:
Group Company
2013 2012 2013 2012
£m £m £m £m
Within credit terms:
Current 43.9 39.6 41.8 39.6
Past due but not impaired:
Less than 30 days 2.0 1.3 2.0 1.3
30 - 60 days 0.2 0.3 0.2 0.3
60 - 90 days 0.2 0.2 0.2 0.2
+ 90 days 1.3 0.6 1.3 0.6
---- ---- ---- ----
47.6 42.0 45.5 42.0
==== ==== ==== ====
The credit quality of trade receivables that are neither past due nor impaired is assessed
by reference to external credit ratings where available, otherwise historical information
relating to counterparty default rates is used. The directors consider that the carrying
amount of trade and other receivables approximates to fair value.
13. Cash and Cash Equivalents
Group Company
2013 2012 2013 2012
£m £m £m £m
Cash at bank and in hand 3.8 7.6 3.8 7.5
Short-term deposits 28.0 31.0 28.0 31.0
---- ---- ---- ----
31.8 38.6 31.8 38.5
==== ==== ==== ====
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates.
Short-term deposits are made for varying periods of between one day and three months' depending
on the immediate cash requirements of the Group and Company, and earn interest at the respective
short-term deposit rates. The directors consider that the carrying amount of cash and cash
equivalents equates to fair value.
14. Trade and Other Payables
Group Company
2013 2012 2013 2012
£m £m £m £m
Trade payables 13.4 10.5 12.9 10.5
Payments received on account 35.6 28.5 35.6 28.5
Amounts owed to group undertakings 1.8 9.8 9.0 9.8
Tax and social security 9.6 8.1 8.8 8.1
Accruals 24.1 17.5 19.2 17.5
---- ---- ---- ----
84.5 74.4 85.5 74.4
==== ==== ==== ====
The directors consider that the carrying amount of trade and other payables equates to fair value.
15. Deferred Income
Group and Company Customers'
Grants contributions Total
£m £m £m
---- ----- ----
Current 0.5 8.3 8.8
Non-current 7.6 237.8 245.4
---- ----- ----
Total at 1 April 2012 8.1 246.1 254.2
---- ----- -----
Receivable 0.2 18.9 19.1
Released to income statement (0.4) (6.5) (6.9)
---- ----- -----
Current 0.5 8.6 9.1
Non-current 7.4 249.9 257.3
---- ----- -----
Total at 31 December 2012 7.9 258.5 266.4
---- ----- -----
Receivable - 29.1 29.1
Released to income statement (0.5) (9.3) (9.8)
---- ----- -----
Current 0.5 9.3 9.8
Non-current 6.9 269.0 275.9
---- ----- -----
Total at 31 December 2013 7.4 278.3 285.7
==== ===== =====
16. Derivative Financial Instruments
Group and Company - Interest rate swaps 2013 2012
£m £m
Current assets 11.3 11.1
Non-current assets 376.9 397.8
----- -----
388.2 408.9
===== =====
Current liabilities (11.3) (11.1)
Non-current liabilities (376.9) (397.8)
----- -----
(388.2) (408.9)
===== =====
Since December 2010, the Company has a £550m portfolio of RPI linked interest
rate swaps. Under these swap arrangements, the Company pays an average fixed
rate of interest of 2.38% indexed by RPI and receives a variable rate of
interest based on LIBOR. RPI accretion is accounted for as interest in the
Group Income Statement. The swaps have maturity dates between 2026 and 2036
(average maturity 2031) and have mandatory break dates on 22 December 2015.
At 31 December 2013 the fair value of the above interest rate swaps was a
liability of £388.2m (2012 - £408.9m). During the year, gains in respect of
movements in the fair value of the swaps of £36.7m are included within finance
costs in the income statement (2012 - losses of £12.5m).
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.
On 1 April 2011, the Company entered into interest rate swap arrangements with
ESBNI which have identical matching terms to the above swaps. Under the swap
arrangements with ESBNI, the Company receives an average fixed rate interest of
2.38% indexed by RPI and pays a variable rate of interest based on LIBOR. RPI
accretion is accounted for as interest in the Group Income Statement. The
swaps have maturity dates between 2026 and 2036 (average maturity 2031) and
have mandatory break dates on 22 December 2015.
At 31 December 2013, the fair value of interest rate swaps was an asset of £388.2m
(2012 - £408.9m). During 2013, losses in respect of movements in the fair value
of the swaps of £36.7m are included within the income statement (2012 - gains of
£12.5m).
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 31 December 2013 is considered by
the Company to fall within the level 2 fair value hierarchy. There have been
no transfers between level 1 or 3 of the hierarchy during the year.
Independent valuations are used in measuring the interest rate swaps and
validated using the present valuation of expected cash flows using constructed
zero-coupon discount curve.
The zero-coupon curve is constructed using the interest rate yield curve of the
relevant currency.
Future cash flows are estimated using expected RPI benchmark levels as well as
expected LIBOR rate sets.
An increase / (decrease) of 0.5% in interest rates would decrease / (increase)
the fair value of interest rate swap liabilities by £59.5m / (£64.9m) (2012 - £64.0m /
(£70.2m)). However, the swap arrangements entered into with ESBNI on 1 April 2011
hedge the Company's cashflows in respect of these liabilities and therefore,
an increase / (decrease) of 0.5% in interest rates would increase / (decrease) the
fair value of the interest rate swap assets by £59.5m / (£64.9m) (2012 - £64.0m /
(£70.2m)) and thereby offset the exposure to the swap liabilities. These sensitivities
are based on an assessment of market rate movements during the period and each is
considered to be a reasonably possible range.
Further details on interest rate risk are included in the Financial Risk
Management section in the Group Strategic Report.
17. Investments
Company - Investment in subsidiaries
2013 2012
£m £m
Cost:
At the beginning of the year / period 0.1 -
Acquisition of subsidiary 7.8 -
Ordinary shares fully paid up - 0.1
---- ----
At the end of the year / period 7.9 0.1
==== ====
All of the Company's subsidiaries are incorporated in the United Kingdom.
In order to comply with the conditions of the European Commission’s certification of the
transmission arrangements in Northern Ireland under Article 9(9) of Directive 2009/72/EC
(the IME 3 Directive), the Company acquired 100% of the share capital of NIE Powerteam
Limited from ESBNI Limited, the immediate parent company of the group, on 1 October 2013.
On 16 December 2013, NIE Powerteam Limited changed its name to NIE Networks Services Limited.
The investment of £7,760,119 comprised 15,000,000 £1 ordinary shares fully paid up. A
summarised balance sheet at the date of acquisition is as follows:
Balance sheet of NIE Networks Services Limited at acquisition date £m
Property, plant and equipment 2.5
Pension asset 30.5
Trade and other receivables 7.1
Current tax asset 0.2
Cash and cash equivalents 0.4
Total assets ----
40.7
----
Trade and other payables 3.7
Deferred tax liability 5.9
Financial liability - other 22.7
Provisions 0.6
Total liabilities ----
32.9
----
Net assets acquired 7.8
====
The principal activity of NIE Networks Services Limited during the year was to
provide electrical infrastructure construction and refurbishment and other
managed services to the Company. As NIE Networks Services Limited provides
services to the Company, revenue on consolidation is £nil.
On 17 September 2012, the Company paid the remaining £0.75 per ordinary share
for its 100% investment in NIE Finance PLC bringing the total investment value
to £50,000 at 31 December 2012. The principal activity of NIE Finance PLC
during the year and prior period was to continue to act as the issuer of the £400m
bond issued on 2 June 2011. Further details of the bond issue are included in note 18.
Dormant subsidiaries
The Company holds 100% of the share capital of NIE Generation Limited, NIE
Limited, NIE Power Limited and NIE Enterprises Limited. These companies are
dormant and the carrying value of these investments as at 31 December 2013 was
£nil (2012 - £nil). Applications have been made to strike off NIE Power
Limited and NIE Enterprises Limited from the Register of Companies.
18. Financial Liabilities
Group Company
2013 2012 2013 2012
£m £m £m £m
Current
Interest payable on £175m bond 3.4 3.4 3.4 3.4
Interest payable on £400m bond 14.8 14.9 - -
Interest payable to group undertakings - - 14.8 14.9
----- ----- ----- -----
18.2 18.3 18.2 18.3
===== ===== ===== =====
Non-current
£175m bond 174.0 173.9 174.0 173.9
£400m bond 398.1 397.9 - -
Amounts owed to group undertakings - - 398.1 397.9
----- ----- ---- -----
572.1 571.8 572.1 571.8
===== ===== ===== =====
Loans and other borrowings outstanding are repayable as follows:
Group and Company 2013 2012
£m £m
In one year or less or on demand 18.2 18.3
Between two and five years 174.0 -
In more than five years 398.1 571.8
----- -----
590.3 590.1
===== =====
The Group and Company's objectives, policies and strategies in respect of
financial liabilities and capital management are disclosed in the Financial
Review section of the Group Strategic Report.
The principal features of the Group's borrowings are as follows:
- the £175m bond is repayable in 2018 and carries a fixed rate of interest
of 6.875%. The bond issue incurred £2.6m of costs associated with raising
finance;
- on 2 June 2011, the Group issued a 15 year £400m bond which is repayable
in 2026 and carries a fixed rate of interest of 6.375%. The bond issue
incurred £2.1m of costs associated with raising finance.
On 2 June 2011, NIE Finance PLC granted a back-to-back loan of £400m to the
Company, which was issued net of £2.1m of costs associated with raising
finance. Interest is paid on the loan at a fixed rate of 6.375%.
The £175m and £400m bonds had fair values at 31 December 2013 of £201.4m (2012
- £206.9m) and £462.0m (2012 - £476.6m) respectively, based on current market
prices. The Company's £400m back-to-back loan had a fair value at 31 December
2013 of £462.0m (2012 - £476.6m) based on the fair value of the £400m bond.
The directors consider that the carrying amount of other financial liabilities
equate to fair value.
The £175m bond, £400m bond, and the Company's related back-to-back loan with
NIE Finance PLC carry interest at fixed rates. Therefore at 31 December 2013
the Group and Company were not exposed to movements in interest rates.
The fair value of bonds as at 31 December 2013 is considered by the Company to
fall within the level 1 fair value hierarchy (defined within note 16). There
have been no transfers between levels in the hierarchy during the year.
The tables below summarise the maturity profile of the Group's financial liabilities
(including trade and other payables) based on contractual undiscounted payments.
At 31 December 2013 On Within 3 3 to 12 1 to 5 More than
Group demand months months years 5 years Total
£m £m £m £m £m £m
£175m bond (including interest payable) - - 12.0 223.1 - 235.1
£400m bond (including interest payable) - - 25.5 102.0 604.0 731.5
Trade and other payables 35.6 39.3 - - - 74.9
Interest rate swap liabilities - - 11.3 376.9 - 388.2
---- ---- ---- ----- ----- -------
35.6 39.3 48.8 702.0 604.0 1,429.7
==== ==== ==== ===== ===== =======
At 31 December 2012 On Within 3 3 to 12 1 to 5 More than
Group demand months months years 5 years Total
£m £m £m £m £m £m
£175m bond (including interest payable) - - 12.0 48.1 187.0 247.1
£400m bond (including interest payable) - - 25.5 102.0 629.5 757.0
Trade and other payables 28.5 37.8 - - - 66.3
Interest rate swap liabilities - - 11.1 397.8 - 408.9
---- ---- ---- ----- ----- -------
28.5 37.8 48.6 547.9 816.5 1,479.3
==== ==== ==== ===== ===== =======
The tables below summarise the maturity profile of the Company's financial liabilities (including trade
and other payables) based on contractual undiscounted payments.
At 31 December 2013 On Within 3 3 to 12 1 to 5 More than
Company demand months months years 5 years Total
£m £m £m £m £m £m
£175m bond (including interest payable) - - 12.0 223.1 - 235.1
Amounts owed to group undertakings - - 25.5 102.0 604.0 731.5
Trade and other payables 35.6 41.1 - - - 76.7
Interest rate swap liabilities - - 11.3 376.9 - 388.2
---- ---- ---- ----- ----- -------
35.6 41.1 48.8 702.0 604.0 1,431.5
==== ==== ==== ===== ===== =======
At 31 December 2012 On Within 3 3 to 12 1 to 5 More than
Company demand months months years 5 years Total
£m £m £m £m £m £m
£175m bond (including interest payable) - - 12.0 48.1 187.0 247.1
Amounts owed to group undertakings - - 25.5 102.0 629.5 757.0
Trade and other payables 28.5 37.8 - - - 66.3
Interest rate swap liabilities - - 11.1 397.8 - 408.9
---- ---- ---- ----- ----- -------
28.5 37.8 48.6 547.9 816.5 1,479.3
==== ==== ==== ===== ===== =======
19. Analysis of Net Debt
Group At Non At
1 January Cash cash 31 December
2013 flow movement 2013
£m £m £m £m
Cash and cash equivalents 38.6 (6.8) - 31.8
Interest payable on £175m bond (3.4) 12.0 (12.0) (3.4)
Interest payable on £400m bond (14.9) 25.5 (25.4) (14.8)
£175m bond (173.9) - (0.1) (174.0)
£400m bond (397.9) - (0.2) (398.1)
------ ----- ----- ------
(551.5) 30.7 (37.7) (558.5)
====== ===== ===== ======
Company At Non At
1 April Cash cash 31 December
2013 Flow movement 2013
£m £m £m £m
Cash and cash equivalents 38.5 (6.7) - 31.8
Interest payable on £175m bond (3.4) 12.0 (12.0) (3.4)
Amounts owed to group undertakings (397.9) - (0.2) (398.1)
Interest payable to group undertakings (14.9) 25.5 (25.4) (14.8)
£175m bond (173.9) - (0.1) (174.0)
------ ----- ----- ------
(551.6) 30.7 (37.7) (558.5)
====== ===== ===== ======
20. Provisions
Group Liability and
Environment damage claims Other Total
£m £m £m £m
--- --- --- ---
Current 0.4 1.2 0.2 1.8
Non-current 4.6 2.9 - 7.5
--- --- --- ---
Total at 1 January 2013 5.0 4.1 0.2 9.3
--- --- --- ---
Acquisition of subsidiary under common control
(see note 17) - 0.6 - 0.6
Applied in the year - (0.6) (0.1) (0.7)
Increase in provisions 0.2 0.6 - 0.8
Release to income statement - - - -
--- --- --- ---
Current 0.6 1.1 0.1 1.8
Non-current 4.6 3.6 - 8.2
--- --- --- ---
Total at 31 December 2013 5.2 4.7 0.1 10.0
=== === === ===
Company Liability and
Environment damage claims Other Total
£m £m £m £m
--- --- --- ---
Current 0.4 1.2 0.2 1.8
Non-current 4.6 2.9 - 7.5
--- --- --- ---
Total at 1 January 2013 5.0 4.1 0.2 9.3
--- --- --- ---
Applied in the year - (0.5) (0.1) (0.6)
Increase in provisions 0.2 0.5 - 0.7
Release to income statement - - - -
--- --- --- ---
Current 0.6 0.6 0.1 1.3
Non-current 4.6 3.5 - 8.1
--- --- --- ---
Total at 31 December 2013 5.2 4.1 0.1 9.4
=== === === ===
Environment
Provision has been made for expected costs of decontamination and demolition
arising from obligations in respect of power station sites formerly owned by
the Group. It is anticipated that most expenditure will take place within the
next five years.
Liability and damage claims
Notwithstanding the intention of the directors to defend vigorously claims made
against the Group, liability and damage claim provisions have been made which
represent the directors' best estimate of costs expected to arise from ongoing
third party litigation matters and employee claims. These provisions are
expected to be utilised within a period not exceeding five years.
21. Pension Commitments
Most employees of the Group are members of Northern Ireland Electricity Pension
Scheme (NIEPS). This has two sections: 'Options' which is a money purchase
arrangement whereby the Group generally matches the members' contributions up
to a maximum of 6% 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.
Under the scheme, employees are entitled to annual pensions on retirement at
age 63 (for members who joined after 1 April 1988) of one-sixtieth of final
pensionable salary for each year of service. Benefits are also payable on
death and following events such as withdrawing from active service.
UK legislation requires that pension schemes are funded prudently. The last
funding valuation of the scheme was carried out by a qualified actuary as at 31
March 2011 and showed a deficit of £150m. The company is paying deficit
contributions of £15.4m per annum (increasing in line with inflation) from 1
April 2012 which along with investment returns from return-seeking assets is
expected to make good this shortfall by 31 March 2022. The next formal
valuation is at 31 March 2014. The Company also pays contributions of 26.9% of
pensionable salaries in respect of current accrual, with active members paying
a further 6% of pensionable salaries.
Profile of the scheme
The net liability includes benefits for current employees, former employees and
current pensioners. Broadly, about 23% of the liabilities are attributable to
current employees, 6% to former employees and 71% to current pensioners. The
scheme duration is an indication of the weighted average time until benefit
payments are made. For the NIEPS, the duration is around 14 years (2012 - 14
years) based on the last funding valuation.
Risks associated with the scheme
Asset volatility - liabilities are calculated using a discount rate set with
reference to corporate bond yields. If assets underperform this yield, this
will create a deficit. The scheme holds a significant proportion of growth
assets (equities and diversified growth funds) which, though expected to
outperform corporate bonds in the long-term, create volatility and risk in the
short-term. The allocation of growth assets is monitored to ensure it remains
appropriate given the scheme's long-term objectives.
Changes in bond yields - a decrease in corporate bond yields will increase the
value placed on the scheme's liabilities for accounting purposes although this
will be partially offset by an increase in the value of the scheme's bond
holdings.
Inflation risk - the majority of the scheme's benefit obligations are linked to
inflation, and higher inflation will lead to higher liabilities (although in
most cases caps on the level of inflationary increases are in place to protect
against extreme inflation. The majority of the scheme assets are either
unaffected by or only loosely correlated with inflation, meaning that an
increase in inflation will also increase the deficit.
Life expectancy - the majority of the scheme's obligations are to provide
benefits for the life of the member, so an increase in life expectancy will
increase the liabilities.
The Company and the trustees have agreed a long-term strategy for reducing
investment risk as and when appropriate. This includes a liability driven
investment policy which aims to reduce the volatility of the funding level of
the plan by investing in assets such as index-linked gilts which perform in
line with the liabilities of the plan so as to protect against inflation being
higher than expected.
The trustees insure certain benefits payable on death before retirement.
Aon Hewitt, the actuaries to NIEPS, have provided a valuation of Focus under
IAS 19 revised as at 31 December 2013 based on the following assumptions (in
nominal terms) and using the projected unit credit method.
2013 2012
Rate of increase in pensionable salaries (per annum) 3.55% 3.05%
Rate of increase in pensions in payment (per annum) 2.30% 1.80%
Discount rate (per annum) 4.40% 4.30%
Inflation assumption (CPI) (per annum) 2.30% 1.80%
Life expectancy:
Current pensioners (at age 60) - males 26.4 years 26.4 years
Current pensioners (at age 60) - females 28.9 years 28.9 years
Future pensioners (at age 60) - males *27.9 years *27.9 years
Future pensioners (at age 60) - females *30.5 years *30.5 years
* Life expectancy from age 60 for males and females currently aged 40.
The life expectancy assumptions are based on standard actuarial mortality
tables and include an allowance for future improvements in life expectancy.
The valuation under IAS 19 revised at 31 December 2013 shows a net pension
liability (before deferred tax) of £91.6m (2012 - £140.2m). A 0.5% increase /
decrease in the assumed discount rate would decrease / increase the net pension
liability by £70.5m (2012 - £67.7m). A 0.5% increase / decrease in the assumed
inflation rate would increase / decrease the net pension liability by £67.5m
(2012 - £61.6m). A one year increase / decrease in life expectancy would
increase / decrease the net pension liability by £34.6m (2012 - £31.9m).
Assets and Liabilities
The Group and Company's share of the assets and liabilities of Focus are:
Group Company
Value at Value at Value at Value at
31 December 31 December 31 December 31 December
2013 2012 2013 2012
£m £m £m £m
Equities - quoted 223.1 157.6 175.5 157.6
Bonds - quoted 362.5 418.9 285.3 418.9
Diversified growth funds - quoted 397.1 144.3 312.4 144.3
Other cash 7.4 2.1 5.8 2.1
------- ------ ------ ------
Total market value of assets 990.1 722.9 779.0 722.9
Actuarial value of liabilities (1,081.7) (863.1) (904.0) (863.1)
------- ------ ------ ------
Net pension liability (91.6) (140.2) (125.0) (140.2)
======= ====== ====== ======
Other assets include cash balances and other investments.
Changes in the market value of assets
Group Company
2013 2012 2013 2012
£m £m £m £m
restated restated
Market value of assets at the beginning of the year / period 722.9 720.5 722.9 720.5
Interest income on scheme assets 32.6 25.5 30.5 25.5
Contributions from employer 19.9 13.8 18.4 13.8
Contributions from scheme members 0.2 0.2 0.2 0.2
Benefits paid (47.8) (33.8) (45.6) (33.8)
Administration expenses paid (1.1) (0.4) (1.1) (0.4)
Remeasurement gains / (losses) on scheme assets 45.5 (2.9) 42.7 (2.9)
Acquisition of subsidiary under common control (see note 17) 206.9 - - -
Re-apportionment of exiting participant's assets 11.0 - 11.0 -
----- ----- ----- -----
Market value of assets at the end of the year / period 990.1 722.9 779.0 722.9
===== ===== ===== =====
Changes in the actuarial value of liabilities
Group Company
2013 2012 2013 2012
£m £m £m £m
restated restated
Actuarial value of liabilities at the beginning of the year / period 863.1 826.3 863.1 826.3
Interest expense on pension liability 37.9 29.0 36.1 29.0
Current service cost 4.0 1.8 2.6 1.8
Curtailment loss - 0.1 - 0.1
Contributions from scheme members 0.2 0.1 0.2 0.1
Benefits paid (47.8) (33.8) (45.6) (33.8)
Acquisition of subsidiary under common control (see note 17) 176.4 - - -
Re-apportionment of exiting participant's liabilities 3.6 - 3.6 -
Actuarial losses on scheme liabilities - financial assumptions 44.3 39.6 44.0 39.6
------- ----- ----- -----
Actuarial value of liabilities at the end of the year / period 1,081.7 863.1 904.0 863.1
======= ===== ===== =====
Powerteam Electrical Services (UK) Limited (PES), a subsidiary of the Group's immediate parent, ESBNI Limited
until its sale on 24 December 2013, was a participating employer in the Focus section of NIEPS. Following
the sale of PES the net assets and liabilities of PES were reapportioned to the Group.
The Group expects to make contributions of c£23.8m to Focus in 2014.
The Group's share of NIEPS service costs is allocated based on the pensionable payroll. Contributions from
employer, interest cost liabilities, interest income on assets and experience gains or losses are allocated
based on the Group's share of the NIEPS net pension liability.
Analysis of the amount charged to operating costs (before capitalisation)
Group Company
12 months 9 months 12 months 9 months
ended ended ended ended
31 December 31 December 31 December 31 December
2013 2012 2013 2012
£m £m £m £m
restated restated
Current service cost (4.0) (1.8) (2.6) (1.8)
Administration expenses paid (1.1) (0.4) (1.1) (0.4)
Curtailment loss - (0.1) - (0.1)
---- ---- ---- ----
Total operating charge (5.1) (2.3) (3.7) (2.3)
==== ==== === ====
Focus has been closed to new members since 1998 and therefore under the projected unit credit
method the current service cost for members of this section as a percentage of salary will
increase as they approach retirement age.
Analysis of the amount charged to net pension scheme interest
Group Company
12 months 9 months 12 months 9 months
ended ended ended ended
31 December 31 December 31 December 31 December
2013 2012 2013 2012
£m £m £m £m
restated restated
Interest income on scheme assets 32.6 25.5 30.5 25.5
Interest expense on liabilities (37.9) (29.0) (36.1) (29.0)
---- ---- ---- ----
Net pension scheme interest (5.3) (3.5) (5.6) (3.5)
==== ==== ==== ====
The actual return on Focus assets was £78.1m (9 months ended 31 December 2012 - £22.2m) for
the Group and £73.2m (9 months ended 31 December 2012 - £22.2m) for the Company.
Analysis of amounts recognised in the Statement of Comprehensive Income
Group Company
12 months 9 months 12 months 9 months
ended ended ended ended
31 31 31 31
December December December December
2013 2012 2013 2012
£m £m £m £m
restated restated
Remeasurement gains / (losses) 45.5 (2.9) 42.7 (2.9)
on scheme assets
Actuarial losses on scheme liabilities:
financial assumptions (44.3) (39.6) (44.0) (39.6)
---- ---- ---- ----
Net gains / (losses) 1.2 (42.5) (1.3) (42.5)
==== ==== ==== ====
The cumulative actuarial losses recognised in the Group and Company Statements of Comprehensive
Income since 1 April 2004 are £68.5m and £76.9m respectively (2012 - £69.7m (restated) and
£75.6m (restated) respectively). The directors are unable to determine how much of the net
pension liability recognised on transition to IFRS and taken directly to equity is attributable
to actuarial gains and losses since the inception of Focus. Consequently, the directors are
unable to determine the amount of actuarial gains and losses that would have been recognised in
the Statement of Comprehensive Income shown before 1 April 2004.
Analysis of amounts recognised in the Statement of Changes in Equity
Group Company
12 months 9 months 12 months 9 months
ended ended ended ended
31 31 31 31
December December December December
2013 2012 2013 2012
£m £m £m £m
Net reapportionment of exiting 7.4 - 7.4 -
participant's net assets === === === ===
22. Share Capital and Equity
Group Company
2013 2012 2013 2012
£m £m £m £m
Share capital 36.4 36.4 36.4 36.4
Share premium 24.4 24.4 24.4 24.4
Capital redemption reserve 6.1 6.1 6.1 6.1
Accumulated profits 207.1 135.9 203.9 135.9
----- ----- ----- -----
274.0 202.8 270.8 202.8
===== ===== ===== =====
The balance classified as share capital comprises the nominal value of the Company's equity
share capital.
The balance classified as share premium records the total net proceeds on the issue of the
Company's equity share capital less the nominal value of the share capital.
The balance classified as capital redemption reserve arises from the legal requirement to
maintain the capital of the Company following the return of that amount of capital to
shareholders on 2 August 1995.
Allotted and fully paid share capital: 2013 2012
£m £m
145,566,431 ordinary shares of 25p each 36.4 36.4
==== ====
23. Lease Obligations
Property, plant and equipment
The Group has entered into leases on certain items of property, plant and equipment. These
leases contain options for renewal before the expiry of the lease term at rentals based on
market prices at the time of renewal.
The future minimum lease payments under non-cancellable operating leases are as follows:
2013 2012
£m £m
Within one year 1.7 0.4
After one year but not more than five years 2.3 0.3
More than five years 1.0 1.0
--- ---
5.0 1.7
=== ===
24. Commitments and Contingent Liabilities
(i) Capital commitments
At 31 December 2013 the Group and Company had contracted future capital
expenditure in respect of property, plant and equipment of £13.3m (2012 - £6.1m)
and computer software assets of £2.3m (2012 - £1.8m).
(ii) 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 (as disclosed in note 20) 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 year end.
The Company has received claims from third parties in relation to potential
diminution in the value of land due to the existence of electricity network
apparatus, a number of which have been referred to the Lands Tribunal of
Northern Ireland. It is uncertain whether any liability will arise as a result
of these claims. In the event that any compensation is awarded, NIE will seek
to recover the payment through the regulatory framework.
The Group does not anticipate that any material liabilities will arise other
than those recognised in the accounts.
25. Financial Commitments
In June 2011 NIE Finance PLC, a subsidiary undertaking of the Company, issued a
£400m bond on behalf of the Company. The Bond has been admitted to the
Official List of the UK Listing Authority and to trading on the London Stock
Exchange's regulated market. The payments of all amounts in respect of the £400m
bond are unconditionally and irrevocably guaranteed by the Company.
26. Related Party Disclosures
Remuneration of key management personnel
The compensation paid to key management personnel is set out below in aggregate
for each of the categories specified in IAS 24 Related Party Disclosures. Key
management personnel of the Group comprise the directors of the Company and the
executive team.
12 months ended 9 months ended
31 December 31 December
2013 2012
£m £m
Salaries and short-term employee benefits 1.3 1.0
Post employment benefits 0.3 0.2
Other long-term benefits 0.1 0.1
--- ---
1.7 1.3
=== ===
Group
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 the Company is a member and for which group accounts 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 accounts is
available from 27 Lower Fitzwilliam Street, Dublin 2.
A full list of the subsidiary undertakings of ESB are included in its accounts.
Related parties of the Company also include the subsidiaries listed in note 17.
Transactions between the Group and related parties and the balances outstanding are disclosed below:
Group Revenue Charges Other Amounts Amounts
Interest from from transactions owed by related owed to related
(paid)/ related related with related party at party at
received party party party 31 December 31 December
£m £m £m £m £m £m
Year ended
31 December 2013
ESBNI - - - - - -
ESB subsidiaries - 20.0 (48.0) (0.1) 3.3 1.8
--- ---- ---- --- --- ---
- 20.0 (48.0) (0.1) 3.3 1.8
=== ==== ==== === === ===
9 months ended
31 December 2012
ESBNI - - - 1.4 - -
ESB subsidiaries - 14.8 (46.7) 0.8 3.2 9.8
--- ---- ---- --- --- ---
- 14.8 (46.7) 2.2 3.2 9.8
=== ==== ==== === === ===
Outstanding balances with subsidiaries are unsecured. Current account balances are settled on a
monthly basis. Amounts owed to related parties primarily arise from transactions relating to regulated
sales and services purchased from ESB subsidiaries. Transactions with ESB group undertakings are
determined on an arm's length basis.
Other transactions with ESB subsidiaries in the year primarily reflect costs incurred for assistance
during storms. In 2012, other transactions with ESBNI primarily reflect the repayment of intercompany
loans.
Transactions between the Company and related parties and the balances outstanding are disclosed below:
Company Revenue Charges Other Amounts Amounts
Interest from from transactions owed by related owed to related
(paid)/ related related with related party at party at
received party party party 31 December/ 31 December/
31 March 31 March
£m £m £m £m £m £m
Year to
31 December 2013
Company's subsidiaries (25.5) 0.3 (16.6) - 22.0 420.1
ESBNI - - - - - -
ESB subsidiaries - 20.0 (48.0) (0.1) 3.3 1.8
---- ---- ---- ---- ---- -----
(25.5) 20.3 (64.6) (0.1) 25.3 421.9
==== ==== ==== ==== ==== =====
Year to
31 December 2012
Company's subsidiaries (19.1) - - - - 412.8
ESBNI - - - 1.4 - -
ESB subsidiaries - 14.8 (46.7) 0.8 3.2 9.8
---- ---- ---- ---- ---- -----
(19.1) 14.8 (46.7) 2.2 3.2 422.6
==== ==== ==== ==== ==== =====
Amounts owed by related parties to the Company at 31 December 2013 include the loan advanced by NIE
to NIE Networks Services Limited during the year (see note 12).
Amounts owed by the Company to related parties at 31 December 2013 and at 31 December 2012 includes
the £400m loan and the associated interest.
Other related parties
During the year the Company contributed £19.1m (9 months ended 31 December 2012 - £14.2m) to NIEPS.