SOURCE: Scottish Power PLC

May 24, 2005 02:00 ET

Scottish Power Plc Announces Preliminary Results 2004/05 And Sale Of Pacificorp

GLASGOW, UK -- (MARKET WIRE) -- May 24, 2005 --SCOTTISH POWER PLC

PRELIMINARY RESULTS 2004/05 AND SALE OF PACIFICORP

Sale of PacifiCorp

  - Sale of PacifiCorp to MidAmerican for $9.4 billion
  - Completion expected in 12-18 months
  - Equity injection net of dividends of $285 million 
    prior to March 2006
  - Impairment charge of GBP927 million
  - Intend to return approximately $4.5 billion of net 
    proceeds to ScottishPower shareholders
  - Sale and return of capital expected to be earnings 
    accretive for ScottishPower from completion
  - Focus on continued growth and development of 
    Infrastructure Division, UK Division & PPM Energy

Preliminary Results 2004/05

  - Profit before tax* up 10% to over GBP1 billion, 
    for the first time
  - Operating profit* for our continuing three 
    businesses up 23%
  - Earnings per share* of 40.22 pence for the year, 
    up 10%
  - Earnings per share* of 11.64 pence for the fourth 
    quarter, up 10%
  - Dividends per share of 22.50 pence, up 10%
  - Dividends for each of the first three quarters of 
    2005/06 of 5.20 pence, up 5%
Note: Items marked * are excluding goodwill amortisation and the exceptional item. ScottishPower management assesses the performance of its businesses by adjusting UK GAAP statutory results to exclude items it considers to be non-operational or non-recurring in nature. In the periods reviewed, goodwill amortisation and the exceptional item have been excluded. We have, therefore, focused our presentation of business performance on the results excluding these items. Unless otherwise stated "year" relates to the year to 31 March 2005, and "quarter" relates to the three months to 31 March 2005.

Ian Russell, ScottishPower Chief Executive, said:

"Along with our financial results, we are today announcing our decision to sell PacifiCorp and focus our management and capital on the Infrastructure Division, UK Division and PPM Energy.

Following our Interim results in November, we conducted a strategic review of PacifiCorp including a review of its prospects, capital requirements and profile of returns. As a result of this review, we are announcing today the sale of PacifiCorp to MidAmerican for $9.4 billion. We intend to return approximately $4.5 billion of the net proceeds to shareholders following the completion of the sale which, subject to regulatory and shareholder approval, is anticipated to take 12 to 18 months. The sale and return of capital is expected to enhance our return on capital and is expected to be earnings accretive from completion.

We are also announcing our results for the year to 31 March 2005. We have achieved profit before tax* of over GBP1 billion for the first time, an increase of 10% compared with the prior year. These results reflect a 20% growth in our UK customer numbers complemented by investments in generation, continued efficiency in our UK network business, the further returns from our US competitive wind and gas storage investments, and lower interest costs. These contributions more than made up for the lower profit at PacifiCorp.

The Infrastructure Division, UK Division and PPM Energy are strong businesses that have driven our recent profit growth. They are also businesses in which we see significant further opportunities for investment that will deliver enhanced growth and returns well in excess of our cost of capital. Over the last two years operating profit, excluding goodwill amortisation, in these businesses has increased by 38%.

In summary, we have today announced the sale of PacifiCorp to MidAmerican for $9.4 billion with approximately $4.5 billion of the net proceeds to be returned to shareholders. Our full year results show profit before tax*, earnings per share* and dividends per share all up by 10%. We have set the dividend for each of the first three quarters of 2005/06 off the higher than expected base for dividends this year, at 5.20 pence per share, representing an increase of 5% from 2004/05, up from 4.2% for the first three quarters of last year, compared to 2003/04. Looking ahead, we remain committed to delivering our strategy of investing for growth and improving operational performance."

SALE OF PACIFICORP

Introduction

In November 2004, the Board began a strategic review of PacifiCorp as a result of its performance and the significant investment it required in the immediate future.

Our review examined PacifiCorp's future capital investment requirements, the likely development of its regulatory regimes, the scope for further operational efficiencies and improvements and the scale and timing of further improvements in its achieved rates of return. We also considered the opportunities for growth and returns that exist in our three other businesses.

The Board concluded that, in the light of the scale and timing of the capital investment required in PacifiCorp and the likely profile of returns from that investment, shareholders' interests were best served by a sale of PacifiCorp and return of capital to shareholders.

The Board therefore announces today that it has entered into a binding agreement for the sale of PacifiCorp to MidAmerican for $9.4 billion. The Board intends to return approximately $4.5 billion of the net proceeds of $5.0 billion from the sale of PacifiCorp, to shareholders. This capital return is anticipated to occur following completion of the sale. The details of the capital return will be communicated to shareholders in due course.

The sale of PacifiCorp enables us to focus our management and capital on the continued development of the Infrastructure Division, UK Division and PPM Energy. These businesses have driven our profit growth over the last two years and delivered overall returns ahead of our cost of capital. They have substantial opportunities for continued growth through capital investment and improved operational performance.

Financial Impact of the Sale and Return of Capital

MidAmerican will be acquiring the equity of PacifiCorp for $5,109.5 million and will be assuming net debt at completion expected to be approximately $4.3 billion which gives a total sale price for PacifiCorp of $9.4 billion. Allowing for that net debt, with no material tax cost expected and after estimated costs, net proceeds from the sale are expected to be approximately $5.0 billion. ScottishPower intends to return approximately $4.5 billion of the net proceeds from the sale to shareholders following the completion of the sale. The sale and return of capital is expected to be earnings accretive for ScottishPower from completion.

An exceptional impairment charge of GBP927 million, under UK GAAP, has been made in ScottishPower's results for the year ended 31 March 2005. This impairment provision has been made to reduce the book value of PacifiCorp down to its expected net realisable value. Pending completion of the sale, PacifiCorp will be treated as a discontinued operation in the financial statements of ScottishPower. The impairment amount excludes foreign exchange gains of GBP485 million, achieved to date, which will be reflected in ScottishPower's Income Statement under IFRS on completion of the sale of PacifiCorp to MidAmerican.

Going forward, we expect to continue our current dividend policy of growing dividends broadly in line with earnings. Our financial strategy will be to retain an A category credit rating for the group and our principal operating subsidiaries. To achieve this rating, on completion of the sale, the group will target credit ratios of adjusted FFO/Net Debt of greater than 25% and FFO/ Interest cover of more than five times. ScottishPower will work closely with the rating agencies in order to ensure its rating objectives are achieved.

For the year ended 31 March 2005, PacifiCorp's UK GAAP profit before tax, excluding goodwill amortisation and the exceptional item, was $581 million and net assets were $4.1 billion as at 31 March 2005. From the perspective of PacifiCorp, its unaudited earnings under US GAAP were $250 million for the same period.

Details of the PacifiCorp Sale

The sale is subject to Securities and Exchange Commission, Federal Energy Regulatory Commission, Federal Trade Commission and Nuclear Regulatory Commission approvals at Federal level, without conditions that would have a material adverse effect on the PacifiCorp business. In addition it is subject to approval at State level in Oregon, Utah, Washington, Wyoming, California and Idaho provided such state approvals are not subject to conditions whose effect would be meaningfully adverse to the business of PacifiCorp. The Directors of ScottishPower anticipate that such approvals should be forthcoming within 12 to 18 months. The sale is subject to further conditions to completion which include the representations and warranties of the parties remaining true and correct, the parties performing their covenants and obligations under the agreement in all material respects, and no material adverse effect in relation to PacifiCorp having occurred. The agreement may be terminated prior to completion by mutual agreement of the parties or otherwise in certain circumstances including material breach of the representations, warranties or covenants of the parties, ScottishPower shareholders not approving the sale or the sale not having been completed by 23 May 2006 or in certain circumstances by 17 February 2007 and (by MidAmerican) where the Board of ScottishPower withdraws or adversely modifies its recommendation of the sale. ScottishPower has also agreed that it will not initiate, solicit or engage in negotiations concerning any alternative proposals relating to PacifiCorp other than in certain specified circumstances.

ScottishPower and MidAmerican have agreed certain break fee arrangements. In summary, ScottishPower has agreed to pay MidAmerican a break fee of $10 million if, prior to ScottishPower shareholders approving the sale, an alternative proposal relating to PacifiCorp or a proposal for the acquisition of control of ScottishPower is made or announced, is rejected by ScottishPower, and ScottishPower shareholders do not subsequently approve the sale at the relevant shareholders' meeting or in any event before 1 September 2005 and the Agreement with MidAmerican is as a result terminated. If the break fee would otherwise become payable then its amount is increased to (a) $100 million (in total) if the ScottishPower Board instead of rejecting such proposal, recommends it or withdraws or adversely modifies its recommendation of the sale and (b) $250 million (in total) if within a year of the agreement with MidAmerican terminating, ScottishPower enters into an agreement with respect to or consummates an alternative proposal relating to PacifiCorp or a proposal for the acquisition of control of ScottishPower. The maximum break fee payable by ScottishPower is therefore $250 million. A break fee of $250 million is payable by MidAmerican to ScottishPower if ScottishPower terminates the Agreement as a result of MidAmerican agreeing to or announcing a proposal to acquire certain competing utility and energy assets if the same directly or indirectly results in the failure to satisfy certain regulatory conditions to the sale and/or creates or imposes additional conditionality or costs which result in MidAmerican choosing not to complete or to terminate the Agreement.

Prior to sale it is envisaged that PacifiCorp will be managed and developed as currently, with no material changes to its operating plans, management structures, or boards.

Between now and closing of the sale, ScottishPower has agreed to invest additional equity in PacifiCorp to fund ongoing capital expenditure in line with PacifiCorp's current plan. Pursuant to these arrangements, ScottishPower will invest $500 million during the financial year 2005/06. In addition ScottishPower has agreed to make further investments during the financial year 2006/07 of up to $525 million, contributed monthly, although ScottishPower will be fully compensated for any such payments made in respect of the financial year 2006/07. Between now and the closing of the sale, ScottishPower is entitled to dividends from PacifiCorp in line with PacifiCorp's current plan. Pursuant to these arrangements, it is expected that, ScottishPower will receive $215 million of dividends during the financial year 2005/06, and $242 million of dividends during the financial year 2006/07, these amounts to accrue monthly.

Due to the size of the sale, the approval of ScottishPower's shareholders is required. Accordingly, a circular containing details of the sale and a notice convening a general meeting will be posted to shareholders in due course. It is expected that the details of the return of capital will be sent to shareholders around the time of completion of the sale. The sale, which is conditional on shareholders' approval and on regulatory clearance, is expected to complete in 12 to 18 months.

PacifiCorp is one of the lowest-cost electricity producers in the United States, providing more than 1.6 million customers with reliable, efficient energy. PacifiCorp works to meet growing energy demand while protecting and enhancing the environment. PacifiCorp has interests in more than 8,300 MW of generation capacity from coal, hydro, renewable wind power, gas-fired combustion turbines and geothermal plants. PacifiCorp operates as Pacific Power in Oregon, Washington, Wyoming and California; and as Utah Power in Utah and Idaho. PacifiCorp merged with ScottishPower in 1999.

Strategy for ScottishPower

Following the sale, ScottishPower will continue to develop its Infrastructure Division, UK Division and PPM Energy, where ScottishPower has strong positions, combined with a market and regulatory environment that it is anticipated will continue to provide attractive opportunities for organic growth and investment. These businesses have also driven ScottishPower's recent profit growth and offer the most attractive returns. In aggregate, these three divisions have shown growth in operating profit of 38% over the last two years.

The Infrastructure Division can benefit from increases in allowed revenue as a result of the recently concluded Distribution Price Control Review and Transmission Price Control Extension. The resulting price controls provide increased revenue allowances for taxation and pension costs, reflect higher capital investment levels and introduce new incentive targets. The Division has geared up across its activities to achieve and, where possible, outperform those new targets and to deliver the increased investment programme. We expect capital expenditure in the Division to amount to approximately GBP1.7 billion to 2010, with 40% of that figure associated with growth in the business.

In our UK Division, over the medium-term, we aim to continue to grow profitably our customer base and generation assets. The growth in customer numbers is expected to deliver increased earnings via higher revenues and a reduction in our average cost to serve. We will support this growth in customer numbers with further investment in generation and gas storage and aim to invest approximately GBP1.4 billion of capital to 2010. This includes the continued expansion of our windfarm portfolio, where we aim to invest GBP1 billion by 2010. Some 75% of UK Division's capital expenditure is expected to support growth, with targeted returns immediately following completion of each project for new investments of at least 300 basis points above the Division's weighted average cost of capital.

At PPM Energy we expect to see continued strong growth in the medium-term coming from our investments in windfarms and gas storage. Approximately GBP1.4 billion of capital is expected to be invested to 2010, almost all for growth, including GBP950 million for new wind capacity, taking our total to at least some 2,300 MW and GBP460 million in the same period to increase our gas storage capacity to 125 BCF. Returns of at least 300 basis points above PPM Energy's weighted average cost of capital are expected immediately following completion of each project.

PRELIMINARY RESULTS 2004/05

In addition to announcing the sale of PacifiCorp to MidAmerican, we are also reporting our Preliminary results for 2004/05.

     Quarter 4                                          Full Year
2004/05 2003/04 GBP million                         2004/05    2003/04
  1,938   1,748 Turnover                              6,849      5,797
   (617)    292 Operating (loss) / profit               153      1,023
    339     321 Operating profit excluding 
                goodwill & exceptional                1,197      1,151
   (664)    239 (Loss) / profit before tax              (29)       792
    292     269 Profit before tax excluding 
                goodwill & exceptional                1,015        920
 (40.54)   9.02 (Loss) / earnings per share (pence)  (16.83)     29.40
  11.64   10.63 Earnings per share excluding 
                goodwill & exceptional (pence)        40.22      36.40
   7.65    6.25 Dividends per share (pence)           22.50      20.50

We have achieved profit before tax* of over GBP1 billion for the first time, an increase of 10% compared with the prior year. These results reflect a 20% growth in our UK customer numbers complemented by investments in generation, continued efficiency in our UK network business, further returns from our US competitive wind and gas storage investments, and lower interest costs. These contributions more than made up for the lower profit at PacifiCorp.

We continue to see very attractive opportunities for profitable growth in our UK network business, where the finalisation of the Distribution Price Control Review places us in a good position to continue to outperform the targets and enhance returns. We are the leading developer of wind generation in the UK and the US with approximately 1,000 MW of plant in operation and some 700 MW of plant to be constructed in the remainder of 2005.

PacifiCorp's financial performance was impacted by milder temperatures and lower thermal generation availability in the first half, and a lack of rainfall and snow held back the contribution from our hydroelectric generation plants in the second half. The lower than normal snow and rainfall over the winter months will also reduce hydroelectric generation availability during the first six months of 2005/06.

The Infrastructure Division delivered an increase in operating profit of 6% in the year and concluded the Distribution Price Control Review and Transmission Price Control Extension. The Division will benefit from increases in allowed revenue as a result. The price controls also introduce challenging new incentive targets which will require further improvements in operational performance. The Division is focused on outperforming these new targets and delivering the increased investment programme.

In the UK Division the investment in generation plant has complemented significant growth in customer numbers, up 865,000 this year to over 5.1 million. Together, these have contributed to the substantial increase of some 80% in the operating profit* of the Division. We are continuing to grow our customer numbers, albeit at a slower rate than experienced in the first nine months of 2004/05, while maintaining our focus on gaining profitable customers that will create shareholder value. Generation has started at the Black Law windfarm and construction is underway at the Beinn Tharsuinn and Coldham windfarms. The UK Division has continued to demonstrate significant progress toward its renewable energy strategy.

PPM Energy continued to grow rapidly with operating profit* rising 60% to GBP59 million, for the year, with additional earnings delivered through Production Tax Credits on wind output. In the year we acquired Atlantic Renewable Energy Corporation in order to expand on the east coast of the US. This acquisition and the recently announced Shiloh and Maple Ridge windfarms, together with windfarms at Klondike II, Trimont and Elk River, gives PPM Energy 574 MW due on-line by 31 December 2005, all of which are expected to be immediately earnings enhancing following completion.

INVESTING FOR GROWTH

We continue to execute our investment strategy across the group and invested GBP1.4 billion during the year, with GBP0.8 billion (60%) invested for growth. Investments in our regulated businesses aim to achieve at least the allowed rate of regulatory returns, while our competitive businesses are expected to achieve returns of at least 300 basis points above each division's weighted average cost of capital.

PacifiCorp's net capital investment was GBP480 million for the year, with GBP231 million (48%) invested for organic growth. Of this, GBP136 million was invested in building new generation. The first phase of the 525 MW Currant Creek plant, representing 280 MW, will be operational this summer with full operations scheduled to begin in summer 2006. Construction at the 534 MW Lake Side plant is scheduled to begin this summer. A further GBP95 million was invested in new connections and network reinforcement.

Infrastructure Division's net capital investment was GBP267 million for the year, with GBP67 million (25%) invested for organic growth, including expenditure on the connection to the Black Law windfarm and other new customer connections. Other organic investment focused on network reinforcement projects, such as the GBP30 million, five-year, Liverpool city centre regeneration programme and initial spend on the Renewable Energy Transmission Study upgrade programme required to accommodate the connection of renewable generation in Scotland. As a result of the Distribution Price Control Review, capital expenditure allowances increase by 55% over the next five years, against the previous control period, with some 1,800 km of overhead lines due to be built. New initiatives in operational excellence will also help our drive towards a 30% improvement in network performance, resulting in reduced fault duration for our customers and minimising risk of financial penalty from Ofgem. We also plan to invest some GBP190 million in the first phase of the Transmission Investment for Renewable Generation.

The UK Division's net capital investment was GBP546 million, including GBP454 million (83%) invested for growth. Growth investment included the acquisitions of the 800 MW Damhead Creek power plant for GBP320 million and the remaining 50% of the 400 MW Brighton power plant for GBP71 million. Other growth investment of GBP63 million related primarily to our windfarm developments, notably the largest consented UK onshore windfarm project at Black Law. Development of the project continues, with completion of approximately 100 MW scheduled for autumn this year. Construction is also underway at the 30 MW windfarm at Beinn Tharsuinn and the 16 MW windfarm at Coldham.

PPM Energy's net capital investment for the year was GBP84 million, with GBP79 million (94%) of this invested for growth, primarily on new wind generation projects where build is ongoing. For 2005/06 PPM Energy has announced 574 MW of new windfarm investments, comprising 75 MW Klondike II, 100 MW Trimont, 150 MW Elk River, 150 MW Shiloh and 50% of the 198 MW joint venture Maple Ridge windfarm in upstate New York, which is being developed along with Zilkha Renewable Energy of Houston. Maple Ridge represents the first project in the northeastern US associated with the PPM Atlantic Renewable acquisition. PPM Energy's share of the capital investment is approximately $160 million and the 120 turbine windfarm is due to be completed this December. Once operational, all of these projects are expected to be immediately earnings enhancing.

Looking ahead, we aim to invest further capital to 2010 of some GBP1.7 billion in the Infrastructure Division including renewable infrastructure investment; GBP1.4 billion in generation and gas storage in the UK Division; and approximately GBP1.4 billion at PPM Energy on new wind and gas storage capacity.

IMPROVING OPERATIONAL PERFORMANCE

PacifiCorp

For the year, operating profit, excluding goodwill amortisation and the exceptional item, was lower by GBP78 million at GBP542 million (down $29 million to $914 million) due mainly to a net GBP61 million adverse translation impact from the weaker US dollar, which has been substantially mitigated at an earnings level by the benefits from our hedging policy. Retail revenue growth of $98 million was offset by both increased net power costs of $98 million and, as expected, the reduction in deferred power cost recoveries of $44 million. Deferred power cost recoveries will expire fully by the end of December 2005. Underlying retail revenues improved due to regulatory rate increases and customer growth, partly offset by lower customer usage, mainly due to the milder weather. Although the contribution from hydroelectric resources was in line with last year, it remained below expectations as a result of the unusually dry conditions. The impact of lower thermal generation availability and related increase in purchase volumes, together with higher fuel and market prices and increased load volumes, all contributed to the rise in net power costs. Operating efficiencies delivered $42 million of benefits and this more than offset adverse other net revenue and cost movements of $37 million, which increased largely as a result of higher labour-related and maintenance costs. Non-recurring items were favourable by $10 million, as the $56 million environmental provision release in the year more than offset $46 million of non-recurring items in the prior year.

Initiatives directed at improving operational efficiency included steps to significantly reduce future expected coal costs over the long-term by commencing underground coal mining in Wyoming; to aid generation efficiency by improving the management of plant overhauls and targeted capital expenditure programmes; and to deliver cost savings by renegotiating operational and service level agreements. In addition, customer service was enhanced following the streamlining and automation of activities and, in April 2005, we opened another new operations centre to facilitate the centralisation of call handling and to provide rapid responses to outages for our customers. These initiatives contributed to PacifiCorp delivering and exceeding its target of $300 million of benefits set at the time of the merger.

In February 2005, the Utah Public Service Commission granted PacifiCorp additional annual revenues of $51 million, based upon a forward-looking test year, effective from 1 March 2005. Along with other awards earlier in the year of $15 million in Washington and $9.25 million in Wyoming, this represents rate case awards in the year of approximately $75 million of additional annual revenue. On 5 May 2005, PacifiCorp filed a general rate case request in Washington for approximately $39 million that also related to increased operating costs.

PacifiCorp is also seeking to account for and recover power costs in Oregon and Washington related to the unfavourable weather conditions. These requests relate to the 2005 calendar year and are expected to be resolved early in 2006. Recovery of any weather-related costs is expected to be made at a future date. PacifiCorp has also requested power cost adjustment mechanisms ("PCAMs") in Oregon and Washington. The proposed PCAMs are designed to be longer-term, ongoing mechanisms that pass through to customers a portion of excess power costs, or return to customers a portion of over-collected power costs. This would enable power costs included within rates to be more closely aligned with PacifiCorp's actual costs and assist in reducing earnings volatility. Discussions on possible PCAMs are also underway in Utah and Wyoming.

Regulatory returns for PacifiCorp at September 2004, the end of the last regulatory reportable period, were approximately 7% on a normalised basis compared to approximately 8% at September 2003, as the period does not include the increased revenue from the Utah general rate case settlement effective in March 2005 and the Washington general rate case outcome from November 2004. PacifiCorp now has licenses or settlements in place regarding seven out of nine recent relicensing agreements. The relicensing of the Klamath River and Prospect River systems remain to be settled.

In April 2005, PacifiCorp received a magistrate judge's opinion agreeing to PacifiCorp's request to dismiss the $1 billion lawsuit filed against it in May 2004 by the Klamath tribes. In May 2005, the tribes filed objections to the magistrate judge's opinion and the matter is now before a district court judge.

From a customer service perspective, the US Department of Energy ranked PacifiCorp second in the nation in terms of the total number of customers purchasing renewable power and third in terms of sales volumes. In July, PacifiCorp was named best for overall customer satisfaction in a nationwide survey of commercial and industrial customers by TQS Research, an improvement from third place last year.

Infrastructure Division

For the year, operating profit increased by GBP23 million to GBP416 million, with regulated revenues higher by GBP13 million mainly as a result of distribution sales volume growth and favourable transmission prices, in line with allowed revenues. Underlying net costs were favourable by GBP14 million mainly due to a reduction in third party transmission charges and lower other net costs. This upside, together with a net GBP4 million increase in one-off gains, including the gain on disposal of gas assets, more than offset an GBP8 million increase in rates and depreciation.

In March, we accepted the new licence conditions for the Distribution Price Control Review over the next five years from 1 April 2005 and the Transmission Price Control Extension for the next two years also from 1 April 2005. The effect of the two reviews is to increase revenues by around GBP60 million in 2005/ 06 mainly due to increased revenue allowances for taxation and pension costs and also reflecting higher capital investment levels. They also introduce challenging new incentive targets which will require further improvements in operational performance in order to avoid penalties. The Division has geared up across its activities to achieve and, where possible, outperform these new targets and to deliver the increased investment programme.

Initiatives include deploying a greater proportion of the workforce to restore customers to the network; improved scheduling and monitoring of repairs; programmes targeted at the worst performing circuits; and a re-prioritised maintenance programme.

On 1 April 2005, the British Electricity Trading and Transmission Arrangements ("BETTA") were successfully introduced with National Grid assuming operational control of the Great Britain ("GB") transmission system, including balancing of generation and demand in Scotland. ScottishPower retains network ownership and all associated responsibilities including development of the network.

Two storms in January affected approximately 77,000 customers across our licence areas in Manweb and southern Scotland. Early deployment of emergency plans ensured power restoration was highly effective and we received favourable feedback from energywatch for our handling of these events.

During the year the system performance of one of our distribution businesses outperformed the regulatory targets and, subject to the annual audit of system performance data, will qualify for a one-off reward of approximately GBP3 million. This reward will be reflected in allowed revenue for 2005/06.

UK Division

For the year, operating profit, excluding goodwill amortisation, was higher by GBP79 million at GBP180 million. Electricity and gas margins improved by GBP198 million due to the growth in customer numbers combined with our investment in generation, which delivered GBP137 million of this increase. The effective management of our generation resource portfolio, including the benefit of our rolling commodity procurement strategy, contributed the majority of the remaining GBP61 million of margin growth. The substantial increase in customer numbers contributed to higher customer capture, energy efficiency and customer service costs of GBP45 million. Other net costs increased by GBP74 million primarily due to GBP33 million of operating expenses relating to Damhead Creek and Brighton and higher depreciation and debt provisioning movements.

Renewable development remains a key part of our business strategy and the Division is the leading developer of wind generation in the UK with approximately 3,000 MW in its renewable development pipeline, in addition to 158 MW that are operational and 142 MW under construction. We have entered into a joint venture with the Co-operative group to build a 16 MW windfarm at Coldham in Cambridgeshire. Construction is expected to be complete later this year. In March, planning determination for an 18 MW windfarm at Wether Hill in Dumfries and Galloway was given and construction will commence early in 2005/06. We have also completed trials of co-firing of biomass at our Cockenzie power station and have commenced full commercial burning. Co-firing trials have also begun at Longannet. Overall these activities demonstrate the Renewables Obligation Scheme is a successful mechanism that can deliver the Government's targets for renewable power. We maintain our support for marine renewable power through our relationship with Ocean Power Delivery, a leading developer of marine power.

As we have grown our portfolio of customers and assets, we continue to maintain a good balance between our retail demand and our generation output. We are maximising the returns from our generating plant by effectively utilising its flexibility, which is increasingly important under the new BETTA market arrangements. Our effective forward purchasing strategy for gas and coal has helped to maintain a competitive cost base for plant and customers, whilst also helping to protect us from wholesale price volatility. We are substantially covered across our commodity requirements for the next two years and have secured access to competitively priced low-sulphur coal from the international market, which will be delivered to our plant via our highly competitive end-to-end coal logistics deal with Clydeport.

We have successfully adapted to the new arrangements under BETTA, and we are capturing the commercial opportunities that the new arrangements present. However, we continue to have concerns with the GB transmission charging arrangements introduced with BETTA and have therefore commenced Judicial Review proceedings with respect to Ofgem's decision to approve the current GB charging methodology.

The 6 Sigma business transformation programme that was originally adopted in our supply activities was extended to our generation activities in the year and, in total, delivered revenue and cost savings of GBP15 million this year. In April 2005, we received a "Best in Class Award" at the European 6 Sigma IQ Awards in recognition of the successful delivery of a project to improve significantly customer accounts set-up time. The benefits of the improvements in our customer service provision have also been evidenced by the results seen in two customer satisfaction studies. ScottishPower came top of Datamonitor's annual survey of Industrial and Commercial customers and was ranked highest for price and value in J.D. Power's domestic gas market award.

PPM Energy

For the year, operating profit, excluding goodwill amortisation, increased by GBP22 million to GBP59 million (by $35 million to $98 million). PPM Energy's contribution to the group's profit before interest and tax, excluding goodwill amortisation and including results from joint ventures, was $99 million. In addition, the group's tax charge was reduced by $12 million, as a result of PPM Energy's Production Tax Credits. Gas storage margins improved by $48 million in the year, with increased contracted storage capacity delivering $34 million of this growth and the owned facilities at Alberta and Katy, adding $14 million. Wind generation profit improved by $10 million, primarily due to investment in 2003/04 in new windfarms delivering substantial volume growth during the year. Energy management activities improved by $7 million mainly as a result of increased contributions from long-term contractual arrangements to supply electricity and gas due to higher volumes. Net operating costs required to support increased business activities and infrastructure were higher by $24 million and depreciation increased by $6 million.

PPM Energy now controls about 830 MW of operating wind energy with new developments totalling 574 MW due to be constructed in 2005, making PPM Energy the largest US developer of renewables announced to date this year. In May 2005, PPM Energy announced plans for a 150 MW windfarm in northern California to be called the Shiloh windfarm. The Shiloh windfarm, together with the previously announced windfarms at Maple Ridge, Klondike II, Trimont and Elk River, will take PPM Energy's total wind portfolio to approximately 1,405 MW by the end of 2005, well on target toward its goal of at least 2,300 MW on-line by 2010. Approximately 90% of PPM Energy's operational windfarm output is committed under long-term contract. In December 2004, PPM Energy also acquired the northeast US wind energy developer, Atlantic Renewable Energy Corporation (now called PPM Atlantic Renewable). Including PPM Atlantic Renewable projects, PPM Energy now has approximately 9,000 MW in its renewable development pipeline, stretching from California to New York. In addition, PPM Energy has over 800 MW of thermal generation.

In May 2005, PPM Energy announced plans to expand the Waha gas storage development project in west Texas from 7.2 BCF to 9.5 BCF based on strong market demand and favourable geological results. PPM Energy also announced the acquisition of the 4.5 BCF Grama Ridge gas storage facility in New Mexico, from ConocoPhillips, which continues PPM Energy's profitable investment in gas storage assets. Including Grama Ridge, PPM Energy now has 80.5 BCF of gas storage under its ownership or control. PPM Energy intends to expand the Grama Ridge site to 6.0 BCF by the end of 2005.

FINANCIAL REVIEW - FULL YEAR

The UK businesses and PPM Energy delivered strong operating profit growth. PacifiCorp's results were adversely affected by the weaker US dollar and the impact of weather and plant availability. Our hedging policy has continued to successfully mitigate the impact on group earnings of the weaker dollar, with an earnings hedge benefit of GBP53 million (2003/04: GBP60 million) delivered at an operating profit level and a balance sheet hedging benefit of GBP88 million (2003/ 04: GBP39 million) delivered to interest from the UK/US interest rate differential.

Group turnover increased by GBP1,052 million to GBP6,849 million for the year with the weaker US dollar reducing sterling revenues by GBP225 million, net of the movement in hedging benefits from the forward sale of dollars. PacifiCorp's dollar turnover increased by 8%, primarily due to higher wholesale and retail revenues and Infrastructure Division's turnover increased by 6% due to higher regulated and new connections business revenues, both driven by higher volumes. The UK Division's turnover grew by 33% as a result of higher retail sales, increased energy balancing activities and the acquisition of generation plant. PPM Energy's dollar turnover was higher by 56% due to increased sales under long-term contracts, activities around owned and contracted storage assets and the addition of new wind generation.

Group operating profit for the year decreased by GBP870 million to GBP153 million due to the exceptional charge in the year of GBP927 million, relating to the impairment of goodwill associated with PacifiCorp. Excluding goodwill amortisation and the exceptional item, group operating profit was GBP46 million higher at GBP1,197 million, after a net adverse foreign exchange effect of GBP58 million. This increase reflects the strong performance of our UK operations and good growth in PPM Energy. Although below our expectations, PacifiCorp delivered an improved second half operational performance compared to the first six months of the year.

On 24 May 2005, the group announced that agreement had been reached to sell PacifiCorp to MidAmerican for a total consideration of $9.4 billion, subject to appropriate regulatory and shareholder approvals. As a consequence, the group has undertaken a review of the goodwill allocated to the PacifiCorp reporting segment. The estimated recoverable value has been based on net realisable value, with reference to the price of comparable businesses, recent market transactions and the estimated proceeds from disposal. This review has resulted in an exceptional charge for the impairment of goodwill of GBP927 million, which is disclosed separately within operating profit as an exceptional item. No material tax costs are expected.

In addition, the group has performed a similar review under US GAAP and as a result a goodwill impairment of GBP1,381 million has been recorded in the PacifiCorp segment under US GAAP. The higher charge is principally due to the higher carrying value of the net assets of PacifiCorp under US GAAP compared to UK GAAP. This difference is primarily attributable to the recognition of regulatory assets, FAS 133 and lower cumulative amortisation of goodwill under US GAAP.

The net interest charge reduced by GBP50 million to GBP188 million for the year The charge included a GBP14 million translation benefit from the weaker US dollar and an additional GBP49 million benefit from the UK/US interest rate differential arising from our dollar balance sheet hedging strategy. The net interest charge also benefited from GBP14 million of net interest receipts following the settlement of outstanding tax claims. The main items partly offsetting these reductions in interest were higher interest payments on floating rate debt and interest payable on capital contributions to be refunded under the new BETTA trading regime.

The loss before tax for the year was GBP29 million compared to a profit before tax of GBP792 million in the prior year, again due to the exceptional goodwill impairment charge. Excluding goodwill amortisation and the exceptional item, profit before tax improved by GBP95 million to GBP1,015 million for the year, with the impact of PacifiCorp's results being more than offset by operating profit improvements in our other businesses and the lower net interest charge.

In line with last year's results, the effective rate of tax, excluding goodwill amortisation and the exceptional item, was 27%. The effective rate of tax was lower than the standard rate, as it benefited from the release of provisions relating to prior years following agreement of specific items with tax authorities, the group's financing arrangements and tax credits from US wind generation. Legislation proposed in the Finance Bill 2005, but not yet enacted, is likely to affect the group's internal financing arrangements and could, therefore, result in an increase in the effective rate in future years. However, higher Production Tax Credits from US windfarms are expected partly to offset this increase.

Earnings per share were lower by 46.23 pence resulting in a loss per share of 16.83 pence for the year. Excluding goodwill amortisation and the exceptional item, earnings per share improved by 3.82 pence to 40.22 pence.

Cash flows from operating activities reduced compared to the prior year to March 2004 by GBP104 million to GBP1,260 million, as favourable operating performance was partly offset by higher working capital commitments mainly due to higher debtors reflecting significant growth in our UK Division and provision movements. Interest, tax and dividend payments totalled GBP600 million, with the tax and interest payments lower than last year due to the settlement of outstanding tax claims and cash benefits associated with our hedging strategy. Other net inflows which impact net debt, other than net investment in assets and acquisitions, were GBP257 million, mainly as a result of cash received on the maturing and cancellation of net investment hedging derivatives during the year. Net capital investment cash spend including Damhead Creek was GBP1,270 million. After adverse non-cash movements of GBP70 million, which included debt acquired following the purchase of the remaining 50% of the Brighton power plant partly offset by the favourable effect of foreign exchange, net debt at 31 March 2005 was GBP4,147 million, GBP423 million higher than at 31 March 2004. Gearing (net debt/equity shareholders' funds) was 104%, compared to 79% as at 31 March 2004.

The dividend for the fourth quarter of 2004/05 will be 7.65 pence per share, payable on 28 June 2005. This takes the total dividends for the year to 22.50 pence per share and is covered 1.79 times by earnings per share, excluding goodwill amortisation and the exceptional item, consistent with our stated dividend policy. The ADS dividend rate is $0.5582 and will also be paid on 28 June 2005 to shareholders of record on 3 June 2005.

FINANCIAL REVIEW - FOURTH QUARTER

Group turnover increased by GBP190 million to GBP1,938 million for the fourth quarter after a GBP47 million impact of the weaker US dollar, net of the movement in hedging benefits from the forward sale of dollars.

The group operating loss for the fourth quarter was GBP617 million compared to an operating profit of GBP292 million in the equivalent period last year. The reduction in operating profit was due to the exceptional charge of GBP927 million relating to the impairment of goodwill associated with PacifiCorp, which is discussed in the "Financial Review - Full Year", above. Excluding goodwill amortisation and the exceptional item, operating profit increased by GBP18 million to GBP339 million, after a net adverse foreign exchange effect of GBP33 million.

PacifiCorp's operating profit, excluding goodwill amortisation and the exceptional item, for the fourth quarter fell by GBP20 million to GBP137 million. This was primarily due to a GBP34 million unfavourable net translation variance arising from the weaker US dollar and reduced hedging benefits compared to the equivalent period last year, when the majority of the full year hedge benefit was recognised in the fourth quarter. Dollar operating profit, excluding goodwill amortisation and the exceptional item, increased by $26 million to $248 million, mainly due to higher retail and other regulatory revenues and efficiency initiatives.

Infrastructure Division's operating profit improved by GBP1 million to GBP103 million for the fourth quarter, with a slight reduction in regulated revenues and an increase in rates and depreciation charges being offset by favourable net operating cost movements.

The UK Division's strong performance continued with operating profit, excluding goodwill amortisation, up by GBP26 million for the fourth quarter at GBP77 million. Electricity and gas margins improved as the contribution from the Damhead Creek and Brighton generation plants, along with the Division's balanced commodity position, helped mitigate the impact of wholesale price volatility on the growing customer base.

PPM Energy's operating profit, excluding goodwill amortisation, rose by GBP11 million to GBP22 million for the fourth quarter (by $18 million to $38 million), primarily as a result of an improved contribution from contractual gas storage.

As a result of these operating profit improvements and a GBP10 million reduction in the net interest charge, profit before tax, excluding goodwill amortisation and the exceptional item, improved by GBP23 million to GBP292 million. The loss before tax was GBP664 million compared to a profit before tax of GBP239 million in the equivalent period last year.

Earnings per share, excluding goodwill amortisation and the exceptional item, improved by 1.01 pence to 11.64 pence. The loss per share was 40.54 pence compared to earnings per share of 9.02 pence for the equivalent period last year.

INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")

ScottishPower is required to report its group consolidated financial results in accordance with IFRS from 1 April 2005 and as a result has restated its financial information for the year ended 31 March 2005. The group has utilised the IFRS 1 'First-time Adoption of International Financial Reporting Standards', exemption not to prepare comparative information in accordance with IAS 32 ' Financial Instruments: Disclosure and Presentation' and IAS 39 'Financial Instruments: Recognition and Measurement'. As these standards will be applied with effect from 1 April 2005 they will, therefore, not impact the IFRS financial information for the year ended 31 March 2005.

The effect of moving from UK GAAP to IFRS resulted in a 1% increase in profit before tax, excluding the impact of goodwill amortisation and the exceptional item. Earnings per share, excluding the impact of goodwill amortisation and the exceptional item, reduced by 1%. Net debt increased by GBP159 million as a result of the recognition of additional finance lease obligations of GBP71 million and the reclassification within the balance sheet of existing finance lease obligations of GBP88 million. Whilst this impacts on what is reported as net debt, underlying cash flows are unaffected. Net assets reduced by 2%, principally as a result of the recognition of the deficit on the group's pension schemes.

A separate announcement detailing the impacts of IFRS and providing primary statements will be published today. Further details are available on the Company's website, www.scottishpower.com. The group will host an IFRS seminar for analysts and institutional investors on Wednesday 25 May 2005.

INVESTOR TIMETABLE

Key investor dates going forward are as follows:

1 June 2005              Shares go ex-dividend for 
                         the fourth quarter
3 June 2005              Last date for registering transfers to 
                         receive the
                         fourth quarter dividend
28 June 2005             Fourth quarter dividend payable
22 July 2005             Annual General Meeting
10 August 2005           Announcement of results for the first 
                         quarter ending 30 June 2005
17 August 2005           Shares go ex-dividend for the 
                         first quarter
19 August 2005           Last date for registering transfers to 
                         receive the first quarter dividend
28 September 2005        First quarter dividend payable
10 November 2005         Announcement of results for the 
                         second quarter and half year ending 
                         30 September 2005
US Dividend Tax Note

The "Jobs and Growth Tax Relief Reconciliation Act of 2003" (the "Act") reduces the rates of US federal income tax on dividends received by individual US shareholders from domestic corporations and "qualified foreign corporations". Based on the Act's legislative history and Internal Revenue Service releases, ScottishPower believes that it is a "qualified foreign corporation" as defined in the Act. As a result, in most cases our ADS holders that are individuals should be subject to the same preferential dividend tax rates as US shareholders owning shares in US-based companies. The Act only applies to individuals subject to US federal net income tax and therefore the tax position of UK shareholders is unaffected. Please note that US federal income tax treatment is dependent upon an individual's tax circumstances. Therefore, you should consult your own tax advisor regarding the tax matters discussed in this statement or any other taxation issue. For further information on the Jobs and Growth Tax Relief Reconciliation Act of 2003, investors are encouraged to go to www.irs.gov and to consult with their tax advisor.

Safe Harbor

Some statements contained herein may include statements regarding our assumptions, projections, expectations or beliefs about future events. These statements are intended as "Forward-Looking Statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements with respect to us, our corporate plans, future financial condition, future results of operations, future business plans, strategies, objectives and beliefs and other statements that are not historical facts are forward looking. Statements containing the words "may", "will", "expect", " anticipate", "believe", "intend", "estimate", "continue", "plan", "project", " target", "on track to", "strategy", "aim", "seek", "will meet" or other similar words are also forward-looking. These statements are based on our management's assumptions and beliefs in light of the information available to us. These assumptions involve risks and uncertainties which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

We wish to caution readers and others to whom forward-looking statements are addressed, that any such forward-looking statements are not guarantees of future performance and that actual results may differ materially from estimates in the forward-looking statements. We undertake no obligation to revise these forward-looking statements to reflect events or circumstances after the date hereof. Important factors that may cause results to differ from expectations include, for example:

-  the success of reorganisational and cost-saving or other
   strategic efforts, including the proposed sale of PacifiCorp;

-  any regulatory changes (including changes in environmental
   regulations) that may increase the operating costs of the group, 
   may require the group to make unforeseen capital expenditures or 
   may prevent the regulated business of the group from achieving 
   acceptable returns;

-  the outcome of general rate cases and other proceedings
   conducted by regulatory commissions;

-  the cost, feasibility and eventual outcome of hydroelectric 
   facility relicensing proceedings;

-  future levels of industry generation and supply, demand
   and pricing, political stability, competition and economic 
   growth in the relevant areas in which the group has 
   operations;

-  the availability of acceptable fuel at favorable prices;

-  weather and weather-related impacts;

-  the availability of operational capacity of plants;

-  adequacy and accuracy of load and price forecasts that
   could impact the hedging strategy and costs to balance 
   electricity load and supply;

-  timely and appropriate completion of the Request for
   Proposals process, unanticipated construction delays, 
   changes in costs, receipt of required permits and 
   authorizations, and other factors that could 
   affect future generation plants and infrastructure 
   additions;

-  the impact of interest rates and investment performance 
   on pension and post-retirement expense;

-  the impact of new accounting pronouncements on results 
   of operations; and

-  development and use of technology, the actions of 
   competitors, natural disasters and other changes to 
   business conditions.



Further Information:

Jennifer Lawton   Head of Investor Relations      0141 636 4527
David Ross        Investor Relations Manager      0141 566 4853
Colin McSeveny    Group Media Relations Manager   0141 636 4515

UBS Limited and Morgan Stanley & Co. Limited are joint financial advisors and corporate brokers to ScottishPower.

UBS Limited and Morgan Stanley & Co. Limited are acting solely for the Company and no-one else in connection with this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to their clients or for providing advice in relation thereto.


Group Profit and Loss Account
for the three months and year ended 31 March 2005

                                 Three months ended        Year ended
                                    31 March                31 March
                                  2005       2004       2005       2004
                      Notes       GBPm       GBPm       GBPm       GBPm
--------------------------------------------------------------------------

Turnover: group and share 
of joint ventures and 
associates                     1,941.9    1,759.1    6,877.4    5,828.9
Less: share of turnover in 
joint ventures                   (3.7)     (10.9)     (27.4)     (31.0)
Less: share of turnover in 
associates                       (0.4)      (0.3)      (1.2)      (0.8)
--------------------------------------------------------------------------

Group turnover            2    1,937.8    1,747.9    6,848.8    5,797.1
Cost of sales                (1,312.1)  (1,121.0)  (4,567.2)  (3,630.6)
--------------------------------------------------------------------------

Gross profit                     625.7      626.9    2,281.6    2,166.5
Transmission and 
distribution costs             (146.1)    (137.4)    (606.2)    (544.5)
--------------------------------------------------------------------------

Administrative expenses 
before goodwill amortisation 
and exceptional items          (153.8)    (178.0)    (511.3)    (498.2)
Goodwill amortisation           (28.7)     (29.5)    (117.5)    (128.0)
Exceptional item - impairment
of goodwill              3     (927.0)         -     (927.0)         -
--------------------------------------------------------------------------

Administrative expenses      (1,109.5)    (207.5)  (1,555.8)    (626.2)
Other operating income           13.0        9.5       33.0       26.8
--------------------------------------------------------------------------

Operating profit before 
goodwill amortisation and 
exceptional item                338.8      321.0    1,197.1    1,150.6
Goodwill amortisation           (28.7)     (29.5)    (117.5)    (128.0)
Exceptional item - impairment 
of goodwill              3     (927.0)         -     (927.0)         -
--------------------------------------------------------------------------

Operating (loss)/profit  2      (616.9)     291.5      152.6    1,022.6
Share of operating profit 
in joint ventures                  0.1        5.0        2.2        7.3
Share of operating profit in 
associates                         0.2        0.2        3.8        0.3
--------------------------------------------------------------------------

(Loss)/profit on ordinary activities
before interest                 (616.9)     296.7      158.6    1,030.2
Net interest and similar charges
- Group                         (46.4)     (55.6)    (183.7)    (232.3)
- Joint ventures                 (0.5)      (1.8)      (4.2)      (5.8)

--------------------------------------------------------------------------                               

                                (46.9)     (57.4)    (187.9)    (238.1)

--------------------------------------------------------------------------

Profit on ordinary activities 
before goodwill amortisation,
exceptional item and taxation   292.2      268.8    1,015.2      920.1
Goodwill amortisation           (28.7)     (29.5)    (117.5)    (128.0)
Exceptional item - impairment 
of goodwill               3    (927.0)         -     (927.0)         -
--------------------------------------------------------------------------

(Loss)/profit on ordinary activities 
before taxation                (663.5)     239.3      (29.3)     792.1
Taxation                        
-  Group                        (77.9)     (72.2)    (272.3)    (247.3)
- Joint ventures                 (0.2)      (0.3)      (0.2)      (1.0)
- Associates                     (0.8)         -       (1.6)      (0.1)


                          4     (78.9)     (72.5)    (274.1)    (248.4)

--------------------------------------------------------------------------

(Loss)/profit after taxation   (742.4)     166.8     (303.4)     543.7
Minority interests 
(including non-equity)           (0.1)      (1.8)      (4.7)      (5.8)
--------------------------------------------------------------------------

(Loss)/profit for the period   (742.5)     165.0     (308.1)     537.9
Dividends                 6    (139.4)    (112.9)    (412.6)    (375.1)
--------------------------------------------------------------------------

(Loss)/profit retained         (881.9)      52.1     (720.7)     162.8
--------------------------------------------------------------------------

(Loss)/earnings per 
ordinary share            5    (40.54)p     9.02p    (1683p)     29.40p
Adjusting item 
  - goodwill amortisation        1.57p       1.61p     6.42p       7.00p
  - exceptional items
  - impairment of goodwill      50.61p          -     50.63p          -

--------------------------------------------------------------------------

Earnings per ordinary share 
before goodwill amortisation                                           
and exceptional item      5     11.64p     10.63p     40.22p     36.40p

--------------------------------------------------------------------------

Diluted (loss)/earnings 
per ordinary share        5    (38.33)p     8.72p    (15.41)p    28.83p
Adjusting item 
  - goodwill amortisation        1.49p      1.53p      6.10p      6.77p
  - exceptional item
  - impairment of goodwill      48.03p         -      48.08p         -

--------------------------------------------------------------------------

Diluted earnings per ordinary 
share before goodwill 
amortisation and exceptional 
item                       5     11.19p     10.25p     38.77p     35.60p

--------------------------------------------------------------------------

Dividends per ordinary 
share                     6      7.65p      6.25p     22.50p     20.50p

--------------------------------------------------------------------------

The above results relate to continuing operations.

Statement of Total Recognised Gains and Losses for the year ended 31 March 2005

                                                         Year ended
                                                          31 March
                                                        2005      2004
                                                        GBPm      GBPm

--------------------------------------------------------------------------

(Loss)/profit for the financial year                  (308.1)    537.9
Exchange movement on translation of overseas results and 
net assets                                            (100.2)   (537.6)
Translation differences on foreign currency hedging    146.6     475.2
Tax on translation differences on foreign currency 
hedging                                               (46.4)      46.1
Revaluation reserve arising on the purchase of the 
remaining 50% of the Brighton Power Station             5.8          -

--------------------------------------------------------------------------

Total recognised gains and losses for the 
financial year                                       (302.3)     521.6

--------------------------------------------------------------------------

Reconciliation of Movements in Shareholders' Funds
for the year ended 31 March 2005

                                                        Year ended
                                                          31 March
                                                       2005       2004
                                                       GBPm       GBPm

--------------------------------------------------------------------------

(Loss)/profit for the financial year                 308.1      537.9
Dividends                                           (412.6)    (375.1)

--------------------------------------------------------------------------

(Loss) / profit retained                            (720.7)     162.8
Exchange movement on translation of overseas results 
and net assets                                      (100.2)    (537.6)
Translation differences on foreign currency hedging   146.6      475.2
Tax on translation differences on foreign currency 
hedging                                              (46.4)      46.1
Revaluation reserve arising on the purchase of the 
remaining 50% of the Brighton Power Station             5.8          -
Share capital issued                                   21.9       13.1
Consideration paid in respect of purchase of own 
shares held under trust                              (30.7)     (28.9)
Credit in respect of employee share awards              7.2        4.9
Consideration received in respect of sale of own 
shares held under trust                                 7.6        0.4

--------------------------------------------------------------------------

Net movement in shareholders' funds                  (708.9)     136.0
Opening shareholders' funds                         4,690.9    4,554.9

--------------------------------------------------------------------------

Closing shareholders' funds                         3.982.0    4,690.9

--------------------------------------------------------------------------

Group Cash Flow Statement
for the year ended 31 March 2005

                                                         Year ended
                                                          31 March
                                                       2005      2004
                                            Notes      GBPm      GBPm

--------------------------------------------------------------------------

Cash inflow from operating activities           7   1,259.7   1,364.0
Dividends received from joint ventures and associates   2.0       0.5
Returns on investments and servicing of finance      (116.4)   (210.0)
Taxation                                              (99.2)   (121.8)

--------------------------------------------------------------------------

Free cash flow                                      1,046.1   1,032.7
Capital expenditure and financial investment        (888.0)   (831.2)

--------------------------------------------------------------------------

Cash flow before acquisitions and disposals           158.1     201.5
Acquisitions and disposals                          (351.1)    (31.3)
Equity dividends paid                               (386.1)   (394.4)

--------------------------------------------------------------------------

Cash outflow before use of liquid resources and 
financing                                           (579.1)   (224.2)
Management of liquid resources                 8    (185.9)   (354.1)
Financing
- Issue of ordinary share capital                      21.9      13.1
- Redemption of preferred stock of PacifiCorp         (4.1)     (4.6)
- Maturity of net investment hedging derivatives      140.0         -
- Cancellation of cross-currency swaps                 92.0      76.1
- Repricing of cross-currency swaps                       -     403.0
- Net purchase of own shares held under trust        (23.1)    (28.5)
- Increase in debt                              8     753.3     464.3

--------------------------------------------------------------------------

                                                      980.0     923.4

--------------------------------------------------------------------------

Increase in cash in year                        8     215.0     345.1

--------------------------------------------------------------------------

Free cash flow represents cash flow from operating activities after adjusting for dividends received from joint ventures and associates, returns on investments and servicing of finance and taxation.


Reconciliation of Net Cash Flow to Movement in Net Debt
for the year ended 31 March 2005
                                                        Year ended
                                                         31 March
                                                      2005          2004
                                             Note     GBPm          GBPm

--------------------------------------------------------------------------

Increase in cash in year                             215.0         345.1
Cash inflow from increase in debt                  (753.3)       (464.3)
Cash outflow from movement in liquid resources       185.9         354.1

--------------------------------------------------------------------------

Change in net debt resulting from cash flows       (352.4)         234.9
Net debt acquired                                  (116.1)             -
Foreign exchange movement                             62.4         388.3
Other non-cash movements                            (16.4)        (26.7)

--------------------------------------------------------------------------

Movement in net debt in year                        (422.5)        596.5
Net debt at end of previous year                  (3,724.5)     (4,321.0)

--------------------------------------------------------------------------

Net debt at end of year                        8  (4,147.0)     (3,724.5)

--------------------------------------------------------------------------


Group Balance Sheet
as at 31 March 2005

                                                      2005       2004
                                          Notes       GBPm       GBPm

--------------------------------------------------------------------------

Fixed assets
Intangible assets                                    845.4    1,855.9
Tangible assets                                    9,602.8    8,756.6
Investments
- Investments in joint ventures:
  Share of gross assets                               85.0      180.8
  Share of gross liabilities                        (46.5)    (157.3)

--------------------------------------------------------------------------

                                                      38.5       23.5
- Loans to joint ventures                             10.6       38.8

--------------------------------------------------------------------------

                                                      49.1       62.3
- Investments in associates                            4.0        2.7
- Other investments                                  120.3      129.8

--------------------------------------------------------------------------

                                                     173.4      194.8

--------------------------------------------------------------------------

                                                  10,621.6   10,807.3

--------------------------------------------------------------------------

Current assets
Stocks                                               185.4      185.5
Debtors
- Gross debtors                                    1,856.6    1,576.2
- Less non-recourse financing                       (65.3)    (109.5)

--------------------------------------------------------------------------


                                                   1,791.3    1,466.7
Short-term bank and other deposits                 1,747.8    1,347.3

--------------------------------------------------------------------------

                                                   3,724.5    2,999.5

--------------------------------------------------------------------------

Creditors: amounts falling due within one year
Loans and other borrowings                         (553.4)    (410.7)
Other creditors                                  (2,110.5)  (1,658.7)

--------------------------------------------------------------------------

                                                 (2,663.9)  (2,069.4)

--------------------------------------------------------------------------

Net current assets                                 1.060.6      930.1

--------------------------------------------------------------------------

Total assets less current liabilities             11,682.2   11,737.4
Creditors: amounts falling due after more than one year
Loans and other borrowings (including convertible 
bonds)                                           (5,341.4)  (4,661.1)
Provisions for liabilities and charges 
- Deferred tax                                   (1,333.5)  (1,242.2)
- Other provisions                                 (399.5)    (504.5)

--------------------------------------------------------------------------

                                                 (1,733.0)  (1,746.7)
Deferred income                                    (570.1)    (577.8)

--------------------------------------------------------------------------

Net assets                                   2    4.037.7    4,751.8

--------------------------------------------------------------------------

Called up share capital                             932.7      929.8
Share premium                                     2,294.7    2,275.7
Revaluation reserve                                  45.5       41.6
Capital redemption reserve                           18.3       18.3
Merger reserve                                      406.4      406.4
Profit and loss account                             284.4    1,019.1

--------------------------------------------------------------------------

Equity shareholders' funds                        3,982.0    4,690.9
Minority interests (including non-equity)            55.7       60.9

--------------------------------------------------------------------------

Capital employed                                  4,037.7    4,751.8
--------------------------------------------------------------------------

Net asset value per ordinary share           5      217.3p     256.2p

--------------------------------------------------------------------------

Notes to the Preliminary Statement and quarterly Accounts for the year ended 31 March 2005

1 Basis of preparation

(a) The financial information included within this Preliminary Statement and quarterly Accounts has been prepared on the basis of accounting policies consistent with those set out in the Accounts for the year ended 31 March 2004.

(b) The information shown for the years ended 31 March 2005 and 31 March 2004 does not constitute statutory Accounts within the meaning of Section 240 of the Companies Act 1985 and has been extracted from the full Accounts for the years ended 31 March 2005 and 31 March 2004 respectively. The reports of the auditors on those Accounts were unqualified and did not contain a Statement under either Section 237(2) or Section 237(3) of the Companies Act 1985. The Accounts for the year ended 31 March 2004 have been filed with the Registrar of Companies. The Accounts for the year ended 31 March 2005 will be delivered to the Registrar of Companies in due course. The information shown in respect of the three months ended 31 March 2005 and 31 March 2004 is unaudited.

(c) The relevant exchange rates applied in the preparation of the Preliminary Statement and quarterly Accounts are detailed in Note 12.

(d) The financial information on pages x to x was approved by the Board on 24 May 2005.

2 Segmental information


(a) Turnover by segment                                                  

                                Three months ended 31 March 
               Total turnover  Inter-segment turnover   External turnover 
               2005      2004      2005      2004        2005       2004 
        Notes  GBPm      GBPm      GBPm      GBPm        GBPm       GBPm 

--------------------------------------------------------------------------

United Kingdom                                    
UK Division 
- Integrated
  Generation
  and 
  Supply(i) 1,156.8     976.2      (0.2)     (7.0)    1,156.6      969.2  
Infrastructure Division 
- Power 
  Systems     193.7     202.7     (92.4)    (95.7)      101.3      107.0  

--------------------------------------------------------------------------

United Kingdom 
total                                                1,257.9     1,076.2 

--------------------------------------------------------------------------

United States                                   
PacifiCorp    558.3     552.7      (0.5)     (0.9)      557.8      551.8  
PPM           124.4     122.2      (2.3)     (2.3)      122.1      119.9  

--------------------------------------------------------------------------

United States 
total                                                  679.9       671.7 

--------------------------------------------------------------------------

Total  (ii)                                          1,937.8     1,747.9  

--------------------------------------------------------------------------


                                  Year ended 31 March 
              Total turnover    Inter-segment turnover  External turnover 
             2005       2004       2005       2004       2005       2004 
       Notes GBPm       GBPm       GBPm       GBPm       GBPm       GBPm 

--------------------------------------------------------------------------

United Kingdom                                   
UK Division 
-Integrated Generation
 and 
 Supply (i) 3,711.0   2,804.0     (25.9)     (26.6)    3,685.1    2,777.4 
Infrastructure 
Division 
- Power 
  Systems     728.1     704.1    (348.0)    (345.8)      380.1      358.3 

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United Kingdom total                                   4,065.2    3,135.7 

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United States                                   
PacifiCorp  2,284.3   2,321.1      (2.8)      (2.5)    2,281.5    2,318.6 
PPM           511.5     352.9      (9.4)     (10.1)      502.1      342.8 

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United States total                                    2,783.6    2,661.4 

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Total   (ii)                                           6,848.8    5,797.1 

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(b) Operating (loss)/profit by segment

                            Three months ended 31 March 

                Before           
              goodwill           Exceptional     
               amorti-                item -
                sation            Impairment        Before
                   and     Goodwill       of      goodwill Goodwill 
           exceptional      amorti- goodwill       amorti-  amorti-
                  item       sation  (Note3)        sation   sation
                  2005         2005     2005  2005    2004     2004  2004 
          Note    GBPm         GBPm     GBPm  GBPm    GBPm     GBPm  GBPm 

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United Kingdom                                   
UK Division 
- Integrated                            
Generation 
and Supply (i)    76.6        (1.3)        -  75.3    50.4    (1.3)  49.1 
Infrastructure 
Division 
- Power Systems  103.2            -        - 103.2   102.4       -  102.4

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United Kingdom 
total            179.8        (1.3)        - 178.5   152.8   (1.3)  151.5 

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United States                                   
PacifiCorp       137.1       (27.3)  (927.0)(817.2)  157.1  (28.1)  129.0
PPM               21.9        (0.1)       -   21.8    11.1   (0.1)   11.0 

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United States 
total            159.0       (27.4)  (927.0)(795.4)  168.2  (28.2)  140.0 

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Total            338.8       (28.7)  (927.0)(616.9)  321.0  (29.5)  291.5 

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                             Year ended 31 March 
 
                Before           
              goodwill           Exceptional     
               amorti-                item -
                sation            Impairment        Before
                   and     Goodwill       of      goodwill Goodwill 
           exceptional      amorti- goodwill       amorti-  amorti-
                  item       sation  (Note3)        sation   sation
                  2005         2005     2005  2005    2004     2004  2004 
          Note    GBPm         GBPm     GBPm  GBPm    GBPm     GBPm  GBPm 

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United Kingdom                                   
UK Division 
- Integrated                            
Generation 
and Supply (i)   180.5        (4.9)        - 175.6   101.0    (4.9)   96.1 
Infrastructure 
Division         
- Power Systems  416.3            -        - 416.3   393.6        -  393.6                                 

--------------------------------------------------------------------------

United Kingdom 
total            596.8        (4.9)        - 591.9   494.6    (4.9)  489.7 

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United States                                   
PacifiCorp       541.7      (112.1)  (927.0)(497.4)   619.3  (122.5) 496.8 
PPM               58.6        (0.5)        -  58.1    36.7    (0.6)   36.1 

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United States 
total            600.3      (112.6) (927.0) (439.3)   656.0  (123.1)  532.9

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Total          1,197.1      (117.5) (927.0)  152.6 1,150.6  (128.0)1,022.6

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(i) UK Division - Integrated Generation and Supply completed the acquisition of the Damhead Creek CCGT power plant and associated contracts on 1 June 2004 and completed the purchase of the remaining 50% of the Brighton Power Station CCGT power plant and associated contracts on 28 September 2004. The post acquisition results of the acquired businesses amounted to turnover of GBP52.0 million and GBP162.2 million and operating profit of GBP30.1 million and GBP53.6 million for the three months and year to March 2005, respectively.

(ii) In the segmental analysis turnover is shown by geographical origin. Turnover analysed by geographical destination is not materially different.


(c)     Net assets by segment

                                                31 March      31 March
                                                    2005          2004
                                         Note       GBPm          GBPm

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United Kingdom
UK Division - Integrated Generation and Supply   1,734.3       1,022.5
Infrastructure Division - Power Systems          2,479.8       2,337.4

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United Kingdom total                             4,214.1       3,359.9

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United States
PacifiCorp                                                     5,935.8
PPM                                              5071.3          439.0

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United States total                              5540.6        6,374.8

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Total                                            9754.7        9,734.7

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Unallocated net liabilities              (i)   (5,717.0)     (4,982.9)

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Total                                            4037.7       4,751.8

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(i) Unallocated net liabilities include net debt, dividends payable, tax liabilities and investments.

3 Exceptional item

In November 2004, the Board began a strategic review of PacifiCorp as a result of its performance and the significant investment it required in the immediate future. In May 2005, the Board concluded that in light of the prospects for PacifiCorp, the scale and timing of the capital investment required and the likely profile of returns, shareholders' interests were best served by a sale of PacifiCorp and the return of capital to shareholders. As a consequence, the group has undertaken a review of the carrying value of the goodwill allocated to the PacifiCorp reporting segment as at 31 March 2005. The estimated recoverable value has been based on net realisable value, with reference to the price of comparable businesses, recent market transactions and the estimated proceeds from disposal. This has resulted in an exceptional charge, in the three months and the year ended 31 March 2005 for the impairment of goodwill of £927 million which is disclosed separately within operating (loss)/profit as an exceptional item.

4 Taxation

The charge for taxation, including deferred tax, for the year ended 31 March 2005 reflects the anticipated effective rate for the year ended 31 March 2005 of 27% (year ended 31 March 2004 27%) on the profit before goodwill amortisation, exceptional items and taxation as detailed below:


                                       Three months ended     Year ended
                                             31 March          31 March
                                          2005    2004     2005      2004 
                                          GBPm    GBPm     GBPm      GBPm 

--------------------------------------------------------------------------

(Loss) /profit on ordinary activities 
before taxation                         (663.5)   239.3    (29.3)    792.1 
Adjusting items- goodwill amortisation    28.7     29.5    117.5     128.0 
               - exceptional item
                 impairment 
                 of goodwill             927.0        -    927.0         - 

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Profit on ordinary activities before 
goodwill amortisation exceptional item
and taxation                             292.2    268.8   1015.2     920.1

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5 (Loss)/earnings and net asset value per ordinary share

(a) (Loss)/earnings per ordinary share have been calculated for all periods by dividing the (loss)/profit for the period by the weighted average number of ordinary shares in issue during the period, based on the following information:


                                   Three months ended         Year ended 
                                       31 March               31 March 
                                    2005       2004       2005       2004 

--------------------------------------------------------------------------

Basic (loss)/ earnings per share               
(Loss)/profit for the period 
(GBP million)                     (742.5)     165.0     (308.1)     537.9 
Weighted average share capital 
(number of shares, million)      1,831.7    1,829.9    1,830.8    1,829.5

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Diluted (loss)/ earnings per share            
(Loss)/profit for the period 
(GBP million)                     (739.8)     167.9     (297.1)     545.0 
Weighted average share capital 
(number of shares, million)      1,929.9    1,925.9    1,928.0    1,890.2 

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The difference between the basic and the diluted weighted average share capital is wholly attributable to outstanding share options and shares held in trust for the group's employee share schemes and the convertible bonds.

(b) The calculation of (loss)/earnings per ordinary share, on a basis which excludes goodwill amortisation and exceptional item, is based on the following adjusted earnings:


                                         Three months ended   Year ended
                                              31 March         31 March
                                           2005     2004     2005    2004
                                           GBPm     GBPm     GBPm    GBPm
--------------------------------------------------------------------------

(Loss)/ profit for the period            (742.5)   165.0   (308.1)  537.9
Adjusting items- goodwill amortisation     28.7     29.5    117.5   128.0
               - exceptional item 
                 impairment of goodwill   927.0        -    927.0       -

--------------------------------------------------------------------------

Adjusted earnings                         213.2    194.5    736.4   665.9

--------------------------------------------------------------------------

ScottishPower assesses the performance of the group by adjusting (loss)/ earnings per share, calculated in accordance with FRS 14, to exclude items it considers to be non-recurring or non-operational in nature and believes that the exclusion of such items provides a better comparison of business performance. Consequently, an adjusted earnings per share figure is presented for all periods.

(c) Net asset value per ordinary share has been calculated based on net assets (after adjusting for minority interests) and the number of shares in issue (after adjusting for the effect of shares held in trust) at the end of the respective financial years.


                                                 31 March    31 March
                                                   2005        2004

--------------------------------------------------------------------------

Net assets (as adjusted) (GBP million)          3,982.0       4,690.9
Number of ordinary shares in issue at the year end 
(as adjusted)(number of shares, million)        1,832.3       1,830.6

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6 Dividends
                               2005            2004
                          pence per       pence per
                           ordinary        ordinary        2005       2004
                              share           share        GBPm       GBPm

--------------------------------------------------------------------------

First interim dividend paid    4.95            4.75        91.1       87.5
Second interim dividend paid   4.95            4.75        91.0       87.4
Third interim dividend paid    4.95            4.75        91.1       87.3
Final dividend                 7.65            6.25       139.4      112.9

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Total dividends               22.50           20.50       412.6      375.1

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7 Reconciliation of operating profit to net cash inflow from operating activities


                                                         2005        2004
                                                         GBPm        GBPm

--------------------------------------------------------------------------

Operating profit                                        152.6     1,022.6
Depreciation, amortisation and impairment             1,527.1       566.7
Profit on sale of tangible fixed assets                 (0.7)       (0.4)
Amortisation of share scheme costs                        7.2         4.9
Release of deferred income                             (19.2)      (19.5)
Movements in provisions for liabilities and charges   (202.1)      (87.6)
Increase in stocks                                      (1.9)      (51.0)
Increase in debtors                                   (394.6)      (38.7)
Increase/(decrease) in creditors                        191.3      (33.0)

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Net cash inflow from operating activities             1,259.7     1,364.0

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8 Analysis of net debt

                            Acquisitions
             At             (excluding              Other           At 
        1 April                 cash &           non-cash     31 March 
           2004    Cash flow overdrafts) Exchange changes         2005 
           GBPm         GBPm       GBPm      GBPm    GBPm         GBPm 

--------------------------------------------------------------------------

Cash at 
bank      758.9        216.4          -     (1.8)       -        973.5  
Overdrafts(20.1)       (1.4)          -       1.0       -        (20.5) 

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                       215.0
Debt due 
after 1 
year  (4,646.1)      (830.5)    (116.1)      54.3   211.0     (5,327.4) 
Debt due 
within 
1 year  (390.6)         76.7          -       8.4 (227.4)       (532.9) 
Finance 
leases   (15.0)          0.5          -       0.5       -        (14.0) 

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                     (753.3)
Other 
deposits  588.4        185.9          -         -       -        774.3 
--------------------------------------------------------------------------
Total  (3,724.5)      (352.4)   (116.1)      62.4  (16.4)    (4,147.0) 
--------------------------------------------------------------------------

'Other non-cash changes' to net debt represents the movement in debt of GBP227.9 million due after one year to due within one year, amortisation of finance costs of GBP7.1 million and finance costs of GBP9.3 million representing the effects of the RPI on bonds carrying an RPI coupon.

9 Summary of differences between UK and US Generally Accepted Accounting Principles ('GAAP')

The consolidated Accounts of the group are prepared in accordance with UK GAAP which differs in certain significant respects from US GAAP. The effect of the US GAAP adjustments to (loss)/profit for the financial year and equity shareholders' funds are set out in the tables below.


                                                      Year ended
                                                       31 March
                                                      2005     2004

(a) Reconciliation of (loss)/profit for the financial year 
    to US GAAP:                                       GBPm     GBPm

--------------------------------------------------------------------------

(Loss)/profit for the financial year under UK GAAP  (308.1)   537.9
US GAAP adjustments:
Amortisation of goodwill                             117.5    128.0
Impairment of goodwill                              (454.0)       -
US regulatory net assets                            (41.8)   (81.2)
Pensions                                              10.7    (0.1)
Depreciation on revaluation uplift                     1.9      1.9
Decommissioning, environmental and mine reclamation (45.1)   (13.0)
PacifiCorp Transition Plan costs                     (8.3)   (29.0)
FAS 133                                              326.5    153.3
Other                                               (30.6)   (10.3)

--------------------------------------------------------------------------

                                                   (431.3)    687.5
Deferred tax effect of US GAAP adjustments          (63.4)     54.7

--------------------------------------------------------------------------

(Loss)/profit for the financial year under US GAAP before cumulative
adjustment for FAS 143                             (494.7)   742.2
Cumulative adjustment for FAS 143                       -     (0.6)

--------------------------------------------------------------------------

(Loss)/profit for the financial year under US GAAP (494.7)   741.6

--------------------------------------------------------------------------

(Loss)/earnings per share under US GAAP            (27.02)   40.54p

--------------------------------------------------------------------------

Diluted (loss)/earnings per share under US GAAP    (27.02)   39.19p

--------------------------------------------------------------------------

The adjustment described as 'FAS 133' comprises FAS 133 and subsequent revising standards, FAS 138 and FAS 149, together with guidance issued by the Derivatives Implementation Group ('DIG').

The cumulative adjustment to the profit under US GAAP for the year ended 31 March 2004 of GBP(0.6) million (net of tax) represented the cumulative effect on US GAAP earnings of adopting FAS 143 'Accounting for Asset Retirement Obligations' effective from 1 April 2003.

In light of the conclusions of the strategic review detailed in Note 3, the group determined that a trigger event had occurred under FAS 144 'Accounting for the impairment or disposal of long lived assets' and FAS 142 'Goodwill and other intangible assets' and accordingly, a review of the carrying value of the long lived assets and goodwill allocated to the PacifiCorp reporting unit under US GAAP has been performed. A two-step impairment test is required under both FAS 144 and FAS 142. Under FAS 144 undiscounted cash flows for the long-lived assets of PacifiCorp exceeded their carrying value and accordingly no impairment was triggered. Under FAS 142 the carrying value of the net assets of PacifiCorp (including goodwill) under US GAAP was determined to be in excess of its fair value, and accordingly the group has carried out an analysis to determine the implied value of goodwill. Fair value was determined under US GAAP primarily using discounted cash flows and with reference to the price of comparable businesses, recent market transactions and estimated proceeds from disposal. As a result, a goodwill impairment charge of £1,381 million has been recorded in the PacifiCorp segment under US GAAP reflecting the amount by which the carrying value of the goodwill exceeded its implied fair value. The impairment charge under US GAAP is £454 million higher than the charge under UK GAAP principally due to the higher carrying value of the net assets of PacifiCorp under US GAAP compared to UK GAAP. This is as a result of the recognition under US GAAP of regulatory assets, the impact of FAS 133 and lower cumulative amortisation of goodwill under US GAAP.


                                                31 March    31 March 
(b) Effect on equity shareholders' funds of 
    differences between UK GAAP and US GAAP:       2005        2004 
                                                   GBPm        GBPm 

--------------------------------------------------------------------------

Equity shareholders' funds under UK GAAP        3,982.0     4,690.9  
US GAAP adjustments:               
Goodwill                                          572.3       572.3  
Business combinations                           (191.0)     (196.1) 
Amortisation of goodwill                          258.7       150.0  
Impairment of goodwill                            454,0       
US regulatory net assets                          545.8       724.7  
Pensions                                         (58.8)      (18.9) 
Dividends                                         139.4       112.9  
Revaluation                                      (59.8)      (54.0) 
Depreciation on revaluation uplift                 14.3        12.4  
Decommissioning, environmental and mine 
reclamation                                      (60.2)      (14.9) 
PacifiCorp Transition Plan costs                   13.5        22.2  
FAS 133                                           403.7         2.2  
Other                                            (11.2)      (12.9) 
Deferred tax:              
Effect of US GAAP adjustments                   (300.5)     (275.0) 
Effect of differences in methodology                 -        14.5  

--------------------------------------------------------------------------

Equity shareholders' funds under US GAAP        4,794.2     5,730.3  

--------------------------------------------------------------------------

The FAS 133 adjustment represents the difference between accounting for derivatives under UK and US GAAP. FAS 133 requires all derivatives, as defined by the standard, to be marked to market value, except those which qualify for specific exemption under the standard or associated DIG guidance, for example those defined as normal purchases and normal sales. The derivatives which are marked to market value in accordance with FAS 133 include only certain of the group's commercial contractual arrangements as many of these arrangements are outside the scope of FAS 133. In addition, the effect of these changes in the fair value of certain long-term contracts entered into to hedge PacifiCorp's future retail energy resource requirements, which are being marked to market value in accordance with FAS 133, are subject to regulation in the US and are therefore deferred as regulatory assets or liabilities pursuant to FAS 71 'Accounting for the Effects of Certain Types of Regulation'. The FAS 133 adjustment included within equity shareholders' funds at 31 March 2005 of GBP403.7 million includes a net liability of GBP89.9 million which is subject to regulation and is therefore offset by a US regulatory asset of GBP89.9 million included within 'US regulatory net assets' above.

10 Acquisitions

On 1 June 2004, ScottishPower completed the acquisition of the 800 MW Damhead Creek CCGT power plant and associated contracts, including the benefit of a long-term gas supply agreement, from its creditor banks for a cash consideration of GBP313 million excluding expenses. On 28 September 2004, ScottishPower completed the purchase of the remaining 50% of the 400 MW Brighton Power Station CCGT power plant and associated contracts, including the benefit of a long-term gas supply agreement, for a cash consideration of GBP26 million excluding expenses. Fair values have been attributed to the assets and liabilities acquired in respect of both acquisitions. No goodwill is required to be recognised in respect of these acquisitions.

11 Subsequent events

On 24 May 2005, the group announced that agreement had been reached to sell PacifiCorp to MidAmerican for a total consideration of $9.4 billion resulting in net proceeds of $5.0 billion after allowing for net debt and estimated costs. The price is payable on completion of the sale, which is subject to regulatory and shareholder approval, and is anticipated to take 12 to 18 months. It is not anticipated that there will be any material tax consequences arising from the disposal. It is proposed to return approximately $4.5 billion of the net proceeds to shareholders following completion of the sale.

12 Exchange rates

The exchange rates applied in the preparation of the Preliminary Statement and quarterly Accounts were as follows:


                                       Year ended
                                         31 March
                                      2005       2004

----------------------------------------------------------

Average rate for quarters ended
30 June                             $1.81/GBP    $1.62/GBP 
30 September                        $1.82/GBP    $1.61/GBP
31 December                         $1.87/GBP    $1.71/GBP 
31 March                            $1.89/GBP    $1.84/GBP

----------------------------------------------------------

Closing rate as at 31 March         $1.89/GBP    $1.84/GBP 

----------------------------------------------------------


                 This information is provided by RNS
        The company news service from the London Stock Exchange