Preliminary Results

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Preliminary Results

• Focus on value creation

May 2001
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Agenda

• David Nish - Financial review
• - Regulatory update
• Ian Russell - Performance review

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Highlights
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Operating profit reconciliation
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Operating profit
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Tax rates
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Capital expenditure

• Generation/ Special Projects - Wind farms, CHP
  and PFI schemes
• Power Systems - Systems expansion and
  refurbishment
• Southern Water - Delivering targets agreed
  with OFWAT
• Thus - Network assurance and infrastructure
  expansion
• PacifiCorp - Expenditure on networks and new
  generation

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Net debt movement
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Financial ratios
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Financial summary
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US regulatory update

• Filings update
• Regulatory timetable

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Oregon filing update

• Rate case - (November 00) - Filing revised to
  60m general costs plus 74m power
  costs - Normal negotiating process - Order due
  August
• Deferred accounting - (November 00) - 23m
  granted February (3 cap) - Decision expected on
  balance in Q1
• Power Cost Adjustment mechanism -filed 22
  March - Requesting 43 million increase for
  three months
• Seeking legislative change to 3 cap

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Utah filing update

• Rate case - (January 01) - 142m filed,
  restated as 169m - Interim award of 70m -
  Initial hearing scheduled 30 July - Order,
  considering full amount, due September
• Deferred accounting - (November 00) - Approved
  to include Hunter costs only

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Other state updates

• Wyoming - Rate case hearings 9 July order due
  mid-October - PCA filed 7 March, 22m sought
  hearing 27 August
• Washington - Exploring options to reopen rate
  plan
• Idaho - Deferred accounting approved January to
  discuss recovery mechanism in May
• California - Pursuing exemption from price
  freeze - Rate case filed 23 March seeking 13
  increase - Sale of assets remains an option

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Other initiatives

• RTO West - Governance, scope and configuration
  approval by FERC April 01 - 90 of
  transmission between Canada and southern
  Nevada - FERC looking to extend reach
• Structural Realignment Proposal
  (SRP) - Collaborative process - Final filings
  in June

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Regulatory timetable
Nov / Dec 00
Jan / Feb 01
Jul / Aug 01
Nov 01
Mar / Apr 01
May / Jun 01
Sep / Oct 01
Rate case
Oregon
Def Acc
PCA
Rate case
Utah
Def Acc
Def Acc
Idaho
Rate case
Wyoming
Def Acc
PCA
Rate case
California
F Filing H Hearing O Order
Washington may receive rate case filings PCA
Power Cost Adjustment

• Vigorously pursuing regulatory cost recovery
• Filed rate cases for 292m, plus deferred
  accounting PCA, 93m awarded to date

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Strategic context

• Reshape and improve existing businesses
• Focused expansion across energy value chain
• Transform and integrate new businesses

Focus on value creation
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Divisional structure
Sharper focus on growth of earnings
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US division review

• Power market initiatives
• Transition Plan progress

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Management actions

• Restore Hunter - in commissioning
• Manage debt exposure from weakercounterparties -
  achieved
• Demand side management - in progress
• Vigorously pursue regulatory recovery - in
  progress
• Introduce new generation capacity - in progress

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Hunter plant in commissioning

• Commissioning underway 30 April
• Net power replacement cost consistent with
  expectations
• Positive lessons from outage

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Successful credit management

• Robust risk controls applied
• Power exchanges in lieu of sales
• Counterparty credit exposure monitored daily
• Trading activity limited to well-capitalised
  counterparties
• Enhanced collateral agreements provide additional
  protection
• Debtor exposure from Californian utilities less
  than 10m

Credit exposure minimised
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Demand side management

• Incentivised rates to reduce load - Irrigators
  paid not to use power - 20/20 rate reduction
  scheme
• Contracting 250 MW from customer-owned generation
• Renewing / restructuring of power contracts to
  our benefit
• Strong legislative and consumer group support

2 reduction in retail load achieved
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Rapid expansionof generation capacity

• Previously announced additions - By Q2 -
  Gadsby 100 MW - West Valley 160 MW - Klamath
  JV 227 MW
• - By Q3 - Stateline wind 300 MW - Wyoming
  wind 50 MW
• Further plant in Q3 - New Klamath gas 100 MW
• Other plants in pipeline
• Long term contracts for output available

Significant addition to length and value
potential
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2000/01 Transition Plan stretch targets exceeded

• Over 120 initiatives commenced
• Workforce reductionsof approximately 420, ahead
  of Year 1 target of 234
• 85m of transition relatedsavings delivered in
  2000/01

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US conclusion

• Strong progress made in Transition Plan
• Hunter plant in commissioning
• Firm action taken to manage market impact
• Opportunities for further value creation

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UK division review

• Generation
• Supply

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Generation

• Trading Arrangements - Systems and processes
  operating
• Rye House and Brighton add 915 MW in England
  Wales market
• Flexible UK portfolioof 5000 MW

Seeking further additions to portfolio
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Supply

• Sharper focus on supply of energy products
• Customer numbers maintained - High number of
  customers won - Offset by industry
  average churn
• Margins improved, profitable business

Focused on profitable organic and acquisitive
growth
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Infrastructure division review

• Power Systems
• Southern Water

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Power Systems

• Cash savings of 75m by 2003 on target
• Further removal of duplication
• Reduced procurement costs
• More rigorous contract management

Streamlined and focused business
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Southern Water

• Cash savings of 67m by 2003 on target
• Continued improvement in service levels
• Substantial achievement of investment outputs

Continue to explore options to release value
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Thus

• Strengthened Board - Executive - Non-executive
• Business focus led to expansion in the second
  half
• Geographic network expansion complete
• Full year results at the top end of expectations

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Summary

• Financial results in line with pre-close
  expectations
• Firm action taken to restore Hunter and
  strengthen PacifiCorps position in the market
• Three divisions focused on earnings growth and
  value creation

Sharper focus on growth of shareholder value
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