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Transco plc
Annual Report and Accounts 2003/04

Table of contents

  • Page 1
    Transco plc Annual Report and Accounts 2003/04

  • Page 2
    ... Review 02 Operating Review 06 Board of Directors 07 Financial Review 12 General Information 14 Independent Auditors' Report to the Members of Transco plc 15 Accounting Policies 17 Group Profit and Loss Account 18 Balance Sheets 19 Group Cash Flow Statement 20 Notes to the Accounts 34 Five Year...

  • Page 3
    ... all our safety related standards of service. importer of gas and we have seen increasing activity in providing the necessary import capability. This includes new liquefied natural gas importation facilities, such as the one on the Isle of Grain which National Grid Transco is developing, which will...

  • Page 4
    ...the methodology used to determine transportation charges. Over the last year and as part of its consultations concerning Network Monopoly Price Controls and the electricity distribution price review, Ofgem has proposed changes to the regulatory framework that applies to all energy network monopolies...

  • Page 5
    ... in transportation charges. The networks price control formulae also incorporate the same cost of capital assumptions at a real pre-tax rate of 6.25%. To set the new networks price control formulae it was also necessary to allocate allowances for operating costs, capital expenditure, replacement...

  • Page 6
    .... Transmission Owner The Transmission Owner price control takes into account, among other factors, operating expenditure, capital expenditure and cost of capital, which for the current price control is set at a real pre-tax rate of 6.25%. In addition, cost 4 Transco plc_Annual Report and Accounts...

  • Page 7
    ... last quarter of 2003/04, we successfully secured long-term usage contracts, including a new pricing structure, with gas suppliers, covering substantially all of our meters, to secure a longterm revenue stream for current, new and replacement meters. Annual Report and Accounts 2003/04_Transco plc 5

  • Page 8
    ... and is also Group Finance Director of National Grid Transco. Previously he had been Executive Director, Finance of Lattice Group since its demerger from BG Group in 2000. Prior to this, he was Treasurer of BG Group having joined British Gas plc in 1994. A Chartered Accountant, he worked in private...

  • Page 9
    ... main components giving rise to the difference between the relevant effective rate and the UK standard corporation tax rate. Retirement arrangements The substantial majority of Transco's employees are members of the Lattice Group Pension Scheme (the Scheme). The Scheme has a defined benefit section...

  • Page 10
    ... of the National Grid Transco Board regularly to demonstrate funding adequacy for at least a 12-month period. The Group also maintains a minimum level of committed facilities in support of that objective. Credit facilities and unutilised Commercial Paper and Medium Term Note Programmes The Group has...

  • Page 11
    ...places surplus funds on the money markets usually in the form of short term fixed deposits which are invested with approved banks and counterparties. Details of the Group's short term investments as at 31 March 2004 are shown in note 17 to the accounts on page 29. Transco plc has a credit rating of...

  • Page 12
    ... gas futures, gas options and gas forwards that are used to manage commodity prices and system capacity associated with its natural gas transportation operations. This includes the buying back of capacity rights already sold in accordance with the Group's UK gas transporter licence and Network Code...

  • Page 13
    ... financial year. The estimated element of turnover is determined as the total of commodity services supplied, calculated from the actual volume of gas transported at estimated weighted average prices, based on recent history and the value of capacity services supplied, which are contracted amounts...

  • Page 14
    ... Group's business. Substantial shareholders Transco plc is a wholly owned subsidiary of Transco Holdings plc. The ultimate parent company of Transco is National Grid Transco plc. Employee policy The Group is committed to ensuring that the environment within which employees work fosters development...

  • Page 15
    ...at 10am on 19 July 2004 at NGT House, Warwick Technology Park, Gallows Hill, Warwick CV34 6DA. On behalf of the Board Alison Kay Company Secretary 26 May 2004 Registered Office: 1-3 Strand, London WC2N 5EH Registered in England and Wales No. 2006000 Annual Report and Accounts 2003/04_Transco plc 13

  • Page 16
    Independent Auditors' Report to the Members of Transco plc We have audited the financial statements which comprise the Group Profit and Loss Account, the Group and Company Balance Sheet, the Group Cash Flow Statement and the related Notes to the Accounts. Respective responsibilities of directors ...

  • Page 17
    ... conditions including restrictions on fund raising, business activities, dividend payments and granting of guarantees. Earnings per share information has not been presented in these accounts as the Company, being an indirectly held wholly owned subsidiary undertaking of National Grid Transco plc...

  • Page 18
    ... not relate to services provided by the employees for the year. l) Leases Operating lease payments are charged to the profit and loss account on a straight-line basis over the term of the lease. m) Financial instruments Derivative financial instruments ('derivatives') are used by the Group mainly...

  • Page 19
    Group Profit and Loss Account 12 months ended 31 Mar 2004 Notes £m 12 months ended 31 Mar 2003 £m Group turnover Operating costs Operating profit - Before exceptional items - Exceptional items Total operating profit Merger costs Profit on disposal of fixed asset investments Loss on disposal of ...

  • Page 20
    ...due after more than one year) Borrowings Other creditors Provisions for liabilities and charges Net assets employed Capital and reserves Called up share capital Share premium account Capital redemption reserve Profit and loss account Equity shareholders' funds Commitments and contingencies are shown...

  • Page 21
    ... and similar charges Net cash outflow for returns on investments and servicing of finance Taxation Corporation tax paid Capital expenditure Payments to acquire tangible fixed assets Receipts from disposal of tangible fixed assets Net cash outflow for capital expenditure Acquisitions and disposals...

  • Page 22
    ... customers. a) Turnover 12 months ended 31 March 2004 Total sales £m Sales between businesses £m Sales to third parties £m Total sales £m 12 months ended 31 March 2003 Restated Sales between businesses £m Sales to third parties £m UK gas distribution UK gas transmission Other activities Group...

  • Page 23
    ... relate to planned cost reduction programmes. (12 months ended 31 March 2004: £66m after tax, 12 months ended 31 March 2003: £70m after tax). (ii) The Merger costs for the 12 months ended 31 March 2003 represents employee and property costs associated with the Merger of National Grid and Lattice...

  • Page 24
    ...of these accounts. A number of the current Directors are also directors and employees of National Grid Transco plc or a subsidiary undertaking of that company and are paid by these companies. As at 31 March 2004, retirement benefits were accruing to 6 Directors under a defined benefit scheme and one...

  • Page 25
    ... National Grid Transco group failing to make agreed payments into the fund. A further valuation was carried out at 31 March 2003, to calculate the charge in accordance with Statement of Standard Accounting Practice 24. The principal assumptions adopted were price inflation of 2.5%; pension increases...

  • Page 26
    ... Mar 2004 12 months ended 31 Mar 2003 UK corporation tax rate Effect on tax charge of: Origination and reversal of timing differences Permanent differences Current tax charge Deferred taxation Effective tax rate before tax adjustments in respect of prior years and exceptional items Tax adjustments...

  • Page 27
    ... vehicles and office equipment £m Total £m Cost at 1 April 2003 Additions Disposals Reclassifications Cost at 31 March 2004 Depreciation at 1 April 2003 Charge for the year Disposals Depreciation at 31 March 2004 Net book value at 31 March 2004 Net book value at 31 March 2003 The Company 75...

  • Page 28
    ... due within one year) The Group At 31 March 2004 £m 2003 £m The Company 2004 £m 2003 £m Borrowings (note 16) Trade creditors and accruals Amounts owed to Group undertakings Amounts owed to fellow subsidiary undertakings Corporation tax Social security and other taxes Other creditors Deferred...

  • Page 29
    ... to capital projects. 16. Borrowings The following table analyses the Group's total borrowings after taking account of currency and interest rate swaps. The Group At 31 March 2004 £m 2003 £m The Company 2004 £m 2003 £m Amounts falling due within one year: Bank loans and overdrafts Commercial...

  • Page 30
    ... Offered Rate). In calculating the weighted average number of years for which interest rates are fixed, swaps which are cancellable at the option of the swap provider are taken to have a life based on the earliest date at which they can be cancelled. 28 Transco plc_Annual Report and Accounts 2003...

  • Page 31
    ...2,248 - 92 (1,093) (4,677) 2,248 62 313 Market values, where available, have been used to determine fair values. Where market values are not available, fair values have been calculated by discounting future cash flows at prevailing interest rates. Annual Report and Accounts 2003/04_Transco plc 29

  • Page 32
    ...profit and loss account. The undiscounted amount of the provision at 31 March 2004 relating to gas site decontamination was £127m, being the undiscounted best estimate of the liability having regard to the uncertainties referred to above (excluding the impact of changes in discount rate). The Group...

  • Page 33
    ... 2003 £m The Group Profit for the year Dividends Net increase in equity shareholders' funds Equity shareholders' funds at the start of the year Equity shareholders' funds at the end of the year 558 (70) 488 1,649 2,137 307 (244) 63 1,586 1,649 Annual Report and Accounts 2003/04_Transco plc 31

  • Page 34
    ... 23. Related party transactions Transco is a wholly owned subsidiary undertaking of National Grid Transco, which consolidates Transco within its publicly available financial statements. Transco is therefore exempt from disclosing transactions with other members of National Grid Transco group. There...

  • Page 35
    ... Inc. British Transco Capital Inc. UK The Netherlands USA USA Gas metering services Financing Financing Financing A full list of all Group and associated undertakings will be attached to the Company's Annual Return to be filed with the Registrar of Companies. Annual Report and Accounts 2003...

  • Page 36
    ... £m £m Fixed assets Current assets Creditors: amounts falling due within one year Net current assets/(liabilities) Total assets less current liabilities Creditors: amounts falling due after more than one year Provisions for liabilities and charges Net assets Transco shareholders' funds Minority...

  • Page 37
    ...Net cash outflow from returns on investments and servicing of financing Net cash outflow from taxation Net cash outflow from capital expenditure and financial investment Net... (95) 6 1,562 (31) 1,531 3 (381) (373) (828) (667) (348) (1,063) 9 1,093 39 Annual Report and Accounts 2003/04_Transco plc 35

  • Page 38
    ... as the context requires. NTS Transco's UK national gas transmission system. Ofgem The Office of Gas and Electricity Markets. Ordinary shares Ordinary shares of 12⁄15 pence each in the capital of Transco. TWh Terawatt hours. 109 kWh. Transco Transco plc and/or its subsidiary undertakings or any of...

  • Page 39

  • Page 40
    Transco plc 1-3 Strand London WC2N 5EH United Kingdom