National Grid 2015 Annual Report Download - page 106

Financial Statements
4. Exceptional items, remeasurements and stranded cost recoveries continued
2015
£m
2014
£m
2013
£m
Included within operating profit
Exceptional items:
Restructuring costs1–(136) (87)
Gas holder demolition costs2–(79) –
LIPA MSA transition3–254 –
Other4–16 –
Net gain on disposal of businesses5–– 3
–55 (84)
Remeasurements – commodity contracts6(83) 16 180
Stranded cost recoveries7––14
(83) 71 110
Included within finance costs
Exceptional items:
Debt redemption costs8 (131) – –
Remeasurements – net (losses)/gains on derivative financial instruments9(34) 93 68
(165) 93 68
Total included within profit before tax (248) 164 178
Included within tax
Exceptional credits/(charges) arising on items not included in profit before tax:
Deferred tax credit arising on the reduction in the UK corporation tax rate10 6398 128
Deferred tax charge arising from an increase in US state income tax rates11 –(8) –
Tax on exceptional items 28 (57) 31
Tax on remeasurements6,8 44 (36) (92)
Tax on stranded cost recoveries ––(5)
78 297 62
Total exceptional items, remeasurements and stranded cost recoveries after tax (170) 461 240
Analysis of total exceptional items, remeasurements and stranded cost recoveries after tax
Exceptional items after tax (97) 388 75
Remeasurements after tax (73) 73 156
Stranded cost recoveries after tax –– 9
Total exceptional items, remeasurements and stranded cost recoveries after tax (170) 461 240
1. No exceptional restructuring costs have been incurred in the year ended 31 March 2015. Restructuring costs for 2014 included: costs related to the continued restructuring of our UK
operations in preparedness to deliver RIIO, other transformation-related initiatives in the UKandUS and an associated software impairment for licences that will no longer be used. For
theyear ended 31 March 2013, restructuring costs included: costs for the restructuring of ourUKoperations of £66m in preparedness for delivering RIIO; costs for transformation-related
initiatives in the UK and US of £31m; and a credit of £10m for the release of restructuring provisions in the UK recognised in prior years.
2. No further provision (2014: £79m) has been made for the demolition of non-operational gas holders in the UK.
3. For the year ended 31 March 2014, a net gain of £254m was recognised. This included a pension curtailment and settlement (£214m) for employees who transferred to a new employer
following the cessation of the Management Services Agreement (MSA) with the Long Island Power Authority (LIPA) on 31 December 2013. There was also a gain of £142m following the
extinguishment of debt obligations of £98m and a £56m cash payment received, in compensation for the Company forgiving an historical pension receivable and carrying charges. These
gainswere offset by transition costs and other provisions incurred to effect the transition.
4. During the year ended 31 March 2014, £16m was received following the sale to a third party of a settlement award which arose as a result of a legal ruling in 2008.
5. For the year ended 31 March 2013, we recognised a gain of £3m on the disposal of two subsidiaries in New Hampshire.
6. Remeasurements – commodity contracts represent mark-to-market movements on certain physical and financial commodity contract obligations in the US. These contracts primarily relate
to the forward purchase of energy for supply to customers, or to the economic hedging thereof, that are required to be measured at fair value and that do not qualify for hedge accounting.
Under the existing rate plans in the US, commodity costs are recoverable from customers although the timing of recovery may differ from the pattern of costs incurred.
7. For the year ended 31 March 2013, stranded cost recoveries of £14m substantially represented the release of an unutilised provision recognised in a prior period.
8. Represents costs arising from a liability management programme. We have reviewed and restructured the Group debt portfolio following the commencement of the RIIO price controls
in2013 and the slow down in our planned short term UK capital investment programme as the industry assesses the impact of EMR. This resulted in a bond repurchase programme with
anotional value of £924m.
9. Remeasurements – net (losses)/gains on derivative financial instruments comprise (losses)/gains arising on derivative financial instruments reported in the income statement. These exclude
gains and losses for which hedge accounting has been effective, which have been recognised directly in other comprehensive income or which are offset by adjustments to the carrying
value of debt. The tax charge in the year includes a credit of £1m (2014: £nil; 2013: £1m) in respect of prior years.
10. The Finance Act 2013 enacted reductions in the UK corporation tax rate from 23% to 21% from 1 April 2014, and from 21% to 20% from 1 April 2015. Other UK tax legislation also reduced
the UK corporation tax rate in prior periods (2013: from 24% to 23%). These reductions have resulted in decreases to UK deferred tax liabilities in these periods.
11. The exceptional tax charge in the prior year arose from a net increase in US state income tax rates. Effective from 1 April 2014, the state income tax rate for Massachusetts regulated utilities
increased from 6.5% to 8% and, effective from 1 April 2016, the state income tax rate for New York will decrease from 7.1% to 6.5%.
– analysis of items in the primary statements continued
Notes to the consolidated financial statements
104