RWE npower's Consolidated Segmental Statement

Year End 2009

RWE npower's Consolidated Segmental Statement for 2009 (below) is provided as required by Ofgem's Electricity and Gas Supply Licences Condition 19A and Electricity Generation Licence Condition 16B.

    Ofgem YE 2009 Pro-Forma (Summary)
    Supply - Electricity Supply - Gas
Revenues Gen Dom Non Dom Dom Non Dom
Revenues from sale of electricity and gas 768 1,894 2,883 1,541 236
Other revenues 51 - - - -
Total revenues 819 1,894 2,883 1,541 236
 
Operating Costs  
Electricity / Gas costs (61) (1,164) (2,144) (1,028) (183)
Other direct costs (107) (365) (571) (293) (33)
Total Direct Costs (168) (1,529) (2,685) (1,322) (216)
Indirect Costs (506) (467) (172) (355) (33)
Total Attributable Costs (674) (1,996) (2,858) (1,676) (249)
EBIT 145 (102) 25 (136) (13)
Depreciation and Amortisation 117 48 15 37 3
EBITDA 262 (54) 41 (99) (10)
WACO(E)/(G) p/KWH n/a 6.9 6.7 2.4 2.1
Volume (TWh) 25.0 16.9 31.6 42.8 8.5

1. BACKGROUND

  • Following the Office of Gas and Electricity Markets' (Ofgem's) Energy Supply Probe, one of the objectives of which was to create greater transparency of financial information, the energy regulator introduced a Financial Information Reporting Licence Condition into the electricity generation, gas supply and electricity supply licences on 21 October 2009.
  • Ofgem’s Electricity Supply and Gas Supply Licences Condition 19A and Electricity Generation Licence Condition 16B require Relevant Licensees (in effect companies including affiliates) generating electricity and supplying electricity and/or gas to more than 50,000 customers to “prepare and publish on their websites a Consolidated Segmental Statement in respect of information relating to the revenues, costs and profits of their activities in the generation and supply of electricity and gas”.
  • The Consolidated Segmental Statement (CSS) must be prepared and published no later than six months after the end of the licensee’s financial year.
  • RWE Npower plc (the Company) and its subsidiary companies meet the criteria. Therefore the Company has prepared and published the CSS in accordance with the licence conditions for the year ended 31st December 2009.

2. SCOPE OF ENTITIES INCLUDED IN THE TEMPLATE

  • The Consolidated Segmental Statement (CSS) aggregates the revenues and costs attributable to the generation, electricity and gas supply activities of all subsidiaries and affiliates of RWE Npower plc that held either an electricity generation; an electricity supply or a gas supply licence and engaged in electricity generation or gas/electricity supply activities during the year ended 31st December 2009.
  • RWE Npower plc (the Company) directly owns and manages a fleet of nine fossil fuel fired power stations located across England and Wales. Through its subsidiary companies it also:
    • Operates a small fleet of Combined Heat and Power plants
    • Manages and operates the supply of gas, electricity and related home and energy services to domestic and non-domestic customers.
  • The ultimate parent company is RWE AG, a company incorporated in Germany.
  • The list of legal entities that held a generation or supply licence and engaged in electricity generation or gas/electricity supply activities during the year ended 31st December 2009 are summarised in the table below:
Legal Entity Name Registered No Electricity Generation Licence Electricity Supply Licence Gas Supply Licence
RWE Npower plc 03892782 sg_list_ticks   sg_list_ticks
Npower Cogen Trading Ltd 2745602 sg_list_ticks    
Npower Ltd 3653277   sg_list_ticks  
Npower Commercial Gas Ltd 3766656     sg_list_ticks
Npower Gas Ltd 2999919     sg_list_ticks
Electricity Plus Supply Ltd 5199936   sg_list_ticks  
Gas Plus Supply Ltd 5199935     sg_list_ticks
Npower Northern Ltd 03432100   sg_list_ticks sg_list_ticks
Npower Direct Ltd 3782443 sg_list_ticks sg_list_ticks sg_list_ticks
Npower Yorkshire Ltd 3937808   sg_list_ticks sg_list_ticks
  • Some of the legal entities listed above also engage in commercial activities that do not relate to the generation of electricity or the supply of gas/electricity to domestic and non-domestic customers. We refer to these activities as “out of scope” and the revenues and costs attributable to these activities are excluded from the CSS. Examples of such “out of scope” activities include:
    • Home Energy services including boiler installation and maintenance
    • Engineering and technical consultancy provided to third parties
    • Meter reading services provided to third parties.
  • The CSS does not include subsidiaries of RWE Npower plc that hold either electricity generation or gas/electricity supply licences but which were dormant and had no trading activities during the year ended 31st December 2009.

3. REVENUES, COSTS AND PROFIT

As already referenced the CSS is an aggregation of the individual statutory accounts of the relevant legal entities that hold a generation or supply licence which engaged in generation or supply activities in the Year Ended 31st December 2009. The individual statutory accounts are prepared under United Kingdom Generally Accepted Accounting Principles (UK GAAP) and have been subject to audit by independent, external auditors.

3.1 GENERATION

Revenue from sale of electricity and gas

  • Our Generation business transfers capability to RWE Supply and Trading GmbH (RWEST) via a fair valued “Asset Tolling Agreement”.
  • In exchange for a capability fee, the Asset Tolling Agreement provides RWEST with the option to deliver fuel to our power stations and have this converted into electricity. The fee is based on the dark/spark spread for 2009 derived from the forward markets at the time of the capability transfer. Transfer typically takes place 2 years to 1 year ahead of time.
  • Thus, the bulk of the revenue of the business represents the sale of asset capability rather than the sale of electricity.
  • Other elements included within this category comprise post option income, ancillary services and balancing mechanism income and CHP electricity sales.

Other Revenues

  • The main element relates to other revenues from CHP stations that hold a generation supply licence.

Electricity/Gas Costs

  • As described above, under the Asset Tolling Agreement operated in the UK, the Generation business does not procure gas or coal. Therefore fuel purchase costs principally relate to CHP generation activities, which are outside the Asset Tolling Agreement.

Other Direct Costs

  • Primarily relates to carbon certificate purchases and non-fuel direct costs relating to CHP generation.

Indirect Costs

  • Comprise of directly attributable station operating and maintenance costs and the Generation segment’s share of common costs.
  • The basis of allocation of these common costs across the segments is described in section 3.3 below.

WACO (E)/(G)

  • As described above, under the Asset Tolling Agreement the Generation segment does not procure gas or coal. Therefore no Weighted Average Cost of Fuel is provided.

3.2 RETAIL

Revenues

  • Turnover (net of VAT) of electricity and gas sales to our domestic and non-domestic energy customers.

Electricity/Gas Costs

  • Reflects the costs of procuring electricity and gas to meet customer requirements. These costs are captured at source between gas and electricity and then analysed between domestic and non-domestic based on the specific demand characteristics of the customer base.
  • Our Retail business transacts the majority of its wholesale commodity exposure via RWEST on a fair value basis.

Other Direct Costs

  • Primarily reflect network costs including electricity distribution/transmission, gas transportation and balancing.

Indirect Costs

  • Costs that are directly attributable to a segment are charged to that segment in the CSS.
  • Customer Service costs (such as billing, customer service and metering) are allocated across the segments on the basis of an activity based costing methodology.
  • Overheads and costs which are not directly attributable to supply segments are allocated between the domestic and non-domestic segments on the basis of the outputs from an internal study that was undertaken to establish a methodology to apportion overheads to specific market segments. The costs are then allocated between gas and electricity on the basis of identifiable cost drivers which include metering points (MPANs).

Depreciation and amortisation

  • The depreciation and amortisation charge of the supply segments includes £73m of goodwill amortisation as charged in the individual statutory accounts.

3.3 COMMON COSTS BETWEEN GENERATION AND RETAIL

  • The costs relating to Central Corporate functions and pension deficit repair payments have been allocated across the Generation and Supply segments on the basis of specific cost drivers that include headcount and membership of the pension scheme. The Supply segments share of the central corporate costs are allocated between its sub-segments on the basis described in section 3.2 above.

4. RECONCILIATION OF CSS EARNINGS BEFORE INTEREST AND TAX (EBIT) TO THE UK STATUTORY ACCOUNTS FOR Y/E 31ST DECEMBER 2009

  • The table below sets out a full reconciliation of the EBIT along with revenues (Turnover) and costs (Total Costs) for the Year Ending 31st December 2009 (as presented in the Consolidated Segmental Statement) to the aggregation of the statutory accounts of the legal entities detailed in Section 2 above.
  • RWE Npower Holdings plc, the holding company of RWE Npower plc, is exempt under Section 400 of the Companies Act 2006 from preparing and filing Consolidated Financial Statements. Therefore, the Consolidated Segmental Statement is an aggregation of the individual statutory accounts of the legal entities that held a generation or supply licence and engaged in electricity generation or gas/electricity supply activities during the year ended 31st December 2009.
  • Excluded from the CSS are:
    • Out of scope activities i.e. activities of the legal entities that do not relate to the generation of electricity or supply of energy,
    • Dividends received from subsidiaries (as these do not arise from Generation or Supply activities) and exceptional costs. These exceptional costs do not directly relate to the ongoing activities of the Company’s operations in 2009. They are of a one-off or non-operating nature and relate to activities such as organisational restructuring or provisions in respect of potential claims or actions that have arisen
  Turnover Total Costs Ebit
Total Statutory EBIT, Turnover and Costs 7,615 (7,664) (49)
Removal of "out of scope" activities (241) 215 (27)
Removal of intercompany dividends and exceptional costs   (5) (5)
Total Reported EBIT, Turnover and Costs 7,373 (7,455) (81)

5. ADDITIONAL INFORMATION TO USERS OF THE CSS

  • As already described in Section 4 above, the CSS is an aggregation of the individual statutory accounts of the relevant legal entities.
  • The Company’s contributions to its defined benefit (DB) pension schemes (including deficit repair payments agreed with the Pension Scheme trustees) are recognised directly in the Statutory Profit and Loss account as and when paid. This is because the Company cannot identify the respective share of the underlying assets and liabilities of its DB scheme on a reasonable and consistent basis across the various legal entities. Thus the DB pension scheme is accounted for as multi-employer scheme under FRS 17 (Retirement Benefits) and therefore the contributions are charged directly to other operating costs within the statutory accounts (and within indirect costs within the CSS).
  • If consolidated accounts were prepared, the Defined Benefit schemes would have been accounted for as such under FRS 17. To assist users of the CSS in better understanding the impact of the different accounting treatment that would have been applied if consolidated accounts were prepared, we have summarised the impact on reported EBIT in the table below.
    Supply - Electricity Supply - Gas
  Gen Dom Non Dom Dom Non Dom
EBIT per CSS 145 (102) 25 (136) (13)
Impact of EBIT if DB scheme accounted for as such rather as multi employer scheme 60 27 26 18 4
Adjusted CSS EBIT (for info only) 205 (75) 51 (117) (9)