Notes to the consolidated financial statements

1. Segmental analysis

The following segmental analysis is presented in accordance with management responsibilities and economic characteristics, including consideration of the risks and returns, of our business activities. The Company assesses the performance of its businesses principally on the basis of operating profit before exceptional items, remeasurements and stranded cost recoveries. The primary reporting format is by business and the secondary reporting format is by geographical area. The following table describes the main activities for each business segment:

Transmission UK	High voltage electricity transmission networks, the gas transmission network in the UK, the UK liquefied natural gas (LNG) storage activities and the French electricity interconnector.
Transmission US	High voltage electricity transmission networks in New York and New England.
Gas Distribution UK	Four of the eight regional networks of Great Britain’s gas distribution system.
Gas Distribution US	Gas distribution in New York and New England.
Electricity Distribution & Generation US	Electricity distribution in New York and New England, and electricity generation in New York.

Other activities primarily relate to non-regulated businesses and other commercial operations not included within the above segments, including UK-based gas metering activities; UK property management; a UK LNG import terminal; other LNG operations; US unregulated transmission pipelines; US home energy services; US gas fields; together with corporate activities, including business development.

Discontinued operations comprise the Ravenswood generation station in New York City and the engineering and communications operations in the US acquired as part of the KeySpan acquisition. The Ravenswood generation station was sold on 26 August 2008, KeySpan Communications was sold on 25 July 2008 and one of our KeySpan engineering companies was sold on 11 July 2008. Subsequent to the year end, two further engineering companies were sold. For the year ended 31 March 2008, discontinued operations also include the wireless infrastructure and communications operations in the UK and the US and an electricity interconnector in Australia. The wireless infrastructure operations in the UK were sold on 3 April 2007; the US wireless operations were sold on 15 August 2007; and the Basslink electricity interconnector in Australia was sold on 31 August 2007. The results for discontinued operations are disclosed in note 8.

Sales between businesses are priced having regard to the regulatory and legal requirements to which the businesses are subject.

(a) Revenue

	Total sales 2009 £m	Sales between businesses 2009 £m	Sales to third parties 2009 £m	Total sales 2008 £m	Sales between businesses 2008 £m	Sales to third parties 2008 £m	Total sales 2007 £m	Sales between businesses 2007 £m	Sales to third parties 2007 £m
Business segments – continuing operations
Transmission UK	3,487	2	3,485	2,956	16	2,940	2,816	18	2,798
Transmission US	420	83	337	299	61	238	270	47	223
Gas Distribution UK	1,466	79	1,387	1,383	70	1,313	1,193	92	1,101
Gas Distribution US	4,786	3	4,783	2,845	2	2,843	638	–	638
Electricity Distribution &
Generation US	4,972	1	4,971	3,508	2	3,506	3,430	2	3,428
Other activities	719	58	661	642	59	583	567	60	507
	15,850	226	15,624	11,633	210	11,423	8,914	219	8,695
Total excluding stranded cost
recoveries			15,189			11,041			8,269
Stranded cost recoveries			435			382			426
			15,624			11,423			8,695
Geographical segments
UK			5,334			4,787			4,397
US			10,290			6,636			4,298
			15,624			11,423			8,695

The table above represents revenue from continuing operations only, as disclosed in the consolidated income statement. For additional disclosures relating to discontinued operations, refer to note 8.

The analysis of revenue by geographical area is on the basis of destination. There are no material sales between the UK and US geographical areas.

Approximately 6% (2008: 9%; 2007: 9%) of revenue for the year ended 31 March 2009 amounting to approximately £1.0bn (2008: £1.0bn; 2007: £0.8bn) derives from a single customer, the Centrica group. The majority of this revenue is in the Gas Distribution UK segment with lesser amounts in the Transmission UK segment and in other activities.

In accordance with the Company’s accounting policy on revenue recognition, where revenue received or receivable exceeds the maximum amount permitted by regulatory agreement and adjustments will be made to reflect the over-recovery, no liability is recognised. Similarly, no asset is recognised where a regulatory agreement permits adjustments to be made to future prices in respect of an under-recovery. In the UK, there was an under-recovery of £52m at 31 March 2009 (2008: £23m; 2007: £33m). In the US, under-recoveries and other regulatory entitlements to future revenue (including stranded cost recoveries) amounted to £2,289m at 31 March 2009 (2008: £1,652m 2007: £1,930m).

(b) Operating profit

	Before exceptional items, remeasurements and stranded				After exceptional items, remeasurements and stranded
	2009 £m	2008 £m	2007 £m		2009 £m	2008 £m	2007 £m
Business segments – continuing operations
Transmission UK	1,126	1,021	946		1,063	1,013	936
Transmission US	175	128	108		173	122	107
Gas Distribution UK	672	595	409		629	574	412
Gas Distribution US	612	392	71		226	487	67
Electricity Distribution & Generation US	265	330	364		531	696	859
Other activities	65	129	133		1	72	132
	2,915	2,595	2,031		2,623	2,964	2,513
Geographical segments
UK	1,875	1,752	1,491		1,729	1,667	1,482
US	1,040	843	540		894	1,297	1,031
	2,915	2,595	2,031		2,623	2,964	2,513

The table above represents operating profit from continuing operations only, as disclosed in the consolidated income statement, and excludes the results of discontinued operations. For additional disclosures relating to discontinued operations, refer to note 8.

(c) Capital expenditure and depreciation

	Capital expenditure				Depreciation and amortisation
	2009 £m	2008 £m	2007 £m		2009 £m	2008 £m	2007 £m
Business segments – continuing operations
Transmission UK	1,259	1,600	1,235		353	372	352
Transmission US	182	111	108		56	40	41
Gas Distribution UK	598	514	490		177	181	170
Gas Distribution US	421	188	36		172	91	24
Electricity Distribution & Generation US	355	257	218		223	146	127
Other activities	427	383	258		146	164	157
	3,242	3,053	2,345		1,127	994	871
Discontinued operations	–	1	30		–	–	72
	3,242	3,054	2,375		1,127	994	943
Geographical segments
UK	2,270	2,493	2,007		679	709	739
US	972	560	365		448	285	196
Rest of the world	–	1	3		–	–	8
	3,242	3,054	2,375		1,127	994	943

Capital expenditure comprises additions to property, plant and equipment and other non-current intangible assets amounting to £3,164m (2008: £3,009m; 2007: £2,343m) and £78m (2008: £45m; 2007: £32m) respectively.

Depreciation and amortisation includes expensed depreciation of property, plant and equipment and amortisation of other intangible assets amounting to £1,058m (2008: £940m; 2007: £889m) and £69m (2008: £54m; 2007: £54m) respectively.

(d) Total assets and total liabilities

	Total assets			Total liabilities
	2009 £m	2008* £m		2009 £m	2008* £m
Business segments – continuing operations
Transmission UK	10,451	10,076		(1,501)	(1,455)
Transmission US*	2,238	1,565		(190)	(83)
Gas Distribution UK	6,158	5,765		(1,279)	(1,222)
Gas Distribution US*	10,112	7,251		(2,024)	(1,612)
Electricity Distribution & Generation US*	7,854	5,674		(3,523)	(2,429)
Other activities*	2,289	2,068		(1,189)	(523)
	39,102	32,399		(9,706)	(7,324)
Discontinued operations*	–	1,506		–	(83)
	39,102	33,905		(9,706)	(7,407)
Joint ventures – continuing operations	168	71		–	–
Unallocated*	5,197	3,795		(30,777)	(24,990)
	44,467	37,771		(40,483)	(32,397)
Geographical segments
UK	18,527	17,533		(3,602)	(3,365)
US*	20,743	16,443		(6,104)	(4,042)
Unallocated*	5,197	3,795		(30,777)	(24,990)
	44,467	37,771		(40,483)	(32,397)

*

Comparatives have been restated for the finalisation of the fair value exercise on the acquisition of KeySpan Corporation (see note 28) and adjusted to present comparatives on a basis consistent with current year classification

The analysis of total assets and total liabilities includes all attributable goodwill and excludes inter-business balances. Unallocated total assets comprise cash and cash equivalents, taxation, current financial investments and total derivative financial assets. Unallocated total liabilities comprise bank overdrafts, borrowings, derivative financial liabilities and taxation.

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