Notes to the consolidated financial statements
6. Finance income and costs
| 2009 £m |
2008* £m |
2007 £m |
||
|---|---|---|---|---|
| Interest income and similar income | ||||
| Expected return on pension and other post-retirement benefit plan assets | 1,236 | 1,064 | 926 | |
| Interest income on financial instruments: | ||||
| Interest income from bank deposits and other financial assets | 60 | 209 | 214 | |
| Interest receivable on finance leases | 1 | 2 | 3 | |
| Gains transferred from equity on disposal of available-for-sale investments | 18 | – | 1 | |
| 1,315 | 1,275 | 1,144 | ||
| Interest expense and other finance costs | ||||
| Before exceptional items and remeasurements | (2,465) | (2,045) | (1,691) | |
| Exceptional items and remeasurements | (84) | (16) | (217) | |
| (2,549) | (2,061) | (1,908) | ||
| Net finance costs | (1,234) | (786) | (764) | |
| Interest expense and other finance costs comprise the following: | ||||
| Interest on pension and other post-retirement benefit plan obligations | (1,250) | (1,001) | (869) | |
| Interest expense on financial liabilities held at amortised cost: | ||||
| Interest on bank loans and overdrafts | (136) | (71) | (48) | |
| Interest on other borrowings | (1,135) | (990) | (768) | |
| Interest on finance leases | (14) | (11) | (1) | |
| Exceptional debt redemption costs | – | – | (45) | |
| Interest on derivatives | 5 | (46) | (54) | |
| Unwinding of discounts on provisions | (68) | (45) | (21) | |
| Less: Interest capitalised (i) | 133 | 119 | 70 | |
| Interest expense and other finance costs before exceptional items and remeasurements | (2,465) | (2,045) | (1,736) | |
| Net gains/(losses) on derivative financial instruments included in remeasurements: | ||||
| Ineffectiveness on derivatives designated as fair value hedges (ii) | (34) | 1 | 18 | |
| Ineffectiveness on derivatives designated as cash flow hedges | (18) | 13 | – | |
| Ineffectiveness on derivatives designated as net investment hedges | (2) | 14 | 25 | |
| On undesignated forward rate risk relating to derivatives designated as net investment hedges | 112 | (53) | (82) | |
| On derivatives not designated as hedges or ineligible for hedge accounting (iii) | (140) | 18 | (114) | |
| Financial element of remeasurements on commodity contracts | (2) | (9) | (19) | |
| Net losses on derivative financial instruments included in remeasurements (iv) | (84) | (16) | (172) | |
| Interest expense and other finance costs after exceptional items and remeasurements | (2,549) | (2,061) | (1,908) |
- *
- Comparatives have been restated for the finalisation of the fair value exercise on the acquisition of KeySpan Corporation (see note 28)
- (i)
- Interest on funding attributable to assets in the course of construction was capitalised during the year at a rate of 5.7% (2008: 6.3%; 2007: 5.6%).
- (ii)
- Includes a net gain on instruments designated as fair value hedges of £382m (2008: £87m gain; 2007: £100m loss) less a net loss of £416m (2008: £86m loss; 2007: £118m gain) arising from fair value adjustments to the carrying value of debt.
- (iii)
- Includes a loss of £nil (2008: £3m; 2007: £126m) relating to pre-tax losses on investment related derivative financial instruments which offset on a post-tax basis.
- (iv)
- Includes a net foreign exchange loss on financing activities of £1,500m (2008: £885m loss; 2007: £122m gain). These amounts are offset by foreign exchange gains and losses on derivative financial instruments measured at fair value.