Notes to the consolidated financial statements - analysis of items in the primary statements
24. Provisions
| Decom- missioning £m | Environ- mental £m | Emissions £m | Restructuring £m | Other £m | Total provisions £m |
|
|---|---|---|---|---|---|---|
| At 1 April 2008 | 87 | 837 | 114 | 66 | 293 | 1,397 |
| Exchange adjustments | 33 | 240 | 33 | – | 73 | 379 |
| Additions | 4 | 101 | 6 | 43 | 28 | 182 |
| Unused amounts reversed | (3) | (23) | (9) | – | – | (35) |
| Unwinding of discount | 2 | 58 | – | – | 8 | 68 |
| Utilised | (15) | (109) | (119) | (9) | (40) | (292) |
| At 31 March 2009 | 108 | 1,104 | 25 | 100 | 362 | 1,699 |
| Exchange adjustments | (9) | (46) | (1) | – | (12) | (68) |
| Additions | 5 | 85 | 4 | 36 | 16 | 146 |
| Reclassifications* | – | – | – | – | 70 | 70 |
| Unused amounts reversed | (1) | (4) | – | (1) | (2) | (8) |
| Unwinding of discount | 2 | 54 | – | – | 14 | 70 |
| Utilised | (8) | (117) | (6) | (30) | (38) | (199) |
| At 31 March 2010 | 97 | 1,076 | 22 | 105 | 410 | 1,710 |
- *
- Primarily represents reclassifications from other non-current liabilities
Provisions have been analysed as current and non-current as follows:
| 2010 £m | 2009 £m |
|
|---|---|---|
| Current | 303 | 248 |
| Non-current | 1,407 | 1,451 |
| 1,710 | 1,699 |
Decommissioning provision
The decommissioning provision of £97m at 31 March 2010 (2009: £108m) primarily represented the net present value of the estimated expenditure (discounted at a nominal rate of 6%) expected to be incurred until 2015 in respect of the decommissioning of certain nuclear generating units that National Grid no longer owns. It also included £46m (2009: £47m) of expenditure relating to other asset retirement obligations expected to be incurred until 2064.
Environmental provision
The environmental provision represents the estimated restoration and remediation costs relating to a number of sites owned and managed by subsidiary undertakings, with the exception of certain US sites that National Grid no longer owns. The environmental provision is as follows:
| 2010 | 2009* | |||||
|---|---|---|---|---|---|---|
| Discounted £m | Undiscounted £m | Discounted £m | Undiscounted £m | Real discount rate |
||
| UK gas site decontamination (i) | 262 | 376 | 226 | 317 | 2.0% | |
| US sites (ii) | 813 | 942 | 876 | 1,037 | 3.2% | |
| Other (iii) | 1 | 1 | 2 | 2 | n/a | |
| 1,076 | 1,319 | 1,104 | 1,356 | |||
- *
- Comparatives have been restated to present items on a basis consistent with the current year classification
- (i)
- Represents the statutory decontamination costs of old gas manufacturing sites in the UK. The anticipated timing of the cash flows for statutory decontamination cannot be predicted with certainty, but they are expected to be incurred over the financial years 2011 to 2058 with some 40% of the spend over the next five years.
There are a number of uncertainties that affect the calculation of the provision for UK gas site decontamination, including the impact of regulation, the accuracy of the site surveys, unexpected contaminants, transportation costs, the impact of alternative technologies and changes in the discount rate. We have made our best estimate of the financial effect of these uncertainties in the calculation of the provision, but future material changes in any of the assumptions could materially impact on the calculation of the provision and hence the income statement.
The undiscounted amount of the provision is the undiscounted best estimate of the liability having regard to the uncertainties above. - (ii)
- The remediation expenditure in the US is expected to be incurred between financial years 2011 and 2067. The uncertainties regarding the calculation of this provision are similar to those considered in respect of UK gas decontamination. However, unlike the UK, with the exception of immaterial amounts of such costs, this expenditure is expected to be recoverable from rate payers under the terms of various rate agreements in the US.
- (iii)
- The remainder of the environmental provision relates to the expected cost of remediation of certain other sites in the UK. This is expected to be utilised within the next five years and there is no material difference between the discounted and undiscounted amounts.
Emissions provision
The provision for emission costs is expected to be settled using emission allowances granted.
Restructuring provision
At 31 March 2010, £24m of the total restructuring provision (2009: £30m) consisted of provisions for the disposal of surplus leasehold interests and rates payable on surplus properties. The remainder of the restructuring provision related to business reorganisation costs in the UK, to be paid until 2015.
Other provisions
Other provisions at 31 March 2010 included £63m (2009: £61m) of estimated liabilities in respect of past events insured by insurance subsidiary undertakings, including employer liability claims. In accordance with insurance industry practice, these estimates are based on experience from previous years and there is, therefore, no identifiable payment date. Other provisions also included £6m (2009: £12m) in respect of the sales of four UK gas distribution networks relating to property transfer costs; and £13m (2009: £13m) in respect of obligations associated with investments in joint ventures.
As at 31 March 2010 other provisions also included a £192m (2009: £219m) onerous lease provision. The associated operating lease related to the Ravenswood generation station but the lease commitment remained with National Grid following the sale of Ravenswood.