Notes to the consolidated financial statements - analysis of items in the primary statements
3. Exceptional items, remeasurements and stranded cost recoveries
| 2010 £m | 2009 £m | 2008 £m |
||
|---|---|---|---|---|
| Exceptional items – restructuring costs (i) | (149) | (192) | (133) | |
| Exceptional items – environmental related provisions (ii) | (63) | (78) | (92) | |
| Exceptional items – gain on disposal of subsidiary and associate (iii) | 11 | – | 6 | |
| Exceptional items – other (iv) | (67) | (5) | (23) | |
| Remeasurements – commodity contracts (v) | 71 | (443) | 232 | |
| Stranded cost recoveries (vi) | 369 | 426 | 379 | |
| Total exceptional items, remeasurements and stranded cost recoveries included within operating profit | 172 | (292) | 369 | |
| Exceptional items – debt redemption costs (vii) | (33) | – | – | |
| Remeasurements – commodity contracts (v) | (1) | (2) | (9) | |
| Remeasurements – net gains/(losses) on derivative financial instruments (viii) | 81 | (82) | (7) | |
| Total exceptional items and remeasurements included within finance costs | 47 | (84) | (16) | |
| Total exceptional items, remeasurements and stranded cost recoveries before taxation | 219 | (376) | 353 | |
| Exceptional tax item – deferred tax credit arising from the reduction in the UK tax rate (ix) | – | – | 170 | |
| Exceptional tax item – deferred tax charge arising from change in UK industrial building allowance regime (x) | – | (49) | – | |
| Exceptional tax item – other (xi) | (41) | – | – | |
| Tax on exceptional items – restructuring costs (i) | 45 | 59 | 49 | |
| Tax on exceptional items – environmental related provisions (ii) | 8 | 16 | 20 | |
| Tax on exceptional items – gain on disposal of subsidiary and associate (iii) | (2) | – | (4) | |
| Tax on exceptional items – other (iv) | 19 | 2 | 5 | |
| Tax on exceptional items – debt redemption costs (vii) | 2 | – | – | |
| Tax on remeasurements – commodity contracts (v) | (28) | 179 | (90) | |
| Tax on remeasurements – derivative financial instruments (viii) | (106) | 8 | (28) | |
| Tax on stranded cost recoveries (vi) | (148) | (170) | (150) | |
| Tax on exceptional items, remeasurements and stranded cost recoveries | (251) | 45 | (28) | |
| Total exceptional items, remeasurements and stranded cost recoveries after taxation | (32) | (331) | 325 | |
| Total exceptional items after taxation | (270) | (247) | (2) | |
| Total commodity contract remeasurements after taxation | 42 | (266) | 133 | |
| Total derivative financial instrument remeasurements after taxation | (25) | (74) | (35) | |
| Total stranded cost recoveries after taxation | 221 | 256 | 229 | |
| Total exceptional items, remeasurements and stranded cost recoveries after taxation | (32) | (331) | 325 |
- (i)
- Restructuring costs include costs related to the integration of KeySpan of £30m (2009: £53m; 2008: £101m), the further restructuring of our liquefied natural gas (LNG) storage facilities of £41m (2009: £50m; 2008: £nil), transformation related initiatives of £56m (2009: £68m; 2008: £11m) and costs associated with the outsourcing of elements of our UK shared services organisation of £22m. Charges in the comparative years also included planned cost reduction programmes in our UK businesses (2009: £21m; 2008: £21m).
- (ii)
- Environmental charges include £21m related to specific exposures in the US together with £42m arising from changes in landfill tax legislation in the UK. For the year ended 31 March 2010, the UK charge was £42m (2009: £37m; 2008: £44m) and the US charge £21m (2009: £41m; 2008: £48m). Costs incurred with respect to US environmental provisions are substantially recoverable from customers.
- (iii)
- During the year there was a gain of £5m on the sale of a 30.29% investment in the associate Steuben Gas Storage Company. In addition there was the release of various unutilised provisions amounting to £6m originally recorded on the sale of Advantica in 2008.
- (iv)
- Other costs for the year ended 31 March 2010 include: an impairment charge of £11m and an amortisation charge of £6m (2009: £5m; 2008: £4m) in relation to acquisition-related intangibles; a charge of £9m relating to US healthcare costs arising from recent legislative changes; and £41m related to a fine of £15m together with associated costs and provisions against receivables and other balance sheet items. For further details on the fine levied upon us by the Gas and Electricity Markets Authority (GEMA) refer to note 28(f).
- (v)
- 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. These movements are comprised of those impacting operating profit which are based on the change in the commodity contract liability and those impacting finance costs as a result of the time value of money.
- (vi)
- Stranded cost recoveries include the recovery of some of our historical investments in generating plants that were divested as part of the restructuring and wholesale power deregulation process in New England and New York during the 1990s. Stranded cost recoveries on a pre-tax basis consist of revenue of £376m (2009: £435m; 2008: £382m) and operating costs of £7m (2009: £9m; 2008: £3m).
- (vii)
- Debt redemption costs in the year represent one-off costs relating to the early redemption of a significant loan.
- (viii)
- Remeasurements – net gains/(losses) on derivative financial instruments comprise gains/(losses) 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 equity or which are offset by adjustments to the carrying value of debt. The tax charge in the year ended 31 March 2010 includes a £78m (2009: £1m; 2008: £11m) charge in respect of prior years.
- (ix)
- The exceptional tax credit in the year ended 31 March 2008 of £170m arose from a reduction in the UK corporation tax rate from 30% to 28% included in the 2007 Finance Act. This resulted in a reduction in deferred tax liabilities.
- (x)
- The exceptional tax charge of £49m in the year ended 31 March 2009 arose from a change in the UK industrial building allowance regime arising in the 2008 Finance Act. This resulted in an increase in deferred tax liabilities.
- (xi)
- The exceptional tax charge of £41m arises due to a change in US tax legislation under the Patient Protection and Affordable Care Act.