1.         GENERAL INFORMATION

The information included within these condensed financial statements that refer to the year ended 31 December 2019, does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor reported on those accounts and that report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

2.         ACCOUNTING POLICIES

Basis of preparation

The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Going concern

In the Company's latest annual reports and accounts for the year to 31 December 2019 the directors set out a number of factors they took into account when they considered continuing to adopt the going concern basis in preparing those annual reports and accounts. The directors confirm that no events have occurred during the six months to 30 June 2020, which alter the view expressed in the annual reports and accounts to 31 December 2019.

Changes in accounting policy

The Company's accounting policies and methods of computation are the same as the accounting policies which are described in the Company's financial statements for the year ended 31 December 2019, with the only changes being outlined below.

Application of new and revised IFRS

In the current year, the company has a number of amendments to IFRS by the International Accounting standards Board ("IASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2020:

None of the standards, interpretations and amendments which are effective for periods beginning 1 January 2020 has had a material effect on the financial statements:

·    Amendments to IFRS 3- Definition of a Business;

·    Amendments to IAS 1 and IAS 8- Definition of Material;

·    Amendments to References to the Conceptual Framework in IFRS Standards; and

·    Amendments to IFRS 9 Financial instruments- Hedging

3.   PRIOR PERIOD ADJUSTMENTS

Adopted assets and intangible assets

The Financial Statements have been restated to incorporate the impact of under reporting of the value of distributions network assets adopted from other parties and the reclassification of IT software assets from property, plant and machinery to intangible assets.

Distribution network assets are on occasions constructed by other parties who then transfer them to the Group. At the date of transfer the value of property, plant and equipment is increased with an equal increase in the value of deferred revenue. The assets are depreciated in line with the depreciation policy for those assets with a similar amortisation of the deferred revenue. It was discovered during late 2019 that not all adopted assets had been captured in the Financial Statements. A new process has been introduced during the 6 month period to June 2020.

 In previous years certain operational IT software assets had been included in property plant and equipment rather than intangible assets.

These had no impact on prior years' profits or net assets, however impacted the constituent parts of the previously reported figures in the Income Statement, the Statement of Financial Position and Statement of Cash Flows as shown below.

Statement of Profit or Loss:

Statement of Financial Position:

3.   PRIOR PERIOD ADJUSTMENTS (CONTINUED)

Statement of Cash Flows:

4.   SEGMENTAL ANALYSIS

The Group operates in the principal area of activity of the distribution of electricity in the United Kingdom.

There has been no change in the basis of segmentation or in the basis of measurement of segment profit or loss in the period.

The following is an analysis of the Group's revenue and results by reportable segment in the six months ended 30 June 2020 (unaudited):

External sales to RWE Npower plc in the six months ended 30 June 2020 represented 14.52% of revenue within the Distribution segment.

External sales to British Gas Ltd in the six months ended 30 June 2020 represented 11.31% of revenue within the Distribution segment.

4.         SEGMENTAL ANALYSIS (CONTINUED)

The following is an analysis of the Group's revenue and results by reportable segment in the six months ended 30 June 2019 (unaudited) (Restated):

External sales to RWE Npower plc in the six months ended 30 June 2019 represented 17.6% of revenue within the Distribution segment.

External sales to British Gas Ltd in the six months ended 30 June 2019 represented 11.2% of revenue within the Distribution segment.

Sales and purchases between the different segments are made at commercial prices.

4.         SEGMENTAL ANALYSIS (CONTINUED)

The accounting policies of the reportable segments are the same as the Group's accounting policies which are described in the Group's latest annual financial statements. The segment results represent the profit earned by each segment without allocation of the share of profits of joint ventures, associates, finance income and finance costs and income tax expense.

5.   INCOME TAX EXPENSE

Tax for the six month period ended 30 June 2020 is charged at 19.7% (six months ended 30 June 2019: 18.3%) which represents the best estimate of the average annual effective tax rate expected for the full year, as applied to the pre-tax income of the six month period. However, due to the tax rate change discussed below, the effective tax rate for the six month period to June 2020 is 35.2%.

Finance Bill 2016 included provisions to reduce the main rate of corporation tax to 17% from 1 April 2020. However, in the March 2020 Budget it was announced that the cut in the rate to 17% will now not occur and the Corporation Tax Rate will be held at 19%. This was substantively enacted through the Provisional Collection of Taxes Act on 17 March 2020. This has led to a one off deferred tax adjustment of £10.9m which is included within the £13.4 deferred tax charge in the income statement.

6.   RETIREMENT BENEFIT SCHEMES

The defined benefit obligation as at 30 June 2020 is calculated on a year-to-date basis, using the annual actuarial valuation as at 31 December 2019. The triennial valuation as at 31 March 2016 was finalised in September 2018. The valuation at 31 March 2019 is to be concluded in 2020. There have not been any significant fluctuations or one-time events since that time that would require adjustment to the actuarial assumptions made at June 2020.

7.   FINANCIAL INSTRUMENTS

Except as detailed in the following table, the directors consider that the carrying value amounts of financial assets and financial liabilities are approximately equal to their fair values:

* The borrowings from the European Investment Bank were drawn down in four tranches, repayable in 2020. The spread of interest rate is as follows:

2020: 4.227% - 4.586%

8.   RELATED PARTY TRANSACTIONS

Group

Transactions entered into with related parties and balances outstanding were as follows:

8.         RELATED PARTY TRANSACTIONS (CONTINUED)

Group - continued

Sales and purchases from related parties were made at commercial prices.

Interest on loans to/from Group companies is charged at a commercial rate.

8.         RELATED PARTY TRANSACTIONS (CONTINUED)

Company

Transactions entered into with related parties and balances outstanding were as follows: