<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported):
June 13, 1997
PACIFICORP
(Exact name of registrant as specified in its charter)
State of Oregon 1-5152 93-0246090
(State of Incorporation) (Commission (I.R.S. Employer
File No.) Identification No.)
700 N.E. Multnomah, Suite 1600, Portland, Oregon 97232-4116
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(503) 731-2000
No Change
(Former Name or Former Address, if changed since last report)
<PAGE>2
Item 5. OTHER EVENTS
Information contained in the news release of PacifiCorp (the
"Company") issued June 13, 1997 relating to the proposed cash offer by a
subsidiary of the Company for all outstanding shares of The Energy Group and
the proposed sale of the Company's wholly owned telecommunications subsidiary,
Pacific Telecom, Inc. ("PTI"), is incorporated herein by reference. Also
incorporated by reference is the information contained in the announcement of
PacifiCorp and The Energy Group, dated June 13, 1997, relating to the proposed
cash offer for shares of The Energy Group.
Item 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS
(b) Pro forma Financial information
1. Unaudited pro forma condensed consolidated income
statements for the three years ended December 31, 1996,
1995 and 1994.
2. Unaudited pro forma condensed consolidated balance sheet
and income statement as of and for the three months
ended March 31, 1997.
(c) Exhibits.
99(a) PacifiCorp news release issued June 13, 1997.
99(b) Announcement of PacifiCorp and The Energy Group, dated
June 13, 1997, relating to the proposed cash offer for
shares of The Energy Group.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PACIFICORP
(Registrant)
By: RICHARD T. O'BRIEN
__________________________________
Richard T. O'Brien
Senior Vice President and
Chief Financial Officer
Date: June 18, 1997
<PAGE>3
<TABLE>
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
For the Year Ended December 31, 1994
(Unaudited)
In Millions of Dollars
<CAPTION>
Historical
________________________________ Pro Forma
Consolidated Consolidated
PacifiCorp Pacific Telecom PacifiCorp
____________ _______________ ____________
<S> <C> <C> <C>
Revenues $3,498.0 $(696.5) $2,801.5
Expenses
Depreciation and amortization 424.3 (104.5) 319.8
Operations, maintenance and other 2,051.4 (427.3) 1,624.1
_______ ______ _______
Total 2,475.7 (531.8) 1,943.9
_______ ______ _______
Income from Operations 1,022.3 (164.7) 857.6
Interest Expense and Other
Interest expense 334.5 (34.8) 299.7
Interest capitalized (14.5) (14.5)
Minority interest and other (15.5) (18.6) (34.1)
_______ ______ _______
Total 304.5 (53.4) 251.1
_______ ______ _______
Income from continuing operations
before income taxes 717.8 (111.3) 606.5
Income taxes 249.8 (40.8) 209.0
_______ ______ _______
Income from continuing operations 468.0 (70.5) 397.5
Discontinued operations - $ 70.5 70.5
_______ ====== _______
Net Income $ 468.0 $ 468.0
======= =======
Earnings on Common Stock
Continuing operations $ 428.3 $ 357.8
Discontinued operations - 70.5
_______ _______
$ 428.3 $ 428.3
======= =======
Average number of common shares
outstanding (Thousands) 282,912 282,912
Earnings per Common Share
Continuing operations $ 1.51 $ 1.26
Discontinued operations - .25
_______ ______
$ 1.51 $ 1.51
======= ======
<FN>
See accompanying notes to the pro forma condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>4
<TABLE>
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
For the Year Ended December 31, 1995
(Unaudited)
In Millions of Dollars
<CAPTION>
Historical
________________________________ Pro Forma
Consolidated Consolidated
PacifiCorp Pacific Telecom PacifiCorp
____________ _______________ ____________
<S> <C> <C> <C>
Revenues $3,416.9 $(640.1) $2,776.8
Expenses
Depreciation and amortization 445.6 (111.9) 333.7
Operations, maintenance and other 1,915.4 (362.9) 1,552.5
_______ ______ _______
Total 2,361.0 (474.8) 1,886.2
_______ ______ _______
Income from Operations 1,055.9 (165.3) 890.6
Interest Expense and Other
Interest expense 378.7 (42.3) 336.4
Interest capitalized (15.1) (15.1)
Minority interest and other (51.5) 27.0 (24.5)
_______ ______ _______
Total 312.1 (15.3) 296.8
_______ ______ _______
Income from continuing operations
before income taxes 743.8 (150.0) 593.8
Income taxes 238.8 (47.0) 191.8
_______ ______ _______
Income from continuing operations 505.0 (103.0) 402.0
Discontinued operations - $ 103.0 103.0
_______ ====== _______
Net Income $ 505.0 $ 505.0
======= =======
Earnings on Common Stock
Continuing operations $ 466.3 $ 363.3
Discontinued operations - 103.0
_______ _______
$ 466.3 $ 466.3
======= =======
Average number of common shares
outstanding (Thousands) 284,272 284,272
Earnings per Common Share
Continuing operations $ 1.64 $ 1.28
Discontinued operations - .36
_______ ______
$ 1.64 $ 1.64
======= ======
<FN>
See accompanying notes to the pro forma condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>5
<TABLE>
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
For the Year Ended December 31, 1996
(Unaudited)
In Millions of Dollars
<CAPTION>
Historical
________________________________ Pro Forma
Consolidated Consolidated
PacifiCorp Pacific Telecom PacifiCorp
_____________ _______________ ____________
<S> <C> <C> <C>
Revenues $4,293.8 $(521.1) $3,772.7
Expenses
Depreciation and amortization 530.4 (106.5) 423.9
Operations, maintenance and other 2,518.3 (255.9) 2,262.4
_______ ______ _______
Total 3,048.7 (362.4) 2,686.3
_______ ______ _______
Income from Operations 1,245.1 (158.7) 1,086.4
Interest Expense and Other
Interest expense 465.7 (40.8) 424.9
Interest capitalized (11.9) (11.9)
Minority interest and other 2.5 4.3 6.8
_______ ______ _______
Total 456.3 (36.5) 419.8
_______ ______ _______
Income from continuing operations
before income taxes 788.8 (122.2) 666.6
Income taxes 283.9 (47.5) 236.4
_______ ______ _______
Income from continuing operations 504.9 (74.7) 430.2
Discontinued operations - $ 74.7 74.7
_______ ====== _______
Net Income $ 504.9 $ 504.9
======= =======
Earnings on Common Stock
Continuing operations $ 475.1 $ 400.4
Discontinued operations - 74.7
_______ _______
$ 475.1 $ 475.1
======= =======
Average number of common shares
outstanding (Thousands) 292,494 292,494
Earnings per Common Share
Continuing operations $ 1.62 $ 1.37
Discontinued operations - .25
_______ ______
$ 1.62 $ 1.62
======= ======
<FN>
See accompanying notes to the pro forma condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>6
<TABLE>
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
For the Three Months Ended March 31, 1997
(Unaudited)
In Millions of Dollars
<CAPTION>
Historical
________________________________ Pro Forma
Consolidated Consolidated
PacifiCorp Pacific Telecom PacifiCorp
____________ _______________ ____________
<S> <C> <C> <C>
Revenues $1,169.8 $(128.0) $1,041.8
Expenses
Depreciation and amortization 137.0 (27.8) 109.2
Operations, maintenance and other 731.2 (60.0) 671.2
_______ ______ _______
Total 868.2 (87.8) 780.4
_______ ______ _______
Income from Operations 301.6 (40.2) 261.4
Interest Expense and Other
Interest expense 117.0 (10.5) 106.5
Interest capitalized (2.9) (2.9)
Minority interest and other (2.5) 1.5 (1.0)
_______ ______ _______
Total 111.6 (9.0) 102.6
_______ ______ _______
Income from continuing operations
before income taxes 190.0 (31.2) 158.8
Income taxes 69.0 (12.9) 56.1
_______ ______ _______
Income from continuing operations 121.0 (18.3) 102.7
Discontinued operations - $ 18.3 18.3
_______ ====== _______
Net Income $ 121.0 $ 121.0
======= =======
Earnings on Common Stock
Continuing operations $ 114.9 $ 96.6
Discontinued operations - 18.3
_______ _______
$ 114.9 $ 114.9
======= =======
Average number of common shares
outstanding (Thousands) 295,393 295,393
Earnings per Common Share
Continuing operations $ .39 $ .33
Discontinued operations - .06
_______ _______
$ .39 $ .39
======= =======
<FN>
See accompanying notes to the pro forma condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>7
<TABLE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1997
(Unaudited)
In Millions of Dollars
<CAPTION>
Historical
________________________ Elimination Pro Forma
Consolidated Pacific of Affiliated Other Consolidated
PacifiCorp Telecom Balances (a) Adjustments (b) PacifiCorp
_____________ _______ _____________ _______________ ____________
<S> <C> <C> <C> <C> <C>
Assets
Property, Plant and Equipment - Net $10,205.9 $(944.8) $ 9,261.1
Net assets of discontinued operations 782.7 $(128.1) 654.6
Current assets 954.7 (216.8) $40.9 778.8
Other Assets 3,344.1 (499.5) 38.9 2,883.5
________ ______ ____ ______ ________
Total Assets $14,504.7 $(878.4) $79.8 $(128.1) $13,578.0
======== ====== ==== ====== ========
Liabilities and Shareholders Equity
Common Equity $ 4,075.4 $ 4,075.4
Preferred Stock 135.5 135.5
Preferred Stock Subject to Mandatory
Redemption 175.0 175.0
Guaranteed Preferred Beneficial Interests in
Company's Junior Subordinated Debentures 209.7 209.7
Long-term Debt 5,205.8 $(501.4) $33.5 4,737.9
Short-term debt and long-term
currently maturing 971.9 (15.9) 37.8 $(128.1) 865.7
Other current liabilities 876.4 (132.1) 3.1 747.4
Deferred income taxes and investment
tax credits 2,092.8 (158.0) 1,934.8
Other deferred credits 729.2 (53.2) 5.4 681.4
Minority interest 33.0 (17.8) 15.2
________ ______ ____ ______ ________
Total Liabilities and Shareholders Equity $14,504.7 $(878.4) $79.8 $(128.1) $13,578.0
======== ====== ==== ====== ========
<FN>
See accompanying notes to the pro forma condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>8
PACIFICORP
Notes to Pro forma Condensed Consolidated Financial Statements
The Company's unaudited pro forma condensed consolidated financial statements
give effect to the disposal of PTI as if such transaction had occurred, for
statements of consolidated income for the years ended December 31, 1994, 1995,
1996 and 1997, and for the consolidated balance sheet as of March 31, 1997.
PTI will be presented as a discontinued segment and historical financial
statements of the Company will be restated to reflect management's decision to
dispose of this segment.
These unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the Company's 1996 audited consolidated financial
statements. The pro forma information shown is not necessarily indicative of
the results that would have been reported had such events actually occurred on
the dates specified, nor is it indicative of the Company's future results.
The accompanying pro forma condensed consolidated income statements consist of
the historical income statements of the Company for the years ended
December 31, 1994, 1995 and 1996 and for the three months ended March 31, 1997
less the historical income statements of PTI. Certain additional adjustments
should be considered.
(i) Assuming that PTI was sold for its net book value of $756 million on
January 1, 1996, a loan agreement would have required $450 million of
debt repayment resulting in estimated interest savings of $25 million and
increased earnings on common stock of $16 million, or $.05 per share. If
the remaining $306 million of proceeds had been used to repay debt, the
additional interest expense reduction in 1996 would have been $17 million
and earnings on common stock would have increased an additional
$11 million, or an additional $.04 per share.
(ii) Assuming that PTI was sold for net book value of $780 million on
January 1, 1997, a loan agreement would have required $134 million of
debt repayment resulting in estimated interest savings of $2 million and
increased earnings on common stock of $1 million. If the remaining
$646 million of proceeds had been used to repay debt, the additional
interest expense reduction for the three months ended March 31, 1997
would have been $9 million, earnings available on common would have
increased an additional $6 million and earnings per share would have
increased an additional $.02.
The accompanying pro forma condensed consolidated balance sheet as of
March 31, 1997 consists of the historical unaudited balance sheet of the
Company, less the historical unaudited balance sheet of PTI, plus the
elimination of affiliated transactions and certain pro forma adjustments
described below:
(a) Affiliated balances between the Company and its subsidiaries and PTI,
eliminated in the consolidation process, were restored on the pro forma
balance sheet.
(b) Proceeds of $128 million were used to repay short-term debt, as required
by the PacifiCorp Holdings, Inc. revolving credit agreement.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
_______ ___________ ____
<S> <C> <C>
99(a) PacifiCorp news release issued June 13, 1997.
99(b) Announcement of PacifiCorp and The Energy Group,
dated June 13, 1997, relating to the proposed
cash offer for shares of The Energy Group.
</TABLE>
<PAGE>
EXHIBIT 99(a)
_____________________________________________________________________________
PACIFICORP NEWS RELEASE
PACIFIC POWER UTAH POWER
_____________________________________________________________________________
FOR FURTHER INFORMATION CONTACT:
Scott Hibbs for investor contacts--(503) 731-2123
Angela Hult for investor contacts--(503) 731-2192
Dave Mead for media contacts--(503) 464-6262
June 13, 1997
PACIFICORP TO ACQUIRE THE ENERGY GROUP FOR $9.6 BILLION;
GAINS SIGNIFICANT ENERGY PRESENCE ON THREE CONTINENTS
NEW YORK--PacifiCorp (NYSE: PPW), a diversified energy company in the
United States and Australia, dramatically accelerated its global expansion
efforts today, announcing a cash tender offer for The Energy Group PLC
(LSE/NYSE: TEG), a diversified energy company in the United Kingdom, the U.S.
and Australia.
The boards of directors of both companies unanimously approved the
transaction, valued at $9.6 billion in debt and equity.
PacifiCorp Holdings, Inc., a wholly owned subsidiary of PacifiCorp, is
offering 6.955 pounds ($11.35) per ordinary share (including a net dividend of
5.5 pence to be paid prior to consummation of the offer) for The Energy Group.
PacifiCorp will assume The Energy Group's $3.8 billion of debt in the
transaction.
Upon completion of the transaction, PacifiCorp will have 5 million
electric and gas customers, 17,000 megawatts of generation capacity and more
than 10 billion tons of coal reserves.
In addition, PacifiCorp will be sharpening its focus in the energy
sector by the planned sale of its Pacific Telecom (PTI) subsidiary to Century
Telephone Enterprises, Inc. (NYSE: CTL) for $1.5 billion in cash, plus
assumption of Pacific Telecom debt.
Fred Buckman, President and Chief Executive Officer of PacifiCorp, said,
"This powerful combination positions the combined group as a premier global
energy company with a significant presence on three continents. The Energy
Group's large, diverse customer base, expertise in energy trading and risk
management and industry-leading position in coal strategically complement
PacifiCorp's competitive strengths in fuel management, low-cost power
generation and bulk power marketing.
PacifiCorp and The Energy Group are already among the lowest-cost energy
suppliers in the marketplace and are committed to meeting customers' total
energy needs. The combination will provide contestable customers with access
to highly competitive energy prices and a wide range of superior products and
services," Buckman said. "Additionally, the experience gained in contestable
markets will benefit our retail customers as the U.S. market is restructured."
(more)
<PAGE>2
PacifiCorp to Acquire The Energy Group... Page 2
____________________________________________________________________________
Derek Bonham, The Energy Group Executive Chairman, said, "Our results,
announced today, demonstrate the soundness of our business. We have
successfully taken the initial steps to implement our strategy.
"PacifiCorp recognized the benefits of this strategy and has offered a
price that represents excellent value for our shareholders," Bonham said.
The combination is expected to be meaningfully accretive to PacifiCorp's
earnings in the first year following completion of the transaction and
thereafter, without considering the benefits of synergy resulting from
potential cost reductions and revenue enhancements.
PacifiCorp will acquire The Energy Group through PacifiCorp Holdings,
Inc., which will finance the cash transaction initially through borrowings and
the sale of its noncore assets. The debt financing will be provided through
multiple debt facilities arranged by Citibank, Goldman, Sachs & Co., and J.P.
Morgan.
The offer is subject to regulatory approvals in the U.K. and to the
conditions of the Hart-Scott-Rodino Antitrust Act in the U.S. PacifiCorp
expects to mail formal tender offer documents to The Energy Group shareholders
shortly and to consummate the offer within a few months.
Goldman, Sachs & Co. is PacifiCorp's financial adviser for the
transaction and acted as coordinator for the financing. The Energy Group is
represented by Lazard and Morgan Stanley & Co. Limited.
The Energy Group, previously part of Hanson PLC, became an independent
company on February 24, 1997. It owns Eastern, the largest British regional
electric company (REC) with 3.1 million retail electric and gas customers.
PacifiCorp has 1.4 million retail electric customers in the western U.S. and
550,000 in the State of Victoria, Australia.
Eastern is one of the lowest-cost electricity suppliers in the U.K., and
is well-positioned to prosper when the U.K. market becomes fully competitive
in 1998. U.K. electricity customers with demand for more than 100 kilowatts
can now choose their supplier.
The Energy Group owns the world's largest private coal company, Peabody,
a low-cost, low-sulfur coal producer with more than 9 billion tons of reserves
in the U.S. and 260 million tons of reserves in Australia. Peabody provides
fuel to 150 power plants in the U.S. PacifiCorp is a major coal operator in
the U.S. with 421 million tons of reserves and in Australia with 450 million
tons.
PacifiCorp and The Energy Group both have natural gas marketing skills
and assets. PacifiCorp recently purchased TPC Corporation, a Houston-based
natural gas storage and marketing company.
PacifiCorp owns or controls 10,000 megawatts of generation in the U.S.,
while The Energy Group has 6,700 megawatts of generation in the U.K.
PacifiCorp is one of the lowest-cost providers of electricity in the U.S.,
with average production costs 25 percent less than the national average.
The combination positions the company to be the largest power sales,
marketing and trading company in the U.S. It joins PacifiCorp's significant
western U.S. power marketing business, its expanding eastern U.S. power
marketing business and Peabody's presence as one of the largest suppliers of
fuel to the U.S. electricity industry.
(more)
<PAGE>3
PacifiCorp to Acquire The Energy Group... Page 3
____________________________________________________________________________
Buckman said he was delighted with the opportunity to work with The
Energy Group management team and will recommend that Bonham and John Devaney,
Chief Executive of Eastern, be invited to join the Board of Directors of
PacifiCorp following the acquisition.
In addition, Buckman said that a management committee will be formed
consisting of Bonham and Devaney, as well as Eric Anstee, Finance Director of
The Energy Group, Irl Engelhardt, Chief Executive of Peabody, and senior
executives from PacifiCorp.
Buckman will remain as President and Chief Executive Officer of the
combined group, Richard O'Brien as Senior Vice President and Chief Financial
Officer and Verl Topham as Senior Vice President and General Counsel.
The combined company will have a workforce of 26,000. The companies do
not expect the combination to result in significant workforce reductions.
As part of the financing of the transaction, PacifiCorp has entered into
an agreement to sell Pacific Telecom, a rural local exchange telephone company
with 570,000 customer access lines in the U.S., to Louisiana-based Century for
$1.5 billion in cash, in addition to Century's assumption of PTI's debt.
"Pacific Telecom has been an important part of PacifiCorp's success for
many years; however, our strategic focus is to become a leading global energy
provider," Buckman said. "This transaction focuses PacifiCorp squarely on the
energy sector and will enable us to better meet the diversified energy needs
of our customers."
The sale of Pacific Telecom is subject to regulatory approvals in
certain of the states in which it does business.
PacifiCorp also plans to sell other noncore assets, including PacifiCorp
Financial Services and Pacific Generation Company.
###
<PAGE>1
EXHIBIT 99(b)
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO
CANADA, AUSTRALIA OR JAPAN.
[PACIFICORP LOGO] [ENERGY GROUP LOGO]
FOR IMMEDIATE RELEASE 13 JUNE 1997
PACIFICORP
RECOMMENDED CASH OFFER
FOR THE ENERGY GROUP PLC
PacifiCorp and The Energy Group announce the terms of a recommended cash offer
for The Energy Group to be made by Goldman Sachs International on behalf of
PacifiCorp Acquisitions, a wholly owned subsidiary of PacifiCorp.
The Offer:
. including the dividend referred to below, values each Energy Group
Share at 695.5 pence;
. allows holders of Energy Group Shares to retain the right to
receive a dividend of 5.5 pence (net) per Energy Group Share to be
paid on 4 July 1997;
. including the dividend referred to above, represents a premium of
approximately 31 per cent. to the Closing Price of 529.5 pence per
Energy Group Share on 13 May 1997, the Business Day 30 days before
this announcement and a premium of approximately 24 per cent. to
the Closing Price of 561.5 pence per Energy Group Share on 9 June
1997, the last Business Day before the announcement by The Energy
Group that it was involved in talks with PacifiCorp in relation to
the Offer;
. values the fully diluted share capital of The Energy Group at
approximately pound sterling 3,659 million; and
. includes a Loan Note Alternative.
The board of The Energy Group, which has been so advised by Lazard and Morgan
Stanley, its financial advisers, considers the terms of the Offer to be fair
and reasonable. In providing advice to the board of The Energy Group, Lazard
and Morgan Stanley have taken account of the directors of The Energy Group's
commercial assessment of the Offer. Accordingly, the directors of The Energy
Group will unanimously recommend all holders of Energy Group Shares and Energy
Group ADSs to accept the Offer, as they have irrevocably undertaken to do in
respect of their personal holdings of 116,385 Energy Group Shares and 1,550
Energy Group ADSs (each Energy Group ADS representing four Energy Group
Shares).
The Combined Group will be an international low-cost power provider, with:
. over five million retail electricity customers across the United
States, the United Kingdom and Australia;
. 17,000 megawatts of generation capacity; and
. more than 9 billion tonnes of coal reserves, of which half is low
sulphur.
The Combined Group will be committed to a strategy of capitalising on the
on-going liberalisation of the world-wide energy industry by reducing costs
and increasing efficiency in its core markets, while
<PAGE>2
expanding into high-growth international markets and building strong positions
in power generation, marketing and distribution.
Mr. Frederick Buckman intends to recommend that Mr. Derek Bonham and Mr. John
Devaney be invited to join the board of directors of the Combined Group
following the Acquisition. In addition, it is intended that following the
Acquisition a management committee will be formed consisting of Mr. Derek
Bonham, Mr. John Devaney, Mr. Eric Anstee and Mr. Irl Engelhardt of The Energy
Group and senior executives from PacifiCorp. Mr. Frederick Buckman will remain
as President and Chief Executive Officer of the Combined Group, Mr. Richard
O'Brien as Chief Financial Officer and Mr. Verl Topham as Senior Vice
President and General Counsel.
Commenting on the Offer, Mr Frederick Buckman, President and Chief Executive
Officer of PacifiCorp said;
"We are delighted to announce an agreed offer for The Energy Group. We believe
that The Energy Group's large, diverse customer base, expertise in energy
trading and risk management and leading position in coal complement our own
strengths in fuel management, low cost power generation and bulk power
marketing. The Acquisition represents a landmark step in achieving our
strategy and will position the Combined Group as a premier global energy group
with a leading presence in three continents."
Mr Derek Bonham, Chairman of The Energy Group, said:
"Our results, announced today, demonstrate the soundness of our businesses.
We have successfully taken the initial steps to implement our strategy.
PacifiCorp recognised the benefits of this strategy and has offered a price
that represents excellent value for our shareholders."
The Conditions of the Offer are attached as Appendix I. Appendix V contains
definitions of certain expressions used in this announcement.
This summary should be read in conjunction with the attached announcement.
ANALYSTS' MEETING
There will be an analysts' meeting today at 10.15 a.m. at The City
Presentation Centre, Chiswell Street, London EC1.
ENQUIRIES:
PACIFICORP ACQUISITIONS/PACIFICORP
INVESTORS: Scott Hibbs 1 503 731 2123
Angela Hult 1 503 731 2192
Dave Mead 1 503 464 6262
GOLDMAN SACHS INTERNATIONAL Richard Sapp 44 171 774 1000
Meyrick Cox 44 171 774 1000
BRUNSWICK Alan Parker 44 171 404 5959
THE ENERGY GROUP Derek Bonham 44 171 647 3200
Eric Anstee 44 171 647 3200
Aviva Gershuny-Roth 44 171 647 3200
LAZARD BROTHERS Nicholas Jones 44 171 588 2721
John Wilford 44 171 588 2721
MORGAN STANLEY Robert Jones 1 212 761 8230
Piers de Montfort 44 171 513 5007
BRUNSWICK Louise Charlton 44 171 404 5959
<PAGE>3
The Offer will not be made, directly or indirectly, in or into Canada,
Australia or Japan. Accordingly, copies of this announcement are not being,
and must not be, mailed or otherwise distributed or sent in or into Canada,
Australia or Japan.
Goldman Sachs International, which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, is acting for PacifiCorp
Acquisitions and PacifiCorp and for no one else in connection with the Offer
and will not be responsible to anyone other than PacifiCorp Acquisitions and
PacifiCorp for providing the protections afforded to its customers or for
giving advice in relation to the Offer. Goldman Sachs International will be
acting through Goldman, Sachs & Co. for the purposes of making the Offer in
and into the United States.
Lazard and Morgan Stanley & Co. Limited, which are regulated in the United
Kingdom by The Securities and Futures Authority Limited, are acting for The
Energy Group and for no one else in connection with the Offer and will not be
responsible to anyone other than The Energy Group for providing the
protections afforded to their customers or for giving advice in relation to
the Offer.
<PAGE>4
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO
CANADA, AUSTRALIA OR JAPAN.
[PACIFICORP LOGO] [ENERGY GROUP LOGO]
FOR IMMEDIATE RELEASE 13 JUNE 1997
PACIFICORP
RECOMMENDED CASH OFFER
FOR THE ENERGY GROUP PLC
1 INTRODUCTION
The boards of PacifiCorp and The Energy Group announce the terms of a
recommended cash offer to be made by Goldman Sachs International on
behalf of PacifiCorp Acquisitions, a wholly owned subsidiary of
PacifiCorp, for the whole of the issued and to be issued share capital
of The Energy Group.
The board of The Energy Group, which has been so advised by Lazard and
Morgan Stanley, its financial advisers, considers the terms of the Offer
to be fair and reasonable. In providing advice to the board of The
Energy Group, Lazard and Morgan Stanley have taken account of the
directors of The Energy Group's commercial assessment of the Offer.
Accordingly, the directors of The Energy Group will unanimously
recommend all holders of Energy Group Shares and Energy Group ADSs to
accept the Offer, as they have irrevocably undertaken to do in respect
of their personal holdings of 116,385 Energy Group Shares and 1,550
Energy Group ADSs.
The definitions of certain expressions used in this announcement are
contained in Appendix V.
2 THE OFFER
The Offer will be subject to the Conditions set out in Appendix I which
will, together with the further terms of the Offer, appear in the Offer
Document and will be made by Goldman Sachs International, on behalf of
PacifiCorp Acquisitions, on the following basis:
for each Energy Group Share 690 pence; and
for each Energy Group ADS pound sterling 27.60
In addition, holders of Energy Group Shares will retain the right to
receive a dividend of 5.5 pence (net) per Energy Group Share announced
today and to be paid on 4 July 1997 to holders of Energy Group Shares on
the register at close of business on 27 June 1997.
The Offer values The Energy Group at approximately pound sterling 3,659
million (assuming the exercise in full of all outstanding options and
the vesting of all outstanding awards under the Energy Group Share
Schemes). Including the dividend referred to above, the Offer represents
a premium of approximately 31 per cent. to the Closing Price of 529.5
pence per Energy Group Share on 13 May 1997, the Business Day 30 days
before this announcement and a premium of approximately 24 per cent. to
the Closing Price of 561.5 pence per Energy Group Share on 9 June 1997,
the last Business Day before the announcement by The Energy Group that
it was involved in talks with PacifiCorp in relation to the Offer.
The Offer will be subject to the applicable requirements of both the
City Code in the United Kingdom and United States federal securities
laws.
<PAGE>5
3 LOAN NOTE ALTERNATIVE
A Loan Note Alternative will be available to holders of Energy Group
Shares (other than North American Persons and certain other
shareholders) who validly accept the Offer on the basis of, for every
pound sterling 1 of cash under the Offer, pound sterling 1 nominal of
Loan Notes, subject to aggregate valid elections being received on or
before the date on which all the Conditions are waived, fulfilled or
satisfied as applicable, for in excess of pound sterling 1 million
nominal value of Loan Notes. If insufficient elections are received,
holders of Energy Group Shares who elect for the Loan Note Alternative
will instead receive cash in accordance with the terms of the Offer.
Goldman Sachs International has advised that, based on market conditions
on 12 June 1997 (the latest practicable date prior to the publication of
this announcement), in its opinion, if the Loan Notes had then been in
issue, the value of each pound sterling 1 nominal would have been
approximately 98 pence.
In considering the Loan Note Alternative, holders of Energy Group Shares
should note that the obligations of the issuer of the Loan Notes are not
guaranteed.
A summary of the terms of the Loan Notes is set out in Appendix II to
this announcement.
4 INFORMATION ON THE PACIFICORP GROUP
PacifiCorp is a diversified energy group based in Portland, Oregon. The
company serves 1.4 million retail customers in Oregon, Washington,
California, Montana, Idaho, Utah and Wyoming. It is one of the lowest
cost electricity suppliers in the United States, with an average net
retail price in 1996 of 4.8 cents per kilowatt-hour, compared with a
national average of 7.15 cents. PacifiCorp is the leading private
wholesaler of electricity in the western United States and is one of the
top power marketers in the eastern United States. In addition,
PacifiCorp recently acquired TPC Corporation, a natural gas storage,
processing and marketing company based in Houston, Texas.
PacifiCorp operates one of the largest open-access transmission systems
in the United States with over 150 access points across 15,000 circuit
miles and has generating capacity of over 10,000 megawatts. It is the
12th largest coal producer in the United States, producing 22.6 million
tonnes in 1996. In 1996, the average electricity production costs at its
coal-fired plants were 25 per cent. lower than the national average.
PacifiCorp also has substantial operations in Australia through
Powercor, the largest electricity distribution business in Victoria and
its partnership interest in the Hazelwood power generating station and
associated mine.
PacifiCorp is listed on the New York and Pacific Stock Exchanges under
the symbol "PPW". In the year ended 31 December 1996, PacifiCorp
recorded net income attributable to holders of ordinary stock of
$475 million based on revenues of $4,298 million. As at the close of
trading on the New York Stock Exchange on 12 June 1997, PacifiCorp had a
market capitalisation of approximately $6.4 billion.
PacifiCorp Acquisitions, a wholly owned subsidiary of PacifiCorp, is a
newly incorporated unlimited company incorporated in England and Wales
on 9 June 1997 for the purpose of making the Offer.
5 INFORMATION ON THE ENERGY GROUP
The Energy Group is a diversified international energy group which
includes Peabody, the world's largest private producer of coal, and
Eastern, one of the leading integrated electricity and gas groups in the
United Kingdom.
Peabody, the largest producer of coal in the United States, operates 26
underground and surface mines in the United States and three surface
mines in Australia. As at 30 September 1996, Peabody had 8.5 billion
<PAGE>6
tonnes of proven and probable coal reserves and in the year ended that
date sold 148 million tonnes of coal. Peabody Australia, one of the ten
largest coal producers in Australia, has interests in four surface mines
in New South Wales, three of which currently operate under its
management. Peabody's equity share of the coal sales of these mines
amounted to 6.1 million tonnes in the year ended 30 September 1996 and
its equity share of the proven and probable reserves associated with
these operations as at 30 September 1996 amounted to 263 million tonnes.
Through Eastern, The Energy Group is one of the leading integrated
electricity and gas groups in the United Kingdom and is involved in a
wide range of operations:
. Eastern Generation, the fourth largest generator of electricity in
Great Britain. Eastern Generation currently owns, operates or has
an interest in eight power stations, representing approximately 10
per cent. of the United Kingdom's total registered generating
capacity as at 30 September 1996;
. Eastern Power & Energy Trading, which manages the price and volume
risks associated with the generation, wholesaling and sale to end
users of electricity. These exposures are managed by trading its
contract portfolio, and bidding Eastern's generation output into
the Pool (the electricity trading market in England and Wales);
. Eastern Natural Gas, a major wholesaler and retail supplier of
natural gas in the United Kingdom with upstream shipping,
purchasing, trading and sales operations, is one of the largest
suppliers of natural gas in the United Kingdom after Centrica plc.
Its principal activities are the buying and selling of natural
gas. It also has small equity interests in three gas-producing
fields in the North Sea; and
. Eastern Group, one of the largest suppliers of electricity in the
United Kingdom with over three million customers whose authorised
area covers approximately 20,300 sq. km. in the east of England
and parts of North London.
In the year ended 30 September 1996, The Energy Group reported pro forma
consolidated turnover of pound sterling 3,635 million and pro forma
consolidated net income of pound sterling 310 million. The Energy
Group's results for the six months ended 31 March 1997 are set out in
Appendix III.
6 REASONS FOR THE OFFER
A number of trends in the world energy industry are influencing
PacifiCorp and The Energy Group. Energy providers have been required to
provide better service, lower prices and more choice to their customers
in the United States, the United Kingdom, Europe and Australia. The
deregulation of electricity markets has led to increased customer choice
and competition between suppliers. Industry participants have reacted to
this by restructuring their businesses and diversifying their
activities.
The Combined Group will be an international low-cost power provider,
with:
. over five million retail electricity customers across the United
States, the United Kingdom and Australia;
. 17,000 megawatts of generation capacity; and
. more than 9 billion tonnes of coal reserves, of which half is low
sulphur.
The Combined Group will be committed to a strategy of capitalising on
the on-going liberalisation of the world-wide energy industry by
reducing costs and increasing efficiency in its core markets while
expanding into high-growth international markets and building strong
positions in power generation, marketing and distribution.
<PAGE>7
The combination of PacifiCorp and The Energy Group will create a premier
international vertically integrated energy provider able to:
. continue both companies' proven ability in providing value added
services to customers at competitive prices;
. capitalise on deregulation in both home markets and abroad and
further enhance competition;
. integrate fuel management, power generation, energy marketing and
distribution to customers on three continents;
. build on existing skills and adopt best practices in mining,
energy marketing, trading and risk management and information
technology; and
. increase the efficient utilisation of generation resources through
effective fuel management and plant optimisation.
7 REGULATION
The Offer is subject to certain regulatory consents and confirmations
being obtained. Amongst other approaches to relevant regulatory
authorities, PacifiCorp Acquisitions is making a submission to the
Office of Fair Trading concerning the Offer and, together with The
Energy Group, will enter into discussions with the DGES. The Offer is
also subject to the expiry or early termination of the waiting period
under the US HSR Act.
8 THE ENERGY GROUP SHARE SCHEMES
The Offer will extend to any fully paid Energy Group Shares which are
unconditionally allotted or issued while the Offer is open for
acceptance, including those unconditionally allotted or issued pursuant
to the exercise of options under the Energy Group Share Schemes.
Appropriate proposals will be made in due course to the participants in
the Energy Group Share Schemes if the Offer becomes or is declared
unconditional in all respects.
9 DIRECTORS, MANAGEMENT AND EMPLOYEES
PacifiCorp Acquisitions has given assurances to the board of The Energy
Group that the existing employment rights, including pension rights, of
all Energy Group directors, management and employees will be fully
safeguarded. PacifiCorp looks forward to working with Energy Group
employees.
Mr. Frederick Buckman intends to recommend that Mr. Derek Bonham and Mr.
John Devaney be invited to join the board of directors of the Combined
Group following the Acquisition. In addition, it is intended that
following the Acquisition a management committee will be formed
consisting of Mr. Derek Bonham, Mr. John Devaney, Mr. Eric Anstee and
Mr. Irl Engelhardt of The Energy Group and senior executives from
PacifiCorp. Mr. Frederick Buckman will remain as President and Chief
Executive Officer of the Combined Group, Mr. Richard O'Brien as Chief
Financial Officer and Mr. Verl Topham as Senior Vice President and
General Counsel.
10 HOLDINGS IN THE ENERGY GROUP
Neither PacifiCorp Acquisitions, nor any of the directors of PacifiCorp
Acquisitions, nor, so far as PacifiCorp Acquisitions is aware, any party
acting in concert with PacifiCorp Acquisitions, owns or
<PAGE>8
controls any Energy Group Securities or holds any options to purchase
Energy Group Shares or holds any derivatives referenced to Energy Group
Securities, other than as set out below:
10.1 PacifiCorp Retirement Fund, a discretionary pension fund of the
PacifiCorp Group under independent control, owns 25,000 Energy Group
Shares;
10.2 CIN Management, a subsidiary of Goldman Sachs International owns
6,517,433 Energy Group Shares;
10.3 Goldman Sachs & Co. Discretionary Customer accounts hold 111,639 Energy
Group Shares;
10.4 Goldman Sachs International Discretionary Customer accounts hold 9,000
Energy Group Shares; and
10.5 Goldman Sachs & Co. owns 776,748 Energy Group Shares.
11 FINANCING
PacifiCorp Acquisitions has arranged appropriate financing in connection
with the Offer. Other wholly-owned subsidiaries of PacifiCorp have
arranged their own funding to assist in PacifiCorp Acquisitions'
financing of the Offer.
12 GENERAL
(a) Goldman Sachs International, which is regulated in the United
Kingdom by The Securities and Futures Authority Limited, is acting
for PacifiCorp Acquisitions and PacifiCorp and for no one else in
connection with the Offer and will not be responsible to anyone
other than PacifiCorp Acquisitions and PacifiCorp for providing
the protections afforded to its customers or for giving advice in
relation to the Offer. Goldman Sachs International will be acting
through Goldman, Sachs & Co. for the purposes of making the Offer
in and into the United States.
(b) Lazard and Morgan Stanley & Co. Limited, which are regulated in
the United Kingdom by The Securities and Futures Authority
Limited, are acting for The Energy Group and for no one else in
connection with the Offer and will not be responsible to anyone
other than The Energy Group for providing the protections afforded
to their customers or for giving advice in relation to the Offer.
(c) The Offer Document will be posted in due course and will be
available for inspection at the offices of Linklaters & Paines,
Barrington House, 59-67 Gresham Street, London EC2V 7JA. The
Conditions are set out in Appendix I to this announcement.
(d) Energy Group Securities will be acquired by PacifiCorp
Acquisitions fully paid and free from all liens, equities,
charges, encumbrances and other interests and, except in respect
of the dividend referred to below, together with all rights now or
hereafter attaching thereto, including without limitation the
right to receive and retain all dividends (other than the right to
receive a dividend of 5.5 pence (net) per Energy Group Share to be
paid on 4 July 1997) and other distributions declared, made or
paid hereafter.
(e) The Initial Offer Period is expected to expire at 3.00 p.m.
(London time), 10.00 a.m. (New York City time) on the day
following the 20th Business Day from the date of the Offer
Document, unless extended. At the conclusion of the Initial Offer
Period, including any extension thereof, the Offer will be
extended for a Subsequent Offer Period of at least 14 calendar
days. Holders of Energy Group Securities will have withdrawal
rights during the Initial Offer Period, including any extension
thereof, but not during the Subsequent Offer Period, including any
extension thereof.
<PAGE>9
(f) THE OFFER WILL NOT BE MADE, DIRECTLY OR INDIRECTLY, IN OR INTO
CANADA, AUSTRALIA OR JAPAN. ACCORDINGLY, COPIES OF THIS
ANNOUNCEMENT ARE NOT BEING, AND MUST NOT BE, MAILED OR OTHERWISE
DISTRIBUTED OR SENT IN OR INTO CANADA, AUSTRALIA OR JAPAN.
(g) The Loan Notes to be issued pursuant to the Offer have not been,
nor will be, registered under the United States Securities Act of
1933, as amended, or under any relevant securities laws of any
states or district of the United States, will not be the subject
of a prospectus under the securities laws of any province of
Canada and will not be registered under any relevant securities
laws of any other country. Accordingly, unless an exception under
such Act or laws is available, the Loan Notes may not be offered,
sold or delivered, directly or indirectly, in or into the United
States, Canada, Australia or Japan.
<PAGE>10
APPENDIX I
CONDITIONS OF THE OFFER
The Offer, which will be made by Goldman Sachs International on behalf of
PacifiCorp Acquisitions, will comply with the rules and regulations of the
City Code and with US federal securities laws (except to the extent that
exemptive relief has been granted by the SEC) and the rules and regulations
made thereunder, will be governed by English law and be subject to the
jurisdiction of the courts of England and the following Conditions:
(a) valid acceptances being received (and not, where permitted, withdrawn)
by not later than 3.00 p.m. (London time), 10.00 a.m. (New York City
time) on the day following the 20th Business Day following the date of
the Offer Document (or such later time(s) and/or date(s) as PacifiCorp
Acquisitions may, subject to the rules and regulations of the City Code,
decide) in respect of not less than 90 per cent. (or such lesser
percentage as PacifiCorp Acquisitions may decide) in nominal value of
Energy Group Securities to which the Offer relates, provided that this
Condition shall not be satisfied unless PacifiCorp Acquisitions and its
wholly owned subsidiaries shall have acquired or agreed to acquire,
whether pursuant to the Offer or otherwise, Energy Group Securities
carrying in aggregate more than 50 per cent. of the voting rights then
exercisable at general meetings of The Energy Group. For the purposes of
this Condition: (i) any Energy Group Shares which have been
unconditionally allotted shall be deemed to carry the voting rights they
will carry upon being entered in the register of members of The Energy
Group; (ii) the expression "Energy Group Securities to which the Offer
relates" shall be construed in accordance with sections 428 to 430F of
the Companies Act; and (iii) valid acceptances shall be treated as
having been received in respect of any Energy Group Shares which
PacifiCorp Acquisitions shall, pursuant to section 429(8) of the
Companies Act, be treated as having acquired or contracted to acquire by
virtue of acceptance of the Offer;
(b) an announcement being made in terms reasonably satisfactory to
PacifiCorp Acquisitions that it is not the intention of the Secretary of
State for Trade and Industry to refer the Acquisition, or any matters
arising from it, to the Monopolies and Mergers Commission;
(c) the DGES indicating in terms reasonably satisfactory to PacifiCorp
Acquisitions that it is not his intention to seek modifications to any
of Eastern's licences under the Electricity Act 1989 (except on terms
reasonably satisfactory to PacifiCorp Acquisitions);
(d) the DGES indicating in terms reasonably satisfactory to PacifiCorp
Acquisitions that he will not seek undertakings or assurances from any
member of the PacifiCorp Acquisitions Group or the TEG Group (except on
terms reasonably satisfactory to PacifiCorp Acquisitions) and that in
connection with the Acquisition he will seek or agree to such
modifications (if any) and such other consents and/or directions (if
any) as are in the reasonable opinion of PacifiCorp Acquisitions
necessary or appropriate with respect to the licences referred to in
Condition (c);
(e) the expiry or early termination of all applicable waiting periods under
the US HSR Act;
(f) PacifiCorp Acquisitions being reasonably satisfied that the acquisition
of Energy Group Securities pursuant to the Offer will not subject
PacifiCorp Acquisitions to regulation, or PacifiCorp Acquisitions will
be exempt from regulation, under the US Public Utility Holding Company
Act of 1935;
(g) no final FERC order being in effect requiring FERC approval of the
acquisition of Energy Group Securities pursuant to the Offer;
<PAGE>11
(h) the Foreign Investment Review Board of Australia indicating on terms
reasonably satisfactory to PacifiCorp Acquisitions that it has no
objection to the Acquisition;
(i) no relevant authority having intervened in a way which would be likely,
or having failed to institute or implement any action the failure of
which would be likely (to an extent which is, in the case of (i) to (iv)
below, material in the context of the PacifiCorp Acquisitions Group or
of the TEG Group or of the financing of the Offer):
(i) to require, prevent or delay the divestiture or materially alter
the terms of any proposed divestiture by PacifiCorp Acquisitions
or The Energy Group or any member of the PacifiCorp Acquisitions
Group or the wider TEG Group of all or any portion of their
respective businesses, assets or properties or impose any
limitation on the ability of any of them to conduct any of their
respective businesses or to own any of their respective assets or
property or any part thereof;
(ii) to impose any limitation on the ability of any member of the
PacifiCorp Acquisitions Group or the wider TEG Group to acquire,
or to hold or to exercise effectively, directly or indirectly, any
rights of ownership in respect of shares in, or management control
over, any member of the wider TEG Group;
(iii) otherwise adversely to affect the financial or trading position of
any member of the PacifiCorp Acquisitions Group or the wider TEG
Group;
(iv) to make the Offer or its implementation or the acquisition or the
proposed acquisition of any Energy Group Shares or Energy Group
ADSs or control of The Energy Group by any member of the
PacifiCorp Acquisitions Group void, illegal, and/or unenforceable,
or otherwise, directly or indirectly, restrain, restrict,
prohibit, delay or otherwise interfere with the implementation
thereof, or impose additional conditions or obligations with
respect thereto, or otherwise challenge or hinder any thereof;
(v) to result in a delay in the ability of any member of the
PacifiCorp Acquisitions Group, or render any such person unable,
to acquire some or all of the Energy Group Shares or Energy Group
ADSs or require or prevent or materially delay divestiture by any
such person of any such securities; or
(vi) to require any member of the PacifiCorp Acquisitions Group or the
wider TEG Group to offer to acquire any shares or other securities
(or the equivalent) in any member of the wider TEG Group owned by
any third party;
and all applicable waiting and other time periods during which any
relevant authority could, in respect of the Offer or the acquisition or
proposed acquisition of any Energy Group Shares or Energy Group ADSs or
control of The Energy Group by PacifiCorp Acquisitions, intervene having
expired, lapsed or terminated;
(j) all necessary filings having been made, all regulatory and statutory
obligations having been complied with, all appropriate waiting periods
under any applicable legislation or regulations of any jurisdiction
having expired, lapsed or terminated in each case in respect of the
Offer or the acquisition of any shares or other securities in, or
control of, The Energy Group by any member of the PacifiCorp
Acquisitions Group and all authorisations and determinations necessary
or appropriate in any jurisdiction for or in respect of the Offer
(including, without limitation, its implementation and financing) or
proposed acquisition of any shares or other securities in, or control
of, The Energy Group by any member of the PacifiCorp Acquisitions Group
or in relation to the affairs of any member of the PacifiCorp
Acquisitions Group or the wider TEG Group having been obtained in terms
and in a form reasonably satisfactory to PacifiCorp Acquisitions from
all relevant authorities or (without prejudice to the generality of the
<PAGE>12
foregoing) from any persons or bodies with whom any member of the
PacifiCorp Acquisitions Group or the wider TEG Group, as the case may
be, has entered into contractual arrangements and such authorisations
and determinations together with all material authorisations and
determinations necessary or appropriate for any member of the PacifiCorp
Acquisitions Group or the wider TEG Group to carry on a business which
is material in the context of the PacifiCorp Acquisitions Group or the
TEG Group as a whole or of the financing of the Offer remaining in full
force and effect and all filings necessary for such purpose having been
made and there being no notice or intimation of any intention to revoke
or not to renew any of the same and all necessary statutory or
regulatory obligations in all relevant jurisdictions having been
complied with;
(k) PacifiCorp Acquisitions not having discovered any provision of any
agreement, arrangement, licence or other instrument to which any member
of the wider TEG Group is a party or by or to which any member of the
wider TEG Group or any part of its assets may be bound, entitled or
subject which would be likely, as a result of the Offer, the proposed
acquisition by PacifiCorp Acquisitions of any shares in, or change in
the control or management of, The Energy Group or otherwise, to result
in (to an extent which is material in the context of the PacifiCorp
Acquisitions Group or the wider TEG Group as a whole or of the financing
of the Offer):
(i) any moneys borrowed by or any other indebtedness, actual or
contingent, of any member of the wider TEG Group being or becoming
repayable or capable of being declared repayable immediately or
prior to its stated maturity, or the ability of any such member to
borrow moneys or incur any indebtedness being withdrawn or
inhibited;
(ii) any such agreement, arrangement, licence or instrument being
terminated or adversely modified or any obligation or liability
arising or any action being taken or arising thereunder;
(iii) the rights, liabilities, obligations or interests of any member of
the wider TEG Group under any such agreement, arrangement, licence
or instrument or the interests or business of any such member in
or with any other person, firm, company or body (or any
arrangements relating to any such interests or business) being
terminated or adversely modified or affected;
(iv) any assets or interests of any such member being or becoming
liable to be disposed of or charged, or any right arising under
which any such asset or interest is required or is likely to be
required to be disposed of or charged, in each case, other than in
the ordinary course of business;
(v) the creation of any mortgage, charge or other security interest
over the whole or any part of the business, property or assets of
any member of the wider TEG Group or any such security interest,
whenever arising or having arisen, becoming enforceable;
(vi) the creation of liabilities for any member of the wider TEG Group
other than in the ordinary course of business; or
(vii) the financial or trading position of any member of the wider TEG
Group being prejudiced or adversely affected;
(l) PacifiCorp Acquisitions not having discovered, save as publicly
announced in accordance with the Listing Rules prior to the date of this
announcement, that any member of the wider TEG Group has, since 30
September 1996 to an extent which is material in the context of the TEG
Group as a whole or of the financing of the Offer:
(i) save to any member of the TEG Group and save for the issue of
Energy Group Securities on the exercise of options granted under
any of the Energy Group Share Schemes prior to
<PAGE>13
the date of this announcement, issued or agreed to issue or
authorised or proposed the issue of additional shares of any
class, or of securities convertible into, or rights, warrants or
options to subscribe for or acquire, any such shares or
convertible securities or redeemed, purchased or reduced any part
of its share capital;
(ii) recommended, declared, paid or made or proposed to recommend,
declare, pay or make any bonus, dividend, or other distribution in
respect of the share capital of The Energy Group (except a
dividend of 5.5 pence (net) per Energy Group Share to be paid on 4
July 1997);
(iii) merged with any body corporate or acquired or disposed of or
transferred, mortgaged or charged or created any security interest
over any assets or any right, title or interest in any assets
(including shares and trade investments) or authorised or proposed
or announced any intention to propose a merger, demerger,
acquisition, disposal, transfer, mortgage, charge or security
interest (in each case, other than in the ordinary course of
business);
(iv) made or authorised or proposed or announced an intention to
propose any change in its share or loan capital save for options
granted under any of the Energy Group Shares Schemes prior to the
date of this announcement and for any Energy Group Securities
allotted upon exercise of such options;
(v) issued, authorised or proposed or announced an intention to
propose the issue of any debentures or (save in the ordinary
course of business) incurred or increased any indebtedness or
contingent liability;
(vi) otherwise than in the ordinary course of business, entered into
any contract, reconstruction, amalgamation, commitment or other
transaction or arrangement or (save for changes in remuneration
notified to PacifiCorp Acquisitions prior to the date of this
announcement) changed the terms of any contract with any director
of The Energy Group;
(vii) save in the ordinary course of business, entered into or varied
any contract, transaction or commitment (whether in respect of
capital expenditure or otherwise) which is of a long-term, onerous
or unusual nature or magnitude or which involves or could involve
an obligation of such a nature or magnitude;
(viii) waived or compromised any claim otherwise than in the ordinary
course of business;
(ix) taken any corporate action or had any order made for its
winding-up, dissolution or reorganisation or for the appointment
of a receiver, administrator, administrative receiver, trustee or
similar officer of all or any of its assets or revenues; or
(x) entered into any contract, commitment, agreement or arrangement or
passed any resolution with respect to, or announced an intention
to, or to propose to effect, any of the transactions, matters or
events referred to in this Condition;
(m) since 30 September 1996, save as publicly announced in accordance with
the Listing Rules prior to the date of this announcement, none of the
following having occurred to an extent which is material in the context
of the wider TEG Group as a whole or of the financing of the Offer:
(i) adverse change or deterioration in the business, assets, financial
or trading position of any member of the wider TEG Group;
(ii) litigation or arbitration proceedings, prosecution or other legal
proceedings having been instituted or threatened in writing by or
against or remaining outstanding against any member of the wider
TEG Group or to which any member of the wider TEG Group is a
<PAGE>14
party (whether as plaintiff, defendant or otherwise) and any
investigation by any relevant authority against, or in respect of
any member of, the wider TEG Group having been threatened in
writing, announced or instituted or remaining outstanding by,
against or in respect of any member of the wider TEG Group; and
(iii) a contingent or other liability of any member of the wider TEG
Group having arisen which would be likely adversely to affect any
member of the wider TEG Group;
(n) PacifiCorp Acquisitions not having discovered:
(i) that any financial, business or other information which has been
publicly disclosed at any time by or on behalf of any member of
the wider TEG Group is materially misleading, contains a material
misrepresentation of fact or omits to state a fact necessary to
make the information contained therein not materially misleading
and which in any such case is material in the context of the wider
TEG Group taken as a whole or of the financing of the Offer; or
(ii) that any member of the wider TEG Group was at the date of the
Energy Group Listing Particulars, or has, outside the ordinary
course of business since that date, become subject to any
liability (contingent or otherwise) which is not disclosed or
referred to in the Energy Group Listing Particulars and which is
material in the context of the wider TEG Group taken as a whole or
of the financing of the Offer; and
(o) save as disclosed or provided for in the Energy Group Listing
Particulars or as otherwise publicly announced in accordance with the
Listing Rules prior to the date of this announcement, PacifiCorp
Acquisitions not having discovered:
(i) that any past or present member of the wider TEG Group has not
complied with all applicable legislation or regulations of any
jurisdiction with regard to the disposal, discharge, spillage,
leak or emission of any waste or hazardous substance or any
substance likely to impair the environment or harm human health,
which non-compliance or any other disposal, discharge, spillage,
leak or emission which has occurred would be likely to give rise
to any liability (whether actual or contingent) on the part of any
member of the wider TEG Group and which is material in the context
of the wider TEG Group taken as a whole or of the financing of the
Offer; or
(ii) that there is, or is likely to be, any liability (whether actual
or contingent) to make good, repair, reclaim, remediate, reinstate
or clean up property now or previously owned, occupied or made use
of by any past or present member of the wider TEG Group under any
legislation, regulation, notice, circular or order of any relevant
authority relating to the protection of or enhancement of the
environment and which is material in the context of the wider TEG
Group taken as a whole or of the financing of the Offer.
For the purposes of these Conditions: (a) "relevant authority" means any
government, government department or governmental, quasi-governmental,
supranational, statutory or regulatory body, court, trade agency, professional
association or institution or environmental body in any jurisdiction; (b) a
relevant authority shall be regarded as having "intervened" if it has
instituted, implemented or threatened to take any action, proceedings, suit,
investigation or enquiry or reference, or made, enacted or proposed any
statute, regulation, decision or order and "intervene" shall be construed
accordingly; (c) "authorisations" mean authorisations, orders, grants,
recognitions, certifications, confirmations, consents, licences, clearances,
permissions and approvals; and (d) the "wider TEG Group" means The Energy
Group and its subsidiary undertakings, associated undertakings and any other
undertakings in which The Energy Group and such undertakings (aggregating
their interests) have a substantial interest; and (e) the "PacifiCorp
Acquisitions Group" means PacifiCorp Holdings, Inc. and its subsidiary
undertakings, associated undertakings and any other undertaking in which
PacifiCorp Holdings, Inc. and such undertakings
<PAGE>15
(aggregating their interests) have a substantial interest and, for these
purposes, "subsidiary undertaking", "associated undertaking", "holding
company" and "undertaking" have the meanings given by the Companies Act (but
for this purpose ignoring paragraph 20(1)(b) of Schedule 4A of the Companies
Act) and "substantial interest" means a direct or indirect interest in 20 per
cent. or more of the equity capital of an undertaking.
PacifiCorp Acquisitions will not invoke either of Conditions (i) or (j) in
respect of actions taken by FERC or for the failure to obtain any approval
from FERC.
PacifiCorp Acquisitions reserves the right to waive all or any of the above
Conditions, in whole or in part, except Condition (a). Conditions (b) to (o)
inclusive, if not, where applicable, waived, must have been fulfilled or
satisfied at the same time as Condition (a) is fulfilled, but subject thereto,
PacifiCorp Acquisitions shall be under no obligation to waive or treat as
satisfied any Condition by a date earlier than the latest date for the
satisfaction thereof, notwithstanding that the other Conditions may at such
earlier date have been waived or fulfilled and that there are at such earlier
date no circumstances indicating that any of such Conditions may not be
capable of fulfilment.
If PacifiCorp Acquisitions is required by the Panel to make an offer for
Energy Group Securities under the provisions of Rule 9 of the City Code,
PacifiCorp Acquisitions may make such alterations to the above Conditions,
including Condition (a), as are necessary to comply with the provisions of
Rule 9.
The Offer will lapse if the Acquisition is referred to the Monopolies and
Mergers Commission before the Initial Closing Date.
The Loan Note Alternative will be conditional upon the Offer being declared or
becoming unconditional in all respects.
<PAGE>16
APPENDIX II
SUMMARY OF THE TERMS OF THE LOAN NOTES
The Floating Rate Unsecured Loan Notes 2004 of PacifiCorp Acquisitions will be
created by a resolution of the Board or a duly authorised committee thereof
and will be constituted by a Loan Note instrument (the "Loan Note Instrument")
executed as a deed by PacifiCorp Acquisitions. The Loan Notes will not be
guaranteed. The issue of the Loan Notes will be conditional on all Conditions
being, where applicable, waived, fulfilled or satisfied. Loan Notes will be
issued only if the aggregate valid elections for the Loan Note Alternative
received on or before the date on which all Conditions are so waived,
fulfilled or satisfied, as applicable, will result in PacifiCorp Acquisitions
issuing in excess of pound sterling 1 million nominal value of Loan Notes. The
Loan Note Alternative will not be available to North American Persons or any
holder of Energy Group Shares who is unable to give a warranty relating to the
fact that he has not received or accepted the Offer through the United States,
Canada, Japan or Australia. The Loan Note Instrument will contain provisions,
inter alia, substantially to the effect set out below.
1 The Loan Notes will be issued by PacifiCorp Acquisitions in amounts and
integral multiples of pound sterling 1 in nominal amount only and will
constitute unsecured obligations of PacifiCorp Acquisitions. No payment
will be made in respect of any amount payable of less than pound
sterling 1. The Loan Note Instrument will not contain any restrictions
on borrowing, disposals or charging of assets by PacifiCorp
Acquisitions.
2 Interest on the Loan Notes will be payable (subject to any requirement
to deduct income tax therefrom) semi-annually in arrear on 30 June and
31 December in each year or, if such a day is not a business day, on the
immediately preceding business day ("interest payment dates") except
that the first payment of interest on the Loan Notes will be made 30
June 1998 in respect of the period from and including the date of issue
of the relevant Loan Note up to but excluding 30 June 1998. The period
from and including the date of issue of the relevant Loan Note up to but
excluding 30 June 1998 and the period from and including that date or
any subsequent interest payment date up to but excluding the next
following interest payment date is herein called an "interest period".
3 (a) The rate of interest on the Loan Notes for each interest period
will be the rate per annum which is 0.5 per cent. below LIBOR.
"LIBOR" means the arithmetic mean (rounded down, if necessary, to
four decimal places) of the respective rates which are quoted as
of 11.00 a.m. on the first business day of the interest period on
the "LIBP" page on the Reuter Monitor Money Rate Service (or such
other page or service as may replace it for the purpose of
displaying London inter-bank sterling offered rates of leading
reference banks) as being the interest rates offered in the London
inter-bank market for six month sterling deposits but:
(i) if only two or three such offered quotations appear, the
relevant arithmetic mean (rounded as mentioned above) shall
be determined on the bases of those offered quotations; and
(ii) if no, or only one, such offered quotations appear, the
relevant arithmetic mean (rounded as mentioned above) shall
be determined instead on the basis of the respective rates
(as quoted to PacifiCorp Acquisitions at its request) at
which each of Barclays Bank PLC and National Westminster
Bank plc is offering six month sterling deposits to prime
banks in the London inter-bank market at or about 11.00 am
on the first business day of the relevant interest period.
(b) If LIBOR cannot be established in accordance with the provisions
of sub-paragraph (a) above for any interest period, the rate of
interest on the Loan Notes for such interest period shall be the
same as that applicable to the Loan Notes during the previous
interest period, unless in such case such other prime bank in the
London inter-bank market as PacifiCorp Acquisitions shall
reasonably select for the purpose
<PAGE>17
shall have been prepared to offer a rate as aforesaid, in which
case the rate of interest in respect of the relevant interest
period shall be the rate so offered.
(c) Each instalment of interest shall be calculated on the basis of a
365 day year and the number of days elapsed in the relevant
interest period.
4 A holder of Loan Notes (a "Noteholder") shall be entitled to require
PacifiCorp Acquisitions to repay the whole (whatever the amount) or any
part (being any integral multiple of pound sterling 1) of the principal
amount of his holding of Loan Notes at par, together with accrued
interest (subject to any requirement to deduct income tax therefrom) up
to but excluding the date of repayment, on any interest payment date,
from and including 30 June 1998 and thereafter on any interest payment
date falling prior to 30 June 2004 by giving not less than 30 days'
prior notice in writing to PacifiCorp Acquisitions accompanied by the
certificate(s) for all the Loan Notes to be repaid and notice of
redemption (duly completed) in the prescribed form on the Loan Notes to
be repaid.
5 If at any time the principal amount of all Loan Notes outstanding is 20
per cent. or less of the total nominal amount of Loan Notes issued in
connection with the Offer, PacifiCorp Acquisitions shall have the right,
on giving the remaining Noteholders not less than 30 days' notice in
writing expiring on 30 June 1998 or any subsequent interest payment
date, to redeem all (but not some only) of the outstanding Loan Notes at
par together with accrued interest thereon (subject to any requirement
to deduct income tax therefrom) up to but excluding the date of
redemption.
6 Any Loan Notes not previously repaid, redeemed or purchased will be
repaid in full at par on 30 June 2004, together with accrued interest
thereon (subject to any requirement to deduct income tax therefrom) up
to but excluding that date.
7 Any Loan Notes repaid, redeemed, or purchased will be cancelled and
shall not be available for re-issue.
8 The Noteholders will have power by extraordinary resolution of the
Noteholders passed in accordance with the provisions of the Loan Note
Instrument or by resolution in writing signed by holders of not less
than 75 per cent. in nominal value of the outstanding Loan Notes, inter
alia, to sanction any modification, abrogation or compromise of or
arrangement in respect of their rights against PacifiCorp Acquisitions
and to assent to any amendment in respect of their rights against
PacifiCorp Acquisitions and to assent to any amendment of the provisions
of the Loan Note Instrument (but in each case subject to the consent of
PacifiCorp Acquisitions). PacifiCorp Acquisitions may, with the consent
of its financial advisers, amend the provisions of the Loan Note
Instrument, without such sanction or consent, if such amendment is of a
formal, minor or technical nature or to correct a manifest error.
9 Each Noteholder will have the right to acquire (by subscription at a
nominal value of an amount up to or equal to such Noteholder's holding
of Notes) additional loan notes to be issued by a subsidiary of
PacifiCorp Acquisitions (the "Additional Notes") on terms and conditions
substantially the same as those applicable to the Loan Notes, except as
follows:
(a) the Additional Notes will not be issued before 30 June 2003;
(b) the rate of interest on the Additional Notes will be 1 per cent.
below the rate per annum described in paragraph 3(a) above; and
(c) the Additional Notes will not carry any right to acquire any
additional securities.
10 Each Noteholder will be entitled to require all or part (being pound
sterling 1 nominal amount or any integral multiple thereof) of the Loan
Notes held by him to be repaid at par together with accrued interest
(subject to any requirement to deduct income tax therefrom) if:
(a) any principal or interest on any of the Loan Notes held by that
Noteholder shall fall to be paid in full within 30 days after the
due date for payment thereof; or
<PAGE>18
(b) an order is made or an effective resolution is passed for the
winding-up or dissolution of PacifiCorp Acquisitions (other than
for the purposes of a solvent reconstruction or a solvent
amalgamation or a members' voluntary winding-up on terms
previously approved by extraordinary resolution of the
Noteholders); or
(c) an encumbrancer takes possession of, or a trustee, receiver,
administrator or similar officer is appointed or an administration
order is made in respect of, the whole or substantially the whole
of the undertaking of PacifiCorp Acquisitions and such order has
not been discharged and such person has not been paid out or
discharged within 30 days.
11 PacifiCorp Acquisitions will be entitled at any time to purchase any
Loan Notes at any price by tender (available to all Noteholders alike),
private treaty or otherwise by agreement with the relevant
Noteholder(s).
12 The Loan Notes will contain provisions entitling PacifiCorp
Acquisitions, without the consent of Noteholders, to substitute any of
its subsidiaries or any holding company or subsidiaries of such holding
company resident in the UK for tax purposes (other than Eastern or any
of its subsidiaries) as the principal debtor under the Loan Note
Instrument and the Loan Notes or to require all or any of the
Noteholders to exchange their Loan Notes for loan notes issued on the
same terms mutatis mutandis by any such company provided that (a)
PacifiCorp Acquisitions guarantees such company's obligations thereunder
and (b) following such substitution or exchange, the Loan Notes or (as
the case may be) such loan notes shall not contain a provision
equivalent to this paragraph 12. References to PacifiCorp Acquisitions
in this summary shall be construed accordingly. PacifiCorp Acquisitions'
right to require substitution of such company as principal debtor (but
not the right to require exchange of the Loan Notes) will be exercisable
only if prior clearance has been obtained from the Inland Revenue to the
effect that the substitution will not be treated as a disposal of the
Loan Notes for the purposes of United Kingdom taxation of chargeable
gains and PacifiCorp Acquisitions' right to require such an exchange
will be exercisable only if the exchange will fall within section 135 of
the Taxation of Chargeable Gains Act 1992, and to the extent relevant,
clearance has been received from the Inland Revenue under section 138 of
that Act in respect of the exchange.
13 The Loan Notes will be evidenced by certificates, will be registered and
will be transferable in integral multiples of pound sterling 1 in excess
of that amount, provided that transfers of Loan Notes will not be
registered during the seven days immediately preceding an interest
payment date or while the register of Noteholders is closed.
14 No application has been made or is intended to be made to any stock
exchange or other dealing service for the Loan Notes to be listed or
otherwise traded.
15 The Loan Notes and the Loan Note Instrument will be governed by and
construed in accordance with English law.
<PAGE>19
APPENDIX III
[RESULTS]
THE ENERGY GROUP RECORDS OPERATING PROFIT INCREASE OF 30 PER CENT FOR RESULTS
TO 31 MARCH, 1997
Results and Dividend
On a pro forma basis, group turnover for the period of six months to 31 March,
1997 rose by 38 per cent from pound sterling 1,826 million to pound sterling
2,519 million, and underlying operating profit was 30 per cent above the same
period last year (on a pro forma basis) at pound sterling 317 million.
Underlying pro forma earnings per share increased 33 per cent.
It is proposed to pay a dividend of 5.5p net per share on 4 July, 1997.
Derek Bonham, Executive Chairman of The Energy Group said: "Today we have
announced the terms of a recommended offer by PacifiCorp for The Energy Group;
together we are well placed to take advantage of and compete effectively in
the fast changing international energy markets. Detailed terms of the offer
will be mailed to our shareholders in due course."
<PAGE>20
Results
<TABLE>
Operating Report
Coal
Pro forma
<CAPTION>
1997 1996
<S> <C> <C>
Turnover for the six months to 31
March pound sterling pound sterling
647mn 656mn
Operating profit for the six months
to 31 March pound sterling pound sterling
66mn 66mn
Tons sold 81mn 77mn
</TABLE>
Peabody continues to lead the industry in the USA with a 15 per cent market
share of coal production. In Australia, our operations were responsible for 5
per cent of the country's coal production. Peabody's subsidiaries operate 26
coal mines in the USA and three mines in Australia. A fourth Australian mine,
Bengalla, is under construction after receiving final development approval
last year.
In the calendar year 1996, our operating companies sold coal to more than 150
US utility power plants, generating more than 9 per cent of all US
electricity, approximately equal to the total amount of US electricity
produced from natural gas. Peabody also exports steam and metallurgical coal
to 15 countries from its US and Australian mines.
Peabody increased its coal sales and its underlying operating profit levels in
the six months ended 31 March, 1997. On a US dollar basis, underlying
operating profits were 5 per cent ahead of last year, although adverse
currency movements reduced reported profits to pound sterling 66 million, the
same as last year's reported level. Productivity has risen consistently, with
our US operating companies averaging 92 tons per employee per workshift for
the six month period - a 13 per cent improvement on the previous year and a
new company record.
According to government statistics, the company's Powder River mines in
Wyoming were the four most productive in the USA during 1996. At the three
Australian mines, average productivity increased by more than 17 per cent from
the prior year, maintaining one of the highest productivity rates in the
country.
Sales volume from Peabody's US and Australian mines increased by 6 per cent to
81.4 million tons, reflecting favourable customer demand for coal from the
Powder River and Australian mines. Turnover of pound sterling 647 million
fell slightly from the same period last year principally as a result of
adverse currency movements, partially offset by increased volumes.
Peabody is preparing for deregulation in the US by working with Citizens
Power, our newly acquired power marketing business in the US, to create
innovative solutions to electric utility fuel supplies.
The safety record for Peabody's US mines was the second best in its history,
capping six years of dramatic gains in safety. Our Freedom Mine was named as
the safest underground coal mine in the USA. An ambitious new safety
programme, One Future: Going For Perfect, has been launched with the goal of
zero lost time accidents.
<PAGE>21
POWER
<TABLE>
Pro forma
<CAPTION>
1997 1996
<S> <C> <C>
Turnover for the six months to 31
March pound sterling pound sterling
1,801m 1,092m
Operating profit for the six months
to 31 March pound sterling pound sterling
129m 44m
Generating capacity at 31 March 6,784MW 495 MW
</TABLE>
Substantial growth in our Power businesses enabled Eastern to make a
significant contribution to The Energy Group's operating profit increase in
the six months to 31 March, 1997. The power businesses' operating profit rose
by 193 per cent to pound sterling 129 million, reflecting our greatly expanded
generation portfolio which now totals almost 7,000 MW, together with the
contribution from related energy trading activities.
The Group's power generation portfolio widened significantly in mid 1996
through the addition of five coal-fired plants leased from National Power and
PowerGen to complement the three combined-cycle gas turbine (CCGT) plants -
Peterborough, King's Lynn, and Barking. The five coal-fired stations were a
major factor in the substantial profit increase in the six months under
review. The performance of the portfolio stations over the key winter period
was excellent, with average availability levels in excess of 92 per cent, and
our 360MW CCGT plant at Peterborough continues to maintain its outstanding
availability record. Our new 340MW CCGT plant at King's Lynn, Norfolk, is
undergoing commissioning trials and is due for final handover in 1997
following further work by the turnkey contractor to meet guaranteed
performance levels. In March 1997, we announced plans to build a 240MW
combined heat and power plant in Deeside using combined-cycle gas technology
to serve the needs of Shotton Paper - the UK's leading newsprint manufacturer.
Eastern's power and energy trading business manages and monitors Eastern's
energy portfolio, including the bidding of its power plants into the
Electricity Pool, the procurement of coal, oil and gas, and the management of
risk for our retail energy operations. The business also offers risk
management services to other independent energy retailers, generators and
trading parties. During the period under review we have further improved our
ability to manage the risks associated with such energy trading activities
through the creation and operation of a variety of options, both physical, eg:
our leased coal-fired generating plant, and through third party contractual
arrangements, such as the innovative major plant-related contracts which were
announced with Enron in January 1997 and Rolls-Royce in April 1997.
Eastern Electricity has maintained its position as a leader in competitive
electricity supply with an estimated 13 per cent of the contestable market.
Major customers include Coats Viyella, McDonald's, Somerfield and Anglian
Water. For franchise customers, new tariffs from 1 April, 1997 will provide
average reductions of between 6 per cent and 9 per cent, and further discounts
have been introduced for customers with annual bills above pound sterling 225
or below pound sterling 100. Eastern Electricity is recognised as being
committed to the environment, and plans are well advanced to introduce a
'green tariff' in October of this year.
Eastern Natural Gas is now the leading retailer in the deregulating gas market
(after British Gas/Centrica) with an annualised turnover of around pound
sterling 250 million and approximately 11 per cent of the competitive gas
market. It is also the leading competitor to British Gas/Centrica in those
parts of the domestic market open to competition, with over 100,000 domestic
customers.
Eastern remains focused on delivering excellent service to its customers to
ensure success in the next stages of deregulation in the UK electricity and
gas markets. Its two customer service centres continue to operate at
exceptionally high standards and answer customer enquiries 24 hours a day, 365
days a year.
<PAGE>22
NETWORKS
<TABLE>
<CAPTION>
Pro forma
1997 1996
<S> <C> <C>
Turnover for the six months to 31 March pound sterling pound sterling
274m 278m
Operating profit for the six months to
31 March pound sterling pound sterling
122m 133m
</TABLE>
Operating profit for our Networks business has reduced by 8 per cent to pound
sterling 122 million, reflecting a pound sterling 20 million reduction in
regulatory income as a consequence of the last price review, partially offset
by savings in operating costs. The re-opening of voluntary severance
programmes and reshaping of the Networks business is already bringing through
further cost savings.
Eastern Electricity's UK network covers 20,300 square kilometres from
Peterborough in the north to parts of London in the south, and from Aylesbury
in the west to Lowestoft in the east. Recent statistics from the Office of
Electricity Regulation show that the network remains one of the most reliable
in the country. Targeted capital investment in the network continues to
contribute to reliability and a new operations centre has helped to enhance
network performance even further. Set up in November 1996, it centrally
monitors and controls over 88,000km of cable and overhead lines.
Eastern Group Telecoms has continued to develop its strong position as a
network provider to telecoms operators, with operating profit of pound
sterling 1.8 million (pro forma 1996 pound sterling 0.4mn).
MORE TO FOLLOW
ENDS [nRNSM9793X]
<PAGE>23
REUTERS Friday, 13 June 1997
______________________________________________________________________________
11:05 RNS-Energy Group PLC <TEG.L> Rec Offer by PacifiCorp - Pt3
RNS No 9568t
THE ENERGY GROUP PLC
13th June 1997
PART 3
<TABLE>
THE ENERGY GROUP PLC - CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 31 March 1997
<CAPTION>
1997
pound sterling mn
<S> <C>
Turnover 2,519
Costs and overheads less other income (2,222)
_____
Operating profit 297
Net interest payable and similar charges (37)
_____
Profit on ordinary activities before taxation 260
Taxation charge for period (81)
_____
Profit on ordinary activities after taxation 179
Dividend (29)
_____
Profit retained for the period 150
Earnings per ordinary share:
Pre-exceptional 38.2p
Basic 34.5p
</TABLE>
The figures on pages 23 to 29 for the six months ended 31 March 1997 have been
extracted from the audited financial statements, but do not themselves
constitute full accounts within the meaning of the Companies Act 1985.
Statutory accounts for the period will be delivered to the Registrar of
Companies in England and Wales. The other information on pages 30 to 33 is
not subject to audit.
<PAGE>24
<TABLE>
SEGMENT INFORMATION
for the six months ended 31 March 1997
<CAPTION>
1997
Operating Capital
profit Turnover employed
pound sterling mn pound sterling mn pound sterling mn
<S> <C> <C> <C>
By activity:
Coal 66 647 1,370
Power 129 1,801 1,117
Networks 122 274 1,063
Other - 9 8
Intra-Group trading
(Networks to Power) - (212) -
_____ _____ _____
317 2,519 3,558
Exceptional restructuring
and reorganisation costs (20) - -
_____ _____ _____
297 2,519 3,558
_____ _____ _____
<CAPTION>
1997
Operating Capital
profit Turnover employed
pound sterling mn pound sterling mn pound sterling mn
<S> <C> <C> <C>
By geographical location:
United Kingdom 228 1,853 2,166
USA 52 574 1,148
Australia 14 74 226
Other 3 18 18
_____ _____ _____
297 2,519 3,558
_____ _____ _____
</TABLE>
<PAGE>25
<TABLE>
BALANCE SHEETS
as at 31 March 1997
<CAPTION>
Group Company
1997 1997
pound sterling mn pound sterling mn
<S> <C> <C>
Fixed Assets
Tangible fixed assets 3,910 -
Investments 72 63
_____ _____
3,982 63
_____ _____
Current Assets
Stocks 256 -
Debtors 1,359 50
Investments 10 -
Short-term deposits 753 -
Cash 385 40
_____ _____
2,763 90
_____ _____
Creditors - due within one year
Short-term borrowings (738) -
Overdrafts (61) -
Other creditors (948) (45)
_____ _____
(1,747) (45)
_____ _____
Net current assets 1,016 45
_____ _____
Total assets less current liabilities 4,998 108
Creditors - due after one year (1,655) -
Provisions for liabilities and charges (1,498) -
_____ _____
Net assets 1,845 108
_____ _____
Capital and reserves
Called up share capital 52 52
Other reserves 639 -
Profit and loss account 1,154 56
_____ _____
Equity shareholders' funds 1,845 108
_____ _____
</TABLE>
<PAGE>26
<TABLE>
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 31 March 1997
<CAPTION>
Note pound sterling mn pound sterling mn
<S> <C> <C> <C>
Cash flow from operating
activities 1 346
Returns on investments
and servicing of finance
Interest received 29
Interest paid (83)
Dividends received from
investments 1
_____
(53)
Taxation (23)
Capital expenditure and
financial investment
Purchase of tangible fixed
assets (133)
Purchase of investments (39)
Sale of tangible fixed assets 4
Sale of investments 12
_____
(156)
Acquisition
Purchase of subsidiary
undertaking (20)
_____
Cash flow before use of liquid
resources and financing 94
Management of liquid resources
Net cash placed on short-term
deposit 3 (753)
Financing
Net new short-term borrowings 3 149
Debt due beyond a year:
New secured loan repayable
within 5 years 3 907
Repayment of amounts borrowed 3 (118)
_____
938
_____
Increase in cash in the period 3 279
_____
</TABLE>
<PAGE>27
NOTES TO CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 March 1997
1. Reconciliation of operating profit to net cash inflow from operating
activities
<TABLE>
<CAPTION>
1997
pound sterling mn
<S> <C>
Operating profit before exceptional items 317
Depreciation and depletion 100
Profit on sales of tangible fixed assets (3)
Share of profit of associated undertakings (2)
(Increase) in investments (2)
(Increase) in stocks (8)
(Increase) in debtors (83)
Increase in creditors 50
Provisions (23)
_____
Net cash inflow from operating activities 346
_____
</TABLE>
2. Analysis of changes in financing
<TABLE>
<CAPTION>
Share Loans and Current Current
capital finance debenture bank
leases loans loans
pound pound pound pound
sterling mn sterling mn sterling mn sterling mn
<S> <C> <C> <C> <C>
Balance as at 1 October 1996 - 945 154 14
Pro forma additional
net debt at 1 October 1996 - - - 381
_____ _____ _____ _____
Pro forma balance at
1 October 1996 - 945 154 395
Non-cash demerger share issue 52 - - -
Additional debt on demerger - - - 42
Exchange movements - (12) (9) -
Cash inflow (outflow) from
financing - 789 (113) 262
Other movements - (54) - (6)
Current loan reallocations - (13) 13 -
_____ _____ _____ _____
Balance as at 31 March 1997 52 1,655 45 693
_____ _____ _____ _____
</TABLE>
The pro forma balance at 1 October 1996 reflects the figures included within
the company's Listing Particulars issued in January 1997.
<PAGE>28
NOTES TO CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)
For the six months ended 31 March 1997
3. Analysis of changes in net debt
<TABLE>
<CAPTION>
Pro forma Additional Other Exchange As at
as at debt movements movements 31 Mar 1997
1 Oct 1996 on demerger Cash flow
pound pound pound pound pound pound
sterling mn sterling mn sterling mn sterling mn sterling mn sterling mn
<S> <C> <C> <C> <C> <C> <C>
Cash 173 - 221 (1) (8) 385
Overdrafts (119) - 58 - - (61)
_____
279
_____
Debt due after
1 year (945) - (789) 67 12 (1,655)
Debt due within
1 year (549) (42) (149) (7) 9 (738)
_____
(938)
_____
Short-term deposits - - 753 - - 753
_____ _____ _____ _____ _____ _____
(1,440) (42) 94 59 13 (1,316)
_____ _____ _____ _____ _____ _____
</TABLE>
The pro forma net debt at 1 October 1996 reflects the figures included within
the company's Listing Particulars issued in January 1997.
4. Reconciliation of net cash flow movement to movement in net debt
<TABLE>
<CAPTION>
1997
pound sterling m
<S> <C>
Net cash inflow in the period 279
Increase in liquid cash resources 753
Change in debt resulting from cash flows (938)
_____
94
Additional debt on demerger (42)
Other movements 59
Exchange movements 13
_____
Movement in net debt in the period 124
Opening pro forma net debt (1,440)
_____
Closing net debt (1,316)
_____
</TABLE>
<PAGE>29
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the six months ended 31 March 1997
<TABLE>
<CAPTION>
1997
pound sterling mn
<S> <C>
Actual invested capital as at 30 September 1996(*) 2,185
Pro forma adjustments as at 30 September 1996 (*):
- - additional debt on demerger (381)
- - other (2)
_____
Pro forma invested capital as at 30 September 1996 (*) 1,802
Increase in additional net debt on demerger:
- - contribution towards dividend paid by Hanson in
January 1997 (32)
- - other (10)
_____
Pro forma opening shareholders' funds 1,760
Profit on ordinary activities after taxation 179
Dividend (29)
Currency differences on foreign net investments (52)
Other movements (13)
_____
Closing shareholders' funds 1,845
_____
<FN>
(*) As disclosed in the Group's Listing Particulars issued in January 1997
</FN>
</TABLE>
During the final stages of the demerger process, the amount of additional net
debt allocated to the Group on demerger was increased by pound sterling 42
million to a total of pound sterling 423 million. The increase principally
reflected a notional contribution to Hanson's dividend of 1.0p per Hanson
ordinary share paid on 10 January 1997 in respect of the quarter ended 31
December 1996.
<PAGE>30
<TABLE>
PRO FORMA CONSOLIDATED PROFIT AND LOSS ACCOUNT
<CAPTION>
Pro forma Pro forma Pro forma Pro forma
year year six months six months
ended ended ended ended
31 Mar 30 Sept 31 Mar 31 Mar
1997 1996 1997 1996
pound pound pound pound
note sterling mn sterling mn sterling mn sterling mn
<S> <C> <C> <C> <C> <C>
Turnover
Coal 1,452 1,461 647 656
Power 2,887 2,178 1,801 1,092
Networks 478 482 274 278
Other 24 24 9 9
Intra-group (381) (378) (212) (209)
_____ _____ _____ _____
4,460 3,767 2,519 1,826
_____ _____ _____ _____
Operating Profit
Coal 154 154 66 66
Power 168 83 129 44
Networks 200 211 122 133
Other (2) (2) - -
_____ _____ _____ _____
Pre exceptional
operating profit 520 446 317 243
Restructuring and
reorganisation costs (2) (20) (20)
National Grid
Group flotation (3) 44 44
_____ _____ _____ _____
Total operating profit 500 490 297 287
Profit on disposal of
First Hydro (4) 25 25
Net interest payable
and similar charges (5) (88) (68) (37) (33)
_____ _____ _____ _____
Profit on ordinary
activities before taxation 412 447 260 279
Taxation charge for
the period (6) (126) (137) (81) (89)
_____ _____ _____ _____
Profit on ordinary
activities after taxation 286 310 179 190
_____ _____ _____ _____
Earnings per share
Pre-exceptional (7) 58.8p 51.8p 38.2p 28.8p
Basic (7) 55.1p 59.5p 34.5p 36.5p
</TABLE>
Notes to the pro forma consolidated profit and loss account are shown on page
31.
<PAGE>31
Notes to the pro forma profit and loss account
(1) The pro forma information for the year ended 30 September 1996 has been
extracted from the Listing Particulars issued during January 1997 in
respect of the demerger. This assumed additional net debt of pound
sterling 381 million arising as a result of the demerger, together with
an average interest rate of 6.2 per cent.
(2) Restructuring and reorganisation costs relate to the re-opening of
Eastern's voluntary severance scheme.
(3) National Grid Group flotation relates to an interim dividend of pound
sterling 11 million and special dividends (net of associated costs)
totalling pound sterling 165 million received in connection with the
flotation of the National Grid Group plc ("National Grid Group").
Amounts credited to electricity customers in the form of a discount on
electricity bills connected with this flotation totalled pound sterling
132 million.
(4) Profit on disposal of First Hydro arose on the disposal of the Group's
interest in the pumped storage business of National Grid Group.
(5) Pro forma net interest payable and similar charges for the year ended 31
March 1997 are based on the actual interest charges borne by the
individual operating entities which now comprise the Group, increased
for an additional pro forma interest charge calculated as 7.5 per cent
of the actual additional net debt allocated to the Group by Hanson on
demerger.
Pro forma net interest payable and similar charges for the six months
ended 31 March 1996 are calculated on a similar basis, but incorporating
an additional pro forma interest charge based on the additional net debt
and average interest rate assumed in the Listing Particulars.
(6) Pro forma tax charge for the year ended 31 March 1997 has been
calculated at the same effective rate before exceptional items as that
which existed for the six months ended 31 March 1997.
Pro forma tax charge for the six months ended 31 March 1996 has been
calculated at the same effective rate before exceptional items as that
assumed in the pro forma tax charge for the year ended 30 September 1996
(7) The pro forma earnings per share for the six months ended 31 March 1996
have been calculated on the pro forma profit for the period and on
520,857,817 shares, being the number of ordinary shares assumed in the
Listing Particulars.
The actual earnings per share for the six months ended 31 March 1997 and
the pro forma earnings per share for the year ended 31 March 1997 are
based on the respective actual and pro forma profits for the relevant
periods and on 518, 607,817 shares which excludes the 2,250,000 shares
held by The Energy Group Employee Benefit Trust, which has waived its
right to dividends on the shares it holds.
(8) No pro forma adjustments have been made for additional annual
administration costs that are expected to arise following the demerger.
The directors estimate that such costs will amount to approximately
pound sterling 15 million per annum.
<PAGE>32
<TABLE>
TRANSLATION TO US DOLLARS
Income Statement and Capital Employed (UK GAAP)
31 March 1997
<CAPTION>
1997 Capital
Income Sales employed
$mn $mn $mn
<S> <C> <C> <C>
By activity:
Coal 108 1,057 2,250
Power 211 2,943 1,834
Networks 199 448 1,745
Other - 15 13
Intra-group (Networks to Power) - (347) -
_____ _____ _____
518 4,116 5,842
Exceptional restructuring and
reorganisation costs (33)
_____
Operating income 485
Net interest expense (60)
Income from ordinary activities
before taxation 425
Taxes on income from ordinary
activities (132)
Net income 293
_____
Net income per ADS
Pre-exceptional $2.50
Basic $2.25
<CAPTION>
1997 Capital
Income Sales employed
$mn $mn $mn
<S> <C> <C> <C>
By geographical location:
United Kingdom 372 3,028 3,556
USA 85 938 1,885
Australia 23 121 371
Other 5 29 30
_____ _____ _____
485 4,116 5,842
_____ _____ _____
</TABLE>
The rates used to translate the above figures were the average rate for the
six months period to 31 March 1997 of $1.6339 to the pound sterling in respect
of income and sales and the period end rate of $1.6420 to the pound sterling
for capital employed.
<PAGE>33
<TABLE>
TRANSLATION TO US DOLLARS
Pro forma consolidated income statements (UK GAAP)
<CAPTION>
Pro forma
Pro forma Pro forma Six months six months
year ended year ended ended ended
31 Mar 1997 30 Sept 1996 31 Mar 1997 31 Mar 1996
pound pound pound pound
sterling mn sterling mn sterling mn sterling mn
<S> <C> <C> <C> <C>
Sales
Coal 2,372 2,387 1,057 1,072
Power 4,717 3,559 2,943 1,784
Networks 781 788 448 454
Other 39 39 15 15
Intra-group
(Networks to Power) (622) (618) (347) (341)
7,287 6,155 4,116 2,984
Operating income
Coal 252 252 108 108
Power 274 135 211 72
Networks 327 345 199 217
Other (3) (3) - -
Operating income before
exceptional items 850 729 518 397
Restructuring and
reorganisation costs (33) - (33) -
National Grid Group
flotation - 72 - 72
Operating income 817 801 485 469
Profit on disposal of
First Hydro - 41 - 41
Net interest expense (144) (111) (60) (54)
Income from ordinary
activities before taxation 673 731 425 456
Taxes on income from
ordinary activities (206) (224) (132) (146)
Net income 467 507 293 310
Net income per ADS
Pre-exceptional $3.84 $3.39 $2.50 $1.88
Basic $3.60 $3.89 $2.25 $2.39
</TABLE>
The rate used to translate the above figures was the average rate for the six
months period to 31 March 1997 of $1.6333 to pound sterling. The assumptions
behind these figures are shown on page 31.
<PAGE>34
APPENDIX IV
SOURCES AND BASES
1 The value of the fully diluted share capital of The Energy Group is
based upon 520,857,817 Energy Group Shares in issue on 12 June 1997 and
9,495,553 Energy Group Shares which could fall to be issued on exercise
in full of options and vesting of all outstanding awards granted under
the Energy Group Share Schemes.
2 The pro forma financial information in respect of The Energy Group for
the year ended 30 September 1996 is taken from the unaudited pro forma
combined financial information set out in the Energy Group Listing
Particulars.
<PAGE>35
APPENDIX V
DEFINITIONS
"Acquisition" the proposed acquisition of The
Energy Group pursuant to the Offer
"Board" or "Directors" the directors of PacifiCorp
Acquisitions
"Business Day" has the meaning given by the US
Williams Act
"Canada" Canada, its provinces, territories
and all areas subject to its
jurisdiction and any political
sub-division thereof
"City Code" The City Code on Takeovers and
Mergers of the UK
"Closing Price" the closing middle market quotation
of an Energy Group Share as derived
from the London Stock Exchange Daily
Official List
"Combined Group" PacifiCorp and its subsidiaries, as
enlarged by the acquisition of The
Energy Group
"Companies Act" the Companies Act 1985 (as amended)
of England and Wales
"Conditions" the conditions of the Offer
described in Appendix I and
"Condition" means any one of them
"DGES" The Director General of Electricity
Supply of the UK
"DGGS" The Director General of Gas Supply
of the UK
"Energy Group ADRs" American Depositary Receipts
evidencing Energy Group ADSs
"Energy Group ADSs" American Depositary Shares issued in
respect of Energy Group Shares, each
representing four Energy Group
Shares
"Energy Group Listing Particulars" the listing particulars relating to
Energy Group dated 27 January 1997
published in accordance with the
Listing Rules
"Energy Group Securities" Energy Group Shares and Energy Group
ADSs
"Energy Group Share Schemes" The Energy Group Executive Share
Option Scheme, The Energy Group
Sharesave Scheme, The Energy Group
Long-term Incentive Plan and The
Energy Group Special Bonus Scheme
"Energy Group Shares" shares of 10p each in the share
capital of The Energy Group in issue
or allotted or issued prior to the
date on which the Offer closes (or
such earlier date, not being earlier
than the Initial Closing Date (as it
may be extended), as PacifiCorp
Acquisitions may determine)
"FERC" the US Federal Energy Regulatory
Commission
"Initial Closing Date" 3.00 p.m. (London time), 10.00 a.m.
(New York City time) 20 Business
Days after the date of the Offer
Document, unless and until
PacifiCorp Acquisitions, in its
discretion, shall have extended the
Initial Offer Period, in which case
the term "Initial Closing Date"
shall mean the latest time and date
at which the Initial Offer Period,
as so extended by PacifiCorp
Acquisitions, will expire or, if
earlier, the date on which Condition
(a) becomes or is declared to have
been satisfied
"Initial Offer Period" the period from the date of the
Offer Document to and including the
<PAGE>36
Initial Closing Date
"Lazard" Lazard Brothers & Co., Limited and
Lazard Freres & Co. Limited
"LIBOR" the London Inter-Bank Offered Rate,
determined in accordance with the
Terms of the Loan Notes, a summary
of which is set out in Appendix II
"Listing Rules" the Listing Rules of the London
Stock Exchange
"Loan Note Alternative" the alternative under which holders
of Energy Group Shares who validly
accept the Offer will be entitled to
elect to receive Loan Notes instead
of cash consideration otherwise
payable to them
"Loan Notes" the Floating Rate Unsecured Loan
Notes 2004 of PacifiCorp
Acquisitions to be issued pursuant
to the Loan Note Alternative
"London Stock Exchange" London Stock Exchange Limited
"Morgan Stanley" Morgan Stanley & Co. Limited
"North American Person" a person in the United States or in
or resident in Canada
"NYSE" the New York Stock Exchange
"Offer" the offer to be made by Goldman
Sachs International on behalf of
PacifiCorp Acquisitions to acquire
the Energy Group Shares (including
those represented by Energy Group
ADSs) and Energy Group ADSs as
described in this document
including, where the context permits
and/or requires, the Loan Note
Alternative and any subsequent
revision, variation, extension, or
renewal of such offer or the Loan
Note Alternative
"Offer Document" the document containing the Offer to
be sent to holders of Energy Group
Shares and Energy Group ADSs
"Panel" The Panel on Takeovers and Mergers
of the UK
"SEC" the US Securities and Exchange
Commission
"Subsequent Offer Period" the period following the Initial
Closing Date during which the Offer
remains open for acceptance
"TEG Group" The Energy Group and its
subsidiaries and subsidiary
undertakings and, where the context
permits, each of them
"The Energy Group" The Energy Group PLC
"UK" or "United Kingdom" the United Kingdom of Great Britain
and Northern Ireland
"United States" or "US" the United States of America, its
territories and possessions, any
State of the United States and the
District of Columbia, and all other
areas subject to its jurisdiction
"US HSR Act" the US Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as
amended, and the rules and
regulations promulgated thereunder
"pound sterling" pound sterling, the lawful currency
of the United Kingdom
"$" United States dollar, the lawful
currency of the United States
END
ENDS [nRNSM9568T]
