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) September 30, 1999
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SOUTHERN INVESTMENTS UK plc
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(Exact name of registrant as specified in its charter)
England and Wales 333-09033 None
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
800 Park Avenue, Aztec West, Almondsbury, Bristol BS32 4SE, England
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(Address of principal executive offices)
Registrant's telephone number, including area code: 011-44-1454-201-101
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N/A
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(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposal of Assets
Southern Investments UK plc holds the entire share capital of South
Western Electricity plc ("SWE").
On September 30, 1999, SWE completed the sale of its supply business
(and certain related activities) to London Electricity plc ("LE") as announced
previously in Form 8-K dated June 11, 1999. Under the terms of the agreement,
SWE received cash consideration of (pound)160 million, and transferred certain
liabilities to LE.
Prior to the sale, SWE was primarily engaged in two electric industry
segments, distribution, which involves the transfer of electricity from the high
voltage transmission system, and its delivery, across lower voltage distribution
systems, to consumers; and supply, which involves bulk purchase of electricity
and arranging for its sale and transfer to its customers.
SWE's operating income is predominantly from the distribution business
and this will continue now that the sale of the supply business has been
completed.
SWE will brand its distribution business as Western Power Distribution
as the SWEB name has transferred to LE.
Item 7. Pro Forma Financial Information
The following unaudited pro forma consolidated statement of income for
the year ended March 31, 1999 gives effect to the disposition of the supply
business as if the sale had occurred on April 1, 1998. The impact on the
consolidated statement of income for the three months ended June 30, 1999, is
less than (pound)0.5 million and therefore a pro forma income statement is not
presented.
The supply business has been treated as a discontinued activity in the
reports filed for the periods ended March 31, 1999 and June 30, 1999 and thus
the impact of the pro forma adjustments on the results previously reported for
these periods is limited.
The following unaudited pro forma consolidated balance sheet as of June
30, 1999 gives effect to the disposition of the supply business as if the sale
had occurred as of that date.
The unaudited pro forma financial statements are presented for
informational purposes only and do not purport to be indicative of the financial
position which would actually have existed or the results of operations which
would actually have been attained if the transaction had occurred in the periods
indicated or which may exist or be obtained in the future.
These statements should be read in conjunction with the historical
financial statements and accompanying notes of the Registrant.
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SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES
PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED MARCH 31, 1999
(In Millions)
For the Year Ended March 31, 1999
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As Reported Pro Forma Pro Forma
Adjustment
(Note 1)
OPERATING REVENUES (pound) 261 - (pound) 261
COST OF SALES 16 - 16
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GROSS MARGIN 245 - 245
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OPERATING EXPENSES:
Maintenance 37 - 37
Depreciation and amortization 51 - 51
Selling, general, and administrative 35 - 35
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Total operating expenses 123 - 123
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OPERATING INCOME 122 - 122
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OTHER INCOME (EXPENSE):
Interest income 1 - 1
Interest income from affiliated company 6 - 6
Interest expense (55) 1 (54)
Investment income 5 - 5
Gain on sale of assets 7 - 7
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Total other income (expense) (36) 1 (35)
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INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 86 1 87
INCOME TAXES (10) - (10)
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NET INCOME FROM CONTINUING OPERATIONS 76 1 77
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See accompanying notes to unaudited pro forma condensed financial statements.
2
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AT JUNE 30, 1999
(In Millions)
As Reported Pro Forma Pro Forma
Adjustment
(Note 2)
PROPERTY, PLANT, AND EQUIPMENT (pound) 1,466 (a) (45) (pound) 1,421
Less accumulated depreciation 164 (a) (19) 145
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Total 1,302 (26) 1,276
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OTHER ASSETS:
Investments 16 (b) 140 156
Prepaid pension cost 138 (c) (10) 128
Goodwill, net of accumulated amortization of(pound)17 166 - 166
Loans to affiliated company 351 - 351
Premium in respect of loans to affiliated company and related hedges,
net of accumulated amortization of(pound)4 38 - 38
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Total 709 130 839
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CURRENT ASSETS:
Cash and cash equivalents 5 - 5
Investments 14 - 14
Receivables:
Customer accounts, less provision for uncollectables 57 (d) (22) 35
Other 19 - 19
Materials and supplies 2 - 2
Prepayments 14 - 14
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Total 111 (22) 89
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TOTAL ASSETS (pound) 2,122 82 (pound) 2,204
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See accompanying notes to unaudited pro forma condensed financial statements.
3
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AT JUNE 30, 1999
(In Millions)
As Reported Pro Forma Pro Forma
Adjustment
(Note 2)
STOCKHOLDER'S EQUITY:
Common stock, par value (pound)1 per share, 902,128,735 shares
authorized, issued and outstanding (pound) 902 - (pound) 902
Retained deficit (136) (e) 116 (20)
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Total 766 116 882
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COMPANY OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES OF SOUTHERN INVESTMENTS
UK CAPITAL TRUST I HOLDING COMPANY JUNIOR
SUBORDINATED DEBENTURES 50 - 50
NON-CURRENT LIABILITIES:
Long-term debt 301 - 301
Accumulated deferred income taxes 363 (f) 45 408
Provision for loss contracts 68 (g) (68) -
Miscellaneous 36 - 36
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Total 768 (23) 745
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CURRENT LIABILITIES:
Commercial paper 30 - 30
Notes payable to banks 304 (b) (20) 284
Notes payable to affiliated company 25 - 25
Other notes payable 7 - 7
Accounts payable 40 (d) (30) 10
Accrued income taxes 54 - 54
Interest accrued 13 - 13
Miscellaneous 65 (h) 39 104
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Total 538 (11) 527
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TOTAL STOCKHOLDER'S EQUITY AND LIABILITIES (pound) 2,122 82 (pound) 2,204
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See accompanying notes to unaudited pro forma condensed financial statements.
4
SOUTHERN INVESTMENTS UK plc AND SUBSIDIARIES
FOR THE YEAR ENDED MARCH 31, 1999 AND THE THREE MONTHS
ENDED JUNE 30, 1999
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS
1. Income Statement
The pro forma adjustment to the consolidated statement of income for the year
ended March 31, 1999, reflects a reduction in interest expense resulting from
short-term debt repayment of (pound)20 million, at an interest rate of 7.9%.
2. Balance Sheet
The pro forma adjustments to the consolidated balance sheet as of June 30, 1999
reflect the following:
a) Disposition of the supply business fixed assets, and write-down of assets
used in the supply business.
b) Adjustment to reflect proceeds from the sale of the supply business, of
which (pound)140 million was temporarily invested in short term investments,
and (pound)20 million was utilized to reduce short-term debt. A longer term
investment is anticipated.
c) Disposition of the supply business prepaid pension credit.
d) Disposition of supply business accounts receivable and accounts payable, and
to record accounts receivable from the supply business which were previously
eliminated in consolidation.
e) The recognition of the anticipated gain from the sale and related income
taxes.
f) Adjustment to reflect the estimated income tax charge related to the gain on
sale.
g) SWE entered into a contract relating to the purchase of 200 megawatts of
capacity from a 7.69% related party, Teesside Power Limited, for a period of
15 years beginning April 1993. SWE had recognized an accrual at the
acquisition date for the excess of these Teesside power purchase costs in
each period over an estimate of the equivalent wholesale market cost in that
respective period. Under the terms of the supply sale agreement, LE will
assume SWE's obligations under the contract and thus the accrual is released.
h) Disposition of supply business accruals, and to reflect expenses that are
incremental and a direct result of the sale of the supply business.
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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 authorised.
SOUTHERN INVESTMENTS UK plc
By: /s/ D. Charl S. Oosthuizen
D. Charl S. Oosthuizen
Chief Financial and Accounting Officer
Date: October 14, 1999