Note 22 – Provisions for liabilities and charges
| Group | |||||||
|---|---|---|---|---|---|---|---|
| |
Decommissioning £m |
Post- retirement benefits £m |
Environmental £m |
Deferred taxation £m |
Restructuring £m |
Other £m |
Total provisions £m |
| At 1 April 2003 (restated) | 143 | 551 | 442 | 3,023 | 156 | 83 | 4,398 |
| Exchange adjustments | (21) | (59) | (25) | (148) | – | – | (253) |
| Additions | 24 | 260 | 35 | 84 | 87 | 13 | 503 |
| Unwinding of discount | 7 | – | 22 | – | – | – | 29 |
| Unused amounts reversed | – | – | (10) | – | – | – | (10) |
| Utilised | (22) | (288) | (36) | – | (154) | (3) | (503) |
| Other | – | – | – | (15) | – | – | (15) |
| At 31 March 2004 (restated) | 131 | 464 | 428 | 2,944 | 89 | 93 | 4,149 |
| Exchange adjustments | (4) | (11) | (6) | (31) | – | – | (52) |
| Acquisition of Group undertaking | 1 | – | – | 32 | – | – | 33 |
| Additions | (2) | 229 | 107 | 127 | 175 | 11 | 647 |
| Unwinding of discount | 5 | – | 9 | – | – | – | 14 |
| Unused amounts reversed | – | – | – | – | – | (4) | (4) |
| Utilised | (26) | (164) | (47) | – | (133) | (3) | (373) |
| Other | – | (6) | – | (36) | – | – | (42) |
| At 31 March 2005 | 105 | 512 | 491 | 3,036 | 131 | 97 | 4,372 |
The decommissioning provision of £105m at 31 March 2005 represented the net present value of the estimated expenditure (discounted at a nominal rate of 4.90%) expected to be incurred in respect of the decommissioning of certain nuclear generating units. Related regulatory assets were also recognised (note 17). Expenditure is expected to be incurred between 2006 and 2010. Additions in the year included £2m in respect of a change in a discount rate.
The post-retirement benefits provision was in respect of pensions £342m (2004: £273m) and other post-retirement benefits (health care and life insurance) £170m (2004: £191m).
The environmental provision represented the estimated environmental restoration and remediation costs relating to a number of sites owned and managed by the Group.
At 31 March 2005, £262m (2004: £252m) of the environmental provision represented the net present value of the estimated statutory decontamination costs of old gas manufacturing sites in the UK (discounted using a nominal rate of 5.25%). The anticipated timing of the cash flows for statutory decontamination cannot be predicted with certainty, but it is expected to be incurred over the period 2006 to 2057 with some 64% of the spend projected to be spent over the next five years. During the year ended 31 March 2005, a review of the provision was undertaken to take into account the impact of recent changes to the regulations on waste disposal. This review together with related revisions to the expected expenditure profile has resulted in an additional provision being made as an exceptional charge of £41m in the profit and loss account – see note 4(a).
There are a number of uncertainties that affect the calculation of the provision for UK gas site decontamination, including the impact of regulation, the accuracy of the site surveys, unexpected contaminants, transportation costs, the impact of alternative technologies and changes in the discount rate. The Group has made its best estimate of the financial effect of these uncertainties in the calculation of the provision, but future material changes in any of the assumptions could materially impact on the calculation of the provision and hence the profit and loss account.
The undiscounted amount of the provision at 31 March 2005 relating to UK gas site decontamination was £340m (2004: £341m), being the undiscounted best estimate of the liability having regard to the uncertainties referred to above (excluding the impact of changes in discount rate).
The environmental provision at 31 March 2005 also included £219m (2004: £165m) which represented the net present value of estimated remediation expenditure in the US which has been discounted at a nominal rate of 5.75%. This expenditure is expected to be incurred between 2006 and 2044. The uncertainties regarding the calculation of this provision are similar to those considered in respect of UK gas decontamination. However, unlike the UK, with the exception of immaterial amounts of such costs, this expenditure is recoverable from rate payers under the terms of the Group’s various rate agreements in the US. As a consequence, any movement in the calculation of the best estimate of the Group’s liability is matched by a corresponding movement in the value of regulatory assets (note 17). Therefore, there is no material impact on the Group’s profit and loss account arising from changes in the calculation of this liability.
The undiscounted amount of environmental provision relating to the Group’s US-based sites amounted to £324m at 31 March 2005. The Group does not have sufficient information to calculate a range of outcomes, but it is expected that any outcome of the liability would be recovered from rate payers.
The remainder of the environmental provision of £10m related to the expected cost of remediation of certain other sites in the UK, is calculated on an undiscounted basis and is expected to be utilised within the next five years.
The undiscounted amount of the total Group environmental provision at 31 March 2005 was £674m.
At 31 March 2005, £36m of the total restructuring provision (2004: £42m) consisted of provisions for the disposal of surplus leasehold interests and rates payable on surplus properties. The expected payment dates for property restructuring costs remain uncertain. The remainder of the restructuring provision related to business reorganisation costs in the UK.
Other provisions at 31 March 2005 included £59m (2004: £54m) of estimated liabilities in respect of past events incurred by the Group’s insurance undertakings, including employer liability claims. In accordance with insurance industry practice, these estimates were based on experience from previous years and there was, therefore, no identifiable payment date. Other provisions at 31 March 2005 also included £11m (2004: £12m) in respect of obligations associated with the impairment of investments in joint ventures.
Deferred taxation comprised:
| Provided | ||
|---|---|---|
| |
2005 £m |
2004 (restated) £m |
| Accelerated capital allowances | 2,770 | 2,748 |
| Other timing differences | 266 | 196 |
| 3,036 | 2,944 | |
A deferred tax asset in respect of substantial capital losses and non-trading debits has not been recognised because their future recovery is uncertain. Final agreement of these losses is outstanding. As at 31 March 2005, the Group has capital losses in excess of £300m which have been agreed with the relevant tax authorities.