ScottishPower is today updating analysts and investors on the Company's strategy and giving an overview of its UK and US business.

The presentation follows an important and very successful year in the development of the ScottishPower group. 1999 saw the introduction of full competition in UK energy markets and regulatory reviews affecting electricity supply pricing, transmission and distribution and ScottishPower's water operations.  The company also floated a minority interest in its telecom and internet subsidiary, Thus, and successfully completed the merger with the major US electricity company, PacifiCorp.

Strategy

The Company's UK strategy is to continue selectively to grow its asset and customer base providing electricity, multi-utility and utility related services.  We will continue to drive for world class performance in all our activities and to maximise value from the 5.5 million homes we currently serve.

In the US we will reshape PacifiCorp's core business and exploit its existing assets, establishing a base from which to grow in the United States. 

We believe this strategy will deliver our vision for 2005 which is:

• To be an internationally acknowledged leader in utility and related services.
• To be in the world top 10 of utilities and related companies.
• To be serving a customer base of 10 million with multiple products.
• To be recognised for our record of value creating growth for shareholders and for innovation.
• Royal Bank of Scotland Joint Venture

ScottishPower and Royal Bank of Scotland are announcing today that they intend to create a multi-million pound Internet based joint venture offering a unique range of products and services to their combined customer base of over 10 million in the residential and small business markets.

The new business will use the Internet as its preferred channel to provide a range of financial, utility, and maintenance services - traditionally sold separately - in one convenient package.  Customers will also be able to access the new range through more traditional routes, such as by telephone.

PacifiCorp

In PacifiCorp we have acquired a major US utility with high quality but under-performing assets. We have put in place a management team that is focused upon improving performance and achieving value for shareholders.

Following completion of the merger in November, we have established an experienced transition team from both ScottishPower and PacifiCorp.  This team will develop, by May 2000, a transition plan to bring improved efficiency and operational performance to PacifiCorp.  In 1998, PacifiCorp was ranked in 75th place amongst US utilities for non generation costs per customer - we aim to achieve a top 10 efficiency ranking by March 2004.  PacifiCorp has recently filed for substantial rate increases in, Utah, Oregon, Wyoming and Washington.  The outcome of the rate cases and our cost reduction programme will drive future earnings growth in PacifiCorp.

Impact of the Regulatory Reviews

As announced in December 1999, ScottishPower has accepted the final proposals put forward by OFGEM and OFWAT in the recent regulatory reviews affecting Southern Water, the distribution and supply businesses of ScottishPower and Manweb and the transmission business of ScottishPower. 

The revised price controls are demanding and the total direct impact on group operating profit is estimated to be £127 million in the year to 31 March 2001.

Management has already announced major programmes to reduce costs in the Company's UK infrastructure businesses, which will aim to offset the ongoing efficiency targets and the cost of new obligations that the regulators have set over the next five years. 

Outlook for the Current Financial Year

Following the completion of the acquisition of PacifiCorp on 30 November, the results of ScottishPower will include the financial performance of PacifiCorp for the four months to 31 March 2000.

The reported pre tax profit of ScottishPower for the year to March 2000 will increase substantially compared to the prior year. This is due to the exceptional gain of some £700 million arising on the flotation of Thus, although this gain is expected to be partially offset by exceptional charges including the costs of restructuring the UK and US businesses.

For the UK businesses, we expect to report operating profit for the year ending 31 March 2000 consistent with trends reported in our interim results, reflecting the costs of the continuing investment in Thus and in growing our customer base in the competitive energy markets. Earnings per share from the UK businesses will see some benefit from the impact of our share buy-back and a lower tax charge.

It is anticipated that the underlying financial performance of PacifiCorp for the four months to 31 March 2000 will be in line with market expectations.  At a group level, for this period, it is expected to be mildly dilutive to earnings per share, before the amortisation of goodwill, due to the seasonality of profits.  As previously announced, the acquisition of PacifiCorp is expected to be earnings accretive, before the amortisation of goodwill, in the year to 31 March 2001. We expect to amortise goodwill of approximately £1.3bn over 20 years.

At 31 March 2000, on consolidation of PacifiCorp, (but excluding Powercor which will be treated as an asset held for disposal) we expect to have gearing (debt to shareholders' funds) of some 90% with debt of around £5.4 billion.  Capital expenditure in the UK is expected to peak at about £800 million in the current year and decline to around £700 million in the year to 31 March 2001.  Capital expenditure in the USA is expected to be about £300 million in the year to 31 March 2001.

We will continue to look at ways of improving balance sheet efficiency while continuing to target an A-band credit rating and 3 times interest cover for the group.

Financial Reporting and Dividends

As previously announced, ScottishPower will move to quarterly reporting with effect from the quarter to June 2000 and expects to announce its first set of quarterly results in August 2000.  Following the completion of our merger with PacifiCorp, ScottishPower is also commencing payment of quarterly dividends.  The first quarterly dividend of 2.23p will be in respect of the period 29 November (the day the merger became effective) to 31 December 1999 and will be paid on 15 February 2000 to shareholders on the register on 21 January 2000.  This is in addition to the pre-completion dividends payable to ScottishPower and PacifiCorp shareholders which were announced on 25 November 1999 and will be paid on 1 February 2000.

Our aim has been to deliver real dividend growth post the regulatory reviews, which take effect in April 2000. With the outcome of the UK regulatory reviews now known, we will target annual dividend growth of 5% nominal for the three years commencing fiscal 2000/01. Our aim will be to maintain an appropriate level of dividend cover to provide funding for earnings growth.

Commenting on the announcement, Sir Ian Robinson, Chief Executive, ScottishPower said
"With a clear strategy, a proven track record and a strong business base, both in the UK and US, ScottishPower is uniquely positioned to deliver shareholder value".

Further Information:
Sue Clark,            Director of Corporate Affairs                        0973 137 992
Colin McSeveny,      Group Media Relations Manager                0850 884 815
Iain Paterson,         Investor Relations Manager                         0850 911 775
Andrew Grant,                 Brunswick                                        0171 404 5959

Note

Safe Harbor
Certain statements contained herein are forward-looking statements that are subject to risks and uncertainties.  These include statements concerning our expectations and other statements that are not historical facts.

We desire to qualify these statements for the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1999.