ScottishPower announces the terms and timetable for the proposed demerger of ScottishPower's interest in THUS Group plc ("THUS Group") ("Demerger")

ScottishPower announces:

• Proposed demerger of ScottishPower's interest in THUS Group to ScottishPower shareholders on the ScottishPower register of members at 5.00 p.m. on 15 March 2002 
• ScottishPower shareholders would receive between approximately 42 and 53 THUS Group ordinary shares for every 100 ScottishPower shares held 
• Demerger expected to become effective at 4.30 p.m. on 19 March 2002 
• Proposed arrangements for ADS holders and certain shareholders with small holdings of ScottishPower shares to have their entitlement of THUS Group ordinary shares sold on their behalf immediately following the Demerger 
• Further information including full terms of the Demerger will be posted to ScottishPower shareholders on or about 14 February 2002

On 18 January 2002 ScottishPower announced that, as a further step in focusing on its international energy and networks operations, ScottishPower intended to put proposals to its shareholders to enable it to dispose of its shareholding in THUS Group by way of a demerger to ScottishPower shareholders. ScottishPower today announces the terms of the proposed Demerger, and the expected timetable to its completion.

The proposed Demerger would enable ScottishPower to release the value of its shareholding in THUS Group to ScottishPower shareholders and allow the management of ScottishPower to focus on its core operations. ScottishPower shareholders who retain their demerger entitlement of THUS Group shares will have the ability to participate in THUS Group's future development. The Demerger is to be effected by way of a special dividend, which would be in addition to and would not affect ScottishPower's normal cash dividends declared quarterly or its current dividend policy.

Following the completion of THUS's £275 million open offer announced on 18 January 2002 (the "THUS Open Offer"), which is fully underwritten by ScottishPower, and implementation of a corporate reorganisation to introduce a new group holding company, THUS Group, above THUS (the "THUS Scheme of Arrangement"), ScottishPower will hold between approximately 714.4 million and approximately 926.4 million THUS Group ordinary shares, depending on the take up under the THUS Open Offer by independent THUS shareholders and any additional underwriters. It is expected that the THUS Open Offer will become unconditional on 12 March 2002. In addition ScottishPower will also hold 25 million THUS Group preference shares. The Demerger, if it proceeds, is to be effected, following the THUS Scheme of Arrangement becoming effective, by the payment of a special dividend to ScottishPower ordinary shareholders which will result in the THUS Group ordinary shares and THUS Group preference shares then owned by ScottishPower being distributed to ScottishPower ordinary shareholders directly on a pro ratabasis.

On 11 February 2002, THUS obtained shareholder approval to implement the THUS Scheme of Arrangement both at an extraordinary general meeting of THUS and at a meeting of certain shareholders of THUS convened as required by the Court of Session. The THUS Scheme of Arrangement remains subject to the final sanction of the Court of Session. It is expected that the THUS Scheme of Arrangement will become effective on 14 March 2002.

Immediately following the Demerger, if it proceeds, the shareholders of THUS Group, including ScottishPower ordinary shareholders (who will have become THUS Group shareholders as a consequence of the Demerger), will be asked to vote on the conversion of the THUS Group preference shares into THUS Group ordinary shares to avoid ScottishPower shareholders retaining unlisted and not readily marketable THUS Group preference shares. The proposed conversion ("Conversion") would be effected by way of a redesignation of the THUS Group preference shares as new THUS Group ordinary shares and non-voting deferred shares. The non-voting deferred shares would effectively have no value.

Assuming the Conversion becomes effective, ScottishPower shareholders would, in aggregate, as a result of the proposed Demerger and the Conversion, receive between approximately 42 and 53 THUS Group ordinary shares for every 100 ScottishPower ordinary shares held at 5.00 p.m. on 15 March 2002. The precise number of THUS Group ordinary shares which ScottishPower shareholders will receive can only be calculated once the THUS Open Offer has closed. ScottishPower expects to be able to announce this number on 7 March 2002. In the event that the Conversion does not become effective, ScottishPower ordinary shareholders would receive between approximately 38 and 50 THUS Group ordinary shares and approximately one THUS Group preference share for every 100 ScottishPower ordinary shares held on the register of members at 5.00 p.m. on 15 March 2002.

In connection with the Demerger, ScottishPower shareholders holding 1,000 ScottishPower ordinary shares or fewer on the register of members at 5.00 p.m. on 15 March 2002 (the "Eligible Cash Out Shareholders") can elect to sell their THUS Group ordinary shares arising on the demerger, including those arising as a result of the proposed Conversion, if it becomes effective, (the "Cash Out Shares") free of commission and, to the extent that such elections are received, ScottishPower and THUS Group will instruct their brokers to use reasonable endeavours to procure purchasers for those shares. The purpose of the sale is to give the Eligible Cash Out Shareholders the opportunity, market conditions permitting, to sell their THUS Group ordinary shares for cash, without paying commission, instead of retaining a small holding of THUS Group ordinary shares. If the Conversion does not become effective, the THUS Group preference shares which Eligible Cash Out Shareholders receive under the Demerger will not be sold.

THUS Group ordinary shares arising on the Demerger and as a result of the Conversion, if it becomes effective, which are received by JPMorgan Chase Bank, as depositary of the ScottishPower ADS programme (together the "ADS Holders' Shares"), will (subject to market conditions) be sold by the brokers of ScottishPower and THUS Group. This sale will be undertaken on a reasonable endeavours basis, in conjunction with the sale of the Cash Out Shares. Any proceeds received by the depositary will be distributed to the ADS holders entitled thereto in the manner contemplated by the ADS deposit agreement

The Cash Out Shares, the ADS Holders' Shares and certain shares arising from fractional entitlements on the proposed Demerger and the Conversion will be sold through a formal bookbuild which is expected to close at 4.30 p.m. on Tuesday 19 March 2002. Based on the ScottishPower register of members as at 5.00 p.m. on 8 February 2002, it is estimated that the maximum size of the bookbuild (excluding fractional entitlements) will be 228,338,303 THUS Group ordinary shares assuming the Demerger and Conversion proceed, representing a maximum of 16.93 per cent. of the total number of THUS Group ordinary shares in issue as enlarged by the Conversion. The result of the bookbuild is expected to be announced on Wednesday 20 March 2002.

Shareholders should note that the price obtained for the Cash Out Shares and the ADS Holders' Shares is not subject to any minimum price but will be dependent upon market demand at the time and may therefore be substantially below the price at which THUS Group ordinary shares will have been trading on the London Stock Exchange market for listed securities over the period prior to the implementation of such sale.

If there is insufficient market demand for the aggregate number of the Cash Out Shares and the ADS Holders' Shares, then the Cash Out Shares will be sold in priority to the sale of ADS Holders' Shares, and accordingly the number of ADS Holders' Shares sold will be reduced first depending on the level of shortfall of market demand. Where there is sufficient market demand for only some of the Cash Out Shares, only that number of shares which matches the market demand will be sold. In such an event, priority in the sale of Cash Out Shares will be given to those Eligible Cash Out Shareholders with the smallest holding of ScottishPower Ordinary Shares at 5.00 p.m. on 15 March 2002 and thereafter in ascending order of size of holding. In such circumstances some Eligible Cash Out Shareholders who have made a Cash Out Election may receive their entitlements to THUS Group ordinary shares as if no Cash Out Election had been made.

To the extent that all of the ADS Holders' Shares are not sold in conjunction with the sale of the Cash Out Shares by the close of business on 20 March 2002, the depositary will be required to attempt to sell any remaining ADS Holders' Shares in the open market. There is no guarantee that such shares will be able to be sold immediately or that the price at which the depositary ultimately sells such shares will not be materially below the price at which THUS Group ordinary shares will have been trading on the London Stock Exchange market for listed securities over the period prior to the implementation of such sale. In addition there is no guarantee that such a sale will not materially impact the market price for the THUS Group ordinary shares.

ScottishPower is seeking shareholder approval in relation to a proposed amendment to its Articles of Association, which will give the directors of ScottishPower the ability to pay the special dividend to effect the proposed Demerger and authorise them to do so. A circular containing further details in relation to the Demerger and notice of an extraordinary general meeting of the Company to be held on 11 March 2002 will be available later today for inspection at the UK Listing Authority's Document Viewing Facility. It is expected that the circular will be sent to all shareholders on or about 14 February 2002.

As part of the proposed Demerger arrangements, ScottishPower has entered into a tax indemnity deed which clarifies and varies existing tax indemnities given to THUS by ScottishPower group companies in September 1999 under certain business transfer agreements. This tax indemnity deed also includes provisions reflecting the steps taken in connection with, inter alia, the THUS Open Offer and THUS Scheme of Arrangement and provides protection for the ScottishPower group and the THUS group following the proposed Demerger. Further details are included in the ScottishPower circular referred to above.

A circular containing details of the proposed Conversion and containing notice of an extraordinary general meeting of THUS Group to be held on 19 March 2002 will be available later today for inspection at the UK Listing Authority's Document Viewing Facility. It is expected that the THUS Group circular will be sent to all ScottishPower shareholders and THUS shareholders on or about 14 February 2002.

Expected timetable of principal events

Latest time and date for receipt by the Registrars of forms of proxy for the ScottishPower Extraordinary General Meeting 11.00 a.m. on 9 March 2002 ScottishPower Extraordinary General Meeting 11.00 a.m. on 11 March 2002 ScottishPower ADSs begin trading with due bills for demerger entitlement 13 March 2002 ADS Holders record date 15 March 2002 Record time for demerger entitlements/cash out election 5.00 p.m. on 15 March 2002* Cash out election period closes 5.00 p.m. on 15 March 2002 Expected time for the Demerger to become effective and cash out bookbuild closes 4.30 p.m. on 19 March 2002* THUS Group Extraordinary General Meeting to approve the Conversion 5.00 p.m. on 19 March 2002 ScottishPower ordinary shares trade ex demerger entitlements 20 March 2002* ScottishPower ADSs trade ex demerger entitlements 20 March 2002 Result of cash out announced 20 March 2002* CREST members' accounts credited with THUS Group shares issued in respect of the Demerger 20 March 2002* Registrars post settlement cheques to Eligib
le Cash Out Shareholders whose THUS Group ordinary shares have been sold By 27 March 2002* Registrars post new THUS Group share certificates By 27 March 2002* JPMorgan Chase Bank post settlement cheques to ADS holders On 8/9 April 2002

All references are to UK times unless otherwise stated.
*These dates depend on the date of confirmation of the ScottishPower share premium account reduction and the sanction of the THUS Scheme of Arrangement by the Court of Session in Edinburgh. Accordingly such dates are subject to change. Any change will be announced to the London Stock Exchange.
These dates are subject to confirmation by the New York Stock Exchange and assume the successful sale of all of the ADS Holders' Shares through the brokers appointed by ScottishPower and THUS Group and receipt by the depositary of the net proceeds of such sale on or before 26 March 2002.

Shareholders should be aware that the Demerger is conditional, inter alia, upon:

• the share premium account reduction becoming effective. ScottishPower shareholders approved the reduction in the share premium account at an extraordinary general meeting held on 21 January 2002. It is expected that the Court of Session in Edinburgh will confirm the reduction on or about 5 March 2002, following which the share premium reduction will take effect; 
• the approval of the special resolution by ScottishPower ordinary shareholders at the extraordinary general meeting to be held on 11 March 2002; and 
• the THUS Open Offer to raise £275 million, underwritten by ScottishPower, becoming unconditional in all respects and the THUS Scheme of Arrangement becoming effective. It is expected that the THUS Open Offer will become unconditional on 12 March 2002 and the THUS Scheme of Arrangement will become effective on 14 March 2002.

Notwithstanding the above, ScottishPower is entitled not to proceed with the Demerger at any time, although it is ScottishPower's present intention that it should be concluded.

It should be noted that the approval of the conversion of the THUS Group preference shares into THUS Group ordinary shares will be sought immediately after the Demerger has become effective. If the Conversion does not become effective, ScottishPower ordinary shareholders who received THUS Group preference shares would continue to hold those shares which are not traded on the London Stock Exchange's market for listed securities and which may therefore be difficult to sell or to otherwise realise value for.

This announcement does not constitute a recommendation regarding the securities of THUS or THUS Group.

ScottishPower helplines for retail shareholders
The ScottishPower Shareholder Information Line 0845 203 2020
ADS Holder Help Line in the USA 1 800 871 3102

ScottishPower
Colin McSeveny - Media 0141 636 4515
Andrew Jamieson - Analysts and Institutional Investors 0141 636 4527

HSBC Investment Bank plc
Peter Jones 020 7336 9315
John Hannaford 020 7336 2006

Notes for editors:

1. To determine the conversion terms of THUS Group preference shares into THUS Group ordinary shares, the 25,000,000 THUS Group preference shares which will be outstanding have been valued at 97p per share, and the THUS Group ordinary shares at 34.6p, the 5 day closing average mid market price of a THUS ordinary share ending 11 February 2002. This would result in approximately 70.09 million THUS Group ordinary shares being issued on Conversion. This represents approximately 5.48 per cent. of the number of THUS Group ordinary shares that will be in issue following the THUS Open Offer and THUS Scheme of Arrangement becoming effective.

HSBC Investment Bank plc has approved the content of this announcement for the purposes of section 21 of the Financial Services and Markets Act 2000. HSBC Investment Bank plc is acting exclusively for ScottishPower and no one else in connection with the proposals described in this announcement and will not be responsible to anyone other than ScottishPower for providing the protections afforded to its clients or for providing advice in relation to such proposals or the contents of this announcement.