Annual Financial Report

RNS Number : 0191H

SSE PLC

13 June 2013

 



Annual Financial Report

Following the Preliminary Results announcement on 22 May 2013, SSE (SSE plc) announces that it has published its Annual Report and Accounts for the year ended 31 March 2013.

The Annual General Meeting (AGM) will be held at the Perth Concert Hall, Mill Street, Perth PH1 5HZ on Thursday, 25 July 2013 at 12 noon.  The mailing to shareholders of the AGM documentation has commenced, and copies of the Annual Report and Accounts and the Notice of Annual General Meeting for 2013 are available to view on the Company's website: www.sse.com.

Copies of the Annual Report and Accounts, Notice of Annual General Meeting, and Form of Proxy for 2013 have been submitted to the UK Listing Authority and will shortly be available for inspection from the National Storage Mechanism, which can be accessed at: www.hemscott.com/nsm.do

The information below, which is extracted in unedited full text from the 2013 Annual Report and Accounts, is included in this announcement for the purpose of compliance with Disclosure and Transparency Rule 6.3.5.  The information reproduced below should be read in conjunction with the Preliminary Results announcement issued on 22 May 2013.  Together these constitute the material required by Disclosure and Transparency Rule 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service.  This material is not a substitute for reading the full 2013 Annual Report and Accounts.  Page numbers and cross-references in the extracted information below refer to page numbers and cross-references in the Annual Report 2013.

APPENDIX A:  Statement of Directors' responsibilities in respect of the annual report and the financial statements (Page 102)

The Directors are responsible for preparing the Annual Report and the Group and parent company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and parent company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company financial statements on the same basis.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent company and of their profit or loss for that period. In preparing each of the Group and parent company financial statements, the Directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgements and estimates that are reasonable and prudent;

·      state whether they have been prepared in accordance with IFRS as adopted by the EU; and

·      prepare the financial statements on the Going Concern basis unless it is inappropriate to presume that the Group and the parent company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

We confirm that to the best of our knowledge:

·      the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

·      the Directors' Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

For and on behalf of the Board

Ian Marchant                             Gregor Alexander

Chief Executive                          Finance Director

21 May 2013

APPENDIX B:  Risk management (Pages 74-79)

All business involves risk; as such risk management is regarded as essential in everything SSE does.

The Board of SSE acknowledges its clear responsibility for risk management. SSE understands that any sustainable and successful business requires clear and effective risk management in all aspects of its activities.

Risk management is first and foremost an integral part of how managers run their activities every day. Therefore SSE focuses on looking at each business area individually and putting in place a framework that works effectively for that area. SSE recognises that this is an ongoing process as it needs to react to changes in the business environment by constantly revisiting its internal processes. This report includes a summary of the developments in SSE's approach to risk management during 2012/13.

The need for good risk governance is critical to ensure the overall business model and operation is effective in practice. Risk management in SSE is characterised by: the clarity of its financial goal; its strategy and business model which help to limit the value at risk; the culture and limited appetite for risk; and its work on risk identification, evaluation and cost effective management.

Limited appetite for risk

SSE's Teamwork value, combined with other factors such as the clear financial goal of sustained real growth in the dividend, means SSE has adopted a limited appetite for, and tolerance of, risk. The appetite varies between businesses. This means that SSE's approach in respect of economically-regulated businesses, which in themselves are lower risk, is more risk averse than is the case in other market-based activities. In these areas, such as electricity generation, SSE might consider taking on additional risk where the risk is very well understood and can be mitigated cost effectively where potential returns are clearly attractive.

Some examples of the way in which appetite/tolerance for risk are limited include:

·      energy portfolio management - levels of exposure are strictly monitored through risk models and clear trading and reporting limits;

·      major project construction - the Company has in place a detailed governance and risk process for all its large capital projects;

·      acquisitions - the Company has a selective and disciplined approach to acquisitions, and sets demanding hurdle rates for expected returns;

·      funding - in treasury and funding matters, there is a clear and prudent approach to liquidity levels, and a mix of maturities and currencies; and

·      insurance - where available on acceptable terms, insurance policies have been placed maintaining an appropriate balance with self insurance. Additionally, the Insurance department actively seeks to identify new or emerging risks where insurance mitigation may be available.

Risk identification, evaluation, and monitoring

Risks are identified, evaluated and monitored by the relevant business units within SSE, with an overview provided by the Group Audit department for the Audit Committee meetings. Key strategic risks are identified and evaluated by senior management on a regular basis. In addition, the Board reviews all aspects of risk management and internal control twice a year, in March and September.

At its meeting in March 2013, the Board held a specific review of the developments within the Company during the year to ensure best practice risk management is in place; and it reviewed the management sponsoring and reporting arrangements to ensure proper controls are in place. The Board also undertook a review of the Company's principal risks and agreed the list set out in pages 77 to 79.

There are three additional risks that are not listed among the principal risks but which could potentially affect a large number of areas of activity: geopolitical developments; the weather; and reputation:

·      Geopolitical developments could have an impact on a number of SSE's activities, such as energy portfolio management or the construction of large capital projects through supply chain impacts. In view of this, SSE's balanced and diverse business model, which is designed amongst other things to avoid dependence on any single technology or fuel, is a key means of seeking to ensure the impact of developments over which SSE can have no control is, in practice, limited;

·      The weather could have an impact on the production and consumption of energy in the Electricity Generation and Energy Supply businesses. The extent of this risk is contained by the diversity within SSE's generation portfolio, the further diversity within its renewable energy portfolio, and the balance between its generation and supply activities. The weather could also have an impact on the operation of energy networks, as was exemplified on Arran and Kintyre in March 2013, and management of this risk is factored in to the operational planning of these networks; and

·      SSE believes that the most effective way to manage risks to its reputation is to manage effectively its principal Group risks. Corporate reputation is very important for a long-term business such as SSE, but seeking to manage 'reputation' rather than the substance of the issues, which determine a company's reputation, could lead to short-term behaviours or actions which have negative long-term implications. For this reason, SSE does not specify 'reputation' as a risk to be managed. Nevertheless, the need to have regard to the Company's long-term reputation is now explicitly recognised in the definition of the corporate arrogance or hubris principal risk.

During the year, the Group Audit department carried out over 60 separate audits of functions, activities and issues managed by SSE, providing senior management with a robust internal control assurance. Each audit report included agreed management actions to improve the overall management of risk. Group Audit reviews complement the work done by business-specific compliance functions in areas such as Safety, Energy Portfolio Management, Energy Efficiency, Energy Supply, IT and Customer Service.

The effectiveness of the business specific compliance functions, and the arrangements around them, is kept under review. In line with that, the compliance function relating to Energy Supply has undergone, and continues to undergo, reform in the light of the breaches by SSE of the new Energy Supply licence conditions introduced in 2009 that were highlighted by Ofgem in April 2013.

Review of SSE risk management during the year

As part of the SSE approach to risk management, the Company continues to review and strengthen its risk and internal control processes. Examples of this approach during 2012/13 are:

·      All the top 20 risks were reviewed in detail by the Management Board, and at the Board meeting in March 2013. Each principal risk has an assigned risk owner who is a member of the Management Board. The risk owner is responsible for ensuring that key controls for the risk are in place and operating effectively.

·      As stated above, the corporate arrogance or hubris risk definition was adapted to include a specific reference to the Company's long-term reputation.

·      The credit management risk was replaced with energy affordability, in recognition of the fact economic, social and energy market and policy conditions could make it difficult for households and businesses to pay the cost of electricity and gas, which could have significant implications for SSE.

·      The Group Audit department facilitated a review of the existing risk management framework. The output from this review led to the business risk and internal control procedures and guidelines being updated to reflect best practice.

·      Risk presentations were given at leadership conferences within the Company to communicate the need for, and required approach to, risk management in SSE.

·      All business unit risk registers have been standardised to ensure that evaluation of risk is consistent across SSE and aligned with the top 20 principal risks. Risk awareness training was given to all Management Board members and their first line of reports.

·      Cyber/information security risk was addressed with a significant investment programme getting under way after being approved in 2012.

·      Business continuity planning exercises were carried out.

In April and May 2013, the Management Board and the Board gave extensive consideration to the penalty notice issued to SSE by Ofgem for breaches of licence conditions in its Energy Supply business. They concluded that the breaches arose from a combination of factors, including weaknesses in the operational model, under-estimation of changes in the external environment and insufficiently robust arrangements to ensure compliance. The Management Board and the Board concluded that the steps taken since 2011 to address these issues had been appropriate and agreed additional steps to strengthen further the operations of the Energy Supply business.

Internal control

Risk management depends on a strong system of internal control, which is fundamental to achieving SSE's strategic objectives. The Board is responsible for the overall system of internal control and risk management, and it either directly, or through its committees, sets performance targets and policies for the management of key risks facing SSE. The system of internal control is designed to manage, rather than eliminate, risk of failure to achieve business objectives and can provide only reasonable and not absolute assurance against material misstatement or loss. The internal control assurance process below provides an overview of the key committees and related assurance activities currently in place within the Group.

All employees are expected to adhere to the Company's signature risk practices in addition to the SSE SET of values - Safety, Service, Efficiency, Sustainability, Excellence and Teamwork - which are embedded in the culture. The signature risk practices adopted within SSE are outlined as:

·      Consistently assess risks using the established evaluation criteria;

·      Apply a standard approach to risk control sheets;

·      Rigorously evaluate risks on a regular basis using detailed review; and

·      Ensure submissions for key decisions include a risk assessment.

Their consistent application is central to all activities in SSE. The Teamwork value, the emphasis on people's knowledge rather than status, and the maintenance of a very experienced team, complemented by the recruitment of additional specialist skills where necessary, are all designed to ensure that the risks associated with operations are fully understood and actively managed. Reporting within the Company is structured so that key issues are escalated through the management team, ultimately to the Board if appropriate.

The key elements of SSE's internal control and financial reporting processes are summarised below:

The Board:

·      approves the policies, procedures and framework for the maintenance of a sound and effective system of internal control ensuring:

·      the provision of quality internal reporting to the Audit Committee and other Board Committees by management and Group Audit;

·      the provision of quality reporting by the external Auditors to the Audit Committee;

·      compliance with the Turnbull Guidance on Internal Control; and

·      compliance with statutory and regulatory obligations;

·      reviews the significant key risks identified by each business unit as well as the mitigating action against those risks following review by the Audit Committee;

·      determines the nature and extent of the significant risks it is willing to take in achieving its strategic objectives;

·      approves and regularly reviews and updates SSE's strategy and business development;

·      reviews the financial reporting process and performance through: annual operating and capital expenditure budgets; monthly reviews against actual results; analysis of variances; and evaluation of key performance indicators;

·      receives regular reports from the Chief Executive, the Finance Director and the Management Board; and

·      undertakes an annual evaluation of the Board, its Committees and individual Directors.

The Management Board:

·      monitors operational and financial performance of SSE;

·      develops and implements: SSE strategy; operational plans; policies; procedures; and budgets;

·      assesses and controls all key strategic SSE risks;

·      monitors competitive forces in each area of operation;

·      receives and reviews reports from its committees, namely: the Risk and Trading Committee; the Safety, Health, and Environment Committee; the Major Projects (Standards and Delivery) Committee; the Disclosure and Governance Committee; and the Business Development Committee; and

·      receives and reviews regular presentations and reports from all the main Group businesses.

Role of committees

The role of the Audit Committee, and the Safety, Health and Environment Advisory Committee in the Group's system of internal control and risk management is set out in the individual committee reports.

The Risk and Trading Committee reports to the Management Board. The specific remit of the Committee is to support the Company's risk management responsibilities by reviewing the strategic, market, credit, operational and liquidity risks and exposures arising from SSE's energy portfolio management, generation and treasury operations.

The Group Audit department:

·      works with the business units to develop and improve risk-management tools and processes in their business operations;

·      ensures that business risks are identified, managed and regularly reviewed and that the key risks are reported to the Audit Committee and Board;

·      ensures that the business units carry out regular reviews on their internal controls relating to the key risks;

·      monitors the effectiveness of SSE's system of internal control through audit reviews, exercises and reports and, where appropriate, action plans to senior managers, Directors, the Audit Committee and external Auditors;

·      monitors adherence to SSE's key policies and principles;

·      provides the Audit Committee and Board with objective assurance on SSE's control environment;

·      undertakes specialist risk based assurance exercises as required; and

·      provides risk training to senior management.

The Board's review of internal control

While the Board retains overall responsibility, reviewing the system of internal control and monitoring its effectiveness is primarily dealt with by the Audit Committee, and its output is reviewed at least annually by the Board. The Board and the Audit Committee have reviewed the effectiveness of the Company's risk management and internal control system in accordance with the Code for the period from 1 April 2012 to 21 May 2013 (being the last practical day prior to the printing of this Annual Report). The Board believes that appropriate action has been taken to address significant failings in SSE's past domestic energy sales activities (see page 75). The Board confirms that no other significant failings or weaknesses have been identified in the Company's management and internal control system.

The internal control procedures described in this section have not been extended to cover its interests in joint ventures. The Group has Board representation on its joint venture companies where separate systems of internal control have been adopted.

Principal risks and their management

Risk definition	Key controls overview	Developments during the year
Safety management Unsafe working practices, equipment and inadequate training may lead to accidents or incidents involving employees, contractors, members of the public or plant and equipment.	Safety is the first of SSE's core values. The Safety, Health and Environment Committee of the Management Board is responsible for ensuring SSE's Safety, Health and Environment policy is adhered to.	Awareness of safety, health and environment risk across SSE has been enhanced. A behavioural safety programme is being embedded companywide and leading performance indicators are increasingly used to target improvements. The Company's focus areas are behavioural safety, contractor safety, and high hazard risks.
Regulatory change An adverse change to the current regulatory framework in all parts of SSE could have a significant effect on its business.	An experienced Regulation Department manages SSE's relationships and interface with Ofgem, Ofwat, Ofcom and other regulators. SSE assesses and anticipates regulatory issues in its decision-making and operations.	During 2012/13, the GB energy regulator Ofgem made decisions on the Retail Market Review and price controls for transmission and gas distribution networks. Following active participation in the regulatory process, SSE has begun implementing these changes.
Legislative change Risks to SSE from unfavourable legislative developments at EU level and in the jurisdictions in which it operates.	SSE has Policy and Public Affairs specialists based in Brussels, London, Edinburgh, Cardiff, Belfast and Dublin who engage openly and constructively with legislators, officials and other policy-makers on all aspects of energy and related environment policy.	The UK government is legislating for a major process of electricity market reform in GB, significant details of which have yet to be confirmed. This means there is significant uncertainty about the future shape of the electricity market in GB. Uncertainty also arises from the fact that a referendum on whether Scotland should become an independent country will take place in September 2014; a 'Yes' vote would extend that uncertainty until the details of Scotland's post-independence relationship with the rest of the United Kingdom are determined.
Energy portfolio management Failure to identify and effectively manage the physical and financial exposures that result from SSE's operational involvement in Generation, Fuel Procurement, Wholesale Trading and Retail Supply.	The Board approves levels of exposure which are strictly monitored through sophisticated reporting and clear reporting limits. The Management Board has a Risk and Trading Committee, with members drawn from a number of key functions across SSE.	The process of the UK energy prices becoming increasingly integrated into the wider global energy market is continuing and as a result there is an increasing focus on macro-economic and geopolitical issues in the ongoing management of the portfolio.
Asset and plant management Loss or extended disruption to key Group Infrastructure caused by failure/loss of containment of key plant.	SSE's Engineering Centre oversees a process of asset life management and risk-based management. Regular testing, review and updating of major incident handling processes takes place. Capital spending and maintenance programmes are maintained and the Risk and Trading Committee provides oversight.	SSE has always emphasised the need for flexibility in its generation assets to ensure that changes in supply of and demand for electricity can be managed. In 2012/13 SSE announced the outcome of the review of its generation fleet to reflect the future sustainability of the fleet in the market conditions.
Networks management Loss or extended disruption to key Group network infrastructure.	Substantial refurbishment and upgrade programmes are designed to prevent network failures. There is a rigorous post-event analysis following each major network event such as storms. Business continuity plans supported by contingency sites and regular testing are well established.	The severe snowstorm in west Scotland in March 2013 represented a big challenge to electricity network resilience. The business continuity plan was deployed successfully, with one of the highlights being the highly successful enhanced plans for customer support and communications that had been developed following a similar event in the winter of 2011/12.
Cyber/information security Unauthorised access or disclosure of data either within the SSE Group or between SSE and external environments and markets.	SSE has in place an actively managed Information Security programme across all of its activities to ensure resilient business operations.	Cyber security has become an increasing focus nationally at Government levels, and SSE has significantly increased its investment in a specific IT Security Programme.
Supply chain Delivery of large-scale investment programme is impacted through failure to establish, contract and maintain adequate supply chains and strategic alliances.	Well-established procurement teams ensure varying supply chains are identified and counterparty exposures monitored.	A supplier relationship model is in place to build relationships with strategic suppliers and put SSE in the position of being a key customer. In the high risk categories long-term contracts are implemented. This is designed to secure supply chains and ensure value for money.
Treasury management Failure to identify and effectively manage treasury and tax exposures and to meet the organisation's funding requirements and obligations.	The Risk and Trading Committee oversees any major changes to treasury policy or objectives. Regular reporting of treasury activity is made to the Audit Committee and Board. Strong internal controls are maintained and independent reviews take place.	SSE continued its approach of maintaining diversity in its funding sources with the issuance of hybrid capital bonds, denominated in Euros and US Dollars in September 2012. In addition, new banking facilities, totalling £650m were signed in March 2013 and will be drawn later in the financial year.
Energy affordability Economic, social and energy market and policy conditions which make it difficult for households and businesses to pay the cost of electricity and gas.	Energy affordability is impacted by issues in the sourcing, production, distribution and supply of electricity and gas. In addition to assessing regularly the likely prevailing economic environment in the years ahead, Managing Directors and their management teams are focused on keeping to a minimum the costs associated with each part of the electricity and gas 'chains'.	In January 2013, the UK Department of Energy and Climate Change published Policy impacts on prices and bills, an assessment of how costs to consumers are affected by changes in energy and climate change policy. It acknowledged that energy and climate change policies impact households and businesses through changes in prices for goods and services and changing patterns of consumption, in particular for energy.
Pension liabilities Liabilities increase due to market conditions or demographic changes and investments under perform.	There are periodic formal valuations of pension schemes and contributions supported by continual monitoring of scheme investments and valuations. Performance of investment managers are reviewed regularly by the pension trustees.	Continued improvements of member longevity will likely add to the liabilities of both the Scottish Hydro-Electric and Southern Electric Pension Schemes. Uncertainty of markets in Eurozone could detract from investment performance directly impacting scheme funding levels.
Sector developments Failure to identify/tardiness in identifying step changes in the industry sectors and reacting appropriately.	There is a strong external focus to ensure developments are anticipated and, where appropriate, addressed. Senior managers have responsibility for areas such as policy and research, strategy and business development. Participation in these areas is broad, to ensure all relevant sector developments are addressed.	There are four significant developments which will influence the sector for the long term: electricity market reform; the Retail Market Review and the RIIO model for economic regulation in Great Britain; and the process of harmonisation affecting energy markets on the island of Ireland. SSE continues to input to policy and regulatory developments in each of these areas.
Large capital projects management Failure to deliver quality projects on time and on budget.	The deployment and updating of SSE's Major Projects Governance Framework is designed to ensure projects are governed, developed, approved and executed in an effective manner.	Management Board Major Projects (Standards and Delivery) Committee has completed a full year of operation. Its Terms of Reference have been updated to reflect its role in overall portfolio management.
Transformation projects management Failure to deliver quality projects on time and on budget to implement required upgrades to customer systems in relation to Smart Metering and the Energy Supply business requirements.	SSE works with experienced advisers and suppliers and implements a strong governance and assurance framework for all aspects of major change programmes. The approach increasingly reflects the governance framework originally developed for large capital projects. The Management Board Major Projects (Standards and Delivery) Committee reviews all major projects.	The remit of SSE's Project Services team has been extended to include centralised expertise and support for all of SSE's significant projects, including large transformational projects in Retail.
Compliance management Any significant or multiple compliance failures could result in an adverse effect on SSE, including the possibility of financial penalties being levied.	Wide-ranging consultation and review of all relevant regulatory, legal and accounting frameworks takes place. Regulation, Compliance and Group Audit teams develop and monitor compliance processes.	In March 2013, the GB energy regulator proposed changes to its enforcement regime 'to deliver credible deterrence and meaningful consequences for businesses that fail consumers and don't comply'. This is intended to complement its Retail Market Review which includes new enforceable standards of conduct. SSE experienced the consequences of shortcomings in compliance management when it received and accepted in April 2013 a £10.5m penalty for past breaches of Energy Supply licence conditions.
Crisis management Inadequate response to a major emergency/contingency event. If something goes wrong, how well can SSE deal with it?	The corporate Emergency Planning and Response standard is reviewed and issued annually. Regular test exercises are undertaken. A member of the Management Board 'champions' crisis management.	SSE reviewed and refreshed its approach to Business Continuity Planning and will progressively update existing plans. Exercises have been undertaken to practise SSE's response capabilities at all levels in the Company.
Management of joint ventures Failure to effectively manage SSE Joint Venture assets results in reputational damage or destruction in value.	Joint ventures are in themselves a means of managing risk, but SSE's interests in them also require careful management and oversight. This is provided through clear governance arrangements, senior manager representation on Boards, and effective reporting within SSE - to the Management Board and the Board as required.	SSE continues to enter into joint venture arrangements, for large projects including renewable generation, gas storage, thermal generation and oil and gas projects.
Succession planning Not having cover for the Board and the Management Board and their direct reports.	The Nomination Committee of the Board is responsible for reviewing the leadership needs of senior management in general and succession plans for the Executive Directors in particular. The detailed report for this Committee is on pages 80 and 81.	A regular management review of all succession plans for the Group businesses was held during the year for senior roles, and to identify future potential talent within the Group. The successor to the Chief Executive was identified from within SSE. An external appointment to the newly created position of Managing Director, Retail was made during the year.
Resource and internal infrastructure Inability to establish and maintain a competent workforce. Failure to forward plan and identify a capabilities matrix to match growth plans. Portfolio of assets (buildings, transport and IT) not maintained and enhanced to support business plans.	An integrated Group Services function is in place to ensure optimum resource management, including Safety, HR, IT, Facilities Management and Procurement.	SSE seeks to strike the balance between cost efficiency and investment in adequate resources for the future. A particular focus was IT, where the Director of IT has led the implementation of plans to improve operational performance, service delivery and project delivery.
Corporate arrogance or hubris Unwarranted belief in SSE's own abilities, failure to keep listening, inadequate regard for the Company's long term reputation and insufficient challenge to conventional wisdom.	There is Board oversight of this, and practical application throughout SSE, including through the performance appraisal system, of the 'SSE SET' of core values: Safety, Service, Efficiency, Sustainability, Excellence and Teamwork.	In a continuing environment of austerity in the UK and Ireland, higher unit prices for energy and increasing expectations on the part of customers and stakeholders of large corporations, SSE has recognised the importance of safeguarding its reputation by including an explicit reference to it in the definition of this principal risk.

Appendix C:  34. Related party transactions (Pages 169-170)

The immediate parent and ultimate controlling party of the Group is SSE plc (incorporated in Scotland). Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

(i) Trading transactions

The following transactions took place during the year between the Group and entities which are related to the Group but which are not members of the Group. Related parties are defined as those in which the Group has control, joint control or significant influence over.

	Sale of goods and services 2013 £m	Purchase of goods and services 2013 £m	Amounts owed from 2013 £m	Amounts Owed to 2013 £m	Sale of goods and services 2012 ￡m	Purchase of goods and services 2012 ￡m	Amounts owed from 2012 ￡m	Amounts owed to 2012 ￡m
Jointly controlled entities:
Seabank Power Ltd	27.2	(99.5)	2.9	8.9	34.7	(94.8)	0.1	9.1
Marchwood Power Ltd	22.5	(85.5)	0.3	6.0	46.8	(80.5)	0.2	4.0
Greater Gabbard Offshore Winds Ltd	-	(90.0)	-	33.4	0.0	(24.4)	0.0	15.4
Scotia Gas Networks Ltd	57.6	(157.2)	9.2	15.1	59.2	(154.3)	7.3	13.9
Other Joint Ventures	42.1	-	9.8	-	42.0	0.0	0.2	0.3
Associates	29.6	(38.3)	1.2	2.4	42.4	(44.5)	11.8	21.4

The transactions with Seabank Power Limited, Marchwood Power Limited and Greater Gabbard Offshore Winds Limited relate to contracts for the provision of energy or the tolling of energy under power purchase arrangements. Scotia Gas Networks Limited has operated the gas distribution networks in Scotland and the South of England from 1 June 2005. The Group's gas supply activity incurs gas distribution charges while the Group also provides services to Scotia Gas Networks in the form of a management service agreement for corporate services, stock procurement services and the provision of the capital expenditure on the development of front office management information systems.

The amounts outstanding are trading balances, are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the amounts owed by related parties. Aggregate capital loans to jointly controlled entities and associates are shown in Note 16.

Remuneration of key management personnel

The remuneration of the key management personnel of the Group, is set out below in aggregate.

	2013 £m	2012 £m
Short-term employment benefits
Executive Directors	1.9	2.8
Other Management Board members	2.5	1.6
	4.4	4.4

Key management personnel are responsible for planning, directing and controlling the operations of the Group. From 1 January 2011 these personnel were identified as the Management Board, which is made up of the Executive Directors, eight (2012 - seven) Managing Directors and also attended by the Chief Executive Officer of Scotia Gas Networks Limited.

In addition, the key management personnel receive share-based remuneration, details of which are found at Note 32. Further information about the remuneration of individual Directors is provided in the audited part of the Directors' Remuneration Report. The Executive Directors are employed by the Company.

Information regarding transactions with post-retirement benefit plans is included in Note 31.

 

END

 

 

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