Notes 11-20

11 Intangible fixed assets – goodwill

	£m
Cost
1 January 2002	1,684
Acquisitions (i)	466
Disposals	(17)
Exchange adjustments	(56)
31 December 2002	2,077
Amortisation
1 January 2002	160
Charge for the year	116
Disposals	(6)
Exchange adjustments	(6)
31 December 2002	264
Net book value 31 December 2002 (ii)	1,813
31 December 2001	1,524
(i) Acquisitions included £8 million for the revision of provisional fair values relating to the recoverability of certain receivables on the Enron Direct acquisition made in 2001. (ii) The net book value of goodwill at 31 December related to the following acquisitions:

	2002 £m	2001 £m	Amortisation period years
The AA	829	879	15-20
Goldfish Bank	124	138	10
Direct Energy	279	332	15
Energy America	41	52	15
Enron Direct	53	49	15
One.Tel	49	53	15
Enbridge Services Inc	167	–	15
Electricity Direct	78	–	15
WTU and CPL	167	–	15
NewPower	8	–	5
British Gas LPG	–	11	20
Other	18	10	5-20
	1,813	1,524

12 Tangible fixed assets

	Land and buildings(i) £m	Plant, equipment(ii)(iii) and vehicles(iv) £m	Power generation(ii) £m	Storage, exploration and production(ii)(v) £m	Total £m
Cost
1 January 2002	123	713	169	3,324	4,329
Additions	2	395	4	69	470
Acquisitions	–	234	46	544	824
Disposals	(12)	(96)	(2)	–	(110)
Disposal of subsidiary	(2)	(77)	–	(179)	(258)
Revision of abandonment asset	–	–	–	6	6
Exchange adjustments	–	(25)	–	(19)	(44)
31 December 2002	111	1,144	217	3,745	5,217
Depreciation and amortisation
1 January 2002	28	318	2	1,923	2,271
Charge for the year	6	130	12	242	390
Disposals	(8)	(78)	(2)	–	(88)
Disposal of subsidiary	–	(40)	–	(79)	(119)
31 December 2002	26	330	12	2,086	2,454
Net book value 31 December 2002	85	814	205	1,659	2,763
31 December 2001	95	395	167	1,401	2,058
(i) The net book value of the group’s land and buildings at 31 December 2002 comprised freehold of £44 million (2001: £48 million), long leasehold of £23 million (2001: £26 million) and short leasehold of £18 million (2001: £21 million). (ii) The net book value of the group’s tangible fixed assets held under finance leases at 31 December 2002 within plant, equipment and vehicles was £8 million (2001: £9 million), power generation £73 million (2001: £167 million) and within storage, exploration and production was £120 million (2001: £136 million). The depreciation and amortisation charge for the year in respect of finance leased assets included £4 million (2001: £nil) on plant, equipment and vehicles, £10 million (2001: £6 million) on power generation and £19 million (2001: £20 million) on storage, exploration and production assets. (iii) The amounts capitalised in the year in respect of customer relationship management (CRM) infrastructure included within plant, equipment and vehicles at 31 December 2002 amounted to £180 million (2001: £60 million). (iv) The net book value of the fixed assets of the Consumers’ Waterheater Income Fund (the Fund) within plant, equipment and vehicles was £182 million (2001: £nil). Debt issued by a subsidiary of the Fund, without recourse to the group, is secured on the assets, as set out in note 32. (v) Included within the group’s exploration and production assets at 31 December 2002 were costs of £60 million pending determination (2001: £16 million). The net book value of the group’s decommissioning costs at 31 December 2002 were £17 million (2001: £11 million).

13 Fixed asset investments

	Shares (i) £m	Loans £m	Own shares (ii) £m	Other investments £m	Total £m
	Joint ventures and associates		Own shares (ii) £m	Other investments £m	Total £m
Share of net assets/cost
1 January 2002	57	23	65	5	150
Disposals and transfers(iii), (iv) and (v)	2	(19)	(14)	–	(31)
Dividends receivable	(59)	–	–	–	(59)
Share of profits less losses for the year	22	–	–	–	22
31 December 2002	22	4	51	5	82
Goodwill
1 January 2002	70	–	–	–	70
Disposals	(11)	–	–	–	(11)
Goodwill amortisation	(7)	–	–	–	(7)
Exchange adjustments	3	–	–	–	3
31 December 2002	55	–	–	–	55
Amounts written off
1 January 2002	(12)	(2)	(36)	(3)	(53)
Amortisation under long term incentive schemes	–	–	(7)	–	(7)
Disposals (iv)	11	–	14	–	25
31 December 2002	(1)	(2)	(29)	(3)	(35)
Net book value 31 December 2002	76	2	22	2	102
31 December 2001	115	21	29	2	167
(i) The group’s share of net assets of associates was £2 million (2001: £3 million). The group’s share of joint ventures’ gross assets and gross liabilities principally comprised its interests in Humber Power Limited (a power station), Centrica Personal Finance Limited (AA and British Gas personal loans activities), AA Financial Services (AA credit card activities) and Luminus NV (energy supply). The group’s share of joint ventures’ gross liabilities included loans payable to the group amounting to £4 million (2001: £12 million). The share of Humber Power Limited’s gross liabilities includes £269 million (2001: £270 million) of lease finance, of which £254 million (2001: £258 million) is repayable after more than five years. Although the group holds a majority of the voting rights in Humber Power Limited, it is restricted in its ability to exercise these rights under an agreement with the other shareholder. Consequently the investment has not been consolidated but has been accounted for as a joint venture.

Investments in joint ventures	Humber Power Limited £m	Centrica Personal Finance Limited £m	AA Financial Services £m	Luminus NV £m	Other £m	Total £m	£m
Investments in joint ventures						2002	2001
Share of gross assets	346	349	45	62	8	810	709
Share of gross liabilities	(327)	(345)	(45)	(13)	(6)	(736)	(597)
	19	4	–	49	2	74	112
Share of net assets of associates						2	3
						76	115
Net (debt)/cash included in above	(251)	(333)	(43)	2	(2)	(627)	(675)
(ii) The Centrica Employees Share Trust held 27 million (2001: 39 million) shares in the company. This represented 0.64% of the called up ordinary share capital (2001: 1%), which had a market value at 31 December 2002 of £47 million and a nominal value of £2 million (2001: £88 million and £2 million respectively). During the year 12,213,398 shares (2001: 1,272,944 shares) were transferred from trust in respect of awards held by employees. All other investments were unlisted. (iii) On 22 November 2002, Humber Power Limited repaid a £15 million loan to the group. Since the acquisition the group has entered into tolling agreements with Humber Power Limited for 750 MWh of capacity through to 2014. (iv) The group’s 42% interest in the Spalding Energy Company Limited was disposed of during the year for consideration of £16 million. The group recognised a profit on disposal of £12 million, against the previously impaired cost of investment. (v) Transfers comprised AA Buyacar which became a 100% subsidiary of the group on 29 November 2002 when the 30% interest not previously owned by the group was acquired.

The principal undertakings of the group are listed in note 31.

14 Stocks

	2002 £m	2001 £m
Gas in storage	67	140
Other raw materials and consumables	96	44
Finished goods and goods for re-sale	17	9
	180	193

15 Debtors

	2002		2001
Amounts falling due	Within one year £m	After one year £m	Within one year £m	After one year £m
a) Goldfish Bank debtors:
Trade debtors: loans and advances to customers	761	10	652	–
Prepayments and accrued income	1	1	2	–
Other	19	–	19	–
	781	11	673	–
b) Other businesses’ debtors:
Trade debtors	785	44	479	–
Accrued energy income	1,427	–	1,168	–
Deferred corporation tax	–	36	–	91
Other debtors	246	5	196	2
Prepayments and other accrued income:
‘Take or Pay’	13	–	7	2
Other	127	49	73	35
	140	49	80	37
	2,598	134	1,923	130

16 Current asset investments

	2002 £m	2001 £m
Money market investments	320	454

Current asset investments included £159 million (2001: £142 million) held by the group’s insurance subsidiary undertakings and £10 million (2001: £9 million) held by the Law Debenture Trust, on behalf of the company, as security to cover unfunded pension liabilities. These amounts were not readily available to be used for other purposes within the group.

17 Borrowings

Amounts falling due	2002		2001
Amounts falling due	Within one year £m	After one year £m	Within one year £m	After one year £m
a) Goldfish Bank borrowings
Bank loans and overdrafts (note 29d)	430	–	610	–
b) Other businesses’ borrowings
Bank loans and overdrafts	13	–	16	–
Sterling bonds(i)	–	518	–	493
Canadian dollar bonds(ii)	–	196	–	–
Commercial paper	237	–	307	–
Loan notes	3	–	5	–
Obligations under finance leases(iii)	36	70	33	105
	289	784	361	598
(i) Sterling bonds are repayable as follows: between one and two years £nil (2001: £nil); between two and five years £125 million (2001: £100 million); and after five years £400 million (2001: £400 million). The bonds bear interest at fixed rates between 5.375% and 5.875% (2001: 5.375% and 5.875%). The bonds have a face value of £525 million (2001: £500 million) and are stated net of £7 million (2001: £7 million) of issuance discount. (ii) Canadian dollar bonds are repayable between four and five years bearing interest at a floating rate.The bonds were issued by the Consumers’ Waterheater Income Trust, a wholly-owned subsidiary of the Consumers’ Waterheater Income Fund, which is treated as a quasi-subsidiary and consolidated into the group accounts. The debt is secured solely on the assets of the Fund and its subsidiaries, without recourse to the group. Summary financial information for the Fund is given in note 32. (iii) Group obligations under finance leases after more than one year at 31 December 2002 were repayable as follows: between one and two years £39 million (2001: £37 million); between two and five years £31 million (2001: £68 million); and after five years £nil (2001: £nil).

18 Other creditors

Amounts falling due	2002			2001
Amounts falling due	Within one year £m	After one year £m	Within one year £m	After one year £m
Goldfish Bank customer deposits	286	–	–	–
Trade creditors	1,343	–	1,141	–
Taxation and social security	137	–	127	–
Other creditors	715	23	659	2
Accruals and deferred income:
Transportation(i)	18	–	183	–
Other accruals and deferred income	832	99	685	32
	850	99	868	32
Dividend payable (note 9)	110	–	76	–
	3,441	122	2,871	34
(i) The group has the option to either prepay or accrue its gas transportation charges in Great Britain. For much of the year, the group prepaid these charges. The group prepaid most of these charges for December 2002, but did not prepay them in December 2001.

19 Provisions for liabilities and charges

	1 January 2002 £m	Foreign exchange £m	Transfers, acquisitions and disposals £m	Revisions £m	Profit and loss charge £m	Utilised in the year £m	31 December 2002 £m
Decommissioning costs	129	–	67	6	4	–	206
Deferred petroleum revenue tax	519	–	–	–	75	(199)	395
Deferred corporation tax(i)	134	(1)	145	–	–	–	278
Pension and other retirement benefits (note 26)	116	–	(2)	–	68	(107)	75
Restructuring costs	13	–	–	–	18	(10)	21
Sales contract loss and renegotiation provisions	227	–	–	–	14	(23)	218
Other	46	–	20	–	23	(20)	69
	1,184	(1)	230	6	202	(359)	1,262
(i) Group deferred tax (assets)/liabilities comprised:

	2002 £m	2001 £m	2002 £m	2001 £m
	Amounts provided		Potential assets unrecognised
Accelerated capital allowances	436	230	(56)	(93)
Deferred petroleum revenue tax	(158)	(156)	–	–
Other timing differences including losses carried forward	(36)	(31)	(107)	(105)
	242	43	(163)	(198)
Deferred corporation tax liability	278	134
Deferred corporation tax asset included in debtors (note 15)	(36)	(91)
	242	43

Decommissioning costs

Provision has been made for the estimated net present cost of decommissioning gas production facilities at the end of their producing lives. The estimate has been based on proven and probable reserves, price levels and technology at the balance sheet date. The timing of decommissioning payments are dependent on the lives of a number of fields but are anticipated to occur between 2005 and 2042. The revision in the year is due to an increase in the estimate for gas field abandonment costs. The profit and loss charge represents £4 million of notional interest (2001: £3 million).

Deferred petroleum revenue tax

The provision for tax on gas and oil activities has been calculated on a unit of production basis.

Deferred corporation tax

A deferred tax provision has been made in respect of accelerated capital allowances and other timing differences, net of recognised deferred tax assets.

Pension and other retirement benefits

This provision included the difference between charges to the profit and loss account and the contributions paid to the pension schemes in respect of retirement pensions and other related benefits.

Restructuring costs

The provision represented costs relating to surplus properties, redundancy and other costs relating to reorganisations. Surplus properties arose mainly following the closure of retail operations in both British Gas Energy Centres and in the AA. The provision relating to surplus properties was calculated as the lower of the difference between rental costs and sublet income over the remainder of the leases and the potential cost to surrender those leases. The provision for redundancy costs reflected announced restructuring plans. The majority of these sums were expected to be spent between 2004 and 2005.

Sales contract loss and renegotiation provisions

The sales contract loss provision represented the net present cost, using a risk free discount rate, of expected losses on onerous long term sales contracts, based on the difference between the contracted sales price and the expected weighted average cost of gas. These contracts terminate between 2005 and 2006. The profit and loss charge included £14 million of notional interest (2001: £15 million).

In previous years, the group renegotiated certain long term ‘Take or Pay’ contracts which would have resulted in commitments to pay for gas that would be excess to requirements and/or at prices above likely market rates. The provision represented the net present cost of estimated payments due to suppliers as consideration for the renegotiations, which are due for settlement between 2003 and 2008.

Other

Other provisions principally cover estimated liabilities in respect of claims reflected in the group’s insurance subsidiaries, Goldfish credit card loyalty points, outstanding litigation, and provision for National Insurance payable in respect of long term incentive scheme liabilities. The National Insurance provision was based on a share price of 171 pence at 31 December 2002 (2001: 222 pence).

20 Called up share capital

	2002 £m	2001 £m
Authorised share capital of the company
4,950,000,000 ordinary shares of 5 5/9 pence each
(2001: 4,950,000,000 ordinary shares of 5 5/9 pence each)	275	275
100,000 cumulative redeemable preference shares of £1 each	–	–
Allotted and fully paid share capital of the company
4,252,856,414 ordinary shares of 5 5/9 pence each
(2001: 4,020,931,056 ordinary shares of 5 5/9 pence each)	236	223

During 2002, 231,925,358 ordinary shares were allotted and issued pursuant to a cash placing in February and, throughout the year, to satisfy the exercise of share options and the matching element of the share incentive plan as follows:

For the year ended 31 December	2002	2001
Number	231,925,358	7,512,180
Nominal value (£m)	12.9	0.4
Consideration (net of issue costs 2002: £6 million; 2001: £nil) (£m)	488(i)	17
(i) Consideration of £488 million included £44 million in respect of employee share schemes and £444 million received from third parties.

	2002 million	2001 million	Latest exercise date	Exercise prices
	Options outstanding over ordinary shares		Latest exercise date	Exercise prices
RESOS(i)	2.1	2.2	November 2004	81.060p to 90.266p
ESOS(ii)	13.5	5.6	April 2012	240.050p and 224.800p
UK sharesave(iii) (iv)	61.6	78.0	November 2007	92.200p to 202.600p
Irish sharesave(iii)	0.3	0.3	May 2008	132.800p to 168.700p
Total 31 December	77.5	86.1
(i) Details of the RESOS appear here, in note (i) to the table of directors’ interests in share options. (ii) Details of the ESOS appear here. (iii) Details of the UK and Irish sharesave schemes appear here. (iv) As permitted by UITF 17 (revised 2000), the group does not recognise the cost of awards to employees in the profit and loss account for the year, on the basis that it operates a UK Inland Revenue-approved sharesave scheme.

The closing price of a Centrica ordinary share on 31 December 2002 was 171 pence (2001: 222 pence).

Long term incentive scheme

At 31 December 2002, 34 million shares (2001: 40 million) were outstanding in respect of allocations made under the long term incentive scheme, which includes allocations of 23 million shares (2001: 23 million) that are subject to performance conditions and allocations of 11 million shares (2001: 17 million) that have reached the conclusion of the performance period but are subject to a two year retention period. Details of the operation of the long term incentive scheme, in which the executive directors participate, can be found in the remuneration report.

The Centrica Employees Share Trusts were established to acquire ordinary shares in the company, by subscription or purchase, with funds provided by way of interest free loans from the company to satisfy rights to shares on the vesting of allocations made under the company’s long term incentive arrangements.

Since the beginning of 2002, no further shares have been acquired by the trust. Any future shortfall will be satisfied by the allotment and issue of new shares.

At 31 December 2002, the trusts held 27 million (2001: 39 million) ordinary shares in the company which had a market value of £47 million (2001: 39 million ordinary shares with a market value of £88 million). Dividends due on shares held in trust are waived in accordance with the trust deeds. All administration costs are borne by the group.