In his address to the shareholders, Murray Stuart, Chairman, said:
"As I have reported in my annual statement to you, since the last Annual General Meeting your company has made major progress across all of its activities. What I would like to do now is just to underscore briefly the extent of this progress, which is much greater than can be described simply by reference to the financial performance of the year - in itself very successful indeed.

In the last two years at Extraordinary General Meetings of the company we have secured your consent to major acquisitions - first Manweb and then Southern Water. At the time we said we would deliver financial and operating benefits from each company. I am pleased to report that we have exceeded our pre-acquisition expectations in both of these areas. In addition we sought to secure a significantly larger customer base, a major expansion of our geographic coverage, and the opportunity to develop strongly as a multi-utility business.

Today we are one of the largest utility businesses in the United Kingdom. In three distinct geographic territories we serve one in five of UK homes. Our activities span electricity, water, gas, telecoms and electrical retailing.

Developing and enhancing the service we provide to our customers has always been a top priority. We are now applying this commitment in Southern Water by means of investment and training of employees.

An example of this is the substantial new Call Centre which has been opened at Worthing which, like the new facility here in Glasgow, for Scottish Energy customers, will provide more responsive and improved service.

Elsewhere in the group we have sustained our investment to improve our electricity systems network. During the year, Manweb's Merseyside region was recognised by OFFER for achieving the fewest customer minutes lost in 1995/96 of any regional electricity operation.

We continue to make substantial investments in computer systems in order that our billing processes and systems are more customer focused. In addition we have revised the layout of our bills, to make them simpler and easier to understand and we have changed the basis of our meter reading operations. Now we call to read the meter every three months, and thus we reduce the number of unpopular estimated bills.

As many of you are aware the electricity and gas markets are now moving rapidly towards deregulation and free competition for all customers. In order to allow this to happen the electricity industry, and indeed the gas industry, have been making very substantial investments to provide systems which will enable customers to benefit from such competition. This has been a huge and extremely difficult undertaking which is expected to be completed during l998.

Your company's investment has been driven by the opportunity competition will bring to provide a multi-utility service. A multi-utility service includes the supply of electricity and gas and, in appropriate areas, telecommunications and even water. Existing business customers can already enjoy the benefits of a single supplier, while ScottishPower is also providing the multi-utility infrastructure for new business sites, homes and retail parks.

We have gained valuable experience in the competitive markets with our successful participation in the domestic gas trials which have been run in the South of England. In the trial areas of Kent and Sussex, which are included in the Southern Water territory, we gained over 70,000 new gas customers and in these areas we believe we are now the second largest gas supplier after British Gas in the domestic market.

Our telecommunications business ScottishTelecom has continued to grow rapidly in the business market and we have recently launched services for domestic customers and small business customers throughout Scotland. The business has an expanding range of services including the provision of mobile telephony and value added services such as "Club Call", "Prestel" and "Weather Call".

Other organisations are recognising the benefits which ScottishPower can bring and we were pleased to recently announce an alliance with the AA, which will enable us to supply an energy package to their 6 million personal members.

During the period since privatisation the price of electricity in Scotland to the domestic customer has fallen by over 16% in real terms. While in Manweb, since ScottishPower took control, there have been three real price reductions. We shall continue to place fundamental importance on efficient operations to enable us to compete in the evolving marketplace in which we operate.

No business such as ours can exist acceptably without a substantial commitment to our environment and sustainable development. We have produced an environment report covering the group's operations which is available to all on application to the Company Secretary. We continue to invest very large sums of money indeed to reduce the impact on the environment for all of our activities, from Generation to the use of motor vehicles. In Southern Water, a major investment programme is being implemented in order to improve the quality and method of waste water treatment and to use water resources more efficiently. Our initiatives in detection and repair of water leaks have resulted in Southern Water having one of the lowest levels of leakage amongst the UK water companies.

A further issue to which I should make reference is the training levy or "Windfall Levy" which was included in the recent budget announced by the Government. We estimate that the ScottishPower group will be liable to pay some £317 million, in two instalments, the first of which is December 1997. Your Board is still considering the impact of this levy upon the company's business plans and future strategy.

Now a reference to current trading. I am happy to say that in the first three months of the current year the trading activities for the group have provided financial results in line with our expectations.

Our initiatives to improve efficiency and enhance services to customers are continuing. In addition, we are making further progress towards the complete deregulation of the electricity and gas markets in 1998 and we have established stretching targets for our market shares. Our aim is to capture by the year 2000 some 15% of the UK electricity market and 12% of the gas market in the three regions in which we operate. In ScottishTelecom our aim is to secure 10% of the Scottish market by the year 2000, a market then forecast to be valued at £2 billion.

The Manweb acquisition and the Southern Water acquisition are both delivering further operational and financial progress resulting in an enhancement to shareholder value which is ahead of our original expectations.

In conclusion, we believe that we have made broad and very substantial advancement towards achieving the strategic aims of your company in becoming a UK multi-utility group. We believe that we have sustained our progress in developing enhanced service for all our customers. We have continued to maintain our responsible and committed focus towards both the environment in which we operate and the communities which we serve."

Further Information:
ScottishPower Press Office                            0141 248 8200