• Operating profit* up 36% at £221 million
• Profit before tax* up 12% to £138 million
• Earnings per share* down 22% to 6.35p
• Exceptional item for PacifiCorp restructuring of £121m (pre tax)
• Quarterly dividend per share up 5% to 6.51p, $0.3928 per ADS
• PacifiCorp Transition Plan exceeding expectations
  *Before exceptionals and goodwill amortisation

The first quarterly report for ScottishPower following the PacifiCorp transaction in November 1999 presents the financial results for the three months to June 2000. The financial performance in the quarter was in line with our expectations and we are confident of our prospects for the full year.

The results reflect the impact of new regulatory price controls for the UK water and electricity businesses, which came into effect on 1 April 2000. As anticipated, revenues in these business segments were lower than the previous year, however the effect on profit was partly offset by cost reduction programmes in Power Systems and Southern Water.

Progress on the integration of US subsidiary PacifiCorp into the ScottishPower group has exceeded expectations. In May we announced a Transition Plan to reduce operating costs by $300 million, to reduce capital expenditure by $250 million and to cut the manpower by 1,600 over a five year period. Implementation of the Plan commenced immediately, and the workforce has already reduced and a further 740 individuals have applied to leave under early retirement arrangements. At the same time investment in call centres has commenced and customers have begun to benefit from improvements in service.

In the UK the customer facing businesses continued to attract new customers and develop new products. A telecoms offering, in conjunction with Thus, aimed at ScottishPower's residential customers, was launched in July. This is the first of a series of potential telecoms joint ventures between ScottishPower and Thus, and should deliver significant benefits for customers across a range of fixed line, mobile and Internet based services. We also launched in July an Internet-based product offering, work24.co.uk, developed in conjunction with The Royal Bank of Scotland which provides services tailored to the needs of small businesses.

Thus continues to implement its strategy with network expansion and the development and launch of new products and services to plan. Competitive pressures, however, in the telecom sector have increased as well as changes to the NTS charging regime. As a consequence, Thus has announced that the revenue growth rate will be materially below the rate set in the previous year although Thus management expect enhanced year-on-year growth in the second half of the financial year. ScottishPower remains fully supportive of Thus' business strategy.

The first quarter dividend of 6.51p per share is in line with ScottishPower's dividend aim of 5% growth per annum. The ADS dividend rate is $0.3928 which has been determined by the directors with reference to the sterling / dollar exchange rate ruling in London on 28 July 2000 (the last business day preceding this results announcement). UK shareholders will benefit from the accelerated payment of this dividend in comparison with the previous timetable.

Charles Miller Smith, Chairman of ScottishPower, said:
"In the first quarter ScottishPower has continued to focus on growing its UK customer base and it was pleasing to see the launch of new telecoms and Internet based products. Progress on the integration with our US business PacifiCorp has exceeded expectations and we are pleased that this has been achieved while delivering improvements in customer service."