In his address to shareholders, ScottishPower Chairman Murray Stuart will say:

"During 1997/98 we continued to deliver value from our two recent major acquisitions Manweb and Southern Water. In Manweb, both business efficiency and customer service targets were exceeded, and its operations have now been combined with ScottishPower, creating an integrated energy business. Some £98 million of annual operating cost savings have now been achieved, with further savings planned.

In Southern Water, we completed a disposal programme for the businesses no longer required in Southern Water, and this realised £90 million, some £20 million ahead of our original target. The sale of surplus properties is expected to exceed the target we set of £30 million. Southern Water has achieved an annual level of operating cost savings of some £28 million, with more to come.

In our Scottish based energy operations, continuing progress has been made in improving customer service, reducing prices in real terms, increasing operating efficiency and investing in our business. We spent over £200 million on capital projects in Scotland last year, and invested some £40 million across the group in preparing for the introduction of competition. We also signed long-term contracts with the major Scottish coal suppliers.

I would like to comment on the rapid growth of ScottishTelecom, which moved into profit and met its target for 1997/98 of £4 million. It now provides a wide portfolio of communication services, ranging through fixed voice, data and mobile telephony, call centres, on line information and Internet access. Both profitability and sales revenue are expected to grow rapidly over the next few years, and the Company will shortly expand into Merseyside and then the areas of Manchester and Staffordshire.

Our strategy as a multi-utility is based upon cross-selling electricity and gas to our franchise and other customers, and selling telecommunications largely in Scotland. Gas supply is now open to competition and at the end of March 1998 we had 320,000 domestic gas customers and 15,000 industrial and commercial gas customers. On this basis we are now one of the leading UK suppliers of domestic gas.

Competition and regulation will bring new pressures on the utility industry, and this will bring some winners and losers. In the newly competitive market for energy, we are committed to being among the winners. I am also pleased to say that both ScottishPower and Manweb have been amongst the industry leaders, in terms of systems development and implementation, and will be two of the first companies ready for the electricity market opening in September.

Within the next two years, our electricity and water businesses will be the subject of major regulatory review. This is necessarily a complex process, involving many of our best people across the Company. We believe that our track record as an efficient, low cost operator, with a good reputation for customer service, will stand us in good stead in the developing regulatory environment.

I am pleased to say that the trading outcome of the Group's operations in the first quarter of the current financial year 1998/99 has been in line with our expectations.

Strategically, we are examining opportunities for the future to extend our operations outside the United Kingdom. We believe that we can create value for shareholders by applying the skills we have developed in the UK to companies overseas. We are focusing our efforts upon the US, where the sector is entering the same process of energy market liberalisation and convergence of gas and electricity that we have seen in the UK. Let me reassure you, we shall not propose any transaction to you unless we are confident that it creates significant value for shareholders.

For the next few years, this combined strategic focus will fully commit and also develop the present executive team which Ian Robinson will continue to lead as Chief Executive, as he has done so successfully for the last three years. I have been a non-executive director of ScottishPower since 1990 and Chairman since July 1992. I have decided to announce my retirement to be effective from the Annual General Meeting in July next year. This is in order to enable adequate time for the Board to seek and appoint my successor as non-executive Chairman. It is our expectation that a successor will be identified well before the next Annual General Meeting."

Further Information:
Sue Clark,                  Director of Corporate Affairs          0141 248 8200
Colin McSeveny,     Group Media Relations Manager        0141 248 8200