Annual Financial Report

 

TIDM32NS 
 
RNS Number : 4959R 
E.ON UK PLC 
30 April 2009 
 

E.ON UK plc 
PUBLICATION OF 2008 ANNUAL REPORT AND ACCOUNTS 
As required by the UK Listing Authority's Disclosure and Transparency Rules 
("DTR") 4.1 and 6.3, E.ON UK plc (the "Company"), as an issuer of debt 
securities, today makes public its information relating to the Annual Report and 
Accounts for the year ended 31 December 2008. 
Please click on the following link and go to the About Us page to view the full 
Annual Report and Accounts (which have been audited) for the year ended 31 
December 2008. The information contained in this link includes information as 
required by the DTR, including Rule 4.1. 
www.eon-uk.com 
IMPORTANT: EXPLANATORY NOTE 
The primary purpose of this announcement is to make public the Company's Annual 
Report and Accounts for the year ended 31 December 2008 (the "2008 Annual Report 
and Accounts"). 
The condensed Financial Statement information below, which is extracted from the 
2008 Annual Report and Accounts, is included solely for the purpose of complying 
with DTR 6.3.5 and the requirements it imposes on issuers as to how to make 
public annual financial reports. This constitutes the material required by DTR 
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 2008 
Annual Report and Accounts. Page numbers and cross-references in the extracted 
information below refer to page numbers and cross-references in the 2008 Annual 
Report and Accounts. 
2008 OVERVIEW 
During 2008 the E.ON UK plc group (the "Group") has undergone significant 
restructuring in conjunction with its parent company, E.ON AG, culminating with 
the disposal of the UK Energy Trading business to E.ON Energy Trading AG. In 
accordance with accounting guidelines the segmentation and other disclosures 
have been revised to reflect new group structures, including presenting the 
Group results between continuing and discontinued operations. On a true 
like-for-like basis the net profits of the Group have reduced from a GBP744 
million profit in 2007 to a loss of GBP108 million in 2008. 
 
 
 
 
INFORMATION EXTRACTED FROM 2008 ANNUAL REPORT AND ACCOUNTS 
DIRECTORS' REPORT 
The directors present their report and the audited accounts of E.ON UK plc ("the 
Company") and its subsidiaries ("the Group" or "E.ON UK") for the year ended 31 
December 2008. 
Principal activities, review of business and future developments 
The Group's principal activities are electricity generation, distribution, 
energy trading and retailing. E.ON UK's aim is to maintain its position as a 
leading player in the UK's electricity and gas markets. E.ON UK's strategy in 
the UK is to build on this position, to sustain and develop its generation and 
distribution asset businesses and to further build a competitive retail 
business.  On 1 January 2009, the Company disposed of its trading business (E.ON 
Energy Trading) to another E.ON AG Group company, E.ON Energy Trading AG ("EET 
AG"). EET AG is an entity established by E.ON AG to merge all of its European 
trading businesses. The trading business has been reclassified to discontinued 
operations and prior year comparatives restated. 
The underlying level of the business during the year was in line with directors' 
expectations, with continuing operations being broadly similar to the prior year 
after taking into account the impact of the change in transfer pricing income 
from E.ON Energy Trading. The profit from continuing activities of GBP457 
million for the year, compared to a loss for the prior year of GBP452 million, 
is largely driven by transfer pricing income received by the Generation business 
from E.ON Energy Trading following a change in the transfer pricing methodology 
in 2008 in anticipation of the disposal. In 2007, the Generation business did 
not receive any significant transfer pricing income from E.ON Energy Trading as 
the two business units were operated as one. 
The loss for the year of GBP108 million (2007: profit of GBP744 million) is 
primarily driven by a GBP896 million net loss on valuation of derivative 
contracts caused by lower forward gas and power prices. 
The Group's funding is substantially through loans from the parent undertaking, 
E.ON AG and other financing entities within the E.ON AG group. The majority of 
this funding matures after one year, however, some of these facilities mature 
within one year and as a result this contributes to the Group continuing to hold 
net current liabilities at the year end. It is intended that these facilities 
will be refinanced with further loan facilities or other financing provided 
directly or indirectly by E.ON AG. 
As noted above, on 1 January 2009, the Company sold its E.ON Energy Trading 
business to EET AG. The formation of EET AG, headquartered in Düsseldorf, 
Germany, and the disposal of the trading business to it was part of the 
fulfilment of the new strategic direction set out by the E.ON AG Board on 31 May 
2007. 
In addition to the disposal of the trading business, E.ON UK also disposed of 
its Engineering business (primarily the UK research and development facility) to 
E.ON Engineering Limited and also Holford Gas Storage Limited (a company 
developing a gas storage facility in the UK) to E.ON Gas Storage UK 
Limited. E.ON UK also disposed of Rheidol, a hydro-electric power station in 
Wales, to Statkraft as part of an E.ON AG Group asset swap with Statkraft. The 
impact from the disposals of the Engineering business, Holford Gas Storage 
Limited and Rheidol is not significant on the Group's business. 
The E.ON AG Group has consolidated all of its renewable power assets and 
operations within a newly formed market unit called E.ON Climate & Renewables 
("EC&R"). The E.ON UK element of EC&R will remain legally owned by E.ON UK and, 
in line with the E.ON AG Group, a newly formed segment is reported with 
comparatives. 
The Group is one of the UK's leading electricity and gas companies with a 
business built on: 
  *  Marketing electricity, gas and other services to domestic and business 
  customers; 
  *  Asset management in electricity production, including renewables activities; 
  *  Network asset management in distribution; and 
  *  Providing services to customers to get connected to energy supplies, heat their 
  homes and understand their energy use. 
 
Retail 
E.ON UK sells electricity, gas and other energy-related products to residential, 
business and industrial customers throughout Great Britain. As of 31 December 
2008, E.ON UK supplied approximately 8.1 million (2007: 8.0 million) customer 
accounts, of which 7.5 million (2007: 7.4 million) were residential customer 
accounts and 0.6 million (2007: 0.6 million) were small and medium-sized 
business and industrial customer accounts. During the year, there was a net 
increase in the total number of customer accounts of approximately 0.1 million. 
E.ON UK continues to focus on reducing the costs of its retail business, through 
efficiency improvements, more economical procurement of services and the 
utilisation of lower cost sales channels. 
During 2008, the directors agreed to transfer a section of the meter reading 
business from the Energy Services business to the Retail business, in order to 
improve customer service and increase efficiencies. 
Residential Customers 
The residential business had approximately 7.5 million customer accounts as of 
31 December 2008. Approximately 63 percent of E.ON UK's residential customer 
accounts are electricity customers and 37 percent are gas customers. Individual 
retail customers who buy more than one product (i.e. electricity, gas or other 
energy-related products) are counted as having a separate account for each 
product although they may choose to receive a single bill for all E.ON UK 
provided services. In the residential customer sector, E.ON UK sold 24.4 TWh of 
electricity and 49.4 TWh of gas in 2008, as compared with 24.6 TWh of 
electricity and 48.3 TWh of gas in 2007. The increased gas volumes reflect both 
higher customer numbers and colder weather. 
E.ON UK targets residential customers through national marketing activities such 
as media advertising (including print, television and radio), targeted direct 
mail, public relations and online campaigns. The E.ON brand has been used 
exclusively since December 2007, following the transition from Powergen. E.ON UK 
seeks to create significant national brand awareness through high profile 
sponsorships under its E.ON brand. This includes the sponsorship of the FA Cup, 
England's most historic football competition, which commences each year in 
August. 
Late 2007 and early 2008 saw an environment of increasing wholesale energy 
prices, which drove increases in electricity and gas retail prices across the 
industry, although the magnitude of specific increases varied by supplier. In 
February 2008, E.ON UK increased average gas and electricity prices for 
customers by 15 percent and 9.7 percent, respectively. Continued rapid increases 
in wholesale prices led to further price increases in August 2008 of 26 percent 
for gas and 16 percent for electricity. Approximately one million customers 
eligible for price protection and/or fixed price products were unaffected by 
this second price increase. E.ON UK also implemented a package of measures 
designed to limit the effects of rising wholesale costs on consumers, by 
offering subsidised energy efficient products including cavity wall and loft 
insulation to a significant proportion of its customers. Some of these 
initiatives contribute to the UK Government's Carbon Emissions Reduction 
Targets, which was increased by 20 percent during 2008. Other measures to 
protect vulnerable customers have been taken, including delayed price increases 
and the commitment to new social tariffs and expenditures. 
Small and Medium-Sized Business and Industrial and Commercial Customers 
In this sector, E.ON UK sold 26.7 TWh of electricity and 28.4 TWh of gas in 
2008, as compared with 27.9 TWh of electricity and 30.6 TWh of gas in 2007. The 
lower electricity volumes are due to a mix of weather and customer portfolio. 
The reduced gas volumes reflect both price sensitivity and energy efficiency 
measures. The initial impact of the economic slowdown at the end of 2008 also 
served to reduce electricity and gas volumes. E.ON UK's focus in this area 
remains on acquiring and retaining the most profitable contracts available. 
Generation 
During 2008, E.ON UK's power generation, renewables and energy trading 
activity previously grouped together as "Energy Wholesale", were separated to 
form the "Generation" business in the UK, "E.ON Climate & Renewables" and "E.ON 
Energy Trading", the latter two now operated as Pan-European businesses and 
separate market units within the E.ON AG group. 
E.ON UK focuses on maintaining a low cost, efficient and flexible electricity 
generation business in order to compete effectively in the wholesale electricity 
market. As of 31 December 2008, E.ON UK owned either wholly, or through joint 
ventures, power stations in the UK with an attributable registered generating 
capacity of 10,330 MW, including 359 MW of combined heat and power ("CHP") 
plants.  As noted previously, on 31 December 2008 the 50 MW hydroelectric plant 
was sold as part of a wider E.ON Group transaction.  E.ON UK's share of the 
generation market in Great Britain remained relatively stable in 2008 at 
approximately 10 percent. 
E.ON UK generates electricity from a diverse portfolio of fuel sources. In 2008, 
approximately 49.4 percent of E.ON UK's electricity output was fuelled by coal 
and approximately 49 percent by gas, of which approximately 5.1 percent was from 
CHP schemes, with the remaining 1.6 percent being generated from hydroelectric, 
wind and oil-fired plants. E.ON UK is continuing its effort to secure a balanced 
and diverse portfolio of fuel sources, giving it the flexibility to respond to 
market conditions and to minimise costs. E.ON UK also regularly monitors the 
economic status of its plant in order to respond to changes in market 
conditions. 
E.ON UK is progressing with significant investments to improve its generation 
capacity. This is partly to replace capacity which will be taken out of 
production in coming years due to applicable environmental regulations. In 2007, 
E.ON UK started construction of one of the largest gas fired CHP stations in the 
UK at the Isle of Grain in Kent. The scheme is expected to generate 1,275 MW of 
power and export up to 340 MW of heat and is planned to be commissioned in 2010. 
Progress was also made on consents to build two new highly efficient coal-fired 
units at Kingsnorth power station in Kent. The new supercritical coal-fired 
units would be built next to the existing four units. The initial planning 
application has been approved by the local authority and has been submitted to 
the UK Government for its approval. 
 E.ON Climate & Renewables 
The EC&R market unit was formed in January 2008, which brought together the 
climate and renewable activities from across the E.ON AG Group. EC&R UK forms 
part of this new market unit and pulls together the renewable operational 
assets, development and construction and renewables trading activities 
previously managed within the Generation business within E.ON UK. The UK 
activities of EC&R remain legally owned by E.ON UK and, in line with the E.ON AG 
Group, a newly formed segment is reported with comparatives. 
EC&R UK is one of the leading developers and owner/operators of renewable 
electricity in the UK. It currently has 21 operational onshore and offshore wind 
farms. In 2008, EC&R commissioned its first dedicated biomass plant (44MW) at 
Steven's Croft, near Lockerbie in southwest Scotland. The EC&R business has a 
total generating capacity of 245MW, which will increase to 425MW when the third 
offshore wind farm, Robin Rigg, located in the Solway Firth is commissioned in 
2009. There is also over 2,000MW of wind and biomass projects in the development 
phase. 
As part of the staged approach towards developing the potential of marine 
energy, EC&R is buying, installing and testing a wave power device in UK waters. 
The initial test programme will be with a single 750kW Pelamis device that is 
currently being built in Edinburgh which will be installed and tested at the 
European Marine Energy Centre in Orkney. 
As a part of its balanced approach, E.ON UK seeks to fulfil its renewables 
obligation through a combination of its own generation, renewable energy 
purchased from other generators under tradeable Renewable Obligation Certificate 
("ROC") contracts, and direct payment of any residual obligation into the 
buy-out fund. For the period from 1 April 2007 to 31 March 2008, E.ON UK 
achieved 71 percent of its renewables obligation through own generation and 
purchases. 
Central Networks 
The electricity distribution business in the UK is effectively a natural 
monopoly within the area covered by the existing network, due to the cost of 
providing an alternative distribution network. Accordingly, it is highly 
regulated. However, new distribution licenses are available for network 
developments, including for those areas already covered by an existing 
distribution license, and electricity distribution could also face indirect 
competition from alternative energy sources such as gas. 
Within the UK there are 14 licensed distribution network operators ("DNO"), each 
responsible for a distribution services area. E.ON UK's Central Networks 
business owns and manages two DNO licenses through Central Networks East plc and 
Central Networks West plc. The combined service area covers approximately 11,312 
square miles, extending from the Welsh border in the West to the Lincolnshire 
coast in the East and from Chesterfield in the North to the northern outskirts 
of Bristol in the South and contains a resident population of about 10 million 
people. The networks distribute electricity to approximately 5 million homes and 
businesses in the combined service area and transport virtually all electricity 
supplied to consumers in the service area (whether by E.ON UK's retail business 
or by other suppliers). Separate distribution licenses are issued for the 
operation of the two networks but the combined business is managed by a 
centralised management team and uses the same methodology and staff to operate 
both networks. 
Distribution charges are billed on the basis of published tariffs and adhere to 
Ofgem's (the UK regulator) price control formulas. The current price controls 
that run from April 2005 until March 2010 were agreed with Ofgem in December 
2004. The price controls incorporate an allowed rate of return for investing in 
and operating the network, as well as a five year performance target.  Central 
Networks is currently negotiating with Ofgem the next set of price controls that 
covers the period from April 2010 to March 2015. Final proposals are due to be 
published in December 2009. 
Central Networks continued to increase its capacity to safely deliver a reliable 
electricity network across Central England. To meet the challenge of a larger 
capital work program (which in the current five-year price control review period 
is 60 percent higher in the East and 44 percent higher in the West than in the 
previous period), our internal workforce has been supplemented by re-trainees, 
apprentices and graduate trainees. 
Energy Services 
During 2008, the Energy Services business included the new connections, metering 
and home installation activities with the vision of providing customers with all 
the services they need to get connected to energy supplies, heat their homes and 
understand their energy use. 
In January 2008, it was announced that during 2008, all meter reading activities 
for Retail customers would transfer on a phased basis from Energy Services to 
Retail. Existing meter reading contracts for third party customers will either 
be exited or honoured to their conclusion. 
During September 2008, following a strategic review of its organisational 
structure driven by external market forces, Energy Services announced a major 
change programme resulting in a headcount reduction of 400. In January 2009, the 
regulated New Connections activities moved to Central Networks, with the goal of 
improving the competitiveness of the remaining business. Metering installation, 
which remains within Energy Services, continues to be an important part of the 
business as E.ON UK works with the Government to achieve a nationwide roll-out 
of smart meters over the next decade. The Home Energy Services and Sustainable 
Energy Solutions activities will become self contained end to end businesses. 
Other activities 
The UK Services business provides a single shared service function delivering 
facilities management, HR, procurement, insurance, property and finance support 
for all of E.ON UK's UK operations. 
E.ON UK acquired minority equity stakes in companies operating electricity 
generation plants in England, Pakistan and Turkey as part of its Midlands 
Electricity acquisition. Following disposals in 2004 and 2005, the only 
remaining generation stake is a 31 percent interest in Trakya Electric Uretin ve 
Ticaret A.S., which owns and operates a 478 MW CCGT plant in Turkey. 
E.ON Energy Trading (discontinued operation) 
During 2008, E.ON UK's energy trading unit engaged in asset-based energy trading 
in gas and electricity markets to assist E.ON UK in commercial risk management 
and the optimisation of its UK gross margin. 
As noted earlier, E.ON AG has established a new market unit to centralise all of 
its European trading operations. The performance of the E.ON UK trading business 
was included in the results of the Group throughout 2008. The E.ON UK trading 
business migrated to Düsseldorf during September 2008 and was legally 
transferred to EET AG on 1 January 2009. The legal sale resulted in the 
financial disposal at fair value of some balance sheet items (e.g. coal at 
ports), contract novations and new back to back arrangements replicating the 
economic benefit of the original trades or contracts associated with the UK 
trading business. 
The Energy Trading business also engages in a controlled amount of proprietary 
trading in gas, power, coal, oil and CO2 emission certificates markets in order 
to take advantage of market opportunities and maintain the highest levels of 
market understanding required to support its optimisation and risk management 
activities. The following table sets forth E.ON UK's electricity and gas 
proprietary trading volumes for 2008 and 2007: 
+-----------------------+-------------+-------------+-------------+-----------+ 
|                       |        2008 |        2007 |        2008 |      2007 | 
| Proprietary Trading   | Electricity | Electricity |         Gas |       Gas | 
| Volumes               |     billion | billion kWh |     billion |   billion | 
|                       |        kWh1 |             |        kWh1 |       kWh | 
+-----------------------+-------------+-------------+-------------+-----------+ 
| Energy bought         |        70.4 |        32.3 |       179.1 |     127.4 | 
+-----------------------+-------------+-------------+-------------+-----------+ 
| Energy sold           |        70.4 |        32.3 |       179.1 |     127.4 | 
+-----------------------+-------------+-------------+-------------+-----------+ 
| Gross volume          |       140.8 |        64.6 |       358.2 |     254.8 | 
+-----------------------+-------------+-------------+-------------+-----------+ 
1 The increase in proprietary trading volumes was to take advantage of market 
opportunities and support risk management 
   activities. 
 
 
In its energy trading operations, E.ON UK uses a combination of bilateral 
contracts, forwards, futures, options contracts and swaps traded 
over-the-counter or on commodity exchanges. E.ON UK also undertakes relatively 
low levels of trading in other commodities, including ROCs, environmental 
products and weather derivatives. All of E.ON UK's energy trading operations, 
including its limited proprietary trading, are subject to E.ON AG's risk 
management policies for energy trading. From 1 January 2008, day-to-day 
management responsibility for these activities was transferred to EET AG. 
E.ON UK has in place a portfolio of fuel contracts of varying volume, duration 
and price, reflecting market conditions at the time of commitment. Coal 
contracts with a variety of suppliers within the UK and overseas ensure that 
supplies are secured for E.ON UK's coal-fired plants, while maintaining enough 
flexibility to minimise the cost of generation across the total generation 
portfolio. E.ON UK's coal import facilities at Kingsnorth power station and 
Gladstone Dock, Liverpool, provide secure access to international coal supplies. 
The supply of gas for E.ON UK's Combined Cycle Gas Turbine ("CCGT") and CHP 
plants is sourced through non-interruptible long-term gas supply contracts with 
gas producers (certain of which contain take or pay provisions), and through 
purchases on the forward and spot markets. Since October 2004, E.ON Ruhrgas has 
been a significant supplier of natural gas to E.ON UK pursuant to a long-term 
supply contract between the parties. The agreed framework for the E.ON Ruhrgas 
contract is essentially that of a "take or pay" arrangement. Risk management 
arrangements in respect of the volume and price risks associated with E.ON UK's 
gas supply contracts are conducted through trading on the spot, over-the-counter 
and bilateral markets. 
Results and dividends 
The loss attributable to the equity shareholder and balance transferred to 
reserves for the financial year to 31 December 2008 was GBP112 million (2007: 
profit of GBP738 million). 
The directors do not recommend the payment of a final dividend (2007: GBPnil). 
No interim dividend was paid during the year (2007: GBP240 million). 
Events after the balance sheet date 
On 1 January 2009, the Group sold its E.ON Energy Trading business to EET AG as 
part of the overall strategy to combine all of the European energy trading 
operations. 
On 14 January 2009, the Group announced its intention to create a joint venture 
with RWE npower with plans to build new nuclear power stations in the UK. The 
Group and RWE npower will each have a 50 percent stake in the joint venture, 
which will focus long-term on seeking to secure sites being sold by the Nuclear 
Decommissioning Authority and taking them through the consents process to 
building and operating new nuclear power stations. 
Directors 
The following directors served on the Board during the year and after the year 
end: 
+-----------------------+------------------------------------------+------------+ 
|                       |                                          |            | 
+-----------------------+------------------------------------------+------------+ 
| Dr Paul Golby         |                                          |            | 
+-----------------------+------------------------------------------+------------+ 
| Graham Bartlett       |                                          |            | 
+-----------------------+------------------------------------------+------------+ 
| John Crackett         |                                          |            | 
+-----------------------+------------------------------------------+------------+ 
| Brian Tear            | (appointed 18 March 2008)                |            | 
+-----------------------+------------------------------------------+------------+ 
| Maria Antoniou        | (appointed 1 October 2008)               |            | 
+-----------------------+------------------------------------------+------------+ 
| Jarri Sandstrom       | (resigned 31 March 2008)                 |            | 
+-----------------------+------------------------------------------+------------+ 
| Robert Taylor         | (resigned 1 October 2008)                |            | 
+-----------------------+------------------------------------------+------------+ 
|                       |                                          |            | 
+-----------------------+------------------------------------------+------------+ 
Information on directors' emoluments is given in Note 3 to the parent company 
financial statements. 
Employees 
The Group provides an environment in which communication is open and 
constructive. There are well established arrangements for communication and 
consultation with employees and their representatives at local and Company level 
which covers a wide range of business and employment issues including those 
considered by the E.ON AG European Works Council, which provides a forum for 
consultation on major issues affecting E.ON AG Group companies in Europe. 
The Group is committed to offering equal opportunities to both current and 
prospective employees. The Group continues to review and develop best practices 
and procedures to ensure that all staff are treated fairly in all aspects of 
employment. It also strives for a diverse environment that is supportive of all 
staff. Individual differences which do not relate to job performance such as 
gender, marital status, sexual orientation, race, colour, ethnic origin, 
nationality, religion, age or disability are respected. 
The Group believes in ensuring that disabled people can compete fairly for job 
opportunities, training and development, through the promotion and development 
of best practices. Links and contacts with external disability networks and 
organisations are maintained to identify best practices in the employment of 
people with disabilities and to provide work experience placements for disabled 
people. In the event of existing employees becoming disabled, the Group will 
seek to maintain their employment through training, redeployment and adjustments 
to the job role and workplace, where it is reasonable and practicable to do so. 
Training and development of staff remains a key priority in achieving the UK 
growth strategy and ensuring that all staff perform at the highest level. 
The Group believes it is important that employees understand the link between 
their own contribution and the overall performance of the business. Therefore 
all eligible employees are able to participate in the E.ON UK Share Incentive 
Plan. This is a share incentive plan that enables employees to develop a greater 
involvement in E.ON AG, through share ownership. Share schemes of this kind help 
to reinforce that link and give employees the opportunity to share in the 
success of the company they work for. 
Contributions for political and charitable purposes 
Donations to charitable organisations during the financial year by the Group 
amounted to GBP141,459 (2007: GBP130,055).  It is the Group's policy not to make 
cash donations to any political party. However, the Group does undertake 
activities, such as event sponsorship, which are not designed to support or 
influence support for any particular political party; which are covered under 
The Political Parties, Elections and Referendums Act 2000 and must be disclosed. 
During the year, the Group sponsored an event at the Labour party conference. 
The total cost required to be disclosed as political donations was GBP10,000 
(2007: GBP10,000). 
Policy on payment of creditors 
Where appropriate in relation to specific contracts, the Company and Group's 
practice is to: 
  *  settle the terms of payment with the supplier when agreeing the terms of each 
  transaction; 
  *  ensure that those suppliers are made aware of the terms of payment by inclusion 
  of relevant terms in the contracts; and 
  *  pay in accordance with its contractual and other legal obligations. 
 
 
 
The Company and Group supports the Better Payments Practice Code and has in 
place well developed arrangements with a view to ensuring that this is observed 
in all other cases. Group companies operating overseas are encouraged to adopt 
equivalent arrangements by applying local best practices. The average number of 
days taken to pay the Group's trade suppliers calculated in accordance with the 
requirements of the Companies Act is 12 days (2007: 20 days). 
Going concern 
Notwithstanding the fact that the Group has net current liabilities and has made 
a loss for the year, the directors have prepared the financial statements on the 
going concern basis. The directors have put in place sufficient committed 
borrowing facilities such that the Group and the Company can meet their 
obligations as they fall due for a period of at least twelve months from the 
date of the directors' approval of these financial statements. Borrowing 
facilities are shown in Notes 19 and 20. 
 
 
The directors have reviewed the Group's budget and cash flow forecasts for the 
year ended 31 December 2009 and the outline projections for the two subsequent 
years. The directors confirm that they have a reasonable expectation that the 
Company and the Group have adequate resources to continue in operational 
existence for the foreseeable future. Accordingly, the directors continue to 
adopt the going concern basis in preparing the Company's consolidated financial 
statements. 
 
 
Auditors 
Each of the directors at the date when this report was approved confirms that: 
  *  So far as the directors are aware, there is no relevant audit information of 
  which the Group's auditors are unaware; and 
  *  Each of the directors have taken all steps that they ought to have taken as 
  directors in order to make themselves aware of any relevant audit information 
  and to establish that the Group's auditors are aware of that information. 
 
 
 
This confirmation is given and should be interpreted in accordance with the 
requirements of s234ZA(2) of the Companies Act 1985. 
A resolution to reappoint the auditors, PricewaterhouseCoopers LLP, and to 
authorise the directors to fix their remuneration will be proposed at the 
forthcoming Annual General Meeting. 
By order of the Board 
 
 
Brian Tear 
Director 
E.ON UK plc 
Westwood Way 
Westwood Business Park 
Coventry 
CV4 8LG 
 
 
28 April 2009 
 
 
FINANCIAL REVIEW (INCLUDING PRINCIPAL RISKS AND UNCERTAINTIES) 
This review is designed to give further financial information concerning the 
E.ON UK results and financial position for the year. 
Overview 
E.ON UK and its associated companies are involved in electricity generation and 
distribution, and gas and electricity retail and trading. As of 31 December 
2008, E.ON UK owned or through joint ventures had an attributable interest in 
10,330 MW of generation capacity, including 359 MW of CHP plants and 245 MW of 
operational wind capacity. On 31 December 2008, the hydroelectric plant (with 
attributable capacity of 50 MW) was disposed. E.ON UK served approximately 8.1 
million electricity and gas customer accounts at 31 December 2008 and its 
Central Networks business served 5.0 million customer connections.Energy 
Services visited more than 12 million households and carried out work in around 
600,000 homes. 
Principal risks and uncertainties 
In the normal course of business, the Group is subject to a number of risks that 
are inseparably linked to the operation of its businesses. To manage these 
risks, the Group uses a comprehensive risk management system that is embedded 
within the business and decision making process. The risk management system is 
designed to enable management to recognise risks early and take the necessary 
countermeasures. The process is continuously reviewed to ensure it remains 
effective and efficient. 
The key business risks affecting the Group are set out below. 
Competition 
The electricity and gas markets within which the Group operates are subject to 
strong competition in both the retail and wholesale sectors. There is 
competition from both new market entrants and existing participants. This highly 
competitive market could lead to depressed margins. The Group uses a 
comprehensive sales management system and intensive customer management to 
minimise these risks. 
Commodity prices 
A significant portion of the Group's expenses comprise of fuel costs which are 
heavily influenced by prices in the world market for oil, natural gas, fuel oil 
and coal. The prices for such commodities have historically been volatile and 
there is no guarantee that prices will remain within projected levels. Increases 
in fuel costs could have an adverse effect on the Group's operating results or 
financial condition. To limit commodity price risks the Group utilises 
derivatives financial instruments that are commonly used in the market place. 
The Group mainly use electricity, gas, coal, carbon emission and oil price 
hedging transactions to limit the exposure to risks resulting from price 
fluctuations, to optimise systems and load balancing and to lock in margins. The 
Group also engages in proprietary commodity trading in accordance with detailed 
guidelines and within narrowly defined limits. 
Credit risk - financial instruments 
The Group is at risk if a counterparty is unable to meet its obligations 
resulting in potential losses. E.ON UK is subject to the E.ON AG Group finance 
policy which sets a credit limit for every financial institution with which the 
Group does a significant amount of business.  The creditworthiness of the 
institutions with which the Group does business is established by the ratings 
they receive from Moody's and Standard & Poor's.  In addition, other 
counterparty credit risk is subject to the E.ON AG Group Credit Risk Management 
policy supported by individual business unit policies to establish internal 
ratings for limit setting. Credit risk assessment involves quantitative and 
qualitative criteria including ratings by independent rating agencies where 
these are available. 
 
 
Credit risk - customer/debtors 
There is a risk that bad debts will exceed the directors' expectations. There is 
also an additional risk to the value of unbilled debt which could lead to write 
offs. 
There are a number of initiatives underway to mitigate against this risk. These 
include credit vetting and systems investment. 
Weather 
Gas and electricity sales volumes and commodity prices are affected by 
temperature and other weather factors. The demand for gas and electricity is 
seasonal with the Group generally experiencing higher demand during the colder 
months of October through to March and lower demand during the warmer months of 
April through September. Revenues and results of the Group can therefore be 
negatively affected by periods of unseasonably warm weather. 
To manage the price risk, the Group has a flexible portfolio. It makes use of 
storage, LNG, fuel switching for generation and demand management to mitigate 
weather risk. 
Asset performance 
If power outage or shutdowns involving the Group's electricity operations occur, 
the Group's business and results of operations could be negatively affected. 
In order to minimise the impact of reduced asset performance, the Group 
undertakes regular facility and network maintenance and adopts good maintenance 
practice. 
 
 
 
 
Key performance indicators ("KPIs") 
Non-financial KPIs for each of the business units are shown below: 
+--------------------+----------+----------+----------------------------------+ 
|        KPIs        |      Results        |            Commentary            | 
+                    +---------------------+                                  + 
|                    |        2008        |                                  |  2007    | 
+--------------------+--------------------+----------------------------------+----------+ 
|                                                                             | 
+-----------------------------------------------------------------------------+ 
| UK Business                                                                 | 
+-----------------------------------------------------------------------------+ 
| Safety LTIFR (The  |  4.08    |  3.66    | The LTIFR was worse than 2007    | 
| Lost Time Injury   |          |          | despite the business working     | 
| Frequency Rate is  |          |          | hard to reduce the number of     | 
| measured by the    |          |          | accidents. The safety of people  | 
| number of lost     |          |          | is of vital importance to the    | 
| time injuries per  |          |          | business and is a key business   | 
| 1,000,000 hours    |          |          | priority for 2009.               | 
| worked)            |          |          |                                  | 
|                    |          |          |                                  | 
+--------------------+----------+----------+----------------------------------+ 
| Total Gas volumes  |   222    |   206    | Gas volumes can be segmented     | 
| sold/used (TWh)    |          |          | into Retail sales, market sales  | 
|                    |          |          | and gas utilised at power        | 
|                    |          |          | stations. The increase is        | 
|                    |          |          | primarily driven by an increase  | 
|                    |          |          | in market sales as a result of   | 
|                    |          |          | the competitive environment and  | 
|                    |          |          | changes in demand. Gas utilised  | 
|                    |          |          | at power stations increased due  | 
|                    |          |          | to market conditions and new     | 
|                    |          |          | rules governing generation       | 
|                    |          |          | causing a shift away from coal   | 
|                    |          |          | towards natural gas. Retail      | 
|                    |          |          | sales remain relatively          | 
|                    |          |          | consistent to the previous year. | 
|                    |          |          |                                  | 
+--------------------+----------+----------+----------------------------------+ 
| Total Power        | 81       | 78       | The increase is due to market    | 
| volumes sold (TWh) |          |          | sales as a result of market      | 
|                    |          |          | conditions.                      | 
|                    |          |          |                                  | 
+--------------------+----------+----------+----------------------------------+ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
+--------------------+----------+----------+----------------------------------+ 
|        KPIs        |      Results        |            Commentary            | 
+--------------------+---------------------+----------------------------------+ 
|                    |     2008 |     2007 |                                  | 
+--------------------+----------+----------+----------------------------------+ 
| Generation                                                                  | 
+-----------------------------------------------------------------------------+ 
| Generating         |   10,330 |   10,380 | Generating capacity has          | 
| capacity (MW)      |          |          | decreased from 31 December 2008  | 
|                    |          |          | due to the sale of Rheidol       | 
|                    |          |          | hydro-electric power station.    | 
|                    |          |          |                                  | 
+--------------------+----------+----------+----------------------------------+ 
| Generation         |       40 |       41 | The decrease in production was   | 
| production (TWh)   |          |          | primarily due to a reduction in  | 
|                    |          |          | production in coal stations      | 
|                    |          |          | partially offset by an increase  | 
|                    |          |          | in gas stations driven by market | 
|                    |          |          | conditions.                      | 
|                    |          |          |                                  | 
+--------------------+----------+----------+----------------------------------+ 
| E.ON Climate & Renewables                                                   | 
+-----------------------------------------------------------------------------+ 
| Generating         |      245 |      189 | There has been an increase in    | 
| capacity (MW)      |          |          | generating capacity following    | 
|                    |          |          | the opening of Steven's Croft    | 
|                    |          |          | biomass power station in         | 
|                    |          |          | Lockerbie, Scotland.             | 
|                    |          |          |                                  | 
+--------------------+----------+----------+----------------------------------+ 
| Generation         |      656 |      420 | The increase in production was   | 
| production (GWh)   |          |          | primarily due to the new biomass | 
|                    |          |          | facility, favourable             | 
|                    |          |          | environmental conditions and     | 
|                    |          |          | excellent availability of wind   | 
|                    |          |          | farms.                           | 
|                    |          |          |                                  | 
+--------------------+----------+----------+----------------------------------+ 
| E.ON Energy        |          |          |                                  | 
| Trading            |          |          |                                  | 
+--------------------+----------+----------+----------------------------------+ 
| Electricity        |      141 |       65 | The increase in proprietary      | 
| proprietary        |          |          | trading volumes was to take      | 
| trading volumes    |          |          | advantage of market              | 
| (kWh)              |          |          | opportunities and support risk   | 
|                    |          |          | management activities.           | 
|                    |          |          |                                  | 
+--------------------+----------+----------+----------------------------------+ 
| Gas propriety      |      358 |      255 | The increase in proprietary      | 
| trading volumes    |          |          | trading volumes was to take      | 
| (kWh)              |          |          | advantage of market              | 
|                    |          |          | opportunities and support risk   | 
|                    |          |          | management activities.           | 
+--------------------+----------+----------+----------------------------------+ 
|        KPIs        |      Results        |            Commentary            | 
+--------------------+---------------------+----------------------------------+ 
|                    |     2008 |     2007 |                                  | 
+--------------------+----------+----------+----------------------------------+ 
| Central Networks                                                            | 
+-----------------------------------------------------------------------------+ 
| Volumes            |     55.6 |     56.0 | The volume of power distributed  | 
| distributed (TWh)  |          |          | remained subdued compared with   | 
|                    |          |          | historic standards and reduced   | 
|                    |          |          | by a further 0.4 percent in 2008 | 
|                    |          |          | despite the leap year having an  | 
|                    |          |          | extra day. The overall reduction | 
|                    |          |          | is driven by a decline in power  | 
|                    |          |          | usage from large non residential | 
|                    |          |          | customers, reflecting the sharp  | 
|                    |          |          | contraction in manufacturing     | 
|                    |          |          | output.                          | 
+--------------------+----------+----------+----------------------------------+ 
| Retail                                                                      | 
+-----------------------------------------------------------------------------+ 
| Customer numbers   |      8.1 |      8.0 | Customer numbers have increased  | 
| (million)          |          |          | slightly compared to the prior   | 
|                    |          |          | year due to strengthening of the | 
|                    |          |          | Group's competitive position.    | 
+--------------------+----------+----------+----------------------------------+ 
| Volumes of         |     51.1 |     52.5 | Volumes are lower due to a mix   | 
| electricity sold   |          |          | of weather, customer portfolio   | 
| (TWh)              |          |          | and the initial impact of the    | 
|                    |          |          | economic slowdown.               | 
+--------------------+----------+----------+----------------------------------+ 
| Volumes of gas     |     77.8 |     78.9 | The reduced gas volumes sold     | 
| sold (TWh)         |          |          | reflect price sensitivity,       | 
|                    |          |          | energy efficiency measures of    | 
|                    |          |          | customers and the initial impact | 
|                    |          |          | of the economic slowdown.        | 
+--------------------+----------+----------+----------------------------------+ 
| Energy Services                                                             | 
+-----------------------------------------------------------------------------+ 
| Domestic           |   31,541 |   46,405 | Lower than annual target and     | 
| connections        |          |          | prior year due to the slow down  | 
|                    |          |          | in the housing market.           | 
|                    |          |          |                                  | 
+--------------------+----------+----------+----------------------------------+ 
| Meter reading      |    96.4% |    96.0% | Performance has slightly         | 
| performance        |          |          | improved compared to prior year. | 
+--------------------+----------+----------+----------------------------------+ 
Key financial KPIs within the Group are considered to be revenue and operating 
profit. These are discussed below within the Group financial results section. 
 
 
Group financial results 
The profit before tax from continuing operations was GBP740 million compared 
with a GBP587 million loss for the previous twelve months. The Group's profit 
before tax from continuing operations adjusted for impairment and restructuring 
costs of GBP95 million (2007: nil) and profits less losses on disposal of 
investments/businesses of GBP5 million (2007: nil) for the year ended 31 
December 2008 was GBP830 million, compared to a loss of GBP587 million for the 
same period last year. 
Revenue 
Group revenue from continuing operations grew by GBP2,433 million during the 
year to GBP9,039 million, an increase of 37 percent. The split of turnover 
between business units has been distorted during 2008 due to the restructuring 
and disposal of the E.ON Energy Trading business to EET AG in January 2009 
(resulting in the E.ON Energy Trading business being reclassed to discontinued 
operations and prior year comparatives restated). The external increase in 
turnover has arisen in the Retail and Distribution businesses. The increase in 
the Retail business was due to higher average (retail) prices as a result of two 
price rises that occurred during the year combined with higher customer 
numbers.External sales in the regulated distribution business increased to 
GBP488 million in 2008 from GBP464 million in 2007. The sales increase was 
principally attributable to tariff changes. The increase in inter-segment 
revenue arises due to the way the E.ON Energy Trading business has been 
separated from the Generation business during 2008 and a new transfer pricing 
mechanism implemented. During 2007 the two businesses traded as one and 
therefore obtaining like-for-like comparative data is not possible. 
Revenue is further analysed below: 
+------------------------------------------------+---------------+---+---------------+ 
|                                                |   Year ended  |   |   Year ended  | 
|                                                |   31 December |   |   31 December | 
|                                                |          2008 |   |          2007 | 
|                                                |          GBPm |   |          GBPm | 
+------------------------------------------------+---------------+---+---------------+ 
| UK Operations                                  |               |   |               | 
+------------------------------------------------+---------------+---+---------------+ 
|                                     Generation |           150 |   |            93 | 
+------------------------------------------------+---------------+---+---------------+ 
|                                     EC&R       |            56 |   |            38 | 
+------------------------------------------------+---------------+---+---------------+ 
|                                     Central    |           488 |   |           464 | 
|                                     Networks   |               |   |               | 
+------------------------------------------------+---------------+---+---------------+ 
|                                     Retail     |         6,524 |   |         5,703 | 
+------------------------------------------------+---------------+---+---------------+ 
|                                     Energy     |           147 |   |            88 | 
|                                     Services   |               |   |               | 
+------------------------------------------------+---------------+---+---------------+ 
| External revenue                               |         7,365 |   |         6,386 | 
+------------------------------------------------+---------------+---+---------------+ 
| Inter-segment revenue to discontinued          |         1,674 |   |           220 | 
| operations                                     |               |   |               | 
+------------------------------------------------+---------------+---+---------------+ 
| Revenue from continuing operations             |         9,039 |   |         6,606 | 
+------------------------------------------------+---------------+---+---------------+ 
 
 
 
 
Operating costs 
Details of the Group's operating costs are set out in Note 3 to the financial 
statements. The figures from continuing operations are summarised below. 
+----------------------------------------+---------------+---+----------------+ 
|                                        |   Year ended  |   |    Year ended  | 
|                                        |   31 December |   |    31 December | 
|                                        |          2008 |   |           2007 | 
|                                        |          GBPm |   |           GBPm | 
+----------------------------------------+---------------+---+----------------+ 
| Fuel costs                             |            15 |   |              - | 
+----------------------------------------+---------------+---+----------------+ 
| Power purchases and other costs of     |         6,601 |   |          5,528 | 
| sales                                  |               |   |                | 
+----------------------------------------+---------------+---+----------------+ 
| Staff costs                            |           553 |   |            520 | 
+----------------------------------------+---------------+---+----------------+ 
| Depreciation, including relevant       |           278 |   |            236 | 
| impairments                            |               |   |                | 
+----------------------------------------+---------------+---+----------------+ 
| Intangible asset amortisation,         |            76 |   |             62 | 
| including relevant impairments         |               |   |                | 
+----------------------------------------+---------------+---+----------------+ 
| Derivative losses                      |           108 |   |             53 | 
+----------------------------------------+---------------+---+----------------+ 
| Other operating charges, including     |           843 |   |            715 | 
| restructuring costs                    |               |   |                | 
+----------------------------------------+---------------+---+----------------+ 
|                                        |         8,474 |   |          7,114 | 
+----------------------------------------+---------------+---+----------------+ 
 
 
The disposal of the trading business has resulted in it being reclassed to 
discontinued activities, meaning that a significant proportion of the fuel costs 
are not included in the continuing activities of the Group. This has led to an 
increase in power purchase costs from continuing operations since fuel costs are 
now recharged from the Trading business via a transfer pricing mechanism. E.ON 
generated 40.4 billion kWh of electricity at its own power plants, about 2 
percent less than in the prior year (41.2 billion kWh). New rules governing the 
generation of fossil-fired power stations came into effect in 2008. This caused 
a shift in generation away from coal towards natural gas. 
 
 
Staff costs at GBP553 million were 6 percent higher than in the previous year 
because of headcount increases and restructuring costs. The UK headcount has 
increased by 5 percent primarily due to an increase in customer facing roles in 
the Retail business and the acquisition of Empower, a vocational training 
company. Staff numbers at 31 December 2008 totalled 17,480 all of which were 
based in the UK. 
 
 
The depreciation charge increased from GBP236 million in 2007 to GBP278 million 
in 2008. The increase is primarily due to increases in investment in 
infrastructure over the last year leading to an increase in the depreciation 
charge. The increase in the intangible asset amortisation is primarily due to a 
GBP13 million impairment of goodwill relating to the Energy Services business. 
Derivative losses were significantly higher in 2008 due to lower forward gas and 
power prices (see Note 3) although the majority of this has been reclassified to 
discontinued operations during 2008. 
Other operating charges included the costs of running the UK businesses and 
supporting corporate infrastructure. Other operating charges have increased 
during 2008 primarily due to costs of restructuring the Energy Services business 
(see Note 4). 
Operating income 
Other operating income from continuing operations during 2008 was GBP333 million 
compared with GBP137 million in the year to 31 December 2007. Gains from 
derivatives increased from GBP85 million in 2007 to GBP197 million in 2008. This 
increase in operating income also included gains of GBP68 million on the 
disposal of plant and equipment, primarily attributable to the disposal of 
Rheidol. During 2007 there was consulting income of GBP12 million and income 
from engineering services of GBP14 million, both of which were disposed of 
during 2008 following the disposal of the Engineering business and included in 
the profit on disposal of plant and equipment. 
Impairment and restructuring costs 
Included in operating costs in 2008 were impairment and restructuring costs 
before tax of GBP95 million. During 2008, certain CHP assets were impaired by 
GBP4 million and an onerous contract provision of GBP32 million was recorded on 
CHP contracts. The impairments arose as a result of rising wholesale gas prices 
resulting in increased costs on CHP contracts that receive a relatively fixed 
price per unit of output. Following a change in the strategic direction of the 
Energy Services business, restructuring and onerous contract costs of GBP34 
million were recognised. Goodwill relating to the Energy Services segment was 
also impaired by GBP13 million. Restructuring costs of GBP12 million were also 
recorded by the Retail business. 
Operating profit/(loss) 
A more detailed analysis of operating profit/(loss) and reconciliation to 
profit/(loss) before tax is set out below: 
+---------------------------------------------------------+-------------+--+-------------+ 
|                                                         |  Year ended |  |  Year ended | 
|                                                         | 31 December |  | 31 December | 
|                                                         |        2008 |  |        2007 | 
|                                                         |        GBPm |  |        GBPm | 
+---------------------------------------------------------+-------------+--+-------------+ 
| UK Operations                                           |             |  |             | 
+---------------------------------------------------------+-------------+--+-------------+ 
|                                     Generation          |         699 |  |       (636) | 
+---------------------------------------------------------+-------------+--+-------------+ 
|                                     EC&R                |          59 |  |           1 | 
+---------------------------------------------------------+-------------+--+-------------+ 
|                                     Central             |         361 |  |         349 | 
|                                     Networks            |             |  |             | 
+---------------------------------------------------------+-------------+--+-------------+ 
|                                     Retail              |        (47) |  |        (17) | 
+---------------------------------------------------------+-------------+--+-------------+ 
|                                     Energy              |       (108) |  |         (2) | 
|                                     Services            |             |  |             | 
+---------------------------------------------------------+-------------+--+-------------+ 
|                                     Central/Unallocated |        (66) |  |        (66) | 
+---------------------------------------------------------+-------------+--+-------------+ 
| Group operating profit/(loss) after                     |         898 |  |       (371) | 
| impairment and restructuring costs                      |             |  |             | 
+---------------------------------------------------------+-------------+--+-------------+ 
| Net finance costs                                       |       (168) |  |       (227) | 
+---------------------------------------------------------+-------------+--+-------------+ 
| Share of results of associates after tax                |          10 |  |          11 | 
+---------------------------------------------------------+-------------+--+-------------+ 
| Profit/(loss) before tax                                |         740 |  |       (587) | 
+---------------------------------------------------------+-------------+--+-------------+ 
Group operating profits from continuing operations totalled GBP898 million for 
the year compared with a loss of GBP371 million in the same period to 31 
December 2007. Within this total, Generation profits were GBP699 million 
compared to losses of GBP636 million in 2007, an increase of GBP1,335 million. 
This primarily reflects the impact of receiving transfer pricing income from 
E.ON Energy Trading. In 2007, the Generation business did not receive any 
significant transfer pricing income from E.ON Energy Trading as the two business 
units were operated as one. 
EC&R's profit increased to GBP59 million in 2008 due to the impact of Steven's 
Croft biomass plant which was not operational in 2007 and Stag's Holt windfarm 
which only became operational in the last quarter of 2007. Recycled benefits and 
the impact of transfer pricing income from E.ON Energy Trading also contributed 
to the improved profits. 
Central Networks' profits increased from GBP349 million to GBP361 million 
primarily due to higher tariffs and general cost savings. 
Within the Retail business, losses increased by GBP30 million to a loss of GBP47 
million mainly due to the impact of government mandated energy efficiency 
measures, lower retail volumes and restructuring costs. 
Energy Services' losses increased to GBP108 million from GBP2 million primarily 
due to restructuring costs, onerous contract costs and impairment of goodwill. 
Central/Unallocated losses are consistent with prior year at GBP66 million. 
Interest costs 
E.ON UK's net interest costs decreased from GBP227 million to GBP168 million due 
primarily to lower rates of interest on loans from fellow group undertakings 
which are linked to LIBOR. 
Treasury management 
E.ON UK, in common with other major E.ON AG subsidiaries, must comply with E.ON 
AG financial management and treasury policies and procedures but must also have 
its own local operational treasury team which services the treasury requirements 
of the business. 
E.ON AG has a central department that is responsible for financing and treasury 
strategy, policies and procedure throughout the E.ON AG Group. Major strategic 
financings and corporate finance actions are planned and executed by the 
corporate finance team at E.ON AG. There is also a treasury team which 
co-ordinates currency and interest risk management as well as cash management 
for the whole E.ON AG Group. 
E.ON UK also operates its own specific treasury procedures within the overall 
E.ON AG treasury framework. The E.ON AG treasury team liaise closely with E.ON 
UK to ensure that liquidity and risk management needs are met within the 
requirements of the E.ON AG policies and procedures. 
E.ON AG's central financing strategy 
E.ON AG's financing policy is to centralise external financing at the E.ON AG 
holding company level and to reduce external debt in subsidiaries wherever 
possible. E.ON AG has the strongest credit rating in the E.ON AG Group and this 
allows more beneficial terms for external finance to be negotiated. E.ON AG then 
funds its subsidiaries with inter-company finance. This finance may be in the 
form of equity or debt, as appropriate. 
The E.ON UK treasury team employs a continuous forecasting and monitoring 
process to ensure that the Group complies with all its banking and other 
covenants, and also the regulatory constraints that apply to the financing of 
the UK business. E.ON UK treasury works in close liaison with the various 
operating businesses within the Group, when considering hedging requirements 
related to their activities. A group-wide cash forecasting and currency exposure 
reporting process exists which ensures regular reporting into UK treasury of 
future positions, both short and medium term. Information is submitted to E.ON 
AG for incorporation into E.ON AG Group forecasting processes on a weekly, 
monthly and quarterly basis. 
E.ON UK does not enter into speculative treasury arrangements. Accordingly, all 
transactions in financial instruments are matched to an underlying business 
requirement, such as committed purchases or forecast debt requirements. Treasury 
activities are reviewed by internal audit on a regular basis. 
The year end position described in more detail below is representative of the 
Group's current position in terms of its objectives, policies and strategies. 
These will continue to evolve as the Group's business develops in line with the 
requirements, objectives, policies and strategies of E.ON AG as the parent 
company of the Group. 
Foreign exchange risk management 
E.ON UK primarily trades in pounds sterling but its principal currency exposures 
are to the US dollar and the Euro. E.ON UK operates within the framework of E.ON 
AG's guidelines for foreign exchange risk management. E.ON UK has local policies 
dealing with transaction exposures (typically cash flows arising on trading and 
construction contracts and foreign currency denominated debt which impact the 
income statement) and translation exposures (the value of foreign currency 
liabilities and assets in the balance sheet). E.ON UK's policy is to hedge all 
contractually committed transaction exposures, as soon as the commitment arises. 
E.ON UK will also hedge less certain cash flows if this is appropriate. 
E.ON UK's policy towards translation exposures is to hedge these exposures where 
practicable, with the intention of protecting the Sterling net asset value. 
These hedges are normally achieved through a combination of borrowing in local 
currency, forward currency contracts or foreign currency swaps. 
Details of the Group's foreign exchange contracts and swaps are set out in Note 
21 to the accounts. 
Interest rate risk management 
E.ON UK operates within the E.ON AG framework for interest rate risk management. 
The Group has a significant portfolio of debt and is exposed to movements in 
interest rates. These interest rate exposures are managed primarily through the 
use of fixed and floating rate borrowings and interest rate swaps. 
Credit risk management 
E.ON UK is subject to the E.ON AG Group Finance policy which sets a credit limit 
for every financial institution with which the Group does a significant amount 
of business.  The creditworthiness of the institutions with which the Group does 
business is established by the ratings they receive from Moody's and Standard & 
Poor's.  In addition, other counterparty credit risk is subject to the E.ON AG 
Group Credit Risk Management policy supported by individual business unit 
policies to establish internal ratings for limit setting. Credit risk assessment 
involves quantitative and qualitative criteria including ratings by independent 
rating agencies where these are available. 
Liquidity planning, trends and risks 
E.ON UK has sufficient committed borrowing facilities to meet planned liquidity 
needs, through facilities provided by its ultimate parent company E.ON AG. 
Movements in energy prices have some impact on operating cash flows, and as 
electricity generation and distribution is a capital intensive business, planned 
capital spending remains at significant levels. The level of operating cash is 
affected by the performance of the business, and market prices and margins 
amongst other things. Some of these factors are outside the Group's control. 
E.ON UK's capital market bond financings do not have financial covenants, but a 
fall in the credit rating below investment grade could, in some circumstances, 
require repayment of these bonds. 
Credit rating 
E.ON UK's long-term credit rating has improved slightly over the year, at A by 
Standard & Poor's and A3 by Moody's. 
Borrowings and facilities 
Details of the Group's borrowing facilities are set out in Notes 19 and 20 to 
the accounts. 
At 31 December 2008, the Group had total borrowings of GBP3,832 million (2007: 
GBP3,542 million) including GBP3,265 million of long-term loans and GBP567 
million of short-term loans and overdrafts. 
At 31 December 2008, the Group had GBP87 million of cash and short-term 
investments (2007: GBP46 million). E.ON UK's policy is to repay debt where 
possible and otherwise to place any surplus funds on short-term deposit with 
approved banks and financial institutions. Strict limits governing the maximum 
exposure to these banks and financial institutions are applied. These limits are 
co-ordinated across the E.ON AG Group. 
The Group's net borrowing position at 31 December 2008 was GBP3,745 million, 
compared to GBP3,496 million at 31 December 2007. The weighted average interest 
rate for the year, when compared to average net borrowings, was 5.9 percent 
compared with 6.0 percent in the previous year. 
Gearing (net debt as a percentage of net assets excluding net debt) was 46 
percent at 31 December 2008 (2007: 46 percent). 
Commodity risk management 
As part of its operating activities, E.ON UK engages in energy trading in the 
gas, electricity, coal, carbon permit and oil markets. This activity is 
primarily focused around the commercial risk management and optimisation of both 
UK electricity and gas assets and to manage the price and volume risks 
associated with its UK retail business, but also encompasses limited proprietary 
trading in the UK and some European energy markets. 
 All of E.ON UK's energy trading operations are subject to E.ON UK's and E.ON 
AG's risk management policies. These include value and profit at risk, credit 
limits, segregation of duties and an independent risk reporting system. To 
achieve its portfolio optimisation E.ON UK uses fixed price bilateral contracts, 
futures and option contracts traded on commodity exchanges and swaps and options 
traded in over-the-counter financial markets. 
Taxation 
The tax charge from continuing operations amounted to GBP283 million for the 
year compared with a GBP135 million credit for the same period to 31 December 
2007. The effective rate on continuing operations was 38 percent compared with 
23 percent in the year to 31 December 2007. The main reasons for the effective 
rate not being 28.5 percent (2007: 30 percent) in the period are adjustments to 
current and deferred tax provisions in respect of prior year items, non 
deductible expenses and non taxable income. A further adjustment has been made 
to deferred tax as a result to the change to capital allowances rates effective 
1 April 2008, particularly the loss of industrial buildings allowances from 2011 
onwards. 
 
 
 
 
STATEMENT OF DIRECTORS' RESPONSIBILTIES 
The following statement which was prepared for the purposes of the 2008 Annual 
Report and Accounts is set out on pages 26 and 27 of that document. This 
statement is repeated here solely for the purpose of complying with DTR 6.3.5. 
This statement relates to and is extracted from the 2008 Annual Report and 
Accounts. It is not connected to the extracted and summarised information 
presented in this announcement. 
 
 
Directors' responsibility statement 
We confirm that to the best of our knowledge: 
  *  The Group financial statements, which have been prepared in accordance with 
  IFRSs as adopted by the EU, give a true and fair view of the assets, 
  liabilities, financial position and loss of the Group; and 
  *  The Directors' Report and Financial Review in the Annual Report includes a fair 
  review of the development and performance of the business and position of the 
  Group, together with a description of the principal risks and uncertainties that 
  it faces. 
 
 
 
By order of the Board 
 
 
Brian Tear 
Chief Financial Officer 
28 April 2009 
 
 
 
 
 
 
Financial Statements: 
GROUP INCOME STATEMENT 
for the year ended 31 December 2008 
+-------------------------------------------+------+-------------+--+------------+ 
|                                           |      |  Year ended |  | Year ended | 
|                                           | Note | 31 December |  |         31 | 
|                                           |      |        2008 |  |   December | 
|                                           |      |        GBPm |  |       2007 | 
|                                           |      |             |  |       GBPm | 
+-------------------------------------------+------+-------------+--+------------+ 
| Revenue                                   |  2   |       9,039 |  |      6,606 | 
+-------------------------------------------+------+-------------+--+------------+ 
| Operating costs excluding impairment and  |  3   |     (8,379) |  |    (7,114) | 
| restructuring costs                       |      |             |  |            | 
+-------------------------------------------+------+-------------+--+------------+ 
| Impairment and restructuring costs        |  4   |        (95) |  |          - | 
+-------------------------------------------+------+-------------+--+------------+ 
| Total operating costs                     |      |     (8,474) |  |    (7,114) | 
+-------------------------------------------+------+-------------+--+------------+ 
| Other operating income                    |  3   |         333 |  |        137 | 
+-------------------------------------------+------+-------------+--+------------+ 
| Operating profit/(loss)                   |      |         898 |  |      (371) | 
+-------------------------------------------+------+-------------+--+------------+ 
| Finance income                            |  7   |          23 |  |         37 | 
+-------------------------------------------+------+-------------+--+------------+ 
| Finance costs                             |  7   |       (191) |  |      (264) | 
+-------------------------------------------+------+-------------+--+------------+ 
| Group's share of associates' profit after |  12  |          10 |  |         11 | 
| tax                                       |      |             |  |            | 
+-------------------------------------------+------+-------------+--+------------+ 
| Profit/(loss) before tax                  |      |         740 |  |      (587) | 
+-------------------------------------------+------+-------------+--+------------+ 
| Taxation                                  |  8   |       (283) |  |        135 | 
+-------------------------------------------+------+-------------+--+------------+ 
| Profit/(loss) for the year from           |      |         457 |  |      (452) | 
| continuing operations                     |      |             |  |            | 
+-------------------------------------------+------+-------------+--+------------+ 
| Discontinued operations                   |      |             |  |            | 
+-------------------------------------------+------+-------------+--+------------+ 
| (Loss)/profit for the year from           |  9   |       (565) |  |      1,196 | 
| discontinued operations                   |      |             |  |            | 
+-------------------------------------------+------+-------------+--+------------+ 
| (Loss)/profit for year                    |      |       (108) |  |        744 | 
+-------------------------------------------+------+-------------+--+------------+ 
|                                           |      |             |  |            | 
+-------------------------------------------+------+-------------+--+------------+ 
| (Loss)/profit attributable to:            |      |             |  |            | 
+-------------------------------------------+------+-------------+--+------------+ 
|                      Minority interest    |  31  |           4 |  |          6 | 
+-------------------------------------------+------+-------------+--+------------+ 
|                      Equity shareholder   |  29  |       (112) |  |        738 | 
+-------------------------------------------+------+-------------+--+------------+ 
|                                           |      |       (108) |  |        744 | 
+-------------------------------------------+------+-------------+--+------------+ 
 
 
 
 
The accounting policies and the Notes on pages 35 to 111 form part of these 
financial statements. 
 
 
The prior year comparatives have been restated following the reclassification of 
the E.ON Energy Trading business to discontinued operations. 
 
 
 
 
 
 
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE 
for the year ended 31 December 2008 
+------------------------------------------+------+-------------+--+------------+ 
|                                          |      |  Year ended |  | Year ended | 
|                                          |      | 31 December |  |         31 | 
|                                          |      |        2008 |  |   December | 
|                                          |      |        GBPm |  |       2007 | 
|                                          |      |             |  |       GBPm | 
+------------------------------------------+------+-------------+--+------------+ 
| (Loss)/profit for the year               |      |       (108) |  |    744     | 
+------------------------------------------+------+-------------+--+------------+ 
| Profit attributable to minority          |      |         (4) |  |    (6)     | 
| interests                                |      |             |  |            | 
+------------------------------------------+------+-------------+--+------------+ 
| (Loss)/profit attributable to equity     |      |       (112) |  |    738     | 
| shareholder                              |      |             |  |            | 
+------------------------------------------+------+-------------+--+------------+ 
| Cash flow hedge fair value               |      |          11 |  |    (4)     | 
| gains/(losses)                           |      |             |  |            | 
+------------------------------------------+------+-------------+--+------------+ 
| Cash flow hedge losses transferred to    |      |           - |  |    147     | 
| the income statement                     |      |             |  |            | 
+------------------------------------------+------+-------------+--+------------+ 
| Available for sale financial assets      |      |           1 |  |     -      | 
+------------------------------------------+------+-------------+--+------------+ 
| Gain on partial disposal                 |      |           2 |  |     -      | 
+------------------------------------------+------+-------------+--+------------+ 
| Actuarial gains/(losses) on pension      |      |         545 |  |   (101)    | 
| scheme arrangements                      |      |             |  |            | 
+------------------------------------------+------+-------------+--+------------+ 
| Tax on items taken directly to equity    |      |       (155) |  |    (12)    | 
+------------------------------------------+------+-------------+--+------------+ 
| Total recognised income for the year     |      |         292 |  |    768     | 
+------------------------------------------+------+-------------+--+------------+ 
 
 
The accounting policies and the Notes on pages 35 to 111 form part of these 
financial statements. 
 
 
 
 
 
 
 
 
GROUP BALANCE SHEET 
as at 31 December 2008 
+------------------------------------------+------+-------------+--+------------+ 
|                                          | Note |          31 |  |         31 | 
|                                          |      |    December |  |   December | 
|                                          |      |        2008 |  |       2007 | 
|                                          |      |        GBPm |  |       GBPm | 
+------------------------------------------+------+-------------+--+------------+ 
| Non-current assets                       |      |             |  |            | 
+------------------------------------------+------+-------------+--+------------+ 
|  Intangible assets                       |      |             |  |            | 
+------------------------------------------+------+-------------+--+------------+ 
|   Goodwill                               |  10  |       2,477 |  | 2,495      | 
+------------------------------------------+------+-------------+--+------------+ 
|   Other                                  |  10  |         487 |  | 409        | 
+------------------------------------------+------+-------------+--+------------+ 
| Total intangible assets                  |      |       2,964 |  |      2,904 | 
+------------------------------------------+------+-------------+--+------------+ 
| Property, plant and equipment            |  11  |       5,817 |  |      5,078 | 
+------------------------------------------+------+-------------+--+------------+ 
| Interests in associates                  |  12  |           3 |  |          3 | 
+------------------------------------------+------+-------------+--+------------+ 
| Available for sale investments           |  14  |          19 |  |         18 | 
+------------------------------------------+------+-------------+--+------------+ 
| Financial receivables                    |  15  |          47 |  |         24 | 
+------------------------------------------+------+-------------+--+------------+ 
| Pension asset                            |  23  |         472 |  |          - | 
+------------------------------------------+------+-------------+--+------------+ 
|                                          |      |       9,322 |  |      8,027 | 
+------------------------------------------+------+-------------+--+------------+ 
| Current assets                           |      |             |  |            | 
+------------------------------------------+------+-------------+--+------------+ 
| Inventories                              |  16  |         257 |  |        193 | 
+------------------------------------------+------+-------------+--+------------+ 
| Trade and other receivables              |  17  |       2,133 |  |      1,983 | 
+------------------------------------------+------+-------------+--+------------+ 
| Commodity and other derivative financial |  21  |       4,279 |  |      1,723 | 
| instruments                              |      |             |  |            | 
+------------------------------------------+------+-------------+--+------------+ 
| Cash and cash equivalents                |      |          87 |  |         46 | 
+------------------------------------------+------+-------------+--+------------+ 
|                                          |      |       6,756 |  |      3,945 | 
+------------------------------------------+------+-------------+--+------------+ 
| Assets of disposal group classified as   |  9   |         235 |  |          - | 
| held-for-sale                            |      |             |  |            | 
+------------------------------------------+------+-------------+--+------------+ 
|                                          |      |       6,991 |  |      3,945 | 
+------------------------------------------+------+-------------+--+------------+ 
| Total assets                             |      |      16,313 |  |     11,972 | 
+------------------------------------------+------+-------------+--+------------+ 
 
 
 
 
 
 
 
 
GROUP BALANCE SHEET 
as at 31 December 2008 (continued) 
+------------------------------------------+------+-------------+--+------------+ 
|                                          |Note  |          31 |  |         31 | 
|                                          |      |    December |  |   December | 
|                                          |      |        2008 |  |       2007 | 
|                                          |      |        GBPm |  |       GBPm | 
+------------------------------------------+------+-------------+--+------------+ 
| Current liabilities                      |      |             |  |            | 
+------------------------------------------+------+-------------+--+------------+ 
| Borrowings                               |  19  |         567 |  |      1,477 | 
+------------------------------------------+------+-------------+--+------------+ 
| Commodity and other derivative financial |  21  |       4,910 |  |      1,661 | 
| instruments                              |      |             |  |            | 
+------------------------------------------+------+-------------+--+------------+ 
| Trade and other payables                 |  18  |       1,579 |  |      1,431 | 
+------------------------------------------+------+-------------+--+------------+ 
| Current tax liabilities                  |      |         396 |  |        227 | 
+------------------------------------------+------+-------------+--+------------+ 
| Provisions                               |  24  |         330 |  |        157 | 
+------------------------------------------+------+-------------+--+------------+ 
|                                          |      |       7,782 |  |      4,953 | 
+------------------------------------------+------+-------------+--+------------+ 
| Liabilities of disposal group classified |  9   |         134 |  |          - | 
| as held-for-sale                         |      |             |  |            | 
+------------------------------------------+------+-------------+--+------------+ 
|                                          |      |       7,916 |  |      4,953 | 
+------------------------------------------+------+-------------+--+------------+ 
| Non-current liabilities                  |      |             |  |            | 
+------------------------------------------+------+-------------+--+------------+ 
| Borrowings                               |  20  |       3,265 |  |      2,065 | 
+------------------------------------------+------+-------------+--+------------+ 
| Provisions                               |  24  |         101 |  |         84 | 
+------------------------------------------+------+-------------+--+------------+ 
| Deferred tax                             |  25  |         720 |  |        717 | 
+------------------------------------------+------+-------------+--+------------+ 
| Pension liability                        |  23  |           - |  |        138 | 
+------------------------------------------+------+-------------+--+------------+ 
|                                          |      |       4,086 |  |      3,004 | 
+------------------------------------------+------+-------------+--+------------+ 
| Total liabilities                        |      |      12,002 |  |      7,957 | 
+------------------------------------------+------+-------------+--+------------+ 
| Shareholders' equity                     |      |             |  |            | 
+------------------------------------------+------+-------------+--+------------+ 
| Ordinary shares                          |  26  |       1,325 |  |      1,325 | 
+------------------------------------------+------+-------------+--+------------+ 
| Share premium                            |  28  |          97 |  |         97 | 
+------------------------------------------+------+-------------+--+------------+ 
| Retained earnings                        |  29  |       2,302 |  |      2,019 | 
+------------------------------------------+------+-------------+--+------------+ 
| Other reserves                           |  30  |         585 |  |        576 | 
+------------------------------------------+------+-------------+--+------------+ 
| Total shareholder equity                 |      |       4,309 |  |      4,017 | 
+------------------------------------------+------+-------------+--+------------+ 
| Minority interest in equity              |  31  |           2 |  |        (2) | 
+------------------------------------------+------+-------------+--+------------+ 
| Total equity                             |      |       4,311 |  |      4,015 | 
+------------------------------------------+------+-------------+--+------------+ 
| Total liabilities and equity             |      |      16,313 |  |     11,972 | 
+------------------------------------------+------+-------------+--+------------+ 
 
 
Approved by the Board on 28 April 2009 
 
 
Brian Tear 
Director 
 
 
28 April 2009 
The accounting policies and the Notes on pages 35 to 111 form part of these 
financial statements. 
GROUP CASHFLOW STATEMENT 
for the year ended 31 December 2008 
+------------------------------------------+------+------------+---+------------+ 
|                                          | Note | Year ended |   | Year ended | 
|                                          |      |         31 |   |         31 | 
|                                          |      |   December |   |   December | 
|                                          |      |       2008 |   |       2007 | 
|                                          |      |       GBPm |   |       GBPm | 
+------------------------------------------+------+------------+---+------------+ 
| Cash flows from operating activities     |      |            |   |            | 
+------------------------------------------+------+------------+---+------------+ 
| Cash generated from operations           |  32  |      1,143 |   |      1,332 | 
+------------------------------------------+------+------------+---+------------+ 
| Interest received                        |      |         10 |   |          7 | 
+------------------------------------------+------+------------+---+------------+ 
| Interest paid                            |      |      (184) |   |      (197) | 
+------------------------------------------+------+------------+---+------------+ 
| Tax paid                                 |      |       (70) |   |       (46) | 
+------------------------------------------+------+------------+---+------------+ 
| Dividends received from associates       |  12  |         22 |   |         16 | 
+------------------------------------------+------+------------+---+------------+ 
| Net cash from operating activities       |      |        921 |   |      1,112 | 
+------------------------------------------+------+------------+---+------------+ 
| Cash flows from investing activities     |      |            |   |            | 
+------------------------------------------+------+------------+---+------------+ 
| Purchase of property, plant and          |      |    (1,223) |   |      (940) | 
| equipment and intangible assets          |      |            |   |            | 
+------------------------------------------+------+------------+---+------------+ 
| Acquisitions (net of cash acquired)      |  36  |       (50) |   |          - | 
+------------------------------------------+------+------------+---+------------+ 
| Purchase of other financial assets       |      |       (41) |   |       (40) | 
+------------------------------------------+------+------------+---+------------+ 
| Finance lease principal receipts         |      |         23 |   |         10 | 
+------------------------------------------+------+------------+---+------------+ 
| Receipts from other financial assets     |      |         57 |   |          - | 
+------------------------------------------+------+------------+---+------------+ 
| Proceeds from sale of property, plant    |      |         83 |   |          6 | 
| and equipment                            |      |            |   |            | 
+------------------------------------------+------+------------+---+------------+ 
| Disposals                                |      |          6 |   |          - | 
+------------------------------------------+------+------------+---+------------+ 
| Proceeds from sale of investments        |  5   |          3 |   |          - | 
+------------------------------------------+------+------------+---+------------+ 
| Net cash used in investing activities    |      |    (1,142) |   |      (964) | 
+------------------------------------------+------+------------+---+------------+ 
| Cash flows from financing activities     |      |            |   |            | 
+------------------------------------------+------+------------+---+------------+ 
| Proceeds from issuance of new shares     |      |          - |   |      1,000 | 
+------------------------------------------+------+------------+---+------------+ 
| Proceeds from issue of new borrowings    |      |      2,311 |   |      2,332 | 
+------------------------------------------+------+------------+---+------------+ 
| Repayment of borrowings                  |      |    (2,029) |   |    (3,208) | 
+------------------------------------------+------+------------+---+------------+ 
| Finance lease principal payments         |      |       (18) |   |       (18) | 
+------------------------------------------+------+------------+---+------------+ 
| Dividends paid to minority interests     |  31  |        (2) |   |        (2) | 
+------------------------------------------+------+------------+---+------------+ 
| Dividends paid to equity shareholder     |  29  |          - |   |      (240) | 
+------------------------------------------+------+------------+---+------------+ 
| Net cash from financing activities       |      |        262 |   |      (136) | 
+------------------------------------------+------+------------+---+------------+ 
|                                          |      |            |   |            | 
+------------------------------------------+------+------------+---+------------+ 
| Net increase in cash and cash            |      |         41 |   |         12 | 
| equivalents                              |      |            |   |            | 
+------------------------------------------+------+------------+---+------------+ 
| Cash and cash equivalents at 1 January   |      |         46 |   |         34 | 
+------------------------------------------+------+------------+---+------------+ 
| Cash and cash equivalents at 31 December |      |         87 |   |         46 | 
|                                          |      |            |   |            | 
+------------------------------------------+------+------------+---+------------+ 
 
 
The accounting policies and the Notes on pages 35 to 111 form part of these 
financial statements. 
 
 
 
 
 
 
NOTES TO THE FINANCIAL STATEMENTS 
1)    Basis of preparation and accounting policies 
The financial information contained in these condensed Financial Statements does 
not constitute the Company's statutory accounts within the meaning of the 
Companies Act 1985. Statutory accounts for the years ended 31 December 2008 and 
31 December 2007 have been reported on, without qualification or drawing 
attention to any matters by way of emphasis, by the Company's auditors and 
without reference to S237 (2) or (3) of the Companies Act 1985. Whilst the 
financial information included in this Annual Report and Accounts announcement 
has been computed in accordance with International Financial Reporting Standards 
('IFRS') this announcement, due to its condensed nature, does not itself contain 
sufficient information to comply with IFRS. 
Statutory accounts for the year ended 31 December 2007 have been delivered to 
the Registrar of Companies. The statutory accounts for the year ended 31 
December 2008, prepared under IFRS for the Group and UK Accounting Standards for 
the parent company, will be delivered to the Registrar in due course. 
2)Accounting policies 
The accounting policies applied in these condensed Financial Statements for the 
year ended 31 December 2008 are consistent with those of the Annual Report and 
Accounts for the year ended 31 December 2007, as described in those Annual 
Report and Accounts, with the exception of standards, amendments and 
interpretations effective in 2008 and changes in segmental reporting, described 
below. 
a)    Standards, amendments and interpretations effective in 2008 
The International Accounting Standards Board ("IASB") and the IFRIC have issued 
standards and interpretations that have been transferred by the EU into European 
law and whose application is mandatory in the reporting period from 1 January 
2008 through 31 December 2008 or which are being voluntarily applied by E.ON: 
+----------------+-------------------------------------+------------------------+ 
| International Financial Reporting Standards          | IAS/IFRS effective     | 
| (IFRS/IAS)                                           | date for periods       | 
| International Financial Reporting Interpretations    | beginning or starting  | 
| Committee (IFRIC)                                    | after                  | 
+------------------------------------------------------+------------------------+ 
| IAS 39         | Reclassification of Financial       | 1 July 2008            | 
| (amended) and  | Assets                              |                        | 
| IFRS 7         |                                     |                        | 
| (amended)      |                                     |                        | 
+----------------+-------------------------------------+------------------------+ 
| IFRIC 11       | IFRS 2 - Group and treasury share   | 1 March 2007           | 
|                | transactions                        |                        | 
+----------------+-------------------------------------+------------------------+ 
| IFRIC 13       | Customer loyalty programmes         | 1 July 2008            | 
+----------------+-------------------------------------+------------------------+ 
| IFRIC 14       | IAS 19 - The limit on a defined     | 1 January 2008         | 
|                | pension benefit asset, minimum      |                        | 
|                | funding requirements and their      |                        | 
|                | interaction bind point              |                        | 
+----------------+-------------------------------------+------------------------+ 
 
 
The adoption of these Interpretations has not led to any changes in the Group's 
accounting policies. 
b)    Change in segmental reporting 
For management purposes, the Group is currently organised into six operating 
divisions - Generation, E.ON Climate and Renewables (EC&R), E.ON Energy Trading, 
Central Networks, Retail and Energy Services. This represents a change compared 
to 2007 since the Group's power generation, renewables and energy trading 
activity, previously reported as the Energy Wholesale segment, were separated 
from 1 January 2008 to form the Generation, E.ON Climate & Renewables and E.ON 
Energy Trading businesses. The comparatives for 2007 have been restated. 
Management has chosen these divisions as the basis on which the Group reports 
its primary segment information, although the EC&R and Energy Services business 
units do not meet the thresholds requiring disclosure as a segment under IAS 14 
'Segment Reporting'. 
Under IFRS, segments or material business units that have been sold or are held 
for sale must be reported as discontinued operations. In 2008, this includes 
E.ON Energy Trading, which is held for sale and was legally disposed of to a 
fellow group undertaking on 1 January 2009 (2007: no discontinued operations). 
The financial statements for 2008 have been adjusted for all components of 
discontinued operations (see Note 9). The comparative figures for 2007 have been 
restated. 
  3)    Segmental reporting 
 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Year          |Generation  |  EC&R  | Central  |Retail  |  Energy  |  Central/   |Eliminations  | Group  | 
| ended         |            |        |Networks  |        |Services  |Unallocated  |              |        | 
| 31            |            |        |          |        |          |             |              |        | 
| December      |            |        |          |        |          |             |              |        | 
| 2008          |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
|               |       GBPm |   GBPm |     GBPm |   GBPm |     GBPm |        GBPm |         GBPm |   GBPm | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
|               |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Revenue       |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| External      |        150 |     56 |      488 |  6,524 |      147 |           - |            - |  7,365 | 
| revenue       |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Inter-segment |          - |      - |      138 |     23 |      339 |           - |        (500) |      - | 
| revenue       |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Inter-segment |      1,505 |    169 |        - |      - |        - |           - |            - |  1,674 | 
| revenue -     |            |        |          |        |          |             |              |        | 
| discontinued  |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Total         |      1,655 |    225 |      626 |  6,547 |      486 |           - |        (500) |  9,039 | 
| revenue       |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
|               |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Result        |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Segment       |        699 |     59 |      361 |   (47) |    (108) |        (66) |              |    898 | 
| result        |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Finance income             |        |          |        |          |             |              |     23 | 
+----------------------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Finance       |            |        |          |        |          |             |              |  (191) | 
| costs         |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Share         |          - |      2 |        - |      - |        - |           8 |              |     10 | 
| of            |            |        |          |        |          |             |              |        | 
| results       |            |        |          |        |          |             |              |        | 
| of            |            |        |          |        |          |             |              |        | 
| associates    |            |        |          |        |          |             |              |        | 
| after tax     |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Profit before              |        |          |        |          |             |              |    740 | 
| tax                        |        |          |        |          |             |              |        | 
+----------------------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Tax           |            |        |          |        |          |             |              |  (283) | 
| charge        |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Profit for the year from continuing activities                                   |              |    457 | 
+----------------------------------------------------------------------------------+--------------+--------+ 
|               |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Total         |     12,396 |    689 |    3,645 |  5,251 |      729 |     (6,632) |              | 16,078 | 
| assets        |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Total         |      9,516 |    586 |    1,133 |  5,495 |      861 |     (5,723) |              | 11,868 | 
| liabilities*  |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Other segment              |        |          |        |          |             |              |        | 
| items                      |        |          |        |          |             |              |        | 
+----------------------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Capital       |        542 |    189 |      347 |      1 |       54 |           9 |              |  1,142 | 
| expenditure   |            |        |          |        |          |             |              |        | 
| (including    |            |        |          |        |          |             |              |        | 
| acquisitions) |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Intangible    |          7 |     16 |        - |     13 |       30 |          11 |              |     77 | 
| expenditure   |            |        |          |        |          |             |              |        | 
| (including    |            |        |          |        |          |             |              |        | 
| acquisitions) |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Depreciation  |        147 |     11 |      100 |      - |       13 |           3 |              |    274 | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Amortisation  |          4 |      - |        - |     58 |        1 |           - |              |     63 | 
| of            |            |        |          |        |          |             |              |        | 
| intangible    |            |        |          |        |          |             |              |        | 
| assets        |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Goodwill      |          6 |     32 |      308 |  1,237 |       22 |         872 |              |  2,477 | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
*Interest and tax liabilities are included within central/unallocated. 
See Note 4 for impairments by segment 
 
 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Year          |Generation  |  EC&R  | Central  |Retail  | Energy   |  Central/   |Eliminations  | Group  | 
| ended         |            |        |Networks  |        | Services |Unallocated  |              |        | 
| 31            |            |        |          |        |          |             |              |        | 
| December      |            |        |          |        |          |             |              |        | 
| 2007          |            |        |          |        |          |             |              |        | 
| (restated)    |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
|               |       GBPm |   GBPm |     GBPm |   GBPm |     GBPm |        GBPm |         GBPm |   GBPm | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
|               |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Revenue       |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| External      |         93 |     38 |      464 |  5,703 |       88 |           - |            - |  6,386 | 
| revenue       |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Inter-segment |          - |     23 |      144 |     26 |      323 |           - |        (516) |      - | 
| revenue       |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Inter-segment |         72 |    148 |        - |      - |        - |           - |            - |    220 | 
| revenue -     |            |        |          |        |          |             |              |        | 
| discontinued  |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Total         |        165 |    209 |      608 |  5,729 |      411 |           - |        (516) |  6,606 | 
| revenue       |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
|               |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Result        |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Segment       |      (636) |      1 |      349 |   (17) |      (2) |        (66) |              |  (371) | 
| result        |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Finance income             |        |          |        |          |             |              |     37 | 
+----------------------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Finance       |            |        |          |        |          |             |              |  (264) | 
| costs         |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Share         |          2 |      - |        - |      - |        - |           9 |              |     11 | 
| of            |            |        |          |        |          |             |              |        | 
| results       |            |        |          |        |          |             |              |        | 
| of            |            |        |          |        |          |             |              |        | 
| associates    |            |        |          |        |          |             |              |        | 
| after tax     |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Loss before tax            |        |          |        |          |             |              |  (587) | 
+----------------------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Tax           |            |        |          |        |          |             |              |    135 | 
| credit        |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Loss for the year from continuing activities                                     |              |  (452) | 
+----------------------------------------------------------------------------------+--------------+--------+ 
|               |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Total         |     14,828 |    571 |    3,397 |  4,843 |      308 |    (11,975) |              | 11,972 | 
| assets        |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Total         |     11,344 |    457 |    1,155 |  1,306 |      286 |     (6,591) |              |  7,957 | 
| liabilities*  |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Other segment              |        |          |        |          |             |              |        | 
| items                      |        |          |        |          |             |              |        | 
+----------------------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Capital       |         75 |    379 |      331 |      - |       59 |          12 |              |    856 | 
| expenditure   |            |        |          |        |          |             |              |        | 
| (including    |            |        |          |        |          |             |              |        | 
| acquisitions) |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Intangible    |         45 |     55 |        - |     13 |        - |           - |              |    113 | 
| expenditure   |            |        |          |        |          |             |              |        | 
| (including    |            |        |          |        |          |             |              |        | 
| acquisitions) |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Depreciation  |        128 |      9 |       90 |      1 |        6 |           3 |              |    237 | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Amortisation  |          2 |      - |        - |     60 |        - |           - |              |     62 | 
| of            |            |        |          |        |          |             |              |        | 
| intangible    |            |        |          |        |          |             |              |        | 
| assets        |            |        |          |        |          |             |              |        | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
| Goodwill      |         36 |     32 |      308 |  1,237 |       13 |         869 |              |  2,495 | 
+---------------+------------+--------+----------+--------+----------+-------------+--------------+--------+ 
*Interest and tax liabilities are included within central/unallocated. 
No impairments were recorded during 2007. 
 
 
 
 
Secondary format - geographical segments 
All material revenue, profits, liabilities, assets and other segment items arise 
within the UK. No secondary segments analysed by geographic destination are 
therefore reported. 
Reportable segments' assets are reconciled to total assets as follows: 
+------------------------------------------------+--------------+--+------------+ 
|                                                |           At |  |         At | 
|                                                |  31 December |  |         31 | 
|                                                |         2008 |  |   December | 
|                                                |         GBPm |  |       2007 | 
|                                                |              |  |       GBPm | 
+------------------------------------------------+--------------+--+------------+ 
| Segment assets for reportable segments         | 16,078       |  | 11,972     | 
+------------------------------------------------+--------------+--+------------+ 
| Assets of disposal group classified as         | 235          |  | -          | 
| held-for-sale                                  |              |  |            | 
+------------------------------------------------+--------------+--+------------+ 
| Total assets per the balance sheet             | 16,313       |  | 11,972     | 
+------------------------------------------------+--------------+--+------------+ 
 
 
Reportable segments' liabilities are reconciled to total liabilities as follows: 
+------------------------------------------------+--------------+--+------------+ 
|                                                |           At |  | At         | 
|                                                |  31 December |  | 31         | 
|                                                |         2008 |  | December   | 
|                                                |         GBPm |  | 2007       | 
|                                                |              |  | GBPm       | 
+------------------------------------------------+--------------+--+------------+ 
| Segment liabilities for reportable segments    | 11,868       |  | 7,957      | 
+------------------------------------------------+--------------+--+------------+ 
| Liabilities of disposal group classified as    | 134          |  | -          | 
| held-for-sale                                  |              |  |            | 
+------------------------------------------------+--------------+--+------------+ 
| Total liabilities per the balance sheet        | 12,002       |  | 7,957      | 
+------------------------------------------------+--------------+--+------------+ 
 
 
 
 
4)    Impairment and restructuring costs` 
Impairment and restructuring costs comprise: 
+-----------------------------------------------+--------------+--+------------+ 
|                                               |   Year ended |  | Year ended | 
|                                               |  31 December |  | 31         | 
|                                               |         2008 |  | December   | 
|                                               |         GBPm |  | 2007       | 
|                                               |              |  | GBPm       | 
+-----------------------------------------------+--------------+--+------------+ 
| Impairment and restructuring costs before     |           95 |  | -          | 
| taxation                                      |              |  |            | 
+-----------------------------------------------+--------------+--+------------+ 
| Tax on impairment and restructuring costs     | (27)         |  | -          | 
+-----------------------------------------------+--------------+--+------------+ 
| Impairment and restructuring costs after      | 68           |  | -          | 
| taxation                                      |              |  |            | 
+-----------------------------------------------+--------------+--+------------+ 
 
 
During 2008, CHP property, plant and equipment was impaired by GBP4 million (see 
Note 11) and a further onerous contract of GBP32 million was recognised with 
respect to the CHP contracts. The impairment and onerous contract arose as a 
result of rising wholesale gas prices resulting in increased costs on CHP 
contracts that receive a relatively fixed price per unit of output. 
Consequently, in some cases the current estimate of unavoidable costs of meeting 
the obligations under the contacts exceeds the economic benefits expected to be 
received under it. CHP plants are within the Generation segment. Goodwill 
relating to the Energy Services segment was impaired by GBP13 million (see Note 
10) and restructuring and onerous contract costs of GBP34 million were 
recognised following a strategic review of the business activities. 
Restructuring costs of GBP12 million relating to the Retail business were also 
recorded. A tax credit of GBP27 million arose as a result of these charges. The 
above charges relate solely to continuing operations. 
 
 
5)    Profits less losses on disposals of investments/businesses 
Profits less losses on disposal of investments/businesses (including provisions) 
comprise: 
+-----------------------------------------------+-------------+--+-------------+ 
|                                               |  Year ended |  | Year ended  | 
|                                               | 31 December |  | 31 December | 
|                                               |        2008 |  | 2007        | 
|                                               |        GBPm |  | GBPm        | 
+-----------------------------------------------+-------------+--+-------------+ 
| Profits less losses on disposal of            |           5 |  | -           | 
| investments/businesses (including provisions) |             |  |             | 
| before taxation                               |             |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
| Tax on profits less losses on disposal of     |           - |  | -           | 
| investments/ businesses (including            |             |  |             | 
| provisions)                                   |             |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
| Profits less losses on disposal of            |           5 |  | -           | 
| investments/ businesses (including            |             |  |             | 
| provisions) after taxation                    |             |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
| Gain on disposals recognised in the income    |           3 |  | -           | 
| statements                                    |             |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
| Gain on partial disposal recognised in equity |           2 |  | -           | 
+-----------------------------------------------+-------------+--+-------------+ 
| Total gains on disposal of investments        |           5 |  | -           | 
+-----------------------------------------------+-------------+--+-------------+ 
 
 
During the year, E.ON UK disposed of 100 percent of its investment in Holford 
Gas Storage Limited. Proceeds from the disposal and net assets at the date of 
disposal were nil. In addition, the Group disposed of 100 percent of the trade 
and assets of E.ON Engineering for GBP3 million. The net assets disposed of were 
GBP0.4 million, resulting in profit of GBP2.6 million. Also, E.ON UK disposed of 
a 40 percent share of E.ON Masdar London Array Limited (formerly E.ON Climate & 
Renewables UK London Array Limited) for total proceeds of GBP5 million. Net 
assets disposed totalled GBP3 million, resulting in a profit of GBP2 million. 
 
 
 
 
6)Finance income and costs 
+------------------------------------------------+------------+--+------------+ 
|                                                | Year ended |  | Year ended | 
|                                                | 31         |  | 31         | 
|                                                | December   |  | December   | 
|                                                | 2008       |  | 2007       | 
|                                                | GBPm       |  | GBPm       | 
+------------------------------------------------+------------+--+------------+ 
| Interest receivable                            |            |  |            | 
+------------------------------------------------+------------+--+------------+ 
| From fellow E.ON group undertakings            | 5          |  | -          | 
+------------------------------------------------+------------+--+------------+ 
| Net pensions interest (Note 23)                | -          |  | 32         | 
+------------------------------------------------+------------+--+------------+ 
| Other                                          | 18         |  | 5          | 
+------------------------------------------------+------------+--+------------+ 
| Finance income                                 | 23         |  | 37         | 
+------------------------------------------------+------------+--+------------+ 
| Interest payable                               |            |  |            | 
+------------------------------------------------+------------+--+------------+ 
| Loans from fellow E.ON group undertakings      | (195)      |  | (254)      | 
+------------------------------------------------+------------+--+------------+ 
| Net pensions interest (Note 23)                | (3)        |  | -          | 
+------------------------------------------------+------------+--+------------+ 
| Other loans                                    | (13)       |  | (16)       | 
+------------------------------------------------+------------+--+------------+ 
| Unwinding of discount in provisions            | (3)        |  | (2)        | 
+------------------------------------------------+------------+--+------------+ 
| Capitalised interest                           | 23         |  | 8          | 
+------------------------------------------------+------------+--+------------+ 
| Finance costs                                  | (191)      |  | (264)      | 
+------------------------------------------------+------------+--+------------+ 
| Net finance costs                              | (168)      |  | (227)      | 
+------------------------------------------------+------------+--+------------+ 
 
 
Finance income and costs all relate to continuing operations. 
 
 
7)    Taxation 
+--------------------------------------------------+-------------+--+------------+ 
|                                                  |  Year ended |  | Year ended | 
|                                                  | 31 December |  |         31 | 
|                                                  |        2008 |  |   December | 
|                                                  |        GBPm |  |       2007 | 
|                                                  |             |  |       GBPm | 
+--------------------------------------------------+-------------+--+------------+ 
| Current tax:                                     |             |  |            | 
+--------------------------------------------------+-------------+--+------------+ 
| United Kingdom Corporation tax at 28.5% (2007:   |         241 |  |         87 | 
| 30%)                                             |             |  |            | 
+--------------------------------------------------+-------------+--+------------+ 
| Overseas tax                                     |          19 |  |          - | 
+--------------------------------------------------+-------------+--+------------+ 
| Over provision in prior year                     |        (21) |  |       (23) | 
+--------------------------------------------------+-------------+--+------------+ 
| Total current tax charge                         |         239 |  |         64 | 
+--------------------------------------------------+-------------+--+------------+ 
| Less current tax on discontinued operations      |       (108) |  |      (300) | 
+--------------------------------------------------+-------------+--+------------+ 
| Current tax on continuing operations             |         131 |  |      (236) | 
+--------------------------------------------------+-------------+--+------------+ 
| Deferred tax:                                    |             |  |            | 
+--------------------------------------------------+-------------+--+------------+ 
| Origination and reversal of temporary timing     |       (211) |  |        214 | 
| differences                                      |             |  |            | 
+--------------------------------------------------+-------------+--+------------+ 
| Impact of change in rate                         |           3 |  |       (51) | 
+--------------------------------------------------+-------------+--+------------+ 
| Under provision in prior year                    |          53 |  |         36 | 
+--------------------------------------------------+-------------+--+------------+ 
| Total deferred tax (credit)/charge (Note 25)     |       (155) |  |        199 | 
+--------------------------------------------------+-------------+--+------------+ 
| Less deferred tax on discontinued operations     |         307 |  |       (98) | 
+--------------------------------------------------+-------------+--+------------+ 
| Deferred tax on continuing operations            |         152 |  |        101 | 
+--------------------------------------------------+-------------+--+------------+ 
| Tax charge/(credit) on profit/(loss) on          |         283 |  |      (135) | 
| continuing activities                            |             |  |            | 
+--------------------------------------------------+-------------+--+------------+ 
 
 
8)    Discontinued operations 
The relevant assets and liabilities relating to the E.ON Energy Trading segment 
have been presented as held-for-sale following the approval of the Group's 
management to sell the E.ON Energy Trading business to a fellow group 
undertaking. The completion date for the transaction was 1 January 2009. 
+-----------------------------------------------+-------------+--+-------------+ 
|                                               |          At |  |             | 
|                                               | 31 December |  |             | 
|                                               |        2008 |  |             | 
|                                               |        GBPm |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
| Operating cashflows                           | 5           |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
| Investing cashflows                           | (5)         |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
| Total cashflows                               | -           |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
 
 
The segment did not operate its own individual bank account and therefore all 
cash flows occur through operating intercompany. 
 
 
a)    Assets of disposal group classified as held-for-sale 
+-----------------------------------------------+-------------+--+-------------+ 
|                                               |          At |  |             | 
|                                               | 31 December |  |             | 
|                                               |        2008 |  |             | 
|                                               |        GBPm |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
| Intangible assets                             | 80          |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
| Inventories                                   | 127         |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
| Commodity and other derivative financial      | 28          |  |             | 
| receivables                                   |             |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
| Total                                         | 235         |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
 
 
b)    Liabilities of disposal group classified as held-for-sale 
+-----------------------------------------------+-------------+--+-------------+ 
|                                               |          At |  |             | 
|                                               | 31 December |  |             | 
|                                               |        2008 |  |             | 
|                                               |        GBPm |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
| Commodity and other derivative financial      | 38          |  |             | 
| payables                                      |             |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
| Trade and other payables                      | 49          |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
| Provisions                                    | 47          |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
| Total                                         | 134         |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
 
 
c)    Analysis of the result of discontinued operations is as follows: 
 
 
+-----------------------------------------------+-------------+--+-------------+ 
|                                               | Year ended  |  | Year ended  | 
|                                               | 31 December |  | 31 December | 
|                                               | 2008        |  | 2007        | 
|                                               | GBPm        |  | GBPm        | 
+-----------------------------------------------+-------------+--+-------------+ 
| Revenue                                       | 2,316       |  | 2,003       | 
+-----------------------------------------------+-------------+--+-------------+ 
| Net expenses                                  | (3,080)     |  | (409)       | 
+-----------------------------------------------+-------------+--+-------------+ 
| (Loss)/profit before tax of discontinued      | (764)       |  | 1,594       | 
| operations                                    |             |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
| United Kingdom Corporation tax                | 180         |  | (398)       | 
+-----------------------------------------------+-------------+--+-------------+ 
| Overseas tax                                  | 19          |  | -           | 
+-----------------------------------------------+-------------+--+-------------+ 
| (Loss)/profit for the year from discontinued  | (565)       |  | 1,196       | 
| operations                                    |             |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
9)    Related party transactions 
Information about material related party transactions is set out below: 
Subsidiary companies 
Details of investments in principal subsidiary companies are disclosed in Note 
13. 
Parent company and fellow subsidiaries 
Transactions and balances with the parent company and fellow subsidiaries are 
summarised below. Purchases and sales relate predominantly to purchases and 
sales of gas. 
 
 
+-----------------------------------------------+-------------+--+-------------+ 
| Income statements items                       | Year ended  |  | Year ended  | 
|                                               | 31 December |  | 31 December | 
|                                               | 2008        |  | 2007        | 
|                                               | GBPm        |  | GBPm        | 
+-----------------------------------------------+-------------+--+-------------+ 
| Expenses incurred from parent undertaking and | 563         |  | 789         | 
| fellow subsidiaries                           |             |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
| Income received from parent undertaking and   | 193         |  | 84          | 
| fellow subsidiaries                           |             |  |             | 
+-----------------------------------------------+-------------+--+-------------+ 
Balance sheet items with parent undertakings and fellow subsidiaries are 
disclosed in Notes 17, 18, 19 and 20. Income statement interest payable and 
receivable are disclosed in Note 7. 
Associates 
Transactions and balances with associates are summarised below. Sales relate 
largely to management fees. Purchases relate largely to electricity generated by 
associates. 
 
 
+-----------------------------------------------+-------------+--+-------------+ 
| Income statements items                       | Year ended  |  | Year ended  | 
|                                               | 31 December |  | 31 December | 
|                                               | 2008        |  | 2007        | 
|                                               | GBPm        |  | GBPm        | 
+-----------------------------------------------+-------------+--+-------------+ 
| Purchases from associates                     | 4           |  | 102         | 
+-----------------------------------------------+-------------+--+-------------+ 
| Sales to associates                           | -           |  | 6           | 
+-----------------------------------------------+-------------+--+-------------+ 
 
 
+-----------------------------------------------+-------------+--+-------------+ 
| Balance sheet items                           | At          |  | At          | 
|                                               | 31 December |  | 31 December | 
|                                               | 2008        |  | 2007        | 
|                                               | GBPm        |  | GBPm        | 
+-----------------------------------------------+-------------+--+-------------+ 
| Receivables from associates                   |      -      |  | 3           | 
+-----------------------------------------------+-------------+--+-------------+ 
| Payables to associates                        |      -      |  | 15          | 
+-----------------------------------------------+-------------+--+-------------+ 
Pension funds 
Information relating to the pension fund arrangements is disclosed in Note 23. 
Directors and key management 
Details of directors' and key management remuneration are disclosed in Note 6. 
10)    Acquisitions 
On 15 January 2008, the Group purchased the entire issued share capital of CHN 
Group Limited for cash consideration of GBP23 million. The CHN Group wholly owns 
five trading subsidiaries, CHN Contractors Limited, CHN Electrical Services 
Limited, CHN Gas Service and Maintenance Limited, CHN Special Projects Limited 
and Industry Developments Limited. These companies are all located within the 
West Midlands. Their primary activities are to provide installation, service, 
maintenance and repair of plumbing, heating and electrical systems, primarily 
through business to business contracts with local authorities and housing 
associations. 
On 31 March 2008, the Group purchased the entire issued share capital of Empower 
Training Services Limited for cash consideration of GBP3 million. The primary 
activity of Empower Training Services Limited is to provide training for the 
utilities industries. 
On 18 July 2008, the Group increased its stake in the London Array 
unincorporated joint venture by acquiring half of Shell's project interest for 
GBP12 million after which the Group had a project interest of 50 percent. The 
London Array project is a consortium to develop an offshore wind farm in the 
outer Thames Estuary. Included in the consideration above is GBP8 million of 
consideration which is contingent on supply of the turbines. The Group's 
effective project interest was reduced to 30 percent following the subsequent 
disposal of a 40 percent share of E.ON Masdar London Array Limited (formerly 
E.ON Climate & Renewables UK London Array Limited). 
On 8 August 2008, the Group acquired 60 percent of the share capital of Lighting 
for Staffordshire Holdings Limited and the trade and assets of its service 
provider for cash consideration of GBP11 million. Lighting for Staffordshire 
Holdings Limited owns the trading subsidiary Lighting for Staffordshire Limited 
which is involved in the maintenance of street lighting and illuminated signs in 
Staffordshire. 
On 31 October 2008, the Group purchased the entire issued share capital of Thor 
Holdings Limited for GBP10 million. Thor Holdings Limited owns Thor Cogeneration 
Ltd which is involved in a project to build a cogeneration plant in the Teesside 
area. 
 
 
The acquisitions described above are immaterial to the Group and therefore the 
information below is shown in aggregate. 
+--------------------------------------------+-----+-------------+--+-------------+ 
|                                            |     |  Book value |  |  Fair value | 
|                                            |     |        GBPm |  |        GBPm | 
+--------------------------------------------+-----+-------------+--+-------------+ 
|                                            |     |             |  |             | 
+--------------------------------------------+-----+-------------+--+-------------+ 
| Property, plant and equipment              |     |           2 |  |           2 | 
+--------------------------------------------+-----+-------------+--+-------------+ 
| Intangibles                                |     |           - |  |          26 | 
+--------------------------------------------+-----+-------------+--+-------------+ 
| Cash and cash equivalents                  |     |           1 |  |           1 | 
+--------------------------------------------+-----+-------------+--+-------------+ 
| Other current assets                       |     |          24 |  |          24 | 
+--------------------------------------------+-----+-------------+--+-------------+ 
| Other current liabilities                  |     |        (10) |  |        (12) | 
+--------------------------------------------+-----+-------------+--+-------------+ 
| Deferred tax liability                     |     |           - |  |         (3) | 
+--------------------------------------------+-----+-------------+--+-------------+ 
| Non-current liabilities                    |     |         (2) |  |         (3) | 
+--------------------------------------------+-----+-------------+--+-------------+ 
|                                            |     |          15 |  |             | 
+--------------------------------------------+-----+-------------+--+-------------+ 
| Fair value of net assets acquired          |     |             |  |          35 | 
+--------------------------------------------+-----+-------------+--+-------------+ 
| Goodwill arising on acquisition            |     |             |  |          25 | 
+--------------------------------------------+-----+-------------+--+-------------+ 
| Total consideration                        |     |             |  |          60 | 
+--------------------------------------------+-----+-------------+--+-------------+ 
|                                            |     |             |  |             | 
+--------------------------------------------+-----+-------------+--+-------------+ 
| Satisfied by:                              |     |             |  |             | 
+--------------------------------------------+-----+-------------+--+-------------+ 
| Cash paid                                  |     |             |  |          51 | 
+--------------------------------------------+-----+-------------+--+-------------+ 
| Contingent consideration - cash            |     |             |  |           8 | 
+--------------------------------------------+-----+-------------+--+-------------+ 
| Directly attributable costs                |     |             |  |           1 | 
+--------------------------------------------+-----+-------------+--+-------------+ 
|                                            |     |             |  |          60 | 
+--------------------------------------------+-----+-------------+--+-------------+ 
 
 
The goodwill arising on these acquisitions is attributable to the anticipated 
profitability of their activities in the new markets and the future operating 
synergies from the combination. 
In total, these acquisitions contributed GBP53 million to revenue and GBP6 
million to profit before tax for the period between the dates of acquisition and 
the balance sheet date. 
If these acquisitions had been completed on the first day of the financial year, 
group revenues for the period would have been GBP69 million and group profit 
attributable to equity holders of the parent would have been GBP7 million. 
 
 
11)    Events after the balance sheet date 
On 1 January 2009, the Group sold its E.ON Energy Trading business to EET AG as 
part of the overall strategy to combine all of the European energy trading 
operations. In accordance with IFRS 5, the E.ON Energy Trading business has been 
disclosed as a discontinued operation in these financial statements. The results 
of the E.ON Energy Trading business are included in discontinued operations in 
the Group income statement and the relevant assets and liabilities are 
classified as held-for-sale in the Group balance sheet as described in Note 9. 
On 14 January 2009, the Group announced its intention to create a joint venture 
with RWE npower with plans to build new nuclear power stations in the UK. The 
Group and and RWE npower will each have a 50 percent stake in the joint venture, 
which will focus long-term on seeking to secure sites being sold by the Nuclear 
Decommissioning Authority and taking them through the consents process to 
building and operating new nuclear power stations. 
 
 
30 April 2009 
For further enquiries please contact: 
Jonathan Smith, E.ON UK plc  [phone] 
Emily Highmore, E.ON UK plc  [phone] 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
 FR ILFIFSDIIVIA