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a) Legal proceedings against the Company
The Company is aware of the following matters, which involve or may involve legal proceedings against the Group:
- Claims and potential claims by or on behalf of current and former employees, including former employees of the Central Electricity Generating Board (CEGB),
and contractors in respect of industrial illness and injury.
Innogy has agreed to indemnify International Power on an after-tax basis to the extent of 50% of any liability that the Company may incur whether directly
or indirectly as a consequence of those proceedings to the extent such liability is not insured by Electra Insurance Limited.
- In 1994 separate complaints were made by the National Association of Licensed Opencast Operators (NALOO) and the South Wales Small Miners
Association (SWSMA) to the European Commission against the Company, PowerGen plc, British Coal Corporation and HM Government. The complaint
alleges violations of EU Competition law arising out of the coal purchasing arrangements entered into by the CEGB prior to 1 April 1990 and requests the
Commission to find that the CEGB's practices violated EU law. NALOO and SWSMA allege that such a finding would be grounds for a claim for damages in
the English courts by members of NALOO. An appeal against the Commission findings was brought by a faction of SWSMA, which was initially ruled out of
time, but an appeal was reinstated. Progress with this claim will be influenced by the outcome of the NALOO appeal. The European Court has ruled that the
Commission is under an obligation to investigate the complaint by NALOO. The Company, PowerGen plc, British Coal Corporation and the Commission have
appealed against the ruling to the European Court of Justice which delivered a judgement on 2 October 2003 for the main part dismissing the appeal. The
ruling confirmed that the Commission has the power to investigate and the matter is now with the Commission for consideration. It is not practicable to
estimate legal costs or possible damages at this stage. The Commission ruled on the complaint in 1998 and did not make any findings against the Company.
Innogy has agreed to indemnify International Power on an after-tax basis to the extent of 50% of any liability that the Company may incur whether directly
or indirectly as a consequence of those proceedings.
b) Taxation
The Company is aware of a number of issues which are, or may be, the subject of disputes with the tax authorities in the territories where the Group has
operations. The principal exposures where significant amounts of tax could arise are in respect of potential exposures relating to the UK tax losses generated
from the acquisition of Australian subsidiaries and related financing arrangements. Discussions are continuing with the UK Inland Revenue to reach agreement
on these issues.
The Directors are of the opinion, having regard to the professional advice received, that adequate provision has been made for the settlement of any taxation
liabilities that might arise.
c) Bonds and guarantees
Various growth and expansion projects are supported by bonds, letters of credit and guarantees issued by the Company totalling £424 million. £11 million of
this is in respect of the loan facilities of its Elcogas investment which was provided for in the year ended 31 December 2001. In February 2004 , this guarantee
and the Company’s loan obligations have been cancelled following the disposal of the investment.
Energy trading activities relating to merchant plant are supported by letters of credit and guarantees totalling £110 million. |
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