<PAGE>

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                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                               ----------------
                                   FORM 20-F

  [_]REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
                               EXCHANGE ACT OF 1934

                                       OR

[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                                      OF 1934
                    For the fiscal year ended March 31, 1999

                                       OR

[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                    ACT OF 1934
                   For the transition period from     to

                               ----------------

                               SCOTTISH POWER plc
             (Exact name of Registrant as specified in its charter)

                                    SCOTLAND
                (Jurisdiction of incorporation or organization)

                   1 Atlantic Quay, Glasgow G2 8SP, Scotland
                    (Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                                                     Name of each exchange
                 Title of each class                  on which registered
                 -------------------                ------------------------
   <S>                                              <C>
   Ordinary shares of 50p each ("ordinary shares")  New York Stock Exchange*

         American Depositary Shares ("ADSs")        New York Stock Exchange
     each of which represents 4 ordinary shares
</TABLE>
--------
*  Not for trading but only in connection with the registration of ADSs
   pursuant to the requirements of the Securities and Exchange Commission.

                               ----------------
   Securities registered or to be registered pursuant to Section 12(g) of the
                                   Act: None

 Securities for which there is a reporting obligation pursuant to Section 15(d)
                                of the Act: None

  Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.

<TABLE>
   <S>                             <C>
   Ordinary shares of 50p each.... 1,198,678,222 shares (as of March 31, 1999)
   Special rights non-voting
    redeemable preference share of (Pounds)1..... 1 share (as of March 31, 1999)
</TABLE>

  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                Yes [X]  No [_]

  Indicate by check mark which financial statement item the registrant has
elected to follow.

                           Item 17 [_]  Item 18 [X]

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>


      Table of Contents

<TABLE>
<CAPTION>
                                                                         Page
      -----------------------------------------------------------------------
       <C>           <S>                                                 <C>
       Introduction                                                         1
      -----------------------------------------------------------------------
       Exchange Rates                                                       1
      -----------------------------------------------------------------------
       Glossary                                                             2
      -----------------------------------------------------------------------
       Part I
      -----------------------------------------------------------------------
       Item 1.       Description of Business                                6
      -----------------------------------------------------------------------
                     Introduction                                           6
                     Energy Business                                       11
                     Southern Water                                        21
                     ScottishTelecom                                       24
                     Other Businesses                                      25
                     Year 2000                                             26
                     Regulation of the Electricity Industry                27
                     Regulation of the Water Industry                      32
                     Effect of Price Controls                              36
                     The Competition Act 1998                              37
                     Environmental Regulation                              37
                     Research & Development                                41
                     Employees                                             41
      -----------------------------------------------------------------------
       Item 2.       Description of Property                               42
      -----------------------------------------------------------------------
                     Generation Facilities                                 42
                     Transmission and Distribution Facilities              42
                     Water Supply and Wastewater Treatment Facilities      42
                     Telecommunication Facilities                          43
                     Retail Facilities                                     43
                     Non-Operational Facilities                            43
      -----------------------------------------------------------------------
       Item 3.       Legal Proceedings                                     44
      -----------------------------------------------------------------------
       Item 4.       Control of Registrant                                 44
      -----------------------------------------------------------------------
       Item 5.       Nature of Trading Market                              45
      -----------------------------------------------------------------------
                     Exchange Controls and Other Limitations Affecting
       Item 6.       Security Holders                                      45
      -----------------------------------------------------------------------
       Item 7.       Taxation                                              46
      -----------------------------------------------------------------------
                     Taxation of Dividends                                 47
                     Taxation of Capital Gains                             48
                     United States Information Reporting and Backup
                     Withholding                                           48
                     U.K. Inheritance Tax                                  48
                     U.K. Stamp Duty and Stamp Duty Reserve Tax            49
      -----------------------------------------------------------------------
       Item 8.       Selected Financial Data                               49
                     Dividends                                             51
                     Exchange Rates                                        52
      -----------------------------------------------------------------------
                     Management's Discussion and Analysis of Financial
                     Condition
       Item 9.       and Results of Operations                             52
      -----------------------------------------------------------------------
                     Results of Operations                                 52
                     Liquidity and Capital Resources                       61
                     Cash Flow                                             62
</TABLE>
ScottishPower Form 20-F 1999

                                                                               i
<PAGE>

<TABLE>
<CAPTION>
                                                                           Page
       <C>           <S>                                                   <C>
                     Treasury                                                63
                     Recent Developments                                     65
                     Outlook                                                 65
                     European Economic and Monetary Union and the impact
                     of the euro                                             65
                     Year 2000                                               66
                     U.K. GAAP to U.S. GAAP Reconciliation                   66
      -------------------------------------------------------------------------
       Item 9A.      Quantitative and Qualitative Disclosures About
                     Market Risk                                             67
      -------------------------------------------------------------------------
                     Market Rate Sensitive Instruments and Risk
                     Management                                              67
                     Financial Instruments and Risk Management               67
      -------------------------------------------------------------------------
       Item 10.      Directors and Officers of Registrant                    71
      -------------------------------------------------------------------------
       Item 11.      Compensation of Directors and Officers                  72
      -------------------------------------------------------------------------
                     Options to Purchase Securities from Registrant or
       Item 12.      Subsidiaries                                            73
      -------------------------------------------------------------------------
       Item 13.      Interest of Management in Certain Transactions          74
      -------------------------------------------------------------------------
       Part II
      -------------------------------------------------------------------------
       Item 14.      Description of Securities to be Registered -- Not
                     Applicable                                              74
      -------------------------------------------------------------------------
       Part III
      -------------------------------------------------------------------------
       Item 15.      Defaults Upon Senior Securities                         74
      -------------------------------------------------------------------------
                     Changes in Securities and Changes in Security for
       Item 16.      Registered Securities                                   75
      -------------------------------------------------------------------------
       Part IV
      -------------------------------------------------------------------------
       Item 17.      Financial Statements and Exhibits -- Not Applicable     77
      -------------------------------------------------------------------------
       Item 18.      Financial Statements and Exhibits                       77
      -------------------------------------------------------------------------
       Item 19.      Financial Statements and Exhibits                       77
      -------------------------------------------------------------------------
                     Signatures                                              79
      -------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
               <S>                                                                      <C>
               Consolidated Financial Statements of Scottish Power plc for Fiscal 1999
               Accounting Policies and Definitions                                       F-1
               Group Profit and Loss Account                                             F-7
               Statement of Total Recognized Gains and Losses                            F-8
               Note of Historical Cost Profits and Losses                                F-8
               Reconciliation of Movement in Shareholders' Funds                         F-8
               Notes to the Group Profit and Loss Account                                F-9
               Group Cash Flow Statement                                                F-12
               Reconciliation of Net Cash Flow to Movement in Net Debt                  F-12
               Notes to the Group Cash Flow Statement                                   F-13
               Balance Sheets                                                           F-16
               Notes to the Balance Sheets                                              F-17
               Principal Subsidiary Undertakings and Other Investments                  F-40
               Directors' Responsibilities for the Preparation of the Financial
               Statements                                                               F-41
               Report of the Independent Accountants                                    F-41
</TABLE>

                                                    ScottishPower Form 20-F 1999

ii
<PAGE>

      Introduction

      In this report, except as otherwise specified, "ScottishPower" or the
      "company" refers to Scottish Power plc (hereinafter also sometimes
      referred to as the "registrant"), and the "group" refers to
      ScottishPower and its subsidiaries and associates and any of their
      respective predecessors in business. ScottishPower was incorporated
      under the Companies Act on April 1, 1989 as a public limited company
      under the name South of Scotland Electricity plc and changed its name
      to Scottish Power plc on August 1, 1989.

      References to fiscal years are to 12 month periods commencing in each
      case on April 1 of the prior year and ending on March 31 of the year
      indicated. References to years not specified as being fiscal years are
      to calendar years.

      ScottishPower's Registered Office is located at 1 Atlantic Quay,
      Glasgow, G2 8SP, Scotland, and its telephone number is 011 44 141 248
      8200.

      Exchange Rates

      The group publishes its consolidated financial statements in pounds
      sterling. In this report, references to "pounds sterling", "(Pounds)",
      "pence" or "p" are to United Kingdom currency and references to "U.S.
      dollars", "U.S.$" or "$" are to United States currency. Solely for the
      convenience of the reader, this report contains translations of certain
      pounds sterling amounts into U.S. dollars at specified rates, or, if
      not so specified, at the Noon Buying Rate in New York City for cable
      transfers in pounds sterling as certified for customs purposes by the
      Federal Reserve Bank of New York (the "Noon Buying Rate") on March 31,
      1999 of (Pounds)1.00 = $1.61. On June 30, 1999, the Noon Buying Rate
      was $1.58 to (Pounds)1.00. No representation is made that the pound
      sterling amounts have been, could have been or could be converted into
      U.S. dollars at the rates indicated or at any other rates.

      The following table sets forth, for the fiscal year indicated, certain
      information concerning the Noon Buying Rate in New York City for pounds
      sterling and U.S. dollars per (Pounds)1.00.

<TABLE>
<CAPTION>
       Fiscal Year Ended March 31    High   Low Average/1/ Year-end
      -------------------------------------------------------------
       <S>                          <C>   <C>   <C>        <C>
       1995                         $1.64 $1.46      $1.57    $1.62
       1996                         $1.62 $1.50      $1.57    $1.53
       1997                         $1.71 $1.49      $1.60    $1.64
       1998                         $1.69 $1.61      $1.65    $1.68
       1999                         $1.72 $1.60      $1.65    $1.61
      -------------------------------------------------------------
</TABLE>
     /1/The average of the Noon Buying Rates on the last day of each month
       during the relevant period.

ScottishPower Form 20-F 1999                                                   1
<PAGE>

      Glossary

      Appointment            Instrument of Appointment made by the Secretary
                             of State for the Environment as a water and
                             sewerage undertaker, now under WIA 1991

      ------------------------------------------------------------------------

      BNFL                   British Nuclear Fuels Limited

      British Energy         British Energy plc, a public limited company
                             formed from the merger of Nuclear Electric plc
                             and Scottish Nuclear plc

      ------------------------------------------------------------------------

      Combined Group         the group, PacifiCorp and its consolidated
                             subsidiaries

      company                Scottish Power plc

      Competition Commission the Competition Commission, formerly the
                             Monopolies and Mergers Commission

      Composite License      license under the Electricity Act to generate
                             electricity, transmit electricity within its
                             authorized transmission area and distribute and
                             supply electricity within its authorized supply
                             area

      CREST                  a relevant system (as defined in the CREST
                             Regulations) in respect of which CRESTCo Limited
                             is the operator (as defined in the CREST
                             Regulations)

      CREST Regulations      the Uncertificated Securities Regulations 1995
                             (SI 1995 No. 3272) as from time to time amended

      ------------------------------------------------------------------------

      DGES                   Director General of Electricity Supply

      DGWS                   Director General of Water Services

      DTI                    Department of Trade and Industry

      ------------------------------------------------------------------------

      EA                     Environment Agency

      effluent               treated sewage outflow

      Electricity Act        Electricity Act 1989

      EPA                    Environmental Protection Act 1990

      ESI                    Electricity Supply Industry in Great Britain,
                             comprising the activities of electricity
                             generation, transmission, distribution and supply

      EU                     European Union

      ------------------------------------------------------------------------

      FERC                   U.S. Federal Energy Regulatory Commission

      ------------------------------------------------------------------------

      GBY                    the Great Britain Yardstick which is defined as
                             the average generation purchase cost per unit of
                             the England and Wales RECs, and is used to cap
                             the allowed generation purchase costs of
                             ScottishPower's supply business

2                                                  ScottishPower Form 20-F 1999
<PAGE>


      gearing                leverage (net debt divided by shareholders'
                             equity expressed as a percentage)

      gigawatt (GW);         a gigawatt is a unit of power equivalent to one
      gigawatt-hour          million kilowatts; one gigawatt hour represents
      (GWh)                  one hour of electricity consumption at a constant
                             rate of 1 GW

      Great Britain          England, Wales and Scotland

      Green Paper            consultation document detailing proposals for
                             future regulation of the electricity, gas, water
                             and telecommunications industries. Sets out the
                             results of the review announced by the President
                             of the Board of Trade, Rt. Hon Margaret Beckett
                             MP, in June 1997

      group                  Scottish Power plc and its consolidated
                             subsidiaries

      Guaranteed Standards   standards of performance agreed between the
                             company and OFFER in relation to transmission,
                             distribution and supply

      ------------------------------------------------------------------------

      HM Government          Her Majesty's Government of the United Kingdom

      ------------------------------------------------------------------------

      Interconnector         Interconnector between the Scottish transmission
                             systems and the national grid in England and
                             Wales

      IPC                    the system of Integration Pollution Control
                             introduced by the EPA

      ------------------------------------------------------------------------

      kilovolt (kV)          one thousands volts

      kilowatt (kW);         a kilowatt is a unit of power, representing the
      kilowatt-hour          rate at which energy is used or produced (i.e.
      (kWh)                  the product of voltage and current); one
                             kilowatt-hour represents one hour of electricity
                             consumption at a constant rate of 1 kW

      ------------------------------------------------------------------------

      Labour Party           a political party that currently forms the
                             Government of the United Kingdom of Great Britain
                             and Northern Ireland

      LCPD                   Large Combustion Plant Directive--European
                             Council Directive 88/609 on the limitation of
                             emissions of certain pollutants into the air from
                             large combustion plants

      ------------------------------------------------------------------------

      megawatt (MW);         one megawatt equals one thousand kilowatts; one
      megawatt-hour          megawatt-hour represents one hour of electricity
      (MWh)                  consumption at a constant rate of 1 MW

      Merger                 the proposed merger of ScottishPower and
                             PacifiCorp

      metric tonnes          one metric tonne is equivalent to: 1.102 short
                             tons or 0.9842 long tons

      Ml                     megaliter; one million liters

      ------------------------------------------------------------------------

      NEA                    Nuclear Energy Agreement among British Energy,
                             Scottish & Southern and ScottishPower dated June
                             1, 1990 and any amendments thereto with respect
                             to the entitlement and must take obligation of
                             ScottishPower and Scottish & Southern to British
                             Energy's nuclear generating capacity. The Nuclear
                             Energy Agreement terminates on April 1, 2005

ScottishPower Form 20-F 1999                                                   3
<PAGE>


      New ScottishPower      New Scottish Power plc (to be renamed Scottish
                             Power plc)

      New ScottishPower      the articles of association of New ScottishPower
      Articles

      New ScottishPower      the special rights non-voting redeemable
      Special Share          preference share of (Pounds)1 in New
                             ScottishPower to be issued to the Special
                             Shareholder pursuant to the Scheme

      NGC                    The National Grid Company plc

      NOx                    oxides of nitrogen

      NRA                    National Rivers Authority

      ------------------------------------------------------------------------

      OFFER                  Office of Electricity Regulation

      OFGAS                  Office of Gas Supply

      OFWAT                  Office of Water Services

      ------------------------------------------------------------------------

      PES license            license under the Electricity Act to supply
                             electricity as a "public electricity supplier" or
                             "PES" to any premises within an authorized area

      Pool                   the wholesale electricity trading market in
                             England and Wales, the rules and procedures of
                             which are contained in a pooling and settlement
                             agreement entered into by parties selling
                             electricity through the Pool in England and Wales

      principal              consolidated trading subsidiaries of Scottish
      subsidiary             Power plc
      undertakings

      ------------------------------------------------------------------------

      REC                    one of twelve regional electricity companies in
                             England and Wales

      RPI                    Retail Price Index measures the average change
                             from month to month in the prices of goods and
                             services bought by most consumers in the U.K. The
                             index is compiled using a large and
                             representative selection of more than 600
                             separate goods and services

      ------------------------------------------------------------------------

      Scheme Date            the date on which the scheme of arrangement
                             becomes effective, expected to be July 30, 1999

      Scottish & Southern    Scottish & Southern Energy plc, which was created
                             by the merger between Scottish Hydro-Electric plc
                             and Southern Electric plc

      Scottish Coal          Scottish Coal Company Limited

      ScottishPower          Scottish Power plc

      ScottishPower Articles the articles of association of ScottishPower

      ScottishPower Special
      Share                  the special rights non-voting redeemable
                             preference share of (Pounds)1 in ScottishPower

      Scottish Nuclear       Scottish Nuclear plc, a subsidiary of British
                             Energy

4                                                   ScottishPower Form 20-F 1999


<PAGE>


      SEPA                   Scottish Environment Protection Agency

      sewage                 wastewater contained in or being discharged from
                             sewerage

      sewerage               wastewater infrastructure assets

      Southern Water         Southern Water Services Limited, a WaSC and
      Services               wholly-owned subsidiary of Southern Water plc

      SO\\2\\                sulphur dioxide

      Special Shareholder    the holder of the ScottishPower Special Share or
                             the New ScottishPower Special Share as the
                             context so requires (currently the Secretary of
                             State for Scotland)

      SWEB                   South West Electricity Board

      ------------------------------------------------------------------------

      terawatt (TW);         one thousand million kilowatts of power; one
      terawatt-hour          terawatt hour represents one hour of electricity
      (TWh)                  consumption at a constant rate of 1 TW

      turnover               sales value of energy, goods, water, wastewater
                             and other services supplied to customers
                             (excluding value added tax and intragroup sales)

      ------------------------------------------------------------------------

      U.K.                   United Kingdom of England, Wales, Scotland and
                             Northern Ireland

      UNECE                  United Nations Economic Commission for Europe

      ------------------------------------------------------------------------

      WA 1989                Water Act 1989

      WIA 1991               Water Industry Act 1991

      WaSC                   Water and Sewerage Company

      Water Quality
      Regulations            water supply water quality regulations which have
                             been amended by the Water Service Companies
                             amendment to regulation of 1989 and 1991

      Windfall Tax           A levy introduced by the Government in the Budget
                             of July 2, 1997

      WTW                    Wastewater Treatment Works

ScottishPower Form 20-F 1999                                                   5
<PAGE>


                                       PART I

      Item 1. Description of Business

      Introduction
      The group is a leading multi-utility business in the U.K. serving
      approximately 5.5 million homes across Scotland, England and Wales. The
      map located on the inside front cover of this report indicates the
      location of the group's principal businesses. The group's activities
      span the generation, transmission, distribution and supply of
      electricity, gas supply, water supply and wastewater services,
      telecommunications, retailing of electrical appliances, technology and
      contracting services. ScottishPower and its subsidiaries comprise one
      of the largest industrial groups in the U.K., positioned around the
      middle of the FTSE 100 index, with an annual turnover in fiscal 1999 of
      over (Pounds)3.2 billion.

      Industry Background
      The U.K. electricity industry has undergone a period of rapid and
      dramatic change in the past decade. The sector has been restructured
      and its major players privatized and floated to the public by the U.K.
      government. Regulation is focused on encouraging cost reduction and
      productivity gains while increasing competition, and consolidation has
      brought further gains for shareholders and customers alike.

      Today, supported by an open and dynamic economy, the U.K. has recently
      completed another major change: full competition in the retail supply
      of electricity and gas services. The gas and electricity markets
      throughout Great Britain were fully opened to competition in May 1998
      and May 1999, respectively. This increased competition has spurred
      multi-utility convergence in the U.K. in a realignment affecting all
      segments of the utility industry.

      Business Strategy
      The group is committed to enhancing shareholder value through building
      businesses in electricity and utility related markets.

      The group has grown from a regional generator, distributor and supplier
      of electricity into a growing U.K. multi-utility business serving some
      5.5 million of the homes in Great Britain. This is due in large part to
      (i) the acquisition in 1995 of Manweb plc ("Manweb"), one of the twelve
      regional electricity companies created when the electricity utility
      industry in England and Wales was restructured in 1990, and (ii) the
      acquisition in 1996 of Southern Water plc ("Southern Water"), one of
      the ten water and wastewater service companies created when the water
      and wastewater industry in England and Wales was privatized in 1989.
      These acquisitions have allowed the group to expand both its customer
      base (by 1.3 million customers in the case of Manweb and 1.7 million
      customers in the case of Southern Water) as well as its geographic and
      product base by expanding into the electricity distribution and supply
      business in north-west England and Wales and into the water and
      wastewater business in southern England. The group has further
      leveraged its utility skills and assets in its expansion into the gas
      supply and telecommunications businesses. In domestic gas supply,
      ScottishPower is already established as a leading competitor to British
      Gas, with a total of 760,000 domestic contracts at the end of fiscal
      1999. Since the opening of the competitive electricity market, the
      Company has secured 190,000 new electricity contracts.

      Improving the efficiency of the group's businesses through a program of
      cost reductions is a key part of the strategy. In the Scottish energy
      businesses, the cost base has been significantly reduced since 1991
      through a process of benchmarking operations against other major
      companies around the world, both within and outside the utility sector.
      ScottishPower management has delivered substantial cost savings from
      both Manweb and Southern Water, totaling (Pounds)139 million to date.
      Management believes that further cost savings from the Scottish energy
      businesses, Manweb and Southern Water are achievable after fiscal 1999.

      The group intends to build its U.K. business primarily by exploiting
      the opportunity, and managing the challenge, of the deregulation of the
      electricity and gas supply markets and the telecommunications sector.
      The aim of the group's energy supply business will be to defend its
      existing base in the ScottishPower and Manweb areas, while exploiting
      the opportunity to expand its electricity and gas supply markets across
      the U.K.

6                                                   ScottishPower Form 20-F 1999


<PAGE>


      In addition, the company intends to utilize its excess capacity of
      efficient, coal-fired plant to continue to increase its share of the
      U.K. electricity generation market by exploiting expansion of the
      capacity of the Interconnector to the England and Wales market and the
      construction of an Interconnector between Scotland and Northern
      Ireland.

      ScottishTelecom's strategy has been to achieve growth through a
      combination of organic growth and selective acquisitions. This has
      provided ScottishTelecom with operations in key markets across the
      communications sector since its launch in 1994.

      ScottishTelecom now provides, under innovative tariff packages, a wide
      portfolio of communication services ranging from voice, data and mobile
      telephony services to call-center, on-line information and Internet
      access services.

      The development of the group has caused the Directors to review the
      future of ScottishTelecom. ScottishPower is currently evaluating the
      strategy of ScottishTelecom and the options available to maximize
      shareholder value from its investment in this business, in what is a
      rapidly changing and developing sector. This assessment includes a
      review of the services provided by ScottishTelecom, its funding needs
      and any consequential restructuring. The Directors expect to reach a
      decision during the year.

      Since privatization of the U.K. electricity industry in 1990-91, the
      group has experienced tightening regulation. Looking ahead it is
      expected that regulation will continue to have a material bearing on
      the profitability and investment capability of the group. The group's
      regulated monopoly businesses comprise electricity transmission and
      distribution in ScottishPower and electricity distribution in Manweb
      (together representing 44% of the group's fiscal 1999 operating
      profits) and the water supply and wastewater business in Southern Water
      (representing 30% of the group's fiscal 1999 operating profits). The
      regulatory price controls relating to these areas of the group's
      business for the five-year period commencing April 1, 2000 are
      currently being reviewed, and reviews are also taking place in relation
      to supply and generation. Nevertheless, the Board is unable to judge
      accurately the outcome of these reviews and there can be no assurance
      that they will not materially affect group profits. It is expected that
      final proposals resulting from these reviews will be known by November
      1999.

      Through organic growth and acquisitions, ScottishPower has laid the
      foundations for its U.K. business, creating a broadly based utility
      group that is strongly placed to add value for shareholders and
      customers.

      As well as continuing to drive for growth in its U.K. businesses, the
      group has explored international opportunities in the electricity
      sector. The focus has been on the United States, where management
      believes the cultural fit and the likely development of U.K.-style
      industry restructuring and convergence offers opportunities to deliver
      shareholder value by applying the group's core skills.

      Proposed ScottishPower--PacifiCorp Merger
      On December 7, 1998, the boards of ScottishPower and PacifiCorp
      announced that they had reached agreement on the proposed merger of
      their two companies. Under the terms of the Merger, PacifiCorp common
      shareholders (other than ScottishPower or any subsidiary of
      ScottishPower or PacifiCorp) will be entitled to receive 0.58
      ScottishPower ADSs, which will be listed on the New York Stock
      Exchange, or 2.32 ordinary shares of ScottishPower, which will be
      listed on the London Stock Exchange, for each share of PacifiCorp they
      own. ScottishPower shareholders will continue to own their existing
      shares after the Merger.

      The Combined Group intends to account for the Merger using the
      acquisition method of accounting under U.K. GAAP and using the purchase
      method of accounting under U.S. GAAP. The Merger is subject to a number
      of conditions, including its approval by both the ScottishPower
      shareholders and the PacifiCorp shareholders which were recently
      obtained. The Merger is also conditional on a number of regulatory, tax
      and other consents and confirmations in the U.S. and the U.K. The
      Merger is expected to be completed this year.

      The Merger will create an international utility company with
      significant energy businesses in the U.K. and the U.S. with
      approximately seven million customers. The Directors believe that
      significant benefits will be derived from the Merger and that the
      Combined Group will be more operationally efficient and stronger
      financially than either ScottishPower or PacifiCorp would be on its
      own. The Merger is expected to enhance New ScottishPower's or
      ScottishPower's, as applicable, earnings per share, before goodwill
      amortization, from the first full year after

ScottishPower Form 20-F 1999                                                   7
<PAGE>

      completion of the Merger compared to the Directors' present
      expectations for the existing group. See "Scheme of Arrangement" below.
      The Merger represents a major step in ScottishPower's stated strategy
      of achieving growth and creating value for shareholders by utilizing
      its core skills in the U.S.

      ScottishPower has carried out detailed analyses of the U.S. market and
      possible combination partners. The Directors believe that PacifiCorp is
      an excellent partner, in that it combines:

      . a sound business, good quality assets and an extensive customer base
        in a region of the U.S. benefiting from good economic growth;

      . substantial scope for improved performance and efficiency;

      . experienced operational management; and

      . low-cost coal resources and generation plant.

      The Combined Group will focus on accelerating PacifiCorp's strategy to
      improve the performance of its western U.S. electricity business.
      ScottishPower and PacifiCorp believe that the application of best
      practices of the two companies will reduce costs and increase operating
      efficiencies with the goal of enhancing shareholder value. Although it
      is difficult to predict the source of cost savings, the Directors
      expect most, if not all, of the anticipated cost savings to come from
      the application of best practices in operational and overhead areas
      rather than through elimination of costs duplicated between
      ScottishPower and PacifiCorp. The Directors believe that this will
      enable PacifiCorp, which has recently suffered from a period of
      financial under-performance, to achieve more quickly its stated aim of
      earning the authorized regulatory rate of return in each U.S. state in
      which it conducts business and will bring PacifiCorp's non-generation
      costs per customer in the U.S. in line with some of the most efficient
      comparable utilities, based on comparisons drawn from information filed
      with FERC.

      To assist the delivery of these improvements, the Directors intend to
      transfer a number of senior managers with integration experience into
      PacifiCorp. Some PacifiCorp managers will also be transferred into
      ScottishPower's U.K. operations to gain experience of ScottishPower's
      working practices.

      The Merger should enable ScottishPower to apply its proven utility
      management skills to PacifiCorp. The Directors believe that these
      skills, developed in the competitive U.K. market, will assist
      PacifiCorp as competition is introduced into the U.S. generation and
      supply businesses.

      The Directors also intend to enhance significantly the performance and
      service standards of PacifiCorp, and to increase the range of energy
      services offered to PacifiCorp customers, by investing in PacifiCorp's
      existing U.S. businesses and by applying the best practices drawn from
      both ScottishPower and PacifiCorp. ScottishPower and PacifiCorp share a
      common commitment to high standards of customer service, to the
      environment and to the communities they serve.

      Earnings and Dividends
      The Merger should, when completed, create one of the largest
      international utility companies and open up more growth opportunities
      for the Combined Group.

      The Merger is expected to be earnings enhancing from the first full
      year, before goodwill amortization, compared to the Directors' present
      expectations for the existing group.

      ScottishPower's stated dividend aim is to achieve 7% to 8% real
      dividend growth per annum until at least the U.K. regulatory reviews
      which take effect in the year 2000, whilst maintaining a prudent level
      of dividend cover. It is ScottishPower's current aim to deliver real
      dividend growth thereafter and this will be re-examined once the
      outcome of the regulatory reviews is known.

      Scheme of Arrangement
      The company announced on February 25, 1999 its intention to recommend
      to ScottishPower shareholders a proposal to introduce a new holding
      company for the group, New ScottishPower (to be renamed Scottish Power
      plc upon the scheme becoming effective). The holding company structure
      will be effected through a "scheme of arrangement" which must be
      sanctioned by a Scottish court and approved by ScottishPower's
      shareholders, which approval was recently obtained. Under the scheme,
      New ScottishPower will issue one share of New ScottishPower

8                                                   ScottishPower Form 20-F 1999


<PAGE>

      in exchange for each outstanding ScottishPower share. As a result, New
      ScottishPower will become the holding company for ScottishPower. The
      Merger with PacifiCorp is not conditional upon the scheme becoming
      effective nor is the scheme conditional upon the Merger becoming
      effective.

      In addition, ordinary shares of New ScottishPower will be listed on the
      London Stock Exchange, New ScottishPower ADSs will be listed on the New
      York Stock Exchange and New ScottishPower will be subject to the
      registration and information requirements of U.S. securities laws.

      The rights attaching to the New ScottishPower ordinary shares will be
      substantially the same as those currently attaching to the
      ScottishPower ordinary shares. Thus, after the scheme is implemented,
      holders of ScottishPower ordinary shares will have their interest in
      ScottishPower replaced by an equivalent proportionate interest in New
      ScottishPower and, subject to the effect of exercise of options to
      subscribe for ScottishPower shares granted under ScottishPower share
      schemes, their proportionate interests in the profits, net assets and
      dividends in the group will not be affected.

      If the scheme of arrangement is not implemented by June 30, 2000, the
      holders of ScottishPower shares will remain as such, ScottishPower
      ordinary shares will continue to be listed on the London Stock Exchange
      and its ADSs will continue to be listed on the New York Stock Exchange.

      If the scheme is sanctioned by the court and the conditions to the
      scheme are satisfied or waived, it is expected to become effective on
      July 30, 1999.

      Share Buy-back
      The Directors started a share buy-back program of up to (Pounds)500
      million following approval of the Merger by both ScottishPower
      shareholders and PacifiCorp shareholders. This is intended to achieve
      further financial efficiency, with an expected net interest cover of
      approximately three times, while targeting an "A" credit rating. The
      buy-back is being undertaken through on-market purchases.

      Outlook
      Apart from the many changes and opportunities which the year ahead
      offers in the U.K. operations, it is expected the PacifiCorp merger
      will be completed later this year. This would make ScottishPower one of
      the top 10 electricity companies in the world and would bring the total
      employment complement in the new enlarged group to 25,000.

      Looking forward into the new millennium, regulation will continue to
      have a significant bearing on the profitability and investment
      capability of the group. The Directors believe that the group has high
      standards of operation and customer service. Nevertheless, they are
      unable to judge accurately the outcome of the current U.K. regulatory
      reviews and there can be no assurance that they will not materially
      affect the group's profits.

      ScottishPower's goal is to provide better service and value to
      customers and at the same time enhanced earnings for shareholders. This
      must be supported by a process of regulation which takes a balanced
      long-term view to reward investment and encourages improvements in
      service and efficiency.

      ScottishPower will continue its strategy to develop and grow the
      business. This will require ongoing revenue and capital investment in
      the year ahead. ScottishPower is confident in its strategy for long-
      term growth and, given the quality of the company and its people, looks
      forward to further success.

      Segmental Business Information
      An analysis of the group's turnover and operating profit by major
      business segment for the last three fiscal years is provided in the
      tables on the following page. All material activities were derived from
      continuing operations in the United Kingdom. This information is
      extracted from the consolidated financial statements of the group which
      have been audited by PricewaterhouseCoopers, Chartered Accountants and
      Registered Auditors for fiscal 1999 and Coopers & Lybrand, Chartered
      Accountants and Registered Auditors for fiscal years 1997 through 1998.
      This segmental business information should be read in conjunction with,
      and is qualified in its entirety by reference to, such consolidated
      financial statements and their accompanying notes located on pages F-1
      through F-40, and in particular the definition of the group's business
      segments on page F-5.

ScottishPower Form 20-F 1999                                                   9
<PAGE>


      Table 1.1 Turnover by business segment

<TABLE>
<CAPTION>
                                     Total turnover            Inter-segment turnover           External turnover
                                   1999      1998      1997      1999      1998      1997      1999      1998      1997
                         Note (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
      ------------------------------------------------------------------------------------------------------------------
       <S>               <C>  <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
       Energy Business
       Generation
       Wholesale            1     914.3   1,014.3     974.4     695.3     764.8     744.4     219.0     249.5     230.0
       Power Systems              470.1     443.0     429.2     416.8     391.1     386.8      53.3      51.9      42.4
       Energy Supply            1,434.5   1,336.2   1,270.4      28.8      11.5       0.9   1,405.7   1,324.7   1,269.5
       Manweb                     614.2     662.5     738.4      18.1       8.6         -     596.1     653.9     738.4
       ----------------------------------------------------------------------------------------------------------------
       Energy Total             3,433.1   3,456.0   3,412.4   1,159.0   1,176.0   1,132.1   2,274.1   2,280.0   2,280.3
       Non-energy
       business
       Manweb                         -       5.3      20.9         -       5.3       4.2         -         -      16.7
       Southern Water             440.2     453.0     316.7       0.7       0.4       0.5     439.5     452.6     316.2
       Scottish Telecom           219.9     113.3      53.7      39.2      31.2      16.7     180.7      82.1      37.0
       Other                1     612.8     410.7     359.2     264.8      97.2      68.7     348.0     313.5     290.5
       ---------------------------------------------------------------------------------- --------- --------- ---------
       Total                                                                                3,242.3   3,128.2   2,940.7
       ---------------------------------------------------------------------------------- --------- --------- ---------
</TABLE>

     /1/The Generation Wholesale segment previously included sales from gas
        trading activities which are now reported in the Other business segment.
        Total turnover for the Generation Wholesale segment for 1998 included
        (Pounds)100.5 million of gas trading sales (1997: (Pounds)30.0 million)
        of which (Pounds)82.4 million related to internal sales (1997:
        (Pounds)16.1 million).

      Table 1.2 Operating profit by business segment

<TABLE>
<CAPTION>
                                        Operating profit
                                       1999       1998       1997
                                  (Pounds)m  (Pounds)m  (Pounds)m
      --------------------------------------------------------------
       <S>                        <C>        <C>        <C>
       Generation Wholesale           115.3      130.8      146.1
       Power Systems
         Transmission                  83.5       80.1       77.3
         Distribution                 178.2      169.4      150.7
       Energy Supply
         First tier electricity        36.3       38.0       39.4
         Second tier electricity          -       (3.8)      (3.2)
         Gas and other energy
         sales                        (16.2)     (19.1)      (3.8)
                                    -------    -------    -------
       Scottish energy
       businesses                     397.1      395.4      406.5
       Manweb                         125.2      131.3      135.0
       Southern Water                 262.2      240.7      114.4/1/
       ScottishTelecom                 10.3        4.7       (1.5)
       Other                            8.0       13.0        9.5
       -------------------------    -------    -------    -------
       Total                          802.8      785.1      663.9
       -------------------------    -------    -------    -------
</TABLE>

     /1/Eight months from the date of acquisition and after reorganization
        costs of (Pounds)21.2 million.

10                                                  ScottishPower Form 20-F 1999
<PAGE>


      Energy Business

      Structure of the Electricity Industry in the United Kingdom
      The U.K. electricity industry, which was restructured in March 1990 to
      introduce competition into the generation and supply of electricity,
      consists of the following activities:

      Generation:     the production of electricity at power stations

      Transmission:   the bulk transfer of electricity across a high voltage
                      transmission system

      Distribution:   the transfer of electricity from the high voltage
                      transmission system and its delivery, across local low
                      voltage distribution systems, to customers

      Supply:         the bulk purchase of electricity by suppliers and its
                      sale to customers, with the associated customer service
                      activities including sales and marketing, billing and
                      income collection

      The U.K. has three distinct geographical systems: Scotland, England &
      Wales and Northern Ireland, each with a different commercial framework.
      The Scottish and English systems are interconnected, and an agreement
      has been reached for the construction of a link between Scotland and
      Northern Ireland.

      In each of Scotland and England & Wales, the electricity industry is
      regulated under the Electricity Act 1989 (the "Electricity Act") by the
      Secretary of State for Scotland or the Secretary of State for Trade and
      Industry, as applicable (collectively, the "Secretary of State"), and
      the Director of Electricity Supply (the "DGES"). See "Regulation of the
      Electricity Industry". The chart below provides an overview of the
      electricity industry in Great Britain.

                                                            [CHART APPEARS HERE]
ScottishPower Form 20-F 1999

                                                                              11
<PAGE>


      Industry Structure in Scotland
      The electricity industry in Scotland is principally comprised of two
      vertically integrated companies, ScottishPower and Scottish & Southern,
      each generating, transmitting, distributing and supplying electricity
      within their respective franchise areas. A third, Scottish Nuclear, a
      subsidiary of British Energy, is primarily a generator selling all the
      electricity it generates at its two nuclear power stations in Scotland
      to ScottishPower and Scottish & Southern under the Nuclear Energy
      Agreement (the "NEA").

      Generation ScottishPower and Scottish & Southern generate electricity
      from their own portfolio of power stations. In addition the companies
      are obliged, under the NEA, to purchase the entire output from Scottish
      Nuclear. A number of further contractual relationships exist between
      the two companies which involve the sharing of coal-fired, dual oil and
      gas-fired and conventional hydro generating capacity by allocating part
      of the capacity of certain generating stations operated by one company
      to the other company. See "Generation Wholesale--Generation Portfolio"
      for further discussion of these contractual arrangements. Currently,
      there exists a surplus of generating capacity in Scotland which enables
      the companies to sell electricity to England and Wales through the
      Interconnector. The quantity of these sales is set to increase as the
      current transmission constraints are reduced.

      Transmission The transmission systems of ScottishPower and Scottish &
      Southern are each made up of a network comprised of overhead lines,
      underground cables and associated equipment operating at either 275 kV
      or 132 kV and, in the case of ScottishPower, 400 kV. This network
      connects the generating stations and distribution entry points
      operating at, or below, 33 kV. ScottishPower's transmission system is
      connected to the national grid in England and Wales by the
      Interconnector. Both companies have access to this link which enables
      the companies to export and import electricity from England and Wales.
      The available capacity of the Interconnector at any time depends on a
      number of variable factors, (e.g., the secure thermal rating of the
      Interconnector circuits and the pattern of scheduled generation on
      either side of the border). In fiscal 1999, the average level of
      exports on the Interconnector was 1,427 MW.

      Distribution The distribution systems are each made up of a network of
      overhead lines and underground cables operating at either 33 kV, 11 kV,
      415 volts or 230 volts. The distribution voltages and equipment used
      are determined by end users' requirements and their location and by the
      relative economics of transferring electricity at different voltages.
      To ensure competition in the supply business, the companies are
      required to provide open access to their transmission and distribution
      networks on a non-discriminatory basis.

      Supply The energy supply business purchases electricity from a range of
      sources, including the group's generation business, for sale to
      customers both within its home areas and outside them.

      Industry Structure in England and Wales
      In England and Wales, electricity is produced by generators, the
      largest of which are National Power plc, PowerGen plc and Nuclear
      Electric plc, a subsidiary of British Energy, and the Energy Group plc.
      Electricity is transmitted through the national grid transmission
      system by NGC and distributed by the 12 RECs (one of which is Manweb)
      in their respective franchise, or authorized, areas. Most customers are
      currently supplied with electricity by their local REC, although there
      are other suppliers holding second tier supply licenses, including
      other generators and RECs, who can also compete to supply customers.

      Generation Virtually all electricity generated in England and Wales is
      sold by generators and bought by suppliers through the Pool. The Pool
      was established at the time of privatization for bulk trading of
      electricity in England and Wales between generators and suppliers. All
      licensed generators and suppliers must become signatories to the
      Pooling and Settlement Agreement governing the constitution and
      operation of the Pool and the calculation of payments due to and from
      generators and suppliers. The Pool also provides centralized settlement
      of accounts and clearing. As discussed above, ScottishPower and
      Scottish & Southern can participate in the Pool by exporting
      electricity to or importing electricity from England and Wales via the
      Interconnector.

      Prices for wholesale electricity sales are set by the Pool daily for
      each half hour of the following day based on the bids of the generators
      and a complex set of calculations matching supply and demand and taking
      account of system stability, security and other costs. A computerized
      system (the settlement system) is used to calculate prices and to

12                                                  ScottishPower Form 20-F 1999


<PAGE>

      process metered, operational and other data and to carry out the other
      procedures necessary to calculate the payments due under the Pool
      trading arrangements. Because Pool prices tend to be volatile and
      difficult to predict, generators and suppliers often enter into
      bilateral arrangements, such as contracts for differences, to provide a
      degree of protection against such fluctuations.

      In October 1997, HM Government requested the DGES carry out a review
      into wholesale electricity trading arrangements in England and Wales to
      advise on whether, and if so what, changes should be made. Under the
      terms of reference of the review, the new trading arrangements being
      considered would be required to be transparent, efficient and risk
      reducing while meeting customers needs, promoting competition and
      avoiding discrimination. The DGES published proposals for new trading
      arrangements in July 1998 and these proposals were supported by HM
      Government in an Energy White Paper in October 1998. These arrangements
      will encompass the development of a balancing market, a short-term bi-
      lateral market and a related settlement system. The DGES is due to
      publish a further policy report in August 1999 with implementation of
      the new arrangements planned for fall 2000.

      Transmission NGC owns and operates the high voltage 275 kV and 400 kV
      electricity transmission system in England and Wales also known as the
      national grid. NGC has a statutory duty to operate a non-discriminatory
      policy both in the day-to-day administration of the system, and in the
      provision of access to the transmission network.

      Distribution The distribution businesses of the RECs operate and
      maintain the assets which carry power from grid supply points to
      individual customers within their authorized areas. This involves a
      network of overhead lines, underground cables, switches and
      transformers operating at voltages ranging from 132 kV down to 230
      volts in residential premises. To ensure competition in the supply
      business, the RECs are required to provide open access to their
      distribution networks on a non-discriminatory basis.

      Supply The supply business covers the bulk purchase of electricity
      through the Pool and the selling on to customers. RECs can supply
      customers within their authorized areas and holders of second tier
      licenses, subject to meeting certain requirements, can supply any
      customer. Second tier licenses are held by all the RECs, National Power
      plc, PowerGen plc, Nuclear Electric, ScottishPower, Scottish & Southern
      and some new suppliers.

      Competitive Framework
      Competition in supply has been progressively introduced in Scotland and
      in England and Wales. ScottishPower and Scottish & Southern in
      Scotland, and the RECs in England and Wales, are subject to competition
      from second tier suppliers for the supply of electricity to customers,
      including residential customers, in their respective franchise areas.

      Generation Wholesale
      The group's Generation Wholesale business ("Generation Wholesale")
      operates ScottishPower's generating stations and deals in the wholesale
      trading of electricity and gas. The business objective is to create
      competitive advantage for ScottishPower by optimizing the energy chain.

      Generation Portfolio
      ScottishPower's owned generation capacity comprises coal, gas, hydro
      and wind power and has available more than 3,500 MW after taking into
      account the impact of contractual obligations to supply Scottish &
      Southern with a proportion of its coal-fired capacity. In addition to
      its own capacity, ScottishPower also has access to nuclear energy, from
      British Energy Generation (U.K.) Limited, and gas-fired, oil-fired and
      hydro power from Scottish & Southern under contracts established in
      connection with the restructuring of the U.K. electricity industry in
      1990 and 1991. These resources combine to give ScottishPower a flexible
      fuel portfolio and result in total available capacity of some 6,400 MW.
      ScottishPower's available capacity in Scotland is significantly greater
      than the demand it is required to meet. Additional information
      concerning the group's generating capacity, either owned or available
      under contract, is set out on the following two pages.

ScottishPower Form 20-F 1999                                                  13
<PAGE>


      Table 1.3  Sources of Owned Generating Capacity and Output as at March
      31, 1999

<TABLE>
<CAPTION>
                                   Number of Generating
                                  Sets and/or Installed Net Output Maximum Capacity
                                               Capacity   Capacity        Available
                            Notes                    MW         MW               MW
      --------------------------------------------------------------------------------
       <S>                  <C>   <C>                   <C>        <C>
       Coal:
       Longannet                                4 x 600      2,304
       Cockenzie                                4 x 300      1,152
                                                             -----
                                                             3,456            2,880/1/
       Methil                                    2 x 30         57               57
       Kincardine               2               2 x 200        Nil              Nil
       Oil:
       Inverkip                 3               3 x 676        Nil              Nil
       Gas Turbine:
       Knapton                                   1 x 42         42               42
       Pumped Storage:
       Cruachan                                 4 x 100        400              400
       Conventional Hydro:
       Galloway Scheme                              109        106              106
       Lanark Scheme                                 16         16               16
       Windfarms:
       Barnesmore                              25 x 0.6         15               15
       Hagshaw Hill                            26 x 0.6         16               16
       P & L Windfarm           4             103 x 0.3         31               16
       Rigged Hill                             10 x 0.5          5                5
       Corkey                                  10 x 0.5          5                5
       Elliots Hill                            10 x 0.5          5                5
       Coal Clough              5              24 x 0.4         10                4
       Carland Cross            5              15 x 0.4          6                3
       --------------------------        --------------      -----            -----
       Total                                                 4,170            3,570
       -------------------------         --------------      -----            -----
</TABLE>

     /1/Scottish & Southern is entitled to a supply of electricity from part
       of the capacity of ScottishPower's coal-fired generating stations at
       Longannet and Cockenzie.

     /2/The IPC consent for Kincardine expired at the end of March 1997, and
       the station is now considered to be unavailable for generation.

     /3/The installed capacity at Inverkip is currently on long term
       preservation and is unavailable for generation.

     /4/The P&L Windfarm is owned by CeltPower Limited, with ScottishPower
       and Tomen Power Corporation (U.K.) Limited each having a 50% ownership
       interest.

     /5/The windfarms at Coal Clough and Carland Cross are owned by joint
       ventures among Manweb, SWEB and Renewable Energy Systems, with Manweb
       having 45% ownership interest.

      In addition to the above, the division owns Strathkelvin House,
      Kirkintilloch which is the grid control center.

      Construction of a 400 MW Combined Cycle Gas Turbine station near
      Brighton has commenced, and commercial operation is planned for winter
      2000/01. The project is a joint venture, in which ScottishPower has a
      50% economic and voting interest, with CSW International Inc., the U.S.
      parent company of SEEBOARD.

      Investment is being made in ScottishPower's Longannet and Cockenzie
      power stations and a major new cost savings initiative has been
      launched. Acquisition of additional generation capacity is kept under
      consideration.

      Progress on developing Hatfield Moors as a gas storage site continues
      with all necessary planning and consents for construction obtained. The
      (Pounds)17.6 million project remains on target to meet the winter
      1999/00 peak demands of some 450,000 customers.

14                                                  ScottishPower Form 20-F 1999


<PAGE>


      Table 1.4 Sources of Generating Capacity and Output Available Under
      Contract as at March 31, 1999

<TABLE>
<CAPTION>
                                      Number of Generating
                                               Sets and/or Net Output Maximum Capacity
                                        Installed Capacity   Capacity        Available
                                Notes                   MW         MW               MW
      --------------------------------------------------------------------------------
       <S>                      <C>   <C>                  <C>        <C>
       Nuclear:
       Torness                     1               2 x 660      1,260              944
       Hunterston B                1               2 x 660      1,220              914
                                                                            -----
         Total Nuclear                                                           1,858
       Dual Oil and Gas Fired:
       Peterhead                    2              2 x 660      1,284              642
       Gas Turbine:
       Peterhead                    3              2 x 120        232              116
       Conventional Hydro:
       Scottish & Southern          4                                              200
       -----------------------------          ------------   -------         ---------
       Total                                                    3,996            2,816
       -----------------------------          ------------   -------         ---------
</TABLE>

     /1/The NEA entitles ScottishPower and Scottish & Southern to 74.9% and
        25.1%, respectively, of the electricity generated from British Energy's
        Hunterston B and Torness nuclear generating stations. Except in limited
        circumstances, the NEA obliges ScottishPower and Scottish & Southern to
        pay for all the electricity declared by British Energy to be available
        from such nuclear stations, whether or not they take such electricity.
     /2/Following the end of the Miller Gas Plateau, ScottishPower is entitled
        to 50% of the net output capacity of Scottish & Southern's Peterhead
        station (or such lesser part of that capacity as Scottish & Southern
        declares to be available to ScottishPower on any day).
     /3/The gas turbines installed at Peterhead are primarily for use during an
        outage on one of the main units at the station to enable the consumption
        of the gas delivered from the Miller gas field. The use of the gas
        turbines at other times is subject to agreement with Scottish &
        Southern.
     /4/The Hydro Agreement entitles ScottishPower to 400 GWh of electricity
        from Scottish & Southern's conventional hydro generating capacity during
        each contract year (although this amount may be reduced during periods
        of unusually low rainfall or unusually low run-off) and requires
        ScottishPower to pay for that amount of electricity, irrespective of how
        much electricity it actually takes.

      Station Performance
      Generation Wholesale's goal is to achieve best practice in terms of
      generation performance and costs, at the same time maintaining the
      flexibility to optimize energy trading.

      Generation Wholesale has undertaken extensive benchmarking of all its
      activities against an international peer group and undertaken programs
      to implement its findings. However, it is the intention of the business
      to drive costs down further through continued reductions in fixed costs
      and manpower plus improved engineering efficiencies and enhanced
      environmental performance. The group has a detailed engineering
      strategy to upgrade its existing coal stations. Furthermore, management
      believes that, as a result of its ongoing maintenance program,
      ScottishPower's portfolio of power stations is in a condition to
      support current and expected generation output.

      Fuel Strategy and Sourcing
      ScottishPower's fuel purchasing strategy is based upon the objective of
      achieving competitive fuel prices while balancing the need for security
      and flexibility of supply. The major components of the fuel portfolio
      are coal, gas and oil.

      Coal -- ScottishPower currently purchases the majority of its coal from
      Scottish suppliers under long-term contracts, with the principal
      supplier being The Scottish Coal (Deep Mine) Limited. Under a six year
      deal which
ScottishPower Form 20-F 1999                                                  15
<PAGE>

      commenced on April 1, 1998, ScottishPower will take 1.67 million tonnes
      per annum of low sulphur coal from Scottish Coal's Longannet Deep Mine
      Complex, adjacent to the Longannet Power Station.

      Up to a further 1.7 million tonnes of Scottish opencast coal will also
      be supplied yearly by other Scottish suppliers under long-term
      contracts of between three and five years, which commenced on April 1,
      1998.

      These purchase commitments secure the major part of ScottishPower's
      coal requirements from local sources at competitive prices. The balance
      of requirements will be sourced through the exercise of options under
      the long term contracts and/or short term competitive tenders,
      depending on market conditions.

      Gas -- ScottishPower purchases gas to meet the needs of the group's
      generation and supply businesses. Balancing and trading of gas is the
      responsibility of the Energy Trading Center.

      The group's gas purchasing strategy is based upon a combination of
      long, medium and short-term contracts. In accordance with this
      strategy, the group has agreed contracts direct with gas producers for
      the supply of gas on a non-interruptible basis. The group has two long
      term contracts (with terms of, respectively, 10 and 15 years, from
      1994) for supply from major gas fields. In addition, ScottishPower is
      party to agreements which require Scottish & Southern to purchase and
      accept delivery of gas from the Miller gas fields at Peterhead power
      station. These agreements continue in force until the reserves of the
      field have been fully depleted. Latest projections are that this could
      occur within the next two to three years. It should be noted that
      ScottishPower is continuing to look at opportunities which might be
      available for it to participate in the Peterhead repowering project
      which will upgrade the station to combined cycle gas turbine status.

      Oil -- From time to time, ScottishPower purchases heavy fuel oil on the
      international spot market when favorable prices are available. Heavy
      fuel oil is therefore an opportunity purchase rather than a firm fuel
      source.

      Generation Sales
      Generation sales totalled 29,679 GWh in fiscal 1999. Approximately
      22,246 GWh were attributable to ScottishPower's energy supply business,
      with the remaining 7,433 GWh either being sold to other suppliers or
      exported via the Interconnector to the Pool in England and Wales.

      The average utilization of ScottishPower's two largest coal-fired
      stations, Longannet and Cockenzie, in fiscal 1999 was approximately 46%
      and 26%, respectively. It is expected that this utilization will
      increase as the capacity of the Interconnector is progressively
      expanded enabling ScottishPower to sell greater quantities of
      electricity into the Pool.

      The Pool in England and Wales
      ScottishPower has the ability to sell, or purchase electricity through,
      the Pool in England and Wales via the Interconnector which is shared by
      Scottish & Southern and BNFL under formal agreement. See "Structure of
      the Electricity Industry in the United Kingdom--Industry Structure in
      England and Wales" for a general discussion of the Pool. The current
      maximum capacity of the Interconnector is 1,950 MW with an average in
      fiscal 1999 of 1,427 MW. As ScottishPower produces electricity for
      significant periods of the year at a cost that is below the price at
      which the Pool purchases electricity, ScottishPower is able to take
      advantage of the prices at which electricity is purchased and sold by
      the Pool.

      The ScottishPower network is also connected at several points to the
      transmission network of Scottish & Southern. An agreement has been made
      with the NGC and Scottish & Southern to upgrade the maximum capacity of
      the Interconnector to 2,200 MW. Planning approval has now been granted
      by HM Government for the reinforcement necessary in England and Wales
      to give full effect to the upgrade. The current completion date for
      this project is September 2001. ScottishPower's generation business
      will provide 75% of the capital cost of the upgrade. Pursuant to an
      agreement with Scottish & Southern, ScottishPower has the contractual
      right to 54% of the pre-upgrade capacity and up to 75% of the
      additional upgrade capacity of the Interconnector.

      ScottishPower's Composite License only entitles it to reserve capacity
      to itself with the consent of the DGES, and obliges it to offer to
      enter into an agreement with a third party applicant for use of the
      Interconnector, except when

16                                                  ScottishPower Form 20-F 1999


<PAGE>

      the DGES determines that the capacity of the Interconnector is
      insufficient to accommodate the requirements of the applicant having
      regard to such amounts of capacity as has already been reserved to
      ScottishPower (with the DGES's consent) or a third party. The DGES
      determined, in December 1998, that ScottishPower may not reserve any of
      its allocated capacity on the Interconnector to its own generation
      business. The DGES also determined that capacity was sufficient to
      accommodate the requirements of BNFL, and specified that ScottishPower
      should make available to BNFL up to 196 MW of capacity for the period
      January 1, 1999 to March 31, 2002. In the case of National Power plc,
      the DGES declined to make a determination on the grounds that National
      Power plc had not provided sufficient information in support of its
      application. Following these determinations, ScottishPower has made
      applications to the DGES to reserve capacity of 75% of the additional
      upgrade capacity to itself and, with respect to the existing capacity,
      is in negotiation with the DGES with respect to amendments to the rules
      governing the allocation of capacity.

      The determinations referred to above resulted from requests to
      ScottishPower from BNFL and National Power plc for access to the
      Interconnector, and a request by ScottishPower that the whole of the
      capacity on the Interconnector to which ScottishPower is contractually
      entitled be reserved to ScottishPower's generation business. On March
      31, 1999, ScottishPower extended on an interim basis its existing Use
      of Interconnector Agreement with BNFL, and negotiations are ongoing to
      enter into a new agreement to provide BNFL with access up to 196 MW per
      year until March 31, 2002 and potentially beyond to accommodate the
      remaining life of the Chapelcross power station. Without negating the
      December 1998 determination, ScottishPower contends that, under the
      existing contractual arrangements, Scottish & Southern is obliged to
      accommodate 46% of BNFL's required access. Scottish & Southern contends
      that all of BNFL's required access should be deducted from
      ScottishPower's share of access. Following discussions between
      ScottishPower and Scottish & Southern a compromise between the two
      positions has now been agreed in principle and will be ratified shortly
      in a formal agreement.

      Trading with Northern Ireland Electricity
      ScottishPower has entered into an agreement with Northern Ireland
      Electricity, a subsidiary of Viridian Group plc, for the construction
      of a Scottish-Northern Irish Interconnector with a transfer capability
      of 250 MW and an agreement for the supply by ScottishPower of around
      1,095 GWh of electricity per year over a period of 70 months from the
      date of commissioning. These agreements amend and restate agreements
      originally entered into in 1994. Once completed, the Northern Irish and
      marine sections of the Scottish-Northern Irish Interconnector will be
      owned by Northern Ireland Electricity, and the Scottish section from
      the converter station will be owned by ScottishPower. Northern Ireland
      Electricity will provide the full capital cost of this Interconnector.
      Approval has been obtained from the Northern Ireland Office for the
      Regulation of Electricity and Gas for this agreement although European
      Commission approval and U.K. competition clearance are still being
      sought. It is anticipated that the Scottish-Northern Irish
      Interconnector will commence commercial operation in December 2001.

      The capital cost to ScottishPower of both the England and Wales
      Interconnector upgrade and the construction of the link between
      Scotland and Northern Ireland are not considered material. Costs
      incurred will be recouped, by the company, through "use of system'
      charges on both projects.

      Power Systems
      ScottishPower owns and manages a substantial electricity network
      comprising both the distribution system to customers in its two
      authorized areas and, in Scotland, the high voltage transmission system
      (132 kilovolts and above). The latter includes all the assets of the
      Anglo-Scottish Interconnector which are in its Scottish authorized
      area. The main function of the power systems business ("Power Systems")
      is to develop and maintain an efficient, coordinated and economical
      network, including high voltage connections to England, and to operate
      and develop the distribution system to approved standards of safety and
      reliability. Within Power Systems the focus continues to be on reducing
      costs and improving service. Its principal business activities involve
      the provision of new connections, construction and refurbishment of the
      system, maintenance and fault repair, setting tariffs and collecting
      revenues for the use of its authorized networks, and all metering
      activities, from provision and repair to meter reading. Power Systems
      continues to focus strongly on the efficient delivery of electricity to
      customers in its franchise areas via its overhead and underground
      network. Investment in the business, has included significant upgrades
      and refurbishments to the transmission and distribution system.

ScottishPower Form 20-F 1999                                                  17
<PAGE>

      Power Systems is divided into three regions in Scotland, three regions
      in the Manweb authorized area and a metering business which covers both
      areas. It has a distribution/transmission network which extends to
      approximately 113,000 kilometers, with 63,000 kilometers of underground
      cables and some 50,000 kilometers of overhead lines.

      Table 1.5 below sets forth key information with respect to the group's
      transmission and distribution services in fiscal 1999.

<TABLE>
<CAPTION>
                              Note ScottishPower       Manweb        Total
      -----------------------------------------------------------------------
       <S>                    <C>  <C>              <C>          <C>
       Franchise area                  22,950 km/2/ 12,200 km/2/ 35,150 km/2/
       Number of franchise
       customers                           1.86m        1.39m        3.25m
       Number of employees       1         2,948        1,295        4,243
       System maximum demand            4,153 MW     3,212 MW     7,365 MW
       Primary substations                   447          611        1,058
       Secondary substations              39,841       40,943       80,784
         Ground mounted                   16,186        9,663       25,849
         Pole mounted                     23,655       31,280       54,935
       Transmission network
       (km)
         Underground                         237          213          450
         Overhead                          3,851        1,299        5,150
       Distribution network
       (km)
         Underground                      40,004       23,504       63,508
         Overhead                         24,392       20,297       44,689
       --------------------------- ---------------------------------------
</TABLE>
     /1/Full-time equivalent

      ScottishPower and Manweb each hold a PES license allowing each company
      to undertake electricity distribution activities within its authorized
      area. The income derived from the distribution business is dependent on
      changes in the demand for electricity by customers in the franchise
      area. Demand for electricity is affected by such factors as growth and
      movements in population, social trends, economic and business growth or
      decline, changes in the mix of energy sources used by customers,
      weather conditions and energy efficiency measures. The following tables
      set out, by customer type, the levels of electricity distributed in GWh
      over ScottishPower and Manweb's distribution systems during the five
      most recent fiscal years.

      Table 1.6 Total Units Distributed in ScottishPower's Franchise Area
      (GWh)

<TABLE>
<CAPTION>
       Fiscal
       Year     Residential    %  Commercial    %  Industrial    %  Other   %   Total
      -------------------------------------------------------------------------------
       <S>      <C>         <C>   <C>        <C>   <C>        <C>   <C>   <C>  <C>
       1995           8,023 38.6%      5,495 26.4%      6,524 31.4%   736 3.6% 20,778
       1996           8,076 38.1%      5,558 26.3%      6,765 31.9%   782 3.7% 21,181
       1997           8,194 37.8%      5,758 26.6%      6,983 32.2%   751 3.4% 21,686
       1998           8,048 37.1%      5,809 26.8%      7,103 32.7%   752 3.4% 21,712
       1999           8,345 37.3%      6,041 27.0%      7,217 32.3%   765 3.4% 22,368
      -------------------------------------------------------------------------------

      Table 1.7 Total Units Distributed in Manweb's Franchise Area (GWh)

<CAPTION>
       Fiscal
       Year     Residential    %  Commercial    %  Industrial    %  Other   %   Total
      -------------------------------------------------------------------------------
       <S>      <C>         <C>   <C>        <C>   <C>        <C>   <C>   <C>  <C>
       1995           4,825 26.1%      3,331 18.0%      9,921 53.7%   408 2.2% 18,485
       1996           4,889 26.4%      3,520 19.0%      9,689 52.3%   421 2.3% 18,519
       1997           4,930 26.8%      3,594 19.5%      9,476 51.4%   417 2.3% 18,417
       1998           4,916 26.5%      3,640 19.7%      9,536 51.5%   430 2.3% 18,522
       1999           5,037 29.1%      3,852 22.2%      8,018 46.3%   417 2.4% 17,324
      -------------------------------------------------------------------------------
</TABLE>

18                                                  ScottishPower Form 20-F 1999


<PAGE>


      The group is committed to providing its customers with an electricity
      supply which is safe and reliable. Both ScottishPower and Manweb are
      fully compliant with the EU standards for safe and reliable electricity
      set forth in the European Standard EN50169 entitled "Voltage
      Characteristics of Electricity Supplied by Public Distribution
      Systems".

      In 1995, the Office of Electricity Regulation ("OFFER") made the
      provision of customer connections to the electrical network
      competitive. This change, together with similar actions by the Office
      of Gas Supply and the Office of Telecommunications, has provided an
      opportunity for the group to provide multi-utility connections, a
      development which provides benefits both to the group and to customers.
      The group has now developed fully integrated, cost effective packages,
      providing solutions for inward investors and property developers. Thus,
      the group has unrivalled expertise in delivering multi-utility projects
      ranging from large scale industrial sites to multi-unit commercial and
      housing developments.

      In late December 1998 and early January 1999, the group's network in
      Scotland sustained damage due to very severe weather conditions,
      causing interruptions to supply. ScottishPower is implementing measures
      to further improve its ability to deal with such incidents and is
      contributing to a review by OFFER of electricity companies' responses
      to the bad weather.

      Energy Supply
      The group's Energy Supply business ("Energy Supply") is responsible for
      the sales and marketing of electricity, gas and related products to
      customers within ScottishPower's and Manweb's respective home areas and
      to the competitive market throughout the rest of Great Britain. At the
      end of fiscal 1999, Energy Supply had 3.2 million electricity customers
      in Great Britain and an overall market share of 12%.

      Energy Supply's strategy is to defend the existing markets, build the
      energy customer base, and add value from an extended range of products
      and services--all underpinned by high-quality, low-cost service. In
      addition the group will continue to meet the electricity supply and
      service obligations of Scottish Power and Manweb under their respective
      PES licenses. The tables below set forth the relative proportion of
      units of electricity supplied by ScottishPower and Manweb to their
      residential, commercial and industrial customers over the five most
      recent fiscal years.

      Table 1.8 Total Units Supplied By ScottishPower (GWh)/1/

<TABLE>
<CAPTION>
       Fiscal
       Year     Residential    %  Commercial    %  Industrial    %  Other   %   Total
      -------------------------------------------------------------------------------
       <S>      <C>         <C>   <C>        <C>   <C>        <C>   <C>   <C>  <C>
       1995           8,023 37.7%      5,672 26.6%      6,718 31.6%   877 4.1% 21,290
       1996           8,076 36.8%      5,691 25.9%      7,053 32.1% 1,132 5.2% 21,952
       1997           8,194 35.8%      6,610 28.9%      7,200 31.4%   890 3.9% 22,894
       1998           7,975 33.4%      6,919 28.9%      8,245 34.5%   761 3.2% 23,900
       1999           8,319 35.3%      6,351 26.9%      8,170 34.6%   755 3.2% 23,595
      -------------------------------------------------------------------------------
</TABLE>

      Table 1.9 Total Units Supplied By Manweb (GWh)/2/

<TABLE>
<CAPTION>
       Fiscal
       Year     Residential    %  Commercial    %  Industrial    %  Other   %   Total
      -------------------------------------------------------------------------------
       <S>      <C>         <C>   <C>        <C>   <C>        <C>   <C>   <C>  <C>
       1995           4,825 42.1%      3,020 26.4%      3,201 28.0%   403 3.5% 11,449
       1996           4,889 46.8%      2,997 28.7%      2,142 20.5%   412 4.0% 10,440
       1997           4,930 50.3%      2,908 29.7%      1,552 15.8%   408 4.2%  9,798
       1998           4,916 55.1%      2,435 27.3%      1,133 12.7%   433 4.9%  8,917
       1999           4,999 62.1%      2,229 27.7%        437  5.5%   380 4.7%  8,045
      -------------------------------------------------------------------------------
</TABLE>
     /1/Covers both first tier (franchise and non-franchise) markets in
        ScottishPower's service territory and second tier sales outside
        ScottishPower's service territory.
     /2/The reduction in Manweb figures in 1997 is attributable to the
        continuing combination of the ScottishPower and Manweb sales force which
        led to all new second tier customers contracting with ScottishPower.

ScottishPower Form 20-F 1999                                                  19
<PAGE>


      Electricity Trading
      Electricity trading, within the Energy Trading Center, secures
      competitive advantage for the group through being an informed trader
      optimizing its position across the electricity value chain and
      continuously evaluating and managing trading risk exposure. The risks
      identified in electricity trading generally relate to price volatility
      arising in the Pool market in England and Wales and the group's overall
      exposure as a net generator (seller) or net supplier (purchaser) of
      electricity which can (and does) vary over time. Such net exposure can
      be managed through trading in contracts for differences with willing
      parties such as other generators, suppliers or intermediaries. As an
      external member of the Pool of England and Wales since 1990,
      ScottishPower has traded principally as an exporter (generator), in
      that energy market.

      Electricity Markets
      Energy Supply purchases electricity from a range of sources, including
      the group's generation business, for sale to customers both within its
      home areas and outside them. Until September 1998, only public
      electricity suppliers were entitled to supply customers in their
      franchise areas (now home areas) with demand less than 100 kW. From
      September 1998 to May 1999, the franchise areas of all public
      electricity suppliers were opened to competition on a phased basis,
      with the result that electricity suppliers holding second tier
      licenses, including ScottishPower and Manweb, are able to supply
      electricity to all customers in the franchise area of a public
      electricity supplier. Large industrial or commercial customers with
      demand above that threshold have been and continue to be able to seek
      supply from other electricity suppliers holding a "second tier"
      license. ScottishPower's and Manweb's respective franchises were opened
      to competition in three phases, commencing in September 1998 and
      running through to February 1999. Since September 1998, the strategic
      focus of the energy supply business has been defense of its existing
      markets, particularly domestic and small business customers in the
      ScottishPower and Manweb areas, while exploiting the opportunity to
      expand its customer base outside these regional boundaries. As at March
      31, 1999, the energy supply business had retained 96% of domestic
      customers in the ScottishPower area and 94% in Manweb. The business had
      also signed up 190,000 electricity contracts outside those home areas.

      In the highly competitive industrial and commercial energy market the
      group has sought to defend market share and has retained 76% of these
      volumes in the ScottishPower area. In Manweb, which comprises some of
      the largest industrial electricity users in the country, the group has
      retained a 27% share of these volumes. Outside the group's home areas,
      the group currently supplies around 1,750 GWh of electricity.

      As the industrial and commercial energy market has become increasingly
      commoditised, the group has continued to develop a presence in the
      growing energy services marketplace, focusing mainly on larger
      businesses. This involves the outsourcing of energy and utility related
      services for on-site generating plant, boiler and steam raising plant
      and other energy efficient applications.

      Gas Markets
      The group has a growing gas supply business, which exploits the
      synergies with the generation business and allows value to be created
      by profiling gas between supply and generation. The domestic gas supply
      market has been open to full competition (i.e., extended to premises
      with consumption under 2,500 therms per annum) since late May 1998. The
      group has now established itself as one of the leading challengers to
      Centrica plc (British Gas Trading) in this market, having already
      acquired a total of 760,000 domestic contracts at the end of fiscal
      1999, approximately 4.0% of the total U.K. gas supply market.

      In the business market, the group has continued to grow, supplying gas
      representing approximately 220 million therms per annum to 23,215 sites
      across the U.K.

      Domestic Energy Contracts
      Fiscal 1999 was a very challenging one for the group's energy
      businesses as the residential electricity supply market was opened to
      competition. At March 31, 1999, new domestic energy contracts secured
      since, in the case of gas, the second phase of competition in April
      1997 and, in the case of electricity, the introduction of competition
      in September 1998, totaled 950,000 (760,000 gas and 190,000 new
      electricity contracts). The group's focus is on securing "dual fuel"
      electricity and gas customers and to date the group has more than
      317,000 dual fuel energy contracts signed. The group's progress has
      been achieved in spite of intense competition. Electricity customers

20                                                  ScottishPower Form 20-F 1999
<PAGE>

      registered to leave the group at March 31, 1999 were 147,000,
      representing 5% of customers in ScottishPower's and Manweb's home
      areas.

      The group will continue to seek to win further new customers.
      Attracting new customers leads to initial costs in sales and marketing,
      information systems and new procedures. However, ScottishPower believes
      that this investment should contribute to earnings in the medium to
      longer term.

      Customer Service
      ScottishPower has taken steps to improve all aspects of its customer
      service within the energy businesses in preparation for full
      competition in the domestic electricity supply market, and intends to
      continue to treat improving customer service as a priority over the
      next year. The businesses' customer service guaranteed standards were
      maintained in the year ended March 31, 1999 at the high level set in
      the previous year, with over 99.99% of all electricity services
      provided currently matching or exceeding regulatory standards.

      All service requirements in Scotland are met by a customer service call
      center, employing modern communications and information technology,
      offering a comprehensive service to customers, including 24 hour faults
      and emergency support. In Manweb's home area the group has focused its
      activities on improving customer service through the provision of two
      regional call centers and a business call center. The group has also
      established a gas call center in Warrington servicing domestic and
      small business customers.

      The performance of ScottishPower and Manweb in the area of Guaranteed
      Standards failures over the last seven years as reported to OFFER is
      shown below.

      [The following is a description of the information that appears in the bar
      charts.

      Scottish Power-Guaranteed Standards          Manweb - Guaranteed
      Failures                                      Standards Failure

                1992/93   -  1673                     1992/93 - 1071
                1993/94   -  1051                     1993/94 -  253
                1994/95   -   249                     1994/95 -  181
                1995/96   -   145                     1995/96 -  242
                1996/97   -   150                     1996/97 -   81
                1997/98   -   117                     1997/98 -   62
                1998/99   -    89                     1998/99 -   40]

      Domestic gas suppliers faced increases in complaints during the period
      of market liberalization. The most common complaints to the Gas
      Consumers' Council have concerned the change of supplier process and
      sales and marketing activity. ScottishPower received 2,285 OFGAS and
      Gas Consumer Council complaints during fiscal 1999, which equates to
      less than 1% of the customer accounts won during the year.
      ScottishPower's performance in terms of user complaints was
      considerably better than that experienced by some other market
      entrants.

      ScottishPower is responding to competition by reducing operating costs
      and improving customer service. Underlying operating costs within
      ScottishPower's home area have declined by an average of 10% per annum
      over the last three years. ScottishPower has achieved these reductions
      by consolidating customer service operations from nine regional offices
      into one Customer Service Call Center; introducing new customer systems
      to streamline processes and remove unnecessary manual effort;
      introducing more flexible working practices which enabled services to
      be expanded at minimum cost. These initiatives have enabled
      ScottishPower to match its resources to work profile more efficiently
      and to remove "back office" costs. In addition, following the Manweb
      acquisition in 1995, the group has continued to exploit opportunities
      for synergy savings in common or shared supply functions.

      Southern Water

      Structure of the Water Industry in the United Kingdom
      Prior to privatization of the water industry, the provision of water
      supply and wastewater services in England and Wales was split between
      twenty-nine statutory water companies, each incorporated by separate
      Acts of Parliament

ScottishPower Form 20-F 1999                                                  21
<PAGE>

      which could only supply water, and ten water authorities established
      under the Water Act 1973 which could provide both water and wastewater
      services. Pursuant to the Water Act 1989 (the "WA 1989"), the functions
      of each water authority relating to water supply (except in areas where
      those functions were carried out through statutory water companies) and
      the provision of wastewater services were transferred on September 1,
      1989 to a Water and Sewerage Company (a "WaSC"). At privatization,
      certain of the water authorities' other functions, including pollution
      control, water resource management, fisheries, flood protection and
      alleviation and land drainage were transferred to the National Rivers
      Authority (the "NRA"). See "Environmental Regulation--Water" for
      further discussion.

      The relevant provisions of the WA 1989 were consolidated with other
      functional legislative provisions into the Water Industry Act of 1991
      ("WIA 1991"). This provides that each company engaged in public water
      supply or wastewater services must be licensed by the Secretary of
      State for the Environment or by the Director General of Water Services
      (the "DGWS"), in accordance with a general authorization given by the
      Secretary of State for the Environment. See "Regulation of the Water
      Industry".

      Southern Water was acquired by ScottishPower on August 6, 1996. At the
      time of its acquisition, Southern Water consisted of the holding
      company, an appointed WaSC (Southern Water Services), and a diverse
      portfolio of 20 other businesses.

      Region
      The region in which Southern Water operates occupies an area of
      approximately 10,450 square kilometers in the counties of Kent, East
      and West Sussex, Hampshire and the Isle of Wight and small parts of
      Wiltshire, Berkshire and Surrey. The region's coastline stretches from
      Swanscombe on the Thames Estuary to just beyond the Solent at Barton on
      Sea, including the Isle of Wight. The region has an estimated
      population of approximately 4.2 million. Around half of the resident
      population of the region live in urban areas spread along the coastline
      and around major estuaries. Approximately one fifth live in
      predominantly inland urban areas and the remainder inhabit
      predominantly rural areas. The portion of the region to which Southern
      Water supplies water covers a total area of some 4,450 square
      kilometers, contains approximately 1.0 million premises and has a
      resident population of some 2.2 million people. Local water companies
      supply the rest of the region's water requirements. Southern Water
      provides wastewater services to virtually all of the region, collecting
      sewage from around 1.7 million premises.

      Water Supply Business
      Southern Water supplies on average 600 million liters of water per day
      which is distributed through 13,300 kilometers of water main. Southern
      Water's 104 water treatment works treat water from 132 water sources in
      the region with 70% of water supplied coming from underground sources.
      Water is pumped through the water mains by 413 pumping stations.
      Southern Water is also responsible for the operation and maintenance of
      four impounding reservoirs which have a total storage capacity of
      42,390 million liters.

      Water put into supply exhibits a pronounced seasonal variation between
      summer and winter. Typically the peak seven day demand in the summer is
      up to 40% higher than the annual average and stems from increased
      residential usage and the influx of tourists to resort towns along the
      south coast and on the Isle of Wight.

      The bulk of Southern Water's underground sources are located in chalk,
      with a small number of abstractions being made from sandstone aquifers.
      The water is of high quality and receives various forms of treatment
      appropriate to each source. These provide reductions in the level of
      pesticides, iron and manganese; the reduction of plumbosolvency; and in
      all cases protection against bacteria throughout the distribution
      system to the point of use at the customers' taps by a residual level
      of chlorine. A single source has treatment to reduce the amount of
      nitrates, which is kept elsewhere within acceptable limits by blending
      output from various sources where necessary.

      The smaller proportion of water from rivers and reservoirs has a more
      complex form of treatment. In addition to the processes used for
      underground supplies, clarification and filtration processes provide a
      similar high quality drinking water. Again, in all cases disinfection
      is maintained by a residual level of chlorine.

      Southern Water has 13,300 kilometers of water main. In order to
      minimize the loss of water through leakage, a leakage control
      initiative was introduced following privatization in 1989 and has
      reduced water loss by 144 million

22                                                  ScottishPower Form 20-F 1999


<PAGE>

      liters per day. Since privatization Southern Water has one of the best
      records with respect to water supply leakage among the WaSCs. Losses
      through leaks in its distribution system stand at 11.2% in fiscal 1999
      compared to 26% just before the time of privatization, with a target to
      achieve 11.0% by the year 2000.

      Southern Water monitors water quality through a program in which
      samples are analyzed regularly for both microbiological and chemical
      parameters. In 1998, 99.82% of water sampled passed the EU performance
      criteria.

      Wastewater Business
      Southern Water has 392 wastewater treatment works ("WTWs") which treat
      sewage pumped through 20,700 kilometers of sewer by 1,975 pumping
      stations. WTWs provide various treatment types as follows: primary,
      enhanced primary, secondary biological and tertiary. In addition, as
      part of the treatment process to meet current bathing water standards,
      Southern Water has 24 long sea outfalls around the coastline of its
      region.

      Under the Water Resources Act 1991, WTWs are granted consent by the
      Environment Agency (the "EA") to discharge sewage effluent to
      controlled waters. The conditions attached to each consent can cover
      quality, quantity and operational parameters as laid down in the
      "Standard Clauses" of the Discharge Consents Manual issued by the EA.
      The basis of the EA's policy is to maintain and improve water quality
      and the aquatic environment.

      In addition to the residential population, the businesses in Southern
      Water's region discharge industrial effluent having the equivalent
      strength of an additional population of about 486,000.

      The disposal of sludge produced by WTWs is strictly controlled.
      Disposal to landfill is becoming restricted due to the lack of
      available local sites. In addition, all sludge disposed in this way is
      subject to a Landfill Tax. Disposal at sea ceased by December 1998. It
      is intended that the majority of the sludge produced at Southern
      Water's WTWs will be further processed to produce a soil conditioner
      which can be recycled and sold to the agricultural industry and any
      remaining amount will be incinerated. The recycling of treated sludge
      to agricultural land is controlled by an EU directive while
      incineration is controlled by licenses issued by the EA. The sludge
      produced by Southern Water's WTWs amounts to 77,500 tonnes of dry
      solids per year.

      In the 1999 bathing season, under the EU Bathing Water Directive, the
      EA is testing 79 beaches in the Southern Water region. Under the
      directive, the EA takes at least 20 samples during the bathing water
      season (May 1 to September 30) at each identified bathing beach and
      compliance is assessed on the basis of tests for bacteria. Additional
      tests are carried out for 19 physicochemical parameters in addition to
      the bacterial test and on two occasions during each season the bathing
      water is tested for the presence or absence of enteroviruses. Results
      may be published and posted by district councils on the beaches
      concerned. In the 1998 bathing season, only 2 beaches out of 77 failed
      the compliance tests. Capital schemes are in progress to reduce the
      likelihood of failures in future years.

      Table 1.10 below sets forth key information with respect to the
      Southern Water's activities in fiscal 1999.

<TABLE>
<CAPTION>
                                                      Southern Water
      --------------------------------------------------------------
       <S>                              <C>
       Franchise area (km/2/)                                 10,450
       Water supply services                      1 million premises
                                                  2.2 million people
       Water supply                       588 million liters per day
       Water main (km)                                        13,300
       Reservoir storage capacity              42,390 million liters
       Wastewater treatment works                                392
       Wastewater treatment services            1.7 million premises
                                                  4.2 million people
       Wastewater treated               1,300 million liters per day
       Capital expenditure fiscal 1999           (Pounds)347 million
</TABLE>
ScottishPower Form 20-F 1999                                                  23
<PAGE>


      Business Objectives
      Following the acquisition, a new business strategy has been developed
      based on maximizing value for ScottishPower shareholders. Under this
      new strategy, the group is seeking to radically remodel Southern Water
      into one of the U.K.'s most efficient water and wastewater companies.
      This has involved shifting the focus firmly back to the core business
      where the group's key utilities skills of asset management, customer
      service and regulatory management are being exploited to deliver
      enhanced value. Non-strategic businesses have been sold and business
      processes have been substantially simplified by absorbing certain key
      activities from the enterprise businesses back into an expanded core
      business. At the same time, head office functions have been
      rationalized, with group functions being transferred to Scotland.
      Southern Water contributed more than (Pounds)21 million of additional
      operating profit, mainly from increased revenues and continued cost
      savings of (Pounds)10 million delivered by the acquisition transition
      plan during fiscal 1999.

      The business strategy is also aimed at building a proactive and co-
      operative relationship with the Office of Water Services ("OFWAT"),
      including the development of an output driven capital program which
      delivers all of the obligations included in fiscal 1996 to fiscal 2000
      price determination period at a reduced cost from the agreed funding
      level granted by OFWAT. The delivery of obligations at lower cost than
      assumed in the price determination will generate efficiencies that will
      initially add shareholder value and ultimately result in a more cost-
      efficient service to customers.

      Investment Program
      In common with other WaSCs, Southern Water is faced with a substantial
      investment program for the period for 1996 to 2000, estimated to be of
      some (Pounds)1.0 billion. This program is largely driven by the EU
      Bathing Water Directive, the Urban Waste Water Treatment Directive
      ("UWWTD"), a sludge strategy to deal with cessation of dumping at sea,
      the increase in the volume of sludge due to the UWWTD and the
      expectation of more stringent environmental constraints relating to
      sludge disposal on land.

      The program is dominated by the construction of 24 new WTWs as required
      by the EU Directives. In addition, there are required regulations set
      by OFWAT, the Drinking Water Inspectorate and the EA to maintain and
      improve the security and quality of service provided. These outputs
      include projects to address:

      . above and below ground asset maintenance;

      . water resources and security of water supply;

      . reduced leakage and improved water pressure;

      . drinking water quality;

      . removal of flooding risk; and

      . avoidance of storm overflows on combined sewers.

      Southern Water was granted implicit funding in the price determination
      via an allowed annual rate of return on the OFWAT estimate of
      investment of (Pounds)1.0 billion. Southern Water's investment program
      has therefore essentially been "funded" upfront. A key aspect of the
      group's business strategy is to seek to deliver all of the required
      regulatory outputs of the capital program as efficiently as possible.

      ScottishTelecom
      ScottishPower Telecommunications Limited ("ScottishTelecom"), a
      subsidiary of ScottishPower, provides competitive communication
      services. Organic growth, coupled with a focused acquisitions policy,
      has positioned ScottishTelecom strongly across the breadth of the
      communication business since its launch in 1994.

      ScottishTelecom now provides, under innovative tariff packages, a wide
      portfolio of communication services ranging from fixed voice, data and
      mobile telephony services to call center services, on-line information
      and Internet access.

      In February 1998 ScottishTelecom acquired Pinnacle Cellular and it
      acquired Demon Internet for (Pounds)66 million on May 1, 1998.
      ScottishTelecom's "Scotland On-Line" and "Prestel" operations combined
      with Demon Internet now have in excess of 275,000 customers.

24                                                  ScottishPower Form 20-F 1999


<PAGE>

      The business moved into operating profit during fiscal 1998 and
      contributed (Pounds)10.3 million to the group's audited consolidated
      operating profits for fiscal year 1999. ScottishTelecom's current share
      of the overall Scottish telecommunications market in which it operates
      is still relatively small, but is increasing. The ScottishPower Board
      believes that revenue growth will come from carrying Demon Internet
      telecoms traffic following the installation of a network switch and
      supporting infrastructure which was completed at the beginning of
      February 1999.

      The development of the group has caused the Directors to review the
      future of ScottishTelecom. ScottishPower is currently evaluating the
      strategy of ScottishTelecom and the options available to maximize
      shareholder value from its investment in this business, in what is a
      rapidly changing and developing sector. This assessment includes a
      review of the services provided by ScottishTelecom, its funding needs
      and any consequential restructuring. The Directors expect to reach a
      decision during the year.

      Other Businesses

      Electrical Retailing
      ScottishPower's electrical retailing business sells electrical products
      through a chain of 183 outlets throughout the U.K. In addition to
      retail sales, the group's electrical retailing business provides
      servicing and repair facilities and delivery and connection facilities.

      ScottishPower's electrical retailing business is the third largest
      specialist retailer of electrical appliances in the U.K. It now has
      5.5% of the U.K. 'white goods' market and 4.0% of the U.K. "brown
      goods' market. Electrical white goods (including cookers, washing
      machines, refrigerators and small residential appliances) account for
      approximately 60% of total appliance sales. Brown goods (including
      televisions, stereo equipment, computers and camcorders) account for
      approximately 40% of appliance sales.

      The business has continued to gain market share through incrementally
      increasing the number of new stores and organic growth from existing
      stores. During fiscal 1999 it opened 10 new superstores, increasing
      selling space by 76,289 square feet.

      Contracting Services
      The group's contracting services business specializes in niche markets,
      including the installation and maintenance of high voltage equipment,
      residential heating (electrical and gas installations), street
      lighting, security and fire alarms, residential telephone connections,
      appliance and installation inspection and pre-planned maintenance, as
      well as instrumentation, mechanical and project management along with
      property and facilities management.

      Technology
      The group's Technology business combines a number of groups which
      specialize in different areas of engineering consultancy and science,
      including mechanical, electrical, civil engineering and environmental
      sciences. The range of work undertaken by the business is expansive and
      includes most categories of engineering consultancy from design and
      construction of buildings, plant and components, to the development of
      sophisticated control systems and monitoring devices.

      In addition to supporting ScottishPower's operational activities, the
      Technology business is closely involved in ScottishPower's capital
      investment program in its power stations, in the design and project
      management of new generation schemes such as combined cycle gas turbine
      plant and wind farms. The business also plays an important role in the
      refurbishment of the group's electrical retailing stores and the
      development of the telecommunications infrastructure.

      Information Systems
      The Information Systems Division is heavily involved in helping the
      group's other businesses prepare for energy supply liberalization. In
      fiscal 1999, expenditure on systems development throughout the group
      was (Pounds)51 million.

      The group has already made substantial progress towards achieving Year
      2000 compliance, investing (Pounds)20 million in fiscal 1999. In
      addition, it has achieved the IBM "e-business mark', a fast developing
      standard for electronic commerce.

ScottishPower Form 20-F 1999                                                  25
<PAGE>


      Year 2000
      Potential computer problems associated with the Year 2000 date change
      are an issue for users of computer systems throughout the world,
      including systems with embedded chips. ScottishPower is dependent on
      its own systems and on those of its key suppliers and customers. The
      Directors do not believe that ScottishPower faces greater risks from
      Year 2000 issues than other comparable utility companies in the U.K.

      ScottishPower established its group-wide Year 2000 program in 1997 to
      seek to manage the effects that Year 2000 issues may have on the
      group's operations. The methodology used builds on practices developed
      in conjunction with several user groups, including the Electricity
      Association (the trade association for electricity), U.K. Y2K Interest
      Group (the largest Year 2000 self-help group in the U.K.) and IMPACT (a
      confederation of many of the Top 100 companies in the U.K.). The scope
      of ScottishPower's program covers all aspects of the group's business.

      ScottishPower's approach concentrates on three main areas which are as
      follows:

      . working on and testing its own internal systems through gathering
        inventory, assessing criticality, prioritization and planning,
        testing and remediation;

      . understanding the Year 2000 readiness of its suppliers and major
        customers; and

      . modifying and developing contingency processes to reduce residual
        risk.

      The program focuses on IT systems, both corporate and desktop, non-IT
      systems (embedded chip systems) including process monitoring and
      control, business processes and business partners. ScottishPower is
      currently reviewing contingency plans, operational procedures, staffing
      issues and "worst case" scenarios. A Millenium Operating Regime is
      being implemented, and is particularly aimed at enhancing the group's
      state of readiness for the rollover period.

      Within each of ScottishPower's businesses, the Directors believe that
      scheduled remediation projects on the group's systems are well advanced
      with 89% of all critical projects substantially complete. The group is
      finalizing compliance work on its systems, and this work is planned to
      be completed well in advance of the end of 1999.

      ScottishPower's systems and operations are also dependent on products
      and services provided by others. Since autumn 1997, all orders and
      contracts placed by ScottishPower have included a Year 2000 clause
      requiring compliance to the BSI standard PD2000-1. As part of the
      supply chain management work undertaken, ScottishPower is assessing
      critical suppliers and customers for their Year 2000 compliance. The
      group has made an initial assessment of all its critical suppliers and
      will continue to monitor all of them during 1999. Interdependencies
      with other utilities are being reviewed through the U.K. Y2K Utilities
      Forum and other forums and one-to-one meetings. All other suppliers are
      being treated in accordance to the group's reliance on them. Where
      appropriate, alternative suppliers may be appointed.

      ScottishPower's Year 2000 program has been carried out using internal
      resources where possible, supplier resources where appropriate and
      specialist contractors where considered necessary. As at March 31,
      1999, the group has already spent approximately (Pounds)22 million on
      its Year 2000 program. The Directors estimate, based on the group's
      best estimates and, where appropriate, advice from specialist
      contractors, that the total cost to ScottishPower of the Year 2000
      program will be approximately (Pounds)30 million. This does not include
      the cost of certain capital investment programs which are being
      accelerated in order to seek to resolve the Year 2000 issues.

      The Directors believe that the group's work on its own systems and
      equipment and review of critical suppliers means that the group is
      taking all reasonable steps to minimize the risks associated with Year
      2000 issues. Based on the current state of knowledge on managing Year
      2000 issues and the Directors' best estimates, the Directors believe
      that, because of the anticipated short-term nature of any potential
      interruptions, it is unlikely that Year 2000 issues will have a
      material impact on the group's financial condition or operations.
      However, there can be no assurance that the steps taken by the group
      will successfully minimize vulnerabilities of its software and systems,
      or those of its suppliers, to the problems associated with the
      transition to the Year 2000, that disruptions to the group's business
      will not occur or that the costs associated with the advent of the Year
      2000 will not be greater than anticipated.

26                                                  ScottishPower Form 20-F 1999
<PAGE>

      Regulation of the Electricity Industry

      Introduction
      The U.K. electricity industry is regulated under the provisions of the
      Electricity Act 1989. The Electricity Act provided for the basis of the
      restructuring of the electricity supply industry ("ESI") in England and
      Wales and in Scotland in 1990, including the introduction of price
      regulation for transmission and distribution and competition in supply
      and generation.

      Regulation of the ESI
      The Electricity Act provides for the appointment of the DGES by the
      Secretary of State for Trade and Industry. The DGES holds office for
      renewable periods of five years and is the head of OFFER and its staff
      of administrators, economists and accountants.

      Under the Electricity Act, the Secretary of State and the DGES are
      required to exercise their respective functions in the manner best
      calculated to achieve various objectives including securing that all
      reasonable demands for electricity are satisfied; securing that license
      holders are able to finance the carrying on of the activities for which
      they are authorized by their licenses; and promoting competition in the
      generation and supply of electricity. Subject to these duties, the
      Secretary of State and the DGES have a number of other duties,
      including protecting the interests of consumers of electricity.

      The DGES exercises, concurrently with the Director General of Fair
      Trading, certain functions relating to monopoly situations in the
      generation, transmission, distribution or supply of electricity under
      the Fair Trading Act 1973 and certain functions relating to anti-
      competitive conduct under the Competition Act 1980. Under the
      Competition Act 1998, the DGES will continue to exercise functions
      concurrently with the Director General of Fair Trading.

      The Licensing Regime
      The Electricity Act prohibits the generation, transmission or supply of
      electricity to any premises unless authorized by a license or
      exemption. Licenses are granted for generation, transmission, public
      electricity supply by a PES and second tier supply.

      Under the electricity regime, England and Wales is divided into 12 PES
      franchise areas, and Scotland into two additional PES franchise areas,
      for the purposes of electricity supply and distribution.

      Each of the 14 PES licenses permits its holder to supply electricity to
      any premises within its authorized franchise area (first-tier license).
      Electricity suppliers which are not the PES license holder for that
      franchise area are known as second-tier suppliers and have second-tier
      supply licenses (second-tier license).

      Each PES licensee distributes electricity for second tier suppliers
      whose customers are within that PES licensee's authorized area, as well
      as for its own supply business. Charges for distribution are made to
      the PES licensee's own supply businesses or to second-tier suppliers as
      appropriate. Each PES license prohibits discrimination between its own
      supply business and other users of its distribution system.

      Each PES licensee is required, among other duties, to develop and
      maintain an efficient, coordinated and economical system of electricity
      and supply and to offer terms for connection to, and use of its
      distribution system on a non-discriminatory basis; in particular, a PES
      licensee may not discriminate in favor of its own first- or second-tier
      supply businesses.

      Each PES license requires the PES licensee to plan and develop its
      distribution system to a standard not less than that previously
      applicable within the nationalized electricity supply industry and to
      report annually to the DGES giving details of the performance of the
      licensee in maintaining distribution security and availability and
      quality of service during the previous financial year.

ScottishPower Form 20-F 1999                                                  27
<PAGE>


      ScottishPower is licensed under the Electricity Act to generate
      electricity, transmit electricity within its authorized transmission
      area and distribute and supply electricity within its authorized supply
      area. This license (a "Composite License") regulates each of its
      generation, transmission, distribution and supply businesses and
      certain other related aspects of its activities. In addition, it has
      second-tier licenses which authorize it to supply electricity to
      customers located outside its authorized supply area.

      Manweb is licensed under the Electricity Act to distribute and supply
      electricity within its authorized supply area pursuant to its PES
      license. Manweb also holds three second tier licenses which authorize
      it to supply electricity to users located in the authorized areas of
      other PESs, in England and Wales, Scotland and Northern Ireland
      respectively.

      Prior to September 1998, PESs were the only suppliers authorized to
      supply electricity to franchise customers (being customers with a
      maximum demand of less than 0.1 MW) in their respective authorized
      areas. Starting from September 1998, each PES was, at the direction of
      the DGES, to open its franchise area progressively to competition from
      other suppliers holding second tier licenses. The scope of the second
      tier licenses was extended correspondingly at the direction of the
      DGES. This process was completed in May 1999.

      In addition, in order for a second tier license holder to supply a
      "designated customer" (being a domestic customer or a customer
      requiring less than 12,000 kWh per year) in the authorized area of a
      PES, the second tier license holder must issue a designated supply
      notice to OFFER, and have its codes of practice (statements of intent
      about how the supplier will interact with customers) approved by OFFER.

      Modification of Licenses
      The DGES is responsible for monitoring compliance with the conditions
      of licenses and, where necessary, enforcing them through procedures
      laid down in the Electricity Act. License conditions may be modified,
      either in accordance with the terms of the relevant licenses or in
      accordance with the procedures laid down in the Electricity Act.

      Under the Electricity Act, the DGES may modify a license condition with
      the agreement of the license holders after due notice, public
      consultation and consideration of any representations or objections. In
      the absence of agreement, the only means by which the DGES can secure a
      modification is following a modification reference to the Competition
      Commission and in the circumstances set out below. A modification
      reference requires the Competition Commission to investigate and report
      on whether matters specified in the reference relating to the
      generation, transmission or supply of electricity in pursuance of a
      license operate, or may be expected to operate, against the public
      interest and, if so, whether the adverse public interest effect of
      those factors could be remedied or prevented by modification of the
      conditions of the license. In determining whether any particular matter
      operates, or may be expected to operate, against the public interest,
      the Competition Commission is to have regard to the matters in relation
      to which duties are imposed on the Secretary of State and the DGES.

      If there is an adverse finding, the Competition Commission's report
      will state whether any adverse effects on the public interest could be
      remedied or prevented by modification of the license conditions. If the
      Competition Commission so concludes, the DGES must then make such
      modifications to the license as appear to him requisite for the purpose
      of remedying or preventing the adverse effects specified in the report,
      after giving due notice and consideration to any representations and
      objections. The Secretary of State has the power to veto any
      modification reference.

      Modifications to license conditions may also be made in consequence of
      a monopoly or merger reference under the Fair Trading Act 1973 or,
      until March 2000, a reference under the Competition Act 1980. At that
      date, the relevant provisions of the Competition Act 1980 will be
      repealed by the Competition Act 1998.

      ScottishPower's acquisition of Manweb in 1995 and Southern Water in
      1996 involved ScottishPower giving assurances to the Secretary of State
      to modify Manweb's PES license and ScottishPower's Composite License
      (and Southern Water Services' Water Appointment). These modifications
      are discussed in more detail below. See "Principal Conditions of
      ScottishPower's Composite License and Manweb's PES License" and
      "Principal Conditions of Southern Water Services' Appointment".

28                                                  ScottishPower Form 20-F 1999


<PAGE>


      Term and Revocation of Licenses
      ScottishPower's Composite License continues until terminated by not
      less than 25 years' notice given by the Secretary of State on or after
      March 31, 2000. Manweb's PES license also continues until terminated by
      not less than 25 years' notice given by the Secretary of State on or
      after March 31, 2000.

      ScottishPower's and Manweb's second-tier licenses in relation to
      second-tier supply in England and Wales continue until terminated by
      not less than 25 years' notice given by the Secretary of State for
      Trade and Industry on or after November 19, 2000, and April 1, 2001,
      respectively. ScottishPower's second-tier license in relation to what
      was formerly Scottish Hydro-Electric plc's authorized supply area
      continues until terminated by not less than 25 years' notice given by
      the Secretary of State for Trade and Industry on or after March 31,
      2000. Manweb's second-tier license in relation to Scotland continues
      until terminated by not less than 25 years' notice given by the
      Secretary of State for Trade and Industry on or after July 1, 2004.

      Licenses under the Electricity Act may be revoked in certain
      circumstances specified in the licenses, such as the insolvency of the
      licensee or the licensee's failure to comply with an enforcement order
      made by the DGES. In addition, the Secretary of State for Trade and
      Industry may revoke each of ScottishPower's generation, transmission
      and PES licenses if ScottishPower ceases to carry on the activities
      authorized by the respective license.


      Principal Conditions of ScottishPower's Composite License and Manweb's
      PES License
      ScottishPower's Composite License and Manweb's PES License require
      ScottishPower and Manweb respectively to prepare and publish separate
      accounts, including on a current cost accounting basis, for each of
      ScottishPower's generation, transmission, distribution and supply
      businesses (first and second tier and wholesaling business) and
      Manweb's distribution and supply businesses.

      It is a further license requirement that none of ScottishPower's nor
      Manweb's businesses gives any cross-subsidy to, or receives any cross-
      subsidy from, any of ScottishPower's or Manweb's other businesses,
      whether regulated by the Composite License or not.

      A number of Composite License and PES License conditions require
      ScottishPower and Manweb, respectively, to be party to certain
      agreements or codes which affect their operational activities, for
      example, the Grid Code, which includes provisions governing the
      technical aspects of connections to, and the operation of, the
      transmission systems. Each PES licensee must also draw up, implement
      and comply with a Distribution Code, which interacts with the Grid Code
      and specifies technical requirements for connection to, and the
      operation and use of, its distribution system, and Codes of Practice on
      customer relations, which require the approval of the DGES. There are
      also Electricity Supply Regulations and certain performance standards
      determined by the DGES which must be complied with.

      The modifications made upon the acquisition of Manweb were designed to
      address the fact that, as a result of the acquisition, Manweb became a
      subsidiary of ScottishPower. Broadly, the modifications were designed
      to ring-fence Manweb's regulated businesses (distribution, supply and
      second-tier supply) from its non-regulated businesses and from
      ScottishPower's other businesses, to impose certain information
      reporting requirements on Manweb and ScottishPower to assist the DGES
      in his ability to carry out his regulatory functions and to address the
      fact that ScottishPower and Manweb are both electricity companies.

      As a condition for regulatory clearance of ScottishPower's acquisition
      of Southern Water, ScottishPower gave assurances to the Secretary of
      State that it would not operate any new business which is not regulated
      under the Electricity Act and whose annual turnover accounts for more
      than 5% of ScottishPower's aggregate annual turnover excluding all
      subsidiaries, other than as subsidiary company; ensure that
      ScottishPower had sufficient management and financial resources to
      fulfill its obligations to enable the introduction of competition in
      supply for all customers in its authorized area; and agree to
      appropriate modifications to Southern Water's license. These are
      discussed in more detail below--see "Principal Conditions of Southern
      Water Services' Appointment".

ScottishPower Form 20-F 1999                                                  29
<PAGE>


      Price Controls
      The primary objective of the regulation of the U.K. electricity
      industry is the promotion of competition wherever possible while
      ensuring that demand can be met and companies are able to finance their
      regulated activities. However, it is recognized that the development of
      competitive markets is not appropriate in some areas (such as in the
      transmission and distribution of electricity) and that in other areas
      it will take time to develop (as in the supply of electricity). In
      these areas regulatory controls are deemed necessary to protect
      customers in a monopoly market (by determining inflation limited price
      caps) and to encourage efficiency.

      ScottishPower and Manweb's businesses are subject to a number of price
      controls which take the form of a maximum price which can be charged
      (price cap). This price cap restricts the average amount charged for a
      bundle of services. Since 1995 regulation has tended to restrict price
      increases to customers to levels below the increase in the retail price
      index through a formula expressed as RPI-X.

      The rationale behind the use of the RPI-X formula is that companies are
      motivated, during the period of the price control, to maximize
      efficiencies knowing that they can retain any element of
      overperformance for their shareholders. The price caps are expressed in
      terms of an RPI minus X constraint on charges, where RPI represents the
      annual percentage change in the U.K.'s retail price index, and X may be
      any number determined by the DGES. The X factor is used to reflect
      expected efficiency gains and investment requirements. For example,
      where RPI is running at 3% and X is 2%, a company would be able to
      increase the average charge for a bundle of services by 1%. Since the
      controls are forward looking and are based on forecasts (e.g.,
      projected electricity sales volumes), correction factors may also be
      required to adjust tariffs in subsequent years to account for any
      forecasting errors.

      The DGES from time to time reviews the price cap formulae applicable to
      the transmission, distribution and supply businesses to ensure that
      reasonable demands for electricity are satisfied, that license holders
      are able to finance the carrying on of their licensed activities
      (including the ability to raise capital at reasonable rates), that
      competition is promoted in the area of energy supply and that the
      interests of consumers of electricity are protected.

      ScottishPower and Manweb participate in reviews of price caps
      applicable to them by submitting to OFFER their view of what reasonable
      efficiency gains and future investment requirements should be built
      into the determination of the revised price control.

      As with any modification to license conditions, the DGES must undertake
      a consultation exercise, inviting comments from PES licensees and third
      parties, before modifying licenses to incorporate new price controls.
      As described above under "--The Licensing Regime--Modification of
      Licenses", license conditions may be modified, either with the consent
      of the licensee or, in the absence of consent, following a modification
      reference to the Competition Commission. The Competition Commission is
      an independent body whose statutory duty is to determine whether the
      matters specified in a reference to it operate or may be expected to
      operate, against the public interest, and if so whether the adverse
      public interest effect of those factors could be remedied or prevented
      by modification of the conditions of the license. The Competition
      Commission must have regard to the matters in relating to which duties
      are imposed on the Secretary of State and the DGES, but will also take
      evidence from the electricity companies and third parties before
      reaching its conclusion. If the Competition Commission concludes that
      adverse effects on the public interest could be remedied or prevented
      by modification of the license conditions, the DGES must then make such
      modifications to the license as to appear to him to be requisite to
      remedy or prevent the adverse effects identified.

      Through participation in, and the submission of evidence to, these
      price control reviews and, where necessary, through the Competition
      Commission modification process described above, companies have the
      opportunity to comment on and seek to influence the final outcome of
      any price control review.

      ScottishPower Transmission Price Control
      The permitted maximum average charge per unit transmitted calculated
      under the transmission formula, multiplied by a pre-determined number
      of units transmitted, including both in area consumption and exports,
      determines the maximum transmission revenue that ScottishPower is
      permitted to earn in any financial year from these services.

30                                                  ScottishPower Form 20-F 1999


<PAGE>


      In September 1993, the DGES announced a revised transmission price
      control for ScottishPower, to take effect from April 1, 1994 and to run
      for five years. The new control left the X factor unchanged at RPI
      minus 1. The major changes to the initial control were: the inclusion
      of Interconnector revenue from the link with NGC within the definition
      of regulated revenue; the use of a predetermined forecast of units
      transmitted (including units transmitted onto another transmission
      system) rather than actual numbers transmitted; and the replacement of
      forecasts of inflation with actual historic values.

      In Spring 1998 ScottishPower agreed with the DGES to a delay of one
      year in the ScottishPower transmission price review with the new price
      control taking effect from April 1, 2000. For the interim year, fiscal
      2000, transmission revenue will be allowed to increase at the rate of
      inflation. OFFER is currently reviewing the scope and duration of the
      transmission price controls for Scotland thereafter and is expected to
      publish draft proposals for revised price controls in August 1999 and
      final proposals in November 1999, which will come into effect in April
      2000.

      Distribution Price Control
      The maximum distribution revenue is calculated from a formula that is
      based on customer numbers as well as units distributed. The current
      value of X for ScottishPower's distribution price control is 2 and will
      continue at this level until March 31, 2000. Following a reopening by
      the DGES in March 1995 of the five year price control set for RECs in
      England and Wales in August 1994 (and due to take effect on April 1,
      1995), the DGES imposed a one-off price reduction of 11% for Manweb
      from April 1, 1996. The value of X from April 1, 1997 to March 31, 2000
      was increased in England and Wales to 3.

      OFFER is currently reviewing the distribution price controls for all
      PESs and is expected to publish draft proposals in August 1999 and
      final proposals in November 1999, to come into effect in April 2000.

      Supply Price Control
      The value of X for ScottishPower's supply price control from April 1,
      1995 to March 31, 1998 was set at 2. The value of X for Manweb's supply
      price control from April 1, 1994 to March 31, 1998 was also set at 2.

      All customers are now subject to competitive supply, although certain
      smaller customers remain protected: for a two-year period from April
      1998, the supply price control operates as a maximum price restraint on
      tariff increases for ScottishPower's and Manweb's designated customers.

      The nature and extent of possible restraints from April 1, 2000 are
      being reviewed at the same time as the distribution price controls. By
      way of protection of the consumer, PES license conditions prohibit
      discriminatory, onerous or predatory pricing in areas in which a PES
      has been determined dominant (currently in the PES's authorized area).

      Future Regulation
      The prices which the group's electricity businesses may charge
      customers in their respective authorized areas are controlled by a
      formula which is linked to the U.K. RPI. Reviews of the price controls
      governing the group's electricity supply activities took effect from
      April 1, 1998 with a further review from April 1, 2000. Reviews of the
      price controls governing the group's transmission activities and
      distribution activities and for the water business will take effect
      from April 1, 2000. The effect of the current price controls is
      illustrated under "Effect of Price Controls".

      In March 1998, the HM Government published a Green Paper "A Fair Deal
      for Consumers-Modernising the Framework for Utility Regulation". In
      July 1998, the HM Government published a summary of the response to its
      consultations and in October 1998 it published a further consultation
      paper which contains specific proposals. The main proposals are:

      . separate licensing of supply and distribution activities of the PESs
        with the licenses to be held by separate legal entities, though not
        necessarily in separate ownership; and

ScottishPower Form 20-F 1999                                                  31
<PAGE>


      . a new single, primary duty on utility regulators to protect the
        interests of consumers, wherever possible and appropriate through the
        promotion of effective competition.

      Further proposals to revise the regulation of the electricity industry
      were published by the HM Government and the DGES in 1998, the most
      important of which include the following:

      . the DGES published proposals in July 1998 to reform the trading
        arrangements in England and Wales along the lines of commodity
        markets and other energy markets. The DTI published an Energy White
        Paper in October 1998, supporting the DGES's proposals, and setting
        out its expectation that wholesale price falls of at least 10% in
        real terms, and possibly more, can be expected in the medium term. In
        November 1998 a framework document on implementation of the new
        trading arrangements was published by the DGES (encompassing the
        development of a balancing market, a short-term bilateral market and
        a related settlement system). A Development and Implementation
        Steering Group has been set up to develop the new trading
        arrangements with a target implementation date of fall 2000;

      . revision of Scottish trading arrangements from April 2000. OFFER
        issued a consultation paper on options for future Scottish trading
        arrangements in December 1998, inviting comments on the creation of
        either a single trading area in Scotland or unified UK-wide trading
        arrangements. Further papers are expected to be published in June and
        August 1999 with final proposals in November 1999; and

      . separation of the supply, distribution, generation and transmission
        activities of ScottishPower and Scottish & Southern into separate
        companies. In May 1998, the DGES published a consultation paper on
        the separation of the distribution and supply activities of PESs to
        facilitate competition. It also considered the interface between
        transmission and generation in Scotland. A further consultation paper
        was published by OFFER in November 1998 proposing alternative
        scenarios for operational separation. Following examination by
        consultants of the costs of separation, OFFER published a further
        paper in May 1999, proposing new arrangements for metering and new
        obligations on PESs to separate their distribution and supply
        activities. In addition, the operational separation of transmission
        from generation in Scotland is being considered as part of the
        reviews of the transmission price controls and Scottish trading
        arrangements. A likely outcome will be a requirement for separate
        licensed businesses within the same group to operate as separate
        legal entities. Detailed proposals are expected in August 1999.

      The timing of any potential legislation arising from these proposals
      has not been announced. Until then the group will be actively involved
      in the consultation process.

      Callum McCarthy has been appointed as combined energy regulator, taking
      up the post of Director General of Gas Supply in November 1998 and
      Director General of Electricity Supply in January 1999.

      Regulation of the Water Industry

      Introduction
      The U.K. Water Industry is principally regulated under the provisions
      of WIA 1991 and the Water Resources Act 1991. WIA 1991 consolidates
      enactments relating to the supply of water and the provision of
      wastewater services, including WA 1989 and other enactments. WA 1989
      provided for the privatization process itself and set up the post-
      privatization structure and regulation of the industry.

      WIA 1991
      WA 1989 (now WIA 1991) provided for the appointment by the Secretary of
      State for the Environment of an industry regulator, the DGWS. The DGWS
      holds office for renewable periods of five years and is the head of
      OFWAT and its staff of administrators, economists and accountants. The
      current DGWS, Ian Byatt, was appointed as the first DGWS on August 1,
      1989 and was subsequently re-appointed for a five-year term to run from
      June 30, 1996 to the end of June, 2000.

      The EA regulates discharges by water companies into rivers and coastal
      waters and the abstraction of water from rivers and ground water; and
      the Drinking Water Inspectorate regulates the quality of drinking water
      in accordance with EU standards.

32                                                  ScottishPower Form 20-F 1999


<PAGE>

      Under WIA 1991, the DGWS and the Secretary of State for the Environment
      must exercise or perform their duties in the manner best calculated to
      secure that the functions of a water undertaker and of a sewerage
      undertaker are properly carried out as respects every area of England
      and Wales; and to ensure that companies holding Appointments are able
      (in particular, by securing reasonable returns on their capital) to
      finance the proper carrying out of their functions.

      These powers and duties are also to be exercised in a manner best
      calculated to ensure that the interests of the customer in relation to
      the fixing and the recovery of charges are protected, and in particular
      to ensure that the interests of customers and potential customers in
      rural areas are so protected; that no undue preference is shown; and
      that there is no undue discrimination in the fixing of those charges.

      The DGWS and the Secretary of State for the Environment are also under
      a duty to ensure that the interests of customers are protected as
      respects benefits that could be secured for them by applying a share of
      the proceeds of any disposals of a WaSC's land in future reviews.

      The DGWS exercises, concurrently with the Director General of Fair
      Trading, certain functions relating to monopoly situations in the
      supply of water or the provision of wastewater services under the Fair
      Trading Act 1973, and certain functions relating to anti-competitive
      conduct in connection with the supply of water or securing a supply of
      water or with the provision of, or securing of, wastewater services
      under the Competition Act 1980. Under the new U.K. competition
      legislation (Competition Act 1998), the DGWS will continue to exercise
      functions concurrently with the Director General of Fair Trading.

      Duties of Water Undertakers
      Under WIA 1991, each water undertaker is under a general duty to
      develop and maintain an efficient and economical system of water supply
      within its license area. It must also ensure that all such arrangements
      have been made for providing supplies of water to premises in its
      license area, for making such supplies available to people who demand
      them and for maintaining, improving and extending its mains and other
      pipes, as are necessary to enable it to meets its water supply
      obligations under the Act.

      Duties of Sewerage Undertakers
      Under WIA 1991, each sewerage undertaker is under a general duty to
      provide, improve and extend such a system of public sewers and to
      cleanse and maintain those sewers to ensure that its sewerage region is
      effectively drained. Sewerage undertakers are required to make
      provision for the emptying of sewers and whatever further arrangements
      are necessary from time to time for effectively dealing with the
      contents of sewers. In addition, discharges from wastewater treatment
      works must be consented to by the Environment Agency ("EA"); and
      sewerage undertakers are responsible under WIA 1991 for regulating
      discharges of industrial effluent into sewers. Contamination of
      controlled waters by non-complying effluent being discharged by a
      treatment works may involve the sewerage undertaker in liability,
      including clean-up costs.

      The Licensing Regime
      Following privatization of the U.K. water industry in 1989, each of the
      water and sewerage undertakers, while maintaining its effective
      monopoly supply, became regulated through an instrument of Appointment.
      The Appointment confirms the appointment of the water or sewerage
      undertaker as supplier in its own area and provides for the monitoring
      of its performance by the DGWS and the Secretary of State for the
      Environment.

      Modification of Licenses
      The DGWS is responsible for monitoring compliance with the conditions
      of Appointments and, where necessary, enforcing them through procedures
      laid down in WIA 1991. Conditions of the Appointment may be modified,
      either in accordance with the terms of the relevant licenses or in
      accordance with the procedures laid down in WIA 1991. Subject to a
      power of veto by the Secretary of State, the DGWS may modify the
      conditions in the Appointment with the consent of the licensee. Before
      making the modifications, the DGWS must publish the proposed
      modifications as part of a consultation process, giving third parties
      the opportunity to make representations and objections which the DGWS
      must consider.
ScottishPower Form 20-F 1999

                                                                              33
<PAGE>


      In the absence of consent, the only means by which the DGWS can secure
      a modification is following a modification reference to the Competition
      Commission and in the circumstances set out below. A modification
      reference requires the Competition Commission to investigate and report
      on whether matters specified in the reference relating to the carrying
      out of any function of a company by virtue of its Appointment operate,
      or may be expected to operate, against the public interest and, if so,
      whether the adverse public interest effect of those factors could be
      remedied or prevented by modification of the conditions of the
      Appointment. In determining whether any particular matter operates, or
      may be expected to operate, against the public interest, the
      Competition Commission is to have regard to the matters in relation to
      which duties are imposed on the Secretary of State for the Trade and
      Industry and the DGWS.

      If there is an adverse finding, the Competition Commission's report
      will state whether any adverse effects on the public interest could be
      remedied or prevented by modification of the license conditions. If the
      Competition Commission so concludes, the DGWS must then make such
      modifications to the Appointment as appear to him requisite for the
      purpose of remedying or preventing the adverse effects specified in the
      report, after giving due notice and consideration to any
      representations and objections. The Secretary of State for Trade and
      Industry has the power to veto any modification by agreement.

      Modifications to license conditions may also be made in consequence of
      a monopoly or merger reference under the Fair Trading Act 1973 or,
      until March 2000, a reference under the Competition Act 1980. At that
      date, the relevant provisions of the Competition Act 1980 will be
      repealed by the Competition Act 1998.

      Southern Water Services' Appointment was modified as a result of
      assurances given by ScottishPower as a condition to receiving
      regulatory clearance for its acquisition of Southern Water plc in 1996.
      These are discussed in more detail below, see "Principal Conditions of
      Southern Water Services' Appointment".

      Term and Revocation of Licenses
      Southern Water Services' Appointment continues until terminated by not
      less than 10 years' notice given to Southern Water Services by the
      Secretary of State for the Environment, expiring not earlier than 25
      years after September 1, 1989, the transfer date. Appointments may also
      be revoked or transferred to another company in certain circumstances
      specified in WIA 1991 or in the Appointments, such as the appointee
      failing to comply with an enforcement order made by the Secretary of
      State for the Environment or the DGWS, or the appointee being unable to
      pay its debts.

      Principal Conditions of Southern Water Services' Appointment
      The principal regulatory provisions which apply to the regulated
      activities of Southern Water Services are set out in WIA 1991 and
      regulations and orders made under it. Other business activities of
      Southern Water, such as waste management and other environmental
      services, engineering services and systems technology services, if
      undertaken, fall outside the direct scope of regulation under WIA 1991.
      Southern Water Services is an appointed WaSC and holds an Appointment
      regulated under WIA 1991 to supply water and sewerage services within
      its authorized area, which regulates its appointed activities. Southern
      Water Services' Appointment requires Southern Water Services to prepare
      and publish separate accounts, including on a current cost accounting
      basis showing separately its appointed business from all other
      businesses and activities. It is a further Appointment requirement that
      the regulated business neither gives to, nor receives from, any other
      business or activity of Southern Water Services, any cross-subsidy,
      whether those businesses are regulated by the Appointment or not.

      Southern Water Services' Appointment was modified following assurances
      given to the Secretary of State for Trade and Industry by ScottishPower
      as a condition to regulatory clearance of its acquisition of Southern
      Water plc to address regulatory concerns arising out of the merger, in
      particular to ensure the management independence of Southern Water
      Services and strengthen the ring fencing of its finances.

      As a result, the Appointment of Southern Water Services contains an
      obligation that it must at all times conduct the businesses regulated
      by its Appointment as if such businesses were substantially Southern
      Water Services' sole business and Southern Water Services were a
      separate public listed company. In particular, Southern Water Services
      must ensure that its board of directors is independent of ScottishPower
      and includes two non-executive

34                                                  ScottishPower Form 20-F 1999
<PAGE>

      Directors of relevant experience and standing. All Directors must
      disclose to Southern Water Services and to the DGWS any conflicts with
      their duties as Directors of Southern Water Services and have regard
      exclusively to the interests of Southern Water Service as a water and
      sewage undertaker, in the event of a potential conflict with the
      interests of other group companies. The DGWS must be informed of any
      change in the identity and functions of the Directors of Southern Water
      Services.

      In addition, Southern Water Services must not, without the consent of
      the DGWS make a loan to or guarantee any liability of any group
      company, or make any disposal of any asset of the regulated business.
      The payment of dividends by Southern Water Services should not impair
      its ability to finance its regulated business. Similarly, any financial
      support or transfer of assets from Southern Water Services to a group
      company must not adversely affect the former's ability to carry out its
      functions.

      In March 1998, Southern Water issued a (Pounds)100 million variable
      rate bond to help fund capital expenditure. The bond listing provides a
      form of Stock Exchange listing for the water business, to compensate
      OFWAT for the loss of comparative information (as a result of the
      discontinuance of Southern Water's stock exchange listing on the
      acquisition by ScottishPower). The bond listing imposes an obligation
      on Southern Water Services to comply with financial information
      requirements incumbent on a quoted plc and to maintain an investment
      grade rating for all its corporate debt.

      As a condition for regulatory clearance of ScottishPower's acquisition
      of Southern Water, ScottishPower gave assurances to the Secretary of
      State that it would not operate any new business which is not regulated
      under the Electricity Act and whose annual turnover accounts for more
      than 5% of ScottishPower's aggregate annual turnover excluding all
      subsidiaries, other than as a subsidiary company; ensure that
      ScottishPower had sufficient management and financial resources to
      fulfil its obligations to enable the introduction of competition in
      supply for all customers in its authorized area; and agree to
      appropriate modifications to Southern Water's license.

      Price Controls
      Southern Water Services' business is subject to price controls.
      Southern Water Services is allowed to increase its standard charges for
      the provision of water supply and sewerage services by the percentage
      change in the RPI plus an adjustment factor K. The value of K is
      currently set at 4% for the period ending on March 31, 2000. In 1996,
      as a result of the takeover of Southern Water Services by
      ScottishPower, ScottishPower undertook that the average price increases
      of Southern Water Services in the three charging years commencing April
      1, 1997, would be lower than the allowed charging limits. This
      undertaking was the subject of a license condition modification which
      came into effect on September 28, 1996, requiring Southern Water
      Services' average prices to be 1% lower than they would otherwise have
      been in 1997 and 3% lower than they would otherwise have been in the
      two years from April 1998.

      Infrastructure charges, being the amount that Southern Water Services
      can charge when new properties are connected for a domestic supply of
      water or sewerage services for each service, are also controlled. The
      infrastructure charge was set at (Pounds)200 for 1995-96 and is
      permitted to rise in line with inflation in subsequent charging years.

      The DGWS reviews Southern Water Services' price controls on a five year
      basis. The DGWS also has the power to make an interim determination to
      adjust price limits between the five yearly periodic reviews. At
      present, price limits for the water and sewerage companies are being
      examined as part of such a periodic review to be concluded in November
      1999, when the DGWS will set new price limits for the period from April
      1, 2000 to March 31, 2005. In setting price limits, the DGWS proposes
      to take into account compliance with environmental and quality
      standards in assessing price limits for the period from 2000 to 2005.
      The DGWS will also consult each water company individually to discuss
      responses to the review. In July 1999, the DGWS will publish a draft
      determination of new price limits to run from 2000 to 2005, and final
      decisions will be made in November 1999. The outcome of this price
      review and its impact on the group is uncertain.

ScottishPower Form 20-F 1999                                                  35
<PAGE>


      As part of the current review process, on October 29, 1998 the DGWS
      published a consultation paper setting out proposed ranges for bills
      for the period from 2000 to 2005. In this paper, the DGWS has confirmed
      that, on the basis of past efficiencies achieved by water companies, he
      considers there to be scope for substantial price reductions in April
      2000. However, HM Government has proposed a program of capital
      expenditure by the water companies aimed at environmental improvements
      which was included in the consultation paper. This program is estimated
      to cost some (Pounds)8.5 billion in the aggregate. The water companies
      would be entitled to pass that cost through to customers with the
      effect of increasing bills in the four years after 2000. In the
      consultation paper, the DGWS estimated, in the case of Southern Water
      Services, that expected average household bills could be reduced by
      more than 17.5% (in real terms) in 2000/01 on previous year levels.
      However, the DGWS expected there to be an overall increase in the
      1999/2000 level of bills in the four year period up to 2005.

      ScottishPower has responded to the DGWS's proposals by requesting an
      initial price increase of 3.5% and a K factor of + 3% which would
      result in an average regulated rate of return of 6.5%.

      Large industrial users can now choose their own water and sewerage
      suppliers. From April 1, 2000 fifteen water companies including
      Southern Water, will not be able to recoup from other customers any
      amounts lost by offering lower tariffs to such industrial users. The
      regulated charging base to which price limits apply will no longer
      include tariffs to large industrial users. Southern Water Services
      agreed to this change to its Appointment in February 1999.

      Future Regulation
      In May 1997, it was reported that the Secretary of State for the
      Environment announced a review by the Department of the Environment to
      examine ways in which environmentally damaging abstractions can be
      equitably curtailed. The review will also include arrangements for
      revoking licenses in areas where pumping causes significant
      environmental damage. The consultation paper was published on June 19,
      1998 and was open for comment until September 17, 1998. The review is
      still progressing and it is unlikely that legislation will be
      introduced before the 2000/01 Parliamentary session.

      Effect of Price Controls
      It is expected that regulation will continue to have a material bearing
      on the profitability and investment capability of ScottishPower.
      ScottishPower's regulated monopoly businesses comprise electricity
      transmission and distribution in ScottishPower and electricity
      distribution in Manweb (together representing 44% of the 1999 operating
      profit) and the water supply and wastewater business in Southern Water
      (representing 30% of ScottishPower's 1999 operating profit). The
      regulatory price controls relating to these areas of ScottishPower's
      business for the five year period commencing April 1, 2000 are
      currently being reviewed by regulatory authorities in the U.K., as well
      as those relating to supply and generation. ScottishPower believes that
      it has high standards of operation and customer service. Nevertheless,
      ScottishPower is unable to judge accurately the outcome of these
      reviews and there can be no assurance that they will not materially
      affect profits. It is expected that all the results of these reviews
      will be known by November 1999.

      The natural monopoly businesses of the group which are currently
      subject to RPI-X price controls in the electricity businesses and RPI +
      K for Southern Water Services had a combined total turnover of
      (Pounds)1,156.2 million in fiscal 1999, or approximately 25% of group
      total turnover of (Pounds)4,706.0 million. However, these businesses
      had a combined operating profit of (Pounds)595.4 million in fiscal
      1999, or some 74% of the group's total operating profit of
      (Pounds)802.8 million. The breakdown of total turnover and operating
      profit among the natural monopoly businesses of the group is shown in
      the table below:

      Table 1.11 Effect of Price Controls

<TABLE>
<CAPTION>
                                      Fiscal 1999      Fiscal 1999
                                   Total Turnover Operating Profit
       Business                         (Pounds)m        (Pounds)m
      ------------------------------------------------------------
       <S>                         <C>            <C>
       ScottishPower Transmission           136.8             83.5
       ScottishPower Distribution           333.3            178.2
       Manweb Distribution                  246.9             91.9
       Southern Water Services              439.2            241.8
      ------------------------------------------------------------
</TABLE>

36                                                  ScottishPower Form 20-F 1999


<PAGE>


      As an example of the effect of an RPI-X price control, the current
      transmission price control applicable to ScottishPower was set at RPI-1
      to take effect from April 1, 1994 and to run for five years. Had this
      control been set at RPI-2 for the same period, then the allowed revenue
      for fiscal 1999 would have been 5% lower than the value of
      (Pounds)136.8 million above, because of the cumulative effect of the
      control. All other things being equal, this would have resulted in a
      reduction of operating profit of some (Pounds)6.8 million. A similar
      effect would occur with the other price controls dependent on when the
      control had been set. For a five year control a tightening of X or K by
      1 percentage point would result in average annual allowed revenue over
      the five year period being reduced by 2.5% which, all other things
      being equal, would be around (Pounds)29 million in total for the four
      regulated businesses above.

      Each price control is subject to a separate price review undertaken by
      the applicable regulator and the setting of a new price control
      requires the license to be amended. If ScottishPower, or any of its
      subsidiaries, does not agree with the new price control then it is up
      to the company to seek a referral to the Competition Commission. Under
      such a reference the Competition Commission would be required to
      investigate and report on whether the revenues generated under the
      control would be sufficient for ScottishPower to finance its activities
      covered by the control.

      While it is only in these natural monopoly businesses that price
      controls (RPI-X and RPI+K) will continue for the foreseeable future, a
      supply price restraint will continue for a period of two years from
      April 1, 1998. The Supply price restraint takes the form of maximum
      tariff levels applying to individual tariffs, or groups of tariffs.
      These levels were set to give a reduction of 4.1% in real terms from
      April 1, 1998 with a further reduction of 3% in real terms from April
      1, 1999. This is an interim measure and the form of constraint is one
      setting maximum tariff levels for the two years. The nature and extent
      of possible restraints from April 1, 2000 will be reviewed in light of
      the experience and prospects at the same time as the distribution price
      controls are reviewed.

      The Competition Act 1998
      The U.K. has enacted new legislation, the Competition Act 1998, which
      introduces in the U.K. law prohibitions on anti-competitive agreements
      and the abuse of a dominant position. The Competition Act 1998 replaced
      the Monopolies and Mergers Commission with a new statutory body to be
      known as the Competition Commission with effect from April 1, 1999. The
      Competition Act 1998 also provides the Office of Fair Trading with
      significant investigative powers and the ability to grant interim
      measures.

      The Competition Act 1998 will grant the DGES and the DGWS concurrent
      powers with the Director General of Fair Trading in relation to,
      respectively "commercial activities connected with the generation,
      transmission, or supply of electricity" and "commercial activities
      connected with the supply (or securing a supply) of water or of
      sewerage services".

      Environmental Regulation
      The group's businesses are subject to numerous regulatory requirements
      with respect to the protection of the environment, including
      environmental laws which regulate the construction, operation and
      decommissioning of power stations, pursuant to legislation implementing
      environmental directives adopted by the EU and protocols agreed under
      the auspices of international bodies such as the United Nations
      Economic Commission for Europe ("UNECE").

      Electricity Generation, Transmission and Supply
      The Electricity Act obligates the Secretary of State to take into
      account the effect of electricity generation, transmission and supply
      activities upon the physical environment in approving applications for
      the construction of generating facilities and the location of overhead
      power lines. This Electricity Act requires the group to take into
      account the conservation of natural features of beauty and other items
      of particular interest, when it formulates proposals for development in
      connection with certain of its activities. The group is required, in
      terms of the Environmental Impact Assessment Regulations, to carry out
      an environmental assessment when it intends to lay cables, construct
      overhead lines or carry out any other development in connection with
      its licensed activities. The group also prepares formal statements on
      the "Preservation of Amenity and Fisheries' in line with the
      requirements of the Electricity Act.

ScottishPower Form 20-F 1999                                                  37
<PAGE>


      Possible adverse health effects of electric and magnetic fields
      ("EMFs") from various sources, including transmission and distribution
      lines, have been the subject of a number of studies and increasing
      public discussion. The scientific research is currently inconclusive as
      to whether EMFs can cause adverse health effects. This uncertainty has
      been reinforced by a number of recent studies and as a result a number
      of claims which were being brought against other companies within the
      electricity business in the U.K. alleging personal injuries caused by
      EMFs have been dropped.

      The Environmental Protection Act of 1990 (the "EPA") requires that
      potentially polluting activities such as the operation of combustion
      processes (which includes power plant) requires prior authorization.
      These authorizations dictate the control technologies and techniques to
      be used to ensure that environmental harm is prevented or minimized.
      The Act also provides for the licensing of waste management and imposes
      certain obligations and duties on companies which produce, handle and
      dispose of waste. Waste generated as a result of the group's
      electricity activities is managed to ensure compliance with legislation
      and waste minimization is undertaken where possible.

      Environmental Regulation of Generation Activities
      The EPA is the primary U.K. statute governing the environmental
      regulation of power stations. It introduced a system of Integrated
      Pollution Control ("IPC") in April 1991 for large scale industrial
      processes, including power stations. Under the EPA, the authority for
      enforcing IPC with respect to emissions to atmosphere in England and
      Wales is the EA, previously Her Majesty's Inspectorate of Pollution
      ("HMIP"), and in Scotland is the Scottish Environment Protection Agency
      ("SEPA"), previously Her Majesty's Industrial Pollution Inspectorate
      ("HMIPI"). Transfer of control from HMIP and HMIPI to EA and SEPA came
      into force on April 1, 1996 and was established by the Environment Act
      of 1995 (the "1995 Act").

      The EU has adopted a framework directive on ambient air quality
      assessment and management which came fully into force in May 1998 (the
      "EU Directive on Integrated Pollution Prevention and Control"). The
      directive defines and fixes objectives for air quality, while
      subsidiary directives establish emission limit values for a number of
      contaminants. The EU Directive on Integrated Pollution Prevention and
      Control is being implemented via modifications to the IPC regime.

      The United Nations Framework Convention on Climate Change sets forth
      standards regarding emissions of greenhouse gases, the most significant
      of which is carbon dioxide (CO\\2\\). Agreement on a Protocol under
      this convention was reached in Kyoto in December 1997. This Protocol,
      when ratified, calls for mandatory target reductions of "a basket" of
      six greenhouse gases, most significantly CO\\2\\, in the commitment
      period 2008-2012. The Protocol also provides for Joint Implementation
      ("JI") between signatories, a Clean Development Mechanism by which
      signatories may gain credit for actions in certain non-signatory
      countries and a provision which would allow for trading of emissions.

      The EU has, under the terms of the Kyoto Protocol, signed up to the
      United Nations Framework Convention on Climate Change, under which
      Member States are committed to reducing "greenhouse gases" by 8% below
      1990 emission levels between the years 2008 and 2012. This reduction
      target applies to the EU as a whole, with each individual Member State
      being allocated its own target which is 12.5% for the U.K. HM
      Government has announced its intention of unilaterally setting itself a
      goal of 20% reduction in carbon dioxide emissions by 2010. The UNECE
      protocols regarding sulphur dioxide (SO\\2\\) and oxides of nitrogen
      (NOx) are currently implemented in the EU by means of the Air Framework
      Directive and Large Combustion Plants Directive (the "LCPD"). Emissions
      limits for existing and new plants will be introduced via the LCPD, the
      Air Framework Directive and, in the future, the EU Directive on
      Integrated Pollution Prevention and Control.

      The principal emissions from fossil fuelled electricity generation are
      SO\\2\\, NOx, CO\\2\\ and particulate matter, such as dust, with the
      main waste being ash, namely pulverized fuel ash and furnace bottom
      ash. The primary focus of current environmental legislation is to
      reduce emissions of SO\\2\\, NOx and particulates, the first two of
      which contribute to acid rain. A number of other power station
      emissions and discharges are subject to environmental regulation.

38                                                  ScottishPower Form 20-F 1999
<PAGE>

      Under the requirements of the LCPD, HM Government has implemented a
      national program, the National Plan, to reduce SO\\2\\ and NOx
      emissions from power stations in Scotland. ScottishPower and Scottish &
      Southern have entered into an agreement providing for the sharing of
      limits in emissions of SO\\2\\ and NOx from existing generating
      stations in Scotland set out in the National Plan to meet the targets
      of the LCPD. It also provides for the sharing of station-specific
      limits on emissions of SO\\2\\ and NOx imposed by SEPA at the
      Peterhead, Longannet and Cockenzie generating stations where capacity
      is shared between ScottishPower and Scottish & Southern. Reductions of
      CO\\2\\, SO\\2\\ and NOx per unit of electricity generated have been
      achieved as a result of the group's investments in environmental
      upgrades, such as low NOx burners and gas reburn, to existing power
      stations and in new power stations, together with increases in the
      proportion of the group's output generated by more efficient coal-fired
      power stations. ScottishPower's emissions of SO\\2\\ and NOx have been
      below the limits set by the National Plan for these emissions each year
      since its publication.

      Each of ScottishPower's power stations is required to have IPC
      authorization. Under IPC, each power station has a single authorization
      which regulates emissions of certain pollutants and seeks to minimize
      pollution of the environment. Each IPC authorization requires that a
      power station uses the Best Available Techniques Not Entailing
      Excessive Cost ("BATNEEC") to prevent the emissions described above or,
      to the extent this is not practicable, to minimize and render harmless
      any such emissions. Each authorization also contains an improvement
      program. ScottishPower's IPC authorizations do not have an expiry date,
      but SEPA is required to review the conditions contained within it at
      least once every four years and may impose new conditions to prevent or
      reduce emissions of pollutants, subject to the application of BATNEEC.
      The EU Directive on Integrated Pollution Prevention and Control
      requires that all emission and pollution control measures be placed
      upon the best available technique to control impact on the environment.

      The IPC authorizations granted in 1993 in respect of ScottishPower's
      existing power stations limit the levels of atmospheric emissions of
      SO\\2\\ and NOx from each station. A number of minor variations have
      taken place with a full four year IPC review now underway with SEPA.
      The review commenced in April 1997. Due to continued UK-wide policy
      development on the control of SO\\2\\, the review has continued into
      1999. The final outcome is awaited. The group is confident that it will
      be able to achieve the environmental improvements required by potential
      future limits arising from this review without materially constraining
      operational and commercial flexibility. In particular, gas reburn
      technology offers greater potential to reduce emissions than other
      technology in use elsewhere in the U.K. Furthermore, planning consent
      has been gained for flue gas desulphurization at Longannet, which will
      be installed when emissions levels require its implementation.

      Water
      Since April 1, 1996, the EA has been responsible in England and Wales
      for the control of water pollution and the maintenance and improvement
      of the quality of controlled waters, including the regulation of
      discharges to those waters; for conserving, redistributing and
      augmenting water resources and for securing the proper use of such
      resources for land drainage and flood defense. Previously, this was the
      responsibility of the NRA in England and Wales. In Scotland, SEPA has
      largely replaced the River Purification Boards to fulfil these
      responsibilities. The group is also subject to regulations governing
      drinking water quality, receiving water quality and wastewater
      discharges. Although recent cases have suggested that commercial
      enterprises may be fined more heavily for pollution offenses than in
      the past, ScottishPower does not believe that the level of fines will
      have a materially adverse impact on its operations.

      Within its general water resource management role, the EA has a duty to
      operate the system under the Water Resources Act 1991, whereby water
      undertakers and other abstractors must have a license authorizing each
      of their abstractions and other impoundments. It also has a duty to
      enter into water resource management arrangements with water
      undertakers to secure the proper management and operation of waters,
      reservoirs and other works vested in the undertakers. The EA may, and
      shall if so directed, consider the setting of minimum acceptable flows
      in rivers and make recommendations to the Secretary of State
      accordingly.

      Under the Water Resources Act 1991 and the Control of Pollution Act
      (COPA) 1974, the EA may require persons to take precautions against
      pollution, may prohibit or restrict certain activities likely to cause
      pollution in areas designated by the Secretary of State, and may impose
      a requirement for a consent to discharge matter from a drain or sewer.
      When reviewing existing consents and issuing new ones, the EA has said
      that it will seek to set contamination which causes, or is likely to
      cause, significant harm to the environment or any pollution of

ScottishPower Form 20-F 1999                                                  39
<PAGE>

      conditions at the level required to at least maintain and, where
      appropriate, improve the quality of the receiving waters.

      HM Government's upgrading of minimum levels of wastewater treatment for
      coastal works will mean further improvements to recently completed new
      works such as Eastbourne and Shoreham, as well as a review of proposed
      treatment levels in several long-term investment projects at Dover and
      Folkestone, Littlehampton and Bognor, Margate and Broadstairs, and the
      Isle of Wight.

      Under the EPA, the EA is responsible for maintaining registers
      containing details of applications for discharge consents, consents
      granted and the results of samples of effluent and receiving waters.
      The registers are open to public inspection.

      European Legislation
      The activities of the WaSCs are affected by the requirements of EU
      directives including the Drinking Water Directive, the Bathing Waters
      Directive and the Urban Waste Water Treatment Directive. EU directives
      are binding on HM Government, not on the Water Service Companies, as to
      the result to be achieved within a specified period. It is the
      responsibility of European Member States, including the U.K., to bring
      into force appropriate national environmental legislation, such as the
      Urban Waste Water Treatment Regulations to implement these EU
      directives.

      New requirements will be binding on the Water Service Companies only
      when they are translated into the law of England and Wales. Any
      expenditure incurred by a Water Service company necessitated by new
      legislation applying to them in their capacity as water or sewerage
      undertakers, or by any change in consents as a result of any changes to
      existing EU directives, or adoption of future EU directives, would be
      eligible for consideration for a specific K adjustment.

      The Water Resources Act and the Urban Waste Water Treatment Regulations
      are the main U.K. statutes governing water abstraction, receiving water
      quality and wastewater discharges. This legislation implements the
      Bathing Waters Directive and the Urban Waste Water Treatment Directive
      and requires improvements in the treatment of wastewater discharges.
      The Water Supply (Water Quality) Regulations introduce the requirements
      of the EU Drinking Water Directive into the U.K. and govern drinking
      water quality. In fiscal 1999, Southern Water spent approximately
      (Pounds)179 million to comply with the relevant statutes. Fines
      received by Southern Water in fiscal 1999 for violating water quality
      standards and the terms of applicable discharge consents were
      immaterial to the results of operations of Southern Water.

      Southern Water, like other WaSCs in the U.K., must have a license from
      the EA authorizing each of its abstractions and certain impoundments.
      For additional obligations of Southern Water affecting the environment,
      see the sections of this document entitled "Water Business--Southern
      Water" and "Regulation of the Water Industry".

      In addition to its other obligations affecting the environment,
      Southern Water may be required by the EA to take precautions against
      pollution, may be prohibited or restricted by the EA from certain
      activities likely to cause pollution in areas designated by the
      Secretary of State, and may be required by the EA to obtain a consent
      to discharge matter (other than sewage or trade effluent) from a drain
      or sewer. Further, in the course of its activities, the EA may carry
      out anti-pollution works and may recover the cost of such works from
      the person responsible for the pollution.

      General
      While the nature of developments in environmental regulation and
      control cannot be predicted, the group anticipates that the direction
      of future changes will be towards tightening controls. In view of the
      age and history of many sites owned by the group, the group may incur
      liability in respect of sites which are found to be contaminated,
      together with increased costs of managing or cleaning up such sites.
      Site values could be affected and potential liability and clean-up
      costs may make disposal of potentially contaminated sites more
      difficult. The Environment Act 1995 (the "1995 Act") requires the
      polluter (or if the polluter cannot be found or has legally transferred
      its responsibilities by disclosure, the owner or occupant) of
      contaminated land to clean up any

40                                                  ScottishPower Form 20-F 1999


<PAGE>

      controlled waters, so that environmental compliance is consistent with
      the intended use of the site. Although there have been prolonged
      consultations, the U.K. Government has yet to bring forward finalized
      regulations to implement the appropriate sections of the 1995 Act but
      is expected to do so during 1999. Other proposals which may impose
      strict liability for environmental damage are also under consideration
      by the EU. ScottishPower is not currently aware of any liability which
      it may have under the 1995 Act or of proposed EU directives which will
      have a materially adverse impact on its operations.

      The group believes that it has taken and continues to take measures to
      comply with applicable laws and regulations for the protection of the
      environment.

      Research & Development
      The group supports research into development of the generation,
      transmission, distribution and supply of electricity and continually
      seeks more innovative and cost effective methods of carrying out its
      water and wastewater activities. It also continues to contribute, on an
      industry-wide basis, towards the cost of research into electricity
      utilization, distribution developments and water purification and
      wastewater treatment. In fiscal years 1997, 1998, and 1999 the group's
      expenditure on research and development was (Pounds)5.6 million,
      (Pounds)5.4 million and (Pounds)5.3 million, respectively.

      Employees
      The group had 15,145 full-time equivalent employees as of March 31,
      1999. A breakdown of the number of full-time equivalent employees
      employed in the group's main businesses over the last five years is
      illustrated in the following table.

      Table 1.12 Employees

<TABLE>
<CAPTION>
       Business                      1999   1998   1997   1996  1995
      --------------------------------------------------------------
       <S>                          <C>    <C>    <C>    <C>   <C>
       Scottish energy businesses   4,823  4,748  4,916  5,215 5,595
       Manweb                       2,099  2,151  2,757  2,979     -
       Southern Water               2,205  2,364  3,526      -     -
       ScottishTelecom              2,336  1,430    702    191   141
       Other                        3,682  3,613  2,500  2,388 2,304
       --------------------------  ------ ------ ------ ------ -----
       Group total                 15,145 14,306 14,401 10,773 8,040
       --------------------------  ------ ------ ------ ------ -----
</TABLE>

      Approximately 45% of group employees are union members and 66% are
      covered by collective bargaining arrangements. These reductions by
      comparison with previous years largely reflect manpower growth within
      ScottishTelecom where union strength is generally low. There are a
      number of different collective agreements now in place throughout the
      group reflecting differing market conditions in which the group's
      businesses operate. Management believes its overall relations with its
      employees are good.

      In the energy businesses, ongoing integration of Scottish and Manweb
      operations has been largely completed. The group continues to benchmark
      for further efficiencies and reduced costs which will include ongoing
      reduction in manpower numbers. However, these reductions have been
      offset in fiscal 1999 by manpower growth within customer-facing
      businesses to gain new customers in the fully deregulated market place.

      Within Southern Water, manpower reductions have occurred and will
      continue as the business is reorganized to focus on core activities,
      achieving operating improvements and taking better advantage of
      technological advancements. Manpower reductions of approximately 20%
      are anticipated over the next two years.

      The manpower figure in ScottishTelecom has increased by 63% in fiscal
      1999 from fiscal 1998 due to significant growth, both organic and
      inorganic, and in particular the group's acquisition of Demon Internet
      in 1998. This growth is expected to continue in fiscal 2000.

      The other businesses which include electrical retailing, electrical
      contracting, engineering consultancy, information systems and corporate
      services have remained relatively stable in manpower numbers since
      fiscal 1998.

ScottishPower Form 20-F 1999                                                  41
<PAGE>


      Item 2. Description of Property

      The group's properties consist of generating stations, transmission and
      distribution facilities, water supply and wastewater treatment
      facilities, telecommunication facilities, retail facilities and certain
      non-operational properties in which the group holds freehold or
      leasehold interests. The group believes that substantially all of its
      facilities are in a condition adequate for their purpose and
      utilization according to the individual nature and requirements of
      relevant operations. The group has a continuing program of improvements
      and maintenance of properties when considered appropriate to meet the
      needs of the individual operations. In connection with any of the
      group's properties that are held under lease, the group believes that
      it will be able to negotiate lease renewals on satisfactory terms or
      relocate the relevant facilities without such relocation having a
      material adverse impact on the group or its operations.

      Generation Facilities
      The group owns eight power stations in Scotland, six of which are
      operational with a total net output capacity of 4,035 MW, and one in
      England. The group also owns three windfarms in Northern Ireland, one
      in Scotland and one in the Republic of Ireland. In addition, the
      company has joint venture interests in three windfarms, two of which
      are in England and one in Wales. All generation plant is owned by the
      group, with the exception of the Methil power station, which is held on
      a ground lease which expires in 2012 and the windfarms which are
      generally held on ground leases of at least 25 years duration. Further
      details regarding the generating capacity of ScottishPower's power
      stations and windfarms as of March 31, 1999 are contained under "Item
      1. Description of Business--Energy Business--Generation Wholesale".

      Transmission and Distribution Facilities
      As of March 31, 1999, the group's transmission facilities included
      approximately 4,000 circuit kms of overhead lines and 240 circuit kms
      of underground cable operated at 400 kV, 275 kV and 132 kV.

      In addition, as of March 31, 1999, the group's distribution facilities
      included approximately 24,000 circuit kms of overhead lines and 40,000
      circuit kms of underground cable operated at 33 kV, 11 kV, and 0.4/0.23
      kV in Scotland and approximately 20,000km of overhead lines and
      23,000km of underground cable operating at 132 kV, 25 kV, 11 kV, 6.6
      kV, 6.3 kV, and 0.4/0.23 kV in England and Wales. The group holds
      either permanent rights or wayleaves which entitles it to run these
      lines and cables through private land. Wayleaves are usually terminable
      by either the landowner or the group upon six or twelve months' notice.
      The group has statutory rights to seek the compulsory retention of a
      wayleave if termination is sought by the landowner. The group owns the
      land for in excess of 95% of the transmission substation sites.
      Approximately 64% of the distribution substation sites are owned by the
      group with the remainder being secured by wayleave lease or local
      agreement. Approximately 25% of the leases securing substation sites
      expire within five years.

      Water Supply and Wastewater Treatment Facilities
      Southern Water has freehold and leasehold interest covering a total of
      approximately 10,000 acres of land. Of such land, an aggregate of
      approximately 9,800 acres are specialized properties, consisting
      chiefly of the raw water storage reservoirs with surrounding land,
      water and wastewater treatment works and pumping stations listed below.
      Approximately 95% of the above-ground water supply and wastewater
      assets are on land in Southern Water's freehold ownership including the
      assets listed below, with the remainder being located on land subject
      to long-leasehold.

      Table 2.1 Storage Reservoirs

<TABLE>
<CAPTION>
                                            Approximate
       Description   Location Capacity (Ml)     acreage
      -------------------------------------------------
       <S>           <C>      <C>           <C>
       Bewl Water        Kent        31,000       1,200
       Darwell         Sussex         4,730         913
       Powdermill      Sussex         1,060       1,171
       Weir Wood       Sussex         5,600         403
</TABLE>

42                                                  ScottishPower Form 20-F 1999


<PAGE>


      Table 2.2 Water Treatment Works

<TABLE>
<CAPTION>
                                                   Approximate
       Description    Location Output (Ml per day)     acreage
      --------------------------------------------------------
       <S>           <C>       <C>                 <C>
       Beauport         Sussex                27.0           4
       Burham             Kent                48.8          61
       Eastling           Kent                48.0           2
       Easton        Hampshire                27.3          25
       Hardham          Sussex                75.0          35
       Otterbourne   Hampshire               102.5         367
       Sutton             Kent                 4.4 less than 1
       Testwood      Hampshire                90.0         152
       Twyford       Hampshire                23.0         183
       Weir Wood        Sussex                21.8          70
       Wingham            Kent                20.0           5
</TABLE>

      Table 2.3 Wastewater Treatment Works

<TABLE>
<CAPTION>
                                        Equivalent Population Approximate
       Description             Location                Served     acreage
      -------------------------------------------------------------------
       <S>                    <C>       <C>                   <C>
       Ashford                     Kent               109,800          90
       Aylesford                   Kent               133,200          40
       Brighton Portabello       Sussex               268,200           5
       Budds Farm             Hampshire               173,800          52
       Canterbury                  Kent               113,300          22
       Chickenhall Eastleigh  Hampshire               102,000          25
       Eastbourne                Sussex               121,800           5
       Eastney                Hampshire               235,900           4
       Millbrook              Hampshire               138,400          17
       Motney Hill                 Kent               286,900         200
       Peel Common            Hampshire               250,900          77
       Worthing East             Sussex               136,900          15
</TABLE>

      Telecommunication Facilities
      As of March 31, 1999, ScottishTelecom operated a network comprising
      approximately 2,550 km of optical fiber cable. Installation of the
      fiber is subject to wayleaves under the Public Telecommunications
      Operator License held by ScottishTelecom. The majority of
      ScottishTelecom's telecommunication network switching and transmission
      equipment is located in four main operational sites in Glasgow, London,
      Edinburgh, and Warrington. Additional telecommunication network
      equipment is housed in equipment rooms under the control of the group.

      Retail Facilities
      As of March 31, 1999, the group operated 183 retail outlets, 24 of
      which are owned by the group and 159 are leased. The outlets are
      located both on the main street of major metropolitan areas and in out
      of town superstores. The group also leases two large retail
      distribution depots, one at Castleford in England consisting of
      approximately 8,000 square meters; and another facility of
      approximately 12,600 square meters at Mossend near Glasgow. The
      properties are generally held on leases of 20 to 25 years.

      Non-Operational Facilities
      In addition to the properties described above, as of March 31, 1999,
      the group utilized a number of non-operational properties comprised
      primarily of offices, depots, warehouses and workshops. Approximately
      50% of these properties are owned by the group with the remainder being
      leased. The most significant of these non-operational properties are
      Cathcart Business Park, Glasgow (which is the main office for the
      electricity businesses in Scotland), the corporate office located at
      Atlantic Quay, Glasgow, the Manweb head office at Manweb House, Chester
      Business Park and the Southern Water head office at Worthing.

ScottishPower Form 20-F 1999                                                  43
<PAGE>


      Item 3. Legal Proceedings

      Manweb participates in the industry-wide Electricity Supply Pension
      Scheme. Two other members of the scheme, National Power plc and NGC,
      have been the subject of legal proceedings in connection with the use
      of surplus following an actuarial valuation at March 31, 1992 to fund
      early retirement benefits. Manweb also applied surplus following that
      valuation and the subsequent valuation at March 31, 1995 ((Pounds)6
      million following the 1992 valuation and (Pounds)32 million following
      the 1995 valuation) for the same purpose.

      In a decision on February 10, 1999, the Court of Appeal decided that,
      without a scheme amendment or trustee agreement, employers could not
      apply surplus unilaterally to forgive an accrued liability. This could
      lead to employers being required to make additional contributions to
      the scheme to meet that liability. A further hearing took place in May
      1999 which clarified certain aspects of the judgment. The judgment
      indicates that Manweb may be liable for additional contribution to the
      scheme. Leave to appeal to the House of Lords was given and if an
      appeal is made, it is unlikely to be heard before mid-2000.

      There is a range of possible outcomes to the current NGC litigation,
      any of which could affect Manweb's own potential liability, if any, to
      contribute to the scheme. If amendments can be made to the scheme to
      perfect the past arrangements to use surplus, no employer contributions
      should be required. If the courts in the NGC case ultimately decide
      that additional payments are due from employers to the scheme in
      respect of all or any part of the surplus used since the 1992
      valuation, Manweb may also be required to make payments. However in
      this event two further points must be determined before the ultimate
      cost to Manweb could be assessed: the effective date for calculating
      the amounts due, and whether payments can be spread over a number of
      years. Both these issues may affect significantly the ultimate cost to
      Manweb.

      No proceedings have been commenced against Manweb as at June 30, 1999
      (being the latest practicable date prior to the publication of this
      document) in respect of the issues raised by the NGC decisions.

      Except as discussed above, ScottishPower is not aware of any material
      pending legal proceedings, other than ordinary routine litigation
      incidental to the business of the group, to which ScottishPower or any
      of its subsidiaries is a party, or of which any of their property is
      the subject, or any such proceedings known to be contemplated by any
      governmental authority.

      Item 4. Control of Registrant

      (a) As far as is known to ScottishPower, ScottishPower is not directly
          or indirectly owned or controlled by another corporation or by any
          foreign government.

      (b)(i)   As of June 30, 1999, no person known to ScottishPower owned more
               than ten per cent of any class of the group's voting securities.

         (ii)  As of June 30, 1999, the total amount of voting securities
               owned by Directors and executive officers of ScottishPower as a
               group was:

<TABLE>
<CAPTION>
       Title of Class   Identity of Group                             Amount Owned Percentage of Class
      ------------------------------------------------------------------------------------------------
       <S>              <C>                                           <C>          <C>
       Ordinary shares  Directors and executive officers (16 persons)      237,569                0.02
</TABLE>

      In addition, as of June 30, 1999, the Directors and executive officers
      of ScottishPower, as a group, held options to purchase 900,559 ordinary
      shares, all of which options were issued pursuant to ScottishPower's
      Long Term Incentive Plan, ScottishPower's Executive Share Option Scheme
      or ScottishPower's Sharesave Scheme. See "Item 12. Options to Purchase
      Securities From Registrant or Subsidiaries" and Note 33 to the
      Consolidated Financial Statements of the group.

      (c) ScottishPower does not know of any arrangements the operation of
          which might result in a change in control of the group.

44                                                  ScottishPower Form 20-F 1999


<PAGE>


      Item 5. Nature of Trading Market

      The principal trading market for the ordinary shares of ScottishPower
      is the London Stock Exchange. In addition, American Depositary Shares
      ("ADSs") (each of which represents four ordinary shares) have been
      issued by The Bank of New York, as depositary (the "Depositary"), for
      the company's ADSs and are traded on the New York Stock Exchange
      following listing on September 8, 1997.

      The table below sets forth, for the calendar quarters of the fiscal
      years indicated, the highest and lowest middle market quotations for
      the ordinary shares, as derived from the Daily Official List of the
      London Stock Exchange and the range of high and low closing sale prices
      for ADSs, as reported over-the-counter prior to September 8, 1997 and
      as reported on the New York Exchange Composite Tape following that
      date.

<TABLE>
<CAPTION>
                                           American Depositary
                    Ordinary Shares/1/          Shares/2/
                     High (p)    Low (p)     High ($)     Low ($)
      -------------------------------------------------------------
       <S>          <C>          <C>       <C>            <C>
       Fiscal 1998
       First             397.00     352.00        26.03       23.18
       Second            480.00     397.00        31.31       26.21
       Third             540.00     420.00        35.63       28.13
       Fourth            582.00     485.00        38.50       33.00
      -------------------------------------------------------------
<CAPTION>
                                           American Depositary
                    Ordinary Shares/1/          Shares/2/
                     High (p)    Low (p)     High ($)     Low ($)
      -------------------------------------------------------------
       <S>          <C>          <C>       <C>            <C>
       Fiscal 1999
       First             576.00     521.00        37.50       35.25
       Second            620.00     528.00        41.28       35.25
       Third             675.00     532.00        44.63       37.00
       Fourth            664.00     529.00        44.02       34.13
      -------------------------------------------------------------
</TABLE>
     /1/The past performance of the ordinary shares is not necessarily
        indicative of future performance.
     /2/Calculated using a ratio of four ordinary shares to one ADS, the ratio
        which took effect on the listing of the ADSs on the New York Stock
        Exchange on September 8, 1997. Until that time, each ADS represented ten
        ordinary shares.

      On March 31, 1999, there were 332 registered holders of 127,842
      ordinary shares with addresses in the United States and 13 registered
      holders of 1,221,487 ADSs (equivalent to 4,885,948 ordinary shares).
      The combined holdings of these shareholders constituted 0.42% of the
      total number of ordinary shares outstanding as of March 31, 1999. As
      certain of the ordinary shares and ADSs are held by brokers and other
      nominees, these numbers may not be representative of the actual number
      of beneficial owners in the United States or the number of ordinary
      shares or ADSs beneficially held by U.S. persons.

      Item 6. Exchange Controls and Other Limitations Affecting Security
               Holders

      (a) There are currently no U.K. laws, decrees or regulations that
          restrict the export or import of capital, including, but not
          limited to, foreign exchange capital restrictions, or that affect
          the remittance of dividends or other payments to non-U.K. resident
          holders of the company's securities except as otherwise set forth
          in "Item 7. Taxation" below.

      (b) There are no limitations imposed by U.K. law or the company's
          Memorandum and Articles of Association that restrict the right of
          non-U.K. resident or non-U.K. citizen owners to hold or vote the
          ordinary shares other than the restrictions described in "Item 14.
          Description of Securities to be Registered--Description of ordinary
ScottishPower Form 20-F 1999                                                  45
<PAGE>

        shares--Restrictions on Voting" and "--Limitations on Holding" in
        ScottishPower's registration statement on Form 20-F (file no.1-14676)
        filed with the U.S. Securities and Exchange Commission in September
        1997 and incorporated herein by reference. However, non-U.K.
        shareholders are not entitled to receive notices from the company,
        including notices of general meetings, unless they have given the
        company an address in the U.K. to which such notices may be sent.

      Item 7. Taxation

      The following discussion of U.K. and U.S. federal income tax
      consequences is set forth with respect to U.S. tax considerations in
      reliance upon the advice of Milbank, Tweed, Hadley & McCloy LLP,
      special U.S. counsel to the company, and with respect to U.K. tax
      considerations in reliance upon the advice of the company's internal
      taxation adviser. The discussion is intended only as a summary of the
      principal U.S. federal income tax and U.K. tax consequences to
      investors who hold the ADSs or ordinary shares as capital assets and
      does not purport to be a complete analysis or listing of all potential
      tax consequences of the purchase, ownership and disposition of ADSs or
      ordinary shares. The summary does not discuss special tax rules that
      may be applicable to certain classes of investors, including banks,
      insurance companies, tax exempt entities, dealers, traders who elect to
      mark to market, investors with a functional currency other than the
      U.S. dollar, persons who hold the ADSs as part of a hedge, straddle or
      conversion transaction, or holders of 10% or more of the voting stock
      of the company. The statements of U.K. and U.S. tax laws and practices
      set out below are based on the laws in force and as interpreted by the
      relevant taxation authorities as of the date of this report. The
      statements are subject to any changes occurring after that date in U.K.
      or U.S. law or practice, in the interpretation thereof by the relevant
      taxation authorities, or in any double taxation convention between the
      United States and the United Kingdom. The company believes, and the
      discussion therefore assumes, that it is not a passive foreign
      investment company for United States federal income tax purposes.

      Each investor is urged to consult its own tax adviser regarding the tax
      consequences of the purchase, ownership and disposition of ordinary
      shares or ADSs under the laws of the United States, the United Kingdom
      and their constituent jurisdictions and any other jurisdiction where
      the investor may be subject to tax.

      If the obligations contemplated by the Deposit Agreement are performed
      in accordance with its terms, a beneficial owner of ADSs will be
      treated as the owner of the underlying ordinary shares for the purposes
      of the current convention between the United States and the United
      Kingdom for the avoidance of double taxation with respect to taxes on
      income and capital gains (the "Income Tax Convention") and for the
      purposes of the U.S. Internal Revenue Code of 1986, as amended (the
      "Code").

      For the purposes of this summary, the term "U.S. Holder" means a
      beneficial owner of the ADSs that is a United States citizen or
      resident, a domestic corporation or partnership, a trust subject to the
      control of a U.S. person and the primary supervision of a U.S. court,
      or an estate the income of which is subject to United States federal
      income tax regardless of its source.

      For the purposes of this summary, the term "Eligible U.S. Holder" means
      a U.S. Holder that is a resident of the United States for the purposes
      of the Income Tax Convention and that satisfies the following
      conditions:

      (i)   is not also resident in the United Kingdom for U.K. tax purposes;

      (ii)  is not a corporation which, alone or together with one or more
            associated corporations, controls, directly or indirectly, 10% or
            more of the voting stock of the company;

      (iii) whose holding of the ADSs is not effectively connected with a
            permanent establishment in the United Kingdom through which such
            holder carries on a business or with a fixed base in the United
            Kingdom from which such holder performs independent personal
            services, and;

46                                                  ScottishPower Form 20-F 1999


<PAGE>


      (iv) under certain circumstances, is not a company 25% or more of the
           capital of which is owned, directly or indirectly, by persons that
           are neither individual residents of, nor nationals of, the United
           States.

      Taxation of Dividends
      Individuals and companies who are resident in the United Kingdom and
      who receive the dividend on the ordinary shares are entitled to a tax
      credit (the "associated U.K. tax credit"). Under the Income Tax
      Convention and under current U.K. law, an Eligible U.S. Holder is
      entitled to receive, in addition to the dividend paid, an amount equal
      to the associated U.K. tax credit, subject to a U.K. withholding tax
      equal to 15% of the sum of the dividend and the associated U.K. tax
      credit. Beginning April 6, 1999, the rate of the associated U.K. tax
      credits for dividends is 1/9 of the dividend (i.e. the equivalent of
      10% of the sum of the dividend and the associated tax credit). As a
      result, Eligible U.S. Holders generally will not receive additional
      payments in respect of associated U.K. tax credits. Instead, payments
      to Eligible U.S. Holders will be reduced by the excess of the U.K.
      withholding tax over the associated U.K. tax credit.

      If ScottishPower paid a dividend of $90, for example, for U.S. federal
      income tax purposes an Eligible U.S. Holder would recognize ordinary
      income of $90 plus the $10 U.K tax credit, or a total of $100. The
      gross payment would be subject to a U.K. withholding tax of $10. The
      income is recognized when the dividend is actually or constructively
      received by the Eligible U.S. Holder, in the case of ordinary shares,
      or by the Depository, in the case of ADSs. The dividend will not be
      eligible for the dividends-received deduction generally allowed to
      United States corporations in respect of dividends received from other
      United States corporations. Distributions in excess of current and
      accumulated earnings and profits, as determined for United States
      federal income tax purposes, will be treated as a return of capital to
      the extent of the Eligible U.S. Holder's basis in the ordinary shares
      or ADSs and thereafter as capital gain. In determining the amount of
      dividend income, an Eligible U.S. Holder will use the spot currency
      exchange rate on the date the dividend is included in income. Any
      difference between that amount and the dollars actually received may
      constitute foreign currency gain or loss, which is ordinary gain or
      loss. Individual Eligible U.S. Holders, however, are not required to
      recognize gain of less than $200 from the exchange of foreign currency
      in a "personal transaction" as defined in Section 988(e) of the Code.

      Subject to certain limitations and requirements, an Eligible U.S.
      Holder will be entitled under the Income Tax Convention to credit the
      U.K. withholding tax against the Eligible U.S. Holder's United States
      federal income tax liability. Claiming a U.S. foreign tax credit with
      respect to the U.K. withholding tax imposed under the Income Tax
      Convention upon the refunded U.K. tax credit may result in a lower
      effective U.S. federal income tax rate on dividends paid by
      ScottishPower for certain Eligible U.S. Holders. It is not clear
      whether inclusion on the U.K tax credit in income and entitlement to
      the U.S. foreign tax credit are dependent on the Eligible U.S. Holder
      filing a claim with the U.K. Inland Revenue. Eligible U.S. Holders that
      do not elect to claim foreign tax credits may instead claim a deduction
      for U.K. withholding tax. For foreign tax credit limitation purposes,
      the dividend will be income from sources without the United States. The
      rules relating to the computation of foreign taxes are complex and
      Eligible U.S. Holders should consult their own tax advisors to
      determine whether and to what extent a credit would be available and
      whether any filings or other actions may be required to substantiate an
      Eligible U.S. Holder's foreign tax credit claim.

      If, at some point in the future, ScottishPower is at least 50% owned by
      United States persons, then under Section 904(g) of the Code, dividends
      paid by a foreign corporation that is at least 50% owned by United
      States persons may be treated as United States source income (rather
      than foreign source income) for foreign tax credit purposes to the
      extent the foreign corporation has more than an insignificant amount of
      United States source income, and the effect of this rule may be to
      treat a portion of the dividends paid by ScottishPower as United States
      source income. Under the Income Tax Convention, Section 904(g)(10) of
      the Code would permit an Eligible U.S. Holder to elect to treat
      ScottishPower dividends as foreign source income for foreign tax credit
      limitation purposes, if the dividend income is separated from other
      income items for purposes of calculating the holder's foreign tax
      credit.

      If the U.S. Holder is a U.S. partnership, trust or estate, the
      associated U.K. tax credit will be available only to the extent that
      the income derived by such partnership, trust or estate is subject to
      United States federal income tax as the income of a resident either in
      its hands or in the hands of its partners or beneficiaries, as the case
      may be.

ScottishPower Form 20-F 1999                                                  47
<PAGE>


      Whether holders of ADSs who reside in countries other than the United
      States are entitled to a tax credit in respect of dividends on ADSs
      depends in general upon the provisions of conventions or agreements, if
      any, as may exist between such countries and the United Kingdom.

      Taxation of Capital Gains
      In general, for U.S. tax purposes, U.S. Holders of ADSs will be treated
      as the owners of the underlying ordinary shares that are represented by
      such ADSs and deposits and withdrawals of ordinary shares by U.S.
      Holders in exchange for ADSs will not be treated as a sale or other
      disposition for U.S. federal income tax purposes.

      Upon a sale or other disposition of ordinary shares or ADSs, an
      Eligible U.S. Holder will recognize gain or loss for United States
      federal income tax purposes in an amount equal to the difference
      between the U.S. dollar value of the amount realized and the Eligible
      U.S. Holder's tax basis (determined in U.S. dollars) in such ordinary
      shares or ADSs. Generally, such gain or loss will be a long-term
      capital gain or loss if the Eligible U.S. Holder's holding period for
      such ordinary shares or ADSs exceeds one year any such gain and loss
      generally will be income from sources within the United States for
      foreign tax credit limitation purposes. Long-term capital gain for a
      non-corporate Eligible U.S. Holder is generally subject to a maximum
      tax rate of 20%.

      A U.S. Holder who is not resident or ordinarily resident for U.K. tax
      purposes in the United Kingdom will not be liable for U.K. tax on
      capital gains recognized on the sale or other disposition of ADSs,
      unless the ADS holder carries on a trade, profession or vocation in the
      United Kingdom through a branch or agency and the ADSs are or have been
      used, held or acquired for the purposes of such trade, profession or
      vocation or such branch or agency.

      U.S. citizens resident or ordinarily resident in the United Kingdom,
      U.S. corporations resident in the United Kingdom by reason of their
      business being managed or controlled in the United Kingdom and U.S.
      citizens who or U.S. corporations which, are trading or carrying on a
      trade, profession or vocation in the United Kingdom through a branch or
      agency and who or which have used, held or acquired the ADSs for the
      purposes of such trade, profession or vocation or such branch or agency
      may be liable for both U.K. and U.S. tax in respect of a gain on the
      disposal of the ADSs. Such holders may not be entitled to a tax credit
      against their United States federal income tax liability for the amount
      of U.K. capital gains tax or U.K. corporation tax on chargeable gains,
      as the case may be, paid in respect of such gain unless the holder
      appropriately can apply the credit against tax due on income from
      foreign sources.

      United States Information Reporting and Backup Withholding
      In general, information reporting requirements will apply to dividend
      payments (or other taxable distributions) in respect of ordinary shares
      or ADSs made within the United States to a non-corporate United States
      person. Accordingly, individual U.S. Holders will receive an annual
      statement showing the amount of taxable dividends paid to them during
      the year. "Backup withholding " at the rate of 31% will apply to such
      payments (i) if the holder or beneficial owner fails to provide an
      accurate taxpayer identification number in the manner required by
      United States law and applicable regulations, (ii) if there has been
      notification from the Internal Revenue Service of a failure by the
      holder or beneficial owner to report all interest or dividends required
      to be shown on its federal income tax returns or, (iii) in certain
      circumstances, if the holder or beneficial owner fails to comply with
      applicable certification requirements.

      In general, payment of the proceeds from the sale of ordinary shares or
      ADSs to or through a United States office of a broker is subject to
      both United States backup withholding and information reporting
      requirements, unless the holder or beneficial owner establishes an
      exemption. Different rules apply to payments made outside the United
      States through an office outside the United States.

      U.K. Inheritance Tax
      An individual who is domiciled in the United States for the purposes of
      the convention between the United States and the United Kingdom for the
      avoidance of double taxation with respect to estate and gift taxes (the
      "Estate Tax Convention") and who is not a national of the United
      Kingdom for the purposes of the Estate Tax Convention generally will
      not be subject to U.K. inheritance tax in respect of the ADSs on the
      individual's death or on a gift of the ADSs during the individual's
      lifetime, unless the ADSs are part of the business property of a
      permanent establishment of the individual in the United Kingdom or
      pertain to a fixed base in the United Kingdom of an individual who
      performs independent personal services. Special rules apply to ADSs
      held in trust. In the

48                                                 ScottishPower Form 20-F 1999


<PAGE>

      exceptional case where the shares are subject both to U.K. inheritance
      tax and to U.S. federal gift or estate tax, the Estate Tax Convention
      generally provides for the tax paid in the United Kingdom to be
      credited against tax paid in the United States.

      U.K. Stamp Duty and Stamp Duty Reserve Tax
      No U.K. stamp duty will be payable on the acquisition or transfer of
      ADSs provided that the instrument of transfer is executed outside the
      United Kingdom and subsequently remains at all times outside the United
      Kingdom. An agreement to transfer ADSs in the form of ADRs settled
      within or reported through any system approved under U.K. Treasury
      Regulations will give rise to a liability to stamp duty reserve tax at
      the rate of 0.5%. Transfers between non-residents not settled or
      reported through any system approved under U.K. Treasury regulations
      are exempt from stamp duty reserve tax.

      An agreement to purchase ordinary shares, as opposed to ADSs, will
      normally give rise to a charge to U.K. stamp duty or stamp duty reserve
      tax at the rate of 0.5% of the price. Stamp duty reserve tax is
      generally the liability of the purchaser and is usually paid by the
      purchaser. Where such ordinary shares are later transferred to the
      Depository's nominee, further stamp duty or stamp duty reserve tax will
      normally be payable at the rate of (Pounds)1.50 per (Pounds)100 (or
      part thereof) of the value of the ordinary shares at the time of the
      transfer. However, where ordinary shares being acquired are transferred
      directly to the Depositary's nominee, the only charge will generally be
      the higher charge of (Pounds)1.50 per (Pounds)100 (or part of the price
      payable for the ordinary shares so acquired) and the stamp duty reserve
      tax generally will not apply.

      Prior to April 6, 1999, a transfer of ordinary shares by the Depositary
      or its nominee to the relative ADS holder when the ADS holder is not
      transferring beneficial ownership gave rise to a U.K. stamp duty at the
      rate of 50p per transfer. On April 6, 1999, this rate increased to
      (Pounds)5 per transfer.

      Item 8. Selected Financial Data

      The selected financial data set out below are extracted or derived from
      the consolidated financial statements of the group which have been
      audited by PricewaterhouseCoopers, Chartered Accountants and Registered
      Auditors, for fiscal 1999 and Coopers & Lybrand, Chartered Accountants
      and Registered Auditors, for fiscal years 1995 to 1998. This selected
      financial data should be read in conjunction with, and is qualified in
      its entirety by reference to, such consolidated financial statements
      and their accompanying notes located on pages F-1 through F-40.

      ScottishPower prepares the consolidated financial statements of the
      group in accordance with accounting principles generally accepted in
      the U.K. ("U.K. GAAP"), which differs in certain significant respects
      from accounting principles generally accepted in the United States
      ("U.S. GAAP"). A description of the significant differences between
      U.K. GAAP and U.S. GAAP applicable to ScottishPower and a
      reconciliation of profit after taxation (or net income) and equity
      shareholders' funds (or shareholders' equity) under U.K. GAAP to those
      under U.S. GAAP are set out in Note 34 to the consolidated financial
      statements of the group.

      In the table below, amounts for fiscal 1999 have been translated,
      solely for the convenience of the reader, at $1.61 to (Pounds)1.00, the
      Noon Buying Rate in effect on March 31, 1999.

      The earnings per ScottishPower ADS have been calculated based on a
      ratio of four ScottishPower ordinary shares to one ScottishPower ADS.
      Dividends per ScottishPower ordinary share and per ScottishPower ADS
      exclude any associated U.K. tax credit available to certain holders of
      ScottishPower ordinary shares and ScottishPower ADS. See "Item 7.
      Taxation--Taxation of Dividends".

ScottishPower Form 20-F 1999                                                  49
<PAGE>


      Other than turnover, U.S. GAAP information for the year ended March 31,
      1995 has not been published by ScottishPower.

<TABLE>
<CAPTION>
                                                                     Fiscal Years
                                          1999          1999          1998          1997          1996          1995
                                 Notes      $m     (Pounds)m     (Pounds)m     (Pounds)m     (Pounds)m     (Pounds)m
      ---------------------------------------------------------------------------------------------------------------
       <S>                       <C>   <C>      <C>           <C>           <C>           <C>           <C>
       U.K. GAAP Information:
       Profit and Loss Account
       information:
       Turnover                      2   5,220         3,242         3,128         2,941         2,271         1,716
       Operating profit              2   1,293           803           785           664           434           380
       Profit before taxation            1,037           644           640           558           404           375
       Ordinary taxation                  (229)         (142)         (152)         (137)         (109)         (101)
       Windfall tax                          -             -          (317)            -             -             -
       Profit after taxation               808           502           171           421           295           274
       Dividends                          (431)         (268)         (243)         (218)         (146)         (112)
       Earnings per ordinary
       share                         1 $0.6830         42.42p        14.41p        38.11p        33.12p        32.88p
       Earnings per ordinary
       share (as adjusted)           1 $0.6846         42.52p        41.28p        38.11p        33.12p        32.88p
       Earnings per
       ScottishPower ADS             1 $  2.74  (Pounds)1.70  (Pounds)0.58  (Pounds)1.52  (Pounds)1.32  (Pounds)1.32
       Earnings per
       ScottishPower ADS (as
       adjusted)                     1 $  2.74  (Pounds)1.70  (Pounds)1.65  (Pounds)1.52  (Pounds)1.32  (Pounds)1.32
       Dividend per
       ScottishPower ordinary
       share, net                      $0.3623         22.50p        20.40p        18.50p        15.50p        13.65p
       Dividend per
       ScottishPower ADS, net          $  1.45  (Pounds)0.90  (Pounds)0.82  (Pounds)0.74  (Pounds)0.62  (Pounds)0.55
       U.K. GAAP Information:
       Balance Sheet
       information:
       Total assets                     10,034         6,232         5,577         4,848         2,861         1,844
       Long term liabilities             3,394         2,108         1,435         1,076           785           313
       Equity shareholders'
       funds                             3,133         1,946         1,708         1,523         1,208         1,106
       U.S. GAAP information:
       Turnover                      2   5,220         3,242         3,128         2,941         2,271         1,716
       Profit after taxation             732.6         455.0         129.8         352.9         271.1             -
       Earnings per ordinary
       share                         1 $0.6181         38.39p        11.00p        31.94p        30.39p            -
       Earnings per ADS              1 $  2.48  (Pounds)1.54  (Pounds)0.44  (Pounds)1.28  (Pounds)1.22             -
       Diluted earnings per
       ordinary share                1 $0.6120         38.01p        10.89p        31.62p        30.14p            -
       Diluted earnings per ADS      1 $  2.45  (Pounds)1.52  (Pounds)0.44  (Pounds)1.26  (Pounds)1.21             -
       Total assets                     11,590         7,199         6,550         6,065         3,480             -
       Equity shareholders'
       funds                             3,962         2,461         2,253         2,340         1,510             -
      ---------------------------------------------------------------------------------------------------------------
</TABLE>

     /1/As permitted under U.K. GAAP, earnings per share has been presented
        above including and excluding the impact of the windfall tax and
        goodwill amortization, to provide an additional measure of underlying
        performance. In accordance with U.S. GAAP, earnings per share has been
        presented above based on U.S. GAAP earnings, without adjustments for the
        impact of windfall tax and goodwill amortization. As such additional
        measures of underlying performance are not permitted under U.S. GAAP,
        the inclusion of windfall tax in the determination of earnings for the
        purpose of computation of earnings per share in accordance with U.S.
        GAAP decreased earnings by (Pounds)317.0 million or 26.86 pence per
        share/(Pounds)1.07 per ADS for the year ended March 31, 1998. The
        inclusion on goodwill amortization decreased earnings by (Pounds)31.2
        million or 2.63 pence per share/(Pounds)0.11 per ADS for the year ended
        March 31, 1999, by (Pounds)29.8 million or 2.53 pence per
        share/(Pounds)0.10 per ADS for the year ended March 31, 1998, by
        (Pounds)23.7 million or 2.14 pence per share/(Pounds)0.09 per ADS for
        the year ended March 31, 1997 and by (Pounds)7.5 million or 0.84 pence
        per share/(Pounds)0.03 per ADS for the year ended March 31, 1996.
     /2/In fiscal 1996, the results included turnover of (Pounds)439.4 million
        and operating profit of (Pounds)37.7 million (net of reorganization
        costs of (Pounds)42.7 million explained below) in respect of Manweb for
        the period of the year following its acquisition on October 6, 1995. In
        September 1994, the Accounting Standards Board issued Financial
        Reporting Standard No. 7 on fair values in acquisition accounting. To
        comply with that reporting standard, reorganization and integration
        costs must be charged against post acquisition profits, and must not be
        reflected in the acquisition balance sheet. Accordingly, in line with
        the company's announcement in January 1996, the severance and
        reorganization costs of (Pounds)42.7 million associated with the
        acquisition of Manweb were charged against profits in the second half of
        fiscal 1996. (Pounds)28.2 million of the (Pounds)42.7 million represents
        accrual for severance costs (including

50                                                  ScottishPower Form 20-F 1999


<PAGE>

      Directors' severance costs) and (Pounds)14.5 million represents
      reorganization costs in areas such as contracting and retail. In fiscal
      1997, the results include turnover of (Pounds)316.2 million and
      operating profit of (Pounds)114.4 million (net of reorganization costs
      of (Pounds)21.2 million) in respect of Southern Water, for the period
      of the year following its acquisition on August 6, 1996.

      Dividends
      An interim dividend in respect of each fiscal year is normally declared
      by ScottishPower in November for payment in the following March. The
      final dividend in respect of each fiscal year is normally recommended
      by Directors in May and paid in October, following approval by
      ScottishPower's shareholders. A final dividend in respect of fiscal
      1999 of 15.00p net per ordinary share will be paid on October 4, 1999,
      making a total dividend of 22.50p net for fiscal 1999. The total
      dividend payable per ADS for fiscal 1999 was approximately $1.45 net
      based on the Noon Buying Rate in effect on March 31, 1999. The
      following table sets out the dividends paid on ordinary shares and ADSs
      in respect of the past five fiscal years, excluding any associated U.K.
      tax credit in respect of such dividends.

<TABLE>
<CAPTION>
                                                   Fiscal Years
                                  Notes   1999   1998   1997   1996   1995
      --------------------------------------------------------------------
       <S>                        <C>   <C>    <C>    <C>    <C>    <C>
       Pence per ordinary share:      1
       Interim                           7.50p  6.80p  6.17p  5.17p  4.55p
       Final                            15.00p 13.60p 12.33p 10.33p  9.10p
       -------------------------------  ------ ------ ------ ------ ------
       Total                            22.50p 20.40p 18.50p 15.50p 13.65p
       -------------------------------  ------ ------ ------ ------ ------
       Pence per ADS                  2
       Interim                          30.00p 27.20p 24.68p 20.68p 18.20p
       Final                            60.00p 54.40p 49.32p 41.32p 36.40p
       -------------------------------  ------ ------ ------ ------ ------
       Total                            90.00p 81.60p 74.00p 62.00p 54.60p
       -------------------------------  ------ ------ ------ ------ ------
       U.S. dollars per ADS         2,3
       Interim                          $ 0.48 $ 0.46 $ 0.40 $ 0.34 $ 0.30
       Final                            $ 0.97 $ 0.91 $ 0.81 $ 0.68 $ 0.60
       -------------------------------  ------ ------ ------ ------ ------
       Total                            $ 1.45 $ 1.37 $ 1.21 $ 1.02 $ 0.90
       -------------------------------  ------ ------ ------ ------ ------
</TABLE>

     /1/Dividends per share and per ADS are shown net of any associated U.K. tax
        credit available to certain holders of ordinary shares and ADSs. See
        "Item 7. Taxation--Taxation of Dividends". Dividends paid by the
        Depositary in respect of ADSs are paid in U.S. dollars based on a market
        rate of exchange that differs from the Noon Buying Rate.
     /2/Calculated based on a ratio of four ordinary shares for one ADS.
     /3/Dividends have been translated from pounds sterling into U.S. dollars,
        solely for the convenience of the reader, at $1.61 to (Pounds)1.00, the
        Noon Buying Rate in effect on March 31, 1999. As dividends paid by
        ScottishPower are in pounds sterling, exchange rate fluctuations will
        affect the U.S. dollar amounts received by holders of ADSs on conversion
        by the Depositary of such cash dividends. See "--Exchange Rates" below.

      Future dividends will be dependent upon the group's earnings, financial
      condition and other factors. Although dividends have historically been
      declared and paid semi-annually, following completion of the merger
      with PacifiCorp, ScottishPower intends to move to quarterly reporting
      and payment of quarterly dividends. It is expected that a dividend will
      be paid in February, May, August and November of each year, which is
      consistent with the current timing of PacifiCorp's dividend payments.
      Interim and final dividends paid in the past are not necessarily
      indicative of future dividends. A person resident in the U.K. for tax
      purposes who receives a dividend from ScottishPower is generally
      entitled to a tax credit, currently at a rate of 1/9th of the dividend
      (the "associated U.K. tax credit"). For further information, see "Item
      7. Taxation--Taxation of Dividends".

ScottishPower Form 20-F 1999                                                  51
<PAGE>


      Exchange Rates
      Cash dividends are paid by ScottishPower in pounds sterling. Exchange
      rate fluctuations will affect the U.S. dollar amounts received by
      owners of the ADSs on conversion by the Depositary of such cash
      dividends paid. In addition, fluctuations in the exchange rate between
      pounds sterling and U.S. dollars will affect the U.S. equivalent of the
      quoted pound sterling price of ordinary shares on the London Stock
      Exchange, and as a result, will likely affect the market price of ADSs
      in the United States.

      Item 9. Management's Discussion and Analysis of Financial Condition and
              Results of Operations

      This management's discussion and analysis is based on the Consolidated
      Financial Statements of the group prepared in accordance with U.K. GAAP
      and should be read in conjunction with the Consolidated Financial
      Statements of the group and Notes thereto included in Item 19 of this
      report.

      Results of Operations
      The results for the last three fiscal years are set out below. This
      data should be read in conjunction with the Consolidated Financial
      Statements and Notes thereto included in Item 19 of this report.

      Results for Fiscal 1999 Compared With Fiscal 1998

      Group Financial Results

      Table 9.1 Group Financial Results
<TABLE>
<CAPTION>
                                                1999      1998    Change
                                           (Pounds)m (Pounds)m (Pounds)m     %
      -------------------------------------------------------------------------
       <S>                                 <C>       <C>       <C>        <C>
       Turnover                              3,242.3   3,128.2     114.1   3.6
       Operating profit                        802.8     785.1      17.7   2.3
       Profit before tax                       643.8     639.6       4.2   0.7
       Free cash flow before windfall tax      702.2     733.8     (31.6) (4.3)
       Earnings per share before windfall
       tax                                    42.42p    41.28p     1.14p   2.8
       Earnings per share before goodwill
       amortization and windfall tax          42.52p    41.28p     1.24p   3.0
       Dividend per share                     22.50p    20.40p     2.10p  10.3
      -------------------------------------------------------------------------
</TABLE>

      Group turnover grew during the year by (Pounds)114 million to
      (Pounds)3,242 million, an increase of 3.6%. This was due mainly to
      growth in the developing domestic gas area and telecommunications
      business. Gas and other energy sales were up by (Pounds)77 million to
      (Pounds)240 million, reflecting our continuing success in gaining new
      customers in the domestic market, and the total sales of
      ScottishTelecom were almost doubled at (Pounds)220 million.

      The rise in overall turnover, together with continued strong control
      over operating costs, led to good growth in earnings before interest,
      tax, depreciation and amortization (EBITDA), up (Pounds)66 million to
      (Pounds)1,017 million, and higher operating profit of (Pounds)803
      million, up (Pounds)18 million.

      The net interest charge increased by (Pounds)14 million to (Pounds)161
      million, mainly due to the impact on debt of the two windfall tax
      payments in December 1997 and December 1998, totaling (Pounds)317
      million, and the continued capital expenditure program.

      Profit before tax grew by (Pounds)4 million to (Pounds)644 million. At
      (Pounds)142 million, the ordinary tax charge represented an effective
      tax rate of 22.0%, reduced from 23.7% in the previous year.

      Earnings per share amounted to 42.42p, a rise of 2.8% on a comparable
      basis. One further measure of earnings per share in the financial
      statements is before windfall tax and amortization of goodwill. This
      amounted to 42.52p, an increase of 3% on the equivalent figure last
      year. The recommended final dividend of 15.00p net per share brought
      the total dividend per share for the year to 22.50p net, an increase of
      10.3%. This is in line with our aim of 7% to 8% real dividend growth
      per annum until at least the regulatory reviews in the year 2000,
      whilst

52                                                  ScottishPower Form 20-F 1999


<PAGE>

      maintaining a prudent level of dividend cover. The dividend cover
      reduced marginally to 1.9 times from 2.0 times the previous year.

      Free cash flow for the year, before windfall tax, was (Pounds)702
      million (as defined on page F-12), a reduction of (Pounds)32 million,
      reflecting working capital increases in our developing gas and
      telecommunications businesses. The group invested (Pounds)754 million
      in capital projects during the year, (Pounds)97 million more than in
      the previous year. This investment was primarily to improve the quality
      of the infrastructure assets in our electricity, and water and
      wastewater services businesses, and to support the growth of our
      telecommunications business.

      Net debt increased from (Pounds)1,953 million to (Pounds)2,421 million,
      mainly due to the continuing capital investment program. Gearing at
      March 31, 1999 increased to 124% compared to 114% a year ago. Interest
      cover remained prudent at 5.0 times.

      Group Turnover

      Table 9.2 Turnover by business segment

<TABLE>
<CAPTION>
                                     Total turnover             Inter-segment turnover            External turnover
                                   1999      1998    Change       1999      1998    Change       1999      1998    Change
                        Notes (Pounds)m (Pounds)m (Pounds)m  (Pounds)m (Pounds)m (Pounds)m  (Pounds)m (Pounds)m (Pounds)m
      -------------------------------------------------------------------------------------------------------------------
       <S>              <C>   <C>       <C>       <C>        <C>       <C>       <C>        <C>       <C>       <C>
       Energy business
       Generation
       Wholesale            1     914.3   1,014.3    (100.0)     695.3     764.8     (69.5)     219.0     249.5     (30.5)
       Power Systems              470.1     443.0      27.1      416.8     391.1      25.7       53.3      51.9       1.4
       Energy Supply            1,434.5   1,336.2      98.3       28.8      11.5      17.3    1,405.7   1,324.7      81.0
       Manweb                     614.2     662.5     (48.3)      18.1       8.6       9.5      596.1     653.9     (57.8)
       ----------------------   -------   -------    ------    -------   -------      -----   -------   -------     -----
       Energy Total             3,433.1   3,456.0     (22.9)   1,159.0   1,176.0     (17.0)   2,274.1   2,280.0      (5.9)
       ----------------------   ----------------------------------------------------------
       Non-energy
       business
       Manweb                         -       5.3      (5.3)         -       5.3      (5.3)         -         -         -
       Southern Water             440.2     453.0     (12.8)       0.7       0.4       0.3      439.5     452.6     (13.1)
       ScottishTelecom      2     219.9     113.3     106.6       39.2      31.2       8.0      180.7      82.1      98.6
       Other              1,2     612.8     410.7     202.1      264.8      97.2     167.6      348.0     313.5      34.5
       ----------------------   ----------------------------------------------------------    -------   -------     -----
       Total                                                                                  3,242.3   3,128.2     114.1
       ----------------------   ----------------------------------------------------------    -------   -------     -----
</TABLE>

     /1/The Generation Wholesale segment previously included sales from gas
        trading activities which are now reported in the Other business segment.
        Total turnover for the Generation Wholesale segment for 1998 included
        (Pounds)100.5 million of gas trading sales of which (Pounds)82.4 million
        related to internal sales.
     /2/The ScottishTelecom business segment and the Other business segment were
        previously combined as the Developing business and ancillary services
        segment. The ScottishTelecom business segment has been separately
        identified due to its increased significance to the group. Prior year
        figures have been restated accordingly.

      Table 9.3 External Energy Turnover

<TABLE>
<CAPTION>
                                                  1999                                     1998
                                Generation     Power    Energy           Generation     Power    Energy
                                 Wholesale   Systems    Supply     Total  Wholesale   Systems    Supply     Total
                                 (Pounds)m (Pounds)m (Pounds)m (Pounds)m  (Pounds)m (Pounds)m (Pounds)m (Pounds)m
      -----------------------------------------------------------------------------------------------------------
       <S>                      <C>        <C>       <C>       <C>       <C>        <C>       <C>       <C>
       First tier electricity            -         -   1,115.6   1,115.6          -         -   1,111.0   1,111.0
       Second tier electricity           -         -     136.6     136.6          -         -     152.4     152.4
       Wholesale electricity         185.4         -         -     185.4      199.4         -         -     199.4
       Gas and other energy
       sales                          33.6      53.3     153.5     240.4       50.1      51.9      61.3     163.3
                                     -----      ----   -------   -------      -----      ----   -------   -------
       ScottishPower sub total       219.0      53.3   1,405.7   1,678.0      249.5      51.9   1,324.7   1,626.1
       Manweb                                                      596.1                                    653.9
       ----------------------------------------------------------------- ------------------------------ ---------
       Total                                                     2,274.1                                  2,280.0
       ----------------------------------------------------------------- ------------------------------ ---------
</TABLE>

ScottishPower Form 20-F 1999                                                  53
<PAGE>


      Group turnover of (Pounds)3,242 million was (Pounds)114 million higher
      than fiscal 1998, an increase of 3.6%. Total energy sales across the
      group were (Pounds)2,274 million, a reduction of (Pounds)6 million on
      the previous year. Higher sales volumes in the ScottishPower franchise
      area and further growth in our share of the domestic gas market were
      more than offset by lower revenues in Manweb and in the ScottishPower
      second tier and large business markets, due to competitive pricing.
      Southern Water's contribution to group turnover reduced by (Pounds)13
      million, reflecting the full-year impact of the disposal of non-core
      businesses in the prior year, with underlying business turnover
      increasing by (Pounds)19 million year-on-year. Scottish Telecom
      increased its total turnover by (Pounds)107 million to (Pounds)220
      million, with external sales rising by (Pounds)99 million to
      (Pounds)181 million. The group's other businesses increased their
      turnover by (Pounds)35 million.

      ScottishPower energy sales are divided into four market segments: first
      tier sales, which represent the sale of electricity to customers in the
      Scottish franchise area; second tier sales by ScottishPower to
      customers outside the Scottish franchise area; wholesale, which is the
      sale of electricity to other electricity companies and to the Pool in
      England and Wales; and gas and other energy sales, which include the
      sale of gas by ScottishPower in both the established commercial and
      industrial market and in the emerging domestic gas market in the U.K.

      First tier sales were (Pounds)1,116 million, an increase of (Pounds)5
      million on the previous year. Volumes increased in the year by 1.4% to
      19,831 GWh, primarily due to more normal winter weather following the
      unusually mild winter in 1997-98. Sales in the first tier competitive
      market were broadly in line with the previous year, despite prices
      being lower in the domestic and commercial sectors, and because of
      continued competition in the industrial sector.

      Sales of electricity in the second tier market sector reduced by
      (Pounds)16 million to (Pounds)137 million, with lower sales volumes
      outside our home territories as a result of exiting from loss-making
      business in this area.

      Wholesale turnover reduced in the year, down 7% to (Pounds)185 million,
      with higher export volumes, up by 442 GWh to 6,049 GWh, offset by lower
      Pool prices. Agency sales were 2.7% lower at 1,010 GWh.

      Gas and other energy sales increased by (Pounds)77 million to
      (Pounds)240 million, mainly as a result of our success in winning
      customers in the new domestic gas markets.

      Manweb's energy turnover for the year was (Pounds)596 million, a fall
      of (Pounds)58 million or 9% compared to the previous year. Distribution
      revenues increased by (Pounds)8 million, principally as a result of the
      regulatory pricing formula. The benefits of lower costs were passed on
      to domestic and business customers through reduced tariffs. The effect
      on profit from tariff reductions to the domestic and small business
      sectors, some (Pounds)20 million, was more than offset by improved
      performance elsewhere in the commercial and industrial sector, arising
      from exiting from loss-making business.

      Southern Water's contribution to group turnover fell by (Pounds)13
      million to (Pounds)440 million, due entirely to the previous year's
      disposal of the non-core businesses. Turnover in the regulated business
      increased to (Pounds)439 million, a rise of (Pounds)19 million compared
      to the previous year, due to higher prices to fund the capital
      expenditure program.

      Total sales in ScottishTelecom increased by (Pounds)107 million to
      (Pounds)220 million, including a contribution to group turnover of
      (Pounds)49 million from Demon Internet for the period since
      acquisition. Total turnover in Telecommunication Services increased by
      (Pounds)41 million to (Pounds)126 million, with total turnover in The
      CallCentre Service rising by (Pounds)3 million to (Pounds)12 million
      and in Information Services by (Pounds)14 million to (Pounds)33
      million. External turnover in ScottishTelecom increased by (Pounds)99
      million to (Pounds)181 million.

      The group's other businesses increased their turnover by (Pounds)35
      million to (Pounds)348 million. The Retail business, despite the poor
      market conditions during the year, increased its turnover to
      (Pounds)287 million due to new store openings, with like-for-like sales
      falling by 5.7%.

      Group Operating Costs
      The 0.5% increase in cost of sales to (Pounds)1,861 million compared
      favorably with the 3.6% increase in turnover. Cost of sales in the
      energy businesses increased due to the higher gas sales volumes.

54                                                  ScottishPower Form 20-F 1999


<PAGE>


      Transmission and distribution costs increased by (Pounds)39 million
      year-on-year, largely due to customer capture costs in the growing
      electricity and gas supply businesses, together with costs of the
      severe winter storms in Scotland. Administrative expenses increased by
      (Pounds)46 million in the year, due to the expansion of our developing
      businesses, especially telecommunications, and increased rates and
      depreciation charges in our wires and pipes businesses.

      The group has continued to use benchmarking as a tool to reduce
      substantially underlying operating costs and improve performance during
      the year.

      In the Scottish energy businesses, Generation Wholesale announced a
      major new cost savings initiative, while Power Systems' continued
      reduction of core business costs has been achieved, principally through
      benchmarking and continued transfer of best practices--specifically by
      comparing performance between regions. Energy Supply achieved
      significant efficiency improvements through best practice transfer
      between ScottishPower and Manweb and from external benchmarking of cost
      and service performance.

      In Manweb further cost savings have been identified through best
      practice transfers with both the Power Systems and Energy Supply
      businesses.

      Cost reduction initiatives in Southern Water have achieved significant
      improvements in OFWAT ratings of cost performance in water and drainage
      businesses. Transition plan savings totaled (Pounds)10 million in the
      year, bringing total savings to (Pounds)41 million since acquisition.
      Further initiatives announced in September 1998 to build on the success
      of the transition plan will deliver additional cost savings.

      Group Operating Profit

      Table 9.4 Group operating profit by business segment

<TABLE>
<CAPTION>
                                        1999       1998     Change
                                   (Pounds)m  (Pounds)m  (Pounds)m
      -------------------------------------------------------------
       <S>                         <C>        <C>        <C>
       Generation Wholesale            115.3      130.8      (15.5)
       Power Systems
       Transmission                     83.5       80.1        3.4
       Distribution                    178.2      169.4        8.8
       Energy Supply
       First tier electricity           36.3       38.0       (1.7)
       Second tier electricity             -       (3.8)       3.8
       Gas and other energy sales      (16.2)     (19.1)       2.9
                                     -------      -----      -----
       Scottish energy businesses      397.1      395.4        1.7
       Manweb                          125.2      131.3       (6.1)
       Southern Water                  262.2      240.7       21.5
       ScottishTelecom                  10.3        4.7        5.6
       Other                             8.0       13.0       (5.0)
       --------------------------    -------      -----      -----
       Total                           802.8      785.1       17.7
       --------------------------    -------      -----      -----
</TABLE>

      Group operating profit amounted to (Pounds)803 million, an increase of
      2.3% or (Pounds)18 million compared with fiscal 1998. This increase in
      group operating profit is after absorbing an additional (Pounds)28
      million of costs compared to the previous year, for capturing new
      energy and telecom customers, marketing the ScottishPower brand, and
      depreciation of new systems required to operate in the competitive
      electricity and gas markets.

      Operating profit in the Scottish energy businesses increased by
      (Pounds)2 million to (Pounds)397 million. Reduced Generation Wholesale
      profit from lower sales prices was more than offset by increased profit
      in Power Systems from higher distribution revenues and in Energy Supply
      from increasing domestic gas margins and improved performance in the
      second tier market.

      The profit in Generation Wholesale was (Pounds)115 million in the year,
      down (Pounds)16 million compared with fiscal 1998. Higher electricity
      volumes were sold at lower prices, both to our Energy Supply business
      and to the wholesale
ScottishPower Form 20-F 1999                                                  55
<PAGE>

      market. In addition there were higher capacity and transmission
      charges. Interconnector capacity was increased in the year, with
      volumes up by 7.9%, but with contribution unchanged due to reductions
      in Pool prices.

      Power Systems increased profit by more than (Pounds)12 million to
      (Pounds)262 million. Transmission increased operating profit by
      (Pounds)3 million to (Pounds)84 million, due to price increases allowed
      under the regulatory formula. Distribution profits improved by
      (Pounds)9 million, as a result of higher distribution revenues from
      allowed price increases, higher sales volumes and a more favorable mix
      of units sold. Further business cost reductions were achieved, which
      partially offset increased depreciation charges and new industry costs
      associated with the operation of the competitive electricity market.

      In Energy Supply, first tier profit reduced by (Pounds)2 million to
      (Pounds)36 million, with lower generation costs more than offset by
      price reductions to customers and the costs of operating in the
      competitive electricity market. The impact of competition on financial
      performance in our first tier market has not been significant. The
      second tier segment recorded a break-even result, despite absorbing
      (Pounds)3 million of capture costs for new domestic electricity
      customers won in this market. Margins have been improved despite the
      competitive pressures in the large business sector of this market,
      primarily as a result of lower Pool prices and exit from loss-making
      contracts.

      In the commercial and domestic gas markets the operating loss of
      (Pounds)16 million reflects customer capture costs of (Pounds)17
      million this year, increased costs from serving the expanded customer
      base, in part offset by the margins obtained from supplying new gas
      customers in the domestic sector. Payback on our initial investment in
      acquiring a domestic gas customer is currently being achieved in 18
      months. Overall, Energy Supply profits increased by (Pounds)5 million
      to (Pounds)20 million.

      Operating profit in Manweb decreased by (Pounds)6 million to
      (Pounds)125 million. Increased depreciation charges and marketing costs
      in the competitive electricity market contributed to the reduction in
      profit, with price reductions passed on to customers offset by lower
      generation prices.

      Southern Water contributed more than (Pounds)21 million of additional
      operating profit, mainly from increased revenues and continuing cost
      savings of (Pounds)10 million delivered by the acquisition transition
      plan during fiscal 1999. These savings offset the additional (Pounds)7
      million costs of new obligations arising from the construction and
      operation of new wastewater treatment plants. Year-on-year, Southern
      Water's operating profit increased by 8.9% from (Pounds)241 million to
      (Pounds)262 million. All non-core businesses have been sold and,
      together with property sales, have realized (Pounds)129 million,
      (Pounds)29 million ahead of the target set at acquisition.

      ScottishTelecom's contribution to group operating profit was (Pounds)10
      million, up from (Pounds)5 million in fiscal 1998, with EBITDA higher
      by (Pounds)15 million to (Pounds)26 million. The improvement in
      operating profit reflects the increased volume of network traffic and
      growth in the provision of Internet services, resulting from our
      acquisition of Demon Internet on May 1, 1998. Operating profit for
      Demon totaled (Pounds)12 million including increased ingress receipts,
      with the Information Services business recording a profit of (Pounds)7
      million and The CallCentre Service (Pounds)2 million. Telecommunication
      Services recorded a loss of (Pounds)11 million, primarily from one-off
      customer capture costs and increased depreciation.

      Profits in the other businesses were (Pounds)8 million, (Pounds)5
      million lower than the previous year due to a fall in Retail's profits,
      as a result of difficult market conditions in this sector throughout
      fiscal 1999. Performance in the other businesses was in line with the
      prior year.

      Interest and Taxation
      The net interest charge of (Pounds)161 million was (Pounds)14 million
      higher than in fiscal 1998. This was due mainly to the full-year effect
      of increased debt on payment of the first installment of the windfall
      tax in December 1997, and part-year impact from the second installment,
      paid in December 1998. Changes to the group's debt portfolio were made
      during the year to take advantage of falling interest rates and to
      extend the maturity profile of the group's borrowings. As a result, the
      average interest rate for the group during the year was 8.0%, versus
      8.4% in fiscal 1998. Interest cover remained prudent at 5.0 times,
      against 5.3 times in the prior year. The effective tax rate was reduced
      to 22.0% from 23.7% in the previous year largely due to higher capital
      allowances on the current mix and level of capital expenditure.

56                                                 ScottishPower Form 20-F 1999
<PAGE>


      Earnings and Dividends
      The profit after ordinary tax for the year amounted to (Pounds)502
      million, an increase of (Pounds)14 million or 2.9%. With a weighted
      average 1,185 million shares in issue during the year, earnings per
      share were 42.42p before windfall tax, an increase of 2.8% on a
      comparable basis.

      The proposed final dividend of 15.00p net per share brings the total
      dividend per share for the year to 22.50p net, an increase of 10.3%.
      The full-year dividend was covered 1.9 times by earnings, versus 2.0
      times in fiscal 1998. This increase in dividend is in line with our
      stated aim of achieving 7% to 8% real dividend growth until at least
      the regulatory reviews in the year 2000, whilst maintaining a prudent
      level of dividend cover. It is ScottishPower's current aim to deliver
      real dividend growth thereafter and this will be re-examined once the
      outcome of the regulatory reviews is known.

      Results for Fiscal 1998 Compared With Fiscal 1997

      Group Financial Results

      Table 9.5 Group Financial Results

<TABLE>
<CAPTION>
                                                1998      1997    Change
                                           (Pounds)m (Pounds)m (Pounds)m    %
      -----------------------------------------------------------------------
       <S>                                 <C>       <C>       <C>       <C>
       Turnover                              3,128.2   2,940.7     187.5  6.4
       Operating profit                        785.1     663.9     121.2 18.3
       Profit before tax                       639.6     558.4      81.2 14.5
       Free cash flow before windfall tax      733.8     583.4     150.4 25.8
       Earnings per share before windfall
       tax                                    41.28p    38.11p     3.17p  8.3
       Dividend per share                     20.40p    18.50p     1.90p 10.3
      -----------------------------------------------------------------------
</TABLE>

      Group turnover of (Pounds)3,128 million in fiscal 1998 was (Pounds)187
      million higher than in fiscal 1997, an increase of 6.4%. This was due
      mainly to a full year's revenue from Southern Water and growth in
      ScottishTelecom where sales more than doubled. Sales in our energy
      businesses were maintained, despite lower prices to our customers due
      to tariff reductions, competitive pricing outside ScottishPower's
      franchise area and lower volumes which resulted from the exceptionally
      mild winter. Offsetting this, gas sales were up by over 200% to
      (Pounds)60 million, reflecting our continuing success in gaining new
      customers in that market. Total domestic gas customers acquired at
      March 31, 1998 were 320,000.

      The rise in overall turnover together with continued strong control
      over operating costs led to good growth in EBITDA, up (Pounds)150
      million to (Pounds)951 million, and higher operating profit of
      (Pounds)785 million, up (Pounds)121 million.

      The net interest charge increased by (Pounds)39 million to (Pounds)147
      million, mainly due to the full year effect of additional borrowings
      associated with the acquisition of Southern Water in August 1996 and
      the payment of the first installment of the windfall tax in December
      1997.

      Profit before tax grew by 14.5% to (Pounds)640 million. At (Pounds)152
      million, the ordinary tax charge represented an effective tax rate of
      23.7%, down from 24.5% in the previous year. Provision has been made in
      full for the windfall tax on utilities announced in the July 1997
      budget; the liability for the group has been assessed at (Pounds)317
      million.

      Earnings per share before the windfall tax amounted to 41.28p, an
      increase of 8.3% compared to fiscal 1997. The recommended final
      dividend of 13.60p net per share brought the total dividend per share
      for fiscal 1998 to 20.40p net, an increase of 10.3% compared to fiscal
      1997. This is in line with ScottishPower's stated aim of 7% to 8% real
      dividend growth per annum, until at least the regulatory reviews in the
      year 2000, while maintaining a prudent level of dividend cover. The
      dividend cover remained at just over two times earnings before the
      windfall tax.

      Free cash flow for the year before windfall tax was (Pounds)734
      million, an increase of (Pounds)150 million compared to fiscal 1997,
      reflecting the improved operating performance and good control of
      working capital. The group invested (Pounds)657

ScottishPower Form 20-F 1999                                                  57
<PAGE>

      million in capital projects during the year, (Pounds)186 million more
      than in the previous year. This investment was primarily to improve the
      quality of the infrastructure assets in the group's electricity and
      water and wastewater services businesses, and to grow the group's
      telecommunications business. The figures also reflect a full year of
      expenditure at Southern Water.

      Net debt increased from (Pounds)1,790 million to (Pounds)1,953 million,
      mainly due to payment of the first installment of the windfall tax of
      (Pounds)158 million.

      Gearing at March 31, 1998 reduced to 114% compared to 118% a year ago,
      despite the impact of part of the windfall tax. Excluding the effect of
      the windfall tax, gearing would have been 100%. Interest cover remained
      prudent at 5.3 times.

      Group Turnover
      Table 9.6 Turnover by business segment

<TABLE>
<CAPTION>
                                    Total turnover             Inter-segment turnover            External turnover
                                  1998      1997    Change       1998      1997    Change       1998      1997    Change
                             (Pounds)m (Pounds)m (Pounds)m  (Pounds)m (Pounds)m (Pounds)m  (Pounds)m (Pounds)m (Pounds)m
      -------------------------------------------------------------------------------------------------------------------
       <S>                   <C>       <C>       <C>        <C>       <C>       <C>        <C>       <C>       <C>
       Energy business
       Generation Wholesale    1,014.3     974.4      39.9      764.8     744.4      20.4      249.5     230.0      19.5
       Power Systems             443.0     429.2      13.8      391.1     386.8       4.3       51.9      42.4       9.5
       Energy Supply           1,336.2   1,270.4      65.8       11.5       0.9      10.6    1,324.7   1,269.5      55.2
       Manweb                    662.5     738.4     (75.9)       8.6         -       8.6      653.9     738.4     (84.5)
                               -------   -------     -----    -------   -------      ----    -------   -------     -----
       Energy Total            3,456.0   3,412.4      43.6    1,176.0   1,132.1      43.9    2,280.0   2,280.3      (0.3)
      -------------------------------------------------------------------------
       Non-energy business
       Manweb                      5.3      20.9     (15.6)       5.3       4.2       1.1          -      16.7     (16.7)
       Southern Water            453.0     316.7     136.3        0.4       0.5      (0.1)     452.6     316.2     136.4
       ScottishTelecom           113.3      53.7      59.6       31.2      16.7      14.5       82.1      37.0      45.1
       Other                     410.7     359.2      51.5       97.2      68.7      28.5      313.5     290.5      23.0
      -------------------------------------------------
       Total                                                                                 3,128.2   2,940.7     187.5
      -------------------------------------------------                                      -------   -------     -----
</TABLE>


      Table 9.7 External energy turnover

<TABLE>
<CAPTION>
                                                  1998                                     1997
                                Generation     Power    Energy           Generation     Power    Energy
                                 Wholesale   Systems    Supply     Total  Wholesale   Systems    Supply     Total
                                 (Pounds)m (Pounds)m (Pounds)m (Pounds)m  (Pounds)m (Pounds)m (Pounds)m (Pounds)m
      -----------------------------------------------------------------------------------------------------------
       <S>                      <C>        <C>       <C>       <C>       <C>        <C>       <C>       <C>
       First tier electricity            -         -   1,111.0   1,111.0          -         -   1,150.3   1,150.3
       Second tier electricity           -         -     152.4     152.4          -         -     101.8     101.8
       Wholesale electricity         199.4         -         -     199.4      195.6         -         -     195.6
       Gas and other energy           50.1      51.9      61.3     163.3       34.4      42.4      17.4      94.2
                                     -----      ----   -------   -------      -----      ----   -------   -------
       ScottishPower sub total       249.5      51.9   1,324.7   1,626.1      230.0      42.4   1,269.5   1,541.9
                                                                              -----      ----   -------
       Manweb                                                      653.9                                    738.4
      ------------------------------------                       -------      -------------------------   -------
       Total                                                     2,280.0                                  2,280.3
      ------------------------------------                       -------      -------------------------   -------
</TABLE>

      Group turnover of (Pounds)3,128 million was (Pounds)187 million higher
      than fiscal 1997, an increase of 6.4%. Total energy sales across the
      group were (Pounds)2,280 million, the same as in the previous year.
      Lower sales as a result of the exceptionally mild winter, combined with
      competitive pricing in the second tier market and lower prices in the
      domestic market, were offset by increased sales in the emerging gas
      markets. Southern Water's contribution to group turnover increased by
      (Pounds)136 million, mainly reflecting the inclusion of the first full
      year's trading. ScottishTelecom turnover was (Pounds)45 million higher
      compared to fiscal 1997.

58                                                  ScottishPower Form 20-F 1999


<PAGE>


      In the first tier market, sales were (Pounds)1,111 million, down
      (Pounds)39 million on the previous year. Volumes were reduced (down
      3.0% to 19,622 GWh) by the unusually mild Winter in fiscal 1998 and
      lower sales in the competitive part of this market. In addition, prices
      were lower due to tariff reductions in the domestic sector and
      competition in the commercial and industrial sector.

      In contrast, second tier volumes continued to grow with volumes
      increasing by 54%; turnover was (Pounds)51 million higher at
      (Pounds)153 million, reflecting our success in winning new customers.
      In addition, the further combination of the ScottishPower and Manweb
      sales forces led to all new customers contracting with ScottishPower.

      Wholesale electricity sales also increased in the year, up 2% to
      (Pounds)199 million, where the effect of lower export volumes, down 4%
      to 5,607 GWh due to system constraints in the first half of the year,
      was offset by higher agency sales.

      Gas and other energy sales increased by (Pounds)69 million to
      (Pounds)163 million in fiscal 1998, mainly as a result of the group's
      success in winning customers in the new domestic gas markets.

      Manweb's energy turnover for fiscal 1998 was (Pounds)654 million, a
      fall of (Pounds)84 million or 11% compared to the previous year.
      Distribution income reduced as a result of the regulatory pricing
      formula and the benefits of lower costs were passed on to domestic and
      business customers through reduced tariffs. In addition, the continued
      combination of the ScottishPower and Manweb sales forces led to further
      new industrial and commercial customers contracting with ScottishPower.

      Southern Water's contribution to group turnover increased by
      (Pounds)136 million to (Pounds)453 million primarily as a result of the
      full year effect. Turnover in the core business increased to
      (Pounds)420 million, an increase of (Pounds)21 million compared to the
      equivalent full year in fiscal 1997, due to higher prices to fund the
      capital expenditure program. In the non-core businesses, turnover for
      the full year fell by (Pounds)43 million, as expected, due to the
      business disposals achieved during the year.

      Turnover in ScottishTelecom increased by (Pounds)45 million in fiscal
      1998 to (Pounds)82 million reflecting the continued expansion through
      further organic growth and acquisitions. External turnover increased by
      122% to (Pounds)82 million and total turnover by 111% to (Pounds)113
      million.

      Turnover in the other businesses increased by (Pounds)23 million in
      fiscal 1998 to (Pounds)314 million. The Retail business, despite the
      poor market conditions experienced during the year, increased its
      turnover by (Pounds)7 million to (Pounds)274 million due to new store
      openings and increased sales of multimedia; however like-for-like sales
      fell by 4%.

      Group Operating Costs
      The 6.1% increase in cost of sales to (Pounds)1,851 million in fiscal
      1998 compared favorably with the 6.4% increase in turnover, reflecting
      the continued focus in the group on cost control and improved
      efficiency. Cost of sales in the energy businesses increased due to the
      higher gas and second tier sales volumes, offset by reduced other costs
      arising from benchmarking and cost initiatives.

      Operating costs at Manweb were (Pounds)24 million less than the
      previous year, beating the original target by (Pounds)6 million. In
      Southern Water on a full year basis, after allowing for higher costs
      from new environmental obligations and capital schemes, operating costs
      fell by (Pounds)28 million, (Pounds)3 million better than target. These
      operating cost reductions have been achieved principally as a result of
      synergies following acquisition and through the sale of non-core
      Southern Water businesses.

      Costs in Scottish Telecom increased due to business expansion.

      Transmission and distribution costs fell by (Pounds)3 million year-on-
      year despite the impact of initial domestic gas customer capture costs
      in the gas business and the repair costs necessary as a result of the
      severe Winter storms.

      Allowing for restructuring costs in the prior year arising on the
      acquisition of Southern Water, administrative expenses reduced due to
      savings which offset increases arising through the expansion in
      telecommunications. As with cost of sales, there is a continued drive
      on improving cost efficiency across all areas of the group.

ScottishPower Form 20-F 1999                                                  59
<PAGE>


      Group Operating Profit

      Table 9.8 Group operating profit by business segment

<TABLE>
<CAPTION>
                                     1998       1997       Change
                                (Pounds)m  (Pounds)m    (Pounds)m
      ------------------------------------------------------------
       <S>                      <C>        <C>          <C>
       Generation Wholesale         130.8      146.1        (15.3)
       Power Systems
       Transmission                  80.1       77.3          2.8
       Distribution                 169.4      150.7         18.7
       Energy Supply
       First tier electricity        38.0       39.4         (1.4)
       Second tier electricity       (3.8)      (3.2)        (0.6)
       Gas and other energy
       sales                        (19.1)      (3.8)       (15.3)
                                    -----      -----        -----
       Scottish energy
       businesses                   395.4      406.5        (11.1)
       Manweb                       131.3      135.0         (3.7)
       Southern Water               240.7      114.4/1/     126.3
       ScottishTelecom                4.7       (1.5)         6.2
       Other                         13.0        9.5          3.5
       -----------------------      -----      -----        -----
       Total                        785.1      663.9        121.2
       -----------------------      -----      -----        -----
</TABLE>
     /1/Eight months from date of acquisition and after reorganization costs
       of (Pounds)21.2 million.

      Group operating profit was (Pounds)785 million in fiscal 1998, an
      increase of 18% compared to fiscal 1997. Operating profit in the
      Scottish Energy businesses fell by (Pounds)11 million to (Pounds)395
      million, due mainly to reduced generation profits and customer capture
      costs in the emerging gas markets. These were offset in part by lower
      costs and increased profit in Power Systems, mainly due to lower costs
      and increased distribution revenues.

      The profit in Generation Wholesale was (Pounds)131 million in fiscal
      1998, down (Pounds)15 million from fiscal 1997. The generation
      profitability was down (Pounds)9 million due to reduced volumes, higher
      depreciation and a greater volume of "must take' nuclear purchases. In
      wholesale, profit fell by (Pounds)6 million reflecting lower export
      volumes, as a result of system constraints, and reduced margins.

      The Power Systems business increased profit by (Pounds)22 million to
      (Pounds)250 million. Within this business, transmission increased
      operating profit by (Pounds)3 million to (Pounds)80 million with higher
      National Grid costs being more than offset by increased exit charges
      and savings from operating cost initiatives. The distribution profit
      increased by (Pounds)19 million as a result of higher distribution
      revenues and operating cost savings.

      In Energy Supply, first tier profit fell by (Pounds)1 million due to
      reductions in prices and the impact of lower volumes as a result of the
      mild Winter. Losses in the second tier market increased modestly to
      (Pounds)4 million due to the competitive pressures in this sector.
      Actions to stem further second tier losses have been taken and much of
      the unprofitable business has now been surrendered. In other energy
      sales, the operating loss of (Pounds)19 million reflects initial
      domestic customer gas capture costs of approximately (Pounds)12
      million, principally in the second half of the year.

      Operating profit in Manweb decreased slightly by (Pounds)4 million to
      (Pounds)131 million. A fall in turnover was offset by a reduction in
      costs due to the implementation of the last stage of the acquisition
      transition plan. Total operating cost savings arising from the
      acquisition of Manweb now total (Pounds)98 million compared to cost
      levels pre-acquisition of (Pounds)176 million, and ongoing cost savings
      are (Pounds)6 million better than the transition plan target.

      Southern Water contributed an additional (Pounds)126 million of
      operating profit arising mainly from the inclusion of results for a
      full year and cost savings of (Pounds)28 million delivered by the
      acquisition transition plan in fiscal 1998, (Pounds)3 million ahead of
      plan. Year-on-year, Southern Water's operating profit increased by 21%
      to (Pounds)241 million from (Pounds)200 million. All enterprise
      businesses are now sold and will realize (Pounds)90 million, (Pounds)20
      million ahead of target. Property disposal proceeds have already
      reached just under the target of (Pounds)30 million, with further sales
      scheduled in the year ahead.

60                                                 ScottishPower Form 20-F 1999

<PAGE>


      Profits in ScottishTelecom were (Pounds)5 million for the year, an
      increase of (Pounds)6 million meeting the previously announced target
      of (Pounds)4 million for the year from a (Pounds)1 million loss in the
      previous year.

      Profits in the other businesses were (Pounds)13 million for the year, a
      decrease of (Pounds)3 million after removing the effect of (Pounds)7
      million of gas capture costs included in this segment last year.
      Retail's profit fell from (Pounds)14 million to (Pounds)9 million due
      to the difficult market conditions in this sector throughout fiscal
      1998. The operating profits of the Contracting Services, Technology and
      other businesses improved from the prior year.

      Interest
      The net interest charge of (Pounds)147 million was (Pounds)39 million
      higher than in fiscal 1997 due mainly to the full year effect of
      increased debt following the acquisition of Southern Water in 1996 and
      the payment of the first installment of the windfall tax of (Pounds)158
      million in December 1997. Changes to the group's debt portfolio were
      made during the year to manage the increasing trend of interest rates
      and extend the maturity profile of the group's borrowings. As a result,
      the average interest rate for the group during the year was 8.4%,
      slightly below that for fiscal 1997. Interest cover remained prudent at
      5.3 times.

      Taxation
      Profit before tax grew by 14.5% to (Pounds)640 million, while the
      effective tax rate was reduced to 23.7% from 24.5% in the previous
      year. The decrease was mainly due to the reduction in the corporation
      tax rate arising from the July 1997 budget and the write back of
      Advance Corporation Tax, offset in part by the previous Chancellor's
      decision to reduce capital allowances on long life assets. Provision
      has been made in full for the windfall tax on utilities announced in
      the July 1997 budget. The liability for the group has been assessed at
      (Pounds)317 million.

      Earnings and Dividends
      The profit after ordinary tax for fiscal 1998 amounted to (Pounds)488
      million, an increase of (Pounds)66 million or 15.7%. With a weighted
      average 1,180 million shares in issue during the year, earnings per
      share before windfall tax were 41.28p, an increase of 8.3%.

      The recommended final dividend of 13.60p net per share brought the
      total dividend per share for the year to 20.40p net, an increase of
      10.3%. The full year dividend was covered just over two times by
      earnings excluding the effects of the windfall tax. This increase in
      dividend is in line with our stated aim of achieving 7% to 8% real
      dividend growth per annum until at least the regulatory reviews in the
      year 2000, while maintaining a prudent level of dividend cover.

      Liquidity and Capital Resources

      Capital Expenditure

      Table 9.9 Net Capital Expenditure/1/

<TABLE>
<CAPTION>
                                  1999      1998      1997
                             (Pounds)m (Pounds)m (Pounds)m
      ----------------------------------------------------
       <S>                   <C>       <C>       <C>
       Generation Wholesale       42.5      43.7      77.2
       Power Systems             127.5     142.1     102.8
       Energy Supply              23.9      29.6       7.2
       Manweb                     85.5      74.7      75.1
       Southern Water            346.6     284.4     129.5
       ScottishTelecom           103.2      58.2      48.8
       Other                      25.0      24.2      29.7
      ------------------------   -----     -----     -----
       Total                     754.2     656.9     470.3
      ------------------------   -----     -----     -----
</TABLE>
     /1/After deducting customer contributions.

ScottishPower Form 20-F 1999                                                  61
<PAGE>


      The group continued to increase investment in its businesses, with net
      capital expenditure for fiscal 1999 of (Pounds)754 million, an increase
      of (Pounds)97 million over fiscal 1998. This reflected increased
      expenditure on the capital program in Southern Water and the continued
      emphasis on growth of ScottishTelecom.

      Capital expenditure in Generation Wholesale was (Pounds)42 million,
      with investment directed towards efficiency and environmental
      improvements and development of gas storage facilities at Hatfield
      Moors. Further expenditure was incurred at Longannet and Cockenzie
      power stations to extend station lives.

      In Power Systems, net capital expenditure for the year amounted to
      (Pounds)128 million, a decrease of (Pounds)14 million. The distribution
      business spent (Pounds)36 million to improve the quality and
      reliability of the electricity supply to customers, and (Pounds)22
      million on expanding the network to meet demand for new electricity
      supply. More than (Pounds)42 million was invested in new systems for
      improved network management, the opening up of the electricity market
      to full competition, and on enhancing customer service.

      In transmission, (Pounds)28 million was invested to reinforce and
      refurbish specific parts of the overhead line system, and on network
      expansion to support new business opportunities.

      In Energy Supply, capital expenditure of (Pounds)24 million mainly
      reflected further investment in new systems for the liberalization of
      the electricity market, and in the development of Energy Services
      products for large business customers.

      Manweb capital expenditure amounted to (Pounds)86 million. (Pounds)26
      million was spent on modernizing the network to improve reliability and
      quality of electricity supply to customers. Net expenditure on
      expanding the network to meet demand growth and on providing new
      connections to customers was (Pounds)37 million. The balance was
      invested in enhancing customer service and business systems for the
      competitive market.

      Capital expenditure in Southern Water, including infrastructure renewal
      expenditure, amounted to (Pounds)347 million, compared with (Pounds)285
      million in the previous year. The amount included (Pounds)197 million
      as part of the ongoing program to ensure compliance with the higher
      standards set by European Union Directives on the quality of bathing
      water, urban wastewater discharges and sludge disposal. Investment was
      also undertaken to improve security of supply, increase the
      availability of water resources and reduce leakage in line with Water
      Summit commitments.

      Capital expenditure in ScottishTelecom amounted to (Pounds)103 million,
      with (Pounds)48 million associated with the expansion of network reach
      and capacity, including (Pounds)16 million in the north of Scotland and
      (Pounds)5 million for expansion in the Manweb territory. A further
      (Pounds)29 million of spending was attributable to Demon Internet,
      including expenditure related to the migration of Demon customers to
      the ScottishTelecom network and to acquiring increased transatlantic
      capacity.

      In the other businesses, Retail's capital expenditure totaled (Pounds)8
      million, most of which related to the opening of new stores.

      Cash Flow
      Net cash inflow from operations decreased from (Pounds)1,014 million to
      (Pounds)945 million. This reflected the group's investment in working
      capital, primarily in the growing gas and telecommunications
      businesses.

      Net interest paid of (Pounds)150 million was (Pounds)3 million higher
      than the equivalent figure in fiscal 1998, with increases due to the
      higher debt level, partly offset by a change in the mix of our debt
      portfolio. Ordinary tax paid decreased by (Pounds)41 million. Free cash
      flow for the group, before windfall tax, was (Pounds)702 million,
      (Pounds)32 million lower than in fiscal 1998. The payment of the final
      installment of windfall tax amounted to (Pounds)158 million and capital
      expenditure was (Pounds)683 million, up (Pounds)90 million on last
      year.

      Business acquisitions in the year totaled (Pounds)77 million, all of
      which were undertaken by ScottishTelecom. Of this total, (Pounds)66
      million related to Demon Internet, (Pounds)2 million to Watermark Games
      and the remainder comprised

62                                                  ScottishPower Form 20-F 1999

<PAGE>

      deferred consideration for prior year acquisitions of Megafone and
      Teledata. Dividends paid to shareholders amounted to (Pounds)253
      million, up from (Pounds)226 million last year.

      Net debt at March 31, 1999 was (Pounds)2,421 million, an increase of
      (Pounds)468 million compared with a year ago, principally due to
      payments of windfall tax and the increased program of capital
      expenditure. Gearing at March 31, 1999 was 124%, up from 114% at March
      31, 1998.

      Treasury

      Financing
      The treasury focus during the year was on further refinancing of the
      group's debt to minimize interest payments and reduce risk. The group
      continues to ensure that borrowings are financed from a variety of
      competitive sources and that committed facilities are available both to
      cover uncommitted borrowings and to meet the financing needs of the
      group in the future.

      Under the Euro-Medium Term Note (EMTN) Program, established in November
      1997, several issues were undertaken during the financial year. These
      included a (Pounds)250 million, 25 year, 6.75% issue in May 1998 and a
      DM725 million, 5.25%, 10-year issue in August 1998, providing a fixed
      rate in sterling of 6.79%. In addition to these, there were nine other
      smaller issues with maturities between two and ten years. Cumulative
      issues under the program reached a peak during the year of $1,870
      million and, as a result, the program limit was increased from $2,000
      million to $4,000 million. This increase will allow the group continued
      access to a variety of funding sources and the ability to tap market
      demand as and when appropriate. As part of the group's strategy to
      develop new funding sources, a (Pounds)150 million facility with the
      European Investment Bank was completed in December. Drawings under the
      facility as at the balance sheet date totaled (Pounds)51 million.

      On March 12, 1999 the company's (Pounds)2,600 million revolving credit
      facility was renegotiated in order to allow for the merger with
      PacifiCorp. In effect this meant reducing it to (Pounds)2,000 million,
      incorporating the creation of a new holding company and raising the
      margin. At the same time a new facility of (Pounds)600 million was
      arranged in order to finance maximum working capital requirements
      during the next 12 to 18 months. This facility has a 364-day life with
      an option to extend it to June 2001, the same maturity date as the
      (Pounds)2,000 million facility.

      The group continues to manage interest rate exposure by maintaining the
      majority of its debt at fixed rates of interest. This is achieved by a
      combination of fixed rate debt issues and the conversion of floating
      rate issues into fixed rate obligations by the use of interest rate
      swaps, interest rate caps and forward rate agreements. The use of
      financial instruments relates directly to underlying indebtedness; no
      speculative or trading transactions are undertaken. The group treasury
      operates strictly within policies set out by the Board and is subject
      to regular examination by internal and external audit. At March 31,
      1999, the interest rate on some 77% of debt was fixed and the interest
      rate on a further 8% of borrowings was capped.

      Risk Management
      The main financial risks faced by the group are exchange rate risk,
      interest rate risk and Pool price risk. The Board has reviewed and
      agreed policies for managing each of these risks as summarized below.
      The use of all classes of financial instruments to manage these risks
      has been approved by the Board. The group treasury, which is authorized
      to conduct the day-to-day treasury activities of the group, reports at
      least annually to the Board and is subject to examination by internal
      audit. The Energy Trading Center, which is authorized to carry out
      activities to manage the group's Pool price risk, reports monthly to a
      risk committee which is comprised of two executive Directors and an
      external consultant. The Energy Trading Center also reports at least
      annually to the Board and is subject to examination by internal audit.

      The weighted average period of maturity of year-end fixed debt and
      swaps was nine years, while the forward cover on capped debt was for an
      average period of some three years. Accordingly, changes in floating
      interest rates will have a limited impact on interest payable by the
      group.

ScottishPower Form 20-F 1999                                                  63
<PAGE>


      In order to reduce the weighted average cost of capital by improving
      the efficiency of the balance sheet, the group is targeting an "A'
      credit rating, which implies a minimum interest cover of approximately
      3.0 times. It is expected that the merger with PacifiCorp will be
      structured in order to achieve this aim. As a result, the group's long-
      term credit ratings may decline from the current levels of Aa3 (Moody's
      Investors Service) and A+ (Standard & Poor's), both of which are under
      review for possible downgrade. The short-term credit ratings of P1/A1
      are not under review.

      The group has limited exposure to foreign currencies. Commercial paper
      and EMTNs issued in currencies other than sterling are fully covered by
      forward contracts or swaps to convert the debt into sterling. Certain
      limited imports of capital equipment and fuel are denominated in
      foreign currencies and the sterling cost of these is fixed by means of
      forward contracts as soon as the company's contractual commitments are
      known.

      The group has procedures in place to minimize exposure to Pool price
      variations, being the possibility that a change in Pool prices will
      reduce the proceeds of electricity sold to the Pool or increase the
      cost of electricity purchased from the Pool. These involve
      ScottishPower and its subsidiary Manweb entering into contracts for
      differences (CfDs). CfDs are contracts which fix the price of
      electricity for an agreed quantity and duration by reference to an
      agreed strike price. The group's use of such derivative instruments
      relate directly to the underlying purchase and sale of electricity to
      and from the Pool.

      In ScottishPower, the risk management efforts of the energy businesses
      are focused on electricity supply and generation, which are exposed to
      Pool price volatility.

      On the supply side, the group sells predominantly fixed price contracts
      to customers and buys output from the Pool to meet the demand of these
      customers. Since the price of electricity purchased from the Pool can
      be volatile, the group is exposed to risk arising from differences
      between the fixed price at which it sells electricity and the
      fluctuating prices at which it purchases electricity, unless it can
      effectively hedge such exposure.

      The group's generation business is also exposed to fluctuations in Pool
      price. It sells electricity through the Pool, via the Anglo-Scottish
      Interconnector. Sales of electricity to other suppliers in Scotland are
      also made at a price related to the Pool price. In addition, the
      generation business purchases electricity from Scottish Nuclear under
      the terms of the Nuclear Energy Agreement, at a Pool-related price.

      The group's exposure to Pool price risk is managed by its Energy
      Trading Center. The role of the Energy Trading Center is to monitor the
      group's overall energy price exposure and hedge this risk where
      appropriate. In the electricity market the primary hedging tool is
      CfDs.

      The Energy Trading Center manages CfDs by reference to its own internal
      forecasts of customer demand, volume available for Pool trading and
      Pool prices and bases its choices on the interpretation of these
      forecasts and market intelligence.

      Bilateral contracts are then entered into with RECs, generators and
      other large electricity consumers to mitigate Pool price risk. These
      contracts are typically settled monthly for cash, based on the actual
      variance of Pool prices to the agreed CfD strike price. Therefore,
      these contracts do not involve actual delivery of the underlying
      commodity. These CfDs involve a degree of credit risk. This is the risk
      that the counterparty to the CfD defaults on settlement. The group
      controls credit risk arising from holding the CfDs through credit
      approvals, limits and monitoring procedures.

      The operation of the Energy Trading Center is carried out under strict
      guidelines which are agreed and monitored by the Risk Management
      Committee, whose membership includes the Executive Finance Director and
      the Executive Director, U.K. Power Operations. In addition, the
      operation of the Energy Trading Center is monitored by internal audit.

      The group's ability to manage both its purchase price risk and its
      sales price risk depends, in part, on the continuing availability of
      properly priced risk management mechanisms such as CfDs. However,
      because the CfD market in electricity is very illiquid, no assurance
      can be given that an adequate, transparent market for such products
      will in fact be available.

64                                                  ScottishPower Form 20-F 1999


<PAGE>


      Recent Developments
      ScottishPower has announced proposals for the creation of a new holding
      company for the group, subject to Court approval. A new holding company
      will be introduced to formalize the separation between the ultimate
      holding company, the existing trading activities of the group and
      PacifiCorp. These changes, expected to take effect at the end of July,
      are in line with the position held by both the U.K. and U.S. Federal
      regulatory authorities, who favor the corporate structure of a "non-
      trading" holding company.

      The first sitting of both the Scottish Parliament and the Welsh
      Assembly took place on May 12, 1999 with devolved powers being assumed
      from July 1, 1999. No party gained overall control in either the
      Scottish Parliament or the Welsh Assembly. The Rt. Hon Donald Dewar MSP
      has been elected First Minister of the Scottish Parliament. In
      Scotland, a coalition agreement has been formed between the Scottish
      Labour Party and the Scottish Liberal Democrats. The Rt. Hon Alun
      Michael AM has been elected First Minister of the Welsh Assembly and
      the Labour Party has formed a minority administration.

      The group has continued to make a very positive contribution to the
      devolution process, which it believes will offer opportunities for
      business. The retention of a "level playing field" across the industry
      in the U.K. remains a centrally important issue. Given that regulatory
      control and macro economic policy is to be retained by Westminster,
      parity is expected to continue. Powers to control and even further
      legislate on local planning, business rates and environmental issues
      will be devolved to the new Parliament as will power to implement EU
      directives and legislation. The Welsh Assembly does not have the power
      to introduce primary legislation and will act as an administrative body
      for the implementation of those powers historically held by the
      Secretary of State for Wales. However, the Assembly will have a large
      scope to concentrate on areas such as economic development, which have
      been expanded through the enhanced operation of a central development
      agency, planning issues and education, again providing positive
      business opportunities.

      In line with ScottishPower's commitment to develop effective working
      relationships with all political audiences, a full contact program
      strategy has been developed and will be implemented in both the
      Scottish Parliament and the Welsh Assembly. Close monitoring of
      developments in Scotland and Wales is also essential to ensure that the
      group identifies positive opportunities as they arise.

      Outlook
      Apart from the many changes and opportunities which the year ahead
      offers in the U.K. operations, it is expected the PacifiCorp merger
      will be completed later this year. This would make ScottishPower one of
      the top 10 electricity companies in the world and would bring the total
      employment complement in the new enlarged group to 25,000.

      Looking forward into the new millennium, regulation will continue to
      have a significant bearing on the profitability and investment
      capability of the group. The Directors believe that the group has high
      standards of operation and customer service. Nevertheless, they are
      unable to judge accurately the outcome of the current U.K. regulatory
      reviews and there can be no assurance that they will not materially
      affect the group's profits.

      ScottishPower's goal is to provide better service and value to
      customers and at the same time enhanced earnings for shareholders. This
      must be supported by a process of regulation which takes a balanced
      long-term view to reward investment and encourages improvements in
      service and efficiency.

      ScottishPower will continue its strategy to develop and grow the
      business. This will require ongoing revenue and capital investment in
      the year ahead. ScottishPower is confident in its strategy for long-
      term growth and, given the quality of the company and its people, looks
      forward to further success.

      European Economic and Monetary Union and the impact of the euro
      European Economic and Monetary Union (EMU) commenced on January 1, 1999
      with the introduction of a new currency, the euro.

      The group's businesses are almost totally domestic in nature, with very
      few sales denominated in currencies other than sterling, and relatively
      few purchases. As a result, while the United Kingdom remains outside
      EMU, the group

ScottishPower Form 20-F 1999                                                  65
<PAGE>

      will be affected to only a very minor extent by the introduction of the
      euro. A project team has been established to review the impact of the
      first wave of EMU on customers and suppliers and to formulate the
      group's response. The project group is also considering the
      implications of potential U.K. membership of EMU.

      The benefits of a new integrated capital market have been recognized
      and the group has already issued commercial paper denominated in euros
      and will consider issuing bonds in euros in due course.

      Year 2000
      Please refer to "Item 1--Description of Business--Year 2000".

      U.K. GAAP to U.S. GAAP Reconciliation
      Under U.S. GAAP, profit after ordinary and windfall taxation for fiscal
      1999 and fiscal 1998 was (Pounds)455.0 million and (Pounds)129.8
      million, respectively, compared with (Pounds)502.8 million and
      (Pounds)170.1 million under U.K. GAAP. Equity shareholders' funds under
      U.S. GAAP at the end of fiscal 1999 and fiscal 1998 were
      (Pounds)2,460.8 million and (Pounds)2,252.6 million compared with
      (Pounds)1,945.9 million and (Pounds)1,707.8 million under U.K. GAAP.
      Differences result principally from the differing accounting treatment
      of pension costs, goodwill, deferred taxation and the recognition of
      dividend payments. For details of these differences, see Note 34 to the
      Consolidated Financial Statements of the group.

      Cautionary Statement for Purposes of the "Safe Harbor" Provisions of
      the Private Securities Litigation Reform Act of 1995
      Certain matters discussed in this Form 20-F are "forward-looking
      statements" within the meaning of the U.S. Private Securities
      Litigation Reform Act of 1995 and any rules, regulations or releases of
      the Securities and Exchange Commission with respect thereto (the
      "PSLRA"). Forward-looking statements in this Form 20-F include, but are
      not limited to, statements in: Item 1. Description of Business under
      the captions "Business Strategy" relating to cost savings after fiscal
      1999 from the Scottish energy businesses, Southern Water and Manweb;
      "Proposed ScottishPower PacifiCorp Merger" with respect to the Merger
      (i) permitting the best practices of the two companies to reduce costs
      and increase operating efficiencies with the goal of enhancing
      shareholder value, (ii) enabling PacifiCorp to achieve more quickly its
      stated aim of earning the authorized regulatory rate of return in each
      U.S. state in which it conducts business and (iii) bringing
      PacifiCorp's non-generation costs per customer in the U.S. in line with
      some of the most efficient comparable utilities; "Earnings and
      Dividends" relating to the company's aim to deliver 7% to 8% real
      dividend growth per annum until at least the regulatory reviews in the
      year 2000, while maintaining a prudent level of dividend cover; "Energy
      Business--Generation Wholesale--Station Performance" with respect to
      ScottishPower's portfolio of power stations being in a condition to
      support current and expected generation output; "Energy Business--
      Generation Wholesale--Trading with Northern Ireland Electricity"
      regarding the expectation that the Scottish-Northern Irish
      Interconnector will commence commercial operation in December 2001;
      "ScottishTelecom" with respect to the Board's belief that revenue
      growth will come from carrying Demon Internet telecoms traffic
      following the installation of a network switch and supporting
      infrastructure; "Year 2000" with respect to (i) the Directors' belief
      that ScottishPower does not face greater risks from Year 2000 issues
      than other comparable utility companies in the U.K., (ii) the
      completion of compliance work well in advance of the end of 1999 at an
      estimated total cost of approximately (Pounds)30 million; (iii) the
      Directors' belief that it is unlikely that Year 2000 issues will have a
      material impact on the group's financial condition or operations, and
      (iv) the Director's belief that no integration problems relating to
      Year 2000 issues will arise as a result of the merger with PacifiCorp;
      "Regulation of the Electricity Industry--Future Regulation" with
      respect to the likely outcome of the HM Government and DGES proposals
      being a requirement for separate licensed businesses within the same
      group to operate as separate legal entities; "Environmental Regulation
      of Generation Activities" with respect to the group's ability to
      achieve the environmental improvements required by potential future
      limits arising from the pending IPC review without materially
      constraining operational and commercial flexibility; and "Employees"
      regarding the manpower reduction of approximately 20% over the next two
      years within Southern Water and the expectation of manpower growth in
      the group's developing businesses; and a statement in Item 2.
      Description of Property with respect to the group's belief that it will
      be able to negotiate lease renewals on satisfactory terms or relocate
      relevant facilities without such relocation having a materially adverse
      impact on the group or its operations.

      ScottishPower wishes to caution readers, and others to whom forward-
      looking statements are addressed, that any such forward-looking
      statements are not guarantees of future performance and that actual
      results may differ materially from estimates in the forward-looking
      statements. In addition to the important factors described elsewhere in
      this Form 20-F, the following important factors, among others, could
      affect the group's actual future

66                                                  ScottishPower Form 20-F 1999


<PAGE>

      results and could cause such results to differ materially from
      estimates expressed in any forward-looking statements made by, or on
      behalf of the group:

      . the level of competition within ScottishPower's and Manweb's
        franchise electricity supply markets, including without limitation
        competition from other RECs and generators, the level of competition
        in the Pool, the level of competition in ScottishTelecom's market and
        the overall demand for services.

      . any regulatory changes (including changes in environmental
        regulations) that may increase the operating costs of the company,
        may require the company to make unforeseen capital expenditures or
        may prevent the regulated businesses of the group from achieving
        acceptable returns.

      . future levels of industry generation and supply, demand and pricing,
        political stability and economic growth in the relevant areas in
        which the group has operations.

      . the availability of acceptable quality coal at favorable prices.

      . the ability of ScottishPower and PacifiCorp to integrate their
        businesses successfully following the merger.

      . development and use of technology, the actions of competitors,
        natural disasters and other changes to business conditions.

      Item 9A. Quantitative and Qualitative Disclosures About Market Risk

      Market Rate Sensitive Instruments and Risk Management
      The following discussion about the group's risk management activities
      includes "forward looking" statements that involve risk and
      uncertainties. Actual results could differ materially from those
      projected in the forward looking statements.

      The following tables summarize the financial instruments, derivative
      instruments and derivative commodity instruments held by the group at
      March 31, 1999, which are sensitive to changes in interest rates,
      foreign exchange rates and commodity prices. The group uses interest
      rate swaps, forward foreign exchange contracts and other derivative
      instruments to manage the primary market exposures associated with the
      underlying assets, liabilities and committed transactions. The group
      uses these instruments to reduce risk by essentially creating
      offsetting market exposures. The instruments held by the group are not
      leveraged and are not held for financial trading purposes.

      Financial Instruments and Risk Management

      Overview
      The main financial risks faced by the group are exchange rate risk,
      interest rate risk and Pool price risk. The Board has reviewed and
      agreed policies for managing each of these risks as summarised below.
      In order to mitigate the risks identified the Board has endorsed the
      use of financial instruments. The financial instruments endorsed for
      use by the Board include swaps, both interest rate and cross currency,
      caps, forward rate agreements, forward contracts and contracts for
      differences. The group treasury, which is authorized to conduct the
      day-to-day treasury activities of the group, reports annually to the
      Board and is subject to both internal and external audit. The Energy
      Trading Center, which is authorized to carry out activities to manage
      the group's Pool price risk reports monthly to a risk committee which
      is comprised of two executive directors and an external consultant.
      Pool price risk is defined as the possibility that a change in the cost
      of electricity from the Pool will either reduce the proceeds of
      electricity sold to the Pool or increase the cost of electricity
      purchased from the Pool.

ScottishPower Form 20-F 1999                                                  67
<PAGE>


      Interest rate risk management
      The group continues to access funding opportunities in the major global
      markets in a range of currencies at both fixed and floating rates of
      interest, using derivatives where appropriate, to convert the
      obligations and payments into fixed or floating rate sterling.

      The exposure to fluctuating interest rates is managed by using a
      spectrum of financial instruments to maintain a majority of the group's
      debt portfolio at fixed rates. This involves either issuing fixed rate
      debt or swapping floating rate debt obligations into fixed rates by
      either interest rate swaps or a string of forward rate agreements
      ("FRA"). Flexibility in the fixed/floating mix is maintained by using
      interest rate caps that protect the group should rates rise, i.e. above
      the strike price, while maintaining the potential benefit should
      interest rates fall. The overall policy framework with regards to the
      fixed/floating debt mix has been approved by the Board. At March 31,
      1999, 77% (1998:81%) of the group's debt was either issued as fixed or
      converted to fixed rates using interest rates swaps. No FRAs were
      outstanding as at March 31, 1999.

      All transactions are undertaken to manage the risks arising from
      underlying activities and no speculative trading is undertaken. The
      counterparties to these instruments generally consist of financial
      institutions and other bodies with good credit ratings, i.e. "AA" rated
      by any one of the following, Standard & Poor's, Moody's or Duff &
      Phelps. Although the group is potentially exposed to credit risk in the
      event of non-performance by counterparties, such credit risk is
      controlled through credit rating reviews of the counterparties and by
      limiting the total amount of exposure to any one party to levels agreed
      by the Board. The group does not believe that it is exposed to any
      material concentration of credit risk.

      The following table indicates the type of swaps used, their duration,
      their respective interest rates, the maturity profile of the foreign
      currency denominated borrowings and the currency of issue. Average
      variable rates are based on rates that are implied by the yield curve
      at March 31, 1999. These may change significantly, affecting future
      cash flows. The information is presented in pounds sterling
      equivalents, the reporting currency of the group. For avoidance of
      doubt, reference to "m" in "m LIBOR" represents months, not millions.

<TABLE>
<CAPTION>
                                   2000       2001       2002       2003       2004  Thereafter      Total  Fair Value
       Liabilities            (Pounds)m  (Pounds)m  (Pounds)m  (Pounds)m  (Pounds)m   (Pounds)m  (Pounds)m   (Pounds)m
      ----------------------------------------------------------------------------------------------------------------
       <S>                    <C>        <C>        <C>        <C>        <C>        <C>         <C>        <C>
       Long-term debt
       Fixed rate (GBP)            11.0      165.8       14.4       15.5       41.6       646.0      894.3     1,009.4
       Average interest rate
       (GBP)                        9.9%      11.0%       9.8%       9.9%       7.6%        7.5%       8.3%
       Fixed rate ($US)               -          -          -      183.0          -           -      183.0       185.0
       Average interest rate
       ($US)                          -          -          -        5.9%         -           -        5.9%
       Fixed rate (CHF)               -          -          -          -        4.1           -        4.1         4.2
       Average interest rate
       (CHF)                          -          -          -          -        2.5%          -        2.5%
       Fixed rate (JPY)             9.7          -       16.9          -          -        46.9       73.5        76.7
       Average interest rate
       (JPY)                        0.0%         -        0.5%         -          -         2.1%       1.5%
       Fixed rate (EUR)               -          -       21.4          -        7.0       282.3      310.7       328.9
       Average interest rate
       (EUR)                          -          -        5.0%         -        4.9%        5.2%       5.2%
       Fixed rate (SEK)               -          -          -          -          -         9.8        9.8        10.4
       Average interest rate
       (SEK)                          -          -          -          -          -         5.4%       5.4%
       Variable rate (GBP)        547.3          -          -       23.0       16.0       133.5      719.8       726.8
       Average interest rate
       (GBP)                   3m LIBOR          -          -   3m LIBOR   4m LIBOR    6m LIBOR          -
       Variable rate ($US)        138.7          -          -          -          -        21.2      159.9       158.3
       Average interest rate
       ($US)                   3m LIBOR          -          -          -          -    3m LIBOR          -
       Variable rate (CHF)         90.4          -          -        5.0          -           -       95.4        94.6
       Average interest rate
       (CHF)                   4m LIBOR          -          -   6m LIBOR          -           -          -
       Variable rate (EUR)         44.5          -        8.6       16.7          -         5.8       75.6        76.6
       Average interest rate
       (EUR)                   3m LIBOR          -   3m LIBOR   3m LIBOR          -    3m LIBOR          -
       Variable rate (CAD)          2.0          -          -          -          -           -        2.0         2.0
       Average interest rate
       (CAD)                   3m LIBOR          -          -          -          -           -          -
       ---------------------------------------------------------------------------------------     -------     -------
                                                                                                   2,528.1     2,672.9
       ---------------------------------------------------------------------------------------     -------     -------
</TABLE>
68                                                  ScottishPower Form 20-F 1999


<PAGE>


<TABLE>
<CAPTION>
                                                2000       2001       2002       2003       2004  Thereafter      Total  Fair Value
    Liabilities:                           (Pounds)m  (Pounds)m  (Pounds)m  (Pounds)m  (Pounds)m   (Pounds)m  (Pounds)m   (Pounds)m
    -------------------------------------------------------------------------------------------------------------------------------
    <S>                                    <C>        <C>        <C>        <C>        <C>        <C>         <C>        <C>
    Interest rate derivatives/1/
    Interest rate swaps
    Variable to fixed (GBP)                        -       50.0      100.0       75.0      150.0       325.0      700.0        81.3
    Average pay rate                               -        7.9%       7.4%       8.1%       7.7%        8.0%       7.8%
    Average receive rate                           -   6m LIBOR   6m LIBOR   6m LIBOR   6m LIBOR    6m LIBOR          -
    Fixed to variable (GBP)                        -      100.0          -          -          -           -      100.0        (1.3)
    Average pay rate                               -   6m LIBOR          -          -          -           -          -
    Average receive rate                           -        6.2%         -          -          -           -        6.2%
    Interest rate caps
    Notional amount                             50.0          -      100.0          -       50.0           -      200.0        (0.6)
    Strike price                                 7.0%         -        7.0%         -        7.0%          -        7.0%
    Cross currency swaps long term/1/
    Receive variable $US pay fixed GBP           6.1          -          -          -          -        21.2       27.3           -
    Average pay rate (GBP)                       7.0%         -          -          -          -         4.9%       5.4%
    Average receive rate ($US)              3m LIBOR          -          -          -          -    3m LIBOR          -
    Receive fixed $US pay fixed GBP                -          -          -      183.0          -           -      183.0         3.9
    Average pay rate (GBP)                         -          -          -        6.9%         -           -        6.9%
    Average receive rate ($US)                     -          -          -        5.9%         -           -        5.9%
    Receive fixed CHF pay variable GBP             -          -          -          -        4.1           -        4.1        (0.1)
    Average pay rate (GBP)                         -          -          -          -   3m LIBOR           -          -
    Average receive rate (CHF)                     -          -          -          -        2.7%          -        2.7%
    Receive variable CHF pay variable GBP       62.7          -          -        5.0          -           -       67.7         0.6
    Average pay rate (GBP)                  3m LIBOR          -          -   6m LIBOR          -           -          -
    Average receive rate (CHF)              4m LIBOR          -          -   3m LIBOR          -           -          -
    Receive fixed JPY pay variable GBP           9.7          -       16.9          -          -        46.9       73.5        (3.7)
    Average pay rate (GBP)                  6m LIBOR          -   6m LIBOR          -          -    6m LIBOR          -
    Average receive rate (JPY)                   0.0%         -        0.5%         -          -         2.1%       1.5%
    Receive fixed EUR pay fixed GBP                -          -          -          -          -       245.5      245.5         7.0
    Average pay rate (GBP)                         -          -          -          -          -         6.8%       6.8%
    Average receive rate (EUR)                     -          -          -          -          -         5.3%       5.3%
    Receive fixed EUR pay variable GBP             -          -       21.4          -        7.0        36.8       65.2        (4.9)
    Average pay rate (GBP)                         -          -   6m LIBOR          -   6m LIBOR    6m LIBOR          -
    Average receive rate (EUR)                     -          -        5.0%         -        4.9%        5.0%       5.0%
    Receive variable EUR pay variable GBP          -          -        8.6       16.7          -         5.8       31.1        (0.6)
    Average pay rate (GBP)                         -          -   3m LIBOR   3m LIBOR          -    6m LIBOR          -
    Average receive rate (EUR)                     -          -        3.1%       3.5%         -         4.9%       3.7%
    Receive fixed SEK pay variable GBP             -          -          -          -          -         9.8        9.8        (0.6)
    Average pay rate (GBP)                         -          -          -          -          -    6m LIBOR          -
    Average receive rate (SEK)                     -          -          -          -          -         5.4%       5.4%
      ------------------------------------------------------------------------------------------------------------------   --------
                                                                                                                               81.0
      ------------------------------------------------------------------------------------------------------------------   --------
</TABLE>
     /1/The average variable rates, LIBOR, above exclude margins.
      LIBOR is the London Inter Bank Offer Rate.
      GBP - Pounds sterling, $US - American Dollars, CHF - Swiss Francs, JPY
      - Japanese Yen, EUR - euros, SEK - Swedish Kronor, CAD - Canadian
      Dollars

ScottishPower Form 20-F 1999                                                  69
<PAGE>

      The assumptions used to estimate current fair values of debt and other
      financial instruments are summarized below:
      (i)   For cash, short-term deposits and short-term borrowings (uncommitted
            borrowing, commercial paper, and short-term borrowings under the
            committed facilities) the book value approximates to fair value
            because of their short maturities.
      (ii)  The fair values of all quoted euro bonds are based on their
            closing clean market price converted at the spot rate of exchange
            as appropriate.
      (iii) The fair values of the sterling bond 2001 and the European
            Investment Bank loans have been calculated by discounting their
            future cash flows at market rates adjusted to reflect the
            redemption adjustments allowed under each agreement.
      (iv)  The fair values of the sterling interest rate swaps and sterling
            interest rate caps have been estimated by calculating the present
            value of estimated cash flows.
      (v)   The fair values of the cross currency interest rate swaps have been
            estimated by adding the present values of the two sides of each
           swap. The present value of each side of the swap is calculated by
           discounting the estimated future cash flows for that side, using
           the appropriate market discount rates for that currency in effect
           at the balance sheet date.
      (vi) The fair values of unquoted debt have been calculated by
           discounting the estimated cash flows for each instrument at the
           appropriate market discount rate in the currency of issue in
           effect at the balance sheet date.

      (a) Foreign exchange risk management
      The primary source of foreign exchange risk is from the foreign
      exchange risk associated with the issue of debt sourced in a foreign
      currency, i.e. debt issued in currencies other than sterling. The
      foreign exchange exposure on the debt is eliminated entirely by the use
      of cross currency interest rate swaps. The group has a policy to hedge
      all contractually committed income/expenditure denominated in
      currencies other than sterling into sterling by the use of spot and
      forward contracts.

      (b) Commodity price risk management
      Almost all electricity generated in England and Wales must be sold to
      the Pool. Electricity suppliers including Manweb and ScottishPower must
      buy electricity from the Pool for resale to their customers in England
      and Wales. The Pool was established at the time of privatization in
      England and Wales for bulk electricity trading between generators and
      suppliers. ScottishPower participates in the Pool by
      exporting/importing electricity to/from England and Wales via the
      interconnector and purchasing electricity from the Pool to meet the
      requirements of its customers in England and Wales. The Pool is
      operated under a Pooling and Settlement Agreement to which all licensed
      generators and suppliers of electricity in Great Britain are party.

      The group has procedures in place to minimize exposure to Pool price
      variations, that is, the possibility that a change in Pool prices will
      reduce the proceeds of electricity sold to the Pool or increase the
      cost of electricity purchased from the Pool. These procedures involve
      ScottishPower and its subsidiary Manweb entering into contracts for
      differences (CfDs) with third parties. In general, the terms of CfDs
      are such that contracts are settled monthly (or more frequently) in
      arrears by reference to actual half hourly Pool prices.

      A CfD is a contract between two parties (e.g. a generator and a public
      electricity supplier) that requires each party to either make or
      receive monthly payments over a specific term based on the difference
      between an agreed price (i.e. the bilaterally determined strike price)
      and a price that varies with a specified commodity index (i.e. the
      Pool), applied to an agreed quantity (i.e. number of MWhs). The group's
      policy is to hedge the net electricity sales to or purchases from the
      Pool.

      During the year ended March 31, 1999, more than 90% of the group
      exposure to Pool prices was hedged in this way. Cover is built up
      throughout the year and at March 31, 1999 a significant proportion of
      the group's exposure to Pool price variations for the following
      financial year is covered.

      The group has also entered into some longer term (in excess of one
      year) arrangements to protect against the volatility of Pool prices.
      These arrangements have the potential to be increased at
      ScottishPower's discretion as the business grows and the time period
      covered will be reviewed on an ongoing basis. The contracts specify the
      price indexation that applies.

70                                                  ScottishPower Form 20-F 1999


<PAGE>


      CfDs involve a degree of credit risk. This is the risk that the
      counterparty to the CfD defaults on settlement. The counterparties
      dealt with include generators, suppliers and financial institutions.
      The group controls credit risk arising from holding the CfDs through
      credit approvals, limits and monitoring procedures.

<TABLE>
<CAPTION>
                                                                                                               Fair
       Contracts for differences        2000      2001      2002      2003      2004 Thereafter     Total     Value
       Maturity Profile            (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m  (Pounds)m (Pounds)m (Pounds)m
      -------------------------------------------------------------------------------------------------------------
       <S>                         <C>       <C>       <C>       <C>       <C>       <C>        <C>       <C>
       Notional amount                   416        32        20         -         -          -       468       1.5
      -------------------------------------------------------------------------------------------------------------
</TABLE>

      The notional amount represents the gross volume covered under the
      contracts multiplied by the respective strike prices. The fair value
      represents the forecast future cash flows at current market prices.
      CfDs are both bought and sold depending on whether ScottishPower is
      exposed as a buyer from or seller to the Pool.

      The difference between these figures and those reported last year is
      due to the inclusion of new CfDs which were entered into during fiscal
      1999.

      It is difficult to estimate the long term level of Pool prices with
      reasonable accuracy and there is no readily identifiable market through
      which the CfDs could be realized in an exchange. However, based on
      management projections of the future prices of electricity, and
      considering the outcome under several future price scenarios, the group
      has determined that the fair value amount of CfDs, outstanding at the
      year end, is not material to the group's Accounts. The fair value
      amount is the difference between the strike price of the contract and
      the estimated Pool price for the relevant half hourly periods.

      Item 10. Directors and Officers of Registrant

      The business of ScottishPower is managed by the Board of Directors.
      ScottishPower's Articles of Association provide that at every Annual
      General Meeting of ScottishPower one third (or the number nearest to
      but not exceeding one third) of the Directors shall retire from office.
      The Directors to retire in each year are the Directors who have been
      longest in office since their appointment or re-appointment. A retiring
      Director is eligible for re-appointment. The Directors may, at any
      time, appoint any person to be a Director. Any person so appointed will
      hold office until the next Annual General Meeting and shall then be
      eligible for election. The Directors may appoint one or more of their
      number to the office of Managing Director or to any other executive
      office for such period and on such terms as the Directors think fit.
      The executive Directors have two year rolling employment contracts with
      ScottishPower, other than Charles Berry and Alan Richardson who have
      service contracts terminable on one year's notice. The executive
      officers have contracts that are terminable by the company on the
      serving of one year's notice.

      The non-executive Directors, the executive Directors and the executive
      officers of ScottishPower are as follows:

<TABLE>
<CAPTION>
       Name                      Notes Title                                          Age/1/ Date appointed to Board
      --------------------------------------------------------------------------------------------------------------
       <S>                       <C>   <C>                                            <C>    <C>
       Non-Executive Directors:    2
       Murray Stuart                   Chairman                                           65      March 30, 1990
       Mair Barnes                     Director                                           54      April 1, 1998
       Sir Peter Gregson               Director                                           62      December 13, 1996
       Ewen Macpherson                 Director                                           57      September 1, 1996
       John Parnaby                    Director                                           61      September 30, 1994

       Executive Directors:        3
       Ian Robinson                    Chief Executive                                    56      March 1, 1995
       Charles Berry                   Executive Director - Customer Sales & Services     46      April 1, 1999
       Alan Richardson                 PacifiCorp CEO Designate                           52      April 1, 1999
       Ian Russell                     Deputy Chief Executive and Finance Director        46      April 5, 1994
       Ken Vowles                      Executive Director - U.K. Power Operations         57      September 30, 1994
      --------------------------------------------------------------------------------------------------------------
</TABLE>
     /1/As at March 31, 1999.
     /2/It was announced on January 27, 1999 that Murray Stuart had postponed
        his retirement and will continue as Chairman of ScottishPower while
        the merger with PacifiCorp is being completed. ScottishPower announced
        the retirement of Sir Ronald Garrick as a non-executive Director on
        April 26, 1999, which took effect on April 30, 1999.
     /3/Duncan Whyte, who was an executive Director of ScottishPower with
        responsibility for Multi-Utility, resigned as a Director and left the
        group on May 31, 1999.

ScottishPower Form 20-F 1999                                                  71
<PAGE>


      The Directors of ScottishPower are currently Directors of New
      ScottishPower in the same capacities. See "Item 1. Description of
      Business--Introduction--Scheme of Arrangement."

      It is proposed that Keith McKennon, currently Chairman, Chief Executive
      Officer and President of PacifiCorp, will join the New ScottishPower
      board as Deputy Chairman, together with Nolan Karras and Robert Miller,
      two non-executive Directors from PacifiCorp, in each case with effect
      from the effective date of the Merger.

<TABLE>
<CAPTION>
       Name                 Note  Title                                 Age/1/ Date appointed to current post
      -------------------------------------------------------------------------------------------------------
       <S>                  <C>   <C>                                   <C>    <C>
       Executive Officers:   2
       Sue Clark                  Director Corporate Affairs             34    January 1, 1996
       David Jones                Managing Director Information Systems  55    June 19, 1995
       Bill Landels               Managing Director Manweb               56    June 26, 1995
       Andrew Mitchell            Secretary                              47    July 1, 1993
       Paul Pagliari              Group Human Resources Director         39    January 11, 1999
       James Stanley              Group Legal Director                   44    March 1, 1996
      -------------------------------------------------------------------------------------------------------
</TABLE>
     /1/As at March 31, 1999.
     /2/On March 1, 1999, Rod Matthews resigned as Chief Executive
        ScottishTelecom.

      The non-executive Directors and executive Directors were appointed to
      the Board of Directors on the dates shown above. The executive officers
      were appointed to the positions shown on the dates above.

      There are no arrangements or understandings between any Director or
      executive officer and any other person pursuant to which such Director
      or executive officer was selected to serve. There are no family
      relationships between any of the Directors or executive officers of
      ScottishPower.

<TABLE>
<CAPTION>
       Members of the      Members of the              Members of the
       Audit Committee     Remuneration Committee      Nomination Committee/1/
      ------------------------------------------------------------------------
       <S>                 <C>                         <C>
       John Parnaby,       Ewen Macpherson, Chairman   Murray Stuart, Chairman
       Chairman/2/
       Sir Peter Gregson   Mair Barnes                 Mair Barnes
       Ewen Macpherson     Sir Peter Gregson           Sir Peter Gregson
       Murray Stuart       John Parnaby                Ian Robinson
      ------------------------------------------------------------------------
</TABLE>
     /1/Formed February 19, 1999.
     /2/Appointed to the Audit Committee on February 19, 1999 and Chairman on
        May 1, 1999.

      On April 30, 1999, Sir Ronald Garrick retired as chairman of the Audit
      Committee and member of the Remuneration Committee.

      Item 11. Compensation of Directors and Officers

      See Note 33 to the Consolidated Financial Statements of the group for
      fiscal 1999 for specific information regarding individual Directors'
      emoluments and interests. The figure given at (a) below includes
      executive officers and is to June 30, 1999 and therefore does not
      correspond to figures shown in Note 33. There is no equivalent figure
      for (b) in Note 33.

      (a) During fiscal 1999 and through to June 30, 1999, the aggregate
          amount of compensation paid by the group to all Directors and
          executive officers of ScottishPower, as a group, was
          (Pounds)3,714,058.

      (b) During fiscal 1999 and through to June 30, 1999, the aggregate
          amount set aside or accrued by the group to provide pension,
          retirement or similar benefits for Directors and executive officers
          of ScottishPower pursuant to any existing plan provided or
          contributed to by the group was (Pounds)994,988.

72                                                  ScottishPower Form 20-F 1999
<PAGE>

      Item 12. Options to Purchase Securities from Registrant or Subsidiaries

      1. See Note 33 for specific information with respect to individual
         Directors' options. The figures given in 2(c) below include
         information relating to executive officers and therefore do not
         correspond to figures in Note 33.
      2. (a) The company replaced its Executive Share Option Scheme with a
         Long Term Incentive Plan, which was approved by shareholders at the
         company's Annual General Meeting in July 1996. Under the Long Term
         Incentive Plan, the following awards to acquire shares in
         ScottishPower at zero cost were made to plan participants up to a
         maximum value equal to 60% of base salary:

<TABLE>
<CAPTION>
       Date of Grant of Award   Date when Award expires Number of Shares under Award
      ------------------------------------------------------------------------------
       <S>                      <C>                     <C>
       August 9, 1996           August 8, 2003          664,440
       May 16, 1997             May 15, 2004            719,547
       May 7, 1998              May 6, 2005             526,512
      ------------------------------------------------------------------------------
</TABLE>

      Awards will vest only if the Remuneration Committee is satisfied that
      certain performance measures related to the sustained underlying
      financial performance of the company and improvements in certain OFFER
      published Customer Service Standards and OFWAT published levels of
      service (in the case of awards granted in 1997 and 1998) are achieved
      over a period of three financial years commencing with the financial
      year preceding the date an award is made.

      Assuming that such targets have been achieved, the number of shares
      that can be acquired will depend upon how the company ranks in terms of
      its total shareholder return performance over a three year period, in
      comparison to the constituent companies of the FTSE 100 Index and the
      electricity and water sectors.

      (b) The following table sets forth certain information with respect to
          options to purchase ordinary shares which were outstanding as of
          March 31, 1999.

<TABLE>
<CAPTION>
                                                                    Number of
                               Date when                      Ordinary Shares
       Date of Grant           Option Expires    Option Price    under Option
      -----------------------------------------------------------------------
       <S>                     <C>               <C>          <C>
       Executive Share Option
       Scheme
       December 18, 1991       December 17, 2001       227.4p         128,303
       June 25, 1992           June 24, 2002           237.7p          22,554
       July 1, 1993            June 30, 2003           310.0p          59,641
       December 17, 1993       December 16, 2003       454.8p          60,766
       May 27, 1994            May 26, 2004            354.0p          18,191
       November 18, 1994       November 17, 2004       352.1p          22,039
       May 12, 1995            May 11, 2005            335.0p          72,026
       November 10, 1995       November 9, 2005        357.5p          47,534
      -----------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                     Number of
                                Date when                      Ordinary Shares
       Date of Grant            Option Expires    Option Price    under Option
      ------------------------------------------------------------------------
       <S>                      <C>               <C>          <C>
       ScottishPower Sharesave
       Scheme
       June 22, 1994            February 29, 2000       273.8p       1,296,233
       June 20, 1995            February 28, 2001       262.1p       1,171,521
       June 20, 1996            February 29, 2000       263.1p       2,017,169
       June 20, 1996            February 28, 2002       263.1p       7,878,787
       June 20, 1997            February 28, 2001       307.0p       1,522,379
       June 20, 1997            February 28, 2003       307.0p       3,169,875
       June 12, 1998            February 28, 2002       440.0p       1,445,360
       June 12, 1998            February 29, 2004       440.0p       2,770,151
      ------------------------------------------------------------------------
</TABLE>

ScottishPower Form 20-F 1999                                                  73
<PAGE>

      Following the acquisition of Southern Water, participants in the
      Southern Water Sharesave Scheme were offered the opportunity to
      exchange existing options over Southern Water shares on the basis of
      3.3514 ScottishPower shares under replacement options for every one
      Southern Water share under option. Consequently, the number of shares
      under options and the option prices were adjusted on this basis for
      participants exchanging options.

<TABLE>
<CAPTION>
                                                                      Number of
                                          Date when              ordinary shares
       Date of Grant                 Option Expires Option Price    under Option
      --------------------------------------------------------------------------
       <S>                       <C>                <C>          <C>
       Southern Water Sharesave
       Scheme
       February 3, 1992          September 30, 1999       74.00p         249,044
       January 26, 1993          September 30, 2000      111.00p         214,610
       January 25, 1994          September 30, 1999      154.87p         369,543
       January 25, 1994          September 30, 2001      154.87p         116,208
       January 25, 1995          September 30, 2000      136.07p         844,875
       January 25, 1995          September 30, 2002      136.07p         142,334
       January 26, 1996          September 30, 2001      160.24p         653,509
       January 26, 1996          September 30, 2003      160.24p         109,190
      --------------------------------------------------------------------------
</TABLE>

      (c) As of June 30, 1999 the total number of ordinary shares issuable or
          transferable upon exercise of all options held by the Directors and
          executive officers of the registrant, as a group, was 900,559.

      Item 13. Interest of Management in Certain Transactions

      (a) There have been no material transactions during the group's three
          most recent fiscal years, nor are there presently proposed to be
          any material transactions to which ScottishPower or any of its
          subsidiaries was or is a party and in which any Director or
          executive officer, or 10% shareholder, or any relative or spouse
          thereof or any relative of such a spouse, who had the same home as
          such person or who is a Director or executive officer of any parent
          or subsidiary of ScottishPower has or is to have a direct or
          indirect material interest.

      (b) During the group's three most recent fiscal years there has been
          no, and at present there is no, outstanding indebtedness to
          ScottishPower or any of its subsidiaries owed or owing by any
          Director or executive officer of the group or any associate
          thereof.

                                      PART II

      Item 14. Description of Securities to be Registered

      Not applicable

                                      PART III

      Item 15. Defaults Upon Senior Securities

      (a) There has been no material default in the payment of principal,
          interest, a sinking or purchase fund installment, or any other
          material default not cured within 30 days, with respect to any
          indebtedness of the company or any of its significant subsidiaries
          exceeding 5 percent of the total assets of the company and its
          consolidated subsidiaries.

      (b) There has been no material delinquency (including a material
          arrearage in the payment of dividends) not cured within 30 days
          with respect to any class of preferred stock of the company which
          is registered or which ranks prior to any class of registered
          securities or with respect to any class of preferred stock of any
          significant subsidiary of the company.

74                                                  ScottishPower Form 20-F 1999


<PAGE>


      Item 16. Changes in Securities and Changes in Security for Registered
               Securities

      (a) Ordinary shares 50p each/American Depositary Shares
          For a discussion of the proposed scheme of arrangement whereby New
          ScottishPower will become the new holding company for the group, see
          "Item 1. Description of Business--Introduction--Scheme of
          Arrangement." If this occurs, in exchange for ADSs or ordinary
          shares of ScottishPower, shareholders will receive ADSs or ordinary
          shares of New ScottishPower, with the same economic and voting
          rights as the ADSs and ordinary shares of ScottishPower.

          The rights attaching to the New ScottishPower ordinary shares will
          be substantially the same as those attaching to the ScottishPower
          ordinary shares. A copy of the Memorandum and Articles of
          Association of New ScottishPower was previously filed with the
          registrant's Form F-4, file no. 333-77877, exhibit 3(i)(a), filed
          with the U.S. Securities and Exchange Commission in May 1999.

          The principal differences between the New ScottishPower Articles and
          the ScottishPower Articles are explained below. The numbering of the
          New ScottishPower Articles (each an "article") referred to below
          corresponds to the numbering of the ScottishPower Articles, other
          than article 6(E) which is a new article and has no equivalent in
          the ScottishPower Articles.

          (1) Article 6(E) (The Redeemable Shares)
          This article was inserted to set out the rights attaching to the
          49,998 redeemable shares of (Pounds)1 each in New ScottishPower (the
          "Redeemable Shares") issued to ScottishPower in order for it to
          obtain a trading certificate under section 117 of the Companies Act
          1985 (as amended). By virtue of a special resolution of New
          ScottishPower passed on April 29, 1999, this article will
          automatically be deleted from the New ScottishPower Articles
          following redemption of all of the Redeemable Shares.

          (2) Article 7 (The New ScottishPower Special Share)
          This article sets out the rights attaching to the New ScottishPower
          Special Share and has been amended so that in addition to those
          matters which are currently deemed in the ScottishPower Articles to
          be a variation of the rights attaching to the ScottishPower Special
          Share and as such only effective with the prior consent in writing
          of the Special Shareholder, the rights attaching to the New
          ScottishPower Special Share provide that each of the following
          matters is also deemed to be a variation requiring the prior consent
          of the Special Shareholder in writing:

          (i)   the giving by New ScottishPower of any consent or agreement to
                any amendment, removal or alteration of the effect of article 7
                of the ScottishPower Articles (as amended in connection with the
                scheme of arrangement);

          (ii)  the giving by New ScottishPower of any consent or agreement to
                the creation or issue of any shares in the capital of
                ScottishPower other than an issue of shares following which New
                ScottishPower will own the full legal and beneficial interest
                in, and control, shares in the capital of ScottishPower carrying
                at least 85% of the voting rights exercisable on a poll at
                general meetings of ScottishPower;

          (iii) the disposal by New ScottishPower of any of the shares in
                ScottishPower held by it or of any rights or interest in such
                shares or the entering into by New ScottishPower of any
                agreement or arrangement with respect to such shares or to the
                exercise of any voting or other rights attaching to such
                shares, such that New ScottishPower would cease to own the
                full legal and beneficial interest in, and control, shares in
                the capital of ScottishPower carrying at least 85% of the
                voting rights exercisable on a poll at general meetings of
                ScottishPower;

ScottishPower Form 20-F 1999                                                  75
<PAGE>


          (iv) the giving by New ScottishPower of any consent or agreement to
               any abrogation, variation, waiver or modification of any of the
               rights or privileges attaching to any shares in ScottishPower
               such that New ScottishPower would cease to own the full legal
               and beneficial interest in, and control, shares in the capital
               of ScottishPower carrying at least 85% of the voting rights
               exercisable on a poll at general meetings of ScottishPower; and

          (v)  any other act or omission to act by New ScottishPower or the
               Directors of New ScottishPower which results in New ScottishPower
               ceasing to own the full legal and beneficial interest in, and
               control, shares in the capital of ScottishPower carrying at least
               85% of the voting rights exercisable on a poll at general
               meetings of ScottishPower.

          (3)Article 98 (Number of Directors to retire)
          This article relates to the number of Directors to retire from
          office by rotation and has been amended in accordance with the new
          London Stock Exchange requirement that all Directors shall retire by
          rotation at least every three years.

          (4)Article 123 (Borrowing powers)
          This article relates to the borrowing powers of New ScottishPower
          and has been amended to include an interim borrowing limit of
          (Pounds)8 billion up to the date of publication of the audited
          accounts of New ScottishPower for the year ended March 31, 2000, and
          to delete the provision which required goodwill and intangible
          assets to be deducted from the Adjusted Capital and Reserves (as
          defined in the New ScottishPower Articles). This deletion reflects
          the U.K. Financial Reporting Standard FRS10.

          (5)Article 130 (Interim dividends)
          This article relates to the ability of the Directors to pay interim
          dividends and has been amended to provide that the Directors may
          declare and pay any dividends, including final dividends, and not
          just interim dividends. This is in order to facilitate the proposed
          move to quarterly dividend payments.

          (6)CREST
          Articles 2 ("Definitions") and 51 ("Limitations on Shareholdings")
          have been amended to reflect the introduction of CREST.

          (7)Removal of interim privatization arrangements
          Articles 2 ("Definitions"), 50 ("Disclosure of interests in shares")
          and 51 ("Limitations on Shareholdings") have been amended to remove
          references to certain interim arrangements originally included in
          relation to the privatization of ScottishPower.

          Future Proposals
          The Directors intend pursuant to the Merger agreement with
          PacifiCorp to propose a resolution at the 2000 Annual General
          Meeting of New ScottishPower to amend the New ScottishPower Articles
          in order to provide (to the extent reasonably possible) for the
          holders of ADSs to attend, vote and speak at general meetings. It is
          intended that the amendments to be proposed will provide for the
          appointment of multiple proxies by approved depositories, for such
          proxies themselves to be able to appoint a proxy, for the holding of
          special and extraordinary resolutions on a poll and for certain
          other minor amendments to the New ScottishPower Articles.

          The Merger with PacifiCorp is not conditional upon the passing of
          this resolution although the Merger agreement requires that the
          resolution, if not passed, would again be put forward for
          consideration at the next annual general meeting.

          New ScottishPower also intends to seek to amend its depository
          agreement to reflect the changes proposed to be made to the New
          ScottishPower Articles and to make certain other amendments.

76                                                  ScottishPower Form 20-F 1999
<PAGE>


      (b) No rights evidenced by any class of registered securities have been
          materially limited or qualified by the issuance or modification of
          any other class of securities.

      (c) There are no assets securing any class of registered securities of
          the company.

      (d) There are no trustees or paying agents for any registered
          securities of the company.

                                      PART IV

      Item 17. Financial Statements and Exhibits

      Not applicable

      Item 18. Financial Statements and Exhibits

      The Consolidated Financial Statements of Scottish Power plc are
      included herein on pages F-1 through F-41.

      Item 19. Financial Statements and Exhibits

      (a)Financial Statements

<TABLE>
<CAPTION>
                                                                           Page
      -------------------------------------------------------------------------
       <S>                                                                 <C>
       Consolidated Financial Statements of Scottish Power plc for Fiscal
       1999/1/
       Accounting Policies and Definitions                                  F-1
       Group Profit and Loss Account                                        F-7
       Statement of Total Recognized Gains and Losses                       F-8
       Note of Historical Cost Profits and Losses                           F-8
       Reconciliation of Movement in Shareholders' Funds                    F-8
       Notes to the Group Profit and Loss Account                           F-9
       Group Cash Flow Statement                                           F-12
       Reconciliation of Net Cash Flow to Movement in Net Debt             F-12
       Notes to the Group Cash Flow Statement                              F-13
       Balance Sheets                                                      F-16
       Notes to the Balance Sheets                                         F-17
       Principal Subsidiary Undertakings and Other Investments             F-40
       Directors' Responsibilities for the Preparation of the Financial
       Statements                                                          F-41
       Report of the Independent Accountants                               F-41
      -------------------------------------------------------------------------
</TABLE>
     /1/The following financial statements and schedules, together with the
       report of PricewaterhouseCoopers, have been reconciled to generally
       accepted accounting principles in the United States and are filed as
       part of this report statement.

      The attached financial statements include certain U.K. accounting
      terminology which may not be familiar to a U.S. reader. The following
      glossary is provided to assist in interpreting these financial
      statements.

<TABLE>
<CAPTION>
       U.K. Term               U.S. Term
      ------------------------------------------------------
       <S>                     <C>
       Turnover                Sales
       Profit before taxation  Income before taxes
       Profit after taxation   Net income
       Earnings per share      Net income per share
       Stocks                  Inventories
       Tangible fixed assets   Property, plant and equipment
       Gearing                 Leverage
      ------------------------------------------------------
</TABLE>

ScottishPower Form 20-F 1999                                                  77
<PAGE>

      (b)Exhibits

      1a. Memorandum of Association of New Scottish Power plc. (Previously
          filed with the registrant's Form F-4, file no. 333-77877, exhibit
          3(i)(a), filed with the U.S. Securities and Exchange Commission in
          May 1999).

      1b. Form of Amended and Restated Deposit Agreement among New Scottish
          Power plc, Scottish Power plc, The Bank of New York, as depository
          and the holders from time to time of New Scottish Power American
          Depository Receipts and/or Scottish Power American Depository
          Receipts. (Previously filed with the registrant's Form F-6, file
          no. 333-10322, exhibit A, filed with the Securities and Exchange
          Commission in May 1999).

      1c. Revised Scottish Power plc -- Generation, Transmission and Public
          Electricity Supply Licence document dated August 1998, as amended
          and modified.

      1d. Revised Public Electricity Supply Licence for Manweb plc, dated
          July 1998 including amendments and modifications thereto.

      2a. Amended and Restated Agreement and Plan of Merger dated as of
          December 6, 1998, as amended as of January 29, 1999 and February 9,
          1999, and amended and restated as of February 23, 1999, by and
          among New Scottish Power plc, Scottish Power plc, NA General
          Partnership, Scottish Power NA1 Limited, Scottish Power NA2 Limited
          and PacifiCorp. (Previously filed with the registrant's Form F-4,
          file no. 333-77877, exhibit no. 2(b), filed with the U.S.
          Securities and Exchange Commission in May 1999).

      2b. Agreement and Plan of Merger, dated as of December 6, 1998, as
          amended as of January 29, 1999 and February 9, 1999, by and among
          Scottish Power plc, NA General Partnership, Scottish Power NA1
          Limited, Scottish Power NA2 Limited and PacifiCorp. (Previously
          filed with the registrant's Form F-4, file no. 333-77877, exhibit
          no. 2(a), filed with the U.S. Securities and Exchange Commission in
          May 1999).

      2c. 364 day multi-currency revolving credit facility with term-out
          option dated March 12, 1999 among (1) ScottishPower as borrower,
          (2) The Royal Bank of Scotland ("RBS") as arranger, (3) RBS as
          agent and (4) various banks, for up to (Pounds)600,000,000.

      2d. Supplemental agreement dated March 12, 1999 among (1) ScottishPower
          as borrower and (2) RBS as agent which amends the terms of the
          five-year revolving credit facility dated June 24, 1996 among (1)
          ScottishPower as borrower, (2) RBS and Union Bank of Switzerland as
          joint arrangers, (3) ING Barings as co-arrangers, (4) various banks
          and (5) RBS as agent.

      2e. Trust Deed dated November 4, 1997 related to ScottishPower's $2
          billion debt issuance programme.

      2f. Supplemental Trust Deed dated November 6, 1998 related to
          ScottishPower's $2 billion debt issuance programme.

      The registrant agrees to furnish to the Securities and Exchange
      Commission, upon request, a copy of any instrument which defines the
      rights of holders of long-term debt of ScottishPower and its
      consolidated subsidiaries.

78                                                  ScottishPower Form 20-F 1999


<PAGE>

      Signatures

      Pursuant to the requirements of Section 12 of the Securities Exchange
      Act of 1934, the registrant certifies that it meets all of the
      requirements for filing on Form 20-F and has duly caused this annual
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.

                                        SCOTTISH POWER PLC

                                         /s/ Ian Simon MacGregor Russell
                                By:____________________________________________
                                        Ian Simon MacGregor Russell
                                        Deputy Chief Executive and Finance
                                        Director

      Date: July 15, 1999

ScottishPower Form 20-F 1999                                                  79
<PAGE>

      Consolidated Financial Statements of Scottish Power plc
      for the year ended March 31, 1999

      Accounting Policies and Definitions

      Basis of accounting
      The Accounts have been prepared under the historical cost convention,
      modified to include the revaluation of certain tangible fixed assets,
      and in accordance with applicable accounting standards in the U.K. and,
      subject to the treatment of water infrastructure grants and
      contributions described under "Grants and contributions" below, comply
      with the requirements of the Companies Act 1985.

      In preparing these Accounts, certain reclassifications and changes in
      presentation have been made to the Accounts previously presented in
      ScottishPower's published U.K. Annual Report and Accounts, with the
      exception of the consolidated cash flow statements, in order to comply
      with accounting presentation and disclosure requirements applicable in
      the United States. A reconciliation to U.S. GAAP is set out in Note 34.

      Basis of consolidation
      The group Accounts include the Accounts of the company and its
      principal subsidiary undertakings together with the group's share of
      results and net assets of associated undertakings and joint ventures.
      For commercial reasons one subsidiary has a different year end. The
      consolidation includes the Accounts of this subsidiary as adjusted for
      material transactions in the period between its year end and March 31.

      Use of estimates
      The preparation of Accounts in conformity with generally accepted
      accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities
      and disclosure of contingent assets and liabilities at the date of
      Accounts and the reported amounts of revenues and expenses during the
      reporting period. Actual results can differ from those estimates.

      Turnover
      Turnover comprises the sales value of energy, goods, water, wastewater
      and other services supplied to customers during the year and excludes
      Value Added Tax and intra-group sales. Income from the sale of energy
      and measured water is the value of units supplied during the year and
      includes an estimate of the value of units supplied to customers
      between the date of their last meter reading and the year end.

      Under/over recovery of regulated income
      Under the licences issued to Scottish Power plc and Manweb plc which
      permit them to operate as public electricity companies, price control
      formulae determine the regulated allowable maximum unit revenues of the
      transmission and distribution businesses, as appropriate. If actual
      revenue for the year exceeds the regulated allowable maximum, the
      excess is deducted from turnover and included in creditors where
      amounts are due to be returned to customers. Where there is an under
      recovery compared with the regulated allowable maximum no anticipation
      of any potential future recovery is made.

      Research and development
      Expenditure on research and development is charged to the profit and
      loss account as it is incurred.

      Interest
      Interest on the funding attributable to major capital projects is
      capitalized gross of tax relief during the period of construction and
      written off as part of the total cost over the operational life of the
      asset. All other interest payable and receivable is reflected in the
      profit and loss account as it arises.

F-1                                                 ScottishPower Form 20-F 1999

<PAGE>

      Financial instruments
      Debt instruments
      All borrowings are stated at the fair value of consideration received
      after deduction of issue costs. The issue costs and interest payable on
      bonds are charged to the profit and loss account at a constant rate
      over the life of the bond.

      Interest rate swaps
      Interest rate swap agreements are used to manage interest rate
      exposures and are accounted for using hedge accounting. In order to
      qualify for hedge accounting, the company's notional amount of interest
      rate swaps and caps must be less than or equal to existing variable
      rate debt. Amounts payable or receivable in respect of these agreements
      are recognized as adjustments to interest expense over the period of
      the contracts. The cash flows from interest rate swaps and gains and
      losses arising on terminations of interest rate swaps are recognized as
      returns on investments and servicing of finance. Where associated debt
      is not retired in conjunction with the termination of an interest swap,
      gains and losses are deferred and are amortized to interest expense
      over the remaining life of the associated debt to the extent that such
      debt remains outstanding.

      Interest rate caps
      Interest rate caps are used to limit interest rate exposures. The
      premiums on these contracts are amortized over the period of the
      contracts and are disclosed as interest expense.

      Forward contracts
      The company enters into forward contracts for the purchase and/or sale
      of foreign currencies in order to manage its exposure to fluctuations
      in currency rates. Unrealized gains and losses on contracts are not
      accounted for until the maturity of the contract. The cash flows from
      forward purchase contracts are classified in a manner consistent with
      the underlying nature of the hedged transaction.

      Premiums and discounts
      Premiums and discounts arising on the early repayment of borrowings are
      written off to the profit and loss account as incurred.

      Contracts for Differences (CfDs)
      The company uses CfDs to minimize exposure to Pool price variations.
      The cost or the income attributable to CfDs is recorded in the
      accounting records when settlement is made. Where delivery under the
      CfD has taken place prior to the period end, adjustments are made to
      account for the known variances between the contract strike price and
      the Pool price on the date of delivery.

      Goodwill
      Purchased goodwill represents the excess of the fair value of the
      purchase consideration over the fair value of the net assets acquired.
      Goodwill arising from the purchase of trading entities in accounting
      periods prior to March 31, 1998 has been written off on acquisition
      against the merger reserve to reduce it to zero and thereafter has been
      offset against the profit and loss reserve. On disposal of trading
      entities, the goodwill previously included in reserves is charged to
      the profit and loss account matched by an equal credit to reserves.
      Goodwill arising on acquisitions since April 1, 1998 is capitalized and
      amortized through the profit and loss account over its useful economic
      life.

ScottishPower Form 20-F 1999                                                 F-2
<PAGE>


      Tangible fixed assets
      Accounting for non-water infrastructure assets
      Tangible fixed assets are stated at cost or valuation and are
      depreciated on the straight line method over their estimated
      operational lives. Tangible fixed assets include capitalized employee
      costs which are directly attributable to construction of fixed assets.
      Land is not depreciated. The main depreciation periods used by the
      group are as set out below:

<TABLE>
<CAPTION>
                                                       Years
      ------------------------------------------------------
       <S>                                             <C>
       Coal and oil-fired generating stations          35-40
       Hydro plant and machinery                       20-40
       Other buildings                                    40
       Transmission and distribution plant             30-40
       Towers, lines and underground cables            40-60
       Vehicles, miscellaneous equipment and fittings   3-15
</TABLE>

      Infrastructure accounting
      Water infrastructure assets, being mains and sewers, reservoirs, dams,
      sludge pipelines and sea outfalls comprise a network of systems.
      Expenditure on water infrastructure assets relating to increases in
      capacity or enhancement of the network and on maintaining the operating
      capability of the network in accordance with defined standards of
      service is treated as an addition to fixed assets.

      The depreciation charge for water infrastructure assets is the
      estimated level of annualised expenditure required to maintain the
      operating capability of the network and is based on the asset
      management plan agreed with the water industry regulator as part of the
      price regulation process.

      The asset management plan is developed from historical experience
      combined with a rolling program of reviews of the condition of the
      infrastructure assets.

      The method of accounting for water infrastructure renewals has been
      revised following the introduction of FRS 12 "Provisions, contingent
      liabilities and contingent assets' and the infrastructure renewals
      accounting basis as set out in FRS 15 "Tangible fixed assets'. As a
      consequence the balance sheet has been restated to take account of the
      necessary changes since the date of acquisition of Southern Water in
      August 1996. Further information is given in Note 16. The change of
      accounting policy has no effect on the profit and loss account other
      than to reclassify the renewals charge as depreciation.

      Comparative figures have been restated in the cash flow statement, the
      balance sheet, Notes 2, 9(b), 10, 16, 19 and 34.

      Leased assets
      As lessee
      Assets leased under finance leases are capitalized and depreciated in
      line with the group depreciation policy. The interest element of the
      finance lease repayments is charged to the profit and loss account in
      proportion to the balance of the capital repayments outstanding.
      Rentals payable under operating leases are charged to the profit and
      loss account as incurred.

      As lessor
      Rentals receivable under finance leases are allocated to accounting
      periods to give a constant periodic rate of return on the net cash
      investment in the lease in each period. The amounts due from lessees
      under finance leases are recorded in the balance sheet as a debtor at
      the amount of the net investment in the lease after making provisions
      for bad and doubtful rentals receivable.

      Property clawback
      A debenture has been issued to the Secretary of State for Scotland
      which entitles HM Government to a proportion of any property gain
      (above certain thresholds and after deducting an amount representing
      corporation tax thereon) accruing or treated as accruing to
      ScottishPower as a result of the disposal or deemed disposal after
      March 31, 1991 of certain property held at March 31, 1990. These
      arrangements last until March 31, 2001.

F-3                                                ScottishPower Form 20-F 1999
<PAGE>


      In the case of Manweb, if properties are disposed of, or are deemed to
      have been disposed of prior to April 1, 2000, a part of the gain over
      the value at March 31, 1990 (as adjusted for inflation and taxation)
      will become payable to HM Government.

      In the case of both companies, a liability for clawback in respect of
      property disposals is recognized only when an actual or a deemed
      disposal occurs.

      Investments
      Investments in subsidiary and associated undertakings and joint
      ventures are stated in the balance sheet of the parent company at cost,
      or nominal value of shares issued as consideration where applicable,
      less provision for any impairment in value. The group profit and loss
      account includes the group's share of the operating profits less
      losses, net interest charge and taxation of associated undertakings and
      joint ventures. The group balance sheet includes the investment in
      associated undertakings and joint ventures at the group's share of
      their net assets. Other fixed asset investments are carried at cost
      less provision for diminution in value.

      Stocks
      Stocks are valued at the lower of cost and net realizable value.

      Foreign currencies
      Transactions in foreign currencies are recorded at the rate ruling at
      the date of the transaction. At the year end, monetary assets and
      liabilities denominated in foreign currencies are translated at the
      rate of exchange ruling at the balance sheet date or, where applicable,
      at the contracted rate. Any gain or loss arising on the restatement of
      such balances is taken to the profit and loss account.

      Taxation
      The charge for ordinary taxation is based on the profits for the year
      and takes into account deferred taxation, using the liability method,
      in respect of timing differences to the extent that it is probable that
      a liability will crystallize in the foreseeable future. Such timing
      differences arise primarily from the differing treatment for taxation
      and accounting purposes of provisions and the depreciation of fixed
      assets.

      Pensions
      The group provides pension benefits through both defined benefit and
      defined contribution arrangements. The regular cost of providing
      pensions and related benefits and any variations from regular cost
      arising from the actuarial valuations for defined benefit schemes are
      charged to the profit and loss account over the expected remaining
      service lives of current employees following consultations with the
      actuary. Any difference between the charge to the profit and loss
      account and the actual contributions paid to the Pension Schemes is
      included as an asset or liability in the balance sheet. Payments to the
      defined contribution schemes are charged against profits as incurred.

      Grants and contributions
      Capital grants and customer contributions in respect of additions to
      non-water infrastructure fixed assets are treated as deferred income
      and released to the profit and loss account over the estimated
      operational lives of the related assets. Grants and contributions
      receivable relating to water infrastructure assets have been deducted
      from the cost or valuation of those assets. While this treatment is in
      accordance with Statement of Standard Accounting Practice (SSAP) 4, it
      is not in accordance with the Companies Act 1985. The Act requires
      capital grants and contributions to be shown as deferred income rather
      than offset against the cost or valuation of tangible fixed assets.
      This departure from the requirements of the Act is, in the opinion of
      the directors, necessary for the Accounts to give a true and fair view
      as, while provision is made for depreciation of water infrastructure
      assets, these assets do not have determinable finite lives and
      therefore no basis exists on which to recognise grants and
      contributions as deferred income. The effect of this treatment on the
      value of tangible fixed assets is disclosed in Note 16.

ScottishPower Form 20-F 1999                                                 F-4
<PAGE>


      Own shares held under trust
      The amount recorded in the balance sheet for shares in the company
      purchased for employee sharesave schemes represents the amounts
      receivable from option holders on exercise of the options.

      Long Term Incentive Plan
      Shares in the company purchased for the Long Term Incentive Plan are
      held under trust and are recorded within investments in the balance
      sheet at cost. The cost of awards made by the trust under the Long Term
      Incentive Plan, being the difference between the fair value of the
      shares and the option price at the date of grant, is taken to the
      profit and loss account on a straight line basis over the period in
      which performance is measured.

      Business segment definitions
      ScottishPower defines business segments based on a combination of
      factors, principally differences in products and services and the
      regulatory environment in which the businesses operate.

      The business segments of the group are defined as follows:

      Generation Wholesale
      The generation of electricity from the company's own power stations,
      the purchase of external supplies of energy for sale to other business
      segments of the company and the sale of electricity to other public
      electricity suppliers and to the Pool in England and Wales.

      Power Systems
      The transmission and distribution businesses in Scotland and,
      specifically, the transportation of units of electricity from the power
      stations through the transmission and distribution networks to
      customers in Scotland and to customers in England and Wales through the
      Anglo-Scottish Interconnector.

      Energy Supply
      The sale of energy to customers, together with related billing and
      collection activities for customers contracted to Scottish Power plc.

      Manweb
      The distribution and supply businesses operating in Merseyside and
      North Wales and, specifically, the purchase, distribution and sale of
      electricity to customers, together with related billing and collection
      activities within that licensed area.

      Southern Water
      The provision of water and wastewater services in the south-east of
      England, together with related billing and collection activities.

      ScottishTelecom
      The provision of telecommunications services, Internet access and
      information services to national corporates, small and medium-sized
      enterprises and residential customers.

      Other
      The retailing and servicing of domestic electrical goods and home
      entertainment appliances, the provision of electrical contracting,
      consultancy and corporate services, gas trading and the businesses of
      the company's other subsidiary and associated undertakings.

      In the segmental analyses on pages F-9 and F-17, all material
      activities are derived from continuing operations in the U.K.

F-5                                                 ScottishPower Form 20-F 1999
<PAGE>


      Revenue cost definitions
      Cost of sales
      The cost of sales for the group, excluding Southern Water, reflect the
      direct costs of the generation and purchase of electricity, the
      purchase of natural gas, retail trading, telecommunication services,
      electrical contracting and consultancy services. For Southern Water,
      cost of sales represents the cost of extracting water from underground
      and raw water surface reservoirs and of its treatment and supply to
      customers and the subsequent collection of wastewater and its treatment
      and disposal.

      Transmission and distribution costs
      The cost of transmitting units of electricity from the power stations
      through the transmission and distribution networks to customers. It
      includes the costs of metering, billing and debt collection. This
      heading is considered more appropriate to the electricity industry than
      the standard Companies Act heading of distribution costs.

      Administrative expenses
      The indirect costs of businesses, the costs of centralised services and
      rates.

      Other definitions
      Company or ScottishPower
      Scottish Power plc.

      Group
      Scottish Power plc and its consolidated subsidiaries.

      Associated undertakings
      Entities in which the company holds a long-term participating interest
      and exercises significant influence.

      Joint ventures
      Entities in which the company holds a long-term interest and shares
      control with another company external to the group.

      Subsidiary undertakings
      Entities in which the company holds a long-term controlling interest.

ScottishPower Form 20-F 1999                                                 F-6
<PAGE>

      Group Profit and Loss Account
      for the year ended March 31, 1999

<TABLE>
<CAPTION>
                                                                 1999        1998        1997
                                                      Notes (Pounds)m   (Pounds)m   (Pounds)m
      ----------------------------------------------------------------------------------------
       <S>                                            <C>   <C>         <C>         <C>
       Turnover: group and share of joint ventures
       and associates                                         3,251.5     3,134.1     2,947.4
       Less: share of turnover in joint ventures                 (7.3)       (3.8)       (4.6)
       Less: share of turnover in associates                     (1.9)       (2.1)       (2.1)
       ----------------------------------------------------   --------    --------    --------
       Group turnover from continuing operations          1   3,242.3     3,128.2     2,940.7
       Cost of sales                                         (1,860.5)   (1,850.7)   (1,743.5)
       ----------------------------------------------------   --------    --------    --------
       Gross profit from continuing operations                1,381.8     1,277.5     1,197.2
       Transmission and distribution costs                     (258.1)     (219.1)     (222.8)
       Administrative expenses                                 (348.8)     (303.0)     (331.1)
       Other operating income                                    27.9        29.7        20.6
       ----------------------------------------------------   --------    --------    --------
       Operating profit from continuing operations      1,2     802.8       785.1       663.9
       Share of operating profit in joint ventures                2.1         1.6         1.8
       Share of operating profit in associates                    0.2         0.3         0.9
       ----------------------------------------------------   --------    --------    --------
       Profit on ordinary activities before interest            805.1       787.0       666.6
       Net interest charge
        -- Group                                               (160.8)     (147.1)     (107.5)
        -- Joint ventures                                        (0.5)       (0.2)       (0.5)
        -- Associates                                               -        (0.1)       (0.2)
                                                          4    (161.3)     (147.4)     (108.2)
       ----------------------------------------------------   --------    --------    --------
       Profit on ordinary activities before taxation            643.8       639.6       558.4
       Ordinary taxation
        -- Group                                               (141.0)     (151.5)     (135.7)
        -- Joint ventures                                        (0.5)       (0.4)       (0.7)
        -- Associates                                            (0.1)        0.3        (0.4)
                                                          5    (141.6)     (151.6)     (136.8)
       ----------------------------------------------------   --------    --------    --------
       Profit after ordinary taxation                           502.2       488.0       421.6
       Exceptional taxation -- windfall tax               6         -      (317.0)          -
       ----------------------------------------------------   --------    --------    --------
       Profit after taxation                                    502.2       171.0       421.6
       Minority interests                                27       0.6        (0.9)       (0.5)
       ----------------------------------------------------   --------    --------    --------
       Profit for the financial year                            502.8       170.1       421.1
       Dividends                                          8    (267.9)     (243.3)     (218.1)
       ----------------------------------------------------   --------    --------    --------
       Profit/(loss) retained                            26     234.9       (73.2)      203.0
       ----------------------------------------------------   --------    --------    --------
       Earnings per ordinary share                        7     42.42p      14.41p      38.11p
       Adjusting items -- goodwill amortization                  0.10p          -           -
                       -- windfall tax                              -       26.87p          -
       ----------------------------------------------------   --------    --------    --------
       Earnings per ordinary share before goodwill
       amortization and windfall tax                      7     42.52p      41.28p      38.11p
       ----------------------------------------------------   --------    --------    --------
       Diluted earnings per ordinary share                7     42.00p      14.27p      37.73p
       Adjusting items -- goodwill amortization                  0.10p          -           -
                       -- windfall tax                              -       26.60p          -
       ----------------------------------------------------   --------    --------    --------
       Diluted earnings per ordinary share before
       goodwill amortization and windfall tax             7     42.10p      40.87p      37.73p
       ----------------------------------------------------   --------    --------    --------
       Dividends per ordinary share                       8     22.50p      20.40p      18.50p
       ----------------------------------------------------   --------    --------    --------
</TABLE>

      The Accounting Policies and Definitions on pages F-1 to F-6, together
      with the Notes on pages F-9 to F-11, F-13 to F-15 and F-17 to F-40
      form part of these Accounts.

F-7                                                 ScottishPower Form 20-F 1999


<PAGE>


      Statement of Total Recognized Gains and Losses
      for the year ended March 31, 1999

<TABLE>
<CAPTION>
                                                1999       1998       1997
                                      Note (Pounds)m  (Pounds)m  (Pounds)m
      --------------------------------------------------------------------
       <S>                            <C>  <C>        <C>        <C>
       Profit for the financial year           502.8      170.1      421.1
       Surplus on revaluation of
       assets                           16         -      229.0          -
       -----------------------------------   -------    -------    -------
       Total recognized gains and
       losses for the financial year           502.8      399.1      421.1
       -----------------------------------   -------    -------    -------

      Note of Historical Cost Profits and Losses
      for the year ended March 31, 1999

<CAPTION>
                                                1999       1998       1997
                                           (Pounds)m  (Pounds)m  (Pounds)m
      --------------------------------------------------------------------
       <S>                            <C>  <C>        <C>        <C>
       Profit on ordinary activities
       before taxation                         643.8      639.6      558.4
       Difference between historical
       cost depreciation charge and
       actual depreciation charge
       for the year calculated on
       the revalued amount of fixed
       assets                                    3.4        1.7          -
       -----------------------------------   -------    -------    -------
       Historical cost profit on
       ordinary activities before
       taxation                                647.2      641.3      558.4
       -----------------------------------   -------    -------    -------
       Historical cost profit/(loss)
       retained for the financial
       year after taxation,
       minority interests and
       dividends                               238.3      (71.5)     203.0
       -----------------------------------   -------    -------    -------

      Reconciliation of Movements in Shareholders' Funds
<CAPTION>
                                                1999       1998       1997
                                           (Pounds)m  (Pounds)m  (Pounds)m
      --------------------------------------------------------------------
       <S>                            <C>  <C>        <C>        <C>
       Profit for the financial year           502.8      170.1      421.1
       Dividends                              (267.9)    (243.3)    (218.1)
       -----------------------------------   -------    -------    -------
       Profit/(loss) retained                  234.9      (73.2)     203.0
       Share capital issued (net of
       costs)                                    3.2       45.5      633.2
       Shares to be issued                         -          -       13.4
       Revaluation of fixed assets                 -      229.0          -
       Goodwill written off                        -      (16.2)    (534.6)
       -----------------------------------   -------    -------    -------
       Net movement in shareholders'
       funds                                   238.1      185.1      315.0
       Opening shareholders' funds           1,707.8    1,522.7    1,207.7
       -----------------------------------   -------    -------    -------
       Closing shareholders' funds           1,945.9    1,707.8    1,522.7
       -----------------------------------   -------    -------    -------
</TABLE>
      for the year ended March 31, 1999


      The Accounting Policies and Definitions on pages F-1 to F-6, together
      with the Notes on pages F-9 to F-11, F-13 to F-15 and F-17 to F-40 form
      part of these Accounts.

ScottishPower Form 20-F 1999                                                 F-8
<PAGE>


      Notes to the Group Profit and Loss Account
      for the year ended March 31, 1999

      1 Segmental business information
      ------------------------------------------------------------------------
      (a) Turnover by business segment
<TABLE>
<CAPTION>
      -----------------------------------------------------------------------------------------------------------------------

                                             Total turnover            Inter-segment turnover           External turnover
                                           1999      1998      1997      1999      1998      1997      1999      1998      1997
                            Notes     (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
      -----------------------------------------------------------------------------------------------------------------------
  <S>                   <C>           <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
  Generation
  Wholesale                     (iii)     914.3   1,014.3     974.4     695.3     764.8     744.4     219.0     249.5     230.0
  Power Systems                           470.1     443.0     429.2     416.8     391.1     386.8      53.3      51.9      42.4
  Energy Supply                         1,434.5   1,336.2   1,270.4      28.8      11.5       0.9   1,405.7   1,324.7   1,269.5
  Manweb                                  614.2     667.8     759.3      18.1      13.9       4.2     596.1     653.9     755.1
  Southern Water                 (ii)     440.2     453.0     316.7       0.7       0.4       0.5     439.5     452.6     316.2
  ScottishTelecom            (iv),(v)     219.9     113.3      53.7      39.2      31.2      16.7     180.7      82.1      37.0
  Other                    (iii),(iv)     612.8     410.7     359.2     264.8      97.2      68.7     348.0     313.5     290.5
  --------------------------------------------------------------------------------------------     -------   -------   -------
  Total                                                                                             3,242.3   3,128.2   2,940.7
  --------------------------------------------------------------------------------------------     -------   -------   -------
  (b) Operating profit/(loss) by business segment
<CAPTION>
  -----------------------------------------------------------------------------------------------------------------------------
                                                                                                       1999      1998      1997
                                                                                                  (Pounds)m (Pounds)m (Pounds)m
  -----------------------------------------------------------------------------------------------------------------------------
  <S>                        <C>                                                                  <C>       <C>       <C>
  Generation Wholesale                                                                                115.3     130.8     146.1
  Power Systems                                                                                       261.7     249.5     228.0
  Energy Supply                                                                                        20.1      15.1      32.4
  Manweb                         (vi)                                                                 125.2     131.3     135.0
  Southern Water                 (ii)                                                                 262.2     240.7     135.6
  ScottishTelecom            (iv),(v)                                                                  10.3       4.7      (1.5)
  Other                          (iv)                                                                   8.0      13.0       9.5
  --------------------------------------------------------------------------------------------     -------   -------   -------
  Sub total                                                                                           802.8     785.1     685.1
  Reorganization costs                                                                                    -         -     (21.2)
  --------------------------------------------------------------------------------------------     -------   -------   -------
  Total                                                                                               802.8     785.1     663.9
  --------------------------------------------------------------------------------------------     -------   -------   -------
  (c) Depreciation by business segment
  ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                                       1999      1998      1997
                                                                                                  (Pounds)m (Pounds)m (Pounds)m
  -----------------------------------------------------------------------------------------------------------------------------
  <S>                            <C>                                                              <C>       <C>       <C>
  Generation Wholesale                                                                                 29.9      19.8      14.5
  Power Systems                                                                                        53.8      44.0      43.5
  Energy Supply                                                                                         4.8       3.7       2.0
  Manweb                                                                                               43.4      37.1      36.6
  Southern Water                 (ii)                                                                  59.9      59.7      43.0
  ScottishTelecom                (iv)                                                                  15.3       6.1       3.1
  Other                          (iv)                                                                  17.1      14.2      13.4
  --------------------------------------------------------------------------------------------     -------   -------   -------
  Total                                                                                               224.2     184.6     156.1
  --------------------------------------------------------------------------------------------     -------   -------   -------
</TABLE>

      (i) In fiscal 1999, ScottishPower adopted FAS 131, Disclosures about
      Segments of an Enterprise and Related Information. This standard
      establishes a new framework for segment reporting where the management
      reporting structure forms the basis of external disclosures. The
      accounting policies of the segments are the same as those described in
      the "Accounting Policies and Definitions' on pages F-1 to F-6.

      (ii) The 1997 figures for Southern Water cover the post-acquisition
      period from August 6, 1996 to March 31, 1997.

      (iii) The Generation Wholesale segment previously included sales from
      gas trading activities which are now reported in the Other business
      segment. Total turnover for the Generation Wholesale segment for 1998
      included (Pounds)100.5 million and for 1997 (Pounds)30.0 million of gas
      trading sales of which (Pounds)82.4 million and (Pounds)16.1 million
      related to internal sales.

      (iv) The ScottishTelecom business segment and the Other business
      segment were previously combined as the Developing businesses and
      ancillary services segment. The ScottishTelecom business segment has
      been separately identified due to its increased significance to the
      group. Prior year figures have been restated accordingly.

      (v) Within the ScottishTelecom business segment, Demon Internet Limited
      contributed external turnover of (Pounds)48.5 million and operating
      profit before goodwill amortization of (Pounds)12.4 million since its
      acquisition on May 1, 1998. The turnover and operating profit of
      Watermark Games Limited are not material to the ScottishTelecom
      business segment.

      (vi) Operating profit for Manweb comprises distribution operating
      profit of (Pounds)91.9 million (1998 (Pounds)95.4 million, 1997
      (Pounds)112.0 million) and supply and other operating profit of
      (Pounds)33.3 million (1998 (Pounds)35.9 million, 1997 (Pounds)23.0
      million).

F-9                                                 ScottishPower Form 20-F 1999


<PAGE>

      2 Operating profit
<TABLE>
<CAPTION>
      ---------------------------------------------------------------------------------------------
                                                                         1999       1998       1997
       Operating profit is stated after charging/(crediting):       (Pounds)m  (Pounds)m  (Pounds)m
      ---------------------------------------------------------------------------------------------
       <S>                                                          <C>        <C>        <C>
       Depreciation and amortization                                    225.4      184.6      156.1
       Release of customer contributions/grants                         (13.6)     (20.6)     (22.5)
       Research and development                                           5.3        5.4        5.6
       Hire of plant and equipment -- operating leases                    4.6        2.6        2.6
       Hire of other assets -- operating leases                          31.0       25.0       20.6
       Auditors' remuneration for audit of
        -- group                                                          0.7        0.6        0.6
        -- company                                                        0.4        0.3        0.3
       -------------------------------------------------------------  -------    -------    -------
       Non-audit fees paid to auditors:
       Regulatory advice                                                  0.9        0.6        0.4
       Advice on new financial systems                                      -        0.2        0.4
       U.S. Listing                                                         -        0.2          -
       General consultancy                                                0.9        0.2        0.5
       Due diligence reporting and other services                         3.6          -        0.1

       Total                                                              5.4        1.2        1.4
       -------------------------------------------------------------  -------    -------    -------
</TABLE>

      Fees of (Pounds)3.1 million, paid to the auditors in respect of due
      diligence reporting and other services in connection with the proposed
      acquisition of PacifiCorp, have been included within prepayments and
      accrued income. Non-audit fees of (Pounds)5.4 million for
      PricewaterhouseCoopers in 1999 include (Pounds)0.7 million paid to
      Coopers & Lybrand and (Pounds)0.4 million paid to Price Waterhouse
      prior to the date of appointment of PricewaterhouseCoopers as auditors.
      Non-audit fees in 1997 and 1998 comprise solely amounts paid to the
      previous auditors Coopers & Lybrand.

      3 Employee information

<TABLE>
<CAPTION>
      -------------------------------------------------------------------------

                                                    1999       1998       1997
       (a) Employee costs                      (Pounds)m  (Pounds)m  (Pounds)m
      -------------------------------------------------------------------------
       <S>                                     <C>        <C>        <C>
       Wages and salaries                          329.3      304.6      277.1
       Social security costs                        25.9       24.0       22.7
       Pension costs                                18.0       18.1       24.7
       --------------------------------------    -------    -------    -------
       Total employee costs                        373.2      346.7      324.5
       Less: charged as capital expenditure        (71.8)     (67.8)     (48.0)
       --------------------------------------    -------    -------    -------
       Charged to the profit and loss account      301.4      278.9      276.5
       --------------------------------------    -------    -------    -------
</TABLE>

      (b) Employee numbers
      The year end and average numbers of employees (full-time and part-time)
      employed by the group, including executive directors, were:
<TABLE>
<CAPTION>
                                     At March 31,           Annual average
                                   1999    1998    1997    1999    1998    1997
      -------------------------------------------------------------------------
       <S>                        <C>     <C>     <C>     <C>     <C>     <C>
       Generation Wholesale         913   1,020   1,054   1,009   1,068   1,094
       Power Systems              2,675   2,736   2,684   2,708   2,757   2,831
       Energy Supply              1,388   1,139     797   1,318     982     810
       Manweb                     2,201   2,248   2,830   2,245   2,330   2,975
       Southern Water             2,262   2,406   3,618   2,352   2,856   4,006
       ScottishTelecom            2,383   1,481     706   2,410   1,147     320
       Other                      4,210   4,069   3,329   4,133   3,939   3,267
       -----------------------  ------- ------- ------- ------- ------- -------
                                 16,032  15,099  15,018  16,175  15,079  15,303
       -----------------------  ------- ------- ------- ------- ------- -------
       The number of full-time
       equivalent staff was:     15,145  14,306  14,401  15,196  14,356  14,657
       -----------------------  ------- ------- ------- ------- ------- -------
</TABLE>

      4 Net interest charge
<TABLE>
      -------------------------------------------------------------------------
<CAPTION>
                                                    1999       1998       1997
       (a) Analysis of net interest charge     (Pounds)m  (Pounds)m  (Pounds)m
      -------------------------------------------------------------------------
       <S>                                     <C>        <C>        <C>
       Interest on overdrafts, bonds and
       other borrowings:
       Repayable wholly within five years           35.1       41.6       65.4
       Not wholly repayable within five years       90.2       33.8       12.6
       Repaid during the year                       54.6       84.7       33.0
       --------------------------------------    -------    -------    -------
                                                   179.9      160.1      111.0
       On finance leases                               -        0.4        0.5
       --------------------------------------    -------    -------    -------
       Total interest payable                      179.9      160.5      111.5
       Interest receivable                          (3.8)      (3.1)      (3.3)
       Capitalized interest                        (14.8)     (10.0)         -
       --------------------------------------    -------    -------    -------
       Net interest charge                         161.3      147.4      108.2
       --------------------------------------    -------    -------    -------
       Interest cover (times)                        5.0        5.3        6.2
       --------------------------------------    -------    -------    -------
</TABLE>

      Interest cover is calculated by dividing profit on ordinary activities
      before interest by the net interest charge.

ScottishPower Form 20-F 1999                                                F-10
<PAGE>

      Note 4 continued
      ------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                  1999      1998      1997
       (b) Analysis of total interest
       payable                               (Pounds)m (Pounds)m (Pounds)m
      --------------------------------------------------------------------
       <S>                                   <C>       <C>       <C>
       Bank loans and overdrafts                  35.5      45.0      65.5
       Government borrowings                      16.3      16.3      16.3
       Loan notes                                  1.3       1.6       2.7
       Commercial paper                           33.4      73.3      24.3
       Medium-term notes/private placements       31.9       4.5         -
       Euro bonds                                 61.5      19.4       2.2
       Finance leases                                -       0.4       0.5
       ------------------------------------    -------   -------   -------
                                                 179.9     160.5     111.5
       ------------------------------------    -------   -------   -------
</TABLE>

      5 Ordinary taxation
      ------------------------------------------------------------------------
      Reconciliation of tax charge to standard rate of U.K. Corporation Tax
<TABLE>
<CAPTION>
                                                    1999       1998       1997
                                               (Pounds)m  (Pounds)m  (Pounds)m
      -------------------------------------------------------------------------
       <S>                                     <C>        <C>        <C>
       Tax on profit before tax at standard
       rate of 31% (1998 31%, 1997 33%)            199.6      198.2      184.2
       Timing differences between taxable and
       accounting profit:
        -- accelerated capital allowances          (40.6)     (35.8)     (49.7)
        -- other timing differences                 (0.2)       1.1        4.5
       Permanent differences                        (4.3)      27.0        9.5
       Advance corporation tax written back        (12.9)     (38.9)     (11.7)
       --------------------------------------    -------    -------    -------
       Ordinary taxation charged to profit
       and loss account                            141.6      151.6      136.8
       --------------------------------------    -------    -------    -------
       Effective tax rate                           22.0%      23.7%      24.5%
       --------------------------------------    -------    -------    -------
</TABLE>
      The effective tax rate is calculated by dividing ordinary taxation by
      profit on ordinary activities before taxation.

      6 Exceptional taxation -- windfall tax
      ------------------------------------------------------------------------
      Exceptional taxation in 1997-98 related to the group's share of the
      windfall tax according to the formula contained within the Finance (No.
      2) Act 1997. The first of two equal installments was paid on December
      1, 1997 and the second installment was paid on December 1, 1998.

      7 Earnings per ordinary share
      ------------------------------------------------------------------------
      (a) Earnings per ordinary share have been calculated in accordance with
      FRS 14 "Earnings per share' for all years by dividing the profit for
      the financial year by the weighted average number of ordinary shares in
      issue during the financial year, based on the following information:

<TABLE>
<CAPTION>
                                                          1999    1998    1997
      ------------------------------------------------------------------------
       <S>                                             <C>     <C>     <C>
       Profit for the financial year ((Pounds)
       million)                                          502.8   170.1   421.1
       Basic weighted average share capital (number
       of shares, million)                             1,185.2 1,180.1 1,104.9
       Diluted weighted average share capital (number
       of shares, million)                             1,197.2 1,191.9 1,116.0
       ----------------------------------------------  ------- ------- -------
</TABLE>
      The difference between the basic and the diluted weighted average share
      capital is wholly attributable to outstanding share options.

      (b) The calculation of earnings per ordinary share, on a basis which
      excludes goodwill amortization and the windfall tax, is based on the
      following adjusted earnings:
<TABLE>
<CAPTION>
                                                      1999      1998      1997
                                                 (Pounds)m (Pounds)m (Pounds)m
      ------------------------------------------------------------------------
       <S>                                       <C>       <C>       <C>
       Profit for the financial year                 502.8     170.1     421.1
       Adjusting items -- goodwill amortization        1.2         -         -
                       -- windfall tax                   -     317.0         -
       ----------------------------------------    -------   -------   -------
       Adjusted earnings                             504.0     487.1     421.1
       ----------------------------------------    -------   -------   -------
</TABLE>
      Adjusted earnings per share has been presented in addition to earnings
      per share calculated in accordance with FRS 14 in order that more
      meaningful comparisons of financial performance can be made. The
      figures for the years ended March 31, 1997 and March 31, 1998 do not
      contain goodwill amortization as the group has adopted the transitional
      provisions of FRS 10 and only capitalized goodwill arising on
      acquisitions since April 1, 1998.

<TABLE>
<CAPTION>
       8 Dividends per
       ordinary share
      ----------------------------------------------------------------------------------
                                    1999     1998     1997
                                   pence    pence    pence
                                     per      per      per
                                ordinary ordinary ordinary      1999      1998      1997
                                   share    share    share (Pounds)m (Pounds)m (Pounds)m
      ----------------------------------------------------------------------------------
       <S>                      <C>      <C>      <C>      <C>       <C>       <C>
       Interim dividend paid        7.50     6.80     6.17      89.9      80.4      72.6
       Proposed final dividend     15.00    13.60    12.33     178.0     162.9     145.5
       -----------------------   -------  -------  -------   -------   -------   -------
       Total dividends             22.50    20.40    18.50     267.9     243.3     218.1
       -----------------------   -------  -------  -------   -------   -------   -------
</TABLE>
F-11                                                ScottishPower Form 20-F 1999


<PAGE>

      Group Cash Flow Statement
      for the year ended March 31, 1999

<TABLE>
<CAPTION>
                                                1999       1998       1997
                                     Notes (Pounds)m  (Pounds)m  (Pounds)m
      ---------------------------------------------------------------------
       <S>                           <C>   <C>        <C>        <C>
       Cash inflow from continuing
       operating activities             10     944.9    1,014.1      801.9
       Dividends received from
       associates and joint
       ventures                                  0.9        0.9          -
       Returns on investments and
       servicing of finance              9    (149.9)    (146.7)    (101.1)
       Ordinary taxation                       (93.7)    (134.5)    (117.4)
       -----------------------------------  --------   --------   --------
       Free cash flow before
       windfall tax                            702.2      733.8      583.4
       Exceptional taxation --
        windfall tax                     6    (157.8)    (157.8)         -
       -----------------------------------  --------   --------   --------
       Free cash flow                          544.4      576.0      583.4
       Capital expenditure and
       financial investment              9    (683.0)    (592.7)    (392.1)
       -----------------------------------  --------   --------   --------
       Cash flow before
       acquisitions and disposals             (138.6)     (16.7)     191.3
       Acquisitions and disposals        9     (77.4)      67.9   (1,234.6)
       Equity dividends paid                  (252.8)    (226.0)    (170.0)
       -----------------------------------  --------   --------   --------
       Cash outflow before use of
       liquid resources and
       financing                              (468.8)    (174.8)  (1,213.3)
       Management of liquid
       resources                      9,13     (12.1)     (17.5)     (21.0)
       Financing
        -- Issue of ordinary share
       capital                           9       3.2        8.9      238.0
        -- Increase in debt           9,13     451.0      252.6    1,048.6
                                               454.2      261.5    1,286.6
       -----------------------------------  --------   --------   --------
       (Decrease)/increase in cash
       in year                          13     (26.7)      69.2       52.3
       -----------------------------------  --------   --------   --------

      Free cash flow represents cash flow from continuing operating
      activities after adjusting for dividends received from associates and
      joint ventures, returns on investments and servicing of finance and
      taxation.

<CAPTION>
                                                1999       1998       1997
                                      Note (Pounds)m  (Pounds)m  (Pounds)m
      ----------------------------------------------------------------------
       <S>                           <C>   <C>        <C>        <C>
       (Decrease)/increase in cash
       in year                                 (26.7)      69.2       52.3
       Cash inflow from increase in
       debt                                   (451.0)    (252.6)  (1,048.6)
       Cash outflow from movement
       in liquid resources                      12.1       17.5       21.0
       -----------------------------------  --------   --------   --------
       Change in net debt resulting
       from cash flows                        (465.6)    (165.9)    (975.3)
       Net debt acquired                        (2.7)      (0.1)    (168.6)
       Net debt disposed                           -        6.7          -
       Loan notes issued                           -       (3.0)     (14.3)
       Other non-cash movements                 (0.3)         -          -
       -----------------------------------  --------   --------   --------
       Movement in net debt in year           (468.6)    (162.3)  (1,158.2)
       Net debt at end of previous
       year                                 (1,952.6)  (1,790.3)    (632.1)
       -----------------------------------  --------   --------   --------
       Net debt at end of year          13  (2,421.2)  (1,952.6)  (1,790.3)
       -----------------------------------  --------   --------   --------
</TABLE>
      Reconciliation of Net Cash Flow to Movement in Net Debt
      for the year ended March 31, 1999


      The Accounting Policies and Definitions on pages F-1 to F-6, together
      with the Notes on pages F-9 to F-11, F-13 to F-15 and F-17 to F-40 form
      part of these Accounts.

ScottishPower Form 20-F 1999                                                F-12
<PAGE>

      Notes to the Group Cash Flow Statement
      for the year ended March 31, 1999

       9 Analysis of cash flows
      -------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                    1999       1998       1997
                                               (Pounds)m  (Pounds)m  (Pounds)m
      -------------------------------------------------------------------------
       <S>                                     <C>        <C>        <C>
       (a) Returns on investments and
       servicing of finance
       Interest received                             3.5        2.7        3.3
       Interest paid                              (153.4)    (149.0)    (103.9)
       Interest element of finance lease
       rental payments                                 -       (0.4)      (0.5)
       --------------------------------------    -------    -------   --------
       Net cash outflow for returns on
       investments and servicing of finance       (149.9)    (146.7)    (101.1)
       --------------------------------------    -------    -------   --------
       (b) Capital expenditure and financial
       investment
       Purchase of tangible fixed assets          (745.1)    (664.6)    (448.0)
       Deferred income received                     47.8       57.9       46.6
       Sale of tangible fixed assets                20.4       26.4       13.9
       Purchase of fixed asset investments          (6.1)     (12.4)      (4.6)
       --------------------------------------    -------    -------   --------
       Net cash outflow for capital
       expenditure and financial investment       (683.0)    (592.7)    (392.1)
       --------------------------------------    -------    -------   --------
       (c) Acquisitions and disposals
       Purchase of subsidiary undertakings         (77.4)      (0.4)  (1,234.6)
       Sale of subsidiary businesses                   -       68.3          -
       --------------------------------------    -------    -------   --------
       Net cash (outflow)/inflow from
       acquisitions and disposals                  (77.4)      67.9   (1,234.6)
       --------------------------------------    -------    -------   --------
       (d) Management of liquid resources *
       Cash outflow in relation to short-term
       deposits and other short-term
       investments                                 (12.1)     (17.5)     (21.0)
       --------------------------------------    -------    -------   --------
       Net cash outflow for management of
       liquid resources                            (12.1)     (17.5)     (21.0)
       --------------------------------------    -------    -------   --------
       (e) Financing
       Issue of ordinary share capital               3.2        8.9      263.0
       Expenses paid in connection with share
       issue                                           -          -      (25.0)
                                                     3.2        8.9      238.0
       Debt due within one year:
        -- net (repayment)/drawdown of
           uncommitted facilities                  (39.1)     (81.8)     252.9
        -- net commercial paper
           (redeemed)/issued                      (174.9)     (31.0)     700.5
        -- medium-term notes/private
           placements                              (62.5)      62.5          -
        -- redemption of loan notes                 (1.1)     (39.4)      (0.4)
        -- European Investment Bank loans          (10.0)       1.3        8.7
       Debt due after one year:
        -- net drawdown of uncommitted
           facilities                                  -          -        3.8
        -- net repayment of committed
           facilities                                  -     (200.6)    (100.0)
        -- medium-term notes/private
           placements                              197.5      240.9          -
        -- European Investment Bank loans           51.2       20.0      (11.6)
        -- 5.875% euro-US dollar bond issue            -      182.9          -
        -- Variable coupon bond issue                  -       99.6          -
        -- 8.375% euro-sterling bond issue             -        0.2      196.6
        -- 6.750% euro-sterling bond issue         247.0          -          -
        -- 5.250% deutschmark bond issue           245.5          -          -
       Capital element of finance lease
       rental payments                             (2.6)      (2.0)      (1.9)
       Increase in debt                            451.0      252.6    1,048.6
       --------------------------------------  -------    -------    --------
       Net cash inflow from financing              454.2      261.5    1,286.6
       --------------------------------------  -------    -------    --------
</TABLE>

      * Liquid resources include term deposits of less than one year,
      commercial paper and other short-term investments.

F-13                                                ScottishPower Form 20-F 1999


<PAGE>

      10 Reconciliation of operating profit to net cash inflow from
      continuing operating activities

      ------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                   1999       1998       1997
                                              (Pounds)m  (Pounds)m  (Pounds)m
      ------------------------------------------------------------------------
       <S>                                    <C>        <C>        <C>
       Operating profit                           802.8      785.1      663.9
       Acquisition reorganization accruals
       and provisions                                 -          -       15.2
       Depreciation and amortization              225.4      184.6      156.1
       Profit on sale of tangible fixed
       assets and disposal of businesses          (18.6)     (21.7)      (2.4)
       Release of deferred income                 (13.6)     (20.6)     (22.5)
       Movements in provisions for
       liabilities and charges                     (7.3)      (5.1)     (17.0)
       Decrease/(increase) in stocks               18.4      (32.0)     (31.1)
       (Increase)/decrease in debtors             (68.7)      81.9       38.7
       Increase in creditors                        6.5       41.9        1.0
       -------------------------------------    -------    -------   --------
       Net cash inflow from continuing
       operating activities                       944.9    1,014.1      801.9
       -------------------------------------    -------    -------   --------
      The acquisition reorganization accruals and provisions for 1997 relate
      to the cost of implementing the post-acquisition plans for Southern
      Water.

      11 Effect of acquisitions and disposals on cash flows
      ------------------------------------------------------------------------
<CAPTION>
                                                   1999       1998       1997
                                              (Pounds)m  (Pounds)m  (Pounds)m
      ------------------------------------------------------------------------
       <S>                                    <C>        <C>        <C>
       Cash flow from operating activities         21.1       10.0      140.3
       Returns on investments and servicing
       of finance                                   0.3       (0.7)      (5.6)
       Taxation                                    (0.1)         -      (18.0)
       Capital expenditure and financial
       investment                                 (10.6)      (5.3)     (93.2)
       Management of liquid resources              (9.2)         -       49.0
       Financing                                   (1.6)       2.1       (2.8)
       -------------------------------------    -------    -------   --------
       (Decrease)/increase in cash                 (0.1)       6.1       69.7
       -------------------------------------    -------    -------   --------

      12 Analysis of cash flows in respect of acquisitions and disposals
      ------------------------------------------------------------------------
<CAPTION>
                                                   1999       1998       1997
                                              (Pounds)m  (Pounds)m  (Pounds)m
      ------------------------------------------------------------------------
       <S>                                    <C>        <C>        <C>
       Cash consideration including expenses      (69.7)      70.2   (1,290.8)
       Cash at bank and in hand
       acquired/(disposed)                          1.4       (1.9)      58.6
       Bank overdrafts acquired                       -          -       (2.4)
       Deferred consideration in respect of
       prior year acquisitions                     (9.1)         -          -
       -------------------------------------    -------    -------   --------
                                                  (77.4)      68.3   (1,234.6)
       -------------------------------------    -------    -------   --------
</TABLE>
      The analysis of cash flows on acquisitions in 1999 relate to the post-
      acquisition cash flows of Demon Internet Limited and Watermark Games
      Limited. The analysis of cash flows from disposals in 1998 relates to
      the cash flows during the period for the Southern Water non-core
      businesses that were sold during the year. The cash flows from the
      acquisitions in 1998 were not material to the group. There were no
      disposals in 1997. The analysis of cash flows on acquisitions in 1997
      principally relate to the post-acquisition cash flows of Southern
      Water.
ScottishPower Form 20-F 1999                                                F-14
<PAGE>


      13 Analysis of net debt
      ------------------------------------------------------------------------
      1997/98 analysis
<TABLE>
<CAPTION>
                                                        Acquisitions      Disposals      Other
                               At April 1,             (excl. cash &  (excl. cash &   non-cash  At March 31,
                                      1997  Cash flow    overdrafts)    overdrafts)    changes          1998
                                 (Pounds)m  (Pounds)m      (Pounds)m      (Pounds)m  (Pounds)m     (Pounds)m
      -------------------------------------------------------------------------------------------------------
       <S>                     <C>          <C>        <C>            <C>           <C>         <C>
       Cash at bank                    2.5       56.3              -              -          -          58.8
       Overdrafts                    (22.2)      12.9              -              -          -          (9.3)
                                                 69.2
       Debt due after 1 year        (689.4)    (343.0)             -              -          -      (1,032.4)
       Debt due within 1 year     (1,111.7)      88.4           (0.1)             -       (3.0)     (1,026.4)
       Finance leases                 (8.7)       2.0              -            6.7          -             -
                                               (252.6)
       Other deposits                 39.2       17.5              -              -          -          56.7
       ----------------------     --------    -------        -------        -------    -------      --------
       Total                      (1,790.3)    (165.9)          (0.1)           6.7       (3.0)     (1,952.6)
       ----------------------     --------    -------        -------        -------    -------      --------
</TABLE>

      "Other non-cash changes' to net debt represents loan notes issued as
      part of the consideration for Pinnacle Cellular Limited.

      ------------------------------------------------------------------------
      1998/99 analysis
<TABLE>
<CAPTION>
                                      At              Acquisitions      Other
                                April 1,             (excl. cash &   non-cash  At March 31,
                                    1998  Cash flow     overdrafts)   changes          1999
                               (Pounds)m  (Pounds)m      (Pounds)m  (Pounds)m     (Pounds)m
      --------------------------------------------------------------------------------------
       <S>                     <C>        <C>        <C>            <C>        <C>
       Cash at bank                 58.8      (20.7)             -          -          38.1
       Overdrafts                   (9.3)      (6.0)             -          -         (15.3)
                                              (26.7)

       Debt due after 1 year    (1,032.4)    (741.2)          (0.1)      89.2      (1,684.5)
       Debt due within 1 year   (1,026.4)     287.6              -      (89.5)       (828.3)
       Finance leases                  -        2.6           (2.6)         -             -
                                             (451.0)
       Other deposits               56.7       12.1              -          -          68.8
       ----------------------   --------    -------        -------    -------      --------
       Total                    (1,952.6)    (465.6)          (2.7)      (0.3)     (2,421.2)
       ----------------------   --------    -------        -------    -------      --------
</TABLE>

      "Other non-cash changes' to net debt represents the movement in debt of
      (Pounds)89.5 million due after more than one year to due within one
      year and amortization of finance costs of (Pounds)0.3 million.

F-15                                                ScottishPower Form 20-F 1999

<PAGE>

      Balance Sheets
      as at March 31, 1999

<TABLE>
<CAPTION>
                                               Group                Company
                                           1999       1998       1999       1998
                                Notes (Pounds)m  (Pounds)m  (Pounds)m  (Pounds)m
      ---------------------------------------------------------------------------
       <S>                      <C>   <C>        <C>        <C>        <C>
       Fixed assets
       Intangible assets           15      71.3          -          -          -
       Tangible assets             16   5,295.1    4,723.9    1,893.3    1,755.1
       Investments
       -- Investments in joint
          ventures:
          Share of gross assets            54.2       23.8
          Share of gross
           liabilities                    (29.8)      (8.0)
                                           24.4       15.8       21.1       13.6
       -- Investments in
          associates                        5.9        7.4          -          -
       -- Other investments                43.4       44.1    1,731.3    1,731.2
                                   17      73.7       67.3    1,752.4    1,744.8
       ------------------------------  --------   --------   --------   --------
                                        5,440.1    4,791.2    3,645.7    3,499.9
       ------------------------------  --------   --------   --------   --------
       Current assets
       Stocks                      18     125.8     144.2       105.6     128.9
       Debtors                     19     559.3      525.9    1,910.1    1,811.1
       Short-term bank and
       other deposits                     106.9      115.5       29.2       48.6
       ------------------------------  --------   --------   --------   --------
                                          792.0      785.6    2,044.9    1,988.6
       ------------------------------  --------   --------   --------   --------
       Creditors: amounts
       falling due within one year
       Loans and other
       borrowings                  20    (843.6)  (1,035.7)    (826.5)  (1,031.1)
       Other creditors             21  (1,332.8)  (1,396.3)  (1,196.6)  (1,455.5)
       ------------------------------  --------   --------   --------   --------
                                       (2,176.4)  (2,432.0)  (2,023.1)  (2,486.6)
       ------------------------------  --------   --------   --------   --------
       Net current
       (liabilities)/assets            (1,384.4)  (1,646.4)      21.8     (498.0)
       ------------------------------  --------   --------   --------   --------
       Total assets less
       current liabilities              4,055.7    3,144.8    3,667.5    3,001.9
       Creditors: amounts
       falling due after more
       than one year
       Loans and other
       borrowings                  20  (1,684.5)  (1,032.4)  (1,584.8)    (932.8)
       Provisions for
       liabilities and charges     23     (30.8)     (38.1)     (11.9)     (10.4)
       Deferred income             24    (393.2)    (364.6)    (196.2)    (179.9)
       ------------------------------  --------   --------   --------   --------
       Net assets                  14   1,947.2    1,709.7    1,874.6    1,878.8
       ------------------------------  --------   --------   --------   --------
       Called up share capital  25,26     599.4      598.4      599.4      598.4
       Share premium               26     394.0      388.7      394.0      388.7
       Merger reserve              26         -          -        5.1        8.2
       Revaluation reserve         26     223.9      227.3          -          -
       Profit and loss account     26     728.6      493.4      876.1      883.5
       ------------------------------  --------   --------   --------   --------
       Equity shareholders'
       funds                       26   1,945.9    1,707.8    1,874.6    1,878.8
       Minority interests          27       1.3        1.9          -          -
       ------------------------------  --------   --------   --------   --------
       Capital employed                 1,947.2    1,709.7    1,874.6    1,878.8
       ------------------------------  --------   --------   --------   --------
</TABLE>

      The Accounting Policies and Definitions on pages F-1 to F-6, together
      with the Notes on pages F-9 to F-11, F-13 to F-15 and F-17 to F-40 form
      part of these Accounts.
ScottishPower Form 20-F 1999                                                F-16
<PAGE>

      Notes to the Balance Sheets
      as at March 31, 1999

      14 Segmental business information
<TABLE>
<CAPTION>
      -------------------------------------------------------------------
                                                         1999       1998
       (a) Net assets/(liabilities) by
       business segment                       Notes (Pounds)m  (Pounds)m
      -------------------------------------------------------------------
       <S>                              <C>         <C>        <C>
       Generation Wholesale                             322.7      361.2
       Power Systems                                  1,234.7    1,136.4
       Energy Supply                                     97.8       45.2
       Manweb                                           672.4      607.3
       Southern Water                                 1,612.4    1,222.4
       ScottishTelecom                        (ii)      307.6      151.0
       Other                            (ii),(iii)       69.9       69.4
       -------------------------------------------- ---------  ---------
       Sub total                                      4,317.5    3,592.9
       Unallocated net liabilities            (iv)   (2,370.3)  (1,883.2)
       -------------------------------------------- ---------  ---------
       Total                                          1,947.2    1,709.7
       -------------------------------------------- ---------  ---------
<CAPTION>
                                                         1999       1998
       (b) Capital expenditure by
       business segment                        (v)  (Pounds)m  (Pounds)m
      -------------------------------------------------------------------
       <S>                              <C>         <C>        <C>
       Generation Wholesale                              42.5       43.8
       Power Systems                                    149.8      163.2
       Energy Supply                                     24.1       21.1
       Manweb                                           101.2      108.9
       Southern Water                                   356.0      294.8
       ScottishTelecom                        (ii)      103.2       58.3
       Other                                  (ii)       25.2       23.9
       -------------------------------------------- ---------  ---------
       Total                                            802.0      714.0
       -------------------------------------------- ---------  ---------
<CAPTION>
                                                         1999       1998
       (c) Total assets by business
       segment                                      (Pounds)m  (Pounds)m
      -------------------------------------------------------------------
       <S>                              <C>         <C>        <C>
       Generation Wholesale                             489.4      564.0
       Power Systems                                  1,511.1    1,395.3
       Energy Supply                                    321.5      267.1
       Manweb                                         1,051.7    1,003.1
       Southern Water                                 2,291.1    2,013.2
       ScottishTelecom                        (ii)      412.0      212.2
       Other                                  (ii)      155.3      121.9
       -------------------------------------------- ---------  ---------
       Total                                          6,232.1    5,576.8
       -------------------------------------------- ---------  ---------
</TABLE>

      (i) In fiscal 1999, ScottishPower adopted FAS 131, Disclosures about
      Segments of an Enterprise and Related Information. This standard
      establishes a new framework for segment reporting where the management
      reporting structure forms the basis of external disclosures.The
      accounting policies of the segments are the same as those described in
      the "Accounting Policies and Definitions' on pages F-1 to F-6.
      (ii) The ScottishTelecom business segment and the Other business
      segment were previously combined as the Developing businesses and
      ancillary services segment.
      (iii) The net assets of the Retail business, included within the Other
      business segment, excluding short-term bank and other deposits of
      (Pounds)37.2 million (1998 (Pounds)19.7 million), are (Pounds)18.6
      million (1998 (Pounds)35.6 million).
      (iv) Unallocated net liabilities include net debt, dividends payable,
      tax liabilities and fixed asset investments.
      (v) Capital expenditure by business segment is stated gross of capital
      grants and customer contributions.

F-17                                                ScottishPower Form 20-F 1999


<PAGE>


      15 Intangible fixed assets
<TABLE>
      ---------------------------------------
<CAPTION>
                                     Goodwill
       Group                        (Pounds)m
      ---------------------------------------
       <S>                        <C>
       Cost:
       At April 1, 1998                     -
       Additions                         72.5
       -------------------------     --------
       At March 31, 1999                 72.5
       -------------------------     --------
       Amortization:
       At April 1, 1998                     -
       Amortization for the year          1.2
       -------------------------     --------
       At March 31, 1999                  1.2
       -------------------------     --------
       Net book value:
       At March 31, 1999                 71.3
       At March 31, 1998                    -
       -------------------------     --------
</TABLE>

      Demon Internet Limited was acquired on May 1, 1998 for cash
      consideration of (Pounds)66 million. On May 18, 1998 Watermark Games
      Limited was acquired for (Pounds)2.9 million cash including deferred
      consideration of (Pounds)1.0 million. Details of the adjustments made
      in respect of these acquisitions are shown below:

<TABLE>
<CAPTION>
                                            Net book
                                               value  Adjustments  Fair value
                                           (Pounds)m    (Pounds)m   (Pounds)m
      ------------------------------------------------------------------------
       <S>                                 <C>        <C>          <C>
       Tangible fixed assets                     9.4         (2.4)        7.0
       Stocks                                    0.1            -         0.1
       Debtors                                   5.8            -         5.8
       Short-term bank and other
       deposits                                  1.4            -         1.4
       Creditors: amounts falling due
       within one year                         (13.7)        (2.3)      (16.0)
       Creditors: amounts falling due
       after more than one year                 (0.1)           -        (0.1)
       ------------------------------------  -------      -------     ---------
                                                 2.9         (4.7)       (1.8)
       ------------------------------------  -------      -------
       Consideration                                                     70.7
       -------------------------------------------------------      ---------
       Goodwill on acquisition                                           72.5
       -------------------------------------------------------      ---------
       Analysis of consideration                                    (Pounds)m
      ------------------------------------------------------------------------
       Cash paid                                                         67.9
       Expenses paid                                                      1.8
       Deferred consideration                                             1.0
       -------------------------------------------------------      ---------
                                                                         70.7
       -------------------------------------------------------      ---------
</TABLE>

      The adjustments relate to alignment of fixed asset capitalization
      policies and recognition of unrecorded liabilities.

      The acquisition method of accounting has been adopted in respect of
      both acquisitions. The results of these companies for the periods
      before and since acquisition are not material to the group.

      Goodwill on these acquisitions is being amortized over 15 years. The
      directors have estimated the useful economic life of goodwill acquired
      after assessment of trade barriers and technology and rate of market
      change.

ScottishPower Form 20-F 1999                                                F-18
<PAGE>


      16 Tangible fixed assets
<TABLE>
<CAPTION>
      ----------------------------------------------------------------------------------------------
                                                          Water
       (a) Group                       Land and  infrastructure  Plant and  Vehicles and
       Year ended March 31,           buildings          assets  machinery     equipment      Total
       1998                      Note (Pounds)m       (Pounds)m  (Pounds)m     (Pounds)m  (Pounds)m
      ----------------------------------------------------------------------------------------------
       <S>                       <C>  <C>        <C>             <C>        <C>           <C>
       Cost or valuation:
       At April 1, 1997                   785.3           697.8    3,236.6         420.5    5,140.2
       Additions                           73.5           128.3      335.4         176.8      714.0
       Acquisitions                         0.4               -        1.2           0.2        1.8
       Revaluation                (i)       9.4            34.4      108.2             -      152.0
       Grants and contributions               -            (8.0)         -             -       (8.0)
       Disposals                          (21.1)           (0.3)     (36.7)        (86.8)    (144.9)
       ------------------------------   -------         -------    -------       -------    -------
       At March 31, 1998                  847.5           852.2    3,644.7         510.7    5,855.1
       ------------------------------   -------         -------    -------       -------    -------
       Depreciation:
       At April 1, 1997                   139.7            10.4      867.6          72.8    1,090.5
       Charge for the year                 14.9            19.0       88.6          62.1      184.6
       Revaluation                (i)         -               -      (77.0)            -      (77.0)
       Disposals                           (2.0)           (0.3)     (21.9)        (42.7)     (66.9)
       ------------------------------   -------         -------    -------       -------    -------
       At March 31, 1998                  152.6            29.1      857.3          92.2    1,131.2
       ------------------------------   -------         -------    -------       -------    -------
       Net book value:
       At March 31, 1998                  694.9           823.1    2,787.4         418.5    4,723.9
       At March 31, 1997                  645.6           687.4    2,369.0         347.7    4,049.7
       ------------------------------   -------         -------    -------       -------    -------
       Year ended March 31,
       1999
      ----------------------------------------------------------------------------------------------
       Cost or valuation:
       At April 1, 1998                   847.5           852.2    3,644.7         510.7    5,855.1
       Additions                          100.2           145.2      392.8         163.8      802.0
       Acquisitions                           -               -        6.0           1.0        7.0
       Grants and contributions               -            (5.6)         -             -       (5.6)
       Disposals                           (7.0)           (0.4)     (11.4)        (16.8)     (35.6)
       ------------------------------   -------         -------    -------       -------    -------
       At March 31, 1999                  940.7           991.4    4,032.1         658.7    6,622.9
       ------------------------------   -------         -------    -------       -------    -------
       Depreciation:
       At April 1, 1998                   152.6            29.1      857.3          92.2    1,131.2
       Charge for the year                 20.3            19.7      119.4          64.8      224.2
       Disposals                           (2.0)           (0.4)      (9.7)        (15.5)     (27.6)
       ------------------------------   -------         -------    -------       -------    -------
       At March 31, 1999                  170.9            48.4      967.0         141.5    1,327.8
       ------------------------------   -------         -------    -------       -------    -------
       Net book value:
       At March 31, 1999                  769.8           943.0    3,065.1         517.2    5,295.1
       At March 31, 1998                  694.9           823.1    2,787.4         418.5    4,723.9
       ------------------------------   -------         -------    -------       -------    -------
</TABLE>

<TABLE>
<CAPTION>
                                          1999       1998
       Historical cost analysis      (Pounds)m  (Pounds)m
      ----------------------------------------------------
       <S>                           <C>        <C>
       Cost                            6,470.9    5,703.1
       Depreciation based on cost     (1,399.7)  (1,206.5)
       ----------------------------  --------   --------
       Net book value based on cost    5,071.2    4,496.6
       ----------------------------  --------   --------
</TABLE>

F-19                                                ScottishPower Form 20-F 1999


<PAGE>

      Note 16 continued
      ------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                     Water              Vehicles
       (b) Company               Land and infrastructure  Plant and        and
       Year ended March 31,     buildings         assets  machinery  equipment      Total
       1998                     (Pounds)m     (Pounds)m  (Pounds)m  (Pounds)m  (Pounds)m
      --------------------------------------------------------------------------------------
       <S>                       <C>        <C>             <C>        <C>        <C>
       Cost:
       At April 1, 1997             279.9            -       2,114.1      198.3    2,592.3
       Additions                      9.1            -         138.8      111.2      259.1
       Disposals                     (0.7)           -          (3.9)      (1.7)      (6.3)
       ------------------------   -------      -------      --------   -------    --------
       At March 31, 1998             288.3           -       2,249.0      307.8    2,845.1
       ------------------------   -------      -------      --------   -------    --------
       Depreciation:
       At April 1, 1997             130.5            -         816.5       67.5    1,014.5
       Charge for the year            1.4            -          44.0       34.4       79.8
       Disposals                     (0.2)           -          (2.8)      (1.3)      (4.3)
       ------------------------   -------      -------      --------    -------   --------
       At March 31, 1998            131.7            -         857.7      100.6    1,090.0
       ------------------------   -------      -------      --------    -------   --------
       Net book value:
       At March 31, 1998            156.6            -       1,391.3      207.2    1,755.1
       At March 31, 1997            149.4            -       1,297.6      130.8    1,577.8
       ------------------------   -------      -------      --------    -------   --------
       Year ended March 31,
       1999
      --------------------------------------------------------------------------------------
       Cost:
       At April 1, 1998             288.3            -       2,249.0      307.8    2,845.1
       Additions                     17.4            -         139.7       85.1      242.2
       Disposals                     (0.3)           -          (8.4)      (3.5)     (12.2)
       ------------------------   -------      -------      --------    -------   --------
       At March 31, 1999            305.4            -       2,380.3      389.4    3,075.1
       ------------------------   -------      -------      --------    -------   --------
       Depreciation:
       At April 1, 1998             131.7            -         857.7      100.6    1,090.0
       Charge for the year            6.2            -          61.8       35.4      103.4
       Disposals                     (0.2)           -          (8.0)      (3.4)     (11.6)
       ------------------------   -------      -------      --------    -------   --------
       At March 31, 1999            137.7            -         911.5      132.6    1,181.8
       ------------------------   -------      -------      --------    -------   --------
       Net book value:
       At March 31, 1999            167.7            -       1,468.8      256.8    1,893.3
       At March 31, 1998            156.6            -       1,391.3      207.2    1,755.1
       ------------------------   -------      -------      --------    -------   --------
<CAPTION>
                                                          Group                Company
       Included in the cost or
       valuation of tangible                         1999       1998       1999       1998
       fixed assets above are:      Notes       (Pounds)m  (Pounds)m  (Pounds)m  (Pounds)m
      --------------------------------------------------------------------------------------
       <S>                          <C>         <C>        <C>        <C>        <C>
       Major assets in the
       course of construction                    537.2         277.3      109.9       12.9
       Grants and contributions
       in respect of water
       infrastructure assets                     (18.0)        (12.4)         -          -
       Capitalized interest            (ii)       32.8          18.0        8.0        8.0
       Assets not subject to
       depreciation                   (iii)       60.6          71.8       19.0       29.2
       ----------------------------------      -------      --------   -------    --------
</TABLE>

      (i) The Manweb distribution and Southern Water operational assets were
      revalued by the directors on September 30, 1997 by assessing discounted
      estimated future cash flows. These revaluations followed the imposition
      of the windfall tax which reduced significantly uncertainties taken
      into account in assessing the values ascribed to these assets at their
      respective dates of acquisition. In view of the isolated nature of the
      reason for the revaluation, the valuations have not been and will not
      be updated, as permitted under the transitional provisions of FRS 15
      "Tangible fixed assets'. The net book value of tangible fixed assets
      included at valuation at March 31, 1999 was (Pounds)2,311.2 million
      (1998 (Pounds)2,373.9 million).
      (ii) Interest on the funding attributable to major capital projects was
      capitalized during the year at a rate of 9% (1998 10%).
      (iii) Assets not subject to depreciation are land. Land and buildings
      held by the group and company are predominantly freehold.
      (iv) The opening balances in respect of cost or valuation and
      depreciation of water infrastructure assets have been restated as a
      result of implementing the infrastructure renewals accounting basis as
      set out in FRS 15 "Tangible fixed assets'. The effect of the adjustment
      has been to increase tangible fixed assets and reduce prepayments and
      accrued income by (Pounds)15.7 million (1998 (Pounds)5.4 million).
      There is no effect on the profit and loss account other than to
      reclassify the renewals charge as depreciation.
      (v) The historical cost of fully depreciated tangible fixed assets
      still in use was (Pounds)241.2 million (1998 (Pounds)234.6 million).

ScottishPower Form 20-F 1999                                                F-20
<PAGE>

      17 Fixed asset investments
<TABLE>
<CAPTION>
      -----------------------------------------------------------------------------------------------------------------------
                                  Subsidiary                                Associated
                                 undertakings       Joint ventures         undertakings            Own
                                                                                           shares held        Other
                              Shares     Loans    Shares      Loans     Shares      Loans  under trust  investments      Total
                           (Pounds)m (Pounds)m (Pounds)m  (Pounds)m  (Pounds)m  (Pounds)m    (Pounds)m    (Pounds)m  (Pounds)m
      -----------------------------------------------------------------------------------------------------------------------
       <S>                 <C>       <C>       <C>        <C>        <C>        <C>        <C>          <C>          <C>
       Group                                                                                        (a)
       Cost or valuation:
       At April 1, 1997            -         -       1.6        4.4        6.0        1.9          2.2          1.6       17.7
       Additions                   -         -         -        9.9        0.7          -         39.4          0.9       50.9
       Share of retained
       profit                      -         -       1.0          -        0.5          -            -            -        1.5
       Disposals and
       other                       -         -      (0.4)      (0.7)      (0.5)      (1.2)           -            -       (2.8)
       ------------------    -------   -------   -------    -------    -------    -------      -------     --------   -------
       At March 31, 1998           -         -       2.2       13.6        6.7        0.7         41.6          2.5       67.3
       Additions                   -         -         -        7.5          -          -          2.8          0.1       10.4
       Share of retained
       profit                      -         -       1.1          -        0.1          -            -            -        1.2
       Disposals and
       other                       -         -         -          -       (0.9)      (0.7)        (2.8)        (0.8)      (5.2)
       ------------------    -------   -------   -------    -------    -------    -------      -------     --------    -------
       At March 31, 1999           -         -       3.3       21.1        5.9          -         41.6          1.8       73.7
       ------------------    -------   -------   -------    -------    -------    -------      -------     --------    -------
       Company
       Cost or nominal
       value:
       At April 1, 1997      1,504.4         -         -        4.4          -          -          2.2            -    1,511.0
       Additions                   -     176.2         -        9.9          -          -         39.4          0.5      226.0
       Acquisitions              8.5         -         -          -          -          -            -            -        8.5
       Disposals and
       other                       -         -         -       (0.7)         -          -            -            -       (0.7)
       ------------------    -------   -------   -------    -------    -------    -------      -------     --------   -------
       At March 31, 1998     1,512.9     176.2         -       13.6          -          -         41.6          0.5    1,744.8
       Additions                   -         -         -        7.5          -          -          2.8          0.1       10.4
       Disposals and
       other                       -         -         -          -          -          -         (2.8)           -       (2.8)
       ------------------    -------   -------   -------    -------    -------    -------      -------     --------   -------
       At March 31, 1999     1,512.9     176.2         -       21.1          -          -         41.6          0.6    1,752.4
       ------------------    -------   -------   -------    -------    -------    -------      -------     --------   -------
</TABLE>

      The principal subsidiary undertakings, joint ventures and associated
      undertakings are listed on page F-40.
      The company is currently evaluating the strategy of ScottishTelecom and
      the options to maximize shareholder value from its investment in this
      business. This assessment includes a review of services provided by
      ScottishTelecom, its funding needs and any consequential restructuring.
      The company has agreed to indemnify its subsidiary in respect of any
      costs and losses which may result.

      (a) Shares in the company held under trust during the year are as
      follows:
<TABLE>
<CAPTION>
                                                  Shares held          Shares             Shares   Shares held Market value
                                                  at April 1,        acquired        transferred  at March 31, at March 31,
                                        Dividends        1997     during year        during year          1998         1998
                                 Notes     waived       (000s)         (000s)             (000s)        (000s)    (Pounds)m
      ---------------------------------------------------------------------------------------------------------------------
       <S>                       <C>    <C>       <C>         <C>             <C>                 <C>          <C>
       Long Term Incentive Plan     (i)        no         678             716                  -         1,394          7.8
       ScottishPower Sharesave
       Scheme                      (ii)       yes           -          16,457             (2,539)       13,918         78.3
       -------------------------------------         -------         -------            -------       -------      -------
                                                          678          17,173             (2,539)       15,312         86.1
       -------------------------------------         -------         -------            -------       -------      -------
<CAPTION>
                                                  Shares held                                      Shares held Market value
                                                  at April 1, Shares acquired Shares transferred  at March 31, at March 31,
                                        Dividends        1998     during year        during year          1999         1999
                                 Notes     waived      (000s)          (000s)             (000s)         (000s)   (Pounds)m
      ---------------------------------------------------------------------------------------------------------------------
       <S>                       <C>    <C>       <C>         <C>             <C>                 <C>          <C>
       Long Term Incentive Plan     (i)        no       1,394             483                  -         1,877         10.1
       ScottishPower Sharesave
       Scheme                      (ii)       yes      13,918               -             (1,128)       12,790         69.1
       -------------------------------------         -------         -------            -------       -------      -------
                                                       15,312             483             (1,128)       14,667         79.2
       -------------------------------------         -------         -------            -------       -------      -------
</TABLE>

      (i) Shares of the company are held under trust as part of the Long Term
      Incentive Plan for executive directors and other senior managers (see
      Note 32 for details of the plan).
      (ii) Shares of the company are held in a Qualifying Employee Share
      Ownership Trust as part of the ScottishPower Sharesave Scheme. Holders
      of options granted under the scheme between June 22, 1994 and June 20,
      1996 will be awarded shares by the Trust following the completion of
      savings contracts and upon exercise of the options. Details of options
      granted under the scheme are disclosed in Note 32.

      18 Stocks
<TABLE>
      -------------------------------------------------------------------------
<CAPTION>
                                         Group                  Company
                                      1999        1998        1999        1998
       <S>                       <C>         <C>         <C>         <C>
                                 (Pounds)m   (Pounds)m   (Pounds)m   (Pounds)m
      -------------------------------------------------------------------------
       Raw materials and
       consumables                    44.8        50.1        31.1        41.5
       Gas stocks                     30.0        48.3        30.0        48.3
       Work in progress               10.2         7.3         6.7         3.1
       Finished goods and goods
       for resale                     40.8        38.5        37.8        36.0
       ------------------------   ---------   ---------   ---------   ---------
                                     125.8       144.2       105.6       128.9
       ------------------------  ---------   ---------   ---------   ---------
</TABLE>

      Gas stocks include gas delivered to third parties under sale and
      repurchase agreements to match gas usage requirements with existing gas
      purchase obligations. Under the provisions of FRS 5, the cost under
      such agreements of gas delivered to third parties is shown as gas
      stocks and amounts payable to third parties totaling (Pounds)17.4
      million (1998 (Pounds)29.4 million) are included in accrued expenses in
      Note 21.

F-21                                                ScottishPower Form 20-F 1999


<PAGE>

      19 Debtors
<TABLE>
<CAPTION>
      -----------------------------------------------------------------------
                                           Group               Company
                                        1999       1998       1999       1998
                                   (Pounds)m  (Pounds)m  (Pounds)m  (Pounds)m
      -----------------------------------------------------------------------
       <S>                         <C>        <C>        <C>        <C>
       (a) Amounts falling due
       within one year:
       Trade debtors                   260.1      255.5      123.0      127.3
       Amounts owed by subsidiary
       undertakings                        -          -      530.6      428.6
       Amounts receivable under
       finance leases                    0.2        0.2          -          -
       Prepayments and accrued
       income                          227.8      153.9      154.9      102.3
       Other debtors                    64.7       68.7       35.3       33.0
       --------------------------  ---------  ---------  ---------  ---------
                                       552.8      478.3      843.8      691.2
       (b) Amounts falling due
       after more than one year:
       Amounts owed by subsidiary
       undertakings                        -          -    1,066.3    1,079.2
       Amounts receivable under
       finance leases                    2.7        3.0          -          -
       Advance corporation tax
       recoverable on proposed
       dividend                            -       40.7          -       40.7
       Other debtors                     3.8        3.9          -          -
       --------------------------  ---------  ---------  ---------  ---------
                                       559.3      525.9    1,910.1    1,811.1
       --------------------------  ---------  ---------  ---------  ---------
</TABLE>

      Amounts receivable under finance leases relate to ScottishPower Leasing
      Limited, one of the company's subsidiaries (see page F-40). The total
      cost of assets acquired by ScottishPower Leasing Limited for letting
      under leases is (Pounds)3.6 million (1998 (Pounds)3.7 million). Total
      amounts receivable during the year under finance leases were
      (Pounds)0.4 million (1998 (Pounds)0.4 million).

      20 Loans and other borrowings
<TABLE>
      ---------------------------------------------------------------------------------------------
<CAPTION>
                                              Weighted
                                               average               Group              Company
                                            interest rate        1999      1998      1999      1998
       (a) Analysis by
       instrument                Notes      1999      1998  (Pounds)m (Pounds)m (Pounds)m (Pounds)m
      ---------------------------------------------------------------------------------------------
       <S>                       <C>    <C>       <C>       <C>       <C>       <C>       <C>
       Bank overdraft                          -         -       15.3       9.3         -       8.4
       Uncommitted bank loan                 7.0%      7.0%     172.7     211.7     171.9     211.1
       Commercial paper            (ii)      7.1%      6.9%     553.4     728.3     553.4     728.3
       Medium-term
       notes/private placements   (iii)      7.1%      7.6%     438.4     303.4     438.4     303.4
       Loan notes                  (iv)      6.8%      6.2%      16.6      17.7      15.5      14.6
       European Investment Bank
       loans                        (v)      9.1%     10.0%     217.6     176.4     217.6     176.4
       11.457% sterling bond
       2001 (held by HM
       Treasury)                            11.5%     11.5%     142.0     142.0     142.0     142.0
       5.875% euro-US dollar
       bond 2003                             6.9%      6.9%     183.0     182.9     183.0     182.9
       Variable coupon bond
       2008                                  6.8%      6.8%      99.6      99.6         -         -
       5.250% deutschmark bond
       2008                                  6.8%        -      245.5         -     245.5         -
       8.375% euro-sterling
       bond 2017                             8.4%      8.4%     197.0     196.8     197.0     196.8
       6.750% euro-sterling
       bond 2023                             6.8%        -      247.0         -     247.0         -
       ----------------------------------------------------   -------   -------   -------   -------
                                                              2,528.1   2,068.1   2,411.3   1,963.9
       ----------------------------------------------------   -------   -------   -------   -------
</TABLE>

      All borrowings are unsecured.

      (i) Committed bank loan
      As at March 31, 1999 there were no amounts drawn under the new
      committed facilities totaling (Pounds)2.6 billion. There were no
      drawings under the previous (Pounds)2.6 billion facility as at March
      31, 1998. The company canceled during this financial year (Pounds)100
      million of committed bilateral facilities that were outstanding,
      undrawn as at March 31, 1998.

      (ii) Commercial paper
      The company has an established US$2.0 billion (1998 US$2.0 billion)
      euro-commercial paper program. Paper is issued in a range of currencies
      and swapped back into sterling. Amounts borrowed under the commercial
      paper program are repayable in less than one year.

      (iii) Medium-term notes/private placements
      The company has an established US$4.0 billion euro-medium term note
      program. Paper is issued in a range of currencies and swapped back into
      sterling. As at March 31, 1999, maturities range from 1 to 9 years.

      (iv) Loan notes
      All loan notes are redeemable at the holders discretion. Ultimate
      maturity dates range from 1999 to 2006.

      (v) European Investment Bank loans
      These loans incorporate agreements with various interest rates and
      maturity dates. The maturity dates of these arrangements range from
      2006 to 2011.

ScottishPower Form 20-F 1999                                                F-22
<PAGE>

      Note 20 continued
      ------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                 Group              Company
                                             1999      1998      1999      1998
       (b) Maturity analysis            (Pounds)m (Pounds)m (Pounds)m (Pounds)m
      -------------------------------------------------------------------------
       <S>                              <C>       <C>       <C>       <C>
       Repayments fall due as follows:
       Within one year, or on demand        843.6   1,035.7     826.5   1,031.1
       After more than one year           1,684.5   1,032.4   1,584.8     932.8
       -------------------------------    -------   -------   -------   -------
                                          2,528.1   2,068.1   2,411.3   1,963.9
       -------------------------------    -------   -------   -------   -------

      Repayments due after more than one year are analyzed as follows:
       Between one and two years            165.8      89.5     165.8      89.5
       Between two and three years           61.3     165.8      61.3     165.8
       Between three and four years         243.2      31.4     243.2      31.4
       Between four and five years           68.7     243.0      68.7     242.9
       More than five years               1,145.5     502.7   1,045.8     403.2
       -------------------------------    -------   -------   -------   -------
                                          1,684.5   1,032.4   1,584.8     932.8
       -------------------------------    -------   -------   -------   -------
</TABLE>

<TABLE>
<CAPTION>
                                                             Weighted average interest rate at
                                 Borrowings at March         which borrowings are fixed/capped Weighted average period for which
                                                 31,                              at March 31,     interest rate is fixed/capped
                                      1999      1998             1999             1998             1999             1998
       (c) Interest rate
       analysis                  (Pounds)m (Pounds)m                %                %            Years            Years
      -----------------------------------------------------------------------------------------------------------------------
       <S>                       <C>       <C>               <C>                  <C>          <C>                 <C>
       Fixed rate borrowings       1,944.1   1,668.6              7.9              8.2                9                7
       Capped rate borrowings        200.0     200.0              7.0              7.0                3                4
       Floating rate borrowings      384.0     199.5
       ------------------------    -------   -------
                                   2,528.1   2,068.1
       ------------------------    -------   -------       -------------------------------------------------------------------
</TABLE>

      All amounts in the analysis above are payable in sterling and take into
      account the effect of interest rate swaps and caps and currency swaps.
      Floating rate borrowings bear interest at rates based on LIBOR.
      Based on the floating rate net debt of (Pounds)384.0 million at March
      31, 1999 (1998 (Pounds)199.5 million), a 1% change in interest rates
      would result in a (Pounds)3.8 million change in profit before tax for
      the year (1998 (Pounds)2.0 million change).

      (d) Borrowing facilities
      The group has the following undrawn committed borrowing facilities at
      March 31 in respect of which all conditions precedent have been met.
      The (Pounds)600 million committed facility that expires within one year
      has a term out option that allows the facility to be extended until
      June 2001.

<TABLE>
<CAPTION>
                                           Floating rate     Total     Total
                                                    1999      1999      1998
                                               (Pounds)m (Pounds)m (Pounds)m
      ----------------------------------------------------------------------
       <S>                                 <C>           <C>       <C>
       Expiring within one year                    600.0     600.0         -
       Expiring between one and two years              -         -     700.0
       Expiring in more than two years           2,000.0   2,000.0   2,000.0
      ----------------------------------------------------------------------
</TABLE>

      (e) Financial instruments and risk management

      (i) Overview
      The main financial risks faced by the group are exchange rate risk,
      interest rate risk and Pool price risk. The Board has reviewed and
      agreed policies for managing each of these risks as summarized below.
      The use of all classes of financial instruments to manage these risks
      has been approved by the Board. The group treasury, which is authorized
      to conduct the day-to-day treasury activities of the group, reports at
      least annually to the Board and is subject to examination by internal
      audit. The Energy Trading Center, which is authorized to carry out
      activities to manage the group's Pool price risk, reports monthly to a
      risk committee which is comprised of two executive directors and an
      external consultant. The Energy Trading Center also reports at least
      annually to the Board and is subject to examination by internal audit.

      (ii) Treasury strategy
      The group treasury aims to obtain finance at the lowest possible cost
      by borrowing in the global financial markets in a range of different
      instruments. Debt is sourced in a range of different currencies,
      maturities and interest terms, primarily by means of a US$4,000 million
      debt issuance program and a US$2,000 million euro-commercial paper
      program. These are supported by committed and uncommitted bank
      facilities and funds from the European Investment Bank.

      Treasury strategy is regularly reviewed by the Board, which sets
      parameters for the maturity and interest profiles of the group's debt.
      Borrowings sourced in currencies other than sterling are swapped back
      to sterling by means of cross currency swaps and the approved balance
      between fixed and floating rate debt is achieved by means of interest
      rate swaps and caps. This means that the group has a substantial
      portfolio of derivative contracts which help to increase flexibility
      and reduce cost. The credit risk associated with such derivative
      contracts is approved by the Board and is limited by reference to
      credit ratings published by the international credit rating agencies.
      These limits also apply to any credit risk associated with cash
      deposits. The group does not believe that it is exposed to any material
      concentration of credit risk.

      All derivative contracts are undertaken as hedging arrangements;
      speculative trades are not undertaken. In view of the long life of some
      of these contracts the effect of marking them to market can give rise
      to substantial present value opportunity profits or losses as is the
      case for medium and long-term primary instruments. These present value
      opportunity profits and losses are not recognized in the profit and
      loss account in the current year since they relate to future periods
      and are matched by cash flows in those periods.

F-23                                                ScottishPower Form 20-F 1999


<PAGE>

      Note 20 continued
      ------------------------------------------------------------------------

      (iii) Energy trading strategy
      Almost all electricity generated in England and Wales must be sold to
      the Pool, and electricity suppliers including Manweb must likewise buy
      electricity from the Pool for resale to their customers. The Pool was
      established at the time of privatization in England and Wales for bulk
      electricity trading between generators and suppliers. ScottishPower
      participates in the Pool by exporting/importing electricity to/from
      England and Wales via the Interconnector. The Pool is operated under a
      Pooling and Settlement Agreement to which all licensed generators and
      suppliers of electricity in Great Britain are party.

      The group has procedures in place to minimize exposure to Pool price
      variations, that is, the possibility that a change in Pool prices will
      reduce the proceeds of electricity sold to the Pool or increase the
      cost of electricity purchased from the Pool. These procedures involve
      ScottishPower and its subsidiary Manweb entering into contracts for
      differences (CfDs). In general, the terms of CfDs are such that
      contracts are settled monthly (or more frequently) in arrears by
      reference to actual half hourly Pool prices.

      During the year ended March 31, 1999, more than 90% of the group's
      exposure to Pool prices was hedged in this way. Cover is built up
      throughout the year and at March 31, 1999 a significant proportion of
      the group's exposure to Pool price variations for the following
      financial year is covered.

      The group has also entered into some longer term (in excess of one
      year) arrangements to protect against the volatility of Pool prices.
      These arrangements have the potential to be increased as the business
      grows and the time period covered will be reviewed on an ongoing basis.

      These CfDs involve a degree of credit risk. This is the risk that the
      counterparty to the CfD defaults on settlement. The group controls
      credit risk arising from holding the CfDs through credit approvals,
      limits and monitoring procedures.

      (iv) Principal financial instruments used by the group

      Interest rate swaps
      Interest rate swaps are used mainly to convert floating rate borrowings
      to fixed rates to reduce the financial risk to the group from potential
      future increases in interest rates.

      Cross currency swaps
      Cross currency swaps are used to convert liabilities for borrowings in
      currencies other than sterling into sterling liabilities.

      Interest rate caps
      Interest rate caps are used solely to limit the group exposure to
      possible future increases in interest rates.

      Forward contracts
      The group generally hedges foreign exchange transaction exposures up to
      one year forward. Hedges are put in place using forward contracts at
      the time that the forecast exposure becomes reasonably certain. Gains
      and losses resulting from changes in exchange rates on contracts
      designated as hedges of forecast foreign exchange transactions are
      deferred and included in the measurement of the related foreign
      currency transaction in the period they occur.

      Commercial paper is issued in several different foreign currencies.
      Forward contracts are taken out solely to convert the debt to sterling
      to eliminate the financial risk to the group of currency movements. As
      at the year end, the group had outstanding forward foreign exchange
      contracts, the majority of which were for periods of three months or
      less, denominated in U.S. Dollars, Canadian Dollars, Swiss Francs,
      German Marks, and Euros.

      Contracts for differences (CfDs)
      A CfD is a contract between two parties (e.g. a generator and a public
      electricity supplier) that requires each party to either make or
      receive monthly payments over a specific term based on the difference
      between an agreed price (i.e. the bilaterally determined strike price)
      and a price that varies with a specified commodity index (i.e. the
      Pool), applied to an agreed quantity (i.e. number of kWs). The average
      duration for these contracts is approximately one year. The group's use
      of such derivative instruments relates directly to the underlying
      purchase and sale of electricity to and from the Pool.

      It is difficult to estimate the long-term level of Pool prices with
      reasonable accuracy and there is no readily identifiable market through
      which the CfDs could be realized in an exchange. However, based on
      management projections of the future prices of electricity, and
      considering the outcome under several future price scenarios, the group
      has determined that the fair value amount of CfDs, outstanding at the
      year end, is not material to the group's Accounts. The fair value
      amount is the difference between the strike price of the contract and
      the estimated Pool price for the relevant half hourly periods.

      The gross value of outstanding CfDs as at March 31, 1999 was
      (Pounds)467.8 million (1998 (Pounds)781.2 million).

ScottishPower Form 20-F 1999                                                F-24
<PAGE>

      Note 20 continued
      ------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                       At March 31, 1999     At March 31, 1998
                                         Book    Current       Book    Current
       (f) Current value of            amount      value     amount      value
       financial instruments        (Pounds)m  (Pounds)m  (Pounds)m  (Pounds)m
      -------------------------------------------------------------------------
       <S>                          <C>        <C>        <C>        <C>
       Short-term debt and current
       portion of long-term debt        843.6      843.6    1,035.7    1,035.7
       Long-term debt                 1,684.5    1,829.3    1,032.4    1,101.4
       ---------------------------    -------    -------    -------    -------
       Total debt                     2,528.1    2,672.9    2,068.1    2,137.1
       Interest rate swaps                  -       80.0          -       51.7
       Interest rate caps                (3.4)      (0.6)      (4.7)      (3.0)
       Cross currency interest
       rate swaps                           -        1.6          -       13.1
       ---------------------------    -------    -------    -------    -------
       Total financial instruments    2,524.7    2,753.9    2,063.4    2,198.9
       ---------------------------    -------    -------    -------    -------
</TABLE>

      The assumptions used to estimate current fair values of debt and other
      financial instruments are summarized below:

      (i) For cash, short-term deposits and short-term borrowings
      (uncommitted borrowing, commercial paper, and short-term borrowings
      under the committed facilities) the book value approximates to fair
      value because of their short maturities.
      (ii) The fair values of all quoted euro bonds are based on their
      closing clean market price converted at the spot rate of exchange as
      appropriate.
      (iii) The fair values of the sterling bond 2001 and the European
      Investment Bank loans have been calculated by discounting their future
      cash flows at market rates adjusted to reflect the redemption
      adjustments allowed under each agreement.
      (iv) The fair values of the sterling interest rate swaps and sterling
      interest rate caps have been estimated by calculating the present value
      of estimated cash flows.
      (v) The fair values of the cross currency interest rate swaps have been
      estimated by adding the present values of the two sides of each swap.
      The present value of each side of the swap is calculated by discounting
      the estimated future cash flows for that side, using the appropriate
      market discount rates for that currency in effect at the balance sheet
      date.
      (vi) The fair values of unquoted debt have been calculated by
      discounting the estimated cash flows for each instrument at the
      appropriate market discount rate in the currency of issue in effect at
      the balance sheet date.

      (g) Hedges
      The group's policy is to hedge the following exposures:
      -- interest rate risk using interest swaps, both sterling and cross
      currency, caps, collars, and forward foreign currency contracts;
      -- currency exposures on foreign denominated debt and future
      purchases/sales using currency swaps and forwards and spot foreign
      currency contracts.
      Gains and losses on instruments used for hedging are not recognized
      until the exposure that is being hedged is itself recognized.
      Unrecognized gains and losses on instruments used for hedging, and the
      movements therein, are as follows:
<TABLE>
<CAPTION>
                                                                     Total net
                                                                        gains/
                                                   Gains     Losses     losses
                                               (Pounds)m  (Pounds)m  (Pounds)m
      ------------------------------------------------------------------------
       <S>                                     <C>        <C>        <C>
       Unrecognized (losses) on hedges at
       April 1, 1998                                (1.6)     (60.2)     (61.8)
       Losses arising in previous years that
       were recognized in 1998-99                    9.7        6.5       16.2
       --------------------------------------    -------    -------    -------
       Gains and (losses) arising before
       April 1, 1998 that were not recognized
       in 1998-99                                    8.1      (53.7)     (45.6)
       Gains and (losses) arising in 1998-99
       that were not recognized in 1998-99           2.6      (38.0)     (35.4)
       --------------------------------------    -------    -------    -------
       Unrecognized gains and (losses) on
       hedges at March 31, 1999                     10.7      (91.7)     (81.0)
       --------------------------------------    -------    -------    -------
       Gains and (losses) expected to be
       recognized in 1999-00                        (4.6)     (23.6)     (28.2)
       --------------------------------------    -------    -------    -------
       Gains and (losses) expected to be
       recognized in 2000-01 or later               15.3      (68.1)     (52.8)
       --------------------------------------    -------    -------    -------
</TABLE>

      The total net unrecognized loss of (Pounds)81.0 million principally
      represents the opportunity cost of protecting the group's interest
      charge against movements
      in interest rates at a time when interest rates were higher than at
      March 31, 1999.
      The analyses of financial instruments in this Note do not include
      short-term debtors and creditors as permitted by FRS 13.

      21 Other creditors
      ------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                 Group              Company
                                             1999      1998      1999      1998
                                        (Pounds)m (Pounds)m (Pounds)m (Pounds)m
      -------------------------------------------------------------------------
       <S>                              <C>       <C>       <C>       <C>
       Amounts falling due within one
       year:
       Trade creditors                      181.4     204.6      99.5     122.7
       Amounts owed to subsidiary
       undertakings                             -         -     462.0     689.7
       Corporation tax                      210.8     164.1      95.0      74.2
       Windfall tax                             -     159.2         -      47.4
       Advance corporation tax               22.1      60.8      22.1      60.8
       Other taxes and social security        9.3       7.3      13.7      12.4
       Payments received on account          35.0      32.7       1.7       3.2
       Capital creditors and accruals       221.6     183.8      55.3      62.6
       Other creditors                       80.2      65.7      31.1      27.9
       Accrued expenses                     394.4     355.2     238.2     191.7
       Proposed dividend                    178.0     162.9     178.0     162.9
       -------------------------------    -------   -------   -------   -------
                                          1,332.8   1,396.3   1,196.6   1,455.5
       -------------------------------    -------   -------   -------   -------
</TABLE>

F-25                                                ScottishPower Form 20-F 1999


<PAGE>


      22 Deferred taxation
      ------------------------------------------------------------------------
      No provision for deferred taxation is considered necessary at March 31,
      1999, since future taxation depreciation is expected to exceed
      accounting depreciation and therefore no deferred taxation liabilities
      are expected to crystallize in the foreseeable future. Total potential
      deferred liabilities computed at the future rate of corporation tax of
      30% (1998 30%) are as follows:

<TABLE>
<CAPTION>
                                          Group                Company
                                      1999       1998       1999       1998
                                 (Pounds)m  (Pounds)m  (Pounds)m  (Pounds)m
      ----------------------------------------------------------------------
       <S>                       <C>        <C>        <C>        <C>
       Accelerated capital
       allowances                    631.6      609.4      307.3      303.5
       Other timing differences      (37.4)     (35.8)     (16.8)      (7.3)
       Advance corporation tax           -      (12.9)         -          -
       ------------------------    -------    -------    -------    -------
                                     594.2      560.7      290.5      296.2
       ------------------------    -------    -------    -------    -------
</TABLE>

      23 Provisions for liabilities and charges
<TABLE>
<CAPTION>
      -----------------------------------------------------------------------------------------------------------------------
                                                    On acquisition Charged to the        Utilized   Released to
                                        At April 1,    of Southern     profit and          during    profit and  At March 31,
                                               1996          Water   loss account            year  loss account          1997
       Group                     Notes    (Pounds)m      (Pounds)m      (Pounds)m       (Pounds)m     (Pounds)m     (Pounds)m
      -----------------------------------------------------------------------------------------------------------------------
       <S>                       <C>    <C>         <C>            <C>             <C>             <C>           <C>
       Reorganization and
       restructuring                (a)        17.7              -              -               -             -          17.7
       Environmental and health     (b)        17.7              -              -            (5.1)            -          12.6
       Other                        (c)        21.4            3.4              -            (6.1)         (5.8)         12.9
       ------------------------------       -------        -------        -------         -------       -------       -------
                                               56.8            3.4              -           (11.2)         (5.8)         43.2
       ------------------------------       -------        -------        -------         -------       -------       -------
<CAPTION>
                                                                   Charged to the        Utilized   Released to
                                                       At April 1,     profit and          during    profit and  At March 31,
                                                              1997   loss account            year  loss account          1998
       Group                     Notes                   (Pounds)m      (Pounds)m       (Pounds)m     (Pounds)m     (Pounds)m
      -----------------------------------------------------------------------------------------------------------------------
       <S>                       <C>                   <C>         <C>             <C>             <C>           <C>
       Reorganization and
       restructuring                (a)                       17.7            2.5            (2.5)         (1.0)         16.7
       Environmental and health     (b)                       12.6              -            (2.6)            -          10.0
       Other                        (c)                       12.9            4.0            (0.9)         (4.6)         11.4
       -----------------------------------------           -------        -------         -------       -------       -------
                                                              43.2            6.5            (6.0)         (5.6)         38.1
       -----------------------------------------           -------        -------         -------       -------       -------
<CAPTION>
                                                                                   Charged to the      Utilized
                                                       At April 1,    Transferred      profit and        during  At March 31,
                                                              1998   to creditors    loss account          year          1999
       Group                     Notes                   (Pounds)m      (Pounds)m       (Pounds)m     (Pounds)m     (Pounds)m
      -----------------------------------------------------------------------------------------------------------------------
       <S>                       <C>                   <C>           <C>             <C>             <C>           <C>
       Reorganization and
       restructuring                (a)                       16.7           (6.8)              -          (0.4)          9.5
       Environmental and health     (b)                       10.0              -             1.5          (1.4)         10.1
       Other                        (c)                       11.4              -             2.1          (2.3)         11.2
       -----------------------------------------           -------        -------         -------       -------       -------
                                                              38.1           (6.8)            3.6          (4.1)         30.8
       -----------------------------------------           -------        -------         -------       -------       -------
       Company
       Environmental and health     (b)                        6.6              -             1.5          (1.3)          6.8
       Other                        (c)                        3.8              -             1.5          (0.2)          5.1
       -----------------------------------------           -------        -------         -------       -------       -------
                                                              10.4              -             3.0          (1.5)         11.9
       -----------------------------------------           -------        -------         -------       -------       -------
</TABLE>

      (a) This provision comprises redundancy costs, including enhanced
      pension benefit, in relation to the group's Voluntary Selective
      Severance arrangements. These costs are expected to be incurred by
      March 31, 2000.

      (b) The environmental and health provisions include:
      (i) Costs which will be incurred in complying with Health and Safety
      requirements. It is anticipated that most of this expenditure will be
      incurred during the period to March 31, 2002.
      (ii) Obligations to ensure certain former operational sites remain in
      an environmentally safe state. The costs are expected to be incurred
      during the period to March 31, 2003.

      (c) The Other category comprises various provisions which are not
      individually sufficiently material to warrant separate disclosure.

      24 Deferred income
<TABLE>
      --------------------------------------------------------------------------
<CAPTION>
                                        Receivable     Released to
                            At April 1,     during profit and loss  At March 31,
                                   1997       year         account          1998
                              (Pounds)m  (Pounds)m       (Pounds)m     (Pounds)m
      --------------------------------------------------------------------------
       <S>                  <C>         <C>        <C>              <C>
       Grants and customer
       contributions:
       -- Group                   335.3       49.9           (20.6)        364.6
       -- Company                 172.0       20.0           (12.1)        179.9
       -------------------     -------    -------         -------       -------
<CAPTION>
                                        Receivable     Released to
                            At April 1,     during profit and loss  At March 31,
                                   1998       year         account          1999
                              (Pounds)m  (Pounds)m       (Pounds)m     (Pounds)m
      --------------------------------------------------------------------------
       <S>                  <C>         <C>        <C>              <C>
       Grants and customer
       contributions:
       -- Group                   364.6       42.2           (13.6)        393.2
       -- Company                 179.9       22.1            (5.8)        196.2
       -------------------      -------    -------         -------       -------
</TABLE>

      Deferred income excludes grants and contributions received in respect
      of water infrastructure assets.

ScottishPower Form 20-F 1999                                                F-26
<PAGE>


      25 Share capital
      ---------------------------------------------------------------
<TABLE>
<CAPTION>
                                                       1999      1998
                                            Note  (Pounds)m (Pounds)m
      ---------------------------------------------------------------
       <S>                                  <C>   <C>       <C>
       Authorized:
       1,700,000,000 (1998 1,700,000,000)
       ordinary shares of 50p each                    850.0     850.0
       One Special Share of (Pounds)1         (a)         -         -
       -----------------------------------------    -------   -------
                                                      850.0     850.0
       -----------------------------------------    -------   -------
       Allotted, called up and fully paid:
       1,198,678,222 (1998 1,196,752,324)
       ordinary shares of 50p each                    599.4     598.4
       One Special Share of (Pounds)1         (a)         -         -
       -----------------------------------------    -------   -------
                                                      599.4     598.4
       -----------------------------------------    -------   -------
</TABLE>

      (a) Special Share
      The "Special Share', which can be held only by one of the Secretaries
      of State or any other person acting on behalf of HM Government, does
      not carry rights to vote at the general or separate meetings but
      entitles the holder to attend and speak at such meetings. Written
      consent of the Special Shareholder is required before certain
      provisions of the company's Articles of Association or certain rights
      attaching to the Special Share are varied. This share shall confer no
      rights to participate in the capital or profits of the company, except
      that in a winding up the Special Shareholder shall be entitled to
      repayment in priority to the other shareholders. The Special Share is
      redeemable at par at any time by the Special Shareholder after
      consultation with the company.

      26 Analysis of movements in shareholders' funds
      ------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                   Profit
                                        Number of      Share     Share     Merger  Revaluation   and loss
                                           shares    Capital   premium    reserve      reserve    account      Total
                                 Notes       000s  (Pounds)m (Pounds)m  (Pounds)m    (Pounds)m  (Pounds)m  (Pounds)m
      ---------------------------------------------------------------------------------------------------------------
      Group
       <S>                       <C>    <C>        <C>       <C>        <C>        <C>          <C>        <C>
       Balance at April 1, 1996
       (as published)                     942,426      471.2     122.0     (230.2)           -      844.7    1,207.7
       Prior period
       reclassification                         -          -         -      230.2            -     (230.2)         -
       ------------------------------   ---------  -------   -------    -------     -------     -------    -------
       Balance at April 1, 1996
       (as restated)                      942,426      471.2     122.0          -            -      614.5    1,207.7
       Retained profit for the
       year                                     -          -         -          -            -      203.0      203.0
       Share capital issued
       -- As part of funding
       for an acquisition                 126,387       63.2         -      332.0            -          -      395.2
       -- Rights issue for an
       acquisition                         95,961       48.0     191.9          -            -          -      239.9
       -- Employee sharesave
       scheme                              12,473        6.2      16.6          -            -          -       22.8
       -- Executive share
       option scheme                          119        0.1       0.2          -            -          -        0.3
       Shares to be issued                      -          -         -       13.4            -          -       13.4
       Share issue expenses                     -          -     (25.0)         -            -          -      (25.0)
       Goodwill written off         (a)         -          -         -     (345.4)           -     (189.2)    (534.6)
       ------------------------------   ---------  -------   -------    -------     -------     -------    -------
       At April 1, 1997                 1,177,366      588.7     305.7          -            -      628.3    1,522.7
       Retained loss for the
       year                                     -          -         -          -            -      (73.2)     (73.2)
       Share capital issued
       -- Employee sharesave
       scheme                              18,687        9.3      81.1       (5.2)           -      (42.0)      43.2
       -- Executive share
       option scheme                          699        0.4       1.9          -            -          -        2.3
       Revaluation of fixed
       assets (see Note 16)                     -          -         -          -        229.0          -      229.0
       Revaluation surplus
       realized                                 -          -         -          -         (1.7)       1.7          -
       Goodwill written off         (a)         -          -         -        5.2            -      (21.4)     (16.2)
       ------------------------------   ---------  -------   -------    -------     -------     -------    -------
       At April 1, 1998                 1,196,752      598.4     388.7          -        227.3      493.4    1,707.8
       Retained profit for the
       year                                     -          -         -          -            -      234.9      234.9
       Share capital issued
       -- Employee sharesave
       scheme                       (b)     1,554        0.8       4.2       (3.1)           -          -        1.9
       -- Executive share
       option scheme                          372        0.2       1.1          -            -          -        1.3
       Revaluation surplus
       realized                                 -          -         -          -         (3.4)       3.4          -
       Transfers                                -          -         -        3.1            -       (3.1)         -
       ------------------------------   ---------  -------   -------    -------     -------     -------    -------
       Balance at March 31,
       1999                             1,198,678      599.4     394.0          -        223.9      728.6    1,945.9
       ------------------------------   ---------  -------   -------    -------     -------     -------    -------
</TABLE>

<TABLE>
       <S>                    <C>  <C>        <C>     <C>     <C>      <C>     <C>      <C>
       Company
       At April 1, 1998            1,196,752    598.4   388.7     8.2        -   883.5  1,878.8
       Retained loss for the
       year                    (c)         -        -       -       -        -    (7.4)    (7.4)
       Share capital issued
       -- Employee sharesave
       scheme                  (b)     1,554      0.8     4.2    (3.1)       -       -      1.9
       -- Executive share
       option scheme                     372      0.2     1.1       -        -       -      1.3
       --------------------------- ---------  ------- ------- -------  ------- -------  -------
       Balance at March 31,
       1999                        1,198,678    599.4   394.0     5.1        -   876.1  1,874.6
       --------------------------- ---------  ------- ------- -------  ------- -------  -------
</TABLE>

<TABLE>
<CAPTION>
      (a)
      Cumulative
      goodwill                           1999      1998      1997
      written off                   (Pounds)m (Pounds)m (Pounds)m
      -----------------------------------------------------------
       <S>                          <C>       <C>       <C>
       Merger reserve                   574.2     574.2     579.4
       Profit and loss account          462.5     462.5     441.1
       --------------------------------------   -------   -------
       Total                          1,036.7   1,036.7   1,020.5
       --------------------------------------   -------   -------
</TABLE>

F-27                                                ScottishPower Form 20-F 1999


<PAGE>

      Note 26 continued
      ------------------------------------------------------------------------

      (b) Share capital issued
      The movement on the merger reserve reflects the reduction in shares
      which were to be issued following the acquisition of Southern Water plc
      in August 1996. It represented the cost to ScottishPower of
      transferring existing options over Southern Water plc shares to the
      Scottish Power plc Share Option Scheme. As these options are exercised,
      the merger reserve is reduced for the attributable cost of the option.

      (c) Profit and loss account of the company
      As permitted by Section 230 of the Companies Act 1985, the company has
      not presented its own profit and loss account. The company's profit and
      loss account was approved by the Board on May 6, 1999. The profit for
      the financial year per the Accounts of the company was (Pounds)260.5
      million (1998 (Pounds)219.1 million).

      27 Minority interests
      ------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                        1999       1998
                                   (Pounds)m  (Pounds)m
      -------------------------------------------------
       <S>                         <C>        <C>
       Equity minority interests:
       At April 1                        1.9        0.4
       Additions                           -        0.6
       Profit and loss account          (0.6)       0.9
       --------------------------    -------    -------
       At March 31                       1.3        1.9
       --------------------------    -------    -------
</TABLE>

      28 Pensions
      ------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                      Pension charge                  Prepayment
                                                                         for the year            as at March 31,
                                              Scheme   Funded or      1999      1998      1997      1999      1998
       Pension fund                             type   unfunded (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
      ----------------------------------------------------------------------------------------------------------
       <S>                           <C>               <C>       <C>       <C>       <C>       <C>       <C>
       ScottishPower                 Defined benefit    funded       6.9       6.5      13.6       5.0      11.9
       Manweb                        Defined benefit    funded       5.8       5.8       6.0         -         -
       Southern Water                Defined benefit    funded       5.3       5.8       5.1         -         -
       Final Salary LifePlan         Defined benefit    funded         -         -         -         -         -
       Money Purchase LifePlan  Defined contribution    funded         -         -         -         -         -
      ----------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                    Principal actuarial assumptions
                                                            Value of                                                   Value of fund
                           Latest full        Valuation assets based      Valuation        Average   Average   Average       assets/
                             actuarial          carried on valuation         method     investment    salary   pension       accrued
     Pension fund            valuation           out by    (Pounds)m        adopted rate of return increases increases      benefits
     -------------------------------------------------------------------------------------------------------------------------------
     <S>             <C>               <C>              <C>          <C>            <C>            <C>       <C>       <C>
     ScottishPower   December 31, 1997 William M Mercer      1,292.0 projected unit           8.5%      6.5%      4.5%          123%
     Manweb             March 31, 1998  Bacon & Woodrow        467.6 projected unit           8.5%      6.5%      4.5%          105%
     Southern Water     March 31, 1998     Watson Wyatt        231.1 projected unit           8.5%      6.5%      4.5%          108%
     --------------  ----------------- ----------------      ------- --------------        -------   -------   -------       -------
</TABLE>

      (a) Group pension arrangements
      Following a review of the group's pension arrangements, the
      ScottishPower Pension Scheme, Manweb Pension Scheme and Southern Water
      Pension Scheme were closed to new members from December 31, 1998.

      The company has introduced two new group pension plans for new
      employees effective from January 1, 1999. The new plans are a defined
      benefit plan and a defined contribution plan. The defined benefit plan
      has an initial employer's contribution of 10% of pensionable salary and
      the employer's contributions to the defined contribution plan vary,
      dependent on age, between 3-5%. The pension charge in respect of these
      schemes since their introduction is (Pounds)30,000.

      (b) ScottishPower
      The company operates a funded pension scheme providing defined benefits
      based on final pensionable salary for eligible employees of the
      company. The assets of the Scheme are held separately from those of the
      company in a separate trustee administered fund. The pension charge for
      the year is based on the advice of the Scheme's independent qualified
      actuary. The prepayment included in the balance sheet represents the
      accumulated excess of the actual contributions paid to the Scheme over
      the pension accounting charge. The outcome of the valuation mentioned
      in the table above resulted in the accounting rate used for the
      calculation of the 1998-99 pension charge remaining at 4.8% of
      pensionable salaries.

      (c) Manweb
      Most of the Manweb employees are entitled to join the Electricity
      Supply Pension Scheme which provides pension and other related benefits
      based on final pensionable pay to employees throughout the Electricity
      Supply Industry in England and Wales. The assets are held in a separate
      trustee administered fund. The pension charge for the year, of 12% of
      pensionable salaries, is based on the advice of the Scheme's
      independent qualified actuary.

      (d) Southern Water
      The Southern Water group operates a number of pension schemes. The
      Scheme details above relate to the principal defined benefit scheme
      which covers the majority of the Southern Water employees. The assets
      are held in a separate trustee administered fund. Southern Water's
      other schemes are not material to the group. The pension charge for the
      year, of 12.8% of pensionable salaries, is based on the advice of the
      scheme's independent qualified actuary.

      29 Contingent liabilities
      ------------------------------------------------------------------------
      (a) The group has contingent liabilities under performance bonds and
      actual and potential claims, none of which, in the opinion of the
      directors, is material to the group.

      (b) The company has guaranteed the overdrafts of three subsidiary
      undertakings up to an amount of (Pounds)0.7 million (1998 one
      subsidiary undertaking for (Pounds)0.5 million).

      (c) The company has guaranteed Manweb's liabilities to the Pool in
      England and Wales. At March 31, 1999 these liabilities were
      (Pounds)30.9 million (1998 (Pounds)37.4 million).

      (d) Under the terms of the merger agreement between ScottishPower and
      PacifiCorp dated December 6, 1998 (as amended), if the merger agreement
      is terminated by PacifiCorp following a change in control of
      ScottishPower, other than through a Scheme of Arrangement under Section
      425 of the Companies Act 1985, ScottishPower would be required to pay
      PacifiCorp a termination fee of US$250 million.

      If the merger agreement is terminated by ScottishPower due to the
      failure to obtain the requisite vote of its shareholders and the
      termination fee described above is not payable, ScottishPower would be
      required to pay PacifiCorp US$10 million if the merger agreement is
      approved by the PacifiCorp shareholders.

ScottishPower Form 20-F 1999                                               F-28
<PAGE>


      30 Financial commitments
<TABLE>
<CAPTION>
      ---------------------------------------------------------
                                                 1999      1998
       (a) Group analysis of annual
       commitments under operating
       leases                               (Pounds)m (Pounds)m
      ---------------------------------------------------------
       <S>                                  <C>       <C>
      Leases of land and buildings
       Expiring during year ending March 31:
       2000                                       1.0       0.5
       2001                                       0.2       0.4
       2002                                       0.3       0.6
       2003                                       0.2       0.1
       2004                                       0.2       0.2
       thereafter                                20.4      16.2
       -------------------------------------  -------   -------
                                                 22.3      18.0
       -------------------------------------  -------   -------

      Other operating leases
       Expiring during year ending March 31:
       2000                                       2.2       4.5
       2001                                       0.6       2.4
       2002                                       3.5       3.7
       2003                                       0.7       0.9
       2004                                       0.8       0.8
       thereafter                                   -       0.6
       -------------------------------------  -------   -------
                                                  7.8      12.9
       -------------------------------------  -------   -------
</TABLE>

<TABLE>
<CAPTION>
                                             Group              Company
                                         1999      1998      1999      1998
       (b) Capital commitments      (Pounds)m (Pounds)m (Pounds)m (Pounds)m
      ---------------------------------------------------------------------
       <S>                          <C>       <C>       <C>       <C>
       Contracted but not provided      315.8     262.0      54.2      70.3
       ---------------------------   -------   -------   -------   -------
</TABLE>

      (c) Other contractual commitments
      Under contractual commitments the group has rights and obligations in
      relation to the undernoted contracts. The annual value of the purchases
      and sales arising from these contracts is provided below:
<TABLE>
<CAPTION>
                                                                Purchases / sales in year
                                                                 under group commitments
                                      Commitment
                                         entered Commitment      1999      1998      1997
                                 Note       into    expires (Pounds)m (Pounds)m (Pounds)m
      -----------------------------------------------------------------------------------
       <S>                       <C>  <C>        <C>        <C>       <C>       <C>
       The purchase of
       electricity from British
       Energy Generation (UK)
       Limited                              1990       2005     367.7     365.8     373.2
       ------------------------------    -------   --------- -------    -------  -------
       The purchase of
       electricity from
       Scottish and Southern
       Energy plc                 (i)       1990  see below      78.8     100.5     120.5
       ------------------------------    -------  ---------  -------    -------  -------
       The supply of
       electricity to Scottish
       and Southern Energy plc              1990       2004      18.2      16.8      15.7
       ------------------------------    -------  ---------  -------    -------  -------
       Revenue from the
       operation of the
       company's transmission
       system and access by
       Scottish and Southern                       No fixed
       Energy plc to the Anglo-                     date of
       Scottish Interconnector              1990     expiry      27.7      26.1      24.7
       ------------------------------    -------  ---------  -------    -------  -------
       Purchase of coal from
       the Scottish Coal
       Company Limited                      1998       2003      22.0      76.9      75.5
       ------------------------------    -------  ---------  -------    -------  -------
       Purchase of coal from
       the Scottish Coal (Deep
       Mine) Company Limited                1998       2004      50.5         -         -
       ------------------------------    -------  ---------  -------    -------  -------
       Purchase of gas from
       various fields in the
       North Sea                            1994       2010     123.6      81.8      50.4
       ------------------------------    -------  ---------  -------    -------  -------
</TABLE>

      (i) There are two agreements relating to the purchase of electricity
      from Scottish and Southern Energy plc. These expire in 2012 and 2039.

F-29                                                ScottishPower Form 20-F 1999


<PAGE>


      31 Related party transactions
      ------------------------------------------------------------------------
      Related party transactions and balances with joint ventures and
      associated undertakings

      (a) Trading transactions and balances arising in the normal course of
      business
<TABLE>
<CAPTION>
                                                                                                                 Amounts due
                                                                                  Sales/(purchases)               from/ (to)
                                                                              to/(from) other group    other group companies
                                                                          companies during the year          as at March 31,
                                                                           1999       1998       1997        1999          1998
       Related party             Related party relationship to  group (Pounds)m  (Pounds)m  (Pounds)m   (Pounds)m     (Pounds)m
      -----------------------------------------------------------------------------------------------------------------------
       <S>                       <C>                                  <C>        <C>        <C>        <C>           <C>
       Sales by related parties
       Scottish Electricity
       Settlements Limited       50% owned joint venture                    5.8          -          -           2.3             -
       Purchases by related
       parties
       Scottish Electricity
       Settlements Limited       50% owned joint venture                   (0.9)      (1.3)      (1.2)         (0.8)         (0.3)
       South Coast Power
       Limited                   50% owned joint venture                   (8.1)         -          -          (0.1)            -
       CeltPower Limited         50% owned joint venture                   (0.1)         -          -          (0.1)            -
       ------------------------  ----------------------------------------------------------------------------------------------
</TABLE>

      Southern Water non-core businesses
      In the year ended March 31, 1998 the group made purchases of (Pounds)18
      million on normal trading terms from the Southern Water non-core
      businesses subsequent to their disposal.

      (b) Funding transactions and balances arising in the normal course of
      business
<TABLE>
<CAPTION>
                                                                Interest payable to        Amounts due to
                                                                        other group           other group
                                                                   companies during       companies as at
                                                                           the year             March 31,
                               Related party relationship to         1999       1998       1999       1998
       Related party           group                            (Pounds)m  (Pounds)m  (Pounds)m  (Pounds)m
      -----------------------------------------------------------------------------------------------------
       <S>                     <C>                              <C>        <C>        <C>        <C>
       Scottish Electricity
       Settlements Limited     50% owned joint venture               (1.5)      (0.6)     (19.1)     (11.8)
       South Coast Power
       Limited                 50% owned joint venture               (0.2)         -          -          -
       CeltPower Limited       50% owned joint venture                  -          -       (2.0)      (2.0)
       Wind Resources Limited  45% owned associated undertaking         -          -          -       (0.7)
       ----------------------  ---------------------------------------------------------------------------
</TABLE>
      32 Employee Share Schemes
      ------------------------------------------------------------------------
      The group has three types of share scheme for employees. Options have
      been granted and awards made to eligible employees to subscribe for
      ordinary shares in Scottish Power plc in accordance with the rules of
      each scheme. The ScottishPower and Southern Water Sharesave Schemes are
      savings related and under normal circumstances share options are
      exercisable on completion of a three, five or seven year save-as-you-
      earn contract as appropriate. The Executive Share Option Scheme applied
      to executive directors and certain senior managers. However, this
      Scheme has been replaced with the Long Term Incentive Plan and,
      although it will not affect options already granted, this plan
      supersedes executive share options. Options granted under the Long Term
      Incentive Plan will vest only if the Remuneration Committee is
      satisfied that certain performance measures related to the sustained
      underlying financial performance of the group and improvements in
      customer service standards are achieved over a period of three
      financial years commencing with the financial year preceding the date
      an award is made.

      (a) Summary of movements in share options in ScottishPower shares
<TABLE>
                                                                                     Southern                 Executive
                               ScottishPower  Weighted       Manweb     Weighted        Water     Weighted        Share
                                   Sharesave   average    Sharesave      average    Sharesave      average       Option
                                      Scheme  exercise       Scheme     exercise       Scheme     exercise       Scheme
                                  (number of     price   (number of        price   (number of        price   (number of
                                shares 000s)    (pence) shares 000s)      (pence) shares 000s)      (pence) shares 000s)
------------------------------------------------------------------------------------------------------------------------
Outstanding at April 1, 1996          18,237     203.3          436         60.8            -            -        1,703
Granted                               11,187     263.1            -            -        7,885        108.3            -
Exercised                            (10,993)    175.2         (436)        60.8       (1,044)        54.0         (119)
Lapsed                                  (917)    234.8            -            -         (149)        94.0          (31)
----------------------------   -------------  --------  -----------     --------  -----------     --------  -----------
Outstanding at April 1, 1997          17,514     252.8            -            -        6,692        117.1        1,553
Granted                                5,268     307.0            -            -            -            -            -
Exercised                             (2,813)    202.6            -            -       (1,956)        87.2         (699)
Lapsed                                  (974)    264.9            -            -         (487)       151.7            -
----------------------------   -------------  --------  -----------     --------  -----------     --------  -----------
Outstanding at April 1, 1998          18,995     274.6            -            -        4,249        126.9          854
Granted                                4,284     440.0            -            -            -            -            -
Exercised                             (1,224)    252.6            -            -       (1,458)       102.9         (372)
Lapsed                                  (783)    295.7            -            -          (91)       166.6          (50)
-----------------------------  -------------  --------  -----------     --------  -----------     --------  -----------
Outstanding at March 31, 1999         21,272     308.4            -            -        2,700        138.5          432
-----------------------------  -------------  --------  -----------     --------  -----------     --------  -----------
<CAPTION>
                                    Weighted
                                     average
                                    exercise        Total
                                       price   (number of
                                      (pence) shares 000s)
-----------------------------------------------------------------------------------------------------------------------
<S>                                 <C>       <C>
Outstanding at April 1, 1996           328.9       20,376
Granted                                    -       19,072
Exercised                              246.7      (12,592)
Lapsed                                 350.1       (1,097)
------------------------------     --------- ---------------
Outstanding at April 1, 1997           326.4       25,759
Granted                                    -        5,268
Exercised                              323.3       (5,468)
Lapsed                                     -       (1,461)
------------------------------     --------- ---------------
Outstanding at April 1, 1998           328.6       24,098
Granted                                    -        4,284
Exercised                              338.1       (3,054)
Lapsed                                 380.2         (924)
------------------------------     --------- ---------------
Outstanding at March 31, 1999          314.4       24,404
------------------------------     --------- ---------------
</TABLE>

ScottishPower Form 20-F 1999                                                F-30


<PAGE>

      Note 32 continued
      ------------------------------------------------------------------------

      (b) Analysis of share options outstanding at March 31, 1999

<TABLE>
<CAPTION>
                                                                       Number of   Option
                                              Date of     Number of       shares    price                              Normal
                                                grant  participants        (000s)  (pence)                   exercisable date
      -----------------------------------------------------------------------------------------------------------------------
      <S>                                    <C>       <C>             <C>         <C>                 <C>
      ScottishPower Sharesave Scheme         22.06.94         1,029        1,296    273.8              6 months to March 2000
                                             20.06.95           958        1,172    262.1              6 months to March 2001
                                             20.06.96         5,098        9,896    263.1      6 months to March 2000 or 2002
                                             20.06.97         4,646        4,692    307.0      6 months to March 2001 or 2003
                                             12.06.98         5,849        4,216    440.0      6 months to March 2002 or 2004
      -----------------------------------------------------------------------------------------------------------------------
      Southern Water Sharesave Scheme        03.02.92            63          249     74.0          6 months to September 1999
                                             26.01.93            76          215    111.0          6 months to September 2000
                                             25.01.94           302          486    154.9  6 months to September 1999 or 2001
                                             25.01.95           398          987    136.1  6 months to September 2000 or 2002
                                             25.01.96           437          763    160.2  6 months to September 2001 or 2003
      -----------------------------------------------------------------------------------------------------------------------
      Executive Share Option Scheme          18.12.91             8          128    227.4                           1994-2001
                                             25.06.92            14           23    237.7                           1995-2002
                                             01.07.93             4           60    310.0                           1996-2003
                                             17.12.93            35           61    454.8                           1996-2003
                                             27.05.94            11           18    354.0                           1997-2004
                                             18.11.94             3           22    352.1                           1997-2004
                                             12.05.95            19           72    335.0                           1998-2005
                                             10.11.95             1           48    357.5                           1998-2005
      -----------------------------------------------------------------------------------------------------------------------
</TABLE>

      All options are exercisable over Scottish Power plc shares. Where
      reference is made to Southern Water, this is to identify the Sharesave
      Scheme under which the options over Scottish Power plc shares have been
      granted. The exercise prices of options granted prior to the rights
      issue on August 30, 1996 were adjusted to reflect the bonus element
      inherent in the rights issue.

      For the Southern Water Sharesave Scheme, the date of grant refers to
      the date the original Southern Water share options were granted. These
      options were exchanged for options over ScottishPower shares following
      acquisition in 1996.

      33 Directors' emoluments and interests
      ------------------------------------------------------------------------
      (a) Policy
      The Remuneration Committee is responsible for making recommendations to
      the Board on the company's remuneration policy. The objective of
      ScottishPower's remuneration policy is to ensure that the rewards for
      executives and directors attract and retain executives of high quality,
      who are incentivised to achieve performance which exceeds that of
      competitors. Furthermore, the objective is to ensure that incentive
      schemes are in line with best practice and promote the interests of the
      shareholders. The Remuneration Committee determines the detail of each
      executive's remuneration package.

      (b) Total emoluments
      ------------------------------------------------------------------------
      The following table provides a breakdown of the total emoluments of the
      Chairman and all directors in office during the year ended March 31,
      1999.

<TABLE>
<CAPTION>
                                     Basic           Benefits     Total      Total      Total
                                    salary   Bonuses  in kind      1999       1998       1997
                                  (Pounds)  (Pounds) (Pounds)  (Pounds)   (Pounds)   (Pounds)
      ---------------------------------------------------------------------------------------
       <S>                       <C>        <C>      <C>      <C>        <C>        <C>
       Chairman and executive
       directors
       C M Stuart                  200,000        -   16,863    216,863    194,294    154,665
       I Robinson                  390,000  109,200   16,093    515,293    487,345    397,256
       M J Kinski (resigned
       April 7, 1998)               13,195        -       81     13,276    335,470    267,716
       I M Russell                 295,000   85,550   46,435    426,985    356,078    333,706
       K L Vowles                  210,000   60,900    9,293    280,193    253,501    210,576
       D Whyte (resigned May
       31, 1999)                   235,000   65,800   16,120    316,920    305,976    279,169
       Non-executive directors
       (fees and expenses)
       M Barnes                     22,708        -    5,754     28,462          -          -
       Sir Ronald Garrick
       (retired April 30, 1999)     30,000        -      555     30,555     31,889     25,449
       Sir Peter Gregson            25,208        -    8,167     33,375     24,960      7,999
       Baroness Jay of
       Paddington (resigned May
       13, 1997)                         -        -        -          -      3,497     13,038
       N C D Kuenssberg
       (retired July 23, 1997)           -        -        -          -     10,000     25,540
       E C S Macpherson             30,000        -    6,412     36,412     30,022     13,421
       J Parnaby                    22,708        -    9,007     31,715     26,645     23,825
       J A Scott (retired July
       24, 1996)                         -        -        -          -          -      7,028
       ------------------------  ---------  -------  -------  ---------  ---------  ---------
                                 1,473,819  321,450  134,780  1,930,049  2,059,677  1,759,388
       Relocation expenses               -         -        -         -     14,358      6,368
       ------------------------  ---------  -------  -------  ---------  ---------  ---------
       Total                     1,473,819   321,450  134,780 1,930,049  2,074,035  1,765,756
       ------------------------  ---------  -------  -------  ---------  ---------  ---------
</TABLE>

      Other emoluments--executive directors

      The emoluments of the highest paid director (Mr Robinson) excluding
      pension contributions were (Pounds)515,293 (1998 (Pounds)487,345, 1997
      (Pounds)397,256). In addition, gains on exercise of share options
      during the year by Mr Robinson amounted to (Pounds)592,966 (1998
      (Pounds)nil, 1997 (Pounds)nil). Pension contributions made by the
      company under approved pension arrangements for Mr Robinson amounted to
      (Pounds)nil (1998 (Pounds)nil, 1997 (Pounds)10,138). Mr Robinson also
      has an entitlement under the unapproved pension benefits described
      further in Note c(iii) below. The total of the liabilities for the 15
      executives and senior employees arising in relation to unapproved
      benefits for service for the year to March 31, 1999 was (Pounds)448,600
      (1998 (Pounds)432,676, 1997 (Pounds)305,952). All benefits for the
      above are provided on a defined benefit basis.

F-31                                                ScottishPower Form 20-F 1999


<PAGE>

      Note 33 continued
      ------------------------------------------------------------------------

      (c) Directors' pension benefits
      Details of pension benefits earned by the executive directors are shown
      below:
<TABLE>
<CAPTION>
                                                                                     Transfer value of
                                                          Additional                   increases after
                                                             pension                        indexation
                                           Transferred in  earned in      Accrued    (net of directors'
                                                 benefits   the year  entitlement         contribution)
       Defined benefits pension scheme            (Pounds)   (Pounds)     (Pounds)             (Pounds)

      ------------------------------------------------------------------------------------------------
       <S>                                 <C>            <C>         <C>            <C>
       Chairman and executive directors
       C M Stuart                                       -          -             -                  -
       I Robinson                                 108,808     30,041       180,080            540,333
       M J Kinski (resigned
       April 7, 1998)                              29,367        473        61,340              5,153
       I M Russell                                  8,098     14,823        52,460            160,830
       K L Vowles                                  89,467     17,644       122,500            272,592
       D Whyte (resigned May 31, 1999)             66,035     10,796       113,664            144,024
       ----------------------                     -------     ------       -------            -------
</TABLE>

      (i) The accrued entitlement of the highest paid director (Mr Robinson)
      was (Pounds)180,080 (1998 (Pounds)141,348, 1997 (Pounds)101,762).
      (ii) The pension entitlement shown is that which would be paid annually
      on retirement based on service to the end of the year assuming normal
      retirement at age 63. Members of the scheme have the option to pay
      additional voluntary contributions; neither the contributions nor the
      resulting benefits are included in the above table.
      (iii) Executives who joined the company on or after June 1, 1989 are
      subject to the earnings cap introduced in the Finance Act 1989. Pension
      entitlements which cannot be provided through the company's approved
      schemes due to the earnings cap are provided through unapproved pension
      arrangements. The pension benefits disclosed above include approved and
      unapproved pension arrangements.
      (iv) The increase in accrued pension during the year allows for an
      increase in inflation of RPI as measured at December 1998 (2.8%) except
      in the case of Mr. Kinski who left service on April 19, 1998.
      (v) The transfer value has been calculated on the basis of actuarial
      advice in accordance with Actuarial Guidance Note GN11, less directors'
      contributions.
      (vi) Transferred in benefits represent pension rights accrued in
      respect of previous employments.

      (d) Directors' interests in share options
<TABLE>
<CAPTION>
                                                                              Option             Market price
                                                                            exercise               at date of        Date
     Executive                  At April 1,                    At March 31,    price        Date     exercise  from which     Expiry
     director                          1998 Granted Exercised          1999  (pence)   exercised       (pence)exercisable       date
     -------------------------------------------------------------------------------------------------------------------------------
     <S>                        <C>         <C>     <C>        <C>          <C>       <C>        <C>          <C>         <C>
      Maximum contingent awards under
      Long Term Incentive Plan
     I Robinson                      51,533       -         -        51,533      nil                           09.08.2000 08.08.2003
                                     53,846       -         -        53,846      nil                           16.05.2001 15.05.2004
                                          -  41,916         -        41,916      nil                           07.05.2002 06.05.2005
     ------------------             -------  ------  --------       -------    -----  ----------        -----  ---------- ----------
                                    105,379  41,916         -       147,295
     ------------------             -------  ------  --------       -------    -----  ----------        -----  ---------- ----------
     I M Russell                     38,650       -         -        38,650      nil                           09.08.2000 08.08.2003
                                     36,923       -         -        36,923      nil                           16.05.2001 15.05.2004
                                          -  31,706         -        31,706      nil                           07.05.2002 06.05.2005
     ------------------             -------  ------  --------       -------    -----  ----------        -----  ---------- ----------
                                     75,573  31,706         -       107,279
     ------------------             -------  ------  --------       -------    -----  ----------        -----  ---------- ----------
     K L Vowles                      27,607       -         -        27,607      nil                           09.08.2000 08.08.2003
                                     27,692       -         -        27,692      nil                           16.05.2001 15.05.2004
                                          -  22,570         -        22,570      nil                           07.05.2002 06.05.2005
     ------------------             -------  ------  --------       -------    -----  ----------        -----  ---------- ----------
                                     55,299  22,570         -        77,869
     ------------------             -------  ------  --------       -------    -----  ----------        -----  ---------- ----------
     D Whyte
     (resigned May
     31, 1999)                       35,889       -         -        35,889      nil                           09.08.2000 08.08.2003
                                     32,307       -         -        32,307      nil                           16.05.2001 15.05.2004
                                          -  25,257         -        25,257      nil                           07.05.2002 06.05.2005
     ------------------             -------  ------  --------       -------    -----  ----------        -----  ---------- ----------
                                     68,196  25,257         -        93,453
     ------------------             -------  ------  --------       -------    -----  ----------        -----  ---------- ----------
      Executive Share Option Scheme
     I Robinson
                                    286,457       -  (286,457)            -    335.0  15.05.1998        542.0  12.05.1998 11.05.2005
     ----------------------         -------  ------  --------       -------    -----  ----------        -----  ---------- ----------
      Sharesave Scheme
     I Robinson
                                      6,581      -         -          6,581    262.1                          01.09.2000  28.02.2001
     ---------------------          ------- ------  --------        -------    -----  ----------        ----- ----------  ----------
     I M Russell                      6,300      -         -          6,300    273.8                          01.09.1999  29.02.2000
     -------------------------      ------- ------  --------        -------    -----  ----------        ----- ----------  ----------
     K L Vowles                       3,933       -         -         3,933    263.1                           01.09.2001 28.02.2002
                                          -   1,568         -         1,568    440.0                           01.09.2003 29.02.2004
     ------------------             -------  ------  --------       -------    -----  ----------        -----  ---------- ----------
                                      3,933   1,568         -         5,501
     ------------------             -------  ------  --------       -------    -----  ----------        -----  ---------- ----------
     D Whyte
     (resigned May
     31, 1999)                        2,223       -         -         2,223    263.1*                          01.09.1999 29.02.2000
                                          -     886         -           886    440.0*                          01.09.2001 28.02.2002
     ------------------             -------  ------  --------       -------    -----  ----------        -----  ---------- ----------
                                      2,223     886         -         3,109
     ------------------             -------  ------  --------       -------    -----  ----------        -----  ---------- ----------
</TABLE>
      * Denotes options granted under a three year scheme.

      Awards made to directors under the Long Term Incentive Plan on May 11,
      1999 were as follows: I Robinson 46,927; C A Berry 18,994; A V
      Richardson 18,994; I M Russell 37,988; and K L Vowles 27,932.

      Options granted to directors under the ScottishPower Sharesave Scheme
      on June 11, 1999 were as follows: C A Berry 903; and A V Richardson
      1,573.
ScotishPower Form 20-F 1999                                                 F-32
<PAGE>

      Note 33 continued
      ------------------------------------------------------------------------

      Notes

      (i) The market price of the shares at March 31, 1999 was 540.0p and the
      range during 1998-99 was 521.0p to 675.0p.

      (ii) The Long Term Incentive Plan supersedes the Executive Share Option
      Scheme, and annual awards to acquire shares in ScottishPower at nil or
      nominal cost are made to the plan participants up to a maximum value
      equal to 60% of base salary. The award will vest only if the
      Remuneration Committee is satisfied that certain performance measures
      related to the sustained underlying financial performance of the
      company and improvements in certain OFFER published Customer Service
      Standards and OFWAT published levels of service (in the case of awards
      granted in 1997 and 1998) are achieved over a period of three financial
      years commencing with the financial year preceding the date an award is
      made. Assuming that such targets have been achieved, the number of
      shares that can be acquired will be dependent upon how the company
      ranks in terms of its total shareholder return performance over a three
      year period, in comparison to the constituent companies of the FTSE 100
      Index and the electricity and water sectors. A percentage of each half
      of the award will vest depending upon the company's ranking within each
      of the relevant comparator groups. The plan participant may acquire the
      shares in respect of the percentage of the award which has vested at
      any time after the fourth year up to the seventh year after the grant
      of the award. No dividends accrue to participants prior to vesting.

      (iii) The option price of executive share options was based on the
      middle-market share price on the day immediately preceding the date of
      grant. For Sharesave options, the option price is calculated in the
      same way at the date of invitation and discounted by 20% in accordance
      with the Inland Revenue rules for such schemes.

      (iv) The options initially granted to each executive director under the
      Executive Share Option Scheme were based on a multiple of four times
      salary in respect of the Chief Executive, Mr Robinson, and three times
      in respect of the other executive directors, which is in accordance
      with the limits set out in current guidelines. Subsequent grant of
      options were made to reflect increases in directors' basic salary
      levels, following periodic review by the Remuneration Committee of the
      performance of the company and the executive directors individually.
      Executive options are normally exercisable in a manner which does not
      attract an income tax liability provided that exercise occurs between
      three and ten years after the date of grant and at least three years
      have elapsed from the date of the last "tax relieved' exercise. Total
      gains made on exercise of directors' share options during the year were
      (Pounds)592,966 (1998 (Pounds)424,097, 1997 (Pounds)16,979).

      (v) The number of options granted to a director under the Sharesave
      Scheme is calculated by reference to the total amount which the
      director agrees to save for a period of three or five years under an
      Inland Revenue approved savings contract, subject to a current maximum
      of (Pounds)250 per month. Options under the Sharesave Scheme are,
      subject to a few exceptions, exercisable within a period of six months
      from the date of completion of the savings contract.

      34 Summary of differences between U.K. and U.S. Generally Accepted
      Accounting Principles ("GAAP')
      ------------------------------------------------------------------------
      The consolidated Accounts of the group are prepared in accordance with
      U.K. GAAP which differs in certain significant respects from U.S. GAAP.
      The effect of the U.S. GAAP adjustments to profit for the financial
      year and equity shareholders' funds are set out in the tables below.

<TABLE>
<CAPTION>
       (a) Reconciliation of profit for               1999      1998      1997
       the financial year to U.S. GAAP:    Notes (Pounds)m (Pounds)m (Pounds)m
      ------------------------------------------------------------------------
       <S>                                <C>    <C>       <C>       <C>
       Profit for the financial year
       under U.K. GAAP                              502.8     170.1     421.1
       U.S. GAAP adjustments:
        Amortization of goodwill             (i)    (30.0)    (29.8)    (23.7)
        Deferred tax                        (ii)    (33.5)    (28.1)    (55.2)
        Pensions                           (iii)     17.6      22.7      16.0
        Depreciation on revaluation
        uplift                              (iv)      3.4       1.7         -
       ---------------------------------------------------   -------   -------
                                                    460.3     136.6     358.2
       Deferred tax effect of U.S. GAAP
       adjustments:
        Pensions                                     (5.3)     (6.8)     (5.3)
       ---------------------------------------------------   -------   -------
       Profit for the financial year
       under U.S. GAAP                              455.0     129.8     352.9
       ---------------------------------------------------   -------   -------
       Earnings per share under U.S.
       GAAP                               (viii)    38.39p    11.00p    31.94p
       ---------------------------------------------------   -------   -------
       Diluted earnings per share under
       U.S. GAAP                          (viii)    38.01p    10.89p    31.62p
       ---------------------------------------------------   -------   -------
</TABLE>

<TABLE>
<CAPTION>
       (b) Effect on equity shareholders' funds
       of differences between U.K. GAAP and U.S.              1999      1998
       GAAP:                                       Notes (Pounds)m (Pounds)m
      ----------------------------------------------------------------------
       <S>                                         <C>   <C>       <C>
       Equity shareholders' funds under U.K. GAAP         1,945.9   1,707.8
       U.S. GAAP adjustments for:
        Goodwill                                     (i)  1,036.7   1,036.7
        Business combinations                        (i)    163.1     163.1
        Amortization of goodwill                     (i)    (92.1)    (62.1)
        ESOP shares held in trust                  (vii)    (33.8)    (36.6)
        Pensions                                   (iii)    116.8      99.2
        Dividends                                   (vi)    178.0     162.9
        Revaluation of fixed assets                 (iv)   (229.0)   (229.0)
        Depreciation on revaluation uplift          (iv)      5.1       1.7
        Deferred tax:
         Effect of U.S. GAAP adjustments            (ii)    (35.7)    (30.4)
         Effect of differences in methodology       (ii)   (594.2)   (560.7)
       ----------------------------------------------------------   -------
       Equity shareholders' funds under U.S. GAAP         2,460.8   2,252.6
       ----------------------------------------------------------   -------
</TABLE>

      (i) Goodwill and business combinations
      Goodwill
      Under U.K. GAAP, goodwill arising from the purchase of operating
      entities before March 31, 1998 has been written off directly against
      the merger reserve to reduce the merger reserve to zero and thereafter
      has been offset against the profit and loss reserve. Goodwill arising
      on acquisitions after March 31, 1998 is capitalized and amortized
      through the income statement over its useful economic life. Under U.S.
      GAAP, goodwill arising from the purchase of operating entities should
      be held as an intangible asset in the balance sheet and amortized over
      its expected useful life.

      The goodwill adjustment is made to recognize goodwill previously
      written off to reserves under U.K. GAAP, as an intangible asset under
      U.S. GAAP.

      This goodwill, which is capitalized under U.S. GAAP, is then amortized
      on a straight line basis over its useful economic life of 40 years with
      the effect being a reduction in profit reflecting the amortization
      charge for the period.

F-33                                                ScottishPower Form 20-F 1999


<PAGE>

      Note 34 continued
      ------------------------------------------------------------------------

      Business combinations
      In addition to re-instating the goodwill calculated under U.K. GAAP as
      described above, goodwill must also be recalculated in accordance with
      U.S. GAAP. This is required due to differences between U.K. GAAP and
      U.S. GAAP in the determination of acquisition price and valuation of
      assets and liabilities at the acquisition date. The adjustment referred
      to as business combinations reflects principally the impact of
      recalculating the goodwill arising on the acquisitions of Manweb and
      Southern Water under U.S. GAAP.

      (ii) Deferred taxation
      Under U.K. GAAP, provision for deferred tax is only required to the
      extent that it is probable that a taxation liability or asset will
      crystallize, in the foreseeable future, as a result of timing
      differences between taxable profit and accounting profit. Provision is
      made at known rates of tax.

      Under U.S. GAAP, full provision for deferred tax is required to the
      extent that accounting profit differs from taxable profit due to
      temporary timing differences. Provision is made at future enacted
      rates.

      The item "effect of U.S. GAAP adjustments' reflects the additional
      impact of making full provision for deferred tax in respect of
      adjustments made in restating the balance sheet to U.S. GAAP.

      The item "effect of differences in methodology' reflects the impact of
      making full provision for deferred tax.

      (iii) Pension costs
       The fundamental differences between U.K. GAAP and U.S. GAAP are as
       follows:
       (a) Under U.K. GAAP, the annual pension charge is determined so that it
       is a substantially level percentage of the current and expected future
       payroll.
       Under U.S. GAAP, the aim is to accrue the cost of providing pension
       benefits in the year in which the employee provides the related service.
       (b) Under U.K. GAAP, pension liabilities are usually discounted using an
       interest rate that represents the expected long-term return on plan
       assets. Under
       U.S. GAAP, pension liabilities are discounted using the current rates at
       which the pension liability could be settled.
       (c) Under U.K. GAAP, variations from plan can be aggregated and
       amortized over the remaining employee service lives. Under U.S. GAAP,
       variations from
       plan must be amortized separately over remaining service lives.
       (d) Under U.K. GAAP, alternative bases can be used to value plan assets.
       Under U.S. GAAP, plan assets should be valued at market or at market
       related values.

      (iv) Revaluation of fixed assets
      The revaluation of Manweb distribution assets and Southern Water
      operational assets is not permitted under U.S. GAAP. Accordingly, the
      reconciliation restates fixed assets to historical cost and the
      depreciation charge has been adjusted. Refer to Note 16 (i) for further
      information relating to the fixed assets revaluation.

      (v) Comprehensive income
      As of April 1, 1998 ScottishPower adopted FAS 130, Reporting
      Comprehensive Income. FAS 130 established new rules for the reporting
      and display of comprehensive income and its components; however, the
      adoption of this statement has no impact on ScottishPower's net income
      or shareholders' equity under U.S. GAAP.

      (vi) Ordinary dividends
      Under U.K. GAAP, final ordinary dividends are recognized in the
      financial year in respect of which they are recommended by the Board of
      Directors for approval by shareholders. Under U.S. GAAP, such dividends
      are not recognized until they are formally declared by the Board of
      Directors.

      (vii) ESOP shares held in trust
      Under U.K. GAAP, shares held by an Employee Share Ownership Plan
      ("ESOP') are recorded as fixed asset investments at cost less amounts
      written off. Under U.S. GAAP, shares held in trust are recorded at cost
      in the balance sheet as a deduction from shareholders' funds. No
      dividends have been paid on the shares held by the ScottishPower ESOP
      and future dividends have been waived.

      (viii) Earnings per share
      Under U.K. GAAP, earnings per share is calculated by dividing the net
      profit or loss for the period by the weighted average number of shares
      (for basic and diluted number of shares) outstanding for the period.
      U.K. GAAP permits the presentation of more than one measure of earnings
      per share provided that all such measures are clearly explained and are
      given equal prominence on the face of the income statement.

      Under U.S. GAAP, earnings per share is calculated by dividing earnings
      from continuing operations, excluding extraordinary items, by the
      weighted average number of shares (for basic and diluted number of
      shares) outstanding for the period. U.S. GAAP permits only one measure
      of earnings per share as a performance measure.

      (a) Earnings per ordinary share have been calculated by dividing the
      profit for the financial year under U.S. GAAP by the weighted average
      number of ordinary shares in issue during the financial year, based on
      the following information:
<TABLE>
<CAPTION>
                                                          1999     1998    1997
      -------------------------------------------------------------------------
       <S>                                            <C>       <C>     <C>
       Profit for the financial year under U.S. GAAP
       ((Pounds) million)                               455.0     129.8   352.9
       Basic weighted average share capital (number
       of shares, millions)                           1,185.2   1,180.1 1,104.9
       Diluted weighted average share capital
       (number of shares, millions)                   1,197.2   1,191.9 1,116.0
      -------------------------------------------------------------------------
</TABLE>

      The difference between the basic and the diluted weighted average share
      capital is wholly attributable to outstanding share options.

      (b) As permitted under U.K. GAAP, earnings per share have been
      presented including and excluding the impact of the windfall tax and
      goodwill amortization, to provide an additional measure of underlying
      performance. In accordance with U.S. GAAP, earnings per share have been
      presented above based on U.S. GAAP earnings, without adjustments for
      the impact of windfall tax and goodwill amortization. As such
      additional measures of underlying performance are not permitted under
      U.S. GAAP, the inclusion of windfall tax in the determination of
      earnings for the purpose of computation of earnings per share in
      accordance with U.S. GAAP decreased earnings by (Pounds)317.0 million
      or 26.86 pence per share for the year ended March 31, 1998. The
      inclusion on goodwill amortization decreased earnings by (Pounds)31.2
      million or 2.63 pence per share for the year ended March 31, 1999, by
      (Pounds)29.8 million or 2.53 pence per share for the year ended March
      31, 1998 and by (Pounds)23.7 million or 2.14 pence per share for the
      year ended March 31, 1997.
ScottishPower Form 20-F 1999                                                F-34
<PAGE>

      Note 34 continued
      ------------------------------------------------------------------------

      Consolidated statement of Cash Flows
      The consolidated statement of cash flows prepared in accordance with
      FRS 1 (Revised) presents substantially the same information as that
      required under U.S. GAAP. Under U.S. GAAP, however, there are certain
      differences from U.K. GAAP with regard to the classification of items
      within the cash flow statement and with regard to the definition of
      cash and cash equivalents.

      Under U.K. GAAP, cash flows are presented separately for operating
      activities, dividends received from associates and joint ventures,
      returns on investments and servicing of finance, taxation, capital
      expenditure and financial investment, acquisition and disposals, equity
      dividends paid, management of liquid resources, and financing. Under
      U.S. GAAP, only three categories of cash flow activity are reported;
      operating activities, investing activities and financing activities.
      Cash flows from dividends received from associates and joint ventures,
      returns on investments and servicing of finance and taxation would be
      included as operating activities under U.S. GAAP. Equity dividends paid
      would be included under financing activities under U.S. GAAP.

      Under U.S. GAAP, cash and cash equivalents are not offset by bank
      overdrafts repayable within twenty four hours from the date of the
      advance, as is the case under U.K. GAAP and instead such bank
      overdrafts are classified within financing activities.

      The consolidated cash flow statement prepared in conformity with U.K.
      GAAP is set out on page F-12. In this statement an additional measure,
      free cash flow, is included which is not an accepted measure under U.S.
      GAAP. This measure represents cash flow from operations after adjusting
      for dividends received from associates and joint ventures, returns on
      investments and servicing of finance and taxation. U.K. investors
      regard free cash flow as the money available to management annually to
      be allocated among a number of options including capital expenditure,
      payments of dividends and the financing of acquisitions.

      Set out below is a consolidated statement of cash flows under U.S. GAAP
<TABLE>
      ------------------------------------------------------------------------
<CAPTION>
                                                     1999      1998      1997
                                                (Pounds)m (Pounds)m (Pounds)m
      ------------------------------------------------------------------------
       <S>                                      <C>       <C>       <C>
       Cash inflow from continuing operating
       activities                                  944.9   1,014.1      801.9
       Dividends received from associates and
       joint ventures                                0.9       0.9          -
       Returns on investments and servicing of
       finance                                    (149.9)   (146.7)    (101.1)
       Ordinary taxation                           (93.7)   (134.5)    (117.4)
       Exceptional taxation -- windfall tax       (157.8)   (157.8)         -
       ---------------------------------------   -------   -------  ---------
       Net cash provided by operating
       activities                                  544.4     576.0      583.4
       ---------------------------------------   -------   -------  ---------
       Capital expenditure and financial
       investment                                 (683.0)   (592.7)    (392.1)
       Acquisitions and disposals                  (77.4)     67.9   (1,234.6)
       ---------------------------------------   -------   -------  ---------
       Net cash used in investing activities      (760.4)   (524.8)  (1,626.7)
       ---------------------------------------   -------   -------  ---------
       Financing                                   454.2     261.5    1,286.6
       Add: movement in bank overdrafts              6.0     (12.9)     (51.9)
       Equity dividends paid                      (252.8)   (226.0)    (170.0)
       ---------------------------------------   -------   -------  ---------
       Net cash provided by financing
       activities                                  207.4      22.6    1,064.7
       ---------------------------------------   -------   -------  ---------
       Net increase/(decrease) in cash and
       cash equivalents                             (8.6)     73.8       21.4
       Cash and cash equivalents at beginning
       of financial year                           115.5      41.7       20.3
       ---------------------------------------   -------   -------  ---------
       Cash and cash equivalents at end of
       financial year                              106.9     115.5       41.7
       ---------------------------------------   -------   -------  ---------
<CAPTION>
                                                     1999      1998      1997
       Significant non-cash investing or
       financing activities                     (Pounds)m (Pounds)m (Pounds)m
      ------------------------------------------------------------------------
       <S>                                      <C>       <C>       <C>
       On acquisition of subsidiaries:
        Shares allotted as part of purchase
        consideration                                  -         -      397.9
        Loan notes                                     -       3.0       10.3
      ------------------------------------------------------------------------
</TABLE>

      Additional information required under U.S. GAAP
      ------------------------------------------------------------------------

      (a) Group profit and loss account
      For the purposes of U.S. GAAP, transmission and distribution costs
      would be included in cost of sales, and gross profit from continuing
      operations would be calculated after deducting these expenses.

      (b) Infrastructure accounting
      The group's accounting policy in respect of Southern Water's
      infrastructure assets and related maintenance and renewals expenditure,
      as set out and explained in the accounting policies, is not generally
      accepted under U.S. GAAP which requires historical cost depreciation
      accounting for these assets. The difference between the infrastructure
      renewals depreciation charge and depreciation accounting under U.S.
      GAAP is not material to profit and equity shareholders' funds.

F-35                                                ScottishPower Form 20-F 1999


<PAGE>


      Note 34 continued
      ------------------------------------------------------------------------

      (c) Share option schemes
      Under U.S. GAAP, the group applies Accounting Principles Board Opinion
      No. 25 (APB 25), Accounting for Stock Issued to Employees, and related
      interpretations in accounting for its plans. Accordingly, compensation
      expense has been recognized for its variable plan (ie long term
      incentive plan). As the group applies APB 25 in accounting for its
      plans, it is permitted, under FAS 123, Accounting for Stock-Based
      Compensation, to adopt the disclosure only option in relation to its
      share option schemes. However, if the accounting provisions of the
      statement had been adopted, the effect on 1999 net earnings would have
      been immaterial (1998: immaterial, 1997: immaterial) and accordingly no
      additional disclosures have been provided.


      (d) Deferred taxation
      U.K. GAAP requires provision for deferred taxation only when it is
      expected that a liability will become payable or an asset will
      crystallize in the foreseeable future and then at the known future
      rates of tax. U.S. GAAP requires full provision for deferred taxes to
      be made using enacted future tax rates.

      The components of the estimated net deferred tax liability that would
      be recognized under U.S. GAAP are as follows:
      ------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                     Group
                                                                 1999       1998
                                                            (Pounds)m  (Pounds)m
      ---------------------------------------------------------------------------
       <S>                                                  <C>        <C>
       Deferred taxation liabilities
        Excess of book value over taxation value of fixed
        assets                                                  631.6      609.4
        Other temporary differences                              39.5       36.1
       --------------------------------------------------     -------    -------
                                                                671.1      645.5
       Deferred taxation assets
        Other temporary differences                             (41.2)     (54.4)
       --------------------------------------------------     -------    -------
       Net deferred tax liability                               629.9      591.1
       --------------------------------------------------     -------    -------
       Analyzed as follows:
       Current                                                  (24.8)     (31.2)
       Non-current                                              654.7      622.3
       --------------------------------------------------     -------    -------
                                                                629.9      591.1
       --------------------------------------------------     -------    -------
</TABLE>
ScottishPower Form 20-F 1999                                                F-36
<PAGE>


      Note 34 continued
      ------------------------------------------------------------------------

      (e) Pensions
      As at March 31, 1999 ScottishPower had six statutorily approved defined
      benefit pension plans. One of these plans, together with a statutorily
      approved defined contribution pension plan, was established with effect
      from January 1, 1999.

      Benefits under the defined benefit plans reflect each employee's basic
      earnings, years of service and age at retirement. Funding of the
      defined benefit plans is based upon actuarially determined
      contributions, with members paying contributions at fixed rates and the
      employers meeting the balance of cost as determined by the scheme
      actuaries.

      Under the defined contribution plan, contributions are paid by the
      member and employer at a fixed rate. Benefits under the defined
      contribution plan reflect each employee's fund at retirement and the
      cost of purchasing benefits at that time.

      ScottishPower does not provide any non-pension post-retirement benefits
      for employees.

      Reconciliations of the beginning and ending balances of the projected
      pension benefit obligation and the funded status of these plans for the
      years ending March 31, 1999 and March 31, 1998 are as follows:

      ------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                       1999      1998
       Change in benefit obligation               (Pounds)m (Pounds)m
      ---------------------------------------------------------------
       <S>                                        <C>       <C>
       Benefit obligation at beginning of year     1,882.4   1,847.6
       Service cost (excluding plan participants
       contributions)                                 36.4      29.5
       Interest cost                                 149.6     144.6
       Plan participants' contributions               13.0      13.2
       Actuarial loss/(gain)                          97.2     (57.3)
       Benefits paid                                (104.4)    (95.2)
       -----------------------------------------   -------   -------
       Benefit obligation at end of year           2,074.2   1,882.4
       -----------------------------------------   -------   -------
</TABLE>

<TABLE>
<CAPTION>
                                                              1999      1998
       Change in plans' assets                           (Pounds)m (Pounds)m
      ----------------------------------------------------------------------
       <S>                                               <C>       <C>
       Fair value of plans' assets at beginning of year   2,372.1   2,045.1
       Actual return on plans' assets                       488.7     395.8
       Employer contributions                                12.0      13.2
       Plan participants' contributions                      13.0      13.2
       Benefits paid                                       (104.4)    (95.2)
       ------------------------------------------------   -------   -------
       Fair value of plans' assets at end of year         2,781.4   2,372.1
       ------------------------------------------------   -------   -------
</TABLE>

<TABLE>
<CAPTION>
                                             1999      1998
                                        (Pounds)m (Pounds)m
      -----------------------------------------------------
       <S>                              <C>       <C>
       Funded status                       707.2     489.7
       Unrecognized net actuarial gain    (600.0)   (393.3)
       Unrecognized transition asset        (4.2)     (5.0)
       -------------------------------   -------   -------
       Prepaid benefit cost                103.0      91.4
       -------------------------------   -------   -------
</TABLE>

      The components of pension benefit costs for the years ended March 31,
      1999, 1998 and 1997 were as follows:

      ------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                              1999      1998      1997
                                         (Pounds)m (Pounds)m (Pounds)m
      ----------------------------------------------------------------
       <S>                               <C>       <C>       <C>
       Service cost                          49.4      42.7      38.8
       Interest cost                        149.6     144.6     132.8
       Expected return on plans' assets    (184.4)   (181.7)   (162.1)
       Amortization of transition asset      (0.8)     (0.8)     (0.8)
       Amortization of experience gains     (13.4)     (0.2)        -
       --------------------------------   -------   -------   -------
       Net periodic benefit cost              0.4       4.6       8.7
       --------------------------------   -------   -------   -------
</TABLE>

      The actuarial assumptions adopted in arriving at the above figures are
      as follows:

      ------------------------------------------------------------------------
<TABLE>
<CAPTION>
       Assumptions at year end              1999    1998    1997
      ----------------------------------------------------------
       <S>                               <C>     <C>     <C>
       Expected return on plans' assets  8% p.a. 8% p.a. 9% p.a.
       Discount rate                     6% p.a. 8% p.a. 8% p.a.
       Rate of earnings increase         5% p.a. 7% p.a. 7% p.a.
       Pension increases                 3% p.a. 5% p.a. 5% p.a.
       --------------------------------  ------- ------- -------
</TABLE>
      These plans' assets are invested in an appropriate diversified range of
      equities, bonds, property and cash. The investments are managed by
      independent appointed management firms. Included within the plans'
      assets are 888,065 (1998: 1,019,606, 1997: 1,111,925) ScottishPower
      shares, purchased by some of the Investment Managers only as part of a
      pooled strategy to match the relative weightings in the U.K. Stock
      Exchange index.

F-37                                                ScottishPower Form 20-F 1999


<PAGE>


      Note 34 continued
      ------------------------------------------------------------------------

      (f) Joint ventures and associates
      Under U.S. GAAP, the investor's interest in the net results of joint
      ventures and associates is disclosed as a single line in the income
      statement net of interest and taxation.

      Under U.K. GAAP, the investor's interest in the turnover and results of
      a joint venture or associate are disclosed gross. The investor's share
      of the interest and taxation are disclosed separately as a component of
      the group interest and taxation lines. The directors do not regard this
      as a material classification difference and there is no impact on net
      income.

      (g) Acquisition of Southern Water
      In accordance with the disclosure requirement of the APB Opinion Number
      16 paragraphs 95 and 96, the following is included relating to the
      acquisition of Southern Water in 1996:

      In August 1996, ScottishPower acquired Southern Water, a U.K. water
      company, for a total consideration of (Pounds)1,716.5 million which
      included a share issue of (Pounds)397.9 million (including 126.4
      million shares). As part of the acquisition agreement, deferred
      contingent consideration of (Pounds)13.4 million was included and
      related to the election made by participants of the Southern Water
      Sharesave Scheme to be granted options over ScottishPower shares in
      place of options previously granted over Southern Water shares. The
      acquisition method of accounting was used and the goodwill arising on
      the acquisition was written off to reserves in the year to March 31,
      1997 in accordance with the accounting policy adopted at that time.
      Southern Water contributed operating profit, before reorganization
      costs, of (Pounds)135.6 million in the eight months from the date of
      acquisition to March 31, 1997 and operating profit of (Pounds)240.7
      million in the year ended March 31, 1998. Had the acquisition taken
      place on April 1, 1996, Southern Water would have contributed turnover
      of (Pounds)474.5 million, operating profit of (Pounds)200.0 million and
      profit after ordinary tax of (Pounds)139.3 million in the year to March
      31, 1997. For the year to March 31, 1996, Southern Water recorded
      turnover of (Pounds)424.7 million, operating profit of (Pounds)170.6
      million and profit on ordinary activities after tax of (Pounds)144.8
      million. Had the acquisition taken place on April 1, 1996, the
      contribution to earnings per share from Southern Water's operations
      would have been 12.60p in the year to March 31, 1997 and 16.20p in the
      year to March 31, 1996.

      New U.S. accounting standards adopted

      Reporting Comprehensive Income
      FAS 130: Statement of Financial Accounting Standard 130, Reporting
      Comprehensive Income. This statement was issued in June 1997 and
      establishes standards for the reporting and display of comprehensive
      income and its components. FAS 130 is effective for fiscal years
      beginning after December 15, 1997. The standard requires financial
      statements provided for earlier periods to be reclassified.

      Segmental Information
      FAS 131: Statement of Financial Accounting Standard 131, Disclosures
      About Segments of an Enterprise and Related Information. This statement
      was issued in June 1997 and establishes standards for the reporting of
      information about operating segments in financial statements issued to
      shareholders. It also establishes standards for related disclosure of
      products and services, geographic areas, and major customers. The
      information set out in Note 1 and Note 14 to the financial statements
      reflects the requirements of FAS 131.

      Employers' Disclosures about Pensions
      FAS 132: Statement of Financial Accounting Standard 132, Employers'
      Disclosures about Pensions and Other Post-retirement Benefits was
      issued in February 1998 and revises employers' disclosures about
      pensions. The information set out above reflects the requirements of
      FAS 132.

      Recent U.S. accounting pronouncements

      Accounting for Derivative Instruments and Hedging Activities
      FAS 133: Statement of Financial Accounting Standard 133, Accounting for
      Derivative Instruments and Hedging Activities has been issued and is
      effective for fiscal periods beginning after June 15, 2000 with earlier
      application permitted. This standard establishes accounting and
      reporting standards for derivative instruments and for hedging
      activities. Management is currently reviewing the standard to assess
      the impact on ScottishPower. Implementation of FAS 133 will result in
      financial instruments being included in the balance sheet and carried
      at fair market value, including hedging activities.

      Accounting for the Costs of Computer Software Developed or Obtained for
      Internal Use
      SOP 98-1: Statement of Position 98-1, Accounting for the Costs of
      Computer Software Developed or Obtained for Internal Use was issued
      during January 1998 by the American Institute of Certified Public
      Accountants (AICPA). This becomes effective for all fiscal years
      beginning after December 15, 1998 and provides guidance on when costs
      incurred for internal use computer software are and are not
      capitalized. ScottishPower does not expect adoption of SOP 98-1 to have
      a material impact on ScottishPower's financial statements.

      Accounting for Contracts Involved in Energy Trading and Risk Management
      Activities
      In December 1998 the FASB Emerging Issues Task Force (EITF) reached a
      consensus on Issue No. 98-10, Accounting for Contracts Involved in
      Energy Trading and Risk Management Activities. The guidance comes into
      effect for ScottishPower for the year ended March 31, 2000 and is
      expected to have minimal impact as the majority of ScottishPower's
      energy contracts fall outside the scope of this consensus.

      Accounting for Plant Decommissioning Costs
      The FASB is currently reviewing the utility industry's accounting
      treatment of certain plant decommissioning costs. In an exposure draft
      issued in February 1996, the FASB concluded that decommissioning costs
      should be accounted for as a liability at expected present value, with
      a corresponding asset in utility plant. The FASB expects to issue a new
      exposure draft in 1999 and ScottishPower will assess the impact at that
      time.

ScottishPower Form 20-F 1999                                                F-38
<PAGE>


      Note 34 continued
      ------------------------------------------------------------------------

      Summary U.K. GAAP financial information

      Set out below is summary financial information on the group which has
      been extracted from ScottishPower's audited consolidated financial
      statements.

      ------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                   Year       Year
                                                  ended      ended
                                              March 31,  March 31,
                                                   1999       1998
       Balance sheet data                     (Pounds)m  (Pounds)m
      -------------------------------------------------------------
       <S>                                    <C>        <C>
       Total assets                             6,232.1    5,576.8
       Current assets                             792.0      785.6
       Non-current assets                       5,440.1    4,791.2
       Current liabilities                     (2,176.4)  (2,432.0)
       Shareholders' equity -
       Common stock, par value 50p per share      599.4      598.4
      -------------------------------------------------------------
</TABLE>

F-39                                                ScottishPower Form 20-F 1999


<PAGE>


      Principal Subsidiary Undertakings and Other Investments

<TABLE>
<CAPTION>
                                                             Proportion
                                                              of shares
       Subsidiary undertakings        Class of share capital       held                                             Activity
      ----------------------------------------------------------------------------------------------------------------------
       <S>                       <C>                         <C>        <C>
       Caledonian Gas Limited      Ordinary shares (Pounds)1       100%                                        Gas retailing
       CRE Energy Limited*         Ordinary shares (Pounds)1       100%                  Wind-powered electricity generation
       Demon Internet Limited*           Ordinary shares 10p       100%                            Internet service provider
       Domestic Appliance
       Insurance Limited* (Isle
       of Man)                     Ordinary shares (Pounds)1       100%                                            Insurance
       Genscot Limited*            Ordinary shares (Pounds)1       100%                               Holding of investments
       Lancastrian Holdings
       Limited*                    Ordinary shares (Pounds)1       100%                         Premium rate service company
       Manweb Energy
       Consultants Limited*        Ordinary shares (Pounds)1       100%                         Provision of energy services
       Manweb Gas Limited*         Ordinary shares (Pounds)1       100%                                        Gas retailing
       Manweb Generation
       Holdings Limited*           Ordinary shares (Pounds)1       100%                                      Holding company
       Manweb plc*                       Ordinary shares 50p       100%                         Regional electricity company
       Pinnacle Cellular
       Limited*                    Ordinary shares (Pounds)1       100%                    Specialist communication retailer
       Scotland On-Line
       Limited*                    Ordinary shares (Pounds)1        50%                            Internet service provider
       ScottishPower Inc
       (USA)**                                  Common stock       100%                               Holding of investments
       ScottishPower Insurance
       Limited* (Isle of Man)      Ordinary shares (Pounds)1       100%                                            Insurance
       ScottishPower
       Investments Limited (a)     Ordinary shares (Pounds)1       100%                               Holding of investments
       ScottishPower Leasing
       Limited*                    Ordinary shares (Pounds)1       100%                                      Leasing company
       ScottishPower NA1
       Limited                     Ordinary shares (Pounds)1       100%                               Holding of investments
       ScottishPower NA2
       Limited                     Ordinary shares (Pounds)1       100%                               Holding of investments
       ScottishPower
       Telecommunications
       Limited*                    Ordinary shares (Pounds)1       100%                                   Telecommunications
       ScottishPower
       Telecommunications
       (Services) Limited          Ordinary shares (Pounds)1        50%                            Mobile telecommunications
       Southern Water plc          Ordinary shares (Pounds)1       100%                                      Holding company
       Southern Water Services
       Finance plc*                Ordinary shares (Pounds)1       100%                                      Finance company
       Southern Water Services
       Limited*                    Ordinary shares (Pounds)1       100%                 Water supply and wastewater services
       Teledata (Holdings)
       Limited                     Ordinary shares (Pounds)1       100%                                   Telecommunications
       Telephone Information
       Services plc*               Ordinary shares (Pounds)1       100%                                   Telecommunications
       Telephone International
       Media Limited*              Ordinary shares (Pounds)1       100%                                   Telecommunications
       Watermark Games Limited*           Ordinary shares 1p       100%                                   Promotive printing

      ----------------------------------------------------------------------------------------------------------------------
      Fixed asset investments

      Joint ventures

       CeltPower Limited           Ordinary shares (Pounds)1        50%                  Wind-powered electricity generation
       Scottish Electricity
       Settlements Limited         Ordinary shares (Pounds)1        50%                     Scottish electricity settlements
       Shoreham Operations
       Company Limited             Ordinary shares (Pounds)1        50%                                  Management services
       South Coast Power
       Limited                     Ordinary shares (Pounds)1        50%                               Electricity generation

      Associated undertakings

       Coastal Wastewater
       Consultants Limited*        Ordinary shares (Pounds)1        50% Marine treatment, engineering design and consultancy
       Wind Resources Limited*     Ordinary shares (Pounds)1        45%                  Wind-powered electricity generation

      Other investments

       Folkestone & Dover Water
       Services Limited*           Ordinary shares (Pounds)1        25%                                         Water supply
                                 Preference shares (Pounds)1        22%
                                   Deferred shares (Pounds)1        12%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

      Notes

      *The investments in these companies are indirect holdings.

      **The common stock of ScottishPower Inc (USA) has no denomination.

      (a)The year end of ScottishPower Investments Limited is 28 February.

      The directors consider that to give full particulars of all subsidiary
      undertakings would lead to a statement of excessive length. The
      information above includes the subsidiary undertakings whose results or
      financial position, in the opinion of the directors, principally affect
      the results or financial position of the group.

      All companies are incorporated in Great Britain, unless otherwise
        stated.

ScottishPower Form 20-F 1999                                                F-40
<PAGE>


      Directors' Responsibilities for the Preparation of the Financial
      Statements

      The directors are required to prepare financial statements for each
      fiscal year which present fairly, in all material aspects, the
      consolidated financial position of the group at the fiscal year end and
      the consolidated results of operations and cash flows of the group for
      that period.

      The directors are also required to consider whether in preparing the
      financial statements for the fiscal years shown on pages F-1 to F-40,
      the group has used appropriate accounting policies, consistently
      applied and supported by reasonable and prudent judgments and
      estimates. They also consider whether all accounting principles which
      they consider to be applicable have been followed and ascertain whether
      it is appropriate for the financial statements to be prepared on the
      going concern basis.

      The directors are responsible for ensuring that the company keeps
      accounting records which disclose with reasonable accuracy the
      financial position of the group and which enable them to ensure that
      the financial statements comply with the U.K. Companies Act 1985. They
      are also responsible for taking such steps that are reasonably open to
      them to safeguard the assets of the group and to prevent and detect
      fraud and other irregularities.

      Report of the Independent Accountants
      To the board of directors and members of Scottish Power plc

      We have audited the consolidated balance sheets of Scottish Power plc
      as at March 31, 1999 and March 31, 1998 and the related consolidated
      statements of income, cash flows and changes in shareholders' funds for
      the years ended March 31, 1999, March 31, 1998 and March 31, 1997.
      These financial statements are the responsibility of the company's
      directors, as set out above. Our responsibility is to express an
      opinion on these financial statements based on our audits. Our
      examinations of these statements were made in accordance with auditing
      standards generally accepted in the United States and in the United
      Kingdom and, accordingly, included such tests of the accounting records
      and such other auditing procedures as we considered necessary in the
      circumstances.

      Opinion

      In our opinion the consolidated financial statements referred to above
      present fairly, in all material respects, the consolidated financial
      position of Scottish Power plc as at March 31, 1999 and March 31, 1998
      and the results of its operations and cash flows for the years ended
      March 31, 1999, March 31, 1998 and March 31, 1997 in conformity with
      accounting principles generally accepted in the United Kingdom.

      Accounting principles in the United Kingdom vary in certain specific
      respects from accounting principles generally accepted in the United
      States. Application of generally accepted accounting principles in the
      United States would have affected the determination of profit for the
      financial year and shareholders' funds as at and for the years ending
      March 31, 1999 and March 31, 1998 to the extent summarized in Note 34
      to the financial statements.

      /s/pricewaterhouseCoopers
      PricewaterhouseCoopers
      Chartered Accountants and Registered Auditors
      Glasgow

      Date: July 15, 1999

F-41                                                ScottishPower Form 20-F 1999