Business Update & Financial Strategy

Scottish & Southern Energy PLC
17 January 2000

                                       
       SCOTTISH AND SOUTHERN ENERGY BUSINESS UPDATE, FINANCIAL STRATEGY


Scottish and Southern Energy - Business Update
Scottish and Southern Energy is today updating analysts and investors  on  the
business,  financial  and  strategic  outlook  for  the  Group  following  its
acceptance of the regulatory price reviews affecting its distribution,  supply
and transmission operations.

Impact of the Regulatory Price Reviews
The  Regulatory price reviews confirmed Scottish and Southern  Energy  as  the
benchmark  company in the UK for efficiency in both distribution  and  supply.
The  distribution  price  review  was  tough  but  the  Group's  past  capital
investment  and  high efficiency were recognised. For supply, the  review  was
well  balanced, and a sound basis was established for the hydro benefit  cross
subsidy between generation and distribution in Scotland.

Utility regulation is, and should be, based on the principle of good companies
earning  above average profits.  Despite the stringency, Scottish and Southern
Energy is confident it can earn more than the 6.5% return set by the Regulator
in all its network businesses, as it drives to further improve efficiency.  In
the  supply  business the notional margin on sales of 1.5% is expected  to  be
exceeded  due  to  efficiencies in both electricity  purchasing  and  indirect
costs.

Efficiency Improvements
Considerable  progress has already been made in the integration of  the  North
and  South  businesses of Scottish and Southern Energy.    An  indirect  costs
savings  target  of at least £75M has been set arising from  synergy  benefits
from  the merger, best practice and general efficiency improvements, with £30M
being  achieved  in  the current financial year and the full  benefit  flowing
through in 2001/2.  In addition a minimum of £10M annual trading benefits  and
£10m capital efficiencies have also been identified.

Financial Position
Scottish and Southern Energy's financial performance has continued to be good,
following the interim results in November and the 1999/2000 dividend  will  be
in line with the policy of 5-8% real growth on the 1998/99 level.

The expected impact of the regulatory price reviews on group profit in 2000/01
will  be  £65M and should, in the absence of unforeseen circumstances,  be  at
least  offset by the synergy benefits delivered by the merger, organic  growth
in supply and earnings from committed generation investments.

As  a  result the company aims to deliver real dividend growth in each of  the
next  five years.  In the first 3 years this growth should be at least  4%  in
real  terms  followed  by  continued real growth thereafter.    Based  on  our
inflation assumption this would give nominal growth of at least 7%.  The Group
will maintain dividend cover above 1.5.

Scottish  and  Southern Energy continues to have one of the strongest  balance
sheets in the utility sector with interest cover in 1999/2000 remaining  above
5  times.  The Group remains exceptionally well positioned for further growth,
and in the medium term intends to maintain interest cover above 4 times.

A  share buyback programme was initiated in December and to date 15.5m  shares
representing  1.8% of issued share capital have been purchased.   The  average
price  paid  was  £4.96  and the full year impact is  an  earnings  per  share
enhancement of 1%.  The programme may continue if the Board decides it  to  be
in the interests of shareholders.

Strategic Outlook
Scottish and Southern Energy will continue to focus on its core strengths  and
exploit these for future strategic growth in the UK.
- Scottish  and Southern Energy has a proven track record in managing  network
  assets  and  this  expertise positions the Group well to capitalise  on  the
  opportunities which become available for either ownership or management;
- Following  the  recent round of regulatory price reviews, the Group  clearly
  leads  the  field  in the UK for efficiency and customer service  standards.
  Our  focus  will  be  on maintaining this edge and exploiting  these  skills
  further in the developing UK utility market;
- Scottish  and Southern Energy has the lowest cost to serve the  mass  market
  supply  business  driven  by  leading edge  CS  systems  developed  for  the
  competitive  market.  This positions the Group well for further  development
  in  mass  market  supply  by organic growth, affinity  deals  and  potential
  acquisitions;
- In  Generation,  plans  are well advanced for further development  of  small
  scale  embedded plant and a significant number of sites have  been  secured.
  Options  for  the development of a second power station at Keadby  are  also
  under  active consideration so that the Group will be well placed  when  the
  gas  moratorium  is  lifted.  This will maintain  its  position  as  the  UK
  generator with the youngest and most efficient portfolio of assets.

Telecoms Business Development
Since  the  merger Scottish and Southern Energy has continued  to  expand  its
telecoms  business, where the competitive advantages the Group  can  offer  in
Scotland  were  already  well developed.  The experience gained  through  this
will  now be exploited on a wider basis with a planned further investment over
the  next  two  years of £45M to give the Group 2150kms (650kms of  which  has
already been installed) of fibre linking the main cities in both licence areas
and  providing  dark fibre and bandwidth services to end customers  and  other
carriers.

Summary
Commenting on the financial strategy and business update, Chief Executive  Jim
Forbes  said  'Scottish  and  Southern Energy  offers  shareholders  a  unique
combination of sustained real dividend growth without damaging dividend  cover
and  a  strong  balance sheet. We are also well on our way to  delivering  the
synergy  benefits  of the merger, maintaining our position  as  the  benchmark
company for both efficiency and customer service.  With our strong performance
in  the  competitive market, Scottish and Southern Energy now has  the  second
largest energy supply business in the UK.

'This   leaves  the  Group  exceptionally  well  positioned  to  exploit   the
opportunities  for  our  growth  which  will  emerge  in  the  next  phase  of
development  of the UK utility market and we look forward with  confidence  to
playing  a  key role.  It also strongly differentiates Scottish  and  Southern
Energy as an investment proposition in the utility sector'.


For further information:
17/01/2000:
Andrew Dowler                                0171 831 3113 or
Financial Dynamics                           07887 607744

Thereafter:
Jim Forbes, Chief Executive
Ian Marchant, Finance Director
Carolyn McAdam, Director of Corporate Communications
Scottish and Southern Energy                 01738 455111