IFRS

Scottish & Southern Energy PLC
01 July 2005


                        SCOTTISH AND SOUTHERN ENERGY PLC
                  INTERNATIONAL FINANCIAL REPORTING STANDARDS

Scottish and Southern Energy plc ('SSE') has applied International Financial
Reporting Standards adopted for use in the European Union ('IFRS') with effect
from 1 April 2005 and will report its results for the six month period ending 30
September 2005 on an IFRS basis. Its seminar for analysts and investors on the
transition to IFRS will be held on 28 September 2005 and the presentation will
also be available at scottish-southern.co.uk.

SSE is on course to finalise its transition to IFRS. Its Annual Report 2005,
published in May 2005, described seven areas of impact identified in respect of
the recognition and measurement issues on conversion to IFRS, and since then SSE
has continued its preparations in respect of these and the other issues, working
closely with its auditors, KPMG. These preparations were reviewed yesterday by
the Board of SSE and, in advance of the main presentation in September, progress
in respect of the issues described in the Annual Report is set out below. This
statement does not include comment on specific accounting issues within the
Group's joint ventures and associates which are currently under review.

Financial Instruments

Under IFRS (IAS 39), financial instruments or derivatives, including contracts
for managing risks around interest rates and foreign currencies, which have been
held off balance sheet under UK GAAP, are generally reflected at fair value on
the balance sheet.

As permitted by the transitional rules set out in IFRS 1, SSE will be adopting
IAS 39 (together with IAS 32) from 1 April 2005 without retrospective
restatement of previous years. The net effect of IAS 39 in terms of SSE's
Treasury and Energy Supply activities is expected to be mildly positive in
respect of net assets at 1 April 2005:

(i) Treasury

In terms of its Treasury activities, the principles of hedge accounting will be
adopted where applicable. SSE believes that the application of IAS 39 will
result in a marginal decrease in net assets at 1 April 2005.

(ii) Energy Supply

Certain commodity contracts also fall within the definition of derivatives under
IAS 39. These include contracts entered into in the course of SSE's energy
trading activities for the purchase and sale of gas, coal, power and other
products. Contracts not meeting the criteria for 'own use' treatment must be
reflected at fair value in the balance sheet. The net impact of bringing these
contracts on to SSE's balance sheet at 1 April 2005 is likely to be positive.
Over time, movements in underlying oil, gas or power prices will, however, lead
to some volatility in reported results.

Income Taxes

Under IFRS (IAS 12) the discounting of deferred tax liabilities is no longer
allowed and companies have to recognise the estimated future tax effects of
temporary differences. As a result, the deferred tax liability currently held on
SSE's balance sheet will increase by just over £300m as at 31 March 2005.

Property, Plant and Equipment

Under IFRS (IAS 16) all fixed assets, with the exception of land, are
depreciated. Since privatisation, hydro civil assets have not been depreciated
because they have been considered to have an indefinite life under UK GAAP. The
expenditure to maintain the hydro generation infrastructure, which is presently
dealt with using renewals accounting, will be reassessed, with appropriate IFRS
book value restatement, and new depreciation policies will be adopted.

SSE intends to depreciate its hydro civil assets over 100 years. In future
years, therefore, there will be a small additional depreciation charge, partly
offset by the capitalisation of safety-related expenditure, resulting in a net
additional charge to the profit and loss account of up to £1m per annum.

Employee Benefits

SSE was an early adopter of the full requirements of FRS 17 for its defined
benefit pension schemes. As a result, the change to IAS 19 is not expected to
result in significant restatement, although there will be a reduction in the
value of SSE's defined benefit pension scheme net assets as at 31 March 2005 of
the order of £10m to £20m, to reflect minor differences in the two standards.

Goodwill

Under UK GAAP, SSE has amortised goodwill from business acquisitions. Under IAS
36, residual goodwill balances will no longer be amortised but will instead be
subject to an annual impairment review. Under transitional rules, SSE will not
be revisiting the goodwill on acquisitions made prior to 1 April 2004.

On 31 March 2005, under UK GAAP, the value of goodwill on SSE's balance sheet
was £260.6m (£274.0m on 31 March 2004) and the charge for the year ended on that
date was £15.4m. SSE intends to carry forward the balance at 31 March 2004 and
write-back the goodwill amortised in 2004/05.

SSE expects that all goodwill balances will pass the impairment tests for the
foreseeable future.

Share-Based Payments

Under IFRS (IFRS 2) a charge is recognised on the fair value of the share-based
payment awards. The fair value is calculated at the grant date using an
option-pricing model and the charge is spread over the vesting period but this
will not be a material change for SSE.

Emissions Rights

As IFRIC 3 has been withdrawn, SSE will account for emissions at 30 September
2005 in the light of discussions with other companies in the sector and what it
believes to be best practice in accordance with the IFRS framework.

Other Accounting Changes

In addition to these seven issues, SSE has been addressing a number of other
important accounting changes stemming from the adoption of IFRS:

   •IAS 10 does not permit accounting for a dividend payable from the year's
    accounts unless that dividend has been declared before the end of the
    reporting year. As SSE normally declares its final dividend after its
    results are approved by its Board, it will not be accrued at the year end.
    This has the effect of increasing opening reserves at 1 April 2004 by £226m
    and closing reserves at 31 March 2005 by £260m, with a movement in the year
    of £34m. SSE will report dividend cover under IFRS, with the impact of IAS
    39 (together with IAS 32), pension fund income and deferred tax being
    adjusted out.

   •SSE does not believe, based on it's current assessments, that any of its
    long term power purchase contracts would be classified as finance leases
    under IAS 17 and IFRIC 4.

   •Under IAS 32, which SSE will adopt in conjunction with IAS 39 from 1
    April 2005, the convertible bond entered into in November 2004 will need to
    be split into debt and equity components which will result in a small
    increase to net assets and a small reduction in net debt.

   •The new standards require that the investors' share of the results of
    equity accounted joint ventures and associates, such as Scotia Gas Networks
    in the case of SSE, be disclosed on the face of the profit and loss account
    as a single line of profit after interest and tax. Nevertheless, given the
    importance of the contributions from joint ventures and associates to SSE,
    sufficient information will be provided to allow operating profit to be
    calculated on a basis that is consistent with previous statements.

Summary

The net impact on SSE of these changes on the net assets at 1 April 2005 is
expected to be immaterial with the negative adjustment for deferred tax being
offset by the removal of the final dividend and a small net positive
mark-to-market asset under IAS 39. Furthermore, it is likely that net debt at 1
April 2005 will be marginally lower, as a consequence of the revised treatment
of the convertible bond.

Similarly, the impact on the income statement for the year to 31 March 2005 is
also not likely to be significant, with the removal of the charge for
amortisation of goodwill being the most significant amendment.

SSE will continue to focus attention on underlying earnings. Currently this is
before any goodwill write-off, pension fund income and deferred tax. Following
the adoption of IFRS, the goodwill amortisation will not be required but any
income statement impact of IAS 39 (together with IAS 32) accounting will also be
adjusted out.

While the transition to IFRS will lead to important changes in the way in which
SSE's results are presented, SSE continues to believe that its adoption will not
have any impact on its dividend policy.

The IFRSs that will be effective (or available for early adoption) in the annual
financial statements for the year ended 31 March 2006 are still subject to
change and to additional interpretations and therefore cannot be determined with
certainty. Accordingly, the accounting policies for that year will be determined
finally only when the annual financial statements are prepared.

Enquires to:

Alan Young, Director of Corporate Communications   0870 900 0410
Denis Kerby, Investor and Media Relations Manager  0870 900 0410



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