Proposed purchase

Scottish & Southern Energy PLC
22 May 2003



FOR IMMEDIATE USE                      Ref: NR-3155                  22 May 2003



                           SCOTTISH AND SOUTHERN ENERGY
                             AND MIDLANDS ELECTRICITY


Scottish and Southern Energy plc ('SSE') has agreed terms with Aquila, Inc. ('
Aquila') and FirstEnergy Corp. ('FirstEnergy') for the purchase of Aquila
Sterling Ltd ('ASL'), which owns Midlands Electricity plc and other businesses.
The acquisition is subject to holders of the three outstanding Avon Energy
Partners Holdings ('AEPH') bonds agreeing to accept a cash payment from ASL in
consideration for the bonds, which would be the equivalent of 86 pence in the
pound / cents in the dollar.



On this basis, the enterprise value of the acquisition would be £1,112m, made up
of the following (based on net debt as at 31 March 2003):



•        £567m for the AEPH bonds

•        £502m assumed debt obligations

•        £43m cash consideration for equity



If the bondholders do not accept the offer of the cash payment, SSE will not
proceed with the acquisition. It is hoped that the transaction will be completed
by the end of August. The acquisition would be financed by new and existing debt
facilities.





Electricity Networks

Midlands Electricity (which trades as Aquila Networks) is the fourth largest
electricity Distribution Network Operator (DNO) of the 12 in England and Wales.
It has 60,000km of overhead lines and underground cables delivering power to 2.4
million industrial, commercial and domestic customers in Birmingham and the
heart of England.



Its acquisition would make SSE the largest electricity network owner and
operator in the UK, responsible for over 180,000km of overhead lines and
underground cables and for delivering power to 5.7m customers in the north of
Scotland, Birmingham, the heart of England, and central southern England.



As at 31 March 2003 the Regulated Asset Base of Aquila Networks was valued at
around £980m. Its turnover in the year to 31 December 2002 was £310m and it
achieved a profit before tax of £115m.



Regulation

Ofgem's policy on the merger of electricity distribution companies provides for
a one-off charge of £32m payable to customers over five years from the date of
the completion of the merger and spread equally across all the distribution
companies in the merged group.  This has been incorporated into SSE's valuation
of Midlands Electricity. Completion of the acquisition is not conditional on
regulatory approval.



Synergy benefits: Networks

The combination of Midlands Electricity with SSE's existing transmission and
distribution businesses (Southern Electric and Scottish Hydro-Electric) would
create an enlarged networks business which would be able to achieve efficiencies
based on sharing best practice within each of the businesses and further
exploiting their enhanced purchasing power.



These efficiencies would result from the elimination of duplicated information
technology and customer service costs, the combination of common support
services and the rationalisation of other key functions.  Annual savings of
around £30m would be expected to be secured by the end of 2005/06.  In addition,
interest costs would be lower following the redemption of the bonds.



At the same time, customers of Midlands Electricity would be able to benefit
from SSE's acknowledged expertise in the management of electricity networks.
The Department of Trade and Industry commended SSE as a 'benchmark company' for
its preparation for, and response to, the severe storm in the south of England
in October 2002.  SSE would aim to improve the quality and reliability of
electricity supply in the Midlands Electricity area.



Other businesses

As part of the terms of the purchase, SSE would also acquire:

•      MEB (Contracting) Ltd, which provides electrical, mechanical and public
lighting services to local authorities, Midlands-based commercial and industrial
customers and to Aquila Networks. It would be combined with SSE's existing
contracting business to create an enlarged Contracting Group with a turnover in
excess of £300m.

•      Metering Services Ltd ('MSL'), which provides data collection services to
electricity, gas and water suppliers and meter operation services to the
electricity industry. In total, MSL provides data collection and meter
operations to around five million and 2.4 million customers respectively, across
the UK.

•      A connections business which last year undertook around 12,000 different
jobs and which would be combined with SSE's existing and successful connections
business.

•      Telecoms assets which would complement SSE's existing telecoms business
and the recently-acquired Neos.

•      Surplus property with an estimated value of around £10m.



On the completion of integration with SSE's existing businesses, these other
businesses would be expected to contribute more than £10m per annum to profit
before tax.



Midlands Power International

Midlands Power International ('MPI') manages Midlands Electricity's investments
in independent power projects. SSE has entered into an agreement with
International Power plc ('IPR') under which, subject to certain conditions, it
would sell MPI's equity interests in overseas plant to IPR for £21m.  SSE would
retain MPI's 26.7% stake in Teesside Power Ltd.



Pensions and other financial information

SSE would assume responsibility for the assets, liabilities and costs of the
Midlands Electricity Pension Scheme. As at 31 December 2002, the date of the
last valuation assessment, the scheme has a liability of around £100m (£70m
after tax).  The impact of this liability would be mitigated by an increase in
equity values, any potential recovery under the forthcoming distribution price
control review and the discounted value of any payments should they be
necessary.



Group profit before tax and exceptional items in the year to December 2002 was
£75.1m and group net assets at that date were £39.9m.  There was an exceptional
charge of £250.9m.



Impact on earnings

The acquisition would be expected to be earnings enhancing, before exceptional
items, from 2003/04 onwards.



Ian Marchant, Chief Executive of SSE, said:

'I am pleased that, after many months of discussion and careful due diligence,
we have reached this agreement with Aquila and FirstEnergy. Completion of the
offer to bondholders is necessary for the acquisition to proceed.  I believe
that this is a fair offer and one that I hope bondholders will accept.



'We have consistently set three criteria for acquisitions.  They must be capable
of successful integration with existing businesses, they must create shareholder
value and they must be capable of beating the share buy-back benchmark. On the
terms set out, this acquisition meets each of these criteria.'



Mr Marchant added: 'Over four years we have carefully and patiently developed
SSE and the addition of Midlands Electricity would be another positive step
forward.'

                                    - ENDS -



A limited section of this news release has been approved for the purposes of
Section 21 of the Financial Services and Markets Act 2000 by UBS Ltd.



For further information please contact:


Scottish and Southern Energy plc
Alan Young - Director of Corporate Communications                         [phone]
Denis Kerby -Investor and Media Relations Manager                         [phone]

Financial Dynamics
Andrew Dowler                                                             [phone]
Fiona Meiklejohn                                                          [phone]

UBS Warburg (Bondholder enquiries only)
Frank Kennedy                                                             [phone]
Rob Ritchie                                                               [phone]





There will be an analysts presentation starting at 08.30 (British Summer Time)
at the offices of Financial Dynamics, Holborn Gate, 26 Southampton Buildings,
London, WC2A 1PB.



Webcast facility: This is available by going to www.scottish-southern.co.uk


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