C E RTA I N F O R WA R D - L O O K I N G STAT E M E N T S
This Report and Accounts includes ‘forward-looking information’ within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the US Securities Exchange Act of 1934, as amended. Certain statements included in this Annual Report and Accounts, including without limitation, those concerning (i) strategies, outlook and growth opportunities, (ii) positioning to deliver future plans and to realise potential for growth, (iii) delivery of the performance required to meet the 2003 and 2006 targets, (iv) expectations regarding oil and gas prices, (v) development of new markets, (vi) the development and commencement of commercial operations of new projects, (vii) liquidity and capital resources, (viii) gas demand growth, (ix) plans for capital and investment expenditure, (x) the economic outlook for the gas and oil industries, (xi) regulation, (xii) qualitative and quantitative disclosures about market risk and (xiii) statements preceded by ‘expected’, ‘scheduled’, ‘targeted’, ‘planned’, ‘proposed’, ‘intended’ or similar statements, contain certain forward-looking statements concerning the Group’s operations, economic performance and financial condition. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, (i) changes in economic, market and competitive conditions, including oil and gas prices, (ii) success in implementing business and operating initiatives, (iii) changes in the regulatory environment and other government actions, including UK and international corporation tax rates, (iv) a major recession or significant upheaval in the major markets in which the Group operates, (v) the failure to ensure the safe operation of the Group’s assets worldwide, (vi) implementation risk, being the challenges associated with delivering capital intensive projects on time and on budget, including the need to retain and motivate staff, (vii) commodity risk, being the risk of a significant fluctuation in oil and/or gas prices from those assumed, (viii) fluctuations in exchange rates, in particular the US$ : UK£ exchange rate being significantly different from that assumed, (ix) risks encountered in the gas and oil exploration and production sector in general and (x) business risk management.
T H I S R E P O RT A N D A CCO U N T S I N CO R P O R AT E S T H E U S F O R M 2 0 - F
BG Group plc is the legal and commercial name of the SEC registrant. BG Group plc is a public limited company listed on the London and New York Stock Exchanges and registered in England. This is the report and accounts for the year ended 31 December 2002. It complies with UK regulations and incorporates the annual report on Form 20-F for the US Securities and Exchange Commission to meet US regulations. An Annual Review including the Summary Financial Statement for the year ended 31 December 2002 has been issued to all shareholders who have not elected to receive this report and accounts.
H I STO RY A N D D E V E L O P M E N T O F T H E CO M PA N Y
The Company is a public limited company incorporated in England and Wales on 30 December 1998 under the Companies Act 1985. It is of infinite duration.
The UK gas industry was nationalised in 1948 and the British Gas Corporation was established in 1973. In April 1986, British Gas was incorporated as a public limited company and in December 1986 the UK Government sold substantially all its shareholdings in British Gas to the public. With effect from 17 February 1997, Centrica plc demerged from BG. Following the Centrica demerger, BG retained the gas transportation and storage businesses, the majority of the exploration and production business, the international downstream business, the research and technology business and the property division of British Gas plc. In connection with the Centrica demerger, British Gas plc’s gas sales, services and retail businesses, together with the gas production business of the North and South Morecambe gas fields and its direct interest in Accord Energy Limited, were transferred to Centrica plc.
With effect from 1 May 1999, BG combined its exploration and production and international downstream businesses which principally engaged in gas and oil exploration and production and the integrated development and supply of gas markets.
With effect from 13 December 1999, the Group was restructured so that the Company, a newly incorporated company, became the new parent company of the Group. The Company held the Transco business in a separate sub-group, including BG Transco plc (now called Transco plc), ring- fenced for regulatory purposes, from the sub-group containing the other Group businesses. The restructuring was accompanied by a refinancing under which BG Transco Holdings plc (now called Transco Holdings plc) issued around £1.5bn of bonds which were transferred together with new shares in the Company to BG shareholders in exchange for their existing shares in BG plc (now called Transco plc). The UK Secretary of State for Trade and Industry held a special rights redeemable preference share in the Company.
On 16 October 2000, the Company’s shareholders approved the demerger of certain businesses (principally Transco) to Lattice, effective on 23 October 2000. This demerger created a new listed company, Lattice Group plc, whose principal business, Transco, owns, operates and develops the substantial majority of the gas transportation system and all the LNG storage facilities in Great Britain. Following demerger, the Company continued to hold BG Energy Holdings comprising the business involved in the development, management and supply of existing and newly emerging gas markets around the world. The special rights redeemable preference share in the Company held by the UK Secretary of State for Trade and Industry was redeemed.
O R G A N I S AT I O N A L ST R U C T U R E
The Company is the ultimate parent of the Group. The following is a list of the Company’s principal subsidiary undertakings:
Group
Country of holding
as at 31 December 2002 incorporation Activity % (a)
BG Energy Holdings Limited* England Group holding company 100.0
BG International Limited England Exploration and production 100.0
BG International (CNS) Limited England Exploration and production 100.0
BG International (NSW) Limited England Exploration and production 100.0
BG Karachaganak Limited England Exploration and production 100.0
British Gas Tunisia Limited England Exploration and production 100.0
British Gas Trinidad and Tobago Limited England Exploration and production 100.0
British Gas Thailand (Pte) Limited Singapore Exploration and production 100.0
BG North Sea Holdings Limited England Exploration and production 100.0
BG Egypt S.A. Cayman Islands Exploration and production 100.0
BG Exploration and Production India Limited Cayman Islands Exploration and production 100.0
BG LNG Services, LLC USA LNG shipping and marketing 100.0
Premier Power Limited Northern Ireland Power generation 100.0
Phoenix Natural Gas Limited Northern Ireland Gas distribution 51.0
Companhia de Gas de São Paulo S.A.(b) Brazil Gas distribution 72.7
MetroGAS S.A.(c) Argentina Gas distribution 45.1
Gujarat Gas Company Limited India Gas distribution 65.1
* Shares are held by the Company where marked with an asterisk; others are held by subsidiary undertakings.
(a) There is no difference between the Group holding of ordinary shares and the Group’s share of net assets attributable to equity shareholders.
(b) BG holds its interest in Companhia de Gas de São Paulo S.A. (Comgas) indirectly through its wholly-owned subsidiary British Gas São Paulo Investments B.V. which holds a 95.8% interest in Integral Investments B.V. which, in turn, holds ordinary shares in Comgas.
(c) Although BG only has a 45.1% holding in MetroGAS S.A. (MetroGAS), it has a controlling interest through a 54.7% holding in Gas Argentino S.A., which has a 70% interest in MetroGAS, together with a 6.8% holding in MetroGAS via wholly-owned subsidiary undertakings.
L I ST I N G A N D P R I C E H I STO RY
The principal trading market for the Company’s ordinary shares is the London Stock Exchange. American Depositary Shares (ADSs), each representing five ordinary shares and evidenced by ADRs, have been issued by JPMorgan Chase Bank as depositary and are listed on the New York Stock Exchange. The table below sets out, for the periods indicated, the reported high and low quoted prices for the Company’s ordinary shares on the London Stock Exchange and the high and low quoted prices for the shares in the form of ADSs on the New York Stock Exchange. Past performance of the Company’s ordinary shares cannot be relied on as a guide to future performance.
London Stock Exchange New York Stock Exchange (Price per Share) (Price per ADS)
High Low High Low
(pence) (pence) ($) ($) 1998 429.50 276.00 35.56 22.81 1999 409.50 320.25 33.50 26.00 2000 444.00 252.00 33.63 18.88 2001 First Quarter 275.00 250.00 21.38 17.84 Second Quarter 296.00 263.75 20.85 18.85 Third Quarter 293.50 248.00 21.10 18.05 Fourth Quarter 283.25 244.00 20.65 17.34 Full Year 296.00 244.00 21.38 17.34 2002 First Quarter 315.00 269.00 22.49 19.25 Second Quarter 319.00 261.00 24.05 19.80 Third Quarter 291.00 227.50 22.80 18.20 August 288.00 248.00 22.30 19.70 September 290.00 243.50 21.20 19.39 October 275.75 242.00 22.00 19.41 November 258.00 229.25 20.65 18.53 December 269.00 229.25 21.75 18.34 Fourth Quarter 275.75 229.25 22.00 18.34 Full Year 319.00 227.50 24.05 18.20 2003 January 266.50 218.25 21.34 18.25
These prices have not been restated for the effect of the demerger of Centrica plc in February 1997, the capital restructuring and refinancing effective in December 1999 or the demerger of Lattice in October 2000.