![Graphics]() Registered number: 02906593 (England and Wales) # Northern Powergrid (Northeast) plc Annual Report and Consolidated Financial Statements for the Year Ended 31 December 2024 ![Graphics]() Northern Powergrid (Northeast) plc Contents Company Information 1 Strategic Report 2 to 20 Directors' Report 21 to 25 Independent Auditor's Report 26 to 32 Consolidated Income Statement 33 Consolidated Statement of Comprehensive Income 34 Consolidated Statement of Financial Position 35 to 36 Company Statement of Financial Position 37 to 38 Consolidated Statement of Changes in Equity 39 Company Statement of Changes in Equity 40 Consolidated Statement of Cash Flows 41 Company Statement of Cash Flows 42 Notes to the Financial Statements 43 to 93 ![Graphics]() Northern Powergrid (Northeast) plc Company Information Directors A P Jones A J Maclennan P A Jones A R Marshall P C Taylor T H France Company Secretary J C Riley Registered office Lloyds Court 78 Grey Street Newcastle upon Tyne Tyne and Wear NE1 6AF Registered Number 02906593 (England and Wales) Statutory Auditor KPMG LLP 110 Quayside House Newcastle upon Tyne NE1 3DX Page 1 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 The directors present the annual report and financial statements for the year ended 31 December 2024 of Northern Powergrid (Northeast) plc (the "Company"), which have been drawn up and presented in accordance with the Companies Act 2006. BUSINESS MODEL The Company is part of the Northern Powergrid Holdings Company and its subsidiaries group of companies (the “Northern Powergrid Group”) and is an authorised distributor under the Electricity Act 1989 holds a licence granted by the Secretary of State. In addition, the Company owns all of the shares of Northern Electric Finance plc (together, the “Group”), a company that acts as the issuer of long-term debt securities. As the Company is the largest contributor to the Group in terms of revenue, the Strategic Report concentrates on the performance and progress of the Company throughout the reporting year. As a distribution network operator ("DNO"), the Company is regulated by the Office of Gas and Electricity Markets (“Ofgem”), which in turn, is governed by the Gas and Electricity Markets Authority (“GEMA”). Ofgem requires the DNOs to operate within a regulatory framework known as a price control, the purpose of which is to protect the interests of end consumers by setting an upper limit on the amount the DNOs can charge for the use of their networks. On 31 March 2024, the Company completed the first year of the RIIO-ED2 price control, which became effective on 1 April 2023, and will conclude on 31 March 2028 (the “ED2 period”). The principal activity of the Company is the distribution of electricity to approximately 1.6 million customers connected to its electricity distribution network (the “Network”) within its distribution services area in the northeast of England, which extends from North Northumberland, south to York and west to the Pennines. The Network includes over 42,000 kilometres of overhead and underground cables and over 28,000 substations. Electricity is received from National Grid's transmission system and from generators connected directly to the Network, and then distributed at voltages of up to 132 kilovolts. Revenue generated by the Company is primarily controlled by a distribution price control formula which is set out in the electricity distribution licence. The price control formula does not directly constrain profits from year-to-year but is a control on revenue that operates independently of a significant portion of the Company’s costs. Allowed revenue is recovered from electricity suppliers via the application of Distribution use of System charges. These charges account for approximately 8% of the electricity end users' overall electricity bill. The Company’s opening base allowed revenue (excluding the effects of incentive schemes, volume or legislative driven adjustment mechanisms, any contract liabilities ("deferred revenues") from the prior price control, and real price effects) has been set and therefore provides the Company with some stability in terms of its income during the ED2 period. Opening base allowed revenues increased in line with inflation (as measured by CPI-H). Page 2 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 (continued) STRATEGY In common with the Northern Powergrid Group, the Company operates a strategy based on six core principles (the "Core Principles"), which comprise Financial Strength, Customer Service, Operational Excellence, Employee Commitment, Environmental Respect and Regulatory Integrity. The Core Principles (which are applied by the Northern Powergrid Group’s parent company, Berkshire Hathaway Energy Company ("Berkshire Hathaway Energy"), set out the basis on which the Company generates shareholder value over the longer-term and defines the standards by which the Northern Powergrid Group holds itself accountable. Each Core Principle is defined by a strategic objective which is linked to the commitments made in the Company’s business plan (available via the Northern Powergrid Group website) for the ED2 period (the “Business Plan”). The directors refer to the values established by the Core Principles and the commitments contained within the Business Plan when considering the consequence of decisions they make. The delivery of the Business Plan is supported by an annual business plan (the “Annual Plan”) which is submitted to the Northern Powergrid Group’s shareholder each financial year and is designed to phase progress towards the achievement of each commitment over the ED2 period. This ensures that the deliverables in both plans can be measured effectively by using a mix of financial and non-financial Key Performance Indicators (“KPIs”). The Strategic Report focuses on each Core Principle and the performance of the associated KPIs throughout the year in order to provide a summary of the success in achieving each strategic objective, progress made against certain Business Plan commitments and performance in relation to the Annual Plan. Page 3 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 (continued) FINANCIAL STRENGTH Strategic objective : Strong finances that enable improvement and growth. KPI 2024 £000 As restated 2023 £000 Operating profit (million) 264.1 166.0 Net cash from operating activities (million) 622.2 521.4 Net cash used in investing activities (million) 587.2 460.1 Credit Score (Standard and Poor's) A A Business Plan commitment: To build on the strong financial base by delivering embedded efficiencies equivalent to 11% of forecast total expenditure. Performance during the year: The Group continued to maintain good control in respect of both its capital and operating costs by effectively managing the financial risks that could have had an adverse impact on its business. At the end of year-one of the ED2 period, the Company’s and Northern Powergrid (Yorkshire) plc’s (its “affiliate”) expenditure was 9% higher than the prior Regulatory year, but 20% (£100.6 million) below phased total expenditure (totex) allowances. Consequently, a number of work programmes were re-phased in support of achieving the 11% efficiency savings. Revenue: The Group's revenue at £536.4 million was £100.7 million higher than the prior year (2023 Restated: £435.7 million) primarily due to an increase in tariffs (average tariff 45% higher than 2023 tariffs), driven by increased revenue allowances because of high inflation. Operating profit and position at the year-end: The Group's operating profit of £264.1 million was £98.1 million higher than the previous year (2023: £166.0 million), primarily reflecting higher revenue detailed above and a fall in Supplier of Last Resort payments amounting to £21.0 million. The statement of financial position shows that, as at 31 December 2024 the Group had total equity of £1,198.6 million (2023: £1,320.7 million). The decrease in equity is primarily down to the issue of a £300.0 million dividend paid during the financial year, see Note 28. Finance costs and investments: Finance costs net of investment income at £28.4 million was £8.0 million higher than the prior year (2023: £20.4 million) mainly reflecting lower finance income relating to the intercompany loans. Cash flow: The Company aims to collect from customers and pay suppliers within contracted terms. Any surplus cash held is remitted to Yorkshire Electricity Group plc ("YEG"), a company in the Northern Powergrid Group, and invested accordingly, generating a market rate of return for the Company. Movements in cash flows were as follows: • Cash flow from operating activities at £622.2 million was £100.8 million higher than the previous year, reflecting higher revenue from customers. • The net cash used in investing activities at £587.2 million was £127.1 million higher than the previous year, reflecting higher purchases of plant, property and equipment and intangible assets. • The net cash outflow from financing activities at £35.0 million was £27.9 million lower than the £62.9 million in the previous year due primarily to movement on intercompany loans. Pensions: The Company is a participating employer in the Northern Powergrid Group of the Electricity Supply Pension Scheme (the "DB Scheme"), a defined benefit scheme. The Company also participates in the Northern Powergrid Pension Scheme, which is a defined contribution scheme. Insurance: As part of its insurance and risk strategy, the Northern Powergrid Group has in place insurance policies, which cover risks associated with employees, third party motor and public liability. Page 4 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 (continued) CUSTOMER SERVICE Strategic objective : Delivering exceptional customer service. KPI 2024 2023 Broad Measure of Customer Satisfaction (“BMCS”) 91% 89.3% BMCS Rank (Out of 14) 9 12 BMCS Power Cuts 89.5% 88.6% BMCS General Enquiries 94.8% 94.2% BMCS Connections 90.3% 87.7% Business plan commitments : To provide a reliable, better communicated and faster customer service offering through a range of channels to suit stakeholder needs. Performance during the year : In respect of BMCS performance, an independent market research company carried out telephone surveys with the Company’s customers to find out how satisfied they were with services related to unplanned or planned power cuts, quotations and subsequent connections, and general enquiries. An increase was recorded in overall satisfaction scores at 91.0% compared to the prior year (89.3%), resulting in the BMCS rank improving to 9 out of 14. To further enhance the service provided to customers, initiatives from the Company’s customer service improvement plan were implemented, including enhancing management routines for connections processes and reviewing the consistency of customer communications across all channels. In addition, the proactive on-site support offered to customers impacted by power cuts lasting more than four hours was refined. Whilst overall performance has continued to improve, it is acknowledged that as the other DNOs also continue to invest in customer service, even making incremental improvements in the BMCS ranking is challenging. Regardless, the Company will strive to continue to achieve its Business Plan commitments during the ED2 period by continuing to focus on the ways it can improve the service it provides to its customers. Activity scheduled in support of this includes the development of guidance to highlight expectations when it comes to managing key scenarios and customer interactions, increased focus on areas of poor Network performance, and a review of the extra care support provided to the most vulnerable customers. Page 5 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 (continued) Connections to the network Business Plan commitment : To deliver a cost-effective, efficient and personalised service for all connections customers, with smarter, more flexible solutions that support the connection of low carbon technologies onto the Network in support of the transition to net zero. Performance during the year : End-to-end lead time improvement continued to be challenging due to the increase in connections volumes arising from low carbon technology uptake and additional applications. However, improvements in small works, such as the new quotation system (reducing time to quote by 54%) and increased operational delivery capacity (reducing time to deliver by 24%) allowed the Company to manage volumes whilst maintaining customer satisfaction (90.3%). For major connections, transmission network connection delays continued to pose a significant issue. Consequently, much of the focus has been on industry reform to align with the Government’s Clean Power 2030 (CP30) Action Plan. The Company held customer webinars in collaboration with National Grid Electricity Transmission and National Grid ESO, to provide updates on the changes and the implementation improvements. In support, the availability and timeliness of information for customers was improved through a Project Progression portal, an online self-service tool that allows customers to view the progress of their project. In terms of accelerating connections, 85 eligible customers were issued accelerated offers as part of the technical limits initiative, reducing the average connection date by six years. Page 6 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 (continued) Corporate Responsibility Business Plan commitment : To build effective relationships with stakeholders, especially those customers who are vulnerable and hard to reach. Performance during the year : The Company continued to undertake engagement activity on the development and delivery of the Distribution System Operator (“DSO”) plan, as well as supporting multiple stakeholders with their own decarbonisation planning. Alongside, the four Business Plan Engagement Groups continued to oversee engagement in the areas of resilience, meeting consumer needs, energy futures and our people, our communities. The ongoing energy crisis and economic uncertainty continued to exacerbate the challenges facing vulnerable customers. As a result, the Company and its affiliate grew the provision of their energy advice services to support 20,000 customers in fuel poverty and a further 5,000 with support to increase the energy efficiency of their homes. Additional support activity from the Company and its affiliate included a donation to Community Action Northumberland to sponsor their Warm Hubs programme, the Net Zero Community Energy Fund provided grant funding to nine organisations totalling £50,000, and the Company established the Community Energy Team to support community energy groups. Alongside, the Company and all funded partners routinely promoted Priority Services Membership and shared energy efficiency materials and winter preparedness information to customers. OPERATIONAL EXCELLENCE Strategic objective : High-quality, efficient operators running a smart reliable energy system. 2023/24 2022/23 KPI Actual Target Actual Target Customer minutes lost 49.5 <42.0 44.0 <50.9 Customer interruptions 48.6 <47.7 46.9 <58.6 2024 2023 Network investment (million) £231.9 £192.7 High voltage restoration time (minutes) 64.1 62.1 Business Plan commitment : To achieve 12% fewer unplanned power cuts and reduce the average length of unplanned power cuts by 25%. Performance during the year : CML and CI are the KPIs set by Ofgem to measure (on a regulatory year basis) the quality of supply and system performance. CML measures the average number of supply minutes lost for every connected customer due to both planned and unplanned power cuts that last for three minutes or longer. CI measures the average number of supply interruptions per every 100 connected customers due to planned and unplanned power cuts that last for three minutes or longer. Performance was below target for CI and CML due to adverse weather conditions. Consequently, the duration of the Company’s (together with its affiliate) power cuts increased by 6.4%. From a high voltage restoration perspective, the Company averaged 60.2 minutes (2023: 62.1 minutes), after allowing for severe weather incidents and other exemptions, which represented a decline from the prior year. The Company invested £231.9 million during the year through its approved Network investment strategy (2023: £192.7 million), which was designed to improve Network performance and increase resilience. Various major projects were undertaken to reinforce the primary Network, refurbish transformers, rebuild overhead lines, replace oil-filled cables, change deteriorated poles, replace switchgear and install and commission new remote-control points. Page 7 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 (continued) Further network enhancements included the continued roll-out of the automatic power restoration system on the high voltage network. At low voltage, the implementation of next generation technology devices continued with the addition of sensors and monitoring which detect developing faults so that they can be proactively managed. Alongside, proposals were submitted to Ofgem as part of the Storm Arwen re-opener to fund the upgrading the Network to enhance its resilience. The Company and its affiliate achieved a successful outcome for 12 projects. Looking ahead to 2025, initiatives will be implemented as part of the Network Performance Improvement Plan, including the continuation of the risk-based vegetation management programme, the installation of fault management devices on the low voltage Network and further developing the operational incident response model. Page 8 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 (continued) EMPLOYEE COMMITMENT Strategic objective : High-performing people doing rewarding jobs in a safe and secure workplace. 2024 2023 KPI Actual Target Actual Target Northern Powergrid Group occupational safety and health administration ("OSHA") 0.41 0.09 0.43 0.09 Preventable vehicle accidents (PVAs) 7 11 8 10 Lost time accidents 1 - 1 - Contractor OSHA incidents 2 3 1 3 Medical treatment accidents 2 1 2 1 Operational incidents 2 3 3 3 Northern Powergrid Group absence rate 3.3% 3.4% Health and Safety Business Plan commitment : To maintain industry leading safety performance and achieve a 50% reduction in contractor accident rates. Performance during the year : In common with the Berkshire Hathaway Energy group, the Northern Powergrid Group measures its safety performance using the OSHA rate, which is a measure used to capture safety incidents down to minor levels of medical treatment. The Northern Powergrid Group failed to meet its target of 0.09 having achieved an OSHA rate of 0.41 (2023: 0.43), which equated to 11 recordable incidents against a goal of two or fewer. PVA performance did show signs of improvement with 7 recorded against a target of 10 or fewer. In terms of the Business Plan commitment, the number of contractor OSHA incidents increased year-on-year, leading to a number of improvement actions being initiated. Whilst the majority of incidents were minor in nature (insect bites and slow reversing accidents), the year-on-year decline reinforced the importance of the Company’s health and safety performance improvement plan which covered colleague safety, contractor safety, health and well-being and public safety. Accordingly, initiatives undertaken and planned for 2025 included the continuation of driver training, commissioning a safety climate survey, the mobilisation of an assurance programme on high -risk activities, leveraging data from the vehicle telematics system and providing an independent employee assistance service, which is a confidential, self-referral counselling and information service to assist with personal or work-related problems and access to services including counselling and physiotherapy referrals. During the year, the Company successfully completed two external surveillance visits on its ISO 45001 accreditation for its occupational health and safety management system. Page 9 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 (continued) Employees Business Plan commitment : High-performing people doing rewarding jobs in a safe and secure workplace. Performance during the year : Focus remained on building capacity by increasing the intake of apprentices and engineers, as well as enhancing working arrangements to ensure seamless customer support. This included adapting agile working, focusing on the retention and attraction of talent, improving wellbeing and cultivating a healthy workplace, and establishing working groups with the trade unions to foster stronger relationships. Employee development continued via the CORE programme, designed to develop leadership and management skills, in addition to leadership apprenticeships and an approach to identifying and developing individual contributors. Routine training also continued in key areas such as customer service, cyber security and management development. The Company also introduced a Core Leadership Expectations 360 programme for senior leaders to identify their specific areas of improvement. During the year, 89 new recruits (2023: 77) joined the Company and Northern Powergrid (Yorkshire) plc’s workforce renewal programme. At 31 December 2024, the Company had 1,511 employees (2023: 1,384). The Northern Powergrid Group’s gender pay gap report can be found via the Northern Powergrid Group’s corporate website. Employee engagement The board and senior management team continue to keep employees and trade union representatives informed of and involved as appropriate in developments that may impact them now or in the future. Consultation for collectively bargained employees is agreed with trade union representatives in the form of a constitutional framework. In addition, the Company utilises focus groups and colleague panels to consult on improvements and changes. In support of this process, the Director of People and Change routinely reports to the board and the Health and Safety Committee to ensure that the views of employees are considered and to facilitate the discussion of and any subsequent decision making in respect of employee related concerns or issues. During the year, the President and Chief Executive Officer, members of the board and members of the senior management team provided regular updates on financial, organisational, safety and customer service performance. The executive directors engaged directly with employees during operational and office-based site visits and induction events. Communication with employees was delivered via various channels including text messages and virtual meetings, alongside regular briefings, line manager conversations, meetings with trade union representatives and utilising the Northern Powergrid Group's intranet. The Berkshire Hathaway Energy code of business conduct ("Code of Conduct") The Northern Powergrid Group has adopted the Code of Conduct, which details the commitment to ethics and compliance with the law, provides reporting mechanisms for known or suspected ethical or legal violations, and establishes minimum standards of behaviour expected of all employees. In support of this, a "speaking up" process is in place enabling all employees to raise concerns of unethical acts, malpractice or impropriety (including bribery or corruption), and an anonymous help line operated by an independent company is also available. All colleagues complete an annual online training programme covering the requirements of the Code of Conduct. This also requires all employees to declare any conflicts of interest and unspent criminal convictions. Employment of disabled persons The Company’s policy is to provide all protected groups, including disabled people, with equality at work in respect of employment, training, career development and promotion, having regard to their aptitudes and abilities. Should any member of staff become disabled during their employment, reasonable adjustments will be made, wherever possible. Page 10 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 (continued) ENVIRONMENTAL RESPECT Strategic objective: Leaders in environmental respect and low carbon technologies 2024 2023 KPI Actual Target Actual Target Total oil/fluid lost (litres) 6,108 <10,073 8,823 <10,387 SF6 gas discharges (kg) 21.40 <11.8 7.45 <12.25 Environmental incidents 1 <3 - <3 KWh energy consumed 20,325,432 20,160,750 Business carbon footprint Tonnes Per km² Tonnes Per km² Fleet fuel use 2,020 0.14 1,931 0.13 Other (including fugitive emissions) 477 0.03 321 0.02 Total scope 1 2,497 0.17 2,252 0.15 Building electrcity use 946 0.07 775 0.05 Substation electricity use 1,735 0.12 1,706 0.12 Total scope 2 2,682 0.18 2,481 0.17 Business fuel use 1,217 0.08 1,070 0.07 Contractor emissions 395 0.03 309 0.65 Total scope 3 1,612 0.11 1,379 0.72 Total carbon footprint (tonnes) 6,791 0.46 6,112 1.04 Notes: KWh energy consumed relates to depot energy and fleet fuel usage. The chosen business carbon footprint intensity ratio is based on the Company’s licence area which equals 14,394km 2 The methodology adopted to calculate energy and business carbon footprint data is aligned with international standards, those required by Defra and BEIS and is audited annually and certified through the Certified Emissions Measurement and Reduction Scheme for compliance with ISO 14064-1:2006. \*Contractor emissions are based on fuel usage and is the best available information at the time of publishing. Page 11 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 (continued) Business Plan commitment : To minimise carbon emissions, pollution and waste and, where possible, seek to enhance the local environments in which we operate. Performance during the year : The Company remains committed to using natural resources wisely and protecting the environment for the benefit of future generations. This commitment is set out in the Environmental RESPECT (Responsibility, Efficiency, Stewardship, Performance, Evaluation, Communication and Training) Policy, which is delivered via the Environmental Action Plan and its twelve impact areas (including scope 1, 2 and 3 emissions, SF6 losses, visual amenity, biodiversity and waste). The Company’s overall business carbon footprint, scope 1 and 2 emissions (excluding losses) increased to 5,179 tonnes during the year as a result of increased SF6 losses and other emissions. Whilst the Company and its affiliate reduced their scope 1 and 2 emissions during ED1 and into the ED2 period, the current rate is slightly above the science-based target set to achieve net zero, indicating that further action is required to reduce emissions. Improvement initiatives include reducing emissions from the operational fleet by replacing diesel vehicles with Ultra Low and Zero Emission Vehicles, exploring new technologies such as hydrogen fuel cells, using alternative, renewable fuels, and enhancing energy efficiency by upgrading facilities at operational sites. In relation to scope 3 emissions, the Company is working in partnership with the Supply Chain Sustainability School and has adopted their carbon calculator to measure supply chain scope 3 emissions, thereby providing the basis to develop a reduction strategy during 2025. In addition, the Company continues to work with other DNOs to ensure expertise and learnings and a consistent methodology are shared. The volume of SF6 losses (21.4kg) increased year-on-year due to a number of significant leaks. In response, the Company continues its operational routines, responses to leaks and due to the work with the DNOs via the Energy Networks Association (“ENA”), to share best practice and trial innovative new SF6-free technologies. During the year, the total amount of fluid loss from the Network was 6,108 litres, which was significantly favourable to the target of 10,078 litres. To continue to minimise losses, the Company is committed to replacing 3,400km of cable during the ED2 period, and will pursue the use of perfluorocarbon tracer (to locate leaks) and self-healing technology. To adhere to the requirement to identify and remove or remediate non-compliant equipment which may contain Polychlorinated biphenyls (“PCBs”) by 31 December 2025, the Company and its affiliate have worked in collaboration with the Environment Agency and ENA to develop a statistical model to determine which pole mounted transformers are non-compliant. The process will be a priority throughout 2025, as approximately 5,900 transformers may be replaced. In respect of the Company’s wider environmental impact, plans have been developed to achieve zero waste to landfill by 2035 and to divert 90% of waste from all of the Company’s operations by 2028. The Company’s Network operations are the largest source of waste generation, with waste arising from excavations and other operations representing 97% of all of the waste generated in 2024. Steps taken to enhance performance in this area include the recycling of materials, with the Company planning to recycle and reuse 85% of total materials by 2028 including the increased volume produced as a result of delivering Network investment plans and decarbonisation objectives. Issues relating to the assessment and classification (as hazardous or non-hazardous) of material arising from unplanned utility excavations, prior to transport from site and disposal, pose a significant challenge to the Company’s objective to reduce waste to landfill. The utilities industry is currently working with Streetworks UK and the Environment Agency to develop and implement a new industry-wide risk-based approach to managing such waste to combat these issues. From a supply chain perspective, the Company will continue to work with suppliers to reduce packaging and ensure environmentally friendly alternatives are used where possible. In support, an embodied carbon model will be used to aid investment decisions including the sourcing of raw materials. At office locations, the use of waste segregation facilities will be increased, and office supplies will wherever possible be low carbon, plastic free and fully recyclable or reusable. The impact of the Company’s operations is mitigated where possible through a range of biodiversity, natural capital and visual amenity programmes. This includes fulfilling the duty to seek to enhance designated areas such as National Parks, as well as improving biodiversity at 200 sites throughout the ED2 period. Page 12 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 (continued) At this time, the Company has no plans to use carbon offsetting to achieve its targets in the ED2 period. The focus remains on reducing physical carbon emissions, on the basis that additional investment in the Network to enable decarbonisation offers much better value to customers. However, at an initiative level, where ad-hoc opportunities exist, the Company may pursue these. From an environmental compliance perspective, the Company operates a United Kingdom Accreditation Service scheme for environmental management and is certified to standard ISO 14001:2015 which is designed to enhance environmental performance, fulfil compliance obligations and achieve environmental objectives, all of which contribute to the achievement of the Company’s KPIs. The Company’s carbon footprint reporting framework is certified under the Certified Emissions Measurement and Reduction Scheme for compliance with ISO 14064-1:2006. To date, the Company’s performance against a number of stretching KPIs to reduce carbon usage and minimise the effects of the Company on stakeholders and the environment has been largely positive. However, it is acknowledged that becoming carbon neutral by 2040, and working with suppliers and partners to accomplish this, is not without its challenges and risks. Accordingly, the Company will continue to evolve its ambitions and enhance the implementation of environmental plans throughout the ED2 Period. The phased targets associated with waste to landfill, recycling, noise pollution and biodiversity and additional descriptions of all key measures can be found in annex 1.4 of the Business Plan, a copy of which can be found via the Northern Powergrid Group’s website (our business plan). Page 13 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 (continued) Environmental Sustainability Strategic focus: Enable growth in customers connecting low carbon technologies and support pathways to net zero. Performance during the year: As the country takes action to reduce carbon emissions in line with the net zero target by 2050, the way in which electricity is produced and used is expected to have a substantial impact on the Network over time. Accordingly, the Company continues to implement its DSO strategy, and act as a key facilitator in the country’s net zero transition by placing decarbonisation at the heart of its investment and actions. As the volume and total capacity of decentralised energy generation grows and given the greater range of load and generation technologies now connected to the Network, the Company continued to develop and action innovative solutions that will reduce the need for traditional and potentially expensive reinforcement. In the past year, the Company engaged with the market for flexibility by tendering for flexibility services on the low voltage and high voltage Network. Under these contracts, customers change their energy consumption and generation patterns as an alternative to the Company carrying out Network reinforcements, thereby facilitating a more efficient and greener Network. And to better understand how to prepare the Network for the future needs of its customers and the potential pathways to net zero, the Company published its updated Distribution Future Energy Scenarios (available via the Northern Powergrid Group’s corporate website). From an innovation perspective, the Company runs a portfolio of projects in the priority areas of customer vulnerability, resilience, and decarbonisation. Following the establishment of the Community DSO project in 2023, which was designed to deliver trials of smart local energy systems to explore how consumer energy resources and flexibility can be utilised in communities, a £3.2 million trial was awarded to a consortium of companies testing approaches to local balancing in an Energy Community in Barnsley, South Yorkshire over an 18-month period. Decarbonisation continues to be more central to the Company’s strategy, and the way in which the Company contributes more broadly to the evolution of the energy industry and the stakeholders with whom it interacts. The Company has been progressive in its ambition to reduce its own business carbon footprint. However, there is a greater opportunity to contribute to decarbonisation by facilitating regional decarbonisation and investing in people, processes and systems in order to actively manage the Network and to optimise the use of assets and generated energy in the region. In delivering its Business Plan commitments, the Company continually engages stakeholders on its DSO Strategy to achieve a number of outcomes and benefits including enabling open energy data sharing, transforming the way decisions and plans are made, supporting the development of new flexible energy markets, increasing customer and Network flexibility and facilitating a whole system energy system. The Company’s Energy Systems directorate centralises responsibility for delivering DSO plans including major connections to the Network. In conjunction with this activity, and with the support of the Independent Stakeholder Group (“ISG”), the Company has operated its DSO Review Panel (“DRP”) for the purpose of making its decisions transparent and to allow the independent members to comment on and challenge the Company’s major investment decisions. Page 14 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 (continued) REGULATORY INTEGRITY Strategic objective : Trustworthy, fair and balanced. KPI: Completion of a quarterly regulatory compliance affirmation process. Business Plan commitment: To manage the Company's business to the highest behavioural standards and adhere to a policy of strict compliance with all relevant standards, legislation and regulatory conditions. Performance during the year : In order to assure compliance with distribution licence and other regulatory obligations, the Company operates a regulatory compliance affirmation process. Responsible managers are required to review compliance with approximately 3,300 obligations on a quarterly basis and report on any identified non-compliances or perceived risks which are then addressed by members of the senior management team. To minimise the risk of the Company breaching its licence conditions and other statutory requirements (which could lead to financial penalties), the board reviews the outcomes of each exercise. Each quarterly regulatory compliance affirmation process was completed satisfactorily during the year. The Company submitted its annual Data Assurance Report to Ofgem in March 2025, which included risk assessments of the regulatory returns to be submitted during the Regulatory Year ahead (April 2025 to March 2026), together with a report detailing the assurance work carried out in the Regulatory Year ended 31 March 2025. On 6 November 2024, Ofgem initiated the process for determining the arrangements for the next electricity distribution price control period, which will begin on 1 April 2028, by issuing a consultation on the framework for ED3. Ofgem envisages that ED3 will have a critical role in the path to achieving net zero by 2050, which could involve a significant change in the level of network investment. In that respect, Ofgem has stated that it will aim to keep the costs of the infrastructure needed for net zero as low as possible through maintaining a low cost of capital and driving further efficiency. The Company submitted its response to the consultation on 15 January 2025 and the process will culminate with Ofgem expected to issue its Draft Determinations in June 2027 and its Final Determinations in December 2027. Page 15 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 (continued) PRINCIPAL RISKS AND UNCERTAINTIES The Northern Powergrid Group operates a structured and disciplined approach to the management of risk as part of its overall risk management policy and in support of its financial reporting practices. A system is in place to facilitate the identification of new and emerging opportunities and risks, including those associated with the achievement of the Northern Powergrid Group’s strategic objectives and Core Principles. This includes regular reviews of the macro environment as well as risks that arise from within functional business areas. Once identified, key risks and their respective controls and mitigation plans are continually assessed and formally reviewed on a quarterly basis by the Risk Advisory Board ("RAB") in order that they are managed to an acceptable level in accordance with the Northern Powergrid Group’s risk appetite. The Northern Powergrid Group’s risk appetite is determined by a process based on risks, issues and consequences. The level of tolerance varies in accordance with the pursuit of objectives and with caution or acceptance adopted depending on whether risks can be influenced or mitigated fully, partly or not at all. The RAB routinely reports its findings to the board to ensure the directors are sufficiently appraised of the risk exposure associated with the pursuit of the Company’s long-term strategy. The risk management programme includes regular reviews of the crisis management, disaster recovery and major incident plans. To determine the level of disaster preparedness and responsiveness against threats to business continuity, risk management plans and processes are periodically tested. This self-evaluation approach is reinforced by Berkshire Hathaway Energy, which benchmarks risk management activities across its business units and shares significant lessons learned. The business continuity and disaster recovery plans are tested regularly to ensure that as required, operational performance can remain resilient and employees are able to perform their duties safely. Principal Risks During the year, 'Customer Service' was added as a risk and two risks were renamed to ‘enabling the energy transition’ (from transmission connection delays) and ‘regulatory framework’ (from the outcome of the regulatory price control). No other notable changes have taken place. The Northern Powergrid Group’s principal risks are not ranked or prioritised in any particular order. Given their sensitivity and ever-changing nature, the board has elected not to disclose the risk appetite associated with each risk. Cyber Security Unauthorised access or compromise of the Information Technology or Operational Technology networks, resulting in loss of network control and availability. Unauthorised access or loss of large volumes of data or sensitive data. Mitigation • Robust cyber security risk mitigation programme is in place. • Accreditation under the ISO 27001 Information Security standard for operational, customer, employee and financial information. • Compliant to the Network Information Security Directive and the Basic Cyber Assessment Frameworks. • Compliance with the Centre for Internet Security Critical Security Controls. Regulatory and policy positioning Decisions taken resulting in negative impacts to our business model. Mitigation • Continued dialogue and engagement with Ofgem. • Active involvement in consultations on price controls. • Robust budgetary and financial position. • Optimising price control reopener mechanisms. Network resilience Loss of the Network due to significant weather events, targeted physical attack or catastrophic asset failure resulting in sustained or widespread loss of essential supply. Mitigation • Major incident and crisis management policies, plans and governance arrangements in place. • An industry mutual aid agreement exists. • Grid resilience programme and audits. • Vulnerable site protocols. Page 16 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 (continued) Safety Fatality or serious harm caused to an employee or a third party. Mitigation • Overseen by the Health and Safety Committee. • Safety Health and Improvement Plan and associated policies and procedures. • Health and safety training, enhanced audit programme and inspection regimes are in place. • ISO45001 safety management system in place. Environment and climate protection Failure to prevent network assets from having a significant negative impact on the environment. Mitigation • Programme to reduce fluid loss, business carbon footprint and remove assets containing PCBs. • Environment improvement plan, Environment Action Plan and science-based targets. • Path to carbon neutrality by 2040. • Incident response, waste management and habitat protection programmes. • ISO14001 environmental management system in place. Resource availability Access to and availability of skilled resource resulting in an inability to deliver work programmes. Mitigation • Mix of direct labour and contracted resource is used. • Workforce renewal programmes in place to recruit and retain employees. • Ongoing training and development builds internal capability. • Employee engagement, health and well-being initiatives in place. • Good relationships with trade unions representatives. Enabling the energy transition The Network either becomes, or is perceived to have become, an obstacle to decarbonisation and energy transition. Mitigation • Overseen by a steering group. • Change programme in place to improve customer connection lead times and customer communication. • Part of an industry work programme through the ENA. • Policy team engages and with Government and Ofgem. • Stakeholder engagement programme scrutinised by the ISG and DRP. Customer Service Loss of repuation, financial penalties. Mitigation • Customer service improvement plan. • Engagement with the ISG and DRP. • Industry collaboration. • Relationship with customer support partners and organisations. • Power of 10 (out of 10) initiative. • Employee training and development. Page 17 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 (continued) Efficiency and output performance Failure to maintain cost and output performance competitiveness in the industry. Mitigation • Robust business planning process. • Robust financial controls in place. • Monthly executive business performance review. • Comprehensive “Efficient Output Delivery” programme. Financial risks The exposure to interest rate, tax, liquidity and treasury risks. Mitigation • Financed by long-term borrowings at fixed rates and access to short-term borrowing facilities at floating rates. • As at 31 December 2024, 100% of the Company's long-term borrowings were at fixed rates and the average maturity for these borrowings was 14 years. • Financial covenant monitoring is in place. Internal Control The Group's internal control environment exists to support the financial reporting process, including regular reporting, a series of operational and financial policies, investigations undertaken by internal audit and a stringent process for ensuring the implementation of internal audit recommendations. In addition, the Company utilises comprehensive business planning procedures, regularly reviews KPIs to assess progress towards its goals, and the internal audit function provides independent scrutiny. Financial controls include centralised treasury operations and established procedures for the planning, approving and monitoring of major capital expenditure. The RAB monitors the effectiveness of internal controls and reports on its findings to the board and Berkshire Hathaway Energy. As part of the statutory reporting process, the Company’s external auditor reviews and tests a sample of internal controls and reports their findings and recommendations for improvements to the board. Controls which are applicable to financial decisions are governed via a schedule of delegations of authority which are approved by the board (and applies to the Northern Powergrid Group) for the purpose of enabling the senior management team to make decisions up to certain financial limits, above which point the decision making reverts to the directors. These limits reflect the board’s level of risk appetite and are reviewed regularly. In accordance with Berkshire Hathaway Energy’s requirements to comply with the Sarbanes-Oxley Act, the Company undertakes a quarterly risk control assessment confirming that the effectiveness of the system of internal controls have been reviewed during the year. A self-certification process is in place, in support of this review, requiring certain senior managers to confirm that the system of internal control in their area of the business is operating effectively. Consequently, the directors believe that a robust system of risk assessment and management is in place. The Northern Powergrid Group does not have a specific human rights policy. However, in accordance with the Core Principles, it remains fully committed to operating ethically and responsibly and with fairness and integrity. This is implemented through its policies and procedures, which are applicable to all stakeholder groups and encompasses employees’ health, safety and welfare, dealings with customers (particularly those who are vulnerable), the impact of the Northern Powergrid Group on the environment and the contribution to sustainability. To ensure that the Northern Powergrid Group maintains the highest level of ethical standards in the conduct of its business, Berkshire Hathaway Energy's Code of Conduct has been adopted (See ‘Employees’). The Northern Powergrid Group has robust procedures in place to meet the requirements of the Bribery Act 2010 for which every employee must undertake annual training. Page 18 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 (continued) Section 172(1) statement Decision-making at the Board All matters which under the Company’s governance arrangements are reserved for decision by the directors are presented at board meetings. Directors are briefed on any potential impacts and risks for customers, and other stakeholders and how they are to be managed. The directors take these factors into account before making decisions, which together they believe are in the best interests of the Company and its member. Long-term sustainability As referenced throughout the Strategic Report, the Company’s business model is to make sufficient profit in order to invest in the Network thereby, ensuring the integrity of the electricity supply for its customers. To achieve this objective, the Company delivers its service to fulfil the needs of the stakeholders with whom it interacts and in doing so, ensures all business relationships are conducted in an open and transparent manner. Consequently, fostering business relationships is a prerequisite of the activity performed by the Company in the pursuit of its goals and the long-term sustainability of the Company is at the forefront of decision-making. The Company’s policy in respect of engaging with stakeholders is governed by the Core Principles and the Code of Conduct. The Core Principle of ‘Regulatory Integrity’ defines the Northern Powergrid Group’s commitment to comply with all laws wherever it does business and the expectation that all employees (including directors) manage their activities in a manner that is compliant with all standards, regulations and corporate policies. In addition, the Code of Conduct requires adherence to the highest level of ethical conduct and fair dealings with all customers, suppliers and competitors. Employees As detailed in ‘Employee Commitment’, the Company works hard to ensure the health and safety of employees and to provide them with opportunities for advancement alongside fair terms whilst remunerating appropriately. Activities undertaken by the board in the year included reviewing health and safety performance, monitoring key appointment changes and reviewing the Company’s gender pay gap report. Customers Customers, whether they are domestic or commercial, are the primary stakeholder group served by the Company and therefore the services offered are all tailored to provide a benefit or enhance an experience. During the year, the board regularly reviewed performance levels, closely monitored the response in respect of major storms and associated Network resilience and engaged with the Chair of the ISG. Further detail of the Company’s relationship with customers and the support programmes provided is discussed in ‘Customer Service’. Producers and suppliers The Company works closely with its supply chain and has measures in place to ensure the treatment of all supplies is fair and equitable. Relations with suppliers is managed using a supplier registration system which supports a robust and transparent procurement process and ensures strict compliance with the prevention of slavery and human trafficking. As a consequence, the system allows the Company to make informed decisions which align with its values when awarding contracts. When considering suppliers, the board advocates prompt payment practices, which are reviewed regularly by the internal audit function, and the implementation of procedures to reduce the risk of modern slavery in supply chains - as set out in the Company’s annual modern slavery statement (available via the Northern Powegrid Group website). Financial stakeholders Financial information is routinely made available to financial stakeholders, including relationship banks and bondholders. Directors engage with stakeholders when entering into new financial arrangements. During the year, the board approved an interim dividend, the annual, interim and Regulatory accounts and the tax strategy and met representatives from the Company’s external auditor. Page 19 ![Graphics]() Northern Powergrid (Northeast) plc Strategic Report for the Year Ended 31 December 2024 (continued) Community and environment Each director is required to take all reasonable steps to minimise any detrimental impact the Company’s operations may have on the environment (see ‘Environmental Respect’). The Company provides a range of charitable and community activities to support customers with fuel poverty and safety around electricity (‘Corporate Responsibility’). During the year, the directors routinely reviewed environmental performance and made decisions pursuant to Environmental Respect. Regulator The Company is in regular dialogue with Ofgem concerning new policy development and emerging risks or opportunities within the sector. As outlined in ‘Regulatory Integrity’, to meet its licence conditions, the Company and the directors provide regular reporting to Ofgem (including the annual regulatory certificates and Regulatory Accounts), contribute to various regulatory consultations and monitor regulatory compliance. Given the implications on the Company’s long-term strategy, the relationship with Ofgem and the evolving ED3 framework were regular items on the board agenda throughout the year. Acting fairly as between the Company’s owners The Company has one class of ordinary shares which are all held by YEG, a company in the Northern Powergrid Group. During the year the directors declared an interim dividend and approved the Business Plan. As outlined in ‘Strategy’, the Northern Powergrid Group is owned by Berkshire Hathaway Energy. Further details of the shareholder relationship is set out in the ‘Corporate Governance Statement’. Non-financial and sustainability information statement In accordance with Section 414CA(7) of the Companies Act 2006, the directors have elected to set out the information required by Section 414CB (1) to (6) in the group annual report and audited consolidated financial statements of Northern Powergrid Holdings Company, a copy of which, will be published on the Northern Powergrid Group's corporate website. Approved by the Board on 11 June 2025 and signed on its behalf by: ......................................... A P Jones Director Page 20 ![Graphics]() Northern Powergrid (Northeast) plc Directors' Report for the Year Ended 31 December 2024 The directors present their report together with the auditor's report and the financial statements for the year ended 31 December 2024. Dividends During the year, an interim dividend of £300.0 million was paid (2023: £31.4 million). The directors recommend that no final dividend be paid in respect of the year (2023: £nil). An interim dividend of £160.0 million was paid in February 2025. The Company's dividend policy is that dividends will be paid only after having due regard to available distributable reserves, available liquid funds and the financial resources and facilities needed to enable the Company to carry on its business for at least the next year, with the Company’s long-term prospects and viability in mind. In addition, the level of dividends is set to maintain sufficient equity in the Northern Powergrid Group so as not to jeopardise any investment grade credit ratings. These strict parameters align with the conditions set out in the distribution licence and are considered carefully by the board so as to ensure that the payment of any dividend does not cause the Company to breach any licence obligations in the future. Directors of the Company The directors, who held office during the year and up to the date of signing, were as follows: A J Maclennan A P Jones A R Marshall P A Jones P C Taylor T H France During the year none of the directors had an interest in any contract which was material to the business of the Company; and up to the date of approval of the Report of the Directors, an indemnity contained in the Company's Articles of Association was in force for the benefit of the directors of the Company and as directors of associated companies, which was a qualifying indemnity provision for the purposes of the Companies Act 2006. Future Developments The financial position of the Company, as at 31 December 2024, is shown in the statement of financial position. With the exception of the aforementioned £160 million dividend, there have been no significant events since the year end. The directors intend that the Company will continue to implement the Business Plan during the remainder the ED2 period, and by delivering the strategic objectives linked to the Core Principles, the Company will continue to develop its business by efficiently investing in the Network and improving the quality of supply and service provided to customers. The Company intends to continue to embrace the role of DSO by expanding its energy systems operations in order to allow its Network to form a key part of a whole energy system, which fosters flexibility and facilitates decarbonisation. Research and Development The Group supports a programme of research that is expected to contribute to higher standards of performance and a more cost-effective operation of its business. During the year, the Company invested £0.9 million (2023: £2.0 million) (Note 5 to the financial statements) in its research and development activities. Financial Instruments Details of financial risks are included in the Principal Risks and Uncertainties in the Strategic Report and Note 29 to the financial statements. As at 31 December 2024 and during the year it was the Group's policy not to hold any derivative financial instruments. Page 21 ![Graphics]() Northern Powergrid (Northeast) plc Directors' Report for the Year Ended 31 December 2024 (continued) Stakeholder engagement and environmental disclosures In accordance with Paragraphs 10, 11 and 15 of Schedule 7 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, details concerning the employment of disabled persons, the relationship and engagement with employees and those with whom the Company does business, in addition to information concerning greenhouse gas emissions can be found in the Section 172 Statement and the Strategic Report (Environmental Respect and Employee Commitment). CORPORATE GOVERNANCE STATEMENT The directors have elected to apply the exemption set out in Section 1B.1.6R of the Disclosure and Transparency Rules (“DTR”). See ‘Principal risks and uncertainty’ and ‘Internal control’ in the Strategic Report for details of internal control and risk management systems. Additional information concerning the Corporate Governance arrangements applicable to the Company, are set out in the Annual Report and Accounts of Northern Electric plc. In respect of the Company’s diversity policy, all appointments are based on merit with due regard for diversity, inclusion and equal opportunity. The Northern Powergrid Group does not set diversity targets. Audit Committee The board of Northern Powergrid Holdings Company has established an audit committee for the Northern Powergrid Group under delegated terms of reference which carries out the functions required by DTR 7.1.3 R. Committee members: • M Knowles - Independent member • J Reynolds - Non-executive Director (Chair) • A P Jones, Finance Director Page 22 ![Graphics]() Northern Powergrid (Northeast) plc Directors' Report for the Year Ended 31 December 2024 (continued) STATEMENT OF DIRECTORS RESPONSIBILITIES The directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare Group and parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with UK-adopted international accounting standards and applicable law and have elected to prepare the parent Company financial statements on the same basis. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent Company financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable, relevant and reliable; • state whether they have been prepared in accordance with UK-adopted international accounting standards; • assess the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and • use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors’ Report, and Corporate Governance Statement that complies with that law and those regulations. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. In accordance with Disclosure Guidance and Transparency Rule (“DTR”) 4.1.16R, the financial statements will form part of the annual financial report prepared under DTR 4.1.17R and 4.1.18R. The auditor’s report on these financial statements provides no assurance over whether the annual financial report has been prepared in accordance with those requirements. Responsibility statement of the directors in respect of the annual financial report We confirm that to the best of our knowledge: • the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and • the strategic report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. Page 23 ![Graphics]() Northern Powergrid (Northeast) plc Directors' Report for the Year Ended 31 December 2024 (continued) Going Concern A review of the Company's business activities during the year, together with details regarding its future development, performance and position, its objectives, policies and processes for managing its capital, its financial risk management objectives and details of its exposures to trading risk, credit risk and liquidity risk are set out in the Strategic Report, the Directors' Report and the appropriate notes to the financial statements. The directors have responsibility over performing a going concern assessment and when considering continuing to adopt the going concern basis in preparing the annual reports and financial statements, they have considered a number of factors, including: • The Company is a stable electricity distribution business operating an essential public service and is regulated by GEMA. In carrying out its functions, GEMA has a statutory duty under the Electricity Act 1989 to have regard to the need to secure that licence holders are able to finance the activities, which are the subject of obligations under Part 1 of the Electricity Act 1989 (including the obligations imposed by the electricity distribution licence) or by the Utilities Act 2000; • The Company is profitable with strong underlying cash flows; • The cash flow forecasts indicate that, in both the base and reasonably possible downside scenario, the Company will require funding through the intercompany current account mechanism to meet its liabilities as they fall due for at least 12 months from the approval of the financial statements, the going concern assessment period; • Northern Powergrid Holdings Company, being the ultimate UK parent company, has indicated its intention to continue to make available such funds as are needed by the Company through the intercompany current account mechanism; • The Company is financed by long-term borrowings with an average maturity of 24 years and has access to short-term committed borrowing facilities of £119 million provided by Barclays Bank plc, Lloyds Bank plc, HSBC UK Bank plc and Royal Bank of Canada; • The Company benefits from strong investment-grade credit ratings and has access to a range of financing options including the capital markets. • Consideration was also given to the obligations contained in the Company's and Northern Powergrid (Yorkshire) plc's distribution licences to provide Ofgem with annual certificates, confirming that the directors have a reasonable expectation that the Company and Northern Powergrid (Yorkshire) plc will have sufficient financial and operational resources available for the continuation of business for a period of at least 12 months. The board determined any material variations to the assumptions used when providing those certificates were unlikely within the eight-year period or beyond. Consequently, after making their assessment, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence and meet its liabilities as they fall due for at least 12 months from the date of approval of these financial statements. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements. Page 24 ![Graphics]() Northern Powergrid (Northeast) plc Directors' Report for the Year Ended 31 December 2024 (continued) Disclosure of information to the auditor Each director has taken steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information. The directors confirm that there is no relevant information that they know of and of which they know the auditor is unaware. This confirmation is given and should be interpreted in accordance with the provisions of s418 of the companies Act 2006. Reappointment of auditor KPMG will continue in office in accordance with the provisions in Section 487 of the Companies Act 2006 and has indicated its willingness to do so. Approved by the Board on 11 June 2025 and signed on its behalf by: ......................................... A P Jones Director Page 25 ![Graphics]() Northern Powergrid (Northeast) plc Independent Auditor's Report to the Members of Northern Powergrid (Northeast) plc 1 Our opinion is unmodified We have audited the financial statements of Northern Powergrid (Northeast) Plc (“the Company”) for the year ended 31 December 2024 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows, the parent Company Statement of Financial Position, the parent Company Statement of Changes in Equity, the parent Company Statement of Cash Flows, and the related notes, including the accounting policies in note 2. In our opinion: • the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 31 December 2024 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards; • the parent Company financial statements have been properly prepared in accordance with UK-adopted international accounting standards and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent with our report to the audit committee. We were first appointed as auditor by the shareholders on 18th September 2024. The period of total uninterrupted engagement is for the one financial year ended 31 December 2024. We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard were provided. 2 Key audit matters: our assessment of risks of material misstatement Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We summarise below the key audit matters, in decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters. The split of total costs between operating and capital expenditure and the assessment of what is directly attributable to Property, Plant and Equipment Expenditure allocated to property, plant and equipment: £58.6m Refer to page 45 (critical accounting estimates and judgements) and pages 43-93 (accounting policies and financial disclosures). Page 26 ![Graphics]() Northern Powergrid (Northeast) plc Independent Auditor's Report to the Members of Northern Powergrid (Northeast) plc (continued) The risk (Group and parent Company) - Accounting Treatment The Group and Company undertake major capital projects, including enhancements to the distribution network. The determination of costs as capital or operating expenditure, in line with IAS 16 Property, Plant and Equipment, depends on the ability to distinguish between enhancement and maintenance works. Under IAS 16, expenditure is capitalised when it is probable that the future economic benefits associated with the item will flow to the entity where such expenditure enhances or increases capacity of the network. We determined that there is an elevated level of judgement involved in determining the costs to be capitalised or expensed, and an elevated level of estimation uncertainty involved, with a potential range of reasonable outcomes greater than our materiality for the financial statements as a whole. Our response We performed the tests below rather than seeking to rely on any of the Group and Company’s controls because the nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed procedures described. Our procedures included: Accounting analysis : Assessment of the Group and Company’s capitalisation policy for compliance with IAS 16; Test of details : critically assessed the capital nature of a sample of additions against the capitalisation policy; Methodology implementation: assessed the mathematical accuracy of the model used to calculate the level of expenditure capitalised, for a sample of costs capitalised; Test of details: challenged the Group and Company on the selection and application of methods and performed sensitivity analysis on the percentage of indirect expenditure that is capitalised, based on our understanding of the business and the nature of the costs; and Assess transparency: assessed the adequacy of the Group’s and Company’s disclosures with respect to its capitalisation policy, including the judgement involved in determining whether expenditure is capital in nature and the estimation involved in setting the capitalisation rate of 41.8%, Our Results: We found the Group’s and Company’s capitalisation of expenditure to be acceptable Page 27 ![Graphics]() Northern Powergrid (Northeast) plc Independent Auditor's Report to the Members of Northern Powergrid (Northeast) plc (continued) 3 Our application of materiality and an overview of the scope of our audit Our application of materiality Materiality for the Group financial statements as a whole was set at £6.6m, determined with reference to a benchmark of Group profit before tax, normalised by averaging over the last three years due to fluctuations in the business cycle, of £173.4m, of which it represents 3.8%. Materiality for the parent Company financial statements as a whole was set at £6.2m determined with reference to a benchmark of the parent Company’s profit before tax, normalised by averaging over the last three years due to fluctuations in the business cycle, of £173.4m, of which it represents 3.6%. In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality was set at 65% of materiality for the financial statements as a whole, which equates to £4.3m for the Group and £4.0m for the parent Company. We applied this percentage in our determination of performance materiality based on our understanding of the control environment obtained as part of our first year audit, and our understanding of the level of identified misstatements during the prior period. We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £0.3m in addition to other identified misstatements that warranted reporting on qualitative grounds. Overview of the scope of our audit We performed risk assessment procedures to determine which of the Group’s components are likely to include risks of material misstatement to the Group financial statements and which procedures to perform at these components to address those risks. In total, we identified 2 components, having considered our evaluation of the Group’s operational and legal structure, and our ability to perform audit procedures centrally. Of those, we identified 1 quantitatively significant component which contained the largest percentages of either total revenue or total assets of the Group, for which we performed audit procedures. Additionally, having considered qualitative and quantitative factors, we selected 1 component with accounts contributing to the specific RMMs of the Group financial statements. Accordingly, we performed audit procedures on 2 components, including the audit of the parent Company. We set the component materialities, ranging from £2.4m to £6.2m, having regard to the mix of size and risk profile of the Group across the components. Our audit procedures covered 100% of Group revenue. We performed audit procedures in relation to components that accounted for 100% of Group profit before tax, and 100% of Group total assets. The scope of the audit work performed was predominately substantive as we placed limited reliance upon the Group’s internal control over financial reporting. Page 28 ![Graphics]() Northern Powergrid (Northeast) plc Independent Auditor's Report to the Members of Northern Powergrid (Northeast) plc (continued) 4 Going concern The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Company or to cease their operations, and as they have concluded that the Group’s and the Company’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”). We used our knowledge of the Group, its industry, and the general economic environment to identify the inherent risks to its business model and analysed how those risks might affect the Group and parent Company’s financial resources or ability to continue operations over the going concern period. The risks that we considered most likely to adversely affect the Group and parent Company’s available financial resources over this period are refinancing risks, uncertainties around inflationary rises in operating costs and regulatory price control outcomes. We considered whether these risks could plausibly affect the liquidity or covenant compliance in the going concern period by comparing severe, but plausible downside scenarios that could arise from these risks individually and collectively against the level of available financial resources and covenants thresholds indicated by the Group’s financial forecasts. Given the purpose of the Group, and since the entity is reliant on financial support from its intermediate parent Company, Northern Powergrid Holdings Company, we assessed the risk that this support would not be available. Our procedures on going concern also included: • Inspecting letters received by the directors indicating the intermediate parent Company’s intention to provide this support; • Inspecting and critically assessing the internally provided cash flow projections over the going concern assessment period for the wider group, and the level of available financial resources indicated by those financial projections to assess the ability of the intermediate parent Company to make scheduled repayments to the Group, including repayments in line with the Group’s external debt obligations; and • Assessing the business reasons why the intermediate parent Company may or may not choose to provide this support. We also assessed the completeness of the going concern disclosure. Our conclusions based on this work: • we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate; • we have not identified, and concur with the directors’ assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Group’s or Company's ability to continue as a going concern for the going concern period; and • We found the going concern disclosure in Note 2 to be acceptable. However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group or the Company will continue in operation. Page 29 ![Graphics]() Northern Powergrid (Northeast) plc Independent Auditor's Report to the Members of Northern Powergrid (Northeast) plc (continued) 5 Fraud and breaches of laws and regulations - ability to detect Identifying and responding to risks of material misstatement due to fraud To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included: • Enquiring of directors, the audit committee, and internal audit, and inspection of policy documentation as to the Group’s high-level policies and procedures to prevent and detect fraud, including the internal audit function, and the Group’s channel for “whistleblowing”, as well as whether they have knowledge of any actual, suspected or alleged fraud. • Reading Board minutes and attending Group audit committee meetings. • Considering remuneration incentive schemes and performance targets for management and directors. • Using analytical procedures to identify any unusual or unexpected relationships. We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit. As required by auditing standards, and taking into account possible pressures to meet profit targets and our overall knowledge of the control environment, we perform procedures to address the risk of management override of controls, in particular the risk that Group management may be in a position to make inappropriate accounting entries and the risk of bias in accounting estimates and judgements such as the overhead capitalisation assumption. On this audit we do not believe there is a fraud risk related to revenue recognition because the lack of material judgement or estimation and, due to the nature of the industry, the Group operates in a stable, regulated market where the energy volumes are monitored and supplied by an independent third party. We did not identify any additional fraud risks. We performed procedures including: • Identifying journal entries to test at the Group level and components based on risk criteria and comparing the identified entries to supporting documentation. These included unusual postings to revenue, cash, loans and borrowings, property plant and equipment, and legal expenses. • Assessing whether the judgements made in making accounting estimates are indicative of a potential bias. Identifying and responding to risks of material misstatement related to compliance with laws and regulations We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience, through discussion with the directors and other management (as required by auditing standards), and from inspection of the Group’s regulatory and legal correspondence and discussed with the directors and other management the policies and procedures regarding compliance with laws and regulations. As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment including the entity’s procedures for complying with regulatory requirements. We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit. The potential effect of these laws and regulations on the financial statements varies considerably. Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation (including related companies’ legislation), distributable profits legislation, taxation legislation, and regulatory requirements governing distribution revenue and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items. Page 30 ![Graphics]() Northern Powergrid (Northeast) plc Independent Auditor's Report to the Members of Northern Powergrid (Northeast) plc (continued) Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or the loss of the Group’s license to operate. We identified the following areas as those most likely to have such an effect: health and safety, data protection laws, anti-bribery, employment law, environmental, Ofgem regulations and certain aspects of company legislation recognising the nature of the Group’s activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the directors and other management and inspection of regulatory and legal correspondence, if any. Therefore, if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach. Context of the ability of the audit to detect fraud or breaches of law or regulation Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of fraud, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations. 6 We have nothing to report on the other information in the Annual Report The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information. Strategic report and directors’ report Based solely on our work on the other information: • we have not identified material misstatements in the strategic report and the directors’ report; • in our opinion the information given in those reports for the financial year is consistent with the financial statements; and • in our opinion those reports have been prepared in accordance with the Companies Act 2006. 7 We have nothing to report on the other matters on which we are required to report by exception Under the Companies Act 2006, we are required to report to you if, in our opinion: • adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent Company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. We have nothing to report in these respects. Page 31 ![Graphics]() Northern Powergrid (Northeast) plc Independent Auditor's Report to the Members of Northern Powergrid (Northeast) plc (continued) 8 Respective responsibilities Directors’ responsibilities As explained more fully in their statement set out on page 23, the directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. The Company is required to include these financial statements in an annual financial report prepared under Disclosure Guidance and Transparency Rule 4.1.17R and 4.1.18R. This auditor's report provides no assurance over whether the annual financial report has been prepared in accordance with those requirements 9 The purpose of our audit work and to whom we owe our responsibilities This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Andrew Williamson (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 319 St Vincent Street, Glasgow G2 5AS 11 June 2025 Page 32 ![Graphics]() Northern Powergrid (Northeast) plc Consolidated Income Statement for the Year Ended 31 December 2024 Note 2024 £ 000 (As restated) 2023 £ 000 Revenue 4 536,365 435,747 Cost of sales (21,458) (42,503) Gross profit 514,907 393,244 Distribution costs (155,755) (144,055) Administrative expenses (95,045) (83,183) Operating profit 6 264,107 166,006 Profit on disposal of property, plant and equipment 5 71 79 Finance income 7 5,110 13,282 Finance costs 7 (33,475) (33,712) Profit before tax 235,813 145,655 Income tax expense 11 (57,937) (32,045) Profit for the year 177,876 113,610 Profit attributable to: Owners of the Company 177,876 113,610 Further detail of prior year adjustments affecting the Income Statement can be found in Note 3. The notes on pages 43 to 93 form an integral part of these financial statements. Page 33 ![Graphics]() Northern Powergrid (Northeast) plc Consolidated Statement of Comprehensive Income for the Year Ended 31 December 2024 2024 £ 000 2023 £ 000 Profit for the year from continuing operations 177,876 113,610 Total comprehensive income for the year 177,876 113,610 Total comprehensive income attributable to: Owners of the Company 177,876 113,610 The notes on pages 43 to 93 form an integral part of these financial statements. Page 34 ![Graphics]() Northern Powergrid (Northeast) plc (Registration number: 02906593) Consolidated Statement of Financial Position as at 31 December 2024 Note 31 December 2024 £ 000 (As restated) 31 December 2023 £ 000 Assets Non-current assets Property, plant and equipment 12 3,084,584 2,949,201 Right of use assets 13 20,884 22,128 Intangible assets 14 54,177 50,605 3,159,645 3,021,934 Current assets Inventories 16 28,544 29,277 Trade and other receivables 17 127,842 345,798 Cash and cash equivalents 18 - 23 156,386 375,098 Total assets 3,316,031 3,397,032 Equity and liabilities Equity Share capital 19 (200,000) (200,000) Retained earnings (996,747) (1,118,871) Equity attributable to owners of the company (1,196,747) (1,318,871) Non-current liabilities Long-term lease liabilities 22 (17,019) (17,754) Loans and borrowings 21 (1,057,728) (1,057,393) Provisions 23 - (55) Trade and other payables 24 (6,549) - Deferred revenue from customer contracts 25 (693,395) (672,734) Deferred tax liabilities 11 (143,466) (134,271) (1,918,157) (1,882,207) Current liabilities Current portion of long-term lease liabilities 22 (4,765) (5,055) Trade and other payables 24 (136,922) (132,082) Loans and borrowings 21 (19,285) (21,922) Current tax liability 11 (6,412) (5,162) Deferred revenue from customer contracts 25 (32,181) (30,219) Provisions 23 (1,562) (1,514) (201,127) (195,954) Total liabilities (2,119,284) (2,078,161) Total equity and liabilities (3,316,031) (3,397,032) The notes on pages 43 to 93 form an integral part of these financial statements. Page 35 ![Graphics]() Northern Powergrid (Northeast) plc (Registration number: 02906593) Consolidated Statement of Financial Position as at 31 December 2024 (continued) Further detail of prior year adjustments affecting the Statement of Financial Position can be found in Note 3. Approved by the Board on 11 June 2025 and signed on its behalf by: ......................................... A P Jones Director The notes on pages 43 to 93 form an integral part of these financial statements. Page 36 ![Graphics]() Northern Powergrid (Northeast) plc (Registration number: 02906593) Company Statement of Financial Position as at 31 December 2024 Note 31 December 2024 £ 000 (As restated) 31 December 2023 £ 000 Assets Non-current assets Property, plant and equipment 12 3,084,584 2,949,201 Right of use assets 13 20,884 22,128 Intangible assets 14 54,177 50,605 Investments in subsidiaries, joint ventures and associates 15 50 50 3,159,695 3,021,984 Current assets Inventories 16 29,603 29,277 Trade and other receivables 17 125,259 349,356 Cash and cash equivalents 18 - 23 154,862 378,656 Total assets 3,314,557 3,400,640 Equity and liabilities Equity Share capital 19 (200,000) (200,000) Retained earnings (998,590) (1,120,678) Total equity (1,198,590) (1,320,678) Non-current liabilities Long-term lease liabilities 22 (17,019) (17,754) Loans and borrowings 21 (1,057,725) (1,057,389) Provisions 23 - (55) Trade and other payables 24 (6,549) - Deferred revenue from customer contracts 25 (693,395) (672,734) Deferred tax liabilities 11 (143,466) (134,271) (1,918,154) (1,882,203) Current liabilities Current portion of long-term lease liabilities 22 (4,765) (5,055) Trade and other payables 24 (136,922) (132,082) Loans and borrowings 21 (15,971) (23,733) Income tax liability 11 (6,412) (5,156) Deferred revenue from customer contracts 25 (32,181) (30,219) Provisions 23 (1,562) (1,514) (197,813) (197,759) Total liabilities (2,115,967) (2,079,962) Total equity and liabilities (3,314,557) (3,400,640) The notes on pages 43 to 93 form an integral part of these financial statements. Page 37 ![Graphics]() Northern Powergrid (Northeast) plc (Registration number: 02906593) Company Statement of Financial Position as at 31 December 2024 (continued) Further detail of prior year adjustments affecting the Statement of Financial Position can be found in Note 3. The Directors have taken the exemption offered under section 408 of the Act from publishing a separate statement of profit or loss. The Company reported a profit for the financial year ended 31 December 2024 of £177.9 million (2023: £113.6 million) Approved by the Board on 11 June 2025 and signed on its behalf by: ......................................... A P Jones Director The notes on pages 43 to 93 form an integral part of these financial statements. Page 38 ![Graphics]() Northern Powergrid (Northeast) plc Consolidated Statement of Changes in Equity for the Year Ended 31 December 2024 Share capital £ 000 Retained earnings £ 000 Total £ 000 At 1 January 2024 200,000 1,118,871 1,318,871 Profit for the year - 177,876 177,876 Total comprehensive income - 177,876 177,876 Dividends - (300,000) (300,000) At 31 December 2024 200,000 996,747 1,196,747 Share capital £ 000 Retained earnings £ 000 Total £ 000 At 1 January 2023 200,000 1,036,661 1,236,661 Profit for the year - 113,610 113,610 Total comprehensive income - 113,610 113,610 Dividends - (31,400) (31,400) At 31 December 2023 200,000 1,118,871 1,318,871 The notes on pages 43 to 93 form an integral part of these financial statements. Page 39 ![Graphics]() Northern Powergrid (Northeast) plc Company Statement of Changes in Equity for the Year Ended 31 December 2024 Share capital £ 000 Retained earnings £ 000 Total £ 000 At 1 January 2024 200,000 1,120,678 1,320,678 Profit for the year - 177,912 177,912 Total comprehensive income - 177,912 177,912 Dividends - (300,000) (300,000) At 31 December 2024 200,000 998,590 1,198,590 Share capital £ 000 Retained earnings £ 000 Total £ 000 At 1 January 2023 200,000 1,038,447 1,238,447 Profit for the year - 113,631 113,631 Total comprehensive income - 113,631 113,631 Dividends - (31,400) (31,400) At 31 December 2023 200,000 1,120,678 1,320,678 The notes on pages 43 to 93 form an integral part of these financial statements. Page 40 ![Graphics]() Northern Powergrid (Northeast) plc Consolidated Statement of Cash Flows for the Year Ended 31 December 2024 2024 £ 000 (As restated) 2023 £ 000 Cash flows from operating activities Cash receipts from customers 622,223 521,353 Net cash from operating activities 622,223 521,353 Cash flows from investing activities Transfers to intercompany accounts (587,249) (460,128) Net cash flows used in investing activities (587,249) (460,128) Cash flows from financing activities Interest paid (32,286) (28,206) Repayment of short-term borrowings (2,711) (34,692) Net cash flows (used in)/from financing activities (34,997) (62,898) Net decrease in cash and cash equivalents (23) (1,673) Opening cash and cash equivalents 23 1,696 Closing cash and cash equivalents - 23 Further detail can be found under 'Restatement of Cash Flow Statement' in Note 3. The notes on pages 43 to 93 form an integral part of these financial statements. Page 41 ![Graphics]() Northern Powergrid (Northeast) plc Company Statement of Cash Flows for the Year Ended 31 December 2024 2024 £ 000 (As restated) 2023 £ 000 Cash flows from operating activities Cash receipts from customers 622,223 521,153 Net cash from operating activities 622,223 521,153 Cash flows from investing activities Transfers to intercompany accounts (599,452) (472,331) Net cash flows used in investing activities (599,452) (472,331) Cash flows from financing activities Interest paid (20,083) (20,125) Repayment of short-term borrowings (2,711) (30,571) Net cash flows (used in)/from financing activities (22,794) (50,696) Net decrease in cash and cash equivalents (23) (1,873) Opening cash and cash equivalents 23 1,919 Closing cash and cash equivalents - 23 Further detail can be found under 'Restatement of Cash Flow Statement' in Note 3. The notes on pages 43 to 93 form an integral part of these financial statements. Page 42 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 1 General information The company is a public company limited by share capital, incorporated in England and Wales and domiciled in United Kingdom. The address of its registered office is Lloyds Court, 78 Grey Street, Newcastle upon Tyne, NE1 6AF. These financial statements were authorised for issue by the Board on 10 June 2025. 2 Accounting policies Statement of compliance The financial statements have been prepared in accordance with United Kingdom adopted international accounts standards as issued by the IASB. Summary of material accounting policies and key accounting estimates The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Basis of preparation The financial statements have been prepared in accordance with adopted IFRSs and under historical cost accounting rules. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The Group financial statements incorporate the Accounts of the Company and its wholly owned subsidiary, Northern Electric Finance plc. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Page 43 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 2 Accounting policies (continued) Going concern A review of the Company's business activities during the year, together with details regarding its future development, performance and position, its objectives, policies and processes for managing its capital, its financial risk management objectives and details of its exposures to trading risk, credit risk and liquidity risk are set out in the Strategic Report, the Directors' Report and the appropriate notes to the financial statements. The directors have responsibility over performing a going concern assessment and when considering continuing to adopt the going concern basis in preparing the annual reports and financial statements, they have considered a number of factors, including: • The Company is a stable electricity distribution business operating an essential public service and is regulated by GEMA. In carrying out its functions, GEMA has a statutory duty under the Electricity Act 1989 to have regard to the need to secure that licence holders are able to finance the activities, which are the subject of obligations under Part 1 of the Electricity Act 1989 (including the obligations imposed by the electricity distribution licence) or by the Utilities Act 2000; • The Company is profitable with strong underlying cash flows; • The cash flow forecasts indicate that, in both the base and reasonably possible downside scenario, the Company will require funding through the intercompany current account mechanism to meet its liabilities as they fall due for at least 12 months from the approval of the financial statements, the going concern assessment period; • Northern Powergrid Holdings Company, being the ultimate UK parent company, has indicated its intention to continue to make available such funds as are needed by the Company through the intercompany current account mechanism; • The Company is financed by long-term borrowings with an average maturity of 24 years and has access to short-term committed borrowing facilities of £119 million provided by Barclays Bank plc, Lloyds Bank plc, HSBC UK Bank plc and Royal Bank of Canada; • The Company benefits from strong investment-grade credit ratings and has access to a range of financing options including the capital markets. • Consideration was also given to the obligations contained in the Company's and Northern Powergrid (Yorkshire) plc's distribution licences to provide Ofgem with annual certificates, confirming that the directors have a reasonable expectation that the Company and Northern Powergrid (Yorkshire) plc will have sufficient financial and operational resources available for the continuation of business for a period of at least 12 months. The board determined any material variations to the assumptions used when providing those certificates were unlikely within the eight-year period or beyond. Consequently, after making their assessment, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence and meet its liabilities as they fall due for at least 12 months from the date of approval of these financial statements. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements. Page 44 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 2 Accounting policies (continued) Judgements, estimation and uncertainties Management may be required to make a number of judgements and assumptions regarding the future and about other sources of estimation uncertainity at the end of the reporting period that may have a significant risk of resulting in a material adjustment to the reported amounts of assets and liabilites within the next financial year. Key sources of estimation uncertainty Useful lives of property, plant and equipment The useful economic lives of distribution system assets and other network related facilities, which principally comprise distribution equipment and other technical installations, are estimated based on management experience. When management identifies that actual useful economic lives differ materially from the estimates used, they are adjusted prospectively. This estimation uncertainty creates a risk of a material adjustment to the asset lives, and therefore the depreciation charge in the next financial year. The depreciation charge on these distribution system assets for the year is£100.1m. Income for connections is recognised over the useful life of the associated distribution system asset, the amount recognised in the financial year was £31.5m. Additionally, consideration has been given to any estimates over the longer-term which should be disclosed to allow for an understanding of the financial statements. The Company has no estimates of this nature to disclose. The following are the critical judgements, that the directors have made in the process of applying the Northern Powergrid Group's accounting policies and that have the most significant effect on amounts recognised in the consolidated financial statements: The split of total costs between operating and capital expenditure and the assessment of what is directly attributable to property, plant and equipment. The allocation of expenditure to property, plant and equipment which results in higher capital expenditure and a reduction in operating costs. Costs are capitalised where it is probable that future economic benefits associated with the asset will flow to the enterprise; and the cost of the item can be reliably measured. The allocation of expenditure to capital is derived from a detailed analysis of the costs and their relevant cost drivers, which is reviewed on an annual basis. This portion of costs that are capitalised is an estimation, however there has been no change in the methodology since the prior year. The amount of expenditure capitalised in the year was £58.6 million out of total costs of £140.3 million (2023: £49.6 million out of a total cost of £118.7 million), this is a capitalisation rate of 41.8% (2023: 41.8%). Page 45 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 2 Accounting policies (continued) Changes in accounting policy New standards, interpretations and amendments effective Effective for periods beginning on 1 January 2024: - Amendments to IAS 1: Classification of Liabilities as Current or Non-current - Amendments to IFRS 16: Lease Liability on a Sale and Leaseback - Amendments to IAS 7 and IFRS 7: Supplier Finance Agreements The Directors have considered the new accounting standards issued that are not yet applicable and have noted no material changes are likely to arise. Revenue recognition Recognition The group earns revenue from the provision of services relating to distribution which is recognised by the following means: - Distribution use of system income is primarily recognised on a per unit (volumetric i.e. kWh and capacity (kVA)) and fixed (per 'customer' per day) basis; - Customer contributions income for connections is over the life of the corresponding distribution system asset; - Intercompany recharges for services provided are based on costs incurred; and - Other revenue includes assessment and design fees and disconnections from the network, these are recognised by reference to the proportion of total costs of providing the service. Revenue is recognised in the accounting period when the services are rendered at an amount that reflects the consideration to which the entity expects to be entitled in exchange for fulfilling its performance obligations to customers. Any under/over-recovery in the regulatory year is trued up in subsequent years’ revenue allowances in line with the regulatory framework. Hence, no accounting adjustments are made for under/over-recoveries in the year that they arise as they are contingent on future events. Due to the nature of the national electricity settlements processes billed revenue includes the reconciliations of data for prior periods. Invoices are raised one month in arrears and typically settles within the month. The principles in IFRS are applied to revenue recognition criteria using the following 5 step model: 1. Identify the contracts with the customer 2. Identify the performance obligations in the contract 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations in the contract 5. Recognise revenue when or as the entity satisfies its performance obligations Page 46 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 2 Accounting policies (continued) Fee arrangements Below are details of fee arrangements and how these are measured and recognised, for revenue from the provision of services: • For regulated fees the revenue for the service is recognised on the basis of agreed charging methodologies on a per GWh basis. • For fixed fee arrangements from services revenue is recognised based on the stage of completion and performance obligations met for actual services provided as a proportion of the total fixed fee agreed in the contract. • For fee for service (time) revenue is recognised by time performed on the contract to the year end date using contractual rates specified in the contract. The main performance obligations in contracts consist of the provision of a distribution network to electricity suppliers. For these contracts, through the distribution and connection use of system agreement (DCUSA) the delivery of performance obligations are measured at the balance sheet date, primarily recognised on a per unit (volumetric i.e. kWh and capacity (kVA)) and fixed (per 'customer' per day) basis; Research and development Expenditure on research and development activities are recognised in the income statement as an expense is incurred. Funding received towards research and development activities is recorded as a liability on the balance sheet and credited to the profit and loss account on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Finance income and costs policy Interest income or expense is recognised using the effective interest method. The effective interest method is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the gross carrying amount of the financial asset to the amortised cost of the financial liability. In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the financial asset (when the asset is not credit-impaired) or to the amortised cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis. Page 47 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 2 Accounting policies (continued) Tax The tax expense for the period comprises current and deferred tax. The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the group operates and generates taxable income. Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements and on unused tax losses or tax credits in the group. Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date. The carrying amount of deferred tax assets are reviewed at each reporting date and are reduced to the extent that is no longer probable that the related tax benefit will be realised. Any such reduction is reversed when the probability of future taxable profits improve. Property, plant and equipment Property, plant and equipment is stated in the statement of financial position at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. The cost of property, plant and equipment includes directly attributable incremental costs incurred in their acquisition and installation along with costs from transfer of inventories used in capital projects. Overheads are allocated to property, plant and equipment which are derived from a detailed analysis of operating costs. Assets in the course of construction are carried at cost, less any recognised impairment loss. Costs include professional fees, and, for qualifying assets, borrowing costs capitalised in accordance with the Company's accounting policy. Such assets are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation on these assets, on the same basis as other assets, commences when the assets are commissioned and ready for use. Adopted assets and associated contributions are recorded upon completion where such assets are adopted by the Company under a Deed of Gift adoption agreement. Assets are derecognised when they are disposed of or replaced using the cost of replacement as an estimate of the cost of the original asset at the time it was acquired or constructed; the difference between cost and net book value is charged in the statement of profit or loss. For other assets disposed of where sales proceeds are received, the profit or loss on disposal is recognised in other gains in the statement of profit or loss. Depreciation Depreciation is charged so as to write off the cost of assets, other than land and properties under construction over their estimated useful lives. Depreciation is recognised on a straight line basis as follows: Page 48 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 2 Accounting policies (continued) Asset Class Depreciation Rate Distribution system; - Generation assets 15 years - Metering equipment up to 5 years - Information Technology equipment up to 10 years - Land not depreciated - Other system assets 45 years Buildings; - Freehold up to 60 years - Leasehold lower of lease period or 60 years Non-operational land not depreciated Furniture, fittings and equipment up to 10 years Intangible assets An internally generated intangible asset arising from development is recognised if the conditions set out in IAS 38 relating to the recognition of intangible assets are met. The amount initially recognised for internally-generated intangible asset is the sum of expenditure incurred from the date when the intangible asset first meets the recognition criteria. Amortisation Amortisation is provided on intangible assets so as to write off the cost, less any estimated residual value, over their expected useful economic life as follows: Asset class Amortisation method and rate Software development costs up to 10 years Derecognition An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in the profit or loss when the asset is derecognised. Investments in subsidiaries Investments in subsidiaries are accounted for at cost less impairment. Where the recoverable amount is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Trade receivables Trade receivables are amounts due from customers for services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Trade receivables are recognised initially at the transaction price. They are subsequently measured at transaction price, less provision for impairment. The Company applies the simplified model for the calculation of expected credit losses which may result in a provision for impairment. Page 49 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 2 Accounting policies (continued) Inventories Inventory is not held for sale, consists primarily of spare parts and expected to be consumed in the normal course of operating and maintaining the network assets. Cost is determined using an average cost basis. Cost includes all directly attributable costs incurred in bringing the inventories to their present location and condition. Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at the transaction price and subsequently measured at amortised cost using the effective interest method. Borrowings Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the right to defer settlement must have substance and exist at the reporting date. The terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification as current or non-current. Intercompany Short-term loans (Current Accounts) The Northern Powergrid group operates a central treasury function operated through its subsidiary Yorkshire Electricity Group plc. As a result, every company within the Northern Powergrid group has a relationship with Yorkshire Electricity Group plc as either an intercompany debtor or creditor. Interest periods are for a duration of one month, and the interest is applied to an intercompany debtor balance on the last day of the preceding month at the compounded reference rate (currently SONIA) applicable under the most recent revolving facility agreement to which Northern Powergrid Holdings Company is a party. Monthly interest is applied to an intercompany creditor balance on the last day of the preceding month at the aggregate of the compounded reference rate (currently SONIA) and the margin (currently 0.2%) applicable under the most recent revolving facility agreement to which Northern Powergrid Holdings Company is a party. The intercompany debtor or creditor balance will be repaid at the end of each month, or if still required will be rolled over monthly. Provisions Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that the group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the reporting date and are discounted to present value where the effect is material. Page 50 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 2 Accounting policies (continued) Leases The Group applies IFRS 16 to all leases (except as noted below) which include buildings, land and fleet vehicles. The right-of-use assets are initially measured at the amount of the lease liability plus any initial direct costs incurred by the lessee, discounted at the rate implicit in the lease if that can be readily determined. If that rate cannot be readily determined, the lessee shall use their incremental borrowing rate. The Group has taken practical expedients as per below: - For short-term leases (lease term of 12 months or less) and leases of low-value assets less than £5k (which includes personal computers, small items of office furniture and telephones), the Company has opted to recognise a lease expense on a straight-line basis as permitted by IFRS 16. This expense is presented within ‘administrative expenses’ in the Statement of Profit or Loss. - Applies the implicit rate in the lease, and uses the IBR when this isn't readily available. The weighted average lessee's incremental borrowing rate is applied to determine the present value of the lease liabilities during the current period was 5.5% in comparison to the incremental borrowing rate used in 2023 of 2.33%. The Group recognises deprecation of right-of-use assets (within administration expenses) and interest on lease liabilities (within finance costs) in the Statement of Profit and Loss. Within the Statement of cash flow, the Company separates the total amount of cash paid between the principal portion and the interest, both of which are presented within financing activities. Right-of-use assets are depreciated over the shorter of the useful life of the asset or the lease term. For information regarding the depreciation charge per class of asset and carrying value, please refer to Note 12 Right of use assets. Impairment of non-financial assets At the balance sheet date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where the recoverable amount is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Share capital Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material, the initial measurement is on a present value basis. Dividends Dividend distribution to the company’s shareholders is recognised as a liability in the company’s financial statements in the period in which the dividends are approved by the company’s shareholders. Page 51 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 2 Accounting policies (continued) Defined benefit pension obligation The Group contributes to the Northern Powergrid Group of the Electricity Supply Pension Scheme (the "DB Scheme"), a defined benefit scheme that shares risk between various entities under common control. There is no contractual agreement or stated policy for charging the net defined benefit cost for the plan as a whole to individual group entities and accordingly the Group financial statements account for the Northern Powergrid Group of the ESPS as if it were a defined contribution scheme, full disclosure of the DB Scheme can be found in the accounts of Northern Electric plc. Contributions to the Northern Powergrid Group of the ESPS are charged to the statement of profit or loss or capitalised as part of property, plant and equipment. Contributions are agreed through agreement between the Trustees of the DB Scheme and the Northern Powergrid Group. The capital costs of ex-gratia and supplementary pensions are normally charged to the statement of profit or loss in the period in which they are granted. The Group also participates in a defined contribution scheme. Contributions payable to the defined contribution scheme are charged to the statement of profit or loss in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the statement of financial position. Financial instruments Initial recognition Financial assets and financial liabilities comprise all assets and liabilities reflected in the statement of financial position, although excluding property, plant and equipment, investment properties, intangible assets, deferred tax assets, prepayments, deferred tax liabilities and employee benefits plan. The group recognises financial assets and financial liabilities in the statement of financial position when, and only when, the group becomes party to the contractual provisions of the financial instrument. Financial assets are initially recognised at fair value. Financial liabilities are initially recognised at fair value, representing the proceeds received net of premiums, discounts and transaction costs that are directly attributable to the financial liability. Subsequent to initial measurement, financial assets and financial liabilities are measured at amortised cost. Financial assets at amortised cost A financial asset is measured at amortised cost if it meets both of the following conditions:- · the assets are held within a business model whose objective is to hold assets in order to collect contractual cash flows; and · the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial liabilities at amortised cost All financial liabilities are measured at amortised cost using the effective interest rate method. Derecognition Financial assets The Group derecognises a financial asset when; - the contractual rights to the cash flows from the financial asset expire, - it transfers the right to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred; or - the group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. On derecognition of a financial asset, the difference between the carrying amount of the asset and the sum of the consideration received is recognised as a gain or loss in the profit or loss. Page 52 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 2 Accounting policies (continued) Financial liabilities The Group derecognises a financial liability when its contractual obligations are discharged, cancelled, or expire. Modification of financial assets and financial liabilities Financial assets If the terms of a financial asset are modified, the Group evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, then the contractual rights to the cash flows from the original financial asset are deemed to expire. In this case the original financial asset is derecognised and a new financial asset is recognised at either amortised cost or fair value. If the cash flows are not substantially different, then the modification does not result in derecognition of the financial asset. In this case, the group recalculates the gross carrying amount of the financial asset and recognises the amount arising from adjusting the gross carrying amount as a modification gain or loss in the statement of income. Financial liabilities If the terms of a financial liabilities are modified, the Group evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, then the contractual obligations from the cash flows from the original financial liabilities are deemed to expire. In this case the original financial liabilities are derecognised and new financial liabilities are recognised at either amortised cost or fair value. If the cash flows are not substantially different, then the modification does not result in derecognition of the financial liabilities. In this case, the group recalculates the gross carrying amount of the financial liabilities and recognises the amount arising from adjusting the gross carrying amount as a modification gain or loss in the statement of income. Impairment of financial assets For trade receivables, the Group applies the simplified approach, which requires expected lifetime losses to be recognised from initial recognition of the receivables. To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. Accrued income relates to unbilled income recognised as a receivable for units transferred over the network but not yet invoiced at the end of the year. Invoices are raised one month in arrears and are typically settled within one month. The Group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets. The expected loss rates are based on the payment profiles of sales over a period of 36 month before 31 December 2024 and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The company has identified GDP growth in the UK to be the most relevant factor, and accordingly adjusts the historical loss rates based on expected changes to this. Definition of default The Group considers the following as constituting an event of default for internal credit risk management purposes as historical experience indicates that financial assets that meet either of the following criteria are not recoverable: • when there is a breach of financial covenants by the debtor; and • information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full. Page 53 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 3 Prior period adjustments Adopted assets The Financial Statements have been restated to incorporate the impact of under reporting of the value of distributions network assets adopted from other parties. Distribution network assets are on occasions constructed by other parties who then transfer them to the Group. At the date of transfer the value of property, plant and equipment is increased with an equal increase in the value of deferred revenue. The assets are depreciated in line with the depreciation policy for those assets with a similar release of the deferred revenue. It was discovered during the year that not all adopted assets had been captured in the Financial Statements. This had no impact on prior years’ profits or net assets, however impacts the constituent parts of the previously reported figures in the Income Statement and the Statement of Financial Position. The impact on the Consolidated Income and the Statement of Financial Position for the Group and Company is shown below: Consolidated Income Statement: 2023 (As restated) £'000 2023 (Previous) £'000 Difference £'000 Revenue (435,747) (435,693) (54) Distribution costs 144,055 144 ,001 54 Profit for the year (291,692) (291,692) - Statement of Financial Position (Consolidated and Company): 31 Dec 2023 (As restated) £ 000 31 Dec 2023 (Previous) £ 000 Difference £ 000 Property, plant and equipment 2,949,201 2,9 44,354 4,847 Deferred revenue non-current (672,734) (668,067) ( 4,667) Deferred revenue current (30,219) (30, 039) (180) Total 2,246,248 2,246,248 - 01 Jan 2023 (As restated) £ 000 01 Jan 2023 (Previous) £ 000 Difference £ 000 Property, plant and equipment 2,851,910 2,849 ,504 2,406 Deferred revenue non-current (654,829) (652,476) (2, 353) Deferred revenue current (29,379) (29,326) (53) Total 2,167,702 2,167,702 - Page 54 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 3 Prior period adjustments (continued) Restatement of Cash Flow Statement During the current year, the Group reflected on the presentation of cash inflows and outflows in the cash flow statement. In the prior year the cash flow statement showed cash flows flowing through the Group and Company's bank account together with transactions made by other entities within the wider Northern Powergrid Group on its behalf and recorded in the inter-company current account. The Group and Company's cash flow statement should have only shown the cash flows flowing through its bank account. The comparatives have been restated accordingly. The prior year cash flow statement for the Group and Company were presented using the indirect method, which reconciled profit before tax to net cash flows from operating activities by adjusting for non-cash items and changes in working capital. The restatement involves presenting cash flows from operating activities using the direct method, which shows major classes of gross cash receipts and gross cash payments. The impact on the operating, investing and financing cash flows is as follows: Consolidated Cash Flow Statement: 2023 (As restated) £000 2023 (Previous) £000 Difference £000 Operating 521,353 293,347 228,006 Investing (460,128) (187,065) (273,063) Financing (62,898) (382,385) 319,487 Net cash flow (1,673) (276,103) 274,430 Company Cash Flow Statement: 2023 (As restated) £000 2023 (Previous) £000 Difference £000 Operating 521,153 293,156 227,997 Investing (472,331) (187,090) (285,241) Financing (50,696) (380,572) 329,876 Net cash flow (1,874) (274,506) 272,632 The reason for all changes relates to amounts paid for or received by other entities within the wider Northern Powergrid Group on the Group and Company's behalf. These are settled through the inter company current account mechanism which was previously included as cash flows. Non cash investing and financing activities were previously disclosed in the Statement of Cash Flows, these are now disclosed in Note 31. This also impacts the reconciliations of liabilities arising from financing activities in Note 27. Related parties: During the preparation of the current year's financial statements, it was identified that certain related party balances were either inaccurate or omitted from the prior year's related party note. These have been corrected in the current year's Statutory Accounts. This restatement has no impact on the primary financial statements. More details can be found in Note 30. Page 55 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 4 Revenue The analysis of the Group's revenue for the year from continuing operations is as follows: 2024 £ 000 (As restated) 2023 £ 000 Distribution use of system revenue 467,040 365,988 Work for related parties 30,678 31,316 Connections revenue 31,481 30,017 Other revenue 7,166 8,426 536,365 435,747 Other revenue includes assessment and design fees and disconnections from the network. Revenue is recognised over the life of the corresponding item of PPE against which the contribution was received. Further detail of prior year adjustments affecting Revenue in the Income Statement can be found in Note 3. Segmental Analysis IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal reports about components of the Company that are regularly reviewed by the President and Chief Executive Officer, who is the Chief Operating Decision Maker, of the Northern Powergrid Group in order to allocate resources to these segments and to assess their performance. In practice, the President and Chief Executive Officer allocates resources and assesses performance based upon the aggregate results of the Company and Northern Powergrid (Yorkshire) plc, another distribution network operator in the Northern Powergrid Group. As there is only one operating segment, this constructs the segmental reporting note in full. Revenue, profit before tax and net assets are attributable to electricity distribution. Revenue is all in respect of sales to United Kingdom customers and all Non-Current assets are held in the United Kingdom. 5 Other gains and losses The analysis of the Group's other gains and losses for the year is as follows: 2024 £ 000 2023 £ 000 Gain on disposal of property, plant and equipment 71 79 Page 56 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 6 Operating profit Arrived at after charging/(crediting) 2024 £ 000 (As restated) 2023 £ 000 Depreciation expense 103,841 99,853 Depreciation on right of use assets 5,455 5,373 Amortisation expense 11,336 11,195 Research and development expenses 866 2,031 Connections revenue (31,481) (30,017) Loss allowance on trade and other receivables 587 675 Amortisation expense is included within administration costs in the consolidated income statement on page 35. Further detail of prior year adjustments affecting Operating Profit in the Income Statement can be found in Note 3. 7 Finance income and costs 2024 £ 000 2023 £ 000 Finance income Other finance income measured at amortised cost 5,110 13,282 Finance costs Interest on bank overdrafts and borrowings (33,009) (33,235) Interest paid to group undertakings (400) (99) Interest expense on leases (823) (781) Borrowing costs included in cost of qualifying asset 757 403 Total finance costs (33,475) (33,712) Net finance costs (28,365) (20,430) Borrowing costs included in the cost of qualifying assets during the year arose on the general borrowing pool and are calculated by applying a capitalisation rate of 3.23% (2023: 3.02%) to expenditure on such assets. Page 57 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 8 Staff costs The aggregate payroll costs for the Group and Company (including directors' remuneration) were as follows: 2024 £ 000 2023 £ 000 Salaries 77,219 67,670 Social security costs 8,683 7,423 Defined benefit pension costs 5,605 5,929 Defined contribution pension costs 6,481 5,048 97,989 86,070 Less capitalised to plant, property and equipment (58,182) (49,029) 39,807 37,041 A proportion of the Company's employees are members of the DB Scheme, most of the remaining employees are members of The Northern Powergrid Scheme (a defined contribution pension scheme). The monthly average number of persons employed by the Group and Company (including directors) during the year, analysed by category was as follows: 2024 No. 2023 No. Technical 415 393 Industrial 490 478 Administration 373 320 Other departments 173 152 1,451 1,343 Page 58 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 9 Directors and other key management personnel remuneration The directors remuneration for the year was paid by a related party company, Northern Electric plc, and recharged. The directors' remuneration for the year was as follows: 2024 £ 000 2023 £ 000 Short-term employee benefits 625 590 Post-retirement benefits - defined contribution 10 9 Other long-term benefits - 283 635 882 During the year the number of directors who were receiving benefits and share incentives was as follows: 2024 No. 2023 No. Accruing benefits under defined benefit pension scheme - - Accruing benefits under money purchase pension scheme 6 4 In respect of the highest paid director: 2024 £ 000 2023 £ 000 Short-term employee benefits 322 287 Long-term benefits - 195 322 482 The directors and key personnel are remunerated for the services to the Northern Powergrid Group. The figures above represent the share of the costs borne by the Group. In respect of key management personnel: 2024 £ 000 2023 £ 000 Short-term employee benefits 695 580 Post-retirement benefits - defined benefit 36 23 Post-retirement benefits - defined contribution 99 108 Other long-term benefits 60 131 890 842 Total directors and key personnel: Page 59 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 9 Directors and other key management personnel remuneration (continued) 2024 £ 000 2023 £ 000 Short-term benefits 1,320 1,170 Post-retirement benefits - defined benefit 36 23 Post-retirement benefits - defined contribution 109 117 Long-term benefits 60 414 1,525 1,724 Other key personnel includes a number of senior functional managers who, whilst not board directors, have authority and responsibility for planning, directing and controlling activities of the Group. Page 60 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 10 Auditors' remuneration 2024 £ 000 2023 £ 000 Fees payable to the auditor for audit of the Company's annual accounts 211 198 Fees payable to the auditor for audit of the Company's subsidiaries 27 21 Audit related assurance services - 69 238 288 Other services relate to non-statutory audit services including regulatory reporting and bond issuance. Page 61 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 11 Income tax Tax charged/(credited) in the income statement 2024 £ 000 2023 £ 000 Current taxation UK corporation tax 51,202 32,550 UK corporation tax adjustment to prior periods (2,460) (1,261) 48,742 31,289 Deferred taxation Arising from origination and reversal of temporary differences 6,899 1,236 Deferred tax adjustment to prior periods 2,296 (480) Total deferred taxation 9,195 756 Tax expense in the income statement 57,937 32,045 The tax on profit before tax for the year is lower than the standard rate of corporation tax in the UK (2023 - lower than the standard rate of corporation tax in the UK) of 25% (2023 - 23.5%). The differences are reconciled below: 2024 £ 000 2023 £ 000 Profit before tax 235,813 145,655 Corporation tax at standard rate 58,966 34,259 Decrease in current tax from adjustment for prior periods (2,460) (1,261) Decrease from effect of expenses not deductible in determining tax loss (1,211) (893) Deferred tax expense/(credit) from unrecognised temporary difference from a prior period 2,296 (480) Deferred tax expense relating to changes in tax rates or laws - 369 Other tax effects for reconciliation between accounting profit and tax expense 346 51 Total tax charge 57,937 32,045 Finance Act 2024 confirmed that the corporation tax rate will remain at 25% from 1 April 2024 as previously enacted. Deferred tax balances are therefore measured at 25% at 31 December 2024. There is no uncertainty over the acceptable income tax treatment. Should any uncertainties arise the Company will apply adopted amendments to IFRIC 23. Increases in the tax adjustments are largely to do with enhanced capital allowances. Page 62 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 11 Income tax (continued) Deferred tax Group Deferred tax movement during the year: At 1 January 2024 £ 000 Recognised in income £ 000 At 31 December 2024 £ 000 Accelerated tax depreciation 135,833 8,735 144,568 Other items (1,562) 460 (1,102) Net tax liabilities 134,271 9,195 143,466 Deferred tax movement during the prior year: At 1 January 2023 £ 000 Recognised in income £ 000 At 31 December 2023 £ 000 Accelerated tax depreciation 134,965 868 135,833 Other items (1,450) (112) (1,562) Net tax liabilities 133,515 756 134,271 Other items comprises provisions and employee expenses deductible for tax on a paid basis and claims for hold over relief. Company Deferred tax movement during the year: At 1 January 2024 £ 000 Recognised in income £ 000 At 31 December 2024 £ 000 Accelerated tax depreciation 135,833 8,735 144,568 Other (1,562) 460 (1,102) Net tax liabilities 134,271 9,195 143,466 Deferred tax movement during the prior year: At 1 January 2023 £ 000 Recognised in income £ 000 At 31 December 2023 £ 000 Accelerated tax depreciation 134,965 868 135,833 Other (1,450) (112) (1,562) Net tax liabilities 133,515 756 134,271 Other comprises provisions and employee expenses deductible for tax on a paid basis and claims for hold over relief. Page 63 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) Page 64 12 Property, plant and equipment Group and Company Non - Operational Land and buildings £000 (As restated) Distribution system £000 Furniture, fittings and equipment £000 (As restated) Total £000 Cost or valuation At 1 January 2023 4,191 3,851,574 57,118 3,912,883 Prior period adjustment - 2,417 - 2,417 At 1 January 2023 (restated) 4,191 3,853,991 57,118 3,915,300 Additions (restated) - 192,680 4,463 197,143 Disposals - (8,184) (116) (8,300) At 31 December 2023 (restated) 4,191 4,038,487 61,465 4,104,143 At 1 January 2024 4,191 4,038,487 61,465 4,104,143 Additions - 231,863 7,361 239,224 Disposals - (10,221) - (10,221) At 31 December 2024 4,191 4,260,129 68,826 4,333,146 Depreciation At 1 January 2023 3,658 1,011,338 48,383 1,063,379 Prior year adjustment - 11 - 11 At 1 January 2023 (restated) 3,658 1,011,349 48,383 1,063,390 Charge for year (restated) 246 96,586 3,021 99,853 Eliminated on disposal - (8,184) (116) (8,300) At 31 December 2023 (restated) 3,904 1,099,750 51,288 1,154,942 At 1 January 2024 3,904 1,099,750 51,288 1,154,942 Charge for the year 148 100,139 3,554 103,841 Eliminated on disposal - (10,221) - (10,221) At 31 December 2024 4,052 1,189,668 54,842 1,248,562 Carrying amount At 31 December 2023 (restated) 287 2,938,737 10,177 2,949,201 At 31 December 2024 139 3,070,461 13,984 3,084,584 Accelerated depreciation on asset disposals is included within the depreciation charge within the year. Further detail of prior year adjustments affecting the Statement of Financial Position can be found in Note 3. ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 12 Property, plant and equipment (continued) Assets in the Course of Construction Distribution system £ 000 Furniture, fittings and equipment £ 000 Total £ 000 Cost or valuation At 1 January 2023 167,998 - 167,998 Additions 192,954 2,197 19 5,150 Commissioned (176,653) (2, 197) (178,850) At 31 December 2023 184,298 - 1 84,298 At 1 January 2024 184,298 - 184,298 Additions 226,593 6,858 233,451 Commissioned (223,024) (6,858) (229,882) At 3 1 December 2024 187,867 - 187,867 Contractual commitments for the acquisition of property, plant and equipment 31 December 2024 £ 000 31 December 2023 £ 000 Distribution system 35,543 33,834 Page 65 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 13 Right of use assets Group and Company Fleet £ 000 Property £ 000 Land £ 000 Total £ 000 Cost or valuation At 1 January 2023 15,610 1,337 18,608 35,555 Additions 1,762 - - 1,762 Disposals (864) - - (864) At 31 December 2023 16,508 1,337 18,608 36,453 At 1 January 2024 16,508 1,337 18,608 36,453 Additions 2,457 1,754 - 4,211 Disposals (2,387) (254) - (2,641) At 31 December 2024 16,578 2,837 18,608 38,023 Depreciation At 1 January 2023 7,479 792 1,545 9,816 Charge for year 2,726 199 2,448 5,373 Eliminated on disposal (864) - - (864) At 31 December 2023 9,341 991 3,993 14,325 At 1 January 2024 9,341 991 3,993 14,325 Charge for the year 2,696 311 2,448 5,455 Eliminated on disposal (2,387) (254) - (2,641) At 31 December 2024 9,650 1,048 6,441 17,139 Carrying amount At 31 December 2023 7,167 346 14,615 22,128 At 31 December 2024 6,928 1,789 12,167 20,884 Page 66 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 14 Intangible assets Group and Company Internally generated software development costs £ 000 Cost or valuation At 1 January 2023 139,797 Additions 14,444 At 31 December 2023 154,241 At 1 January 2024 154,241 Additions 14,908 At 31 December 2024 169,149 Amortisation At 1 January 2023 92,441 Amortisation charge 11,195 At 31 December 2023 103,636 At 1 January 2024 103,636 Amortisation charge 11,336 At 31 December 2024 114,972 Carrying amount At 31 December 2023 50,605 At 31 December 2024 54,177 During the year the amount of contractual commitments for the acquisition of intangible assets amounted to £5.2 million (2023: £4.1 million). The majority of the costs classified under intangible assets relate to the development and implementation of IT software systems. These systems are integral to the Company's operations, enhancing efficiency and supporting the management of our energy distribution network. Page 67 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 15 Investments Summary of the Company investments 31 December 2024 £ 000 31 December 2023 £ 000 Investments in subsidiaries 50 50 Subsidiaries £ 000 Cost At 1 January 2023 50 At 31 December 2023 50 At 1 January 2024 50 At 31 December 2024 50 Provision Carrying amount At 31 December 2024 50 At 1 January 2023 50 Group subsidiaries Details of the Group subsidiaries as at 31 December 2024 are as follows: Name of subsidiary Principal activity Registered office Proportion of ownership interest and voting rights held 2024 2023 Northern Electric Finance plc Finance company Lloyds Court, 78 Grey Street, Newcastle upon Tyne, NE1 6AF England and Wales 100% 100% All subsidiaries are included within consolidation. All above investments are held as ordinary shares. Page 68 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 15 Investments (continued) Group associates Details of the Group associates as at 31 December 2024 are as follows: Name of associate Principal activity Registered office Proportion of ownership interest and voting rights held 2024 2023 ElectraLink Limited Data transfer network operator Northumberland House, 303-306 Holborn, WC1V 7JZ, England and Wales 6.2% 6.2% DCUSA Limited Governance of Distribution Connection and Use of System Agreement Northumberland House, 303-306 Holborn, WC1V 7JZ, England and Wales 1.69% 1.69% Smart Energy Code Company Ltd Governance of smart metering energy agreement 8 Fenchurch Place, London, EC3M 4AJ 0.32% 0.32% Page 69 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 16 Inventories Group Company 31 December 2024 £ 000 31 December 2023 £ 000 31 December 2024 £ 000 31 December 2023 £ 000 Inventory 28,544 28,670 28,544 28,670 Work in progress - 607 - 607 28,544 29,277 28,544 29,277 Work in progress that was included within inventories in 2023 is now included in trade receivables 2024. This relates to recoverable amounts from third parties from damages to our network that have not yet been billed. See note 17. 17 Trade and other receivables Group Company 31 December 2024 £ 000 31 December 2023 £ 000 31 December 2024 £ 000 31 December 2023 £ 000 Distribution use of system receivables and accrued income\* 75,264 59,298 75,264 59,298 Trade receivables 3,128 8,113 3,128 8,113 Provision for impairment of trade receivables (3,383) (6,174) (3,383) (6,174) Net trade receivables 75,009 61,237 75,009 61,237 Receivables from related parties 46,945 279,533 45,421 283,091 Prepayments 5,888 5,028 5,888 5,028 127,842 345,798 126,318 349,356 Page 70 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 17 Trade and other receivables (continued) \* Accrued income in 2024 was £43.7m (2023: £32.4m) More information on receivables from related parties can be found within the accounting policies section under intercompany short-term loans as well as Note 30. Trade receivables now includes work in progress that was previously included within inventories. This relates to recoverable amounts from third parties from damages to our network that have not yet been billed to customers. The average credit period on receivables is 30 days. Interest is charged on overdue distribution use of system receivables. There has been no change in the estimation techniques or significant assumptions made during the current reporting period. The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation or has entered into bankruptcy proceedings, or when the trade receivables are over two years past due, whichever occurs earlier. None of the trade receivables that have been written off is subject to enforcement activities. Accrued income relates to unbilled income recognised as a receivable for units transferred over the network but not yet invoiced at the end of the year. Invoices are raised one month in arrears and are typically settled within one month. Movement in the loss allowance 31 December 2024 £ 000 31 December 2023 £ 000 At 1 January 6,174 5,619 Amounts utilised/written off in the year (3,368) (120) Amounts recognised in the statement of profit or loss 577 675 At 31 December 3,383 6,174 The loss allowance is made on amount due net of VAT which would be recoverable from His Majesty's Revenue and Customs when the debt is written off. Subject to certain conditions mentioned below, losses arising in relation to distribution use of system debts will be recovered through an increase in future allowed income. Included in the allowance for doubtful debts are specific trade receivables, with a balance of £1.6 million (2023: £4.6 million), which have been placed in administration. The impairment represents the difference between the carrying amount of the specific trade receivable and the present value of the expected liquidation dividend. Page 71 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 17 Trade and other receivables (continued) Distribution Use of System Receivables The customers served by the Group’s distribution network are supplied predominantly by a number of electricity supply businesses (circa 110) with the E.ON group accounting for approximately 16.2% of distribution revenues in 2024 (2023: 18.1%) and British Gas plc accounting for approximately 13.5% of distribution revenues in 2024 (2023: 14.5%). Ofgem under Code Governance arrangements, set out a framework known as Credit Cover within the Distribution Connection and Use of System Agreement (DCUSA), which sets credit limits for each supply business based on its credit rating (taken from a credit agency). If no score is available, then they can build up their credit limit through good payment history. In addition, suppliers can provide other forms of collateral to cover their value at risk (measured as being equivalent to 45 days usage) or if their credit rating alone is not sufficient to cover their value at risk. Acceptable collateral typically is provided in the form of a parent company guarantee, letter of credit, cash or an escrow account. Included within other payables are customer cash deposits of which there was £2.5m as at 31st December 2024 (2023: £7.1m), due to an repayment in the deposit held of £4.7m relating to Octopus Energy Ltd. Provided the Group has implemented credit control, billing and collection processes in line with Ofgem’s best practice guidelines and can demonstrate compliance with the guidelines or is able to satisfactorily explain departure from the guidelines, any bad debt losses arising from supplier default will be recovered through an increase in future years allowed income. Included in the Group's use of system (“UoS”) receivables are 0 debtors with a carrying value of £nil, which have been placed into administration and have therefore been provided in full at the year-end (2023: £3.0m). Other Trade Receivables In determining the recoverability of other trade receivables, the Company considers any change in the credit quality of other trade receivables from the date credit was initially granted up to the reporting date. The concentration of credit risk, other than in relation to DUoS receivables, is limited due to the customer base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts. There has been no significant change in the gross amounts of trade receivables that has affected the estimation of loss allowance. Significant increase in credit risk In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group compares the risk of a default occurring on a financial instrument at the reporting date with the risk of a default occurring on the financial instrument at the date of initial recognition. In making this assessment the Group considers historical experience as well as forward-looking information that is available without undue cost or effort. Forward-looking information includes the future prospects of the industries in which the Group's debtors operate obtained from economic expert reports, financial analysts, government bodies, relevant think-tanks and other similar organisations. In particular the following information is taken into account when assessing whether credit risk has increased significantly since initial recognition: • existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor's ability to meet its debt obligations; • an actual or expected significant deterioration in the operating results of the debtor; • significant increases in credit risk on other financial instruments of the same debtor; and • an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor's ability to meet its debt obligations. Sales of goods and services comprise all income streams which are not classified as DUoS income. Examples of non-DUoS income streams would be service alterations/disconnections, assessment and design fees, and recovery of amounts for damage caused by third parties to the distribution system. The average credit period on sales of goods and services is 30 days. Interest is not generally charged on the trade receivables paid after the due date. Page 72 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 18 Cash and cash equivalents Group Company 31 December 2024 £ 000 31 December 2023 £ 000 31 December 2024 £ 000 31 December 2023 £ 000 Cash at bank - 23 - 23 19 Share capital Allotted, called up and fully paid shares 31 December 2024 31 December 2023 No. 000 £ 000 No. 000 £ 000 Ordinary Share Capital of £1 each 200,000 200,000 200,000 200,000 The Company has 300 million shares authorised for issue. The Company has one class of ordinary shares which carries no right to fixed income. Page 73 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 20 Reserves Group Retained earnings £ 000 At 1 January 2024 1,118,871 Profit for the year 177,876 Total comprehensive income 177,876 Dividends (300,000) At 31 December 2024 996,747 Retained earnings £ 000 At 1 January 2023 1,036,661 Profit for the year 113,610 Total comprehensive income 113,610 Dividends (31,400) At 31 December 2023 1,118,871 Company Retained earnings £ 000 At 1 January 2024 1,120,678 Profit for the year 177,912 Total comprehensive income 177,912 Dividends (300,000) At 31 December 2024 998,590 Page 74 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 20 Reserves (continued) Retained earnings £ 000 At 1 January 2023 1,038,447 Profit for the year 113,631 Total comprehensive income 113,631 Dividends (31,400) At 31 December 2023 1,120,678 21 Loans and borrowings Group Company 31 December 2024 £ 000 31 December 2023 £ 000 31 December 2024 £ 000 31 December 2023 £ 000 Non-current loans and borrowings 1,057,728 1,057,393 1,057,725 1,057,389 Current loans and borrowings 19,285 21,922 15,971 23,733 1,077,013 1,079,315 1,073,696 1,081,122 Group Book value Fair value 31 December 2024 £ 000 31 December 2023 £ 000 31 December 2024 £ 000 31 December 2023 £ 000 Short-term loan 80 2,716 80 2,716 European Investment Bank 2027 – 2.564% 120,128 120,128 111,524 111,677 Northern Electric Finance plc 2035 – 5.125% 153,647 153,550 150,467 158,526 Northern Electric Finance plc 2049 – 2.75% 150,225 150,161 92,098 106,192 Northern Powergrid (Northeast) plc 2052 - 3.25% 355,096 355,018 233,823 272,362 Northern Powergrid (Northeast) plc 2062 - 1.875% 297,837 297,742 132,772 159,538 1,077,013 1,079,315 720,764 811,011 Page 75 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 21 Loans and borrowings (continued) Company Book value Fair value 31 December 2024 £ 000 31 December 2023 £ 000 31 December 2024 £ 000 31 December 2023 £ 000 Short-term loan 80 2,716 80 2,716 European Investment Bank 2027 - 2.564% 120,128 120,128 111,524 111,677 Northern Electric Finance plc 2035 – 5.125% 50,399 50,302 50,199 52,855 Northern Electric Finance plc 2037 - 5.125% 99,884 105,009 95,088 105,784 Northern Electric Finance plc 2049 - 2.75% 150,271 150,207 93,078 107,300 Northern Powergrid (Northeast) plc 2052 3.25% 355,096 355,018 233,823 272,362 Northern Powergrid (Northeast) plc 2062 1.875% 297,838 297,742 132,772 159,538 1,073,696 1,081,122 716,564 812,232 The fair value of liabilities held at amortised cost, is set out above and based on Level 1 inputs. The fair value of the bonds is determined with reference to quoted market prices. The directors' estimates of the fair value of bank loans and internal borrowings are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions or dealer quotes for similar instruments. The fair value of short-term borrowings is equal to their book value. All loans are non-secured and are denominated in sterling. The Company's exposure to market and liquidity risk in respect of loans and borrowings is disclosed in financial risk review Note 29. Information on the new bond issuance during the year can be found in the financial strength section of the strategic report. Page 76 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 22 Lease Liabilities Group and Company Lease commitments Leases primarily relate to the hire of fleet vehicles from Vehicle Lease and Service Ltd and the rental of operational and non operational land and buildings. The vehicle leases have terms between 2 and 7 years. The company does not have the option to purchase the vehicles at the end of the lease term. The operational land lease are between 10 and 999 years, but in the majority are between 20 and 60 years. As the leases are regarded as a business tenancy, the Company has the option to renew the lease under the 1954 Landlord and Tenant Act unless a landlord is to redevelop or has grounds to recover land as prescribed under the Act, and may acquire the freehold at any time by agreement. The Company also has the ability to compulsory purchase the freehold. Maturity analysis - contractual undiscounted cash flows: 31 December 2024 £ 000 31 December 2023 £ 000 Within one year 5,539 5,741 In two to five years 15,711 16,250 In over five years 3,285 3,287 Total undiscounted lease payments 24,535 25,278 Impact of discounting (2,751) (2,468) Total lease liability 21,784 22,809 The total cash outflow for leases during the year was £6.0m (2023: £5.9m), of which £0.8m (2023: £0.7m) relates to interest and £5.2m (2023: £5.2m) relates to the repayment of principal. 23 Provisions Group and Company Legal proceedings £ 000 Other provisions £ 000 Total £ 000 At 1 January 2024 1,057 512 1,569 Additional provisions 1,676 268 1,944 Provisions used (1,679) (272) (1,951) At 31 December 2024 1,054 508 1,562 Page 77 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 23 Provisions (continued) Legal proceedings: Provision has been made to cover costs arising from utility damages, public liability, and motoring legal proceedings. Settlement is expected substantially within 12 months. The provisions are not discounted on the grounds of materiality. The impact of discounting is immaterial to the financial statements, as the effect on the present value of the provision is not significant enough to influence the economic decisions of users of the financial statements. Therefore, the provisions are presented at their nominal value. Other: Primarily consists of a provision for future safe disposal of transformers which contain oil contaminated with Polychlorinated Biphenyls (PCBs), and for an amount to cover claims made under Section 74 of the New Road and Street Works Act 1991. Costs are expected to be incurred over the next 15 years for PCB claims and in the next year for all others. 24 Trade and other payables Group Company 31 December 2024 £ 000 31 December 2023 £ 000 31 December 2024 £ 000 31 December 2023 £ 000 Current liabilities Trade payables 16,181 4,749 16,181 4,749 Accrued expenses 30,847 36,528 30,847 36,528 Social security and other taxes 13,144 8,165 13,144 8,165 Other payables 4,573 4,340 4,573 4,340 Payments on account 72,177 78,300 72,177 78,300 136,922 132,082 136,922 132,082 Non-current liabilities Payment on accounts 6,549 - 6,549 - Non-current liabilities 6,549 - 6,549 - Payments on account are primarily advanced customer contributions for which no associated distribution asset has been constructed or yet to be completed. The Group's and Company's exposure to market and liquidity risks, including maturity analysis, related to trade and other payables is disclosed in Note 29 "Financial Risk Review". Included within the Payment on Account line is innovation funding received from the National Energy System Operator (NESO) for the Community DSO project of £10.5m (2023: £8.8m). The funding will be released over a period of time until 2028. This funding was successfully bid for and is aimed at supporting the development and implementation of a decentralised system operator model within the community. The performance obligations associated with this funding include the establishment of infrastructure, engagement with local stakeholders and reporting on project progress and outcomes across the industry. Based on the latest project schedule, £3.9m has been classified as current and £6.6m as non-current as at the reporting date. For the comparative year, the total amount was incorrectly included in current payments on account. As the Directors do not consider the effect on the prior period financial statements to be material, this has not been adjusted. The related income recognised in the current year was £1.5m (2023: £0.5m). Page 78 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 25 Contract Liabilities (Deferred Revenue) Group and Company 31 December 2024 £ 000 (As restated) 31 December 2023 £ 000 Opening balance 702,953 681,802 Prior year restatement - 2,406 Revised opening balance 702,953 684,208 Additions (prior year restated) 54,105 48,761 Amortisation (prior year restated) (31,482) (30,017) Closing balance 725,576 702,953 31 December 2024 £ 000 (As restated) 31 December 2023 £ 000 Current 32,181 30,219 Non-current 693,395 672,734 725,576 702,953 Contract liabilities (deferred revenue) are deferred customer contributions payments for distribution system assets where work has commenced or is completed. The Group's policy is to credit the customer contribution to revenue on a straight-line basis, in line with the useful life of the associated distribution system asset. More details on the restatement can be found in Note 3. 26 Dividends 31 December 2024 31 December 2023 £ 000 £ 000 Interim dividend of 150p (2023 - 15.7p) per ordinary share 300,000 31,400 An interim dividend of £160.0 million was paid during Feb 2025 via an intercompany transfer. Page 79 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 27 Reconciliation of liabilities arising from financing activities Group Non-cash changes At 1 January 2024 £ 000 Financing cash flows £ 000 New finance leases £ 000 Other changes £ 000 At 31 December 2024 £ 000 Borrowings 1,079,315 (34,997) - 32,695 1,077,013 Lease liabilities 22,809 - (1,025) - 21,784 1,102,124 (34,997) (1,025) 32,695 1,098,797 (As restated) Non-cash changes At 1 January 2023 £ 000 Financing cash flows £ 000 New finance leases £ 000 Other changes £ 000 At 31 December 2023 £ 000 Borrowings 1,111,332 (62,898) - 30,881 1,079,315 Lease liabilities 22,809 - (3,401) - 26,210 1,137,542 (62,898) (3,401) 30,881 1,102,124 Company Non-cash changes At 1 January 2024 £ 000 Financing cash flows £ 000 New finance leases £ 000 Other changes £ 000 At 31 December 2024 £ 000 Borrowings Lease liabilities (As restated) Non-cash changes At 1 January 2023 £ 000 Financing cash flows £ 000 New finance leases £ 000 Other changes £ 000 At 31 December 2023 £ 000 Borrowings Lease liabilities Other charges relate to amortisation of financing fees, discounts and new leases entered into which are non cash. For more detail on the restatement refer to Note 3. Page 80 1,081,122 (22,794 ) 1,073,696 22,809 (1,025) - 21,784 1,103,931 1,095,480 - (22,794) - 1 5,368 15,368 (1,025) 1,108,013 (50,696) 1,081,122 26,210 - 22,809 1,134,223 1,103,931 - (50,696) - (3,401) (3,401) 23,805 23,805 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 28 Classification of financial assets and financial liabilities Group The classification of financial assets and financial liabilities by accounting categorisation for the period ended 31 December 2024 was as follows: Financial assets at amortised cost £ 000 Financial liabilities at amortised cost £ 000 Assets Current assets Trade and other receivables 81,390 - Total assets 81,390 - Liabilities Non-current liabilities Long term lease liabilities - (17,019) Loans and borrowings - (1,057,728) - (1,074,747) Current liabilities Current portion of long term lease liabilities - (4,765) Trade and other payables - (130,308) Loans and borrowings - (19,285) - (154,358) Total liabilities - (1,229,105) Page 81 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 28 Classification of financial assets and financial liabilities (continued) The classification of financial assets and financial liabilities by accounting categorisation for the period ended 31 December 2023 was as follows: Financial assets at amortised cost £ 000 Financial liabilities at amortised cost £ 000 Assets Current assets Trade and other receivables 345,787 - Cash and cash equivalents 23 - 345,810 - Total assets 345,810 - Liabilities Non-current liabilities Long term lease liabilities - (17,754) Loans and borrowings - (1,057,393) - (1,075,147) Current liabilities Current portion of long term lease liabilities - (5,055) Trade and other payables - (123,916) Loans and borrowings - (21,922) - (150,893) Total liabilities - (1,226,040) Fair values are derived from level 1 inputs. Page 82 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 28 Classification of financial assets and financial liabilities (continued) Company The classification of financial assets and financial liabilities by accounting categorisation for the period ended 31 December 2024 was as follows: Financial assets at amortised cost £ 000 Financial liabilities at amortised cost £ 000 Assets Current assets Trade and other receivables - Total assets - Liabilities Non-current liabilities Long term lease liabilities - (17,019) Loans and borrowings - (1,057,725) - (1,074,744) Current liabilities Current portion of long term lease liabilities - (4,765) Trade and other payables - (130,308) Loans and borrowings - (15,971) - (151,044) Total liabilities - (1,225,788) Page 83 81,390 81,390 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 28 Classification of financial assets and financial liabilities (continued) The classification of financial assets and financial liabilities by accounting categorisation for the period ended 31 December 2023 was as follows: Financial assets at amortised cost £ 000 Financial liabilities at amortised cost £ 000 Assets Current assets Trade and other receivables 349,345 - Cash and cash equivalents 23 - 349,368 - Total assets 349,368 - Liabilities Non-current liabilities Long term lease liabilities - (17,754) Loans and borrowings - (1,057,389) - (1,075,143) Current liabilities Current portion of long term lease liabilities - (5,055) Trade and other payables - (123,916) Loans and borrowings - (23,733) - (152,704) Total liabilities - (1,227,847) Page 84 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 29 Financial risk review This note presents information about the Group’s exposure to financial risks and the Group’s management of capital. Capital Management The covenants associated with the 2035 bonds issued by Northern Electric Finance plc, a wholly-owned subsidiary of the Company, include restrictions on the issuance of new indebtedness and the making of distributions dependent on the scale of the ratio of Senior Total Net Debt to Regulatory Asset Value (“RAV”). The Senior Total Net Debt to RAV restriction is 65% and 75% respectively. The definition of Senior Total Net Debt excludes any subordinated debt and any debt incurred on a non-recourse basis. In addition, it excludes interest payable, any fair value adjustments and unamortised issue costs. The Company's Senior Total Net Debt as of 31 December 2024 totalled £1,070.0m. Using the RAV value as of March 2025, as outlined by Ofgem in its ED2 price control financial model published in January 2025, and adjusting for the effects of movements in the value of the CPIH Index gives an approximation for the RAV value as at 31 March 2025 of £2,065.1m. The Senior Total Net Debt to RAV ratio for the Company is therefore estimated at 51.8% (2023: 54.2%). During the year all obligations under the various debt convents have been complied with. Credit risk The Group's definition of credit risk is Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties. The Group's exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group's maximum exposure to credit risk as no collateral or other credit enhancements are held. The risk is mitigated by the group by The Group's income is primarily generated from use of system revenue from electricity suppliers; suppliers are credit checked by independent ratings agencies. Impaired income from DUoS will be recovered in future periods through system charges and is therefore of no material risk to the Group. Group 2024 Notes Gross carrying amount £ 000 Loss allowance £ 000 Net carrying amount £ 000 Trade and other receivables 17 131,225 (3,383) 127,842 2023 Trade and other receivables 17 351,972 (6,174) 345,798 Company 2024 Notes Gross carrying amount £ 000 Loss allowance £ 000 Net carrying amount £ 000 Trade and other receivables 17 129,701 (3,383) 126,318 Equity investments at cost 50 - 50 Page 85 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 29 Financial risk review (continued) 2023 Trade and other receivables 17 355,530 (6,174) 349,356 Equity investments at cost 50 - 50 For DUoS trade receivables the Group has applied the simplified approach in IFRS 9 to measure the loss allowance at lifetime ECL. The Group determines the expected credit losses on these items by using a provision matrix, estimated based on historical credit loss experience based on the past due status of the debtors, adjusted as appropriate to reflect current conditions and estimates of future economic conditions. Accordingly, the credit risk profile of these assets is presented based on their past due status in terms of the provision matrix. The carrying amount of the Group's financial assets disclosed in Note 28 best represents their respective maximum exposure to credit risk. The Group holds no collateral over any of these balances. Liquidity risk Ultimate responsibility of liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the Group's short, medium, and long-term funding and liquidity management requirements. The Group manages liquidity by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities The Company has access to a £100 million revolving credit facility provided by Barclays Bank plc, Lloyds Bank plc, HSBC UK Bank plc and Royal Bank of Canada. The Company entered into a new Facility Agreement in December 2021 for a period of three years, with two 1 year extension options. During the year the Company exercised the second extension option which extended the termination date to December 2026. In addition, the Company has access to further short-term borrowing facilities provided by YEG and to a £19 million overdraft facility provided by Lloyds Bank plc, which is reviewed annually, these borrowings are repayable on demand. At 31 December 2024, the Group had available £119.0m (2023: £116.3m) of undrawn committed borrowing facilities in respect of which all conditions precedent had been met. Page 86 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 29 Financial risk review (continued) Maturity analysis for financial liabilities and financial assets The following table sets out the remaining contractual maturities of the group’s financial liabilities and financial assets by type. Group 2024 Non-derivative liabilities Less than 3 month £ 000 3 months - 1 year £ 000 1-5 years £ 000 More than 5 years £ 000 Total £ 000 Non-interest bearing 94,907 - - - 94,907 Variable Interest Rate Liabilities 80 - - - 80 Fixed Interest Rate Liabilities - 31,889 241,404 1,525,875 1,799,168 Total 94,987 31,889 241,404 1,525,875 1,894,155 2023 Non-derivative liabilities Less than 3 month £ 000 3 months - 1 year £ 000 1-5 years £ 000 More than 5 years £ 000 Total £ 000 Non-interest bearing 87,389 - - - 87,389 Variable Interest Rate Liabilities 2,717 - - - 2,717 Fixed Interest Rate Liabilities - 31,889 244,480 1,554,688 1,831,057 Total 90,106 31,889 244,480 1,554,688 1,921,163 Company 2024 Non-derivative liabilities Less than 3 month £ 000 3 months - 1 year £ 000 1-5 years £ 000 More than 5 years £ 000 Total £ 000 Non-interest bearing 94,907 - - - 94,907 Variable interest rate liabilities 80 - - - 80 Fixed interest rate liabilities - 31,964 241,704 1,537,625 1,811,293 Total 94,987 31,964 241,704 1,537,625 1,906,280 Page 87 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 29 Financial risk review (continued) 2023 Non-derivative liabilities Less than 3 month £ 000 3 months - 1 year £ 000 1-5 years £ 000 More than 5 years £ 000 Total £ 000 Non-interest bearing 87,389 - - - 87,389 Variable interest rate liabilities 2,717 - - - 2,717 Fixed interest rate liabilities 5,125 31,964 244,780 1,566,513 1,848,382 Total 95,231 31,964 244,780 1,566,513 1,938,488 Market risk The Group's definition of market risk is Market risk is the risk of loss arising from movements in market variables such as interest rates, exchange rates and commodity prices. Risks are mitigated by utilising appropriate risk management products. The group manage this by The Group's policy on interest rate risk is designed to limit the Group's exposure to floating interest rates. Consistent with this policy, at 31 December 2024 the Group had 99% (2023: 99%) of net debt at fixed rates. Short-term loans and inter-company short term loans is charged at a floating rate of interest based on Sonia plus a margin of 0.20% plus a credit adjustment spread, thus exposing the Group to cash flow interest rate risk. A 1% movement in interest rates would subject the Group to an approximate change in interest costs of £0.1m per year. This is considered an acceptable level of risk. All other loans are at fixed interest rates and expose the Group to fair value interest rate risk. . 30 Related party transactions Summary of transactions with joint ventures Vehicle Lease and Service Limited is a joint venture of Northern Electric plc and provides vehicle fleet and servicing for the Northern Powergrid Group. Income constitutes recharges for use of management personnel and purchases are lease and servicing payments for fleet vehicles. Summary of transactions with other related parties Other subsidiaries of the Northern Powergrid Group. Included within these amounts are: - Integrated Utility Services and Integrated Utility Services (Eire) that provide engineering contracting resource; - Northern Powergrid (Yorkshire) plc that provides and receives mutual support through use of staff and resources which are then recharged; - Northern Powergrid Metering that is recharged for the use of staff; - Northern Electric Finance Limited that provides loan financing; - Northern Powergrid Holdings Company that provides loan financing; and - Yorkshire Electricity Group plc that operates the group intercompany treasury account. - CE Gas Limited Page 88 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 30 Related party transactions (continued) Income and receivables from related parties - Group 2024 Sales to related parties £ 000 Purchases from related party £ 000 Finance costs/(interest recevied) £ 000 Amounts owed from related party £ 000 Dividends paid to/(from) £ 000 Northern Powergrid (Yorkshire) Plc 29,861 12,387 (809) (33) - Northern Powergrid Metering Limited 43 - - - - Integrated Utility Services Limtied (registered in Eire) - 1,970 - 152 - Integrated Utility Services Limited 338 8,350 - 1,002 - Northern Electric Plc 9 5,261 - (38) 300,000 Vehicle Lease and Service Limited 61 4,894 - (210) - CE Gas Limited 283 - - - - Northern Powergrid Holdings Company 476 - - - - Yorkshire Electricity Group - - (3,931) - - 31,071 32,862 (4,740) 873 300,000 2023 (As restated) Sales to related parties £ 000 Purchases from related party £ 000 Finance costs/(interest received) £ 000 Amounts owed from related party £ 000 Dividends paid to/(from) £ 000 Northern Powergrid (Yorkshire) Plc 31,153 14,415 (786) - - Northern Powergrid Metering Limited 37 - -- - Integrated Utility Services Limtied (registered in Eire) - 2,159 - 636 - Integrated Utility Services Limited 370 5,479 - 799 - Northern Electric Plc 12 5,010 - - 31,400 Vehicle and Lease Services Limited 37 5,132 - - - CE Gas Limited 4 - - - - Northern Powergrid Holdings Company - - - - - Yorkshire Electricity Group - - (12,380) - - 31,614 32,195 (13,166) 1,434 31,400 As explained in Note 3, the comparatives have been restated. The main changes relate to the inclusion of th e dividend payment (£31.4m) to Northern Electric Plc and the finance income from Yorkshire Electricity Group (£12.4m). Page 89 ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 30 Related party transactions (continued) Income and receivables from related parties - Company Sales to related parties £ 000 Purchases from related party £ 000 Finance costs/(interest recevied) £ 000 Amounts owed from related party £ 000 Dividends paid to/(from) £ 000 Sales to related parties £ 000 Purchases from related party £ 000 Finance costs/(interest received) £ 000 Amounts owed from related party £ 000 Dividends paid to/(from) £ 000 2024 Northern Powergrid (Yorkshire) Plc Northern Powergrid Metering Limited Integrated Utility Services Limtied (registered in Eire) Integrated Utility Services Limited Northern Electric Plc Vehicle Lease and Service Limited CE Gas Limited Northern Powergrid Holdings Company NEFL Yorkshire Electricity Group 2023 (As restated) Northern Powergrid (Yorkshire) Plc Northern Powergrid Metering Limited Integrated Utility Services Limtied (registered in Eire) Integrated Utility Services Limited Northern Electric Plc Vehicle and Lease Services Limited CE Gas Limited Northern Powergrid Holdings Yorkshire Electricity Group Page 90 29,861 12,387 (809) (33) - 43 - - - - - - 338 - 9 300,000 61 1,970 8,350 5,261 4,894 - 152 - 1,002 - (38) - (210) - 283 - - - - 476 - - - - - - 12,439 130 - - - (3,931) - - 31,071 32,862 7,699 1,003 300,000 31,153 14,415 (786) - 37 - - - - - (12,380) 636 - 370 - 12 31,400 37 - 2,159 6,953 5,010 5,132 - 799 - - - - - 4 - - - - - - 12,434 130 - - - - - - 31,614 32,195 (732) 1,565 31,400 As explained in Note 3, the comparatives have been restated. The main changes relate to the inclusion of the dividend payment (£31.4m) to Northern Electric Plc. ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 30 Related party transactions (continued) Loans (to)/from related parties - Group 2024 Other related parties £ 000 At start of period (279,533) Net movement 232,579 At end of period (46,954) 2023 Other related parties £ 000 At start of period (274,429) Net movement (5,104) At end of period (279,533) Loans (to)/from related parties - Company 2024 Subsidiary £ 000 Other related parties £ 000 At start of period 305,518 (283,091) Net movement - 237,670 Interest paid (4,964) - At end of period 300,554 (45,421) 2023 Subsidiary £ 000 Other related parties £ 000 At start of period 300,366 (272,832) Net movement - (10,259) Net Interest 22,104 - Interest paid (16,952) - At end of period 305,518 (283,091) More information on the intercompany balances can be found in the accounting policies note under the intercompany short-term loans section. Page 91 ![Graphics]() 31 Non-cash investing and financing activities The following items were settled by other entities within the Northern Powergrid Group through the intercompany current account mechanism. Group 2024 2023 £000 £000 Non-cash investing activities Acquisitions of property plant and equipment (232,354) (185,982) Proceeds from sale of property plant and equipment 71 79 Acquisition of intangible assets (14,908) (14,444) Interest received 5,110 13,282 Advance of intercompany loan / repayments recevied on intercompany loan 237,048 (279,781) Total non-cash in investing activities (5,033) (466,846) Non-cash financing activities Movement in short-term borrowings 78 (1,718) Interest expense on leases (823) (781) Interest paid (619) (644) Payments to lease creditors (5,236) (5,163) Dividends paid (300,000) (31,400) Total non-cash in financing activities (306,600) (39,706) Company 2024 2023 £000 £000 Non-cash investing activities Acquisitions of property plant and equipment (232,354) (185,982) Proceeds from sale of property plant and equipment 71 79 Acquisition of intangible assets (14,908) (14,444) Interest received 5,082 13,257 Advance of intercompany loan / repayments recevied on intercompany loan 242,351 (283,091) Total non-cash in investing activities 242 (470,181) Non-cash financing activities Movement in short-term borrowings 100 (1,718) Interest expense on leases (823) (781) Interest paid (17,819) (7,723) Payments to lease creditors (5,236) (5,163) Dividends paid (300,000) (31,400) Total non-cash in financing activities (323,778) (46,785) Page 92 Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) Northern Powergrid (Northeast) plc ![Graphics]() Northern Powergrid (Northeast) plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 32 Parent and ultimate controlling party The Company's immediate parent is Northern Electric plc. The ultimate parent is Berkshire Hathaway, Inc. These financial statements are available upon request from 3555 Farnam Street, Omaha, Nebraska 68131 The ultimate controlling party is Berkshire Hathaway, Inc. Relationship between entity and parents The parent of the largest group in which these financial statements are consolidated is Berkshire Hathaway, Inc, incorporated in United States. The address of Berkshire Hathaway, Inc is: 3555 Farnam Street, Omaha, Nebraska 68131 The parent of the smallest group in which these financial statements are consolidated is Northern Electric plc, incorporated in United Kingdom. The address of Northern Electric plc is: Lloyds Court, 78 Grey Street, Newcastle upon Tyne, NE1 6AF 33 Subsequent Events An interim dividend of £160.0 million was paid in February 2025. Page 93 ![Graphics]() Northern Powergrid (Northeast) plc Unaudited Pro Forma Supplementary Group Cash Flows 2024 £ 000 2023 £ 000 Cash flows from/(used in) operating activities Profit for the year 177,876 113,610 Depreciation and amortisation 115,176 111,048 Depreciation on right of use assets 5,455 5,373 Amortisation of deferred revenue (31,481) (30,017) Profit on disposal of property plant and equipment (71) (79) Finance income (5,110) (13,282) Finance costs 33,475 33,712 Income tax expense 57,937 32,045 353,257 252,410 Increase in inventories (326) (3,871) Increase in trade and other receivables (17,746) (2,217) Increase in trade and other payables 2,004 16,486 Decrease in provisions (7) (83) Cash generated from operations 337,182 262,725 Receipt of customer contributions 56,917 57,008 Income taxes paid (47,492) (26,386) Net cash flow from operating activities 346,607 293,347 Cash flows from/(used in) in investing activities Acquisitions of property plant and equipment (232,354) (185,982) Proceeds from sale of property plant and equipment 71 79 Acquisition of intangible assets (14,908) (14,444) Interest received 5,110 13,282 Net cash flows used in investing activities (242,081) (187,065) Cash flows from/(used in) in financing activities Movement in intercompany loans 237,048 (279,781) Movement in short-term borrowing (2,633) (32,289) Repayment of lease liabilities (5,236) (5,163) Interest expense on leases (823) (781) Interest paid (32,905) (32,971) Dividends paid (300,000) (31,400) Net cash flow (used in)/from financing activities (104,549) (382,385) Net decrease in cash and cash equivalents (23) (276,103) Cash and cash equivalents at 1 January 23 276,126 Cash and cash equivalents at 31 December - 23 Page 94 The p roforma supplementary statement of cash flows above shows the amounts settled by Yorkshire Electricity Group Plc on behalf of the Group as if they were cash inflows and outflows of the Group.