# Northumbrian Water Finance plc ## Registered No: 04326507Annual Report and Financial Statements for the year ended 31 March 2025 Northumbrian Water Finance plc # Annual Report and Financial Statements for the year ended 31 March 2025 # Contents Page Company information 3 Strategic report 4 Directors’ report 6 Directors’ responsibilities statement 8 Independent auditor’s report 9 Statement of comprehensive income 18 Balance sheet 19 Statement of changes in equity 20 Notes to the financial statements 21 Northumbrian Water Finance plc - 3 - # Company information Registered No: 04326507 Directors H Mottram R W P Somerville M A Williams Company Secretary R W P Somerville Auditor Deloitte LLP Statutory Auditor 1 City Square Leeds United Kingdom LS1 2AL Bankers National Westminster Bank plc 16 Northumberland Street Newcastle upon Tyne NE1 7EL Registered Office Northumbria House Abbey Road Pity Me Durham DH1 5FJ Northumbrian Water Finance plc - 4 - The Directors of NorthumbrianWater Finance plc(NWF or the Company)are pleased to presenttheir Strategic Report for the year ended 31 March 2025. Review of the business The Company is incorporated and domiciled in the UK. The Company’sprincipal activityis toraise andadminister financeon behalfof itsimmediate parent company, NorthumbrianWater Limited (NWL). In April2022, theboard ofNWL approvedan updatedTreasuryStrategy settingout aframework for raisingc.£1.2bnoffundingoverthenextfouryears.InOctober2022theCompanyestablisheda £6bn EuropeanMediumTermNote(EMTN)programme,ofwhich£1.2bnhas beenutilisedtodate, enabling more regular and efficient issuance of bondsby the Company. In March 2025,the Company issuedtwo £50m tapsof existing bondsunder the EMTN,the proceeds of which were received in the year.After the balance sheet date, the proceedsof a £90m bond priced off the EMTN in the year were received in April2025. NWL is guarantor of all these bonds and received theissue proceeds by way of inter-company loans. Future developments The Directorshave noplans toexpand theoperations ofthe Company.Future financingactivity will be dependent upon the requirements of NWL. Results and dividends The Company madeno profit after taxationin the year(2024: £nil).The Directors donot recommend the payment of a final dividend (2024: £nil). Risks arising from the Company’s financialinstruments Allloanslistedinnote8,arecoveredbyinter-companyloanagreementswithNWLonthesame termsandconditionsasthoseoftheexternalloans,leadingtoabreak-evenpositionforthe Company.Inaddition,allloansareunconditionallyandirrevocablyguaranteedbyNWL;therefore there are norisks arisingfrom the Company’sfinancial instrumentsexcept the riskof default byNWL which, inthe Directors’opinion, isremote.As such,the Directorsdo notconsider thesetting ofkey performance indicators to be appropriate.The Company did not use any derivatives during the year. Risks arising from Climate Change The Companyconsiders thatthe impactof climatechange doesnot giverise toa materialimpact on theseFinancialStatements.NWLhasassessedandreporteditsclimaterisksinitsclimate-related financial disclosures. Events after the balance sheet date Northumbrian Water Finance plc - 5 - There have been no events subsequent to the year endand to the date of signing this report. Approved by the Board of Directors on 23 July 2025 and signedon its behalf: H Mottram Director 23 July 2025 Northumbrian Water Finance plc # Directors’ report - 6 - TheDirectorsarepleasedtopresenttheirAnnualReportandauditedFinancialStatementsforthe year ended 31 March 2025. Directors The Directors who served during the year and up to thedate of signing were: ● H Mottram ● R W P Somerville ● M A Williams Results and dividends Information on results and dividends is contained in theStrategic Report. Events after the Balance Sheet date Events after the Balance Sheet date are disclosed in the StrategicReport. Going concern TheDirectorsconfirmthat,intheiropinion,theCompanyhassufficientresourcestocontinuein operationalexistencefortheforeseeablefuture.ThegoingconcernstatusoftheCompanyrelies upon NWL’s ability torepay its borrowings to the Company as they fall due. In arrivingattheirdecision,theDirectorshavemadeenquiriesandtakenintoaccountthefollowing factors: ● NWLisastablewaterandwastewaterbusinessoperatinganessentialpublicserviceina regulated market; ● NWLhasastrongbalancesheet,supportedby£450mofcommittedrevolvingbankfacilitiesof which£375mwasundrawnasat31March2025andnewdebtissuancereceivedthroughthe year.After thebalance sheetdate, thecommittedrevolving facilitieswere refinancedfor avalue of £500m(withcapacitytoincreaseto £600m)maturinginApril 2028,withoptionsto extendto April 2030. In addition,proceeds from a £90mbond were receivedin April 2025 andan additional committed bankterm loanfacility of£50m whichwas signedin June2025, withproceeds notyet received at the date these accounts have been signed; ● NWL (and NWF’s) investment grade credit ratings;and ● NWL’sgoingconcernandviabilitystatements,aspublishedinitsAnnualReportandFinancial Statementsfortheyearended31March2025inparticular;itsEMTNprogramme,givingthe Directors confidence that NWL will be able to raise newfinancing in a timely manner as required. Accordingly,the Directorscontinue toadopt thegoing concernbasis inpreparing theAnnual Report and Financial Statements. Future developments Information on future developments is contained in theStrategic Report. Northumbrian Water Finance plc # Directors’ report - 7 - Treasury operations The Company’sBoard isresponsible forthe financingstrategy ofthe Company,which isdetermined withintreasurypoliciessetbyNorthumbrianWaterGroupLimited(NWGL),theimmediateparent company of NWLand indirect parentcompany of theCompany.The aim ofthis strategy isto assess theongoingcapitalrequirementoftheCompanyandtoraisefundingonatimelybasis,taking advantage of any favourable market opportunities whereappropriate. TheTreasurydepartmentofNWGLcarriesouttreasuryoperationsonbehalfoftheCompany. Surplus funds areinvested based uponforecast requirements, inaccordance with thetreasury policy. Derivativesmaybeusedaspartofthisprocess,butthetreasurypoliciesprohibituseofthesefor speculation. Financial instruments TheCompany’spolicyinrelationtotheuseoffinancialinstrumentsissetoutabove.Risks associated with financial instruments are discussed inthe Strategic Report. Political donations There have been no political donations during the current orprior year. Directors’ declaration As requiredunder section418 ofthe CompaniesAct 2006,so faras eachDirector isaware, thereis no relevant audit informationof which the Company’s auditor isunaware and eachDirector has taken allthestepsthatheorsheoughttohavetakenasaDirectorinordertomakehimselforherself aware ofany relevantaudit informationand toestablishthat theCompany’sauditor isaware ofthat information. Indemnification of Directors Directors’andOfficers’liabilityinsurancewasinplacefortheyearended31March2025.On21 March2017NWGLenteredintoadeedofindemnitytogranttheDirectorsofNWGLandits subsidiariesfurther protectionagainst liabilityto thirdparties, subjectto theconditions setoutin the Companies Act 2006, and this remains in place. Auditor Pursuanttosection487oftheCompaniesAct2006,DeloitteLLPisdeemedtobere-appointedas the Company’s auditor for the ensuing year. Approved by the Board of Directors on 23 July 2025 andsigned on its behalf H Mottram Director 23 July 2025 Northumbrian Water Finance plc # Directors’ responsibilities statement - 8 - TheDirectorsareresponsibleforpreparingtheAnnualReportandFinancialStatementsin accordance with applicable law and regulations. Company law requires theDirectors to prepareFinancial Statements foreach financial period.Under thatlawtheDirectorshaveelectedtopreparetheFinancialStatementsinaccordancewithUnited KingdomGenerallyAcceptedAccountingPractice(UnitedKingdomAccountingStandardsand applicablelaw)including FinancialReportingStandard(FRS)101‘ReducedDisclosureFramework’. Under company law the Directors must not approvethe Financial Statements unless they are satisfied that they give atrue and fair viewof the state ofaffairs of theCompany and ofthe profit or lossof the Company for that period.In preparing these Financial Statements, the Directorsare required to: ● select suitable accounting policies and then apply themconsistently; ● make judgements and accounting estimates that are reasonableand prudent; and ● preparetheFinancialStatementsonthegoingconcernbasisunlessitisinappropriateto presume that the Company will continue in business. The Directors areresponsible for keepingproper accounting recordswhich are sufficientto show and explain theCompany’stransactionsanddisclose withreasonableaccuracyatany timethefinancial position of theCompany and toenable them toensure thatthe FinancialStatements complywith the CompaniesAct2006.TheyarealsoresponsibleforsafeguardingtheassetsoftheCompanyand hencefortakingreasonablestepsforthepreventionanddetectionoffraudandotherirregularities. Northumbrian Water Finance plc # Independent auditor’s report to the members of Northumbrian WaterFinance plc - 9 - Report on the audit of the Financial Statements 1. Opinion In our opinion the Financial Statements of NorthumbrianWater Finance plc (the ‘Company’): • giveatrueandfairviewofthestateoftheCompany’saffairsasat31March2025andofits results for the year then ended; • havebeenproperlypreparedinaccordancewithUnitedKingdomGenerallyAccepted AccountingPractice,includingFinancialReportingStandard101‘ReducedDisclosure Framework’; and • have been prepared in accordance with the requirementsof the Companies Act 2006. We have audited the Financial Statements which comprise: ● the statement of comprehensive income; ● the balance sheet; ● the statement of changes in equity; ● the material accounting policy information; and ● the related notes 1 to 11. The FinancialReporting Frameworkthat hasbeen appliedin theirpreparation isapplicable lawand UnitedKingdomAccountingStandards,includingFinancialReportingStandard101‘Reduced Disclosure Framework’(United Kingdom Generally Accepted Accounting Practice). 2. Basis for opinion WeconductedourauditinaccordancewithInternationalStandardsonAuditing(UK)(ISAs(UK)) and applicablelaw.Our responsibilitiesunder thosestandards arefurther describedin theauditor’s responsibilities for the audit of the Financial Statementssection of our report. We are independent of theCompany in accordance with the ethicalrequirements that are relevant to ourauditoftheFinancialStatementsintheUK,includingtheFinancialReportingCouncil’s(the ‘FRC’s’)Ethical Standardas appliedto listedpublic interestentities, andwe havefulfilled ourother ethicalresponsibilitiesinaccordancewiththeserequirements.Weconfirmthatwehavenot provided any non-audit services prohibited by the FRC’sEthical Standard to the Company. We believe thatthe audit evidencewe have obtainedis sufficientand appropriateto provide abasis for our opinion. 3. Summary of our audit approach Key audit matters The key audit matters that we identified in the currentyear was: ● Recoverability of inter-company loans. The key audit matter identified is consistent with the previousyear. Northumbrian Water Finance plc # Independent auditor’s report to the members of Northumbrian WaterFinance plc - 10 - Materiality The materiality thatwe used inthe current yearwas £3.2m (2024:£3.59m) which was determined on the basis of 2% (2024: 2%)of finance income. Scoping Audit workto respondto therisks ofmaterial misstatementwas performed directly by the audit engagement team. Significant changes in our approach Our approach has remained consistent with that of theprevious year. 4. Conclusions relating to going concern In auditing the Financial Statements,we have concluded thatthe Directors’ use of thegoing concern basis of accounting in the preparation of the FinancialStatements is appropriate. Our evaluationof theDirectors’ assessmentof theCompany’s abilityto continueto adoptthe going concern basis of accounting included: ● Assessing financingfacilities including availabilityand accessat the balancesheet date, the nature of facilities, repayment and expiration terms andassociated covenants; ● Understood andassessedhow managementhave consideredthe currentconditions within the sector and how these impact the going concern assessment; ● Evaluatingtheamount,andperformingsensitivityanalysis,ofheadroomintheforecasts focusing on cash and covenants associated with financingactivities; ● Assessingthemodelusedtopreparetheforecasts,testingofmathematicalaccuracyand reasonablenessof thoseforecastsand assessinghistoricalaccuracyof forecastsprepared by management; ● EvaluatingtheabilityoftheCompany’sprimarydebtcounterparty,NorthumbrianWater Limited, to continue to service and repay its debt; and ● Evaluating the disclosure made in the Financial Statements. Based onthe workwe haveperformed, wehave notidentified anymaterial uncertaintiesrelating to eventsorconditionsthat,individuallyorcollectively,maycastsignificantdoubtontheCompany’s ability to continueas a goingconcern for aperiod of atleast twelve monthsfrom when theFinancial Statements are authorised for issue. OurresponsibilitiesandtheresponsibilitiesoftheDirectorswithrespecttogoingconcernare described in the relevant sections of this report. 5. Key audit matters Key audit matters arethose matters that, inour professional judgement,were of most significancein our audit of theFinancial Statements ofthe current periodand include themost significant assessed risksofmaterialmisstatement(whetherornotduetofraud)thatweidentified.Thesematters included those which hadthe greatest effecton the overall auditstrategy,the allocation of resources in the audit,and directing the efforts of the engagementteam. These matterswereaddressedinthecontextofouraudit oftheFinancialStatementsas awhole, and in forming our opinion thereon, and we do not providea separate opinion on these matters. Northumbrian Water Finance plc # Independent auditor’s report to the members of Northumbrian WaterFinance plc - 11 - 5.1. Recoverability of inter-company loans Key audit matter description TheCompanyhasexternaldebtof£3.44bn(2024:£2.96bn)asat31 March2025,withfinancingcomprisinglisted debtin theform offixedrate Eurobonds,aCPI-linkedEurobondandaCPI-linkedPrivatePlacement. This debtis duebetweenOctober 2026and July2053 andincurs interest of between 1.625%and 6.375%.The purpose ofthese bonds wasto raise finance for Northumbrian WaterLimited (“NWL”),being the parent company of Northumbrian Water Finance Plc. InApril2024,theCompanyraisedfinancingonbehalfofNorthumbrian Water Limited(“NWL”) of£350m through£100m ofCPI-linked Guaranteed Senior Noteswitha couponof CPI-3mplus 2.49%repayablein 2039and £250moffixedrateGuaranteedseniornoteswithacouponof5.5% repayable in 2037. In March2025, theCompany raisedfinancing onbehalf ofNWL of£100m throughtwoissuances£50mof fixedrate Guaranteedsenior noteswitha coupon of 4.5% repayable in 2031 and 5.5% repayable in2027. TheCompanyalsohasinterestaccrualsof£56.1m(2024:£46.4m)asat 31 March 2025, with an associated amount owed by groupundertakings. All loansare coveredby inter-companyloan agreementswith NWLon the same terms andconditions andthese loansare guaranteed byNWL which isthemaintradingentityinthewiderNorthumbrianWaterGroup(“the Group”).The ability of the Companyto repay the debt and relevantinterest chargesexternallyisdependentontherecoverabilityoftheloantoNWL. ThisrecoverabilityisthusdependentontheperformanceofNWL. JudgementisthereforerequiredbytheDirectorsastowhethertheinter- companyloandirectlysupportingpaymentoftheexternalloanis recoverablebasedonthe,economic,societalandindustrychangesand prospects of the trading entity. Weconsiderthistobeakeyauditmatterastheinter-companyloansto NWL is of a significantvalue and fundamentalto the principal activityof the Company. FurtherdetailsareincludedwithintheDirectors’Reportonpage6and notes 1, 5 and 6 to the Financial Statements. How the scope of our audit responded to the key audit matter ● Weobtainedanunderstandingofrelevantcontrolsrelatedtothe Company’sassessmentoftherecoverabilityofintercompany loans; ● WeevaluatedtheabilityoftheCompanytocontinuetorepaythe interestandprincipalontheexternaldebtbyassessingthe recoverability of the Company’s inter-company loan toNWL; ● WeassessedtheabilityofNWLtocontinuetorepaytheinter- Northumbrian Water Finance plc # Independent auditor’s report to the members of Northumbrian WaterFinance plc - 12 - company interest owed to the Company by evaluatingthe net asset position of NWL to determine whetherthere is enough coverage for these inter-company borrowings; ● WechallengedDirector’sassessment,throughreferenceto external sources ofinformation, of theimpact of economic,societal andindustrychangesonthecarryingvalueoftheNWL’sassets and liabilities including intercompany receivables; and ● Weevaluatedtheappropriatenessofdisclosuresmadeinthe above -mentioned notes to the Financial Statements. Key observations Based on the work performed, we concluded that the inter-companyloan is appropriately stated, and the disclosure in respect of the carryingvalue of intercompany receivables is appropriate. 6. Our application of materiality 6.1. Materiality WedefinematerialityasthemagnitudeofmisstatementintheFinancialStatementsthatmakesit probable thattheeconomicdecisions ofa reasonablyknowledgeableperson wouldbe changedor influenced.Weusematerialitybothinplanningthescopeofourauditworkandinevaluatingthe results of our work. Based onour professionaljudgement, wedeterminedmaterialityfor theFinancialStatementsas a whole as follows: Materiality £3.2m (2024: £3.59m). Basis for determining materiality 2.0%(2024:2.0%)offinanceincome,beingtheinter-companyinterest received from NWL. Rationale for the benchmark applied As the Companywas set upwith the purposeof raising andholding finance onbehalfofNWL,thefinanceincomefromNWLwasselectedasthe appropriate measure on which to determine materiality. ![image_p13i0]() ![image_p13i1]()![image_p13i2]()![image_p13i3]() ![image_p13i4]() Northumbrian Water Finance plc # Independent auditor’s report to the members of Northumbrian WaterFinance plc - 13 - Finance income £160m Materiality £3.2m Board of directors reporting threshold £0.16m Finance income Materiality 6.2. Performance materiality Wesetperformancematerialityatalevellowerthanmaterialitytoreducetheprobabilitythat,in aggregate,uncorrectedandundetectedmisstatementsexceedthematerialityfortheFinancial Statementsasawhole.Performancematerialitywassetat70%ofmaterialityforthe2025audit (2024: 70%).In determining performance materiality,we considered the following factors: ● Low number of corrected and uncorrected misstatements inprior years; ● Our assessment of the control environment; ● The cumulative knowledge we have of the Company;and ● A low turnover within in management or key accountingpersonnel at the Company. 6.3. Error reporting threshold WeagreedwiththeAuditCommitteethatwewouldreporttotheAuditCommitteeallaudit differencesin excessof £0.16m(2024: £0.18m),as wellas differencesbelow thatthreshold which, in ourview,warranted reportingon qualitativegrounds.Wealso reportto theAudit Committeeon disclosuremattersthatweidentifiedwhenassessingtheoverallpresentationoftheFinancial Statements. 7. An overview of the scope of our audit 7.1. Scoping Ourauditwasscopedbyobtaininganunderstandingoftheentityanditsenvironment,including internal control, and assessingthe risks of materialmisstatement.Audit work to respondto the risks of material misstatement was performed directly by the auditengagement team. 7.2. Our consideration of the control environment We involvedour ITspecialists toassess relevantcontrols overthe Company’sIT systems,with the keysystemidentifiedbeingOracleEBSFinancials(‘Oracle’)fortheiruseasthegeneralledger system forfinancial reportingand, asreported tothe AuditCommittee, wedid notadopt norplan to adoptacontrolsrelianceapproachinthecurrentyear,accordinglywedidnottesttheITcontrols. Whereanydeficienciesincontrolhavebeenidentifiedwehaveassessedtheseverityofthese deficienciesandtheirimpactonourauditprocedures,bothindividuallyandinaggregate,while identifying and considering any mitigating controls. Northumbrian Water Finance plc # Independent auditor’s report to the members of Northumbrian WaterFinance plc - 14 - 7.3 Our consideration of climate-related risks Aspartoftheaudit,wemadeenquiriesofmanagementtounderstandtheprocesstheyhave adopted to assessthe potential impactof climate changeon the FinancialStatements. Management considersthattheimpactofclimatechangedoesnotgiverisetoamaterialfinancialstatement impact.Weusedourknowledgeoftheentity,toevaluatemanagement’sassessmentandtheir conclusionthatthereisnomaterialFinancialStatementimpact.Wealsoconsideredwhetherthe disclosuresinrelationtoclimatechangemadeintheotherinformationintheannualreportis materially consistent with the Financial Statements andour knowledge from our audit. 8. Other information TheotherinformationcomprisestheinformationincludedintheAnnualReport,otherthanthe FinancialStatementsandour auditor’sreportthereon.TheDirectorsare responsiblefortheother information contained within the Annual Report. OuropinionontheFinancialStatementsdoesnotcovertheotherinformationand,excepttothe extent otherwiseexplicitly statedin our report,we donot expressany formof assuranceconclusion thereon. Ourresponsibilityistoreadtheotherinformationand,indoingso,considerwhethertheother information is materiallyinconsistent with theFinancial Statementsor our knowledgeobtained in the course of the audit, or otherwise appears to be materiallymisstated. If weidentifysuchmaterialinconsistenciesor apparentmaterialmisstatements,we arerequiredto determine whether this gives rise to a material misstatementin the Financial Statements themselves. If, basedon thework wehave performed,we concludethat thereis amaterial misstatementof this other information, we are required to report that fact. We have nothing to report in this regard. 9. Responsibilities of Directors’ As explainedmore fullyin theDirectors’ responsibilitiesstatement, theDirectors areresponsible for the preparation of the FinancialStatements and for being satisfiedthat they give a true andfair view, andforsuchinternalcontrolastheDirectorsdetermineisnecessarytoenablethepreparationof Financial Statements that are free from material misstatement,whether due to fraud or error. InpreparingtheFinancialStatements,theDirectorsareresponsibleforassessingtheCompany’s ability to continue as agoing concern, disclosing asapplicable, matters related togoing concern and usingthegoingconcernbasisofaccountingunlesstheDirectorseitherintendtoliquidatethe Company or to cease operations, or have no realistic alternativebut to do so. 10. Auditor’s responsibilities for the audit of the FinancialStatements OurobjectivesaretoobtainreasonableassuranceaboutwhethertheFinancialStatementsasa whole arefree frommaterial misstatement,whether dueto fraudor error,and toissue anAuditor’s Reportthatincludesouropinion.Reasonableassuranceisahighlevelofassurancebutisnota guaranteethatanauditconductedinaccordancewithISAs(UK)willalwaysdetectamaterial misstatementwhenitexists.Misstatementscanarisefromfraudorerrorandareconsidered materialif,individuallyorintheaggregate,theycouldreasonablybeexpectedtoinfluencethe Northumbrian Water Finance plc # Independent auditor’s report to the members of Northumbrian WaterFinance plc - 15 - economic decisions of users taken on the basis of theseFinancial Statements. A further descriptionof our responsibilitiesfor the auditof the FinancialStatements is locatedon the FRC’swebsiteat: [www.frc.org.uk/auditorsresponsibilities](http://www.frc.org.uk/auditorsresponsibilities) .Thisdescriptionformspartofour Auditor’s Report. 11.Extenttowhichtheauditwasconsideredcapableofdetectingirregularities,including fraud Irregularities, including fraud, are instances ofnon-compliance with laws and regulations.We design proceduresinlinewithourresponsibilities,outlinedabove,todetectmaterialmisstatementsin respectofirregularities,includingfraud.Theextenttowhichourproceduresarecapableof detecting irregularities, including fraud is detailed below. 11.1. Identifying and assessingpotential risks related to irregularities In identifying and assessingrisks of material misstatementin respect of irregularities,including fraud and non-compliance with laws and regulations, we consideredthe following: ● thenatureoftheindustryandsector,controlenvironmentandbusinessperformance includingthedesignoftheCompany’sremunerationpolicies,keydriversforDirectors’ remuneration, bonus levels and performance targets; ● resultsofourenquiriesofmanagement,internalauditandtheDirectorsabouttheirown identification and assessmentof the risksof irregularities, includingthose that arespecific to the Company’s sector; ● anymattersweidentifiedhavingobtainedandreviewedtheCompany’sdocumentationof their policies and procedures relating to: o identifying,evaluatingandcomplying withlawsand regulationsandwhethertheywere aware of any instances of non-compliance; o detecting andresponding tothe risksof fraudand whetherthey haveknowledge ofany actual, suspected or alleged fraud; and o theinternalcontrolsestablishedtomitigaterisksoffraudornon-compliancewithlaws and regulations; and ● the mattersdiscussedamong theaudit engagementteamand relevantinternalspecialists, including taxand ITspecialists regardinghow andwhere fraudmight occurin theFinancial Statements and any potential indicators of fraud. As a result of these procedures,we considered the opportunities andincentives that may exist within theorganisationforfraud.IncommonwithallauditsunderISAs(UK),wearealsorequiredto perform specific procedures to respond to the risk ofmanagement override. WealsoobtainedanunderstandingofthelegalandregulatoryframeworksthattheCompany operatesin,focusingonprovisionsofthoselawsandregulationsthathadadirecteffectonthe determinationofmaterialamountsand disclosuresinthe FinancialStatements.The keylaws and regulations we considered in this context included theUK Companies Act and tax legislation. In addition, we considered provisions of other laws andregulations that do not have a direct effect on the Financial Statementsbut compliance withwhich may befundamental to theCompany’s ability to operate or to avoid material penalty. Northumbrian Water Finance plc # Independent auditor’s report to the members of Northumbrian WaterFinance plc - 16 - 11.2. Audit response torisks identified As a result ofperforming the above,we did notidentify any keyaudit matters relatedto the potential risk of fraud or non-compliance with laws and regulations. Our procedures to respond to risks identified included thefollowing: ● reviewingtheFinancialStatementdisclosuresandtestingtosupportingdocumentationto assesscompliancewithprovisionsofrelevantlawsandregulationsdescribedashavinga direct effect on the Financial Statements; ● enquiringofmanagement,theDirectorsandbothin-houseandexternallegalcounsel concerning actual and potential litigation and claims; ● performinganalyticalprocedurestoidentifyanyunusualorunexpectedrelationshipsthat may indicate risks of material misstatement due to fraud; ● readingminutesofmeetingsofthosechargedwithgovernance,reviewinginternalaudit reports and reviewing internal audit reports for the widerGroup; and ● Inaddressingtheriskoffraudthroughmanagementoverrideofcontrols,testingthe appropriateness of journal entries and other adjustments;assessing whether the judgements made inmakingaccountingestimatesare indicativeof apotentialbias;andevaluatingthe businessrationaleofanysignificanttransactionsthatareunusualoroutsidethenormal course of business. Wealsocommunicatedrelevantidentifiedlawsandregulationsandpotentialfraudriskstoall engagementteammembersincludinginternalspecialists,andremainedalerttoanyindicationsof fraud or non-compliance with laws and regulations throughoutthe audit. Report on other legal and regulatory requirements 12. Opinions on other matters prescribed by the CompaniesAct 2006 In our opinion, based on the work undertaken in the courseof our audit: ● the informationgiven inthe StrategicReport andthe Directors’Report forthe financialyear for which the Financial Statements are prepared is consistentwith the Financial Statements; and ● theStrategicReportandtheDirectors’Reporthavebeenpreparedinaccordancewith applicable legal requirements. In the light ofthe knowledge andunderstanding of theCompany and its environmentobtained in the course of theaudit, we havenot identified anymaterial misstatementsin the StrategicReport or the Directors’ Report. 13. Matters on which we are required to report byexception 13.1. Adequacy of explanations received and accountingrecords Under the Companies Act 2006 we are required to reportto you if, in our opinion: ● we have not received all the information and explanationswe require for our audit; or ● adequate accounting recordshave not been kept,or returns adequate forour audit have not been received from branches not visited by us; or ● the Financial Statements are not in agreement with the accountingrecords and returns. Northumbrian Water Finance plc # Independent auditor’s report to the members of Northumbrian WaterFinance plc - 17 - We have nothing to report in respect of thesematters. 13.2. Directors’ remuneration Under the CompaniesAct 2006 weare also requiredto report ifin our opinioncertain disclosuresof Directors’ remuneration have not been made. We have nothing to report in respect of thismatter. 14. Other matters which we are required to address 14.1. Auditor tenure Wewereappointedby theDirectorson14October2011toaudittheFinancialStatementsforthe yearending31March2012andsubsequentfinancialperiods.Followingacompetitivetender processinApril2022,wewerereappointedastheCompany’sauditorfortheyearendedMarch 2024. The period of total uninterrupted engagementincluding previous renewals and reappointments of the firm is 14 years, covering the years ending 31 March2012 to 31 March 2025. 14.2. Consistency of the Audit Report with the additionalreport to the Audit Committee Our auditopinion isconsistent withthe additionalreport tothe AuditCommitteewe arerequiredto provide in accordance with ISAs (UK). 15. Use of our report This reportis madesolely tothe Company’smembers,as abody,in accordancewith Chapter3 of Part 16of the CompaniesAct 2006.Our auditwork hasbeen undertakenso thatwe mightstate to the Company’smembers thosematters weare requiredto stateto themin anAuditor’s Reportand fornootherpurpose.Tothefullestextentpermittedbylaw,wedonotacceptorassume responsibilitytoanyoneotherthantheCompanyandtheCompany’smembersasabody,forour audit work, for this report, or for the opinions we haveformed. Dave Johnson FCA (Senior Statutory Auditor) For and on behalf of Deloitte LLP Statutory Auditor Leeds, United Kingdom 23 July 2025 Northumbrian Water Finance plc - 18 - # Statement of comprehensive income for the year ended 31 March 2025 2025 2024 Notes £000 £000 Continuing operations Finance income 159,990 179,431 Finance costs (159,990) (179,431) Result before taxation - - Taxation 4 - - Result for the year attributable to the shareholder of the Company - - Northumbrian Water Finance plc - 19 - Registered No: 04326507 # Balance sheet as at 31 March 2025 2025 2024 Notes £000 £000 Non-current assets Loans to group undertakings 5 3,437,692 2,961,292 Current assets Trade and other receivables 6 56,170 46,457 Cash and bank balances 13 13 56,183 46,470 Total assets 3,493,875 3,007,762 Current liabilities Trade and other payables 7 (56,133) (46,420) (56,133) (46,420) Non-current liabilities Loans and borrowings 8 (3,437,692) (2,961,292) Total liabilities (3,493,825) (3,007,712) Net assets 50 50 Capital and reserves Share capital 9 50 50 Profit and loss account - - Equity attributable to the shareholder of the Company 50 50 Approved by the Board of Directors on 23 July 2025 and signedon its behalf H Mottram 23 July 2025 Northumbrian Water Finance plc - 20 - # Statement of changes in equity for the year ended 31 March 2025 Share capital Retained earnings Total £000 £000 £000 At 1 April 2023 50 - 50 Result for the year and total comprehensive income - - - At 31 March 2024 50 - 50 Result for the year and total comprehensive income - - - At 31 March 2025 50 - 50 Northumbrian Water Finance plc # Notes to the financial statements for the year ended 31 March 2025 - 21 - ### 1. Accounting policies General information NWFisacompanyincorporatedintheUnitedKingdomundertheCompaniesAct2006.The Company is a public company limited byshares registered in England and Wales.The address of the Company’sregisteredofficeisshownonpage3.TheCompanyhasonereportablesegmentof business andthe natureof itsoperations andits principalactivities areset outin theStrategic report on page 4. These FinancialStatementsare presentedin sterlingand allvaluesare roundedto thenearestone thousand pounds (£000) except where otherwise indicated. Significant accounting policies Basis of accounting TheCompanymeetsthedefinitionofaqualifyingentityunderFRS100‘ApplicationofFinancial ReportingRequirements’issuedbytheFinancialReportingCouncil.Accordingly,thesefinancial statements were prepared in accordance with FRS 101 ‘ReducedDisclosure Framework’. The Financial Statements have been prepared under the historicalcost convention. As permittedby FRS101, theCompany hastaken advantageof thedisclosure exemptionsavailable underthatstandardinrelationtofinancialinstruments,presentationofacashflowstatement, standards not yet effective, related party transactionsand capital management. The principal accounting policies adopted are set out below. Accounting standards The impact of new standards adopted in the period wasnot material to the financial statements. Going concern TheDirectorsconfirmthat,intheiropinion,theCompanyhassufficientresourcestocontinuein operationalexistencefortheforeseeablefuture.ThegoingconcernstatusoftheCompanyrelies upon NWL’s ability torepay its borrowings to the Company as they fall due. In arrivingattheirdecision,theDirectorshavemadeenquiriesandtakenintoaccountthefollowing factors: ● NWLisastablewaterandwastewaterbusinessoperatinganessentialpublicserviceina regulated market; and ● NWLhasastrongbalancesheet,supportedby£450mofcommittedrevolvingbankfacilitiesof which£375mwasundrawnasat31March2025andnewdebtissuancereceivedthroughthe year.After thebalance sheetdate, thecommitted revolvingfacilities wererefinanced fora value of £500m(withcapacitytoincreaseto £600m)maturinginApril 2028,withoptionsto extendto April 2030. In addition,proceeds from a £90mbond were receivedin April 2025 andan additional committedbanktermloanfacilityof£50mwassignedinJune2025,withproceedsnotyet received at the date these accounts have been signed; ● NWL (and NWF’s) investment grade credit ratings;and Northumbrian Water Finance plc # Notes to the financial statements for the year ended 31 March 2025 - 22 - ## 1. Accounting policies (continued) ● NWL’sgoingconcernandviabilitystatements,aspublishedinitsAnnualReportandFinancial Statementsfortheyearended31March2025;inparticularitsEMTNprogramme,givingthe Directors confidence that NWL will be able to raise newfinancing in a timely manner as required. The Company raises financeon behalf of itsimmediate parent company,NWL.All loans are covered by inter-companyloan agreementson theexact sameterms andconditions asthose ofthe external loans,thereforeleadingtoabreak-evenpositionfortheCompany.Inaddition,allloansare unconditionally and irrevocably guaranteed by NWL. Accordingly,theDirectorsbelieveitisappropriatetocontinuetoadoptthegoingconcernbasisin preparing the Annual Report and Financial Statements. Finance income Finance income relates to interest receivableon loans due from NWL.Finance income is taken to the income statementover theterm ofthe loanat aconstant rateon thebalance sheetcarrying amount of the loan. Finance costs Financecostsandissuecostsarerecognisedintheincomestatementoverthedurationofthe borrowingusingtheeffectiveinterestratemethod.Thecarryingamountofindexlinkedborrowings increasesannuallyinlinewiththerelevantRPI,withtheaccretionbeingchargedtotheincome statement as finance costs payable. Other borrowingcosts arerecognised asan expensewhen incurredand feesare recognisedevenly over the duration of the borrowing. Taxation Current tax The tax currentlypayable isbased ontaxable profitfor theyear.Taxableprofit differsfrom netprofit as reported inthe income statementbecause it excludesitems of incomeor expense thatare taxable ordeductibleinotheryearsanditfurtherexcludesitemsthatarenevertaxableordeductible.The Company’sliabilityforcurrenttaxiscalculatedusingtaxratesthathavebeenenactedor substantively enacted by the balance sheet date. Deferred tax Deferredtaxisthetaxexpectedtobepayableorrecoverableondifferencesbetweenthecarrying amounts of assetsand liabilities in theFinancial Statementsand the correspondingtax bases usedin thecomputationoftaxableprofit,andisaccountedforusingthebalancesheetliabilitymethod. Deferred taxliabilities aregenerally recognisedfor alltaxable temporarydifferences anddeferred tax assetsarerecognisedtotheextentthatitisprobablethattaxableprofitswillbeavailableagainst which deductible temporary differences can be utilised. Northumbrian Water Finance plc # Notes to the financial statements for the year ended 31 March 2025 - 23 - Deferred tax iscalculated atthe tax ratesthat areexpected toapply in theperiod whenthe liabilityis settled orthe assetis realisedbased ontax lawsand ratesthat havebeen enactedor substantively enacted at the balance sheet date. Themeasurementofdeferredtaxliabilitiesandassetsreflectsthetaxconsequencesthatwould follow fromthe mannerin whichthe Companyexpects, atthe endof thereporting period,to recover or settle the carrying amount of its assets and liabilities. Deferred tax assetsand liabilities areoffset whenthere is alegally enforceable rightto set offcurrent taxassetsagainstcurrenttaxliabilitiesandwhentheyrelatetoincometaxesleviedbythesame taxationauthorityandtheCompanyintendstosettleitscurrenttaxassetsandliabilitiesonanet basis . Current tax and deferred tax for the year Currentanddeferredtaxarerecognisedintheincomestatement,exceptwhentheyrelatetoitems thatarerecognisedinothercomprehensiveincomeordirectlyinequity,inwhichcase,thecurrent and deferred tax are also recognised in other comprehensiveincome or directly in equity respectively. Loans and receivables Loans and receivables are shown at amortised cost lessprovision for any impairment in value. Interest bearing loans and borrowings All loansand borrowingsare initiallystated atthe amountof thenet proceeds,being fairvalue ofthe considerationreceivednetofissuecostsassociatedwiththeborrowing.Fixedrateborrowingsare statedatamortisedcost.Financeandissuecostsarerecognisedintheincomestatementoverthe duration of the borrowing using theeffective interest rate method.The carrying amount of indexlinked borrowingsincreasesannuallyinlinewiththerelevantRPI,withtheaccretionbeingchargedtothe incomestatementasfinancecostspayable.Otherborrowingcostsarerecognisedasanexpense when incurred and fees are recognised evenly over theduration of the borrowings. Realised gainsand lossesthat occurfrom theearly terminationof loansand borrowingsare takento the income statement in that period. Net debt is the sum of allcurrent and non-current liabilitiesless cash and cash equivalents, shortterm cash deposits, financial investments and loans receivable. Critical accounting judgements and key sources ofestimation uncertainty Intheprocessofapplyingtheaccountingpolicies,theCompanyisrequiredtomakecertain judgements,estimatesandassumptionsthatitbelievesarereasonablebasedontheinformation available.TheDirectorsconsiderthattherearenosignificantjudgementsorkeysourcesof estimation uncertainty appliedat the balancesheet date, whichmay have asignificant risk ofcausing a material adjustment to the carrying amounts of assetsand liabilities within the next financial year. Northumbrian Water Finance plc # Notes to the financial statements for the year ended 31 March 2025 - 24 - ### 2. Auditor’s remuneration Auditor’sremunerationfortheauditoftheFinancialStatementsfortheyearended31March2025 was£12,621(2024:£12,299)whichhasbeenbornebyNWL,theCompany’simmediateparent company, and is notrepayable. ### 3. Staff costs There were no employees during the year (2024: nil). The Directorsof theCompanyare remuneratedinfullby NWGLand NWLand,as theirservicesto the Companyare incidentalto theservicesprovided toother Groupcompanies,they donot receive any remuneration in respect of qualifying services to theCompany (2024: nil). ### 4. Taxation (a) Tax in the income statement There isno taxliability forthe yearended 31March 2025(2024: £nil),no deferredtax liability(2024: £nil) and no unprovided deferred tax (2024: £nil). (b) Reconciliation of total tax charge 2025 2024 £000 £000 Result before tax multiplied by the rate of UK corporation tax of 25% (2024: 25%) - - Effects at 25% (2024: 25%) of: Transfer pricing adjustments 85 73 Balancing payment receivable (85) (73) Totaltax (note 4a) - - Transfer pricing adjustments relateto loans made to NWL, being the immediate parent company. Northumbrian Water Finance plc # Notes to the financial statements for the year ended 31 March 2025 - 25 - (c) Factors that may affect future tax charges The rate of UK corporation tax for the current year was25%. The Organisationfor EconomicCo-operationandDevelopments(OECD)releasedPillarTwomodel rulesinDecember2021introducingaglobalminimumtaxrateof15%toaddressthetaxconcerns about uneven profitdistribution and taxcontributions of largemultinational corporations.In December 2022,theOECDreleasedtransitionalsafeharbourrulesasashort-termmeasuretominimisethe compliance burden for lower risk jurisdictions. The PillarTwotop-up taxrules weresubstantiallyenacted inthe UKin 2023with applicationfrom 1 January 2024.The Groupdoes notexpect tobe subjectto thetop-up taxin relationto itsoperations inanyofthejurisdictionsinwhichitoperatesbecausetheyfallwithintheOECDtransitionalsafe harbourruleswhichhavealsobeenadoptedbytheUK.TheGrouphasappliedatemporary mandatory relieffrom deferredtax accountingfor theimpacts ofthe top-uptax andwill accountfor it as current tax when it is incurred. Northumbrian Water Finance plc # Notes to the financial statements for the year ended 31 March 2025 - 26 - ### 5. Loans to group undertakings Loans to group undertaking £000 At 31 March 2024 2,961,292 Effect of indexation 34,628 Amortisation of fees and interest 1,342 New loan 450,000 New loan unamortised fees (9,570) At 31 March 2025 3,437,692 2025 2024 Disclosed as: £000 £000 Non-current assets 3,437,692 2,961,292 Loans togroupundertakingrelate tointer-companyloanstoNWL,whichare providedonthesame terms and conditions as the external borrowings detailed innote 8. ### 6. Trade and other receivables 2025 2024 £000 £000 Interest owed by group undertakings 56,133 46,420 Called up share capital not paid 37 37 56,170 46,457 The terms and conditions of loans to group undertakingsare detailed in note 8. ### 7. Trade and other payables 2025 2024 £000 £000 Interest accruals 56,133 46,420 Northumbrian Water Finance plc # Notes to the financial statements for the year ended 31 March 2025 - 27 - ### 8. Loans and borrowings 2025 2024 £000 £000 Non-current instalments due on external borrowings: £350m Fixed Rate Bonds: due 29 April 2033 bearing interestrate of 5.625% 345,324 344,897 £360m Fixed Rate Bonds: due 23 January 2042 bearinginterest rate of 5.125% 357,233 357,105 £150m Index linked Bonds: due 15 July 2036 bearing interestrate of 2.033% 307,265 296,660 £60m Index linked Bonds: due 30 January 2041 bearing interestrate of 1.6274% 121,011 116,849 £100m Index linked Bonds: due 16 July 2049 bearing interestrate of 1.7118% 200,362 193,477 £100m Index linked Bonds: due 16 July 2053 bearing interestrate of 1.7484% 200,355 193,470 £300m Fixed Rate Bonds: due 11October 2026 bearing interest rate of 1.625% 299,579 299,321 £300m Fixed Rate Bonds: due 5 October 2027 bearinginterest rate of 2.375% 299,142 298,813 £100m CPI Index Linked Private Placement: due 29 October2039 bearing interest rate of CPI + 0.242% 125,208 122,077 £400m Fixed Rate Bonds: due 31 October 2034 bearinginterest rate of 6.375% 392,241 391,662 £400m (2024: £350m): Fixed Rate Bonds: due 28 February2031 bearing interest rate of 4.5% 394,356 346,961 £300m Fixed Rate Bonds: due 2 Oct 2037 bearing interestrate of5.5% 293,071 - £100m CPI Linked Bond: due 5 Apr 2039 bearing an interestrate of CPI + 2.49% 102,545 - 3,437,692 2,961,292 The differencebetween theprincipal valueof £3,468.3m(2024: £2,983.6m)and the carryingvalue of £3,437.7m (2024:£2,961.3m) relates to unamortised issuance costsof £30.6m (2024: £22.3m). Northumbrian Water Finance plc # Notes to the financial statements for the year ended 31 March 2025 - 28 - ### 9. Share capital 2025 2024 Authorised: £000 £000 50,000 Ordinary Shares of £1 each (2024: 50,000) 50 50 2025 2024 Allotted, called up and partly paid: £000 £000 50,000 Ordinary Shares of £1 each (2024: 50,000) 50 50 On 21November2001 theCompanyissued50,000 £1sharesat par.At thebalancesheetdate 75p per share remained unpaid.The above shares rank pari passu in all respects. 10. Related parties TheCompanyisanindirectlywhollyownedsubsidiaryofNWGL,whosepubliclyavailable consolidated Financial Statementsinclude the Company.Accordingly,the Company isexempt under thetermsofFRS101fromdisclosingtransactionswithotherwhollyownedmembersoftheGroup headed by NWGL. 11. Parent undertaking and controlling party NWGL is,in theDirectors’opinion, theCompany’sultimate parentundertaking andcontrolling party, andistheparentundertakingofthelargestgroupofundertakingsforwhichgroupFinancial Statements are drawn up, and of which the reportingcompany is a member.NWGL is incorporated in England andWales.Copies ofNWGL’sgroup FinancialStatements areavailable onthe websiteat: [www.nwg.co.uk](http://www.nwg.co.uk/) and fromits registeredoffice atNorthumbria House,Abbey Road,Pity Me,Durham, DH1 5FJ. The Company’s immediateparent undertaking is NWLwhich is the parentundertaking of the smallest group of undertakingsfor which groupFinancial Statementsare drawn up,and of whichthe reporting companyisamember.NWLisincorporatedinEnglandandWales.CopiesofNWL’sgroup Financial Statementsare available onthe website at: [www.nwg.co.uk](http://www.nwg.co.uk/) and fromits registered officeat Northumbria House, Abbey Road, Pity Me, Durham, DH15FJ.