213800L7HZMXLTISFT69-2024-12-31-0-en.xhtml

Registration number: 02366942 (England and Wales)

Northern Electric plc

Annual Report and Consolidated Financial Statements

for the Year Ended 31 December 2024

Northern Electric plc

Contents

Company Information 1

Strategic Report 2 to 27

Directors' Report 28 to 40

Consolidated Income Statement 50

Consolidated Statement of Comprehensive Income 51

Consolidated Statement of Financial Position 52 to 53

Statement of Financial Position 54 to 55

Consolidated Statement of Changes in Equity 56

Statement of Changes in Equity 57

Consolidated Statement of Cash Flows 58

Notes to the Financial Statements 59 to 134

Northern Electric plc

Company Information

Directors

A P Jones

S J Lockwood

J N Reynolds

J C Riley

Company Secretary

J C Riley

Registered office

Lloyds Court

78 Grey Street

Newcastle upon Tyne

Tyne and Wear

NE1 6AF

Registration number

02366942 (England and Wales)

Auditor

KPMG LLP

319 St Vincent Street

Glasgow

United Kingdom

G2 5AS

Page 1

Northern Electric plc

Strategic Report for the Year Ended 31 December 2024

The directors present their annual report and audited financial statements for the year ended 31 December 2024

of Northern Electric plc (the "Company"), which have been drawn up and are presented in accordance with the

Companies Act 2006 (the “CA06”).

Business model

The Company is part of the Northern Powergrid Holdings Company and its subsidiaries group of companies

(the “Northern Powergrid Group”) and acts as a holding company of Northern Powergrid (Northeast) plc (“NPg

Northeast”), Integrated Utility Services Limited (“IUS”) and Northern Powergrid Metering Limited (“NPg

Metering”), alongside other smaller companies, collectively, (the “Group”).

NPg Northeast is an authorised distributor under the Electricity Act 1989 and holds a licence granted by the

Secretary of State. As a distribution network operator (“DNO”), NPg Northeast 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 NPg Northeast 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 the

average of the United Kingdom's Retail Prices Index and Consumer Prices Index “CPI-H” in the month of April

2023, and as measured by CPI-H there onwards).

IUS provides engineering contracting services and NPg Metering rents meters to energy suppliers.

Strategy

In common with the Northern Powergrid Group, the Group 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.

Page 2

Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

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.

As the largest contributor to the Group in terms of revenue, the Strategic Report primarily concentrates on the

performance and progress of NPg Northeast throughout the reporting year.

FINANCIAL STRENGTH

Strategic objective:

Strong finances that enable improvement and growth.

KPI

Operating Profit

Cash from operating activities

Cash used in investing activities

Credit Rating (Standard & Poor's)

(As restated)

2024 2023

£ 314.5 million £ 216.2 million

£ 590.2 million £ 368.7 million

£(504.5) million £(285.2) million

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.

Revenue:

The Group's revenue at £670.7 million was £100.2 million higher than the prior year primarily due to

inflation-driven increase in tariffs in the 2024/25 regulatory year.

Operating profit and position at the year-end:

The Group's operating profit of £314.5 million was £98.3

million higher than the previous year, primarily reflecting higher revenue detailed above and a fall in Supplier of

Last Resort payments amounting to £21.0 million, alongside an increase in IT related expenditure. The

statement of financial position shows that, as at 31 December 2024, the Group had total equity of £1,402.7

million (2023: £1,485.2 million). The decrease in net assets (£82.5m) was driven by dividends of £277.4m and

fair valuation re-measurements on pensions and cash flow hedges of £12.9m, offset by profits in the year of

£207.7m and higher capital expenditure, mainly on asset resilience and decarbonisation-enabling investment on

the network.

Finance costs and investments:

Finance costs net of investment income at £33.7 million were £3.5 million

lower than the prior year mainly reflecting an increase on interest earned due to the rate applied to the average

intercompany borrowings balance during the year.

Taxation

: The effective tax rate in the year was 26%. Tax charge for the year was £73.5 million which was

£28.4 million higher than prior year of £45.1 million primarily due to higher profits. Details of the income tax

expense are provided in Note 9 to the financial statements.

Share capital:

The Company has one class of ordinary shares which carries no right to fixed income. Details of

cumulative non-equity preference shares are contained in the borrowings Note 19. There were no changes to the

Company's share capital during the year.

Page 3

Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

Cash flow:

The Group 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 Northern Powergrid Group. Movements in

cash flows were as follows:

• Operating activities:

Net cash flow from operating activities at £590.2 million was £221.5 million higher

than the previous year due to higher cash receipts from customers and reduced supplier payments.

• Investing activities:

Cash flow used in investing activities at £504.5 million was £219.3 million higher

than

the previous year mainly driven by movement in intercompany treasury account and higher

capital expenditure, mainly on asset resilience and decarbonisation-enabling investment on the network.

• Financing activities:

Cash outflow from financing activities at £86.9 million was £4.7 million higher than

the previous year, mainly due to lower net proceeds from borrowings.

Pensions:

The Company is a participating and sponsoring employer in the Group of the Electricity Supply

Pension Scheme (the "DB Scheme"), a defined benefit scheme. Further details of the Group's commitments to

the DB Scheme and the associated deficit repair payments are provided in Note 24 to the financial statements.

The Group also participates in the Northern Powergrid Pension Scheme, which is a defined contribution scheme.

Insurance:

As part of its insurance and risk strategy, the Group has in place insurance policies, which cover

risks associated with employees, third party motor and public liability. The Group carries appropriate excesses

on those policies and is effectively self-insured up to the level of those excesses.

CUSTOMER SERVICE

Strategic objective:

Delivering exceptional customer service.

KPI 2024 2023

Broad Measure of Customer Satisfaction ("BMCS") 91.0% 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 commitment:

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 NPg Northeast’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 NPg Northeast’s customer service

improvement plan were implemented, including enhancing management routines for connections processes,

undertaking end-to-end journey mapping for unplanned interruptions, 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.

Page 4

Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

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, NPg Northeast 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

Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

Connections to the network

Business Plan commitment:

To reduce small work end-to-end connections lead times by 20% while offering

more self-service options, greater support and more flexibility over delivery for both small and major works

customers.

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 NPg Northeast 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. NPg Northeast 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.

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

: NPg Northeast 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, NPg Northeast 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 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 NPg Northeast established the Community Energy Team to support community energy groups.

Alongside, NPg Northeast 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 ("CML") 49.5 <42.0 44.0 <50.9

Customer interruptions ("CI") 48.6 <47.7 46.9 <58.6

KPI 2024 2023

High voltage restoration time (minutes) 64.1 62.1

Network investment (million) £228.5 £189.7

Page 6

Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

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 NPg Northeast’s (together with its affiliate's)

power cuts increased by 6.4%.

From a high voltage restoration perspective, NPg Northeast averaged 64.1 minutes (2023: 61.2 minutes), after

allowing for severe weather incidents and other exemptions, which is an improved performance from the prior

year.

NPg Northeast invested £228.5 million during the year through its approved Network investment strategy (2023:

£189.7 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.

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. NPg Northeast 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.

CLIMATE CHANGE ADAPTATION

Strategic objective:

Operate a highly reliable and resilient Network

Business Plan commitment:

To adapt the Network and operations to build resilience against the effects of

climate change.

Page 7

Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

Performance during the year:

The climate is changing and, despite international efforts to reduce greenhouse

gas emissions, it is expected to continue to change over the course of the century. The Northern Powergrid

Group has taken steps to understand the risks and opportunities presented by climate change and has established

initiatives in response such as for NPg Northeast, an industry leading flood mitigation programme and a robust

vegetation management programme.

In respect of performance against the KPIs established for the ED1 period, during the year, NPg Northeast and

its affiliate upgraded an additional high-risk site and installed three further substation defences. This resulted in

all planned sites being fully protected with a combined investment on flood mitigation works of £0.52 million.

From a vegetation management perspective, £1.8 million was invested by NPg Northeast and Northern

Powergrid (Yorkshire) plc to clear spans and make the high-voltage Network more resilient. For the latter, the

work entailed creating corridors between vegetation and the Network to accommodate the falling distance of

trees. The target was increased between 2023 and 2024. This was to reflect the actual volumes of work

undertaken given a large number of surveys are undertaken which confirm continued compliance, and therefore

cutting is not required. In addition, increased growth was observed, driven by the wetter winter. The

acceleration of the vegetation management programme will be supported by the use of Light Detection and

Ratings (“LiDAR”) to help more effectively target the work.

Collaboration with LRFs was positive with NPg Northeast and its affiliate attendance at meetings with 64

quarterly tactical business groups for each of the seven LRFs in the operating areas.

Page 8

Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

Governance Arrangements

In respect of the management of climate-related risks and opportunities, the Northern Powergrid Group has

well-defined and mature governance arrangements in place, which are defined by its risk management policy

and processes and are overseen by the Risk Advisory Board (“RAB”) with the support of the Internal Audit

function (see ‘Risk Management’ and ‘Internal Control’ for further details). Each subsidiary is responsible for

the assessment and management of its own risks and opportunities, with risks then being reported via the

processes set out below including being tracked and monitored at a Northern Powergrid Group level via the

RAB.

As is the case for all types of risk across the Northern Powergrid Group, climate related risks and opportunities

are identified, assessed and managed at a variety of levels with escalation points incorporated at various stages

of the process.

Risks that are identified via NPg Northeast’s operational working groups are put forward to the Asset

Serviceability Review steering group where appropriate actions and controls are monitored by senior

management. Risks can then be further escalated to the Asset Risk Management Executive Review Group for

further oversight by a subset of the Executive Leadership team.

When identified at a subsidiary or directorate level, risks are reviewed and monitored by the relevant Senior

Management team and are escalated through the quarterly risk identification process run by the Internal Audit

team. In all scenarios, where risks are identified as being above the Northern Powergrid Group’s risk appetite,

they are reported to the RAB.

The Northern Powergrid Group’s risk management process (including for climate related risks) takes place on a

quarterly basis and includes the Chair of the RAB reporting risks and opportunities to the board. In addition, an

annual risk submission is made to the Northern Powergrid Group’s shareholder, noting that Berkshire Hathaway

Energy is routinely made aware of risks via regular dialogue with members of the Executive Leadership team

and the board.

Given the significance upon the Northern Powergrid Group and its stakeholders, the board considers climate

related risks and opportunities via routine reporting (including scrutinising performance against KPIs) and

in-focus updates on at least a quarterly basis. Whilst always being guided by the Core Principles, the board is

also cognisant of the impact of risks and opportunities on the Northern Powergrid Group’s strategy and business

model and, has regard to this when making decisions such as reviewing and approving business plans and

monitoring performance.

Page 9

Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

Risk Management

In terms of identification, climate related risks and opportunities are typically detected via a number of channels,

including at the operational, subsidiary and directorate level (as outlined above), as a result of detailed risk

assessments based on climate projections, by investigations into exceptional events, from reviewing the macro

environment for trends, or via shared learning from other Berkshire Hathaway Energy subsidiary companies or

collaborative work with other DNOs. In relation to the latter, the DNOs typically work with the ENA to

establish a sector wide perspective and have used this approach to implement regulatory requirements such as

those under the Climate Change Act 2008 and the National Adaptation Plan.

Regardless of the source, all risks are integrated into the Northern Powergrid Group’s overall risk management

process, are recorded within a central risk register and are categorised by likelihood and impact. Supplementary

to this, all climate related risks are also recorded and tracked through the Northern Powergrid Group’s climate

risk register.

Once identified, all risks (including climate related) are allocated to an owner and are assessed to determine if

they are to be tolerated, influenced or mitigated. If the risk is to be mitigated, appropriate actions are developed

to reduce or eliminate the impact of the risk over an appropriate timescale. As outlined above, all risks that are

above the Northern Powergrid Group’s risk appetite are monitored by the RAB and are allocated to a member of

the Executive Leadership team to mitigate or manage. Climate related opportunities are typically reviewed by

the Science and Technology Advisory Panel in conjunction with the Executive Leadership team ahead of

scoping options to maximise the benefits and progressing to implementation as relevant.

Strategy

Following the publication by the Department for Environment, Food & Rural Affairs (“Defra”) of the

supplementary Green Book Guidance on ‘Accounting for the Effects of Climate Change’ in November 2020, a

thorough assessment of the impact of climate change and severe weather upon NPg Northeast its affiliate was

undertaken in collaboration with other gas and electricity network operators through the ENA. The results of the

review and associated adaption, recovery and transform plans were published in the NPg Northeast and its

affiliates ‘Adapting to Climate’ strategy in November 2021. An update to the actions laid out in the report was

published in December 2024 as part of the fourth round of adaptation reporting (ARP4).

In line with Defra’s recommended approach, the assessment was performed at the operational and asset base

level and followed the specific guidance for projects, policies and programmes that have a lifespan that goes

beyond 2035. This included using two climate scenarios (as utilised by the Climate Change Commission) to:

- Consider options which include all adaptation measures which would mitigate the known impacts of the 2°C

scenario; and

- Make decisions based on the Northern Powergrid Group’s risk appetite about whether to consider adaptation

measures aligned with the 4°C global warming scenario.

Using outputs from the work that the ENA had commissioned from the Met Office, potential climate related

hazards, including high temperatures, heavy rain, droughts, storms, sea level changes, snow, ice, wildfires and

lighting - or a combination of these, were identified. The hazards were then reviewed against other variables

such as regional climate change considerations (known events and topography), asset configuration and

interdependencies on other national infrastructure to identify a range of impact scenarios.

The risk assessment was carried out across three timescale horizons, short term: current climate, medium term:

2050’s and long term: 2080’s, for both the 2°C and 4°C scenario and was applied to each of NPg Northeast and

Northern Powergrid (Yorkshire) plc’s six operating zones. The three time periods are aligned with the UK

Climate Projections 2018 and the most recent guidance from Defra (ARP4) This allowed the Northern

Powergrid Group to understand how each impact scenario affected the whole of NPg Northeast and its affiliates

geographic operating locations, including those where known vulnerabilities already exist such as in coastal

areas, flood plains and exposed areas, and over what period, so as to establish and prioritise the key areas of risk

and identify relevant opportunities.

Page 10

Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

Climate Change Adaptation

From an overall business model and strategy resilience perspective, the risk assessments (and corroborated via

the findings from other DNOs through the work of the ENA) identified that there was no significant divergence

in the climate projections, the impact scenarios or key risks themselves, were observed between the three

timescales until beyond 2050.

Whilst this provides some comfort during the short term, adapting to climate change requires an understanding

of how to better resist the challenges and how to absorb the impact to minimise it as when events do occur and

how to utilise the opportunities this creates.

Accordingly, where the risk assessments identified that risks were more likely to occur (at any point over the

three timescales) and/or that the impact was potentially greater, these were categorised as the highest priority

risk areas and programmes covering bespoke adaptation, recovery actions and longer-term transformations were

developed accordingly. It was identified that the highest priority risk areas included:

- Flooding presented by changes in precipitation rates and sea level rise; and

- Changes in growth rates and patterns of trees due to changes in temperature and precipitation.

As referenced in ‘further information’ below, the impact of climate related issues upon the Northern Powergrid

Group, particularly NPg Northeast, are incorporated into the five-year regulatory Business Plan. This includes

an assessment of the impact of investing in mitigation programmes and undertaking innovation projects with

climate change acting as a key driver, particularly in network investment decisions. These plans are fully

incorporated into the Northern Powergrid Group’s financial planning process (including with consideration of

the impact on areas such as the Northern Powergrid Group’s supply chain) and the impact of climate related

issues will continue to be included in regulatory business plans for the relevant time periods in question. Climate

related risk assessment scenarios that feed into financial and strategic planning are included in the NPg

Northeast and Northern Powergrid (Yorkshire) plc’s third round Adapting to Climate Change report and its

supporting annex (available via the Northern Powergrid Group’s website). An update to this report is available

in the fourth round Adapting to Climate Change update report (which is also available via the website).

Principal climate-related opportunities and risks arising in connection with the Group’s operations

1. Physical risk (long term - acute/chronic)

: Precipitation (extreme prolonged rainfall) - long periods of above

average precipitation or intense rainfall events resulting in flooding and erosion.

Assessment assumptions: data was used concerning the accumulation of rainfall over a month and where it

exceeds the 90th and 95th percentile of today’s climate, the Soil Moisture Deficit and for heavy daily rainfall

events, the percentage changes in the 99th percentile of seasonal daily mean precipitation.

Findings: There was a large regional variation in how the frequency of climate related hazards were expected to

change in future periods. However, in autumn and winter months, instances of prolonged rainfall, heavy daily

rainfall events and heavy hourly precipitation were projected to increase across most of the UK. Assets located

in coastal areas were more vulnerable to changes in sea level, notably in the Humber Estuary and Seal Sands.

Impact: Access issues, asset damage and reduced performance, predominantly as a result of Grid and Primary

Substations being adversely affected.

Serious flooding in particular was likely to result in the most severe consequences, including the loss of

electricity supply to thousands of people, as well as to other types of infrastructure. This in turn had the potential

to lead to additional costs as a result of replacing or repairing damaged equipment, as well as increasing the

number of customer interruptions, thereby having a negative effect on service and performance levels.

Page 11

Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

As set out in ‘Operational Excellence’, Network reliability is recorded via Ofgem’s Interruptions Incentive

Scheme (“IIS”) through targets in relation to CML and CI. If IIS targets are exceeded, there is a reward.

Conversely, in the event targets are missed, there is a penalty. In addition, if Guaranteed Standards or service

levels that are agreed by Ofgem are failed, payments must be made to those customers affected. Therefore,

unless there is an exemption applied for an extreme weather event, NPg Northeast is susceptible to an increase

in costs if service and performance levels reduce.

Mitigation: Flood defences programme - designed to comply with national guidance on how to improve the

resilience of electricity substations to flooding.

Mitigation activity:

- Improve and maintain flood resilience through targeted adaptations in civil defences and install additional

substation defences.

- Improve flood resilience at distribution substations, either by moving them out of the line of flooding risk or

by implementing mitigation measures.

2. Physical risk (long term - acute/chronic): Temperature

(extreme heat) - high temperatures that may reduce

the performance and efficiency of assets.

Assessment assumptions: Thresholds to understand the frequency of days which constitute ‘extreme

temperatures’ across the UK and how these may change under future climate projections were used. This

included the frequency with which the daily maximum temperature exceeded 28°C, 30°C and 35°C and the

frequency with which the daily maximum temperature exceeded 28°C for 3 consecutive days.

Findings: Trends in observational records confirmed that the UK climate is warming with high temperature

thresholds being exceeded each year and expected to increase in line with Representative Concentration

Pathway 8.5 (being the worst-case climate change scenario). Met Office climate projections identified that the

frequency of hot summer periods is becoming increasingly common.

The rate of change for extreme heat was expected to be slower for cooler regions of the UK such as the North of

England. However, by the 2060s the frequency with which extreme heat occurred in the North of England

would be the equivalent to that of the warmest areas of the UK at the time of the assessment.

Impact: A reduction in the performance and efficiency of assets. This in turn has the potential to increase fault

volumes, leading to additional costs being incurred as a result of repairs and maintenance, reduce service levels

and customer satisfaction, and could cause delays to other work planned for delivery.

Whilst the likelihood of global temperature rise is accepted, the impacts on DNOs has not yet begun to be

realised. Because of this, networks do not currently see any drivers to invest ahead of the need to offset risks.

Mitigation activity:

- Network and asset performance will continue to be monitored and will be modified once climate change

begins to have a direct and longer-term impact.

- Standards and specifications will be updated to include projected changes in temperatures and ground

movements.

Page 12

Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

3. Physical risk (long term - acute/chronic): Precipitation

(storms) - Strong winds are a significant hazard,

especially when experienced in conjunction with heavy rain.

Assumptions: As for Precipitation (extreme prolonged rainfall)

Findings: There was no clear evidence within climate projections that there would be a change in the frequency

or power of storms. Accordingly, the risk of strong winds was assessed in line with the climate conditions at that

time. It was also recognised that research into the effects of wind had been carried out between 2011 and 2015

under the Resilient Electricity Networks for Great Britain project and learnings had been incorporated into the

NPg Northeast’s specifications.

Impact: A number of storms have affected the Network since the initial risk assessment, notably storm Arwen. It

is therefore recognised that storms can lead to operational failure of above ground assets, resulting in increased

faults and loss of supply to customers, which in turn affects customer service. The potential for damage to

telecommunications infrastructure, leading to the inability to communicate with staff in the field or control

technology, can also impact repair efforts further.

Mitigation: Resilience programme - Resilience programme - Maintain operational resilience and embed

long-term resilience across the asset programmes, working with others to better understand future risks.

Mitigation activity:

- Utilise drones for storm damage assessments.

- Undertake collaborative exercises to test operational response.

- Major Incident procedures in place.

- Embed resilience across asset programme designs and specifications to deliver long-term synergistic

resilience.

- Vegetation management programme (see below).

4. Physical risk (long term - chronic): Temperature / Precipitation

(gradual increase in temperature and

rainfall) - warmer and wetter conditions may extend vegetation growing seasons, resulting in increased or

accelerated growth of vegetation.

Assumptions: The length of the growing season was calculated using mean daily temperatures beginning at the

start of a period of five successive days where the daily-average temperature was greater than 5°C and ending

on the day before a period of five successive days when the daily-average temperature was less than 5°C.

Findings: The average growing season length had increased by approximately 30 days per year over the course

of the last 60 years and was reported as being largely due to an earlier onset of spring. As a result, the combined

effect of temperature and precipitation was likely to lead to increased vegetation growth.

Impact: Interference to overhead lines could cause a variety of power supply issues ranging from transient

interruptions, due to vegetation touching the line, through to severe damage from trees, or parts of trees, falling

onto the lines. This may result in increased levels of investment being required in order to maintain Network

resilience, additional costs associated with maintenance and cutting cycles and performance and customer

service related issues.

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Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

Under abnormal weather conditions there is also the potential for large scale power outages with some supply

restorations taking many days.

Mitigation: Vegetation management programme - improving the resilience of the overhead Network under

abnormal weather conditions using a risk-based methodology.

Mitigation activity:

- Undertake enhanced resilience cuts in line industry standards on the overhead network to comply with

enhanced resilience requirements.

- Establish and maintain clearance corridors.

- Assess and tackle the issues anticipated from ash tree dieback through the management of affected spans.

- Undertake a vegetation clearance programme for substations and tower bases.

- Utilise Light Detection and Ratings (“LiDAR”) technology to ensure efficient targeting for vegetation

management.

5. Transition risk: Enabling the Energy Transition - see Principal Risks and Uncertainties

6. Opportunity: Innovation

- participating in and leading innovation projects as a way of developing creative

solutions to mitigate the risks of climate change and enhance responsiveness in the event an incident does occur.

A number of projects are planned for the ED2 period including:

- Optimising the use of LiDAR data in order to carry out more effective and efficient clearance and vegetation

management by prioritising cutting responses;

- Reviewing the link between rainfall and underground cable faults to understand and quantify the risk;

- Research into substation design specifications and innovative materials to mitigate risks associated with

high-temperatures and assets;

- Investigations to understand the performance limitations of outdoor control equipment during periods of

extreme heat; and

- Estimate the extent of Ash tree dieback and its impacts on the Network.

Further detail of innovation supporting decarbonisation can be found in the ‘Environmental Sustainability’

section of the Strategic Report.

7. Opportunity: Decarbonisation

- adapting and evolving the Network to facilitate the UK’s net zero strategy.

There are many benefits associated with decarbonisation, not just for the Northern Powergrid Group, but for the

areas the Northern Powergrid Group serves and the people who live and work there. This includes developing

the Network to accommodate additional connections to enable more electric vehicle chargers to be installed, to

allow greener heating solutions, to provide a mechanism for local electricity production and to facilitate the

growth of renewable energy sources by offering greater flexibility.

Further detail of the initiatives underway to facilitate decarbonisation can be found in the ‘Environmental

Sustainability’ section of the Strategic Report.

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Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

8. Opportunity: Collaboration

- working with stakeholders including industry partners and energy networks to

find solutions to mitigate the risk of climate change and improve resilience through collaborative work on

interdependencies to reduce the risk of cascade failures across systems.

The Northern Powergrid Group works closely with its stakeholders and partners to share best practice, evolve

new protocols, develop industry guidance and adopt measures to prevent or manage the impact of climate

change. This includes working with Local Authorities and regional bodies to evolve their climate resilience and

decarbonisation plans and collaborating on specific issues to generate practical solutions - such as with the ENA

as outline above.

Initiatives planned in this area include collaboration with:

- Other regional infrastructure operators to identify and mitigate interdependencies.

- The Environment Agency and local authorities on the implementation of their regional flood risk management

plans and establish support for these where appropriate.

Further information

Given the likely impact of climate related opportunities and risks on the Network, the NPg Northeast and its

affiliates various mitigation programmes (including KPIs and the methodology for determining these) were fully

scoped and costed as part of the Business Plan submission to Ofgem for the ED2 Period, details of which can be

found via the Northern Powergrid Group’s website.

In addition to the information contained above, the Northern Powergrid Group has published a ‘Climate

Resilience Strategy’ and an ‘Adapting to Climate Change Report’, the former having been submitted to Ofgem

and part of the Business Plan for 2023 to 2028 and the latter having been submitted to Defra in line with the

requirements of the Climate Change Act (2008). The Northern Powergrid Group’s most recent report was

published as part of the fourth round in 2024 and is an update report which should be read in conjunction with

the third-round report published in 2021. Copies of both reports can be found on the Northern Powergrid

Group’s website.

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Northern Electric 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") rate 0.23 0.09 0.43 0.09

Preventable vehicle accidents (PVAs) 7 11 8 14

Lost time accidents 1 0 1 0

Medical treatment accidents 2 1 2 1

Operational incidents 2 4 3 4

Absence rate 3.52% 3.35%

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 0.68 (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 11 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 Group’s health and safety performance improvement plan

which covered colleague safety, contractor safety, health and well-being and public safety. Accordingly,

initiatives undertaken 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 Group successfully completed two external surveillance visits on its ISO 45001

accreditation for its occupational health and safety management system.

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Northern Electric 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 Group 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 NPg Northeast’s and Northern Powergrid (Yorkshire) plc’s

workforce renewal programme. At 31 December 2024, the Group had 1,639 employees (2023: 1,522).

Details of how the Northern Powergrid Group is supporting gender diversity in the energy industry can be found

in the Northern Powergrid Group’s gender pay gap report 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 Group 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 Group’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.

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Northern Electric 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 <11,406

SF6 gas discharges (kg) 21.4 <11.8 7.45 <12.75

Environmental incidents 1 <3 0 <2

KPI 2024 2023

Carbon footprint (tonnes) 6,791 15,222

KWh Energy Consumed 20,325,432 20,160,750

Business carbon footprint Tonnes Per km² Tonnes Per km²

Scope 1 2,497 0.17 2,252 0.15

Scope 2 2,682 0.18 2,481 0.17

Scope 3 1,612 0.11 1,379 0.72

Total carbon footprint (tonnes) 6,791 0.46 6,112 1.06

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.

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.

Business Plan commitment:

To reduce our business carbon footprint by 20% and reduce oil loss by 15%.

Performance during the year:

The Group 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).

NPg Northeast’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 NPg Northeast 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.

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Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

In relation to scope 3 emissions, NPg Northeast 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, NPg Northeast 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,

NPg Northeast 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, NPg Northeast 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, NPg Northeast 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 NPg Northeast’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 NPg Northeast’s operations by 2028. NPg Northeast’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 NPg Northeast 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 NPg

Northeast’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, NPg Northeast 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 NPg Northeast’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.

At this time, NPg Northeast 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, NPg Northeast may pursue these.

From an environmental compliance perspective, NPg Northeast 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 Group’s KPIs. The Group’s carbon footprint reporting framework

is certified under the Certified Emissions Measurement and Reduction Scheme for compliance with ISO

14064-1:2006.

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Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

To date, the Group’s performance against a number of stretching KPIs to reduce carbon usage and minimise the

effects of the Group on stakeholders and the environment has been 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 NPg Northeast 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 20

Northern Electric 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, NPg Northeast 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, NPg Northeast continued to develop and action

innovative solutions that will reduce the need for traditional and potentially expensive reinforcement.

In the past year, NPg Northeast 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 NPg Northeast 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, NPg Northeast published its updated

Distribution Future Energy Scenarios (available via the Northern Powergrid Group’s corporate website).

From an innovation perspective, NPg Northeast 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 NPg Northeast’s strategy, and the way in which NPg Northeast

contributes more broadly to the evolution of the energy industry and the stakeholders with whom it interacts.

NPg Northeast 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, NPg Northeast 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. NPg Northeast’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”), NPg

Northeast 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 NPg Northeast’s major investment decisions.

Page 21

Northern Electric 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 Group'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, NPg Northeast 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 NPg Northeast 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.

NPg Northeast 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. NPg Northeast 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.

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

Group’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.

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Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

Principal Risks

During the year, 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 and Information 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.

Mitigations:

•

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.

Mitigations:

•

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.

Mitigations:

•

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.

Safety

Fatality or serious harm caused to an employee or a third party.

Mitigations:

•

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.

Page 23

Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

Environment and climate protection

Failure to prevent network assets from having a significant negative impact on the environment.

Mitigations:

•

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.

Mitigations:

•

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 and a diversity, equality and inclusion plan 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.

Mitigations:

•

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.

Efficiency and output performance

Failure to maintain cost and output performance competitiveness in the industry.

Mitigations:

•

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.

Mitigations:

• Financed by long-term borrowings at fixed rates and access to short-term borrowing facilities at floating

rates.

• As at 31 December 2024, 98% of the Group's long-term borrowings were at fixed rates and the average

maturity for these borrowings was 23 years.

•

Financial covenant monitoring is in place.

•

Regulatory adjustments control the effect of taxation changes.

Page 24

Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

Internal control

The Company’s internal control 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 Group 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 Group’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

Group 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.

Section 172(1) statement

Decision-making at the Board

All matters which under the Company and Group’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 Group and its

member.

Page 25

Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

Long-term sustainability

As referenced throughout the Strategic Report, NPg Northeast’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, NPg Northeast 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 Group in the

pursuit of its goals and the long-term sustainability of the Group is at the forefront of decision-making.

The Group’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 Group 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 Northern Powergrid Group’s gender pay gap report.

Customers

Customers, whether they are domestic or commercial, are the primary stakeholder group served by the Group

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 Group’s relationship

with customers and the support programmes provided is discussed in ‘Customer Service’.

Producers and suppliers

The Group 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 Group 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 Northern Powergrid Group’s annual modern slavery

statement.

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 Group’s external auditor.

Community and environment

Each director is required to take all reasonable steps to minimise any detrimental impact the Group’s operations

may have on the environment (see ‘Environmental Respect’). NPg Northeast 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

NPg Northeast 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, NPg

Northeast 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 NPg Northeast’s long-term strategy, the relationship with Ofgem and the evolving ED3

framework were regular items on the board agenda throughout the year.

Page 26

Northern Electric plc

Strategic Report for the Year Ended 31 December 2024 (continued)

Acting fairly between the Company’s owners

The Company has one class of ordinary shares which are all held by Northern Powergrid Limited, a company

owned by Northern Powergrid UK Holdings. The Company also has one class of preference shares, further

details of which can be found in Note 20. 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’.

Statement pursuant to Listing Rule 14.3.27R Task Force on Climate-related Financial Disclosures

(“TCFD”)

The non-financial reporting information pursuant to Section 414CA of the Companies Act 2006 has been

reported throughout the Strategic Report and principal risks and uncertainties. The climate-related financial

disclosures pursuant to Section 414CB (2A) can be found in the ‘Adapting to Climate Change’

and ‘Environmental Respect’ sections of the Strategic Report.

The Company has complied with all of the requirements of LR 14.3.27R by including climate related financial

disclosures consistent with the TCFD recommendations and recommended disclosures, with the exception of the

scope 3 greenhouse emissions disclosures relating Metrics and Targets (b) . The Company has reported scope

3 emissions in relation to certain categories (being those required by Ofgem’s reporting framework) .

However, it is accepted that further work is required to develop the disclosures.

The steps the Company plans to take in order to be able to make the relevant disclosures in the future, and the

timeframe within which it expects to be able to make those disclosures, is set out in Ofgem’s ‘Environmental

Reporting Guidance’, sections 3.8 to 3.13, a copy of which can be found via Ofgem’s website. This includes a

recommendation for the energy industry to work collaboratively to develop an appropriate methodology for

reporting scope 3 emissions during the remainder of the ED2 period.

Approved by the Board on 11 June 2025 and signed on its behalf by:

A P Jones

Director

Page 27

Northern Electric plc

Directors' Report for the Year Ended 31 December 2024

The directors present their annual report and the audited consolidated financial statements for the year ended 31

December 2024.

Dividends

During the year, an interim dividend of £277.4 million was paid (2023: £48.0 million). The directors

recommend that no final dividend be paid in respect of the year (2023: £nil).

An interim dividend of £300.0 million was paid on the 26 March 2024 from NPg Northeast to the Company.

The Group'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 and

Group to carry on its business for at least the next year, with the Company and Group’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 NPg Northeast’s distribution licence and are considered carefully by the board so as to

ensure that the payment of any dividend does not cause NPg Northeast to breach any licence obligations in the

future.

Directors of the Company

The directors who held office during the year under review and to the date of signing this report were:

A P Jones

S J Lockwood

J N Reynolds

J C Riley (appointed 17 October 2024)

During the year, none of the directors had an interest in any contract which was material to the business of the

Company or Group. During the year and up to the date of approval of the Directors' Report, an indemnity

contained in the Company's (and each company within the Northern Powergrid Group’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 and future outlook

The financial position of the Group, as at 31 December 2024, is shown in the consolidated statement of financial

position. There have been no significant events since the year end and the directors intend that:

• NPg Northeast will continue to develop its business by efficiently investing in the Network and improving

the quality of supply and service provided to customers. NPg Northeast 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.

• IUS will develop its business by concentrating on its core skills of engineering contracting thereby

delivering a high standard of service to its existing clients and pursuing opportunities to increase its portfolio

of clients.

• NPg Metering will retain its focus on pursuing opportunities in the market for meter asset provision as the

smart meter roll-out programme develops.

There are no plans to change the existing business model of the Company, or any of the companies within the

Group.

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 Group invested £5.6 million (2023: £2.0

million) in its research and development activities.

Page 28

Northern Electric plc

Directors' Report for the Year Ended 31 December 2024 (continued)

Financial instruments

Financial risk management

Details of financial risks are included in the Principal Risks and Uncertainties, found in the Strategic Report and

in Note 28 to the financial statements.

Financial derivatives

As at 31 December 2024 the Group held two derivative financial instrument (2023: two) to mitigate the interest

rate risk on a floating interest rate loan. More details on derivative financial instruments are available in Note 29

to the financial statements.

Stakeholder engagement and environmental disclosures

In accordance with Paragraphs 10, 11 and 20 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 and Group 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).

Vote holder and issuer notification

There have been no disclosures to the Company under Disclosure and Transparency Rule 5 (Vote Holder and

Issuer Notification Rules).

Directors' biographies

Alex P Jones

Mr Jones joined the Northern Powergrid Group in January 2015 and became Finance Director in March 2022.

He is a Chartered Accountant having completed his training with KPMG, spending seven years in their

Restructuring practice. Prior to becoming Finance Director, Mr Jones was the Director of Performance and

Planning, leading on the development of the Northern Powergrid Group’s Business Plan. He has also spent time

leading the Northern Powergrid Group’s engineering and major projects operations teams.

Stephen J Lockwood

Appointed in April 2022, Mr Lockwood joined the Northern Powergrid Group in 1983 and became Group

Financial Controller in 2016 before taking on the role of Head of Technical Accounting and Quality in 2023.

Prior to this he held a number of finance roles in the Northern Powergrid Group. Mr Lockwood is a qualified

Chartered Management Accountant and Chartered Tax Advisor.

Jennifer C Riley

Mrs Riley was appointed in October 2024 as a director of Northern Electric plc. Mrs Riley joined the Northern

Powergrid Group in 2016 as the Company Secretary. Prior to this, she had held a number of roles at Farnell UK

(formerly Premier Farnell plc). Mrs Riley is a Chartered Governance Professional and Company Secretary.

Board diversity

Of the four board directors of the Company, one is female (25%). Mrs Riley does not hold any of the positions

outlined in Listing Rule 16.3.29 (ii). No members of the board are from a minority ethnic background.

All appointments are based on merit with due regard for diversity, inclusion and equal opportunity. The

Northern Powergrid Group does not set diversity targets.

Page 29

Northern Electric plc

Directors' Report for the Year Ended 31 December 2024 (continued)

CORPORATE GOVERNANCE STATEMENT

The Company has sought to apply the UK Corporate Governance Code 2018 (the "Code") and report on the

application of the Principles and supporting Provisions. Given the nature of the securities in issue, the Company

(nor any Company within the Northern Powergrid Group) is not required to adopt the Code, and it has not been

voluntarily applied. However, the board has elected to operate within the spirit of the Code and explain below

how the Company’s governance framework aligns with the Principles and Provisions.

The directors confirm that the governance framework in place is appropriate to the circumstances of the

Company and the Group. The framework is agreed with the Northern Powergrid Group’s shareholder, Berkshire

Hathaway Energy. The Company and the Group has not complied with Provisions 4, 9, 12, 17, 18, 19, 20, 23,

26, 32, 33, 35, 38, 40 and 41 as they are deemed not to be relevant to the Company’s or the Group’s

circumstances (given it is privately owned) or for the reasons explained in the pages that follow. Consequently,

the Company and Group do not intend to put actions in place in order to comply with the aforementioned

provisions at this time. A copy of the Code can be found at https://frc.org.uk/.

BOARD LEADERSHIP AND COMPANY EXPOSURE

Strategic Ownership

The board (of the Company and the Group throughout) is collectively responsible for generating value for the

Northern Powergrid Group’s shareholder and wider society which is achieved through the delivery of a strategy

which corresponds to Berkshire Hathaway Energy’s six Core Principles. The strategy is set out in two forms of

business plan (the Business Plan and Annual Plan), both of which are approved and monitored by the board and

are designed to promote the long-term sustainable success of the Company and the Group whilst achieving the

commitments developed to address stakeholder requirements.

For the purpose of scrutinising performance in respect of both business plans, the board review a range of

financial and non-financial KPIs which correspond to the Core Principles and have been established to operate

within a framework of internal controls.

The deliverables set out in the business plans shape the allocation of both financial and operational resource for

which the board delegates the responsibility to a single senior management team who have specific functional

responsibilities in respect of operations, safety, health and environment, asset management, customer service,

business development, energy systems, regulation, economic analysis, human resources, information systems,

legal and finance.

Page 30

Northern Electric plc

Directors' Report for the Year Ended 31 December 2024 (continued)

Engagement and Values

The Company and Group has an established relationship with its shareholder, reflected by the leadership

structure, whereby the President and Chief Executive Officer of the Northern Powergrid Group reports directly

to the President and Chief Executive Officer of Berkshire Hathaway Energy. Frequent interaction and dialogue

with Berkshire Hathaway Energy (which is maintained through regular governance reporting and meetings with

the Northern Powergrid Group’s President and Chief Executive Officer and senior management team) ensures

that strategic views and board decisions are understood and aligned, and that appropriate values, standards and a

desired culture of integrity, openness and transparency are set. Demonstrated by the adoption of Berkshire

Hathaway Energy’s ‘Core Leadership Expectations’, required behaviour and standards include the delivery of

quality and improvement (for which all employees are responsible) to developing individuals and teams,

building stakeholder relationships and establishing strategic direction (predominantly responsibilities of the

senior management team and the board).

Employee engagement (and the investment therein) is implemented through consistent messaging and regular

training which commences with the induction programme, during which colleagues are introduced to the

Northern Powergrid Group, its business model, strategy and the Core Leadership Expectations. Throughout the

year, every employee has regular meetings with line management and communications from the President and

Chief Executive Officer in addition to having access to the board and senior leadership team during events

(whether virtual or physical), via engagement visits and as a result of rotational working locations. Whilst there

is direct exposure, given the Group’s large and disparate workforce, the board elect to engage with employees

via the senior management team and the reporting hierarchy which is deemed to be very effective. However, to

supplement the existing arrangement, the board engages directly with members of each of the trade unions

which represent the workforce.

A number of policies such as the Code of Conduct and Code of Practice and Business Ethics support the

employee engagement programme and underpin the onward dissemination of the values, desired culture and

expected standards of behaviour to the wider employee population. The board is able to reassure itself that

corporate messaging concerning behaviour and culture is provided on an annual basis in the form of training on

the aforementioned policies. In addition, the Northern Powergrid Group’s non-executive directors and

independent member routinely challenge the executive team on topics that are more difficult to track, including

cultural change and diversity to establish how embedded the culture is. In the event employees have concerns

regarding behaviour, ethics or compliance related matters, they are able to raise these confidentially via either

internal or externally facilitated independent channels.

Throughout the year, the board routinely monitored the effectiveness of engagement with the Group’s various

stakeholders via updates and bespoke briefings. In addition, the directors participate in direct engagement with

the Northern Powergrid Group’s shareholder, Chair of ISG, the external auditor, employees (as detailed above)

as well as various political and regulatory representatives. Further detail concerning the way in which the

Company and Group participates in engagement with stakeholders can be found in the Strategic Report.

DIVISION OF RESPONSIBILITIES

The role of the President and Chief Executive Officer

The President and Chief Executive Officer combines the executive responsibility of running the Company and

Group’s business with the responsibility for the leadership of the Company and Northern Powergrid Group’s

various boards of directors, which includes directing the Company and the Group, ensuring its effectiveness and

facilitating a constructive and open board culture. The Northern Powergrid Group’s shareholder supports the

role undertaken by the President and Chief Executive Officer and, through the shareholder’s regular interaction

with the President and Chief Executive Officer and input into and oversight of the principles governing to whom

the board of the Company (and the wider Northern Powergrid Group) delegates its authority, ensures no one

person has unfettered powers of decision. Chairpersons and senior independent non-executive directors are not

routinely appointed to the Group’s boards.

Page 31

Northern Electric plc

Directors' Report for the Year Ended 31 December 2024 (continued)

Non-executive directors

The board of the Company comprises three executive directors and one non-executive director. There are two

additional non-executive directors appointed within the Northern Powergrid Group. Each of the Northern

Powergrid Group’s non-executive directors and Mr Knowles (a member of the Group’s audit committee) are

considered to be independent. Although the board of the Company (nor that of any other Northern Powergrid

Group company) does not include a balanced number of executive and non-executive directors, the board

believes that the combination is appropriate, and it possesses the requisite skills and experience necessary to

provide effective leadership, stewardship and control of the Company and the Group. The non-executive

directors of the Company and the Northern Powergrid Group constructively challenge the executive board and

senior management team on the delivery of the Company’s and the Group’s strategic objectives. In accordance

with their individual areas of specialism, the non-executive directors chair a number of the Northern Powergrid

Group’s board sub-groups, which combined with the guidance and challenge they provide during routine board

meetings, gives them additional opportunity to hold the executive directors and senior management team to

account.

Time Commitment and Resources

To facilitate the delivery of their duties, the directors continually update their knowledge of and familiarity with

the operations of the Company and the Group. This is supported by robust reporting arrangements, access to the

Group's operations and interaction with its staff. Under the direction of the President and Chief Executive

Officer, information is provided to the board in a timely manner to enable directors to commit sufficient time to

the preparation for and attendance at board meetings. In addition, updates and briefings are circulated during the

course of the regular board meeting cycle. The directors are able to utilise the advice and services of the

Company Secretary and her team. Upon request, the directors have access to independent professional advice. A

commitment is not jeopardised. Conflicts of interests are declared as a matter of routine pursuant to individual

director’s duties.

The board of NPg Northeast meet on a quarterly basis to review business performance, strategic initiatives and

operational and risk-related issues. Additional board meetings are held as required. Meetings of the board are

chaired by the President and Chief Executive. The board of the Company meet on a regular basis, with meetings

predominantly aligned with reporting financial cycles.

Board committees and sub-groups

During the year, there were a number of committees and board sub-groups in operation, acting under delegated

terms of reference which oversee the Company and Group and report regularly on their activities. Attendance at

meetings by the Company and Group’s appointed representatives during the year was as follows:

Page 32

Northern Electric plc

Directors' Report for the Year Ended 31 December 2024 (continued)

Page 33

Northern Electric plc

Directors' Report for the Year Ended 31 December 2024 (continued)

The senior leadership team attend meetings of the RAB and relevant members also attend meetings of the

Health and Safety Committee and STAP. A number of independent members are also appointed to the STAP.

Health and Safety Committee

Role: Meets bi-annually to manage the health and safety policy and performance of the Company and Group.

Duties:

• oversee the implementation and review the effectiveness of health and safety policy;

• develop the strategy for managing health and safety issues;

• monitor health and safety performance consider policy changes; and

• report to the board.

STAP

Role: Meets quarterly to provide independent and expert challenge and assurance to the Group’s plans, as the

sector transitions to the low-carbon energy future embodied in the national targets for decarbonisation.

Duties:

• provide strategic oversight and challenge of the Group’s science, data and technology programmes, initiatives

or projects, and promote a culture of change, creativity and innovative thinking;

• keep under review progress against ED2 (including decarbonisation) commitments;

• monitor the level of risk and opportunity associated with the programme; and

• report to the board.

Further detail concerning the Audit Committee and RAB can be found in ‘Audit, risk and internal control’

below.

Appointments

Given the nature of the relationship between the Northern Powergrid Group and its shareholder, a nominations

committee has not been established for the purpose of identifying board appointments, or indeed considering the

removal of directors. Instead, this function is undertaken by the appropriate representative of Berkshire

Hathaway Energy and the President and Chief Executive Officer of the Northern Powergrid Group. All board

appointments are subject to a formal and rigorous process and are considered with due regard to the board’s

overall composition including the balance of skills, experience and the promotion of diversity, inclusion and

equal opportunity, ahead of recommendations being put to the board. Succession plans are in place for all board

and senior management positions and are reviewed and agreed by the President and Chief Executive Officer of

Berkshire Hathaway Energy. Prior to appointment, the commitments already held by directors are considered so

as to ensure each individual has sufficient time to discharge their duties.

Page 34

Northern Electric plc

Directors' Report for the Year Ended 31 December 2024 (continued)

Evaluation

The board of the Company (and that of each Northern Powergrid Group subsidiary) is subject to thorough

evaluation as a consequence of its performance being continually monitored and assessed by Berkshire

Hathaway Energy through the delivery of the Annual Plan. In addition, each year, the President and Chief

Executive Officer of the Northern Powergrid Group considers the composition of the board as a whole and its

effectiveness in achieving strategic objectives during the annual performance evaluation process. Off cycle

reviews of the Northern Powergrid Group’s governance arrangements (including the composition or board and

sub-board groups) is also undertaken periodically to ensure its structure remains fit for purpose and evolves to

reflect changes to strategic priorities. The Northern Powergrid Group does not and is not required to undertake

external evaluation of its boards.

As a matter of routine, the committees and sub-groups that have been constituted on behalf of the Northern

Powergrid Group have historically been evaluated through the activity delivered in accordance with their terms

of reference. In addition, board committees and sub-groups are also subject to the aforementioned off-cycle

governance reviews, whereby the scope, purpose, duties and membership are revisited so as to ensure they

remain effective, are refreshed as appropriate and have the requisite level of skill and expertise.

The Company’s Articles of Association requires the periodic retirement and re-election of directors.

Appointments and reappointments are therefore put to the shareholders at the Company’s Annual General

Meetings. The notice period for all board members is less than one year.

Diversity policy

The Company and Group has adopted a number of policies (including the policy on diversity at work and the

Code of Conduct) that collectively comprise the policy on diversity. Diversity is actively supported through

recruitment, educational programmes, employee opportunities and the Global Days of Service charitable support

programme. All appointments (which includes board, board committee, and senior management appointments)

are based on merit with due regard for diversity, inclusion and equal opportunity. The Northern Powergrid

Group does not set diversity targets. . Further information concerning how the Group and Northern Powergrid

Group is supporting gender diversity in the energy industry can be found in the Northern Powergrid Group’s

gender pay gap report via the Northern Powergrid Group’s corporate website.

AUDIT, RISK AND INTERNAL CONTROL

Each of the Company’s and Group’s directors is responsible for the management of risk and the internal control

environment which is designed to address Berkshire Hathaway Energy’s United States Sarbanes-Oxley Act

requirement. As part of this responsibility, the board has established and maintains robust procedures and

processes which ensure the effectiveness of both the internal and external audit functions.

Audit committee

The audit committee meets twice per year as a minimum to consider the application of corporate reporting, risk

management and internal control principles. Membership comprises, an independent non-executive director

(chair), an independent member and the Finance Director. All members are considered to have relevant financial

experience. Its duties include:

- carrying out the functions required by DTR 7.1.3R;

- overseeing the RAB;

- monitoring the internal audit plan;

- sub-delegating activities to another person or body as seen fit; and

- reporting to the board.

As referenced above, the performance of the audit committee is evaluated each year via a review process

whereby its remit, terms of reference and the attributes of its members is assessed by the board and through the

process whereby Berkshire Hathaway Energy’s Finance team retains a degree of oversight of a number of duties

including the financial audit process.

Page 35

Northern Electric plc

Directors' Report for the Year Ended 31 December 2024 (continued)

Internal Audit

The internal audit team operates in an independent and objective manner without interference from the

Company or the Group. This provides the flexibility to refocus the scope of the annual internal audit plan to

align with changing priorities if required. Internal audit findings including the resilience of internal controls are

reported to the board on a quarterly basis in order to keep the directors sufficiently apprised of areas of risk. An

external assessment of the activity of the internal audit team confirmed it operates at the highest level in

accordance with the Institute of Internal Audit standards.

External Audit

An appropriate relationship is maintained with the Northern Powergrid Group’s external auditor to ensure

independence and rigour is preserved. The Audit Engagement Lead has regular interaction with the Finance

Director and routinely attends two board meetings per year to present the audit plan for the forthcoming year

and subsequently disseminate the findings. It is at such meeting where the board consider the effectiveness of

the external audit process, in terms of quality, timeliness, preparation and insight into technical matters and

discuss any comments and issues raised. Matters (predominantly routine) raised by KPMG and considered by

the board during the year included capitalisation of plant, property and equipment, the valuation of the defined

benefit obligation and the prior period restatements set out in Note 1 to the financial statements. Any control

findings raised by the external auditor are allocated to an owner and are tracked by the Finance Director or

managed via the internal audit team, both of whom report their findings to the board.

Deloitte LLP had been the Company’s external auditor since 1998. As such, and in accordance with the

Statutory Auditors and Third Country Auditors Regulations 2016, the Audit Committee, in conjunction with the

Northern Powergrid Group’s procurement team, undertook a selection process, following which, a

recommendation was put to the board and a resolution was put to the Company’s shareholder at the 2024

Annual General Meeting to appoint KPMG as the Company’s external auditor.

KPMG staff have full access to the Group’s systems and premises for the purpose of conducting their audit

work in a robust and efficient manner.

RAB

The RAB is chaired by one of the Northern Powergrid Group’s independent non-executive directors and meets

quarterly to ensure effective risk management and internal control processes are in place. Its duties include:

• contributing to the setting of the Northern Powergrid Group’s risk tolerance and appetite;

• keeping under review current business risks and the effectiveness of internal controls;

• overseeing the processes for the identification of emerging risks; and

• reporting to the board, Berkshire Hathaway Energy and the Audit Committee.

Further detail concerning the procedures to manage risk, oversee the internal financial reporting control

framework, set the board’s risk appetite and the Company's principal risks can be found in the Strategic Report.

Page 36

Northern Electric plc

Directors' Report for the Year Ended 31 December 2024 (continued)

REMUNERATION

As outlined above, the board has not elected to establish a remuneration committee for the purpose of

determining executive directors’ and senior managers’ compensation. However, this does not reflect a lack of

policy or rigour given the process is instead managed by the Northern Powergrid Group’s shareholder. As a

consequence, remuneration is strictly aligned to both the Company’s and the Northern Powergrid Group’s

long-term strategy, the delivery of sustainable growth and Berkshire Hathaway Energy’s values as defined by

the Core Principles. No individual is involved in determining their own remuneration.

The Company’s and the Northern Powergrid Group’s executive directors’ and senior managers’ remuneration is

considered on an annual basis and is explicitly linked to the employee performance evaluation process. Each

individual’s effectiveness is measured against both personal and Berkshire Hathaway Energy goals with all

resulting awards based on merit and linked to the delivery of stretching accountabilities. Only basic salary is

pensionable.

Non-executive director remuneration is also reviewed on an annual basis and is reflective of time commitment

and level of responsibility. Any increases are made in line with the wider Northern Powergrid Group’s

employee population and is subject to continued satisfactory performance.

Page 37

Northern Electric 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 profitable with strong underlying cash flows;

• The Company benefits from strong investment-grade credit ratings;

• The Company meets its day to day working capital requirements from intercompany loans (via the current

account mechanism) with the Northern Powergrid Group;

• Northern Powergrid Holdings Company, being the ultimate UK parent company, has indicated its intention

to make available such funds as are needed by the Company through the intercompany current account

mechanism;

• The Northern Powergrid Group as a whole is financed both in its operating companies and in other entities

within the Northern Powergrid Group through the use of the current account mechanism. For that reason,

financial health is also considered with reference to the Northern Powergrid Group, the directors therefore

take into consideration a number of factors affecting the wider group

o The Northern Powergrid Group's main subsidiaries, NPg Northeast and NPg Yorkshire, are stable

electricity distribution businesses operating an essential public service and are regulated by the Gas and

Electricity Markets Authority (“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

o The Northern Powergrid Group is financed by long-term borrowings with an average maturity of 17 years

and has access to short-term committed borrowing facilities of £242 million provided by Barclays Bank plc,

Lloyds Bank plc, HSBC UK Bank plc and Royal Bank of Canada

o The Northern Powergrid Group benefits from strong investment-grade credit ratings which allow access to

a range of financing options including the capital markets. A successful bond issue by the Northern

Powergrid Group in April 2025, demonstrates that the Northern Powergrid Group’s bonds remain attractive

to investors and there is an active market with strong appetite to invest

o The Northern Powergrid Group has prepared forecasts which consider reasonable possible changes in

trading performance, show that the Northern Powergrid Group has sufficient resources to settle its liabilities

as they fall due for at least the 12 months from the date of these accounts; and

o Consideration was also given to the obligations contained in NPg Northeast plc and NPg Yorkshire plc

licences to provide Ofgem with annual certificates, confirming that the directors have a reasonable

expectation that the Northern Powergrid Group will have sufficient financial and operational resources

available for the continuation of business for a period of at least 12 months.

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 38

Northern Electric 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 group'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.

Non-financial and sustainability information statement

In accordance with Section 414CA(7) of the CA06, the directors have set out the information required by

Section 414CB (1) to (6) in Strategic Report.

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 have elected 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.

Page 39

Northern Electric plc

Directors' Report for the Year Ended 31 December 2024 (continued)

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.

Approved by the Board on 11 June 2025 and signed on its behalf by:

A P Jones

Director

Page 40

Northern Electric plc

Independent Auditor's Report to the Members of Northern Electric plc

1 Our opinion is unmodified

We have audited the financial statements of Northern Electric 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, 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 accounting

standards, including FRS 101 Reduced Disclosure Framework; 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 26th June 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.

Page 41

Northern Electric plc

Independent Auditor's Report to the Members of Northern Electric plc (continued)

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.

Retirement Benefit Obligations

Gross Defined Benefit Obligations: £850.9m (2023: £949.7m)

Refer to page 62 (critical accounting estimates and judgements) and pages 59-134 (accounting policies and

financial disclosures) .

The risk - Subjective valuation

The Company is the principal employer of a defined benefit pension scheme, Northern Powergrid Group of the

ESPS, that is material in the context of the overall balance sheet and the results of the Group and Company.

Significant assumptions, including the discount rate, the inflation rate and the mortality rate, are made in valuing

the Group’s and Company’s defined benefit pension obligations (before deducting the scheme assets) . Small

changes in the assumptions and estimates with respect to the obligation would have a significant effect on the

financial position of the Group and Company. The Group and Company engages external actuarial specialists to

assist them in selecting appropriate assumptions and calculate the obligations.

The effect of these matters is that, as part of our risk assessment, we determined that the valuation of the defined

benefit obligations has a high degree of estimation uncertainty, with a potential range of reasonable outcomes

greater than our materiality for the financial statements as a whole, and possibly many times that amount.

Our response

We performed the tests below rather than seeking to rely on any of the Group’s or 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:

•

Benchmarking financial assumptions

: involved our actuarial specialists to develop an independent

expectation over the key financial assumptions, including the discount rate and inflation rate, to compare the key

financial assumptions against the market data.

•

Benchmarking demographic assumptions

: involved our actuarial specialists to assess management's process

for development of key demographic assumptions, including the mortality, and the resulting assumptions, to

compare the key demographic assumptions against market data.

•

Actuary's credentials

: assessed the competence, capabilities and objectivity of the Group's and Company’s

actuarial expert.

•

Sensitivity analysis

: assessed the sensitivity of the defined benefit obligation to changes in key assumptions.

Page 42

Northern Electric plc

Independent Auditor's Report to the Members of Northern Electric plc (continued)

•

Assessing transparency

: considered adequacy of the Group's and Company’s disclosures in respect of the

sensitivity of the gross obligation to changes in key assumptions.

Our Results:

We found the valuation of the gross defined benefit obligation to be acceptable.

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 62 (critical accounting estimates and judgements) and pages 59-134 (accounting policies and

financial disclosures) .

The risk - Accounting Treatment

The Group undertakes 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’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

: assessed the Group’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 on the selection and application of methods and performed sensitivity

analysis on the percentage of 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 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 capitalisation of expenditure to be acceptable.

Page 43

Northern Electric plc

Independent Auditor's Report to the Members of Northern Electric 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 £7.8m, 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 £206.7m, of which it represents 3.8%.

Materiality for the parent Company financial statements as a whole was set at £3.6m determined with reference

to a benchmark of the parent Company’s total assets of which it represented 0.8%.

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

£5.1m for the Group and £2.3m for the parent Company. We applied this percentage in our determination of

performance materiality based on 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

£0.4m in addition to other identified misstatements that warranted reporting on qualitative grounds.

The Group team performed the parent Company audit. The audit was performed using the materiality levels set

out above.

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 8 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 percentage of either total revenue or total assets of the Group,

for which we performed audit procedures.

We also identified 1 component as requiring special audit consideration, owing to the Group risk relating to the

gross defined benefit pension obligations residing in the component.

Additionally, having considered qualitative and quantitative factors, we selected 2 components with accounts

contributing to the specific RMMs of the Group financial statements.

Accordingly, we performed audit procedures on 4 components, including the audit of the parent Company.

We set the component materialities, ranging from £3.1m to £6.2m, having regard to the mix of size and risk

profile of the Group across the components.

Our audit procedures covered 93% of Group revenue. We performed audit procedures in relation to components

that accounted for 93%of Group profit before tax, and 95% 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 44

Northern Electric plc

Independent Auditor's Report to the Members of Northern Electric 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 45

Northern Electric plc

Independent Auditor's Report to the Members of Northern Electric 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 defined benefit

pension assumptions. 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.

Page 46

Northern Electric plc

Independent Auditor's Report to the Members of Northern Electric plc (continued)

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 others 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,

pensions 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.

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.

Page 47

Northern Electric plc

Independent Auditor's Report to the Members of Northern Electric plc (continued)

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 48

Northern Electric plc

Independent Auditor's Report to the Members of Northern Electric plc (continued)

8 Respective responsibilities

Directors’ responsibilities

As explained more fully in their statement set out on page 39, 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

Glasgow

United Kingdom

G2 5AS

11 June 2025

Page 49

Northern Electric plc

Consolidated Income Statement for the Year Ended 31 December 2024

Note

2024

£ 000

(As restated)

2023

£ 000

Revenue

3,4 670,688 570,538

Cost of sales (54,476) (78,420)

Gross profit

616,212 492,118

Distribution costs

3 (154,203) (145,263)

Administrative expenses (147,512) (130,660)

Operating profit

314,497 216,195

Other gains

456 1,538

Finance income

5 20,537 16,704

Finance costs

(54,243) (53,916)

Profit before tax

281,247 180,521

Income tax expense

(73,529) (45,143)

Profit for the year

207,718 135,378

Profit attributable to:

Owners of the Company

207,718 135,378

The above results were derived from continuing operations.

The notes on pages 59 to 134 form an integral part of these financial statements.

Page 50

Please refer to Note 3 for details of the restatement.

Northern Electric plc

Consolidated Statement of Comprehensive Income for the Year Ended 31 December

2024

Note

2024

£ 000

2023

£ 000

Profit for the year

207,718 135,378

Items that will not be reclassified subsequently to profit or

loss

Remeasurements of post employment benefit obligations (net)

24 (11,825) (7,995)

Items that may be reclassified subsequently to profit or loss

Loss on cash flow hedges (net)

(1,027) (5,261)

Total comprehensive income for the year

194,866 122,122

Total comprehensive income attributable to:

Owners of the Company

194,866 122,122

The notes on pages 59 to 134 form an integral part of these financial statements.

Page 51

Northern Electric plc

(Registration number: 02366942)

Consolidated Statement of Financial Position as at 31 December 2024

Note

31 December

2024

£ 000

(As restated)

31 December

2023

£ 000

(As restated)

1 January

2023

£ 000

Assets

Non-current assets

Property, plant and equipment

10 3,309,787 3,186,730 3,079,086

Right of use assets

11 12,013 11,229 12,787

Intangible assets

12 54,300 50,606 47,357

Equity accounted investments

13 3,289 3,633 3,982

Pension assets

24 138,700 148,600 151,500

Trade and other receivables

15 8,051 6,463 4,087

Other non-current financial assets

8,827 8,831 18,926

3,534,967 3,416,092 3,317,725

Current assets

Inventories

14 29,388 29,904 25,740

Trade and other receivables

15 178,254 342,948 349,542

Tax receivable

9 - - 1,054

Cash and cash equivalents

16 13,440 14,760 13,439

Contract assets

4 10,286 7,052 5,824

Other current financial assets

4,496 5,861 2,781

235,864 400,525 398,380

Total assets

3,770,831 3,816,617 3,716,105

Equity and liabilities

Equity

Share capital

17 (72,173) (72,173) (72,173)

Share premium

(158,748) (158,748) (158,748)

Capital redemption reserve

(6,185) (6,185) (6,185)

Cash flow hedging reserve

18 (9,992) (11,019) (16,280)

Retained earnings (1,155,598) (1,237,104) (1,157,721)

Equity attributable to owners of the Company (1,402,696) (1,485,229) (1,411,107)

Non-current liabilities

Lease liabilities

20 (9,632) (8,395) (9,791)

Trade and other payables

(6,548) - -

Loans and borrowings

19 (1,119,735) (1,153,068) (1,193,131)

Provisions

21 (983) (1,641) (1,921)

Deferred revenue from contracts with

customers

3, 23 (693,396) (672,734) (654,829)

Deferred tax liabilities

(171,291) (165,505) (167,588)

(2,001,585) (2,001,343) (2,027,260)

The notes on pages 59 to 134 form an integral part of these financial statements.

Page 52

Northern Electric plc

(Registration number: 02366942)

Consolidated Statement of Financial Position as at 31 December 2024 (continued)

Note

31 December

2024

£ 000

(As restated)

31 December

2023

£ 000

(As restated)

1 January

2023

£ 000

Current liabilities

Lease liabilities

20 (2,942) (3,231) (3,402)

Trade and other payables

(188,609) (155,769) (117,404)

Loans and borrowings

19 (134,763) (135,284) (125,040)

Income tax liability

9 (5,655) (3,245) -

Deferred revenue from contracts with

customers

3, 23 (32,181) (30,219) (29,379)

Provisions

(2,400) (2,297) (2,513)

(366,550) (330,045) (277,738)

Total liabilities (2,368,135) (2,331,388) (2,304,998)

Total equity and liabilities

(3,770,831) (3,816,617) (3,716,105)

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 59 to 134 form an integral part of these financial statements.

Page 53

Northern Electric plc

(Registration number: 02366942)

Company Statement of Financial Position as at 31 December 2024

Note

31 December

2024

£ 000

31 December

2023

£ 000

Assets

Non-current assets

Property, plant and equipment

10 1,534 1,541

Right of use assets

11 742 879

Investments in subsidiaries, joint ventures and associates

13 242,903 242,902

Pension assets 138,700 148,600

383,879 393,922

Current assets

Trade and other receivables

15 71,743 11,416

Income tax asset

844 4,367

72,587 15,783

Total assets

456,466 409,705

Equity and liabilities

Equity

Share capital

17 (72,173) (72,173)

Share premium

(158,748) (158,748)

Capital redemption reserve

(6,185) (6,185)

Retained earnings (139,195) (119,570)

Total equity (376,301) (356,676)

Non-current liabilities

Lease liabilities

20 (697) (850)

Loans and borrowings

19 (1,117) (1,117)

Provisions

21 (983) (956)

Deferred tax liabilities

(34,357) (36,802)

(37,154) (39,725)

Current liabilities

Lease liabilities

20 (153) (64)

Trade and other payables

(35,853) (6,557)

Loans and borrowings

19 (7,005) (6,368)

Provisions

- (315)

(43,011) (13,304)

Total liabilities (80,165) (53,029)

Total equity and liabilities

(456,466) (409,705)

The notes on pages 59 to 134 form an integral part of these financial statements.

Page 54

Northern Electric plc

(Registration number: 02366942)

Company Statement of Financial Position as at 31 December 2024 (continued)

Approved by the Board on 11 June 2025 and signed on its behalf by:

A P Jones

Director

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

£311.1 million (2023: £51.3 million).

The notes on pages 59 to 134 form an integral part of these financial statements.

Page 55

Northern Electric plc

Consolidated Statement of Changes in Equity for the Year Ended 31 December 2024

Share capital

£ 000

premium

£ 000

Capital

redemption

reserve

£ 000

Cash flow

hedging

reserve

£ 000

Retained

earnings

£ 000

Total

£ 000

At 1 January 2024

72,173 158,748 6,185 11,019 1,237,104 1,485,229

Profit for the year

- - - - 207,718 207,718

Other comprehensive income/(expense) - - - (1,027) (11,825) (12,852)

Total comprehensive income

- - - (1,027) 195,893 194,866

Dividends (note 25) - - - - (277,400) (277,400)

At 31 December 2024

72,173 158,748 6,185 9,992 1,155,598 1,402,696

Share capital

£ 000

premium

£ 000

Capital

redemption

reserve

£ 000

Cash flow

hedging

reserve

£ 000

Retained

earnings

£ 000

Total

£ 000

At 1 January 2023 (As restated)

72,173 158,748 6,185 16,280 1,157,721 1,411,107

Profit for the year (As restated)

- - - - 135,378 135,378

Other comprehensive income/(expense) - - - (5,261) (7,995) (13,256)

Total comprehensive income (As restated)

- - - (5,261) 127,383 122,122

Dividends (note 25) - - - - (48,000) (48,000)

At 31 December 2023 (As restated)

72,173 158,748 6,185 11,019 1,237,104 1,485,229

The notes on pages 59 to 134 form an integral part of these financial statements.

Page 56

Retained earnings at 1 January 2023 were previously reported as £1,144.6 million. Total equity at 1 January 2023 was reported as £1,398.0 million. Please refer to Note 3 for details of the prior

year adjustment (£13.1 million).

Northern Electric plc

Company Statement of Changes in Equity for the Year Ended 31 December 2024

Share capital

£ 000

premium

£ 000

Capital

redemption

reserve

£ 000

Retained

earnings

£ 000

Total

£ 000

At 1 January 2024 72,173 158,748 6,185 119,570 356,676

Profit for the year

- - - 311,050 311,050

Other comprehensive income - - - (14,025) (14,025)

Total comprehensive income

- - - 297,025 297,025

Dividends - - - (277,400) (277,400)

At 31 December 2024

72,173 158,748 6,185 139,195 376,301

Share capital

£ 000

premium

£ 000

Capital

redemption

reserve

£ 000

Retained

earnings

£ 000

Total

£ 000

At 1 January 2023 72,173 158,748 6,185 126,897 364,003

Profit for the year

- - - 51,323 51,323

Other comprehensive income - - - (10,650) (10,650)

Total comprehensive income

- - - 40,673 40,673

Dividends - - - (48,000) (48,000)

At 31 December 2023

72,173 158,748 6,185 119,570 356,676

The notes on pages 59 to 134 form an integral part of these financial statements.

Page 57

Northern Electric plc

Consolidated Statement of Cash Flows for the Year Ended 31 December 2024

Note

2024

£ 000

(As restated*)

2023

£ 000

3 789,750 693,455

(133,664) (289,824)

(65,923) (34,959)

590,163 368,672

(264,640) (239,773)

(15,259) (14,444)

(226,536) (31,973)

803 416

1,083 615

(504,548) (285,158)

(39,254) (39,090)

(25) (360)

(2,688) (26,548)

(8,983) (8,983)

(3,430) (3,511)

9,200 37,300

(41,754) (41,001)

(86,934) (82,193)

(1,320) 1,321

14,760 13,439

GROUP

Cash flows from operating activities

Cash receipts from customers

Cash paid to suppliers and employees

Income taxes paid

Net cash from operating activities

Cash flows from investing activities

Acquisition of PPE

Acquisition of intangible assets

Cash transferred to related parties

Interest received

Dividends received

Net cash flows used in investing activities

Cash flows from financing activities

Interest paid

Financing transaction costs

Movement in short-term borrowings

Preference dividends paid

Payment of lease liabilities

Proceeds from loans and borrowings

Repayment of borrowings

Net cash flows from financing activities

Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at 1 January

Cash and cash equivalents at 31 December

13,440 14,760

FRS 101 disclosure exemptions have been taken for the Company to not present a statement of cash flows

*Further detail can be found under 'Restatement of Cash Flow Statement' in Note 3.

The notes on pages 59 to 134 form an integral part of these financial statements.

Page 58

Northern Electric 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 the United Kingdom and is part of the Northern Powergrid Holdings Company and its subsidiaries group of

companies (the "Northern Powergrid Group").

The principal activities of the Group is split between the following three areas:

- NPg Northeast is the distribution of electricity to approximately 1.6 million customers connected to its

electricity distribution network.

- IUS provides engineering contracting services.

- NPg Metering rents meters to energy suppliers.

The address of its registered office is:

Lloyds Court, 78 Grey Street, Newcastle upon Tyne, Tyne and Wear, NE1 6AF, United Kingdom.

2 Accounting policies

Statement of compliance

The consolidated 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.

Page 59

Northern Electric plc

Notes to the Financial Statements for the Year Ended 31 December 2024 (continued)

2 Accounting policies (continued)

Basis of preparation

The consolidated financial statements of the group have been prepared in accordance with UK-adopted

international accounting standards.

The preparation of consolidated 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 Company financial statements were prepared in accordance with Financial Reporting Standard 101

Reduced Disclosure Framework (“FRS 101”). In preparing these financial statements, the Company applies the

recognition, measurement and disclosure requirements of UK-adopted international accounting standards

(“UK-adopted IFRS”), but makes amendments where necessary in order to comply with Companies Act 2006

and has set out below where advantage of the FRS101 disclosure exemptions has been taken. In the transition to

FRS 101 from UK-adopted IFRS, the Company has made no measurement and recognition adjustments.

In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of

the following disclosures:

• The statement of cash flows;

• Certain disclosures regarding revenue;

• Certain disclosures regarding leases;

• Comparative period reconciliations for tangible fixed assets;

• Disclosures in respect of transactions with wholly owned subsidiaries;

• Disclosures in respect of capital management;

• Disclosures in respect of the compensation of Key Management Personnel; and

• Disclosures of transactions with a management entity that provides key management personnel services to the

Company;

• Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7

Financial Instrument Disclosures.

Climate change

No material impact from climate change within the accounts.

Principal activity

The nature of the Company's business model, strategic objectives, operations and activities are set out in the

Strategic Report.

Page 60

Northern Electric plc

Notes to the Financial Statements for the Year Ended 31 December 2024 (continued)

2 Accounting policies (continued)

Going Concern

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 profitable with strong underlying cash flows;

• The Company benefits from strong investment-grade credit ratings;

• The Company meets its day to day working capital requirements from intercompany loans (via the current

account mechanism) with the Northern Powergrid Group;

• Northern Powergrid Holdings Company, being the ultimate UK parent company, has indicated its intention

to make available such funds as are needed by the Company through the intercompany current account

mechanism;

• The Northern Powergrid Group as a whole is financed both in its operating companies and in other entities

within the Northern Powergrid Group through the use of the current account mechanism. For that reason,

financial health is also considered with reference to the Northern Powergrid Group, the directors therefore

take into consideration a number of factors affecting the wider group: