![Graphics]() Registered number: 03070482 (England and Wales) # Northern Electric Finance plc Annual Report and Financial Statements for the Year Ended 31 December 2024 ![Graphics]() Northern Electric Finance plc Contents Company Information 1 Strategic Report 2 to 3 Directors' Report 4 to 7 Independent Auditor's Report 8 to 12 Statement of Profit or Loss 13 Statement of Financial Position 14 Statement of Changes in Equity 15 Notes to the Financial Statements 16 to 27 ![Graphics]() Northern Electric Finance plc Company Information Directors A P Jones T H France P A Jones Company Secretary J C Riley Registered office Lloyds Court 78 Grey Street Newcastle upon Tyne NE1 6AF Registered number 03070482 (England and Wales) Auditor KPMG LLP 110 Quayside House Newcastle Upon Tyne NE1 3DX Page 1 ![Graphics]() Northern Electric Finance plc Strategic Report for the Year Ended 31 December 2024 The directors present the annual reports and the audited financial statements for the year ended 31 December 2024 of Northern Electric Finance plc (the "Company"), which have been drawn up and presented in accordance with the Companies Act 2006. BUSINESS MODEL The Company is part of the Northern Powergrid Holdings Company and its subsidiaries group of companies (the “Northern Powergrid Group”) and acts as a financing company. The principal activity of the Company is to meet its obligations to make the interest payments required by the 2035 5.125% bonds and the 2049 2.75% bonds, both of which are guaranteed by Northern Powergrid (Northeast) plc. Those payments for the year were made on 7 May 2024 and 24 May 2024 respectively. The Company made loss after tax for the year of £37,000 (2023: loss of £21,000) mainly due to interest expenses exceeding interest income (more information on finance income and costs can be found in Note 3). SECTION 172(1) STATEMENT The information pursuant to Section 414CA of the Companies Act 2006 which describes how the directors have had regard to the matters set out in Section 172(1) (a) to (f) when performing their duty under Section 172 is set out below: (a) the likely consequences of any decision in the long term: Decisions are made with due regard to the principal activity of the Company and the wider impact upon the Northern Powergrid Group. (b)the interests of the Company's employees: The Company does not have any employees. (c) the need to foster the Company's business relationships with suppliers, customers and others: The Company does not have customers or interact with suppliers. Relationships with bond holders are managed by the Northern Powergrid Group’s treasury department and the relevant bond trustee. (d) the impact of the Company's operations on the community and the environment: The Company’s operation has negligible impact on the community and environment. (e) the desirability of the Company maintaining a reputation for high standards of business conduct: In common with Northern Powergrid Group, the Company has adopted the Berkshire Hathaway Energy Company’s Core Principles which includes Regulatory Integrity. This requires that the Company’s affairs are managed in accordance with the highest behavioural standards and adherence to a policy of strict compliance with all relevant standards, legislation and regulatory conditions. (f) the need to act fairly as between members of the Company: The Company has one class of shares which are all held by Northern Powergrid (Northeast) plc, a company owned by the Northern Powergrid Group. Page 2 ![Graphics]() Northern Electric Finance plc Strategic Report for the Year Ended 31 December 2024 (continued) PRINCIPAL RISKS AND UNCERTAINTY Details regarding the main features of the Northern Powergrid Group's internal control and risk management systems can be found in the annual reports and financial statements of Northern Powergrid Holdings Company for the year to 31 December 2024. The principal risks and uncertainties specific to the Company are outlined as follows: Risk/Uncertainty and Mitigations Financial risks: Failure to meet financial liabilities. Mitigation • Interest payments are provided for by Northern Powergrid (Northeast) plc. • Northern Powergrid (Northeast) plc is financed by long-term borrowings at fixed rates and access to short-term borrowing facilities at floating rates. • As at 31 December 2024, 100% of Northern Powergrid (Northeast) plc’s long-term borrowings were at fixed rates and the average maturity for these borrowings was 14 years. • Northern Powergrid (Northeast) plc has financial covenant monitoring in place. • Regulatory adjustments control the effect of taxation changes. Approved by the Board on 27 May 2025 and signed on its behalf by: A P Jones Director Page 3 ![Graphics]() Northern Electric Finance plc Directors' Report for the Year Ended 31 December 2024 The directors present their report together with the auditor's report and the audited financial statements for the year ended 31 December 2024. Dividends During the year no interim dividend was paid (2023: £nil). The directors recommend that no final dividend be paid in respect of the year (2023: £nil). Directors of the Company The directors, who held office during the year and to the date of signing were as follows; A P Jones P A Jones T H France During and as at the end of the year, none of the directors had any interest in any contract which was significant in relation to the business of the Company and an indemnity contained in the Company's Articles of Association was in force for the benefit of the directors of the Company and as directors of associated companies, which was a qualifying third-party indemnity provision for the purposes of the Companies Act 2006. Future developments The financial position of the Company, as at 31 December 2024, is shown in the statement of financial position on page 14. There have been no significant events since the year end. There are no plans to change the existing business model. Research and development The Company does not undertake research and development. Financial risk management Details of financial risks are covered in Note 11, within the Notes to the financial statements. Political donations During the year, no contributions were made to political organisations (2023: £nil). Corporate governance statement The directors have elected to apply the exemption set out in Section 1B.1.6R of the Disclosure and Transparency Rules (“DTR”). See ‘Principal risks and uncertainty’ for details of internal control and risk management systems. In respect of the Company’s diversity policy, all appointments are based on merit with due regard for diversity, inclusion and equal opportunity. The Northern Powergrid Group does not set diversity targets. Audit committee The board of Northern Powergrid Holdings Company has established an audit committee for the Northern Powergrid Group under delegated terms of reference which carries out the functions required by DTR 7.1.3 R. Committee members: - J Reynolds - Non-executive Director - Northern Powergrid Holdings Company (Chair) - A P Jones, Finance Director - M Knowles - Independent member - Northern Powergrid Holdings Company Page 4 ![Graphics]() Northern Electric Finance plc Directors' Report for the Year Ended 31 December 2024 (continued) STATEMENT OF DIRECTORS' RESPONSIBILITIES The directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK accounting standards and applicable law (UK Generally Accepted Accounting Practice), including FRS 101 Reduced Disclosure Framework. 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 Company and of the profit or loss of the Company for that period. In preparing these financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; • assess the 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 Company or to cease operations, or have no realistic alternative but to do so. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the 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 Company and to prevent and detect fraud and other irregularities. Responsibility statement of the directors in respect of the annual financial report We confirm that to the best of our knowledge: - the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and - the strategic report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. Page 5 ![Graphics]() Northern Electric Finance 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 benefits from strong investment-grade credit ratings; • The Company is financed by long-term borrowings with an average maturity of 17 years; • The cash flow forecasts indicate that, in both the base and reasonably possible downside scenario, the Company will require funding through the intercompany current account mechanism to meet its liabilities as they fall due for at least 12 months from the approval of the financial statements, the going concern assessment period; • Northern Powergrid Holdings Company, being the ultimate UK parent company, has indicated its intention to continue to make available such funds as are needed by the Company through the intercompany current account mechanism, as with any company placing reliance on other group entities for financial support, the directors acknowledge that there can be no certainty that this support will continue although, at the date of approval of these financial statements, they have no reason to believe that it will not do so; • The Northern Powergrid Group as a whole is financed both in its operating companies and in other entities 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: • 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; • 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; • 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; • 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 • 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. Disclosure of information to the auditor Each director has taken steps that they ought to have taken as director in order to make themselves aware of any relevant audit information and to establish that the company's auditor is aware of that information. The directors confirm that there is no relevant information that they know of and of which they know the auditor is unaware. This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006. Page 6 ![Graphics]() Northern Electric Finance plc Directors' Report for the Year Ended 31 December 2024 (continued) Appointment of auditor KPMG will continue in office in accordance with the provisions in Section 487 of the Companies Act 2006 and has indicated its willingness to do so. Approved by the Board on 27 May 2025 and signed on its behalf by: A P Jones Director Page 7 ![Graphics]() Northern Electric Finance plc Independent Auditor's Report to the Members of Northern Electric Finance plc 1. Our opinion is unmodified We have audited the financial statements of Northern Electric Finance plc (“the Company”) for the year ended 31 December 2024 which comprise the Statement of Profit or Loss, Statement of Financial Position, 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 Company’s affairs as at 31 December 2024 and of its loss for the year then ended; • have been properly prepared in accordance with UK accounting standards, including FRS 101 Reduced Disclosure Framework; and • 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 21 February 2025. 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 Company in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard were provided. 2. Key audit matters: our assessment of risks of material misstatement Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We summarise below the key audit matters, in decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters. Recoverability of amounts due from group undertakings Amounts due from group undertakings: (£300.6million; 2023: £305.6million) Refer to page 19 (critical accounting estimates and judgements) and pages 16-27 (accounting policies and financial disclosures). The Risk (Low risk, high value) The carrying amount of the intra-group debtor balance represents 99.5% (2023: 100%) of the Company’s total assets. Their recoverability is not at a high risk of material misstatement or subject to significant judgement. However, due to their materiality in the context of the Company financial statements, this is considered to be the area that had the greatest effect on our overall Company audit. Page 8 ![Graphics]() Northern Electric Finance plc Independent Auditor's Report to the Members of Northern Electric Finance plc (continued) Our response We performed the tests below rather than seeking to rely on any of the 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: • Tests of detail: Assessing with reference to the relevant debtor’s draft balance sheet, whether they have a positive net asset value and therefore coverage of the debt owed, as well as assessing whether the debtor company has historically been profit-making. • Evaluating ability of wider group to repay the receivable: critically evaluating the Company’s assessment of the ability of the wider group to meet their obligations to the Company by inspecting the internally provided cash flow projections of the group. This included evaluating the reasonableness of the key assumptions in those projections against our knowledge of the group and experience of the industry in which it operates. We also assessed the probability of default of the counterparty. Our Results: We found the amounts due from group undertakings to be acceptable. 3. Our application of materiality and an overview of the scope of our audit Materiality for the Company financial statements as a whole was set at £2.4m, determined with reference to a benchmark of total assets, of which it represents 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 £1.56m. We applied this percentage in our determination of performance materiality based on our understanding of the control environment obtained as part of our first year audit. . We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £0.12m, in addition to other identified misstatements that warranted reporting on qualitative grounds. Our audit of the Company was undertaken to the materiality level specified above and was performed by a single audit team. The scope of the audit work performed was predominately substantive as we placed limited reliance upon the Company’s internal control over financial reporting. 4. Going concern The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or to cease its operations, and as they have concluded that 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 its 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 Company, its industry, and the general economic environment to identify the inherent risks to its business model and analysed how those risks might affect the 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 Company’s available financial resources over this period was the inability for the Company’s intermediate parent Company, Northern Powergrid Holdings Company Limited to provide continuing financial support during the going concern assessment period, which would result in the inability of the Company to meet its own external debt obligations as they fall due. We considered whether this risk could plausibly affect the liquidity in the going concern period by assessing the directors’ sensitivities over the level of available financial resources indicated by the Company’s financial forecasts taking account of severe, but plausible adverse effects that could arise from these risks individually and collectively. Page 9 ![Graphics]() Northern Electric Finance plc Independent Auditor's Report to the Members of Northern Electric Finance plc (continued) Given the purpose of the Company, 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 in relation to going concern are inherently linked with our key audit matter in relation to the recoverability of the intercompany debtor. 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 Company, including repayments in line with the Company’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 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 Company will continue in operation. 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 Company’s high-level policies and procedures to prevent and detect fraud, including the internal audit function, and the Company’s channel for “whistleblowing”, as well as whether they have knowledge of any actual, suspected or alleged fraud. • Reading Board minutes and attending Company 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 Company management may be in a position to make inappropriate accounting entries and the risk of bias in accounting estimates and judgements such as the assessment of recoverability of amounts due from group undertakings. On this audit we do not believe there is a fraud risk related to revenue recognition because the there are no revenue transactions. We did not identify any additional fraud risks. We performed procedures including: • Identifying journal entries to test at the based on risk criteria and comparing the identified entries to supporting documentation. These included unusual postings to cash, loans and borrowings, and legal expenses. • Assessing whether the judgements made in making accounting estimates are indicative of a potential bias. Page 10 ![Graphics]() Northern Electric Finance plc Independent Auditor's Report to the Members of Northern Electric Finance 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 other management (as required by auditing standards) and discussed with the directors and other management the policies and procedures regarding compliance with laws and regulations. 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 Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation (including related companies legislation), distributable profits legislation, and taxation legislation, 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 Company 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. We identified the following areas as those most likely to have such an effect: data protection laws, anti-bribery, and certain aspects of company legislation recognising the nature of the Company’s activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the directors and other management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach. Context of the ability of the audit to detect fraud or breaches of law or regulation Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of fraud, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations. 6. We have nothing to report on the other information in the Annual Report The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information. Strategic report and directors’ report Based solely on our work on the other information: • we have not identified material misstatements in the strategic report and the directors’ report; • in our opinion the information given in those reports for the financial year is consistent with the financial statements; and • in our opinion those reports have been prepared in accordance with the Companies Act 2006. Page 11 ![Graphics]() Northern Electric Finance plc Independent Auditor's Report to the Members of Northern Electric Finance plc (continued) 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, or returns adequate for our audit have not been received from branches not visited by us; or • the 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. 8. Respective responsibilities Directors’ responsibilities As explained more fully in their statement set out on page 5, 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 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 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. 9. The purpose of our audit work and to whom we owe our responsibilities This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Andrew Williamson (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 319 St Vincent Street, Glasgow G2 5AS 27th May 2025 Page 12 ![Graphics]() Northern Electric Finance plc Statement of Profit or Loss for the Year Ended 31 December 2024 Note 2024 £ 000 2023 £ 000 Revenue - - Administrative expenses (28) (28) Operating loss (28) (28) Finance costs 3 (12,488) (12,458) Finance income 3 12,467 12,459 Loss before tax (49) (27) Income tax credit/(expense) 6 12 6 Loss for the year (37) (21) There has been no other comprehensive income during the year (2023: £nil). The notes on pages 16 to 27 form an integral part of these financial statements. Page 13 ![Graphics]() Northern Electric Finance plc (Registration number: 03070482) Statement of Financial Position as at 31 December 2024 Note 31 December 2024 £ 000 31 December 2023 £ 000 Assets Non-current assets Intercompany and other receivables 7 296,429 296,267 Current assets Intercompany and other receivables 7 5,650 9,251 Total assets 302,079 305,518 Equity and liabilities Equity Share capital 8 (50) (50) Retained losses 1,844 1,807 Total equity 1,794 1,757 Non-current liabilities Loans and borrowings 10 (296,432) (296,271) Current liabilities Loans and borrowings 10 (7,441) (10,998) Income tax liability - (6) (7,441) (11,004) Total liabilities (303,873) (307,275) Total equity and liabilities (302,079) (305,518) Approved by the Board on 27 May 2025 and signed on its behalf by: ......................................... A P Jones Director The notes on pages 16 to 27 form an integral part of these financial statements. Page 14 ![Graphics]() Northern Electric Finance plc Statement of Changes in Equity for the Year Ended 31 December 2024 Share capital £ 000 Retained losses £ 000 Total £ 000 At 1 January 2024 50 (1,807) (1,757) Loss for the year - (37) (37) Total comprehensive expense - (37) (37) At 31 December 2024 50 (1,844) (1,794) Share capital £ 000 Retained losses £ 000 Total £ 000 At 1 January 2023 50 (1,786) (1,736) Loss for the year - (21) (21) Total comprehensive expense - (21) (21) At 31 December 2023 50 (1,807) (1,757) The notes on pages 16 to 27 form an integral part of these financial statements. Page 15 ![Graphics]() Northern Electric Finance 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 under the Companies Act and domiciled in England and Wales. The address of its registered office is Lloyds Court, 78 Grey Street, Newcastle upon Tyne, NE1 6AF. 2 Accounting policies Statement of compliance The financial statements have been prepared and approved by the directors in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”) as issued by the International Accounting Standards Board (IASB) in conformity with the requirements of the Companies Act 2006. 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. Summary of significant accounting policies and key accounting estimates The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Basis of preparation These 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 FRS 101 disclosure exemptions has been taken. In the transition to FRS 101 from UK-adopted IFRS, the Company has made no measurement and recognition adjustments. Northern Powergrid Holdings Company includes the Company in its consolidated financial statements. The consolidated financial statements of Northern Powergrid Holdings Company are prepared in accordance with International Financial Reporting Standards and are available to the public and may be obtained from Lloyds Court, 78 Grey Street, Newcastle Upon Tyne, NE1 6AF. Page 16 ![Graphics]() Northern Electric Finance plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 2 Accounting policies (continued) In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures: IAS 1: Presentation of Financial Statements IAS 7: Statement of Cashflows IAS 8: Basis of Preparation of Financial Statements IAS 16: Property, Plant and Equipment IAS 24: Related Party Disclosures IAS 38: Intagibile Assets IAS 40: Investment Property IFRS 7: Financial Instrument Disclosures IFRS 13: Fair Value Measurement Page 17 ![Graphics]() Northern Electric Finance 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 benefits from strong investment-grade credit ratings; • The Company is financed by long-term borrowings with an average maturity of 17 years; • The cash flow forecasts indicate that, in both the base and reasonably possible downside scenario, the Company will require funding through the intercompany current account mechanism to meet its liabilities as they fall due for at least 12 months from the approval of the financial statements, the going concern assessment period; • Northern Powergrid Holdings Company, being the ultimate UK parent company, has indicated its intention to continue to make available such funds as are needed by the Company through the intercompany current account mechanism, as with any company placing reliance on other group entities for financial support, the directors acknowledge that there can be no certainty that this support will continue although, at the date of approval of these financial statements, they have no reason to believe that it will not do so; • The Northern Powergrid Group as a whole is financed both in its operating companies and in other entities 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: • 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; • 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; • 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; • 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 • 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 18 ![Graphics]() Northern Electric Finance plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 2 Accounting policies (continued) Critical judgements in applying accounting policies In the preparation of financial statements in conformity with FRS 101 the directors did not identify any critical accounting judgements or key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Key sources of estimation uncertainty In the preparation of financial statements in conformity with FRS 101 the Directors did not identify any key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Changes in accounting policy New standards, interpretations and amendments effective Effective for periods beginning on or after 1 January 2024 - Amendments to IAS 1: Disclosure of Accounts Policies - Amendsments to IFRS 16: Leases - Amendments to IAS 7: Statement of Cash Flows - Amendments to IAS 21: The Effects of Changes in Foregin Exchange Rates These amendments did not have a material impact on the financial statements. The other amendments have had no material impact on the financial statements including the comparatives. Finance income and expenses policy Finance income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition. All other borrowing expenses are recognised in profit or loss in the period which they are incurred. Page 19 ![Graphics]() Northern Electric Finance plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 2 Accounting policies (continued) Tax The tax credit for the period comprises current tax. Tax is recognised in profit or loss, except that a change attributable to an item of income or expense recognised as other comprehensive income is also recognised directly in other comprehensive income. The current income tax credit is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the countries where the Company operates and generates taxable income. Intercompany loan receivables Intercompany loan receivables are amounts due from related parties for services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Intercompany loan receivables are recognised initially at the transaction price. They are subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for the impairment of intercompany receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. Borrowings All borrowings are initially recorded at the amount of proceeds received, net of transaction costs. Borrowings are subsequently carried at amortised cost, with the difference between the proceeds, net of transaction costs, and the amount due on redemption being recognised as a charge to the income statement over the period of the relevant borrowing. Interest expense is recognised on the basis of the effective interest method and is included in finance costs. Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Share capital Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material, the initial measurement is on a present value basis. Financial instruments Initial recognition Financial assets and financial liabilities comprise all assets and liabilities reflected in the statement of financial position. The Company recognises financial assets and financial liabilities in the statement of financial position when, and only when, the Company becomes party to the contractual provisions of the financial instrument. Financial assets are initially recognised at fair value. Financial liabilities are initially recognised at fair value, representing the proceeds received net of premiums, discounts and transaction costs that are directly attributable to the financial liability. Subsequent to initial measurement, financial assets and financial liabilities are measured at amortised cost. Page 20 ![Graphics]() Northern Electric Finance plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 2 Accounting policies (continued) Derecognition Financial assets The Company derecognises a financial asset when; - the contractual rights to the cash flows from the financial asset expire; - it transfers the right to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred; or - the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. On derecognition of a financial asset, the difference between the carrying amount of the asset and the sum of the consideration received is recognised as a gain or loss in the profit or loss. Financial liabilities The Company derecognises a financial liability when its contractual obligations are discharged, cancelled, or expire. Modification of financial assets and financial liabilities Financial assets If the terms of a financial asset are modified, the Company evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, then the contractual rights to the cash flows from the original financial asset are deemed to expire. In this case the original financial asset is derecognised and a new financial asset is recognised at amortised cost. If the cash flows are not substantially different, then the modification does not result in derecognition of the financial asset. In this case, the Company recalculates the gross carrying amount of the financial asset and recognises the amount arising from adjusting the gross carrying amount as a modification gain or loss in the statement of income. Financial liabilities If the terms of a financial liabilities are modified, the Company evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, then the contractual obligations from the cash flows from the original financial liabilities are deemed to expire. In this case the original financial liabilities are derecognised and new financial liabilities are recognised at amortised cost. If the cash flows are not substantially different, then the modification does not result in derecognition of the financial liabilities. In this case, the Company recalculates the gross carrying amount of the financial liabilities and recognises the amount arising from adjusting the gross carrying amount as a modification gain or loss in the statement of income. Page 21 ![Graphics]() Northern Electric Finance plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 3 Finance income and costs 2024 £ 000 2023 £ 000 Finance income Interest income from inter-company loans 12,467 12,459 Finance costs Interest on borrowings (12,364) (12,359) Interest paid to group undertakings (124) (99) Total finance costs (12,488) (12,458) Net finance (costs)/income (21) 1 4 Employees and directors No directors' or key personnel remuneration was charged for the year (2023: £nil). There were no employees during the year (2023: none). At 31 December 2024 no directors accrued benefits under a defined benefit scheme (2023: none). All remuneration and director emoluments costs are paid via the parent company, Northern Powergrid (Northeast) ltd. 5 Auditor's remuneration 2024 £ 000 2023 £ 000 Audit of the financial statements 27 21 No non audit services were provided during the financial year. Page 22 ![Graphics]() Northern Electric Finance plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 6 Income tax Tax credited in the income statement 2024 £ 000 2023 £ 000 Current taxation UK corporation tax (12) (6) The tax on profit before tax for the year is the same as the standard rate of corporation tax in the UK (2023 - the same as the standard rate of corporation tax in the UK) of 25% for the whole of 2024. (2023 - 19/25%). There are no timing differences and therefore no deferred tax in 2024 (2023: nil) Page 23 ![Graphics]() Northern Electric Finance plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 7 Intercompany and other receivables 31 December 2024 £ 000 31 December 2023 £ 000 Current trade and other receivables Amounts due from group undertakings 5,650 9,251 Non-current trade and other receivables Amounts due from group undertaking 296,429 296,267 302,079 305,518 The fair value of the trade and other receivables as at 31 December 2024 is estimated to be £242.6 million (2023: £268 million), determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable market transactions or dealer quotes for similar instruments. The valuation of assets set out above is based on Level 2 inputs. None of these debts are past due or impaired at the statement of financial position date as the directors do not consider there to be any doubt over their recoverability. Amounts due from Northern Powergrid Group undertakings represents £300 million of long-term loans made to Northern Powergrid (Northeast) plc, the Company's immediate parent. They are at fixed rates of interest ranging from 2.75% to 5.125% with maturities ranging from 2035 to 2049. Northern Powergrid (Northeast) plc maintains an investment grade credit rating. The maximum risk exposure to the Company is the book value of these loans. Page 24 ![Graphics]() Northern Electric Finance plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 8 Share capital Allotted, called up and fully paid shares 31 December 2024 31 December 2023 No. £ No. £ Ordinary Share Capital of £1 each 50,000 50,000 50,000 50,000 9 Reserves Retained losses £ 000 At 1 January 2024 (1,807) Loss for the year (37) Total comprehensive expense (37) At 31 December 2024 (1,844) Retained losses £ 000 At 1 January 2023 (1,786) Loss for the year (21) Total comprehensive expense (21) At 31 December 2023 (1,807) Retained Losses Reserves The retained losses represent the accumulated losses of the company over the years. These losses arise from the company's operations and are carried forward to future periods. The retained losses impact the equity of the company, reducing the overall reserves available for distribution to shareholders. Page 25 ![Graphics]() Northern Electric Finance plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 10 Loans and borrowings 31 December 2024 £ 000 31 December 2023 £ 000 Non-current loans and borrowings 296,432 296,271 Current loans and borrowings 7,441 10,998 303,873 307,269 Book value Fair value 31 December 2024 £ 000 31 December 2023 £ 000 31 December 2024 £ 000 31 December 2023 £ 000 Intercompany - 3,558 - 3,558 2035 - 5.125% bonds 153,647 153,550 150,467 158,526 2049 - 2.75% bonds 150,225 150,161 92,098 106,192 303,872 307,269 242,565 268,276 The fair value of the bonds is determined with reference to quoted market prices. The fair valuation of the borrowings is based on level 1 inputs. At 31 December 2024, the Company had no undrawn committed borrowing facilities. The Company's 5.125% 2035 bonds are guaranteed by Northern Powergrid (Northeast) plc and AMBAC Assurance UK Limited. The Company's 2.75% 2049 bonds are guaranteed by Northern Powergrid (Northeast) plc. Borrowings are measured at amortised cost using the effective interest method. The covenants associated with the 2035 bonds issued by the Company include restrictions on the issuance of new indebtedness and the making of distributions dependant on the scale of the ratio of Senior Total Net Debt to Regulatory Asset Value ("RAV") of Northern Powergrid (Northeast) plc. The definition of Senior Total Net Debt excludes any subordinated debt and any debt incurred on a non-recourse basis. In addition, it excludes interest payable, any fair value adjustments and unamortised issue costs. The liquidity risk, credit risk and market risk associated with these borrowings, and the management thereof, is covered within Financial Risk Management on pages 27 to 27 of these financial statements. Page 26 ![Graphics]() Northern Electric Finance plc Notes to the Financial Statements for the Year Ended 31 December 2024 (continued) 11 Maturity analysis for financial liabilities The following tables sets out the remaining undiscounted contractual cash flows of financial liabilities by type. 2024 Non-derivative liabilities Total outflow £ 000 1-3 months £ 000 3 months - 1 year £ 000 1-5 years £ 000 More than 5 years £ 000 Non-interest bearing - - - - - Fixed interest rate liabilities 487,687 - 11,813 47,250 428,624 Total 487,687 - 11,813 47,250 428,624 2023 Non-derivative liabilities Total outflow £ 000 1-3 months £ 000 3 months - 1 year £ 000 1-5 years £ 000 More than 5 years £ 000 Variable interest rate liabilities 3,557 3,557 - - - Fixed interest rate liabilities 499,500 - 11,813 47,250 440,437 Total 503,057 3,557 11,813 47,250 440,437 12 Parent and ultimate parent undertaking The Company's immediate parent is Northern Powergrid (Northeast) plc. The ultimate parent is Berkshire Hathaway, Inc. These financial statements are available upon request from 3555 Farnam Street, Omaha, Nebraska 68131. Relationship between entity and parents The parent of the largest group in which these financial statements are consolidated and the ultimate controlling party is Berkshire Hathaway, Inc, incorporated in United States. The registered address of Berkshire Hathaway, Inc is: 3555 Farnam Street, Omaha, Nebraska 68131. The parent of the smallest group in which these financial statements are consolidated is Northern Powergrid (Northeast) Plc, incorporated in United Kingdom. The registered address of Northern Electric plc is: Lloyds Court, 78 Grey Street, Newcastle upon Tyne, NE1 6AF. Page 27