Cotati City Council
October 22, 2024

Dividends
Note 26

Events after the balance sheet date
Note 19 on page
175, note S2 on
pages 191 to 203,
and note S6 on
pages 215 to 217
Financial instruments
2 to 55 Future developments
53 and 251 Greenhouse Gas (GHG) Emissions
71 Human rights
73 Internal control over financial reporting
110 Material shareholdings
38 to 43 People
111 Political donations and expenditure
Note S8

Related party transactions
12 to 45 Research and development activities
1 Results
28 to 34 Risk management
17 and 68 to 69 Section 172(1) Statement (Director’s Duty) 111 Share capital
45 Speak Up
14 to 15 Stakeholder engagement (including
employees, suppliers and customers)
41 to 44 Sustainability
47 to 55 TCFD and CFD
15, 38 to 40, 45, 46,
58, 70 to 71, 90, 96,
107 and 111
The Company’s approach to investing in
and rewarding its workforce
The Directors submit the Annual Report and Accounts for Centrica plc, together with the consolidated Financial Statements of the Centrica group of companies, for the year ended 31 December 2023. The Directors’ Report required under the Companies Act 2006 (the ‘Act’) comprises this Directors’ and Corporate Governance Report (pages 57 to 112) including the TCFD section for disclosure of our greenhouse gas (GHG) emissions in the Strategic Report (pages 47 to 55) and note 26 (page 189) to the Financial Statements. The index on this page includes matters contained in the Strategic Report that would otherwise be required in the Directors’ Report. The management report required under Disclosure Guidance and Transparency Rule 4.1.5 R comprises the Strategic Report (pages 2 to 55) (which includes the risks relating to our business), Shareholder Information (page 243) and details of acquisitions and disposals made by the Group during the year in note 12 (page 161). The Strategic Report on pages 2 to 55 fulfils the requirements set out in Section 414 of the Act. This Directors’ and Corporate Governance Report fulfils the requirements of the corporate governance statement required under Disclosure Guidance and Transparency Rule 7.2.1.

ARTICLES OF ASSOCIATION (‘ARTICLES’)
The Company’s Articles were adopted at the 2023 Annual General Meeting (AGM) and may only be amended by a special resolution of the shareholders. The Articles include various rules outlining the running and governing of the Company, for example rules relating to the appointment and removal of the Directors and how the Directors can use all of the Company’s powers (except where the Articles or legislation says otherwise), for example in relation to issuing and buying back shares. The Articles can be found on our website centrica.com.

CENTRICA SHARES
Significant shareholdings
At 31 December 2023, Centrica had received notification of the following interests in voting rights pursuant to the Disclosure and Transparency Rules:

Date
notified
% of share
capital(1)
BlackRock, Inc. 08.04.2022 5.25%
Schroders Investment Management Limited 27.04.2023 <5%
Bank of America Corporation 02.06.2023 <5%
(1) Percentages are shown as a percentage of the Company’s issued share capital when the Company was notified of the change in holding. As at 14 February 2024, the Company had received no further notifications. Copies of historic notifications and any notifications received since 14 February 2024, can be found on our website at centrica.com/rnsannouncements.
110 Governance | Centrica plc Annual Report and Accounts 2023 459 of 1021
Share capital
The Company has a single share class which is divided into ordinary shares of 6 14/81 pence each. The Company was authorised at the 2023 AGM to allot up to 1,895,391,323 ordinary shares as permitted by the Act. A renewal of a similar authority will be proposed at the 2024 AGM. The Company’s issued share capital as at 31 December 2023, together with details of shares issued during the year, is set out in note 25 to the Financial Statements on page 189.

Rights attaching to shares
Each ordinary share of the Company carries one vote. Further information on the voting and other rights of shareholders is set out in the Articles and in explanatory notes which accompany notices of general meetings, all of which are available on our website centrica.com. There are no shareholder agreements or restrictions in 2023.

Purchase of shares
As permitted by the Articles, the Company obtained shareholder authority at the 2023 AGM to purchase its own shares up to a maximum of 568,617,397 ordinary shares of 6 14/81 pence each (‘shares’). The 2022-23 repurchase programme completed on 29 March 2023 having purchased 250,483,802 shares. The 2023 programme commenced on 5 April 2023 and completed on 9 October 2023 with 235,455,079 shares purchased.

As announced in the Company’s Interim Results on 27 July 2023, the Company intends to repurchase a further £450m of shares to return surplus capital to shareholders. The 2023-2024 programme commenced on 10 October 2023. From 10 October 2023 to
31 December 2023, 72,049,447 shares were purchased (of which 70,465,051 shares had settled and were held as treasury shares).

The shares purchased during this period represent approximately

1.2% of the issued ordinary share capital at an aggregate cost of approximately £108m (£106m in respect of settled shares).

The total number of shares purchased during the financial year was 512,273,445, which represents approximately 8.7% of the Company’s issued share capital, at an aggregate cost of approximately £615m.

Of the total number of shares purchased during the year, 66,123,754 were used for share schemes with the rest held as treasury shares.

As at 31 December 2023, there were 490,250,737 shares held in the treasury shares account representing approximately 8.3% of the Company’s issued share capital. Dividends are waived in respect of shares held in the treasury share account. Further details are set out in note S4 to the Financial Statements on page 212.

Shares held in employee benefit trusts
The Centrica plc Employee Benefit Trust (EBT) is used to purchase shares on behalf of the Company for the benefit of employees, in connection with the Restricted Share Scheme. The Centrica plc Share Incentive Plan Trust (SIP Trust) is used to purchase shares on behalf of the Company for the benefit of employees, in connection with the SIP.

Both the Trustees of the EBT and the SIP Trust, in accordance with best practice, have agreed not to vote any unallocated shares held in the EBT or SIP Trust at any general meeting and dividends are waived in respect of these shares. In respect of allocated shares in both the EBT and the SIP Trust, the Trustees shall vote in accordance with participants’ instructions. In the absence of any instruction, the Trustees shall not vote.

EMPLOYEE PARTICIPATION IN SHARE SCHEMES
The Company’s all-employee share schemes are a long-established and successful part of our total reward package, encouraging the involvement of UK employees in the Company’s performance through employee share ownership. We offer a Share Incentive Plan (SIP) in the UK, with a take-up of 28%. In 2023, all eligible employees globally were awarded a Profit Share award under the SIP.

OTHER INFORMATION
Directors’ indemnities and insurance
In accordance with the Articles, the Company has granted a deed of indemnity, to the extent permitted by law, to the Directors of the Company. Qualifying third-party indemnity provisions (as defined by Section 234 of the Act) were in force during the year ended 31 December 2023 and remain in force. The Company also maintains directors’ and officers’ liability insurance for its Directors and officers.

The Company has granted qualifying pension scheme indemnities in the form permitted by the Companies Act 2006 to the directors of Centrica Pension Plan Trustees Limited, Centrica Engineers Pension Trustees Limited and Centrica Pension Trustees Limited, that act as trustees of the Company’s UK pension schemes.

Political donations
The Company operates on a politically neutral basis. No political donations were made by the Group for political purposes during the year.

Payments policy
We recognise the importance of good supplier relationships to the overall success of our business. We manage dealings with suppliers in a fair, consistent and transparent manner.

Significant agreements – change of control
There are a number of agreements to which the Company is party that take effect, alter or terminate upon a change of control of the Company following a takeover bid.

The significant agreements of this kind include:
¢ Those that relate to 2009, when the Company entered into certain transactions with EDF Group in relation to an investment in the former British Energy Group, which owned and operated a fleet of nuclear power stations in the UK. The transactions include rights for EDF Group and the Company to offtake power from these nuclear power stations. As part of the arrangements, on a change of control of the Company, the Group loses its right to participate on the boards of the companies in which it has invested. Furthermore, where the acquirer is not located in certain specified countries, EDF Group is able to require Centrica to sell out its investments to EDF Group; and
¢ Committed facility agreements, subordinated fixed rate notes and bonds issued under the Company’s medium-term note
programme.

The Remuneration Policy sets out on page 107 details on the treatment of the Executive Directors’ pay arrangements, including the treatment of share schemes in the event of a change of control.

Disclosures required under Listing Rule 9.8.4 R
The Company is required to disclose certain information under Listing Rule 9.8.4 R in the Directors’ Report or advise where such relevant information is contained. All such disclosures are included in this Directors’ and Corporate Governance Report, other than the following sections of the 2023 Annual Report and Accounts:

Information Location in Annual Report Page(s)
Capitalised interest
(borrowing costs)
Financial Statements 156, note 8
Details of long-term
incentive schemes
Remuneration Report 85 and 92
Governance | Centrica plc Annual Report and Accounts 2023 111 460 of 1021
DIRECTORS’ STATEMENTS
Accounting standards require that Directors satisfy themselves that it is reasonable for them to conclude whether it is appropriate to prepare the Financial Statements on a going concern basis. The Group’s business activities, together with factors that are likely to affect its future development and position, are set out in the Group Chief Executive’s Statement on pages 6 to 8 and the Business Reviews on pages 23 to

25. After making enquiries, the Board has a reasonable expectation that Centrica and the Group as a whole have adequate resources to continue in operational existence and meet their liabilities as they fall due, for the foreseeable future.

For this reason, the Board continues to adopt the going concern basis in preparing the Financial Statements.

Additionally, the Directors’ Viability Disclosure, which assesses the prospects for the Group over a longer period than the 12 months required for the going concern assessment, is set out on pages 35 to

37. Further details of the Group’s liquidity position are provided in notes 24 and S3 to the Financial Statements on pages 185 to 188 and 204 to 210.

Directors’ responsibilities
The Directors are responsible for preparing the Annual 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, the Directors are required to prepare the Group financial statements in accordance with international accounting standards, in conformity with the requirements of the Companies Act 2006. The Directors have also chosen to prepare the parent company financial statements in accordance with Financial Reporting Standard 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 the parent company financial statements, the Directors are required to:
¢ Select suitable accounting policies and then apply them consistently; ¢ Make judgements and accounting estimates that are reasonable and prudent;
¢ State whether Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ has been followed, subject to any material departures disclosed and explained in the Financial Statements; and ¢ Prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

In preparing the Group Financial Statements, International Accounting Standard 1 requires that Directors:
¢ Properly select and apply accounting policies;
¢ Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
¢ Provide additional disclosures when compliance with the specific requirements in IFRS Standards are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and
¢ Make an assessment of the Company’s ability to continue as a going concern.

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 also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

DIRECTORS’ RESPONSIBILITY STATEMENT
Each of the Directors confirm that to the best of their knowledge:
¢ The Financial Statements, prepared in accordance with the relevant financial reporting framework, 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; ¢ The Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the Principal Risks and Uncertainties that they face; and
¢ The Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company’s position and performance, business model and strategy.

The names of the Directors and their functions are listed on pages 59 to 62.

Information to the independent auditors
The Directors who held office at the date of this Report confirm that:
¢ There is no relevant audit information of which Deloitte LLP are unaware; and
¢ They have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.

Deloitte LLP have expressed their willingness to continue in office as auditors and a resolution to re-appoint them will be proposed at the forthcoming AGM.

This report, including the Directors’ Responsibility Statement, was approved by the Board of Directors on 14 February 2024 and is signed on its behalf by:

By order of the Board
Raj Roy
Group General Counsel & Company Secretary
14 February 2024
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114 Independent Auditor’s Report
127 Group Income Statement
128 Group Statement of Comprehensive Income
129 Group Statement of Changes in Equity
130 Group Balance Sheet
131 Group Cash Flow Statement
132 Notes to the Financial Statements
229 Company Financial Statements
241 Gas and Liquids Reserves (Unaudited)
242 Five Year Summary (Unaudited)
Financial Statements | Centrica plc Annual Report and Accounts 2023 113 Financial
Statements
462 of 1021
INDEPENDENT AUDITOR’S REPORT

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

1. Opinion
In our opinion:
¢ the financial statements of Centrica plc (the ‘Company’) and its subsidiaries (the ‘Group’) give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 December 2023 and of the Group’s profit for the year then ended; ¢ the Group financial statements have been properly prepared in accordance with United Kingdom adopted international accounting standards;
¢ the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’; and ¢ the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements which comprise:
¢ the Group Income Statement;
¢ the Group Statement of Comprehensive Income;
¢ the Group Statement of Changes in Equity;
¢ the Group Balance Sheet;
¢ the Group Cash Flow Statement;
¢ the related notes to the Group financial statements 1 to 26; ¢ the supplementary notes S1 to S11 of the Group financial statements; ¢ the Company Statement of Changes in Equity;
¢ the Company Balance Sheet; and
¢ the notes I to XVI to the Company financial statements.

The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and United Kingdom adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the Company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice).

2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.

We are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services provided to the Group for the year are disclosed in note S9 to the financial statements. We confirm that we have not provided any non-audit services prohibited by the FRC’s Ethical Standard to the Group or the Company.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 114 Financial Statements | Centrica plc Annual Report and Accounts 2023 463 of 1021

3. Summary of our audit approach
Key audit matters The key audit matters identified in the current year were:
¢ the valuation of residential energy supply billed debt provisions within British Gas; ¢ the accuracy and completeness of revenue arising from British Gas’s new billing platform, ENSEK, including manual adjustments made in respect of revenue recognised through this platform; ¢ impairment considerations in respect of the Group’s investment in its Nuclear associate; ¢ accounting for the Electricity Generator Levy (“EGL”); and ¢ the valuation of complex energy derivative contracts.

Other than as explained below, these key audit matters are consistent with those identified in the prior year:
¢ In the prior year, we noted a key audit matter in respect of energy supply arrangements, which covered a number of judgements associated with the supply of energy including the billed debt provision, accounting for customer support schemes and ENSEK revenue. This year the judgement in respect of government support schemes has reduced following the wind-down of those schemes, leading to this area no longer being considered a key audit matter, and the other two areas have been reported on as separate key audit matters this year. The Group has continued to migrate customers onto ENSEK and ENSEK is now a bigger proportion of overall Group revenue which has led to increased risk. ¢ A new key audit matter in the year relates to accounting for the Electricity Generator Levy (“EGL”). At the end of 2022, the Government announced the implementation of the temporary levy applicable to receipts that the Group has realised from electricity generation in the UK from nuclear and renewable sources in the period from 1 January 2023 to 31 March 2028.

There is significant uncertainty in how the legislation should be interpreted in relation to the Group’s significant minority shareholder off-take arrangement with its Nuclear associate. Payment has been made on account to HMRC for the maximum potential cost however the Group has also made considerations as to whether this could constitute a tax deposit asset. Given the complexity of the legislation, the impact on the Group and the estimation uncertainty in relation to the amount of levy the Group owes for 2023 and whether a tax deposit asset should be recorded for the recovery of payments on account made to HMRC, we identified a key audit matter in respect of the accounting for the EGL.

Whilst the commodity price environment has remained volatile in 2023, commodity prices are lower than in 2022. Centrica’s higher liquidity headroom, reduced volatility and management’s active liquidity risk management has reduced margin call risk significantly.

Hence the audit of the going concern assumption is no longer identified as a key audit matter. Section 4 of our report describes the specific procedures performed to reach our conclusions related to the going concern basis of accounting in the preparation of the Group financial statements.

Within this report, key audit matters are identified as follows:
! Newly identified
r Increased level of risk
vw Similar level of risk
s Decreased level of risk
Materiality The materiality used for the audit of the Group financial statements is £135m (2022: £158m), determined based on adjusted profit before tax. Adjusted profit before tax is the pre-tax profit adjusted for the impact of exceptional items and certain remeasurements. The decrease in materiality in 2023 reflects the decrease in commodity prices contributing to lower adjusted profit in the Upstream and Trading segments, partially offset by profit in the Energy Supply segments which is higher than in prior year.

Scoping All components of the Group were subject to a full-scope audit other than New Energy Services (within the Centrica Business Solutions segment) which continues to be subject to review procedures and the components presented below which were subject to specified audit procedures:
¢ Centrica Business Solutions Energy Supply;
¢ Bord Gáis;
¢ British Gas Services and Solutions segment; and
¢ Centrica Energy Storage+ (within the Upstream segment).

Component materiality levels were set based on the size and audit risk associated with each component on a range of applicable metrics. Our risk assessment procedures resulted in a reduction in the group reporting scope for Centrica Business Solutions Energy Supply from a full-scope audit in the prior year to an audit of specified account balances in the current year.

In the current year the audit team has defined Head office as a separate component of the Group. The business activities of the Head office component are materially in line with those of the Company and this component has been subject to a full-scope audit in line with the audit of the Company.

Significant changes
in our approach
Other than the changes in key audit matters and scope discussed above, there were no other significant changes in our audit approach when compared to 2022.

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4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Group’s and Company’s ability to continue to adopt the going concern basis of accounting included:
¢ Assessing the Group’s future cash flow forecasts, by considering actual cash flow performance in 2023, the current commodity price environment, historical accuracy of the Group forecasts and key assumptions underpinning management’s going concern assessment; ¢ Agreeing the level of committed undrawn facilities of £3.8bn (2022: £4.0bn) to signed facility agreements, along with support from our treasury specialists, where relevant, to review the key terms of new facility agreements; ¢ We obtained an understanding of the relevant controls over the going concern and viability assessment. ¢ Testing the clerical accuracy of the model used to prepare the cash flow forecasts and assessing the sophistication of the model used to prepare the forecasts;
¢ Assessing whether management’s cash flows consider the impact of Group’s planned investment strategy announced in July 2023; ¢ Assessing the sensitivities run by the directors and the linkage of these sensitivities to the Group’s principal risks disclosed on pages 30 to 34 of the Annual Report & Accounts. These sensitivities include the impact of margin cash volatility, a reduction in the Group’s credit rating, a reduction in commodity prices and Upstream asset underperformance, a reduction in commodity trading performance, or the risk of adverse weather and worsening macroeconomic factors and the resultant impact on cashflows; ¢ Assessing the mitigating actions that could be taken by the directors to maximise liquidity headroom including a reduction in capital expenditure and a reduction in discretionary spend; and ¢ Assessing the appropriateness of management’s going concern disclosures in light of the above assessment.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group’s and Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included 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.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

5.1 The valuation of residential energy supply billed debt provisions within British Gas vw Key audit matter
description
The Group supplies gas and power to residential customers in the UK through its British Gas Energy segment. Of the Group total of £2,991 million (2022: £2,207 million) billed trade receivables, the British Gas Energy reporting segment contributes £2,380 million (2022: £1,531 million). British Gas Energy includes residential and small business customers.

The Group’s energy supply business has seen changes as a result of current macroeconomic factors, restrictions on debt recovery actions and reduced continued pressure on customer finances throughout 2023. As a result, there continues to be increased judgement in determining the recoverability of customer debt, which raises the risk of material misstatement in determining the billed debt provision at 31 December 2023. Credit losses of £1,240m (2022: £822m) have been recognised on billed trade receivables of which £764m (2022: £501m) relate to UK residential customers, including additional provisions to reflect changes in the macroeconomic environment as a result of the cost-of-living crisis. Further details on billed debt provisions relating to trade receivables can be found in notes 3(b) and

17. These matters are also considered by the Audit and Risk Committee in its report on pages 75 to 78.

To determine the billed debt provision, certain key assumptions are made. These include the methodology used to assess the impact of macroeconomic factors on future cash collection. The need to make significant additional provisions (“additional macroeconomic” provision) beyond those provisions that are indicated by past collection performance (“business-as-usual” provision) increases the level of judgement and accordingly risk of material misstatement. We have therefore also identified this as a fraud risk.

In the current year the “business-as-usual” provision has increased as a result of declines in actual cash collection rates during 2023, triggered by   the ongoing cost-of living crisis now being reflected in the backwards looking calculation. Consequently, the “additional macroeconomic” provision for residential customers has reduced as a percentage of billed debt in the current year from 3.9% to 3.8%.

How the scope of
our audit responded
to the key audit
matter
¢ We tested and relied upon controls relevant to the calculation of billed debt provisions, where applicable. ¢ With involvement of our IT and data analytics specialists, we tested the accuracy of the underlying debt books, including the age of debt, and recalculated management’s provision rates based on historical cash collection. ¢ We assessed how amounts receivable at 31 December 2022 were collected over 2023 in order to estimate an expected profile of the recovery of 31 December 2023 balances, on a “business as usual” basis. We applied this profile to 31 December 2023 debt and then assessed:
– the impact and sensitivity of this profile based on external forecasts such as household disposable income and inflation forecasts and the impact on billed debt provisions as the economic situation changes; and – management’s accounting for the impact of these changes in the billed debt provision estimate. ¢ We considered the extent to which the provision on a ”business as usual” basis factors in the continuing uncertainty in the current macroeconomic environment.
¢ We obtained an understanding of the relevant controls and challenged the methodology over the determination and recording of the “additional macroeconomic” provision, with reference to available third party analysis. ¢ We performed procedures to challenge the completeness and the appropriateness of the “additional macroeconomic” provision by evaluating the reasonableness of management’s assumptions and economic data (both forecast and historical) used to derive this. ¢ We assessed the appropriateness of the disclosures provided relating to this key source of estimation uncertainty, and the range of sensitivities disclosed.

Key observations We are satisfied that the billed debt provisions including the additional provisions to reflect macroeconomic uncertainty on residential customers, and the associated methodology to calculate this adjustment, are appropriate. We consider the “additional macroeconomic” provision recognised beyond “business-as-usual” provisions to be appropriate and close to the mid-point of a calculated reasonable range, which is consistent with the prior year.

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5.2. The accuracy and completeness of revenue arising from British Gas’s new billing platform, ENSEK, including manual adjustments made in respect of revenue recognised through this platform r Key audit matter
description
In 2023, British Gas Energy generated revenues of £17.7bn (2022: £13.0bn)  with 5.4m (2022: 2m) customers having been migrated to the new ENSEK platform by the year end, as seen on page 90. As at 31 December 2023 a significant proportion of this revenue was therefore  recognised from customers on this platform. Revenue from customers on the ENSEK platform is presented within the overall revenue figure for British Gas Energy in note 4.

These matters are also considered by the Audit and Risk Committee in its report on pages 75 to 78.

ENSEK was adopted in order to improve customer service and reduce cost to serve, hence the consumption mechanism is deliberately more simplistic in ENSEK when compared to the one in the legacy SAP system. Whilst SAP applies sophisticated bias correction factors, reflecting machine learning as a result of comparing estimated to actual consumption, when it comes to the estimation of unbilled revenue, ENSEK relies more on industry data flows which is a more common approach taken by other suppliers in the market.

Industry data flows are based on historical information however and experience delays from data collection to publication. Judgemental manual adjustments to estimated unbilled revenue are therefore required in ENSEK to allow for the most recent consumption trends experienced.

ENSEK is a Software-as-a-Service (“SaaS”) arrangement and the system is controlled by, and continues to be developed by a third party. British Gas Energy Supply is therefore dependent on the efficacy of the general IT controls, application controls, and other controls that the third party operates on its behalf. As highlighted in the Audit and Risk Committee’s report on page 73, the ENSEK system is still in development and evolving alongside the migration process and hence these controls are evolving and developing and cannot be tested directly by British Gas due to the nature of the SaaS arrangement. Given the significant quantum of revenue, as well as the developing ENSEK control environments and the differences in the process between the unbilled revenue recognition for customers on the legacy SAP system and the ENSEK system, there remains a reliance on manual adjustments to appropriately record ENSEKdriven unbilled revenue. This increases the risk of material misstatement, and we have additionally identified this as a potential fraud risk given the extent of judgement applied in determining the appropriate manual adjustments.

How the scope of
our audit responded
to the key audit
matter
¢ We obtained an understanding of the relevant controls over the recognition of revenue from customers within the ENSEK system, both in the Centrica and ENSEK environment, including those regarding the completeness and accuracy of consumption data within the ENSEK environment and the manual adjustment to ENSEK estimated revenue. We did not plan to place reliance on these controls due to the maturity of the control environment, as detailed by the Audit and Risk Committee in its report on pages 75 to 78. ¢ Considering the developing control environment, we performed test of details over the billed energy supply volume and pricing revenue data in the ENSEK platform, agreeing amounts back to contractual tariffs and actual or estimated meter readings. ¢ We calculated an expectation of the billed energy supply revenue recognised through the ENSEK environment, comparing differences to predetermined thresholds and tested the completeness and accuracy of the key inputs to the expectation. ¢ We worked with our data analytics specialists to recalculate the unbilled revenue recognised through the ENSEK platform and to test the accuracy and completeness of the source data used in the recalculation, including that migrated from the legacy SAP systems. ¢ We challenged the methodology and key inputs used to calculate the manual adjustment to billed and unbilled revenue in ENSEK.

We have also tested the arithmetical accuracy of the model computing the revenue derecognition adjustment.

Key observations Given we did not rely on ENSEK controls due to their developing nature, we increased the level of substantive testing performed to respond to the increased level of risk. Through the performance of our fully substantive procedures, we are satisfied that the accuracy and completeness of the Group’s energy supply revenue recognised through the ENSEK platform, including the methodology to generate unbilled revenue and manual derecognition adjustment is appropriate.

Management has had in place throughout the year a Finance Systems Roadmap, which includes plans in relation to the development of an established control environment in ENSEK. Progress against these plans is reported to the Audit and Risk Committee at regular intervals. We have provided feedback to management to further enhance these plans, including: negotiating the right to perform, directly or indirectly, testing of the ENSEK system to gain assurance over the system controls; and formalising management’s review controls to provide sufficient evidence of effective operation.
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5.3. Impairment considerations in respect of the Group’s investment in its Nuclear associate vw Key audit matter
description
Power prices have continued to reduce from the high levels in 2022, resulting in a significant decrease in the expected cash flows from the Nuclear investment. The decrease in future forecast cashflows in the assessment of the value of the investment in Nuclear was offset by the extension of station lives pertaining to Heysham 1 and Hartlepool, both which have been extended to operate to March 2026, which represents a two year extension. The total pre-impairment book value of the investment in Nuclear was £1,452m (2022:
£1,560m) with a pre-tax impairment of £549m (2022: pre-tax impairment reversal of £195m) recorded at 31 December 2023.

The details on the key sources of estimation uncertainty underpinning the impairment for these assets can be found in note 3(b). Details on the sensitivity of the above impairment reviews to changes in key assumptions such as power prices are disclosed in note 7(c). This includes sensitivities associated with the Group’s commodity price curves if these curves were aligned with the Net Zero scenario (‘Net Zero curve’) which assumes governmental policies are put in place to achieve the temperature and net zero goals by 2050. The matter is also considered by the Audit and Risk Committee in its report on page 77.

Given the significant impairment in the investment in Nuclear in the current year, we identified a key audit matter around the valuation of these assets for impairment testing purposes. The underlying impairment cost has been recorded within the exceptional items and certain re-measurements column of the Group income statement.

The key assumptions and judgements underpinning the impairment testing of the investment in Nuclear include:
¢ forecast future commodity prices, including the likely impact of climate change and international governmental intervention to reduce CO2 emissions on those prices;
¢ forecast future generation profiles of the assets;
¢ forecast future cash flows for the assets;
¢ useful life estimates;
¢ impact of the Electricity Generator Levy on the future forecast of cashflows; and ¢ the discount rate.

How the scope of
our audit responded
to the key audit
matter
Procedures on the overall impairment review:
¢ We understood management’s process for identifying indicators of impairment and impairment costs and for performing their impairment assessment.
¢ We obtained an understanding of the relevant controls relating to the asset impairment models, the underlying forecasting process and the impairment reviews performed.
¢ We evaluated and challenged the key assumptions and inputs into the impairment models, which included performing sensitivity analysis, to evaluate the impact of selecting alternative assumptions. We evaluated changes in key assumptions and assessed retrospectively whether prior year assumptions were appropriate. ¢ We involved our valuation specialists to evaluate management’s discount rates, which involved benchmarking against available market views and analysis.
¢ We tested the arithmetical accuracy of the impairment models. ¢ We assessed the appropriateness of management’s disclosures of the key assumptions and sensitivities including the presentation of the impairment cost within the exceptional items and certain re-measurements column of the Group income statement.

Procedures relating to forecast future cash flows:
¢ We assessed whether forecast cash flows were consistent with the operator approved forecasts, where relevant, and analysed reasonably possible downside sensitivities.
¢ We assessed the reasonableness of the plants’ forecast outage rates by looking at recent historical outage rates and sensitised the impact of a change in assumptions on the overall impairment model. ¢ We assessed the reasonableness of the life extension at Heysham 1 and Hartlepool by assessing management's intention and rationale for the extension. We further inspected evidence from the station operators, EDF, as well as information available in the public domain.
¢ We evaluated the Group’s estimation of future commodity prices, benchmarked against externally available future commodity price estimates and performed sensitivity analysis with alternative future prices. This includes a scenario which assumes governmental policies are put in place to achieve the temperature and net zero goals by 2050. We recalculated management’s disclosures relating to the sensitivity of the Group’s impairment tests to reduced commodity prices, including the Net Zero curves. ¢ We worked with our tax specialist to conclude on the reasonableness of implementation of the Electricity Generator Levy and as a result, aid our subsequent impact assessment on the forecast future cash outflows.

Key observations We are satisfied that the key assumptions used to determine the value in use of the Group's investment in Nuclear, including production and availability forecasts, are appropriate. We are also satisfied that the Group's discount rate assumptions are based on acceptable valuation methodologies.

The Group's future commodity price estimates fall within the middle of the acceptable range of external sources, which is consistent with the prior year. We observed that the baseload price forecasts from acceptable external sources were generally higher than the assumed prices in the net zero scenario. We consider the sensitivity disclosures related to the impact of future commodity price estimates arising from climate change on the Group's impairment reviews to be acceptable.

We are satisfied that the impairment cost recognised by the Group for the year is appropriate and we found the presentation of this cost under the exceptional items and certain re-measurements column of the Group income statement to be consistent with Group policy.

Financial Statements | Centrica plc Annual Report and Accounts 2023 119 468 of 1021

5.4. Accounting for the Electricity Generator Levy (“EGL”) ! Key audit matter
description
At the end of 2022, the UK Government announced the implementation of the EGL, a new, temporary levy applicable to receipts that the Group has realised from electricity generation in the UK from nuclear and renewable sources in the period from 1 January 2023 to 31 March 2028. The levy applies a 45% charge on receipts generated from the production of wholesale electricity sold at an average price in excess of £75/Mwh, exceeding an annual threshold of £10m. It applies to generators whose generation exceeds 50GWh annually, as well as off-take arrangements with significant minority shareholders in such generators.

During the year, the Group’s share of its Nuclear associate’s EGL payments amounted to £41m (recorded within the share of profit after tax from associates). The Group has also made payments on account to HMRC of £285m in relation to its estimated EGL liabilities for its minority shareholder Nuclear offtake arrangements during the December 2023 financial year and this expense has been recorded within the income statement, as part of Cost of Sales.

The EGL legislation is new and its interpretation and application is unclear in respect of the Group’s minority shareholder Nuclear offtake arrangements.  While the Group has made payments on account to HMRC totalling £285m, were it considered probable that these payments on account are recoverable, then (up to) the £285m could be recognised as a tax deposit asset on the balance sheet rather than as a cost within the income statement, in accordance with the 2019 IFRIC Agenda decision on Deposits relating to taxes other than income taxes. However, no tax deposit asset has been recorded because it is not deemed probable, as at the balance sheet date, that this will ultimately be recoverable (or used to settle another tax liability).

Given the complexity of the legislation and the impact on the Group, we identified a key audit matter in respect of the accounting for the EGL, principally whether the amounts due should be recorded within the income statement or as a tax deposit on the balance sheet.

The Group has recognised the full charge in the income statement. Further detail can be found in note 3(b). The Audit & Risk Committee also consider this matter on page 75.

How the scope of
our audit responded
to the key audit
matter
¢ We gained an understanding of the Group’s process and judgements applied in accounting for and recognising EGL within the financial statements and evaluated the objectivity and competence of management’s experts and the appropriateness of the underlying source documents relied upon.
¢ We gained an understanding of the relevant controls in relation to review of the judgements formed by management. ¢ We tested EGL payments on account to HMRC in the year to supporting third party evidence. ¢ We worked with our tax specialists to assess the appropriate interpretation of the EGL legislation in addition to reviewing legal advice received by the Group. We assessed the accounting for the EGL with a particular focus on whether any of the amount of £285m paid in December 2023 should be recorded in the income statement or on the balance sheet as a tax asset. We evaluated the appropriateness of management's conclusions, considering the identified sources of estimation uncertainty, the opinions of management’s experts and the evaluation of reasonability performed by our tax specialists. ¢ We considered the appropriateness of the disclosures within the financial statements on the accounting position adopted and the judgements involved.
¢ We considered the nature and impact of the contradictory audit evidence on management’s assessment.

Key observations We are satisfied that that the EGL expenditure has been appropriately presented within the Group income statement, that the nonrecognition of a tax deposit asset at this stage is appropriate and that the disclosures within the financial statements relating to EGL are appropriate.
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5.5. The valuation of complex energy derivative contracts vw Key audit matter
description
Note 7 of the financial statements discloses a re-measurements profit of £3,573m for the year (2022: loss of £5,160m) on energy derivative contracts. Details on the Group’s energy contracts can be found in note 19 and note S3(a). The key sources of estimation uncertainty associated with energy contracts can be found in note 3(b) with further details on the presentation of certain remeasurement arising on derivatives disclosed in note 2(b). The matter is also considered by the Audit and Risk Committee in its report on page 76.

The Group undertakes proprietary trading activities and enters into forward commodity contracts to optimise the value of its production and generation assets, as well as to meet the future needs of its customers. Certain of these arrangements are accounted for as derivative financial instruments and are recorded at fair value. We identified a key audit matter related to the valuation of complex derivative trades performed internally by management's valuation specialists. Valuing complex energy derivative contracts requires judgement, particularly where there is modelling complexity and bespoke contractual terms (level 3 in accordance with IFRS 13 'Fair Value Measurement'). Given the judgement involved and the potential for management bias in the modelling, we identified a potential risk of fraud.

Level 3 complex energy derivative financial assets of £156m (2022: £592m) were recognised at 31 December 2023 and £272m (2022:
£850m) level 3 complex energy derivative financial liabilities. Although the value of complex energy derivative contracts decreased during the year due to the continued reduction in commodity prices, these continue to be a significant balance within the financial statements.

Given the continued complexity and heightened level of risk, the valuation of these contracts is a key audit matter.

How the scope of
our audit responded
to the key audit
matter
¢ We obtained an understanding of the Group’s processes, including the user access and segregation of duties controls, for authorising and recording commodity trades.
¢ We obtained an understanding of management’s process and the relevant controls relating to the valuation of complex energy derivatives within the Group’s Centrica Energy business. We were unable to place reliance on these controls due to findings relating to user access and the oversight of service organisations, as set out in the Audit and Risk Committee report on page 73.

We increased the extent of our substantive work to sample further valuations to mitigate the risk. ¢ We assessed the competence, capability and objectivity of management’s own internal valuation specialists. ¢ We worked with our financial instrument specialists to assess the value of material complex trades, either by creating an independent valuation or by testing how management developed their estimate. Particular emphasis was made to assess any new material models and material changes to relevant models including additional procedures to assess the reasonableness and appropriateness of these.
¢ We assessed the movement in the fair values based on the change in significant inputs, while testing these inputs, where relevant. ¢ We considered the appropriateness of the relevant complex derivative energy contracts disclosures, including the key source of estimation uncertainty disclosures.

Key observations We are satisfied that complex derivative energy contracts are valued on an appropriate basis.

We have provided feedback to management with respect to control improvements in respect of user access and oversight of service organisations.

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6. Our application of materiality

6.1 Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

Based on our professional judgement, we determined the materiality of the financial statements as a whole as follows:

Group financial statements Company financial statements Materiality £135 million (2022: £158 million) £54 million (2022: £150 million) Basis for
determining
materiality
We determined materiality on the basis of 5% (2022: 5%) of adjusted profit before tax. Adjusted profit before tax is the pre-tax profit adjusted for the impact of exceptional items and certain remeasurements.

We determined materiality based on 3.0% (2022: 3.0%) of net assets but capped materiality at 40% (2022: 95%) of the Group materiality. Our final materiality constituted 0.7% of net assets (2022: 2.8% of net assets).

Rationale for the
benchmark applied
We considered adjusted profit before tax to be the most appropriate benchmark to measure the performance of the Group.

We consider it appropriate to adjust for exceptional items and remeasurements as these items are volatile and not reflective of the underlying performance of the Group.

In determining materiality, we also considered a range of alternative benchmarks. The materiality of £135m represents 0.4% (2022:

0.5%) of business performance revenue, 0.6% (2022: 0.5%) of total assets, and 6.1% (2022: 6.4%) of free cash flow. Given that the determined materiality was within the range of those alternative benchmarks, we have concluded it to be appropriate.

We considered our established materiality against the final audit results and considered that it remained appropriate in the context of the financial statements as a whole.

We considered net assets to be the most appropriate benchmark given the primary purpose of the Company is a holding company.

We reduced the cap on Group materiality percentage in the current year to align to the group audit strategy more clearly.

6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole.

Group financial statements Company financial statements Performance
materiality
70% (2022: 70%) of Group materiality 70% (2022: 70%) of Company materiality Basis and rationale
for determining
performance
materiality
The factors we considered in setting performance materiality at 70% of Group and Company materiality included:
¢ The overall quality of the control environment and that we were able to rely on controls in certain of the Group’s businesses. ¢ The nature, size and number of uncorrected misstatements identified in previous audits and management’s willingness to correct those adjustments.

6.3. Error reporting threshold
The decrease in materiality has led to a decrease in the error reporting threshold, which stands at £6.8m (2022: £7.9m). We have however, at the Audit and Risk Committee’s request continued to report individual audit differences in excess of £5m (2022: £5m), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also reported to the Audit and Risk Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements. 122 Financial Statements | Centrica plc Annual Report and Accounts 2023 471 of 1021

7. An overview of the scope of our audit

7.1 Identification and scoping of components
The Group is organised into segments as outlined in note 4. These segments contain a number of individual businesses, and we use these businesses as the basis for identifying and scoping components. In the current year, the Head Office was identified as a component of the Group given the significant contribution to the Group’s adjusted profit before tax. Other changes in scoping have been outlined in section 3 above.

Our audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and assessing the risks of material misstatement at the Group level. Having performed this assessment, we established the following audit scope for each of the Group’s businesses.

Segment Business Audit scope
British Gas Energy British Gas Energy Full scope audit
British Gas Services and Solutions British Gas Services and Solutions Audit of specified account balances Bord Gáis Energy Bord Gáis Energy Audit of specified account balances Centrica Energy (formerly EM&T) Centrica Energy (London) (formerly EM&T (London))
Full scope audit
Centrica Energy (Aalborg) (formerly EM&T (Aalborg)) Full scope audit Centrica Business Solutions New Energy Services Review procedures Energy supply Audit of specified account balances
Upstream Nuclear Full scope audit
Spirit Energy Full scope audit
Centrica Energy Storage+
(formerly Centrica Storage)
Audit of specified account balances
Head office Central functions Full scope audit
This scoping resulted in 99% of Group revenue, 98% of Group adjusted profit before tax and 88% of Group shareholders’ equity being subject to audit excluding those where we performed review procedures. The equivalent figures in 2022 were 99% of Group revenue, 100% of the adjusted profit before tax and 89% of shareholders’ equity.

7.2 Our consideration of the control environment
Our audit strategy is to rely on controls over certain processes within the more established businesses of the Group. These included revenue within British Gas Services and Solutions, Bord Gáis and within the legacy SAP system in British Gas Energy and Centrica Business Solutions Energy supply; billed debt provision in British Gas Energy; and the Group’s central expenditure processes. The use of data analytics in Centrica Energy (London) means the need for controls reliance is reduced as we are able to test close to 100% of all trades.

Given the importance of IT to the recording of financial information and transactions, we tested the general IT controls, and placed reliance on them in certain areas. The key IT systems we included in scope include the Group’s SAP general ledger and consolidation financial reporting systems, the SAP and ENSEK revenue reporting systems in British Gas Energy and CBS Energy, the SAP reporting system in Bord Gáis Energy, the Endur trading system in Centrica Energy, and Workday which is used to manage the Group’s payroll processes.

The control environment within the more established processes is regarded as mature and we are generally able to place reliance on these controls. The control environment for the ENSEK platform has continued to evolve in 2023, and therefore as described in section 5.2, we did not plan to place reliance on these controls this year.

Across some of Group’s systems we had findings in relation to the Group’s approach to the oversight of service organisations and user access controls, including in respect of the Centrica Energy complex valuations (section 5.5) and the Group’s central payroll system. As a result, we performed mitigating procedures and extended our substantive testing. We have provided feedback to management in relation to their improvement of the oversight of service organisations and to enhance the robustness of user access controls.

7.3 Our consideration of climate-related risks
Management performed an assessment of the resilience of their annual strategic and financial planning process in the face of climaterelated issues. This included assessing the potential impact of the material risks and opportunities and its Climate Transition Plan on both the current balance sheet position and its accounting policies.

Management identified higher risks of material misstatement on the impact of the Net Zero price scenario on the non-current long-life asset Upstream impairment tests. In response, management performed further sensitivities based on forecast prices aligned to net zero price curves. The net zero price curves for E&P and Nuclear consider prices from third party experts in forecast curves.

We reviewed management’s climate change risk assessment and evaluated the completeness of the identified risks and impact on the financial statements. We also considered climate change within our audit risk assessment process in conjunction with our assessment of the balances.

To mitigate the Net Zero price scenario risk for the Exploration and Production (E&P) assets and the Group’s investment in Nuclear, we performed the following procedures:
¢ Assessed the reasonableness of management‘s net zero prices by comparing these to credible third-party net zero price curves. ¢ Evaluated the price providers data utilised by the Group to assess whether net zero price curves are appropriate. ¢ Verified the mathematical accuracy of the conversion to Nominal 2023 prices by adjusting the raw external price forecast data for inflation.

With the involvement of our climate specialists, we:
¢ evaluated the financial statement disclosures to assess whether climate risk assumptions underpinning specific account balances were appropriately disclosed; and
¢ read the climate change-related statements (as disclosed in the ‘People and Planet’ section in the Strategic Report) and considered whether the information included in the narrative reporting is materially consistent with the financial statements and our knowledge obtained in the audit.

Financial Statements | Centrica plc Annual Report and Accounts 2023 123 472 of 1021

7.4 Working with other auditors
All components except for Bord Gáis Energy and Aalborg are audited from the UK and we oversee all component audits through regular meetings and direct supervision. Whilst we visited Aalborg during the year, the oversight procedures on Bord Gáis were performed virtually.

The Group audit team was directly involved in overseeing the component audit planning and execution, through frequent conversations, virtual and in person meetings, debate, challenge and review of reporting and underlying work papers. We held a two-day planning meeting with all component teams and specialists to discuss audit execution and our risk assessment, including risks of material misstatement due to fraud. In addition to our direct interactions and detailed instructions to our component audit teams, Jane Boardman, as lead audit partner, is also the lead Audit Partner for the British Gas segment. This enables direct Group supervision on one of the most significant components of the Group.

We are satisfied that the level of involvement of the lead audit partner and Group audit team in the component audits has been extensive and has enabled us to conclude that sufficient appropriate audit evidence has been obtained in support of our opinion on the Group financial statements as a whole.

8. Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor’s report thereon. This information comprises the Strategic report, the Directors’ and Corporate Governance report, the Committee reports, the Remuneration Report and the Other Statutory Information. The directors are responsible for the other information contained within the annual report.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

9. Responsibilities of directors
As explained more fully in the Directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group’s and 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 the directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

10. Auditor’s responsibilities for the audit of the financial statements 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 an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a 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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/ auditorsresponsibilities. This description forms part of our auditor’s report. 124 Financial Statements | Centrica plc Annual Report and Accounts 2023 473 of 1021

11. Extent to which the audit was considered capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

11.1 Identifying and assessing potential risks related to irregularities In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following:
¢ the nature of the industry and sector, control environment and business performance including the design of the Group’s remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets; ¢ the Group’s own assessment of the risks that irregularities may occur either as a result of fraud or error including the Group’s fraud risk programme;
¢ results of our enquiries of management, internal audit and the Audit and Risk Committee about their own identification and assessment of the risks of irregularities, including those that are specific to the group’s sector; ¢ any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:
– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance; – detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; and – the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations. ¢ the matters discussed among the audit engagement team including the component audit teams and relevant internal specialists, including tax, valuations, pensions, climate change, treasury and IT, regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.

As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following areas:
¢ The valuation of residential energy supply billed debt provisions within British Gas; ¢ The accuracy and completeness of revenue arising from British Gas’s new billing platform, ENSEK, including manual adjustments made in respect of revenue recognised through this platform; ¢ The valuation of complex energy derivative contracts; and ¢ The valuation of decommissioning provisions.

In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.

We also obtained an understanding of the legal and regulatory framework that the Group operates in, focusing on provisions of those laws and regulations that:
¢ had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the UK Companies Act, the UK Listing Rules, the Electricity Generator Levy, pensions and tax legislation; and
¢ do not have a direct effect on the financial statements but compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty. These included the regulations set by the Office of Gas and Electricity Markets (Ofgem) and Regulations levied by the UK Financial Conduct Authority and Prudential Regulatory Authority.

11.2. Audit response to risks identified
As a result of performing the above, we identified the following as key audit matters related to the potential risk of fraud: (1) the valuation of residential energy supply billed debt provisions within British Gas; (2) the accuracy and completeness of revenue arising from British Gas’s new billing platform, ENSEK, including manual adjustments made in respect of revenue recognised through this platform and (3) the valuation of complex energy derivative contracts. The key audit matters section of our report explains the matters in more detail and also describes the specific procedures we performed in response to those key audit matters.

Our procedures to respond to risks identified included the following:
¢ reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements; ¢ enquiring of management, the Audit and Risk Committee, in-house legal counsel and the Group’s ethics team concerning actual and potential litigation and claims;
¢ reviewing the reporting to the Audit and Risk Committee, on matters relating to fraud and potential non-compliance with laws and regulations including the Group’s whistleblowing programme; ¢ performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud;
¢ reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence with HMRC, Ofgem, the FCA and the PRA;
¢ in addressing the risk of fraud associated with decommissioning provisions, we used data analytics to identify the assumptions to which the decommissioning model is most sensitive and performed audit procedures, including benchmarking these inputs to independent documentation (such as project management cost, wells cost and norms and rates) and external industry reports; and ¢ in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal specialists and component audit teams, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.

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REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

12. Opinions on other matters prescribed by the Companies Act 2006 In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:
¢ the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and ¢ the Strategic report and the Directors’ Report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the Group and the Company and their environment obtained in the course of the audit, we have not identified any material misstatements in the Strategic Report or the Directors’ Report.

13. Corporate Governance Statement
The Listing Rules require us to review the directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK Corporate Governance Code specified for our review.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit:
¢ the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 112;
¢ the directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period is appropriate set out on pages 35 to 37;
¢ the directors' statement on fair, balanced and understandable set out on page 73; ¢ the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 29; ¢ the section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 73; and
¢ the section describing the work of the Audit and Risk Committee set out on pages 72 to 78.

14. Matters on which we are required to report by exception

14.1 Adequacy of explanations received and accounting records Under the Companies Act 2006 we are required to report to you if, in our opinion:
¢ we have not received all the information and explanations we require for our audit; or ¢ adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or
¢ the Company financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not been made or the part of the Directors’ Remuneration Report to be audited is not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

15. Other matters which we are required to address

15.1. Auditor tenure
Following the recommendation of the Audit and Risk Committee, we were reappointed by the shareholders on 13 June 2023 to audit the financial statements for the year ending 31 December 2023 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is 7 years, covering the years ending 31 December 2017 to 31 December 2023.

15.2. Consistency of the audit report with the additional report to the Audit & Risk Committee Our audit opinion is consistent with the additional report to the Audit and Risk Committee we are required to provide in accordance with ISAs (UK).

16. Use of our report
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.

As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.15R – DTR 4.1.18R, these financial statements form part of the Electronic Format Annual Financial Report filed on the National Storage Mechanism of the FCA in accordance with DTR 4.1.15R – DTR 4.1.18R. This auditor’s report provides no assurance over whether the Electronic Format Annual Financial Report has been prepared in compliance with DTR 4.1.15R – DTR 4.1.18R. This auditor’s report provides no assurance over whether the annual financial report has been prepared in compliance with DTR 4.1.15R – DTR 4.1.18R.

Jane Boardman FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
14 February 2024
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GROUP INCOME STATEMENT
2023 2022
Business
performance
£m
Exceptional items
and certain remeasurements
£m
Results for the
year
£m
Business
performance
£m
Exceptional items
and certain remeasurements
£m
Results for the
year
Year ended 31 December Notes £m
Group revenue 4,7 32,561 (6,916) 25,645 32,785 (9,896) 22,889 Insurance services revenue 4, S7 813 — 813 852 — 852
Total Group revenue 33,374 (6,916) 26,458 33,637 (9,896) 23,741 Cost of sales (i) 5,7 (27,682) 17,497 (10,185) (27,616) 14,986 (12,630) Insurance services cost of sales 5,S7 (475) — (475) (582) — (582) Re-measurement and settlement of derivative
energy contracts 7 — (6,175) (6,175) — (8,484) (8,484)
Gross profit 4,7 5,217 4,406 9,623 5,439 (3,394) 2,045
Operating costs before insurances services
operating costs, exceptional items and credit
losses on financial assets 5 (1,778) — (1,778) (1,608) — (1,608) Insurance services operating costs 5,S7 (294) — (294) (264) — (264) Credit losses on financial assets 5,17 (602) — (602) (351) — (351) Exceptional items – (impairment)/write-back of
power assets 7 — (563) (563) — 207 207
Exceptional items – impairment of gas storage
asset 7 — (82) (82) — — —
Exceptional items – net loss on significant
disposals 7 — — — — (362) (362)
Operating costs 5 (2,674) (645) (3,319) (2,223) (155) (2,378) Share of profits/(losses) of joint ventures and
associates, net of interest and taxation 6 209 (1) 208 92 1 93 Group operating profit/(loss) 4 2,752 3,760 6,512 3,308 (3,548) (240) Financing costs 8 (308) — (308) (220) — (220)
Investment income 8 269 — 269 77 — 77
Net finance cost 8 (39) — (39) (143) — (143)
Profit/(loss) before taxation 2,713 3,760 6,473 3,165 (3,548) (383) Taxation on profit/(loss) 7,9 (838) (1,595) (2,433) (1,046) 793 (253) Profit/(loss) for the period 1,875 2,165 4,040 2,119 (2,755) (636) Attributable to:

Owners of the parent 1,859 2,070 3,929 2,050 (2,832) (782) Non-controlling interests 16 95 111 69 77 146
Earnings per ordinary share Pence Pence
Basic 10 70.6 (13.3)
Diluted 10 69.4 (13.3)
Interim dividend paid per ordinary share 11 1.33 1.00
Final dividend proposed per ordinary share 11 2.67 2.00 (i) Cost of sales includes an £833 million credit (2022: £1,766 million credit) relating to the unwind of the onerous energy supply contract provision within the certain re-measurements column. See note 7.

The notes on pages 132 to 228 form part of these Financial Statements.

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GROUP STATEMENT OF COMPREHENSIVE INCOME
2023
£m
2022
Year ended 31 December Notes £m
Profit/(loss) for the period 4,040 (636)
Other comprehensive income
Items that will be or have been reclassified to the Group Income Statement:

Impact of cash flow hedging, net of taxation S4 (2) (20) Exchange differences on translation of foreign operations (i) S4 (44) (90) Exchange differences reclassified to the Group Income Statement on disposal S4 — 272 Items that will not be reclassified to the Group Income Statement:

Net actuarial losses on defined benefit pension schemes, net of taxation S4 (288) (124) Gains on revaluation of equity instruments measured at fair value through other comprehensive income, net of taxation S4 3 —
Share of other comprehensive loss of associates, net of taxation 14,S4 (95) (293) Other comprehensive loss, net of taxation (426) (255)
Total comprehensive income/(loss) for the period 3,614 (891) Attributable to:

Owners of the parent 3,504 (1,042)
Non-controlling interests S11 110 151
(i) Exchange differences on translation of foreign operations includes £43 million (2022: £95 million) of losses attributable to the equity holders of the parent, and £1 million of losses (2022: £5 million of gains) attributable to non-controlling interests.

The notes on pages 132 to 228 form part of these Financial Statements. 128 Financial Statements | Centrica plc Annual Report and Accounts 2023 477 of 1021

GROUP STATEMENT OF CHANGES IN EQUITY
Share
capital
£m
Share
premium
£m
Retained
earnings
£m
Other
equity
£m
Total
£m
Non-controlling
interests
£m
Total
equity
£m
1 January 2022 363 2,377 377 (752) 2,365 385 2,750
(Loss)/profit for the year — — (782) — (782) 146 (636)
Other comprehensive (loss)/income — — — (260) (260) 5 (255) Total comprehensive (loss)/income — — (782) (260) (1,042) 151 (891) Employee share schemes and other
share transactions 2 17 (2) (14) 3 — 3
Share buyback programme (note S4) — — — (250) (250) — (250) Dividends paid to equity holders (note 11) — — (59) — (59) — (59) Distributions to non-controlling interests — — — — — (273) (273) 31 December 2022 365 2,394 (466) (1,276) 1,017 263 1,280 Profit for the year — — 3,929 — 3,929 111 4,040
Other comprehensive loss — — — (425) (425) (1) (426)
Total comprehensive income/(loss) — — 3,929 (425) 3,504 110 3,614 Employee share schemes and other share
transactions — — (3) 45 42 — 42
Share buyback programme (note S4) — — — (500) (500) — (500) Dividends paid to equity holders (note 11) — — (186) — (186) — (186) Distributions to non-controlling interests (note 12) — — — — — (17) (17) 31 December 2023 365 2,394 3,274 (2,156) 3,877 356 4,233 The notes on pages 132 to 228 form part of these Financial Statements.

Financial Statements | Centrica plc Annual Report and Accounts 2023 129 478 of 1021

GROUP BALANCE SHEET
31 December
2023
£m
31 December
2022
Notes £m
Non-current assets
Property, plant and equipment 13 1,846 1,748
Interests in joint ventures and associates 14 903 1,580 Other intangible assets 15 340 707
Goodwill 15 405 409
Deferred tax assets 16 456 1,709
Trade and other receivables, and contract-related assets 17 210 129 Derivative financial instruments 19 899 1,393
Retirement benefit assets 22 64 150
Other investments 61 —
Securities 24 116 525
5,300 8,350
Current assets
Trade and other receivables, and contract-related assets 17 5,409 8,450 Other intangible assets 15 293 —
Inventories 18 1,079 1,269
Derivative financial instruments 19 2,373 6,034
Current tax assets 64 93
Securities 24 405 —
Cash and cash equivalents 24 6,443 4,842
16,066 20,688
Total assets 21,366 29,038
Current liabilities
Derivative financial instruments 19 (2,391) (8,841)
Trade and other payables, and contract-related liabilities 20 (7,000) (10,016) Insurance contract liabilities S7 (165) (160)
Current tax liabilities (299) (472)
Provisions for other liabilities and charges 21 (279) (1,213) Bank overdrafts, loans and other borrowings 24 (1,002) (1,009) (11,136) (21,711)
Non-current liabilities
Deferred tax liabilities 16 (424) (8)
Derivative financial instruments 19 (615) (1,310)
Trade and other payables, and contract-related liabilities 20 (207) (165) Provisions for other liabilities and charges 21 (1,469) (1,446) Retirement benefit obligations 22 (181) (110)
Bank loans and other borrowings 24 (3,101) (3,008)
(5,997) (6,047)
Total liabilities (17,133) (27,758)
Net assets 4,233 1,280
Share capital 25 365 365
Share premium 2,394 2,394
Retained earnings 3,274 (466)
Other equity S4 (2,156) (1,276)
Total shareholders’ equity 3,877 1,017
Non-controlling interests S11 356 263
Total shareholders’ equity and non-controlling interests 4,233 1,280 The Financial Statements on pages 127 to 228, of which the notes on pages 132 to 228 form part, were approved and authorised for issue by the Board of Directors on 14 February 2024 and were signed below on its behalf by:

Chris O’Shea Russell O’Brien
Group Chief Executive Group Chief Financial Officer
Centrica plc Registered No: 03033654
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GROUP CASH FLOW STATEMENT
Year ended 31 December Notes
2023
£m
2022
£m
Group operating profit/(loss) including share of results of joint ventures and associates 6,512 (240) Deduct share of profits of joint ventures and associates, net of interest and taxation 6 (208) (93) Group operating profit/(loss) before share of results of joint ventures and associates 6,304 (333) Add back/(deduct):

Depreciation and amortisation 13,15 518 669
Write-downs, impairments and write-backs 4,7 669 (99)
Loss on disposals — 343
Decrease in provisions (1,021) (1,903)
Cash contributions to defined benefit schemes in excess of service cost income statement charge (215) (184) Employee share scheme costs 31 10
Unrealised (gains)/losses arising from re-measurement of energy contracts (2,949) 4,095 Operating cash flows before movements in working capital relating to business performance and payments relating to taxes, exceptional charges and operating interest 3,337 2,598
Decrease/(increase) in inventories 186 (593)
Decrease/(increase) in trade and other receivables and contract-related assets relating to business performance 2,911 (2,302) (Decrease)/increase in trade and other payables and contract-related liabilities relating to business performance (2,853) 2,239 Operating cash flows before payments relating to taxes, exceptional charges and operating interest 3,581 1,942 Taxes paid 9 (803) (574)
Operating interest paid 8 (20) (30)
Payments relating to exceptional charges in operating costs 7 (6) (24) Net cash flow from operating activities 2,752 1,314
Purchase of businesses, net of cash acquired 12 (34) 12 Sale of businesses, including receipt of deferred consideration 12 55 92 Purchase of property, plant and equipment and intangible assets 4 (335) (371) Sale of property, plant and equipment and intangible assets — 11 Investments in joint ventures and associates 14 (9) (18) Dividends received from joint ventures and associates 14 220 60 Interest received 267 46
Net purchase of other investments (37) —
Settlement of securities 24 — 150
Purchase of securities 24 (12) (548)
Net cash flow from investing activities 115 (566)
Proceeds from exercise of share options S4 6 —
Payments for own shares S4 — (5)
Share buyback programme S4 (613) (43)
Cash inflow from borrowings 24 930 1,220
Distributions to non-controlling interests 12 (17) (273) Financing interest paid 24 (286) (172)
Cash outflow from repayment of borrowings and capital element of leases 24 (1,248) (1,585) Equity dividends paid 11 (186) (59)
Net cash flow from financing activities (1,414) (917)
Net increase/(decrease) in cash and cash equivalents 1,453 (169) Cash and cash equivalents including overdrafts, and cash classified as held for sale at 1 January 4,242 4,328 Effect of foreign exchange rate changes 24 (66) 83
Cash and cash equivalents including overdrafts at 31 December 24 5,629 4,242 Included in the following line of the Group Balance Sheet:

Cash and cash equivalents 24 6,443 4,842
Overdrafts included within current bank overdrafts, loans and other borrowings 24 (814) (600) The notes on pages 132 to 228 form part of these Financial Statements.

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NOTES TO THE FINANCIAL

STATEMENTS
Notes to the Financial Statements provide additional
information required by statute, accounting standards
or Listing Rules to explain a particular feature of the consolidated Financial Statements.

The notes to these Financial Statements focus on areas
that are key to understanding our business. Additional
information that we are required to disclose by
accounting standards or regulation is disclosed in the
Supplementary Information (notes S1 to S11).

In addition, for clarity, notes begin with a simple
introduction outlining its purpose.

1. BASIS OF PREPARATION AND SUMMARY

OF SIGNIFICANT NEW ACCOUNTING

POLICIES AND REPORTING CHANGES
This section details new accounting standards,
amendments to standards and interpretations, whether
these are effective in 2023 or later years, and if and how these are expected to impact the financial position and performance of the Group.

The material accounting policies applied in the preparation of these consolidated Financial Statements are set out below and in the Supplementary Information (note S2). Unless otherwise stated, these policies have been consistently applied to the years presented.
(a) Basis of preparation
The consolidated Financial Statements have been prepared in accordance with United Kingdom adopted International Accounting Standards and in conformity with the requirements of the Companies Act 2006.

The consolidated Financial Statements have been prepared on the historical cost basis except for: certain gas inventory, derivative financial instruments, financial instruments required to be measured at fair value through profit or loss or other comprehensive income, and those financial instruments so designated at initial recognition, and the assets of the Group’s defined benefit pension schemes that have been measured at fair value; the liabilities of the Group’s defined benefit pension schemes that have been measured using the projected unit credit valuation method; and the carrying values of recognised assets and liabilities qualifying as hedged items in fair value hedges that have been adjusted from cost by the changes in the fair values attributable to the risks that are being hedged.

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future, which reflects a period of twelve months from the date of approval of the accounts, with modelled analysis extending to 31 December 2026. The scenarios considered as part of the going concern assessment are consistent with those used in the longer-term viability statement. In particular, cash forecasts for the Group have been stress-tested for different scenarios including reasonably possible increases/decreases in commodity prices and the risk scenarios described in the viability statement, assessing reasonably possible combinations of risks, the largest of which is the increased margin outflows in our trading and upstream businesses. Risks considered also include the impact of significant adverse weather events, increased bad debt charges due to the cost of living crisis, the risk of financial loss due to counterparty default, underperformance of the trading business and production falls in the Group’s upstream business. The persistent volatility of the external risk environment in recent years underscores the significance of securing ample financial facilities, placing a heightened emphasis on trading entities to maintain sufficient collateral for mark-to-market positions. The Group continues to manage the Group’s financing profile through accessing a diverse source of term funding and maintaining access to carefully assessed levels of standby liquidity which support the Group’s planned financial commitments. The level of undrawn committed bank facilities and available cash resources has enabled the Directors to conclude that there are no material uncertainties relating to going concern. As a result, the Group continues to adopt the going concern basis of accounting in preparing the financial statements. Further information on the Group’s strong liquidity position, including its indebtedness and available committed facilities, is provided in note 24.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity and areas where assumptions and estimates are significant to the consolidated Financial Statements are described in notes 2 and 3.
(b) New accounting policies, standards, amendments
and interpretations effective or adopted in 2023
From 1 January 2023, the following standards and amendments are effective in the Group’s consolidated Financial Statements:
¢ IFRS 17 ‘Insurance Contracts’;
¢ Amendments to IAS 8 ‘Accounting policies, Changes in
Accounting Estimates and Errors’, distinguishing changes in accounting estimates from changes in accounting policies; ¢ Amendments to IAS 1 ‘Presentation of Financial Statements’, disclosure of accounting policies and materiality judgements; and ¢ Amendments to IAS 12 ‘Income Taxes’:
– Deferred tax related to assets and liabilities arising from a single transaction; and
– International tax reform, pillar 2 model rules.

There has been no material impact on the consolidated Financial Statements from any amendments effective during the year.

IFRS 17 ‘Insurance Contracts’
IFRS 17 became effective on 1 January 2023. The Group has fixedfee service contracts that it previously accounted for as insurance contracts under IFRS 4 ‘Insurance Contracts’. These contracts fall within the scope of IFRS 17 where the Group reflects an assessment of the risk associated with an individual customer in setting the price of the contract. The Group is applying the simplified ‘Premium Allocation Approach’ to its fixed-fee service contracts on the basis that the coverage period of the Group’s insurance contracts is not greater than one year. No material change in accounting has arisen from the application of IFRS 17 and therefore there has been no impact on the opening balance sheet. Revenue arising from the Group’s insurance contracts within the scope of IFRS 17 amounts to £813 million (2022: £852 million).

The Group has presented both current and prior year revenue and costs from insurance contracts on the Group Income Statement and net insurance liabilities on the Group Balance Sheet in accordance with IFRS 17. Further detail regarding the Group’s fixed fee insurance contracts is provided in note S7.
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1. BASIS OF PREPARATION AND SUMMARY

OF SIGNIFICANT NEW ACCOUNTING

POLICIES AND REPORTING CHANGES
Electricity Generator Levy
At the end of 2022, the Government announced the
implementation of the Electricity Generator Levy (EGL), a new, temporary levy applicable to receipts that the Group realises from electricity generation in the UK from nuclear and renewable sources in the period from 1 January 2023 to 31 March 2028. It was legislated in the Finance (No 2) Act 2023. The levy applies a 45% charge on receipts generated from the production of wholesale electricity sold at an average price in excess of £75/MWh, exceeding an annual threshold of £10 million. It applies to generators whose generation exceeds 50GWh annually, as well as off-take arrangements with significant minority shareholders in such generators (e.g. generation within our Nuclear associate and potentially our off-take from that associate).

The Group has determined that the accounting for the levy falls within the scope of IAS 37 ‘Provisions, contingent liabilities, and contingent assets’ and IFRIC 21 ‘Levies’ on the basis that the levy represents a legislative liability imposed by the Government, calculated with reference to revenue generated. The Group recognises the levy progressively over time, as the related electricity is sold. The Group also considered the applicability of IAS 12 ‘Income Taxes’, however the EGL is based on revenue generated, and not taxable profit and is therefore outside the scope of IAS 12.

During the year an amount of £285 million has been reflected within cost of sales as a result of this levy. A further £41 million is recorded within the share of profit after tax from the Nuclear associate.

Whilst the legislation was substantively enacted on 20 June 2023 and received Royal Assent on 11 July 2023, there remain some uncertainties in how it should be interpreted in relation to significant minority shareholder off-take arrangements. It is currently expected to remain in effect until 31 March 2028. As payment has been made on account to HMRC, the Group also considered whether this tax deposit could constitute an asset. In accordance with the 2019 IFRIC agenda decision on Deposits relating to taxes other than income taxes, the Group’s policy is to recognise an asset where it is probable that the EGL payment on account will ultimately be due back from HMRC (or used to settle another tax liability). The Group’s current view is that it is not probable and accordingly no asset has been recorded. Further details are included in the Key Sources of Estimation Uncertainty, note 3(b).

Renewables certificates
The Group purchases both renewable certificates and carbon dioxide emissions allowances in order to comply with, and meet its obligations under a number of UK and EU renewable energy schemes. These items are initially recognised at cost and are presented within other intangible assets. The certificates are classified as current or non-current based on the Group’s expectations, at the end of each reporting period, of when it expects to realise those assets. Where the renewable certificates are expected to be surrendered within a year of purchase they are presented as current assets, otherwise they are presented as noncurrent. At 31 December 2022, the portfolio of certificates of £280 million was classified as non-current. At 31 December 2023, the portfolio of renewable certificates of £293 million was classified as current based on the Group’s assessment of the expected submission dates of the certificates within the portfolio. (c) Standards and amendments that are issued but
not yet applied by the Group
At the date of authorisation of these consolidated Financial Statements, the Group has not applied the following new and revised standards and amendments that have been issued but are not yet effective:
¢ Amendments to IAS 1 ‘Presentation of Financial Statements’:
– Classification of liabilities as current or non-current, effective from 1 January 2024; and
– Non-current liabilities with covenants, effective from 1 January 2024;
¢ Amendments to IFRS 16 ‘Leases’; effective from 1 January 2024:
– Lease liability in a sale and leaseback;
¢ Amendments to IAS 7 ‘Statement of Cash Flows’ and IFRS 7 ‘Financial Instruments: Disclosures’, effective from 1 January 2024:
– Supplier finance arrangements;
¢ Amendments to IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’, effective from 1 January 2025; and
¢ Amendments to IFRS 10 ‘Consolidated Financial Statements and IAS 28 ‘Investments in Associates and Joint Ventures’; effective date deferred but available for early adoption.

Management does not expect other issued but not effective amendments or standards, or standards not discussed above to have a material impact on the consolidated Financial Statements.

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2. CENTRICA SPECIFIC ACCOUNTING

MEASURES
This section sets out the Group’s specific accounting
measures applied in the preparation of the consolidated Financial Statements. These measures enable the users
of the accounts to understand the Group’s underlying
and statutory business performance separately.
(a) Use of adjusted performance measures
The Directors believe that reporting adjusted measures (revenue, margin, profit, earnings per share and cash flow) provides additional useful information on business performance and underlying trends. These measures are used for internal performance purposes, are not defined terms under IFRS and may not be comparable with similarly titled measures reported by other companies.

Management uses adjusted revenue, adjusted gross margin and adjusted operating profit to evaluate segment performance. They are defined as revenue/gross margin/operating profit before:
¢ Exceptional items; and
¢ Certain re-measurements.

Exceptional items and certain re-measurements are excluded because these items are considered by the Directors to distort the Group’s underlying business performance. See section (b) of this note for further details. Similarly, for Segmental adjusted operating profit, the impact of the colleague profit share is excluded because management considers it unrelated to Segmental business performance.

Adjusted earnings is defined as earnings before:
¢ Exceptional items net of taxation; and
¢ Certain re-measurements net of taxation.

A reconciliation of adjusted earnings and adjusted earnings per share is provided in note 10.

Free cash flow is used by management to assess the cash generating performance of each segment. Segmental free cash flow is defined as net cash flow from operating and investing activities before:
¢ Deficit reduction payments made to the UK defined benefit pension schemes;
¢ Movements in variation margin and collateral;
¢ Interest received;
¢ Sale, settlement and purchase of securities; and
¢ Taxes paid and refunded.

Segmental free cash flow as assessed by management excludes cash flows relating to tax. This is because the effect of Group relief and similar reliefs could distort the measure of segment performance. As a Group-wide measure, free cash flow includes taxes paid and refunded.

Free cash flow gives a measure of the cash generation
performance of the business after taking account of the need to maintain its capital asset base. By excluding deficit reduction payments and movements in variation margin and collateral, which are predominantly triggered by wider market factors and, in the case of collateral and margin movements, represent timing differences, free cash flow gives a measure of the underlying performance of the Group.

Interest received and cash flows from the sale, settlement and purchase of securities are excluded from free cash flow as these items are included in the Group’s adjusted net cash/(debt) measure and are therefore viewed by the Directors as related to the manner in which the Group finances its operations.

Adjusted net cash/(debt) is used by management to assess the underlying indebtedness of the business. Adjusted net cash/(debt) is defined as cash and cash equivalents, net of bank overdrafts, borrowings, leases, interest accruals and related derivatives. This is adjusted for:
¢ Securities; and
¢ Sub-lease assets.
(b) Exceptional items and certain re-measurements
The Group reflects its underlying financial results in the business performance column of the Group Income Statement. To be able to provide users with this clear and consistent presentation, the effects of ‘certain re-measurements’ of financial instruments, and ‘exceptional items’, are reported in a different column in the Group Income Statement.

The Group is an integrated energy business. This means that it utilises its knowledge and experience across the gas and power (and related commodity) value chains to make profits across the core markets in which it operates. As part of this strategy, the Group enters into a number of forward energy trades to protect and optimise the value of its underlying production, generation, storage and transportation assets and contracts (and similar capacity or off-take arrangements), as well as to meet the future needs of its customers (downstream demand). These trades are designed to reduce the risk of holding such assets, contracts or downstream demand and are subject to strict risk limits and controls.

Primarily because some of these trades include terms that permit net settlement, they are prohibited from being designated as ‘own use’ and so IFRS 9 ‘Financial Instruments’ requires them to be individually fair valued.

Fair value movements on these commodity derivative trades do not reflect the underlying performance of the business because they are economically related to our upstream assets, capacity/off-take contracts or downstream demand, which are typically not fair valued. Similarly, where our downstream customer supply contracts have become onerous as a result of significant market price movements (and the fact any associated commodity hedges have separately been recognised at fair value under IFRS 9 and therefore the onerous supply contract assessment must reflect the reversal of those gains in subsequent periods), movements in the required provision are also reflected as a certain re-measurement in the ‘Cost of sales’ line item and separately disclosed in note 7.

Movements in this provision do not reflect the underlying performance of the business because they are economically related to both the hedges and forecast future profitability of the supply contracts. Therefore, these certain re-measurements are reported separately and are subsequently reflected in business performance when the underlying transaction or asset impacts profit or loss.

The effects of these certain re-measurements are presented within either revenue or cost of sales when recognised in business performance depending on the nature of the contract. They are managed separately from proprietary energy trading activities where trades are entered into speculatively for the purpose of making profits in their own right. These proprietary trades are included in revenue in the business performance column of the Group Income Statement.
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2. CENTRICA SPECIFIC ACCOUNTING

MEASURES
The Group’s result for the year presents both realised and unrealised fair value movements on all derivative energy contracts within the ‘Re-measurement and settlement of derivative energy contracts’ line item. The Group’s result for the year presents the unrealised onerous supply contract provision movements within the ‘Cost of sales’ line item.

Exceptional items are those items that, in the judgement of the Directors, need to be disclosed separately by virtue of their nature, size or incidence. Again, to ensure the business performance column reflects the underlying results of the Group, these exceptional items are also reported in the separate column in the Group Income Statement. Items that may be considered
exceptional in nature include disposals of businesses or significant assets, business restructurings, debt repurchase costs, certain pension past service credits/costs, asset impairments/write-backs, and the tax effects of these items.

The Group distinguishes between business performance asset impairments/write-backs and exceptional impairments/write-backs on the basis of the underlying driver of the impairment, as well as the magnitude of the impairment. Drivers that are deemed to be outside of the control of the Group (e.g. commodity price changes) give rise to exceptional impairments. Additionally, impairment charges that are of a one-off nature (e.g. reserve downgrades or one-time change in intended use of an asset) and significant enough value to distort the underlying results of the business are considered to be exceptional. Other impairments that would be expected in the normal course of business, such as unsuccessful exploration activity (dry holes), are reflected in business performance.

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3. CRITICAL ACCOUNTING JUDGEMENTS
AND KEY SOURCES OF ESTIMATION

UNCERTAINTY
This section sets out the key areas of judgement and
estimation that have the most significant effect on the amounts recognised in the consolidated Financial
Statements.
(a) Critical judgements in applying the Group’s
accounting policies
Management has made the following key judgements in applying the Group’s accounting policies that have the most significant effect on the consolidated Group Financial Statements.

Share buyback programme
On 10 November 2022, the Group announced an intention to undertake a share buyback of £250 million and the Group entered into contracts with third parties to undertake this repurchase programme which has now completed. During 2023, the Group firstly increased the share buyback by an additional £300 million which completed during the second half of the year.

Subsequently, in July 2023, the Group announced a further £450 million extension to the share buyback programme and as a result, the Group signed an agreement with a third party to undertake the repurchase of £200 million of shares which is expected to complete by March 2024. The repurchase of the remaining £250 million of shares is expected to commence in the first half of 2024.

The Group judges that the terms and conditions of the contracts mean that, at 31 December 2023, it was unable to cancel the obligation arising under the contract signed in the second half of 2023. Accordingly, the Group has recorded a financial liability at 31 December 2023 of £94 million (31 December 2022: £207 million) for this obligation in accordance with IAS 32 ‘Financial instruments:

Presentation’ that is subsequently measured in accordance with IFRS 9 ‘Financial instruments’. This liability is included within other payables, with the corresponding debit presented in the other equity reserve.

The Group has not recognised a liability relating to the further £250 million announced during 2023, as no contract has been signed and therefore no financial liability has yet arisen. The monthly breakdown of all shares purchased and the average price paid (excluding expenses) in relation to the financial liability recognised at 31 December 2023 are detailed in note S4.

Spirit Energy consolidation
During 2017, the Group acquired Bayerngas Norge’s exploration and production business and combined this with the Group’s existing exploration and production business to form the Spirit Energy business. The Group holds a 69% interest in Spirit Energy.

While Spirit Energy has a 31% non-controlling interest, the Group, through its Board majority, can control decisions that represent Board Reserved Matters and the Directors consider that these rights provide control over the relevant activities that most significantly influence the variable returns of the Spirit Energy business. The Group has concluded that it controls Spirit Energy and consequently Spirit Energy is fully consolidated with a noncontrolling interest of 31%.

Metering contracts
As part of the ongoing smart meter roll-out, the Group periodically renews meter rental arrangements with third parties. The last renegotiation took place in 2021. The Group assessed that these were not leases under IAS 17 and IFRIC 4 because at inception of the contract there were no specified assets, the Group did not have the right to physically or operationally control the smart meters and other parties took more than an insignificant amount of the output from the assets. This assessment was grandfathered on adoption of IFRS 16.

A reassessment of the contracts was performed in accordance with IFRS 16, following renegotiations of the meter rental arrangements. On the basis that the asset has a predetermined use and the Group neither has the right to operate the asset, nor was involved in its design, the conclusion that these arrangements are not leases continues to be appropriate.

LNG contracts
The Group is active in the Liquified Natural Gas (LNG) market, both procuring long-term LNG supply arrangements and transacting in shorter-term LNG cargoes. As part of its operations in the market, the Group optimises its contractual positions in order to meet customer demand for physical commodity. In response to the continuing development of the global LNG market which,
consistent with prior years, is not considered to be active, the Group has reviewed its portfolio of LNG transactions and contracts.

It has judged that its activities are carried out for the purpose of receipt or delivery of physical commodity in accordance with its expected purchase and sale requirements. As a result, the Group’s contracts to buy and sell LNG are outside the scope of IFRS 9 and are accounted for on an accruals basis.

Assets held for sale and discontinued operations
On 8 December 2021 the Group announced that it had agreed to sell Spirit Energy’s entire Norwegian portfolio plus the Statfjord field to Sval Energi and Equinor. The transaction completed in the first half of 2022. See note 12.

The Group assessed whether the disposal group constituted a discontinued operation. Key considerations included the effect of the disposal on the Upstream business and whether the disposal group represented a separate major line of business or
geographical operation. Following the disposal, because the Upstream segment retained other European producing fields, the Group judged that it was neither exiting a geographical area nor a separate major line of business, and hence concluded the disposal group did not constitute a discontinued operation.

Supplier of Last Resort (SoLR)
During 2021, the Group was appointed as the Supplier of Last Resort (SoLR) to eight suppliers who ceased trading during the year; one further appointment was made in January 2022. Under Ofgem’s licence conditions, the Group was entitled to make a Last Resort Supplier Payment (LRSP) claim for the shortfall between costs reasonably incurred in supplying gas and electricity to premises under the Last Resort Supply Direction, and the charges recovered from customers.

The Group submitted an initial claim in 2021 and a second claim in 2022, both of which were accepted by Ofgem. The claims covered both incremental commodity costs, incurred as a result of procuring gas and electricity to supply affected customers, and the cost of recovering customer credit balances, where the Group had not waived the right to do so. The initial claim was settled between April 2022 and April 2023 and the second claim is being settled over the current twelve month period ending in April 2024.

The value recognised for the SoLR receivable at 31 December 2023 is £48 million (31 December 2022: £275 million). This includes residual balances for which the Group has submitted a third claim to be settled between April 2024 and April 2025, but no significant incremental costs have been incurred during the year (31 December 2022: £299 million).

The Group has concluded that the LRSP process represents an Ofgem support mechanism, enabling energy suppliers to provide stability to the customers of failed suppliers. The Group determines that the LRSP is within the scope of IAS 20 ‘Government Grants’ and amounts receivable under the mechanism are recognised as a credit within cost of sales and operating costs, as the related expenses are incurred.
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3. CRITICAL ACCOUNTING JUDGEMENTS
AND KEY SOURCES OF ESTIMATION

UNCERTAINTY
(b) Key sources of estimation uncertainty
The sections below detail the assumptions the Group makes about the future and other major sources of estimation uncertainty when measuring its assets and liabilities at the reporting date. The information given relates to the sources of estimation uncertainty that have a significant risk of resulting in a material adjustment to those assets and liabilities in the next financial year.

Estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, including current and expected economic conditions, and, in some cases, actuarial techniques. Although these estimates and associated assumptions are based on management’s best knowledge of current events and circumstances, actual results may differ.

Electricity Generator Levy
As detailed in note 1(b), the Electricity Generator Levy (EGL) is applicable from 1 January 2023. During the year, the Group’s share of its Nuclear associate’s EGL payments amounted to £41 million (recorded within the share of profit after tax from associates). The Group has also made payments on account to HMRC of £285 million in relation to its estimated EGL liabilities for its minority shareholder Nuclear offtake arrangements during the December 2023 financial year and this expense has been recorded within the income statement, as part of Cost of Sales.

Similar to other relevant businesses, the Group is reviewing the EGL legislation and its application. The EGL legislation is new, and its interpretation and application is unclear in respect of the Group’s minority shareholder Nuclear offtake arrangements. As such, the extent of the levy that will ultimately be due in this regard is not yet certain, and a different amount may eventually be determined. If this were the case, a tax deposit asset would be recorded on the Group Balance Sheet, and as a credit within Cost of Sales in the income statement, when it became probable, in accordance with the 2019 IFRIC Agenda decision on Deposits relating to taxes other than income taxes. No tax deposit asset has been recorded because it is not deemed probable, as at the balance sheet date, that this will ultimately be recoverable (or used to settle another tax liability).

We have determined there is a key source of estimation uncertainty in relation to the amount of levy the Group owes for 2023 and whether a tax deposit asset should be recorded for the recovery of payments on account made to HMRC of up to £285 million. Whilst a material change in the accounting could occur in the next financial period, ultimate resolution of this uncertainty may take a number of years.

Credit provisions for trade and other receivables
The macroeconomic environment continues to be challenging with continued higher interest rates, high inflation and low growth all contributing to cost of living pressures which may impact the ability of the Group’s customers to pay amounts due. Leading debt indicators, including the number of customers going into debt and direct debit cancellation rates in the Group’s residential portfolio have continued to deteriorate in 2023. The Group also suspended all debt recovery field activity throughout the majority of the year, and this has resulted in a deterioration of debt performance for affected cohorts of customers during the period. Customer support schemes, implemented by the Government in 2022 to provide discounts to energy customers, largely ended on 30 June 2023 and despite declining commodity prices during the year, prices are still significantly higher than in previous years.

These factors all result in the assessment and adequacy of credit provisions for trade and other receivables to continue to be a key source of estimation uncertainty. See note 17 for further information.

The Group utilises a range of factors, including both internal and external, historic and forward-looking, to assess the adequacy of the Group’s credit provisions. Whilst the Group utilises a matrix output model to record provision coverage, management
recognises that the model does not adequately capture scenarios where there is a delayed impact on customer payments, such as the ending of Government support schemes, and forward-looking macroeconomic challenges. The Group has therefore recorded a macroeconomic credit provision of £175 million (31 December 2022: £125 million) which results in a total credit provision for trade and other receivables at 31 December 2023 of £1,309 million (31 December 2022: £872 million).

British Gas Energy and Centrica Business Solutions Onerous Supply Contracts
The Group operates and manages a hedging strategy to ensure that the future costs of supplying customers of the British Gas Energy and Centrica Business Solutions portfolios are appropriately managed.

Hedges are measured at fair value under IFRS 9 and are
recognised as certain re-measurements in the Group’s Income Statement until the point at which the related costs to purchase electricity and gas are incurred. Fair value movements on energy purchase contracts entered to meet the future needs of customers are economically related to customer demand; the supply contracts for which are measured on an accrual basis.

Gains and losses arising from hedges have been recognised in the income statement (within certain re-measurements) in accordance with the requirements of IFRS 9. Because of this hedge value recognition, the assessment of whether the supply contracts are onerous must include the contracted energy purchase costs and those mark-to-market reversals. As a result, the Group recognised an onerous supply contract provision of £999 million in the consolidated Group Financial Statements for the year ended 31 December 2022.

During 2023, commodity costs have declined and as a result, fair value movements on energy purchase contracts entered to meet the future needs of both British Gas Energy residential customers and the Group's non-domestic customers have resulted in losses rather than gains being recognised as certain re-measurements in the Group’s Income Statement. As a result, the Group determined that at the reporting date, the future costs to fulfil both British Gas residential and the Group's non-domestic customer contracts fell below charges recoverable from customers and the onerous supply contract provision previously recognised in relation to the fulfilment of the Group's customer contracts has been either utilised, or reversed, in full. £833 million of this movement has been reflected in certain re-measurements, where it was originally recorded. The remainder, which was recognised on the balance sheet as part of the Avanti Gas acquisition in 2022, has been presented in the business performance column to match the unwind of the related derivatives also acquired.

Note that cumulatively, over time, the onerous contract provision certain re-measurements movement in the Group's Income
Statement will total £nil.

The key sources of estimation uncertainty previously related to the expected future tenure of the Group’s customer portfolio, and the estimated gross margin attributable to them. Due to the fair value losses recognised on energy purchase contracts at 31 December 2023, no onerous supply contract arises and the estimation of tenure and gross margin is no longer required. Therefore, there is no longer a key source of estimation uncertainty. If commodity prices increase, a provision may be required in the future. Further disclosures relating to movements in certain re-measurements are provided in note 7.

Financial Statements | Centrica plc Annual Report and Accounts 2023 137 486 of 1021

3. CRITICAL ACCOUNTING JUDGEMENTS
AND KEY SOURCES OF ESTIMATION

UNCERTAINTY
Impairment and impairment reversals of long-lived assets The Group makes judgements in considering whether the carrying amounts of its long-lived assets (principally Upstream gas assets, Nuclear investment (20% economic interest accounted for as an investment in associate) and goodwill) or cash-generating units (CGUs) are recoverable and estimates their recoverable amounts.

Forward commodity prices have declined during 2023, both in terms of observable market prices and forecast forward prices. This follows significant year-on-year increases in both 2021 and 2022.

Predominantly as a result of the declining prices the recoverable amounts of certain assets have been affected and an impairment of £645 million has been recorded. See note 7(b) for details.

Upstream gas assets
Forward prices for gas are a key input in the determination of the recoverable amount of the Group’s gas assets (including storage asset). 2023 has seen declines in the prices of this commodity, both in terms of observable market prices and forecast forward prices. As a result of both price declines and increased operating costs, the Group assesses that the net recoverable value of the Rough storage asset has fallen below its carrying value and an impairment of £82 million has been recognised at the year-end.

Impairment headroom remains for the Group’s other significant fields at the year-end. As at 31 December 2023, this remains a key source of estimation uncertainty due to potential future price decreases. As a sensitivity, were gas prices in the liquid period (2024-28) to fall by 50% a post-tax impairment of £269 million would arise. Potential future price increases give rise to less estimation uncertainty, as the recoverable amounts of the Group’s gas assets are capped at depreciated historic cost.

Further details of the assumptions used in determining the recoverable amounts and sensitivities to the assumptions are provided in note 7.

Nuclear investment
The recoverable amount of the Nuclear investment is based on the value of the existing UK nuclear fleet operated by EDF. The existing fleet value is calculated by discounting pre-tax cash flows derived from the stations based on forecast power generation and power prices, whilst taking account of outages and the likely operational lives of the stations. During the year, the recoverable amount has decreased, predominantly due to falling forecast commodity prices. This has resulted in an impairment of £549 million.

The key source of estimation uncertainty is commodity price forecasts, other input assumptions include production levels, application of the Electricity Generator Levy and station lives.

Further details of these uncertainties, together with the methodology, assumptions and impairment booked during the year are provided in note 7, together with related sensitivities.

Revenue recognition – unread gas and electricity meters Revenue for energy supply activities includes an assessment of energy supplied to customers between the date of the last meter reading and the year-end (known as unread revenue). Unread gas and electricity comprises both billed and unbilled revenue. It is estimated through the billing systems, using historical consumption patterns, on a customer-by-customer basis, taking into account weather patterns, load forecasts and the differences between actual meter readings being returned and system estimates.

Actual meter readings continue to be compared to system estimates between the balance sheet date and the finalisation of the accounts.

An assessment is also made of any factors that are likely to materially affect the ultimate economic benefits that will flow to the Group, including bill cancellation and re-bill rates. Estimated revenue is restricted to the amount the Group expects to be entitled to in exchange for energy supplied. The judgements applied, and the assumptions underpinning these judgements, are considered to be appropriate. However, a change in these assumptions would have an impact on the amount of revenue recognised. The primary source of estimation uncertainty relating to unread revenue arises in the respect of gas and electricity sales to UK downstream customers in British Gas Energy and Centrica Business Solutions, including where changes in customer behaviour in response to elevated prices, affects estimated consumption. At 31 December 2023 unread revenue arising from these customers amounted to £2,992 million (2022: £2,893 million).

A change in these assumptions of 2% would impact revenue and profit by £60 million.

Decommissioning costs
The estimated cost of decommissioning at the end of the producing lives of gas fields is reviewed periodically and is based on reserves, price levels and technology at the balance sheet date.

Provision is made for the estimated cost of decommissioning at the balance sheet date. The payment dates of total expected future decommissioning costs are uncertain and dependent on the lives of the facilities, but are currently anticipated to be predominantly incurred by 2035.

The level of provision held is sensitive to the discount rate used to discount the estimated decommissioning costs. The real discount rate used to discount the decommissioning liabilities at 31 December 2023 is 1% (2022: 1%). There are a number of variable inputs into the calculation of discount rates including risk-free interest rates and debt and equity risk premium. A 1% change in this discount rate would change the decommissioning liability by approximately £85 million.

Gas and liquids reserves
The volume of proven and probable (2P) gas and liquids reserves is an estimate that affects the unit of production method of depreciating producing gas and liquids property, plant and equipment (PP&E) as well as being a significant estimate affecting decommissioning and impairment calculations.

The impact of a change in estimated 2P reserves is dealt with prospectively by depreciating the remaining book value of producing assets over the expected future production. If 2P reserves estimates are revised downwards, earnings could be affected by higher depreciation expense or an immediate writedown (impairment) of the asset’s book value. A change in reserves estimates could also change the timing of decommissioning activity, which could change the carrying value of the Group’s provisions. The complex interaction of field-specific factors means that it is not possible to give a meaningful sensitivity of the Group’s financial position or performance to gas and liquids reserves estimates. The factors impacting gas and liquids estimates, the process for estimating reserve quantities and reserve recognition and details of the Group’s 2P reserves are given on page 241.

Details of impairments of exploration and production fields and goodwill, along with associated sensitivities, are given in note 7.

Determination of fair values – energy derivatives
The fair values of energy derivatives classified as Level 3 in accordance with IFRS 13 ‘Fair Value Measurement’ are determined to be a key source of estimation uncertainty as they are not actively traded and their values are estimated by reference in part to published price quotations in active markets and in part by using complex valuation techniques. The key source of estimation uncertainty is future commodity prices and their inclusion in the reliable estimation of the unobservable components of the Group’s Level 3 derivatives in an elevated and volatile commodity price environment. More detail on the assumptions used in determining fair valuations of energy derivatives is provided in note S6 and on the sensitivities to these assumptions in note S3.
138 Financial Statements | Centrica plc Annual Report and Accounts 2023 487 of 1021

3. CRITICAL ACCOUNTING JUDGEMENTS
AND KEY SOURCES OF ESTIMATION

UNCERTAINTY
Climate change
In preparing the financial statements, the Directors have considered the impact of climate change in the context of the risks and opportunities identified in the Task Force on Climate-related Financial Disclosures (TCFD) disclosures on pages 47 to 55. There has been no material impact identified on the financial reporting judgements and estimates. The Directors specifically considered the impact of climate change in the following areas:
¢ Cash flow forecasts used in the impairment assessment of noncurrent assets, including goodwill; ¢ Carrying value and useful economic lives of property, plant and equipment;
¢ Recoverability of deferred tax assets; and
¢ Going concern and viability of the Group over the next three years.

Whilst there is no short-term impact expected from climate change, the Directors are aware of the risks and regularly assess these risks against judgements and estimates made in preparation of the Group’s financial statements.

Further detail is provided in the ‘Climate change’ note below.

Financial Statements | Centrica plc Annual Report and Accounts 2023 139 488 of 1021

3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (c) Climate change
The Group’s assessment of how climate-related issues might affect the business has been integrated into its annual strategic and financial planning process. At the same time, the Group reviews the potential impact of the material risks and opportunities and its Climate Transition Plan on both the current balance sheet position and its accounting policies (including the useful economic lives of its assets).

Summary of our most material risks and opportunities
TCFD category Climate-related trend Potential impact
Transition: Policy, Markets and
Technology
Transition away from fossil fuelled
heating
Risk: Reduced GM from the sale and servicing of natural gas residential boilers and commercial Combined, Heat and Power (CHP) units at British Gas Services & Solutions (BG S&S), Centrica Business Solutions (CBS) and Bord Gáis Energy (Bord Gáis)
Transition: Policy, Markets and
Technology
Growth in low carbon heating market Opportunity: Increased sales and servicing of electric and hydrogen fuelled heating systems, and associated opportunities in energy efficiency at BG S&S, CBS and Bord Gáis
Transition: Policy, Markets and
Technology
Transition away from natural gas Risk: Reduced GM from the sale of natural gas from fuel switching and energy efficiency at British Gas Energy (BGE), CBS and Bord Gáis Transition: Policy, Markets and
Technology
Growth in low carbon heating market Opportunity: Increased sales of electricity and green/low carbon hydrogen at BGE, CBS and Bord Gáis
Transition: Markets Growth of EV transport market Opportunity: Access to new and growing value pools related to EV charging installs, operation and maintenance (O&M), and energy supply at BG S&S and Bord Gáis
Transition: Energy Source Growth in demand for renewable energy Opportunity: Strong growth in solar and battery markets driven by decarbonisation at CBS, Bord Gáis and BG S&S
Physical Chronic Rising mean temperatures Risk: Reduced sales of natural gas and electricity for heat at BGE, CBS and Bord Gáis
IFRS dictates how each asset or liability should be accounted for (e.g. cost, fair value or other measurement criteria) and accordingly, there is a fundamental difference between the holistic forward-looking risk and opportunities business analysis (see TCFD disclosure on pages 47 to 55), and the possible sensitivity of current accounting carrying values to these risks and opportunities.

For example, whilst the activity of supplying gas to customers or servicing/installing gas boilers is clearly subject to climate-related risks (and opportunities), the balance sheet does not reflect an overall value of those businesses (aside from an element of goodwill). Instead, accounting balances related to these businesses generally manifest themselves in short-term working capital assets and liabilities associated with procuring and selling gas or servicing/installing boilers; with those balances generally settled within six months and so specifically less exposed to climate risks.

In a similar vein, Upstream assets are tested for impairment in accordance with relevant IFRS accounting standards. These generally require the recoverable amount of the asset to be calculated based on a best estimate of long-term forecast commodity prices, which the Group estimates based on current market prices and the consensus of reputable commodity pricing consultants forecasts. However, these estimates are not consistent with net zero scenarios from the consultants (as they do not factor in any prospective, yet to be announced legislative or market changes that would be required to meet temperature targets) and hence impairment reviews are not based on net zero scenario forward prices. The Group instead discloses the impact on the carrying value of Upstream assets by way of sensitivity analysis (see note 7(c)).
140 Financial Statements | Centrica plc Annual Report and Accounts 2023 489 of 1021

3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY Accordingly, the Group is mindful of these dynamics when it considers which areas of the balance sheet are exposed to key estimation uncertainty from climate-related issues. The Group considers which assets are most exposed to impairment from climate risks and similarly whether there are any liabilities that are either currently unrecognised or might increase as a result of those risks.

The Group’s assets/liabilities have been segmented into three tranches, grading each balance’s exposure to climate risks/opportunities:
(i) Higher risk – As the consumption of gas and power is intrinsically linked to carbon emissions, their pricing is consequently exposed to climate and legislative risk. Accordingly, where assets or contract values have a key dependency on commodity price assumptions, those assets (or contracts) are deemed higher risk.
(ii) Medium risk – Gross margin energy transition considerations and their potential impact on forward-looking balances (e.g. Supply and Services and Energy Trading goodwill) and decommissioning balances in E&P. (iii) Lower risk – No significant risk identified on the basis that positions are short-term in nature or are specifically linked to the energy transition or are immaterial.

The key non-current asset (and decommissioning provision) balance sheet items have been presented in more granular detail below, together with the groupings into the above risks and with rationale set out below the table:

As at 31 December 2023 related to (£m): Goodwill Intangibles Investment in
associates
Property, plant &
equipment
Deferred tax
assets
Decommissioning
provision
Energy Supply 197
Customer relationships 14
Application software 117
Energy Services 63
Customer relationships 6
Brand (mainly Dyno) 57
Application software 107
Battery storage 66
Electric vehicles (vans/cars) 55
Non-electric vehicles (vans/cars) 50
Energy Trading 145
Customer relationships 2
Application software 27
LNG vessel leases 100
Gas Assets (E&P and Storage)
E&P fields (Spirit) 1,015 (69) (1,191)
E&P tax losses (Spirit) 94
Gas storage facility (Rough) 8 145 (319)
Power Assets
Nuclear investment 903
Gas-fired power stations/engines 233 (17)
Combined heat power (CHP)/other power assets 53
Solar 39
Group/Other
Application software 10
Land & buildings (i) 145
Derivatives deferred tax (i) 343
Other (i) 82 (57)
Total (notes 13-16 and 21) 405 340 903 1,846 456 (1,527) (i) Land & buildings, Derivatives deferred tax and Other Property, plant & equipment/Deferred tax have not been allocated out across business type.

Higher
Medium
Lower
Financial Statements | Centrica plc Annual Report and Accounts 2023 141 490 of 1021

3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY All items noted above may be impacted by climate-related risks but are not currently considered to be key areas of judgement or sources of estimation uncertainty in the current financial year.

Higher risk
E&P field valuations are dependent on forecast commodity prices. Climate change risk means that there is uncertainty over gas demand and forecast prices. This is not currently a key source of estimation uncertainty because current liquid commodity prices mean that there is impairment headroom over current carrying values. Nonetheless, valuation sensitivity information based on a net zero price forecast has been provided in note 7(c) to show field values can move significantly. (Note that the Group’s intention is to run-off remaining fields with most production forecast in the next five years. Decommissioning obligations will be substantively met by the early 2030s, whilst further investment in exploring for new gas fields has ceased.) Recoverability of E&P deferred tax assets associated with historic losses is dependent on future field profitability and so is subject to climate change risk.

The valuation of the investment in Nuclear is also highly dependent on forecast commodity prices. Climate change risks and opportunities means there is uncertainty over electricity demand and forecast prices. The underlying Nuclear stations, which produce electricity with no carbon emissions, have different useful economic lives, with the last station forecast to cease operating in 2055. Valuation sensitivity information based on a net zero price forecast has been provided in note 7(c).

Medium risk
The Group’s small number of gas-fired power stations and engines are exposed to climate change risk, with valuations dependent on forecast gas and electricity prices and electricity demand. However, they are deemed medium risk as they do not have a significant carrying value in the context of the Group.

Similarly the Group’s investment in CHP and other power assets are also exposed to climate risk. They have useful economic lives of up to 15 years but they do not, individually or in total, have material carrying values.

LNG Vessels on the balance sheet are exposed to risk from climate change, but as they are leased assets with the current term remaining less than five years, this risk is reduced to medium.

The Group is in the process of transitioning to an electrified vehicle fleet. Non-electric vehicles are deemed medium risk because their remaining useful economic lives are generally quite short.

Decommissioning provisions are generally longer-term but this could be brought forward for E&P assets if the energy transition accelerates. However, as the decommissioning discount rate is only 1% (real), the balance sheet and income statement impact of earlier decommissioning would not be material.

Deferred tax associated with field accelerated capital allowances and decommissioning in E&P and Storage is not considered high risk due to the length of carry-back rules for decommissioning and the mechanical unwind of other temporary differences. Deferred tax assets associated with derivatives are considered medium risk as the derivatives generally realise within two years.

Energy Supply, Energy Services and Energy Trading Goodwill and Application Software are categorised as medium risk because the businesses are exposed to energy transition risk as a result of climate change. However, there are also significant opportunities for these businesses and the carrying values are not material.

Lower risk
All other assets denoted in the table above are considered lower risk because they are either specifically related to the energy transition (e.g. electric vehicles, battery storage) or are immaterial.

Other contracts
The Group also has long-term LNG supply contracts with Cheniere, Delfin and Mozambique. These are not reflected on the balance sheet but the Group has certain purchase commitments (see note 23). The contracts currently have significant value because of gas price locational spreads but are exposed to climate-change risk and therefore could ultimately become onerous in net zero scenarios. The commitments note provides detail of the length of the contracts and commodity purchase commitments. 142 Financial Statements | Centrica plc Annual Report and Accounts 2023 491 of 1021

4. SEGMENTAL ANALYSIS
The Group’s reporting segments are those used internally by management to run the business and make decisions. The Group’s segments are based on products and services as well as the major factors that influence the performance of these products and services across the geographical locations in which the Group operates. (a) Segmental structure
The types of products and services from which each reportable segment derived its income during the year are detailed below. All reportable segments are operating segments. Income sources are reflected in total Group revenue unless otherwise stated:

Segment Description
British Gas Services &
Solutions
¢ The installation, repair and maintenance of domestic central heating and related appliances, and the provision of fixed-fee maintenance/breakdown service and insurance contracts in the UK; and ¢ the supply of new technologies and energy efficiency solutions in the UK.

British Gas Energy ¢ The supply of gas and electricity to residential and small business customers in the UK.

Bord Gáis Energy ¢ The supply of gas and electricity to residential, commercial and industrial customers in the Republic of Ireland; ¢ the installation, repair and maintenance of domestic central heating and related appliances in the Republic of Ireland;
¢ the procurement, trading and optimisation of energy in the Republic of Ireland (i); and ¢ power generation in the Republic of Ireland.

Centrica Business Solutions ¢ The supply of gas and electricity to business customers in the UK (i); ¢ the supply of energy services and solutions to large organisations in the UK, Europe and North America; and ¢ the development and operation of large-scale power assets in the UK and Europe.

Centrica Energy ¢ The procurement, trading and optimisation of energy in the UK and Europe (i); and ¢ the global procurement and sale of LNG.

Upstream ¢ The production and processing of gas and liquids principally within Spirit Energy (i); ¢ the sale of power generated from nuclear assets in the UK; and ¢ gas storage in the UK.
(i) Where income is generated from contracts in the scope of IFRS 9, this is included in re-measurement and settlement of derivative energy contracts.

Financial Statements | Centrica plc Annual Report and Accounts 2023 143 492 of 1021

4. SEGMENTAL ANALYSIS
(b) Revenue
Gross segment revenue includes revenue generated from the sale of products and services to other reportable segments of the Group. Total Group revenue reflects only the sale of products and services to third parties. Sales between reportable segments are conducted on an arm’s length basis. 2023 2022
Gross
segment
revenue
£m
Less intersegment
revenue
£m
Total
Group
revenue
£m
Gross
segment
revenue
£m
Less intersegment
revenue
£m
Total
Group
revenue
Year ended 31 December £m
British Gas Services & Solutions 1,597 (57) 1,540 1,527 (50) 1,477 British Gas Energy 17,742 — 17,742 13,096 — 13,096
Bord Gáis Energy 1,815 — 1,815 1,771 — 1,771
Centrica Business Solutions 3,522 (6) 3,516 3,000 (19) 2,981 Centrica Energy 7,732 (476) 7,256 14,441 (219) 14,222
Upstream 2,935 (1,430) 1,505 3,351 (3,261) 90
Total Group revenue included in business
performance 35,343 (1,969) 33,374 37,186 (3,549) 33,637 Less: revenue arising on contracts in scope of IFRS 9
included in business performance (6,916) (9,896)
Total Group revenue 26,458 23,741
The table below shows the total Group revenue arising from contracts with customers, and therefore in the scope of IFRS 15, and revenue arising from contracts in the scope of other standards. The key economic factors impacting the nature, timing and uncertainty of revenue and cash flows are considered to be driven by the type and broad geographical location of the customer. The analysis of IFRS 15 revenue below reflects these factors.
2023
Revenue from
contracts with
customers in
scope of IFRS 15 (i)
£m
Revenue from
fixed-fee service
and insurance
contracts in
scope of IFRS
17, and leasing
contracts in
scope of IFRS 16
£m
Total Group
revenue
£m
Revenue in
business
performance
arising from
contracts in
scope of IFRS 9
£m
Total Group
revenue included
in business
performance
Year ended 31 December £m
Energy services and solutions 727
British Gas Services & Solutions 727 813 1,540 — 1,540
Energy supply – UK 17,742
British Gas Energy 17,742 — 17,742 — 17,742
Energy supply – Republic of Ireland 1,438
Bord Gáis Energy 1,438 — 1,438 377 1,815
Energy supply – UK 2,232
Energy services 208
Centrica Business Solutions 2,440 4 2,444 1,072 3,516
Energy sales to trading and energy procurement counterparties 3,132 Centrica Energy 3,132 29 3,161 4,095 7,256
Gas and liquid production 133
Upstream 133 — 133 1,372 1,505
25,612 846 26,458 6,916 33,374
(i) The Group has recognised £3,698 million (2022: £1,539 million) of revenue from the Government in relation to the Energy Price Guarantee scheme for domestic customers in the British Gas Energy segment. A further £448 million (2022: £219 million) of revenue has been recognised in respect of the Energy Bill Relief Scheme. £320 million (2022: £175 million) of this total relates to Centrica Business Solutions customers and £128 million (2022: £44 million) relates to non-domestic customers in the British Gas Energy segment.
144 Financial Statements | Centrica plc Annual Report and Accounts 2023 493 of 1021

4. SEGMENTAL ANALYSIS
2022
Year ended 31 December
Revenue from
contracts with
customers in
scope of IFRS 15
£m
Revenue from
fixed-fee service
and insurance
contracts in
scope of IFRS 17,
and leasing
contracts in
scope of IFRS 16
£m
Total Group
revenue
£m
Revenue in
business
performance
arising from
contracts in
scope of IFRS 9
£m
Total Group
revenue included
in business
performance
£m
Energy services and solutions 625
British Gas Services & Solutions 625 852 1,477 — 1,477
Energy supply – UK 13,096
British Gas Energy 13,096 — 13,096 — 13,096
Energy supply – Republic of Ireland 1,323
Bord Gáis Energy 1,323 — 1,323 448 1,771
Energy supply – UK 1,465
Energy services 249
Centrica Business Solutions 1,714 14 1,728 1,253 2,981
Energy sales to trading and energy procurement counterparties 5,639 Centrica Energy 5,639 16 5,655 8,567 14,222
Gas and liquid production 462
Upstream 462 — 462 (372) 90
22,859 882 23,741 9,896 33,637
Geographical analysis of revenue and non-current assets The Group monitors and manages performance by reference to its operating segments and not solely on a geographical basis. However, provided below is an analysis of revenue and certain non-current assets by geography.

Total Group revenue
(based on location of customer)
Non-current assets
(based on location of assets) (i)
Year ended 31 December
2023
£m
2022
£m
2023
£m
2022
£m
UK 22,207 17,480 2,875 3,827
Republic of Ireland 1,438 1,323 229 152
Scandinavia (including Denmark) 919 1,473 170 181
North America 390 867 12 14
Rest of the world 1,504 2,598 314 353
26,458 23,741 3,600 4,527
(i) Non-current assets comprise goodwill, other intangible assets, PP&E, interests in joint ventures and associates and non-financial assets within trade and other receivables, and contract-related assets.

Financial Statements | Centrica plc Annual Report and Accounts 2023 145 494 of 1021

4. SEGMENTAL ANALYSIS
(c) Adjusted gross margin and adjusted operating profit/(loss) The measure of profit used by the Group is adjusted operating profit. Adjusted operating profit is operating profit before exceptional items and certain re-measurements. This includes business performance results of equityaccounted interests.

This note also details adjusted gross margin. Both measures are reconciled to their statutory equivalents.

Adjusted gross margin Adjusted operating profit/(loss)
Year ended 31 December
2023
£m
2022
£m
2023
£m
2022
£m
British Gas Services & Solutions 616 504 47 (9)
British Gas Energy (i) 2,141 1,114 751 72
Bord Gáis Energy 139 160 1 31
Centrica Business Solutions 309 238 104 44
Centrica Energy 1,016 1,558 774 1,400
Upstream 999 1,874 1,083 1,793
Segmental adjusted gross margin/adjusted operating profit 5,220 5,448 2,760 3,331 Reconciling items to Group Income Statement:

Colleague profit share (ii) (3) (9) (8) (23)
Total Group adjusted gross margin/adjusted operating profit 5,217 5,439 2,752 3,308 Certain re-measurements:

Onerous energy supply contract provision movement 833 1,766 833 1,766 Derivative contracts 3,573 (5,160) 3,573 (5,160)
Share of re-measurement of certain associates’ energy contracts (net of taxation) — — (1) 1 Gross profit 9,623 2,045
Exceptional items in operating profit (645) (155)
Operating profit/(loss) after exceptional items and certain re-measurements 6,512 (240) (i) Included within British Gas Energy adjusted operating profit in 2023 is a £84 million (2022: £50 million) charge relating to increases in the British Gas Energy Support Fund, supporting downstream customers. £62 million of this charge is booked as a revenue deduction and £22 million within operating costs. (ii) The impact of the colleague profit share is excluded because management considers it unrelated to segmental business performance. 146 Financial Statements | Centrica plc Annual Report and Accounts 2023 495 of 1021

4. SEGMENTAL ANALYSIS
(d) Included within adjusted operating profit
Presented below are certain items included within adjusted operating profit, including a summary of impairments of property, plant and equipment and write-downs relating to exploration and evaluation assets.

Depreciation and impairments of
property, plant and equipment
Amortisation, write-downs and
impairments of intangibles
Year ended 31 December
2023
£m
2022
£m
2023
£m
2022
£m
British Gas Services & Solutions (42) (31) (12) (16)
British Gas Energy (3) (3) (54) (79)
Bord Gáis Energy (9) (8) (11) (13)
Centrica Business Solutions (11) (13) (26) (32)
Centrica Energy (30) (31) (18) (15)
Upstream (281) (481) — —
Other (i) (28) (31) (17) (24)
(404) (598) (138) (179)
(i) The Other segment includes corporate functions, subsequently recharged.

Impairments and write-downs of PP&E
During 2023, £9 million of impairments of PP&E (2022: £88 million) were recognised within business performance.

Impairments and write-downs of intangible assets
During 2023, £15 million of impairments of other intangible assets (2022: £20 million) were recognised within business performance.

Financial Statements | Centrica plc Annual Report and Accounts 2023 147 496 of 1021

4. SEGMENTAL ANALYSIS
(e) Capital expenditure
Capital expenditure represents additions, other than assets acquired as part of business combinations or asset purchase agreements, to property, plant and equipment and intangible assets. Capital expenditure has been reconciled to the related cash outflow.

Capital expenditure on property,
plant and equipment
Capital expenditure on intangible
assets other than goodwill
Year ended 31 December
2023
£m
2022
£m
2023
£m
2022
£m
British Gas Services & Solutions 45 52 32 25
British Gas Energy — — 565 582
Bord Gáis Energy 69 3 7 4
Centrica Business Solutions 80 47 193 205
Centrica Energy 5 — 14 14
Upstream 95 124 18 13
Other 79 26 — —
Capital expenditure 373 252 829 843
Capitalised borrowing costs (note 8) (2) — — —
Inception of new leases and movements in payables and prepayments related to capital expenditure (89) (49) 4 5
Capital expenditure cash outflow subsequent to transfer to held for sale — 109 — 10 Purchases of emissions allowances and renewable obligation certificates (note 15) (i) — — (780) (799) Net cash outflow 282 312 53 59
(i) Purchases of emissions allowances and renewable obligation certificates of £565 million (2022: £578 million) in British Gas Energy, £193 million (2022: £203 million) in Centrica Business Solutions, £18 million (2022: £13 million) in Upstream, and £4 million (2022: £5 million) in Centrica Energy. 148 Financial Statements | Centrica plc Annual Report and Accounts 2023 497 of 1021

4. SEGMENTAL ANALYSIS
(f) Free cash flow
Free cash flow is used by management to assess the cash-generating performance of each segment, after taking account of the need to maintain its capital asset base. By excluding deficit reduction payments and movements in collateral and margin cash, which are predominantly triggered by wider market factors, and in the case of collateral and margin movements, represent timing movements, free cash flow is used by management as an adjusted measure of the cash generation of the business. Free cash flow excludes investing cash flows that are related to adjusted net cash/ debt. This measure is reconciled to the net cash flow from operating and investing activities.

Year ended 31 December
2023
£m
2022
£m
British Gas Services & Solutions 64 (19)
British Gas Energy (i) 302 1,283
Bord Gáis Energy (146) 81
Centrica Business Solutions 220 (48)
Centrica Energy (ii) 1,354 199
Upstream (iii) 1,236 1,539
Other (iv) (20) 26
Segmental free cash flow excluding tax 3,010 3,061
Taxes paid (803) (574)
Total free cash flow 2,207 2,487
UK pension deficit payments (note 22) (180) (214)
Movements in variation margin and collateral (note 24) 585 (1,173) Interest received 267 46
Purchase and settlement of securities (note 24) (12) (398) 2,867 748
Net cash flow from operating activities 2,752 1,314
Net cash flow from investing activities 115 (566)
Total cash flow from operating and investing activities 2,867 748 (i) British Gas Energy free cash flow in 2023 includes significant working capital outflows of approximately £500 million largely related to the impact of falling commodity prices. British Gas Energy free cash flow in 2022 includes £440 million received under the Energy Bill Support Scheme, which was disclosed as restricted cash, and accelerated cash flows of approximately £700 million under the Energy Price Guarantee. (ii) Centrica Energy free cash flow in 2023 includes operating cash inflows of around £580 million driven by profit on 2022 derivative positions cash settling during the year.

Centrica Energy free cash flow in 2022 includes cash outflows associated with increased gas in storage, and working capital movements of approximately £500 million.

Centrica Energy adjusted operating profit in 2022 included a significant portion of unrealised derivative positions. (iii) Upstream free cash flow in 2023 includes inflows of £55 million relating to deferred consideration received from the 2022 Spirit Norway disposal, and realised hedge cash outflows of £34 million (2022: £161 million) have been incurred relating to the Norwegian assets, but were held outside the disposal groups. £630 million of free cash flow excluding tax in 2022 relates to the Norwegian disposal groups, including its disposal cash flows. £300 million of taxes paid in 2022 relate to the Norway disposal group. (iv) The Other segment includes corporate functions.

Financial Statements | Centrica plc Annual Report and Accounts 2023 149 498 of 1021

5. COSTS
This section details the types of costs the Group incurs and the number of employees in each of our operations. (a) Analysis of costs by nature
2023 2022
Year ended 31 December
Cost of sales
and settlement
of certain
energy
contracts
£m
Operating
costs
£m
Total
costs
£m
Cost of sales
and settlement
of certain
energy
contracts
£m
Operating
costs
£m
Total
costs
£m
Transportation, distribution, capacity market and metering costs (4,813) — (4,813) (4,694) — (4,694)
Commodity costs (i) (20,258) — (20,258) (20,748) — (20,748) Depreciation, amortisation, impairments and write-downs (324) (218) (542) (441) (336) (777) Employee costs (608) (777) (1,385) (704) (753) (1,457)
Other direct costs (i) (2,154) (1,077) (3,231) (1,611) (783) (2,394) Costs included within business performance before
credit losses on financial assets (28,157) (2,072) (30,229) (28,198) (1,872) (30,070) Credit losses on financial assets (net of recovered amounts) (note 17) — (602) (602) — (351) (351)
Total costs included within business performance (28,157) (2,674) (30,831) (28,198) (2,223) (30,421) Adjustment for gross cost of settled energy contracts in the scope of IFRS 9 and onerous energy supply contract
provision 17,497 — 17,497 14,986 — 14,986
Exceptional items and re-measurement and settlement of
derivative energy contracts (note 7) (6,175) (645) (6,820) (8,484) (155) (8,639) Total costs within Group operating profit (16,835) (3,319) (20,154) (21,696) (2,378) (24,074) (i) Commodity costs include £nil recoverable under the Last Resort Supplier Payment claim (2022: £241 million credit), a further credit of £5 million is included in other direct operating costs (2022: £nil). These credits offset costs incurred as a result of the Group’s appointment as Supplier of Last Resort to customers of energy suppliers who have ceased trading. See note 3.
(b) Employee costs
The below employee costs exclude the costs of redundancy and similar termination benefits.

Year ended 31 December
2023
£m
2022
£m
Wages and salaries (1,105) (1,159)
Social security costs (146) (100)
Pension and other post-employment benefits costs (118) (171) Share scheme costs (note S4) (31) (10)
(1,400) (1,440)
Capitalised employee costs 15 10
Repayment of Coronavirus government support programmes — (27) Employee costs recognised in business performance in the Group Income Statement (1,385) (1,457) 150 Financial Statements | Centrica plc Annual Report and Accounts 2023 499 of 1021

5. COSTS
(c) Average number of employees during the year
2023
Number
2022
Year ended 31 December Number
British Gas Services & Solutions 12,309 12,470
British Gas Energy 3,979 3,257
Bord Gáis Energy 395 320
Centrica Business Solutions 1,334 1,444
Centrica Energy 780 573
Upstream 699 670
Group Functions 1,518 1,220
21,014 19,954

6. SHARE OF RESULTS OF JOINT VENTURES AND ASSOCIATES
Share of results of joint ventures and associates represents the results of businesses where we exercise joint control or significant influence and generally have an equity holding of up to 50%.

Share of results of joint ventures and associates
The Group’s share of results of joint ventures and associates principally arises from its interest in Nuclear – Lake Acquisitions Limited, an associate, reported in the Upstream segment.
2023 2022
Year ended 31 December
Share of
business
performance
£m
Share of
exceptional
items and
certain remeasurements
£m
Share of
results for the
year
£m
Share of
business
performance
£m
Share of
exceptional
items and
certain remeasurements
£m
Share of
results for the
year
£m
Income 680 — 680 592 — 592
Expenses before exceptional items and certain remeasurements (397) — (397) (472) — (472) Exceptional items and re-measurement of certain contracts — (1) (1) — 1 1 Operating profit/(loss) 283 (1) 282 120 1 121
Financing gain — — — 3 — 3
Taxation on profit/(loss) (74) — (74) (31) — (31)
Share of post-taxation results of joint ventures and
associates 209 (1) 208 92 1 93
Further information on the Group’s investments in joint ventures and associates is provided in notes 14 and S10.

Financial Statements | Centrica plc Annual Report and Accounts 2023 151 500 of 1021

7. EXCEPTIONAL ITEMS AND CERTAIN RE-MEASUREMENTS
(a) Certain re-measurements
Certain re-measurements are the fair value movements on energy contracts entered into to meet the future needs of our customers or to sell the energy produced from our upstream assets. These contracts are economically related to our upstream assets, capacity/off-take contracts or downstream demand, which are typically not fair valued, and are therefore separately identified in the current period and reflected in business performance in future periods when the underlying transaction or asset impacts the Group Income Statement.

If the future costs to fulfil customer supply contracts, including the mark-to-market reversal of any energy hedging contracts entered into to meet this demand, exceed the charges recoverable from customers, an onerous contract provision will be recognised. Because the associated hedging gains or losses will be recognised in certain re-measurements, the movements in the onerous provision will also be recognised in certain re-measurements.

Year ended 31 December
2023
£m
2022
£m
Certain re-measurements recognised in relation to energy contracts:

Net gains/(losses) arising on delivery of contracts 3,529 (1,403) Net gains/(losses) arising on market price movements and new contracts 44 (3,757) Net re-measurements included within gross profit before onerous supply contract provision 3,573 (5,160) Onerous energy supply contract provision movement (i) 833 1,766 Net re-measurements included within gross profit 4,406 (3,394) Net (loss)/gain arising on re-measurement of certain associates’ contracts (net of taxation) (1) 1 Net re-measurements included within Group operating profit 4,405 (3,393) Taxation on certain re-measurements (note 9) (ii) (1,649) 1,000 Certain re-measurements after taxation 2,756 (2,393)
(i) The onerous supply contract provision represents the future costs to fulfil customer contracts on a current market price basis. During the period, this provision has been fully unwound. The associated hedging gains or losses are separately recognised within the gains/losses arising on market price movements and new contracts. The movement in the onerous provision is detailed in note 3(b). (ii) Taxation on onerous energy supply contracts amounted to a £196 million debit (2022: £295 million debit) and taxation on other certain re-measurements amounted to £1,453 million debit (2022: £1,295 million credit).

Year ended 31 December
2023
£m
2022
£m
Total re-measurement and settlement of derivative energy contracts excluding: (6,175) (8,484) IFRS 9 business performance revenue (6,916) (9,896)
IFRS 9 business performance cost of sales 16,664 13,220 Unrealised certain re-measurements recognised in relation to energy contracts included in gross profit 3,573 (5,160) Onerous contract provision movement (cost of sales) 833 1,766 Total certain re-measurements 4,406 (3,394)
The table below reflects the certain re-measurement derivative movements by business segment:

Year ended 31 December
2023
£m
2022
£m
UK Energy Supply (British Gas Energy and Centrica Business Solutions) 506 (6,364) Upstream/Centrica Energy/Bord Gáis 3,067 1,204
Unrealised certain re-measurements recognised in relation to energy contracts included in gross profit 3,573 (5,160) 152 Financial Statements | Centrica plc Annual Report and Accounts 2023 501 of 1021

7. EXCEPTIONAL ITEMS AND CERTAIN RE-MEASUREMENTS
(b) Exceptional items
Exceptional items are those items that, in the judgement of the Directors, need to be disclosed separately by virtue of their nature, size or incidence. Items which may be considered exceptional in nature include disposals of businesses or significant assets, business restructurings, pension change costs or credits, significant debt repurchase costs and asset write-downs/impairments and write-backs.

Year ended 31 December
2023
£m
2022
£m
Loss on disposal of E&P Norway — (362)
Impairment of gas storage asset (i) (82) —
(Impairment)/write-back of power assets (ii) (563) 207
Exceptional items included within Group operating profit (iii) (645) (155) Net exceptional item taxation (note 9) (iv) 54 (207)
Total exceptional items recognised after taxation (591) (362) (i) In the Upstream segment, an impairment of the Rough gas storage asset of £82 million (post-tax £59 million) has been recorded as a result of a reduction in both forecast gas prices and forecast summer/winter gas price spreads. (ii) In the Upstream segment, an impairment of the Nuclear investment of £549 million (post-tax £549 million) (2022: write-back of £195 million (post-tax £195 million)) has been recorded predominantly as a result of the decrease in forecast power prices offset by the positive effect of life extensions at Heysham and Hartlepool. In the Centrica Business Solutions segment, an impairment of £14 million (post-tax £11 million) (2022: write-back of £12 million (post-tax £9 million)) has been recorded, predominantly related to a battery storage asset and a gas engine, also following lower forecast commodity prices. See note 7(c). (iii) Exceptional items for 2023 are non-cash. The cash flows recorded as payments relating to exceptional charges of £6 million (2022: £24 million) in the Group Cash Flow Statement relate to previous year exceptional restructuring costs. (iv) Exceptional item taxation includes a credit of £28 million associated with net deferred tax asset recognition predominantly related to exploration and production PRT carry-back, offset by a reduction in the expected recovery of tax losses and investment allowance, due to the reduction in forecast commodity prices. This item is unrelated to the other exceptional items.

Financial Statements | Centrica plc Annual Report and Accounts 2023 153 502 of 1021

7. EXCEPTIONAL ITEMS AND CERTAIN RE-MEASUREMENTS
(c) Impairment accounting policy, process and sensitivities The information provided below relates to the assets and CGUs (or groups of CGUs) that have been subject to impairment during the year.

Exceptional impairment assessments of assets measured on a value-in-use (VIU) basis Segment Asset/CGU Basis for impairment assessment
Recoverable
amount
£m
Impairment
£m
Upstream Nuclear (i) The decrease in short-term baseload power prices has more than offset the impact of life extensions at Heysham 1 and Hartlepool stations 903 549
(i) During the year ended 31 December 2022, an impairment write-back of £195 million was booked in relation to the Nuclear investment. The recoverable amount at the end of 2022 was £1,560 million.

Nuclear
A VIU calculation has been used to determine the recoverable amount of the Group’s investment in Nuclear. The cash flows incorporated in the valuation are based on detailed business forecasts in the short term, extrapolated to future years to account for the expected generation profile of the fleet for its remaining life. Assumptions include forward commodity prices, capacity rates, fuel and network costs, and operating and capital expenditure requirements. Price assumptions are based on liquid market prices for 2024 to 2027 which are then blended over a one-year period to long-term price forecasts. Long-term price assumptions derived from third-party market comparator median curves are used due to alignment with pricing that a reasonable market participant would use.

The Electricity Generator Levy, applying a 45% tax rate to revenues generated over £75/MWh until 31 March 2028, based on the above price assumptions, has also been included in the assessment. See notes 1 and 3.

In March 2023, the Nuclear business announced that estimated operating lifetimes at the Heysham 1 and Hartlepool stations would be extended by two years to March 2026, with a range of plus or minus one year. Based on prices at 31 December 2023, the lifetime extensions increase the value of the Group’s investment in Nuclear by £131 million. The plus/minus one-year range would impact value by an increase of £48 million or a decrease of £53 million.

The VIU calculation assumes that the Sizewell plant operates until 2055, reflecting a 20-year extension beyond its original design life. In the absence of this extension, the carrying value of the Group’s investment in Nuclear would be reduced by £98 million. All other stations’ life assumptions are aligned to lifetime closure dates announced by the operator (being between March 2026 and March 2028).

The VIU calculation is also sensitive to changes in outage assumptions, and the base level generation volumes assumed for the fleet were decreased during the period based on a review of planned and unplanned outages. A reduction of 5% in the unplanned outage rate applied to volumes across the Nuclear fleet would lead to a write-back movement of £125 million.

The future pre-tax cash flows generated by the investment in the associate are discounted using a pre-tax nominal discount rate of 17.3% (2022: 24.8%). This equated to a post-tax rate of 8.5% (2022: 8.0%). The post-tax discount rate is initially derived from the Group weighted average cost of capital as adjusted for the risks associated with the asset and with reference to comparator companies. The pre-tax rate is then back-calculated by removing tax cash flows and assessing the rate that would give the same result as the post-tax rate. As baseload power prices for the liquid period remain higher than longer-term forecast prices, the near-term cash flows are elevated, which caused the pre-tax discount rate to remain high. A 2% increase in the post-tax discount rate would lead to an impairment of £56 million (when compared with the closing year-end carrying value). Similarly, a 2% reduction in the post-tax discount rate would lead to a write-back of £73 million.

The asset is particularly sensitive to changes in commodity price and the table below details average prices for the first 5- and 10-year periods and associated sensitivities. Note that the asset is valued for its entire economic life and not just this 15-year period.

Change in pre/post-tax write-back/(impairment) (ii)
Five-year liquid and blendedperiod price (i)Ten-year long-term average price (i) +10% -10%
2024-2028 2023-2027 2029-2038 2028-2037
31 December
2023
31 December
2022
31 December
2023
31 December
2022
31 December
2023
31 December
2022
31 December
2023
31 December
2022
£/MWh £/MWh £/MWh £/MWh £m £m £m £m
Baseload power 71 164 56 68 148 198 (191) (198)
+50%
Five-year liquid
and blendedperiod only
-50%
Five-year liquid
and blendedperiod only
325 (672)
(i) Prices are shown in 2022 real terms.
(ii) A 10% change was historically deemed to represent a reasonably possible variation across the entire period covered by the liquid market and comparator curves used in the nuclear impairment test. Given the volatility in commodity prices during recent years, a further sensitivity has been included based on a 50% change in liquid and blend-period commodity prices only. 31 December 2023 sensitivities are impacted by the effect of the Electricity Generator Levy threshold of £75/MWh.

Furthermore, there is also uncertainty due to climate change and international governmental intervention to reduce CO2 emissions and the likely impact this will have on both power demand and forecast prices. As a result, a further sensitivity is disclosed below based on the average forecast prices aligned to the net zero price curves issued by Aurora and Baringa (power analytics providers), which assumes governmental policies are put in place to achieve the temperature and net zero goals by 2050. This sensitivity retains the prices for the liquid period (four years) but replaces the longer term thereafter with the average of Aurora and Baringa’s forecast prices for net zero. 154 Financial Statements | Centrica plc Annual Report and Accounts 2023 503 of 1021

7. EXCEPTIONAL ITEMS AND CERTAIN RE-MEASUREMENTS
Ten-year
long-term
average price (i)
Change in
pre/post-tax
impairment (ii)
2029-2038
2023 £m
Baseload power (£/MWh) 56 (15)
(i) Prices shown in 2022 real terms. The ten-year long-term average net zero price is the same as the Group’s base case but the annual price profiles differ. (ii) Change would lead to a small further write-off of the carrying value.

Exceptional impairment assessments of assets measured on a FVLCD basis Segment Asset/CGU (or group of CGUs) Basis for impairment assessment Recoverable
amount (i)
£m FV hierarchy
Impairment
£m
Upstream Rough gas storage asset The reduction in both forecast NBP gas prices and forecast summer/winter NBP gas price spreads
(183) L3 82
(i) Recoverable amount includes the decommissioning costs associated with the gas field, together with related tax impacts. The decommissioning provision for Rough at the year-end is £319 million.

Fair value less costs of disposal (FVLCD) is determined by discounting the post-tax cash flows expected to be generated by the assets or CGU, net of associated selling costs, taking into account those assumptions that market participants would use in estimating fair value.

Post-tax cash flows used in the FVLCD calculation are based on the Group’s Board-approved business plans and strategic shape assumptions, together with, where relevant, long-term production and cash flow forecasts.

An exceptional impairment has been recorded in 2023 for the Rough gas storage asset measured on a FVLCD basis. No other Upstream gas assets have been impaired during the year but they still have a significant carrying value on the balance sheet and accordingly further sensitivities (including for the Rough gas storage asset) are provided in the paragraph below:

Upstream gas assets (including Rough gas storage asset) For Upstream gas assets post-tax cash flows are derived from projected production profiles of each field, taking into account forward prices for gas and liquids over the relevant period. Where forward market prices are not available (i.e. outside the active period for each commodity), prices are determined based on the median of third-party market comparator curves. The date of cessation of production depends on the interaction of a number of variables, such as the recoverable quantities of hydrocarbons, production costs, the contractual duration of the licence area and the selling price of the gas and liquids produced. As each field has specific reservoir characteristics and economic circumstances, the post-tax cash flows for each field are computed using individual economic models.

Price assumptions are critical and use liquid market prices for 2024 to 2027, blended over a one-year period to long-term price forecasts.

Long-term price assumptions derived from third-party market comparator median curves are deemed best aligned with pricing that a reasonable market participant would use. Following the implementation of the Energy Profits Levy, the increased tax rates have been included in the FVLCD calculations until the sunset date of 31 March 2028. For the Rough gas storage asset, in addition to the above process associated with its cushion gas production, an assessment is also made of value to be derived from cycling gas in and out of the reservoir (predominantly from summer/winter NBP gas spreads). This assessment utilises the forward market prices noted above and is also used to calculate the optimum cushion gas production date to maximise the recoverable amount of the asset.

The future post-tax cash flows are discounted using a post-tax nominal discount rate of 11.0% (2022: 10.5%).

As forward commodity prices are a key assumption in these valuations, average prices and associated impairment sensitivities for the Group’s upstream gas assets are shown below. Note that the fields are valued over their respective economic lives and the 5- and 10-year pricing information shown below is just to provide context. Note that the asset portfolio reserves are predominantly gas (rather than liquids) and therefore only NBP figures have been shown below.

Change in post-tax write-back/(impairment) (ii)
Five-year liquid and blendedperiod price (i)Ten-year long-term average price (i) +10% -10%
2024-2028 2023-2027 2029-2038 2028-2037
31 December
2023
31 December
2022
31 December
2023
31 December
2022
31 December
2023
31 December
2022
31 December
2023
31 December
2022
£m £m £m £m
NBP (p/th) 71 155 61 75 6 — (5) —
+50%
Five-year liquid
and blendedperiod only
-50%
Five-year liquid
and blendedperiod only
32 (269)
(i) Prices are shown in 2022 real terms.
(ii) Sensitivity relates to Upstream exploration and production assets and CGUs (including gas storage assets). A 10% change was historically deemed to represent a reasonably possible variation across the entire period covered by both the liquid market and longer-term comparator curves used in upstream gas impairment tests.

Given the significant movements in commodity prices during the last few years, a further sensitivity has been included based on a 50% change in liquid and blend-period commodity prices only. The changes shown relate to further write-backs or impairments and are restricted because the most material fields have already been written back to their depreciated historic cost and have excess impairment headroom.

Financial Statements | Centrica plc Annual Report and Accounts 2023 155 504 of 1021

7. EXCEPTIONAL ITEMS AND CERTAIN RE-MEASUREMENTS
Furthermore, there is also uncertainty due to climate change and international governmental intervention to reduce CO2 emissions and the likely impact this will have on gas demand and forecast prices. As a result, a further sensitivity is disclosed below based on forecast prices aligned to an average of the International Energy Agency’s (IEA), Aurora and Baringa’s net zero emissions by 2050, which assumes governmental policies are put in place to achieve the temperature and net zero goals by 2050. This sensitivity retains the prices for the liquid period (four years) but replaces the longer term thereafter with the average of these forecast prices for net zero emissions by 2050.

Ten-year
long-term
average price (i)
Change in
post-tax
write-back/
(impairment) (ii)
2029-2038
2023 £m
NBP (p/th) 57 —
(i) Prices shown in 2022 real terms.
(ii) Change in impairment restricted due to the most material fields having already been written back to their depreciated historic cost and having excess impairment headroom, as well as most hydrocarbon production being in the liquid period and hence unaffected by net zero pricing.

8. NET FINANCE COST
Financing costs mainly comprise interest on bonds and bank debt, the results of hedging activities used to manage foreign exchange and interest rate movements on the Group’s borrowings and notional interest arising from the discounting of decommissioning provisions and pensions. An element of financing cost is capitalised on qualifying projects.

Investment income predominantly includes interest received from short-term investments in money market funds, bank deposits and government bonds.
2023 2022
Financing
costs
£m
Investment
income
£m
Total
£m
Financing
costs
£m
Investment
income
£m
Total
Year ended 31 December £m
Cost of servicing net debt:

Interest income — 269 269 — 52 52
Interest cost on bonds, bank loans and
overdrafts (262) — (262) (184) — (184)
Interest cost on lease liabilities (12) — (12) (6) — (6) (274) 269 (5) (190) 52 (138)
Net (losses)/gains on revaluation (2) — (2) — 22 22
Notional interest arising from discounting (14) — (14) (3) 3 — (290) 269 (21) (193) 77 (116)
Other interest charges (i) (20) — (20) (31) — (31)
Capitalised borrowing costs (ii) 2 — 2 4 — 4
Financing (cost)/income (iii) (308) 269 (39) (220) 77 (143) (i) Other interest charges includes interest charged on cash collateral, and fees for letters of credit. The cash flow associated is £20 million (2022: £30 million). (ii) Borrowing costs have been capitalised using an average rate of 8.39% (2022: 5.57%). The capitalised borrowing costs in 2022 relate entirely to the Norwegian assets held for sale, and subsequently disposed of.
(iii) Investment income has increased significantly during 2023, and as a result we have amended our Group Income Statement presentation to disclose investment income and financing costs separately.
156 Financial Statements | Centrica plc Annual Report and Accounts 2023 505 of 1021

9. TAXATION
The taxation note details the different tax charges and rates, including current and deferred tax arising in the Group.

The current tax charge is the tax payable on this year’s taxable profits together with amendments in respect of tax provisions made in earlier years. This tax charge excludes the Group’s share of taxation on the results of joint ventures and associates. Deferred tax represents the tax on differences between the accounting carrying values of assets and liabilities and their tax bases. These differences are temporary and are expected to unwind in the future. (a) Analysis of tax charge
2023 2022
Year ended 31 December
Business
performance
£m
Exceptional
items and
certain remeasurements
£m
Results for
the year
£m
Business
performance
£m
Exceptional
items and
certain remeasurements
£m
Results for
the year
£m
Current tax
UK corporation tax (535) 105 (430) (331) (262) (593)
UK energy profits levy (160) 11 (149) (54) 21 (33)
UK petroleum revenue tax 1 — 1 2 — 2
Non-UK tax (100) — (100) (477) 32 (445)
Adjustments in respect of prior years – UK 3 (26) (23) (47) 24 (23) Adjustments in respect of prior years – non-UK 2 — 2 (8) — (8) Total current tax (789) 90 (699) (915) (185) (1,100)
Deferred tax
Origination and reversal of temporary differences – UK (92) (1,312) (1,404) (128) 840 712 UK energy profits levy 34 (376) (342) 23 (85) (62)
Change in UK tax rate (2) (3) (5) (7) 242 235
UK petroleum revenue tax — 52 52 6 (19) (13)
Origination and reversal of temporary differences – non-UK 4 (20) (16) (89) 32 (57) Adjustments in respect of prior years – UK 7 (26) (19) 49 (27) 22 Adjustments in respect of prior years – non-UK — — — 15 (5) 10 Total deferred tax (49) (1,685) (1,734) (131) 978 847
Total UK tax (744) (1,575) (2,319) (487) 734 247
Total non-UK tax (94) (20) (114) (559) 59 (500)
Total taxation on profit/(loss) for the year (i) (838) (1,595) (2,433) (1,046) 793 (253) (i) Total taxation on profit/(loss) excludes taxation on the Group’s share of profits of joint ventures and associates.

UK tax rates
Most activities in the UK are subject to the standard rate for UK corporation tax of 23.5% (2022: 19%). Upstream gas production activities are taxed at a rate of 30% (2022: 30%), a supplementary charge of 10% (2022: 10%), plus the energy profits levy of 35% (2022: 25%) to give an overall tax rate of 75% (2022: 65%). Certain upstream gas production assets in the UK are subject to the UK petroleum revenue tax (PRT) regime at the current tax rate of 0% (2022: 0%).

The UK corporation tax rate increased to 25% effective 1 April 2023, giving an overall rate of 23.5% for the year (being the average of 19% in the period to 31 March 2023 and 25% thereafter).

Non-UK tax rates
Taxation in non-UK jurisdictions, where the Group has a substantial presence, is calculated at the rate prevailing in those respective jurisdictions.

The main non-UK rates of corporation tax are 12.5% (2022: 12.5%) in the Republic of Ireland, 22% (2022: 22%) in Denmark and 17% (2022: 17%) in Singapore.

Prior year adjustments reflect changes made to estimates or to judgements when further information becomes available.

Movements in deferred tax liabilities and assets are disclosed in note 16. Tax on items taken directly to equity is disclosed in note S4.

Financial Statements | Centrica plc Annual Report and Accounts 2023 157 506 of 1021

9. TAXATION
(b) Factors affecting the tax charge
The Group is expected to continue carrying out most of its business activities in the UK and accordingly considers the standard UK rate to be the appropriate reference rate.

The differences between the total taxation shown above and the amount calculated by applying the standard rate of UK corporation tax to the profit/(loss) before taxation are as follows:
2023 2022
Business
performance
£m
Exceptional
items
and certain
re-measurements
£m
Results for
the year
£m
Business
performance
£m
Exceptional
items
and certain
re-measurements
£m
Results for
the year
Year ended 31 December £m
Profit/(loss) before taxation 2,713 3,760 6,473 3,165 (3,548) (383) (Deduct)/add back share of (profits)/losses of joint ventures and associates, net of interest and taxation (209) 1 (208) (92) (1) (93) 2,504 3,761 6,265 3,073 (3,549) (476)
Tax on profit/(loss) at standard UK corporation tax rate of

23.5% (2022: 19%) (588) (884) (1,472) (584) 674 90
Effects of:

Depreciation/impairment on non-qualifying assets (1) (129) (130) 1 37 38 Other permanent differences (16) 1 (15) — — —
Electricity Generator Levy (67) — (67) — — —
Higher rates applicable to Upstream profits/losses (44) (180) (224) (429) (112) (541) Energy profits levy charge for the year (133) (395) (528) (31) (212) (243) Energy profits levy re-measurement of deferred tax
balances 7 30 37 — 148 148
Upstream investment incentives — — — 32 — 32
Petroleum revenue tax — 52 52 1 — 1
Non-UK tax rates (excluding Upstream) 6 17 23 (28) (32) (60) Movements in uncertain tax provisions (1) — (1) (13) — (13) (Impairment)/write-back of deferred tax assets relating to Upstream losses and decommissioning — (55) (55) (1) 121 120 Changes in UK tax rate (2) (3) (5) (7) 242 235
Disposal of Norway business — — — — (69) (69)
Prior year adjustment 12 (52) (40) 9 (8) 1
Other (non-tax deductible)/non-taxable items (11) 3 (8) 4 4 8 Taxation on profit/(loss) (838) (1,595) (2,433) (1,046) 793 (253) Less: movement in deferred tax 49 1,685 1,734 131 (978) (847) Total current tax (789) 90 (699) (915) (185) (1,100)
The Group is subject to taxation in a number of jurisdictions. The complexity of applicable rules may result in legitimate differences of interpretation between the Group and taxing authorities (or between different taxing authorities) especially where an economic judgement or valuation is involved. Resolution of these differences typically takes many years. The uncertain tax provisions represent multiple layers of estimation for different time periods and different jurisdictions.

The Group has applied IFRIC 23 ‘Uncertainty over Income Tax Treatments’. The interpretation requires consideration of the likelihood that the relevant taxing authority will accept an uncertain tax treatment in order to determine the measurement basis. The value is calculated in accordance with the rules of the relevant tax authority when acceptance is deemed probable.

The Group’s uncertain tax provision relates to differences in the interpretation of tax legislation in the UK and Canada. Due to the uncertainty associated with such tax items, there is a possibility that, on conclusion of open tax matters at a future date, the final outcome may differ. The uncertain tax provision represents management’s assessment of the likely outcome of each issue.

At 31 December 2023 the provision for uncertain tax items was £43 million (2022: £42 million). The Group provided an indemnity to Sval Energi following the sale of Spirit Energy’s Norwegian business and the transfer of the legal liabilities in respect of open tax disputes. Any movement in the underlying indemnity (excluding movements attributable to foreign exchange rates) will be recorded through the profit before tax of the Group. As at 31 December 2023 the indemnity in respect of the tax disputes was £123 million (2022: £129 million). 158 Financial Statements | Centrica plc Annual Report and Accounts 2023 507 of 1021

9. TAXATION
(c) Factors that may affect future tax charges
The Group’s effective tax rates are impacted by changes to the mix of activities and profitability across the territories in which it operates.

Effective tax rates may also fluctuate where profits and losses cannot be offset for tax purposes. For example, losses arising in one territory cannot be offset against profits in another.

The Group’s effective tax rate is dependent on the proportion of Group profits and losses arising from its UK upstream and nuclear activities relative to lower taxed UK and other jurisdictions’ profits and losses.

The headline rate of tax on ring fence profits from gas production in the UK was 75% (consisting of ring fence corporation tax of 30%, supplementary charge of 10%, and the Energy Profits Levy of 35%) versus 23.5% UK statutory corporation tax rate.

The Energy Profits Levy is a temporary measure and will apply to gas production profits until 31 March 2028. However, on 9 June 2023 the UK Government announced the Energy Security Investment Mechanism. As a result, the Energy Profits Levy will cease to apply if average oil and gas prices fall to historically normal levels for two consecutive quarters. Based on 20-year averages, normal levels would be achieved where both average oil and gas prices fall to, or below, US$71.40 per barrel for oil and £0.54 per therm for gas. If the Energy Profits Levy ceases to apply, the headline rate on ring fence profits will reduce to 40%. Based on the independent Office for Budget Responsibility’s forecast, the Energy Security Investment Mechanism is not expected to be triggered before the planned end date for Energy Profits Levy of 31 March 2028.

PRT is set at 0% but may still give rise to historic refunds from the carry-back of excess reliefs (for example, from decommissioning).

The Electricity Generator Levy applies from 1 January 2023 to 31 March 2028 at the tax rate of 45% to electricity generation revenues, which will be determined by reference to revenue from sales exceeding a benchmark price of £75/MWh. The benchmark price is indexed on 1 April each year by reference to Consumer Price Index for the previous December.

The Electricity Generator Levy is not an income tax for accounting purposes and therefore is included in the Group’s cost of sales and our share of the results of joint ventures and associates operating profits and is not deductible for the purposes of UK corporation tax. The Electricity Generator Levy is a wholly new type of levy and there remains some uncertainty over how the provisions are to be applied and consequently the amount of levy payable. See note 1(b) for details of the uncertainties regarding the application of the Electricity Generator Levy to the Group’s revenues.

The Group monitors income tax developments in all the jurisdictions in which the Group operates, including the OECD Base Erosion and Profit Shifting (BEPS) initiative (Pillar 2), which may affect the Group’s tax liabilities. On 8 October 2022, more than 135 countries of the OECD Inclusive Framework on BEPS committed to fundamental changes to the international corporate tax system. This includes a proposed global minimum corporation tax rate set at 15% for financial years beginning in 2024. Steps to introduce a global minimum corporation tax have been enacted in 2023 in the jurisdictions in which the Group operates.

The Group does not expect its tax liabilities to be materially increased as a result of the implementation of the Pillar 2 rules. The Group is currently assessing their detailed impact, but the Republic of Ireland is the only jurisdiction that is likely to be affected. The Republic of Ireland has enacted a minimum corporate tax rate of 15% with effect from 1 January 2024, increasing the rate from its current 12.5%. The impact on the Group’s effective tax rate based on 2023 profits is less than 1%. (d) Relationship between current tax charge and taxes paid 2023 2022
UK
£m
Non-UK
£m
Total
£m
UK
£m
Non-UK
£m
Total
Year ended 31 December £m
Current tax charge/(credit):

Corporation tax 602 98 700 649 453 1,102
Petroleum revenue tax (1) — (1) (2) — (2)
Total tax on results for the year (per note 9(b)) 601 98 699 647 453 1,100 Current tax included in other comprehensive income (i) (29) — (29) (29) — (29) Total tax charge 572 98 670 618 453 1,071
Taxes paid/(refunded):

Corporation tax 690 116 806 261 331 592
Petroleum revenue tax (3) — (3) (18) — (18)
687 116 803 243 331 574
Included in the following lines of the Group Cash Flow Statement:

Taxes paid in net cash flows 803 574
(i) Current tax movements relating to pension deficit payments are reported in other comprehensive income.

Differences between current tax charged and taxes paid arose principally due to the following factors:
¢ Corporation tax payments are generally made by instalment, based on estimated taxable profits, or the prior period’s profits.

Fluctuations in profits from year to year, one-off items and mark-to-market movements within the year may therefore give rise to divergence between the charge for the year and the taxes paid. In certain jurisdictions advance tax payments are required (based on estimated tax liabilities) which can result in overpayments. These are included as tax assets, to be refunded in a subsequent period; and ¢ PRT refunds are based on results in the preceding six-monthly PRT period, therefore PRT cash movements will reflect refunds on a six-month delay.

Financial Statements | Centrica plc Annual Report and Accounts 2023 159 508 of 1021

10. EARNINGS PER ORDINARY SHARE
Earnings per share (EPS) is the amount of profit or loss attributable to each share. Basic EPS is the amount of profit or loss for the year divided by the weighted average number of shares in issue during the year. Diluted EPS includes the impact of outstanding share options.

Basic earnings per ordinary share has been calculated by dividing the profit attributable to equity holders of the Company for the year of £3,929 million (2022: loss of £782 million) by the weighted average number of ordinary shares in issue during the year of 5,569 million (2022: 5,869 million). The number of shares excludes 339 million ordinary shares (2022: 32 million), being the weighted average number of the Company’s own shares held in the employee share trust and treasury shares repurchased during the year by the Group as part of the share buyback programme. These 339 million shares do not include shares expected to be repurchased as part of the Group’s share buyback programme during 2024. See note S4.

The Directors believe that the presentation of adjusted basic earnings per ordinary share, being the basic earnings per ordinary share adjusted for certain re-measurements and exceptional items, assists with understanding the underlying performance of the Group, as explained in note 2.

Information presented for diluted and adjusted diluted earnings per ordinary share uses the weighted average number of ordinary shares as adjusted for 91 million (2022: 68 million) potentially dilutive ordinary shares as the denominator, unless it has the effect of increasing the profit or decreasing the loss attributable to each ordinary share.

Basic to basic adjusted earnings per ordinary share reconciliation 2023 2022
Year ended 31 December £m
Pence per
ordinary share £m
Pence per
ordinary share
Earnings – basic 3,929 70.6 (782) (13.3)
Net exceptional items after taxation (notes 2 and 7) (i) 600 10.8 279 4.8 Certain re-measurement (gains)/losses after taxation (notes 2 and 7) (i) (2,670) (48.0) 2,553 43.4 Earnings – adjusted basic 1,859 33.4 2,050 34.9
Earnings – diluted (ii) 3,929 69.4 (782) (13.3)
Earnings – adjusted diluted 1,859 32.8 2,050 34.5
(i) Net exceptional items after taxation and certain re-measurement losses after taxation are adjusted to reflect the share attributable to non-controlling interests. (ii) Potential ordinary shares are not treated as dilutive when they would decrease a loss per share.

11. DIVIDENDS
Dividends represent the return of profits to shareholders. Dividends are paid as an amount per ordinary share held. The Group retains part of the profits generated to meet future investment plans or to fund share buyback programmes. 2023 2022
£m
Pence per
ordinary share
Date of
payment £m
Pence per
ordinary share
Date of
payment
Prior year final dividend 113 2.00 20 Jul 2023 — — —
Interim dividend 73 1.33 16 Nov 2023 59 1.00 17 Nov 2022 186 59
The Directors propose a final dividend of 2.67 pence per ordinary share for the year ended 31 December 2023 (which would total £144 million based on shareholding at that date). The dividend will be paid on 11 July 2024 to those shareholders registered on 31 May 2024.

The Company has sufficient distributable reserves to pay dividends to its ultimate shareholders. Distributable reserves are calculated on an individual legal entity basis and the ultimate parent company, Centrica plc, currently has adequate levels of realised profits within its retained earnings to support dividend payments. Refer to the Centrica plc Company Balance Sheet on page 230. At 31 December 2023, Centrica plc’s Company-only distributable reserves were c.£4.5 billion (2022: c.£2.9 billion). On an annual basis, the distributable reserve levels of the Group’s subsidiary undertakings are reviewed and dividends paid up to Centrica plc as appropriate to replenish its reserves. 160 Financial Statements | Centrica plc Annual Report and Accounts 2023 509 of 1021

12. ACQUISITIONS AND DISPOSALS
This section details business combinations, asset acquisitions and disposals made by the Group.

During the year, Centrica Business Solutions acquired a number of companies with existing grid connections for the purpose of building power assets in line with the Group’s strategy of being a flexible energy provider. The total consideration was £34 million with one transaction being accounted for as a business combination and the remainder as asset acquisitions. There have been no other material acquisitions or disposals either individually or in aggregate. There have been no material updates to the fair value of assets and liabilities recognised for businesses acquired in 2022.

During the year, the Group increased its equity holding in Greener Ideas Limited from 50% to 80% for consideration of £nil at which point it obtained control and started acquisition accounting. Property, plant and equipment of £44 million was acquired as part of this acquisition alongside debt which meant that no goodwill arose.

During the period, deferred consideration of £55 million was received in respect of the Spirit Norway disposal in 2022 and £17 million was distributed to SWM Bayerische E&P Beteiligungsgesellschaft mbH.

Financial Statements | Centrica plc Annual Report and Accounts 2023 161 510 of 1021

13. PROPERTY, PLANT AND EQUIPMENT
PP&E includes significant investment in power generating assets, storage assets and gas and liquid production assets.

Once operational, all assets are depreciated over their useful lives. (a) Carrying amounts
2023 2022
Land and
buildings
£m
Plant,
equipment
and
vehicles
£m
Power
generation
£m
Gas
production
and
storage
£m
Total
£m
Land and
buildings
£m
Plant,
equipment
and
vehicles
£m
Power
generation
£m
Gas
production
and
storage
£m
Total
£m
Cost
1 January 235 691 199 11,517 12,642 259 575 205 11,339 12,378 Acquisitions (i) 1 7 70 — 78 — — — — —
Additions and capitalised
borrowing costs 53 123 108 89 373 — 117 12 123 252
Disposals/retirements (8) (33) (3) — (44) (33) (21) (27) (29) (110) Write-downs — — — — — — — — (64) (64)
Decommissioning liability and
dilapidations revisions and
additions (note 21)
4 — 2 92 98 1 — — 67 68
Lease modifications and
re-measurements 12 50 — 8 70 — (7) — — (7)
Exchange adjustments (3) (13) (4) (32) (52) 8 27 9 81 125 31 December 294 825 372 11,674 13,165 235 691 199 11,517 12,642 Accumulated depreciation and
impairment
1 January 131 396 45 10,322 10,894 131 329 63 9,870 10,393 Charge for the year (ii) 24 85 12 274 395 22 81 15 392 510 Impairments/(write-backs) 3 18 2 82 105 4 (2) (10) 20 12 Disposals/retirements (8) (32) (3) — (43) (28) (19) (25) (29) (101) Exchange adjustments (1) (3) (1) (27) (32) 2 7 2 69 80
31 December 149 464 55 10,651 11,319 131 396 45 10,322 10,894 NBV at 31 December 145 361 317 1,023 1,846 104 295 154 1,195 1,748 (i) Acquisitions includes £44 million relating to the step-up of the investment in Greener Ideas Limited from joint venture to subsidiary during the year. See note 12 for further details.
(ii) Depreciation of £324 million (2022: £441 million) has been recognised in cost of sales, and £71 million (2022: £69 million) in operating costs before exceptional items. 162 Financial Statements | Centrica plc Annual Report and Accounts 2023 511 of 1021

13. PROPERTY, PLANT AND EQUIPMENT
(b) Assets in the course of construction included in above carrying amounts 31 December
2023
£m
2022
£m
Plant, equipment and vehicles 99 33
Gas production and storage 29 61
Power generation 166 27
(c) Additional information relating to right-of-use assets included in the above 2023 2022
Land and
buildings
£m
Plant,
equipment
and
vehicles
£m
Power
generation
£m
Gas
production
and
storage
£m
Total
£m
Land and
buildings
£m
Plant,
equipment
and
vehicles
£m
Power
generation
£m
Gas
production
and
storage
£m
Total
£m
Additions 47 41 — — 88 — 54 — — 54
Depreciation charge for the year (23) (65) — (10) (98) (21) (66) — (12) (99) NBV at 31 December 123 223 — 14 360 86 207 — 16 309
Further information on the Group’s leasing arrangements is provided in note 23.

Financial Statements | Centrica plc Annual Report and Accounts 2023 163 512 of 1021

14. INTERESTS IN JOINT VENTURES AND ASSOCIATES
Investments in joint ventures and associates represent businesses where we exercise joint control or significant influence and generally have an equity holding of up to 50%. These include the investment in Lake Acquisitions Limited, which owns the existing UK nuclear power station fleet. (a) Interests in joint ventures and associates
2023 2022
Investments in
joint ventures
and associates
£m
Investments in
joint ventures
and associates
£m
1 January 1,580 1,628
Additions (i) 9 18
(Impairments)/write-backs (ii) (549) 195
Share of profit for the year 208 93
Share of other comprehensive loss (iii) (95) (293)
Dividends (220) (60)
Disposals (iv) (28) —
Other movements (2) (1)
31 December 903 1,580
(i) The £9 million in 2023 relates to cash injections into Greener Ideas Limited. (ii) The £549 million in 2023 relates to nuclear investment impairment (2022: £195 million write-back). See note 7 for further details. (iii) Share of other comprehensive loss mainly relates to actuarial changes on pension schemes within the nuclear investment. (iv) In 2023, the Group increased its equity interest in Greener Ideas Limited and obtained control of the entity from that point. (b) Share of joint ventures’ and associates’ assets and liabilities 2023 2022
31 December
Associates
Nuclear
£m
Other
£m
Total
£m
Total
£m
Share of non-current assets 3,888 — 3,888 4,196
Share of current assets 780 — 780 842
4,668 — 4,668 5,038
Share of current liabilities (270) — (270) (348)
Share of non-current liabilities (2,449) — (2,449) (2,613) (2,719) — (2,719) (2,961)
Cumulative impairment (1,046) — (1,046) (497)
Interests in joint ventures and associates 903 — 903 1,580 Net cash included in share of net assets 99 — 99 112
Further information on the Group’s investments in joint ventures and associates is provided in notes 6 and S10. 164 Financial Statements | Centrica plc Annual Report and Accounts 2023 513 of 1021

15. OTHER INTANGIBLE ASSETS AND GOODWILL
The Group Balance Sheet contains significant intangible assets. Goodwill, customer relationships and brands usually arise when we acquire a business. Goodwill is attributable to enhanced geographical presence, cost savings, synergies, growth opportunities, the assembled workforce and also arises from items such as deferred tax. Goodwill is not amortised but is assessed for recoverability each year.

The Group uses European Union Allowances (EUAs) and Renewable Obligation Certificates/Renewable Energy Certificates (ROCs/RECs) to satisfy its related obligations.

Upstream exploration and evaluation expenditure is capitalised as an intangible asset until development of the asset commences, at which point it is transferred to PP&E or is deemed not commercially viable and is written down. (a) Carrying amounts
2023 2022
Customer
relationships
and brands
£m
Application
software
(i)(ii)
£m
EUA/
ROC/
REC (iii)
£m
Exploration
and
evaluation
expenditure
£m
Goodwill
£m
Total
£m
Customer
relationships
and brands
£m
Application
software
(i)(ii)
£m
EUA/
ROC/
REC
£m
Exploration
and
evaluation
expenditure
£m
Goodwill
£m
Total
£m
Cost
1 January 208 1,510 280 121 680 2,799 201 1,584 213 121 665 2,784 Additions and capitalised
borrowing costs — 49 780 — — 829 — 44 799 — — 843
Acquisitions 4 — — — — 4 11 — — — — 11
Disposals/retirements
and surrenders (46) (38) (767) (121) — (972) (9) (129) (732) — — (870) Exchange adjustments (2) (6) — — (7) (15) 5 11 — — 15 31 31 December 164 1,515 293 — 673 2,645 208 1,510 280 121 680 2,799 Accumulated
amortisation and
impairment
1 January 111 1,180 — 121 271 1,683 95 1,143 — 121 264 1,623 Amortisation (iv) 16 107 — — — 123 17 142 — — — 159
Disposals/retirements
and surrenders (46) (38) — (121) — (205) (9) (129) — — — (138) Impairments 5 10 — — — 15 5 15 — — — 20
Exchange adjustments (2) (4) — — (3) (9) 3 9 — — 7 19
31 December 84 1,255 — — 268 1,607 111 1,180 — 121 271 1,683 NBV at 31 December 80 260 293 — 405 1,038 97 330 280 — 409 1,116 (i) Application software includes assets under construction with a cost of £110 million (2022: £83 million). (ii) The remaining amortisation period of individually material application software assets, which had a carrying value of £65 million (2022: £100 million), is between 0 and 5 years. Additionally, there is £82 million (2022: £61 million) of individually material software assets under construction. (iii) The Group has assessed the expected submission dates of EUA/ROC/RECs currently held and where they are expected to be surrendered within a year of purchase, they are presented within current assets, otherwise as non-current. At 31 December 2023, £293 million is presented within current assets. See note 1 for further details. (iv) Amortisation of £123 million (2022: £159 million) has been recognised in operating costs before exceptional items.

Financial Statements | Centrica plc Annual Report and Accounts 2023 165 514 of 1021

15. OTHER INTANGIBLE ASSETS AND GOODWILL
(b) Carrying amount of goodwill and intangible assets with indefinite useful lives allocated to CGUs Goodwill acquired through business combinations, and indefinite-lived intangible assets, have been allocated for impairment testing purposes to individual CGUs or groups of CGUs, each representing the lowest level within the Group at which the goodwill or indefinitelived intangible asset is monitored for internal management purposes. See note S2 for further details on impairment assumptions. 2023 2022
31 December
Principal acquisitions to which
goodwill and intangibles with
indefinite useful lives relate
Carrying
amount of
goodwill
£m
Carrying amount of
indefinite-lived
intangible assets (i)
£m
Total
£m
Carrying
amount of
goodwill
£m
Carrying amount of
indefinite-lived
intangible assets (i)
£m
Total
£m
CGUs
British Gas Services & Solutions AlertMe/Dyno-Rod 63 57 120 63 57 120 British Gas Energy Enron Direct/Electricity Direct 121 — 121 121 — 121 Centrica Business Solutions
– Energy supply Enron Direct/Electricity Direct 60 — 60 60 — 60 Bord Gáis Energy Bord Gáis Energy 16 — 16 16 — 16
Centrica Energy Neas Energy 145 — 145 149 — 149
405 57 462 409 57 466
(i) The indefinite-lived intangible assets relate mainly to the Dyno-Rod brand.

The Group has considered the impact of climate change on the carrying value of goodwill, including the impact of the risks and opportunities. See note 3(c).
166 Financial Statements | Centrica plc Annual Report and Accounts 2023 515 of 1021

16. DEFERRED TAX LIABILITIES AND ASSETS
Deferred tax is an accounting adjustment to provide for tax that is expected to arise in the future as a result of differences in the accounting and tax bases of assets and liabilities. The principal deferred tax assets and liabilities recognised by the Group relate to capital investments, decommissioning assets and provisions, tax losses, fair value movements on derivative financial instruments, PRT and pensions.

Accelerated tax
depreciation
(corporation tax)
£m
Net
decommissioning (i)
£m
Losses
carried
forward (ii)
£m
Other timing
differences
£m
Marked-tomarket
positions
£m
Net deferred
PRT (iii)
£m
Retirement
benefit
obligation and
other
provisions
£m
Total
£m
1 January 2022 (458) 556 187 31 545 42 (116) 787
(Charge)/credit to income (136) (101) 29 (93) 1,160 (13) 1 847 Credit/(charge) to equity — — — — 8 — (6) 2
Transferred within held for sale — — — 70 — — — 70
Exchange and other adjustments (1) — — (4) — — — (5)
31 December 2022 (595) 455 216 4 1,713 29 (121) 1,701
Credit/(charge) to income 115 (13) (122) (6) (1,738) 52 (22) (1,734) Credit to equity — — — 6 — — 64 70
Exchange and other adjustments — — — (5) — — — (5)
31 December 2023 (480) 442 94 (1) (25) 81 (79) 32
(i) Net decommissioning includes deferred tax assets of £617 million (2022: £596 million) in respect of decommissioning provisions. (ii) The losses arise principally from accelerated allowances for upstream investment expenditure, for which equivalent deferred tax liabilities are included under accelerated tax depreciation.
(iii) The deferred PRT amounts include the effect of deferred corporation tax as PRT is chargeable to corporation tax.

Certain deferred tax assets and liabilities have been offset where there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. 2023 2022
31 December
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
Gross deferred tax balances 1,007 (975) 2,481 (780)
Offsetting deferred tax balances (551) 551 (772) 772
Net deferred tax balances (after offsetting for financial reporting purposes) 456 (424) 1,709 (8) Deferred tax assets arise typically on decommissioning provisions, trading losses carried forward, retirement benefit obligations and marked-to-market positions. Forecasts indicate that there will be suitable taxable profits to utilise those deferred tax assets not offset against deferred tax liabilities. Specific legislative provisions applicable to gas production provide assurance that deferred tax assets relating to decommissioning costs and certain trading losses will be utilised.

The UK upstream deferred tax assets and liabilities were measured at the headline rate of tax of 75% applicable to the UK gas profits, consisting of 30% ring fence corporation tax, 10% supplementary charge and 35% energy profits levy.

At the balance sheet date, the Group had £1,402 million (2022 revised: £939 million) unrecognised deductible temporary differences related to carried forward tax losses and other temporary differences available for utilisation against future taxable profits.

At the balance sheet date, no taxable temporary differences existed in respect of the Group’s overseas investments (2022: £nil).

We have applied the mandatory exception to recognising and disclosing information about the deferred tax assets and liabilities related to Pillar 2 income taxes in accordance with the amendments to IAS 12 adopted by the UK Endorsement Board on 19 July 2023.

Financial Statements | Centrica plc Annual Report and Accounts 2023 167 516 of 1021

17. TRADE AND OTHER RECEIVABLES AND CONTRACT-RELATED ASSETS Trade and other receivables include accrued income, and are amounts owed by our customers for goods we have delivered or services we have provided. These balances are valued net of expected credit losses. Other receivables include payments made in advance to our suppliers. Contract-related assets are balances arising as a result of the Group’s contracts with customers in the scope of IFRS 15. 2023 2022
31 December
Current
£m
Non-current
£m
Current
£m
Non-current
£m
Financial assets:

Trade receivables 2,991 — 2,207 —
Unbilled downstream energy income 1,065 — 1,281 —
Trading and energy procurement accrued income (i) 1,782 — 3,179 — Other accrued income 76 — 324 —
Cash collateral posted 260 — 1,154 —
Supplier of Last Resort receivables 45 3 253 22
Government scheme receivables — — 284 —
Other receivables (including contract assets) 176 101 346 24 6,395 104 9,028 46
Less: provision for credit losses (1,309) — (872) —
5,086 104 8,156 46
Non-financial assets: prepayments, other receivables and costs to obtain a contract with a customer (ii) 323 106 294 83
5,409 210 8,450 129
(i) Trading and energy procurement counterparty receivables are typically with customers with external, published credit ratings. Such receivables have typically much lower credit risk than downstream counterparties, are settled in a short period of time and expected credit losses are not significant. (ii) Includes costs of £10 million (2022: £14 million) incurred to obtain contracts with customers in the British Gas Energy and British Gas Services & Solutions segments.

Costs are amortised over the expected tenure of the customer contract. See note S2.

The amounts above include gross amounts receivable arising from the Group’s IFRS 15 contracts with customers of £2,782 million (2022: £2,325 million). Additionally, accrued income of £1,115 million (2022: £1,371 million) arising under IFRS 15 contracts is included.

Trade and other receivables include financial assets representing the contractual right to receive cash or other financial assets from residential customers, business customers and treasury, trading and energy procurement counterparties as follows:
2023 2022
31 December
Current
£m
Non-current
£m
Current
£m
Non-current
£m
Financial assets by business type:

Residential customers (i) 2,725 3 2,755 22
Business customers 1,516 98 1,750 22
Treasury, trading and energy procurement counterparties 2,154 3 4,523 2 6,395 104 9,028 46
Less: provision for credit losses (1,309) — (872) —
5,086 104 8,156 46
(i) Residential customers include current other receivables of £45 million (2022: £253 million) and non-current other receivables of £3 million (2022: £22 million) in relation to SoLR claims, see note 3(a) for further details.
168 Financial Statements | Centrica plc Annual Report and Accounts 2023 517 of 1021

17. TRADE AND OTHER RECEIVABLES AND CONTRACT-RELATED ASSETS Credit loss charge for trade and other receivables
The impairment charge in trade receivables is stated net of credits for the release of specific provisions made in previous years, which are no longer required. These relate primarily to residential and business customers in the UK. Movements in the provision for credit losses by business type are as follows:
2023 2022
Residential
customers
£m
Business
customers
£m
Treasury,
trading
and energy
procurement
counterparties
£m
Total
£m
Residential
customers
£m
Business
customers
£m
Treasury,
trading
and energy
procurement
counterparties
£m
Total
£m
1 January (567) (305) — (872) (426) (207) — (633)
Increase in impairment of trade receivables
(predominantly related to credit impaired trade
receivables) (i) (ii) (iii) (396) (198) (16) (610) (234) (124) — (358) Receivables written off (iv) 113 60 — 173 93 26 — 119
31 December (850) (443) (16) (1,309) (567) (305) — (872) (i) Includes £587 million (2022: £348 million) of credit losses related to trade receivables resulting from contracts in the scope of IFRS 15. (ii) All loss allowances reflect the lifetime expected credit losses on trade receivables and contract assets. (iii) Excludes recovery of previously written-off receivables of £8 million (2022: £7 million). Due to the large number of individual receivables and the matrix approach employed, any reduction in provision is reflected in a reduced charge for the relevant period, rather than in separately identifiable reversals of previous provisions. (iv) Materially all write-offs relate to trade receivables where enforcement activity is ongoing. The gross carrying value of write-offs related to trade receivables where enforcement activity is ongoing was £142 million (2022: £105 million).

Year ended 31 December
2023
£m
2022
£m
Increase in impairment provision for trade receivables (per above) (610) (358) Less recovery of previously written-off receivables 8 7 Credit losses on financial assets (per Group Income Statement) (602) (351) Enforcement activity continues in respect of balances that have been written off unless there are specific known circumstances (such as bankruptcy) that render further action futile.

Financial Statements | Centrica plc Annual Report and Accounts 2023 169 518 of 1021

17. TRADE AND OTHER RECEIVABLES AND CONTRACT-RELATED ASSETS Credit loss charge for trade and other receivables
Receivables from residential and business customers are generally considered to be credit impaired when the payment is past the contractual due date. The Group applies different definitions of default for different groups of customers, ranging from sixty days past the due date to six to twelve months from the issuance of a final bill. Receivables are generally written off only once a period of time has elapsed since the final bill. Contractual due dates range from falling due upon receipt to falling due in thirty days from receipt.

The table below shows credit impaired balances in gross receivables (those that are past due) and those that are not yet due and therefore not considered to be credit impaired.

Gross trade and other receivables
31 December
2023
£m
2022
£m
Balances that are not past due 4,403 7,414
Balances that are past due (i) 1,992 1,614
6,395 9,028
(i) The majority of balances that are past due relate to residential and business customers, ageing of these receivables is included in the credit risk tables in the sections below.

The IFRS 9 impairment model is applicable to the Group’s financial assets including trade receivables, contract assets and other financial assets using the simplified approach as described in note S3. As the majority of the relevant balances are trade receivables and contract assets to which the simplified model applies, this disclosure focuses on these balances.

The provision for credit losses for trade receivables and contract assets is based on an expected credit loss model that calculates the expected loss applicable to the receivable balance over its lifetime. Expected credit losses on receivables due from treasury, trading and energy procurement counterparties are not significant (see note S3 for further analysis of this determination). For residential and business customers default rates are calculated initially by considering historical loss experience and applied to trade receivables within a provision matrix. The matrix approach allows application of different default rates to different groups of customers with similar characteristics. These groups are determined by a number of factors including: the nature of the customer, the payment method selected and, where relevant, the sector in which they operate. The characteristics used to determine the groupings of receivables are the factors that have the greatest impact on the likelihood of default. The rate of default increases once the balance is thirty days past due.

Concentration of credit risk in trade and other receivables Treasury, trading and energy procurement counterparty receivables are typically with customers with external, published credit ratings.

Such receivables have typically much lower credit risk than downstream counterparties, and that risk is assessed primarily by reference to the credit ratings rather than to the ageing of the relevant balance. Counterparty credit rating information is given in note S3.

The Group continues to recover amounts receivable under the Last Resort Supplier Payment mechanism which was triggered when the Group was appointed as a Supplier of Last Resort to a number of energy suppliers who ceased to trade during 2021 and 2022. In accordance with Ofgem licence conditions, the Group submitted two claims for incremental costs reasonably incurred to supply affected customers. The first of these claims has now been settled, and the second is being settled in twelve monthly payments ending in April 2024. A further smaller claim is in process and expected to be settled by April 2025. The receivable outstanding at 31 December 2023 is £48 million (31 December 2022: £275 million). The claims are settled by network operators, to whom the Group separately pays transmission and distribution charges. The risk of default is considered low. In addition, Ofgem has the power under licensing conditions to take enforcement action against default in accordance with its statutory duties and its enforcement guidelines.

The Group’s cash collateral balance has decreased to £260 million in 2023 (2022: £1,154 million) as a result of lower commodity prices.

Collateral counterparties typically have strong credit ratings and accordingly have low credit risk; the Group does not expect credit losses to arise on these balances. See note S3.

The majority of the Group’s credit exposure arises in the British Gas Energy and Centrica Business Solutions segments and relates to residential and business energy customers. The credit risk associated with these customers is assessed as described above, using a combination of the age of the receivable in question, internal ratings based on a customer’s payment history, and external data from credit rating agencies and wider macroeconomic information. The disclosures below reflect the information that is reported internally for credit risk management purposes in these segments.
170 Financial Statements | Centrica plc Annual Report and Accounts 2023 519 of 1021

17. TRADE AND OTHER RECEIVABLES AND CONTRACT-RELATED ASSETS British Gas Energy credit risk
Of the Group total of £2,991 million (2022: £2,207 million) billed trade receivables, the British Gas Energy reporting segment contributes £2,380 million (2022: £1,531 million). British Gas Energy includes small business customers on the basis that their profile closely matches those of residential customers. As described above, credit risk is concentrated in receivables from energy customers who pay in arrears.

Gross receivables from British Gas Energy residential customers amount to £1,651 million (2022: £992 million) and are analysed below.

Trade receivables due
from British Gas
residential energy
customers as at
31 December (i) 2023 2022
Days beyond invoice date (ii)
<30 days
£m
30-90 days
£m
>90 days
£m
Total
£m
Percentage
of credit risk
<30 days
£m
30-90 days
£m
>90 days
£m
Total
£m
Percentage
of credit risk
Risk profile
Direct debits (iii)
Gross receivables 310 55 171 536 216 51 66 333
Provision — — (7) (7) — — (23) (23)
Net 310 55 164 529 1% 216 51 43 310 7%
Payment on receipt of bill (iii)
Gross receivables 114 71 650 835 118 54 286 458
Provision (4) (9) (412) (425) (4) (7) (180) (191)
Net 110 62 238 410 51% 114 47 106 267 42%
Final bills (iv)
Gross receivables 21 27 232 280 12 13 176 201
Provision (4) (12) (199) (215) (3) (6) (140) (149)
Net 17 15 33 65 77% 9 7 36 52 74%
Total net British Gas
residential energy
customers trade
receivables 437 132 435 1,004 39% 339 105 185 629 37%
(i) The receivables information presented in this table relates to downstream customers who pay energy bills using the methods presented. It excludes low residual credit risk amounts, such as balances in the process of recovery through pay-as-you-go energy (PAYGE) arrangements and amounts receivable from PAYGE energy vendors.

Gross amounts in the process of recovery through PAYGE arrangements at 31 December 2023 are £154 million (2022: £203 million), against which a provision of £117 million is held (2022: £138 million).
(ii) This ageing analysis is presented relative to invoicing date and presents receivables according to the oldest invoice outstanding with the customer. There are a range of payment terms extended to residential energy customers. Amounts paid on receipt of a bill (PORB), which are settled using bank transfers, cash or cheques are typically due within fourteen days of invoicing. Direct debit customers typically pay in equal instalments over a twelve-month period. (iii) Receivables settled by direct debit are deemed to present a lower credit risk than PORB amounts. This is reflected in the relative level of provision held for these types of receivables.
(iv) Final bill customers are those who are no longer customers of the Group and have switched energy supplier. These balances are deemed to have the highest credit risk.

Financial Statements | Centrica plc Annual Report and Accounts 2023 171 520 of 1021

17. TRADE AND OTHER RECEIVABLES AND CONTRACT-RELATED ASSETS Gross receivables from British Gas Energy small business customers amount to £575 million (2022: £336 million) and are analysed below.

Trade receivables due
from British Gas small
business energy
customers as at
31 December 2023 2022
Days beyond invoice date (i)
<30 days
£m
30-90 days
£m
>90 days
£m
Total
£m
Percentage
of credit risk
<30 days
£m
30-90 days
£m
>90 days
£m
Total
£m
Percentage
of credit risk
Risk profile
Small businesses
Gross receivables 115 53 407 575 64 21 251 336
Provision (3) (8) (302) (313) (1) (2) (191) (194)
Total net British Gas
small business energy
customers trade
receivables 112 45 105 262 54% 63 19 60 142 58%
(i) This ageing analysis is presented relative to invoicing date and presents receivables according to the oldest invoice outstanding with the customer. There are a range of payment terms extended to business energy customers. Standard credit terms for small business customers are ten working days.

Unbilled downstream energy income at 31 December 2023 includes gross balances of £693 million in respect of British Gas energy customers (2022: £880 million), against which a provision of £56 million is held (2022: £36 million).

Centrica Business Solutions energy credit risk
Of the Group total of £2,991 million (2022: £2,207 million) billed trade receivables, the Centrica Business Solutions reporting segment contributes £313 million (2022: £390 million). As described above, credit risk is concentrated in receivables from business energy customers who pay in arrears, the remaining balances being immaterial in disaggregation. Gross receivables from these customers amount to £269 million (2022: £346 million) and are analysed below.

Trade receivables due
from Centrica Business
Solutions business energy
customers as at
31 December 2023 2022
Days beyond invoice date (i)
<30 days
£m
30-90 days
£m
>90 days
£m
Total
£m
Percentage
of credit risk
<30 days
£m
30-90 days
£m
>90 days
£m
Total
£m
Percentage
of credit risk
Risk profile
Commercial and industrial (ii)
Gross receivables 75 9 26 110 170 9 31 210
Provision — — (13) (13) — — (15) (15)
Net 75 9 13 97 12% 170 9 16 195 7%
Medium-sized entities
Gross receivables 50 19 90 159 47 15 74 136
Provision — (1) (57) (58) — — (49) (49)
Net 50 18 33 101 36% 47 15 25 87 36%
Total net Centrica
Business Solutions
business energy
customers trade
receivables 125 27 46 198 26% 217 24 41 282 18%
(i) This ageing analysis is presented relative to invoicing date and presents receivables according to the oldest invoice outstanding with the customer. There are a range of payment terms extended to business energy customers. Standard credit terms for medium-sized entity customers are ten working days. Credit terms for Commercial and Industrial customers are bespoke and are set based on the commercial agreement with each customer. (ii) This category includes low credit risk receivables, including those from public sector and customers with high turnover (greater than £100 million).

Unbilled downstream energy income at 31 December 2023 includes gross balances of £239 million in respect of Centrica Business Solutions business energy customers (2022: £349 million), against which a provision of £14 million is held (2022: £14 million).

The remaining reporting segments which are not shown above are not considered to have material credit risk. 172 Financial Statements | Centrica plc Annual Report and Accounts 2023 521 of 1021

17. TRADE AND OTHER RECEIVABLES AND CONTRACT-RELATED ASSETS Sensitivity to changes in assumptions
Typically, the most significant assumption included within the expected credit loss provisioning model that gives rise to estimation uncertainty is that future performance will be reflective of past performance and that there will be no significant change in the payment profile or recovery rates within each identified group of receivables. To address this risk, the Group reviews and updates default rates, by group, on a regular basis to ensure they incorporate the most up to date assumptions along with forward-looking information where available and relevant. The Group also considers regulatory changes and customer segment specific factors that may have an impact, now or in the future, on the recoverability of the balance.

The specific consideration of forward-looking information in the impairment model does not usually give rise to significant changes in the levels of credit losses. However, inflationary pressures and high wholesale gas and electricity costs continue to cause uncertainty in economic outlook. The economic recovery remains vulnerable and there remains a level of estimation uncertainty inherent in determining credit loss provisions for the Group’s trade receivables.

Where customers experience difficulties in settling balances, the increased ageing of these amounts results in an increase in provisions held in respect of them under the provision matrix approach employed. The Group has also considered changes in customer payment patterns, the specific circumstances of the customers and the economic impacts of the factors identified above, on the sectors in which they operate. Whilst economic recovery is expected, a level of unpredictability remains apparent.

Customers are facing increases in their cost of living, including increased energy bills, higher inflation and higher interest rates. The Group has considered macroeconomic forecasts and sensitivities, as well as disposable income analysis from a credit rating agency, to model and determine the level of provisions for credit losses.

During 2023 the Group recognised credit losses of £602 million (2022: £351 million) in respect of financial assets, representing 2.3% of total Group revenue (2022: 1.5%) and 1.8% of total Group revenue from business performance (2022: 1.0%). As described above, the majority of the Group’s credit exposure arises in respect of downstream energy receivables in British Gas Energy and Centrica Business Solutions. Credit losses in respect of these assets amounted to £554 million (2022: £331 million). This represents 2.6% (2022: 2.1%) of total UK downstream energy supply revenue from these segments of £21,046 million (2022: £15,814 million). Further details of segmental revenue are provided in note 4.

Due to the different level of risks presented by billed and unbilled receivables, these asset groups are considered separately in the analysis below.

Billed trade receivables
31 December
2023
£m
31 December
2022
£m
Trade receivables (i) 2,991 2,207
Provision (1,240) (822)
Net balance 1,751 1,385
31 December
2023
%
31 December
2022
%
Provision coverage 41 37
Sensitivity £m £m
Impact on billed receivables/operating profit from 1 percentage point (increase)/decrease in provision coverage (ii) (30)/30 (22)/22 (i) Excludes the Government receivables under the Energy Price Guarantee (EPG) and Energy Bill Relief Scheme (EBRS) schemes of £nil (2022: £284 million) which are not provided for.
(ii) Credit risk in the Group is impacted by a large number of interacting factors.

Financial Statements | Centrica plc Annual Report and Accounts 2023 173 522 of 1021

17. TRADE AND OTHER RECEIVABLES AND CONTRACT-RELATED ASSETS Overall billed debt levels have increased significantly. Credit provisions have accordingly increased, primarily caused by the declining levels of cash collection performance. This has resulted in decreased recovery rates and increased provision rates for customers in the Group’s downstream operations. Within this portfolio, the continued deterioration seen in the payment on receipt of bill collections performance, coupled with a change in the mix of debt within the portfolio, has particularly driven the increase in provision rates.

The macroeconomic environment remains challenging with higher inflation, higher interest rates, lower growth projections and more limited government support measures. The collection performance in relation to customers who pay on receipt of bill has declined steadily, with more customers being unable to pay their energy bills due to the cost of living crisis. The impact has been further exacerbated by the suspension of all field activity since January 2023, following the investigation into certain prepayment meter installation activity.

There remains significant uncertainty around the persistent impact of these factors on bad debt. Leading debt indicators including the number of customers going into debt, insolvency volumes in business and direct debit cancellation rates in residential have continued to deteriorate during 2023. High commodity prices and the delayed impact on customer payments have not yet been fully reflected in the underlying matrix output model used to record provision coverage, partly due to the continued inclusion of Government support measures which only ended in June 2023. Therefore, as part of management’s assessment of adequacy of bad debt provisions, a £50 million increase to the macroeconomic provision has been recorded, the provision now totals £175 million across billed and unbilled debt and is included in the tables both above and below (2022: £125 million). Management considers the impact of specific cohorts of customers referenced in the previous tables when making this assessment, recognising the different credit terms and different risk profiles that exist.

This assessment also utilises a range of factors, both internal and external, historic and forward-looking, and considers the sensitivities of these to help management estimate the likely recovery of debt.

It remains uncertain as to when and how these factors will reduce the collectability of debt and at what scale. The impact of future changes in commodity prices may also impact this. The table above and the unbilled section below provide details of the sensitivity of moving the debt provision by a further 1%.

The Group’s services, upstream and trading operations are less susceptible to credit risk. No significant deterioration of credit risk has been experienced or is expected in the relevant segments in respect of billed trade receivables recognised at 31 December 2023, taking into account cash collection cycles in those areas of the Group and credit rating information (see note S3).

Unbilled downstream energy income
The table below shows the IFRS 15 unbilled downstream energy income for the Group as a whole. 31 December
2023
£m
31 December
2022
£m
Gross unbilled receivables 1,065 1,281
Provision (69) (50)
Net balance 996 1,231
31 December
2023
%
31 December
2022
%
Provision coverage 6 4
Sensitivity £m £m
Impact on unbilled receivables/operating profit from 1 percentage point (increase)/decrease in provision coverage (i) (11)/11 (13)/13 (i) Credit risk in the Group is impacted by a large number of interacting factors.

Unbilled downstream energy income is typically provided at a significantly lower rate than billed debt. This is because a large proportion of this debt once billed will be subject to the very short cash collection cycles of the Group’s downstream energy supply businesses.

18. INVENTORIES
Inventories represent assets that we intend to use in future periods, either by selling the asset itself (for example gas in storage) or by using it to provide a service to a customer. 31 December
2023
£m
2022
£m
Gas in storage and transportation (i) 824 1,076
Other raw materials and consumables 120 114
Finished goods and goods for resale 135 79
1,079 1,269
(i) Includes gas in storage held at fair value of £263 million (2022: £539 million).

The Group consumed £1,912 million of inventories (2022: £3,508 million) during the year. Write-downs amounting to £5 million (2022: £6 million) were charged to the Group Income Statement in the year. Reversals of write-downs amounted to £nil (2022: £9 million) during the year.
174 Financial Statements | Centrica plc Annual Report and Accounts 2023 523 of 1021

19. DERIVATIVE FINANCIAL INSTRUMENTS
The Group generally uses derivative financial instruments to manage the risk arising from fluctuations in the value of certain assets or liabilities associated with treasury management and energy sales and procurement, and for proprietary energy trading purposes. The Group also uses derivatives to hedge exchange risk.

For accounting purposes, derivatives are either classified as held for trading, in which case changes in their fair value are recognised in the Group Income Statement, or they are designated in hedging relationships. Where derivatives are in hedging relationships, the treatment of changes in their fair value depends on the nature of that relationship, and whether it represents a fair value hedge or a cash flow hedge. Note S5 provides further detail on the Group’s hedge accounting.

The table below gives a high-level summary of the Group’s accounting for its derivative contracts.

Purpose Classification Accounting treatment
Proprietary energy trading and
treasury management.

Held for trading and fair
value hedges.

Changes in fair value recognised in the Group’s business performance results for the year.

Treasury management. Cash flow hedges. Effective portion of hedge initially recognised in the Group Statement of Other Comprehensive Income. Gains and losses are recycled to the Group Income Statement when the hedged item impacts profit or loss. Ineffective portions of the hedge are recognised immediately in the Group’s business performance results for the year.

Energy procurement and
optimisation.

Held for trading. Changes in fair value recognised in the Group’s exceptional items and certain re-measurements results for the year.

The carrying values of derivative financial instruments by product type for accounting purposes are as follows:
2023 2022
31 December
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
Derivative financial instruments – held for trading under IFRS 9:

Energy derivatives – for procurement/optimisation 1,733 (1,715) 1,723 (5,400) Energy derivatives – for proprietary trading 1,418 (993) 5,355 (4,256) Foreign exchange derivatives 85 (144) 275 (268)
Derivative financial instruments in hedge accounting relationships:

Interest rate derivatives — (136) 37 (221)
Foreign exchange derivatives 36 (18) 37 (6)
Total derivative financial instruments 3,272 (3,006) 7,427 (10,151) Included within:

Derivative financial instruments – current 2,373 (2,391) 6,034 (8,841) Derivative financial instruments – non-current 899 (615) 1,393 (1,310) The contracts included within energy derivatives are subject to a wide range of detailed specific terms, but comprise the following general components, analysed on a net carrying value basis:
31 December
2023
£m
2022
£m
Short-term forward market purchases and sales of gas and electricity:

UK and Europe 1,163 (214)
Other derivative contracts including structured gas sale and purchase arrangements (720) (2,364) Net total 443 (2,578)
Net gains/(losses) on derivative financial instruments due to change in fair value 2023 2022 31 December
Income
Statement
£m
Equity
£m
Income
Statement
£m
Equity
£m
Financial assets and liabilities measured at fair value:

Derivative financial instruments – held for trading 3,024 — (4,568) — Derivative financial instruments in hedge accounting relationships 48 (13) (228) (10) 3,072 (13) (4,796) (10)
Financial Statements | Centrica plc Annual Report and Accounts 2023 175 524 of 1021

20. TRADE AND OTHER PAYABLES AND CONTRACT LIABILITIES
Trade and other payables include accruals and are principally amounts we owe to our suppliers. Financial deferred income represents monies received from customers in advance of the delivery of goods or services that may be returned to the customer if future delivery does not occur. For example, downstream customers with a credit balance may request repayment of the outstanding amount in cash, rather than taking delivery of commodity. By contrast, contract liabilities and non-financial deferred income arise when the Group receives consideration from a customer in advance of performance, and has a non-financial liability to deliver future goods or services in return. 2023 2022
31 December
Current
£m
Non-current
£m
Current
£m
Non-current
£m
Financial liabilities:

Trade payables (474) (4) (481) (4)
Deferred income (i) (1,178) — (538) —
Capital payables (152) — (158) —
Cash collateral received (184) — (601) —
Other payables (ii) (389) (197) (479) (150)
Accruals:

Commodity costs (2,464) — (5,371) —
Transportation, distribution and metering costs (319) — (377) — Operating and other accruals (942) — (765) —
(3,725) — (6,513) —
(6,102) (201) (8,770) (154)
Non-financial liabilities:

Other payables and accruals (iii) (761) — (701) (1)
Contract liabilities (30) (3) (37) (7)
Deferred income (iv) (107) (3) (508) (3)
(7,000) (207) (10,016) (165)
(i) Includes downstream customer credit balances for amounts billed in advance of energy supply. The amount naturally peaks over summer as customers consume less and will unwind as consumption of gas and electricity increases over winter. (ii) Other payables includes share buyback liability of £94 million (2022: £207 million). See note S4 for further details. (iii) Other non-financial payables and accruals includes ROCs creditors of £600 million (2022: £588 million). (iv) Deferred income includes £nil (2022: £440 million) from the Energy Bill Support Scheme which finished in 2023.

Maturity profile of financial liabilities within current trade and other payables 31 December
2023
£m
2022
£m
Less than 90 days (5,653) (8,383)
90 to 182 days (194) (217)
183 to 365 days (255) (170)
(6,102) (8,770)
176 Financial Statements | Centrica plc Annual Report and Accounts 2023 525 of 1021

21. PROVISIONS FOR LIABILITIES AND CHARGES
Provisions are recognised when an obligation exists that can be reliably measured, but where there is uncertainty over the timing and/or amount of the payment. The main provisions relate to decommissioning costs for upstream assets we own, or have owned, which require restoration or remediation, along with onerous supply contracts. Further provisions relate to restructuring costs, and legal and regulatory matters. 1 January 2023
£m
Charged in the
year
£m
Notional
interest
£m
Unused and
reversed in
the year
£m
Utilised
£m
Revisions and
additions
£m
Transfers (v)
£m
Exchange
adjustments
£m
31 December
2023
£m
Current
Restructuring costs (15) (6) — 6 3 — (1) 2 (11)
Decommissioning
costs (i) (ii) (216) — — — 173 — (89) — (132)
Onerous contracts
provision (iii) (937) (19) — 359 568 — — (1) (30)
Other (iv) (45) (89) — 7 26 — (4) (1) (106)
Total (1,213) (114) — 372 770 — (94) — (279)
1 January 2023
£m
Charged in the
year
£m
Notional
interest
£m
Unused and
reversed in
the year
£m
Revisions and
additions
£m
Transfers (v)
£m
Exchange
adjustments
£m
31 December
2023
£m
Non-current
Restructuring costs (5) — — — — 1 — (4)
Decommissioning costs (i) (ii) (1,298) (80) (21) 7 (94) 89 2 (1,395) Onerous contracts provision (iii) (99) (2) — 75 — — 1 (25) Other (iv) (44) (7) — 5 (4) 4 1 (45)
Total (1,446) (89) (21) 87 (98) 94 4 (1,469)
Included within the above liabilities are the following financial liabilities:
2023 2022
31 December
Current
£m
Non-current
£m
Current
£m
Non-current
£m
Restructuring costs (11) (4) (15) (5)
Provisions other than restructuring costs (123) (60) (973) (132) (134) (64) (988) (137)
Maturity profile of decommissioning provisions
31 December
2023
£m
2024-2028 (445)
2029-2033 (908)
2034-2038 (162)
2039-2043 (10)
2044-2048 (1)
2049-2053 (1)
(1,527)
(i) Provision has been made for the estimated net present cost of decommissioning gas production facilities at the end of their useful lives. The estimate has been based on 2P reserves, price levels and technology at the balance sheet date. The payment dates of decommissioning costs are dependent on the lives of the facilities, but utilisation of the provision is expected to occur until the 2040s. The maturity profile of total decommissioning provisions is analysed above. The rate used to discount decommissioning provisions is 1% (2022: 1%). See note 3. (ii) Included in the provision balance as at 31 December 2023 is £1,191 million held in Spirit Energy, £319 million in relation to the Rough field, and £17 million in the remainder of the business.
(iii) The provision balance at 31 December 2022 primarily comprised the onerous supply contract provision of £999 million. This provision has been fully unwound during 2023, see note 3(b).
(iv) Other provisions have been made for dilapidations, insurance, legal, warranty and various other claims. (v) Relates to amounts transferred between current and non-current provisions.

Financial Statements | Centrica plc Annual Report and Accounts 2023 177 526 of 1021

22. POST-RETIREMENT BENEFITS
The Group manages a number of final salary and career average defined benefit pension schemes. It also has defined contribution schemes. The majority of these schemes are in the UK. (a) Summary of main post-retirement benefit schemes
Number of
active
members
as at
31 December
2023
Total
membership
as at
31 December
Name of scheme Type of benefit Status Country 2023
Centrica Engineers Pension
Scheme
Defined benefit final salary pension Closed to new members in 2006 UK 1,483 8,402 Defined benefit career average pension Closed to new members in 2022 UK 2,761 7,179 Centrica Pension Plan Defined benefit final salary pension Closed to new members in 2003 UK 1,400 8,408 Centrica Pension Scheme Defined benefit final salary pension Closed to new members in 2003 UK 1 10,120 Defined benefit career average pension Closed to new members in 2008 UK 734 4,191 Defined contribution pension Open to new members UK 11,409 22,848 Bord Gáis Energy Company
Defined Benefit Pension Scheme Defined benefit final salary pension Closed to new members in 2014 Republic
of Ireland 89 169
Bord Gáis Energy Company
Defined Contribution Pension Plan Defined contribution pension Open to new members Republic
of Ireland 317 455
The Centrica Engineers Pension Scheme (CEPS), Centrica Pension Plan (CPP) and Centrica Pension Scheme (CPS) form the significant majority of the Group’s defined benefit obligation and are referred to below as the ‘Registered Pension Schemes’. The other schemes are individually, and in aggregate, immaterial.

Independent valuations
The Registered Pension Schemes are subject to independent valuations at least every three years, on the basis of which the qualified actuary certifies the rate of employer contributions, which together with the specified contributions payable by the employees and proceeds from the schemes’ assets, are expected to be sufficient to fund the benefits payable under the schemes.

The latest full actuarial valuations agreed and finalised with the Pension Trustees were carried out at the following dates: the Registered Pension Schemes at 31 March 2021 and the Bord Gáis Energy Company Defined Benefit Pension Scheme at 1 January 2023. These valuations have been updated to 31 December 2023 for the purpose of meeting the requirements of IAS 19. Investments held in all schemes have been valued for this purpose at market value.

Governance
The Registered Pension Schemes are managed by trustee companies whose boards consist of both company-nominated and membernominated Directors. Each scheme holds units in the Centrica Combined Common Investment Fund (CCCIF), which holds the majority of the combined assets of the Registered Pension Schemes. The board of the CCCIF is currently comprised of seven directors: two independent directors (including the Chair), two directors appointed by Centrica plc and one director appointed by each of the three Registered Pension Schemes.

Under the terms of the Pensions Act 2004, Centrica plc and each trustee board must agree the funding rate for its defined benefit pension scheme and a recovery plan to fund any deficit against the scheme-specific statutory funding objective. This approach was first adopted for the triennial valuations completed at 31 March 2006, and has been reflected in subsequent valuations, including the 31 March 2021 valuation.
178 Financial Statements | Centrica plc Annual Report and Accounts 2023 527 of 1021

22. POST-RETIREMENT BENEFITS
(b) Risks
The Registered Pension Schemes expose the Group to the following risks:

Asset volatility
The pension liabilities are calculated using a discount rate set with reference to AA corporate bond yields. If the growth in plan assets is lower than this, this will create an actuarial loss within other equity. The CCCIF is responsible for managing the assets of each scheme in line with the risk tolerances that have been set by the trustees of the schemes, and invests in a diversified portfolio of assets. The schemes are relatively young in nature (the schemes opened in 1997 on the formation of Centrica plc on demerger from BG plc (formerly British Gas plc)), and only took on past service liabilities in respect of active employees.

The trustees significantly reduced their tolerance to scheme valuation risk in 2019, increasing inflation and interest rate hedges from one third to two thirds, and further de-risked thereafter such that there was an 85% hedge level (in relation to assets) at 2021 year-end. This de-risking included the use of collateralised gilt holdings in the Schemes’ Liability-Driven Investment (LDI) portfolio (shown in the Pension scheme asset table in section (f) of this note within Liability matching assets).

Throughout 2022 and in particular during September, there were significant increases and volatility in gilt yields. This led to a significant fall in the value of assets invested in the UK Registered Pension Schemes’ LDI funds, thereby driving collateral calls and temporarily reducing the hedge position. All liquid credit mandates were placed into redemption with proceeds directed to the LDI portfolio to increase collateral and reduce leverage.

In October 2022, the Group agreed to provide the Schemes with a £400 million two-year revolving, unsecured, interest-bearing credit facility, and a short-term £150 million loan. This money was immediately drawn down to purchase physical gilts to reduce the extent of interest rate and inflation risk. The short-term loan was repaid in December 2022 and the remaining £400 million credit facility is scheduled for repayment in October 2024. At the 2023 year-end, the £400 million loan (together with unpaid interest) is recorded in Securities from a Centrica plc Group perspective and as a reduction to scheme assets for the UK Registered Pension Schemes. The Securities balance is included within the Group’s Adjusted net cash/(debt). See note 24(c).

The above events resulted in a reduction of both return-seeking and liquid assets within the portfolio, as well as a higher weighting to assets that are expected to better manage downside risk. At the 2023 year-end, the LDI and gilts portfolio provides a level of hedging against movements in long-term interest rates and inflation expectations at around 80% as a proportion of scheme assets. The schemes also benefit from further hedging arising from the other long-dated income unquoted asset portfolio.

Interest rate
A decrease in bond interest rates will increase the net present value of the pension liabilities. The relative immaturity of the schemes means that the duration of the liabilities is longer than average for typical UK pension schemes, resulting in a relatively higher exposure to interest rate risk. This risk is reduced via the hedging referred to in the Asset volatility section.

Inflation
Pensions in deferment, pensions in payment and pensions accrued under the career average schemes increase in line with the Retail Prices Index (RPI) and the Consumer Prices Index (CPI). Therefore, scheme liabilities will increase if inflation is higher than assumed, although in some cases caps are in place to limit the impact of significant movements in inflation. Furthermore, a pension increase exchange (PIE) option implemented in 2015 is available to future retirees, which gives the choice to receive a higher initial pension in return for giving up certain future increases linked to RPI, again limiting the impact of significant movements in inflation. Inflation risk is reduced via the hedging referred to in the Asset volatility section.

Longevity
The majority of the schemes’ obligations are to provide benefits for the life of scheme members and their surviving spouses; therefore increases in life expectancy will result in an increase in the pension liabilities. The relative immaturity of the schemes means that there is comparatively little observable mortality data to assess the rates of mortality experienced by the schemes, and means that the schemes’ liabilities will be paid over a long period of time, making it particularly difficult to predict the life expectancy of the current membership.

Furthermore, pension payments are subject to inflationary increases, resulting in a higher sensitivity to changes in life expectancy.

Salary
Pension liabilities are calculated by reference to the future salaries of active members, and hence salary rises in excess of assumed increases will increase scheme liabilities. During 2011, changes were introduced to the final salary sections of CEPS and CPP such that annual increases in pensionable pay are capped to 2%, resulting in a reduction in salary risk. During 2016, a salary cap on pensionable pay for the CPS career average and CPP schemes was implemented, and in 2019 a similar change took place for CEPS. All of the 2011, 2016 and 2019 changes result in a reduction in salary risk.

High Court ruling
In June 2023, the UK High Court issued a ruling in the case of Virgin Media Limited v NTL Pension Trustees II Limited and others relating to the validity of certain historical pension changes. This case may have implications for other defined benefit schemes in the UK, although is subject to possible appeal in 2024. The Group is aware of this legal ruling and is assessing whether there is any potential impact upon the Group, although currently no conclusion has been reached therefore no quantification of any potential impact has been determined.

Foreign exchange
Certain assets held by the CCCIF are denominated in foreign currencies, and hence their values are subject to exchange rate risk. The CCCIF has long-term hedging policies in place to manage interest rate, inflation and foreign exchange risks. The table below analyses the total liabilities of the Registered Pension Schemes, calculated in accordance with accounting principles, by type of liability, as at 31 December 2023.

Financial Statements | Centrica plc Annual Report and Accounts 2023 179 528 of 1021

22. POST-RETIREMENT BENEFITS
Total liabilities of the Registered Pension Schemes
31 December
2023
%
Actives – final salary – capped 11
Actives – final salary – uncapped and crystallised benefits 5 Actives – career average 4
Deferred pensioners 38
Pensioners 42
100
(c) Accounting assumptions
The accounting assumptions for the Registered Pension Schemes are given below:

Major assumptions used for the actuarial valuation
31 December
2023
%
2022
%
Rate of increase in employee earnings:

Subject to 2% cap 1.6 1.5
Other not subject to cap 2.6 2.9
Rate of increase in pensions in payment 3.0 3.3
Rate of increase in deferred pensions:

In line with CPI capped at 2.5% 2.3 2.5
In line with RPI 2.9 3.0
Discount rate 4.6 4.7
The assumptions relating to longevity underlying the pension liabilities at the balance sheet date have been based on a combination of standard actuarial mortality tables, scheme experience and other relevant data, and include an allowance for future improvements in mortality. The longevity assumptions for members in normal health are as follows:

Life expectancy at age 65 for a member 2023 2022
31 December
Male
Years
Female
Years
Male
Years
Female
Years
Currently aged 65 22.0 23.5 22.4 23.9
Currently aged 45 23.2 24.6 23.6 25.0
The other demographic assumptions have been set having regard to the latest trends in scheme experience and other relevant data. The assumptions are reviewed and updated as necessary as part of the periodic actuarial valuations of the pension schemes.

For the Registered Pension Schemes, marginal adjustments to the assumptions used to calculate the pension liability, or significant swings in bond yields or stock markets, can have a large impact in absolute terms on the net assets of the Group. Reasonably possible changes as at 31 December to one of the actuarial assumptions would have affected the scheme liabilities as set out below:

Impact of changing material assumptions 2023 2022
31 December
Increase/
decrease in
assumption
Indicative
effect on
scheme
liabilities %
Increase/
decrease in
assumption
Indicative
effect on
scheme
liabilities %
Rate of increase in employee earnings subject to 2% cap 1.00% +/-1 1.00% +1/-2 Rate of increase in pensions in payment and deferred pensions 1.00% +15/-12 1.00% +14/-12 Discount rate 1.00% -16/+20 1.00% -15/+19
Inflation assumption 1.00% +15/-12 1.00% +15/-12
Longevity assumption 1 year +/-3 1 year +/-2
The indicative effects on scheme liabilities have been calculated by changing each assumption in isolation and assessing the impact on the liabilities. For the reasonably possible change in the inflation assumption, it has been assumed that a change to the inflation assumption would lead to corresponding changes in the assumed rates of increase in uncapped pensionable pay, pensions in payment and deferred pensions.

The remaining disclosures in this note cover all of the Group’s defined benefit schemes. 180 Financial Statements | Centrica plc Annual Report and Accounts 2023 529 of 1021

22. POST-RETIREMENT BENEFITS
(d) Amounts included in the Group Balance Sheet
31 December
2023
£m
2022
£m
Fair value of plan assets 6,143 6,312
Present value of defined benefit obligation (6,260) (6,272) Recognised in the Group Balance Sheet (117) 40
Presented in the Group Balance Sheet as:

Retirement benefit assets 64 150
Retirement benefit liabilities (181) (110)
The Trust Deed and Rules for the Registered Pension Schemes provide the Group with a right to a refund of surplus assets assuming the full settlement of scheme liabilities. The Trustees do not have the unilateral right to wind-up the schemes and cannot unilaterally enhance member benefits. The Group has not recognised any liability in relation to future contributions under its minimum funding agreement with the Trustees. No asset ceiling restrictions have been applied in the consolidated Financial Statements. (e) Movements in the year
2023 2022
Pension
liabilities
£m
Pension
assets
£m
Pension
liabilities
£m
Pension
assets
£m
1 January (6,272) 6,312 (10,666) 10,666
Items included in the Group Income Statement:

Current service cost (22) — (84) —
Contributions by employer in respect of employee salary sacrifice arrangements (i) (24) — (21) — Total current service cost (46) — (105) —
Interest (expense)/income (291) 300 (193) 196
Termination benefit 1 — 4 —
Items included in the Group Statement of Comprehensive Income:

Returns on plan assets, excluding interest income — (474) — (4,559) Actuarial gain from changes to demographic assumptions 357 — 34 — Actuarial (loss)/gain from changes in financial assumptions (49) — 4,803 — Actuarial loss from experience adjustments (215) — (425) — Items included in the Group Cash Flow Statement:

Employer contributions — 236 — 264
Contributions by employer in respect of employee salary sacrifice arrangements — 24 — 21 Other movements:

Benefits paid from schemes 257 (257) 278 (278)
Other (2) 2 (2) 2
31 December (6,260) 6,143 (6,272) 6,312
(i) A salary sacrifice arrangement was introduced on 1 April 2013 for pension scheme members. The contributions paid via the salary sacrifice arrangement have been treated as employer contributions and included within the current service cost, with a corresponding reduction in salary costs.

In addition to current service cost on the Group’s defined benefit pension schemes, the Group also charged £72 million (2022: £66 million) to operating profit in respect of defined contribution pension schemes. This included contributions of £25 million (2022: £20 million) paid via a salary sacrifice arrangement.

Financial Statements | Centrica plc Annual Report and Accounts 2023 181 530 of 1021

22. POST-RETIREMENT BENEFITS
(f) Pension scheme assets
The market values of plan assets were:
2023 2022
31 December
Quoted
£m
Unquoted
£m
Total
£m
Quoted
£m
Unquoted
£m
Total
£m
Equities 23 503 526 19 486 505
Corporate bonds 6 — 6 24 — 24
High-yield debt 18 1,238 1,256 106 1,331 1,437
Liability matching assets 2,860 — 2,860 2,835 — 2,835
Other long-dated income assets — 1,204 1,204 — 1,343 1,343 Property — 305 305 — 366 366
Cash pending investment 391 — 391 205 — 205
Loan and interest — (405) (405) — (403) (403)
3,298 2,845 6,143 3,189 3,123 6,312
Unquoted private equity, other long-dated income assets and debt funds are valued at fair value as calculated by the investment manager at the latest valuation date in accordance with generally accepted guidelines, adjusted for cash flow in the intervening period. Investment properties are valued in accordance with guidelines by independent valuers. These valuations are reviewed annually as part of the CCCIF audit and receive greater scrutiny now that unquoted assets make up a greater proportion of the scheme portfolio. Included within equities are £nil of ordinary shares of Centrica plc (2022: £nil) via pooled funds that include a benchmark allocation to UK equities. Included within corporate bonds are £nil (2022: £nil) of bonds issued by Centrica plc, albeit minor exposure may be held within pooled funds over which the CCCIF has no ability to direct investment decisions. Apart from the investment in the Scottish Limited Partnerships which form part of the asset-backed contribution arrangements described in section (g) of this note, no direct investments are made in securities issued by Centrica plc or any of its subsidiaries or property leased to or owned by Centrica plc or any of its subsidiaries. The corporate bond, highyield debt and liability matching asset categories headings above have segregated portfolio mandates which include the cash, cash funds and derivatives associated with the mandates.

The liability matching assets in the table above relate to the quoted LDI and gilts portfolio used to hedge against movements in interest rates and inflation. The other long-dated income assets are unquoted investments in infrastructure and similar assets.

At 31 December 2023, the aggregate LDI and gilts portfolio was approximately 1.4 times leveraged (1 times being unleveraged) (2022: 1.3 times leveraged).

Included within the Group Balance Sheet within non-current securities are £104 million (2022: £95 million) of investments, held in trust on behalf of the Group, as security in respect of the Centrica Unapproved Pension Scheme. Of the pension scheme liabilities above, £49 million (2022: £49 million) relate to this scheme. More information on the Centrica Unapproved Pension Scheme is included in the Remuneration Report on pages 84 to 109.
(g) Pension scheme contributions
The Group estimates that it will pay £53 million of ordinary employer contributions during 2024 for its defined benefit schemes, at an average rate of 21% of pensionable pay, together with £27 million of contributions paid via a salary sacrifice arrangement.

For the Registered Pension Schemes the last actuarial valuation was as at 31 March 2021. As at that date, the weighted average duration of the liabilities of the Registered Pension Schemes was 22 years and the technical provisions deficit (funding basis) was £944 million. The Group committed to additional annual cash contributions to fund this pension deficit. The overall deficit contributions, including the previously disclosed asset-backed contribution arrangements, totalled £175 million in 2021 (of which £99 million was after 31 March 2021), £204 million in 2022, £175 million in 2023; and will amount to £175 million per annum in 2024 and 2025, with a balancing payment of £116 million in 2026. Separately, a pension strain payment of £5 million associated with employee redundancies was also contributed in 2023 (2022: £10 million).

On a pure roll-forward basis, from 31 March 2021, using the same methodology and consequent assumptions, the technical provisions deficit (funding basis) would be around £900 million on 31 December 2023. Note that the valuation methodology and assumptions used for future assessments may differ from those previously used.

At the beginning of 2022, the Group had provided security of £745 million of letters of credit and £250 million cash in escrow to the Registered Pension Schemes. In October 2022, as part of the £400 million loan arrangement from Centrica plc to the Registered Pension Schemes (described in part (b) above), this security was reduced by £545 million, so that only £450 million of letters of credit remained.

When this loan is repaid, currently due in October 2024, replacement security may be required (dependent on the funding position) and the form of security will be at the Group’s discretion. 182 Financial Statements | Centrica plc Annual Report and Accounts 2023 531 of 1021

23. LEASES, COMMITMENTS AND CONTINGENCIES
(a) Commitments and leases
Commitments are not held on the Group’s Balance Sheet as these are executory arrangements, and relate to amounts that we are contractually required to pay in the future as long as the other party meets its contractual obligations.

The Group’s commitments in relation to commodity purchase contracts disclosed below are stated net of amounts receivable under commodity sales contracts where there is a right of offset with the counterparty, and are based on the expected minimum quantities of gas and other commodities that the Group is contracted to buy at estimated future prices.

The commitments in this note differ in scope and in basis from the maturity analysis of energy derivatives disclosed in note S3, as only certain procurement and sales contracts are within the scope of IFRS 9 and included in note S3 and the volumes used in calculating the maturity analysis in note S3 are estimated using valuation techniques, rather than being based on minimum contractual quantities.

The Group’s 20-year agreement with Cheniere to purchase 89bcf per annum of LNG volumes for export from the Sabine Pass liquefaction plant in the US commits the Group to capacity payments of £3.4 billion (included in ‘LNG capacity’ below) between 2023 and 2039. It also allows the Group to make up to £4.9 billion of commodity purchases based on market gas prices and foreign exchange rates as at the reporting date.

During 2019, the Group signed a 20-year agreement to purchase LNG volumes from Mozambique LNG1 Company. The commercial start date is 2025 and under this agreement the Group is committed to make commodity purchases expected to amount to £7.9 billion based on market gas and oil prices at the reporting date.

During 2023, the Group signed a 15-year agreement to purchase LNG volumes from Delfin LNG. The provisional commencement date is 2029 and under this agreement the Group is committed to make commodity purchases expected to amount to £4.2 billion based on market gas prices at the reporting date.

These LNG contracts are deemed to be own use and therefore are accounted for on an accruals basis. Based on forecast gas spreads, they are predicted to be profitable but due to their duration are exposed over a long period of time to the impact of governmental policy decisions in relation to climate change.

The Group has numerous renewable power purchase arrangements where renewable obligation certificates are purchased as power is produced. This gives rise to the commitments below.
31 December
2023
£m
2022
£m
Commitments in relation to the acquisition of PP&E 56 75 Commitments in relation to the acquisition of intangible assets:

Renewable obligation certificates 3,369 3,642
Other intangible assets 323 194
Other commitments:

Commodity purchase contracts 40,908 69,824
LNG capacity 4,230 3,894
Transportation capacity 266 320
Other long-term commitments (i) 414 459
(i) Other long-term commitments include amounts in respect of executory contracts and the smart meter roll-out programme.

The maturity analysis for commodity purchase contract commitments at 31 December is given below:

Commodity purchase contract commitments
Fixed price
commodity commitments
Commodity commitments
that float with indices
31 December
2023
£bn
2022
£bn
2023
£bn
2022
£bn
<1 year 5.9 13.0 6.3 15.4
1–2 years 1.3 2.3 5.0 10.9
2–3 years 0.2 0.9 1.9 7.5
3–4 years 0.2 0.1 1.6 2.3
4–5 years — — 1.2 1.8
>5 years 0.1 0.1 17.2 15.5

7.7 16.4 33.2 53.4
Financial Statements | Centrica plc Annual Report and Accounts 2023 183 532 of 1021

23. LEASES, COMMITMENTS AND CONTINGENCIES
The Group enters into lease arrangements for assets including property, vehicles, vessels and assets used within the exploration and production business.

The carrying amount, additions and depreciation charge associated with right-of-use assets is disclosed in note 13 and the interest expense arising on the Group’s lease liability is disclosed in note 8. The total Group cash outflow in the year for capital and interest from lease arrangements was £105 million (2022: £107 million), and the maturity analysis of cash flows associated with the Group’s lease liability at the reporting date is shown in note S3.

The table below provides further information on amounts not included in the lease liability and charged to the Group Income Statement during the year.

Year ended 31 December
2023
£m
2022
£m
Expense related to short-term leases 71 82
Expense related to variable lease payments 9 9
During the year, the Group’s expense related to short-term lease commitments predominantly related to the hire of LNG vessels and exploration and production drilling rigs. The commitment at the balance sheet date also relates to assets of a similar nature. The Group has £31 million of operating sub-lease arrangements mainly for LNG vessels. The Group does not have any material arrangements in which it acts as a lessor.
(b) Guarantees and indemnities
This section discloses any guarantees and indemnities that the Group has given, where we may have to provide security in the future against existing and future obligations that will remain for a specific period.

In connection with the Group’s energy trading, transportation and upstream activities, certain Group companies have entered into contracts under which they may be required to prepay, provide credit support or provide other collateral in the event of a significant deterioration in creditworthiness. The extent of credit support is contingent upon the balance owing to the third party at the point of deterioration.

As at 31 December 2023, £279 million (2022: £84 million) of letters of credit and on-demand payment bonds have been issued in respect of decommissioning obligations included in the Group Balance Sheet. (c) Contingent liabilities
The Group has no material contingent liabilities.
184 Financial Statements | Centrica plc Annual Report and Accounts 2023 533 of 1021

24. SOURCES OF FINANCE
(a) Capital structure
The Group seeks to maintain an efficient capital structure with a balance of debt and equity as shown in the table below:
31 December
2023
£m
2022
£m
Gross debt 3,408 3,570
Shareholders’ equity 3,877 1,017
Capital 7,285 4,587
Debt levels are restricted to limit the risk of financial distress and, in particular, to maintain a strong credit profile. The Group’s credit standing is important for several reasons: to maintain a low cost of debt, limit collateral requirements in energy trading, hedging and decommissioning security arrangements, and to ensure the Group is an attractive counterparty to energy producers and long-term customers.

The Group monitors its current and projected capital position on a regular basis, considering a medium-term view of at least three years, and different stress case scenarios, including the impact of changes in the Group’s credit ratings and significant movements in commodity prices. A number of financial ratios are monitored, including those used by the credit rating agencies.

The level of debt that can be raised by the Group is restricted by the Company’s Articles of Association. Borrowing is limited to the higher of £10 billion and a gearing ratio of three times shareholder’s equity. The Group funds its long-term debt requirements through issuing bonds in the capital markets and taking bank debt. Short-term debt requirements are met primarily through commercial paper or shortterm bank borrowings. The Group maintains substantial committed facilities and uses these to provide liquidity for general corporate purposes, including short-term business requirements and back-up for commercial paper.

British Gas Insurance Limited (BGIL) is required to hold a minimum capital amount under PRA regulations and has complied with this requirement since its inception. BGIL’s capital management policy and plan are subject to review and approval by the BGIL board.

Reporting processes provide relevant and timely capital information to management and the board. A medium-term capital management plan forms part of BGIL’s planning and forecasting process, embedded into approved timelines, management reviews and board approvals.

Financial Statements | Centrica plc Annual Report and Accounts 2023 185 534 of 1021

24. SOURCES OF FINANCE
(b) Liquidity risk management and going concern
The Group has a number of treasury and risk policies to monitor and manage liquidity risk. Cash forecasts identifying the Group’s liquidity requirements are produced regularly and are stress tested for different scenarios, including, but not limited to, reasonably possible increases or decreases in commodity prices and the potential cash implications of a credit rating downgrade. The Group seeks to ensure that sufficient financial headroom exists for at least a twelve month period to safeguard the Group’s ability to continue as a going concern, and as at the reporting date, the analysis performed by the Group extends to 31 December 2025. It is the Group’s policy to maintain committed facilities and/or available surplus cash resources of at least £1,500 million, raise at least 75% of its gross debt (excluding non-recourse debt) in the capital market and to maintain an average term to maturity in the recourse long-term debt portfolio greater than five years.

At 31 December 2023 the Group had undrawn committed credit facilities of £3,784 million (2022: £3,951 million) and £5,525 million (2022: £3,687 million) of unrestricted cash and cash equivalents, net of outstanding overdrafts. 80% (2022: 82%) of the Group’s gross debt has been raised in the long-term debt market and the average term to maturity of the long-term debt portfolio was 10.5 years (2022: 9.9 years).

The Group’s liquidity is impacted by the cash posted or received under margin and collateral agreements. The terms and conditions of these agreements depend on the counterparty and the specific details of the transaction. Margin/collateral is generally posted or received to support energy trading and procurement activities. It is posted when contracts with marginable counterparties are out of the money and received when contracts are in the money. Cash is generally returned to the Group or by the Group within two days of trade settlement.

At 31 December 2023 the collateral position was as follows:
31 December
2023
£m
2022
£m
Collateral (received)/posted included within:

Trade and other payables (184) (601)
Trade and other receivables 260 1,154
Collateral posted extinguishing:

Net derivative liabilities (i) 164 270
Net collateral posted (ii) 240 823
(i) Variation margin on daily settled derivatives results in the extinguishment of the net derivative asset/liability. These contracts remain outstanding until a future delivery date, and therefore the cumulative daily settlement is considered collateral until that fulfilment date. (ii) In-year movements of net collateral posted include exchange adjustments of £2 million (2022: £61 million).

The Group utilises initial margin waiver facilities to help manage its liquidity and working capital position in relation to derivative trading. For certain types of trade, initial margin is a requirement before entering into a transaction, as it provides credit assurance for the exchange. As initial margin is not a liability of the Group and is refundable, it is reflected as a margin asset on the Group’s balance sheet. Accordingly, where counterparties waive any requirement to post initial margin, the Group has no liability.

The level of undrawn committed bank facilities and available cash resources has enabled the Directors to conclude that the Group has sufficient headroom to continue as a going concern. The statement of going concern is included in the Governance section – Other Statutory Information, on page 112.
186 Financial Statements | Centrica plc Annual Report and Accounts 2023 535 of 1021

24. SOURCES OF FINANCE
(c) Adjusted net cash/(debt) summary
Adjusted net cash/(debt) predominantly includes capital market borrowings offset by cash, securities and certain hedging financial instruments used to manage interest rate and foreign exchange movements on borrowings.

Presented in the derivatives and current and non-current borrowings, leases and interest accruals columns shown below are the assets and liabilities that give rise to financing cash flows.

Other assets and liabilities
Current and
non-current
borrowings,
leases and
interest accruals
£m
Derivatives
£m
Gross debt
£m
Cash and cash
equivalents, net
of bank
overdrafts (i) (ii)
£m
Current and
non-current
securities (iii)
£m
Sub-lease
assets
£m
Adjusted
net (debt)/
cash
£m
Group adjusted net (debt)/cash at 1 January 2022 (3,899) 93 (3,806) 4,328 156 2 680 Disposal of business 6 — 6 (30) (21) — (45)
Cash outflow from settlement and purchase of securities — — — (398) 398 — — Cash outflow for payment of capital element of leases 103 — 103 (103) — — — Cash outflow for repayment of borrowings (vi) 1,482 — 1,482 (1,482) — — — Cash inflow from short-term borrowings (vi) (1,220) — (1,220) 1,220 — — — Remaining cash inflow — — — 796 — — 796
Revaluation/interest receivable on securities 240 (238) 2 — (11) — (9) Financing interest paid 179 (8) 171 (172) — — (1)
Increase in interest payable and amortisation of borrowings (181) — (181) — — — (181) New lease agreements and re-measurement of existing
lease liabilities (42) — (42) — — — (42)
Exchange adjustments (85) — (85) 83 3 — 1
Group adjusted net (debt)/cash at 31 December 2022 (3,417) (153) (3,570) 4,242 525 2 1,199 Transfer of other investments from net debt (iv)
— — — — (27) — (27)
Acquisition of businesses (v) (13) — (13) — — — (13)
Cash outflow from net purchase of securities — — — (12) 12 — — Cash outflow for payment of capital element of leases 93 — 93 (93) — — — Cash outflow for repayment of borrowings (vi) 1,155 — 1,155 (1,155) — — — Cash inflow from borrowings (vi) (930) — (930) 930 — — — Cash inflow from operating activities — — — 2,752 — — 2,752 Cash inflow from other investing activities (vii) — — — 106 — — 106 Cash outflow from other financing activities (viii) — — — (810) — — (810) Revaluation (59) 44 (15) — 9 — (6)
Interest receivable on securities — — — — 23 — 23
Interest received on securities — — — 21 (21) — —
Financing interest paid 177 41 218 (286) — — (68)
Increase in interest payable and amortisation of borrowings, and impact of associated interest rate swaps (186) (51) (237) — — — (237) New lease agreements and re-measurement of existing lease liabilities (158) — (158) — — — (158)
Exchange adjustments 49 — 49 (66) — — (17)
Group adjusted net (debt)/cash at 31 December 2023 (3,289) (119) (3,408) 5,629 521 2 2,744 (i) Cash and cash equivalents includes £104 million (2022: £555 million) of restricted cash, of which £nil (2022: £440 million) relates to cash received from the Energy Bill Support Scheme, this scheme concluded in 2023. This includes cash totalling £2 million (2022: £6 million) within the Spirit Energy business that is not restricted by regulation but is managed by Spirit Energy’s own treasury department. (ii) Cash and cash equivalents are net of £814 million bank overdrafts (2022: £600 million). (iii) Securities balances includes £405 million (2022: £403 million) of loans to the pension schemes and £12 million (2022: £nil) of other loans receivable, both measured at amortised cost, as well as £72 million (2022: £67 million) other debt instruments and £32 million (2022: £55 million) equity instruments, both measured at fair value. See note 22 for further details on pension loans provided.
(iv) Transfer of other investments represents the reclassification of certain minority investments to Other investments from Securities in the Group Balance Sheet. Cash outflows from these securities in 2022 were £2 million. See note S2. (v) Acquisition of business relates to the recognition of a £12 million external loan due to the step-up of the investment in Greener Ideas Limited from joint venture to subsidiary during the year, and the recognition of a £1 million lease liability acquired by Centrica Business Solutions during the year. (vi) Repayment of borrowings comprises the repayment of £20 million short-term borrowing obtained during December 2022, £886 million repayment of commercial paper taken out during the period and a scheduled £249 million repayment of a 4.00% USD bond repaid on 16 October 2023. During the year other borrowings of £44 million were obtained. Bond repayment in 2022 comprises £36 million repayment of a 3.68% HKD bond repaid on 22 February 2022, and £246 million repayment of a 6.375% GBP bond repaid on 10 March 2022. In August 2022 the Group borrowed £1,200 million, which was repaid in September 2022. (vii) Cash inflow from other investing activities excludes purchase of securities of £12 million, and interest received on securities of £21 million during the year. (viii)Cash outflows from other financing activities comprise £17 million (2022: £273 million) of distributions to non-controlling interests (see note 12), proceeds of £6 million from exercise of share options (2022: £5 million payments for own shares), cash outflow of £186 million (2022: £59 million) for equity dividends and cash outflow of £613 million (2022: £43 million) related to the share buyback programme. There is a liability of £94 million (2022: £207 million) recognised at 31 December 2023 related to this programme. See note S4 for further details on the share buyback programme.

Financial Statements | Centrica plc Annual Report and Accounts 2023 187 536 of 1021

24. SOURCES OF FINANCE
(d) Borrowings, leases and interest accruals summary
2023 2022
31 December
Coupon rate
%
Principal
m
Current
£m
Non-current
£m
Total
£m
Current
£m
Non-current
£m
Total
£m
Bank overdrafts (814) — (814) (600) — (600)
Bank loans (> 5 year maturity) — (130) (130) — (143) (143) Other borrowings (37) (20) (57) (20) — (20)
Bonds (by maturity date):
16 October 2023 4.000 US$302 — — — (246) — (246)
4 September 2026 (i) 6.400 £52 — (50) (50) — (49) (49)
16 April 2027 5.900 US$70 — (55) (55) — (58) (58)
13 March 2029 (i) 4.375 £552 — (497) (497) — (471) (471) 5 January 2032 (ii) Zero €50 — (71) (71) — (69) (69)
19 September 2033 (i) 7.000 £770 — (703) (703) — (684) (684) 16 October 2043 5.375 US$367 — (284) (284) — (299) (299) 12 September 2044 4.250 £550 — (539) (539) — (539) (539) 25 September 2045 5.250 US$50 — (38) (38) — (41) (41)
10 April 2075 (i) (iii) 5.250 £450 — (428) (428) — (418) (418) — (2,665) (2,665) (246) (2,628) (2,874)
Obligations under lease arrangements (98) (286) (384) (88) (237) (325) Interest accruals (53) — (53) (55) — (55)
(1,002) (3,101) (4,103) (1,009) (3,008) (4,017)
(i) Bonds or portions of bonds maturing in 2026, 2029, 2033 and 2075 have been designated in a fair value hedge relationship. See note S5 for details of hedge relationships.
(ii) €50 million of zero coupon notes have an accrual yield of 4.2%, which will result in a €114 million repayment on maturity. (iii) The Group has the right to repay at par on 10 April 2025 and every interest payment date thereafter. 188 Financial Statements | Centrica plc Annual Report and Accounts 2023 537 of 1021

25. SHARE CAPITAL
Ordinary share capital represents the total number of shares issued which are publicly traded. We also disclose the number of own and treasury shares the Company holds, which the Company has bought, principally as part of share buyback programmes.

Allotted and fully paid share capital of the Company
31 December
2023
£m
2022
£m
5,907,846,138 ordinary shares of 614/81 pence each (2022: 5,907,846,138) 365 365 The closing price of one Centrica ordinary share on 31 December 2023 was 140.7 pence (2022: 96.5 pence). Centrica employee share ownership trusts purchase Centrica ordinary shares from the open market and receive treasury shares to satisfy future obligations of certain employee share schemes. The movements in own and treasury shares during the year are shown below:

Own shares (i) Treasury shares (i)
2023
million shares
2022
million shares
2023
million shares
2022
million shares
1 January 30.4 33.8 45.7 —
Shares purchased 1.4 6.5 — —
Shares issued and placed into trust — 8.4 — —
Shares transferred from treasury and placed into trust 34.3 — (34.3) — Shares released to employees on vesting (19.3) (18.3) (31.7) — Share buyback programme (ii) — — 512.3 45.7
31 December (i) 46.8 30.4 492.0 45.7
(i) Own shares are shares held in trusts to meet employee share awards. Treasury shares are shares that have been purchased from the open market and have not been cancelled. The closing balance in the treasury and own shares reserves of own shares was £44 million (2022: £20 million) and treasury shares was £606 million (2022: £43 million), these are both held at weighted average cost. (ii) See note S4 for further details of the share buyback programme.

26. EVENTS AFTER THE BALANCE SHEET DATE
The Group updates disclosures in light of new information being received, or a significant event occurring, in the period between 31 December 2023 and the date of this report.

The Directors propose a final dividend of 2.67 pence per ordinary share for the year ended 31 December 2023 (which would total £144 million based on shareholding at that date). The dividend will be submitted for formal approval at the Annual General Meeting to be held on 5 June 2024 and, subject to approval, will be paid on 11 July 2024 to those shareholders registered on 31 May 2024.

Financial Statements | Centrica plc Annual Report and Accounts 2023 189 538 of 1021
Supplementary information includes additional information and disclosures we are required to make by accounting standards or regulation.

S1. GENERAL INFORMATION
Centrica plc (the ‘Company’) is a public company limited by shares, domiciled and incorporated in the UK, and registered in England and Wales. The address of the registered office is Millstream, Maidenhead Road, Windsor, Berkshire, SL4 5GD. The Company, together with its subsidiaries, comprise the ‘Group’. The nature of the Group’s operations and principal activities are set out in note 4(a) and on pages 1 to 55.

The consolidated Financial Statements of Centrica plc are presented in pounds sterling. Operations and transactions conducted in currencies other than pounds sterling are included in the consolidated Financial Statements in accordance with the foreign currencies accounting policy set out in note S2.

Supplementary Information
190 Financial Statements | Centrica plc Annual Report and Accounts 2023 539 of 1021
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
This section sets out the Group’s material accounting policies in addition to the critical accounting policies applied in the preparation of these consolidated Financial Statements. Unless otherwise stated, these accounting policies have been consistently applied to the years presented.

Basis of consolidation
The Group Financial Statements consolidate the Financial Statements of the Company and entities controlled by the Company.

Subsidiaries are all entities (including structured entities) over which the Group has control. Control is exercised over an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Transactions with non-controlling interests that relate to their ownership interests and do not result in a loss of control are accounted for as equity transactions.

The results of subsidiaries acquired or disposed of during the year are consolidated from the effective date of acquisition (at which point the Group gains control over a business as defined by IFRS 3, and applies the acquisition method to account for the transaction as a business combination) or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries, associates and joint ventures to align the accounting policies with those used by the Group.

When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as a joint venture, associate or financial asset.

Segmental reporting
The Group’s operating segments are reported in a manner consistent with the internal reporting provided to and regularly reviewed by the Group’s Executive Committee (which is the Group’s Chief Operating Decision Maker as defined by IFRS 8 ‘Operating segments’) for the purposes of evaluating segment performance and allocating resources.

Revenue
Energy supply to business and residential customers
The vast majority of contractual energy supply arrangements have no fixed duration, and require no minimum consumption by the customer. No enforceable rights and obligations exist at inception of the contract and arise only once the cooling off period is complete and the Group is the legal supplier of energy to the customer. The performance obligation is the supply of energy over the contractual term; the units of supply represent a series of distinct goods that are substantially the same with the same pattern of transfer to the customer. The performance obligation is considered to be satisfied as the customer consumes based on the units of energy delivered.

This is the point at which revenue is recognised. In respect of energy supply contracts, the Group considers that it has the right to consideration from the customer for an amount that corresponds directly with the invoiced value delivered to the customer through their consumption. The Group’s assessment of the amount that it has a right to invoice includes an assessment of energy supplied to customers between the date of the last meter reading and the year-end (known as unread revenue). Unread gas and electricity comprises both billed and unbilled revenue and is estimated through the billing systems, using historical consumption patterns, on a customer-bycustomer basis, taking into account weather patterns, load forecasts and the differences between actual meter readings being returned and system estimates. Actual meter readings continue to be compared to system estimates between the balance sheet date and the finalisation of the accounts.

The Group holds a number of energy supply contracts that specify a minimum consumption volume over a specified contractual term.

The transaction price for these contracts is the minimum supply volume multiplied by the contractually agreed price per unit of energy.

Revenue from the sale of additional volumes is considered to be variable and not included in the transaction price. Revenue for these contracts continues to be recognised as invoiced.

In making disclosures under IFRS 15, the Group applies the practical expedient in paragraph 121 of IFRS 15 and therefore does not disclose information related to the transaction price allocated to remaining performance obligations on the basis that the Group recognises revenue from the satisfaction of the performance obligations within energy supply contracts in accordance with Paragraph B16.

Financial Statements | Centrica plc Annual Report and Accounts 2023 191 540 of 1021
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
Energy services provided to business and residential customers Energy services relate to the installation, repair and maintenance of central heating, ventilation and air conditioning systems.

In the UK, delivery of an item is considered a separate performance obligation to the installation of the item, both satisfied at a point in time. Delivery is the point at which control passes to the customer as the customer takes physical possession of the asset. It is also the point at which the Group has the right to consideration. Delivery and installation usually occur at the same point in time and consequently revenue is recognised for both performance obligations simultaneously.

Costs to obtain or fulfil a contract
Under IFRS 15 ‘Revenue from contracts with customers’, the incremental costs of obtaining a contract are recognised as an asset if they are expected to be recovered. These costs include expenditures that would not have been incurred if the contract had not been secured and typically relate to sales commissions payable in relation to both Energy supply and Energy service contracts.

Costs to fulfil a contract are recognised as an asset where they are directly related to a contract and where they generate or enhance resources of the entity that will be used in satisfying the performance obligations. Costs must be expected to be recoverable. Assets relating to costs to obtain or fulfil a contract are amortised over the period of the contract. See note 17.

Sales of LNG
Revenue arising from sales of LNG is recognised when control of the commodity passes to the counterparty, with each cargo representing a separate performance obligation satisfied at a point in time.

Sales of own gas and liquid production
Revenue arising from the sale of produced gas is recognised in a manner consistent with energy supply contracts with the revenue recognition profile reflecting the supply of gas to the customer.

The rights and obligations identifiable within a contract where the Group holds sellers’ nomination rights are considered to be enforceable from inception of the contract. The transaction price for the contract will include variable consideration based on forecast production and market prices. The point at which the performance obligation is satisfied and revenue recognised is the point at which control of the commodity passes to the customer according to the contractual trading terms, usually on shipment or delivery to a specified location.

Energy sales to trading and energy procurement counterparties Revenue arising from the sale of energy procured from generation asset owners to trading and energy procurement counterparties is also recognised in a manner consistent with energy supply contracts. There is a single performance obligation being the supply of energy over the contractual term at spot prices and revenue is recognised at the point at which energy is supplied to the counterparty in accordance with the contractual terms.

Revenue arising from contracts outside the scope of IFRS 15 Revenue from sources other than the Group’s contracts with customers is recognised in accordance with the relevant standard, as detailed below:

Fixed-fee service and insurance contracts: revenue from these contracts is recognised in the Group Income Statement with regard to the incidence of risk over the life of the contract, reflecting the seasonal propensity of claims to be made under the contracts and the benefits receivable by the customer, which span the life of the contract as a result of emergency maintenance being available throughout the contract term.

Power generation: revenue is recognised under IFRS 9 where contracts to supply power are measured at fair value.

Cost of sales
Energy supply includes the cost of gas and electricity produced and purchased during the year for own-use contracts, taking into account the industry reconciliation process for total gas and total electricity usage by supplier and related transportation, distribution, royalty costs and bought-in materials and services.

Cost of sales relating to fixed-fee service and insurance contracts includes direct labour and related overheads on installation work, repairs and service contracts in the year.

Cost of sales relating to gas production includes depreciation of assets used in production of gas, royalty costs and direct labour costs.

Cost of sales within power generation businesses includes the depreciation of assets included in generating power, fuel purchase costs, direct labour costs and carbon emissions costs.

Re-measurement and settlement of energy contracts
Re-measurement and settlement of energy contracts includes both realised (settled) commodity sales and purchase contracts in the scope of IFRS 9, as well as unrealised (fair value changes) on active contracts, as detailed further in note 2.

Financing costs
Financing costs that arise in connection with the acquisition, construction or production of a qualifying asset are capitalised and subsequently amortised in line with the depreciation of the related asset. Financing costs not arising in connection with the acquisition, construction or production of a qualifying asset are expensed. 192 Financial Statements | Centrica plc Annual Report and Accounts 2023 541 of 1021
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
Foreign currencies
The consolidated Financial Statements are presented in pounds sterling, the functional currency of the Company and the Group’s presentational currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded in the functional currency of the entity at the exchange rate ruling at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency of the relevant entity at the rate of exchange ruling at the balance sheet date and exchange movements included in the Group Income Statement for the period.

Non-monetary items that are measured at historical cost in a currency other than the functional currency of the entity concerned are translated using the exchange rate prevailing at the dates of the initial transaction.

For the purpose of presenting consolidated Financial Statements, the assets and liabilities of the Group’s non-sterling functional currency subsidiary undertakings, joint ventures and associates are translated into pounds sterling at exchange rates prevailing at the balance sheet date. The monthly results of these (generally foreign) subsidiary undertakings, joint ventures and associates are translated into pounds sterling each month at the average rates of exchange for that month. The closing exchange rates, and the average of the rates used to translate the results of foreign operations to pounds sterling are shown below.

Exchange rate per pounds sterling (£)
Closing rate at
31 December
Average rate for the year ended
31 December
2023 2022 2023 2022
US dollars 1.27 1.20 1.24 1.24
Canadian dollars 1.68 1.63 1.68 1.61
Euro 1.15 1.14 1.15 1.17
Norwegian krone 12.90 11.89 13.14 11.84
Danish krone 8.59 8.51 8.58 8.73
Exchange adjustments arising from the retranslation of the opening net assets and results of non-sterling functional currency operations are transferred to the Group’s foreign currency translation reserve, a separate component of equity, and are reported in other comprehensive income. In the event of the disposal of a non-sterling functional currency subsidiary, the cumulative translation difference arising in the foreign currency translation reserve is charged or credited to the Group Income Statement on disposal. Where the Group utilises net investment hedging, changes in the fair value of the hedging instrument are recognised in equity and remain there until the disposal of the specific, related investments, at which point the gains and losses are recycled to profit or loss.

Employee share schemes
The Group operates a number of employee share schemes, detailed in the Remuneration Report on pages 84 to 86, under which it makes equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value at the date of grant (excluding the effect of non-market-based vesting conditions). The fair value determined at the grant date is expensed on a straightline basis together with a corresponding increase in equity over the vesting period, based on the Group’s estimate of the number of awards that will vest, and adjusted for the effect of non-market-based vesting conditions.

The majority of the share-based payment charge arises from the Annual Incentive Plan. This scheme is applicable to senior executives, and senior and middle management. Shares issued under the scheme vest subject to continued employment within the Group in two stages (half after two years and the other half after three years). Employees leaving prior to the vesting date will normally forfeit their rights to unvested share awards. The fair value of the awards is measured using the market value at the date of grant.

More information is included in the Remuneration Report on pages 84 to 86.

Financial Statements | Centrica plc Annual Report and Accounts 2023 193 542 of 1021
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
Business combinations and goodwill
The acquisition of subsidiaries is accounted for using the acquisition method (at the point the Group gains control over a business as defined by IFRS 3). The cost of the acquisition is measured as the cash paid and the aggregate of the fair values, at the date of exchange, of other assets transferred, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement at the acquisition date.

Acquisition-related costs are expensed as incurred. The identifiable assets, liabilities and contingent liabilities are recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS

5. The Group recognises any non-controlling interests in the acquiree either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets.

Goodwill arising on a business combination represents the excess of the consideration transferred, the amount of the non-controlling interests and the acquisition date fair value of any previously held interest in the acquiree over the Group’s interest in the fair value of the identifiable net assets acquired. Goodwill arising on the acquisition of a stake in a joint venture or an associate represents the excess of the consideration transferred over the Group’s interest in the fair value of the identifiable assets and liabilities of the investee at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. The goodwill arising on an investment in a joint venture or in an associate is not recognised separately, but is shown under ‘Interests in joint ventures and associates’ in the Group Balance Sheet. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the Group Income Statement.

Acquisitions of joint operations that meet the definition of a business as defined in IFRS 3 are accounted for as business combinations.

On disposal of a subsidiary, associate or joint venture entity, any amount of goodwill attributed to that entity is included in the determination of the profit or loss on disposal. A similar accounting treatment is applied on disposal of assets that represent a business.

Other intangible assets
Intangible assets acquired separately are measured on initial recognition at cost.

Capitalisation begins when expenditure for the asset is being incurred and activities necessary to prepare the asset for use are in progress and ceases when substantially all the activities that are necessary to prepare the asset for use are complete. Amortisation commences at the point of commercial deployment. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition.

Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Intangible assets with finite lives are amortised over their useful lives and are tested for impairment, as part of the CGU to which they relate where necessary, annually and whenever there is an indication that the asset could be impaired. The amortisation period and method for an intangible asset are reviewed at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for on a prospective basis by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates.

Intangible assets are derecognised on disposal, or when no future economic benefits are expected from their use.

Intangible assets with indefinite useful lives are not amortised but tested for impairment annually, and whenever there is an indication that the intangible asset could be impaired, either individually or at the CGU level. The indefinite life assessment is reviewed annually and, if not supportable, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

The useful economic lives for the material categories of intangible assets are as follows:

Customer relationships and other contractual assets Up to 20 years Strategic identifiable acquired brands Indefinite
Application software Up to 15 years
Strategic identifiable acquired brands are deemed to have indefinite lives where evidence suggests that the brand will generate net cash inflows for the Group for an indefinite period.

Cloud computing arrangements
The Group has a number of contracts for Software as a Service (SaaS) and Platform as a Service (PaaS) Cloud Computing Arrangements.

These contracts permit the Group to access vendor-hosted software and platform services over the term of the arrangement. The Group does not control the underlying assets in these arrangements and costs are expensed as incurred.

The Group also incurs implementation costs in respect of these contracts. Implementation costs are capitalised as intangible assets where costs meet the definition and recognition criteria of an intangible asset under IAS 38. Such costs typically relate to software coding which is capable of providing benefit to the Group on a standalone basis. Other implementation costs, primarily relating to the configuration and customisation of the Cloud software solution, are assessed to determine whether the implementation activity relating to these costs is distinct from the Cloud Arrangement, in which case costs are expensed as the activity occurs. If the configuration and customisation costs relate to activity which is integral to the Cloud Arrangement such that the activity is received over the term of the Cloud Arrangement, costs are recognised as a prepayment and expensed over the term of the Cloud Arrangement. 194 Financial Statements | Centrica plc Annual Report and Accounts 2023 543 of 1021
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
UK & EU Emissions Trading Scheme
Purchased carbon dioxide emissions allowances are recognised initially at cost (purchase price) within intangible assets. The liability is measured at the cost of purchased allowances up to the level of purchased allowances held, and then at the market price of allowances ruling at the balance sheet date, with movements in the liability recognised in operating profit.

Forward contracts for the purchase or sale of carbon dioxide emissions allowances are measured at fair value with gains and losses arising from changes in fair value recognised in the Group Income Statement. The intangible asset is surrendered and the liability is extinguished at the end of the compliance period. No amortisation is charged up to the date of surrender as the cost and residual value of the intangible asset are deemed to be the same with no consumption of economic benefit.

Renewable certificates
The Group purchases renewable certificates both on a standalone basis, and through Power Purchase Agreements. The main types of renewable certificates acquired are Renewable Energy Guarantees of Origin (REGOs) which are certificates issued by Ofgem certifying that electricity has been produced from renewable sources, Renewable Obligation Certificates (ROCs) which are issued to accredited generators for the eligible renewable electricity they generate and Guarantees of Origin (GoOs) which are the EU equivalent of REGOs.

The Group uses renewable certificates to meet its obligations under a number of Ofgem schemes, namely the Feed-in Tariff (FIT), the Contracts for Difference (CFD), the Fuel Mix Disclosure (FMD) and the Renewables Obligation (RO) scheme.

Purchased renewable certificates are recognised initially at cost within intangible assets as an indefinite life asset. A liability for the RO is recognised based on the level of electricity supplied to customers, and is calculated in accordance with percentages set by the UK Government and the renewable obligation certificate buyout price for that period.

The intangible asset is surrendered and the liability is extinguished at the end of the compliance period to reflect the consumption of economic benefits. Any recycling benefit related to the submission of renewable obligation certificates is recognised in the Group Income Statement when received. The Group also recognises supplier obligations for CFD and FIT schemes; renewable certificates are used to offset these liabilities.

Cash flows relating to renewable obligation certificates and similar schemes are recognised within cash flows from operating activities.

Exploration, evaluation, development and production assets The Group uses the successful efforts method of accounting for exploration and evaluation expenditure. Exploration and evaluation expenditures associated with an exploration well, including acquisition costs related to exploration and evaluation activities are capitalised initially as intangible assets. Certain expenditures such as geological and geophysical exploration costs are expensed. If the prospects are subsequently determined to be successful on completion of evaluation, the relevant expenditure is transferred to PP&E. If the prospects are subsequently determined to be unsuccessful, the associated costs are expensed in the period in which that determination is made.

All field development costs are capitalised as PP&E. Such costs relate to the acquisition and installation of production facilities and include development drilling costs, project-related engineering and other technical services costs. PP&E, including rights and concessions related to production activities, is depreciated from the commencement of production in the fields concerned, using the unit of production method, based on all of the 2P reserves of those fields. Changes in these estimates are dealt with prospectively.

The net carrying value of fields in production and development is compared annually on a field-by-field basis with the likely discounted future net revenues to be derived from the remaining commercial reserves. An impairment loss is recognised where it is considered that recorded amounts are unlikely to be fully recovered from the net present value of future net revenues. Exploration assets are reviewed annually for indicators of impairment and production and development assets are tested annually for impairment.

Interests in joint arrangements and associates
The Group’s joint ventures and associates (as defined in note 6) are accounted for using the equity method.

The Group’s interests in joint operations (gas exploration and production licence arrangements) are accounted for by recognising its assets (including its share of assets held jointly), its liabilities (including its share of liabilities incurred jointly), its revenue from the sale of its share of the output arising from the joint operation, its share of the revenue from the sale of the output by the joint operation and its expenses (including its share of any expenses incurred jointly).

Where the Group has an equity stake or a participating interest in operations governed by a joint arrangement for which it is acting as operator, an assessment is carried out to confirm whether the Group is acting as agent or principal. As the terms and conditions negotiated between business partners usually provide joint control to the parties over the relevant activities of the gas fields that are governed by joint arrangements, the Group is usually deemed to be an agent when it is appointed as operator and not as principal as the contracts entered into presents gross liabilities and gross receivables of joint operations (including amounts due to or from non-operating partners) in the Group Balance Sheet in accordance with the netting rules of IAS 32 ‘Financial instruments – presentation’.

Property, plant and equipment
PP&E is included in the Group Balance Sheet at cost, less accumulated depreciation and any provisions for impairment.

Subsequent expenditure in respect of items of PP&E, such as the replacement of major parts, major inspections or overhauls, are capitalised as part of the cost of the related asset where it is probable that future economic benefits will arise as a result of the expenditure and the cost can be reliably measured. All other subsequent expenditure is expensed as incurred.

Financial Statements | Centrica plc Annual Report and Accounts 2023 195 544 of 1021
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
Freehold land is not depreciated. Other PP&E, with the exception of upstream production assets (see above), are depreciated on a straight-line basis at rates sufficient to write off the cost, less estimated residual values, of individual assets over their estimated useful lives. The depreciation periods for the material categories of assets are as follows:

Freehold and leasehold buildings Up to 50 years
Plant 5 to 20 years
Equipment and vehicles 3 to 10 years
Power generation assets Up to 30 years
The carrying values of PP&E are tested annually for impairment and are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Residual values and useful lives are reassessed annually and, if necessary, changes are accounted for prospectively.

Impairment assumptions
The Group tests the carrying amounts of goodwill, PP&E and intangible assets (with the exception of exploration assets) for impairment at least annually. Interests in joint ventures and associates and exploration assets are reviewed annually for indicators of impairment and tested for impairment where such an indicator arises. Where an asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the CGU to which the asset belongs. The recoverable amount is the higher of value in use (VIU) and fair value less costs of disposal (FVLCD).

At inception, goodwill is allocated to each of the Group’s CGUs or groups of CGUs that expect to benefit from the business combination in which the goodwill arose. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. Any impairment is expensed immediately in the Group Income Statement. Any CGU impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to the other assets of the CGU pro rata on the basis of the carrying amount of each asset in the CGU.

Further information on the assumptions used in the VIU calculations and FVLCD calculations that resulted in impairment or impairment reversals during the year can be found at note 7.

VIU – Key assumptions used
Pre-tax cash flows used in the VIU calculations are derived from the Group’s Board-approved business plans, and assumptions specific to the nature and life of the asset. The Group’s business plans and assumptions are based on past experience and adjusted to reflect market trends, economic conditions and key risks. Commodity prices used in the planning process are based in part on observable market data and in part on estimates. Note S6 provides additional detail on the active period of each of the commodity markets in which the Group operates.
(a) VIU – Growth rates and discount rates
Unless stated otherwise in the table below, cash flows beyond the planned period have been extrapolated using long-term growth rates in the market where the CGU operates. Long-term growth rates are determined using a blend of publicly available historical data and longterm growth rate forecasts published by external analysts. Cash flows are discounted using a discount rate specific to each CGU.

Discount rates reflect the current market assessments of the time value of money and are based on the estimated cost of capital of each CGU. Additionally, risks specific to the cash flows of the CGUs are reflected within cash flow forecasts. Each CGU’s weighted average cost of capital is then adjusted to reflect the impact of tax in order to calculate an equivalent pre-tax discount rate.

Long-term growth rates and pre-tax discount rates used in the VIU calculations for each of the Group’s CGUs are shown below. 2023
British Gas
Services &
Solutions
%
British Gas
Energy
%
Centrica
Business
Solutions
Energy
Supply
%
Bord Gáis
Energy
%
Centrica
Business
Solutions
(turbines/
engines/
battery/solar) (i)
%
Centrica
Energy
%
Nuclear (i)
%
Growth rate to perpetuity (including inflation) 2.1 2.1 2.1 1.6 N/A 2.1 N/A Pre-tax discount rate 10.0 10.7 12.0 10.7 10.0/8.0 (ii) 12.0 17.3 2022
British Gas
Services &
Solutions
%
British Gas
Energy
%
Centrica
Business
Solutions
Energy
Supply
%
Bord Gáis
Energy
%
Centrica
Business
Solutions
(turbines/
engines/
battery/solar) (i)
%
Centrica Energy
%
Nuclear (i)
%
Growth rate to perpetuity (including inflation) 2.0 2.0 2.0 1.9 N/A 2.0 N/A Pre-tax discount rate 9.3 10.0 11.3 8.1 9.3/8.0 (ii) 11.3 24.8 (i) Cash flows arising after the plan period have been derived from forecasts to the end of the asset lives. Due to the nature of these finite-lived assets, this provides a more appropriate valuation in later years.
(ii) Flexible assets (turbines, engines, battery) and solar discount rates respectively. 196 Financial Statements | Centrica plc Annual Report and Accounts 2023 545 of 1021
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
(b) VIU – Inflation rates
Inflation rates used in the business plan were based on a blend of publicly available inflation forecasts and range from 1.6% to 7.5%. (c) Key operating assumptions by CGUs using VIU
The key operating assumptions across all CGUs are gross margin, revenues and operating costs. These assumptions are tailored to the specific CGU using management’s knowledge of the environment, as shown in the table below:

CGU Gross margin Revenues Operating costs
All – base
assumptions
Existing customers: based on
contractual terms.

Losses are forecast based on historic
data and future expectations of
the market.

New customers and renewals: based
on gross margins achieved in the
period leading up to the date of the
business plan. Both adjusted for
current market conditions and cost of
goods inflation.

For the Services business, future sales
and related gross margins are based
on planned future product sales and
contract losses based upon past
performance and future expectations
of the competitive environment.

Existing customers: based on
contractual terms.

Losses are forecast based on historic
data and future expectations of
the market.

Adjusted for: growth forecasts which
are based on sales and marketing
activity, recent customer acquisitions
and the current economic environment
in the relevant geography.

Gas and electricity revenues based
on forward market prices.

Market share: percentage immediately
prior to business plan.

Wages: projected headcount in line
with expected efficiency programme.

Salary increases based on inflation
expectations.

Credit losses: historical assumptions
regarding realised cash losses have
been updated to reflect the current
environment.

Centrica Energy Existing and new markets:
management’s estimate of future
trading performance.

As above. Future development: increase in costs
to support growth forecasts, adjusted
for planned business process
efficiencies.

Centrica Business
Solutions (turbines/
engines/battery/solar)
Based on forecast revenues,
operations and maintenance costs,
grid network and balancing system
charges for the asset life.

Based on forward and contracted
prices for commodity, capacity market
and grid ancillary service contracts for
the asset life.

Based on run-rate and forecast
changes, including expected inflation
for the asset life.

Overlift and underlift
Off-take arrangements for gas produced from joint operations are often such that it is not practical for each participant to receive or sell its precise share of the overall production during the period. This results in short-term imbalances between cumulative production entitlement and cumulative sales, referred to as overlift and underlift.

An overlift payable, or underlift receivable, is recognised at the balance sheet date within trade and other payables or trade and other receivables respectively, and is measured at market value, with movements in the period recognised within cost of sales.

Financial Statements | Centrica plc Annual Report and Accounts 2023 197 546 of 1021
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
Leases
The Group assesses its contractual arrangements to determine whether they are or contain leases based on whether they convey the right to control the use of an identified asset for a period of time in exchange for consideration.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain re-measurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. The liabilities for the majority of the Group’s lease portfolio are calculated using the incremental borrowing rate. This rate is calculated on a lease-by-lease basis, taking into account the credit rating of the Group at the inception of the lease and the lease term. The credit adjustment used in this calculation is modified to reflect the security implicit in a lease arrangement based on the specific class of asset being leased.

Lease payments included in the measurement of the lease liability comprise: fixed payments (including in-substance fixed payments), variable lease payments that depend on an index or a rate (initially measured using the index or rate as at the commencement date), amounts expected to be payable under a residual value guarantee, the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early. When considering whether the Group is reasonably certain to exercise extension or termination options, various factors are considered, such as the level of lease payments relative to the market rate, the importance of the specific asset to the Group’s operations and the period remaining until the option becomes exercisable. Such judgements are reconsidered when there is a significant event or change of circumstances that is within the control of the Group. Variable lease payments that do not depend on an index or rate are recognised in profit or loss in the period in which the event or condition that triggers those payments occurs.

The lease liability is subsequently measured at amortised cost using the effective interest method. It is re-measured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, lease-term extension or termination option. Cash flows reflecting payment of capital and interest on leases are shown in cash flows from financing activities.

When the lease liability is re-measured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use of asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Group recognises the lease payments associated with short-term leases (leases expiring within twelve months from commencement) and leases of low value assets (underlying asset value less than £5,000) on a straight-line basis over the lease term.

The Group holds interests in a number of joint operations within its exploration and production business. The Group has applied judgement in identifying the customer where a lease arrangement is to be used by a jointly controlled operation.

If the leased asset is dedicated to a specific joint operation and its usage is dictated by the joint operating agreement, the joint operation is deemed the customer. In such instances:
¢ When the Group signs a lease agreement on behalf of a joint operation and has primary responsibility for payments to the lessor, the Group recognises 100% of the lease liability and a right-of-use asset on its balance sheet. When the partner is obliged to reimburse the Group for its share of lease payments, a sub-lease receivable is recognised and an equal adjustment to the right-of-use asset is made; and
¢ When the partner has the primary responsibility for payments to the lessor and the Group is obliged to reimburse its share of the lease payments, a lease liability due to the partner and equal right-of-use asset are recognised.

If the leased asset is not dedicated to a specific joint operation or its usage is not dictated by the joint operating agreement of a joint operation to which it is dedicated, the signatory to the lease agreement is deemed the customer. If this is the Group, the lease liability and right-of-use asset are recognised in full. If it is the partner, no lease liability or right-of-use asset is recognised. 198 Financial Statements | Centrica plc Annual Report and Accounts 2023 547 of 1021
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
Inventories
Inventories of finished goods are valued at the lower of cost (using weighted-average cost) or estimated net realisable value after allowance for redundant and slow-moving items. The cost of inventories includes the purchase price plus costs of conversion incurred in bringing the inventories to their present location and condition.

Inventory of gas in storage held for the purpose of the Group’s own use is measured on a weighted-average cost basis, whilst gas used for trading purposes is measured at fair value less any costs to sell. Changes in fair value less costs to sell are recognised in the Group Income Statement.

Government grants
Government grants are transfers of resources to the Group in return for past or future compliance with certain conditions relating to the operating activities of the entity. Government assistance is designed to provide an economic benefit that is specific to an entity qualifying under certain criteria. The Group recognises government grants only when there is reasonable assurance that the Group will comply with the conditions attached to them and the grant will be received. Government grants are recognised in profit and loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate.

Government grants related to assets are deducted from the carrying amount of the asset.

In 2022 and 2023 the Group recognised a Supplier of Last Resort (SoLR) receivable in relation to amounts recoverable under the Last Resort Supplier Payment (LRSP) mechanism administered by Ofgem, a government body, which is detailed in note 3. This process allows suppliers, appointed as Supplier of Last Resort, to recover costs reasonably incurred in supplying affected customers. The receivable recognised reflects amounts incurred primarily on commodity costs up to the reporting date which are recoverable under the LRSP claim.

The associated credit has been recognised in cost of sales and operating costs.

Decommissioning costs
A provision is made for the net present value of the estimated cost of decommissioning gas production facilities at the end of the producing lives of fields and power stations at the end of their useful lives, based on price levels and technology at the balance sheet date.

When this provision relates to an asset with sufficient future economic benefits, a decommissioning asset is recognised and included as part of the associated PP&E and depreciated accordingly. The asset is subject to impairment review as detailed above. Changes in estimates and discount rates are dealt with prospectively and reflected as an adjustment to the provision and corresponding decommissioning asset included within PP&E. The discount rate used to calculate the provision is 1% as discussed in note 3.

The unwinding of the discount on the provision is included in the Group Income Statement within financing costs.

Non-current assets and disposal groups held for sale and discontinued operations Non-current assets and disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs of disposal. No depreciation is charged in respect of non-current assets classified as held for sale.

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable, the asset or disposal group is available for immediate sale in its present condition and the Directors are committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

The profits or losses and cash flows that relate to a major component of the Group that has been sold or is classified as held for sale are presented separately from continuing operations as discontinued operations within the Group Income Statement and Group Cash Flow Statement.

Pensions and other post-employment benefits
The Group operates a number of defined benefit and defined contribution pension schemes. The cost of providing benefits under the defined benefit schemes is determined separately for each scheme using the projected unit credit actuarial valuation method. Actuarial gains and losses are recognised in the period in which they occur in other comprehensive income.

The cost of providing retirement pensions and other benefits is charged to the Group Income Statement over the periods benefitting from employees’ service. Past service cost is recognised immediately. Costs of administering the schemes are charged to the Group Income Statement. Net interest, being the change in the net defined benefit liability or asset due to the passage of time, is recognised in the Group Income Statement within net finance cost.

The net defined benefit liability or asset recognised in the Group Balance Sheet represents the present value of the defined benefit obligation of the schemes and the fair value of the schemes’ assets. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits are paid, and that have terms of maturity approximating to the terms of the related pension liability.

Payments to defined contribution retirement benefit schemes are recognised in the Group Income Statement as they fall due.

In 2022 the Group provided a loan facility to the Group’s three defined benefit pension schemes. The Group recognised the loan as a financial asset under IFRS 9 ‘Financial instruments’ measured at amortised cost and classified as a receivable within Securities on the Group’s balance sheet. The loan liability has been deducted from plan assets on the basis that the loan does not relate to employee benefits in accordance with IAS 19.

Financial Statements | Centrica plc Annual Report and Accounts 2023 199 548 of 1021
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, that can be measured reliably, and it is probable that the Group will be required to settle that obligation. Provisions are discounted to present value where the effect is material.

Where discounting is used, the increase in the provision due to the passage of time is recognised in the Group Income Statement within interest expense. Onerous contract provisions are recognised where the unavoidable costs of meeting the obligations under a contract exceed the economic benefits expected to be received under it. Contracts to purchase or sell energy are reviewed on a portfolio basis given the fungible nature of energy, whereby it is assumed that the highest priced purchase contract supplies the highest priced sales contract and the lowest priced sales contract is supplied by the lowest priced purchase contract. Since 2021, the Group recognises a material onerous supply contract provision where the future costs to fulfil customer contracts on a current market price basis exceed the charges recoverable from customers because the associated hedging gains have already been recognised in the Group Income Statement. Further detail relating to the key assumptions and sources of estimation uncertainty are provided in note 3.

Taxation
Current tax, including UK corporation tax, UK petroleum revenue tax and foreign tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. From time to time, the Group may have open tax issues with a number of revenue authorities. Where an outflow of funds is believed to be probable and a reliable estimate of the dispute can be made, management provides for its best estimate of the liability. These estimates take into account the specific circumstances of each dispute and relevant external advice as well as the rules and regulations of the relevant tax authority in the jurisdiction of the dispute. Often the Group is unable to predict whether an uncertain tax treatment will be accepted by the relevant authority. In such instances the effects of uncertainty are reflected in management’s assessment of the most likely outcome of each issue, as reviewed and updated on a regular basis. Each item is considered separately and on a basis that provides the better prediction of the outcome, unless the Group determines that it is appropriate to group certain items for consideration. See note 9 for further details on uncertain tax provisions.

Deferred tax is recognised in respect of all temporary differences identified at the balance sheet date, except to the extent that the deferred tax arises from the initial recognition of goodwill, or the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting profit nor taxable profit and loss. Temporary differences are differences between the carrying amount of the Group’s assets and liabilities and their tax base.

Deferred tax liabilities may be offset against deferred tax assets within the same taxable entity or qualifying local tax group. Any remaining deferred tax asset is recognised only when, on the basis of all available evidence, it can be regarded as probable that there will be suitable taxable profits, within the same jurisdiction, in the foreseeable future, against which the deductible temporary difference can be utilised.

Deferred tax is provided on temporary differences arising on subsidiaries, joint ventures and associates, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the asset is realised or liability settled, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Measurement of deferred tax liabilities and assets reflects the tax consequences expected from the manner in which the asset or liability is recovered or settled. 200 Financial Statements | Centrica plc Annual Report and Accounts 2023 549 of 1021
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
Financial instruments
Financial assets and financial liabilities are recognised in the Group Balance Sheet when the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the Group no longer has the rights to cash flows, the risks and rewards of ownership or control of the asset. Financial liabilities are derecognised when the obligation under the liability is discharged, cancelled or expires.
(a) Trade receivables
Trade receivables are initially recognised at a value based on their transaction price, and are subsequently held at amortised cost using the effective interest method (taking into account the Group’s business model, which is to collect the contractual cash flows owing) less an allowance for impairment losses. Balances are written off when recoverability is assessed as being remote. If collection is expected in one year or less, receivables are classified as current assets. If not, they are presented as non-current assets. (b) Trade payables
Trade payables are initially recognised at fair value, which is usually the original invoice amount and are subsequently held at amortised cost using the effective interest method. If payment is due within one year or less, payables are classified as current liabilities. If not, they are presented as non-current liabilities.
(c) Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds received. Own equity instruments that are reacquired (treasury or own shares) are deducted from equity.

No gain or loss is recognised in the Group Income Statement on the purchase, sale, issue or cancellation of the Group’s own equity instruments.
(d) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and current balances with banks and similar institutions and money market deposits, which are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value and have an original maturity of three months or less. Money market funds are also included in cash and cash equivalents, and are required to be measured at fair value through profit or loss under IFRS 9, as noted in section (g) below. Cash and cash equivalents are presented net of outstanding bank overdrafts where there is a legal right of set off and, for the Group’s cash pooling arrangements, to the extent the Group expects to settle its subsidiaries’ year-end account balances on a net basis.

For the purpose of the Group Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.
(e) Interest-bearing loans and other borrowings
All interest-bearing loans and other borrowings with banks and similar institutions are initially recognised at fair value net of directly attributable transaction costs. After initial recognition, interest-bearing loans and other borrowings are subsequently measured at amortised cost using the effective interest method, except when they are hedged items in an effective fair value hedge relationship where the carrying value is also adjusted to reflect the fair value movements associated with the hedged risks. Such fair value movements are recognised in the Group Income Statement. Amortised cost is calculated by taking into account any issue costs, discount or premium. (f) Financial instruments at fair value through other comprehensive income Financial assets at fair value through other comprehensive income are equity instruments that the Group has elected to recognise the changes in fair value of in other comprehensive income. They are recognised initially at fair value in the Group Balance Sheet and are remeasured subsequently at fair value with gains and losses arising from changes in fair value recognised directly in equity and presented in other comprehensive income. Dividends arising on these financial assets are recognised in the Group Income Statement.

Cumulative gains and losses on equity instruments at fair value through other comprehensive income are not recycled to the Group Income Statement.
(g) Financial assets at fair value through profit or loss The Group previously held investments in gilts which it designated at fair value through profit or loss in order to eliminate asymmetry arising from the measurement of an index-linked derivative. Other debt instruments and money market funds (which are classified as cash equivalents) are required to be measured at fair value through profit or loss under IFRS 9, as the assets are not held solely for the purpose of collecting contractual cash flows related to principal and interest. Both mandatory and designated instruments are measured at fair value on initial recognition and are re-measured to fair value in each subsequent reporting period. Gains and losses arising from changes in fair value are recognised in the Group Income Statement within investment income or financing costs. (h) Securities
The Group holds debt and equity securities predominantly in respect of the Centrica Unapproved Pension Scheme (see note 22). Debt securities are required to be measured at fair value through profit or loss under IFRS 9, as the contractual terms of these assets do not give rise to cash flows that are solely payments of principal and interest on the principal amounts outstanding. The Group has elected to recognise the changes in fair value of the equity securities in other comprehensive income.

The Group classifies the loan facility provided to the Group’s defined benefit pension schemes within Securities. It is recognised as a financial asset under IFRS 9 ‘Financial instruments’ and measured at amortised cost. Correspondingly, the loan liability is deducted from plan assets on the basis the loan does not relate to employee benefits (scheme liabilities) in accordance with IAS 19.

Securities also includes a loan made to the minority shareholder in the Group’s Greener Ideas Limited subsidiary which is similarly recognised as a financial asset under IFRS 9 and measured at amortised cost. (i) Other investments
Other investments include minority interest equity investments which the Group accounts for under IFRS 9, because it does not have the ability to control, or significantly influence the investment. According to the requirements of IFRS 9, the Group may either measure these investments at fair value with value changes recognised in profit or loss, or it may elect to recognise those value changes in other comprehensive income. For the majority of the Group’s other investments, fair value movements are recognised in other comprehensive income; this election is made separately for each investment made.

Financial Statements | Centrica plc Annual Report and Accounts 2023 201 550 of 1021
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
(j) Derivative financial instruments
The Group routinely enters into sale and purchase transactions for physical delivery of gas and power. A portion of these transactions take the form of contracts that were entered into and continue to be held for the purpose of receipt or delivery of the physical commodity in accordance with the Group’s expected sale, purchase or usage requirements (‘own use’), and are not within the scope of IFRS 9. The assessment of whether a contract is deemed to be ‘own use’ is conducted on a Group basis without reference to underlying book structures, business units or legal entities.

Certain purchase and sales contracts for the physical delivery of gas and power are within the scope of IFRS 9 due to the fact that they net settle or contain written options. Such contracts are accounted for as derivatives under IFRS 9 and are recognised in the Group Balance Sheet at fair value. Gains and losses arising from changes in fair value on derivatives that do not qualify for hedge accounting are taken directly to the Group Income Statement for the year.

The Group uses a range of derivatives for both trading and to hedge exposures to financial risks, such as interest rates, foreign exchange and energy price risks, arising in the normal course of business. Where considered appropriate, the Group may use weather derivatives to protect against earnings volatility arising from unseasonal weather variations. The use of such derivatives did not have a material financial statement impact in 2023 or 2022. The use of derivative financial instruments is governed by the Group’s policies which are approved by the Board of Directors. Further detail on the Group’s risk management policies is included within the Strategic Report – Principal Risks and Uncertainties on pages 28 to 34 and in note S3.

The accounting treatment of derivatives is dependent on whether they are entered into for trading or hedging purposes. A derivative instrument is considered to be used for hedging purposes when it alters the risk profile of an underlying exposure of the Group in line with the Group’s risk management policies and is in accordance with established guidelines. Certain derivative instruments used for hedging purposes are designated in hedge accounting relationships as described by IAS 39 (the Group has not applied the hedge accounting requirements of IFRS 9). In order to qualify for hedge accounting, the effectiveness of the hedge must be reliably measurable and documentation describing the formal hedging relationship must be prepared at the point of designation. The hedge must be highly effective in achieving its objective. The Group also holds derivatives that are used for hedging purposes which are not designated in hedge accounting relationships and are held for trading.

All derivatives are recognised at fair value on the date on which the derivative is entered into and are re-measured to fair value at each reporting date. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Derivative assets and derivative liabilities are offset and presented on a net basis only when there is a currently enforceable legal right of set-off, and the intention to net settle the derivative contracts is present. The disclosure of current and non-current derivative assets and liabilities is determined by the settlement date of the derivative.

The Group enters into certain energy derivative contracts covering periods for which observable market data does not exist. The fair value of such derivatives is estimated by reference in part to published price quotations from active markets, to the extent that such observable market data exists, and in part by using valuation techniques, the inputs to which include data that is not based on or derived from observable markets. Where the fair value at initial recognition for such contracts differs from the transaction price, a fair value gain or fair value loss will arise. This is referred to as a day-one gain or day-one loss. Such gains and losses are deferred (not recognised) and amortised to the Group Income Statement based on volumes purchased or delivered over the contractual period until such time as observable market data becomes available. When observable market data becomes available, any remaining deferred day-one gains or losses are recognised within the Group Income Statement.

Recognition of the gains or losses resulting from changes in fair value depends on the purpose for issuing or holding the derivative. For derivatives that do not qualify for cash flow or net investment hedge accounting, any gains or losses arising from changes in fair value are taken directly to the Group Income Statement and are included within gross profit or investment income and financing costs. Where derivatives qualify for cash flow or net investment hedging, changes in fair value arising from the effective element of the hedge are recognised initially in the Group Statement of Comprehensive Income and are recycled to the Group Income Statement when the hedged item impacts profit or loss. Further details on the treatment of energy derivatives in the Group Income Statement is provided in note 2.

Further detail on the treatment of derivatives in hedging relationships is provided in note S5.

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not carried at fair value, with gains or losses reported in the Group Income Statement. The closely related nature of embedded derivatives is reassessed when there is a change in the terms of the contract that significantly modifies the future cash flows under the contract. Where a contract contains one or more embedded derivatives, and providing that the embedded derivative significantly modifies the cash flows under the contract, the option to fair value the entire contract may be taken and the contract will be recognised at fair value with changes in fair value recognised in the Group Income Statement. Gains and losses arising from changes in the fair value of energy derivative contracts are recognised within ‘Re-measurement and settlement of energy contracts’ in the Group’s Results for the period under IFRS. 202 Financial Statements | Centrica plc Annual Report and Accounts 2023 551 of 1021
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
(k) Hedge accounting
The Group continues to apply the hedge accounting requirements of IAS 39 and has not adopted IFRS 9 hedge accounting.

For the purposes of hedge accounting, hedges are classified as either fair value hedges or cash flow hedges. Note S5 details the Group’s accounting policies in relation to derivatives qualifying for hedge accounting under IAS 39. (l) Financial guarantees
Financial guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. The Group accounts for financial guarantee contracts under IFRS 9.
(m) Impairment of financial assets
In accordance with IFRS 9, the Group has applied the expected credit loss model to financial assets measured at amortised cost and to investments in debt instruments measured at fair value through other comprehensive income.

For trade receivables and contract assets the simplified approach is taken and the lifetime expected credit loss provided for.

For all other in-scope financial assets at the balance sheet date either the lifetime expected credit loss or a 12-month expected credit loss is provided for, depending on the Group’s assessment of whether the credit risk associated with the specific asset has increased significantly since initial recognition. As the Group’s financial assets are predominantly short-term (less than 12 months), the impairment loss recognised is not materially different using either approach. Further details of the assumptions and inputs used to calculate expected credit losses are shown in note 17.

Nuclear activity
The Group’s investment in Lake Acquisitions Limited (‘Nuclear’) is accounted for as an associate. The following accounting policies are specific to this nuclear activity.
(a) Fuel costs – nuclear front end
Front-end fuel costs consist of the costs of procurement of uranium, conversion and enrichment services, and fuel element fabrication.

All costs are capitalised into inventory and charged to the Group Income Statement in proportion to the amount of fuel burnt. (b) Fuel costs – nuclear back end
Advanced gas-cooled reactors (AGR)
Spent fuel extracted from the reactors is sent for reprocessing and/or long-term storage and eventual disposal of resulting waste products. Back-end fuel costs comprise of a loading-related cost per tonne of uranium and a rebate/surcharge to this cost which is dependent on the out-turn market electricity price and the amount of electricity generated from AGR stations in the year. These costs are capitalised into inventory and charged to the Group Income Statement in proportion to the amount of fuel burnt.

Pressurised water reactor (PWR)
Back-end fuel costs are based on wet storage in station ponds followed by dry storage and subsequent direct disposal of fuel. Back-end fuel costs are capitalised into inventory on loading and are charged to the Group Income Statement in proportion to the amount of fuel burnt.
(c) Nuclear PP&E – depreciation
The majority of the cost of the nuclear fleet is depreciated from the date of the Group acquiring its share of the fleet on a straight-line basis, with remaining depreciable periods currently of up to 32 years.

Other expenditure including amounts spent on major inspections and overhauls of production plant is depreciated over the period until the next outage which for AGR power stations is 2 to 3 years and for the PWR power station is 18 months. (d) Nuclear Liabilities Fund (NLF) funding arrangements Under the arrangements in place with the Secretary of State, the NLF will fund, subject to certain exceptions, qualifying uncontracted nuclear liabilities and qualifying decommissioning costs.

In part consideration for the assumption of these liabilities by the Secretary of State and the NLF, the former British Energy Group agreed to pay fixed decommissioning contributions each year and £150,000 (indexed to RPI) for every tonne of uranium in PWR fuel loaded into the Sizewell B reactor after the date of these arrangements. (e) NLF and nuclear liabilities receivables
The UK Government indemnity is provided to indemnify any future shortfall on NLF funding of qualifying uncontracted nuclear liabilities (including PWR back-end fuel services) and qualifying nuclear decommissioning costs such that the receivable equals the present value of the associated qualifying nuclear liabilities (apart from a small timing difference due to timing of receipts from NLF). (f) Nuclear liabilities
Nuclear liabilities represent provision for liabilities in respect of the costs of waste management of spent fuel and nuclear decommissioning. (g) Unburnt fuels at shutdown
Due to the nature of the nuclear fuel process there will be quantities of unburnt fuel in the reactors at station closure. The costs relating to this unburnt fuel (final core) are fully provided for at the balance sheet date. The provision is based on a projected value per tonne of fuel remaining at closure, discounted back to the balance sheet date and recorded as a long-term liability.

Financial Statements | Centrica plc Annual Report and Accounts 2023 203 552 of 1021
S3. FINANCIAL RISK MANAGEMENT
The Group’s normal operating, investing and financing activities expose it to a variety of financial risks: market risk (including commodity price risk, currency risk and interest rate risk), credit risk and liquidity risk. The Group’s overall financial risk management processes are designed to identify, manage and mitigate these risks.

Further detail on the Group’s overall risk management processes is included within the Strategic Report – Principal Risks and Uncertainties on pages 28 to 34.

Commodity price risk management is carried out in accordance with individual business unit policies and directives including appropriate escalation routes.

Treasury risk management, including management of currency risk, interest rate risk and liquidity risk is carried out by a central Group Treasury function in accordance with the Group’s financing and treasury policy, as approved by the Board.

The wholesale credit risks associated with commodity trading and treasury positions are managed in accordance with the Group’s credit risk policy. Downstream customer credit risk management is carried out in accordance with appropriate Group-wide and individual business unit credit policies.

Market risk management
Market risk is the risk of loss that results from changes in market prices (commodity prices, foreign exchange rates and interest rates). The level of market risk to which the Group is exposed at a point in time varies depending on market conditions, expectations of future price or market rate movements and the composition of the Group’s physical asset and contract portfolios. (a) Commodity price risk management
The Group is exposed to commodity price risk in its energy procurement and supply activities, production, generation and trading operations and uses specific limits to manage the exposure to commodity prices associated with the Group’s activities to an acceptable level. The Group uses Profit at Risk (PaR) limits to control exposures to market prices. These are complemented by other limits including Value at Risk (VaR), volumetric or stop-loss limits to control risk around trading activities. (i) Energy price exposed business activities
The Group’s price exposed business activities consist of equity gas and liquids production, equity power generation, bilateral procurement and sales contracts, market-traded purchase and sales contracts and derivative positions primarily transacted with the intent of securing gas and power for the Group’s supply customers, from a variety of sources at an optimal cost. The Group actively manages commodity price risk by optimising its asset and contract portfolios and making use of volume flexibility.

The Group’s commodity price risk exposure within its business activities is driven by the cost of procuring gas and electricity to serve its supply customers and selling gas and electricity from its upstream production and generation, which varies with wholesale commodity prices. The primary risk is that market prices for commodities will fluctuate between the time that sales prices are fixed or tariffs are set and the time at which the corresponding procurement cost is fixed, thereby potentially reducing expected margins or making sales unprofitable.

The Group’s supply activities are also exposed to volumetric risk in the form of an uncertain consumption profile arising from a range of factors, including the weather, energy consumption changes, customer attrition and the economic climate. There is also risk associated with ensuring that there is sufficient commodity available to secure supply to customers. The Group’s production and generation activities are also exposed to volumetric risk in the form of uncertain production profiles.

In order to manage the exposure to market prices associated with the Group’s business operations the Group uses a specific set of risk limits (including VaR and PaR) established by the Board, and sub-delegated downwards through the delegation lines to the commercial leaders.

PaR measures the estimated potential loss in a position or portfolio of positions associated with the movement of a commodity price for a given confidence level, over the remaining term of the position or contract. VaR measures the estimated potential loss for a given confidence level over a predetermined holding period. The standard confidence level used is 95%. In addition, regular stress and scenario tests are performed to evaluate the impact on the portfolio of possible substantial movements in commodity prices.

The Group measures and manages the commodity price risk associated with the Group’s entire energy price exposed business portfolio.

Only certain of the Group’s energy contracts constitute financial instruments under IFRS 9 (see note S6).

As a result, while the Group manages the commodity price risk associated with both financial and non-financial energy procurement and sales contracts, it is the notional value of energy contracts being carried at fair value that represents the exposure of the Group’s energy price exposed business activities to commodity price risk according to IFRS 7 ‘Financial Instruments: Disclosures’. This is because energy contracts that are financial instruments under IFRS 9 are accounted for on a fair value basis and changes in fair value immediately impact profit. Conversely, energy contracts that are not financial instruments under IFRS 9 are accounted for as executory contracts and changes in fair value do not immediately impact profit and, as such, are not exposed to commodity price risk as defined by IFRS 7. So, whilst the PaR or VaR associated with energy procurement and supply contracts that are outside the scope of IFRS 9 are monitored for internal risk management purposes, only those energy contracts within the scope of IFRS 9 are within the scope of the IFRS 7 disclosure requirements.
204 Financial Statements | Centrica plc Annual Report and Accounts 2023 553 of 1021
S3. FINANCIAL RISK MANAGEMENT
(ii) Proprietary energy trading
The Group’s proprietary energy trading activities consist of physical and financial commodity purchases and sales contracts taken on with the intent of benefitting from changes in market prices or differences between buying and selling prices. The Group conducts its trading activities in the over-the-counter market and through exchanges in the UK and continental Europe. The Group is exposed to commodity price risk as a result of its proprietary energy trading activities because the value of its trading assets and liabilities will fluctuate with changes in market prices for commodities.

The Group sets volumetric and VaR limits to manage the commodity price risk exposure associated with the Group’s proprietary energy trading activities. VaR measures the estimated potential loss at a 95% confidence level over a one-day holding period. The carrying value of energy contracts used in proprietary energy trading activities at 31 December 2023 is disclosed in note 19.

As with any modelled risk measure, there are certain limitations that arise from the assumptions used in the VaR calculation. VaR assumes that historical price behaviours will continue in the future and that the Group’s trading positions can be unwound or hedged within the predetermined holding period. Furthermore, the use of a 95% confidence level, by definition, does not take into account changes in value that might occur beyond this confidence level.
(b) Currency risk management
The Group is exposed to currency risk on foreign currency denominated forecast transactions, firm commitments, monetary assets and liabilities (transactional exposure) and on its net investments in foreign operations (translational exposure). IFRS 7 only requires disclosure of currency risk arising on financial instruments denominated in a currency other than the functional currency of the commercial operation transacting. As a result, for the purposes of IFRS 7, currency risk excludes items that are not financial instruments, such as the Group’s net investments in international operations as well as foreign currency denominated forecast transactions and firm commitments. (i) Transactional currency risk
The Group is exposed to transactional currency risk on transactions denominated in currencies other than the underlying functional currency of the commercial operation transacting. The primary functional currencies remain pounds sterling in the UK, Danish krone in Denmark, euros in the Netherlands and the Republic of Ireland and US dollars in the Group’s LNG business. The risk is that the functional currency value of cash flows will vary as a result of movements in exchange rates. Transactional exposure arises from the Group’s energy procurement, production and generation activities, where many transactions are denominated in foreign currencies. In addition, in order to optimise the cost of funding, the Group has, in certain cases, issued foreign currency denominated debt or entered into foreign currency loans, primarily in US dollars, euros and Japanese yen.

It is the Group’s policy to hedge material transactional exposures using derivatives (either applying formal hedge accounting or economic hedge relationships) to fix the functional currency value of non-functional currency cash flows, except where there is an economic hedge inherent in the transaction. At 31 December 2023, there were no material unhedged non-functional currency monetary assets or liabilities, firm commitments or probable forecast transactions (2022: £nil), other than transactions which have an inherent economic hedge and foreign currency borrowings used to hedge translational exposures. (ii) Translational currency risk
The Group is exposed to translational currency risk as a result of its net investments in Europe. The risk is that the pounds sterling value of the net assets of foreign operations will decrease with changes in foreign exchange rates. The Group’s policy is to protect the pounds sterling book value of its net investments in foreign operations where appropriate, subject to certain parameters, by holding foreign currency debt, entering into foreign currency derivatives, or a mixture of both.

The Group manages translational currency risk taking into consideration the cash impact of any hedging activity as well as the risk to the net asset carrying values in the Group’s Financial Statements. The translation hedging programme including the potential cash impact is managed by the Group Treasury function and monitored by the Chief Financial Officer. (c) Interest rate risk management
In the normal course of business the Group borrows to finance its operations. The Group is exposed to interest rate risk because the fair value of fixed-rate borrowings and the cash flows associated with floating rate borrowings will fluctuate with changes in interest rates. The Group’s policy is to manage the interest rate risk on long-term borrowings by ensuring the exposure to floating interest rates remains within a 30% to 70% range, including the impact of interest rate derivatives.

The return generated on the Group’s cash balance is also exposed to movements in short-term interest rates. The Group manages cash balances to protect against adverse changes in rates whilst retaining liquidity.

Financial Statements | Centrica plc Annual Report and Accounts 2023 205 554 of 1021
S3. FINANCIAL RISK MANAGEMENT
(d) Sensitivity analysis
IFRS 7 requires disclosure of a sensitivity analysis that is intended to illustrate the sensitivity of the Group’s financial position and performance to changes in market variables (commodity prices, foreign exchange rates and interest rates) as a result of changes in the fair value or cash flows associated with the Group’s financial instruments. The sensitivity analysis provided discloses the effect on profit or loss and equity at 31 December 2023, assuming that a reasonably possible change in the relevant risk variable had occurred at 31 December 2023, and has been applied to the risk exposures in existence at that date to show the effects of reasonably possible changes in price on profit or loss and equity. Reasonably possible changes in market variables used in the sensitivity analysis are based on implied volatilities, where available, or historical data for energy prices and foreign exchange rates. Reasonably possible changes in interest rates are based on management judgement and historical experience.

The sensitivity analysis has been prepared based on 31 December 2023 balances and on the basis that the balances, the ratio of fixed to floating rates of debt and derivatives, the proportion of energy contracts that are financial instruments, the proportion of financial instruments in foreign currencies and the hedge designations in place at 31 December 2023 are all constant. Excluded from this analysis are all non-financial assets and liabilities and energy contracts that are not financial instruments under IFRS 9. The sensitivity to foreign exchange rates relates only to monetary assets and liabilities denominated in a currency other than the functional currency of the commercial operation transacting, and excludes the translation of the net assets of foreign operations to pounds sterling.

The sensitivity analysis provided is hypothetical only and should be used with caution as the impacts provided are not necessarily indicative of the actual impacts that would be experienced. This is because the Group’s actual exposure to market rates is changing constantly as the Group’s portfolio of commodity, debt and foreign currency contracts changes. Changes in fair values or cash flows based on a variation in a market variable cannot be extrapolated because the relationship between the change in market variable and the change in fair value or cash flows may not be linear. In addition, the effect of a change in a particular market variable on fair values or cash flows is calculated without considering interrelationships between the various market rates or mitigating actions that would be taken by the Group.
(i) Transactional currency risk
The Group has performed an analysis of the sensitivity of the Group’s financial position and performance to changes in foreign exchange rates. The Group deems 10% movements to US dollar and euro currency rates relative to pounds sterling to be reasonably possible.

The material impact of such movements on profit and equity, both before and after taxation, are as follows:

Incremental profit/(loss)
2023
Impact on
profit
£m
2022
Impact
on profit
£m
US dollar – increase/(decrease) 102/(54) 139/(180)
Euro – increase/(decrease) (56)/128 36/(38)
All other currency sensitivities are not material.
(ii) Interest rate risk
The Group has performed an analysis of the sensitivity of the Group’s financial position and performance to changes in interest rates. The Group deems a one percentage point move in UK, US and Euro interest rates to be reasonably possible. The impact of such movements on profit and equity, both after taxation, is immaterial. (iii) Commodity price risk – non-proprietary
The impacts of reasonably possible changes in commodity prices on profit and equity, both after taxation, based on the assumptions set out above are as follows:
2023 2022
Energy prices Base price (i)
Reasonably
possible
change in
variable (ii)
% Base price (i)
Reasonably
possible
change in
variable (ii)
%
UK gas (p/therm) 86 +/-54 184 +/-47
European gas (€/MWh) 33 +/-54 71 +/-47
UK power (£/MWh) 85 +/-13 189 +/-26
UK emissions (€/tonne) 80 +/-7 86 +/-7
UK oil (US$/bbl) 73 +/-10 84 +/-19
North American gas (US cents/therm) 34 +/-11 44 +/-25
Japan Korea Marker (JKM) gas price (US$/MMBtu) 12 +/-9 21 +/-10 206 Financial Statements | Centrica plc Annual Report and Accounts 2023 555 of 1021
S3. FINANCIAL RISK MANAGEMENT
Incremental profit/(loss)
2023
Impact on
profit (ii)
£m
2022
Impact on
profit (ii)
£m
UK gas price – increase/(decrease) 218/(218) 365/(374)
UK power price – increase/(decrease) 84/(83) 540/(544)
European gas price – (decrease)/increase (167)/167 (171)/171 Other UK energy prices (oil and emissions) – (decrease)/increase (2)/2 (32)/32 UK and European energy prices (combined) – increase/(decrease) 133/(132) 702/(715) North American energy prices (combined) – increase/(decrease) 35/(35) 60/(60) JKM gas price – increase/(decrease) 60/(60) 294/(294)
(i) The base price represents the average forward market price over the duration of the active market curve used in the sensitivity analysis provided. (ii) The reasonably possible change in variable and the impact on profit are calculated using both the active and inactive market curves for energy prices.

The impact on other comprehensive income of such price changes is immaterial. (iv) Commodity price risk – proprietary trades
As at 31 December 2023 the VaR associated with proprietary trading was £4 million (2022: £5 million). This represents the statistical downside risk associated with the proprietary trade and associated hedging positions. The changes in the year only relate to changes in commodity prices. Intra-day trading positions are monitored using a live time risk management system.

The impacts of reasonably possible changes using probability-based high and low price curves applied to level 3 proprietary trades are as follows:

Incremental profit/(loss)
2023
Impact on
profit (i)
£m
2022
Impact on
profit (i)
£m
Level 3 proprietary trades – increase/(decrease) (ii) 24/(24) 891/(877) (i) The reasonably possible change in variable and the impact on profit are calculated using both the active and inactive market curves for energy prices, see note 7(c) for detail on market curves.
(ii) The level 3 proprietary financial instruments’ sensitivity has been valued in Secure Environment and excludes associated hedges which would mitigate this impact.

Financial Statements | Centrica plc Annual Report and Accounts 2023 207 556 of 1021
S3. FINANCIAL RISK MANAGEMENT
Credit risk management
Credit risk is the risk of loss associated with a counterparty’s inability or failure to discharge its obligations under a contract.

The Group continually reviews its rating thresholds for relevant counterparty credit limits and updates these as necessary, based on a consistent set of principles. It continues to operate within its limits. In respect of trading activities for both the US and Europe there is an effort to maintain a balance between exchange-based trading and bilateral transactions. This allows for a reasonable balance between counterparty credit risk and potential liquidity requirements. In addition, the Group actively manages the trade-off between credit and liquidity risks by optimising the use of contracts with collateral obligations and physically settled contracts without collateral obligations.

The Group is exposed to credit risk in its treasury, trading, energy procurement and downstream activities. The maximum exposure to credit risk for financial instruments at fair value is equal to their carrying value. Gross amounts are shown by counterparty credit rating in the table below. Further details of other collateral and credit security not offset against these amounts is shown in note S6. 2023
Financial assets at
amortised cost Financial assets at fair value
31 December
Receivables
including
treasury, trading
and energy
procurement
counterparties (i)
£m
Securities (ii)
£m
Cash and cash
equivalents
£m
Cash and cash
equivalents
£m
Derivative
financial
instruments with
positive
fair values
£m
Securities
£m
Other
investments
£m
AAA to AA 65 — — 4,859 — 104 —
AA- to A- 605 — 1,459 — 819 — —
BBB+ to BBB- 1,054 — 41 — 1,646 — —
BB+ to BB- 164 — 5 — 438 — —
B+ or lower 58 — 8 — 45 — —
Unrated (iii) 4,553 417 71 — 324 — 61
6,499 417 1,584 4,859 3,272 104 61
2022
Financial assets at
amortised cost Financial assets at fair value
31 December
Receivables
including
treasury,
trading and
energy
procurement
counterparties
£m (i)
Securities (ii)
£m
Cash and cash
equivalents (iv)
£m
Cash and cash
equivalents
£m
Derivative
financial
instruments
with positive
fair values
£m
Securities
£m
Other investments
£m
AAA to AA 245 — — 2,800 19 95 —
AA- to A- 914 — 1,844 178 1,271 — —
BBB+ to BBB- 2,727 — 20 — 4,459 — —
BB+ to BB- 542 — — — 724 — —
B+ or lower 112 — — — 235 — —
Unrated (iii) 4,534 403 — — 719 27 —
9,074 403 1,864 2,978 7,427 122 —
(i) The Group holds a provision of £1,309 million (2022: £872 million) against receivables. The significant majority of this provision is held against amounts due from unrated counterparties. Further analysis of past due trade receivables may be found at note 17. (ii) Securities held at amortised cost consist of loans to the pension schemes of £405 million (2022: £403 million) and other loans receivable of £12 million (2022: £nil) – see note 24.
(iii) The unrated counterparty receivables primarily comprise amounts due from downstream customers, subsidiaries of rated entities, exchanges or clearing houses. (iv) Cash and cash equivalents measured at amortised cost in 2022 have been restated following re-analysis of counterparty credit rating. 208 Financial Statements | Centrica plc Annual Report and Accounts 2023 557 of 1021
S3. FINANCIAL RISK MANAGEMENT
Details of how credit risk is managed across the asset categories are provided below:
(a) Treasury, trading and energy procurement activities Wholesale counterparty credit exposures are monitored by individual counterparty and by category of credit rating, and are subject to approved limits. The Group uses master netting agreements to reduce credit risk and net settles payments with counterparties where net settlement provisions exist (see note S6 for details of amounts offset). In addition, the Group employs a variety of other methods to mitigate credit risk: margining, various forms of bank and parent company guarantees and letters of credit.

The vast majority of Group credit risk associated with its treasury, trading and energy procurement activities is with counterparties in related energy industries or financial institutions together with smaller exposures to commodity traders and small independent renewable producers. The impairment considerations of IFRS 9 are applicable to financial assets arising from treasury, trading and energy procurement activities that are carried at amortised cost and debt instruments that are carried at fair value through other comprehensive income (FVOCI). Debt instruments measured at FVOCI are not material for further disclosure.

Included in the table above within receivables including treasury, trading and energy procurement counterparties is £2,155 million (2022:
£4,525 million) of treasury, trading and energy procurement assets. The Group’s risk assessment procedures and counterparty selection process ensure that the credit risk on this type of financial asset is always low at initial recognition.

Included within the table above is information about the exposure to credit risk arising from only certain of the Group’s energy procurement contracts – those in the scope of IFRS 9. Whilst the Group manages the credit risk associated with both financial and nonfinancial energy procurement contracts, it is the carrying value of financial assets within the scope of IFRS 9 that represents the maximum exposure to credit risk in accordance with IFRS 7.
(b) Trade receivables and contract assets
The simplified approach of measuring lifetime expected credit losses has been applied to trade receivables and contract asset balances, which are the focus of this disclosure. Therefore, consideration of the significance of any change in credit risk since initial recognition for the purpose of applying this model is not required for any material component of the receivables balance.

In the case of business customers, credit risk is managed by checking a company’s creditworthiness and financial strength both before commencing trade and during the business relationship. For residential customers, creditworthiness is ascertained normally before commencing trade to determine the payment mechanism required to reduce credit risk to an acceptable level. Certain customers will only be accepted on a prepayment basis or with a security deposit. In some cases, an ageing of receivables is monitored and used to manage the exposure to credit risk associated with both business and residential customers. In other cases, credit risk is monitored and managed by grouping customers according to method of payment or profile.

Liquidity risk management and going concern
Liquidity risk is the risk that the Group is unable to meet its financial obligations as they fall due. The Group experiences significant movements in its liquidity position due primarily to the seasonal nature of its business and margin cash arrangements associated with certain wholesale commodity contracts. To mitigate this risk the Group maintains significant committed facilities and holds cash on deposit to ensure that there is sufficient liquidity headroom at all points in the seasonal trading cycle of the business. See note 24 for further information.

Financial Statements | Centrica plc Annual Report and Accounts 2023 209 558 of 1021
S3. FINANCIAL RISK MANAGEMENT
Maturity profiles
Maturities of derivative financial instruments, provisions, borrowings and leases are provided in the following tables (all amounts are remaining contractual undiscounted cash flows):

Due for payment 2023
<1
year
£m
1 to 2
years
£m
2 to 3
years
£m
3 to 4
years
£m
4 to 5
years
£m
>5
years
£m
Energy and interest derivatives in a loss position that will be settled on a net basis (i) (300) (80) (30) (21) (17) (47) Gross energy procurement contracts and other derivative buy trades carried at fair value (4,541) (2,423) (78) (35) (32) (82) Foreign exchange derivatives that will be settled on a gross basis:

Outflow (7,783) (1,367) (570) (298) — —
Inflow 7,732 1,360 570 296 — —
Trade and other payables and contract liabilities (6,267) (130) (41) (20) (2) (8) Borrowings (bank loans, bonds, overdrafts and interest) (924) (593) (183) (182) (125) (3,397) (12,083) (3,233) (332) (260) (176) (3,534)
Leases: (ii)
Minimum lease payments (99) (91) (78) (44) (25) (99)
Capital elements of leases (98) (80) (68) (38) (21) (79) Due for payment 2022
<1
year
£m
1 to 2
years
£m
2 to 3
years
£m
3 to 4
years
£m
4 to 5
years
£m
>5
years
£m
Energy and interest derivatives in a loss position that will be settled on a net basis (i) (1,159) (146) (47) (28) (18) (80) Gross energy procurement contracts and other derivative buy trades carried at fair value (10,490) (8,525) (4,580) (67) (47) (116) Foreign exchange derivatives that will be settled on a gross basis:

Outflow (7,748) (1,244) (73) — — —
Inflow 8,027 1,207 239 20 1 —
Trade and other payables and contract liabilities (8,930) (113) (24) (17) — — Borrowings (bank loans, bonds, overdrafts and interest) (1,016) (157) (595) (185) (186) (3,575) (21,316) (8,978) (5,080) (277) (250) (3,771)
Leases: (ii)
Minimum lease payments (89) (79) (70) (55) (26) (29)
Capital elements of leases (88) (69) (67) (51) (24) (26) (i) Proprietary energy trades are excluded from this maturity analysis as the Group does not take physical delivery of volumes traded under these contracts. The associated cash flows are expected to be equal to the contract fair value at the balance sheet date. See note 19 for further details. (ii) The difference between the total minimum lease payments and the total capital elements of leases is due to future finance charges. 210 Financial Statements | Centrica plc Annual Report and Accounts 2023 559 of 1021
S4. OTHER EQUITY
This section summarises the Group’s other equity reserve movements.

Cash flow
hedging
reserve
£m
Foreign
currency
translation
reserve
£m
Actuarial
gains and
losses
reserve
£m
Financial
asset at
FVOCI
reserve
£m
Treasury
and own
shares
reserve
£m
Sharebased
payments
reserve
£m
Merger,
capital
redemption
and other
reserves
£m
Total
£m
1 January 2022 10 (304) (1,012) 3 (18) 42 527 (752)
Actuarial loss — — (147) — — — — (147)
Employee share schemes:

Exercise of awards — — — — 10 (22) — (12)
Value of services provided — — — — — 10 — 10
Purchase of own shares — — — — (5) — — (5)
Issue of shares — — — — (7) — — (7)
Share buyback programme:

Purchase of Treasury shares — — — — (43) — — (43)
Accrual for committed share purchases — — — — — — (207) (207) Impact of cash flow hedging (28) — — — — — — (28)
Taxation on above items 8 — 23 — — — — 31
Share of other comprehensive loss of joint ventures
and associates, net of taxation — — (293) — — — — (293) Exchange differences on translation of foreign
operations — (95) — — — — — (95)
Exchange differences reclassified to Group Income
Statement on disposal — 272 — — — — — 272
31 December 2022 (10) (127) (1,429) 3 (63) 30 320 (1,276) Actuarial loss — — (381) — — — — (381)
Employee share schemes:

Exercise of awards — — — — 22 (20) — 2
Value of services provided — — — — — 31 — 31
Proceeds from exercise of share options — — — — 6 — — 6 Share buyback programme:

Purchase of Treasury shares — — — — (615) — — (615)
Movement on accrual for committed share
purchases — — — — — — 115 115
Impact of cash flow hedging (3) — — — — — — (3)
Share of other comprehensive loss of joint ventures
and associates, net of taxation — — (95) — — — — (95)
Exchange differences on translation of foreign
operations — (43) — — — — — (43)
Revaluation of FVOCI securities — — — 4 — — — 4
Taxation on above items 1 — 93 (1) — 6 — 99
31 December 2023 (12) (170) (1,812) 6 (650) 47 435 (2,156) Merger, capital redemption and other reserves
During February 1997, BG plc (formerly British Gas plc) demerged certain businesses (grouped together under GB Gas Holdings Limited (GBGH)) to form Centrica plc. Upon demerger, the share capital of GBGH was transferred to Centrica plc and was recorded at the nominal value of shares issued to BG plc shareholders. In accordance with the Companies Act 1985, no premium was recorded on the shares issued. On consolidation, the difference between the nominal value of the Company’s shares issued and the amount of share capital and share premium of GBGH at the date of demerger was credited to a merger reserve.

On 8 December 2017, the Group’s existing exploration and production business was combined with that of Bayerngas Norge AS to form the Spirit Energy business. The Group acquired 69% of the Spirit Energy business and Bayerngas Norge’s former shareholders acquired 31%. The non-controlling interest established on acquisition has been based on its share of the carrying value of the combined business, with the other reserve representing the difference between the fair value and this carrying value.

In accordance with the Companies Act, the Company has transferred to the capital redemption reserve an amount equal to the nominal value of shares repurchased and subsequently cancelled. As at 31 December 2023 the cumulative nominal value of shares repurchased and subsequently cancelled was £28 million (2022: £28 million).

At the year-end, the Group has recognised a financial liability of £94 million relating to the share buyback programme. See Treasury and own shares reserve section for more details.

Financial Statements | Centrica plc Annual Report and Accounts 2023 211 560 of 1021
S4. OTHER EQUITY
Treasury and own shares reserve
The own shares reserve reflects the cost of shares in the Group held in the Centrica employee share ownership trusts to meet the future requirements of the Group’s share-based payment plans.

Treasury shares are acquired equity instruments of the Company.

On 10 November 2022, the Group announced an intention to undertake a share buyback of £250 million and the Group entered into contracts with third parties to undertake this repurchase programme which has now completed. During 2023, the Group firstly increased the share buyback by an additional £300 million which completed during the second half of the year.

Subsequently, in July 2023, the Group announced a further £450 million extension to the share buyback programme and as a result, the Group signed an agreement with a third party to undertake the repurchase of £200 million of shares which is expected to complete by March 2024. The repurchase of the remaining £250 million of shares is expected to commence in the first half of 2024. See note 3 for further details.

During the year ended 31 December 2023, the Group purchased 512 million ordinary shares, representing approximately 8.7% of the issued ordinary share capital at an average price of 120.1 pence per share, and an aggregate cost of £615 million under the share buyback programme. Of this £615 million, £613 million has been paid and £2 million relates to shares committed to being purchased at 31 December 2023 but not yet settled.

A financial liability of £94 million was recognised at 31 December 2023, representing the difference between purchases paid for to date under the current tranche, and the maximum potential repurchase under the contract of £200 million.

The monthly breakdown of all shares purchased and the average price paid per share (excluding expenses) in relation to the financial liability of £207 million recognised at 31 December 2022 were as follows:

Period
Number
of shares
purchased under
share buyback
programme
Average price paid
Pence
Total cost
£m
Authorised
purchases
unutilised at
month end
£m
January 2023 44,926,039 95.4 43 164
February 2023 51,825,628 100.7 52 112
March 2023 108,017,252 103.7 112 —
Total 204,768,919 101.1 207 —
The monthly breakdown of all shares purchased and the average price paid per share (excluding expenses) in relation to the additional £300 million programme for the year ended 31 December 2023 were as follows:

Period
Number
of shares
purchased under
share buyback
programme
Average price paid
Pence
Total cost
£m
Authorised
purchases
unutilised at
month end
£m
April 2023 43,184,077 112.7 49 251
May 2023 29,309,742 116.5 34 217
June 2023 42,623,172 118.4 50 167
July 2023 54,532,501 119.7 65 102
August 2023 22,378,746 142.3 32 70
September 2023 30,685,854 163.6 50 20
October 2023 12,740,987 153.1 20 —
Total 235,455,079 127.4 300 —
The monthly breakdown of all shares purchased and the average price paid per share (excluding expenses) in relation to the further £200 million programme for the year ended 31 December 2023 were as follows. This includes £2 million relating to shares committed to being purchased at 31 December 2023 but not yet settled.

Period
Number
of shares
purchased under
share buyback
programme
Average price paid
Pence
Total cost
£m
Authorised
purchases
unutilised at
month end
£m
October 2023 17,642,000 155.8 27 173
November 2023 27,672,575 151.5 42 131
December 2023 26,734,872 145.4 39 92
Total 72,049,447 150.6 108 92
212 Financial Statements | Centrica plc Annual Report and Accounts 2023 561 of 1021
S5. HEDGE ACCOUNTING
The Group primarily applies hedge accounting to address interest rate and foreign currency risk on borrowings.

For the purposes of hedge accounting, hedges are classified either as fair value hedges, cash flow hedges or hedges of net investments in foreign operations.

The fair values of derivatives and primary financial instruments in hedge accounting relationships at 31 December were as follows:
2023 2022
31 December Hedge
Assets
£m
Liabilities
£m
Change in
fair value
£m
Assets
£m
Liabilities
£m
Change in
fair value
£m
Interest rate risk Fair value — (136) 48 37 (221) (228) Foreign exchange risk Cash flow hedge 36 (18) (13) 37 (6) (10) 2023 Hedge
Timing of
nominal
amount Average rate Nominal value Hedged item
Change in
fair value
of hedged item
in year
£m
Cumulative
amount of
fair value
hedge
adjustments
on hedged
item
£m
Accumulated
(losses)/gains
in equity (i)
£m
Interest rate risk Fair value 2025-2033 Fixed to
floating
at Fallback
LIBOR +
2%-5%
£50 million-
£550 million
Bonds (ii) (59) 138 N/A
Foreign exchange risk Cash flow hedge 2032 GBP to euro
at 1.171
€50 million Euro bonds (1) N/A 3
Cash flow hedge 2036-2038 GBP to yen
at 158.87
¥20 billion Yen bank
loans
7 N/A (21)
2022 Hedge
Timing of
nominal
amount Average rate Nominal value Hedged item
Change in
fair value
of hedged item
in year
£m
Cumulative
amount of fair
value hedge
adjustments on
hedged item
£m
Accumulated
gains/(losses) in
equity (i)
£m
Interest rate risk Fair value 2022-2033 Fixed to floating at LIBOR/US
IBOR + 1%-5%
£50 million-
£550 million,
$250 million
Bonds (ii) 228 158 N/A
Foreign exchange risk Cash flow hedge 2032 GBP to euro
at 1.171
€50 million Euro bonds 7 N/A 26
Cash flow hedge 2036-2038 GBP to yen
at 157.33
¥20 billion Yen bank
loans
3 N/A (23)
(i) In the years presented all amounts related to continuing cash flow hedge relationships. (ii) The carrying amount of bonds designated as hedged items in hedging relationships is disclosed in note 24.

The Group’s accounting policies in relation to derivatives qualifying for hedge accounting under IAS 39 are described below.

Fair value hedges
A derivative is designated as a hedging instrument and its relationship to a recognised asset or liability is classified as a fair value hedge when it hedges the exposure to changes in the fair value of that recognised asset or liability. The Group’s fair value hedges consist of interest rate swaps used to protect against changes in the fair value of fixed-rate, long-term debt due to movements in market interest rates. Any gain or loss from re-measuring the hedging instrument to fair value is recognised immediately in the Group Income Statement in net finance cost. Any gain or loss on the hedged item attributable to the hedged risk is adjusted against the carrying amount of the hedged item and recognised in the Group Income Statement within net finance cost. The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, the hedge no longer qualifies for hedge accounting or the Group revokes the designation. Any adjustment to the carrying amount of a hedged financial instrument for which the effective interest method is used is amortised to the Group Income Statement. Amortisation may begin as soon as an adjustment exists and begins no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.

Financial Statements | Centrica plc Annual Report and Accounts 2023 213 562 of 1021
Cash flow hedges
A derivative is classified as a cash flow hedge when it hedges exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset, liability or a highly probable forecast transaction. The Group’s cash flow hedges consist primarily of:
¢ Forward foreign exchange contracts used to protect against the variability of functional currency denominated cash flows associated with non-functional currency denominated highly probable forecast transactions; and ¢ Cross-currency interest rate swaps and forward foreign exchange contracts used to protect against the variability in cash flows associated with borrowings denominated in non-functional currencies.

The portion of the gain or loss on the hedging instrument which is effective is recognised directly in equity while any ineffectiveness is recognised in the Group Income Statement. The Group does not have any material sources of ineffectiveness. The gains or losses that are initially recognised in the cash flow hedging reserve through other comprehensive income are transferred to the Group Income Statement in the period in which the hedged item affects profit or loss. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, no longer qualifies for hedge accounting or the Group revokes the designation. At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity remains in equity until the hedged transaction occurs. If the transaction is no longer expected to occur, the cumulative gain or loss recognised in equity is recognised in the Group Income Statement. Note S4 details movements in the cash flow hedging reserve. 214 Financial Statements | Centrica plc Annual Report and Accounts 2023 563 of 1021
S6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Group has documented internal policies for determining fair value, including methodologies used to establish valuation adjustments required for credit risk.
(a) Fair value hierarchy
Financial assets and financial liabilities measured and held at fair value are classified into one of three categories, known as hierarchy levels, which are defined according to the inputs used to measure fair value as follows:
¢ Level 1: fair value is determined using observable inputs that reflect unadjusted quoted market prices for identical assets and liabilities; ¢ Level 2: fair value is determined using significant inputs that may be directly observable inputs or unobservable inputs that are corroborated by market data; and
¢ Level 3: fair value is determined using significant unobservable inputs that are not corroborated by market data and may be used with internally developed methodologies that result in management’s best estimate of fair value. 2023 2022
31 December
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Financial assets
Derivative financial instruments:

Energy derivatives — 2,995 156 3,151 — 6,486 592 7,078
Interest rate derivatives — — — — — 37 — 37
Foreign exchange derivatives — 121 — 121 — 312 — 312
Debt instruments 72 — 1 73 66 — 1 67
Equity instruments 32 — 60 92 29 9 17 55
Contingent consideration receivable — — — — — 26 — 26
Cash and cash equivalents — 4,859 — 4,859 — 2,978 — 2,978 Total financial assets at fair value 104 7,975 217 8,296 95 9,848 610 10,553 Financial liabilities
Derivative financial instruments:

Energy derivatives — (2,436) (272) (2,708) — (8,806) (850) (9,656) Interest rate derivatives — (136) — (136) — (221) — (221) Foreign exchange derivatives — (162) — (162) — (274) — (274) Contingent consideration payable — — (123) (123) — — (96) (96) Total financial liabilities at fair value — (2,734) (395) (3,129) — (9,301) (946) (10,247) The reconciliation of the Level 3 fair value measurements during the year is as follows:
2023 2022
Financial
assets
£m
Financial
liabilities
£m
Financial
assets
£m
Financial
liabilities
£m
Level 3 financial instruments
1 January 610 (946) 501 (290)
Total realised and unrealised (losses)/gains:

Recognised in Group Income Statement (297) 252 10 (784) Recognised in Other Comprehensive Income (1) — — —
Net movement in contingent consideration liability — (27) — (96) Purchases, sales, issuances and settlements (net) 2 194 (4) — Transfers between Level 3 and Level 2 (i) (96) 131 101 224 Foreign exchange movements (1) 1 2 —
31 December 217 (395) 610 (946)
Total (losses)/gains for the year for Level 3 financial instruments held at the end of the reporting period (297) 252 10 (784) (i) Transfers between levels are deemed to occur at the beginning of the reporting year. (b) Valuation techniques used to derive Level 2 and Level 3 fair values and Group valuation process Level 2 interest rate derivatives and foreign exchange derivatives comprise interest rate swaps and forward foreign exchange contracts.

Interest rate swaps are fair valued using forward interest rates extracted from observable yield curves. Forward foreign exchange contracts are fair valued using forward exchange rates that are quoted in an active market, with the resulting market value discounted back to present value using observable yield curves.

Financial Statements | Centrica plc Annual Report and Accounts 2023 215 564 of 1021
Level 2 energy derivatives are fair valued by comparing and discounting the difference between the expected contractual cash flows for the relevant commodities and the quoted prices for those commodities in an active market. The average discount rate applied to value this type of contract during the year was 5% per annum (2022: average discount rate of 5% per annum).

For Level 3 energy derivatives, the main input used by the Group pertains to deriving expected future commodity prices in markets that are not active as far into the future as some of our contractual terms. This applies to certain contracts within Europe and North America.

Fair values are then calculated by comparing and discounting the difference between the expected contractual cash flows and these derived future prices using an average discount rate of 5% (Europe) and 5% (North America) per annum (2022: average discount rate of 5% (Europe) and 5% (North America) per annum).

Active period of markets Gas Power Coal Emissions Oil
UK (years) 4 4 3 3 3
Because the Level 3 energy derivative valuations involve the prediction of future commodity market prices, sometimes a long way into the future, reasonably possible alternative assumptions for gas, power, coal, emissions or oil prices may result in a higher or lower fair value for Level 3 financial instruments. The impact of reasonably possible changes in commodity prices on profit and loss are included in note S3.

Other than commodity prices there are no other unobservable inputs which would have a material impact.

It should be noted that the fair values disclosed in the tables above only concern those contracts entered into that are within the scope of IFRS 9. The Group has numerous other commodity contracts that are outside of the scope of IFRS 9 and are not fair valued. The Group’s actual exposure to market rates is constantly changing as the Group’s portfolio of energy contracts changes.

The Group’s valuation process includes specific teams of individuals that perform valuations of the Group’s derivatives for financial reporting purposes, including Level 3 valuations. The Group has an independent team that derives future commodity price curves based on available external data and these prices feed into the energy derivative valuations, subject to adjustments to ensure they are compliant with IFRS 13 ‘Fair Value Measurement’. The price curves are subject to review and approval by the Group’s Executive Committee and valuations of all derivatives, together with other contracts that are not within the scope of IFRS 9, are also reviewed regularly as part of the overall risk management process. The Group adjusts the market value of derivative instruments to account for counterparty credit risk and corresponding possibility of a counterparty default preventing full realisation of the risk-free market value of the derivative. The Group estimates Credit Valuation Adjustments by computing an expected evolution of the market value of a counterpart’s derivatives portfolio over the life of the contracts weighted by the probability of a default and an assumption of the market value recoverable in the event of a default. The default probability is calibrated to the price of Credit Default Swaps – a debt instrument reflecting the insurance premium payable to protect against a debtor’s default. Debit valuation adjustments are the amount added back to the derivative value to account for the expected gain from the Group’s own default and are calculated using a similar methodology with reference to the Group’s own probability of default.

Where the fair value at initial recognition for contracts which have significant unobservable inputs and the fair value differs from the transaction price, a day-one gain or loss will arise. These deferred gains are presented net against respective derivative assets and derivative liabilities. Such gains and losses are deferred and amortised to the Group Income Statement based on volumes purchased or delivered over the contractual period until such time as observable market data becomes available (see note S2 for further detail). The amount that has yet to be recognised in the Group Income Statement relating to the differences between the transaction prices and the amounts that would have arisen had valuation techniques used for subsequent measurement been applied at initial recognition, less subsequent releases, is as follows:

Day-one gains deferred
2023
£m
2022
£m
1 January 304 90
Net gains deferred on transactions in the year 98 401
Net amounts recognised in Group Income Statement (254) (195) Exchange differences (6) 8
31 December 142 304
(c) Fair value of financial assets and liabilities held at amortised cost The carrying value of the Group’s financial assets and liabilities measured at amortised cost are approximately equal to their fair value except as listed below:
2023 2022
31 December Notes
Carrying value
£m
Fair value
£m
Fair value
hierarchy
Carrying value
£m
Fair value
£m
Fair value
hierarchy
Bonds Level 1 24 (2,594) (2,769) Level 1 (2,805) (2,840) Level 1 Level 2 24 (71) (79) Level 2 (69) (79) Level 2
Bank borrowings
The fair values of bonds classified as Level 1 within the fair value hierarchy are calculated using quoted market prices. The fair values of Level 2 bonds have been determined by discounting cash flows with reference to relevant market rates of interest. The fair values of overdrafts and bank loans are assumed to materially equal their carrying values.

Other financial instruments
Due to their nature and/or short-term maturity, the fair values of trade and other receivables, cash and cash equivalents, trade and other payables, other borrowings and securities held at amortised cost are estimated to approximate their carrying values. 216 Financial Statements | Centrica plc Annual Report and Accounts 2023 565 of 1021
S6. FAIR VALUE OF FINANCIAL INSTRUMENTS
(d) Financial assets and liabilities subject to offsetting, master netting arrangements and similar arrangements
Related amounts not offset in
the Group Balance Sheet (i)
31 December 2023
Gross
amounts
of recognised
financial
instruments
£m
Gross amounts of
recognised financial
instruments offset
in the Group
Balance Sheet
£m
Net amounts
presented
in the Group
Balance Sheet
£m
Financial
instruments
£m
Collateral
£m
Net amount
£m
Derivative financial assets 9,883 (6,611) 3,272 (77) (184) 3,011 Derivative financial liabilities (9,617) 6,611 (3,006) 77 260 (2,669) 266 342
Balances arising from commodity contracts:

Accrued and unbilled downstream and energy income 7,067 (4,220) 2,847 (2) — 2,845 Accruals for commodity costs (6,684) 4,220 (2,464) 2 — (2,462) Cash and financing arrangements:

Cash and cash equivalents 6,443 — 6,443 (814) — 5,629
Bank loans and overdrafts (944) — (944) 814 — (130)
Related amounts not offset in the
Group Balance Sheet (i)
31 December 2022
Gross amounts
of recognised
financial
instruments
£m
Gross amounts of
recognised financial
instruments offset
in the Group
Balance Sheet
£m
Net amounts
presented
in the Group
Balance Sheet
£m
Financial
instruments
£m
Collateral
£m
Net amount
£m
Derivative financial assets 28,019 (20,592) 7,427 (956) (601) 5,870 Derivative financial liabilities (30,743) 20,592 (10,151) 956 1,154 (8,041) (2,724) (2,171)
Balances arising from commodity contracts:

Accrued and unbilled downstream and energy income 12,751 (8,057) 4,694 (622) — 4,072 Accruals for commodity costs (13,428) 8,057 (5,371) 622 — (4,749) Cash and financing arrangements:

Cash and cash equivalents 4,842 — 4,842 (600) — 4,242
Bank loans and overdrafts (743) — (743) 600 — (143)
(i) The Group has arrangements in place with various counterparties in respect of commodity trades which provide for a single net settlement of all financial instruments covered by the arrangement in the event of default or termination, or other circumstances arising whereby either party is unable to meet its obligations. The above table shows the potential impact of these arrangements being enforced by offsetting the relevant amounts within each Group Balance Sheet class of asset or liability, but does not show the impact of offsetting across Group Balance Sheet classes where the offsetting Group Balance Sheet class is not included within the above table.

Financial Statements | Centrica plc Annual Report and Accounts 2023 217 566 of 1021
S7. FIXED-FEE SERVICE AND INSURANCE CONTRACTS
This section includes fixed-fee service (FFS) and insurance contract disclosures for services related to British Gas.

FFS non-insurance contracts in the UK are entered into with home services customers by British Gas Services Limited. FFS insurance contracts in the UK are entered into with home services customers by British Gas Insurance Limited, authorised by the PRA and regulated by the FCA and the PRA.

Product offerings include central heating, boiler and controls, plumbing and drains and electrical appliance insurance cover. Insurance contracts normally provide cover for twelve months with the option of renewal.

The contracts that protect policyholders against the risk of breakdowns result in risk transfer to the contract provider. Benefits provided to customers vary in accordance with terms and conditions of the contracts entered into. However, they generally include maintenance, repair and/or replacement of the items affected.

IFRS 17 ‘Insurance contracts’ became effective on 1 January 2023 and replaced the existing insurance standard, IFRS 4. FFS insurance contracts fall within the scope of IFRS 17 where the Group reflects an assessment of the risk associated with an individual customer in setting the price of the contract, this captures materially all the Group’s insurance contracts. The Group applies the simplified ‘Premium Allocation Approach’ to its contracts on the basis that the coverage period of the Group’s insurance contracts is not greater than one year. The implementation of IFRS 17 has not caused any material accounting changes to the Group, see note 1.

The levels of risk exposure and service provision to customers under the contract terms depend on the occurrence of uncertain future events, particularly the nature and frequency of faults, and the cost of repair or replacement of the items affected. Accordingly, the timing and the amount of future cash outflows associated with the contracts is uncertain. As the Group’s insurance contract portfolio is comprised of a large number of contracts with small individual values, a high volume of claims with relatively low unit cost results. The characteristics of the business mean that material concentrations or aggregations of risk are relatively remote. The key terms and conditions that affect future cash flows are as follows:
¢ Provision of labour and parts for repairs, dependent on the agreement and associated level of service; ¢ A specified number of safety and maintenance inspections are carried out as set out in the agreement (usually once a year); ¢ No limit to the number of call-outs to carry out repair work; and ¢ Limits on certain maintenance and repair costs.

The most significant insurance risk is an extreme weather event for an extended period, which has the propensity to increase claim frequencies. The Group regularly assesses insurance risk sensitivities, the most significant relating to increases in breakdown frequency and increases in the average cost of repair. A reasonably possible increase in either would not have a material impact on the results of the Group.

Revenue is recognised over the life of contracts (usually a twelve month period) regarding the incidence of risk, in particular the seasonal propensity of claims that span the life of the contract as a result of emergency maintenance being available throughout the contract term.

Costs incurred to settle claims represent principally the engineer workforce employed by the Group within home services and the cost of parts utilised in repair or maintenance. Revenue is accounted for over a twelve month period in accordance with the premium allocation approach required by IFRS 17, with adjustments made to reflect the seasonality of workload over a given year. Claims frequency is sensitive to the reliability of appliances as well as the impact of weather conditions. The contracts are not exposed to any interest rate risk or significant credit risk and do not contain any embedded derivatives.

Weather conditions and the seasonality of repairs both affect the profile of the workload and associated costs incurred across the year.

The risk exposure of these uncertain events is actively managed by undertaking the following risk mitigation activities:
¢ An initial service visit is provided to customers taking up most central heating contracts and in some instances pre-existing faults may lead to the contract being cancelled and no further cover being provided; ¢ An annual maintenance inspection is performed as part of most central heating contracts to help identify and prevent issues developing into significant maintenance or breakdown claims; and
¢ Contract limits are applied to certain types of maintenance and repair work considered to be higher risk in terms of frequency and cost.

The costs of FFS insurance claims was £nil (2022: £2 million) and revenue earned from FFS insurance contracts in the scope of IFRS15 was £nil (2022: £5 million). The cost of insurance claims incurred during the year was £240 million (2022: £290 million) and is included in the table below in ‘Insurance services cost of sales’. Due to the short average lead time between claims occurrence and settlement, no material provisions were outstanding at the balance sheet date in 2023 or 2022. 31 December
2023
£m
2022
£m
Insurance services revenue 813 852
Insurance services cost of sales (475) (582)
Insurance services operating costs (294) (264)
Insurance contract liabilities:

Liabilities for incurred claims (LIC) (126) (124)
Liability for remaining coverage (LRC) (39) (36)
218 Financial Statements | Centrica plc Annual Report and Accounts 2023 567 of 1021
S8. RELATED PARTY TRANSACTIONS
The Group’s principal related party is its investment in Lake Acquisitions Limited, which owns the existing UK nuclear fleet. The disclosures below, including comparatives, only refer to related parties that were related in the current reporting period.

During the year, the Group entered into the following arm’s length transactions with related parties who are not members of the Group, and had the following associated balances:
2023 2022
31 December
Purchase of
goods and
services
£m
Amounts
owed to
£m
Purchase of
goods and
services
£m
Amounts
owed to
£m
Associates:

Nuclear (655) (94) (564) (102)
Joint ventures (1) — — —
(656) (94) (564) (102)
During the year, there were no material changes to commitments in relation to joint ventures and associates.

At the balance sheet date, the Group had committed facilities to the Lake Acquisition Group totalling £120 million (2022: £120 million), although nothing has been drawn at 31 December 2023.

Remuneration of key management personnel
Year ended 31 December
2023
£m
2022
£m
Short-term benefits 5.0 4.4
Post-employment benefits 0.2 0.1
Share-based payments 4.6 4.1

9.8 8.6
Key management personnel comprise members of the Board and Executive Committee, a total of 14 individuals at 31 December 2023 (2022: 11).

Remuneration of the Directors of Centrica plc
Year ended 31 December
2023
£m
2022
£m
Total emoluments (i) 4.6 3.2
Amounts receivable under long-term incentive schemes 7.7 2.3 Contributions into pension schemes 0.1 —

12.4 5.5
(i) These emoluments were paid for services performed on behalf of the Group. No emoluments related specifically to services performed for the Company.

Directors’ interests in shares are given in the Remuneration Report on pages 84 to 109.

Financial Statements | Centrica plc Annual Report and Accounts 2023 219 568 of 1021
S9. AUDITORS’ REMUNERATION
Year ended 31 December
2023
£m
2022
£m
Fees payable to the Company’s auditors for:

Audit of the Company's individual and consolidated Financial Statements 5.8 4.8 Audit of the Company’s subsidiaries 2.0 1.7
Total fees related to the audit of the parent and subsidiary entities 7.8 6.5 Fees payable to the Company’s auditors and its associates for other services:

Audit-related assurance services (i) 0.7 0.9
Total fees 8.5 7.4
Fees in respect of pension scheme audits (ii) 0.1 0.1
(i) Predominantly relates to the review of the condensed interim Financial Statements. (ii) The pension scheme audit continues to be performed by PricewaterhouseCoopers LLP. 220 Financial Statements | Centrica plc Annual Report and Accounts 2023 569 of 1021
S10. RELATED UNDERTAKINGS
The Group has a large number of related undertakings principally in the UK, US, Canada, Denmark, the Netherlands and the Republic of Ireland. These are listed below.
(a) Subsidiary undertakings
Investments held directly by Centrica plc with 100% voting rights 31 December 2023 Principal activity
Country of incorporation/
registered address key (i) Class of shares held
Centrica Beta Holdings Limited Holding company United Kingdom A Ordinary shares Centrica Ireland Holdings Limited Holding company Republic of Ireland B Ordinary shares CH4 Energy Limited (ii) Dormant United Kingdom A Ordinary shares Rhodes Holdings HK Limited Non-trading Hong Kong C Ordinary shares Investments held indirectly by Centrica plc with 100% voting rights 31 December 2023 Principal activity
Country of incorporation/
registered address key (i) Class of shares held
Accord Energy (Trading) Limited (ii) Dormant United Kingdom A Ordinary shares Alertme.com GmbH In liquidation Germany D Ordinary shares Astrum Solar, Inc. Home and/or commercial services United States E Ordinary shares Blandford Hill Eco Hub Limited (iii) Building solar farm & connecting to grid United Kingdom A Ordinary shares Bord Gáis Energy Limited Energy supply and power generation Republic of Ireland B Ordinary shares Bord Gáis Energy Trustees DAC Pension trustee company Republic of Ireland B Ordinary shares British Gas Finance Limited Vehicle leasing United Kingdom A Ordinary shares British Gas Insurance Limited Insurance provision United Kingdom A Ordinary shares British Gas Limited Energy supply United Kingdom A Ordinary shares British Gas New Heating Limited Electrical and gas installations United Kingdom A Ordinary shares British Gas Services (Commercial) Limited Non-trading United Kingdom A Ordinary shares British Gas Services Limited Home services United Kingdom A Ordinary shares British Gas Social Housing Limited Servicing and installation of heating systems United Kingdom A Ordinary shares British Gas Trading Limited Energy supply United Kingdom A Ordinary shares British Gas X Limited Dormant United Kingdom A Ordinary shares Caythorpe Gas Storage Limited Gas storage United Kingdom F Ordinary shares CBS Energy Assets Belgium B.V. Construction of battery storage Belgium G Ordinary shares CBS Energy Storage Assets UK Limited (iv) Construction of battery storage United Kingdom A Ordinary shares CBS Services Holdings Limited (iv) Holding company United Kingdom A Ordinary shares CBS Solar Assets UK Limited Building solar farm & connecting to grid United Kingdom A Ordinary shares CEA SLH Limited (iii) (iv) Construction of gas peaker United Kingdom A Ordinary shares Centrica (Lincs) Wind Farm Limited Dormant United Kingdom A Ordinary shares Centrica Barry Limited Power generation United Kingdom A Ordinary shares Centrica Business Holdings Inc. Holding company United States H Ordinary shares Centrica Business Solutions (Generation) Limited Power generation United Kingdom A Ordinary shares Centrica Business Solutions B.V. Energy management products and services Netherlands I Ordinary shares Centrica Business Solutions Belgium NV Demand response aggregation Belgium G Ordinary shares Centrica Business Solutions Canada Inc. Energy management products and services Canada J Ordinary shares Centrica Business Solutions Deutschland GmbH Demand response aggregation Germany K Ordinary shares Centrica Business Solutions France SASU Demand response aggregation France L Ordinary shares Centrica Business Solutions International Limited Dormant United Kingdom A Ordinary shares Centrica Business Solutions Ireland Limited Energy management products and services Republic of Ireland B Ordinary shares Centrica Business Solutions Italia Srl Energy management products and services Italy M Ordinary shares Centrica Business Solutions Management Limited Holding company United Kingdom A Ordinary shares Financial Statements | Centrica plc Annual Report and Accounts 2023 221 570 of 1021
S10. RELATED UNDERTAKINGS
31 December 2023 Principal activity
Country of incorporation/
registered address key (i) Class of shares held
Centrica Business Solutions Romania Srl Energy management products and services Romania N Ordinary shares Centrica Business Solutions Services, Inc. Energy management products and services United States O Ordinary shares Centrica Business Solutions UK Limited Energy management products and services United Kingdom A Ordinary shares Centrica Business Solutions UK Optimisation
Limited
Demand response aggregation United Kingdom A Ordinary shares Centrica Business Solutions US, Inc. Energy management products and services United States O Ordinary shares Centrica Business Solutions Zrt Energy management products and services Hungary P Ordinary shares Centrica Combined Common Investment Fund
Limited
Dormant United Kingdom A Ordinary shares
Centrica Directors Limited Dormant United Kingdom A Ordinary shares Centrica Distributed Generation Limited Power generation United Kingdom A Ordinary shares Centrica Energy Assets Holdings Limited (iv) Power generation United Kingdom A Ordinary shares Centrica Energy Limited Wholesale energy trading United Kingdom A Ordinary shares Centrica Energy Marketing Limited Wholesale energy trading United Kingdom A Ordinary shares Centrica Energy Renewable Investments Limited (ii) Dormant United Kingdom A Ordinary shares Centrica Energy Storage Limited (iv) Gas production and processing United Kingdom F Ordinary shares Centrica Energy Trading A/S Energy services and wholesale energy trading Denmark Q Ordinary shares Centrica Energy Trading GmbH Energy services and wholesale energy trading Germany R Ordinary shares Centrica Energy Trading Pte. Ltd Energy services and wholesale energy trading Singapore S Ordinary shares Centrica Engineers Pension Trustees Limited Dormant United Kingdom A Ordinary shares Centrica Finance (Scotland) Limited Holding company United Kingdom T Ordinary shares Centrica Finance Investments Limited Holding company United Kingdom A Ordinary shares Centrica Finance Norway Limited Dormant Jersey U Ordinary shares Centrica Gamma Holdings Limited Holding company United Kingdom A Ordinary shares Centrica Hive Limited Energy management products and services United Kingdom A Ordinary shares Centrica Hive Srl Energy management products and services Italy V Ordinary shares Centrica Holdings Limited (v) Holding company United Kingdom A Ordinary shares Centrica Ignite GP Limited Investment company United Kingdom A Ordinary shares Centrica Ignite LP Limited Investment company United Kingdom A Ordinary shares Centrica India Offshore Private Limited Business services India W Ordinary shares Centrica Innovations UK Limited Investment company United Kingdom A Ordinary shares Centrica Innovations US, Inc. Investment company United States O Ordinary shares Centrica Insurance Company Limited Insurance provision Isle of Man X Ordinary and preference shares
Centrica Lake Limited Holding company United Kingdom A Ordinary shares Centrica LNG Company Limited LNG trading United Kingdom A Ordinary shares Centrica LNG UK Limited LNG trading United Kingdom A Ordinary shares Centrica Nederland B.V. Holding company Netherlands I Ordinary shares Centrica Nigeria Limited Holding company United Kingdom A Ordinary shares Centrica Nominees No.1 Limited (ii) Dormant United Kingdom A Ordinary shares Centrica Offshore UK Limited Gas and/or liquid exploration and production United Kingdom F Ordinary shares Centrica Onshore Processing UK Limited (ii) Dormant United Kingdom F Ordinary shares Centrica Overseas Holdings Limited Holding company United Kingdom A Ordinary shares Centrica Pension Plan Trustees Limited Dormant United Kingdom A Limited by guarantee Centrica Pension Trustees Limited Dormant United Kingdom A Ordinary shares Centrica Production Limited Dormant United Kingdom T Ordinary shares Centrica Resources (Nigeria) Limited Non-trading Nigeria Y Ordinary shares Centrica Secretaries Limited Dormant United Kingdom A Ordinary shares Centrica Services Limited Business services United Kingdom A Ordinary shares Centrica Smart Meter Assets Limited (iii) Metering assets and services United Kingdom A Ordinary shares 222 Financial Statements | Centrica plc Annual Report and Accounts 2023 571 of 1021
S10. RELATED UNDERTAKINGS
31 December 2023 Principal activity
Country of incorporation/
registered address key (i) Class of shares held
Centrica Storage Holdings Limited Holding company United Kingdom F Ordinary shares Centrica Titan Limited Dormant United Kingdom A Ordinary shares Centrica Trading Limited Dormant United Kingdom A Ordinary shares Centrica Trinidad and Tobago Limited Business services Trinidad and Tobago
Z Ordinary shares
Centrica Trust (No.1) Limited Dormant United Kingdom A Ordinary shares DEML Investments Limited Holding company Canada J Ordinary shares DER Development No.10 Ltd. Holding company Canada J Ordinary shares Distributed Energy Customer Solutions Limited Energy management products and services United Kingdom A Ordinary shares Dyno-Rod Limited Operation of a franchise network United Kingdom A Ordinary shares ECL Contracts Limited Dormant United Kingdom A Ordinary shares ECL Investments Limited Dormant United Kingdom A Ordinary shares Electricity Direct (UK) Limited (ii) Dormant United Kingdom A Ordinary shares ENER-G Nagykanizsa Kft Energy management products and services Hungary P Ordinary shares ENER-G Rudox, LLC Energy management products and services United States O Membership interest Energy For Tomorrow Not-for-profit energy services United Kingdom A Limited by guarantee GB Gas Holdings Limited Holding company United Kingdom A Ordinary shares Generation Green Solar Limited Dormant community benefit society United Kingdom A Ordinary shares GF One Limited (vi) In liquidation United Kingdom AA Ordinary shares GF Two Limited (vi) In liquidation United Kingdom AA Ordinary shares Goldbrand Development Limited (ii) Dormant United Kingdom A Ordinary shares Greener Ideas Limited (vii) Development of flexible power generation sites
Republic of Ireland B Ordinary shares
Home Assistance UK Limited Dormant United Kingdom A Ordinary shares Leicestershire Solar 1 Limited (iii) Building solar farm and connecting to grid United Kingdom A Ordinary shares Neas Energy Limited Energy services and wholesale energy trading United Kingdom A Ordinary shares Neas Invest A/S Dormant Denmark Q Ordinary shares
P.H Jones Group Limited Holding company United Kingdom A Ordinary shares P&M Energy Ltd (iii) Construction of battery storage United Kingdom T Ordinary shares Panoramic Power Ltd. Energy management products and services Israel AB Ordinary shares Pioneer Shipping Limited LNG vessel chartering United Kingdom A Ordinary shares SN12 6EF Limited (iii) Power generation United Kingdom A Ordinary shares South Energy Investments, LLC Investment company United States AC Membership interest Vista Solar, Inc. Distributed energy and power United States AD Ordinary shares Financial Statements | Centrica plc Annual Report and Accounts 2023 223 572 of 1021
S10. RELATED UNDERTAKINGS
Investments held indirectly by Centrica plc with 69% voting rights 31 December 2023 Principal activity
Country of incorporation/
registered address key (i) Class of shares held
Bowland Resources Limited Gas and/or liquid exploration and production United Kingdom A Ordinary shares Bowland Resources (No.2) Limited Gas and/or liquid exploration and production United Kingdom A Ordinary shares Elswick Energy Limited Gas and/or liquid exploration and production United Kingdom A Ordinary shares Spirit Energy Hedging Holding Limited (viii) Dormant United Kingdom AE Ordinary shares Spirit Energy Hedging Limited (viii) Dormant United Kingdom AE Ordinary shares Spirit Energy Limited Holding company United Kingdom A Ordinary and deferred shares
Spirit Energy Nederland B.V. Gas and/or liquid exploration and production Netherlands AF Ordinary Shares Spirit Energy North Sea Limited Gas and/or liquid exploration and production United Kingdom A Ordinary shares Spirit Energy North Sea Oil Limited Gas and/or liquid exploration and production United Kingdom AG Ordinary shares Spirit Energy Norway AS Gas and/or liquid exploration and production Norway AH Ordinary shares Spirit Energy Production UK Limited Gas and/or liquid exploration and production United Kingdom A Ordinary shares Spirit Energy Resources Limited Gas and/or liquid exploration and production United Kingdom A Ordinary shares Spirit Energy Southern North Sea Limited Gas and/or liquid exploration and production United Kingdom A Ordinary shares Spirit Energy Treasury Limited Finance company United Kingdom A Ordinary shares Spirit Europe Limited Holding company United Kingdom A Ordinary shares Spirit Infrastructure B.V. Construction, ownership and exploitation of infrastructure
Netherlands AF Ordinary shares
Spirit North Sea Gas Limited Gas and/or liquid exploration and production United Kingdom AG Ordinary shares Spirit Norway Holdings AS Dormant Norway AI Ordinary shares Spirit Norway Limited Gas and/or liquid exploration and production United Kingdom A Ordinary shares Spirit Production (Services) Limited Business services United Kingdom AG Ordinary shares Spirit Resources (Armada) Limited Gas and/or liquid exploration and production United Kingdom A Ordinary shares (i) For list of registered addresses, refer to note S10(d). (ii) Active proposal to strike off.
(iii) Incorporated or acquired in 2023.
(iv) The following name changes were made during the year:
– Centrica Brigg Limited to CBS Energy Storage Assets UK Limited – ENER-G Cogen International Limited to CBS Services Holdings Limited – EL (SLH CM) Limited to CEA SLH Limited
– Centrica KPS Limited to Centrica Energy Assets Holdings Limited – Centrica Storage Limited to Centrica Energy Storage Limited (v) Centrica Holdings Limited moved from being a direct to indirect subsidiary during the year. (vi) GF One Limited and GF Two Limited are 75% indirectly owned by Centrica plc. (vii) During 2023, the voting rights for Greener Ideas Limited increased to 80%. (viii) Dissolved in January 2024.
224 Financial Statements | Centrica plc Annual Report and Accounts 2023 573 of 1021
S10. RELATED UNDERTAKINGS
(b) Subsidiary undertakings – partnerships held indirectly by Centrica plc with 100% voting rights 31 December 2023 Principal activity
Country of incorporation/
registered address key (i) Class of shares held
CF 2016 LLP Group financing United Kingdom A Membership interest CFCEPS LLP Group financing United Kingdom A Membership interest Direct Energy Resources Partnership Holding entity Canada AJ Membership interest Finance Scotland 2016 Limited Partnership Group financing United Kingdom T Membership interest Finance Scotland CEPS Limited Partnership Group financing United Kingdom T Membership interest Ignite Social Enterprise LP Social enterprise investment fund United Kingdom A Membership interest (i) For list of registered addresses, refer to note S10(d).

The following partnerships are fully consolidated into the Group Financial Statements and the Group has taken advantage of the exemption (as confirmed by regulation 7 of the Partnerships (Accounts) Regulations 2008) not to prepare or file separate accounts for these entities:
¢ Finance Scotland 2016 Limited Partnership;
¢ Finance Scotland CEPS Limited Partnership; and
¢ Ignite Social Enterprise LP.
(c) Joint arrangements and associates
31 December 2023 Principal activity
Country of incorporation/
registered address key (i) Class of shares held
Indirect
interest
and voting
rights (%)
Joint ventures (ii)
Allegheny Solar 1, LLC Energy supply and/or services United States AK Membership interest 40.0% C2 Centrica MT, LLC Energy supply and/or services United States AL Membership interest 50.0% Eurowind Polska VI Sp z.o.o. Operation of an onshore windfarm Poland AM Ordinary shares 50.0% Three Rivers Solar 1, LLC Energy supply and/or services United States AK Membership interest 40.0% Three Rivers Solar 2, LLC Energy supply and/or services United States AK Membership interest 40.0% Three Rivers Solar 3, LLC Energy supply and/or services United States AK Membership interest 40.0% Vindpark Keblowo ApS Operation of an onshore windfarm Denmark AN Ordinary shares 50.0% Associates (ii)
Lake Acquisitions Limited Holding company United Kingdom AO Ordinary shares 20.0% (i) For list of registered addresses, refer to note S10(d). (ii) Further information on the principal joint ventures and associate investments held by the Group is disclosed in notes 6 and 14.

All Group companies principally operate within their country of incorporation unless noted otherwise.

Financial Statements | Centrica plc Annual Report and Accounts 2023 225 574 of 1021
S10. RELATED UNDERTAKINGS
(d) List of registered addresses
Registered
address key Address
A Millstream, Maidenhead Road, Windsor, SL4 5GD, United Kingdom (i) B 1 Warrington Place, Dublin 2, Republic of Ireland
C 5/F, Manulife Place, 348 Kwun Tong Road, Kowloon, Hong Kong (ii) D Thomas-Wimmer-Ring 1-3, 80539, Munich, Germany
E 2 Wisconsin Circle #700, Chevy Chase, MD 20815, United States F Woodland House, Woodland Park, Hessle, HU13 0FA, United Kingdom G Roderveldlaan 2 bus 2, 2600 Antwerp, Belgium
H 3411 Silverside Road, Rodney Building #104, Wilmington, DE 19810, United States I Wiegerbruinlaan 2A, 1422 CB Uithoorn, Netherlands
J 550 Burrard Street, Suite 2900, Vancouver BC V6C 0A3, Canada K Neuer Wall 10, 20354 Hamburg, Germany
L 60 Avenue Charles de Gaulle, Cs 60016, 92573, Neuilly sur Seine Cedex, France M Milan (MI), Via Emilio Cornalia 26, Italy
N Strada Martir Colonel loan Uţă nr.28 camera 1, Municipiul Timisoara judet Timis, Romania O 3411 Silverside Road, Suite 104, Tatnall Building, Wilmington, DE 19810, United States P H-1106 Budapest Jászberényi út 24-36, Hungary
Q Skelagervej 1, 9000 Aalborg, Denmark
R Esplanade 40, 20354 Hamburg, Germany
S 220 Orchard Road, #05-01 Midpoint Orchard, Singapore 238852, Republic of Singapore T 1 Waterfront Avenue, Edinburgh, Scotland EH5 1SG, United Kingdom U 47 Esplanade, St Helier, JE1 0BD, Jersey, Channel Islands V Via Paleocapa Pietro 4, 20121, Milano, Italy
W G-74, LGF, Kalkaji, New Delhi, South Delhi, 110019, India X 3rd floor, St George's Court, Upper Church Street, Douglas, IM1 1EE, Isle of Man Y Sterling Towers, 20 Marina, Lagos, Nigeria
Z 48-50 Sackville Street, Port of Spain, Trinidad and Tobago AA 1 More London Place, London, SE1 2AF, United Kingdom AB 15 Atir Yeda Street, Kfar Saba, 44643, Israel
AC 6 Landmark Square, 4th floor, Stamford CT 06901, United States AD 4640 Admiralty Way, 5th floor, Marina del Rey, California 90292, United States AE 1st floor, 20 Kingston Road, Staines-upon-Thames, TW18 4LG, United Kingdom AF Transpolis Building, Polarisavenue 39, 2132 JH Hoofddorp, Netherlands AG 5th floor, IQ Building, 15 Justice Mill Lane, Aberdeen, AB11 6EQ, United Kingdom AH Veritasvien 29, 4007 Stavanger, Norway
AI Lilleakerveien 8, 0283 Oslo, Norway
AJ 350 7th Avenue SW, Suite 3400, Calgary AB T2P 3N9, Canada AK 1209 Orange Street, Wilmington, New Castle County, DE 19801, United States AL 850 New Burton Road, Suite 201, Dover, DE 19904, United States AM Ul. Wysogotowska 23, 62-081 Przezmierowo, Wielkpolskie, Poland AN Mariagervej 58B, DK 9500 Hobro, Denmark
AO 90 Whitfield Street, London, W1T 4EZ, United Kingdom (i) The following entities changed their registered address during the year from 1st floor, 20 Kingston Road, Staines-upon-Thames, TW18 4LG, United Kingdom to the address listed above.

Bowland Resources Limited
Bowland Resources (No.2) Limited
Elswick Energy Limited
Spirit Energy Limited
Spirit Energy North Sea Limited
Spirit Energy Production UK Limited
Spirit Energy Resources Limited
Spirit Energy Southern North Sea Limited
Spirit Energy Treasury Limited
Spirit Europe Limited
Spirit Norway Limited
Spirit Resources (Armada) Limited
(ii) Rhodes Holdings HK Limited changed its registered address during the year from Level 54, Hopewell Centre, 183 Queens Road East, Hong Kong to the address listed above.
226 Financial Statements | Centrica plc Annual Report and Accounts 2023 575 of 1021
S10. RELATED UNDERTAKINGS
(e) Summarised financial information
Management has determined that the investment in Lake Acquisitions Limited is sufficiently material to warrant further disclosure on an individual basis. Accordingly, the Group presents summarised financial information, along with reconciliations to the amounts included in the consolidated Group Financial Statements, for this investee.

Lake Acquisitions Limited
Summarised statement of total comprehensive income
2023 2022
Year ended 31 December
Associate
information
reported to
Group
£m
Unadjusted
20% share
£m
Fair value
and other
adjustments
£m
Group
share
£m
Associate
information
reported to
Group
£m
Unadjusted
20% share
£m
Fair value
and other
adjustments
£m
Group
share
£m
Revenue 3,398 680 — 680 2,960 592 — 592
Operating profit/(loss) before
interest and tax 1,671 334 (52) 282 737 147 (26) 121
Profit/(loss) for the year 1,242 248 (40) 208 542 108 (15) 93 Other comprehensive (loss)/income (477) (95) — (95) (1,467) (293) — (293) Total comprehensive income/(loss) 765 153 (40) 113 (925) (185) (15) (200) Summarised balance sheet
2023 2022
31 December
Associate
information
reported to
Group
£m
Unadjusted
20% share
£m
Fair value
and other
adjustments (i)
£m
Group
share
£m
Associate
information
reported to
Group
£m
Unadjusted
20% share
£m
Fair value
and other
adjustments (i)
£m
Group
share
£m
Non-current assets 15,970 3,194 694 3,888 17,121 3,424 751 4,175 Current assets 3,901 780 — 780 4,212 842 — 842
Current liabilities (1,350) (270) — (270) (1,742) (348) — (348) Non-current liabilities (11,675) (2,335) (114) (2,449) (12,405) (2,481) (131) (2,612) Net assets 6,846 1,369 580 1,949 7,186 1,437 620 2,057
(i) Before cumulative impairments of £1,046 million (2022: £497 million) of the Group’s associate investment.

During the year, dividends of £220 million (2022: £60 million) were paid by the associate to the Group.

Joint operations - fields/assets
31 December 2023 Location Percentage holding
Cygnus UK North Sea 61%
Financial Statements | Centrica plc Annual Report and Accounts 2023 227 576 of 1021
S11. NON-CONTROLLING INTERESTS
The Group has one subsidiary undertaking with a material non-controlling interest: Spirit Energy Limited, through which the Group carries out the majority of its exploration and production activities. 2023 2022
Year ended 31 December
Noncontrolling
interests
%
Profit for
the year
£m
Total
comprehensive
income
£m
Total
equity
£m
Distributions
to noncontrolling
interests
£m
Noncontrolling
interests
%
Profit for
the year
£m
Total
comprehensive
income
£m
Total
equity
£m
Distributions
to noncontrolling
interests
£m
Spirit Energy Limited 31 111 110 356 (17) 31 146 151 263 (273) Summarised financial information
The summarised financial information disclosed is shown on a 100% basis. It represents the consolidated position of Spirit Energy Limited and its subsidiaries that would be shown in its consolidated financial statements prepared in accordance with IFRS under Group accounting policies before intercompany eliminations.

Summarised statement of total comprehensive income
Year ended 31 December
2023
£m
2022
£m
Revenue 974 1,667
Profit for the year (i) 357 371
Other comprehensive (loss)/income (i) (1) 116
Total comprehensive income 356 487
(i) 2023 includes £nil exchange differences reclassified to the income statement on disposal not attributable to non-controlling interests (2022: £101 million).

Summarised balance sheet
31 December
2023
£m
2022
£m
Non-current assets 1,028 1,683
Current assets 2,099 1,451
Current liabilities (481) (1,183)
Non-current liabilities (1,498) (1,104)
Net assets 1,148 847
Summarised cash flow
Year ended 31 December
2023
£m
2022
£m
Net decrease in cash and cash equivalents (13) (73)
228 Financial Statements | Centrica plc Annual Report and Accounts 2023 577 of 1021

COMPANY STATEMENT OF CHANGES IN EQUITY
Share
capital
£m
Share
premium
£m
Retained
earnings
£m
Other
equity
(note II)
£m
Total
equity
£m
1 January 2022 363 2,377 2,590 (19) 5,311
Profit for the year (i) — — 719 — 719
Other comprehensive loss — — — (51) (51)
Total comprehensive income/(loss) — — 719 (51) 668
Employee share schemes and other share transactions (ii) 2 17 (2) (14) 3 Share buyback programme (iii) — — — (250) (250)
Dividends paid to equity holders — — (59) — (59)
31 December 2022 365 2,394 3,248 (334) 5,673
Profit for the year (i) — — 2,258 — 2,258
Other comprehensive loss — — — (35) (35)
Total comprehensive income/(loss) — — 2,258 (35) 2,223
Employee share schemes and other share transactions (ii) — — (3) 39 36 Share buyback programme (iii) — — — (500) (500)
Dividends paid to equity holders — — (186) — (186)
31 December 2023 365 2,394 5,317 (830) 7,246
(i) Includes inter-company dividend income of £2,635 million (2022: £1,500 million). (ii) Includes taxation on employee share schemes and other share transactions attributable to the Company only. (iii) See note I and note S4 of the Group consolidated Financial Statements for further details of the share buyback programme.

As permitted by section 408(3) of the Companies Act 2006 no Income Statement or Statement of Comprehensive Income is presented.

The Directors propose a final dividend of 2.67 pence per ordinary share for the year ended 31 December 2023 (which would total £144 million based on shareholding at that date). The dividend will be paid on 11 July 2024 to those shareholders registered on 31 May 2024.

Details of the interim and final dividends are provided in note 11 to the Group consolidated Financial Statements.

Details of the Company’s share capital are provided in the Group Statement of Changes in Equity and note 25 to the Group consolidated Financial Statements.

The notes on pages 231 to 240 form part of these Financial Statements, along with note 25 to the Group consolidated Financial Statements.

Financial Statements | Centrica plc Annual Report and Accounts 2023 229 578 of 1021

COMPANY BALANCE SHEET
2023
£m
2022
31 December Notes £m
Non-current assets
Property, plant and equipment IV 11 11
Investments V 94 949
Deferred tax assets XII 11 1
Trade and other receivables VI 14,274 13,089
Derivative financial instruments VII 39 101
Retirement benefit assets XIV 28 56
Securities IX 104 498
14,561 14,705
Current assets
Trade and other receivables VI 590 1,500
Derivative financial instruments VII 66 217
Securities IX 405 —
Cash and cash equivalents 5,482 3,395
6,543 5,112
Total assets 21,104 19,817
Current liabilities
Derivative financial instruments VII (116) (211)
Trade and other payables XI (9,925) (9,883)
Provisions for other liabilities and charges (2) (1)
Bank overdrafts, loans and other borrowings XIII (789) (905) (10,832) (11,000)
Non-current liabilities
Deferred tax liabilities XII (3) —
Derivative financial instruments VII (170) (271)
Trade and other payables XI (3) (45)
Provisions for other liabilities and charges (1) (1)
Retirement benefit obligations XIV (49) (49)
Bank loans and other borrowings XIII (2,800) (2,778)
(3,026) (3,144)
Total liabilities (13,858) (14,144)
Net assets 7,246 5,673
Share capital 365 365
Share premium 2,394 2,394
Retained earnings (i) 5,317 3,248
Other equity II (830) (334)
Total shareholders’ equity 7,246 5,673
(i) Retained earnings includes a net profit after taxation of £2,258 million (2022: £719 million) which includes inter-company dividend income of £2,635 million (2022: £1,500 million).

The Financial Statements on pages 229 to 240, of which the notes on pages 231 to 240 form part, along with note 25 to the Group consolidated Financial Statements, were approved and authorised for issue by the Board of Directors on 14 February 2024 and were signed on its behalf by:

Chris O’Shea Russell O’Brien
Group Chief Executive Group Chief Financial Officer
Centrica plc Registered No: 03033654
230 Financial Statements | Centrica plc Annual Report and Accounts 2023 579 of 1021

NOTES TO THE COMPANY FINANCIAL STATEMENTS
I. GENERAL INFORMATION AND MATERIAL ACCOUNTING POLICIES OF THE COMPANY General information
The Company is a public company limited by shares, incorporated and domiciled in the UK, and registered in England and Wales.

The registered office is Millstream, Maidenhead Road, Windsor, Berkshire, SL4 5GD.

The Company Financial Statements are presented in pounds sterling which is the functional currency of the Company. (a) Basis of preparation
The separate financial statements of the Company are presented as required by the Companies Act 2006. The Company meets the definition of a qualifying entity under FRS 100 ‘Application of Financial Reporting Requirements’ issued by the FRC. Accordingly, these financial statements are prepared in accordance with FRS 101 ‘Reduced Disclosure Framework’. (b) New accounting policies, standards, amendments and interpretations effective or adopted in 2023 From 1 January 2023, the following standards and amendments are effective in the Company’s Financial Statements:
¢ IFRS 17 ‘Insurance Contracts’;
¢ Amendments to IAS 8 ‘Accounting policies, Changes in Accounting Estimates and Errors’, distinguishing changes in accounting estimates from changes in accounting policies;
¢ Amendments to IAS 1 ‘Presentation of Financial Statements’, disclosure of accounting policies and materiality judgements; ¢ Amendments to IAS 12 ‘Income Taxes’:
– Deferred tax related to these assets and liabilities arising from a single transaction; and – International tax reform, pillar 2 model rules.

There has been no material impact on the Company’s Financial Statements from any standards and amendments effective during the year.

Pension Scheme Loan Arrangement
In October 2022, the Company agreed to provide the Schemes with a £400 million two-year revolving, unsecured, interest bearing credit facility, and a short-term £150 million loan. This money was immediately drawn down to purchase physical gilts to reduce the extent of interest rate and inflation risk. The short-term loan was repaid in December 2022 and the remaining £400 million credit facility is scheduled for repayment in October 2024. See note 22 of the Group consolidated Financial Statements for further details. At the 2023 year-end, the £400 million loan (together with unpaid interest) is recorded in note IX Securities on the Company’s balance sheet and as a reduction to scheme assets for the UK Registered Pension Schemes.
(c) Standards and amendments that are issued but not yet applied by the Company At the date of authorisation of these Company Financial Statements, the Company has not applied the following new and revised standards and amendments that have been issued but are not yet effective:
¢ Amendments to IAS 1 ‘Presentation of Financial Statements’:
– Classification of liabilities as current or non-current, effective 1 January 2024; and – Non-current liabilities with covenants, effective 1 January 2024. ¢ Amendments to IFRS 16 ‘Leases’; effective from 1 January 2024; – Lease liability in a sale and leaseback;
¢ Amendments to IAS 7 ‘Statement of Cash Flows’ and IFRS 7 ‘Financial Instruments : Disclosures’; effective from 1 January 2024:
– Supplier finance arrangements; and
¢ Amendments to IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’.

Management does not expect other issued but not effective amendments or standards, or standards not discussed above to have a material impact on the Company’s Financial Statements.

As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to:
¢ The requirements of IAS 7 ‘Statement of Cash Flows’;
¢ The statement of compliance with Adopted IFRSs;
¢ The effects of new but not yet effective IFRSs;
¢ Prior year reconciliations for property, plant and equipment and intangible assets; ¢ The prior year reconciliation in the number of shares outstanding at the beginning and at the end of the year for share capital; ¢ Disclosures in respect of related party transactions with wholly owned subsidiaries in a group; ¢ Disclosures in respect of the compensation of key management personnel; ¢ Disclosures in respect of capital management; and
¢ The requirements of paragraphs 45(b) and 46 to 52 of IFRS 2 ‘Share-based Payment’.

As the Group consolidated Financial Statements of Centrica plc, which are available from the registered office, include the equivalent disclosures, the Company has taken the exemptions available under FRS 101 in respect of certain disclosures required by IFRS 13 ‘Fair Value Measurement’ and the disclosures required by IFRS 7 ‘Financial Instruments: Disclosures’. These disclosures have not been provided apart from those that are relevant for financial instruments held at fair value.

The Company has also taken the advantage of the exemption in respect of disclosures for Pillar 2 tax, as required by paragraphs 88C and 88D of IAS 12 ‘Income Taxes’, as the equivalent disclosures are available in the notes 9(c) and 16 of the Group consolidated Financial Statements.

Financial Statements | Centrica plc Annual Report and Accounts 2023 231 580 of 1021
I. GENERAL INFORMATION AND MATERIAL ACCOUNTING POLICIES OF THE COMPANY Measurement convention
The Company Financial Statements have been prepared on the historical cost basis except for: investments in subsidiaries that have been recognised at deemed cost on transition to FRS 101; derivative financial instruments, financial instruments required to be measured at fair value through profit or loss or other comprehensive income, and those financial assets so designated at initial recognition, and the assets of the defined benefit pension schemes that have been measured at fair value; the liabilities of the defined benefit pension schemes that have been measured using the projected unit credit valuation method; and the carrying values of recognised assets and liabilities qualifying as hedged items in fair value hedges that have been adjusted from cost by the changes in the fair values attributable to the risks that are being hedged.

Going concern
The accounts have been prepared on a going concern basis, as described in the Directors’ Report and note 24(b) of the Group consolidated Financial Statements.

Critical accounting judgements – share buyback programme On 10 November 2022, the Group announced an intention to undertake a share buyback of £250 million and the Company entered into contracts with third parties to undertake this repurchase programme which has now completed. During 2023, the Company firstly increased the share buyback by an additional £300 million which completed during the second half of the year.

Subsequently, in July 2023, the Group announced a further £450 million extension to the share buyback programme and as a result, the Company signed an agreement with a third party to undertake the repurchase of £200 million shares which is expected to complete by March 2024. The repurchase of the remaining £250 million shares is expected to commence in the first half of 2024.

The Company judges that the terms and conditions of the contracts mean that, at 31 December 2023, it was unable to cancel the obligation arising under the contract signed in the second half of 2023. Accordingly, the Company has recorded a financial liability at 31 December 2023 of £94 million (31 December 2022: £207 million) for this obligation in accordance with IAS 32 ‘Financial instruments:

Presentation’ that is subsequently measured in accordance with IFRS 9 ‘Financial instruments’. This liability is included within other payables, with the corresponding debit presented in the other equity reserve.

The Company has not recognised a liability relating to the further £250 million announced during 2023, as no contract has been signed and therefore no financial liability has yet arisen. The monthly breakdown of all shares purchased and the average price paid (excluding expenses) in relation to the financial liability recognised at 31 December 2023 are detailed in note S4 of the Group consolidated Financial Statements.

Material accounting policies
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these Company Financial Statements.

Employee share schemes
The Group has a number of employee share schemes under which it makes equity-settled share-based payments as detailed in the Remuneration Report on pages 84 to 86 and in note S2 to the Group consolidated Financial Statements. Equity-settled share-based payments are measured at fair value at the date of grant (excluding the effect of non-market-based vesting conditions). The fair value determined at the grant date is expensed on a straight-line basis together with a corresponding increase in equity over the vesting period, based on the Group’s estimate of the number of awards that will vest and adjusted for the effect of non-market-based vesting conditions.

The issue of share incentives by the Company to employees of its subsidiaries represents additional capital contributions. When these costs are recharged to the subsidiary undertaking, the investment balance is reduced accordingly. Fair value is measured using methods detailed in note S2 to the Group consolidated Financial Statements.

Foreign currencies
The Company’s functional and presentational currency is pounds sterling. Transactions in foreign currencies are translated at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into pounds sterling at closing rates of exchange. Exchange differences on monetary assets and liabilities are taken to the Income Statement. 232 Financial Statements | Centrica plc Annual Report and Accounts 2023 581 of 1021
I. GENERAL INFORMATION AND MATERIAL ACCOUNTING POLICIES OF THE COMPANY Property, plant and equipment
PP&E is included in the Balance Sheet at cost, less accumulated depreciation and any provisions for impairment. The initial cost of an asset comprises purchase price and construction cost and any costs directly attributable to bringing the asset into operation. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset.

Depreciation is charged so as to write off the cost of assets over their estimated useful lives, on a straight-line basis, over a period of 3 to 10 years.

Investments
Fixed asset investments in subsidiaries’ shares are held at deemed cost on transition to FRS 101 and at cost in accordance with IAS 27 ‘Separate Financial Statements’, less any provision for impairment as necessary.

Impairment
Impairment of investments in subsidiaries and non-financial assets The Company’s accounting policies in respect of impairment of property, plant and equipment, and intangible assets are consistent with those of the Group.

The carrying values of investments in subsidiary undertakings are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an investment in a subsidiary undertaking is the greater of its value in use and its fair value less cost of disposal. In assessing a recoverable amount, the market capitalisation of the Company is taken and, following relevant adjustments, allocated to specific holding company investments. Separately, an average of third-party analysts’ ‘sum of the parts’ valuations for the Group’s business units, allocated to specific investments and assessed relative to internal forecasts, is also considered. An appropriate recoverable amount is then determined from this work and compared with the investment carrying value and net intercompany receivable held on the Company’s balance sheet.

Refer to note V for more details on the impairment charge and reduction in the cost of investments in subsidiaries recognised during the year.

Impairment of other financial assets and credit losses for financial guarantee contracts The Company’s impairment policies in relation to financial assets are consistent with those of the Group, with additional consideration given to amounts owed by Group undertakings. Except for certain loans due in greater than one year, all outstanding receivable balances are repayable on demand and arise from funding provided by the Company to its subsidiaries. Where net receivers of funding are unable to repay loan balances in full at maturity, or if the debt was otherwise called upon, the Company expects that in such circumstances the counterparty would either negotiate extended credit terms with the Company or obtain external financing to repay the balance. As such, this is considered a significant risk of causing material adjustment to the carrying amounts of financial assets within the next financial year.

A detailed review of the amounts owed by Group undertakings for the expected credit loss provision is carried out on an annual basis.

The model considers whether the receivable is repayable on demand within a 12-month period and the probability of default by the counterparty. As at 31 December 2023, there was a release of cumulative provision for expected credit losses on current financial assets of £15 million (2022: £15 million expected credit losses charge) as disclosed in note VI (i) and on non-current financial assets of £217 million (2022: £872 million expected credit losses charge) as disclosed in note VI (ii). This was either due to the settlement of the loan receivable during the year or a fall in the estimate of the credit loss of the financial instrument when measured in accordance with IFRS 9 ‘Financial instruments’.

The Company has applied the impairment requirements of IFRS 9 to financial guarantees issued to its subsidiary undertakings. A financial guarantee contract is measured at fair value at the reporting date and where the expected credit loss is higher than calculated on recognition, an additional liability is recognised. Expected credit losses which arise on such arrangements have been calculated according to the nature of the guarantee and the Company’s estimate of potential exposure at the balance sheet date. As at 31 December 2023, there was a release of net provision for expected credit losses on financial guarantees contracts of £126 million (2022: £55 million expected credit loss provision charge) as disclosed in note XI (iii). The significant decrease in the expected credit loss provision is due to the reduced short-term derivative liabilities in the market-facing entities which actively trade and are exposed to the risk of market price volatility during the year.

Pensions and other post-employment benefits
The Company’s employees participate in a number of the Group’s defined benefit pension schemes. The total Group cost of providing benefits under defined benefit schemes is determined separately for each of the Group’s schemes under the projected unit credit actuarial valuation method. Actuarial gains and losses are recognised in full in the period in which they occur. The key assumptions used for the actuarial valuation are based on the Group’s best estimate of the variables that will determine the ultimate cost of providing postemployment benefits, on which further detail is provided in notes 3(b) and 22 to the Group consolidated Financial Statements.

The Company’s share of the total Group surplus or deficit at the end of the reporting period for each scheme is calculated in proportion to the Company’s share of ordinary employer contributions to that scheme during the year; ordinary employer contributions are determined by the pensionable pay of the Company’s employees within the scheme and the cash contribution rates set by the scheme trustees. Note that as a participant in these multi-employer schemes, the Company could be liable for other entities’ obligations (for example under section 75 of the Pensions Act). See note 22 of the Group consolidated Financial Statements for details of the overall scheme obligations.

Current service cost is calculated with reference to the pensionable pay of the Company’s employees. The Company’s share of the total Group interest on scheme liabilities, expected return on scheme assets and actuarial gains or losses is calculated in proportion to ordinary employer contributions in the prior accounting period. Changes in the surplus or deficit arising as a result of the changes in the Company’s share of total ordinary employer contributions are also treated as actuarial gains or losses.

Financial Statements | Centrica plc Annual Report and Accounts 2023 233 582 of 1021
I. GENERAL INFORMATION AND MATERIAL ACCOUNTING POLICIES OF THE COMPANY Taxation
Current tax, including UK corporation tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised in respect of all temporary differences identified at the balance sheet date, except for differences arising on:
¢ The initial recognition of an asset or liability in a transaction which is not a business combination and which at the time of the transaction affects neither accounting profit nor taxable profit; and ¢ Investments in subsidiaries where the Company is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Temporary differences are differences between the carrying amount of the Company’s assets and liabilities and their tax base.

Deferred tax assets and liabilities are offset when the Company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

Deferred tax assets that are not eligible for offset against deferred tax liabilities are recognised only when, on the basis of all available evidence, it can be regarded as probable that there will be suitable taxable profits in the foreseeable future, against which the deductible temporary difference can be utilised.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the asset is realised or the liability is settled, based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Measurement of deferred tax liabilities and assets reflects the tax consequences expected from the manner in which the asset or liability is recovered or settled.

The tax expense for the year comprises current and deferred tax. Tax is recognised in the Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Financial instruments
The Company’s accounting policies for financial instruments are consistent with those of the Group as disclosed in note S2 to the Group consolidated Financial Statements. The Company’s financial risk management policies are consistent with those of the Group and are described in the Strategic Report – Principal Risks and Uncertainties on pages 28 to 34 and in note S3 to the Group consolidated Financial Statements.

Financial guarantees
Financial guarantees are contracts that require the Company to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. The Company accounts for financial guarantee contracts under IFRS 9.

Presentation of derivative financial instruments
In line with the Group’s accounting policy for derivative financial instruments, the Company has classified those derivatives held for the purpose of treasury management as current or non-current, based on expected settlement dates. 234 Financial Statements | Centrica plc Annual Report and Accounts 2023 583 of 1021
II. OTHER EQUITY
Cash flow
hedging
reserve
£m
Actuarial gains
and losses
reserve
£m
Financial asset
at FVOCI
reserve
£m
Treasury and
own shares
reserve
£m
Share-based
payments
reserve
£m
Capital
redemption
reserve
£m
Total
£m
1 January 2022 5 (87) 11 (18) 42 28 (19)
Actuarial losses — (44) — — — — (44)
Employee share schemes:

Exercise of awards — — — 10 (22) — (12)
Value of services provided — — — — 10 — 10
Purchase of own shares — — — (5) — — (5)
Issue of shares — — — (7) — — (7)
Share buyback programme: (i)
Purchase of Treasury shares — — — (43) — — (43)
Accrual for committed share purchases — — — — — (207) (207) Impact of cash flow hedging (26) — — — — — (26)
Taxation on above items (ii) 8 11 — — — — 19
31 December 2022 (13) (120) 11 (63) 30 (179) (334)
Gains on revaluation of equity investments
measured at fair value through other
comprehensive income
— — 3 — — — 3
Actuarial losses — (48) — — — — (48)
Employee Share Schemes:

Exercise of awards — — — 22 (20) — 2
Value of services provided — — — — 31 — 31
Net proceeds from exercise of share options — — — 6 — — 6 Share buyback programme: (i)
Purchase of Treasury shares — — — (615) — — (615)
Movement on committed share purchases — — — — — 115 115 Impact of cash flow hedging (3) — — — — — (3)
Taxation on above items (ii) 1 12 (1) — 1 — 13
31 December 2023 (15) (156) 13 (650) 42 (64) (830)
(i) See note I and note S4 of the Group consolidated Financial Statements for further details of the share buyback programme. (ii) Includes current and deferred taxation on above items attributable to the Company only.

III. DIRECTORS AND EMPLOYEES
(a) Employee costs
Year ended 31 December
2023
£m
2022
£m
Wages and salaries (12) (7)
Other (8) (8)
(20) (15)
(b) Average number of employees during the year
Year ended 31 December
2023
Number
2022
Number
Administration 171 138
Power 11 8
182 146
Financial Statements | Centrica plc Annual Report and Accounts 2023 235 584 of 1021
IV. PROPERTY, PLANT AND EQUIPMENT
Plant,
equipment &
vehicles
2023
£m
Cost
1 January 12
Additions 4
31 December 16
Accumulated depreciation
1 January (1)
Charge for the year (4)
31 December (5)
NBV at 31 December (i) 11
(i) Included within the above are right-of-use assets of £6 million relating to infrastructure services (2022: £9 million), and £5 million of staff salary sacrifice electric vehicles (2022: £2 million).

V. INVESTMENTS IN SUBSIDIARIES
2023 (i)
£m
2022 (i)
£m
Cost
1 January 2,262 2,273
Additions (ii) — —
Write-downs (iii) (863) —
Disposals (iv) (1,313) —
Employee share scheme net capital movement (v) 8 (11)
31 December 94 2,262
Provision
1 January (1,313) (1,173)
Impairment provided in the year (vi) — (140)
Disposals (iv) 1,313 —
31 December — (1,313)
NBV at 31 December 94 949
(i) Direct investments are held in CH4 Energy Limited (formerly Centrica Trading Limited) and Centrica Beta Holdings Limited, both of which are incorporated in England, and Rhodes Holdings HK Limited, which was incorporated in Hong Kong and Centrica Ireland Holdings Limited, which was incorporated in Ireland. The prior year direct investment held in Centrica Holdings Limited, which was incorporated in England, has become an indirect investment after a share transfer with Centrica Ireland Holdings Limited in January 2023. Related undertakings are listed in note S10 to the Group consolidated Financial Statements. (ii) The Company acquired 100% share capital of £0.02 million in Centrica Ireland Holdings Limited. (iii) Investments in CH4 Energy Limited, and Centrica Beta Holdings Limited were largely written down as deemed irrecoverable after the dividend payment of £686 million (2022: £nil) and £1.7 billion (2022: £nil) from these companies in November 2023 and December 2023 respectively. (iv) Disposals predominantly relate to Centrica Holdings Limited, following a share for share exchange transaction, swapping the previous investment in Centrica Holdings Limited for shares in Centrica Ireland Holdings Limited. (v) Employee share scheme movement is the net change in shares to be awarded under employee share schemes to employees of Group undertakings. (vi) An impairment charge was recognised in the prior year, predominantly in relation to the investment in Centrica Holdings Limited.

The Directors believe that the carrying value of the investments is supported by their realisable value.

VI. TRADE AND OTHER RECEIVABLES
2023 2022
31 December
Current (i)
£m
Non-current (ii)
£m
Current (i)
£m
Non-current (ii)
£m
Amounts owed by Group undertakings 582 14,262 1,496 13,085 Prepayments and other receivables 8 12 4 4
590 14,274 1,500 13,089
(i) The amounts receivable by the Company includes a gross balance of £480 million (2022: £1,424 million) that bears interest at a quarterly rate determined by Group treasury and linked to the Group cost of funds. The quarterly rates ranged between 2.1% and 5.7% per annum during 2023 (2022: 0% and 4.1%). The other amounts receivable from Group undertakings are interest free. All amounts receivable from Group undertakings are unsecured and repayable on demand. Amounts receivable by the Company are stated net of credit loss provision of £nil (2022: £15 million). (ii) The amounts receivable by the Company includes a gross balance of £15,082 million (2022: £14,206 million) due after more than one year that bears interest at a quarterly rate determined by Group treasury and linked to the Group cost of funds. The quarterly rates ranged between 2.1% and 5.7% per annum during 2023 (2022: 0% and

4.1%). The other amounts receivable from Group undertakings are interest-free. All amounts receivable from Group undertakings are unsecured and not expected to be repayable within 12 months from the reporting date. Amounts receivable by the Company are stated net of credit loss provisions of £655 million (2022: £872 million). 236 Financial Statements | Centrica plc Annual Report and Accounts 2023 585 of 1021
VII. DERIVATIVE FINANCIAL INSTRUMENTS
2023 2022
31 December
Current
£m
Non-current
£m
Total
£m
Current
£m
Non-current
£m
Total
£m
Derivative financial assets 66 39 105 217 101 318
Derivative financial liabilities (116) (170) (286) (211) (271) (482) VIII. FINANCIAL INSTRUMENTS
(a) Determination of fair values
The Company’s policies for the classification and valuation of financial instruments carried at fair value are consistent with those of the Group, as detailed in note S6 to the Group consolidated Financial Statements. (b) Financial instruments carried at fair value
2023 2022
31 December
Level 1
£m
Level 2
£m
Total
£m
Level 1
£m
Level 2
£m
Total
£m
Financial assets
Derivative financial assets held for trading:

Foreign exchange derivatives (i) — 69 69 — 243 243
Derivative financial assets in hedge accounting relationships:

Interest rate derivatives — — — — 37 37
Foreign exchange derivatives — 36 36 — 38 38
Debt instruments 72 — 72 66 — 66
Equity instruments 32 — 32 29 — 29
Cash and cash equivalents (ii) — 4,673 4,673 — 2,809 2,809 Total financial assets at fair value 104 4,778 4,882 95 3,127 3,222 Financial liabilities
Derivative financial liabilities held for trading:

Foreign exchange derivatives (i) — (134) (134) — (257) (257) Derivative financial liabilities in hedge accounting relationships:

Interest rate derivatives — (136) (136) — (221) (221)
Foreign exchange derivatives — (16) (16) — (4) (4)
Total financial liabilities at fair value — (286) (286) — (482) (482) (i) In addition to the derivatives included in the table above, the Company also has internal derivative assets with a fair value of £133 million (2022: £257 million) entered into on behalf of its subsidiaries and are included within Trade receivables in note VI, and internal derivative liabilities with a fair value of £66 million (2022: £242 million) included within Trade payables in note XI.
(ii) Included within cash and cash equivalents are money market funds amounting to £4,673 million (2022: £2,809 million).

IX. SECURITIES
2023 2022
Current Non-current Current Non-current
31 December £m £m £m £m
Debt instruments — 72 — 66
Equity instruments — 32 — 29
Other 405 — — 403
405 104 — 498
Within Non-current securities, £104 million (2022: £95 million) of investments were held in trust, on behalf of the Company, as security in respect of the Centrica Unapproved Pension Scheme (refer to note XIV (c)).

Other Current securities represents the pension scheme loan arrangement (including interest) of £405 million (2022: £403 million within Non-current securities) as disclosed in note I(b), note XIV(f) and in note 22(b) to the Group consolidated Financial Statements.

Financial Statements | Centrica plc Annual Report and Accounts 2023 237 586 of 1021
X. LEASE LIABILITIES MATURITY ANALYSIS
A maturity analysis of lease liabilities based on undiscounted gross cash flow is reported in the table below:
2023 2022
£m £m
Less than one year 5 4
2 years 4 4
3 years 1 3
Total lease liabilities (undiscounted) 10 11
Future finance charges are expected to be £1 million (2022: £1 million). 2023 2022
Analysed as: £m £m
Non-current 5 7
Current 5 4
10 11
XI. TRADE AND OTHER PAYABLES
2023 2022
31 December
Current (i)
£m
Non-current (ii)
£m
Current (i)
£m
Non-current (ii)
£m
Amounts owed to Group undertakings (9,749) (3) (9,503) (45) Loss on financial guarantee contracts (iii) (33) — (159) — Accruals and other creditors (iv) (107) — (221) —
Taxation and social security (v) (36) — — —
(9,925) (3) (9,883) (45)
(i) The amounts payable by the Company includes £9,582 million (2022: £8,577 million) that bears interest at a quarterly rate determined by Group treasury and linked to the Group cost of funds. The quarterly rates ranged between 2.1% and 5.7% per annum during 2023 (2022: 0% and 4.1%). Other amounts payable by the Company are interest free, unsecured and repayable on demand. Refer to note I for further details. (ii) These other amounts payable by the Company are interest free and unsecured. (iii) During the year, the Company has released £126 million (2022: £55 million expected credit loss provision charge) of expected credit loss provision on financial guarantee contracts. See note I for further details.
(iv) During the year, the Company recognised a financial liability of £94 million (2022: £207 million) relating to the share buyback programme. See note I and ‘Own and treasury shares reserve’ section in note S4 of the Group consolidated Financial Statements for more details. (v) Includes group relief creditor of £36 million in 2023 (2022: £nil).

XII. DEFERRED TAX LIABILITIES AND ASSETS
Retirement
benefit
obligation
£m
Other
£m
Total
£m
1 January 2022 (2) (12) (14)
(Charge)/credit to income (6) 2 (4)
Credit to equity 11 8 19
Deferred tax assets/(liabilities) at 31 December 2022 3 (2) 1 (Charge)/credit to income (5) 2 (3)
Credit to equity 9 1 10
Deferred tax assets at 31 December 2023 7 1 8
Other deferred tax assets primarily relate to other temporary differences. All deferred tax crystallises in over one year.

XIII. BANK OVERDRAFTS, LOANS AND OTHER BORROWINGS
2023 2022
31 December
Current
£m
Non-current
£m
Current
£m
Non-current
£m
Bank loans and overdrafts (731) (130) (600) (143)
Bonds — (2,665) (246) (2,628)
Interest accruals (53) — (55) —
Lease obligations (5) (5) (4) (7)
(789) (2,800) (905) (2,778)
Disclosures in respect of the Group’s financial liabilities are provided in notes 24 and S3 to the Group consolidated Financial Statements.

With the exception of leases and overdrafts, materially all of the Group’s financing activity is carried out through the Company. 238 Financial Statements | Centrica plc Annual Report and Accounts 2023 587 of 1021
XIV. PENSIONS
(a) Summary of main schemes
The Company’s employees participate in the following Group defined benefit pension schemes: Centrica Pension Plan (CPP), Centrica Pension Scheme (CPS) and Centrica Unapproved Pension Scheme. Its employees also participate in the defined contribution section of the Centrica Pension Scheme. Information on these schemes is provided in note 22 to the Group consolidated Financial Statements.

Together with the Centrica Engineers Pensions Scheme (CEPS), CPP and CPS form the significant majority of the Group’s and Company’s defined benefit obligation and are referred to below and in the Group Financial Statements as the ‘Registered Pension Schemes’.
(b) Accounting assumptions, risks and sensitivity analysis The accounting assumptions, risks and sensitivity analysis for the Registered Pension Schemes are provided in note 22 to the Group consolidated Financial Statements.
(c) Movements in the year
2023 2022
Pension liabilities
£m
Pension assets
£m
Pension liabilities
£m
Pension assets
£m
1 January (731) 738 (1,328) 1,364
Items included in the Company Income Statement:

Current service cost (2) — (6) —
Contributions by employer in respect of employee salary sacrifice arrangements (i) (2) — (2) —
Total current service cost (4) — (8) —
Interest (expense)/income on scheme liabilities/assets (40) 41 (24) 27 Termination benefit — — 1 —
Items included in the Company Statement of Comprehensive Income:

Returns on plan assets, excluding interest income — 144 — (633) Actuarial (loss)/gain from changes to demographic
assumptions (97) — 4 —
Actuarial (loss)/gain from changes in financial assumptions (60) — 621 — Actuarial loss from experience adjustments (35) — (36) — Other movements:

Employer contributions — 21 — 17
Contributions by employer in respect of employee salary sacrifice arrangements — 2 — 2
Benefits paid from schemes 38 (38) 39 (39)
31 December (929) 908 (731) 738
(i) A salary sacrifice arrangement was introduced on 1 April 2013 for pension scheme members. The contributions paid via the salary sacrifice arrangement have been treated as employer contributions and included within the current service cost, with a corresponding reduction in salary costs.

Presented in the Company Balance Sheet as:
31 December
2023
£m
2022
£m
Retirement benefit pension assets 28 56
Retirement benefit pension liabilities (49) (49)
The pension scheme liabilities relate to the Centrica Unapproved Pension Scheme.

Financial Statements | Centrica plc Annual Report and Accounts 2023 239 588 of 1021
XIV. PENSIONS
(d) Analysis of the actuarial losses recognised in reserves Year ended 31 December
2023
£m
2022
£m
Actuarial gain/(loss) (actual return less expected return on pension scheme assets) 144 (633) Experience loss arising on the scheme liabilities (35) (36) Changes in assumptions underlying the present value of the schemes’ liabilities (157) 625 Actuarial loss recognised in reserves before adjustment for taxation (48) (44) Cumulative actuarial losses recognised in reserves at 1 January, before adjustment for taxation (196) (152) Cumulative actuarial losses recognised in reserves at 31 December, before adjustment for taxation (244) (196) (e) Defined benefit pension scheme contributions
Note 22 to the Group consolidated Financial Statements provides details of the triennial review carried out at 31 March 2021 in respect of the UK Registered Pension Schemes and the future pension scheme contributions, including asset-backed arrangements, agreed as part of this review. Under IAS 19, the Company’s contribution and trustee interest in the Scottish Limited Partnerships are recognised as scheme assets.

The Company estimates that it will pay £4 million of employer contributions during 2024 for its defined benefit schemes, at an average rate of 22% of pensionable pay, together with contributions via the salary sacrifice arrangement of £2 million.

For details of the weighted average duration of the liabilities of the Registered Pension Schemes see note 22 of the Group consolidated Financial Statements.
(f) Pension scheme assets
2023 2022
31 December
Quoted
£m
Unquoted
£m
Total
£m
Quoted
£m
Unquoted
£m
Total
£m
Equities 23 503 526 19 486 505
Corporate bonds 6 — 6 24 — 24
High-yield debt 18 1,238 1,256 106 1,331 1,437
Liability matching assets 2,860 — 2,860 2,835 — 2,835
Other long-dated income assets — 1,204 1,204 — 1,343 1,343 Property — 305 305 — 366 366
Cash pending investment 391 — 391 205 — 205
Loan and interest — (405) (405) — (403) (403)
Asset-backed contribution assets — 469 469 — 527 527
Group pension scheme assets (i) 3,298 3,314 6,612 3,189 3,650 6,839 2023
£m
2022
£m
Company share of the above 908 738
(i) Total pension scheme assets, including asset-backed contribution assets not recognised in the Group consolidated Financial Statements.

XV. COMMITMENTS
At 31 December 2023, the Company had commitments of £93 million (2022: £66 million) relating to contracts for outsourced services, £129 million (2022: £177 million) relating to the contracts for centralised information services and £5 million (2022: £5 million) relating to contracts for property services.

The Company has provided guarantees and letters of credit relating to its subsidiaries’ trading activities and decommissioning obligations.

At 31 December 2023, the Group has derivative liabilities of £3,006 million (2022: £10,151 million), and decommissioning liabilities of £1,527 million (2022: £1,514 million). See notes 19 and 21 to the Group consolidated Financial Statements for further information on these balances.

XVI. RELATED PARTIES
During the year the Company accepted cash deposits on behalf of the Spirit Energy group of companies giving rise to a Trade and other payables balance of £1,356 million (2022: £1,091 million). Spirit Energy Limited is a subsidiary of the Company, held indirectly, that is not wholly owned. See note 3 to the Group consolidated Financial Statements for more information. 240 Financial Statements | Centrica plc Annual Report and Accounts 2023 589 of 1021

GAS AND LIQUIDS RESERVES (UNAUDITED)
The Group’s estimates of reserves of gas and liquids are reviewed as part of the full year reporting process and updated accordingly.

A number of factors affect the volumes of gas and liquids reserves, including the available reservoir data, commodity prices and future costs. Due to the inherent uncertainties and the limited nature of reservoir data, estimates of reserves are subject to change as additional information becomes available.

The Group discloses 2P gas and liquids reserves, representing the central estimate of future hydrocarbon recovery. Reserves for Centrica operated fields are estimated by in-house technical teams composed of geoscientists and reservoir engineers. Reserves for non-operated fields are estimated by the operator but are subject to internal review and challenge.

As part of the internal control process related to reserves estimation, an assessment of the reserves, including the application of the reserves definitions, is undertaken by an independent technical auditor. An annual reserves assessment has been carried out by DeGolyer & McNaughton for the Group’s global reserves. Reserves are estimated in accordance with a formal policy and procedure standard.

The Group has estimated 2P gas and liquids reserves in Europe.

The principal retained fields in Spirit Energy are Cygnus, Morecambe Hub, Rhyl and Chiswick. The principal non-Spirit Energy field is Rough. The European reserves estimates are consistent with the guidelines and definitions of the Society of Petroleum Engineers, the Society of Petroleum Evaluation Engineers and the World Petroleum Council’s Petroleum Resources Management System using accepted principles.

Estimated net 2P reserves of gas
(billion cubic feet) Spirit Energy (i) Rough Total
1 January 2023 261 16 277
Revisions of previous estimates (ii) 40 — 40
Production (iii) (59) (1) (60)
31 December 2023 242 15 257
Estimated net 2P reserves of liquids
(million barrels) Spirit Energy (i) Rough Total
1 January 2023 1 — 1
Revisions of previous estimates (ii) 1 — 1
Production (iii) (1) — (1)
31 December 2023 1 — 1
Estimated net 2P reserves
(million barrels of oil equivalent) Spirit Energy (i) Rough Total 31 December 2023 (iv) 42 3 45
(i) The movements represent Centrica’s 69% interest in Spirit Energy. (ii) Revision of previous estimates include those associated with Morecambe Hub, Chiswick and Cygnus. (iii) Represents total sales volumes of gas and oil produced from the Group’s reserves. (iv) Includes the total of estimated gas and liquids reserves at 31 December 2023 in million barrels of oil equivalent.

Liquids reserves include oil, condensate and natural gas liquids.

Financial Statements | Centrica plc Annual Report and Accounts 2023 241 590 of 1021

FIVE YEAR SUMMARY (UNAUDITED)
Year ended 31 December
2019 (restated) (i)
£m
2020 (restated) (i)
£m
2021
£m
2022
£m
2023
£m
Total Group revenue from continuing operations included in business performance 15,958 14,949 18,300 33,637 33,374
Operating profit/(loss) from continuing operations before exceptional items and certain re-measurements:

British Gas Services & Solutions (i) 187 191 121 (9) 47 British Gas Energy (i) 117 82 118 72 751
Bord Gáis Energy (i) 50 42 28 31 1
Centrica Business Solutions (i) (20) (132) (52) 44 104
Centrica Energy (i) 138 174 70 1,400 774
Upstream (i) 178 90 663 1,793 1,083
Colleague profit share — — — (23) (8)
650 447 948 3,308 2,752
Operating profit from discontinued operations before exceptional items and certain re-measurements (i) 251 252 — — —
Exceptional items and certain re-measurements after taxation (1,531) (520) 866 (2,755) 2,165 (Loss)/profit attributable to equity holders of the parent (1,023) 41 1,210 (782) 3,929 Pence Pence Pence Pence Pence
Earnings per ordinary share (17.8) 0.7 20.7 (13.3) 70.6 Adjusted earnings per ordinary share 7.3 6.5 4.1 34.9 33.4 Dividend per ordinary share in respect of the year 1.5 — — 3.0 4.0

ASSETS AND LIABILITIES
31 December (restated) (ii)
2019
£m
2020
£m
2021
£m
2022
£m
2023
£m
Goodwill and other non-current intangible assets 4,033 1,940 1,161 1,116 745 Other non-current assets 5,826 4,767 6,040 7,234 4,555
Net current (liabilities)/assets (696) 622 1,465 (1,023) 4,930 Non-current liabilities (7,474) (8,072) (6,360) (6,047) (5,997) Net assets of disposal groups held for sale 106 2,125 444 — — Net assets 1,795 1,382 2,750 1,280 4,233
Adjusted net (debt)/cash (ii) (note 24) (3,507) (2,998) 680 1,199 2,744

CASH FLOWS
Year ended 31 December (restated) (ii)
2019
£m
2020
£m
2021
£m
2022
£m
2023
£m
Cash flow from operating activities before exceptional payments 1,548 1,532 1,687 1,338 2,758 Payments relating to exceptional charges in operating costs (298) (132) (76) (24) (6) Net cash flow from investing activities (503) (285) 2,263 (566) 115 Cash flow before cash flow from financing activities 747 1,115 3,874 748 2,867 (i) Results have been restated to reflect the new operating structure of the Group, effective during 2021. (ii) Results have been restated to reflect the change in definition of adjusted net cash/debt in 2021. 242 Financial Statements | Centrica plc Annual Report and Accounts 2023 591 of 1021

SHAREHOLDER INFORMATION

GENERAL ENQUIRIES
Centrica’s share register is administered and maintained by Equiniti, our Registrar, whom you can contact directly if you have any questions about your shareholding which are not answered here or on our website. You can contact Equiniti using the following details:

Address: Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA, UK
Telephone: 0371 384 2985*
Outside the UK: +44 (0)371 384 2985
Contact: help.shareview.co.uk
Website: equiniti.com
You can also contact Equiniti using the Relay UK website at relayuk.bt.com
* Calls to an 03 number cost no more than a national rate call to an 01 or 02 number. Lines open 8.30am to 5.30pm, Monday to Friday (UK time), excluding public holidays in England and Wales.

When contacting Equiniti or registering via shareview.co.uk, you should have your shareholder reference number to hand. This can be found on your share certificate, dividend confirmation or any other correspondence you have received from Equiniti.

Together with Equiniti, we have introduced an electronic queries service to enable our shareholders to manage their investment at a convenient time. Details of this service can be found at shareview.co.uk.

DIVIDEND
As communicated previously, dividends are now paid only by direct transfer to your bank or building society account, rather than by cheque. This is faster, more secure and better for the environment.

If you have not already done so, please therefore provide Equiniti with your bank or building society account details. You can do this online at www.shareview.co.uk or by telephoning Equiniti on +44 (0)371 384 2985.

AMERICAN DEPOSITARY RECEIPT (ADR)
We have an ADR programme, trading under the symbol CPYYY.

Centrica’s ratio is one ADR being equivalent to four ordinary shares. Further information is available on our website or please contact:

Regular mail delivery address: BNY Mellon Shareowner Services, PO Box 505000, Louisville, KY 20233-5000, USA
Overnight, certified, registered delivery address: BNY Mellon Shareowner Services, 462 South 4th Street, Suite 1600, Louisville, KY 40202, USA
Email: [email protected]
Website: mybnymdr.com
Telephone: +1 888 269 2377 (toll-free in the US)
Outside the US: +1 201 680 6825

MANAGE YOUR SHARES ONLINE
We actively encourage our shareholders to receive communications via email and view documents electronically via our website, centrica.com. Receiving communications and documents
electronically saves your Company money and reduces our environmental impact. If you sign up for electronic communications, you will receive an email to notify you that new shareholder documents are available to view online, including the Annual Report and Accounts, on the day it is published.

You will also receive alerts to let you know that you can cast your Annual General Meeting (AGM) vote online. You can manage your shareholding online by registering at shareview.co.uk, a free online platform provided by Equiniti, which allows you to:
¢ view information about your shareholding;
¢ update your personal details and your bank account details; and ¢ appoint a proxy for the AGM.

CENTRICA FLEXISHARE
FlexiShare is an easy way to hold Centrica shares without a share certificate. Your shares are held by a nominee company, Equiniti Financial Services Limited. However, you are able to attend and vote at general meetings as if the shares were held in your own name. Holding your shares in this way is free and gives you:
¢ low cost share dealing rates (full details of which are available on centrica.com, together with dealing charges);
¢ quicker settlement periods for buying and selling shares; and ¢ no paper share certificates to lose.
centrica.com
The Shareholder Centre on our website contains a wide range of information including a dedicated investors section where you can find further details about shareholder services including:
¢ share price information;
¢ dividend history;
¢ telephone and internet share dealing;
¢ downloadable shareholder forms; and
¢ taxation.

This Annual Report and Accounts can also be viewed online by visiting centrica.com/ar23.

SHAREGIFT
If you have a small number of shares and the dealing costs or the minimum fee make it uneconomical to sell them, it is possible to donate them to ShareGift, a registered charity, which provides a free service to enable you to dispose charitably of such shares.

More information on this service can be found at sharegift.org or by calling +44 (0)20 7930 3737.

FINANCIAL CALENDAR
Ex-dividend date for 2023 final dividend 30 May 2024
Record date for 2023 final dividend 31 May 2024
Annual General Meeting (AGM) 5 June 2024
Payment of 2023 final dividend 11 July 2024
For more information on Centrica’s financial calendar please visit centrica.com/investors/financial-calendar
Other Information | Centrica plc Annual Report and Accounts 2023 243 592 of 1021
ADDITIONAL INFORMATION – EXPLANATORY NOTES (UNAUDITED)
Definitions and reconciliation of adjusted performance measures Centrica’s 2023 consolidated Financial Statements include a number of non-GAAP measures. These measures are chosen as they provide additional useful information on business performance and underlying trends. They are also used to measure the Group’s performance against its strategic financial framework. They are not however, defined terms under IFRS and may not be comparable with similarly titled measures reported by other companies. Where possible they have been reconciled to the statutory equivalents from the primary statements (Group Income Statement (‘I/S’), Group Balance Sheet (‘B/S’), Group Cash Flow Statement (‘C/F’)) or the notes to the Financial Statements.

Adjusted revenue, adjusted gross margin, adjusted operating profit, adjusted earnings and free cash flow have been defined and reconciled separately in notes 2, 4 and 10 to the Financial Statements where further explanation of the measures is given. Additional performance measures are used within these Financial Statements to help explain the performance of the Group and these are defined and reconciled below. Further information has been provided to help readers when reconciling between different parts of the consolidated Group Financial Statements, and when reconciling cash flow measures to the Group Cash Flow Statement.

Adjusted EBITDA
Adjusted EBITDA is a business performance measure of operating profit, after adjusting for depreciation and amortisation. It provides a performance measure in its own right, and provides a bridge between the Income Statement and the Group’s key cash metrics. Further, a reconciliation excluding Spirit Energy disposed assets is provided.

Year ended 31 December Notes
2023
£m
2022
£m Change
Group operating profit/(loss) I/S 6,512 (240)
Exceptional items included within Group operating profit/loss and certain re-measurements before taxation 7 645 155
Certain re-measurements before taxation 7 (4,405) 3,393 Share of profits of joint ventures and associates, net of interest and taxation (i) I/S (209) (92) Depreciation and impairments of PP&E (i) 4 404 598
Amortisation, write-downs and impairments of intangibles (i) 4 138 179 Group total adjusted EBITDA 3,085 3,993 (23) %
(i) These line items relate to business performance only.

Adjusted EBITDA excluding Spirit Energy disposed assets Year ended 31 December Notes
2023
£m
2022
£m Change
Group total adjusted EBITDA 3,085 3,993
Less: disposed assets adjusted EBITDA (including associated hedges) — (485) Adjusted EBITDA excluding Spirit Energy disposed assets 3,085 3,508 (12) % Adjusted operating profit excluding Spirit Energy disposed assets Year ended 31 December Notes
2023
£m
2022
£m Change
Group total adjusted operating profit I/S 2,752 3,308
Less: disposed assets adjusted operating profit (including associated hedges) — (485) Adjusted operating profit excluding Spirit Energy disposed assets 2,752 2,823 (3) % 244 Other Information | Centrica plc Annual Report and Accounts 2023 593 of 1021
The below table shows how adjusted EBITDA reconciles to free cash flow:

Year ended 31 December Notes
2023
£m
2022
£m
Adjusted EBITDA 3,085 3,993
Group operating profit/(loss) including share of joint ventures and associates, from exceptional items and certain re-measurements I/S 3,760 (3,548)
Share of losses/(profits) of joint ventures and associates, net of interest and taxation, from exceptional items and certain re-measurements I/S 1 (1)
Depreciation, amortisation, write downs, impairments and write-backs, from exceptional items and certain remeasurements I/S 645 (207) Loss on disposals C/F — 343
Decrease in provisions C/F (1,021) (1,903)
Cash contributions to defined benefit schemes in excess of service cost income statement charge C/F (215) (184) Employee share scheme costs C/F 31 10
Unrealised (gains)/losses arising from re-measurement of energy contracts C/F (2,949) 4,095 Net movement in working capital C/F 244 (656)
Taxes paid C/F (803) (574)
Operating interest paid C/F (20) (30)
Payments relating to exceptional charges in operating profit C/F (6) (24) Net cash flow from operating activities 2,752 1,314
Purchase of businesses, net of cash acquired C/F (34) 12 Sale of businesses, including receipt of deferred consideration C/F 55 92 Purchase of property, plant and equipment and intangible assets C/F (335) (371) Sale of property, plant and equipment and intangible assets C/F — 11 Investments in joint ventures and associates C/F (9) (18) Dividends received from joint ventures and associates C/F 220 60 Net purchase of other investments C/F (37) —
UK pension deficit payments 4 180 214
Movements in variation margin and collateral 4 (585) 1,173 Group total free cash flow 4 2,207 2,487
Adjusted earnings attributable to shareholders excluding Spirit Energy disposed assets Year ended 31 December Notes
2023
£m
2022
£m Change
Adjusted earnings attributable to shareholders I/S 1,859 2,050 Less: disposed assets adjusted earnings attributable to shareholders (including associated hedges) — (45) Adjusted earnings attributable to shareholders excluding Spirit Energy disposed assets 1,859 2,005 (7) % Adjusted basic earnings per share excluding Spirit Energy disposed assets Year ended 31 December Notes 2023 2022 Change
Adjusted earnings attributable to shareholders excluding Spirit Energy disposed assets (£m) 1,859 2,005 Weighted average of ordinary shares in issue during the period (million shares) 10 5,569 5,869 Adjusted basic earnings per share excluding Spirit Energy disposed assets 33.4p 34.2p (2) % Other Information | Centrica plc Annual Report and Accounts 2023 245 594 of 1021
Definitions and reconciliation of adjusted performance measures Gain on disposals
Year ended 31 December Notes
2023
£m
2022
£m
Loss on disposals C/F — 343
Less: exceptional loss on disposals 7 — (362)
Gain on disposals relating to business performance — (19) Group net investment
With an increased focus on cash generation, capital discipline and managing adjusted net cash/debt, Group net investment provides a measure of the Group’s capital expenditure from a cash perspective and allows the Group’s capital discipline to be assessed.

Year ended 31 December Notes
2023
£m
2022
£m Change
Capital expenditure (including small acquisitions) (i) 415 377 Net disposals (ii) (55) (103)
Group net investment 360 274 31%
Dividends received from joint ventures and associates C/F (220) (60) Interest received C/F (267) (46)
Net purchase of securities C/F 12 398
Net cash flow from investing activities C/F (115) 566 (120) % (i) Capital expenditure is the net cash flow on capital expenditure, purchases of businesses and other investments, and investments in joint ventures and associates (less than £100 million). See table (a).
(ii) Net disposals is the net cash flow from sales of businesses, and property, plant and equipment and intangible assets. See table (b).

Group net investment is capital expenditure including acquisitions less net disposals. It excludes cash flows from investing activities not associated with capital expenditure as detailed in the table above. (a) Capital expenditure (including small acquisitions)
Year ended 31 December Notes
2023
£m
2022
£m Change
Purchase of property, plant and equipment and intangible assets C/F 335 371 Purchase of businesses, net of cash acquired C/F 34 (12) Investment in joint ventures and associates C/F 9 18
Net purchase of other investments C/F 37 —
Less: material acquisitions (>£100 million) — —
Capital expenditure (including small acquisitions) 415 377 10% (b) Net disposals
Year ended 31 December Notes
2023
£m
2022
£m Change
Sale of businesses, including receipt of deferred consideration C/F (55) (92) Sale of property, plant and equipment and intangible assets C/F — (11) Net disposals (55) (103) (47) %
246 Other Information | Centrica plc Annual Report and Accounts 2023 595 of 1021
Definitions and reconciliation of adjusted performance measures The following tables provide additional information to help readers when reconciling between different parts of the consolidated Group Financial Statements, and the Group Cash Flow Statement.

Reconciliation from free cash flow to change in adjusted net cash Year ended 31 December Notes
2023
£m
2022
£m
Group total free cash flow 4 2,207 2,487
Financing interest paid C/F (286) (172)
Interest received C/F 267 46
UK pension deficit payments 4 (180) (214)
Proceeds from exercise of share options C/F 6 —
Payments for own shares C/F — (5)
Share buyback programme C/F (613) (43)
Distributions to non-controlling interests C/F (17) (273) Equity dividends paid C/F (186) (59)
Movements in variation margin and collateral 4 585 (1,173) Cash flows affecting adjusted net cash 1,783 594
Non-cash movements in adjusted net cash (238) (75)
Change in adjusted net cash 1,545 519
Opening adjusted net cash 24 1,199 680
Closing adjusted net cash 24 2,744 1,199
Reconciliation of adjusted net cash to unadjusted net cash Adjusted net cash is a business performance measure used by management to assess the underlying indebtedness of the business.

Year ended 31 December Notes
2023
£m
2022
£m
Adjusted net cash 24 2,744 1,199
Less: current and non-current securities 24 (521) (525) Less: sub-lease assets 24 (2) (2)
Unadjusted net cash 2,221 672
Payments relating to exceptional charges in operating costs Year ended 31 December Notes
2023
£m
2022
£m
Utilisation of prior year restructuring liabilities 6 24 Payments relating to exceptional charges in operating costs C/F 6 24 Other Information | Centrica plc Annual Report and Accounts 2023 247 596 of 1021
Definitions and reconciliation of adjusted performance measures Depreciation, amortisation, write-downs, impairments and write-backs Year ended 31 December Notes
2023
£m
2022
£m
Movement from depreciation, amortisation, write-downs, impairments and write-backs, from exceptional items included in the Group Cash Flow Statement 7 645 (207) Made up of:

Impairment/(write-back) of power assets 7 563 (207)
Impairment of gas storage asset 7 82 —
Movement from depreciation, amortisation, write-downs, impairments and write-backs, from business performance included in the Group Cash Flow Statement 542 777 Made up of:

Business Performance PP&E depreciation 4 395 510
Business Performance PP&E impairments 4 9 88
Business Performance intangibles amortisation 4 123 159 Business Performance intangibles impairments and write-downs 4 15 20 Movement from depreciation, amortisation, write-downs, impairments and write-backs included in the Group Cash Flow Statement 1,187 570
Reconciliation of receivables and payables to Group Cash Flow Statement Year ended 31 December Notes
2023
£m
2022
£m
Receivables opening balance B/S 8,579 6,114
Less: receivables closing balance B/S (5,619) (8,579)
Payables (incl. insurance contract liabilities) opening balance B/S (10,341) (7,633) Less: payables (incl. insurance contract liabilities) closing balance B/S 7,372 10,341 Net reduction in receivables and payables (9) 243
Non-cash changes, and other reconciling items:

Movement in share buyback liability 113 (207)
Business disposals (55) (22)
Movement in capital creditors 8 6
Movement in ROCS and emission certificate intangible assets (13) (67) Other movements (including foreign exchange movements) 14 (16) Non-cash changes, and other reconciling items 67 (306)
Movement in trade and other receivables, trade and other payables and contract-related assets/liabilities relating to business performance C/F 58 (63)
Pensions
Year ended 31 December Notes
2023
£m
2022
£m
Cash contributions to defined benefit schemes in excess of service cost income statement charge C/F (215) (184) Ordinary employer contributions 22 (56) (50)
UK pension deficit payments 22 (180) (214)
Contributions by employer in respect of employee salary sacrifice arrangements 22 (24) (21) Total current service cost 22 46 105
Termination benefit 22 (1) (4)
248 Other Information | Centrica plc Annual Report and Accounts 2023 597 of 1021
PEOPLE AND PLANET –

PERFORMANCE MEASURES
In 2023, we engaged DNV Business Assurance Services UK Limited (DNV) to conduct an independent limited assurance engagement using the International Standard on Assurance Engagements (ISAE) 3000 (Revised): ‘Assurance Engagements Other Than Audits or Reviews of Historical Financial Information’. DNV has provided an unqualified opinion in relation to four KPIs that are identified with the symbol ‘†’ and feature on pages 1, 53 and 251. It is important to read the responsible business information in the Annual Report and Accounts 2023 in the context of DNV’s full limited assurance statement and Centrica’s Basis of Reporting, which are available at centrica.com/assurance

READ MORE ABOUT OUR PEOPLE & PLANET PLAN
ON PAGES 41 TO 55

READ MORE ABOUT OUR WIDER NON-FINANCIAL
PERFORMANCE AT CENTRICA.COM/DATACENTRE

READ MORE ABOUT OUR SASB DISCLOSURE AT
CENTRICA.COM/PEOPLEANDPLANET
PROGRESS AGAINST OUR PEOPLE & PLANET PLAN Key: Progress against goals On track l Behind l Goal Milestone 2023 Progress 2022 Progress
Create an engaged team that reflects the
full diversity of the communities we serve
by 2030 – this means all company and
senior leaders to be(i):
¢ 48% women
¢ 18% ethnically diverse
¢ 20% disability
¢ 3% LGBTQ+
¢ 4% ex-service
By the end of 2025:
¢ 40% women
¢ 16% ethnically diverse
¢ 10% disability
¢ 3% LGBTQ+
¢ 3% ex-service
All company: (ii) All company: (ii)
¢ 30% women l ¢ 30% women l
– 41% excluding
Field engineers
l – 41% excluding
Field engineers
l
¢ 15% ethnically diverse l ¢ 14% ethnically diverse l
¢ 3% disability l ¢ 3% disability l
¢ 3% LGBTQ+ l ¢ 3% LGBTQ+ l
¢ 2% ex-service l ¢ 2% ex-service l
Senior leaders: (ii) Senior leaders: (ii)
¢ 32%women l ¢ 33% women l
– 32%excluding
Field engineers
l – 32%excluding
Field engineers
l
¢ 9% ethnically diverse l ¢ 9% ethnically diverse l
¢ 2% disability l ¢ 3% disability l
¢ 2% LGBTQ+ l ¢ 0% LGBTQ+ l
¢ 2% ex-service l ¢ 3% ex-service l
Recruit 3,500 apprentices and provide
career development opportunities for
under-represented groups by 2030
(base year 2021)
2,000 apprentices by the end
of 2025
1,198 apprentices l 1,033 apprentices l
Inspire colleagues to give 100,000 days
to build inclusive communities by 2030
(base year 2019)
35,000 days by the end of 2025 20,383 days l 13,155 days (iii) l Help our customers be net zero by 2050 (iv)
(base year 2019)
28% greenhouse gas (GHG)
intensity reduction by the end
of 2030
10% reduction l 6% reduction l
Be a net zero business by 2045 (v)
(base year 2019)
40% GHG reduction by the end
of 2034
21% reduction l 5% reduction (iii)(vi) l
(i) Updated at the start of 2023 to align with newly released 2021 Census data for working populations. (ii) Beyond gender, Centrica’s 2023 performance is based on colleague voluntary disclosure of 74% ethnic diversity, 45% disability, 51% LGBTQ+ and 3% ex-service. For 2022, this was 72% ethnic diversity, 40% disability, 47% LGBTQ+ and 2% ex-service. All company relates to everyone who works for Centrica. Senior leaders include colleagues above general management and spans senior leaders, the Centrica Leadership Team and the Board. (iii) Restated due to availability of improved data.
(iv) Net zero goal measures the greenhouse gas (GHG) intensity of our customers’ energy use including electricity and gas with a 2019 base year of 183gCO2e/kWh, normalised to reflect acquisitions and divestments in line with changes in Group customer base. Target aligned to the Paris Agreement and based on science to limit global warming, corresponding to a well below 2°C pathway initially and 1.5°C by mid-century. (v) Net zero goal measures scope 1 (direct) and 2 (indirect) GHG emissions based on operator boundary. Comprises emissions from all operated assets and activities including the shipping of Liquified Natural Gas (LNG) alongside the retained Spirit Energy assets in the UK and Netherlands. Non-operated nuclear emissions are excluded. Target is normalised to reflect acquisitions and divestments in line with changes in Group structure against a 2019 base year of 2,132,680mtCO2e. It’s also aligned to the Paris Agreement and based on science to limit global warming, corresponding to a well below 2°C pathway initially and 1.5°C by mid-century. (vi) Previous figure included in DNV’s limited assurance scope for the Annual Report 2022 was 6%. See centrica.com/performanceandreporting for our 2022 Basis of Reporting and DNV’s 2022 Assurance Statement.

Other Information | Centrica plc Annual Report and Accounts 2023 249 598 of 1021

PROGRESS AGAINST OUR FOUNDATIONS
People
Metric 2023 2022 What’s next
Customers
British Gas Services & Solutions –
Services Engineer Net Promoter
Score (NPS) (i)
+71 +64 Deliver energy, services and solutions that energise a greener, fairer future for all
British Gas Energy – Energy
Touchpoint NPS (ii)
+17 +13
Bord Gáis Energy – Journey NPS (iii) +18 +19
Centrica Business Solutions – Energy
supply Touchpoint NPS (iv)
+32 +31
British Gas Services & Solutions –
Services complaints per customer (v)

6.0% 7.0% Maintain focus on driving down complaints by improving customer experience
British Gas Energy – Energy
complaints per customer (vi)

13.3% 14.4%
Bord Gáis Energy – Complaints per
customer (vii)

1.7% 2.2%
Centrica Business Solutions – Energy
supply complaints per customer (vii)

12.2% 9.1%
Customer support provided during
the energy crisis (cumulative) (viii)
£140m £53m Ensure customers in vulnerable circumstances receive the help they need with their energy bills during the energy crisis and beyond Customer safety incident frequency
rate per 1,000,000 jobs completed

2.82 3.64 Keep customers safe by following controls and encouraging customers to maintain distance from work areas
(i) Measured independently, through individual questionnaires, the customer’s willingness to recommend British Gas following a gas engineer visit. (ii) Measured independently, through individual questionnaires, the customer’s willingness to recommend British Gas Energy following contact. (iii) Weighted NPS for the main customer interaction channels. (iv) Measured independently, through individual questionnaires and the customer’s willingness to recommend. (v) Total complaints, measured as any expression of dissatisfaction where we identify material distress, inconvenience or financial loss, as a percentage of average customers over the year.
(vi) Total complaints, measured as an expression of dissatisfaction in line with submissions made to Ofgem, as a percentage of average customers over the year. (vii) Total complaints, measured as any oral or written expression of dissatisfaction, as a percentage of average customers over the year. (viii) Forms part of our total community contributions in the Communities section on page 251.

Metric 2023 2022 What’s next
Colleagues
Colleague engagement (i) 7.7 7.4 Strive to achieve top quartile performance by connecting colleagues with our purpose and strategy, whilst supporting them to be their best Gender pay gap (ii) 14% median 23% median Reduce our pay gaps by building a diverse and inclusive team through our People & Planet Plan and associated Diversity, Equity and Inclusion Action Plans
15% mean 15% mean
Gender bonus gap (iii) 14% median 12% median
36% mean 30% mean
Ethnicity pay gap (ii)(iv) 11% median 10% median
2% mean 3% mean
Ethnicity bonus gap (iii)(iv) 25% median 23% median
4% mean 0% mean
Retention 90% 88% Improve retention through our focus on talent development whilst providing a supportive and inclusive culture
Absence (v) 10 days 10 days Reduce absence through good management practices alongside proactive support and education via our health and wellbeing suite of support
Total recordable injury frequency rate
(TRIFR) per 200,000 hours worked

0.84 1.12 Drive down TRIFR and LTIFR by keeping safety front-of-mind and reinforcing a strong safety culture whilst advancing controls and monitoring Lost time incident frequency rate
(LTIFR) per 200,000 hours worked

0.44 0.67
Process safety incident frequency
rate (Tier 1 and 2) per 200,000 hours
worked

0.09 0 Continue to ensure robust operational controls and operator competencies, timely safety-critical maintenance programmes and effective performance management
Significant process safety events (Tier 1) 1 0
Fatalities 1 1 Return to zero fatalities
(i) Colleague engagement methodology has changed from percentage favourable to an average score out of 10, measuring how colleagues feel about the Company. (ii) Based on hourly rates of pay for all employees at full pay (including bonus and allowances) at the snapshot dates of 5 April 2022 and 2023. Read our Gender and Ethnicity Pay Statement to find out more at centrica.com/pay.
(iii) Includes anyone receiving a bonus during the 12-month period leading up to the pay gap snapshot date and who are still employed on the snapshot date. (iv) Based on 74% of colleagues in 2023 and 70% of colleagues in 2022, who confirmed whether they are from a Black, Asian or Mixed/Multiple ethnic group. (v) Relates to absence from sickness rather than wider forms of absence such as bereavement. 250 Other Information | Centrica plc Annual Report and Accounts 2023 599 of 1021
Metric 2023 2022 What’s next
Communities
Total community
contributions
£501.6 million (i) £293.5 million (ii) Make a big difference in our local communities – from helping people with their energy bills and energy efficiency, to volunteering and fundraising for causes that colleagues care passionately about
On the ground site audits
completed
20 9 Continue to monitor and raise standards across our supply chain to reduce risk and guard against modern slavery,
focusing on enhancing engagement and controls Sites completing remote worker surveys
13 6
Colleagues committed to
Our Code
96% 98% Ensure all colleagues uphold Our Code as part of our commitment to doing the right thing and acting with integrity (i) Comprises £409.4 million in mandatory and £88.1 million in voluntary contributions to support vulnerable customers and colleagues, alongside £4.0 million in charitable donations which includes £0.21million in contributions from third parties such as colleague fundraising. Sum of constituent parts is lower than total due to rounding.

Voluntary category extended to include colleagues following the introduction of our Colleague Support Foundation. (ii) Restated due to availability of improved data. Comprises £243.8 million in mandatory and £45.1 million in voluntary contributions to support vulnerable customers, alongside £4.5 million in charitable donations which includes £0.23 million in contributions from third parties such as colleague fundraising. Sum of constituent parts is lower than total due to rounding.

Planet
Metric 2023 2022 What’s next
Greenhouse gas (GHG)
and energy
Total GHG emissions
(scope 1 and 2) (i)
1,681,475tCO2e (ii)† 2,009,885tCO2e (iii)(iv)(v) Measure and reduce our emissions through our People & Planet Plan by focusing on being a net zero business by 2045 and helping our customers be net zero by 2050 Scope 1 emissions 1,674,829tCO2e (vi)† 2,004,693tCO2e (iv)(v)(vii) Scope 2 emissions 6,647tCO2e (viii)† 5,193tCO2e (iv)(v)(ix) Scope 3 emissions (x) 21,180,922tCO2e 24,330,208tCO2e
Total GHG intensity
by revenue (xi)
64tCO2e/£m (xii) 85tCO2e/£m (xiii) Analyse the impact of our strategy on decoupling GHG emissions from value creation
Total energy use 7,437,652,380kWh (xiv)† 9,047,097,047kWh (v)(xv) Remain focused on energy efficiency as we strive to be a net zero business by 2045
Water, waste and
non-compliance
Total water use 335,512m3 317,760m3 Effectively monitor, manage and reduce our water use and waste production, as well as our incidence of environmental non-compliance
Total waste generated 15,161 tonnes 18,686 tonnes
Environmental
non-compliance (xvi)
12 22
Reporting is based on operator boundary which is the more commonly used approach for reporting environmental matters, and includes all emissions from our shipping activities relating to LNG alongside the retained Spirit Energy assets in the UK and Netherlands. Non-operated nuclear emissions are excluded. † Included in DNV’s independent limited assurance report. See page 249 or centrica.com/assurance for more. (i) Comprises scope 1 and scope 2 emissions as defined by the Greenhouse Gas Protocol. (ii) Comprises UK 547,542tCO2e and non-UK 1,133,933tCO2e. (iii) Comprises UK 726,891tCO2e and non-UK 1,282,994tCO2e. (iv) Restated due to availability of improved data.
(v) Included in DNV’s limited assurance scope for the Annual Report 2022. See centrica.com/performanceandreporting for our 2022 Basis of Reporting and DNV’s 2022 Assurance Statement. Previous figures included in DNV’s limited assurance scope include total GHG emissions 2,007,655tCO2e, scope 1 1,994,153tCO2e and scope 2 13,502tCO2e.
(vi) Comprises UK 542,244tCO2e and non-UK 1,132,585tCO2e. (vii) Comprises UK 722,810tCO2e and non-UK 1,281,883tCO2e. (viii) Market-based, comprises UK 5,299tCO2e and non-UK 1,348tCO2e. Location-based is 17,041tCO2e. (ix) Market-based, comprises UK 4,082tCO2e and non-UK 1,111tCO2e. Location-based is 16,275tCO2e. (x) Includes emissions from the following scope 3 categories defined by the Greenhouse Gas Protocol: purchased goods and services, capital goods, fuel and energyrelated activities, waste generated in operations, business travel, employee commuting, upstream and downstream transportation and distribution, use of sold product and investments. All emissions are calculated in line with the methodologies set out by the Greenhouse Gas Protocol’s technical guidance, apart from working from home emissions which are based on methodology set out in EcoAct’s homeworking emissions whitepaper. Other categories spanning upstream leased assets, processing of sold products, end-of-life treatment of sold product, downstream leased assets and franchises, are not included because they are not relevant to our business.
(xi) Carbon intensity of revenue is employed as our intensity measure because it is the most meaningful intensity measure for our diverse business and is the most widely used and understood measure for climate-related stakeholders such as CDP. Based on statutory revenue. (xii) Comprises UK 25tCO2e/£m and non-UK 267tCO2e/£m.
(xiii) Comprises UK 42tCO2e/£m and non-UK 203tCO2e/£m.
(xiv) Comprises UK & Offshore 1,654,616,311kWh and non-UK energy use 5,783,036,069kWh. (xv) Comprises UK & Offshore 2,394,832,533kWh and non-UK energy use 6,652,264,514kWh. (xvi) Includes breaches of environmental authorisation including permit, licence and consent coupled with wider environmental legislation where we are either required to notify the regulator or where an authority or regulator is involved. The majority of incidents relate to offshore activities.

Other Information | Centrica plc Annual Report and Accounts 2023 251 600 of 1021

GLOSSARY
$ Refers to US dollars unless specified otherwise
2P reserves Proven and probable reserves
Acas The Advisory, Conciliation and Arbitration Service is an independent public body that receives funding from the UK Government to provide employees and employers with free impartial advice on workplace rights and to help resolve disputes AGM Annual General Meeting
AIP Annual Incentive Plan
bcf Billion cubic feet
CFD Climate-Related Financial Disclosure
CHP Combined heat and power
CO2e Universal unit of measurement of the global warming potential (GWP) of greenhouse gases (GHG) expressed in terms of the GWP of one unit of CO2e (carbon dioxide equivalent)
CPI Consumer Price Index
CSS Consolidated Segmental Statement
CUPS DB Centrica Unapproved Pension Scheme defined benefit CUPS DC Centrica Unapproved Pension Scheme defined contribution Data analytics The process of examining data sets to draw conclusions and insights about the information they contain
EBITDA Earnings before interest, tax, depreciation and amortisation EBT Employee Benefit Trust
EP Economic profit
EPS Earnings per share
ESG Environmental, Social & Governance
Ethnically diverse Colleagues from a Black, Asian, Mixed or other ethnic background EV Electric vehicle
EU European Union
FCA Financial Conduct Authority
FCF Free cash flow
FRS Financial Reporting Standards
GDPR General Data Protection Regulation
GHG Greenhouse gas emissions
GM Gross margin
GMB Trade union
Green jobs Jobs that have a direct positive impact on the planet GW Gigawatt
GWh Gigawatt hours
IAS International Accounting Standards
IFRS International Financial Reporting Standards
KPI Key performance indicators
kWh Kilowatt hour
LGBTQ+ Lesbian, Gay, Bisexual, Trans and Queer/Questioning plus. The ‘plus’ is inclusive of other groups such as asexual, intersex and questioning
LNG Liquified natural gas
LTIFR Lost time injury frequency rate
mmboe Million barrels of oil equivalent
MThms Million therms
Net zero The point at which there is a balance between human-related carbon dioxide (CO2) being emitted into the atmosphere and the CO2 taken out
NGO Non-governmental organisation
NPS Net promoter score
Ofgem The government regulator for gas and electricity markets in Great Britain
Paris Agreement A global agreement to keep temperature rise well below 2°C above pre-industrial levels, and pursue efforts to limit the increase to 1.5°C
PP&E Property, Plant and Equipment
ppt Percentage point
Process safety Process safety is concerned with the prevention of harm to people and the environment, or asset damage from major incidents such as fires, explosions and accidental releases of hazardous substances
PRA Prudential Regulatory Authority
PRT Petroleum Revenue Tax
PWR Pressurised water reactor
RBD Reconciliation by difference
ROC Renewable Obligation Certificate
RPI Retail Price Index
SASB Sustainability Accounting Standards Board
SAYE Save As You Earn
SESC Safety, Environment and Sustainability Committee
SIP Share Incentive Plan
tCO2e Tonnes of carbon dioxide equivalent
T&Cs Terms and Conditions
TCFD Task Force on Climate-related Financial Disclosures The Company Centrica plc
The Group Centrica plc and all of its subsidiary entities TRIFR Total recordable injury frequency rate
TSR Total shareholder return
TWh Terawatt hour
UAOCF Underlying adjusted operating cash flow
Underrepresented
groups
A person or group of people who are insufficiently or inadequately represented in society such as women apprentices or those who are ethnically diverse, have a disability, are LGBTQ+ or carers VIU Value in use
WBCSD World Business Council for Sustainable Development WRI World Resources Institute
252 Other Information | Centrica plc Annual Report and Accounts 2023 601 of 1021
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Disclaimer
This Annual Report and Accounts does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any Centrica shares or other securities.

This Annual Report and Accounts contains certain forward-looking statements, forecasts and projections that reflect the current intentions, beliefs or expectations of Centrica’s Management with respect to, the Group’s financial condition, goals and commitments, prospects, growth, strategies, results, operations and businesses of Centrica.

These statements only take into account information that was available up to and including the date that this Annual Report and Accounts was approved and can be identified by the use of terms such as ‘intend’, ‘aim’, ‘project’, ‘anticipate’, ‘estimate’, ‘plan’, ‘believe’, ‘expect’, ‘forecasts’, ‘may’, ‘could’, ‘should’, ‘will’, ‘continue’ and other similar expressions of future performance and results including any of their negatives.

Although we make such statements based on assumptions that we believe to be reasonable, by their nature, readers are cautioned that these forward-looking statements are not guarantees or predictions of the Group’s future performance and undue reliance should not be placed on them when making investment decisions. Any reliance placed on this Annual Report and Accounts or past performance is not indicative of future results and is done entirely at the risk of the person placing such reliance.

There can be no assurance that the Group’s actual future results, financial condition, performance, operations and businesses will not differ materially from those expressed or implied in the forward-looking statements due to a variety of factors that are beyond the control of the Group and therefore cannot be precisely predicted. Such factors include, but not limited to, those set out in the Principal Risks and Uncertainties section of the Strategic Report in this Annual Report and Accounts. Other factors could also have an adverse effect on our business performance and results.

At any time subsequent to the approval of this Annual Report and Accounts, neither Centrica nor any other person assumes responsibility for the accuracy and completeness or undertakes any obligation, to update or revise any of these forward-looking statements to reflect any new information or any changes in events, conditions or circumstances on which any such forward-looking statement is based save in respect of any requirement under applicable law or regulation.

Further when considering the information contained in, or referred to in this Annual Report and Accounts, please note that profit and inventory from Rough operations are reported under Centrica Energy Storage Limited for presentational purposes only. Centrica Energy Storage Limited does not produce, supply or trade gas, except to the extent necessary for the efficient operation of the storage facility. In accordance with the Gas Act 1986, such production, supply and trading of gas is carried out wholly independently of Centrica Energy Storage Limited by other Centrica group companies.

Certain figures shown in this announcement were rounded in accordance with standard business rounding principles and therefore there may be discrepancies. 602 of 1021 Centrica plc
Registered office:

Millstream
Maidenhead Road
Windsor
Berkshire
SL4 5GD
Company registered
in England and Wales
No. 3033654
centrica.com
603 of 1021
Appendix B –
Sample M & V Report
604 of 1021
September 1st, 2017
Cortland County, New York
Year 3 Measurement and Verification Report
Scott Clark, PE, CEM, CMVP
Project Director
3 Rosell Dr, Ballston Lake, NY
518-406-0739
[email protected]
Ryan Urschel, CEM, CMVP
Senior Energy Engineer
3 Rosell Dr, Ballston Lake, NY
518-406-0326
[email protected]
605 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
(C) 2021 Centrica plc.

Table of Contents

1.0 Executive Summary.................................................................................................................2

1.1 Project Overview...............................................................................................................................2

1.2 Summary of Guaranteed and Verified Savings.................................................................................2

2.0 Project Background.................................................................................................................6

2.1 Facility Improvement Measure Overview..........................................................................................6

2.2 Baseline Utility Usage........................................................................................................................6

2.3 Baseline Utility Rates.........................................................................................................................7

3.0 Verified Savings Analysis.........................................................................................................9

3.1 FIM 1 – Lighting Upgrades...................................................................................................................9

3.2 FIM 2 – Building Envelope Improvements.........................................................................................15

3.3 FIM 3 – Window Sealing at the County Office Building.....................................................................19

3.4 FIM 4 – Replace Windows at the Highway Garage............................................................................22

3.5 FIM 5 – Replace Windows at the Courthouse ...................................................................................24

3.6 FIM 6 – Install Window Tinting at the County Office Building ..........................................................26

3.7 FIM 7 – HVAC Upgrades at the Public Safety Building.......................................................................28

3.8 FIM 8 – Cooling Tower Replacement at PSB......................................................................................34

3.9 FIM 9 – Replace Boilers in Public Safety Building ..............................................................................36

3.10 FIM 10 – HVAC Upgrades at the County Office Building .................................................................38

3.11 FIM 11 – Replace RTUs in the County Office Building .....................................................................46

3.12 FIM 12 – Replace Domestic Hot Water Heater at the COB.............................................................49

3.13 FIM 13 – HVAC Upgrades at the Courthouse ..................................................................................50

3.14 FIM 14 – Insulate Basement Steam Piping at Courthouse ..............................................................54

3.15 FIM 15 – Replace Suite 301 AC Unit at the Courthouse ..................................................................56

3.16 FIM 16 – Water Fixture Upgrades....................................................................................................58

3.17 FIM 17 – Replace Transformers.......................................................................................................60 606 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
(C) 2021 Centrica plc.

1.0 Executive Summary

1.1 Project Overview
Centrica Business Solutions (Formerly SmartWatt Energy) completed a Utility Energy Service Contract (UESC) through National Grid at various facilities owned by Cortland County. An Investment Grade Audit was completed by Centrica leading to the Utility Energy Service Contract totaling $4,642,872. This was adjusted from the original IGA proposal of $5,020,470 due to the removal of the Jail building from the original scope of work. Substantial Completion documentation for the project was completed on November 30th 2017.

This report documents the savings achieved in one complete year of energy savings based on the period from December 2019 to November 2020 which represents the third complete year of savings in the term.

1.2 Summary of Guaranteed and Verified Savings
This project was executed through a Utility Energy Service Contract with a guaranteed annual utility cost savings of $179,303 in Year 3 of the term. The agreed to annual Operations & Maintenance (O&M) cost savings is $116,752 for a total annual cost savings of $305,853. The figure on the following page represents a comparison of energy cost savings from the guaranteed amount to the verified savings through the M&V plan included in the IGA for Year 3 of the Term.

The verified savings are completed using Option A of the IPMVP. This method isolates each measure as called out in the M&V plan of the IGA.

NOTE:

During Year 3 of the project term, the building controls system has been adjusted by the County to reflect a change in the schedules and set-point temperatures throughout that vary from the values agreed upon as part of the Measurement and Verification plan. Due to this change, there is a savings deficit for Year 2 of $2,466. If the schedules and setpoints are adhered to as agreed in the Measurement and Verification Plan, the County should expect a net surplus of approximately $12,831/yr. This would be a result of all the measures in the project. 607 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
(C) 2021 Centrica plc.

The cost savings are based on units of energy (kWh of electricity, therms, of natural gas) The baseline utility rates, as described in Section 2.3, are applied to the verified energy savings to determine the verified cost savings. The savings summary resulting from the installation of the FIMs is presented in Figure 1. The total annual verified utility cost savings is $170,208. This amount is short of the SmartWatt utility savings guarantee stated in the IGA M&V Plan of $172,674/yr. This results in a deficit in savings of $2,466/yr. The summary below displays a comparison of the guaranteed savings and verified savings following project completion. A complete description of the savings for each FIM is found in Section 2 of this report.
$130,000 $160,000
Verified Savings $
Guaranteed Savings $
$170,208
$172,674
$2,466 Deficit
Figure 1: Cost Savings Comparison
608 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
(C) 2021 Centrica plc.

Table 1: Guaranteed Annual Savings Summary
Guaranteed Energy/Water Reduction Cost Savings
FIM # FIM Description Electric
(kWh/yr)
Natural Gas
(Therm/yr)
Water Savings
(kGal/yr)
Electricity
($/yr)
Natural
Gas ($/yr)
Water
($/yr)
Total Cost
Savings
($/yr)
1 Lighting Improvements 316,116 - - $34,490 - - $34,490 2 Building Envelope
Improvements 12,737 19,959 - $1,370 $17,198 - $18,569
3 Window Sealing at County
Office Building 5,711 3,995 - $603 $3,376 - $3,978
4 Replace Windows at Highway
Garage - 332 - - $277 - $277
5 Window Replacement at
Courthouse 11,598 14,021 - $1,417 $11,626 - $13,043
6 Window Tinting at County
Office Bldg. 17,398 2,015 - $1,831 $1,703 - $3,534
7 HVAC Upgrades at PSB 53,867 3,285 - $5,169 $2,725 - $7,893 8 Cooling Tower Replacement at
PSB 9,790 - - $939 - - $939
9 Boiler Replacement at PSB - 2,478 - - $2,055 - $2,055 10 HVAC Upgrades at COB 144,379 14,481 - $15,195 $12,236 - $27,431 11 Replace Roof Top Units at COB 59,847 - - $6,299 - - $6,299 12 Install New Hot Water Heater
at COB -1,950 - - $(205) - - $(205)
13 HVAC Upgrades at Courthouse 17,777 46,355 - $2,164 $38,440 - $40,605 14 Insulate Basement Piping at
Courthouse - 855 - - $709 - $709
15 Replace Suite 301 AC Unit at
Courthouse 5,862 - - $714 - - $714
16 Water Conservation - 682 525 - $592 $4,330 $4,923
17 Replace Transformers 68,395 - - $7,422
Total 721,528 108,460 525 $77,407 $90,937 $4,330 $172,674

609 of 1021
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Year 3 Measurement and Verification Report
(C) 2021 Centrica plc.

Table 2: Verified Annual Savings Summary
Verified Energy/Water Reduction Cost Savings
FIM # FIM Description Electric
(kWh/yr)
Natural Gas
(Therm/yr)
Water Savings
(kGal/yr)
Electricity
($/yr)
Natural
Gas ($/yr)
Water
($/yr)
Total Cost
Savings ($/yr)
1 Lighting Improvements 339,439 - - $37,035 - $37,035
2 Building Envelope Improvements 12,737 19,959 - $1,364 $19,431 $20,796 3 Window Sealing at County Office
Building 5,711 4,262 - $601 $3,601 $4,202
4 Replace Windows at Highway
Garage - 332 - - $289 $289
5 Window Replacement at
Courthouse 11,598 14,021 - $1,412 $11,627 $13,039
6 Window Tinting at County Office
Bldg. 17,398 2,015 - $1,831 $1,703 $3,534
7 HVAC Upgrades at PSB 48,705 1,116 - $4,623 $926 $5,549 8 Cooling Tower Replacement at
PSB 11,599 - - $1,101 - $1,101
9 Boiler Replacement at PSB - 2,439 - - $2,023 $2,023
10 HVAC Upgrades at COB 150,084 13,577 - $15,795 $11,471 $27,267 11 Replace Roof Top Units at COB 63,059 - - $6,637 - $6,637 12 Install New Hot Water Heater at
COB -1,950 - - $(205) - $(205)
13 HVAC Upgrades at Courthouse 10,668 40,619 - $1,299 $33,684 $34,983 14 Insulate Basement Piping at
Courthouse - 855 - - $709 $709
15 Replace Suite 301 AC Unit at
Courthouse 7,289 - - $887 - $887
16 Water Conservation - 685 527 - $595 $4,347 $4,942
17 Replace Transformers 68,486 - - $7,422 $7,422
Total 744,824 99,880 527 $79,803 $86,058 $4,347 $170,2081 1 Year 2 savings results in a deficit of $2,466.
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Measurement and Verification Report
(C) 2019 SmartWatt Energy, Inc., All Rights Reserved
6 2.0 Project Background

2.1 Facility Improvement Measure Overview
SmartWatt Energy completed seventeen FIMs as part of an energy efficiency project. These measures were described in the Investment Grade Audit and subsequent UESC contract that was signed in April 2016.

Substantial completion for the project was completed on November 30th, 2017. A summary of each of the FIMs is provided below:
• FIM 1: Lighting Upgrades: Interior and exterior lighting replacement with LED fixtures. • FIM 2: Building Envelope Improvements
• FIM 3: Window Sealing at County Office Building
• FIM 4: Window Replacement at Highway Garage
• FIM 5: Window Replacement at the Courthouse
• FIM 6: Window Tinting at the County Office Building
• FIM 7: HVAC Upgrades at the PSB
• FIM 8: Cooling Tower Replacement at the PSB
• FIM 9: Boiler Replacements at the PSB
• FIM 10: HVAC Upgrades at the COB
• FIM 11: Replace Roof Top Units at the COB
• FIM 12: Install New Hot Water Heater at COB
• FIM 13: HVAC Upgrades at the Courthouse
• FIM 14: Insulate Basement Piping at the Courthouse
• FIM 15: Replace Suite 301 AC Unit at the Courthouse
• FIM 16: Water Conservation
• FIM 17: Transformer Upgrade

2.2 Baseline Utility Usage
Table 3 provides a summary of the baseline energy usage prior to the Energy Performance Contract. The baseline period is January 1st 2014 – December 31st, 2014. Costs are determined by applying the baseline utility rates as defined in Section 2.3.
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Year 3 Measurement and Verification Report
(C) 2021 Centrica plc.

Table 1: Baseline Utility Usage and Cost Summary
Facility Electric Usage
(kWh/yr)
Natural Gas
Usage
(Therm/yr)
Water Usage
(kGal/yr)
County Office Building 1,059,920 59,014 626
Jail / PSB / Courthouse 879,840 103,348 3,957
Cleary Building 61,040 2,186 37
DMV 12,144 3,024 64
Highway Complex 62,038 4,198 26
Recycle Center 338,760 55,609 174
Total 2,413,742 227,380 4,884
Baseline Electric
Cost ($/yr)
Baseline Natural
Gas Cost ($/yr)
Baseline Water Cost
($/yr)
Total Baseline
Utility Cost ($/yr)
$250,620 $185,261 $38,355 $474,236

2.3 Escalated Year 2 Utility Rates
Table 4 provides a summary of the baseline energy rates as presented in Schedule D of the Energy Performance Contract. These values are applied to the guaranteed and verified utility usage savings to determine the annual cost savings for Year 2 of the term.

Table 2: Escalated Year 2 Utility Rates
Building
Electricity
Distribution
($/kWh)
Electricity
Supply
($/kWh)
Electricity
Total ($/kWh)
COB $0.039 $0.066 $0.105
Jail/PSB $0.029 $0.066 $0.095
Courthouse $0.056 $0.066 $0.122
Recycle Center $0.075 $0.066 $0.141
Cleary Building $0.087 $0.066 $0.153
DMV $0.057 $0.066 $0.123
Highway Garage $0.043 $0.066 $0.109
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Year 3 Measurement and Verification Report
(C) 2021 Centrica plc.

Building
Natural Gas
Distribution
($/therm)
Natural Gas
Supply
($/therm)
Natural Gas
Total
($/Therm)
COB $0.216 $0.629 $0.845
Jail/PSB $0.206 $0.624 $0.829
Courthouse2 $0.206 $0.624 $0.829
Recycle Center $0.426 $0.629 $1.055
Cleary Building $0.419 $0.629 $1.048
DMV $0.410 $0.626 $1.036
Highway Garage $0.234 $0.631 $0.865
Building Water & Sewer
($/kGal)
COB $8.15
Jail $7.93
Courthouse $8.15
Recycle Center $13.33
Cleary Building $8.41
DMV $9.54
Highway Garage $8.97
PSB (Water Only) $8.19
2 Shares Gas Meter with the Jail/PSB
613 of 1021
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Year 3 Measurement and Verification Report
(C) 2021 Centrica plc.

3.0 Verified Savings Analysis
Verified utility usage savings are described in the following section for each FIM. The utility rates as described in Section 2.3 are applied to determine the annual cost savings. Table 2 provides a summary of the verified savings with the appropriate costs applied. Adjustments made to the measured energy use is discussed in further detail within the FIM write-up.

3.1 FIM 1 – Lighting Upgrades
Pre-Installation
Pre-Installation Energy
Use IGA (kWh/yr)
Pre-Installation Energy Use
- Verified3 Variance (kWh/yr)
647,910 639,531 8,379
Post - Installation
Post - Installation IGA
Energy Use (kWh/yr)
Post - Installation Verified
Energy Use (kWh/yr) Variance (kWh/yr)
331,794 300,091 (31,703)
Energy Savings
Guaranteed Energy
Savings (kWh/yr)
Verified Energy Savings
(kWh/yr)
Variance from
Guarantee
316,116 339,439 23,323
Overview
SmartWatt completed a lighting upgrade that included replacing existing fluorescent lighting with new LED lighting throughout the County Buildings. The measurement and verification plan outlined in the IGA required measurements for this FIM to be performed in Year 1 only. Therefore, the measurements made below are representative from Year 1 of the project term and reflected accordingly.

Savings Measurement Procedure
IPMVP Option A (Retrofit Isolation) was utilized for energy savings verification for this measure. The key parameter measured was power draw for a representative sample of post installation fixtures. The table below represents four fixture types that account for 47% of the total energy savings. Sample sizes and the results for these fixture types assume a coefficient of variation (Cv) of 0.2, 20% Precision, and 80% Confidence. The voltage and amperage were measured on site. A power factor of 1 was used. The wattage can be calculated by multiplying the voltage, amperage, and power factor together (V x A x PF). 3 Includes baseline fixture wattage measurements.
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Cortland County, NY
Year 3 Measurement and Verification Report
(C) 2021 Centrica plc.

The table below represents the fixture sample size needed to meet the above-mentioned coefficient of variation, precision, and confidence factors.

Fixture Type Quantity Sample Size
RL - 2 LED tube 1,119 4
RL - 2 LED tube - low powered 735 16
RL A lamp 317 10
RL - 3 LED tube - low powered 496 13
Total 2,667 40
The pre-installation verified baseline was used during the first year of the reporting period to reflect consistency and to be conservative in the savings calculations.

Table 3: Pre-Installation Fixture Measurement
Building Fixture Location Sample
Quantity Fixture Type Measured Amperage
Measured
Voltage
Verified
Wattage
Office Building 121 - Office #1 1 RKTF2F28N 0.16 277 44.3 Office Building 121 - Office #2 1 RKTF2F28N 0.15 277 41.6 Office Building 100- 1st Floor
Hallways 2 RKTF2F28N 0.16 277 44.3
Office Building 215- Office #1 1 RKTF2F28N 0.15 276.7 41.5 Office Building 215 - Office #2 1 RKTF2F28N 0.15 279 41.9 DMV Cash Room 1 VN4/2F32/E 0.16 276.9 44.3
DMV Mens Room 1 TF/2F32/E 0.16 276.4 44.2
Jail 18- Lobby 1 S4/2F32/E 0.15 280 42
Courthouse 35-Office 1 W4/2F32/E 0.14 280 39.2
Office Building 103-105 Open
Area 4 RB2F28LPS 0.16 279 44.6
Office Building GYM 2 RB2F28LPS 0.15 278 41.7
Office Building Bathroom next to
B12A 1 RB2F25L 0.15 279.3 41.9
Office Building DSS Storage Near
Gym 3 RB2F28L 0.16 278.3 44.5
Office Building 230 - Open Area 2 RB3F28L 0.27 279.3 75.4 Office Building 240 - Music Room 2 RB3F28L 0.27 274.1 74 Office Building 222-Open Area 2 RB3F28L 0.28 278 77.8
Office Building 131-129 Open
Area 2 RB3F28L 0.26 276 71.8
Office Building B18- Cafeteria 2 RB3F28L 0.28 277 77.6
615 of 1021
Cortland County, NY
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Building Fixture Location Sample
Quantity Fixture Type Measured Amperage
Measured
Voltage
Verified
Wattage
Office Building
310 - County
Legislative
Chambers
1 RLPAR40DIM 0.35 112 39.2
Office Building Auditorium 2 I/100 0.81 117 94.8
HB3 Tiny Bathroom 1 I/60 0.47 110 51.7
HB1 Stairs 1 CF/13TWIST 0.2 110 22
HB1 Mens Room 1 I/40 0.36 110 39.6
Cleary Bld bathroom 1 1 I/100 0.83 116 96.3
Courthouse Judges Chambers 2 I/50 0.41 111 45.5
Courthouse Attic 1 CF26W 0.18 115 20.7
Table 4: Post Installation Lighting Measurements
Building Fixture
Location
Sample
Quantity Fixture Type Measured
Amperage
Measured
Voltage
Verified
Wattage
Office
Building 121 - Office #1 1
RL - 2 LED tube-county
office - low powered 0.09 276 24.8
Office
Building 121 - Office #2 1
RL - 2 LED tube-county
office - low powered 0.09 278 25
Office
Building
100- 1st Floor
Hallways 2
RL - 2 LED tube-county
office - low powered 0.08 277 22.2
Office
Building 215- Office #1 1
RL - 2 LED tube-county
office - low powered 0.09 277 24.9
Office
Building 215 - Office #2 1
RL - 2 LED tube-county
office - low powered 0.1 279 27.9
DMV Cash Room 1 RL - 2 LED tube 0.1 278 27.8
DMV Mens Room 1 RL - 2 LED tube 0.09 277 24.9
Jail 18- Lobby 1 RL - 2 LED tube 0.10 279 27.9
Courthouse 35-Office 1 RL - 2 LED tube 0.09 280 25.2
Office
Building
103-105 Open
Area 4
RL - 2 LED tube-county
office - low powered 0.09 278 25
Office
Building
GYM 2RL - 2 LED tube-county
office - low powered

0.1 278 27.8
Office
Building
Bathroom next
to B12A 1
RL - 2 LED tube-county
office - low powered 0.1 279 27.9
Office
Building
DSS Storage
Near Gym 3
RL - 2 LED tube-county
office - low powered 0.09 279 25.1
Office
Building 230 - Open Area 2
RL - 3 LED tube-county
office - low powered 0.13 277 36.0
Office
Building
240 - Music
Room 2
RL - 3 LED tube-county
office - low powered 0.14 276 38.6
616 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
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Building Fixture
Location
Sample
Quantity Fixture Type Measured
Amperage
Measured
Voltage
Verified
Wattage
Office
Building 222-Open Area 2
RL - 3 LED tube-county
office - low powered 0.13 279 36.3
Office
Building
131-129 Open
Area 2
RL - 3 LED tube-county
office - low powered 0.13 277 36.0
Office
Building B18- Cafeteria 2
RL - 3 LED tube-county
office - low powered 0.14 277 38.8
Office
Building
310 - County
Legislative
Chambers
1 RL A lamp 0.1 111 11.1
Office
Building Auditorium 2 RL A lamp 0.1 115 11.5
HB3 Tiny Bathroom 1 RL A lamp 0.1 112 11.2
HB1 Stairs 1 RL A lamp 0.1 112 11.2
HB1 Mens Room 1 RL A lamp 0.11 111 12.2
Cleary Bld bathroom 1 1 RL A lamp 0.11 120 13.2
Courthouse Judges
Chambers 2 RL A lamp 0.11 113 12.4
Courthouse Attic 1 RL A lamp 0.11 113 12.4
Baseline and post retrofit fixture wattages are provided in Appendix 1 for each fixture type. Operating hours were determined through logged data and stipulated in the Measurement and Verification Plan. A summary of the hours determined, and occupancy sensor savings by space type are listed in the tables below. The electric rates for this savings analysis are based on the baseline utility rates as described in Section 2.3.

Table 5: Lighting Operating Hours by Space Type
Building Space Hours / Year
Office Building Break / Kitchen 1,195
Office Building Conference 1,377
Office Building Corridor 3,509
Office Building Courtroom 808
Office Building Office 2,700
Office Building Open Office 2,712
Office Building Restroom 1,063
Office Building Closet / Storage / Gym 521
Cleary Building Break / Kitchen 1,195
Cleary Building Conference 1,377
Cleary Building Corridor 3,509
Cleary Building Office 2,700
Cleary Building Restrooms 1,063
Cleary Building Storage / Closet 521
Courthouse Break / Kitchen 1,195
Courthouse Conference 1,377
617 of 1021
Cortland County, NY
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Building Space Hours / Year
Courthouse Corridor 3,509
Courthouse Courtroom 808
Courthouse Office 2,700
Courthouse Open Office 2,712
Courthouse Restrooms 1,063
Courthouse Storage / Closet 521
DMV Office 2,700
DMV Break / Kitchen / DMV 8,760
DMV Corridor 3,509
DMV Storage / Closet 521
Highway Buildings Office 2,700
Highway Buildings Break / Kitchen 1,195
Highway Buildings Corridor 3,509
Highway Buildings Garage 1,859
Highway Buildings Restrooms 1,063
Highway Buildings Storage / Closet 521
Public Safety
Building Conference 1,172
Public Safety
Building Corridor 8,760
Public Safety
Building Office 2,972
Public Safety
Building Mechanical / Evidence 8,760
Public Safety
Building
Women’s Restroom 2nd
Floor 1,063
Public Safety
Building Restrooms 6,682
Public Safety
Building Storage / Closet 521
Recycle Center Production / Office /
Hallways 2,529
Recycle Center Storage / Closet 521

Table 6: Occupancy Sensor Hour Reduction Factor
Building Usage Group % Reduction
Highway Department /
Courthouse Offices 73
618 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
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Highway Department Cubicle Office Space 80
Public Safety Building Break Rooms 91
Jail Conference Rooms 30
Highway Department /
Courthouse
Wampsville Hwy
Garage 60
The average post installation wattage measured for each like fixture type were applied to the “𝑊𝑎𝑡𝑡𝑠𝑝𝑜𝑠𝑡 ” variable in the equations below to calculate verified energy savings. The annual energy usage and cost savings are calculated using the following equations for each space.

𝐴𝑛𝑛𝑢𝑎𝑙 𝐸𝑛𝑒𝑟𝑔𝑦 𝑆𝑎𝑣𝑖𝑛𝑔𝑠 = 𝐵𝑎𝑠𝑒𝑙𝑖𝑛𝑒 𝐸𝑛𝑒𝑟𝑔𝑦 𝑈𝑠𝑎𝑔𝑒 − 𝑃𝑜𝑠𝑡 𝑅𝑒𝑡𝑟𝑜𝑓𝑖𝑡 𝐸𝑛𝑒𝑟g𝑦 𝑈𝑠𝑎𝑔𝑒 𝐵𝑎𝑠𝑒𝑙𝑖𝑛𝑒 𝐸𝑛𝑒𝑟𝑔𝑦 𝑈𝑠𝑎𝑔𝑒 = 𝑄𝑡𝑦𝑒𝑥𝑖𝑠𝑡𝑖𝑛𝑔 × 𝑊𝑎𝑡𝑡𝑠𝑒𝑥𝑖𝑠𝑡𝑖𝑛𝑔 × 𝐻𝑟𝑠𝑒𝑥𝑖𝑠𝑡𝑖𝑛𝑔 × 1 𝑘𝑊⁄1,000 𝑊𝑎𝑡𝑡𝑠 𝑃𝑜𝑠𝑡 𝑅𝑒𝑡𝑟𝑜𝑓𝑖𝑡 𝐸𝑛𝑒𝑟𝑔𝑦 𝑈𝑠𝑎𝑔𝑒 = 𝑄𝑡𝑦𝑝𝑜𝑠𝑡 × 𝑊𝑎𝑡𝑡𝑠𝑝𝑜𝑠𝑡 × H𝑟𝑠𝑝𝑜𝑠𝑡 × % 𝑅𝑒𝑑𝑢𝑐𝑡𝑖𝑜𝑛 × 1 𝑘𝑊⁄1,000 𝑊𝑎𝑡𝑡𝑠 𝐸𝑛𝑒𝑟𝑔𝑦 𝐶𝑜𝑠𝑡 𝑆𝑎𝑣𝑖𝑛𝑔𝑠 = 𝐴𝑛𝑛𝑢𝑎𝑙 𝐸𝑛𝑒𝑟𝑔𝑦 𝑆𝑎𝑣𝑖𝑛𝑔𝑠 × 𝐸𝑙𝑒𝑐𝑡𝑟𝑖𝑐 𝑅𝑎𝑡𝑒 Where,
𝑄𝑡𝑦𝑒𝑥𝑖𝑠𝑡𝑖𝑛𝑔= Existing number of fixtures
𝑊𝑎𝑡𝑡𝑠𝑒𝑥𝑖𝑠𝑡𝑖𝑛𝑔 = Per fixture wattage of existing fixtures including lamps and ballasts, Watts 𝐻𝑟𝑠𝑒𝑥𝑖𝑠𝑡𝑖𝑛𝑔 = Existing annual hours of operation, hours/yr 𝑄𝑡𝑦𝑝𝑜𝑠𝑡= Post retrofit number of fixtures from as-built documentation 𝑊𝑎𝑡𝑡𝑠𝑝𝑜𝑠𝑡 = Per fixture wattage of post installation fixtures, Watts % Reduction = % Reduction in post installation hours where applicable H𝑟𝑠𝑝𝑜𝑠𝑡 = Post retrofit annual hours of operation, hours/yr 619 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
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3.2 FIM 2 – Building Envelope Improvements
Pre-Installation
Pre-Installation Energy Use
(kWh/yr)
Pre-Installation Natural
Gas Use (Therm/yr)
12,737 19,959
The post retrofit conditions verify that the total crack area was sealed and the energy losses were reduced to zero.

Energy Savings - Guarantee Energy Savings - Verified Variance from IGA Guarantee
Electric
(kWh/yr)
Natural Gas
(Therm/yr)
Electric
(kWh/yr)
Natural Gas
(Therm/yr)
Electric
(kWh/yr)
Natural
(Therm/yr)
12,737 19,959 12,737 19,959 0 0
Overview
The measurement and verification plan outlined in the IGA required measurements for this FIM to be Performed in Year 1 only. Therefore, the measurements made below are representative from Year 1 of the project term and reflected accordingly
County Office Building
11 Single commercial doors weather-stripped (bronze anodized weather-stripping) 1 Double commercial door weather-stripped (bronze anodized weather-stripping) 1 Single commercial door weather-stripped, sweep only (bronze anodized weather-stripping) 1 Single commercial attic access door weather-stripped (bronze anodized weather-stripping) 1 Attic hatch/door weather-stripped, 12 linear feet (bronze anodized weather-stripping) Note: newly installed 2014 doors are not included in door weather-stripping 1 Overhead garage door weather-stripped, 32 linear feet 10 Roof top ventilators opened, dampers lubricated and perimeters sealed, 84 linear feet 9,400 Square feet of attic space air-sealed (seal pipe, duct, wire penetrations) and fiberglass batt insulation (R30) re-distributed continuously through-out space.

Courthouse
5 Single commercial doors weather-stripped (bronze anodized weather-stripping) 1 Single commercial attic access door weather-stripped
620 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
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3 Double commercial doors weather-stripped (bronze anodized weather-stripping) Public Safety Building / Jail
8 Single commercial doors weather-stripped (5 bronze anodized weather-stripping) 2 Single commercial roof access doors weather-stripped
10 Single commercial doors weather-stripped, secure areas (4 bronze anodized weather-stripping) 3 Roll-up garage doors weather-stripped, 132 linear feet Cleary Building
4 Single commercial doors weather-stripped (2 bronze anodized weather-stripping) 1 Double commercial door weather-stripped (1 bronze anodized weather-stripping) DMV
4 Single commercial doors weather-stripped
1 Double commercial doors weather-stripped
1 Roll-up garage door weather-stripped, 36 linear feet
1 Roof top ventilators opened, dampers lubricated and perimeters sealed, 4 linear feet Highway Garage Complex
HB1
5 Single commercial doors weather-stripped
1 Mail slot opening in door weather-stripped (overlapping extra-large fin seal brush) 117’ Roof/wall joint sealed (building addition)
HB2
3 Single commercial doors weather-stripped
4 Overhead garage doors weather-stripped, 212 linear feet HB3
3 Single commercial doors weather-stripped
621 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
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27 Overhead garage doors weather-stripped, 1,512 linear feet (bottom track extensions required for all) HB4
11 Single commercial doors weather-stripped
1 Double commercial door weather-stripped
21 Overhead garage doors weather-stripped, 1,228 linear feet 15 Roof top ventilators opened, dampers lubricated and perimeters sealed, 60 linear feet Recycle Center
1 Single commercial door weather-stripped
1 Double commercial door weather-stripped
The following materials have been specified for use in the weatherization of Cortland County. Cut sheets for these materials are provided in Appendix C of the IGA.

Single/Double Door Weather-Stripping
ECP Aluminum Door Carrier (QDS 650 Retainer) (mill finish and dark bronze anodized) Schlegel QLON-QDS 650 Polyethylene Clad Urethane Foam Gasket Schlegel QLON-QFS 375 Polyethylene Clad Urethane Foam Gasket w/ adhesive backer 3M Super 77 Multipurpose Spray Adhesive
Schlegel Door Sweep with Fin Seal
DAP Alex Plus Acrylic Latex Caulk Plus Silicone (clear) Overhead/Roll-Up Garage Door Weather-Stripping
Sealeze Nylon Brush Weather-Seal with EPDM Fin Seal Gasket Action Industries Aluminum Bottom Overhead Door Retainer (“T” Rubber Retainer) Action Industries Bottom “T” Rubber Seal
DAP Alex Plus Acrylic Latex Caulk plus Silicone (clear) Roof Top Ventilator Sealing
WD40
622 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
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DAP All Purpose Indoor/Outdoor Silicone
Convenience Products Touch’nSeal All-season 1-component Foam #10-3-1/2” Hexagonal Self Drilling Sheet Metal Screws (re-securing units to curb) Roof/Wall Joint and Soffit Joint Air-Sealing
Convenience Products Touch’nSeal CPDS 750FR (2 part foam) Dow Thermax Sheathing FSK (1/2”, 1”) (used as insulated backer for joint spans larger than 4”) Stipulated Parameters
Stipulated parameters were based on equipment nameplates, drawings, and engineering estimates as defined in the table that follows.

Building Envelope Upgrades
% Infiltration to Exfiltration 50%
Wind Velocity 8.7 mph
Heating Efficiency Varies by Building See Appendix B of IGA Cooling Efficiency Varies by Building See Appendix B of IGA Outside Air Temperature BIN Maker Pro for Syracuse, NY
Heating and Cooling Season Hours BIN Maker Pro for Syracuse, NY Supply Air Enthalpy Psychometric Chart
Outside Air Enthalpy BIN Maker Plus for Syracuse, NY
Stack Coefficient Table in Appendix B of IGA
Wind Coefficient Table in Appendix B of IGA
Shielding Class Table in Appendix B of IGA
Post FIM Measurement Procedure
Visual Inspection of doors and gaps to ensure cracks are eliminated. Confirmation of initial scope of work was verified on site to confirm project was installed as closely designed.

Savings Measurement Procedure
Energy savings are calculated with an energy model based on the reduction in infiltration. The calculation is provided in Appendix B of the IGA report.

𝐴𝑛𝑛𝑢𝑎𝑙 𝑆𝑎𝑣𝑖𝑛𝑔𝑠 = 𝐵𝑎𝑠𝑒𝑙𝑖𝑛𝑒 𝐼𝑛𝑓𝑖𝑙𝑡𝑟𝑎𝑡𝑖𝑜𝑛 𝐸𝑛𝑒𝑟𝑔𝑦 𝐿𝑜𝑠𝑠 − 𝑃𝑜𝑠𝑡 𝐼𝑛𝑠𝑡𝑎𝑙𝑙𝑎𝑡𝑖𝑜𝑛 𝐸𝑛𝑒𝑟𝑔𝑦 𝐿𝑜𝑠𝑠 𝐴𝑛𝑛𝑢𝑎𝑙 $ 𝑆𝑎𝑣𝑖𝑛𝑔𝑠 = 𝐴𝑛𝑛𝑢𝑎𝑙 𝑁𝐺 𝑆𝑎𝑣𝑖𝑛𝑔𝑠 ×
$
𝑇ℎ𝑒𝑟𝑚
𝑅𝑎𝑡𝑒 + 𝐴𝑛𝑛𝑢𝑎𝑙 𝑘𝑊ℎ 𝑆𝑎𝑣𝑖𝑛𝑔𝑠 ×
$
𝑘𝑊ℎ
𝑅𝑎𝑡
623 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
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3.3 FIM 3 – Window Sealing at the County Office Building SmartWatt has sealed 42 ft² of window casings in the County Office Building. During construction, 218 ft² of window casing space was removed from the original scope of 260 ft². Instead SmartWatt has included 1,040 ft² of floor slab insulation under the tunnel leading to the Courtyard area of the County Office Building. The change in scope of work was considered slightly positive in savings comparison and is reflected below.

SmartWatt has also sealed and caulked 6,246 ft of window perimeter in the County Office Building and was included in the as-built package and accounted for in the calculations.

The pre-installation numbers in the tables below reflect the original baseline alone with the adjusted baseline to include the other buildings in the scope of work.

Pre-Installation Energy / Fuel Use
IGA Electric
(kWh/yr)
IGA Natural Gas
(Therm/yr)
Adjusted Electric
(kWh/yr)
Adjusted Natural Gas
(Therm/yr)4
5,711 3,995 5,711 4,326
Post – Installation (Electric)
Post – Installation IGA
Electric Usage (kWh/yr)
Post - Installation Verified
Energy Use (kWh/yr) Variance (kWh/yr)
0 0 0
Post – Installation (Gas)
Post – Installation IGA
Natural Gas (Therm/yr)
Post - Installation Verified
Energy Use (Therm/yr) Variance (Therm/yr)
0 (64) (64)
Energy Savings - Guarantee Energy Savings - Verified Variance from IGA Guarantee Electric
(kWh/yr)
Natural
Gas
(Therm/yr)
Electric
(kWh/yr)
Natural Gas
(Therm/yr)
Electric
(kWh/yr)
Natural
(Therm/yr)5
5,711 3,995 5,711 4,262 0 267
4 Reflects scope of work change that took place during construction. 5 Change reflects net savings from installation of the floor slab insulation. 624 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
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Overview
Implementation of this FIM included the following:
• Removed trim and insulated casing on 42 ft² of windows • Install insulation on 1,040 ft² of floor slab.
• Install window caulk on 6,246 linear feet of window perimeter.

The measurement and verification plan outlined in the IGA required measurements for this FIM to be Performed in Year 1 only. Therefore, the measurements made below are representative from Year 1 of the project term and reflected accordingly.

Stipulated Parameters
Stipulated parameters were based on current equipment nameplates, drawings, and engineering estimates as defined in the table that follows.

Window Sealing Upgrades
% Infiltration to Exfiltration 50%
Wind Velocity 8.7 mph
Size of Air Gap 1/32”
Total Gap Size 16.3 ft2
Heating Efficiency 92%
Cooling Efficiency 0.8 kW/ton
Space Heating Temperature Occupied 70°F, Unoccupied 69°F Space Cooling Temperature Occupied 74°F, Unoccupied78°F Outside Air Temperature BIN Maker Pro for Syracuse, NY
Heating and Cooling Season Hours BIN Maker Pro for Syracuse, NY Supply Air Enthalpy Psychometric Chart
Outside Air Enthalpy BIN Maker Pro for Syracuse, NY
Stack Coefficient Table in Appendix B of the IGA
Wind Coefficient Table in Appendix B of the IGA
Shielding Class Table in Appendix B of the IGA
Existing U-value 1.0
Proposed U-value 0.333
Post FIM Measurement Procedure
SmartWatt has verified proper installation of the following items mentioned below:
• Verified square footage of window area for window trim and casing insulation. • Verified linear foot of window perimeter sealing.
• Verified square footage of floor slab to be insulated.

Saving Measurement Procedure
The post retrofit verified conditions confirm that the total crack area was sealed and the energy losses associated with window infiltration were reduced to zero. The post installation window joint and floor slab 625 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
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insulation is calculated by an increase in R-value from the baseline to verified installation. The calculation method is provided in Appendix B of the IGA.
626 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
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3.4 FIM 4 – Replace Windows at the Highway Garage
SmartWatt has replaced four windows in the lounge area of Highway Building three with new high efficiency windows. Savings were associated with a reduction in infiltration as well as thermal losses.

Pre-Installation
Pre-Installation Gas Use (Therm/yr)
411
Post - Installation
Post – Installation IGA
Natural Gas (Therm/yr)
Post - Installation Verified
Natural Gas (Therm/yr) Variance (Therm/yr)
79 79 0
Energy Savings
Guaranteed NG Savings
(Therm/yr)
Verified NG Savings
(Therm/yr)
Variance from
Guarantee (Therm/yr)
332 332 0
Overview
SmartWatt has replaced four large windows in the lounge area of Building HB3 with vinyl Alside units with Climatech TG2 glass. The new units have a U-value of 0.22, with a surface area of 142ft². The measurement and verification plan outlined in the IGA required measurements for this FIM to be performed in Year 1 only.

Therefore, the measurements made below are representative from Year 1 of the project term and reflected accordingly.

Stipulated Parameters
Stipulated parameters were based on equipment nameplates, drawings, and engineering estimates as defined in the table that follows.

Building Envelope Upgrades
% Infiltration to Exfiltration 50%
Wind Velocity 8.7 mph
Size of Air Gap 1/32”
Total Gap Size 0.3 ft2
Heating Efficiency 80%
Cooling Efficiency N/A
Space Heating Temperature Occupied 70°F, Unoccupied 70°F Space Cooling Temperature N/A
Outside Air Temperature BIN Maker Pro for Syracuse, NY
Heating and Cooling Season Hours BIN Maker Pro for Syracuse, NY Supply Air Enthalpy Psychometric Chart
627 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
(C) 2021 Centrica plc.

Outside Air Enthalpy BIN Maker Pro for Syracuse, NY
Stack Coefficient Table in Appendix B of the IGA
Wind Coefficient Table in Appendix B of the IGA
Shielding Class Table in Appendix B of the IGA
Existing U-value 1.0
Proposed U-value 0.22
Post FIM Measurement Procedure
Visual Inspection of windows and confirmation of specified windows being installed.

Savings Measurement Procedure
Energy savings are calculated with an energy model based on the reduction in infiltration and an increase in the R-value of the new windows. By reducing infiltration and thermal losses the rate of heat transfer is reduced, resulting in energy savings. To verify energy savings a spreadsheet model was developed to determine the leakage rate, thermal losses, hearing energy savings, and cooling energy savings. The calculation is provided in Appendix B of the IGA.

𝐴𝑛𝑛𝑢𝑎𝑙 𝑆𝑎𝑣𝑖𝑛𝑔𝑠 = 𝐵𝑎𝑠𝑒𝑙𝑖𝑛𝑒 𝐼𝑛𝑓𝑖𝑙𝑡𝑟𝑎𝑡𝑖𝑜𝑛 𝐸𝑛𝑒𝑟𝑔𝑦 𝐿𝑜𝑠𝑠 − 𝑃𝑜𝑠𝑡 𝐼𝑛𝑠𝑡𝑎𝑙𝑙𝑎𝑡𝑖𝑜𝑛 𝐸𝑛𝑒𝑟𝑔𝑦 𝐿𝑜𝑠𝑠 𝐴𝑛𝑛𝑢𝑎𝑙 $ 𝑆𝑎𝑣𝑖𝑛𝑔𝑠 = 𝐴𝑛𝑛𝑢𝑎𝑙 𝑁𝐺 𝑆𝑎𝑣𝑖𝑛𝑔𝑠 ×
$
𝑇ℎ𝑒𝑟𝑚
𝑅𝑎𝑡𝑒 + 𝐴𝑛𝑛𝑢𝑎𝑙 𝑘𝑊ℎ 𝑆𝑎𝑣𝑖𝑛𝑔𝑠 ×
$
𝑘𝑊ℎ
𝑅𝑎𝑡𝑒
628 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
(C) 2021 Centrica plc.

3.5 FIM 5 – Replace Windows at the Courthouse
SmartWatt has replaced 239 windows totaling 5,673 ft² in the County Courthouse.

Pre-Installation
Pre-Installation Energy Use
(kWh/yr)
Pre-Installation Natural
Gas Use (Therm/yr)
11,598 17,904
The post retrofit conditions assume that the total crack area will be sealed and the energy losses will be reduced to zero for the infiltration and electric savings. There was thermal savings claimed in this measure and the post installation consumption is presented in the table below.

Post - Installation
Post – Installation IGA
Natural Gas (Therm/yr)
Post - Installation Verified
Natural Gas (Therm/yr) Variance (Therm/yr)
3,884 3,884 0
Energy Savings -
Guarantee Energy Savings - Verified Variance from IGA Guarantee Electric
(kWh/yr)
Natural
Gas
(Therm/yr)
Electric
(kWh/yr)
Natural Gas
(Therm/yr)
Electric
(kWh/yr)
Natural
(Therm/yr)
11,598 14,021 11,598 14,021 0 0
Overview
SmartWatt has replaced the existing windows at the Courthouse. The measurement and verification plan outlined in the IGA required measurements for this FIM to be performed in Year 1 only. Therefore, the measurements made below are representative from Year 1 of the project term and reflected accordingly.

Stipulated Parameters
Stipulated parameters were based on equipment nameplates, drawings, and engineering estimates as defined in the table that follows.

Building Envelope Upgrades
% Infiltration to Exfiltration 50%
Wind Velocity 8.7 mph
Size of Air Gap Caulking 1/64”, weather-stripping 3/32” Total Gap Size 28.2 ft2
Heating Efficiency 80%
Cooling Efficiency 1.2 kW/ton
Space Heating Temperature Occupied 70°F, Unoccupied 70°F 629 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
(C) 2021 Centrica plc.

Space Cooling Temperature Occupied 74°F, Unoccupied 74°F Outside Air Temperature BIN Maker Pro for Syracuse, NY
Heating and Cooling Season Hours BIN Maker Pro for Syracuse, NY Supply Air Enthalpy Psychometric Chart
Outside Air Enthalpy BIN Maker Pro for Syracuse, NY
Stack Coefficient Table in Appendix B of the IGA
Wind Coefficient Table in Appendix B of the IGA
Shielding Class Table in Appendix B of the IGA
Existing U-value 0.9
Proposed U-Value 0.32
Post FIM Measurement Procedure
Visual Inspection of windows and gaps to ensure cracks are eliminated. Confirmation of specified windows being installed.

Savings Measurement Procedure
Energy savings are calculated with an energy model based on the reduction in infiltration and an increase in the R-value of the new windows. The calculation is provided in Appendix B of the IGA.

𝐴𝑛𝑛𝑢𝑎𝑙 𝑆𝑎𝑣𝑖𝑛𝑔𝑠 = 𝐵𝑎𝑠𝑒𝑙𝑖𝑛𝑒 𝐼𝑛𝑓𝑖𝑙𝑡𝑟𝑎𝑡𝑖𝑜𝑛 𝐸𝑛𝑒𝑟𝑔𝑦 𝐿𝑜𝑠𝑠 − 𝑃𝑜𝑠𝑡 𝐼𝑛𝑠𝑡𝑎𝑙𝑙𝑎𝑡𝑖𝑜𝑛 𝐸𝑛𝑒𝑟𝑔𝑦 𝐿𝑜𝑠𝑠 𝐴𝑛𝑛𝑢𝑎𝑙 $ 𝑆𝑎𝑣𝑖𝑛𝑔𝑠 = 𝐴𝑛𝑛𝑢𝑎𝑙 𝑁𝐺 𝑆𝑎𝑣𝑖𝑛𝑔𝑠 ×
$
𝑇ℎ𝑒𝑟𝑚
𝑅𝑎𝑡𝑒 + 𝐴𝑛𝑛𝑢𝑎𝑙 𝑘𝑊ℎ 𝑆𝑎𝑣𝑖𝑛𝑔𝑠 ×
$
𝑘𝑊ℎ
𝑅𝑎𝑡𝑒
630 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
(C) 2021 Centrica plc.

3.6 FIM 6 – Install Window Tinting at the County Office Building SmartWatt has installed 3,384 ft² of window tint on the south facing windows of the County Office Building.

Pre- Installation
IGA Electric
(kWh/yr)
IGA Natural Gas
(Therm/yr)
31,068 4,160
Post – Installation (kWh)
Post – Installation IGA
Electric Usage (kWh/yr)
Post - Installation Verified
Energy Use (kWh/yr)
13,670 13,670
Post – Installation (Therms)
Post – Installation IGA
Natural Gas (Therm/yr)
Post - Installation Verified
Energy Use (Therm/yr)
2,145 2,145
Energy Savings - Guarantee Energy Savings - Verified Variance from IGA Guarantee Electric
(kWh/yr)
Natural
Gas
(Therm/yr)
Electric
(kWh/yr)
Natural Gas
(Therm/yr)
Electric
(kWh/yr)
Natural
(Therm/yr)
17,398 2,015 17,398 2,015 0 0
Overview
Installation of this FIM included applying tinting to 3,384 ft² on the south side of the County Office Building. The measurement and verification plan outlined in the IGA required measurements for this FIM to be Performed in Year 1 only. Therefore, the measurements made below are representative from Year 1 of the project term and reflected accordingly.

Stipulated Parameters
Stipulated parameters were based on equipment nameplates, drawings, and engineering estimates as defined in the table that follows.

Building Envelope Upgrades
% Solar Heat Rejection 56%
Cooling Equipment Efficiency 1.0 kW/ton
Solar Radiation Data Location, NREL Syracuse, NY
Existing Window U Value 0.64 Btu/hr-ft2-°F
Window U Value Including Film 0.33 Btu/hr-ft2-°F
631 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
(C) 2021 Centrica plc.

Heating Efficiency 92%
Post FIM Measurement Procedure
SmartWatt has verified proper installation of window film located throughout the County Office Building mentioned above. The energy calculations were based upon the verified square footage of window area covered.

Saving Measurement Procedure
Energy savings for this measure is based on a spreadsheet model that was developed to calculate the cooling load increase associated with solar gain and the heat loss associated with the existing windows. The spreadsheet uses average daily transmitted solar radiation from the National Renewable Energy Laboratory (NREL) for the Syracuse/Cortland area. Based on this solar radiation data the cooling gain was determined for the existing conditions and for the post retrofit conditions based on a 56% reduction in solar heat rejection.

Savings for the heating season are determined by a BIN analysis to calculate the existing and proposed heat loss based on a reduction in window U value from 0.64 to 0.33 Btu/hr-ft2-F). The calculation is provided in Appendix B of the IGA.
632 of 1021
Cortland County, NY
Year 3 Measurement and Verification Report
(C) 2021 Centrica plc.

3.7 FIM 7 – HVAC Upgrades at the Public Safety Building Pre-Installation Energy Use
Electric Usage (kWh/yr) Natural Gas Usage
(Therm/yr)
177,123 29,485
Post - Installation IGA Post - Installation Verified Variance Electric
Usage
(kWh/yr)
Natural
Gas Usage
(Therm/yr)
Electric
Usage
(kWh/yr)
Natural Gas
Usage
(Therm/yr)
Electric Usage
(kWh/yr)
Natural Gas
Usage
(Therm/yr)
117,270 25,835 128,417 28,369 11,147 4,899
Energy Savings - Guarantee6 Energy Savings - Verified Variance from IGA Guarantee
Electric (kWh/yr)
Natural
Gas
(Therm/yr)
Electric
(kWh/yr)
Natural Gas
(Therm/yr)
Electric
(kWh/yr)
Natural
(Therm/yr)
53,867 3,285 48,705 1,116 (5,162) (2,169)
Overview
Installation of this FIM includes the following three upgrades:
o Replaced water source heat pumps with high efficiency heat pumps. o Install VFDs on the loop transfer pumps.
o Install Building Automation System.