INSIDE THIS REPORT
Governance
57
Directors’ and Corporate
Governance Report
59
Board of Directors
64 Corporate Governance Statement
72 – Audit and Risk Committee
79 – Nominations Committee
82
– Safety, Environment and Sustainability
Committee
84 – Remuneration Report
110 Other Statutory Information
Strategic Report
1 Group Highlights
2 Centrica At A Glance
4 Chair’s Statement
6 Group Chief Executive’s Statement
9 Our Purpose, Culture and Values
10 Business Model and Strategic Framework
12 Market Trends
13 Macro Trends
14 Our Stakeholders and s172 statement
18 Group Chief Financial Officer’s Report
22 Our View on Taxation
23 Business Review
26 Key Performance Indicators
28 Our Principal Risks and Uncertainties
35 Assessment of Viability
38 Group Chief People Officer’s Report
41 People and Planet
46
– Non-Financial and Sustainability
Information Statement
47
– Task Force on Climate-Related Financial
Disclosures
Financial Statements
114
Independent Auditor’s Report
127
Group Income Statement
128
Group Statement of Comprehensive
Income
129
Group Statement of Changes inEquity
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)
Other Information
243 Shareholder Information
244
Additional Information
– Explanatory Notes (Unaudited)
249
People andPlanet
– Performance Measures
252 Glossary
READ MORE ABOUT
OUR COMPANY
OUR PROGRESS
IN2023
OUR FINANCIAL
PERFORMANCE
OUR PEOPLE OUR GOVERNANCE
READ MORE ON
PAGES4 to 5
READ MORE ON
PAGES6 to 8
READ MORE ON
PAGES18 to 21
READ MORE ON
PAGES38 to 40
READ MORE ON
PAGES 57 to 58
Unless otherwise stated, all references to the Company shall mean Centrica plc (registered in England
andWales No. 3033654); and references to the Group shall mean Centrica plc and all of its subsidiary
undertakings and equity-accounted associate/joint venture undertakings; and references to operating
profit or loss, taxation, cash flow, earnings and earnings per share throughout the Strategic Report are
adjusted figures, reconciled to their statutory equivalents in the Group Chief Financial Officer’s Report on
pages 18 to 21. See also notes 2, 4 and 10 to the Financial Statements on pages 134 to 135, 143 to 149
and 160 for further details of these adjusted performance measures. In addition see pages 244 to 248
for an explanation and reconciliation of other adjusted performance measures used within the
document. This Annual Report and Accounts does not offer investment advice, and does contain
forward-looking statements. The Disclaimer relating to this Annual Report and Accounts is included on
page 253.
WWW.CENTRICA.COM
GROUP HIGHLIGHTS
Strategic report | Centrica plc Annual Report and Accounts 2023 1
GROUP OPERATIONAL METRICS
British Gas Services & Solutions – Services
Engineer Net Promoter Score (NPS)
(1)
Total recordable injury frequency rate
(per200,000 hours worked)
Colleague engagement
(2)
Total greenhouse gas emissions (tCO
2
e)
(3)
GROUP FINANCIAL METRICS (YEAR ENDED 31 DECEMBER 2023)
£6,512m £2,752m
Group statutory operating profit/(loss) Group adjusted operating profit
70.6p 33.4p
Group statutory basic EPS Group adjusted basic EPS
£2,752m £2,207m
Group statutory net cash flow from
operating activities
Group free cash flow from continuing
operations
£2,744m 4.0p
Adjusted net cash Full year dividend per share
† Included in DNV Business Assurance Services UK Limited (DNV)’s independent limited
assurance engagement. See page 249 or centrica.com/assurance for more.
(1) Measured independently, through individual questionnaires, the customer’s willingness
torecommend British Gas following a gas engineer visit.
(2) Colleague engagement methodology has changed from percentage favourable to an
average score out of 10, measuring how colleagues feel about the Company.
(3) Comprises scope 1 and 2 emissions as defined by the Greenhouse Gas Protocol.
(4) Restated due to availability of improved data.
(5) 2022 comparator as reported. Excluding disposed Spirit Energy Norway assets 2022,
adjusted operating profit was £2,823m and adjusted EPS was 34.2p.
2022
£(240)m
2022
£3,308m
(5)
2022
(13.3)p
2022
34.9p
(5)
2022
£1,314m
2022
£2,487m
2022
3.0p
+71
+64
2023
2022
0.84
1.12
2023
2022
7.7
7.4
2023
2022
1,681,475
2,009,885
2023
2022
(4)
We reported another strong financial result in2023,
against a backdrop of continued elevated commodity
prices and volatility for much of the year. We’ve also
been focused on improving colleague engagement
and operational performance, resulting in improved
customer outcomes as welook to underpin customer
retention, growth and long-term profit sustainability.
†
2022
£1,199m
CENTRICA AT A GLANCE
2 Governance | Centrica plc Annual Report and Accounts 2023
OUR PURPOSE,
CULTURE AND
VALUES
Our Purpose is – ‘energising
agreener, fairer future’. Our
culture and values remain
firmly embedded in who we
are and guide everything
wedo.
READ MORE ON PAGE 9
OUR STRATEGY
AND BUSINESS
MODEL
RETAIL
Focused on providing
leading customer service
and experience, helping
customers to save money
and decarbonise through
innovative offerings.
OPTIMISATION
Supporting the responsible
buying and selling of
energy, managing risk
across our business and
accessing value from green
generation in our trading
business while continuing
to build out the flexibility
required for the future
energy system.
INFRASTRUCTURE
Investing to build a low
carbon, reliable energy
system including power
generating renewables,
flexible peaking generation
and energy storage
through batteries and
geological storage.
READ MORE ON PAGE 10
We are unique amongst energy companies in the
UK and Ireland, operating across the energy value
chain through our distinct, but complementary
businesses. Our Purpose is to energise agreener,
fairerfuture as we journey towards net zero for our
customers and Centrica.
WHAT SETS CENTRICA APART AS AN
INVESTMENT OPPORTUNITY?
Centrica is a uniquely
integrated energy company
operating primarily in the UK
and Ireland. We aim to deliver
long-term value for investors
by driving and leading the
energy transition through our
distinct, but complementary
businesses.
21,000 7,000 7,200
Colleagues worldwide Engineers Volunteering days
Top 50 13.0GW
Ranked in The Times Top
50 Employers for Gender
Equality
Route to market for
renewables under our
management
Strategic report | Centrica plc Annual Report and Accounts 2023 3
OPTIMISATION INFRASTRUCTURE
(1) Included within Retail and Infrastructure. Read more on page 10.
SUPPORTING COMMUNITIES, OUR PLANET AND EACH OTHER
Our People & Planet Plan aims to create a more inclusive and sustainable future – from being a net zero
business by 2045 and helping our customers be net zero by 2050, to creating the diverse and inclusive
team we need to get there and contributing to the communities we’re all part of.
READ MORE ABOUT OUR APPROACH AND OUR JOURNEY TO NET ZERO ATCENTRICA.COM/PEOPLEANDPLANET
RETAIL
READ MOREABOUT OUR PEOPLE & PLANET PLAN ON PAGE 41
(1)
(1)
This instability in energy markets has largely
been caused by global conflicts, and these
conflicts look set to continue. Whilst we
cannot control this, we are acutely aware of
the impact that price fluctuations have on all
our customers.
While other suppliers in the UK have collapsed
due to the volatility and uncertainty in the
market, we have not only stepped in to
support their customers but actually improved
our resilience and business model to ensure
we can be there for all of our customers, old
and new. You can read more about this in the
‘Business Model’ section on page 10.
It is this resilience that means we can add
value across the entire energy value chain. We
are integrated in a way that differentiates us
from our competitors. This is important in
itself; our business model is built on each part
of Centrica supporting the others, but it has
also been important for ensuring we can
support those who are struggling most during
the crisis. I am very pleased with what we
have achieved in 2023.
OUR PERFORMANCE
When I became Chair of the Board in 2020
the business was in a very different position.
Over the last few years, we have been going
through a turnaround process and can now
say the vast majority of that is complete. We
can see the impact of the turnaround in the
strong performance of the business.
I believe people have started to appreciate the
quality of the Company we have here. We
have a resilient balance sheet, good or
improving returns across business units, and
we have a clear plan for the future. We have
shown that the way our business fits together
really compounds the overall value of it.
A strong Centrica is vital for the customers
who rely on us every day and is good for our
shareholders. Our performance has allowed
us to resume and grow our dividend, whilst
remaining prudent, and we have also returned
capital to shareholders through our share
repurchases. These actions reflect the Board’s
confidence in the strength of Centrica and its
ability to deliver.
OUR SUPPORT FOR CUSTOMERS
Our performance matters to our shareholders
– including those thousands of private retail
shareholders of whom many were the original
‘Sids’ who bought shares during the
privatisation of British Gas in the 1980s. It also
matters to our customers. It is only because
we are in such a strong, resilient position
thatwe can go above and beyond for our
customers.
In 2023 we brought our total commitment to
helping customers since the start of 2022 to
£140 million, we hired 700 more UK-based
colleagues to support customers over winter
and into the future, and net promoter scores in
our Retail businesses have been improving.
The way the price cap is structured means
that if customers don’t pay their bills, costs are
added to the bills of all other customers. We
will continue to strive to find the right balance
between supporting those in difficulty whilst
keeping bills as low as possible for all our
customers.
This work shows leadership and it is
something we can be proud of. Leadership
also means responding responsibly when
something goes wrong.
Early in 2023 it was brought to our attention
that the supplier we worked with to install
prepayment meters under warrant had, in
some instances, not been showing our
customers empathy and respect. This is a
complex area, and the business took swift
action to investigate and report publicly on the
findings.
Our in-depth investigation highlighted some
issues in the installation of prepayment
meters. However, whilst these were not
systemic, we take the view that even one
failure, is one too many. Chris O’Shea and his
team showed leadership and humility in
investigating the issues and putting them right.
Centrica takes pride in the fact that we do
more to support customers that are in financial
difficulties than anyone else in the markets we
serve and we will always strive to do the right
thing by our customers.
4 Strategic report | Centrica plc Annual Report and Accounts 2023
CHAIR’S STATEMENT
Centrica occupies a unique place in the energy
market. It is a place I am very proud that we
occupy. We are a lynchpin of stability in a market
that for the last few years has been inturmoil.
Scott Wheway | Chair
OUR CONTRIBUTION TO ENERGY
SECURITY
Security of supply has climbed in importance
over the last two years and is likely to remain
important as long as global conflicts continue.
Our performance has meant we could take a
leading role in this area. I know the team at
Centrica are hugely proud of the contribution
we’ve made to energy security in the UK
andIreland.
Over 2023 we’ve expanded the capacity of
the Rough storage field, improving the UK’s
gas storage levels. However, the capacity of
the storage field at Rough is unlikely to be
expanded further without the certainty of a
regulatory model that would underpin a very
significant investment for the future. Our
colleagues in Centrica Energy have also
played a pivotal role in securing Liquified
Natural Gas (LNG) through multi-billion-dollar
deals, including a new deal with Delfin
Midstream in the US that will enhance energy
security for the customers we serve.
OUR FUTURE
Alongside our Interim Results in July 2023,
Chris and the Centrica Leadership Team
presented our new, Green Focused
Investment Strategy. We announced that
Centrica intends to invest between £600m
and £800m a year over the next five years
primarily in security of supply and flexibility,
renewable generation, and our customers. We
also gave guidance on our expected range of
annual operating profit in our Retail and
Optimisation businesses and provided clarity
on a new financial framework, including our
progressive dividend policy.
Centrica’s direction was already clear to our
investors and our wider stakeholders, but the
July update provided a clear overview of the
approach Centrica will take in the future. I’m
glad the update was received positively by the
market.
I am excited to see what Centrica can
accomplish in the coming years and I want to
take this opportunity to assure our
shareholders that your Board will be prudent
custodians of your money.
OUR SUPPORT FOR NET ZERO
Our Green Focused Investment Strategy will
also mean that Centrica is playing its part to
underpin the energy transition.
We are unequivocal in our support for net
zero. We believe it is an opportunity for the UK
and Ireland and we will continue to feed into
live discussions with our valuable experience
of energy markets. Gas is likely to continue to
be a transition fuel for some time, and your
Board is acutely aware that we have a
responsibility to ensure that energy is
affordable for everyone through the transition.
Last year I said that to meet net zero a
combination of technologies will be required,
and that these technologies would create
opportunities for companies with strong
balance sheets, flexible business models and
detailed knowledge of markets. This year, it is
my belief that we have cemented our position
as one of those companies.
We are one of the largest heat pump installers
in the UK’s emerging heat pump market, we
are leading on hydrogen innovation across the
UK and Ireland, and our strategy shows the
scale of our ambitions in renewables. Our
commitment is not merely words, it can be
seen in our actions.
OUR COLLEAGUES
None of this would be possible without the
fantastic work of our colleagues. It is a great
source of pride for me that Centrica continues
to grow and that we continue to show
leadership in the areas people care about,
such as our Carers Leave Policy.
Over the course of 2023 we have seen the
engagement of our colleagues increase, no
doubt due to the supportive culture that Chris
and Centrica’s Leadership Team have
nurtured in the business. I was also very
happy to see the continuation of our Shadow
Board initiative. It is absolutely right that a
representative group of our colleagues should
have the opportunity to share their views on
the management decisions that impact them.
Of course, we have also welcomed new
employees to the business this year and I
welcome all of them, not least the 700
permanent employees that were hired in time
to support our customers over the winter. I am
also delighted to welcome Russell O’Brien to
Centrica on his appointment as Group Chief
Financial Officer and Executive Director in
March 2023, and Philippe Boisseau who was
appointed to the Board as a Non-Executive
Director in September 2023.
Towards the end of the year, we were also
very pleased to announce the appointments of
Jo Harlow and Sue Whalley as Non-Executive
Directors. They bring an exciting mix of
experience to our Board, and I know their
contribution to the Remuneration Committee
and Nominations Committee will be highly
valued.
Thank you to all colleagues across Centrica for
your contribution in 2023.
SUMMARY
This year Centrica has taken significant steps
forward on performance, on delivering the
things that people care about and on showing
where our future lies. We are never satisfied
and there is still work to do, but I hope our
stakeholders across society can see a
company that cares about what it does and
makes a significant contribution to the UK’s
energy system.
I am confident that our capabilities, our
resilience, and our determination will deliver
great things in 2024, and I look forward to
reporting on our progress next year.
Scott Wheway, Chair
14 February 2024
Strategic report | Centrica plc Annual Report and Accounts 2023 5
Despite that pace of change, I stand by the
statement I made in last year’s report. I said:
“ My belief is that climate change is the
biggest single threat facing civilisation
today, and net zero is the biggest single
opportunity wehave at Centrica.
Climatechange is real, it’s here, and
it’simpacting lives across the planet.
Transforming how we generate, store
and use energy can make a huge
difference to reducing the warming of
ourplanet. Longer term, if the net zero
transition is thoughtful and targeted,
itcan keep prices stable for customers
and drive economic growth, especially
for those companies and countries at
theforefront of thetransition.”
As I write at the end of 2023, I am even more
convinced that this is the case. Your
Company is incredibly well placed to both
drive forward, and benefit from, the energy
transition. This will require a relentless focus on
performance and continuous improvement,
and disciplined but bold capital allocation to
ensure we have a portfolio of investments
across a mix of technologies. We have a lot to
play for.
I believe we get more right than we get wrong,
but the real test of character is how you
respond when things go wrong. It’s my view
that we need to put things right when this
happens, and we need to learn from our
experience.
Sadly, we saw an example of getting it wrong
early in 2023 when a report highlighted some
of our contractors were not treating our
customers with the respect they deserved
when installing prepayment meters under
warrant. We immediately apologised, we
suspended the installation of prepayment
meters under warrant, and we launched an
investigation overseen by an independent third
party. Whilst our investigation found no wide-
ranging problems with our systems and
processes, it did highlight some isolated
instances that fell short of the high standards
of behaviour that we expect when engaging
with customers. Asa result, we have brought
all such activity ‘in house’ (as opposed to
using contractors) and have spent the past
year ensuring our policies, procedures and
practices are updated and that our colleagues
are fully trained in these areas. We also
contributed to the development of new
industry rules to protect vulnerable customers.
At the time of writing, we have not yet
restarted the installation of prepayment meters
under warrant. However, we may choose to
do so in the future, as, done properly, they are
an effective tool both in helping customers
manage their costs and in helping energy
companies manage bad debts, which is even
more important as people struggle with the
cost of living. This is important because under
the price cap, those who pay for their energy
ultimately end up paying for those who
choose not to pay, and we don’t think
that’sright.
However, we are not sitting on our hands
waiting for others to solve the problem of
people who can’t pay for their energy. We
have taken decisive steps to support
consumers who are facing hardship and
we’ve done more than any other UK energy
company. Since 2022, we have committed
£140 million to support customers struggling
with their energy bills in the UK and Ireland,
whichis on top of around £400 million of
contributions we are required to make each
year. It is a huge amount of money but our
customers are at the heart of everything we
do, and we must support them when they’re
in need. Unfortunately it cannot address all of
the issues our customers face today because
these are not limited to energy costs – people
are struggling to pay their mortgage or rent,
their council tax, their food costs, and so
much more.This is a societal issue which
requires a societal response.
We have been vocal in our calls for regulatory
reform, both in terms of how energy
companies are made more robust to avoid
failures in the future, and in terms of how we
can have a system which is fairer for
consumers.
6 Strategic report | Centrica plc Annual Report and Accounts 2023
GROUP CHIEF EXECUTIVE’S
STATEMENT
I am increasingly coming to the conclusion that the
speed with which things seem to change is now
simply indicative of the world we live in. The news
cycle has shortened, the urgency with which things
need to happen has increased, and the pace at
which we are moving in our quest to make your
Company the best is as fast as I’ve seen it in my
fiveand a half years at Centrica.
Chris O’Shea | Group Chief Executive
For consumers, we believe that the standing
charge for gas and electricity where people
pay a fixed fee to cover things like network
costs (roughly £300 each year) should be
eliminated. Those costs should be recovered
through the unit rate for gas and electricity so
that those who consume less pay less and
those who consume more pay more. We also
believe a social tariff should be introduced
where those who are the most vulnerable pay
less for energy. We believe that this, along
with all policy costs, should be funded from
general taxation but that is not something
which has universal support.
For energy companies, we believe that they
should be made to hold sufficient capital to
ensure that if more companies go bust, their
shareholders pick up the costs rather than the
unacceptable situation in recent years where
the costs were picked up by consumers. We
have seen some progress on this, with Ofgem
requiring energy companies to hold £115 of
capital for each customer by March 2025.
This is welcome but it is our view that this
does not go far enough, nor fast enough. We
believe that all companies should be required
to hold in the region of three times this
amountand that they should not be able
totake on additional customers until they
candemonstrate they are financially sound.
Asof now, a number of energy companies
effectively have a free bet, using customer
deposits to fund their businesses. If their bet
comes good, their owners get all of the
rewards; and if it doesn’t, consumers bear all
of the cost. This cannot be right, and we urge
Ofgem to be more focused on establishing a
fairer market for consumers and to ensure
energy companies who are not yet financially
resilient enough are forced to meet proper
capital adequacy requirements.
2023 PROGRESS AND PERFORMANCE
We can support customers and credibly make
the case for market reform only because we
are a very resilient company. That resilience
comes from our uniquely integrated business
model and strong balance sheet.
We have a well-balanced portfolio with
market-leading positions across the entire
energy value chain. In our Retail business we
are the largest supplier of energy to residential
customers in the UK through British Gas
Energy and the second largest in Ireland
through Bord Gáis Energy, and we have a
strong and growing B2B energy supply
position. Our Infrastructure business brings
electricity and gas to the market every single
day. Then at the heart of these energy flows
sits the Optimisation business, the glue that
binds our group together.
As I look at our portfolio, I see a number of high
performing businesses. But the real value-add
that makes us unique at Centrica comes at the
portfolio level as we integrate our businesses
with each other. I believe this model means we
are well-positioned to adapt to any future
changes in the energy landscape.
You can see just how this integration works in
practice in our performance and achievements
over the last year. At a Group level, our
performance in 2023 was very strong. Our
Group adjusted operating profit was £2.8bn
compared to £3.3bn at year end in 2022. Our
adjusted basic EPS was 33.4p in 2023
compared to 34.9p in 2022, 4.1p in 2021,
and 2.8p in 2020, and our free cash flow was
£2.2bn. We ended the year with £2.7bn of net
cash – just three years ago we had £2.8bn in
net debt. In short, your Company has been
transformed. There is still so much more that
we can go for, but as Russell points out in his
CFO report, there were some large one-off
benefits in the 2023 results which we don’t
expect to repeat in future years.
RETAIL
British Gas Energy performed well in the
year and benefitted in 2023 from the recovery
of costs incurred in previous years under
Ofgem’s price cap adjustments. By the end of
the year, we had migrated around two thirds
of our customers on to our new software
platform and we should complete the transfer
in the next 12 months or so. This allows us to
develop our new energy offering, which will
help give our customers insight into the best
time to use their energy, putting more power
in their hands. Our PeakSave Sundays
product already has half a million customers
and we are learning every day how our
customers vary their energy use depending on
costs changing during the day.
Bord Gáis was quite a mixed picture in 2023.
We continued to see pressure in the retail
market in Ireland and had another year of
making losses in that market, all of which were
offset by profits made in our infrastructure (the
Whitegate power station in Cork) and
optimisation activities. We believe that the
issues in the Irish retail market are temporary
and we hope to see a return to normality
in2024.
It is very pleasing to see the continued
recovery in British Gas Services and
Solutions with the operational foundations of
the business as strong as they’ve been for
many years. Our customer service has
improved materially and we’re seeing the
benefits in improved customer satisfaction and
higher customer retention rates. This allows us
to focus on increasing customer numbers
whilst maintaining the improved operational
delivery and getting into a positive cycle of
growing the business.Our growth
opportunities in this business are not only in
our traditional contract market but in the ‘on
demand’ market. There are 20 million
households in the UK who pay tradespeople
to fix things as and when they break down, a
market we have not traditionally served. In
2023 we delivered 218,000 ‘on demand’ jobs
to 201,000 ‘on demand’ customers (2022:
122,000 jobs to 114,000 customers) and we
expect to continue to grow this area in 2024
and for many years to come.
OPTIMISATION
Centrica Energy had another strong
performance and continues to ensure we
make the most of all our business areas. This
year we saw a range of corporate power deals
with partners such as Deutsche Bahn and
Vodafone, among others, and were delighted
to improve energy security with our deal with
Delfin Midstream to buy LNG.
INFRASTRUCTURE
We made good progress across our entire
infrastructure business in 2023, building and
advancing our portfolio of investment
opportunities in clean electricity generation
and storage whilst focusing on maximising the
value of our existing assets. We were very
pleased to see Centrica Business Solutions
deliver a range of projects including Centrica’s
first major solar asset in the Codford solar farm
earlier this year, and committing to a range of
other projects for the future including a 65MW
battery storage plant in Perthshire.
In Spirit Energy we extended the life of our
Morecambe Bay gas field in the East Irish Sea
into the 2030s and we were awarded a
carbon storage licence allowing us to further
our plans to invest around £1bn in developing
one of the largest carbon storage facilities in
the world. In Centrica Energy Storage+ we
doubled the capacity of our Rough storage
facility, now providing half of the UK’s entire
gas storage capacity and we continued to
advance our plans to invest up to £2bn to
convert this to become the world’s largest
hydrogen storage facility which we believe is
necessary to unlock the UK’s
decarbonisation.
WE MAKE IT – we produce
gas at Spirit Energy, and we
generate electricity through our
green-focused investments and
our nuclear stake.
WE STORE IT – we can store
gas through Centrica Energy
Storage+, and electricity through
our battery projects in Centrica
Business Solutions.
WE MOVE IT – Centrica
Energy is one of Europe’s
largest wholesalers of gas and
electricity.
WE SELL IT – millions of
homes across the UK and
Ireland are supplied with gas
and electricity through British
Gas and Bord Gáis.
WE MEND IT – we install,
maintain, and fix, heating
systems in millions of homes.
Strategic report | Centrica plc Annual Report and Accounts 2023 7
CENTRICA’S CONTRIBUTION TO
SOCIETY IN 2023
It is because our business performs so
strongly that we can contribute more to
society than the jobs and essential services
we provide to our 21,000 colleagues and
our10 million customers. Our profits have
apurpose. We have continued to encourage
colleagues to volunteer in their local
communities with over 7,200 days donated
tothe communities we operate in throughout
2023.
We’ve also fundraised and donated £4m to
charitable causes we all care about in our local
communities; we’ve paid over £1bn in tax
across all of the countries we operate in; and
as I mentioned earlier, we’ve committed
£140m to supporting customers since the
start of the energy crisis.
This year we’ve signed major new
partnerships with Team GB, ParalympicsGB,
Scottish Rugby, and the Scottish Football
Association, all of which will have significant
and lasting impacts on grassroots sport
across the UK and demonstrate how net zero
can be an opportunity for clubhouses and
sports facilities across the country.
WHAT DOES THE FUTURE HOLD FOR
YOUR COMPANY?
I am particularly proud of my colleagues
because in 2023, not only did we achieve all
of the things we set out, but we also gave
direction on Centrica’s future. In July we
outlined our new Green Focused Investment
Strategy, which will see Centrica invest up to
£4bn over the next five years in security of
supply and flexibility, renewable generation,
and our customers. We expect to invest
across three pillars:
¢ Customer solutions. We will help
customers better understand their energy
usage and fully grasp their energy spending
through innovation in smart metering and
other flexibility tools and services that give
customers the information to make better
decisions about their energy costs.
¢ Security of supply and flexibility. You
can already see our experience in batteries
and other flexible assets – over the next five
years we will accelerate this. You can
expect to see more from Centrica on how
this investment will support the roll out of
more intermittent power generation such as
wind and solar by balancing the grid when
the wind doesn’t blow, and the sun doesn’t
shine.
¢ Green electricity generation. We will
look to increase our investment in clean
energy with a focus on the areas we are
strong in, looking at wind in Ireland,
green hydrogen production and a
continuation of our investment in solar,
having opened our first solar farm during
the year.
In addition to this investment programme, we
will continue to progress our plans for
hydrogen storage at Rough, carbon storage at
Morecambe, and we will continue to evaluate
the potential to bring further low carbon
energy to our customers through investments
in new nuclear generation. We have a rich set
of investment opportunities, but we are also
disciplined in our deployment of capital, and
we will only invest where the returns are
acceptable, the risks are manageable, and the
balance sheet sustainable.
Notably, our business model and our
investment plans are robust regardless of
thepace at which net zero is delivered.
Iwould argue that Centrica is well placed to
provide stability, remain sustainable, and
deliver value across all our stakeholder
groupsirrespective of changes to the pace
ofnet zero.
SUPPORTING OUR COLLEAGUES AND
ENHANCING OUR CAPABILITIES
We have supported our colleagues on their
own professional journeys in 2023 and I am
pleased to see that our colleague engagement
score improved to almost 7.7 by the end of
the year, which is approaching top quartile
performance for our sector. We will continue
to provide training for growth, space for our
employee-led networks to flourish, and
opportunities to nurture wellbeing into 2024.
The next phase of our journey is focused on
driving growth in all of our businesses. To this
end we have refreshed our Purpose.
Colleagues across Centrica will work to
energise agreener, fairer future as we
journey towards net zero for our customers
and Centrica.
In addition, we’re looking at how we can
improve our capabilities in a number of areas.
In Infrastructure, we have demonstrated that
we have a team who knows how to deliver
growth over a number of years. There is more
to do in both our Retail and Infrastructure
businesses and I am delighted that our new
Chief Customer Officer will join on 1 May 2024
with a remit to drive relentless improvements
in customer experience and help our retail
businesses access the growth that we all
know is there.
CONCLUSION
2023 has been a strong year for Centrica. We
have not got everything right, but where we
get things wrong, we put them right. Our
business is on an incredibly strong footing, our
future is laid out ahead of us and we are firmly
on the path to continue the growth we’ve
seen in recent years.
Going into 2024 I want to take this moment to
thank all our customers, colleagues and
shareholders for their support this year, and I
want to take this opportunity to assure you
that our progress will continue. We will
continue to support our customers, we will
continue to improve energy security, and we
will continue to provide the sensible, expert-
based input into the net zero discussion.
It is always invigorating and a privilege to be
your Chief Executive. I look forward to seeing
what we can achieve in the year ahead.
Chris O’Shea, Group Chief Executive
14 February 2024
8 Strategic report | Centrica plc Annual Report and Accounts 2023
WHEN WE MAKE AN
INVESTMENT WE LOOK
FOR THREE RETURNS
ON THAT INVESTMENT
We deliver a return on
the Infrastructure
asset investment.
We deliver a return by
trading that asset on
markets through our
Optimisation business.
This gives us the
necessary capital base
to deliver a return from
our Retail business.
OUR PURPOSE, CULTURE AND VALUES
We care deeply about
our impact on the
planet, our customers
and our colleagues.
We want to make a
difference to society
and the safety and
wellbeing of our team
and customers is
paramount
Together we win,
webuild winning
relationships
throughout our own
organisation and with
others to deliver on the
scale challenges the
industry faces
We step up and
takeresponsibility.
Werecognise the
importance of
challenging the
industry to make
difficult decisions for
our future and we
stand by our beliefs
We are nimble,
curious and
innovative; we adapt
to our markets rapidly
and seek out
opportunities to
support the system
and succeed
We do things right and
deliver for all of our
stakeholders
We are providing
crucial help through
the exceptional cost
of living crisis by
delivering material,
targeted support to
customers and
communities during
the energy crisis,
including via the
British Gas Energy
Trust.
We collaborate
closely across our
businesses to
understand how our
Group is exposed
and responding to
the climate challenge.
Our ability to draw
insights effectively
between our
businesses through
close collaboration is
demonstrated by our
strong performance
in climate disclosures.
We’ve stepped up to
support the UK's
security of supply,
reinstating the Rough
field as gas storage.
We recognise the
long-term needs for
the UK and will invest
in long-term security
and decarbonisation
through hydrogen
and carbon capture.
Our Optimisation
businesses have
rapidly responded to
volatile energy
markets, managing
risk across our Group
and proactively
supporting our
customers through
access to scale long-
term gas supply and
LNG deals.
We value delivering
great service and
customer outcomes.
We are rigorous, and
do things the right
way. We have been
recognised by Ofgem
as a well-run supplier,
been protecting
customer credit
balances and
invested an additional
£25m in customer
service through the
energy crisis.
Strategic report | Centrica plc Annual Report and Accounts 2023 9
At Centrica our Purpose is – ‘energising a
greener, fairer future’ – because we believe in
energy that works for colleagues, customers and
communities, today and into the future. It’s why
we exist. Our strategy is driven by our Purpose,
and we live by our values. While we have evolved
our strategy to help meet today’s challenges and
prepare us for a net zero future, our values
remain firmly embedded in who we are and guide
everything we do.
BUSINESSMODEL
10 Strategic report | Centrica plc Annual Report and Accounts 2023
Our strategy is driven
by our Purpose of
energising a greener,
fairer future for
colleagues,
customers and
communities.
In July 2023, we introduced our
refreshed strategy, which is focused
on creating value through the energy
transition. Since 2020, Centrica has
been on a journey to simplify and
de-risk our business, strengthening
our balance sheet and delivering
material performance improvements
along the way. While we remain
focused on continuous improvement,
we are also underpinning our future
by delivering sustainable earnings
from our core businesses, investing
for longer-term value and growth,
and delivering attractive shareholder
returns.
Centrica is a uniquely integrated energy company comprising a
balanced portfolio of market leading businesses that complement,
de-risk and add value to one another. Together, we are greater than
the sum of our parts.
Investing to build a low carbon,
reliable energy system including
power generating renewables,
flexible peaking generation and
energy storage through batteries
and geological storage.
Centrica Energy Storage+
(formerly Centrica Storage Limited)
Storing and withdrawing gas to
manage seasonal demand and
energy security
Centrica Business Solutions
(1)
Low carbon solutions for
businesses, building and operating
a portfolio of flexibleassets
Bord Gáis
(1)
Power generation, asset
management and low carbon
solutions for businesses, building
and operating a portfolio of energy
assets focused on decarbonisation
Centrica Nuclear
Minority stake in the UK’s portfolio
of operating nuclear power stations
Spirit Energy
Oil and gas production in existing
UK assets
We remain relentlessly focused
onproviding a leading customer
service and experience helping
customers to save money and
decarbonise through innovative
offerings.
British Gas Energy
Energy supply for residential and
small business customers in
England, Scotland and Wales
British Gas Services &
Solutions
Services & solutions for residential
customers in England, Scotland,
and Wales
Bord Gáis
(1)
Energy supply, services and
solutions for business and
residential customers in the
Republic of Ireland
Centrica Business Solutions
(1)
Energy supply for large business
customers in England, Scotland
and Wales
We are supporting the responsible
buying and selling of energy,
managing risk across our business
and accessing value from green
generation in our trading business
while continuing to build out the
flexibility required for the future
energy system.
Centrica Energy
(formerly Centrica Energy Marketing
& Trading) Trading and optimisation
of energy globally, managing energy
procurement and risk
(1) Note within the Group Chief Financial Officer’s Report, Centrica Business Solutions is included within Optimisation, and Bord Gáis is included within Retail.
Strategic report | Centrica plc Annual Report and Accounts 2023 11
Our disciplined approach to capital allocation: In our Interim Results announcement in July 2023, we
laid out our disciplined capital allocation framework, which comprises five key elements:
Sustainable earnings:
We expect to deliver
around £800m of
operating profit from our
Retail and Optimisation
businesses by 2026,
with material cash
generation expected
from our Infrastructure
businesses over the
medium-term.
Maintaining a strong
balance sheet: We aim
to maintain a Net Debt/
EBITDA ratio of <1,
which provides enough
of a buffer to ride out any
energy market volatility
and provides flexibility to
invest in the future and
maintain and grow our
shareholder distributions.
Progressive dividends:
We maintain a
progressive dividend
policy and expect
dividend cover from
earnings to move to 2x
coverage over time.
Investing for value:
We aim to deploy
£600-800m per year to
2028, focusing on assets
that generate attractive
returns, complement our
existing capabilities,
provide balance to the
portfolio, and align to the
needs of the energy
transition.
Returning surplus
capital: In July 2023, we
increased our share
buyback programme to
£1bn since November
2022. Any future
distributions will be
reviewed against our
revised capital
framework and future
outlooks.
partners. We can add value to these projects
through using our route-to-market capabilities
in Centrica Energy and selling the zero carbon
power to our Retail customer base.
Security of supply: We have existing
capability and are already invested in battery
storage and gas peaking generation, as well
as owning a range of siteswith valuable grid
connections.
We know how to develop energy assets and
can also look to co-locate complementary
technologies.
Customers: We will invest in capabilities that
willreinforce our leading market positions and
unique workforce. We launched our
Our business model is well positioned to benefit from the energy
transition, regardless of how fast it materialises. Our balance sheet
strength, investment grade credit ratings and strong existing capabilities
give us the building blocks to begin a material green-focused
investment programme.
We see a myriad of attractive investment
opportunities across our value chain, which are
aligned to our net zero ambitions. We expect to
deliver average post-tax unlevered returns of at
least 7-10% at the asset level with additional
upside expected from being part of Centrica’s
portfolio. Our investment programme will also
allow us to maintain balance in the portfolio as
existing infrastructure assets naturally decline,
helping underpin future sustainable profits that
will enable further investments, future growth
anda progressive dividend.
To give a flavour of the kinds of
investments weanticipate:
Renewable generation: This could be in our
own projects or ones where we invest with
own Smart Meter Asset company in 2023
and will consider further opportunities
designed to unlock the adoption of ‘big
ticket’ household energy technologies,
suchas financing or leasing heating systems
to households.
Any large-scale investments, such as
expanding gas storage capacity and
converting to hydrogen storage at Rough or
carbon capture utilisation and storage
(CCUS) at Morecambe, would be additional
to the options outlined above.
Achieving net zero will provide opportunities for us to grow and create
value for our shareholders. It’s good for the planet and for our
Company. In line with the targets published in our Climate Transition
Plan in 2021, more than 50% of our capital is expected to go into green
taxonomy eligible projects, such as solar and batteries between 2024
and 2028. That’s up from less than 5% in 2019.
MARKET TRENDS
12 Strategic report | Centrica plc Annual Report and Accounts 2023
Like last year, our customers,
colleagues and businesses
continue to feel the squeeze
ontheir budgets from rising
costs and a challenging
macroeconomic environment.
HOW WE’RE RESPONDING
¢ Since 2022, Centrica has
committed £140m in energy
bill support delivered directly
and via key partners like the
British Gas Energy Trust and
Focus Ireland, to help them
through the energy crisis
¢ We introduced innovative energy
propositions including PeakSave
Sundays, Hive SmartCharge and the
Dimplex Quantum Storage Heater
tariffthat help customers access
cheaper energy rates at particular
timesof the day
¢ In addition to our colleague energy
allowance and broader benefits
package, we launched the Centrica
Colleague Support Foundation, an
independent charitable trust that
provides grant funding to colleagues
inextreme financial difficulty
After a tumultuous year in
UKenergy markets, 2023
sawmarket volatility return
topre-energy crisis levels,
although energy prices
remained relatively high.
Consumer energy bills were
somewhat shielded through
theEnergy Price Guarantee
during the first half of 2023.
Macroeconomic conditions,
including elevated inflation
andinterest rates, negatively
affected asset returns and
capital costs.
HOW WE’RE RESPONDING
¢ Our vertically integrated model has
allowed us to capture value across our
business, demonstrating the benefits
ofhaving a balanced and diversified
portfolio
¢ The progress we have made in
strengthening our balance sheet will
allow us to continue to invest in a
diversified asset portfolio despite the
challenging investment environment
¢ Our strategy is designed to remain
robust under all market conditions,
andpositions us for growth and
valuecreation
High energy prices, increasing
climate consciousness and
supportive Government
incentives continued to drive
interest in green technologies
for homes and businesses.
HOW WE’RE RESPONDING
¢ From Hive thermostats to EV
chargers to heat pumps, we
install, maintain and optimise a
range of devices in customer
homes that place them on their
individual journeys to net zero
¢ We offer a Home Health Check for
residential customers, which helps them
better understand the energy fabric of
their home and potential pathways to
netzero
¢ Through Bord Gáis, we are working with
the Irish Farmers’ Association to install
solar power systems on Irish farms,
helping them to reduce their energy bills
and making their operations greener
MACRO TRENDS
Strategic report | Centrica plc Annual Report and Accounts 2023 13
Climate change and the
imperative to decarbonise
remain central concerns for
ourcustomers and key
stakeholders across society.
The last several years have
brought the impacts of climate
change to our doorstep, as
we’ve experienced hotter
summers, extended droughts,
unprecedented flooding
andextreme weather with
increasing frequency. As a
UKand Ireland energy
industryleader and a
responsible business, our
strategy remains focused on
the drive to net zero.
HOW WE’RE RESPONDING
¢ We committed to an ambitious
investment programme that aims for
>50% of total capex invested in green
taxonomy investments through 2028,
thereby underpinning our transition to
net zero
¢ We created a new business intended
to be a one-stop green home services
shop for residential customers
¢ We are working with partners to
explore decarbonisation opportunities
for our existing conventional power
generation and molecule storage
assets
Unlocking the full benefit of
renewables will require more fast-
acting generation and storage,
flexible energy consumption, and
intelligent systems working in the
background to seamlessly
manage the two. Centrica already
plays a key role in this area by
optimising energy flows to and
from grid-side assets, as well as
within the home.Through further
investment and continued
customer engagement, we will
continue unlocking opportunities
for flexible energy generation
andutilisation to reduce cost
andcarbon.
HOW WE’RE RESPONDING
¢ We create additional value for renewable
asset operators and investors through
our advanced trading and optimisation
business
¢ We help customers to reduce the cost
and carbon footprint of their biggest
household energy devices, like electric
cars and home batteries, through British
Gas and Hive’s myriad of smart energy
propositions
¢ We are investing in batteries and gas
peakers to meet the near-term flexibility
needs of the grid, and looking into other
forms of energy storage that will meet
the needs of the future energy system
Customers rightfully expect a lot
from their home energy and
services providers, which drives
competition in the market and
requires us to constantly
innovate and improve. With
recent advances in artificial
intelligence and machine
learning, we see an opportunity
to further leverage the power of
technology and data to create a
step change in our service
delivery and customer value
proposition.
HOW WE’RE RESPONDING
¢ We appointed a Chief Data Analytics Officer,
who will work across the business to identify
and execute opportunities that harness the
power of data to personalise our
propositions and servicedelivery
¢ We are closely collaborating with leading
technology companies to implement AI
toolsand systems across our business,
helping our colleagues to do more and
better for our customers
¢ We are in the midst of a digital
transformation that will fundamentally
change the way we work in the digital
environment, providing material cost
savingsto the business and unlocking new
capabilities needed for future propositions
OUR STAKEHOLDERS
Energy is at the heart of how we all live, work
and move. That’s why we regularly engage
key stakeholders to understand their interests
and how they may be impacted by our
actions, so that we can carefully consider their
views and evolve our strategy accordingly.
Indoing so, we can better harness
opportunities and reduce risk as we work to
fulfil our Purpose of energising a greener, fairer
future, whilst maximising the wider positive
contribution we make in society. Engagement
is often led by senior leaders who regularly
update the Board. This arms theBoard with
the knowledge to make informed decisions
that take into account the long-term
consequences of its decisions from the
perspective of a diverse range ofstakeholders.
14 Strategic report | Centrica plc Annual Report and Accounts 2023
SECTION 172(1) COMPANIES
ACT 2006 STATEMENT
The Directors consider that they’ve
performed their duty as required under
Section 172, by promoting the
success of the Company for the
benefit of our stakeholders through
their decision making.
These pages set out our key
stakeholders together with an
example of how engagement was
vital to navigating the energy crisis,
which was one of the most
significant issues faced by the
Company and our stakeholders in
2023. Further detail on how the
Board engaged and balanced the
needs of different stakeholders
during 2023, together with the
principal decisions made as a result,
are also disclosed.
Engaging our key stakeholders
enables usto create stronger
outcomes for people, planet
and our business.
OUR KEY STAKEHOLDERS
Importance – Our 21,000-strong team are
the beating heart of our business. Through
engagement, we can help create a culture
where everyone can be themselves and
thrive. In doing so, we can attract, promote
and retain the diverse and talented team we
need to succeed.
Main focuses – Health, safety and wellbeing,
reward, development, inclusion, engagement
and communication.
Engagement – Dialogue occurs through a
range of channels including our colleague
networks, Shadow Board, townhalls and
structured engagement with trade unions.
We also track sentiment and gather
feedback through our engagement survey.
We use these interactions to co-create a
fairer, safer and more inclusive culture,
underpinned by a competitive package of
reward, training and policies, as well as our
Diversity, Equity and Inclusion Action Plans.
Importance – Our long-term success is
dependent on being able to attract and
retain customers. The Directors therefore
recognise the need to act on customer
feedback, so that we can deliver on their
expectations.
Main focuses – Customer service, energy
prices and bill support, alongside affordable
energy efficient and low carbon services and
solutions.
Engagement – We predominantly engage
through focus groups, surveys, proposition
and usability testing. To meet feedback,
we’re investing in our customer service
systems and customer-facing team, as well
as our ability to deliver services and solutions
that help customers save time, money and
energy. At the same time, we provide
dedicated channels to ensure support for
those who need extra help with their energy
bills.
Importance – Shareholders and debt holders
from across the world provide funds that help
us run and grow our business.
Main focuses – Financial and operational
performance, shareholder returns and
dividend, strategy and growth, alongside
Environmental, Social and Governance
(ESG)matters which includes our approach
to netzero.
Engagement – Investors are predominantly
engaged via post-financial result investor
roadshows, the Annual General Meeting
(AGM) and ad-hoc meetings. We additionally
respond to information requests and
assessments from ESG ratings agencies.
Engagement enables us to consider and
reflect the views of different investors when
updating on our strategy, to ensure a
sustainable return on investment.
READ MORE ON PAGES 38 to 40, 42 to 45
and 70
READ MORE ON PAGES 6 to 7, 16 to 17
and 43-45
READ MORE ON PAGES 17, 47 and 70
Importance – Policies set by governments
and regulators can have a material impact on
how we do business. Consequently, we
work closely to help create a stable
regulatory environment where policy is
developed in the interests of consumers,
whilst ensuring asustainable and investable
market.
Main focuses – Market design, customer
service, skills, inclusion, net zero, energy
security and energy prices.
Engagement – To exchange expertise, we
participate in consultation processes, attend
meetings and host technology teach-ins and
site visits. This enables us to effectively inform
policy development and reforms that deliver
on key issues, such as ensuring the UK has a
secure and affordable supply of energy and
that progress is being made on the energy
transition.
Importance – Our suppliers are vital to
securing a reliable supply of services and
solutions for customers. To reduce risk
across our supply chain, the Directors fully
support collaboration to ensure they uphold
the same high standards of business
conduct as us.
Main focuses – Payment practices together
with social and environmental compliance
on important issues like human rights.
Engagement – Suppliers are engaged
through multiple methods such as
tendering, onboarding surveys, site audits
and remote worker surveys. These
interactions help us uphold fair payment and
enforcement of our Responsible Sourcing
Policy, which sets out the standards we
expect so that everyone operates in a way
that benefits people and planet, including
fulfilling obligations under anti-modern
slavery laws.
Importance – Local communities expect
companies to champion issues that are
important to them. By working in partnership
with charities, non-governmental
organisations (NGOs) and community
groups, we create more inclusive and
sustainable communities.
Main focuses – Tackling urgent social and
environmental issues like fuel poverty and
climate change.
Engagement – Through meetings and
research, the Directors understand
community issues and how the Company
can make the greatest difference – from
donating to the British Gas Energy Trust to
provide expert advice and grants alongside
energy efficiency measures that help reduce
energy bills and emissions, to volunteering,
fundraising and sponsoring local charities,
schools, clubs and more.
READ MORE ON PAGES 16, 29 and 47 READ MORE ON PAGES 45 and 50 READ MORE ON PAGES 16, 43 and 45
Strategic report | Centrica plc Annual Report and Accounts 2023 15
HELPING PEOPLE WITH THEIR
ENERGY BILLS IN THE UK
Although 2023 saw lower wholesale energy prices
than in 2022, the cost of energy remained high for
consumers. Energy bills therefore remained a key
concern for many.
16 Strategic report | Centrica plc Annual Report and Accounts 2023
In 2023, global supplies continued to
be constricted and government
support schemes introduced to help
consumers at the start of the crisis,
had concluded. We see it as our duty
to help customers and communities
through difficult times, so we
maintained close relationships with
stakeholders to explore what more
we could do. This enabled the Board
to take meaningful action.
We more than doubled our energy
support fund to £140million, making
it the biggest voluntary support
package provided by an energy
company in the UK and Ireland. Of
this, we have committed £134 million
in the UK since 2022. This results in
total donations of around £60 million
to the British Gas Energy Trust, to
predominantly create a dedicated
cash support fund for customers and
help communities. To further
strengthen support at the heart of
communities, £2 million was
additionally provided to front-line
charities like StepChange. The
remaining funding, managed directly
by British Gas, is helping residential
and business customers with a
particular focus on prepayment
customers. To ensure support gets to
those who need it most, we proactively
reached out to customers and ran
campaigns encouraging people to come
forward. This included targeting older
people who we found were reluctant to
seek support and volunteering to provide
energy advice at over 150 Post Office
Pop-Ups at 100 locations.
Having worked so hard to help
customers through the crisis, we were
deeply saddened about the lack of
empathy and respect shown by some
contractors employed to install
prepayment meters under warrant. We
immediately paused installations and
whilst our investigation resulted in
nosystemic issues being identified, we
introduced improvements including
bringing the installation of prepayment
meters in-house. Like other energy
suppliers, we will not restart installations
until Ofgem have permitted it. The
Directors alongside specialists in the
Company, have worked constructively
with the regulator to ensure customers
are protected during this time, and
provided related evidence at two
Parliamentary Committees.
We also worked with parliamentarians
to ensure they were up to date with
the wider consumer support available
during the energy crisis via
information leaflets, meetings and
drop-in sessions.
Additionally, we worked together on
short and longer-term improvements
for a more secure and sustainable
energy market. We increased
investment in renewable and low
carbon energy, worked with US and
Norwegian partners to secure gas
supplies, and expanded gas storage
capacity at our Rough facility whilst
progressing our thinking on net zero
optionality at the site. Although this
will likely see our greenhouse gas
emissions rise in the short-term, our
action has been vital to future-proof
the UK’s energy security and reduce
costs for consumers. Throughout,
we’ve needed to balance the needs
of different stakeholders and the
transition to net zero, to ensure we
help people today and avoid
anotherenergy crisis in the future.
READ MORE ON PAGE 43
SECTION 172(1) STATEMENT
PRINCIPAL DECISION BY THE BOARD
BOARD CONSIDERATIONS
With the turnaround of Centrica now
materiallycomplete and the balance sheet
strengthened, the Board carefully considered
the refreshed strategy developed by
management and how that would impact
ourstakeholders.
The Board anchored its consideration of the
strategy on the expected macro-economic
environment over the next decade, noting the
widespread view of market experts that a
period of material acceleration in the energy
transition is anticipated. In that context, the
Board considered the future of retail energy
and services, the future of optimisation and
trading as well as Centrica’s People & Planet
Plan targets, including the Climate Transition
Plan. This was overlaid against a detailed
review of Centrica’s long-term financial
forecasts and the expected financial
framework through to 2028. In particular, the
Board noted both how some of Centrica’s
existing assets were approaching end of life
but also how, with investment, many of them
could play important roles in supporting
energy security and the energy transition.
From that foundation, the Board assessed
that the green-focused investment strategy
was aligned to those key market trends, and
therefore carefully reviewed the strategy from
the perspectives of stakeholders.
Customers: the Board considered customer
perspectives around the cost of the energy
transition and the impact on pricing when the
cost of living remains high. The Board noted
how investment could benefit the customer
experience, and the strategy could support
customers in the transition tonet zero.
Colleagues: The Board considered employee
perspectives around developing the skills
needed to deliver our net zero plans. Our
colleagues are essential in implementing our
strategy, and the Board recognises the
importance of investing in their skills and in our
organisational culture. The capabilities and
passion of our colleagues is central to
achieving our strategy.
Investors: The Board considered investor
perspectives on Centrica’s financial
sustainability and how the refreshed strategy
seeks to underpin Centrica’s financial health
and earnings potential. Following the
announcement of the strategy, investor
feedback was presented to the Board.
Investors commented that following the
investor presentation, Centrica’s strategy was
better understood, they had more clarity on
Centrica’s view of sustainable earnings, and
on investment plans and returns.
OUTCOMES
After carefully evaluating the relevant
stakeholder perspectives, the Board
concluded that the refreshed strategy will
successfully deliver for all our stakeholder
groups while helping improve the UK’s energy
security in our core markets and supporting
the transition to net zero.
The green-focused growth and investment
strategy ensures our customers, colleagues
and our communities are at the forefront of
theenergy transition. It has the potential to
bring customers greener energy and at an
affordable price, while helping insulate the
UKfrom energy shocks in the future. We are
also investing to build a better customer
experience, with our strong operational
foundations already beginning to drive better
levels of customer satisfaction. Additionally,
we remain well positioned to help our
customers with the changing retail energy
trends, rewarding customers for flexing their
energy use through PeakSave, helping
customers understand and control their
energy use through energy insights and
optimising customers’ energy consumption
through Smart Charge.
Our strategy will support Centrica’s aim of
connecting more closely with customers and
provide a number of opportunities for
colleagues. In 2023, we hired an additional
700 UK based front line colleagues to support
customers, and the skills required for the
netzero transition will create opportunities for
colleagues far into the future.
Having simplified our portfolio and improved
operational performance, our refreshed
strategy is aligned to delivering sustainable
profitability from our portfolio, and we expect
to deliver around £800 million of adjusted
operating profit on average each year over the
medium term from our Retail and Optimisation
activities. Additionally, our Infrastructure assets
in Spirit Energy, Nuclear and Centrica Energy
Storage+ will continue to play a vital role in the
UK’s energy security. Recent life extensions in
Spirit Energy and Nuclear and a capacity
increase to our Rough gas storage facility
mean we expect our existing Infrastructure
businesses to continue to contribute material
medium-term cash flows.
We will also pursue new opportunities to
create value from wider market trends,
withinvestment expected to build to
£600-£800 million per year until at least 2028.
Aspart of this, we will invest in flexible and
renewable power assets, replacing our
existing declining infrastructure, as well as
investing in an in-house smart meter asset
provider business, supporting the roll-out of
innovative tariffs and allowing a more direct
relationship with customers. Over time, the
residential heating technology mix is expected
to transition away from gas boilers towards
newer technology such as heat pumps. We
are uniquely placed to support this transition
with the UK's largest energy services
workforce. Overall, across 2023 to 2028,
atleast 50% of our capital expenditure is
expected to go into green taxonomy eligible
projects, compared to only 5% in 2019.
Thiswill help us meet our targets to achieve
net zero by 2045, and help our customers
reach net zero by 2050.
Longer term, and subject to the appropriate
regulatory frameworks being in place, we also
retain net-zero aligned optionality for potential
hydrogen and carbon capture investments,
through our Rough and Spirit Energy assets,
and continue to consider potential investment
in nuclear new-build projects.
We will do this while maintaining strong
liquidity, balance sheet strength and capital
discipline, with the appropriate medium-term
leverage for the Group assessed as being up
to 1x Net Debt to EBITDA. This provides us
with enough headroom to manage volatility in
the energy system and to continue to invest
for the future. In addition, we remain focused
on delivering compelling shareholder returns,
including for over 440,000 retail shareholders,
with a progressive dividend policy, and an
expectation that dividend cover will move to
around 2x over the coming years supported
by the sustainable earnings of the Retail and
Optimisation businesses, whilst returning
surplus capital to shareholders where
appropriate.
READ MORE ON PAGE 68
Strategic report | Centrica plc Annual Report and Accounts 2023 17
PRINCIPAL DECISION BY THE BOARD
A refreshed strategy focused on creating value for
all our stakeholders through the energy transition.
FINANCIAL OVERVIEW
The Group’s adjusted operating profit was
£2.8bn (2022: £3.3bn), with lower
Infrastructure and Optimisation results partially
offset by a higher Retail contribution.
Reflecting this, along with both a lower net
finance charge and taxation on business
performance, Group adjusted earnings
attributable to shareholders were £1.9bn
(2022: £2.1bn) and Group adjusted EPS was
33.4p (2022: 34.9p).
From a statutory perspective, operating profit
was £6.5bn (2022: £0.2bn loss). This includes
a large certain re-measurement gain during
the year of £4.4bn (2022: £3.4bn loss)
predominantly due to unwinds of 2022 out-of-
the-money positions and release of the
onerous energy supply contract provision. In
addition an exceptional loss of £0.6bn (2022:
£0.2bn) was recognised driven predominantly
by impairments to both our Nuclear
investment and Rough gas storage asset
reflecting changes in commodity prices and
spreads. Statutory profit attributable to
shareholders was £3.9bn (2022: £0.8bn loss)
and statutory EPS was 70.6p (2022: 13.3p
loss).
None of the items reported in the middle
column of the Income Statement are
considered to reflect the underlying
performance of the business.
The Group’s total Free Cash Flow (FCF)
reduced to £2.2bn (2022: £2.5bn), with the
impact of lower operating profit and the timing
of tax payments partially offset by a net
working capital inflow of £0.2bn (2022: £0.7bn
outflow).
From a statutory perspective, net cash flow
from operating and investing activities was
£2.9bn (2022: £0.7bn). This was higher than
the FCF noted above largely because of the
exclusions from that measure of movements
in variation margin and collateral, which
support our commodity hedging activity and
Centrica Energy optimisation activity and
generated an inflow of £0.6bn (2022: £1.2bn
outflow).
The Group’s net assets increased to £4.2bn
(2022: £1.3bn) with the impact of the increase
in statutory profit partially offset by the impact
of £1.1bn from items reported in other
comprehensive income or directly in equity,
including impacts of the share buyback
programme, net actuarial losses on defined
benefit pension schemes and dividends paid
to both shareholders and non-controlling
interests.
18 Strategic report | Centrica plc Annual Report and Accounts 2023
Our 2023 financial performance was strong as
we start to deliver against our refreshed
strategy. The benefits of our balanced portfolio
were demonstrated with robust earnings, free
cash flow and a very healthy closing balance
sheet position.
GROUP CHIEF FINANCIAL
OFFICER’SREPORT
READ MORE ON PAGE 11
Russell O’Brien | Group Chief Financial Officer
REVENUE
Total Group statutory revenue increased by 11% to £26.5bn (2022: £23.7bn). Total Group revenue included in business performance, which
includes revenue arising on contracts in scope of IFRS9, decreased by 1% to £33.4bn (2022: £33.6bn).
Gross segment revenue, which includes revenue generated from the sale of products and services between segments, decreased by 5% to
£35.3bn (2022: £37.2bn). This was driven largely by the impact of lower commodity prices and volatility on revenue in Centrica Energy, partially
offset by the impact of commodity prices on retail tariffs in British Gas Energy, Bord Gáis Energy and Centrica Business Solutions.
A table reconciling the different revenue measures is included in note 4(b) of the accounts.
OPERATING PROFIT/(LOSS)
YEAR ENDED 31 DECEMBER (£M) 2023 2022
Retail
799 94
British Gas Services & Solutions
47 (9)
British Gas Energy
751 72
Residential energy supply
726 23
Business energy supply
25 49
Bord Gáis Energy
1 31
Optimisation
878 1,444
Centrica Business Solutions
104 44
Centrica Energy (formerly Energy Marketing & Trading)
774 1,400
Infrastructure (excl. disposed Spirit Energy assets)
1,083 1,308
Spirit Energy (retained)
235 245
Centrica Energy Storage+
312 339
Nuclear
536 724
Colleague profit share
(8) (23)
Operating profit from business performance excl. disposed Spirit Energy assets
2,752 2,823
Spirit Energy disposed assets
- 485
Operating profit from business performance (Adjusted operating profit)
2,752 3,308
Exceptional items and certain re-measurements
3,760 (3,548)
Group operating profit/(loss) (Statutory operating profit) 6,512 (240)
Adjusted operating profit decreased by £556m, or by £71m when
excluding the impact of the disposal of Spirit Energy’s Norwegian
assets in 2022, to £2,752m (2022:£3,308m or £2,823m excluding the
disposed Spirit Energy assets).
More detail on specific business unit adjusted operating profit
performance is provided in the Business Review on pages 23 to 25.
Statutory operating profit was £6,512m (2022: £240m loss), with the
difference between the two measures of profit relating to a net gain on
exceptional items and certain re-measurements of £3,760m (2022:
£3,548m loss).
Certain re-measurements
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 similar capacity or off-take contracts), as
well as to meet the future needs of our customers. A number of these
arrangements are considered to be derivative financial instruments and
are required to be fair valued under IFRS 9.
The Group shows the fair value movements on these commodity
derivative trades separately as certain re-measurements, as they do not
reflect the underlying performance of the business because they are
economically related to our infrastructure assets, capacity/off-take
contracts or downstream demand, which are typically not fair valued.
The operating profit in the statutory results includes a net pre-tax profit
of £4,405m (2022: £3,393m loss) relating to re-measurements. This
was largely made up of the components outlined below:
¢ A net gain of £3,573m on the re-measurement of derivative energy
contracts. This predominantly reflects the unwind of 2022 out-of-the-
money energy supply contract hedge purchases, while there was
also an unwind of our infrastructure businesses and Centrica Energy
out-of-the-money positions from December 2022. The net positive
impact of these two factors was £3,529m. In addition, we saw a net
unrealised mark-to-market gain of £44m from our wider portfolio as
we were in a net sell position at certain points in the year as
commodity prices fell.ell.]
¢ A net gain of £833m from the onerous energy supply contract
provision utilisation and reversal. At the 2022 year-end, an onerous
provision was held on the balance sheet relating to our non-domestic
customers on longer-term fixed contracts agreed at levels below the
forward commodity prices in December 2022. This was because,
although the Group is predominantly hedged and so does not
expect to make a true economic loss on these contracts, the hedges
are generally market trades which are reflected as derivatives and are
marked-to-market through the middle column as certain re-
measurements. At 2022 year-end, the unrealised hedges were still
in-the-money and this led to retaining an onerous contract provision.
However, following the fall in commodity prices seen in 2023, the
supply hedges were out-of-the-money at the end of the year and as
a result, the remaining energy supply onerous provision has been
fully unwound.
Further details can be found in note 7(a).
Strategic report | Centrica plc Annual Report and Accounts 2023 19
Exceptional items
An exceptional pre-tax charge of £645m was recognised within the statutory Group operating profit (2022: £155m), made up of:
¢ A £549m impairment of the nuclear investment, as a result of lower forecast commodity prices, partially offset by the positive effect of life
extensions at Heysham 1 and Hartlepool.
¢ An £82m impairment of the Rough gas storage asset as a result of a reduction in both forecast gas prices and forecast summer/winter gas
price spreads.
¢ A £14m impairment in Centrica Business Solutions predominantly related to a battery storage asset and a gas engine, also as a result of
the lower forecast commodity prices.
Further details on exceptional items, including on impairment accounting policy, process and sensitivities, can be found in notes 7(b) and 7(c).
GROUP EARNINGS AND DIVIDEND
2023 2022
YEAR ENDED 31 DECEMBER (£M) Notes
Business
performance
Exceptional items
and certain re-
measurements
Results for the
year
Business
performance
Exceptional items
and certain re-
measurements
Results for the
year
Group operating profit/(loss)
4(c)
2,752 3,760 6,512 3,308 (3,548) (240)
Net finance cost
8
(39) — (39) (143) — (143)
Taxation
9
(838) (1,595) (2,433) (1,046) 793 (253)
Profit/(loss) from operations 1,875 2,165 4,040 2,119 (2,755) (636)
Less: Profit attributable to non-
controlling interests
(16) (95) (111) (69) (77) (146)
Adjusted earnings/(loss) attributable to
shareholders 1,859 2,070 3,929 2,050 (2,832) (782)
Adjusted earnings attributable to
shareholders excluding disposed Spirit
Energy assets 1,859 2,005
Finance costs
Net finance costs decreased to £39m (2022: £143m), largely due to
increased interest income on cash balances reflecting higher UK
interest rates, partially offset by increased interest costs on floating
debt.
Taxation
Business performance taxation on profit decreased to £838m (2022:
£1,046m). After taking account of tax on joint ventures and associates,
the adjusted tax charge was £912m (2022: £1,077m).
The resultant adjusted effective tax rate for the Group was 33% (2022:
34%), with the profit mix moving slightly away from highly taxed E&P
activities. The adjusted effective tax rate calculation is shown below:
YEAR ENDED 31 DECEMBER (£M) 2023 2022
Adjusted operating profit before impacts of
taxation
2,752 3,308
Add: JV/associate taxation included in
adjusted operating profit
74 31
Net finance cost
(39) (143)
Adjusted profit before taxation 2,787 3,196
Taxation on adjusted operating profit
(838) (1,046)
Share of JV/associate taxation (74) (31)
Adjusted tax charge (912) (1,077)
Adjusted effective tax rate 33% 34%
A charge totalling £326m related to the Electricity Generator Levy is
included in the Group’s cost of sales and in our share of the results of
joint venture and associates operating profits. The Levy is not an
income tax and is not deductible for corporation tax purposes. If this
had been treated as a tax, the Group’s adjusted effective tax rate
would have been 40%.
Re-measurements and exceptional items generated a taxation charge
of £1,595m (2022: £793m credit).
See note 1(b), 3(b), 7(a), 7(b) and 9 for more details.
Group earnings
Reflecting the adjusted operating profit, net finance cost and adjusted
taxation as described above, profit for the year from business
performance after taxation was £1,875m (2022: £2,119m). After
adjusting for non-controlling interests relating to Spirit Energy, adjusted
earnings were £1,859m (2022: £2,050m, or £2,005m after excluding
the disposed Spirit Energy assets).
Adjusted basic EPS was 33.4p (2022: 34.9p, or 34.2p after excluding
the disposed Spirit Energy assets), which also includes the impact of a
lower weighted average number of shares than in 2022 reflecting the
ongoing share repurchase programme.
After including exceptional items and certain re-measurements,
including those attributable to non-controlling interests, the statutory
profit attributable to shareholders for the period was £3,929m (2022:
£782m loss).
The Group reported a statutory basic EPS of 70.6p (2022: 13.3p loss).
Dividend
In addition to the interim dividend of 1.33p per share, the proposed final
dividend is 2.67p per share, giving a total full year dividend of 4.0p per
share (2022: 3.0p per share).
GROUP CASH FLOW, NET CASH AND BALANCE SHEET
Group cash flow
Free cash flow (FCF) is the Group’s primary measure of cash flow as
management believe it provides relevant information to show the cash
generation of the business after taking account of the need to maintain
its capital asset base. FCF is reconciled to statutory net cash flow from
operating and investing activities in the table below.
See explanatory note 4(f) for more details.
20 Strategic report | Centrica plc Annual Report and Accounts 2023
YEAR ENDED 31 DECEMBER (£M) 2023 2022
Statutory cash flow from operating
activities
2,752 1,314
Statutory cash flow from investing activities
115 (566)
Statutory cash flow from operating and
investing activities
2,867 748
Add back/(deduct):
Sale and purchase of securities 12 398
Interest received (267) (46)
Movements in collateral and margin cash (585) 1,173
Defined benefit pension deficit payments 180 214
Free cash flow 2,207 2,487
FCF was £2,207m (2022: £2,487m), as reconciled to statutory cash
flow measures in the table above.
Net cash flow from operating activities increased to £2,752m (2022:
£1,314m), with the impact of lower adjusted EBITDA more than offset
by collateral and margin cash inflows and positive working capital
movements.
Adjusted EBITDA decreased to £3,085m (2022: £3,993m), reflecting
the movements in adjusted operating profit as described on page 19.
The collateral and margin cash inflow was £585m (2022: £1,173m
outflow), as wholesale commodity prices reduced from their elevated
levels last year.
The net inflow of working capital was £244m (2022: £656m outflow).
This included an inflow of £579m in Centrica Energy, as profit on 2022
derivative positions cash settled in 2023, which was partially offset by
an outflow of £505m in British Gas Energy reflecting the settlement of
high December 2022 commodity costs in January 2023 and the timing
of customer and Government support and regulatory scheme cash
flows.
Net cash inflow from investing activities was £115m (2022: £566m
outflow). Within this, interest received increased to £267m (2022:
£46m) reflecting the higher interest rate environment, while dividends
from our Nuclear associate increased to £220m (2022: £60m). Capital
expenditure (including small acquisitions) increased to £415m (2022:
£377m or £258m excluding Spirit Norway) as we build momentum in
our green-focused growth and investment strategy. Of the 2022
investing activities outflow, £400m related to a loan to the pension
schemes in October 2022 to help them manage through volatile
market conditions.
Net cash outflow from financing activities increased to £1,414m (2022:
£917m). This includes a reduced distribution of £17m (2022: £273m) to
Spirit Energy’s minority partner, with the outflows in both years related
to the disposal of Spirit Energy’s Norway assets. It also includes
materially increased cash distributions to shareholders, with £613m
(2022: £43m) relating to the Group’s share buyback programme and
£186m (2022: £59m) related to ordinary dividend payments.
Group adjusted net cash
The above resulted in a £1,453m increase in cash and cash equivalents
over the year. Gross debt reduced by £162m, reflecting the repayment
of a bond upon its maturity in October 2023 which was partially offset
by new lease arrangements during the year. When also including the
impact of foreign exchange adjustments on cash, the Group’s adjusted
net cash position at the end of December 2023 was £2,744m,
compared to £1,199m on 31 December 2022.
Further details on the Group’s sources of finance and net debt are
included in note 24.
Balance sheet
Net assets increased to £4,233m (2022: £1,280m), predominantly
driven by the statutory profit. This was partially offset by the impact of
items reported in other comprehensive income or directly in equity,
including a £500m reduction from the share buyback programme,
£288m net actuarial losses on defined benefit pension schemes and
£203m of dividends paid to both shareholders and non-controlling
interests.
Pension deficit
The Group’s IAS 19 net pension deficit was £117m at the year-end,
compared with a £40m surplus at 31 December 2022, with the impact
of pension deficit contributions during the year being more than offset
by a decrease in high quality corporate bond yields used to discount
the pension liabilities, a lower than expected return on scheme assets
and an actuarial adjustment due to inflation experience. The technical
provisions deficit is based on more conservative assumptions and is
used to determine the agreed level of cash contributions into the
schemes. In September 2022, we reached agreement with the pension
trustees on a March 2021 technical provisions deficit of £944m, with
annual deficit contributions remaining unchanged at £175m until 2026.
On a roll-forward basis using the same methodology, consequent
assumptions and contributions paid, the technical provision deficit
would be around £900m at 31 December 2023.
Further details on post-retirement benefits are included in note 22.
Acquisitions, disposals and disposal groups classified as held
forsale
During the period deferred consideration of £55m was received in
respect of the Spirit Norway disposal in 2022 and £17m was
distributed to SWM Bayerische E&P Beteiligungsgesellschaft mbH.
Further details on assets purchased, acquisitions and disposals are
included in notes 4(e) and 12.
EVENTS AFTER THE BALANCE SHEET DATE
Details of events after the balance sheet date are described in note 26.
RISKS AND CAPITAL MANAGEMENT
The nature of the Group’s principal risks and uncertainties are broadly
unchanged from those set out in its 2022 Annual Report, although the
Group’s top three Principal Risks are now credit and liquidity risk,
market risk (including the outage risk of financial loss due to impact of
lost asset production) and weather risk. In our assessment, overall
credit and liquidity risk has increased due to a notable increase in
customer debt driven by cost of living challenges, high levels of fuel
poverty and relatively high inflation impacting our customers' ability to
pay for their energy supply. Market and weather risks have reduced
given lower volatility in commodity markets and a fall in global wholesale
energy prices from their 2022 peaks. In addition, political, legal and
regulatory risks have heightened due to continued financial pressures
facing many consumers and an impending UK general election.
The Group has actively responded to these risks. Further support
measures and processes have been developed to help customers
repay their debt, a Risk Capital Steering methodology has been
developed to bolster our current robust monitoring and to improve our
ability to react to changes in our financial risks, while we have
successfully refinanced multi-year credit facilities to fortify our liquidity
capacity. We also remain engaged with regulators and political parties
and will continue to monitor and assess the impact of any changes in
government policy in our markets.
Details of how the Group has managed financial risks such as liquidity
and credit risk are set out in note S3. Details of the Group’s capital
management processes are provided under sources of finance in
note24.
ACCOUNTING POLICIES
The Group’s accounting policies and specific accounting measures,
including changes of accounting presentation and selected key
sources of estimation uncertainty, are explained in notes 1, 2 and 3.
Russell O’Brien, Group Chief Financial Officer
14 February 2024
Strategic report | Centrica plc Annual Report and Accounts 2023 21
OUR VIEW ON TAXATION
The Group takes its obligations to pay and collect the correct amount
of tax very seriously.
Responsibility for tax governance and strategy lies with the Group Chief
Financial Officer, overseen by the Board and the Audit and Risk
Committee.
OUR APPROACH
Wherever we do business in the world, we take great care to ensure
we fully comply with all our obligations to pay or collect taxes and to
meet local reporting requirements.
We are committed to providing disclosures and information necessary
to assist understanding beyond that required by law and regulation.
We do not tolerate tax evasion or fraud by our employees or other
parties associated with Centrica. If we become aware of any such
wrongdoing, we take appropriate action.
Our cross-border pricing reflects the underlying commercial reality
ofour business.
We ensure that income and costs, including costs of financing
operations, are appropriately recognised on a fair and sustainable
basisacross all countries where the Group has a business presence.
We understand that this is not an exact science and we engage openly
with tax authorities to explain our approach.
In the UK we maintain a transparent and constructive relationship with
His Majesty’s Revenue & Customs (HMRC). This includes regular,
opendialogue on issues of significance to HMRC and Centrica.
Ourrelationship with fiscal authorities in other countries where we
dobusiness is conducted on the same principles.
We carefully manage the tax risks and costs inherent in every
commercial transaction, in the same way as any other cost.
We do not enter into artificial arrangements in order to avoid taxation
nor to defeat the stated purpose of tax legislation.
We seek to actively engage in consultation with governments on tax
policy where we believe we are in a position as a Group to provide
valuable commercial insight.
THE GROUP’S TAX CHARGE, TAXES PAID AND THE UK
TAXCHARGE
The Group’s businesses are subject to corporate income tax rates
asset out in the statutory tax rates on profits table.
The overall tax charge is dependent on the mix of profits and the tax
rate to which those profits are subject.
STATUTORY TAX RATES ON PROFITS
Group activities
23.5%
75%
22%
12.5%
UK supply of energy
and services (1) (2)
UK gas production
Denmark energy
services
Republic of Ireland
supply of energy
and services
(1) From 1 January 2023, revenues from our Nuclear and solar business (included
inenergy supply and services) are subject to Electricity Generator Levy (EGL)
at45% on wholesale revenues sold at an average price in excess of £75/MwH,
exceeding an annual threshold of £10 million. The EGL is accounted for as an
expense and is included in cost of sales.
(2) With effect from 1 April 2023 the statutory rate applicable to UK supply of energy
and services increased from 19% to 25%. The average corporation tax rate for
the year is 23.5%.
TAX CHARGE COMPARED TO CASH TAX PAID
2023 2023
Current tax
charge/(credit)
Cash tax paid/
(received)
UK (including Petroleum Revenue Tax) 572 687
Denmark 96 121
Singapore — 25
Republic of Ireland 2 (29)
Rest of world — (1)
670 803
Electricity generator levy 285 285
Total tax paid 1,088
Corporation tax is paid in instalments, generally based on estimates; one-off items
and fluctuations in mark to market positions may cause divergence between the
charge for the year and the tax paid.
FURTHER INFORMATION ON THE TAX CHARGE ISSET OUT IN
NOTE 9 OF THE ANNUAL REPORT AND ACCOUNTS.
OUR GROUP TAX STRATEGY, A MORE DETAILED EXPLANATION
OF THE WAY THE GROUP’S TAX LIABILITY IS CALCULATED AND
THE TIMING OF CASH PAYMENTS, IS PROVIDED ON OUR
WEBSITE AT CENTRICA.COM/RESPONSIBLETAX
22 Strategic report | Centrica plc Annual Report and Accounts 2023
(1)(2)
BUSINESS REVIEW
BUSINESS UNIT OPERATIONAL, COMMERCIAL AND
FINANCIAL PERFORMANCE
We expect to deliver around £800m of sustainable adjusted operating
profit on average each year from Retail and Optimisation by 2026, with
additional growth potential. We also expect to deliver material medium-
term cash flows from Infrastructure.
Of the £800m per year, we expect UK residential energy supply to
make £150m-£250m, British Gas Services & Solutions to continue to
recover to £100m-£200m, Centrica Energy to make £250m-£350m,
and UK business energy supply and Bord Gáis Energy to deliver
combined adjusted operating profit of £100m-£200m.
In any given year the actual results by business are likely to fluctuate, so
these ranges should be seen as an average over time. However, one of
the key benefits of our balanced portfolio is that our businesses de-risk
each other and this reinforces our confidence in the delivery of these
overall profit projections.
RETAIL
In Retail, we have ramped up investment in our operations and
customer service. This has resulted in improved performance metrics,
with lower complaints and improving NPS scores across our
businesses. Total Retail adjusted operating profit increased to £799m
(2022: £94m), largely due to the material recovery of costs incurred in
prior periods through the regulatory price cap mechanism in British Gas
Energy.
British Gas Services & Solutions
YEAR ENDED 31 DECEMBER 2023 2022 Change
Services & Solutions customers (‘000)
(closing)
(1)
2,950 3,193 (8%)
On-demand jobs (‘000)
(2)
218 122 79%
Boiler installs (‘000) 95 99 (4%)
Services complaints per customer (%)
(3)
6.0% 7.0% (14%)
Services Engineer NPS
(4)
71 64 7pt
Adjusted operating profit/(loss) (£m) 47 (9) nm
All 2023 metrics and 2022 comparators are for the 12 months ended 31 December
unless otherwise stated.
(1) Services & Solutions customers are defined as single households having a
contract or an on-demand job with British Gas Services & Solutions.
(2) On-demand jobs are defined as Services & Repair one-off on-demand repairs,
home improvements and maintenance.
(3) 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.
(4) Measured independently, through individual questionnaires, the customer’s
willingness to recommend British Gas following a gas engineer visit.
In British Gas Services & Solutions we have significantly improved our
operations, as we look to stabilise our core activity of contract service
and repair, whilst driving growth in on-demand and heating installs.
Operational metrics continued to improve over the year, including a
halving of job reschedule rates, to 3%. This improved operational
performance underpinned improved customer satisfaction, which was
reflected in lower complaints and higher engineer NPS. Customer
numbers were broadly stable in the second half of 2023, having fallen
by 6% in the first half, which had reflected a high inflation backdrop and
cost of living pressures, and the final roll-off of ‘free product’ customers
from the portfolio. Reflecting this, revenue per customer increased from
£286 to £310.
Our improved operational performance and increased engineer
capacity means we can now better target the significant opportunity
that exists in the on-demand and heating installation markets.
Reflecting this, on-demand customers increased to 201,000 and on-
demand jobs increased to 218,000, up 75% and 79% on 2022
respectively. We also grew our market share and margins in boiler
installations in a declining market, underpinned by more innovative
commercial offerings.
Adjusted operating profit was £47m (2022: £9m loss), with improved
productivity allowing better margin capture in the core contract service
and repair and installation businesses, and lower pension costs. These
positive impacts were partially offset by the impacts of lower average
customer numbers and ongoing inflationary cost pressures.
British Gas Energy
YEAR ENDED 31 DECEMBER 2023 2022 Change
Residential energy customers (‘000)
(closing)
(1)
7,529 7,516 0%
Small business customer sites (‘000)
(closing)
552 480 15%
Energy complaints per customer (%)
(2)
13.3% 14.4% (8%)
Energy Touchpoint NPS
(3)
17 13
4pt
Cost per residential energy customer
(excl.bad debt) (£)
91 83 10%
Adjusted operating profit (£m)
751 72 943%
All 2023 metrics and 2022 comparators are for the 12 months ended 31 December
unless otherwise stated.
(1) Residential energy customers are defined as single households buying energy
from British Gas.
(2) Total complaints, measured as an expression of dissatisfaction in line with
submissions made to Ofgem, as a percentage of average customers over the
year.
(3) Measured independently, through individual questionnaires, the customer’s
willingness to recommend British Gas Energy following contact.
In British Gas Energy, we continue to invest in strengthening our
operational foundations to drive innovation, retention and better
customer outcomes in order to underpin long-term profit sustainability.
The number of residential customers remained broadly flat over the
year, as price competition remained low in the market and suppliers
competed more on service and brand. The number of small business
customers increased by 15% in the year.
In line with our strategy we have invested further in customer service,
including the hiring of 700 additional contact centre colleagues.
Reflecting this, we saw lower complaints and a higher NPS, and
improving these metrics further will remain a focus. The NPS is higher
for customers who are on our new platform, and we continue to make
good progress on customer migration. A further 2m customers were
migrated in the second half of 2023, taking the total to over 5m and we
aim for our customers migration to the new platform to be substantially
complete by 2025.
Reflecting our investment in customer service and migration, our
annualised cost per residential energy customer (excluding bad debt)
increased by £8, including a £4 increase from dual running IT costs.
When combined, the impact from incremental investment in service
and from total dual running IT costs was around £100m in 2023.
Adjusted operating profit increased to £751m (2022: £72m) following a
strong first half result which included an industry-wide one-off recovery
of around £500m of prior period costs. These were largely related to
unexpected standard variable tariff demand and the phasing of
commodity costs and associated revenues; a supplier's costs may not
perfectly match the revenues received under the price cap in a given
period. We also delivered effective risk management and optimisation
during the year, while higher commodity costs naturally drove higher
unit margins.
Strategic report | Centrica plc Annual Report and Accounts 2023 23
These positive impacts were partially offset by a number of other
factors predominantly related to a weak economy and the cost of living
crisis. The bad debt charge increased to £541m (2022: £297m),
including impacts from pausing field debt collection activity, with an
increase in both residential (up £158m) and small business (up £86m).
We also saw an underlying reduction in consumption per customer,
with customer bills remaining elevated compared to historic levels
alongside the reduction of wider government support for both
residential and small business customers. In addition, 2023 profit was
impacted by the increase in cost per customer reflecting our investment
in customer service and system migration, and our voluntary
commitment of a further £84m to support customers struggling to pay
their bills.
Bord Gáis Energy
YEAR ENDED 31 DECEMBER 2023 2022 Change
Customers (‘000) (closing)
503 526
(4%)
Complaints per customer (%)
(1)
1.7% 2.2%
(23%)
Journey NPS
(2)
18 19
(1pt)
Adjusted operating profit (£m)
1 31 (97%)
All 2023 metrics and 2022 comparators are for the 12 months ended 31 December
unless otherwise stated.
(1) Total complaints, measured as any oral or written expression of dissatisfaction,
as a percentage of average customers over the year.
(2) Weighted NPS for the main customer interaction channels.
In Bord Gáis Energy we are focused on creating value from our
integrated energy model, while investing in the future energy system to
help underpin energy security and decarbonisation in Ireland.
Against a backdrop of challenging conditions in the retail energy supply
business, customer numbers declined by 4% as the business reduced
its focus on customer acquisition. We continued to invest in customer
service, resulting in lower complaints per customer compared with
2022 and a 5pt improvement in NPS over the second half of the year,
following a reduction in the first half. In line with our commitment to
support our customers, we donated an incremental £3m to our energy
support fund to help vulnerable customers struggling with bills,
doubling the total to £6m over the past two years.
We continued with the construction of our two, hydrogen ready,
100MW flexible natural gas peaking plants in Athlone and Dublin, with
our investment expected to total around €300m. We expect these
plants to be commissioned by around the middle of 2025.
Adjusted operating profit reduced to £1m (2022: £31m), reflecting
pricing pressure in energy supply as we absorbed higher energy costs,
particularly in the first half of 2023. This was partially offset by continued
strong performance from our Whitegate power station and wholesale
optimisation activities. The second half of the year saw the beginnings
of more sustainable energy supply performance, with continued easing
in commodity prices affording us the opportunity to pass on price
reductions to customers.
OPTIMISATION
In Optimisation, we continue to develop and leverage our physical
positions and world class capabilities. Total Optimisation adjusted
operating profit remained elevated at £878m (2022: £1,444m),
although was lower compared to 2022 against a backdrop of lower
absolute prices and volatility in commodity markets.
Centrica Energy
YEAR ENDED 31 DECEMBER 2023 2022 Change
Renewable capacity under management (GW)
(1)
13.0 12.6 3%
Adjusted operating profit (£m)
774 1,400 (45%)
All 2023 metrics and 2022 comparators are for the 12 months ended 31 December
unless otherwise stated.
(1) Including assets that have signed contracts but are not yet operational.
In Centrica Energy (previously Energy Marketing & Trading), our world
class asset-backed trading and logistics business, we are looking to
build on our diverse portfolio of physical contracted positions, while
continuing to leverage our differentiated risk management and
optimisation capabilities to add further value across the Group.
Centrica Energy had another strong year in 2023, against the backdrop
of much lower market volatility than experienced in 2022. We continue
to build out our portfolio of physical contractual positions, delivering a
3% increase in renewable assets under management in Renewable
Energy Trading and Optimisation (RETO) to 13.0GW. Total renewable
and flexible assets increased to 16.3GW (2022: 15.8GW).
We also added to our global LNG portfolio. In July 2023 we signed a
15-year Sale and Purchase agreement with Delfin to take 1 million
tonnes of LNG, free on board, from their floating facility in the Gulf of
Mexico. Volumes are expected to commence towards the end of this
decade.
Adjusted operating profit remained elevated at £774m (2022:
£1,400m). Lower levels of market volatility impacted our gas and power
trading business. However, we saw the benefit of our diverse portfolio,
with increased profit in both the LNG and RETO businesses reflecting
our ability to capture some longer-term value from the volatile
environment seen in 2022. Included within the total operating profit was
a £35m loss from the Sole Pit legacy gas contract (2022: £19m profit),
with further losses from the contract at current forward prices expected
to be around £30m in total until 2025, when the contract ends.
Centrica Business Solutions (CBS)
YEAR ENDED 31 DECEMBER 2023 2022 Change
Energy supply total gas and electricity
volume (TWh)
20.7 22.3 (7%)
Energy supply complaints per customer
(%)
(1)
12.2% 9.1% 34%
Energy supply Touchpoint NPS
(2)
32 31
1pt
Services order intake (£m)
225 212
6%
Net investment (£m)
114 19
500%
Adjusted operating profit (£m)
104 44 136%
All 2023 metrics and 2022 comparators are for the 12 months ended 31 December
unless otherwise stated.
(1) Total complaints, measured as any oral or written expression of dissatisfaction,
as a percentage of average customers over the year.
(2) Measured independently, through individual questionnaires and the customer’s
willingness to recommend.
In Centrica Business Solutions we continue to focus on strengthening
our customer service foundations and delivering improved margins and
sales performance in energy supply to larger businesses, while building
a portfolio of flexible, green-focused assets.
We continued with our planned shift in focus away from supplying
energy to the lower margin large-scale Commercial and Industrial
sector, and total volumes fell by 7% as a result. However, within this,
volumes supplied to medium sized enterprises grew 14% to 11.6TWh
(2022: 10.2TWh), with consistent organic growth alongside the
customer book acquisition of Avantigas ON Limited in H2 2022.
We continue to focus on delivering high levels of customer service,
although complaints per customer increased against a backdrop of
customer concern from high energy bills and complexity relating to
government support schemes. Despite this, customer service delivery
remained strong, with Touchpoint NPS increasing by 1pt year-on-year.
24 Strategic report | Centrica plc Annual Report and Accounts 2023
Having announced our green-focused investment strategy in July
2023, we have made incremental early stage progress in developing
our asset pipeline. Net investment in CBS was £114m in 2023 (2022:
£19m) as we continued with a range of solar, battery and gas-peaking
investments, and we now have around 550MW of assets in detailed
planning or delivery in the UK and Continental Europe. We also
commenced commercial operations on the 18MW Codford solar farm
in the first half of 2023 and acquired the operational 13MW
Roundponds solar farm in the second half, taking total operational
capacity in CBS to 132MW.
Adjusted operating profit increased to £104m (2022: £44m). Energy
supply profit increased driven by strong risk management and
commodity procurement performance, supported by the increase in
volumes supplied to medium-sized enterprise customers. This was
partially offset by an increased loss in Services and Assets, reflecting
the impact of lower market price volatility on our flexible assets, and
restructuring actions taken in our services business to improve
profitability in the coming years.
INFRASTRUCTURE
Our Infrastructure businesses consist of our ownership in the Spirit
Energy gas production business, the UK’s nuclear fleet, and Centrica
Energy Storage+, the operator of the UK's largest gas storage facility,
Rough. These businesses all saw asset lives extended in 2023 and will
continue to play an important role for UK energy security. Total
Upstream adjusted operating profit fell to £1,083m (2022: £1,793m or
£1,308m excluding disposed Spirit assets).
Upstream
YEAR ENDED 31 DECEMBER 2023 2022 Change
Spirit Energy retained total production
volumes (mmboe)
14.8 17.5 (15%)
Nuclear power generated (GWh)
7,456 8,719 (14%)
Adjusted operating profit (£m)
1,083 1,793 (40%)
All 2023 metrics and 2022 comparators are for the 12 months ended 31 December.
Total volumes from the retained Spirit Energy assets were down 15%,
with lower production across the portfolio in line with expected natural
decline rates. In May 2023, Spirit Energy was awarded a carbon
storage licence for the Morecambe Hub, and its potential to be one of
the UK’s largest carbon storage hubs provides us with long-term net
zero optionality.
Centrica Energy Storage+ (CES+) delivered good operational reliability
from the Rough asset following its return to gas storage operations in
the second half of 2022, and from the Easington gas processing plant
which CES+ also owns. An increase in capacity at Rough to 54bcf was
announced in June 2023, with third party exemption granted until at
least 2030. We continue to develop plans to enable us to increase
capacity at the asset, and ultimately convert to a hydrogen storage
facility, with any material investment subject to an appropriate
regulatory support mechanism.
Centrica's share of Nuclear generation volumes was 14% lower than
2022, reflecting the Hinkley Point B closure in August 2022 and higher
scheduled outages. During 2023, the expected closure dates for
Heysham 1 and Hartlepool were extended by two years to March
2026, with a plus or minus one year window either side of this date.
Additionally, in January 2024, an ambition was announced to further
extend the lives of Heysham 1, Hartlepool, Heysham 2 and Torness,
subject to inspections and regulatory approvals.
Adjusted operating profit from the retained Spirit Energy business was
£235m (2022: £245m), with the impact of lower production volumes
largely offset by a higher average achieved gas price, underpinned by
our rateable hedging strategy. Centrica Energy Storage+ adjusted
operating profit was £312m (2022: £339m), with strong performance in
the first half of 2023 driven by high seasonal gas price spreads in winter
2022/23 and further optimisation from market price volatility, followed
by a second half which saw lower seasonal spreads for winter 2023/24
and reduced optimisation opportunities due to lower levels of volatility.
Nuclear adjusted operating profit was £536m (2022: £724m), with
higher achieved prices and lower balancing charges more than offset
by the combined impacts of lower generation volumes and a £326m
impact of the Electricity Generator Levy, of which £285m is recorded in
cost of sales and £41m within the share of profit after tax from
associates.
Details of our forward hedging positions for 2024 and 2025 are outlined
below:
2024 2025
Volume
hedged
Average
hedged
price
Volume
hedged
Average
hedged
price
Spirit Energy 443mmth 174p/th 197mmth 139p/th
Nuclear 5.4TWh £153/MWh 1.7TWh £110/MWh
Strategic report | Centrica plc Annual Report and Accounts 2023 25
Group free cash flow from continuing
operations (£m)
(i)
Group adjusted operating profit from
continuing operations (£m)
(i)
Free cash flow from continuing operations is
the Group’s primary measure of cash flow. It
reflects the cash generation of the business
after taking into account the need to
continue to invest.
Free cash flow decreased by 11% reflecting
the reduction in Group adjusted operating
profit and an increase in taxes paid, largely
related to 2022 profits. These impacts were
partially offset by working capital inflows
compared with outflows in 2022, with inflows
in Centrica Energy as 2022 profits converted
to cash more than offsetting outflows in
British Gas Energy, largely related to the
impact of falling commodity prices.
Group adjusted operating profit from
continuing operations is one of our
fundamental financial measures,
Group adjusted operating profit fell 17%
predominantly reflecting decreased profit
inUpstream (part of our Infrastructure
business), reflecting the sale of the Spirit
Energy Norway assets and the introduction
of the Electricity Generator Levy and
inCentrica Energy reflecting lower energy
price volatility. This was partially offset by
increased profit in British Gas Energy,
including the recovery of costs incurred in
prior periods through the default tariff cap.
Group adjusted basic earnings per share
from continuing operations (EPS)
(i)
Total greenhouse gas (GHG) emissions –
40% reduction by 2034 and net zero by
2045 (base year 2019)
(ii)
EPS is a standard measure of corporate
profitability. Adjusted EPS is used to
measure the Group’s underlying
performance against its strategic financial
framework.
Group adjusted basic EPS was down 4%,
reflecting the decreased operating profit,
partially offset by reduced finance costs with
higher interest rates resulting in increased
interest income on cash held and a lower
effective tax rate dueto the profit mix moving
away from highly taxed gas production
activities, as well as a reduction in the
number of shares as a result of the share
buyback programme.
Getting to net zero is vital for our planet,
which is why we have a green-focused
investment strategy. Towards this, we cut
our emissions by 21% from our 2019 base
year, building on the 5% reduction achieved
the previous year. Further gains were mainly
driven by emission reductions from our
Whitegate power station as well as our gas
production operations. Overall, we’ve made
positive progress against our long-term goal
to be a net zero business by 2045 (see
page 44).
33.4
34.9
6.1
4.1p
p
p
(i) See notes 2, 4 and 10 to the Financial
Statements for definition and
reconciliation of these measures.
(ii) 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 alongside the retained Spirit Energy
assets in the UK and the 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 2,132,680mtCO
2
e. 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. 2022 restated due to availability
of improved data.
READ MORE ABOUT OUR
STRATEGY REFRESH ON PAGES
10 TO 11
READ MORE ABOUT OUR
FINANCIAL PERFORMANCE
ONPAGES 18 TO 21
26 Strategic report | Centrica plc Annual Report and Accounts 2023
KEY PERFORMANCE INDICATORS
Our Key Performance Indicators (KPIs)
helpthe Board and executive
management team assess performance
against our refreshed strategy laid out
inJuly 2023.
2,207
2,487
1,174
2,752
3,308
948
2022
2021
2022
2021
2022
2021
2023
2022
2021
-53%
-5%
2023
2023
2023
-21%
British Gas Services & Solutions – Services
Engineer Net Promoter Score (NPS)
(i)
Total customers (m)
(ii)
Providing a great service is fundamental to
our ability to attract and retain customers.
With our focus on productivity and improved
operational performance, we were able to
provide a better service for customers. This
led to our NPS rising by seven points.
Our business exists to serve customers, who
drive our growth. Following year-on-year
gains, overall customer numbers remained
stable with 0% change. This broadly reflects
the challenging inflationary backdrop and
cost of living pressures.
Total recordable injury frequency rate
(TRIFR)
Colleague engagement
(iii)
Keeping colleagues and customers safe is
essential to running our business
responsibly. We therefore maintain a strong
safety culture through preventative initiatives
including manual handling, safe driving and
winter readiness training. As a result, our
TRIFR per 200,000 hours reduced by 25%.
Incidents mainly related to slips, trips and
musculoskeletal injuries.
Having an engaged and motivated team is
key to our success because colleagues are
the beating heart of our business. Through
our continued focus on creating a more
inclusive and supportive place to work whilst
connecting colleagues with our purpose and
strategy, colleague engagement improved by
0.3 points to 7.7, which is approaching top
quartile performance for our sector.
7.7
7.4
0
(i) Measured independently, through
individual questionnaires, the customer’s
willingness to recommend British Gas
following a gas engineer visit. For wider
business unit NPS, see pages 23 to 25.
(ii) Includes British Gas Energy, British Gas
Services &Solutions and Bord Gáis
Energy households, as well as business
customer sites inBritish Gas Energy and
Centrica Business Solutions. 2022
restated due to availability of improved
data. For business unit customer
numbers, see pages 23 to 25.
(iii) Colleague engagement methodology has
changed from percentage favourable to
an average score out of 10, measuring
how colleagues feel about the Company.
We are unable to provide a 2021
comparison due to the change in
methodology.
READ MORE ABOUT
OURNON-FINANCIAL
PERFORMANCE ON PAGES
41 TO 55 AND 249 TO 251
Strategic report | Centrica plc Annual Report and Accounts 2023 27
10,266
10,296
10,067
2022
2021
0.84
1.12
1.07
2022
2021
2023
+71
+64
+60
2022
2021
2022
2021
2022
20232023
2023
We manage risks
tosupport our
Groupstrategy.
RISK MANAGEMENT
In the following pages, we set out an overview
of Centrica’s risk management framework.
Our Principal Risks and the Group’s risk
appetite is expressed in relation to our four
categories of risk: Strategic, Operational,
Financial and Compliance.
RISK MANAGEMENT AND INTERNAL
CONTROL
Centrica’s Group Enterprise Risk and Internal
Controls Framework remains a core element
of the Group’s Governance Model which is set
out below. The most significant Principal Risks
to the Group are set out on pages 30 to 34,
inorder of magnitude to the Group.
RISK APPETITE
The Board is ultimately responsible for aligning
the risk appetite of the Group with our long-
term strategic objectives, taking into account
the emerging and Principal Risks. Risk
appetites for the categories of Strategic,
Operational, Financial and Compliance risks
are in place and the key risks within Centrica’s
Risk Universe have been mapped into these
categories.
Due to the industry and the nature of some of
the markets in which the Group operates, we
have high to moderate risk appetites for our
strategic and operational risks. However, we
have a minimal risk appetite for operational
safety risk and we continue to strive for an
incident-free workplace. For financial risks we
adopt a conservative approach to manage our
liquidity position and balance sheet strength.
However, due to the higher risks inherent in
managing the commodity and weather
variables within our energy supply businesses,
we accept a higher appetite for those
elements offinancial market risk. We are
committed to operating our businesses in
compliance with relevant laws and regulations.
Risks are identified and assessed at a
Business Unit (BU) level to determine impact
and likelihood, with an appropriate risk
response subsequently evaluated and
implemented. The different risk responses are:
¢ Terminate: cease the activity that creates
the risk;
¢ Transfer: pass the risk to another party;
¢ Tolerate: accept a level of risk;
¢ Treat: act to reduce the likelihood or
impact of risk.
During BU and Group risk reviews, the net
residual risk scores are compared to the
Group risk appetite to review the adequacy of
existing mitigating actions/controls, with
further action taken tocontrol and monitor
risks as required.
RISK FRAMEWORK
Day-to-day ownership of risk sits with
business management under the regular
scrutiny of the Centrica Leadership Team
(CLT) to whom the Board has delegated
principal responsibility for risk oversight. The
Group Principal Risks are those which could
potentially impact delivery of our strategic
objectives over the medium to long term,
where medium term is up to three years,
asdetermined through our strategic planning
process. The annual risk management
process is summarised in the diagrambelow.
QUARTERLY BUSINESS UNIT RISK
REVIEWS
¢ Each BU is responsible for identifying and
assessing its significant risks with support
from functional subject matter experts.
Current and emerging risks and issues are
reviewed quarterly bythe BU leadership
teams;
¢ The finalised risk reporting and assessment
of each BU’s control environment is then
discussed at a Group Risk and Controls
Review for each BU. The meetings are
chaired by the Group Chief Financial Officer;
¢ At these quarterly reviews, recent
assurance reports and findings from internal
audits and other assurance reviews are
discussed. Actions from previous audits
and assurance reviews are tracked to
ensure close out in line with agreed
timescales.
EXECUTIVE AND BOARD COMMITTEE
REVIEWS
¢ Bi-annually the Group Principal Risks are
presented to the CLT for review and
challenge.
¢ These include the aggregate risk
assessments from the BU ‘bottom-up’
process and any Group-level risk
assessments.
28 Strategic report | Centrica plc Annual Report and Accounts 2023
* Audit and Risk Committee (ARC).
** Safety, Environment and Sustainability Committee (SESC).
OUR PRINCIPAL RISKS AND UNCERTAINTIES
¢ The Group Principal Risk profile, as
reviewed by the CLT, ispresented to the
Audit and Risk Committee (ARC) for review;
¢ Internal Audit presents four times a year to
the ARC on any material findings as a result
of independent assurance work;
¢ Risk deep dives are undertaken by the
ARC and Safety, Environment and
Sustainability Committee (SESC) to
review high priority risks, ad-hoc topics
and emerging matters.
In our assessment of viability, we consider the
potential impact of ‘severe but plausible’ risks
and note linkages to the Group Principal Risks
as described on pages 35 to 37. The annual
viability assessmenthas been presented to
and approved by the ARC.
BOARD
¢ The Board receives adequate information to
review risk as part of its strategy review
process and during the year conducted a
robust assessment of the Company’s
emerging and Principal Risks;
¢ At the year-end the Board reviewed and
approved the Principal Risk and
Uncertainties disclosure;
¢ We evaluate our System of Risk
Management and Control annually, which is
supported by a certification of controls and
adherence to Group policies by senior
management.
CHANGES IN RISK CLIMATE
BUs and Functions review their risks and report
key changes aspart of their Business
Performance and Risk Reviews. Major emerging
risks and issues are escalated immediately.
During 2023 no new material risks were
identified but a number of Group-level areas of
risk were closely monitored, and actions taken
to mitigate their impact on the Group.
Inflation and cost of living
The cost of living crisis continued in 2023, with
food, fuel and energy prices remaining high. In
October 2023 the fall in the energy price cap
enabled by falls in wholesale energy prices
helped to reduce the Consumer Price Inflation
rate to 4.7%, compared to a high of 11.1% in
October 2022. In November 2023, Ofgem
announced that from 1 January 2024 the
energy price cap will be set at an annual level
of £1,928 (previously £1,834, a 5% rise) for a
dual fuel household paying by direct debit
based on typical consumption. This may result
in further pressure on household bills.
The Energy Bills Support Scheme and the
Energy Bills Relief Scheme, both of which
were introduced by the Government in 2022
have concluded. The Government has
committed to the Energy Price Guarantee
(EPG) remaining in place until the end of
March 2024 should energy prices increase
above £3,000 per year. The Ofgem price cap
is lower than the EPG. Government support is
focused on aligning costs for comparable
prepayment meter (PPM) and direct debit
customers, ensuring thatPPMusers no longer
pay a premium for their energy. For eligible
non-domestic customers, the Energy Bills
Discount scheme is in place until March 2024.
The impact of the Government support
schemes is considered in the bad debt
provision (see note 17), which is also factored
into the Going Concern review.
Energy market
Global wholesale energy prices have reduced
since their peaks in 2022, however European
gas and power prices remain above historical
averages. While the war in Ukraine continues,
alternative sources of gas to replace the Nord
Stream 1 pipeline have been secured across
Europe, largely through Liquified Natural Gas
(LNG) shipped from outside the European
continent. The Gaza conflict has the potential
to increase market volatility if wider Middle
Eastern states are caught up in the conflict.
The gas storage capacity for Rough has been
increased from 30 to 54 bn cubic feet of gas,
and Ofgem (the UK regulator) has agreed to
extend the exemption to negotiated third-party
access until April 2030. The strategic goal for
Rough is to act as one of the world’s largest
natural gas and hydrogen storage facilities and
to play a key part of energy security
infrastructure within Great Britain and the
wider European market.
Centrica has concluded a 15-year LNG off-
take agreement with Delfin Midstream. The
additional 1m tonnes per annum of LNG will
provide another key foundation to ensuring
energy security whilst providing Centrica with
increased optimisation capacity from 2029.
A Risk Capital Steering methodology has been
developed to bolster our existing robust
monitoring and to improve our ability to react
to changes in our Financial risks.
Government and regulatory intervention
In the November 2023 Autumn Statement, the
Government announced it will legislate for a
new investment exemption for the Electricity
Generator Levy (EGL). The EGL is a temporary
45% levy on receipts from the production of
nuclear and renewable electricity sold at an
average price in excess of £75/MWh
applicable from 1 January 2023 to 31 March
2028. We are reviewing the Government’s
technical note on the new investment
exemption and developing our approach on
how to implement.
Other announcements impacting the Energy
sector include £1,000 off electricity bills for a
decade for those living near energy
infrastructure such as pylons or onshore
turbines; committing the Electricity System
Operator to work with Government to
produce a new Strategic Spatial Energy Plan;
introducing competition into onshoreelectricity
networks in 2024 to benefit consumers and
confirmation from the Chancellor that full
expensing for certain capital expenditure will
be made permanent for businesses, and will
not expire in 2026.
The Government will commit £4.5bn to
strategic investment in UK manufacturing over
the next five years and this includes a £2bn
investment in the zero-emissions vehicle
sector. A further £960m will be made available
for new green industry growth, focusing
onCarbon Capture Utilisation, Electricity
Networks, Hydrogen, Nuclear andOffshore
Wind.
Additionally in November 2023, the
Government and Ofgem jointly published a
Connections Action Plan, setting out a series
ofreforms to the process for connecting
generation projects to the transmission
network, with substantial progress expected
in2025 at the latest.
We will review the measures announced in the
Autumn Statement and the Connections
Action plan and the potential risks and
opportunities they present to the Group.
Environmental, Social and Governance (ESG)
management and reporting requirements are
being developed at the UK, EU and
international level. We continue to sustain our
focus on ESG matters and on meeting our
corresponding reporting obligations.
We await the outcome of a General Election in
2024 and are in close contact with the main
political parties to understand their policies on
overall governance of the energy industry,
taxation, storage and net zero (including
transport infrastructure for hydrogen) and will
monitor to assess the impact of any change in
Government.
The Financial Reporting Council published an
updated UK Corporate Governance Code in
January 2024. We are already working to
improve our Governance, control frameworks
and assurance policies and will ensure this
work aligns with the latest requirements.
Technology
We continue to invest in our Finance systems
to improve our controls, reduce duplication and
manual intervention, and the risk of errors or
omissions. We are strategically replacing or
integrating our Trading and SAP ERP systems.
In British Gas Energy, 5m customers have
been migrated to our new energy platform.
This is strategically critical to reduce our cost
to serve and deliver a quality service to energy
customers at a competitive price.
Deployment of the Simplified Integrated
Planning and Dispatch system (SIPD) and
Supply Chain Transformation in our Services
business is also key to transforming our
service to customers, allowing us to better
meet customer demand through streamlined
processes, increased efficiency and improved
responsiveness to customer needs.
This has not led to any changes in Principal
Risks, but transformation risk willbe
monitored within the BUs and functions as
these technology changes are delivered and
embedded.
Strategic report | Centrica plc Annual Report and Accounts 2023 29
PRINCIPAL RISKS
The following Principal Risks were adopted by the Board in 2023 and reflect the position of the Group at the point of signing the
accounts. The risks are presented in order of highest to lowest magnitude to the Group based on net residual risk, after mitigations.
The Risk Climate is the expected change in the risk landscape from the previous year’s risk review, based onthe environment and
controls inplace.
CREDIT AND LIQUIDITY RISK
Overview
Risk Category — Financial
Risk of financial loss due to counterparty/customer/third party default or a credit event limiting the availability of financial facilities or unsecured credit lines
¢ Hedging commodity price risk in the markets exposes Centrica to (i) credit risk, which is the risk of a loss if a counterparty fails to perform on its obligations or (ii) liquidity risk
when trades on exchange or with margining agreements result in collateral postings
¢ Trending directional price moves can lead to a build-up of mark to market positions which is a key component of credit and liquidity risk
¢ Volatile commodity markets can also increase cash and working capital requirements for both ourselves and our counterparties (with the latter increasing the risk that one of our
counterparties fails to perform and consequently increases the risk of contagion)
¢ Further information is included in the S3: Financial risk management section within the Supplementary Information to the Financial Statements
¢ Cost of living, higher levels of fuel poverty, and relatively high inflation are impacting customers’ ability to pay for their energy supply, which means overall customer bad debt has
notably increased. This has been further impacted by Ofgem’s moratorium on the installation of prepayment meters (PPMs) under warrant (in place from February 2023 to
January 2024). BG Energy are considering the timescales and permissions required in order to restart this activity
Mitigations
¢ Financial risks reviewed regularly in dedicated Risk Committee forums
¢ Credit risk teams actively manage and reduce credit exposures, taking account of liquidity considerations
¢ Credit mitigation instruments negotiated, as needed, including guarantees, and letters of credit and/or tenor and volume restrictions imposed to avoid exposures building
¢ Centrica Energy and Group Treasury work closely to monitor liquidity requirements under normal and stressed market conditions
¢ Capital Reporting is distributed to CLT members monthly and bi-annually to the Board, who agree a risk capital buffer to underpin Centrica’s strategy
¢ Access to diversified sources of committed and uncommitted liquidity
¢ Monitoring of forecast versus actual customer debt position, and review of the bad debt provision
¢ Increased bad debt risk from the restrictions on fitting prepayment meters under warrant is partly mitigated through additional support processes to help customers to repay
their debt
Developments
¢ Market prices persist at levels higher than historical averages, albeit lower than 2022 record highs
¢ Credit exposures have significantly reduced from 2022 levels and stand within the Group Credit Risk limits
¢ The higher interest rate environment has adversely affected some smaller sized, highly leveraged counterparties. These exposures are being actively monitored through the
various credit review forums
¢ In 2023, the multi-year committed credit facilities which are provided by Centrica's relationship banks were successfully refinanced
¢ Sources of liquidity have been increased and diversified over the year in response to the volatile energy markets witnessed in 2022
¢ In British Gas Energy the planned implementation of an end-to-end debt management system in H1 2024 will help to manage and respond to energy customer debt
RISK CLIMATE DETERIORATED
MARKET RISK
Overview
Risk Category — Financial
Risk of financial loss due to trends and volatilities in commodity prices
¢ Commodity exposure arises within the trading businesses, which provide a route to market for Centrica’s upstream/infrastructure and power generation operations, sourcing of
electricity and gas for the Group’s energy supply businesses and proprietary trading activities. We also have commodity exposures driven by our LNG portfolio, and in particular
the Cheniere contract
¢ Material movements in commodity prices can impact in-year P&L through revenue on sale of asset production, and impact on the long-term valuation of asset portfolios
¢ Hedging commodity price risk in the markets exposes Centrica to supply shock, an unexpected event that changes the supply of a commodity, resulting in a sudden change in
price
¢ Changes in our customer demand requirements can result in a commodity exposure as we balance our established hedges at market prices
Mitigations
¢ Review of hedging policies in bi-annual Group Risk Hedging Policy Committee
¢ The monthly Downstream Energy Margin Meeting is a forum for all relevant parties to review demand forecasting performance, hedge positions, risk and P&L, with actions
recorded and tracked to completion
¢ Hedging decisions and risk are agenda items at the monthly Finance Performance Reviews across the Group
¢ Financial risks reviewed regularly in dedicated Risk Committee forums, financial risk reporting is monitored against limits on a daily basis in Centrica Energy
Developments
¢ Prices and volatilities have reduced but remain elevated versus historical averages
¢ Optimisations to the Route to Market process ensure that hedging decisions are made and executed efficiently
¢ The financial impact of outage risk associated with the output of upstream/infrastructure assets remains high due to the higher price environment and the ageing asset
infrastructure
RISK CLIMATE IMPROVED
30 Strategic report | Centrica plc Annual Report and Accounts 2023
WEATHER RISK
Overview
Risk Category — Financial
The impact on present or future profitability resulting from volume impacts as a result of deviation to normal weather
¢ Downstream is exposed to revenue loss in warm weather which may be compounded by selling hedges at a loss
¢ When commodity prices are higher than the energy price cap allowance and the risk exposure is primarily to cold weather, additional volumes may be required for downstream
customers at a cost higher than can be recharged
Mitigations
¢ Dynamic hedging strategy approved by the Group Chief Executive, to reduce the exposure to high price and cold weather risk
¢ Options to mitigate weather risk in British Gas Energy, to narrow the range of gross margin outcomes, are reviewed ahead of winter seasons with decision rights held by the
Group Chief Executive
¢ The monthly Downstream Energy Margin Meeting is a forum for all relevant parties to review weather impact and hedging proposals and performance, with actions recorded
and tracked to completion
¢ Regular reviews ensure there is adequate access to liquidity in stressed cold weather scenarios
Developments
¢ Higher European gas storage levels have helped to mitigate the risk of winter supply shocks
¢ The risk is skewed to warm weather affecting revenue generation by the downstream business together with potential losses from selling back hedges
RISK CLIMATE STABLE
POLITICAL, LEGAL, REGULATORY OR ETHICAL INTERVENTION/COMPLIANCE
Overview
Risk Category — Compliance/Strategic
The risk of political or regulatory intervention and changes, failure to comply with laws and regulations, or greater regulatory scrutiny detecting unknown areas of non-
compliance
¢ The level of regulatory scrutiny particularly in relation to the retail energy supply and insurance businesses in the UK remains significant; driven by a heightened political focus on
the cost of living challenges for many consumers against the backdrop of an impending election
¢ Increased focus on ESG interventions and the impact on investor confidence in our responses
¢ Material or sustained non-compliance with legal or regulatory obligations could lead to financial penalties, reputational damage, customer churn and/or legal and/or regulatory
action
¢ Any material real or perceived failure to follow Our Code would undermine trust in our business
Mitigations
¢ Continuous engagement with policy makers and consumer groups to help form future regulatory requirements
¢ Dedicated Corporate Affairs and Regulatory teams which examine upcoming political and regulatory changes and their impact, with reporting to the Centrica Leadership Team
on an ongoing basis
¢ Understanding the expectations of stakeholders through reputational surveys and the review of media sentiment
¢ Continuous dialogue with Ofgem and the FCA to influence the regulatory environment
¢ The Board sets the tone from the top through Our Code and leadership behaviours
¢ Regulatory compliance monitoring activities performed by dedicated teams to drive Group-wide consistency and quality
¢ The Energy Compliance team has built capability in Energy Assurance to support the business with meeting complex regulatory requirements
¢ Control frameworks in place to deliver customer experience in line with requirements over sales compliance, billing, retentions, customer correspondence and complaints
handling. These are regularly reviewed by relevant leadership teams through KPIs
¢ The Financial Crime team monitors threats throughout the business and adequacy of response to the threat of bribery and corruption
¢ Our Code employee annual training represents our commitment to doing the right thing and acting with integrity. The training includes new mandatory topics such as
Consumer Duty and a refresher on all topic areas covered by our code of conduct
¢ A global ‘Speak Up’ helpline exists to provide a consistent Group-wide approach to reporting unethical behaviour
Developments
¢ Keeping pace with the volume, speed of implementation and complexity of political and regulatory change impacting the Group has proved challenging
¢ Ofgem will run a broad Compliance programme in 2024, including customer service complaints, direct debits and prepayment meter installation obligations
¢ New licence obligations introduced regarding installation of prepayment meters for reasons of debt.Ofgem is overseeing the process for a controlled ‘restart’
¢ Power granted to the Electricity System Operator to remove unviable projects from the grid connections queues
¢ We continue to advocate for a revised policy framework for Smart meters with Ofgem and Government
¢ Ofgem’s non-domestic market review is concluding, focused on improving transparency. Broker conduct remains a concern, with Ofgem seeking powers to regulate this
sector directly
¢ Centrica Energy is impacted by a number of regulatory changes to MiFID (Markets in Financial Instruments Directive), Remit (EU Regulation on Wholesale Energy Market
Integrity and Transparency) and EMIR (European Market Infrastructure Regulation)
¢ Centrica Energy investing in a Compliance Transformation Programme to respond to regulatory risks and improve Governance and controls frameworks
RISK CLIMATE DETERIORATED
Strategic report | Centrica plc Annual Report and Accounts 2023 31
CLIMATE CHANGE
Overview
Risk Category — Strategic
Risk of market, regulatory and policy changes driven by climate change affecting the ability of the Group to execute its strategy
¢ Increased pressure from Government, investors and customers to commit to meaningful carbon reduction targets
¢ Execution of the Group’s strategy to realise opportunities from the energy transition
¢ Timing and execution of British Gas pivot to decarbonised heating, power and transport products and services
¢ ESG management and reporting requirements are being developed at the UK, EU and international level and many have defined timelines in which Centrica, or its subsidiary
businesses, will be legally obligated
¢ Increased focus on ‘greenwashing’ and greater rigour on how organisations market low carbon products and propositions
Mitigations
¢ Monitoring of progress against People and Planet targets including net zero targets for our business and our customers
¢ Centrica’s Climate Transition Plan which outlines our approach to move to a low carbon future, published in 2021, will be updated in 2024 and subject to a non-binding vote at
the 2025 AGM
¢ Progress against our Climate Transition Plan has been incorporated into executive remuneration
¢ The SESC, which is chaired by an independent Non-Executive Director, typically reviews climate change information and the Climate Transition Dashboard three times a year.
The SESC additionally maintains oversight over material climate-related matters
¢ We have achieved full compliance in our 2023 Task Force on Climate-related Financial Disclosures (TCFD) reporting, reflected in pages 47 to 55
¢ New Business and Net Zero lines of business and Centrica Business Solutions develop innovative and competitive products and propositions to gain a significant footprint in
the growing low carbon market
¢ Green Claims Principles have been developed and implemented to manage ‘greenwashing’ risk across theGroup
Developments
¢ Continued geopolitical focus on COP28 and on how corporations respond to climate change
¢ The Government has extended the deadlines for both the phase-out of gas boilers and the ban on petrol/diesel vehicles to 2035 and increased the grant for Heat Pump
installations by £2.5k to £7.5k
¢ The European Corporate Social Responsibility Directive (CSRD) aims to create a sustainable economy for the EU. The CSRD requirements are broader in scope, complexity
and granularity of reporting on ESG matters and require assurance activity
In July 2023 the Group announced a new Investment Plan, to invest between £600m–£800m a year until 2028 in renewable generation, security and flexibility of supply, and
our customers. Our investment strategy will channel capital investment to realise investment opportunities from moving to a low carbon future. Examples of low carbon
energy projects include:
¢ Solar farm at Codford and battery storage development atBrigg
¢ Hydrogen initiatives include a partnership with HiiROC, testing injection at Brigg
¢ Centrica Energy Storage+ is investing to support potential repurposing of the Rough asset for production and hydrogen storage
¢ Spirit Energy is exploring the feasibility of converting the Morecambe gas terminal to a Carbon Capture Storage asset and has been awarded a carbon storage licence in 2023
¢ British Gas has published a second net zero homes index to understand public sentiment and to develop relevant products and solutions
RISK CLIMATE STABLE
CUSTOMER
Overview
Risk Category — Operational/Strategic
Failure to deliver satisfactory customer service leading to complaints or loss of customers
¢ Cost of living, higher levels of fuel poverty and relatively high inflation are impacting customers’ ability to pay for their energy supply, overall customer bad debt has notably
increased. This has been further impacted by Ofgem’s moratorium on the installation of PPMs under warrant (in place from February 2023 to January 2024). British Gas Energy
are considering the timescales and permissions to restart this activity
¢ Increased call volumes driven by Ofgem Price Cap changes and the Government’s EBRS and EBSS schemes concluding
¢ British Gas Services & Solutions peak services demand exceeding engineer capacity
¢ Bord Gáis Energy continue to operate in a highly competitive landscape with expected political and customer pressure to reduce prices further in Q1 2024
Mitigations
¢ Customer facing business units focusing on complaints reduction, root cause analysis and understanding customer pain points
¢ Customer Conduct Boards provide oversight to minimise customer detriment, complaints and regulatory action
¢ British Gas Services & Solutions continues to build delivery capacity measures through optimised planning and forecasting methodologies, and winter resilience activity
incorporating lessons learnt from 2022
¢ Continued deployment of SIPD
¢ British Gas Energy’s ongoing recruitment of frontline colleagues to maintain adequate attrition and recruitment levels with the aim of increasing the level of onshore Customer
Service teams; and the introduction of ‘blended’ working patterns and multi-skilling
Developments
¢ The energy crisis and customer affordability challenges, continue to drive unprecedented levels of customer contact
¢ British Gas Energy and Bord Gáis Energy has more than doubled its energy support package in 2023 compared to 2022, which now totals £140m since the start of the
energy crisis, and includes dedicated support for customers with PPMs in the UK (see page 6 and 16 for more)
British Gas Energy:
¢ PeakSave, the National Grid’s discount scheme to manage peak demand has been extended to Winter 2023/2024. The scheme rewards customers for using less electricity at
peak times
British Gas Services & Solutions:
¢ Consumer Duty Embedding Program established to ensure ongoing product value for our customers
¢ Improvement activities focused on enhancing customer service include data analytics to enable us to respond to our customers more effectively
Bord Gáis:
¢ Domestic energy customers will receive further assistance from the Government, a new €450 electricity credit payment to be paid in three instalments from December 2023.
The 9% VAT rate on electricity and gas will be extended for 12 months
RISK CLIMATE STABLE
32 Strategic report | Centrica plc Annual Report and Accounts 2023
PEOPLE
Overview
Risk Category — Operational
Risk of failure to attract, develop, engage and retain key talent
Risk of deterioration to the health and wellbeing of colleagues
¢ Failure to attract and retain key capabilities and safeguard the health and wellbeing of the workforce across the business could have a detrimental impact on our ability to meet
our strategic objectives
¢ The cost of living crisis and inflation impact on colleague mental health and wellbeing
¢ Labour market shortages for key skills impacting retention in some BUs and locations
Mitigations
¢ Quarterly Performance Conversations in place as part of the Terms and Conditions governance framework
¢ Monitoring of key metrics including the Quarterly Employee Engagement index, absence and attrition rates. Proactive implementation of actions to support colleagues
¢ Tailored strategies in place to address localised retention and recruitment issues
¢ Succession planning continues locally with assessments of critical roles and people, rolling up to a conversation with the CLT and with the Board
¢ Diversity, Equity and Inclusion Action Plans by BU and Function to increase diversity of representation at senior levels, improve equity of opportunity and promote continuous
behaviours
¢ Continuous focus on our values and culture aligned to our Purpose
¢ The Shadow Board provides a forum to engage with the CLT to influence decisions, positively disrupt assumptions, and challenge executives’ thinking to support colleague-
centred decision-making
¢ Open access to colleague-led employee networks, including working parents, fertility and carers networks, to build communities within Centrica
Developments
¢ Organisational change taking place to ensure our continued success and to help achieve growth through our net zero strategy. We will continue to monitor the impact on our
colleagues via wellbeing and engagement data sources
¢ Externally, the Trade Union environment remains active across all sectors. There are numerous high-profile disputes relating to pay and the increased cost of living
¢ Internally, we are in negotiation for a full pay review to be implemented in March 2024. Discussions are ongoing; the outcome of this negotiation is currently unknown
¢ Following the introduction of FlexFirst during lockdown, we have committed to adopting a hybrid working approach
¢ A Centrica-wide working group continues to support colleagues with the cost of living crisis including the introduction of lifestyle savings
¢ Colleague Support Foundation successfully launched with charity status and is supporting colleagues that need financial help and have exhausted other means
¢ As part of our ongoing commitment to Diversity, Equity and Inclusion, we have launched Courageous Conversations about Race training to provide colleagues with the
foundation to start their journey in helping us become an anti-racist organisation
RISK CLIMATE STABLE
SAFETY
Overview
Risk Category — Operational
Risk of occupational, transportation, customer/third-party fatality or injury due to safety hazards
¢ Our operations have the potential to result in personal harm
¢ Significant Health, Safety and Environment (HSE) events could have regulatory, financial and reputational repercussions that would adversely affect some or all our brands and
businesses
Mitigations
¢ Regular review of HSE risks to ensure they are reduced to as low as reasonably practicable
¢ Continued investment in training and competency to ensure maintenance of safe operating practices
¢ HSE Management Systems are established to include policies, standards and procedures to protect employees, third parties and our environment
¢ Assurance over our HSE processes and controls provided by our in-house HSE teams supported by external subject matter experts, where needed
¢ Leadership to drive improvements in HSE maturity and continuous improvement in key metrics
¢ Our approach to customer visits is continually reviewed to ensure that employees are operating in line with Government guidelines and/or industry best practices and that the
health and safety of employees and customers is maintained
Developments
Management is enhancing existing HSE frameworks to respond to changing risks as the Group strategy evolves to include the following activities:
¢ The continued operation of Rough as a storage facility and potential repurposing for hydrogen production and storage
¢ The expansion of the services businesses
¢ Development of new peaking plants in the UK & Ireland
¢ Construction of a battery storage project at Brigg
¢ Ongoing trial with HiiROC (a Green Technology company) to inject hydrogen into a gas peaking plant at Brigg
RISK CLIMATE STABLE
Strategic report | Centrica plc Annual Report and Accounts 2023 33
CYBER
Overview
Risk Category — Operational/Compliance
Risk of failure to prevent impacts from denial of service, cyber espionage and the related theft/disclosure of confidential/customer data leading to reputational, regulatory and
financial impacts
A cyber-attack could present to Centrica as follows:
¢ Confidentiality: leakage of customer or company confidential data by threat actor, third party, staff or system error, either maliciously or by accident
¢ Integrity: inaccuracy of Centrica’s data due to malicious or accidental alteration by internal or external parties, or malicious actors
¢ Availability: loss of assets, including data, due to a cyber compromise
Due to the diversity of Centrica’s technology, the Group could suffer any or all of the above which could lead to:
¢ Regulatory compliance impact or fines, including but not limited to, General Data Protection Regulations (GDPR), Smart Metering obligations (Ofgem), Security of Network &
Information Systems Regulations 2018 and enhanced NIS II
Mitigations
¢ Ongoing threat intelligence gathering, collaboration and information sharing with industry peers and National Cyber Security Centre
¢ The Cyber Security Change Programme builds security capabilities and improvements in controls that increase the difficulty of targeting Centrica and being able to exploit
weaknesses without detection
¢ The Ransomware Programme has delivered improvements to enhance Centrica’s ability to co-ordinate and recover from a ransomware attack
¢ Enhanced cyber controls dedicated to protecting operational technology (control systems used to manage domestic, commercial and industrial processes) have been
implemented
¢ Training and awareness campaigns delivered to all employees in 2023 and focused training has been developed for key groups to raise awareness and highlight responsibilities
in protecting data
¢ Cyber-attack simulations to identify and remediate controlgaps
Developments
The current geopolitical situation and advancements in technology have increased the complexity of the external threat landscape. This can be attributed to several factors:
¢ Political instability in certain regions of the Middle East
¢ In Ukraine there have been several high-profile cyber-attacks on energy infrastructure
¢ The rapid pace of technological development has made it easier for cyber criminals to launch sophisticated attacks on all sectors including energy and utilities
¢ Artificial Intelligence (AI) poses a new threat to cyber security. The risk of misuse of AI to create complex attacks is expected to increase rapidly with AI tools becoming cheaper
and more accessible
¢ The targeting of supply chains as a mechanism to attack firms by exploiting the trust between known suppliers
¢ The volume, sophistication and frequency of ransomware attacks has evolved, with the most catastrophic bringing down IT systems within very short timeframes, and in some
circumstances leading to publication of exfiltrated data
¢ The increased connectivity of operational technology presents an opportunity for attackers that if exploited could cause major harm and disruption to industrial processes
including processes in the energy sector
Our business strategy to expand to low carbon markets and help our customers toward net zero may increase our regulatory obligations in maintaining our cyber security
posture, requiring enhanced Governance and external regulator oversight
RISK CLIMATE DETERIORATED
OPERATIONAL ASSET INTEGRITY
Overview
Risk Category — Operational
Risk that impaired structural or asset integrity, resulting from any of a failure in design, failure in appropriate maintenance and inspection, operating outside of design
conditions and/or human error, leads to a major accident (such as loss of containment of flammable/hazardous materials or structural collapse) that could result in multiple
fatalities and/or major damage to the environment
¢ Failure to invest in the inspection, maintenance and development of our assets could result in significant safety issues, such as personal or environmental harm, or asset
underperformance through unplanned outages
¢ Failure to capture adequate return on our nuclear investment due to operational issues or early station closures suppressing earnings and cash flows
Mitigations
¢ The Group Annual Plan includes contingencies to cover events such as unexpected outages from assets
¢ Group-wide minimum operational and safety standards are applied to all assets, whether operated or non-operated, and adherence against them is monitored and reported
¢ Maintenance activity and improvement programmes are conducted across the asset base to optimise effectiveness and maximise production levels
¢ We use our presence on the Board of EDF Energy Nuclear Generation Group Limited to monitor the performance of the nuclear fleet
¢ Continued investment in training to ensure maintenance of safe operating practices
¢ HSE Management Systems are established to include policies, standards and procedures to protect employees, third parties and our environment
¢ Continuous engagement with regulatory agencies such as the Environment Agency, North Sea Transition Authority and UK Health and Safety Executive
¢ Assurance over our HSE processes and controls provided by our in-house HSE teams supported by external subject matter experts, where needed
Developments
¢ The Whitegate Plant operated with strong availability and reliability in 2023. As the plant ages and we move to more flexible generation, plant reliability and safety risks will need
to be carefully managed as the impact of any outages can be significant. A close focus on long-term asset integrity is required through proactive management, maintenance
and investment
¢ Rough gas storage facility reopened in October 2022, with increased levels of inspection and ongoing maintenance. The Group Insurance team continues to discuss the cost
and benefits of business interruption cover with relevant BUs
¢ The HSE Function works with the business to ensure effective HSE resources and competency operate consistently and effectively across the business
¢ Spirit Energy continues to focus on safely delivering production from existing assets; meeting and de-risking decommissioning obligations and pursuing strategic energy
transition opportunities from existing assets
¢ The Nuclear fleet has performed well in 2023 with strong reliability metrics, although outage downside risks are binary and potentially significant. In March 2023, a two-year
lifetime extension was announced in respect of Heysham 1/ Hartlepool. Our nuclear business has also announced an ambition to further extend the lives of the four
generating Advanced Gas-cooled Reactor stations (Heysham 1&2, Hartlepool, Torness), subject to inspections and regulatory approvals. There is a strategic intention to
extend our Pressurised Water Reactor station Sizewell by 20 years to 2055. The nuclear business continues to monitor performance and station lifetimes very carefully
RISK CLIMATE STABLE
34 Strategic report | Centrica plc Annual Report and Accounts 2023
ASSESSMENT OF VIABILITY
REQUIREMENT
In accordance with provision 31 of the UK Corporate Governance
Code the Directors have assessed the prospects and viability of the
Group considering the business model (as set out in the Strategic
Report on pages 2 to 3), current position in the context of liquidity and
credit metrics of the Group, and Principal Risks.
ASSESSMENT OF PROSPECTS
The assessment considers the current position of the Group, the
Group’s strategy, longer-term market trends and customer needs, and
the Group’s Principal Risks as well as forecast cash generation against
long-term obligations to repay debt and fund the defined benefit
pension schemes.
Our business model is designed to allow us to focus on meeting the
changing energy supply, services and solutions needs of our
customers, helping them transition to a lower carbon future while
positioning ourselves to deliver returns for shareholders and meet our
broader obligations to society over the long term.
Key factors in assessing the long-term prospects of the Group include
the following:
1. The Group’s competitive position today
Centrica has strong brands with large customer bases as the number
one supplier in many of the markets in which it operates. In its core
markets: British Gas Energy and British Gas Services & Solution are the
largest residential energy supplier and home services provider in the
UK; Bord Gáis Energy is the second largest residential energy supplier
in Ireland; and the Centrica Energy business is a leading route to
market services provider across Europe. Centrica also has the largest
heating engineer workforce in the country who are highly trusted by our
customers and well positioned to continue to support new fuels and
technologies.
In assessing our prospects beyond the strategic planning period, the
Board considers how these strengths position the Company to grow
long term shareholder value.
2. Market trends affecting future prospects
¢ Commodity price volatility and its impact on the UK energy supply
market;
¢ Cost of living crisis and its impact on our customers;
¢ Increasing progress and Government support for net zero,
corporates committing to clear net zero targets;
¢ Competition remains intense with margins under pressure within our
retail business, and we expect that may remain the case as the
market emerges from the current crisis;
¢ Falling costs for battery, solar and wind, electric vehicles deployment
accelerates, growing need for flexibility;
¢ Increasing LNG demand; and
¢ Role of data analytics, artificial intelligence, and automation
increasingly important.
We continuously monitor emerging trends to proactively identify
potential risks and strategically shape our investment approach where
we could leverage a competitive advantage.
3. Customer needs
¢ Hassle-free, empathetic, personalised, and safe service. Offering
solutions, not just products;
¢ Responsible options (including green tariffs) and expert guidance to
help them achieve their net zero goals;
¢ Trusted and credible counterparty; and
¢ Lower costs and greater efficiency.
We put customers needs at the centre of everything we do and this is
the core part of our strategy, as set out in the People and Planet and
Strategic Report sections of this Annual Report and Accounts on
pages 41 and 10 respectively.
4. The Group’s strategic objectives
The Group’s strategic purpose is to energise a greener, fairer future –
because we believe in energy that works for colleagues, customers and
communities, today and tomorrow, as set out on page 2 of this Annual
Report and Accounts. This supports the assessment of the Group’s
prospects.
5. The Principal Risks facing the Group, as set are out on pages
28to34
The risks we consider to be of greatest significance in assessing our
prospects include:
¢ Political or regulatory intervention, including increased focus on ESG
interventions and responding to climate change;
¢ External risks associated with weather, commodity price movements
and the cost of living crisis;
¢ Risk of financial loss due to counterparty default or a credit event
limiting the availability of financial facilities or unsecured credit lines;
¢ Compromised asset production and health and safety impacts of
process loss of containment; and
¢ Operational risks associated with the effectiveness of our internal
control environment in relation to cyber risk, data protection and
customer conduct.
Climate change is one of the most important drivers guiding Centrica’s
prospects today and is a core part of our Purpose as reflected by the
actions we have taken, which include:
¢ We’ve outlined our plans for how we intend to decarbonise power,
heat and transport through our Climate Transition Plan;
¢ We will continue to build out our green supply and solutions offerings
for customers;
¢ We’re training the next generation of apprentices to deliver low
carbon technologies like heat pumps and electric vehicle chargers
while exploring the future of hydrogen; and
¢ We’re committed to capital investment of £600–800m per year
until 2028, of which we are aiming for at least 50% into green
taxonomy eligible projects as set out on pages 47 to 56.
Good progress has been made on managing the prospects of the
Group during 2023. We continue to simplify our management structure
and increase the proportion of our colleagues who interact directly with
customers, enabling us to put customers at the heart of everything we
do. In addition, our balance sheet is now much stronger than in
previous years, with an improved adjusted net cash position as at
31December 2023.
The Board has confidence in the long-term prospects of the business.
The Board believes that the strategic steps taken in 2023 aligned with
the Group’s revised strategy as outlined in the July 2023 strategy
update will set the Group up to be successful and generate sustainable
profits in the long term while investing in renewable generation, security
of supply and our customers.
ASSESSMENT OF VIABILITY
The assessment is based on the Group Annual Plan for 2024 and the
longer-term strategic forecasts which are approved annually by the
Board. The Board continues to believe that a three-year time horizon is
the appropriate timeframe to assess viability and is also consistent with
the Group’s planning cycle and the period of reasonable visibility in the
energy markets. The Group’s focus on the energy supply and services
businesses means the most significant risks continue to be shorter-
term in nature including, commodity prices, trading performance,
margin cash requirements, weather, and asset performance.
Strategic report | Centrica plc Annual Report and Accounts 2023 35
Important context to the Viability Assessment is the management of the
Group’s financing profile through accessing a diverse source of term
funding and maintaining access to carefully assessed levels of liquidity
which support the Group’s planned financial commitments. During
2023, Centrica successfully refinanced the core credit facilities with
strong support from the relationship bank group. As at 31 December
2023, the Group had total committed credit facilities of £5.3bn, of
which £0.2bn expire in 2024, £1.0bn expire in late 2026 and £4.1bn
expire in 2028. Of the £5.3bn of committed credit facilities, a total of
£3.8bn remained undrawn as at 31 December 2023.
While commodity prices have shown a notable decrease in volatility
throughout 2023, and the Group anticipates a relatively stable trend in
2024, 2025, and 2026, it is crucial to acknowledge that in a setting
characterised by erratic commodity prices, the Group's portfolio
presents greater potential for value capture and outperformance.
However, it comes with a considerably broader range of risk outcomes.
In such an environment, the pressure on liquidity intensifies, making it
imperative for entities to focus on ensuring access to a reliable and
diverse portfolio of financial resources.
In addition, the cost of living crisis continues. Although inflation has
started to fall in 2023 it could remain elevated due to underlying
pressures. As a result, the Group is exposed to elevated levels of bad
debt as customers struggle to pay their bills.
To reflect the current volatility of risk factors, the Company has used
judgement to determine severe but plausible scenarios and has
modelled three versions of the Viability Assessment to give a high, base
and low-price scenario. These scenarios reflect a range of reasonably
possible increases or decreases in commodity prices due to market
conditions. The price curves used for the high and low scenario are
summarised right:
LOW PRICE ENVIRONMENT
2024 2025 2026
NBP (p/th) 69 68 68
Baseload Power (£/Mwh) 54 56 52
HIGH PRICE ENVIRONMENT
2024 2025 2026
NBP (p/th) 319 210 162
Baseload Power (£/Mwh) 245 189 134
Viability was initially assessed based on August 2023 prices. We have
continued to monitor these price changes to ensure that our base, high
and low curves remain appropriate and specifically whether our base
assumptions remain within the high to low range. As a result of this
exercise, the high and base price scenarios were not adjusted (as the
base scenario remained within the high to low range).
Commodity prices for NBP have fallen sharply in January 2024 and
consequently we have also completed a separate assessment based
on an updated low curve to confirm that the Group remains viable in
the event that both NBP and baseload power fell further.
REVISED LOW PRICE
ENVIRONMENT
2024 2025 2026
NBP (p/th) 46 50 52
Baseload Power (£/Mwh) 47 44 44
The four scenarios share the same risks but, where relevant, the risks
were flexed to reflect the Group’s exposure in each scenario. We have
modelled groups of risks within ‘clusters’. It is not plausible that all risks
would occur at the same time, and therefore each of the clusters is
considered as a plausible combination of risks. The table below details
the risk clustering and linkage to Principal Risks. Each of the clusters
includes common risks throughout in addition to the risks associated
with the cluster. The risks relating to commodity price, margin cash,
bad debt, credit risk, cyber risk and letters of credit were selected as
constant events in all four clusters.
RISK CLUSTER RISK DESCRIPTION LINKS TO PRINCIPAL RISKS
RISK >5% OF
OPENING
HEADROOM?*
Commonrisks
Commodity price impacts on earnings of asset-based
businesses
¢ Financial Markets – Market Risk
Increased margin cash requirements arising from adverse
market conditions
¢ Financial Markets – Credit & Liquidity Risk
¢ Financial Markets – Market Risk
Higher bad debt due to cost of living crisis ¢ Financial Markets – Market Risk
¢ Financial Markets – Credit & Liquidity Risk
Cyber-attack – risk of failure to prevent denial of service ¢ Cyber
Credit Risk: risk of financial loss due to counterparty default ¢ Financial Markets – Credit & Liquidity Risk
Removal of 25% of drawn uncommitted Letters of Credit ¢ Financial Markets – Credit & Liquidity Risk
Cluster 1: Industrial
&Regulatory
Regulatory risks in relation to loss of sensitive data
¢ Political, Legal, Regulatory or Ethical Intervention/
Compliance
Operational impact of sustained employee industrialaction ¢ People
¢ Customer
Cluster 2: Asset
Performance
Significant disruption to the asset-based businesses leading
to loss of production and earnings
¢ Operational Asset Integrity
¢ Safety
Cluster 3: Adverse
Retail Market
Significant adverse weather event and commodity
pricevolatility
¢ Financial Markets – Weather Risk
Cluster 4: Trading
Business Under-
performance
Underperformance of trading business ¢ Financial Markets – Market Risk
See note below** Increased collateral requirements arising from a single-notch
credit rating downgrade
¢ Financial Markets – Credit & Liquidity Risk
* Headroom is calculated as undrawn committed facilities plus total liquid resources.
** A credit rating downgrade risk has only been applied to scenarios where the stressed credit metrics indicate Centrica would be at significant risk of downgrade by the
credit agencies.
36 Strategic report | Centrica plc Annual Report and Accounts 2023
Group-wide assumptions include:·
¢ No material acquisitions or disposals of Group business areas; and
¢ An updated investments profile in line with the July 2023 strategy
update;
¢ Centrica have a long-standing relationship bank group and
successfully refinanced the committed credit facilities in 2023. As
such, the Directors are confident in the ability of Centrica to refinance
appropriate credit facilities; and
¢ Access to Commercial Paper and Debt Capital Markets as
sources of liquidity.
LIQUIDITY REQUIREMENTS
Centrica has established enhanced processes to manage and monitor
liquidity requirements across the entire organisation with a focus on
trading entities and possible increased cash margin requirements.
These processes include:
¢ Monitoring reasonably possible scenarios for increased liquidity
requirements because of changes in commodity prices and market
conditions; and
¢ Ensuring Centrica maintains ample headroom to address
reasonably anticipated liquidity needs throughout the Viability
Assessment period. This entails ensuring flexibility in accessing
debt capital markets and a range of additional resources as
needed, including committed credit facilities, uncommitted letters
of credit, commercial paper, and various other short-term
funding options.
Centrica has also established enhanced governance measures to
review liquidity forecasts under various scenarios and implement
mitigating actions where appropriate.
Centrica uses sophisticated modelling and analysis of the volatile
market conditions over the last two years, and market forward data to
determine severe but plausible scenarios of the liquidity requirements of
the whole Group. These include high and low-price scenarios which are
reflected in the Viability Assessment. While these scenarios include
assessing to stressed market conditions that may arise in the future,
they will not necessarily predict future conditions given markets are
volatile. Therefore, Centrica maintains and monitors the liquidity
requirements across the business to ensure sufficient headroom is
retained.
Regular assessments are performed of the credit worthiness of
counterparties that Centrica trades with and pay and receive cash
margin calls from. These include assessing the level of exposure to
counterparties, monitoring and dynamically managing credit limits and
arranging credit enhancements such as requiring letters of credit from
financial institutions.
OUTCOME OF VIABILITY ASSESSMENT
The viability scenarios have been assessed to confirm whether the
Group would have sufficient liquidity available to meet its future planned
financial commitments, and that the credit metrics calculated would not
imply a sustained fall to below investment grade credit ratings (S&P
BB+ and Moody’s Ba1).
To reach a conclusion as to the Group’s viability, the Directors have
considered the following:
¢ The Directors considered whether any of the scenarios and clusters
of risks noted above breached the available headroom in the three-
year period and concluded that sufficient headroom was available in
all scenarios; and
¢ The Directors considered whether any of the scenarios indicated
a deterioration in the credit rating metrics which would lead to a
two-notch downgrade, to sub-investment grade. They
concluded that the Group has a reasonable expectation that its
net debt ratios would continue to sustainably support investment
grade ratings (at least BBB- for S&P, and at least Baa3 for
Moody’s) for all scenarios.
While mitigations were not required in any of the above scenarios to
ensure the Group was viable, additional mitigations could be deployed
to increase headroom and reduce the risk of a credit downgrade,
including reductions in operational and capital expenditure.
Reverse Stress Testing identified that there are some extreme risks that
could theoretically result in Centrica entering a position whereby its
financial resources were insufficient to meet its liabilities as they fall due.
However, given the current financial strength of the Company, the
combination of events required to achieve this scenario is extremely
unlikely to occur. We therefore believe that these risks do not represent
a ’severe but plausible’ threat to the viability of the Company.
CONCLUSION
The Directors have considered all the above factors in their assessment
of viability, including the availability of mitigating actions within their
control if one of the scenarios above materialises. We have performed
sensitivity analysis that enables the Directors to confirm that they have
areasonable expectation of the Group’s ability to continue to operate
and meet its liabilities, as they fall due, over a period of at least
threeyears.
Strategic report | Centrica plc Annual Report and Accounts 2023 37
Amongst our many successes we’ve donated
and fundraised £4 million to make a big
difference to charitable causes we all care
passionately about acrossour local
communities. We are helping colleagues and
customers as much as possible with ongoing
energy and cost of living issues. We continued
with our returns to shareholders which will also
benefit the majority of our colleagues who are
or will become shareholders due to our Global
Profit Share award.
COLLEAGUE ENGAGEMENT
I am delighted that colleague engagement has
continued to improve quarter on quarter
improving by 0.3 points to 7.7 by the end of
the year, which is just below top quartile
performance for our sector. Our engaged
workforce is also working alongside other
business initiatives to continue improvements
in our customer satisfaction journey, and we
can see confidence in our products and
services rising.
LISTENING TO OUR PEOPLE
The Shadow Board is a Centrica Leadership
Team sponsored initiative introduced in 2021.
The Shadow Board comprises ten colleagues,
each with different knowledge and experience,
and all from different business units and
functions and at different levels across the
Group. The Shadow Board provides an
opportunity for the views of colleagues to
positively challenge assumptions and influence
decisions by offering a colleague perspective
on a range of topics, including those of a
strategic nature. The Shadow Board is not
expected to deliver outcomes independently.
One key outcome that led from feedback from
this process between the CLT and the
Shadow Board is the closer relationship that
has been actively developed between our
networks and our British Gas Field colleagues.
DEVELOPING NEW CAPABILITIES
During 2023 we also made some leadership
appointments which will support the growth
of our businesses and achieve a cleaner,
greener future. The new business of ‘New
Business and Net Zero’ will continue to build
our in-home net zero offering to residential
customers and ensure that all of us at
Centrica continue to play a leading role in the
energy transition. Our new Chief Customer
Officer role will strengthen the voice of our
customers, continuously pushing the team to
create a customer experience that promotes
loyalty and retention for new and existing
customers. In the wider workforce, we
continued to grow our professional capability
during 2023 with over 1,000 professional
colleagues joining our Group. Our award
winning Graduate & Summer Placement
Programme and our Ex-Forces Pathway
programme supports our People Strategy
andour Workforce for the Future aspirations
and demands.
Career mobility and developing our internal
talent is critical and we have a consistent,
future-focused Talent Framework and Talent
Review approach in place which enables all
people managers to better understand team
strengths of today and development for
tomorrow.
We continue to secure our net zero
commitments by investing in our customer
facing teams and our training academies.
Thisincludes building skills for today and the
future in purpose-built locations and driving
new apprenticeship pathways, giving us the
opportunity to serve our customers with up
todate skills and technologies.
38 Strategic report | Centrica plc Annual Report and Accounts 2023
Jill Shedden MBE | Group Chief People Officer
GROUP CHIEF PEOPLE
OFFICER’SREPORT
Our People function has
made a huge contribution
to Centrica as we have
partnered change in the
business, and our positive
colleague engagement
scores illustrate our
colleagues’ appreciation
for the strong and
supportive culture
withinCentrica.
2023 has been another extraordinary year for
Centrica. I am really proud of what all our
colleagues have achieved together to adapt to
changing business needs and to support our
customers and each other throughout the year.
We believe our culture is a unique one, with our
‘caring’ and ‘delivery’ values standing out.
COLLEAGUE NETWORKS
I am incredibly proud that we have a number
of active colleague-led networks that operate
across Centrica. Our networks cover areas
such as gender, sexual orientation, family,
community, disability, health and wellbeing
andethnicity.
We have over ten employee-led networks and
we are proud of what our employee networks
are achieving. They play a key role in
partnering with the organisation to drive
change and make our workplace a more
inclusive place for our people to thrive in and
be themselves.
Centrica Forces Network is a group of
colleagues across all areas of Centrica who
have either served in, or are serving reservists
in the Armed Forces, or have an interest in
being part of a community that supports these
groups of colleagues. The objective is to
create a diverse community that supports
veterans and reservists within Centrica
ensuring that we become an employer of
choice for these groups. The network has had
some great success with its Armed Forces
pathway which brings talented veterans,
serving reservists, those about to leave the
armed forces, military spouses, and partners
into our Group. We are delighted that our
Forces network has recently been shortlisted
for Employee Network of the Year at the
British Diversity Awards.
Our Carers Network is a support group
where colleagues are able to connect with
others (who may or may not be carers) who
can share ideas and information about any
aspect of caring. Centrica has a long and
proud history of supporting colleagues who
are juggling work and care and 2024 will be
the Carers Network’s 20th anniversary. We
were the first company to earn Carers UK’s
‘Carer Confident Ambassador’ accreditation
and we have maintained this high standard
since with an industry-leading Carers Leave
Policy. I am proud that Centrica’s values for
caring shine through in all that we do.
LOOKING AFTER COLLEAGUES
ANDTHEIR LOVED ONES
Health, safety and wellbeing are part of
everything we do. We believe providing
education, tools, resources, and benefits
tosupport these key priorities, can lead toa
healthier, happier workforce and a more
prosperous workplace.
Centrica is focused on our colleagues being
able to speak openly about the issues
affecting their personal lives, as we know that
not only is the support important to their
mental and physical wellbeing, but that it is
beneficial to retention and productivity.
Looking after wellbeing is not about making
drastic changes but rather implementing
healthy habits that can help colleagues
manage everyday stressors better. We do our
utmost to create an environment and culture
where looking after wellbeing comes naturally
and is integrated into the way we operate.
Our healthcare plan which is available to all
colleagues includes many wellbeing benefits,
such as nutritional advice, physical health,
emotional wellbeing, menopause support,
giving peace of mind to colleagues and
theirfamilies.
PROACTIVE HEALTH
We have a proactive wellbeing programme
with the aim to raise awareness of difficult and
taboo subjects. We have run multiple events
on menopause, mens’ mental health, suicide
and mental wellbeing with colleagues, experts
and GP’s attending and sharing experiences
and recommending practical actions to
support, which have been attended by
thousands of colleagues. We have ongoing
reporting across many health metrics which
allows us to see any trends, concerns and
improvements. These insights drive our action
planning for the future.
LOOKING AFTER OUR COLLEAGUES
THROUGH THE RISING COST
OFLIVING
During 2023 our colleagues have continued to
face the cost of living crisis, it is important that
we support our colleagues during this time.
We have increased our colleague energy
allowance to pay a proportion of the energy
price cap. Furthermore, with inflation hitting all
aspects of life, we introduced a new charitable
trust ‘The Colleague Support Foundation’.
This gives access to funds in time of financial
need. Since our launch in July2023, we
havesupported over 100 colleagues and
paidout c.£100k. The payments range from
supporting colleagues with the funeral cost of
a loved one or covering food costs to feed
their families. Colleagues do not have to pay
the moneyback.
SHARE IN THE COMPANY’S SUCCESS
In 2023 we granted a further Global Profit
Share award to all colleagues, relating to our
profits in 2022. The award was made in
shares so our colleagues share in our success
as we continue to grow our business. We
willbe making another profit share award in
shares in 2024, relating to our 2023 profit.
100+
Colleagues supported by
The Colleague Support Foundation
20,044
Colleagues who received a profit share
payment in 2023.
Strategic report | Centrica plc Annual Report and Accounts 2023 39
OUR PATHWAY TO PARENTHOOD & PROACTIVE HEALTH
In June 2023 we launched our
biggest support package yet to help
our colleagues who are struggling
with fertility. Our ‘Pathway to
Parenthood’ package, which is
available to all our UK employees as
part of their healthcare plan, offers
comprehensive financial support
towards fertility treatment. This can
be used for IUI, IVF, and egg or
sperm donation and storage. It can
also be used to cover costs for
adoption or surrogacy. Additionally,
we offer colleagues five days paid
leave for their fertility treatment,
adoption, or surrogacy appointments
per year. We are already seeing the
positive impact that the package is
making, helping our employees feel
supported whilst they go through
huge changes in their personal lives.
We have a suite of health and
wellbeing resources and benefits,
including our 120+ strong Mental
Health First Aider Network, Wellbeing
app, 24-hour access to a GP and
a24-hour emotional support line. We
provide Mental Health Training for
Leaders and have added two
wellbeing vans to our wellbeing
portfolio this year allowing us to get
out and visit our remote workers to
provide health and wellbeing
consultations where they conduct
‘Know your numbers’ tests,
functional movement screening and
emotional signposting.
WHAT OUR COLLEAGUES SAY ABOUT HEALTH AND WELLBEING AT CENTRICA
40 Strategic report | Centrica plc Annual Report and Accounts 2023
“ Really pleased to have these sessions
to continue the conversations on
women’s health and menopause.
Ithelpsreduce the stigma in workplace
andhelps to know, that as a woman,
youhave a support network.”
“ I found this very interesting from various
perspectives. I am a manager, a parent to a
daughter who struggles with anxiety and
having never suffered with anxiety myself the
menopause has started to produce anxiety
symptoms. It is great how much support
Centrica offer around mental health.”
“ I am very grateful to Centrica for providing
such an informative session on menopause
and embracing the subject. This is a subject
that gets brushed under the carpet in so
many organisations so thank you Centrica.”
“ This topic is very close to me both
professionally and personally. I found the
training very useful and opened my eyes on
a few aspects of life that I will be more
considerate on.”
“ Thank you for arranging the webinar,
itwas truly appreciated. I felt privileged
towork at Centrica and came away
fromthe call feeling so engaged and
motivated. I felt I learned strategies to help
myself and others which is fantastic.”
PEOPLE AND PLANET
Our People & Planet Plan consists of five
Group-wide goals that accelerate action on
issues that matter deeply to our business and
society, and where we’re well-placed to make
a world of difference – from achieving net zero
and creating the diverse and inclusive team
we need to get there, to contributing to the
communities we’re all partof.
In 2023, we made really positive progress
toward the majority of our goals but we’re
behind on others (see pages 42 to 44). This is
partly because transformation takes time, and
partly because we re-focused efforts to help
customers and communities through the
energy crisis which has been a top priority.
Consequently since 2022, we’ve donated
£140 million to support people with their
energy bills.
With the plans we have in place, we’re
confident we’ll get back on track to meet our
goals in the years ahead. Central to this will
becontinuing to work closely with key
stakeholders like colleagues, communities and
governments, to help progress our goals and
manage wider activities responsibly. In doing
so, we can deliver on our Purpose of
energising a greener, fairer future, whilst
contributing positively to the United Nations
Sustainable Development Goals (SDGs).
READ MORE ABOUT OUR PEOPLE &
PLANET PLAN, CLIMATE TRANSITION
PLAN, SDGs AND MORE AT
CENTRICA.COM/PEOPLEANDPLANET
READ MORE ABOUT OUR NON-
FINANCIAL KPIS ON PAGES 249 TO 251
“ I’m really proud of what we’ve
achieved through our People &
Planet Plan and beyond – whether
that’s doing more than any other
energy supplier to help consumers
with their energy bills, or creating a
pipeline of flexibleand low carbon
assets that provide the energy we
need today and through the energy
transition. The road ahead won’t
beeasy but I’m excited tobe
energising a greener, fairer future.”
Chris O’Shea | Group Chief Executive
Strategic report | Centrica plc Annual Report and Accounts 2023 41
(1) All company and senior leaders to reflect latest 2021 Census data for working populations. This means 48% women, 18% ethnically diverse, 20% disability, 3% LGBTQ+
and 4% ex-service by 2030 (40% women, 16% ethnically diverse, 10% disability, 3% LGBTQ+ and 3% ex-service by the end of 2025).
OUR PEOPLE & PLANET PLAN
Supporting communities, our planet and each other
PEOPLE
Supporting every colleague to be themselves to
better serve our customers and communities.
WE WANT TO:
¢ Create an engaged team that reflects the full
diversity of the communities we serve by 2030
(1)
¢ Recruit 3,500 apprentices and provide career
development opportunities for under-
represented groups by 2030
(2,000 apprentices by the end of 2025)
PLANET
Supporting every customer to live more
sustainably.
WE WANT TO:
¢ Help our customers be net zero by 2050
(28% greenhouse gas intensity reduction
by theend of 2030)
¢ Be a net zero business by 2045
(40% greenhouse gas reduction
by the end of 2034)
¢ Inspire colleagues to give 100,000 days to build inclusive communities by 2030 (35,000 days by the end of 2025)
DOING BUSINESS RESPONSIBLY
Underpinned by strong foundations to ensure we act fairly and ethically – from customer service to human rights
Creating a more inclusive and
sustainable future that supports
communities, our planet and
each other.
PEOPLE
Supporting every colleague
to be themselves to better
serve our customers and
communities.
By 2030, we want to:
Create an engaged team that reflects the full
diversity of the communities we serve – this
means all company and senior leaders to be
48% women, 18% ethnically diverse, 20%
disability, 3% LGBTQ+ and 4% ex-service
(1)
2023 PROGRESS
Progress against goals: l On track l Behind
ALL
COMPANY
(2)
SENIOR
LEADERS
(2)
Women
30% l 32% l
– Excluding
Field engineers
41% l 32% l
Ethnically
diverse
15% l
9% l
Disability
3% l 2% l
LGBTQ+
3% l
2% l
Ex-service
2% l 2% l
(1) Updated at the start of 2023 to align with newly
released 2021 Census data for working populations.
We aim to be 40% women, 16% ethnically diverse,
10% disability, 3% LGBTQ+ and 3% ex-service by
the end of 2025.
(2) Beyond gender, data is based on voluntary
disclosure of 74% ethnic diversity, 45% disability,
51% LGBTQ+ and 3% ex-service. All company
relates to everyone who works for Centrica. Senior
leaders include colleagues above general
management and spans seniorleaders, the Centrica
Leadership Team and the Board.
To build a more sustainable future, we need
the best team – a diverse mix of people and
skills, where different thoughts and ideas can
grow, and where everyone feels welcome and
able to succeed.
Towards this in 2021, our leadership team
shared an open letter with colleagues that set
out our plan for attracting, promoting and
retaining more diverse talent. Since then,
we’ve seen strong progress as better
recruitment and retention practices provided
an initial boost to the majority of our diversity
goals which improved by up to 4%.
Our performance in 2023 has, however,
remained relatively static and indicates that it
may take time to deliver systemic change
across our business and society. In particular,
diversifying senior levels and growing disability
representation are areas for us to work on.
Attracting more women into engineering is
also challenging given our large Field
engineering team reflects the existing male-
dominated market, which impacts our overall
Group performance that would otherwise be
on track. We’re taking action which includes:
¢ further embedding tailored Diversity, Equity
and Inclusion (DE&I) Action Plans and
dashboards for each business, with
progress reviewed quarterly to drive
improvement and accountability;
¢ expanding talent development programmes
to over 150 colleagues from under-
represented groups whilst embedding
succession planning and diverse shortlisting
to strengthen our senior leadership team;
¢ inspiring more women into engineering
through apprenticeships (see goal 2) as we
grow diversity among our wider team;
¢ rolling-out Courageous Conversations
about Race training to educate colleagues
and make them feel confident to challenge
unacceptable behaviour;
¢ creating a Great Minds programme for
launch in 2024 that will help normalise and
better support neurodiverse colleagues,
whilst encouraging more colleagues to
disclose if they have a disability; and
¢ helping carers better balance work with
caring. We extended our industry-leading
Carers Leave Policy to colleagues in
Ireland which provides up to six week’s
paid leave when matched with annual
leave. And thanks to joint campaigning
with Carers UK, all working carers in the
UK will now receive statutory carers leave
following Royal Assent of the bill.
Through these activities and more (see pages
38 to 40), we’ve received external recognition
for our efforts including earning a place in The
Times Top 50 Employers for Gender Equality.
In 2024, we’ll continue to embed our DE&I
Action Plans, with a particular focus on
improving the representation of colleagues
who are women, ethnically diverse or have a
disability. We’ll also encourage colleagues to
share who they are via our ongoing #ThisIsMe
campaign, which will enable us to target
action and track progress more effectively.
42 Strategic report | Centrica plc Annual Report and Accounts 2023
“ I enjoyed six years in the
military but I was ready for a new
adventure. So havingembarked
on an apprenticeship with
BritishGas two years ago, I’m
pleased to now be a fully
qualified engineer. During this
transition, the wrap-around
support has been invaluable and
it’s enabled me to be at my best
when helping customers with
their energy.”
Amy Gray | British Gas
Smart EnergyEngineer
WIDER GENDER BREAKDOWN
(3)
2023 2022
Women Men Women Men
Board 5 (42%) 7 (58%) 4 (44%) 5 (56%)
Senior executives
and direct reports
27 (34%) 52 (66%) 24 (33%) 49 (67%)
Senior leaders 136 (32%) 287 (68%) 117 (33%) 243 (67%)
All company 6,221 (30%) 14,398 (70%) 5,938 (30%) 14,190 (70%)
(3) Relates to everyone who works for Centrica. Total headcount differs from elsewhere in the report as Spirit
Energy are not included above. See page 81 for more on Board diversity.
By 2030, we want to:
Recruit 3,500 apprentices and provide
careerdevelopment opportunities for
under-represented groups (2,000 apprentices
by the end of 2025)
(1)
2023 PROGRESS
Progress against goals: l On track l Behind
Apprentices
1,198 l
(1) Base year 2021.
To provide the best service for customers and
get to net zero, we need to create thousands
of high-quality jobs. To fill these roles, there’s a
huge opportunity to tap into the talent of
under-represented groups to deliver a greener
and fairer future. So we’ve committed to hire
an apprentice every day over the next decade.
Since 2021, we’ve recruited 1,198
apprentices and helped over 750 trainees
professionally qualify in areas like gas and
whitegoods. This is slightly behind where we
wanted to be as we slowed recruitment in
2023 to focus on operational stability across
our customer-facing business. As a result, we
welcomed 165 apprentices to our team last
year. Less hiring opportunity also impacted
our Ex-Forces Pathway programme which got
off to a flying start in 2022 but meant that by
the end of 2023, 227 people had been hired
against our rolling ambition to recruit 500
veterans, reservists, spouses and partners, so
it will continue into 2024-25.
Meanwhile, progress against our ambition for
women to make up 50% of our Smart Energy
Apprentices, dipped from 20% to 14% but
remains much higher than the national gas
engineer average of 0.2% women. In 2024,
we’ll continue to breakdown stereotypes and
inspire more diversity in engineering through
recruitment, marketing and volunteering
campaigns as we work to diversify our wider
team too. This includes ramping up our
apprenticeship intake which we hope will get
us back on track in the years ahead.
We’re also encouraging more young people to
choose acareer in energy. For example, we’re
supporting Tech She Can’s educational
programme, Tech We Can, which has directly
reached over 60,000 students.
By 2030, we want to:
Give 100,000 days to build inclusive
communities (35,000 days by the end of
2025)
(2)
2023 PROGRESS
Progress against goals: l On track l Behind
Days
20,383 l
(2) Base year 2019.
We’re harnessing the passion of our people to
build inclusive communities because strong
communities are central to a more sustainable
future. It’s also a great way to help colleagues
develop skills and improve engagement.
Although COVID-19 and the energy crisis
impacted volunteering in recent years,
volunteering has grown from strength-to-
strength and is now on track having reached
20,383 days since 2019. As part of this,
colleagues gave 7,228 days in 2023. This far
exceeded our annual plan of 4,000 days
which had been based on doubling our 2022
performance.
Substantive gains were largely made possible
by fully embedding team targets at the start of
the year to help drive and plan volunteering
activity, whilst expanding volunteering
opportunities via ‘The Big Difference’, which is
inspiring colleagues to get involved in local
causes they care passionately about.
To maintain momentum, we’ll continue to
expand volunteering opportunities in 2024
including via our Get Set for Positive Energy
schools partnership with Team GB and
ParalympicsGB. This will stand us in good
stead for the annual step-up required in the
years ahead, which will see us move from
1 in 4 colleagues volunteering in 2023 to
1 in 3 by 2030.
Alongside volunteering, we support our
communities with donations and fundraising
focused in three key areas – helping people
with their energy today, building a more
sustainable energy future for tomorrow, and
making a big difference in our local
communities everyday. Towards these
causes, we invested over £500 million in total
community contributions during 2023
(3)
.
(3) Comprises £409.44 million in mandatory and
£88.08million in voluntary contributions to support
vulnerable customers and colleagues which
includes the Warm Home Discount and Energy
Company Obligation amongst others, alongside
£4.05 million in charitable donations.
Strategic report | Centrica plc Annual Report and Accounts 2023 43
SOME OF THE
WAYS WE MADE
A DIFFERENCE
IN 2023
£140m
Cumulatively donated in energy bill
support since 2022 to help
customers through the energy
crisis, which in 2023 included an
additional £84 million being
committed in the UK for distribution
mainly via British Gas and the
British Gas Energy Trust
In Ireland during 2023, we donated
€3 million in energy bill support
managed by Bord Gáis Energy and
charity partners like Focus Ireland,
and we absorbed higher energy
costs overthe first halfof the year
10
New community organisations
helped on the journey to net zero
though our Energy for Tomorrow
social impact fund, which has an
annual budget of up to £600,000
and has supported 36 initiatives
to date
>800
Good causes supported through
The Big Difference in 2023 – our
£2million local community fund
that supports organisations like
The Baby Bank in Windsor and
theChildren’s Hospices Across
Scotland
€432k
Donated and fundraised during
theyear to help prevent family
homelessness via our €4.4 million
partnership with Focus Ireland,
which has helped nearly 8,400
family cases since 2015
By 2050, we want to:
Help our customers be net zero (28% GHG
intensity reduction by the end of 2030)
(1)
2023 PROGRESS
Progress against goals: l On track l Behind
Reduction
10% l
(1) Net zero goal measures the greenhouse gas (GHG)
intensity of our customers’ energy use including
electricity and gas with a 2019 base year of
183gCO
2
e/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.
The biggest thing we can do to tackle climate
change, is to help our customers use energy
more sustainably. This is because around
90% of our total GHG emissions (scope 1,
2and 3), comefrom the gas and electricity
provided to customers (scope 3). In 2023, we
provided energy, services and solutions that
cut the GHG intensity of the energy our
customers use by 10% against the 2019 base
year – equivalent to the annual emissions of
more than 860,000 homes. Savings were
predominantly driven by our renewable and
low carbon energy tariffs alongside energy
efficiency and optimisation solutions like air
source heat pumps and Hive Active Heating.
This was up from the 6% reduction achieved
in2022 and was largely due to a rise in the
zero-carbon content of our reported electricity
fuel mix, which improved by 5% to 80%
compared to the UK national average of 55%.
In 2023, we helped our customers progress
their journey to net zero by supporting them
with measures to decarbonise power, heat
and transport by:
¢ introducing market-leading incentives that
encourage the adoption of low carbon
technologies – whether that’s offering heat
pump price and performance guarantees,
or providing free electric vehicle (EV)
charging for a year with the purchase of a
Hive charger;
¢ delivering around 3,000 heat pumps for the
able to pay market and via the Energy
Company Obligation (ECO);
¢ cumulatively installing over 34,000 EV
charging points since 2013; and
¢ launching PeakSave Sundays which has
encouraged over 500,000 customers to
shift their energy use away from peak
demand to reduce pressure on the grid,
with the reward of cutting costs as well
as emissions.
13.0GW
Route-to-market for renewables under our
management – enough to power around
12 million homes
Whilst we currently purchase energy
certificates such as Renewable Energy
Guarantees of Origin and Nuclear Declarations
to back both our green and standard tariffs,
we’ll review whether that’s the right thing for
our customers and our business in 2024.
We’re acutely aware that the debate around
the value of these certificates is evolving, with
recent research studies and broader expert
opinion, identifying a number of issues such as
the risk that certificates do not incentivise the
building of additional renewable or zero
carbon power generation. We’ll engage a
range of stakeholders on our approach and
provide an update in due course.
In the meantime as set out in our Climate
Transition Plan (see pages 52 and 54), we’ll
continue to help customers reduce their
emissions by focusing on energy efficiency
and optimisation services alongside low
carbon technologies and cleaner energy.
By 2045, we want to:
Be a net zero business (40% GHG reduction
bythe end of 2034)
(2)
2023 PROGRESS
Progress against goals: l On track l Behind
Reduction
21% l
(2) 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 2,132,680mtCO
2
e.
It’salso aligned to the Paris Agreement and based
on science to limit global warming, corresponding
to awell below 2°C pathway initially and 1.5°C by
mid-century.
Meaningful progress has been made against
our net zero target in 2023, with our total GHG
emissions reducing by 21% against the 2019
base year. This was up from the 5% reduction
delivered in 2022 and was largely driven by
reduced emissions from our Whitegate power
station as well as our gas production
operations. Sustainable savings were also
secured via the gradual roll-out of our EV road
fleet and across our property portfolio with
lower occupancy being driven by FlexFirst,
which lets colleagues choose when they want
to work from home or come into the office.
Although we’re currently ahead of the
glidepath for our net zero target, like many
energy companies, our journey to net zero
won’t be a linear one. This is because we
operate in a challenging geopolitical
environment where security of supply is a real
risk for consumers and as a leading supplier
ofenergy in the UK and Ireland, we have a
responsibility to ensure they have the energy
they need. Towards this, we increased LNG
activity and began work on two new 100MW
flexible peaking gas-fired power plants in
Ireland which will come online in 2024. Whilst
these investments will play an important role in
securing a more affordable supply of energy
as well as providing flexible power to back-up
intermittent renewables, they are predicted to
cause our emissions to rise from 2024 before
they come back down again around 2027.
With general consensus being that gas will be
essential during the energy transition until at
least the mid-2030s, our action is in line with
what’s needed, although it does make our
pathway to net zero more challenging in the
short term. All of our gas peaking plants will,
however, be capable of running on hydrogen
when hydrogen is available which will help us
meet our goal in the medium to long term,
which we expect to do.
Alongside these activities, we’ll continue to
drive wider emissions out of our business and
identify opportunities wherever possible to
support the adoption of lower carbon energy
for customers via our Climate Transition Plan –
from securing up to 800MW of low carbon
and transition assets by 2025 which includes
solar, battery storage and flexible generation,
to exploring the conversion of our Rough gas
storage facility to store hydrogen and more
(see pages 52 and 54).
70%
Our GHG emission reduction over the last
decade
(3)
(3) Represents our gross reductions. This differs from
our net zero goal which is normalised for
acquisitions and divestments against the base year.
44 Strategic report | Centrica plc Annual Report and Accounts 2023
PLANET
Supporting every customer
to live more sustainably.
OUR FOUNDATIONS
Our People & Planet Plan
is underpinned by strong
foundations that ensure
we act fairly and
ethically.
CUSTOMERS
We’ve taken decisive steps to secure a
stronger service for customers. For example,
in 2023, we invested in engineer training and
customer service systems, whilst recruiting
700 additional customer contact roles in the
UK as part of our aim to move all call centre
resource onshore. Compared to 2022, these
operational improvements have contributed
toour British Gas Services Engineer Net
Promoter Score (NPS) rising by seven points
to +71 and our British Gas Energy Touchpoint
NPS gaining four points to +17, alongside a
reduction in complaints. In Bord Gáis Energy
complaints similarly reduced over the course
of the year but against a backdrop of
challenging conditions, our Journey NPS
declined by one point to +18 despite afive
point improvement in the second half of2023.
Meanwhile, at Centrica Business Solutions,
customer concern for high energy bills and
complexity relating to government support
schemes led to an increase in complaints.
Despite this, customer service delivery
remained strong with energy supply
Touchpoint NPS improving by one point to
+32. See pages 23 to 24 for more.
In recognition that energy bills remain a worry,
we continued to help customers through the
energy crisis. In 2023, we more than doubled
our energy support fund to total £140 million,
which is the largest voluntary support package
provided by an energy supplier in the UK and
Ireland. Since 2022, this has enabled
meaningful advice and grants to be provided
to customers struggling with their energy bills
whilst providing help at the heart
ofcommunities (see pages 16 and 43).
COLLEAGUES
It’s important that colleagues feel safe,
engaged and rewarded. Although we had no
colleague fatalities in 2023, a member of the
public tragically lost their life in a road traffic
accident involving one of our Dyno
Franchisees. We also had one Tier 1 process
safety gas release at a Spirit Energy asset,
resulting in our process safety incident
frequency rate increasing from zero to 0.09
per 200,000 hours worked. Our total
recordable injury frequency rate did, however,
improve by 25% to 0.84 per 200,000 hours
worked (see page 27). We continue to focus
on keeping safety front-of-mind by reinforcing
a strong safety culture, which in 2023 included
improving new starter, safety and role-specific
training.
Alongside physical health, we’re always
mindful of wider wellbeing. So we ran
campaigns that talked about the importance
of being open about mental health whilst
encouraging use of our comprehensive suite
of support which includes a company-funded
benefit healthcare plan for all, a wellbeing app,
and our 100-strong network of mental health
first aiders. In recognition of the cost of living
crisis, we also introduced a Colleague Support
Foundation to provide dedicated money
advice and grants (see page 39). The CCLA
continued to rank us a leader for our approach
and disclosure on mental health.
We maintained focus on fair reward practices
– from paying at least the Real Living Wage in
the UK and upholding equal pay, to working
to reduce pay gaps. Our gender pay gap
continued to be largely driven by more men
working in higher paid jobs like engineering,
coupled with more women working in valued
but lower paid jobs such as customer service.
In 2023, our median gender pay gap
improved by 9% to 14%. Our ethnicity pay
gap, which we publish voluntarily, is due to
similar factors as the gender pay gap, and
increased by 1% to 11% median. We’re fully
committed to reducing our pay gaps over time
as we help transform our business, sector and
society (see pages 42 to 43).
Action like this is important to colleague
engagement. In 2023, our engagement score
improved by 0.3 points to 7.7, with gains
driven by the value we place on recognition
and growing our colleagues, as well as a
stronger belief in our purpose and strategy.
This was on track with our annual goal and is
approaching top quartile performance for our
sector. With engagement being fundamental
to our productivity and our success, we’ll
target top quartile performance in 2024 by
striving to provide a more inclusive and fulfilling
place to work.
COMMUNITIES AND ETHICS
Our Code and Our Values set out the
standards we expect for anyone who works
for us or with us. This ensures we operate
withintegrity and in a way that benefits our
communities.
At the heart of Our Code is our commitment
to uphold and protect human rights. We
therefore take action to ensure colleagues and
workers in our supply chain are safeguarded
from abuses through activities like risk-based
training and ongoing due diligence, alongside
monitoring of supplier selection and renewal.
Ifsuppliers receive a high-risk rating relating
tothe country where they operate or the
products/services provided, we consider
appropriate action which may involve
conducting a third-party audit to better
understand the level of risk. Where concerns
are identified, we work with suppliers to raise
standards, and if they can’t or won’t
improve,we may end the relationship
andreport any abuse.
In 2023, we ramped up our audit programme
by conducting 20 on-the-ground site
inspections and over 6,500 remote worker
surveys. These spanned workwear and
manufacturing as well as solar panels, battery
systems, smart meters and wider electrical
products across Bangladesh, Cambodia,
China, Hong Kong, India, Pakistan, the
Netherlands and the UK. Whilst we’ve not
identified any specific instances of modern
slavery, we agreed 142 improvement
opportunities with suppliers to help raise
standards across labour as well as health and
safety practices. The majority of actions have
now been completed and the rest are planned
to finalise in 2024. As part of our due diligence
and monitoring across supplier selection
andcontract renewals, we also ensured
compliance with sanctions on Russia.
Our Code additionally provides clear guidance
on bribery and corruption. We prohibit any
improper payments, including facilitation
payments regardless of value or jurisdiction,
and exchange gifts and hospitality responsibly,
declaring them on a register. Anti-bribery
training is also provided for higher risk roles
and our Financial Crime team run third-party
risk management screening. A register is used
to record and manage potential or actual
conflicts of interest.
During 2023, 96% of colleagues completed
refresher training on Our Code and confirmed
they’d uphold its principles. If anyone
suspects Our Code is being contravened, we
provide a confidential 24/7 Speak Up helpline.
In 2023, we had 1.4 reports of concern per
100 colleagues which broadly aligns with the
external benchmark of 1.5, demonstrating that
colleagues feel safe to speak up. Reports
mainly related to perceived unfair treatment
and fraud. All reports were investigated by
theEthics and Compliance team, with
quarterly monitoring via the Safety,
Environment and Sustainability Committee
aswell as the Audit and Risk Committee,
withmatters as appropriate, brought to the
attention of the Board.
READ MORE IN OUR MODERN
SLAVERYSTATEMENT AT
CENTRICA.COM/MODERNSLAVERY
ENVIRONMENT
Monitoring and managing our wider
environmental impact is crucial. Our water
consumption remained relatively steady during
2022-23, increasing by 6% to 335,512m
3
.
Waste decreased by 19% to 15,161 tonnes
due to a reduction in decommissioning works
and process enhancements in 2023
compared to 2022.
Strategic report | Centrica plc Annual Report and Accounts 2023 45
NON-FINANCIAL AND SUSTAINABILITY
INFORMATION STATEMENT
In line with the Non-Financial Reporting Directive and
Companies Act 2006, we have set out where the relevant
information we need to report against can be located.
Reporting requirement Section
Business model
Our Strategy & Business Model – Pages 9-11
Reporting requirement
and policy position
Our Code sets out our position on key issues by providing a
high-level summary of key policies that form the foundation for
how we do business.
Due diligence and outcome
READ MORE AT CENTRICA.COM/OURCODE
Colleagues
Our policy states that we work collaboratively to create a
workplace that has a respectful and inclusive culture whilst
offering fair reward and recognition. We’re also committed
toworking safely and provide proactive support to ensure
colleagues’ health and wellbeing.
¢ Group Chief Executive’s Statement – Page 8
¢ Stakeholder Engagement – Pages 15 and 17
¢ Principal Risks and Uncertainties: People, Safety and Operational Asset Integrity –
Pages 33 to 34
¢ Group Chief People Officer’s Report – Pages 38 to 40
¢ People and Planet – Pages 42 to 43 and 45
¢ Key Performance Indicators (KPIs) – Pages 27, 39, 42 to 43, 45 and 249 to 250
Environmental matters
This policy sets out that we endeavour to understand,
manage and reduce our environmental impact. Towards
this,we will play our part in the transition to net zero.
¢ Chair’s Statement – Page 5
¢ Group Chief Executive’s Statement – Page 8
¢ Business Model and Market Trends – Pages 10 to 13
¢ Stakeholder Engagement – Pages 15 to 17
¢ Business Review – Pages 24 to 25
¢ Principal Risks and Uncertainties: Energy Market, Government and regulatory
intervention, Weather, Political, Legal, Regulatory or Ethical Intervention/
Compliance, Operational Asset Integrity and Climate Change – Pages 29, 31 to 32
and 34
¢ People and Planet including TCFD – Pages 44 to 45 and 47 to 55
¢ KPIs – Pages 24 to 26, 44 to 45, 53 to 54, 249 and 251
Social matters
Our policy states that we will treat all of our customers fairly.
As part of this, we strive to provide services and solutions that
meet their needs as well as care for customers who need
extra support. We also want to make a big difference by
helping to create more inclusive and sustainable communities.
We partner with community and charity organisations on key
issues and inspire colleagues to volunteer and fundraise.
¢ Chair’s Statement – Pages 4 to 5
¢ Group Chief Executive’s Statement – Pages 6 to 7
¢ Stakeholder Engagement – Pages 15 to 17
¢ Business Review – Pages 23 to 24
¢ Principal Risks and Uncertainties: Inflation and cost of living, Technology,
Customer, Political, Legal, Regulatory or Ethical Intervention/Compliance,
Cyberand Safety – Pages 29, 31 to 32 and 34
¢ People and Planet – Pages 43 to 45 and 52
¢ KPIs – Pages 23 to 24, 27, 43, 45 and 250 to 251
Human rights
This policy commits that wherever we work in the world, we
respect and uphold the fundamental human rights and
freedoms of everyone who works for us or with us.
¢ Stakeholder Engagement – Page 15 to 16
¢ Principal Risks and Uncertainties: Political, Legal, Regulatory or Ethical
Intervention/Compliance and Safety – Pages 31 and 33
¢ People and Planet – Page 45
¢ KPIs – Pages 45 and 251
Anti-bribery and corruption
Our policy commits us to working with integrity, within the
laws and regulations of all the countries in which we operate
and in accordance with recognised international standards.
This includes not offering or accepting bribes or other corrupt
practices. We will not tolerate any form of bribery
orcorruption from suppliers or others.
¢ People and Planet – Page 45
¢ Principal Risks and Uncertainties: Political, Legal, Regulatory or Ethical
Intervention/Compliance – Page 31
¢ Based on materiality, KPIs specific toanti-bribery and corruption are not reported
externally.
46 Strategic report | Centrica plc Annual Report and Accounts 2023
This includes an explanation of the relevant Group policies
whichrelate to the stated matters below, together with an overall
summary of their effectiveness, including specific examples of
how the policies are implemented alongside due diligence
processes conducted and associated outcomes.
TASK FORCE ON CLIMATE-
RELATED FINANCIAL
DISCLOSURES
Climate change requires
urgent action. As an
energy, services and
solutions company, we
have an essential role in
helping our customers,
communities andour
business get to net zero.
It’s important that we analyse and report what
we’re doing to effectively manage the impact
of climate-related risks and opportunities
across our business (see our Business Model
on pages 10 to 11). That’s why since 2020,
we’ve chosen to structure our reporting
around the Task Force on Climate-related
Financial Disclosures (TCFD)
recommendations (see page 55), to drive
greater transparency and action on climate-
related matters. Whilst we’ve achieved full
compliance forthe third year running in our
2023 reporting, we’ll endeavour to
continuously improve across all TCFD
disclosure requirements to ensure we stay
abreast of evolving best practice and
stakeholder feedback.
GOVERNANCE
As tackling climate change is at the heart of
our purpose and strategy, climate change is
akey issue for the Board. Governance is
therefore embedded across the full breadth
ofour business, with the Board supported in
its duty to oversee climate-related matters via
a series of Board-level and executive-level
committees (see governance diagram
overleaf). In 2023, climate matters were
reviewed by the Board and its Committees in
a number of meetings including at all three
meetings of the Safety, Environment and
Sustainability Committee as well as via the
annual Board strategy review. This was
complemented by further embedding net zero
criteria in our Group investment framework
and into strategic planning processes
(seepage 50).
To aid the Board in overseeing climate change
matters and in managing regular engagement
on the issue with stakeholders like investors,
government and regulators, it’s vital the
Boardhave the collective skills required.
Consequently, the Board continuously seeks
to strengthen capabilities on climate change
across energy, regulation, geopolitics and
technology, to reduce risk and maximise
opportunities. To assess capability, the Board
has ‘climate change and sustainability’ as one
of the 11 criteria used in the Skills Matrix,
spanning climate science, climate risk and
mitigation, alongside evolving stakeholder
expectations. In 2023, 60% of the Board were
identified as having these competencies
whichenables us to effectively govern climate
matters and we aim to strengthen this even
further in the future. To support and grow
capability in 2023, the Board underwent
deep-dive sessions run by internal and
external experts on greenwashing, evolving
Environment, Social and Governance (ESG)
regulations and responsible sourcing.
Effectiveness in tackling climate change is
incorporated in our remuneration scheme for
Executive Directors via the ‘Restricted Share
Plan’ (RSP). Vesting is subject to an underpin
determined by the Remuneration Committee,
whereby the Committee assesses
performance across a range of financial and
non-financial KPIs, including our Climate
Transition Dashboard alongside any material
risk of regulatory failures (see pages 85 to 87).
The RSP vests every three years with the first
vesting period due at the end of 2024.
Our approach to governance and disclosure
isstrongly influenced by the materiality of ESG
matters which includes climate-related issues.
To understand what’s important and what’s
not, we assess the impact of these issues on
our stakeholders as well as on our business.
To do this, we undertake research and
conduct direct engagement with stakeholders
(see page 15) whilst applying our TCFD
financial materiality thresholds. Through
identification of our material issues together
with associated laws and regulations,
management teams can then ensure the
necessary processes are in place to effectively
measure, manage, mitigate and disclose.
Werecognise that stakeholder needs and
theregulatory landscape are continuously
evolving, so we remain agile and adjust our
approach in line with expectations.
Strategic report | Centrica plc Annual Report and Accounts 2023 47
Our climate-related financial disclosures
additionally comply with the requirements of
the Companies Act 2006, as amended by the
Companies (Strategic Report) (Climate-related
Financial Disclosure) Regulations 2022.
LISTING RULE COMPLIANCE
We’ve complied with the requirements of
LR 9.8.6R, by including climate-related
financial disclosures that are consistent
with the four TCFD pillars and the 11
recommended disclosures that are set
out on page 55.
A DIAGRAM OF OUR CLIMATE GOVERNANCE
The Board
Has ultimate responsibility for climate change and delegates authority to its Committees
¢ Sets strategy for People and Planet matters including climate change
¢ Reviews strategic and financial planning to ensure integration of climate
considerations as we transition to net zero
¢ Oversees progress against climate targets and ambitions, whilst ensuring
related risks and opportunities are managed effectively
¢ Approves People and Planet annual reporting
¢ Chaired by Scott Wheway with attendance including the Group Chief
Executive, who has overall accountability for climate change and
regularly attends Committee meetings as well as chairs the CLT
Our Committees
Provides challenge and reviews updates from senior leaders, with outputs shared with the Board
Safety, Environment and Sustainability Committee (SESC)
¢ Meets three times a year and is primarily responsible for supporting
the Board in overseeing climate change
¢ Assesses and approves proposals relating to net zero targets and
the Climate Transition Plan, whilst monitoring progress alongside
risks and opportunities
¢ Reviews annual reporting and associated requirements like TCFD
¢ Monitors stakeholder views on matters such as climate change
¢ Chaired by Heidi Mottram, Independent Non-Executive Director
Audit and Risk Committee (ARC)
¢ Meets quarterly
¢ Reviews mitigations related to Principal
Risks, including those related to climate
change
¢ Oversees and informs Group audits,
financial statements and non-financial
disclosures
¢ Chaired by Nathan Bostock, Independent
Non-Executive Director
Remuneration Committee
¢ Meets four times a year
¢ Ensures Executive Directors are
appropriately rewarded - they
consider lots of non-financial
reporting items as part of this,
including progress against our
Climate Transition Plan
¢ Chaired by Carol Arrowsmith,
Independent Non-Executive
Director
Centrica Leadership Team (CLT)
Ensures ongoing oversight and challenge on climate strategy
CLT – As frequently as needed at the eight meetings held per year and chaired
by the Group Chief Executive, the CLT monitors, assesses and informs
progress and plans relating to net zero targets and ambitions as well as
Principal Risks and opportunities. At meetings of the Centrica Investment
Committee, asub-committee of the CLT, investment opportunities are
reviewed with regard to how we can deliver net zero.
Sub-groups
Supports leadership on integrating climate change into strategy
TCFD working group – Ongoing engagement led by Group Environment
alongside Strategy, Risk, Finance and Reward, to fulfil mandated reporting
requirements and embed climate strategy Group-wide
(1)
Group Risk and Controls Review – Chaired by the Group Chief Financial
Officer with business unit Managing Directors and Chief Financial Officers
in attendance, they review Principal Risks and opportunities alongside
controls quarterly (see page 28)
Business units
Follows and provides feedback on climate strategy
Managers and teams – Operationalises climate change considerations in line
with Group strategy
Risk owners – Identifies, assesses and mitigates climate risks and
opportunities
(1) Group Head of Environment develops and socialises climate change strategy and progress, whilst co-ordinating and influencing related activities. Director of Group
Strategy embeds climate change into our strategic planning and investment frameworks. Group Head of Enterprise Risk and Controls integrates climate risk and
opportunities into the Enterprise Risk Management (ERM) Framework. Head of Accounting Reporting and Tax supports the business to understand the financial impacts
ofnet zero. Group Head of Reward integrates ESG targets into remuneration frameworks.
48 Strategic report | Centrica plc Annual Report and Accounts 2023
READ MORE ON PAGES 57 TO 71
READ MORE ON PAGES
82 TO 83
READ MORE ON PAGES
72 TO 78
READ MORE ON PAGES
84 TO 102
STRATEGY
2023 saw no material changes to the shape of
our business, so we decided not to re-run our
scenario analysis as the 2022 analysis remains
fit for purpose. In 2023 we did, however, focus
efforts on wider related improvements such as
expanding the scope of our analysis to include
additional sites like our new solar farm in
Codford, whilst increasing stakeholder
engagement across the value chain.
Our scenario analysis conducted in 2022 to
test our strategic resilience to climate change,
was run using ten independent climate
scenarios that are most relevant to national
climate targets as well as our business and
the key markets in which we operate across
the UK and Ireland. As a next step, we used
our in-house scenario analysis model, to
assess the various plausible pathways relating
to global warming ranging between 1.5°C to
4°C
(1)
, and the potential positive and negative
impact of each on our businesses’ key
services, solutions and assets.
Our in-house model projects our key lines of
business based on the relevant external
scenario, whilst maintaining our market share
and unit margin at a consistent level. This
allows us to calculate the potential growth or
shrinkage of gross margin (GM) across each
business in isolation or in aggregate, out to
2050. In 2023, we updated our short, medium
and long-term time horizon intervals from
2025, 2035 and 2050 to 2028, 2038 and
2050, which acknowledges the passage of
time since our first publication and better
aligns with our latest strategic business plan.
We consider this time horizon appropriate as
italso aligns with our net zero targets and
Climate Transition Plan, as well as
encompassing the expected lifetime of the
vast majority of our assets alongside the
materialisation of key potential transitional risks
and opportunities.
As we continue to shift our reported
timeframes further out whilst keeping our
base-year static, our analysis naturally shows
a greater impact as the scenarios accelerate
towards net zero. We do, however, recognise
that scenarios extending this far out into the
future are subject to significant uncertainties
and carry material dependencies, which need
to be taken into consideration when reviewing
insights.
Other critical assumptions on matters such
aspolicy and technology pathways are as
perthe independent scenarios utilised in the
analysis.
(1) Climate scenario global warming measured out
to2100.
Net
financial
benefit
Our modelling suggests an overall net
financial benefit for the Group across
all climate scenarios
Our scenario analysis findings (see page 51),
show that based on our strategic plans and
capabilities, we’re well-placed to mitigate the
risks and seize the opportunities presented by
climate change as we journey to net zero.
Indeed, our modelling suggests an overall net
financial benefit for the Group across all
scenarios assessed.
This is because as a uniquely integrated
energy company with market-leading
positions across the energy value chain, our
business model has been designed to be
resilient and evolve in line with the needs of the
energy transition, to ensure that we deliver on
our Purpose of energising a greener, fairer
future. That said, in any given scenario, we
fully recognise that the potential for risks to
manifest is subject to uncertainty, as are the
opportunities and our ability to pivot effectively
to realise them. We therefore always consider
this uncertainty when assessing our strategic
resilience to decarbonisation.
Looking at our findings, we see parts of our
business exposed to potential transitional risks
and opportunities, such as those relating to
policy and regulatory changes which range
from ‘low’ to ‘high’ in significance over the
longer term. For example, the key risk for
British Gas and Bord Gáis Energy, mainly
relates to the gradual phase-out of natural gas
in heating which although an essential
transition fuel in the mid-term, may require a
shift in the range of services and solutions
offered to customers. We believe we’re well
positioned to pursue the opportunities created
by this shift, given our brands have all the
necessary systems and capabilities to adjust
from the trading and sale of gas and
electricity, to a system that’s more heavily
dependent on electricity and hydrogen.
Strategic report | Centrica plc Annual Report and Accounts 2023 49
Scenarios used:
¢ Transitional impacts are assessed using
four different scenarios from the National
Grid Future Energy Scenarios, where
assumptions onenergy demand,
production and use cases are adjusted
out to 2050. This enables more detailed
modelling of potential impacts in the UK
and Ireland at the individual product and
commodity level, based on the level of
demand for different types of fuel like
hydrogen adoption or the scale up of
different types of technologies like EVs.
We adapt the scenarios for the Irish
context to reflect key differences, such
as off-grid consumers making up a
bigger proportion of customers.
¢ Physical impacts areassessed using
three different scenarios based on the
Intergovernmental Panel on Climate
Change Representative Concentration
Pathways. The scenarios allow physical
climate attributes to be modelled such
as temperature and sea level rise as well
as flooding and extreme weather, across
differing average temperature rises
resulting from varying radiative forces.
¢ Asset impairment is assessed using the
International Energy Agency Net Zero
Emissions scenario and Aurora Net Zero
Mixed & High Renewable Energy Share
scenarios, which model 1.5˚C pathways
to net zero for the energy sector. This
allows us to model the potential impact
on global and regional demand for
different energy sources in response to
different drivers like carbon pricing. In
turn, this affects commodity prices and
the potential implications for the
valuation of gas and power assets.
For instance:
¢ our market-leading engineering workforce
primarily installs gas heating solutions today,
but can be gradually upskilled to deliver
new solutions via our centre of excellence
training campuses that are located around
the UK; and
¢ we’re continuing to enhance our strategic
resilience by structurally altering our
business model to establish positions in
low carbon solutions like heat pumps and
hydrogen, which are expected to drive
the energy transition forward. This
includes launching an internal business
unit, New Business and Net Zero, which
is dedicated to delivering low carbon
solutions to residential customers,
alongside Centrica Business Solutions
which provides some fossil fuel-based
solutions but specialises in helping large
scale energy users with the creation of
bespoke net zero action plans and the
adoption of low carbon energy solutions.
Moreover, most of the modelled opportunities
exist in areas where we’ve a strong market
presence and are associated with relatively
mature technologies like EVs, electric heat
pumps, solar and battery storage. Clean
hydrogen for heating is the only high-impact
opportunity we’ve identified that’s reliant on
more emerging technology, which may
therefore be harder to harness. Consequently,
we’ve been proactive in hydrogen research
and development opportunities – whether
that’s the trial of hydrogen production at our
Brigg power station with HiiROC, or the
exploration of hydrogen fuel switching at our
Easington Terminal.
Alongside transitional risks and opportunities,
sit our physical risks. During the scenario
analysis, we took into account acute physical
risks relating to extreme weather such as the
risk of increased wave height as well as
chronic physical risks which include those
associated with longer term shifts in climate
patterns that lead to sea level rise or sustained
heat waves. Across both, our focus was on
our energy assets in Centrica Energy
Storage+, Centrica Business Solutions and
Spirit Energy, which are typically more
vulnerable to these kinds of risks due to the
nature of activity undertaken. In 2023, we built
on our 2022 assessment by running scenario
analysis on new sites. This included our new
solar farm in Codford and our distribution
centre in Leicester. The analysis re-confirmed
that we’re generally exposed to physical acute
risks that are ‘low’ in significance in the near
and longer term. Our only potential ‘medium’
risk arose from a physical chronic risk,
whereby a rise in mean temperature with an
extreme >4°C warming future by 2050,
reduces energy demand for heating. This risk,
however, would be partially offset by an
increase in cooling demand and counters
many of the transitional risks, to provide a
natural hedge for the Group.
The risk of asset impairment was additionally
refreshed in 2023 based on price forecasts
aligned with a 1.5°C scenario. This showed
that our most exposed assets were our gas
production fields alongside our investment in
nuclear. We found that the impact on the
value of our gas assets was relatively ‘low’
dueto both existing impairment headroom
and the fact that the majority of fields are
expected to have produced most of their
reserves within the next five years. Our
investment in nuclear would be further
impaired by around £15million, as baseload
power price scenarios are slightly over net
zero price forecasts (see note 7 to the financial
statements). Further details on how the
Directors’ have considered the impact of
climate risk and opportunities on the wider
financial reporting judgements and estimates,
are provided in note 3 to the financial
statements.
In 2023, we shifted our approach to engage
suppliers on the potential impact of climate
change to their operations, and their
subsequent supply of goods and services to
us. Through our updated Responsible
Procurement Framework, we targeted all
‘strategic’ and ‘critical’ suppliers as well as
some ‘core’ suppliers to participate in our
assessment
(1)
.
We had a strong supplier response rate of
30%, with around 80% assessing their
exposure to risk, 60% using sophisticated
scenario analysis and 100% having resilience
plans in place – this included the one
company who reported a risk of disruption
supplying us due to climate-risk. Overall, we
concluded that our supply chain risk remained
‘low’ in significance over the near and longer
term. We believe that risk across our supply
chain can be effectively managed through our
ongoing deepening ofdialogue with suppliers,
alongside defined hedging strategies and
collaboration with counterparties. As with all
risks identified, we’llcontinue to monitor our
supply chain risk, so that we can act if the
level of potential impact rises.
As the energy transition deepens, all modelled
scenarios involve significant disruption to our
markets. So we’ll need to adapt accordingly.
Our assessment of the capital expenditure
required to manage potential risks and
opportunities, remains in line with our current
plans and balance sheet. We’ve also identified
numerous opportunities for capital investment
into new and existing assets and technologies
through the process. For example, through
our green-focused investment strategy,
we’llbuild investment levels to £600-£800
million per year through to 2028, with at least
50% of capital expenditure due to gointo
green taxonomy eligible projects compared
to5% only two years ago. This will help us
meet our targets to achieve net zero and
ourclimatetransition ambitions, including our
commitment to invest up to £100 million in low
carbon and transition assets
(2)
annually
from 2020 to 2025, whilst exploring longer
term optionality at assets for hydrogen storage
and carbon capture and storage.
Our assessment of how climate-related issues
might affect our business, is integrated into
our annual strategic and financial planning
process at a business unit level as well as a
Group level. This includes growth plans for
keyopportunities identified, with metrics and
targets to determine whether performance
ison track. All investment proposals are
additionally assessed on their anticipated
GHG emissions, EU taxonomy eligibility and
their role in delivering net zero, the outcome of
which informs the final investment decision.
This process importantly underpins how we
are pivoting our organisation towards a lower
carbon future and helps shape our decisions
on energy, services and solutions.
READ MORE ABOUT OUR FINANCIAL
PLANNING PROCESS IN OUR CDP
DISCLOSURE AT CENTRICA.COM/CDP23
Progressing opportunities for a greener
future in 2023:
65MW
Battery storage plant planned in Perthshire to
store offshore wind energy – our largest battery
storage project to date that’ll be capable of
powering 130,000 homes and is due to be up and
running by 2028
18MW
Solar farm built and opened at Codford which can
power 5,000 homes – our first Centrica-owned
solar farm
(1) Strategic and critical suppliers are long-term
providers of essential products and services which
can affect our ability to operate. Core suppliers are
suppliers who aren’t essential but play an important
role in the products and services provided and were
selected by our Procurement team from a broader
group.
(2) A mixed portfolio of solar, battery and gas-fired
peaking assets, all enabling the grid to decarbonise.
50 Strategic report | Centrica plc Annual Report and Accounts 2023
SUMMARY OF OUR MOST MATERIAL RISKS AND OPPORTUNITIES
(1)
Impact on gross margin (GM)
0-5%
(low)
5-10%
(medium)
>10%
(high)
TFCD
category
Climate
related trend
Potential financial
impact
Potential materiality Strategic response
and resilience
2028
(short
term)
2038
(medium
term)
2050
(long
term)
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)
¢ Strategic aim to remain the market
leader in heating solutions in the UK and
Ireland (UK&I), whilst growing market
share in heating installs
¢ Installation of hydrogen-ready boilers
and CHP units
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
andBord Gáis
¢ Heat pump business launched with
material growth plans, aiming for 20,000
installs a year by 2025 with plans to
build fromthere
¢ Partnering to grow capability and
adoption with hydrogen use trials
alongside research and development
into low carbon CHP
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
¢ Strategic aim to grow customer
numbers in UK&I energy supply
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
¢ Systems and capabilities in place to
pivot towards trading and selling
hydrogen
¢ Partnering in hydrogen production and
use trials to grow capability and
adoption
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
¢ Internal business unit, New Business
and Net Zero, launched with the aim of
becoming a leader in EV charging
infrastructure installs and O&M
¢ Ambition to install up to 100,000 EV
charging points per annum by 2025
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
¢ Strategy to invest up to £100 million
each year by 2025 to build a low carbon
and transition asset portfolio of more
than 800MW
¢ Value derived from install, O&M and
asset ownership
Physical Chronic Rising mean
temperatures
Risk: Reduced sales of natural
gas and electricity for heat at
BGE, CBS and Bord Gáis
¢ Strategic aim to grow customer
numbers in UK&I energy supply
¢ Heat pump business launched with
material growth plans, which is also
capable of providing cooling
Net impact for
the Group
¢ Analysis suggests an overall net
financial benefit for the Group across all
scenarios, based on our strategic plans,
portfolios and capabilities
(1) Our financial scenario analysis is conducted every three years unless there is a material change to the business or external scenarios. Materiality above is therefore based
on 2021 Group GM due to our last scenario analysis taking place in 2022 (see page 49). A well-below and well-above 2°C scenario for global warming has been used to
best demonstrate the spectrum of proactive and inactive progress on climate change in our key markets, and the impact this may have on our business. In the analysis
which spans over 95% of the Group, this table includes our most material risks and opportunities together with the inclusion of our most material physical risk because
whilst less material than all other key risks in the long term, we believe it’s important to transparently show the net impact of physical risk on GM. All listed ‘opportunities’
result in a positive impact on GM whilst all listed ‘risks’ correlate to a negative impact on GM. The table concludes by showing an overall positive net financial benefit for
the Group across all climate scenarios and time periods assessed.
Strategic report | Centrica plc Annual Report and Accounts 2023 51
>2° C
l l l
1.5° C
l l l
>2° C
l l l
1.5° C
l l l
>2° C
l l l
1.5° C
l l l
>2° C
l l l
1.5° C
l l l
>2° C
l l l
1.5° C
l l l
>2° C
l l l
1.5° C
l l l
>2° C
l l l
1.5° C
l l l
>2° C
l l l
1.5° C
l l l
+ + +
+ + +
OUR CLIMATE TRANSITION PLAN SET OUT IN 2021
Our Plan helps us effectively manage our risks and opportunities to ensure we deliver our net zero targets, whilst enabling a fair and
affordable transition for all. Within our Plan, we’ve set a number of ambitions that are aspirational but are fully baked into business unit
growth plans, to advance the energy transition.
Our ambitions to help our customers be net zero by 2050
areto:
¢ double the number of Hive customers to 2.5 million by 2025;
¢ deliver 6 million additional smart meters by 2025;
¢ achieve annual installs of up to 100,000 EV charging points
and 20,000 heat pumps by 2025; and
¢ invest up to £100 million in low carbon and transition
assets each year from 2020 to 2025
(1)
.
Our ambitions to be a net zero business by 2045 areto:
¢ build azero-emission road fleet in the UK by 2025
(2)
;
¢ cutour UK property emissions by a further 50% by 2030;
¢ progress our strategic transformation to exit remaining
activities in oil and gas exploration and production with the
intention to run-off remaining fields and meet
decommissioning obligations substantively by the early
2030s, whilst stopping any further investment in new oil
andgas fields;
¢ redirect investment into assets thatdrive the transition
forward – from securing up to 800MW of low carbon and
transition assets by 2025
(1)
, toexploring theconversion of our
Rough gasstorage facility to store hydrogen by 2035, and
decarbonising the Humber industrial cluster by 2040; and
¢ grow the portion of our capital allocated to green-eligible
activities from 5% to at least 50% by 2025
(2)
.
We can’t achieve these ambitions on our own, so we’ll need to
maintain an open dialogue with customers, government and
others, to ensure they play their part as we play ours. For the
transition to be a success, we must also ensure that we don’t
leave anyone behind. We’ll therefore champion the needs of
our customers and ensure support for those who struggle with
their energy bills, create thousands of high quality inclusive
green jobs, back sustainable initiatives in communities and
work towards a low carbon supply chain.
Every three years, we’ll provide an update on our Climate
Transition Plan, with the next iteration due in 2024 followed by
ashareholder advisory vote at the AGM in 2025. At the AGM
in2022, our existing Plan achieved a 79.96% shareholder
advisory approval rate.
(1) A mixed portfolio of solar, battery and gas-fired peaking assets,
allenabling the grid to decarbonise.
(2) From 2024, our ambition for a zero-emission van fleet will be extended
out to 2030 (see page 53). Our capital allocated to green investment will
also run out to 2028 (see page 11).
RISK MANAGEMENT
Transition and physical climate risks alongside
all wider risks, continued to be predominantly
managed via our ERM Framework to ensure
consistency in identification and controls
management. The Framework uses atime
horizon of 0–3 years toassess Principal Risks,
coupled with a longer timeframe of 3–20 years
to assess Emerging Risks. Following this
process, climate change was made a Principal
Risk in 2021 through to 2023.
The process starts with our wider strategic
planning process, whereby Group Strategy
and Environment, run the climate scenario
analysis to identify and assess risks and
opportunities across a range of plausible
future scenarios. They then work closely with
Group Enterprise Risk and Control, to ensure
full consideration of potential financial impacts
across time horizons, alongside integration
within the ERMFramework, the Group
Principal Risks table and business unit risk
registers. Climate change risks alongside other
business unit risks are then considered at the
Group Risk and Controls Review. The most
material Principal Risks which include Climate
change alongside other risks that may impact
our ability to deliver on our Climate Transition
Plan such as Weather and Operational Asset
Integrity, are subsequently reported to the CLT
and then to the Board’s ARC (see page 28).
This is supported by more detailed reports on
climate change strategy, progress, risk and
opportunities, presented to the SESC. The
Board Annual Planning Conference then
examines the external landscape and strategic
plans, which includes risk relating to market,
competition, technology and policy, that are all
influencedby climate change. With this
context, the Board is able to review the
robustness of the business’s strategic
proposals and transition plans.
READ MORE ABOUT RISK ON PAGES
28 TO 37
METRICS AND TARGETS
We’ve a strong track record in adopting best
practice reporting of GHG emissions as well
as in setting and achieving climate-related
targets. Having fully considered the TCFD
recommendations on metrics and targets,
wereport those that are most relevant and
material to our business and stakeholders. As
part of this, we robustly manage and mitigate
our impact through our metrics, targets,
ambitions.
These include:
¢ metrics for energy consumption and global
GHG scope 1, 2 and 3 emissions (see
emissions table overleaf). The majority of
these metrics have undergone limited
external assurance every year since 2012.
In 2022-23, our emissions declined, mainly
as a result of reductions at our Whitegate
power station as well as our gas production
operations.
52 Strategic report | Centrica plc Annual Report and Accounts 2023
READ MORE ABOUT PROGRESS AGAINST
OUR AMBITIONS ON PAGE 54
READ MORE AT CENTRICA.COM/
CLIMATETRANSITION
READ MORE ABOUT CLIMATE ENGAGEMENT
WITH TRADE ASSOCIATIONS AT
CENTRICA.COM/TRADEASSOCIATIONS
¢ targets in our People & Planet Plan focus on being a net zero
business by 2045 and helping our customers be net zero by 2050.
They therefore actively contribute to the UK’s target to get to net zero
by 2050. The targets are also aligned to the Paris Agreement and
based on science, corresponding to a well below 2°C pathway
initially and 1.5°C by mid-century. We are, however, currently unable
to progress our validation by the Science Based Target initiative
(SBTi) due to the continued delayed Oil and Gas guidance, which
theSBTi believe will apply to us. In alignment with best practice, our
targets will predominantly be delivered through carbon abatement
rather than offsetting. Although we expect to have hard-to-remove
residual emissions in the 2040s, we’ll use our in-house carbon
trading team to engage high-quality carbon removal projects like tree
planting, to achieve net zero in a credible way. Our targets receive
limited external assurance on a rotational basis every three years. In
2023 we were on track with both our customer and business targets
(see page 44); and
¢ climate transition ambitions. Our ambitions were introduced
inour Climate Transition Plan to help respond to key risks and
opportunities, and drive progress toward our People & Planet
Plan net zero targets. Through incorporation into budgets,
business plans and accounting assumptions, good progress is
being delivered against our ambitions although we’re behind on
some of them. For example, our EV van fleet roll-out has been
slowed due to deployment issues which includes not all
engineers being able to charge their vehicles easily and efficiently
due to the majority not having private driveways in which to
charge their EV, especially as the wider charging infrastructure is
growing at a slower rate than anticipated. This means we will not
meet our 2025 ambition. Delivering for our customers will remain
our top priority, so we have re-set our ambition for a zero-
emission van fleet to 2030, which still remains five years ahead of
the re-stated UK ban of new petrol and diesel vans. Likewise,
demand for installing EV charging points and heat pumps has
grown over the years but at a slower pace than expected. So
we’ll need to remain focused on developing capability and
market-leading offers that excite customers into taking up and
harnessing the value these technologies create (see page 44).
We will review our ambitions in full as we develop our updated
Climate Transition Plan due for publication in 2024. See more
about our progress in our Climate Transition Dashboard overleaf,
the performance of which is embedded into remuneration
arrangements for Executive Directors.
To ensure we reduce our emissions and progress toward our climate
transition targets and ambitions, we use an internal carbon price which
helps guide commercial decisions in line with our Climate Transition
Plan. In 2023 our internal carbon price ranged between £92/tCO
2
e and
£119/tCO
2
e. The carbon price is time-sensitive and rises over time to
incentivise future decisions and better predict long-term impact of
regulation on our business. For example in 2023, our internal carbon
price was utilised for hedging to support the decarbonisation of our fuel
mix as well as to determine the price point for bidding in the energy
market auction for potential future generation assets, alongside power
purchase agreements.
Whilst the metrics and targets set out below and on pages 44 and 54
relate to our most material climate-related risks and opportunities, we
measure and track a number of wider less material environmental
metrics including water and waste (see pages 45 and 251). Our
metrics, targets and ambitions will likely evolve in line with best
practice and the changing world around us.
OUR ENERGY USE AND GHG EMISSIONS
2023 2022
Total GHG emissions (scope 1 and 2)
(1)
1,681,475tCO
2
e
†(2)
2,009,885tCO
2
e
(3)(4)
Scope 1 GHG emissions 1,674,829tCO
2
e
†(5)
2,004,693tCO
2
e
(4)(6)
Scope 2 GHG emissions 6,647tCO
2
e
†(7)
5,193tCO
2
e
(4)(8)
Scope 3 GHG emissions
(9)
21,180,922tCO
2
e 24,330,208tCO
2
e
Total GHG intensity by revenue
(10)
64tCO
2
e/£m
(11)
85tCO
2
e/£m
(12)
Total energy use 7,437,652,380kWh
†(13)
9,047,097,047kWh
(14)
Reporting practices for environmental metrics are drawn from the WRI/WBCSD Greenhouse Gas Protocol and Defra’s Environmental Reporting Guidelines. Reporting is
additionally 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.
(1) Comprises scope 1 and scope 2 emissions as defined by the Greenhouse Gas Protocol.
(2) Comprises UK 547,542tCO
2
e and non-UK 1,133,933tCO
2
e.
(3) Comprises UK 726,891tCO
2
e and non-UK 1,282,994tCO
2
e.
(4) Restated due to availability of improved data.
(5) Comprises UK 542,244tCO
2
e and non-UK 1,132,585tCO
2
e.
(6) Comprises UK 722,810tCO
2
e and non-UK 1,281,883tCO
2
e.
(7) Market-based, comprises UK 5,299tCO
2
e and non-UK 1,348tCO
2
e. Location-based is 17,041tCO
2
e.
(8) Market-based, comprises UK 4,082tCO
2
e and non-UK 1,111tCO
2
e. Location-based is 16,275tCO
2
e.
(9) Includes emissions from the following scope 3 categories defined by the Greenhouse Gas Protocol: purchased goods and services, capital goods, fuel and energy-
related activities, waste generated in operations, business travel, employee commuting, upstream and downstream transportation and distribution, use of sold
productand investments. All emissions are calculated in line with the methodologies set out by the Greenhouse Gas Protocol’s technical guidance, apart from
workingfrom 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
toour business.
(10) 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.
(11) Comprises UK 25tCO
2
e/£m and non-UK 267tCO
2
e/£m.
(12) Comprises UK 42tCO
2
e/£m and non-UK 203tCO
2
e/£m.
(13) Comprises UK & Offshore 1,654,616,311kWh and non-UK energy use 5,783,036,069kWh.
(14) Comprises UK & Offshore 2,394,832,533kWh and non-UK energy use 6,652,264,514kWh.
Strategic report | Centrica plc Annual Report and Accounts 2023 53
OUR CLIMATE TRANSITION DASHBOARD – PROGRESS AGAINST OUR CLIMATE TRANSITION PLAN 2021
(1)
Includes our net zero targets, supported by our climate transition ambitions
Progress against targets and ambitions: l On track l Behind
TARGETS & AMBITIONS
2023 Progress 2022 Progress
Customer GHG emissions – 28% intensity reduction by 2030 and net zero by 2050
(from2019)
10% reduction l
6% reduction l
Hive Active Heating – 2.5 million customers by 2025 (units to date)
2.4m l 2.0m l
Smart meters – 6 million additional installed by 2025 (from 2020)
3.0m l 2.3m l
EV charging points – 100,000 in year by 2025 (annual units)
7.0k l 7.4k l
Heat pumps – 20,000 in year by 2025 (annual units)
3.0k l 1.0k
(2)
l
Centrica GHG emissions – 40% reduction by 2034 and net zero by 2045 (from 2019)
21% reduction l 5% reduction
(3)
l
Low carbon and transition assets – 800MW installed by 2025 (from 2020)
(4)
132MW l 101MW l
Fleet by 2025 (total to date)
(5)
– 100% EV van roll-out
– 100% EV car roll-out
29% l
74% l
23% l
43% l
Property – 50% reduction in UK emissions by 2030 (from 2019)
65% l 63% l
Capex – grow capital allocated to green activities from 5% to at least 50% by 2025 (from 2019)
(5)
31% l 9% l
(1) Glidepath trajectory for climate transition ambitions is not linear. Demand is expected to increasingly grow, resulting in accelerated delivery against the target as we
approach the target date.
(2) Restated to additionally include installations via ECO.
(3) Restated due to availability of improved data.
(4) A mixed portfolio of solar, battery and gas-fired peaking assets, all enabling the grid to decarbonise.
(5) From 2024, our ambition for a zero-emission van fleet will be extended out to 2030 (see page 53). Our capital allocated to green investment will also run out to 2028
(seepage 11).
READ MORE ABOUT OUR WIDER DATA AND TRENDS IN
OUR DATA CENTRE AT CENTRICA.COM/DATACENTRE
54 Strategic report | Centrica plc Annual Report and Accounts 2023
TASK FORCE ON CLIMATE RELATED FINANCIAL DISCLOSURES
The table below sets out the 11 TCFD recommendations and where the related information can be found.
Recommendation Recommended disclosure Pages
Governance
a) Describe the Board’s oversight of climate-related risks and
opportunities
¢ Pages 47 to 48 and 57 to 71
b) Describe management’s role in assessing and managing
climate-related risks and opportunities
¢ Pages 47 to 48, 52, 72 to 78
and 82 to 83
Strategy
a) Describe the climate-related risks and opportunities
theorganisation has identified over the short, medium,
andlong term
¢ Pages 49 to 52,138 to 142
and 152 to 156
b) Describe the impact of climate-related risks and
opportunities on the organisation’s businesses, strategy,
andfinancial planning
¢ Pages 49 to 52, 138 to 142
and 152 to 156
¢ CDP 2023 submission
centrica.com/CDP23
c) Describe the resilience of the organisation’s strategy, taking
into consideration different climate-related scenarios,
including a 2°C or lower scenario
¢ Pages 49 to 52
Risk management
a) Describe the organisation’s processes for identifying and
assessing climate-related risks
¢ Pages 28 to 29, 48 and 52
b) Describe the organisation’s processes for managing climate-
related risks
¢ Pages 28 to 29, 31 to 32, 34,
48 and 52
c) Describe how processes for identifying, assessing, and
managing climate-related risks are integrated into the
organisation’s overall risk management
¢ Pages 28 to 29, 48 and 52
Metrics and targets
a) Disclose the metrics used by the organisation to assess
climate-related risks and opportunities in line with its strategy
and risk management process
¢ Pages 52 to 54
¢ Data centre at centrica.com/
datacentre
b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3
greenhouse gas (GHG) emissions, and the related risks
¢ Pages 49 to 53
c) Describe the targets used by the organisation to manage
climate-related risks and opportunities and performance
against targets
¢ Pages 44 and 52 to 54
¢ Climate Transition Plan at
centrica.com/climatetransition
The Strategic Report has been approved by the Board and
signed on its behalf by:
Raj Roy
Group General Counsel
& Company Secretary
14 February 2024
Strategic report | Centrica plc Annual Report and Accounts 2023 55
56 Governance | Centrica plc Annual Report and Accounts 2023
Governance
57
Directors’ and Corporate Governance Report
59 – Board of Directors
64 Corporate Governance Statement
72 – Audit and Risk Committee
79 – Nominations Committee
82
– Safety, Environment and Sustainability Committee
84 – Remuneration Report
110 Other Statutory Information
DIRECTORS’ AND CORPORATE
GOVERNANCE REPORT
DEAR SHAREHOLDER
I am pleased to present the 2023
Directors’ and Corporate Governance
Report. The Board recognises that good
governance is essential for the effective
delivery of our strategy and the ongoing
development and sustainability of the
Group, and in this report, we will update
you on Centrica’s corporate governance,
what the Board did in 2023 and the
Board’s focus areas for the year ahead.
Having successfully revitalised the business by materially simplifying our
portfolio and strengthening our balance sheet, alongside a relentless
focus on operational performance, the Board has spent time seeking to
build on this success and, as a result, significant efforts have been
dedicated to crafting a green-focused investment strategy. This
strategy is designed to ensure Centrica’s long-term sustainability and
enhance stakeholder value. More information about this can be found
on pages 14 and 15.
The Board is dedicated to delivering sustainable value to both
shareholders and other stakeholders. In 2023, the Company declared
and paid a total of 4.0p per share in dividends to shareholders (up
33%on the total dividend of 3.0p per share paid in 2022). As of
31December 2023, we returned £613 million to our shareholders
through our share buyback programme, with a further £2 million
committed not yet settled, being a total of £615 million, as part of our
commitment to distribute surplus capital. We expect to invest around
£600-£800 million ayear until 2028, primarily in customer technology,
renewable generation and flexible power assets, enhancing the security
of energysupply inthe UK, while creating value for our shareholders.
Wehave also maintained a strong focus on advancing the Company’s
energytransition journey as outlined in our Climate Transition Plan
(CTP). TheCTP, and details of our progress to date, can be found
atcentrica.com/sustainability and in earlier sections of this Annual
Reportand Accounts.
ORGANISATIONAL CULTURE
Centrica is grounded in values of Care, Delivery, Agility, Courage and
Collaboration, which form the core of our organisational culture. Our
values are supported by Our Code that sets out our fundamental
standards for engagement and collaboration. Our Code guides our
decision-making, reflects our commitment to integrity and can be
accessed at centrica.com/ourcode.
The Group Chief Executive regularly updates the Board on issues
related to employee engagement, with the quarterly ‘Our Voice’ survey
offering the Board crucial insights into the Company’s culture. This is
supplemented with feedback from a variety of other sources, including
dedicated colleague engagement meetings. I and my fellow Directors
find these meetings to be most informative and we appreciate the
opportunity to engage directly with colleagues in this way. You can find
more information on the survey and other workforce engagement
practices on pages 38 and 39. The Board maintains a focus on
cultivating the Company’s culture, emphasising colleague development
and digital enablement for Centrica’s future readiness.
DIVERSITY, EQUITY AND INCLUSION
Diversity, equity and inclusion continue to be key priorities for the
Board. As at 31 December 2023, we complied with the diversity
targets outlined in the FTSE Women Leaders Review and the Parker
Review to have over 40% female representation on the Board and at
least one Director from a minority ethnic background. We also
complied with the Board and senior executive gender and ethnicity
targets in the Listing Rules, save for the target that at least one senior
position (Chair, Senior Independent Director, Group Chief Executive
and Group Chief Financial Officer) be held by a woman. This situation
arose when Kate Ringrose stepped down as Group Chief Financial
Officer last year and Russell O’Brien was appointed following a
thorough and robust recruitment process involving both a diverse
candidate pool and interview panel. However, as explained in further
detail in the Nominations Committee Report, the Board is fully
committed to meeting the diversity target in relation to the above-
mentioned senior Board roles. The Board will therefore, as part of its
ongoing succession planning arrangements, ensure that this
requirement is taken into account in a way that enables the Company
to meet the diversity target at the earliest possible opportunity. Overall
the Board’s range and depth of experience and skills has expanded
over the past year with new appointments to the Board in a way that
will assist the Company in the delivery of its strategy.
The Board has recently updated its diversity policy to comply with
Disclosure Guidance and Transparency Rule 7.2.8A, the FTSE Women
Leaders Review, and the Parker Review. This update also extends the
policy to the Board’s Committees. For more detailed information on the
Board’s diversity policy, please visit centrica.com or refer to the
Nominations Committee Report on page 80.
Centrica is dedicated to fostering an inclusive environment where all
individuals, regardless of their background, can succeed. We are
actively working to ensure that our workforce, including senior
leadership, mirrors the diversity of the communities we serve. Our
Company has implemented policies aimed at enhancing diversity,
equity and inclusion at every level. We have made progress in
recruiting, promoting, and developing employees from diverse
backgrounds, and we are committed to continuing these efforts.
Governance | Centrica plc Annual Report and Accounts 2023 57
BOARD COMPOSITION
On 1 March 2023, Russell O’Brien became Group Chief Financial
Officer. During the year, after a detailed assessment of the Board’s
needs and the strategic path of the Group by the Nominations
Committee, three new independent Non-Executive Directors were
appointed; Philippe Boisseau, Jo Harlow and Sue Whalley, each of
whom brings a wealth of diverse experience to the Board. You can find
more information on these Directors and their appointments in the
biographies and the Nominations Committee Report on pages 59 to 62
and 79 to 80 respectively.
BOARD, COMMITTEE AND DIRECTOR EVALUATIONS
ANDEFFECTIVENESS
In September 2023, the Board conducted a self-evaluation supported
by Lintstock, a corporate advisory firm specialising in Board
performance evaluations. The evaluation focused on a broad range
oftopics, which are discussed in more detail on page 66. Lintstock
generated a tailored report, drawing on input from all the Directors.
Theoutput from this evaluation was reviewed at the Nominations
Committee meeting in November 2023, in which all Directors
participated.
The Directors concluded that, overall, the Board was performing
effectively and the Committees were effective in supporting the Board
to deliver against its objectives. The evaluation also identified areas
which could benefit from increased focus and these topics (see page
69) will be amongst the key priorities for the Board in the year ahead,
inaddition to the strategic and operational priorities already discussed
in other sections of this Annual Report and Accounts.
ENGAGEMENT WITH OUR STAKEHOLDERS
Stakeholder views are gathered through an extensive network of
strategic engagements to help grow the business and deliver
improvements for our customers, colleagues and society over the long
term. During 2023, representatives from the Board met with major
shareholders from time to time in order to obtain their perspectives on a
range of matters, including the Company’s performance, strategy and
ESG matters.
The Board maintains collective responsibility for engaging with
employees regularly throughout the year, recognising the insights and
benefits gained by all Board members from regular interactions with a
diverse range of colleagues.
Throughout the year, Non-Executive Directors have visited a number of
sites to immerse themselves in the operational aspects and
communicate directly with employees about their work experiences
and other significant issues. For instance, in 2023 the Board visited
numerous sites Group wide, including the Brigg power station, the
Hessle office, the Centrica Energy Storage gas terminal at Easington
and the British Gas contact centre in Stockport. This engagement
strategy is reviewed periodically to ensure its effectiveness.
Further details of how the Board has discharged its duties under
Section 172 of the Companies Act 2006 can be found in our Section
172 statement and Stakeholder Engagement section on pages 16
to17.
LOOKING FORWARD
Overall, I am pleased with the strong progress that was made in terms
of the governance of the Company in 2023. The Board naturally
remains focused on delivering against strategy, succession planning
and ultimately creating long term sustainable value for all our
stakeholders.
Thank you for your continued support and I look forward to updating
you again during the year at our Annual General Meeting in June.
Scott Wheway, Chair
14 February 2024
58 Governance | Centrica plc Annual Report and Accounts 2023
BOARD OF DIRECTORS*
Scott Wheway | Chair
Scott joined the Board on 1 May 2016
andbecame Chair of the Board on
17March 2020.
Relevant skills and experience
Scott has a wealth of experience as a senior
customer-facing business leader with a mix of
deep retail and consumer expertise. He has
considerable knowledge gained in both the
retail and insurance sectors, together with a
strong understanding of operating within
highly regulated businesses.
Previous experience
Scott worked in retail for 27 years both in the
UK and internationally. His prior roles include
chair of AXA UK plc from December 2017 until
June 2022, seven years on the board of
Santander UK plc, where he was the senior
independent director, and non-executive
director of Aviva plc between 2007 and 2016.
He is the former chief executive officer of Best
Buy Europe (retail services), director of The
Boots Company plc, managing director and
retail director of Boots the Chemist at Alliance
Boots plc and a director of the British Retail
Consortium. He formerly held a number of
senior executive positions at Tesco plc (retail
services), including chief executive of Tesco
inJapan.
External appointments
Non-executive director of Lloyds Banking
Group plc and chair of Scottish Widows
Group.
Chris O’Shea | Group Chief Executive
Chris joined Centrica in 2018 as Group
Chief Financial Officer and was appointed
as Group Chief Executive in 2020. Chris is
also Chair of the Disclosure Committee and
Chair of Spirit Energy (joint venture).
Relevant skills and experience
Chris has wide-ranging experience across the
entire energy value chain together with
recognised experience in transforming
business and financial performance. He has
considerable knowledge of working in highly
regulated industries and in complex, multi-
national organisations, not only in the energy
sector but also in technology-led
engineeringandservices industries.
Previous experience
Chris was appointed Group Chief Executive
inearly 2020 having previously been Group
Chief Financial Officer. Prior to joining Centrica,
Chris wasgroup chief financial officer ofUK
listed Smiths Group plc and Vesuvius plc,
anda non-executive director of Indian listed
Foseco India Ltd. From 2006 to 2012 Chris
held various senior finance roles with BG
Group plc, including chief financial officer of
Africa Middle East & Asia and Europe &
Central Asia, prior to which he held a number
of senior roles with Shell, (living and working in
the UK, the US and Nigeria), and with Ernst &
Young.
Chris studied Accounting and Finance at the
University of Glasgow, is a Chartered
Accountant, and holds an MBA from the
Fuqua School ofBusiness at Duke University.
External appointments
None.
Russell O’Brien | Group Chief Financial Officer
Russell joined the Centrica plc Board on
1March 2023 and is also on the Board
ofthe majority-controlled subsidiary,
SpiritEnergy.
Relevant skills and experience
Russell has broad experience from across the
energy value chain having spent more than 25
years with Shell plc. He developed his financial
management experience through work in
various business models from Retail through
to upstream development. Russell has
extensive knowledge of controlling, capital
markets, commercial finance and mergers
and acquisitions activities.
Previous experience
Prior to joining Centrica, Russell worked for
Shell plc from 1995 to 2021. From 2006 to
2009 Russell was financial controller for Shell’s
upstream operations in the Americas. Russell
was then CFO for Shell’s global retail business
from 2009 to 2013. Following this, he was
CFO for Shell’s Integrated Gas division. In
2015 he was appointed group treasurer.
During his time as treasurer Russell was also a
board member of Shell Trading and chairman
of Shell Asset Management Co. Russell has
lived and worked in the USA, Singapore, the
Netherlands and the UK. He was a board and
advisory council member of the FICC Market
Standards Board from 2015 to 2021. Russell
is a Fellow of the Chartered Institute of
Management Accountants and the Association
of Corporate Treasurers. Russell studied
Economics and Management and graduated
from St. Andrews University in 1995.
External appointments
None.
Governance | Centrica plc Annual Report and Accounts 2023 59
Carol Arrowsmith | Independent Non-Executive
Director
Carol joined the Board on 11 June 2020
and is Chair of the Remuneration
Committee.
Relevant skills and experience
Carol brings extensive advisory experience,
especially of advising boards on executive
remuneration across a range of sectors, and is
a Fellow of the Chartered Institute of
Personnel and Development.
Previous experience
Carol is a former deputy chair and senior
partner of Deloitte LLP. She was a member of
the Advisory Group for Spencer Stuart, Global
Partner of Arthur Andersen, managing director
of New Bridge Street Consultants and non-
executive director of Compass Group PLC
and Vivo Energy plc.
External appointments
Director and trustee of Northern Ballet Limited.
Philippe Boisseau | Independent Non-Executive
Director
Philippe joined the Board on 1 September
2023.
Relevant skills and experience
Philippe brings broad experience of the
energyindustry, particularly of energy assets,
energy infrastructure, energy trading and the
renewable energy transition.
Previous experience
Philippe was the chief executive officer of
CEPSA (Compañía Española de Petróleos
SA), the Spanish multinational oil and gas,
chemicals, and renewable energy business,
from 2019 to 2021. Before joining CEPSA, he
worked at TotalEnergies SA for over two
decades. During his tenure there, Philippe held
president and senior executive roles across
various business divisions and was
instrumental in establishing and leading Total’s
New Energies division from 2007 to 2016.
Philippe was a senior advisor to Carlyle
International Energy Partners between 2017
and 2019 and was a board member at I-Pulse
Inc. from 2017 to 2021.
Philippe graduated from Ecole Polytechnique
and has an MSc inTheoretical Physics.
External appointments
Senior advisor to OMERS Infrastructure,
Ondra Partners and Sibanye-Stillwater
Limited.
Nathan Bostock | Independent Non-Executive
Director
Nathan joined the Board on 9 May 2022
and is Chair of the Audit and Risk
Committee.
Relevant skills and experience
Nathan has worked in financial services since
the mid-1980s and brings a wealth of
financial, commercial, risk and compliance
expertise, particularly in large-scale customer-
facing businesses. Nathan possesses current
and pertinent experience in financial matters.
Previous experience
Nathan was chief executive officer of
Santander UK from 2014 until early 2022, as
well as global head of investment platforms of
Banco Santander before leaving in late 2023.
He joined Santander from the Royal Bank of
Scotland plc (RBS), where he was an
executive director and group finance director.
He previously held the post of group chief risk
officer and head of restructuring having joined
RBS in 2009. Nathan served on the board of
Abbey National plc (now Santander UK) as an
executive director and chief financial officer
from 2005 until 2009. Prior to this he held a
number of senior positions with Abbey
National, 2001 to 2004, RBS, 1992 to 2001
and Chase Manhattan Bank, 1985 to 1992.
Nathan is a chartered accountant and holds
aBSc (Hons) in Mathematics.
External appointments
None.
60 Governance | Centrica plc Annual Report and Accounts 2023
Chanderpreet (CP) Duggal | Independent Non-
Executive Director
CP joined the Board on 16 December
2022.
Relevant skills and experience
CP brings valuable expertise of digital
technology and the use of data and analytics
in large customer-facing businesses.
Previous experience
CP worked for 20 years at American Express
in various senior roles, the last of which was
leading the company-wide digital and analytics
organisation to enable growth, efficiency, and
innovation globally. His experience includes
managing digital/mobile channels and
technology platforms across the customer
lifecycle, applications of AI and Data Science
across wide-ranging business applications,
operational excellence and managing fraud
risk.
In his most recent executive role, CP was the
chief digital and analytics officer for Burberry
plc and a member of its executive committee.
He was responsible for transforming
e-commerce and omni-channel strategy
globally, accelerating customer relationship
management focus and leveraging analytics
across the company.
External appointments
None.
Jo Harlow | Independent Non-Executive Director
Jo joined the Board on 1 December 2023.
Relevant skills and experience
Jo has more than 25 years’ experience
working in various senior roles, predominantly
in the branded and technology sectors.
Previous experience
Prior to her non-executive career, Jo held
theposition of corporate vice president of
thephones business unit at Microsoft.
Shepreviously spent 11 years at Nokia
Corporation in a number of senior
management roles, including executive vice
president of smart devices. Jo was also non-
executive director at InterContinental Hotels
Group PLC from 2014 to 2023 (including as
remuneration committee chair from 2017 to
2023) and was a non-executive director of
Ceconomy-AG from 2017 to 2021.
Jo attended Duke University in North Carolina
and has a BSc in Psychology.
External appointments
Non-executive director and chair of
remuneration committee at J Sainsbury plc.
Senior independent director and remuneration
committee chair at Halma plc, and non-
executive director at Chapter Zero Ltd.
Heidi Mottram | Independent Non-Executive
Director
Heidi joined the Board on 1 January 2020
and is Chair of the Safety, Environment and
Sustainability Committee.
Relevant skills and experience
Heidi brings considerable relevant strategic
and operational experience acquired in her
current and previous roles. Her deep
understanding of the importance of customer
service, delivered in complex, multi-
stakeholder environments with a high public
profile, is particularly pertinent to the Group at
this time, as it focuses on the delivery of its
customer-centric strategy.
Previous experience
Heidi began her career with British Rail in the
mid-1980s. She held a number of roles in
GNER, before joining Midland Mainline in 1999
as operations director. She was managing
director of Northern Rail from 2004, and
before that she was commercial director of
Arriva Trains Northern and operations director
of Midland Mainline Limited from 1999 to
2003. Additionally, Heidi was vice-chair of the
North East Local Enterprise Partnership and
Newcastle University Council.
External appointments
Chief executive director of Northumbrian
Water Limited and Northumbrian Water Group
Limited, and a member of the board of The
Great British Railways Transition Team.
Governance | Centrica plc Annual Report and Accounts 2023 61
Kevin O’Byrne | Senior Independent Director
Kevin joined the Board on 13 May 2019.
Hebecame Senior Independent Director
on1 June 2022.
Relevant skills and experience
Kevin brings extensive retail and finance
experience to the Board, having occupied
senior roles in a number of leading UK and
international retailers. Kevin possesses current
and pertinent experience in financial matters.
The Board considers that Kevin has recent
and relevant financial experience.
Previous experience
Kevin was chief financial officer of J Sainsbury
plc from January 2017 to March 2023. Prior
tothat, he was chief executive officer of
Poundland Group plc, and previously held
executive roles at Kingfisher plc, including
divisional director UK, China and Turkey, chief
executive officer of B&Q UK & Ireland and
group finance director. Prior to that he was
finance director of Dixons Retail plc. From
2008 to 2017 he was a non-executive director
and chairman of the audit committee of Land
Securities Group PLC where he was also
senior independent director from 2012 to
2016. Kevin was chair of Centrica plc’s Audit
and Risk Committee from 2019 to 2023.
External appointments
Non-executive director of International Flavors
& Fragrances Inc. (NYSE listed)
Rt Hon. Amber Rudd | Independent
Non-Executive Director
Amber joined the Board on 10 January
2022.
Relevant skills and experience
Amber brings a wealth of real-world
experience in energy, policy and business.
Previous experience
After around 20 years working in business,
Amber served as a Member of Parliament
between 2010 and 2019. In addition to
holding the roles of Home Secretary,
Secretary of State for Work and Pensions and
Minister for Women and Equalities, Amber
served as Secretary of State for Energy and
Climate Change from 2015 to 2016, having
been Parliamentary Under Secretary ofState
at the Department of Energy and Climate
Change from July 2014 until May 2015.
Amber led the UK team to the successful
completion of the Paris Climate Change
Agreement. This UN sponsored 2015
Conference of the Parties (COP21) achieved
alandmark global commitment to reduce
national carbon emissions.
External appointments
Non-executive director of Pinwheel, advisor to
businesses including Energy 1, Equinor, FGS,
Centerview Partners and Phoenix Group, and
a trustee of TheClimate Group, RUSI.
Sue Whalley | Independent Non-Executive Director
Sue joined the Board on 1 December 2023.
Relevant skills and experience
Sue brings a blend of experience in people
and cultural transformation, and strategic,
technological, and operational evolution in
large, complex organisations, championing
the use of innovation to improve customer
service.
Previous experience
Prior to joining Associated British Foods plc in
2019, Sue spent 12 years at Royal Mail where
she held several executive roles. She was
chief executive officer of the UK post and
parcels business where she led complex
organisation and digital transformation to
support e-commerce growth in the logistics
and delivery business. Sue has extensive
experience working with complex stakeholder
landscapes including unions and regulators.
Sue spent nearly 18 years in management
consultancy working in a range of industries
including retail and utilities.
Sue is a graduate of the University of
Cambridge and holds an MBA from Harvard
Business School.
External appointments
Chief people and performance officer at
Associated British Foods plc.
62 Governance | Centrica plc Annual Report and Accounts 2023
Raj Roy | Group General Counsel & Company
Secretary
Raj was appointed Group General Counsel
& Company Secretary on 1 October 2020.
Relevant skills and experience
Raj has overall responsibility for legal,
regulatory, compliance and secretariat
activities across the Group, the effective
operating of Centrica plc’s Board and advising
on key issues of corporate governance and
compliance. Raj joined Centrica in 2014 as the
Legal Director for Residential Energy, before
becoming General Counsel for the UK and
Ireland region in 2017. He has led legal,
regulatory and compliance teams at Centrica
in various formations across the UK and
Ireland region and the Consumer division.
Previous experience
Prior to joining Centrica, Raj spent nine years
at Vodafone, holding a number of senior in-
house legal roles in the Group and UK legal
functions. Raj started his career in private
practice, qualifying as a solicitor at Slaughter
and May in London and subsequently working
for Freshfields in Brussels.
External appointments
Member of the Board of Energy UK
(representing Centrica) and the Board of
General Counsel for Diversity and Inclusion
(GCD&I).
*as at 14 February 2024
The Board considers that each of the Directors
continues to contribute effectively to the work
and deliberations of the Board.
Reasons for the (re-)election of each of our
Directors at the forthcoming AGM can be
found within the Centrica plc Notice of Annual
General Meeting 2024 which will be made
available on our website centrica.com/agm24.
Full biographies can be found at centrica.com/
board
Governance | Centrica plc Annual Report and Accounts 2023 63
CORPORATE GOVERNANCE
STATEMENT
The Board is committed to high standards of corporate governance
and is pleased to confirm that throughout the year ended 31December
2023, the Company complied with all relevant provisions of the UK
Corporate Governance Code (UK Code) apart from Provisions 40 and
41. An explanation of the non-compliance can be found in the
Remuneration Committee Report on page 108. Ourapplication of
theUK Code is set out below.
An explanation of non-compliance with Listing Rule 9.8.6(9) whereby
the Company does not have at least one senior position held by a
woman can be found on page 80. The UK Code and associated
guidance are available on the Financial Reporting Council’s website at
frc.org.uk. The index on page 110 sets out where to find each of the
required disclosures in respect of Listing Rule 9.8.4 and Disclosure
Guidance and Transparency Rules 4.1.5 R and 7.2.1.
Section 1 | Board Leadership and Company Purpose
Principles A, B, C,
D, E
The Corporate Governance statement (CG Statement) on pages 64 to 71 gives information on the Group’s compliance
with the principles relating to the Board’s Leadership and Company Purpose. More detailed information on:
¢ the Group’s statement of purpose can be found on page 9;
¢ the Group’s strategy, resources and the indicators it uses to measure performance can be found on pages 10 to 11
and 26 to 27 respectively;
¢ the Group’s engagement with stakeholders and the Group’s Section 172(1) Statement is set out on pages 14 to 17;
and
¢ the Group’s approach to workforce matters can be found in the Chief People Officer’s report and in ‘Our
people’ within our People and Planet section on pages 38 to 43.
Details of AGM voting results can be found on page 70, the Group’s framework of controls is contained in the Audit
andRisk Committee report on pages 73 to 74 of the CG Statement and in the Principal Risk and Viability Disclosure
section on pages 28 to 37.
Section 2 | Division of Responsibilities
Principles F, G, H, I The CG Statement describes the structure and operation of the Board. In the CG statement, we describe on page 66
the process the Company conducts to evaluate the Board, to ensure that it continues to operate effectively, that
individual Director’s contributions are appropriate and that the oversight of the Chair promotes a culture of openness
andconstructive yet challenging debate. The policies and processes which support the Board to function effectively
andefficiently can be found on our website at centrica.com/board.
Section 3 | Composition, Succession and Evaluation
Principles J, K, L Details of the skills, experience and knowledge of the existing Board directors can be found in the Board biographies on
pages 59 to 63. Information on the Board’s appointment process and approach to succession planning is contained in
the Nominations Committee report on pages 79 to 80. Information on the Board evaluation process can be found on
page66.
Section 4 | Audit, Risk and Internal Control
Principles M, N, O Information on the policies and procedures the Group has in place to monitor the effectiveness of the Group’s Internal
and External Audit functions, and the integrity of the Group’s financial statements, is contained in the Audit and Risk
Committee report on pages 72 to 74 of the CG Statement, along with an overview of the procedures in place to manage
risk and oversee the internal control framework. Further information on the Group’s approach to risk management is
contained in the Principal Risk and Viability Disclosure section of the Strategic Review on pages 28 to 37. The Board
believes the 2023 Annual Report to be a fair, balanced and understandable assessment of the Company’s position and
prospects. A description of the Audit and Risk Committee’s work in enabling the Board toreach this conclusion is
contained in the Audit and Risk Committee report on page 73.
Section 5 | Remuneration
Principles P, Q, R The Directors’ Remuneration Report section of the CG Statement describes the Group’s approach to Directors’
remuneration, including the procedure for developing policy and the Remuneration Committee’s discretion for
authorising remuneration outcomes. Details of linkage of the Directors’ Remuneration Policy with long-term strategy
arecontained on page 102.
The Board and its committees continue to monitor developments in governance, and welcome the important revisions to the UK Corporate
Governance Code (the Code) published by the Financial Reporting Council (FRC) on 22 January 2024.
64 Governance | Centrica plc Annual Report and Accounts 2023
GOVERNANCE FRAMEWORK
The Board is responsible for leading the Group in an efficient manner,
establishing the Group’s purpose, values and strategy, to which the
Group’s culture is aligned. It focuses primarily on strategic and policy
issues and is responsible for developing long-term sustainable value
forstakeholders. It is responsible for ensuring there are effective risk
assessment and management processes, setting the Group’s strategy,
overseeing the allocation of resources and monitoring the performance
of the Group. The framework to enable this is set out in a schedule
ofmatters reserved for the Board. In order to allow the Board to focus
on its priorities, a number of its oversight responsibilities have been
delegated to four principal Committees. These responsibilities are set
out in the terms of reference for each Committee. The Board regularly
reviews the remit, authority, composition and terms of reference of
each Committee. In performance of these duties, the Board has regard
to the interests of the Group’s key stakeholders and the potential
impact of the decisions it makes on wider society.
Matters reserved exclusively for the Board
There are certain key responsibilities that the Board does not
delegate,and which are reserved for its consideration. The Board’s
responsibilities include: the development of strategy; the acquisition
anddivestment policy; the approval of major capital expenditure; the
Group’s capital structure; the approval of financials; and oversight
andindependent assurance of policies and procedures. The full
schedule of matters reserved is available on the governance page
ofour website at centrica.com.
OUR BOARD
The Board comprises the Non-Executive Chair (independent on
appointment), two Executive Directors (Group Chief Executive and
Group Chief Financial Officer), and nine independent Non-Executive
Directors. There is a clear division of responsibilities between the Chair
and the Group Chief Executive, reflected in the schedule of matters
reserved for the Board.
Board Committees
The Board oversees the Group’s operations through a unitary Board
and four principal Committees, these being the Audit and Risk
Committee, Nominations Committee, Remuneration Committee and
the Safety, Environment and Sustainability Committee. The terms of
reference for these Committees can be found on our website,
centrica.com, and attendance at meetings of each of these
Committees in 2023 can be found on page 68. Further information on
the work of these Committees can be found in later sections of this
Annual Report and Accounts (pages 72, 79, 82 and 84).
In addition to the above-mentioned Committees, the work of the Board
is supported by a Disclosure Committee, the terms of reference for
which are available on our website. The Disclosure Committee is
responsible for overseeing the timely and accurate disclosure of
sensitive information and maintaining procedures and controls to
enable compliance with legal and regulatory disclosure obligations.
Meetings of the Disclosure Committee are convened as and when
necessary and membership of the Committee comprises the Group
Chief Executive, Group Chief Financial Officer and the Group General
Counsel & Company Secretary.
Centrica Leadership Team (CLT)
The CLT is led by the Group Chief Executive and members include the
Group Chief Financial Officer, Group General Counsel & Company
Secretary and the Chief People Officer. The CLT is responsible for
ensuring the delivery of the Group’s strategy, business plans and
financial performance.
Board appointments
The report of the Nominations Committee on pages 79 to 80 describes
the work of the Committee in relation to Board appointments. All
Directors are subject to annual re-election. The Board sets out in the
Notice of Annual General Meeting the specific reasons why each
Director’s contribution is, and continues to be, valuable to the
Company’s long-term sustainable success.
The Board
The Board is responsible for corporate governance, developing strategy and major policies, reviewing management performance, approving financials
and providing entrepreneurial leadership to the Company within a framework of prudent and effective controls which enable risk to be assessed
andmanaged. It is also responsible for setting the Company’s culture, values and the behaviours it wishes to promote in conducting its business.
TheBoard’s role and responsibilities are reviewed against the UK Code to ensure that it is meeting all of its responsibilities.
Chair Group Chief Executive
The Chair is responsible for the leadership and management ofthe
Board. In doing so, he is responsible for promoting high ethical
standards, ensuring the effective contribution of all Directors and,
with support from the Group General Counsel & Company
Secretary, ensuring best practice in corporate governance and the
timely distribution of accurate and clear information to Directors.
The Group Chief Executive is responsible for the executive
leadership and day-to-day management of the Company,
toensure the delivery of the strategy agreed by the Board.
Independent
Non-Executive Directors
Senior Independent
Director
Group Chief
Financial Officer
Group General Counsel
&Company Secretary
Independent Non-Executive
Directors are responsible for
contributing sound judgement
and objectivity to the Board’s
deliberations and overall decision-
making process, providing
constructive challenge, and
monitoring the Executive
Directors’ delivery of the strategy
within the Board’s risk and
governance structure. All of the
Non-Executive Directors are
considered independent.
The Senior Independent
Director acts as a sounding
board for the Chair and serves
as a trusted intermediary for the
other Directors, as well as
shareholders, as required.
The Group Chief Financial
Officer is responsible for
providing strategic financial
leadership to the Company and
for the day-to-day management
of the finance function.
The Group General Counsel &
Company Secretary advises the
Chair on governance, together
with updates on regulatory and
compliance matters; supports the
Board agenda with clear
information flow; and acts as a
link between the Board and its
Committees, and between
Independent Non-Executive
Directors and senior
management.
Governance | Centrica plc Annual Report and Accounts 2023 65
Evaluation and effectiveness of the Board, Committees
and the Directors
To ensure that the Board and its Committees continue to operate
effectively, a performance evaluation of the Board and its principal
Committees is undertaken annually with an externally facilitated
evaluation every third year. We used the services of external advisors,
Lintstock Limited, to support the 2023 internal evaluation process,
which year on year has built on the priorities identified in the
previousyears.
The 2023 evaluation, overseen by the Group General Counsel &
Company Secretary, was conducted by way of a questionnaire which
covered a broad range of topics, including:
¢ Board composition;
¢ Board dynamics;
¢ Stakeholder oversight;
¢ Strategic oversight;
¢ Management and focus of meetings;
¢ Risk management and internal controls;
¢ Succession planning and people oversight;
¢ Board support; and
¢ priorities.
The outcome of this year’s evaluation demonstrated that the Board
andits Committees continue to operate effectively.
The evaluation highlighted certain topics and actions for focus in the
year ahead, including additional training on technological threats and
opportunities, with a focus on green technologies and artificial
intelligence, enhancing insights into global supply chain considerations
and competitor strategies and performance. The Board and the
Nominations Committee will also continue to focus on succession
planning, both at Board and senior executive level. Creating further
opportunities for engagement with senior leadership and management
was also identified.
Feedback from the 2022 evaluation related to succession planning,
Board training and increasing the Board’s exposure to and
understanding of certain stakeholders. During the course of 2023,
meetings dedicated to talent and succession planning, including
assessment of Board skills and composition, were held. The Board
reviewed its training requirements and the 2023 and 2024 work
programmes were updated to include training sessions on a broad
range of topics. Stakeholder related information provided to the Board
was enhanced, including site visits, meetings with colleagues and
increased content on supply chain and customers as part of business
unit deep-dive sessions.
Independent Board Evaluation will be appointed to provide the triennial,
in-depth, externally facilitated evaluation of the Board’s effectiveness in
2024. Further information on the process and feedback from this
evaluation will be reported in the 2024 Annual Report and Accounts.
Training and development for Directors
It is important to ensure that Directors’ skills and knowledge are
refreshed and updated regularly, given the dynamic business and
regulatory environment in which the Company operates. The Chair,
supported by the Group General Counsel & Company Secretary
andSecretariat, and informed by the Nominations Committee, is
responsible for the ongoing development of all Directors. The Chair
discusses with each Director any individual training and development
needs, such as formal and informal briefings, meetings with
management and visits to the Group’s operations. During 2023, the
Directors received deep dives including British Gas Energy, Centrica
Energy and Centrica Energy Storage+, and training on various matters
including, directors’ duties and hydrogen and carbon capture storage
models (including economic regulation frameworks). In addition, the
Directors have full access to the advice and services of the Group
General Counsel & Company Secretary, who is responsible for advising
the Board, on corporate governance matters. Should it prove
necessary, Directors are also able to seek independent professional
advice at the Company’s expense in respect of their duties.
Directors’ independence and conflicts
All our Non-Executive Directors are considered to be independent
against the criteria in the UK Code, and free from any business interest
which could materially interfere with the exercise of their independent
judgement. In addition, the Board is satisfied that each Non-Executive
Director is able to dedicate the necessary amount of time to the
Company’s affairs.
The Non-Executive Directors’ Letters of Appointment state that they
must inform the Group General Counsel & Company Secretary of any
other businesses, directorships, appointments, advisory roles, or other
relevant commitments (including any relevant changes, and a broad
indication of the time involved). Directors also confirm that they will
inform the Board of any subsequent changes to their circumstances
which may affect the time they can commit to their duties. The
agreement of the Chair must be obtained before accepting additional
commitments that might affect the time Non-Executive Directors are
able to devote to their appointment.
In accordance with the Companies Act 2006 and the Company’s
Articles of Association, Directors are required to report actual or
potential conflicts of interest to the Board for consideration and,
ifrequired, authorisation. If such conflicts exist, Directors recuse
themselves from consideration of the relevant subject matter.
TheCompany maintains a schedule of authorised conflicts of
interestwhich is regularly reviewed by the Board.
The Company’s Articles of Association provide how Directors are
appointed, retired and replaced. These can be found on our website.
Directors’ induction
The Board has in place processes for the Directors’ induction and
ongoing training. The Directors’ induction programme is led by the
Chair and supported by the Group General Counsel & Company
Secretary and Secretariat. It is tailored to meet the individual’s needs,
providing all the information and support required in a structured way
toallow them to be effective in their role. Directors are asked to provide
input on how their induction should be tailored, in relation to both
content and delivery, with the opportunity for periodic subsequent
review with the Chair. For example, CP Duggal met with each of
thebusiness Managing Directors and their teams during the year,
including a visit tothe Stockport Call Centre and Bord Gáis Energy
inDublin, together with deep dive sessions with the Centrica Energy
andBritish Gas Energy businesses, and some external training
andmentoring sessions.
DIRECTOR INDUCTION 2023 – CP DUGGAL,
RUSSELL O’BRIEN, PHILIPPE BOISSEAU,
JOHARLOW AND SUE WHALLEY
Following appointment, all Directors receive a comprehensive
and tailored induction programme. This is designed through
discussion with the Chair and the Group General Counsel &
Company Secretary and considers existing expertise and any
prospective Board Committee roles.
The induction plans for CP Duggal and Russell O’Brien
comprised a combination of in-person and virtual sessions
with both internal functions and external advisors over an
initial period of six months. This was structured to ensure that
information material to their roles was delivered in the early
stages of the programme.
These briefings provided an initial opportunity to meet senior
leaders and were supported by site visits to provide on-the-
ground understanding of business units and working
environments.
The induction for Philippe Boisseau, who joined the Board
on1 September 2023, and for Jo Harlow and Sue Whalley,
who joined the Board on 1 December 2023, has begun.
Anupdate on their respective inductions will be provided
inthe 2024 Annual Report & Accounts.
66 Governance | Centrica plc Annual Report and Accounts 2023
Areas covered during induction Sessions covered by
Centrica’s purpose, strategic priorities and business unit operations Group Chief Executive and Managing Directors of each
Business Unit, Group Head of Strategy
Financial position, performance, investment and funding, including
creditratings
Group Chief Financial Officer, Group Financial Controller and the
Company’s brokers
Pensions, Treasury & Insurance Group Head of Treasury, Pensions, & Insurance
External assurance External auditors
Remuneration Committee advisors PwC
Rewards & Benefits Group Chief People Officer, Director of Rewards & Benefits
People & Culture Group Chief People Officer
Energy sector and trends, energy markets Group Strategy Director, Group Regulatory Affairs Director,
GroupHead of M&A, Group Head of Investor Relations
Net zero, sustainability Group Strategy Director, Group Head of Environment
Stakeholder communication and engagement Group General Counsel & Company Secretary and Group
Corporate Affairs Director
Corporate governance and Board operations Chair of the Board and Group General Counsel & Company
Secretary
Shareholder and investment perspectives Group Head of Investor Relations and the Company’s brokers
Legal and regulatory landscape Group General Counsel & Company Secretary, Director of
Regulatory Affairs and Policy
Centrica’s risk profile Chief Risk Officer
Safety, health and environment, people and culture Group General Counsel & Company Secretary, Group Chief People
Officer
Digital technology / Cyber security Chief Information Officer, VP – Cyber Security
Board meetings
TheBoard is committed to upholding high standards of corporate
governance and compliance, recognising their importance for the
Company’s enduring performance and value generation. These
standards underpin the Company’s strategic objectives and critical
decision-making, crucial for reinforcing its financial foundation and
navigating challenging market conditions.
The Board held eight formal meetings in 2023, which primarily occurred
face-to-face. In addition, supplementary meetings were called for
specific approvals. The table showing the attendance of Directors at
Board meetings in 2023 can be found on page 68. If Directors are
unable to attend a meeting, they have the opportunity beforehand to
discuss any agenda items with the Chair. The agendas for Board
meetings are agreed in advance by the Chair, Group Chief Executive
and Group General Counsel & Company Secretary. The agenda
typically consists of regular standing items, suchas reports on financial
performance, and in-depth examination oranalysis of a topic.
During the year, the independent Non-Executive Directors, including
the Chair, mettwice without management present.
Site visits
The Directors recognise the importance of, and benefits gained by,
visiting the Group’s operations and endeavour to visit Centrica sites
each year. The site visits that the Board undertook in 2023 and
theinteractions at those visits are described in the Chair’s letter
onpage 58.
Governance | Centrica plc Annual Report and Accounts 2023 67
Number of Board and Committee meetings attended during 2023
(1)
:
Name Role
Joined the
Board Tenure
(2)
Board AC NC RC SC
Scott Wheway
Chair 01/05/2016 7 years, 8 months 8/8 N/A 3/3 N/A 3/3
Chris O’Shea
Group Chief Executive 01/11/2018 5 years, 2 months 8/8 N/A N/A N/A N/A
Kate Ringrose
(3)
Group Chief Financial Officer 18/01/2021 2 years, 1 month 2/2 N/A N/A N/A N/A
Russell O’Brien
(3)
Group Chief Financial Officer 01/03/2023 0 years, 10 months 6/6 N/A N/A
N
N/A N/A
Carol Arrowsmith
Independent Non-Executive Director 11/06/2020 3 years, 6 months 8/8 4/4 3/3 5/5 N/A
Philippe Boisseau
Independent Non-Executive Director 01/09/2023 0 years, 4 months 3/3 1/1 1/1 N/A 1/1
Nathan Bostock
Independent Non-Executive Director 09/05/2022 1 year, 7 months 8/8 4/4 3/3 N/A 3/3
CP Duggal
Independent Non-Executive Director 16/12/2022 1 year, 1 month 8/8 4/4 3/3 5/5 N/A
Jo Harlow
Independent Non-Executive Director 01/12/2023 0 years, 1 month 1/1 N/A N/A N/A N/A
Heidi Mottram
Independent Non-Executive Director 01/01/2020 4 years, 0 months 8/8 N/A 3/3 5/5 3/3
Kevin O’Byrne
Senior Independent Non-Executive Director 13/05/2019 4 years, 7 months 8/8 4/4 3/3 N/A N/A
Amber Rudd
Independent Non-Executive Director 10/01/2022 1 year, 11 months 8/8 N/A 3/3 5/5 3/3
Sue Whalley
Independent Non-Executive Director 01/12/2023 0 years, 1 month 1/1 N/A N/A N/A N/A
(1) Any Director who is unable to attend a Boardmeeting provides feedback to the Chair on the matters to be discussed in advance of the meeting.
(2) Data as at 31 December 2023.
(3) Kate Ringrose stepped down as Group Chief Financial Officer and an Executive Director on 28 February 2023 and Russell O’Brien joined as Group Chief Financial Officer
and an Executive Director on 1 March 2023.
Board activity including Section 172(1) considerations
The Board, as custodian of the Company, acknowledges the
importance of understanding stakeholder needs and expectations to
secure the Company’s long-term viability and to deliver value to all
stakeholders and society at large.
Throughout the year, the Board’s activities have included evaluating
regular operational and financial reports, strategising, and approving
various governance matters. Read more about Board discussions held
on page 69. Moreover, they have conducted deep dives on special
topics. The Directors ensure that their decisions are informed by the
considerations set out in Section 172 of the Companies Act 2006.
Feedback from key stakeholder engagements is routinely considered
by the Board, and this report, alongside our website, contains
additional examples and evidence of the Directors’ adherence to their
duties as outlined in Section 172. Read more about the Section 172
statement and the principal decision taken by the Board described on
page 17.
Section 172 Evidence
The likely consequences of any decision in the long term Please see page 9 to 11, 14 to 17, 41 to 55 and 67 to 69
The interests of our colleagues Please see page 14 to 17, 38 to 40, 42 to 43, and 67 to 71
The need to foster relationships with suppliers, customers and others Please see page 14 to 17, 70 and 82 to 83
The impact of the Company’s operations on the community and the
environment
Please see pages 41 to 55 and 82 to 83
The desirability of the Company maintaining a reputation for high
standards of business conduct
Please see pages 45, 70 to 71, and 82 to 83 and visit our website
centrica.com
The need to act fairly between members of the Company Please see pages 15 to 17 and 69
68 Governance | Centrica plc Annual Report and Accounts 2023
BOARD DISCUSSIONS HELD DURING THE YEAR INCLUDED
Strategy and business plan
The Board set the delivery of the strategic direction of the Group
and oversaw the delivery of that strategy for the benefit of relevant
stakeholders. In particular, the Board also considered the following
matters:
¢ Group Annual Plans for 2023 and 2024
¢ The Group’s new strategic & investment framework
¢ The Energy Supply Market – future investment strategy
¢ The Climate Transition Plan
¢ Return of surplus capital to shareholders
¢ Energy transition investment opportunities
¢ Responsible sourcing strategy
¢ Stress testing under range of scenarios
Stakeholders considered:
Culture and stakeholders
The Board recognises that understanding the views and interests of
the Company’s diverse community of stakeholders, including
customers, is important.
The views and interests of stakeholders are considered in the
development, delivery and oversight of the Group’s business model,
strategy and culture. During the year, the Board considered the
following matters:
¢ Cost of living crisis and the impact on customers and colleagues
¢ Colleague engagement
¢ Pensions
¢ Company culture
¢ Investor updates and feedback
¢ Senior leadership development and succession planning
¢ Diversity, Equity & Inclusion strategy
Stakeholders considered:
Political and regulatory environment
During the year, the Board considered a range of political and
regulatory matters relevant to the Group’s activities and strategy,
including in particular:
¢ Macro/geopolitical developments
¢ Reform of energy markets
¢ Modern Slavery Act developments
¢ TCFD disclosure
¢ Government intervention initiatives
¢ UK and Ireland energy security
¢ FCA Consumer Duty
Stakeholders considered:
Performance and risk
Financial performance and risks, as well as risk controls and
processes are regularly reported to the Board and to the Audit and
Risk Committee. Risks are also brought to the attention of the
Board through reports from the Group Chief Executive, Group Chief
Financial Officer, heads of business and functional subject matter
experts. These reports covered a wide range of topics, including:
¢ Health and safety performance and process safety risk
¢ Group Performance Reports
¢ 2022 preliminary results statement and 2023 interim results
statement
¢ Group credit exposure and liquidity
¢ Business reviews, including operational performance
¢ Periodic results
¢ Cyber security risk management
¢ Commodity price movements
¢ Climate Transition Plan performance
¢ People & Planet Plan performance
¢ Going concern and viability statements
¢ Audit fees
¢ Internal Audit review
¢ Internal controls
¢ Tax
¢ Treasury risk management
¢ Insurance
¢ Ensek migration
¢ 2022 final dividend
¢ 2023 interim dividend
¢ Technology systems roadmap
Stakeholders considered:
Governance
The Board receives regular reports from the Group General Counsel
& Company Secretary on governance and regulatory matters, as
well as regular updates and insights on market trends from the
Investor Relations function. During the year, the Board took time to
consider or oversee the following key governance activities/matters:
¢ 2022 Annual Report and Accounts
¢ Independent Non-Executive Director recruitment
¢ Board effectiveness evaluation
¢ Succession planning for the Board
¢ Committee composition
¢ Reports from Committee Chairs
¢ Conflicts of interest reviews
¢ Terms of reference reviews
¢ Director skillset and Director training requirements
¢ Director independence
¢ Workforce engagement
¢ All-Employee Share Plan
¢ Dividend policy
¢ Company’s investigation results on warrant-based prepayment
meter installations
Stakeholders considered:
Governance | Centrica plc Annual Report and Accounts 2023 69
RELATIONS WITH OUR STAKEHOLDERS
Shareholder engagement
The Board is committed to maintaining open channels of
communication with all of the Company’s stakeholders. An important
part of this is providing a clear explanation of the Company’s strategy
and objectives, and ensuring feedback is acknowledged, considered
and, where appropriate, acted upon.
Meetings, roadshows and conferences
The Company reports its financial results to shareholders twice a year,
with the publication of its annual and half-year results. The Group Chief
Executive and Group Chief Financial Officer typically meet with our
major institutional shareholders twice a year, following the Company’s
preliminary and interim results, which provides an opportunity for a
review of the Company’s strategy and performance. The results
presentations, webcast and announcement from the 2022 preliminary
results and 2023 interim results are available on our website,
centrica.com.
In addition, management and/or Investor Relations attend a number of
investor conferences throughout the year, giving shareholders further
opportunity to meet and receive updates directly from Company
representatives. Senior management, the Chair, Senior Independent
Director and Remuneration Committee Chair are also available to meet
on an ad-hoc basis with major shareholders if requested.
Engagement themes with our institutional shareholders
During the year, engagement themes included:
¢ Centrica’s strategic refresh;
¢ Full year and interim results;
¢ the Rough storage facility;
¢ UK energy security;
¢ Dividends and shareholder returns;
¢ The regulatory and political environment for UK energy;
¢ Impact of rising commodity prices;
¢ Energy transition investment opportunities;
¢ Board succession;
¢ Liquidity and result of stress tests; and
¢ ESG matters.
GENERAL MEETINGS
The Board is committed to communicating with shareholders and other
stakeholders in a clear and open manner and seeks to ensure effective
engagement through the Company’s regular communications, the
AGM and other investor relations activities. During 2023, the Company
undertook an ongoing programme of meetings with investors (in
person and virtually). The majority of these meetings were led by the
Group Chief Executive and Group Chief Financial Officer.
The Company holds an Annual General Meeting (AGM) each year and
holds General Meetings as required. At the AGM, the Chair gives his
thoughts on governance aspects of the preceding year and the Group
Chief Executive reviews the performance of the Group over the last
year. In advance of each AGM, we write to our largest shareholders
inviting discussion on any questions they might like to raise and
makingthe Chairs of the Board, the Audit and Risk Committee and
theRemuneration Committee available to meet shareholders should
they so wish. In addition, the Company engaged with its largest
shareholders and key governance agencies in early 2023, on
resolutions concerning the Directors’ Remuneration Policy and our
Climate Transition Plan. Feedback was received from major
shareholders and governance agencies and dialogue entered into
witha number of shareholders regarding the proposals.
The 2023 AGM was held as a hybrid meeting, giving shareholders the
opportunity to participate (including asking questions and voting) in
person or virtually via an online platform (Lumi). Shareholders were
encouraged to exercise their votes by submitting their proxy forms
either electronically or by post. We also invited shareholders to submit
their questions in advance of the AGM via a dedicated question facility
on our website and, where appropriate, the answers were published
onour website.
Our 2023 AGM was well supported with voting in favour of the
resolutions ranging from 92% to 99% and with 65% of issued share
capital voted.
Information about the 2024 AGM will be provided in the Notice of
Meeting and will be available in due course at centrica.com/agm24.
Voting on the resolutions will generally be conducted by a poll and the
voting results will be announced through the Regulatory News Service
of the London Stock Exchange and also made available on the
Company’s website.
Centrica.com
Our website, centrica.com, contains up-to-date information for
shareholders and other interested parties including Annual Report and
Accounts, shareholder circulars, share price information, news
releases, presentations to the investment community and information
on shareholder services.
WORKFORCE
Workforce engagement
Responsibility for workforce engagement is shared amongst the
Directors of the Board, which is a well-recognised approach adopted
by companies. Through engaging with colleagues and understanding
what they think and feel, the Board is able to make more informed
decisions which enable better outcomes for colleagues as well as the
Company.
During the year, the Chair and Non-Executive Directors engaged with
members of the workforce in various ways. This included site visits
toBrigg, Hessle, Easington Terminal, and Park House where they met
with colleagues to better understand the businesses.
Quarterly engagement surveys, feedback from the Shadow Board,
town halls, meetings with members of the Centrica Leadership Team,
both individually and together, leader-led listening sessions and
colleague-led network sessions provided additional mechanisms to
better understand the views of the workforce and to foster a more
collegial culture.
Ongoing and holistic engagements like these contributed to the
decision-making of theCentrica Leadership Team and the
Boardthroughout the course of 2023. Further information on some
ofthe decision-making of the Board can be found on page 17.
Equal opportunities
The Group has, and is committed to, an active equal opportunities
policy which includes, but is not limited to, recruitment and selection,
training, career development, performance reviews, promotion and
through to retirement. Our culture is to create an inclusive and safe
environment free from discrimination, harassment and victimisation.
Ourpolicies are in place to ensure everyone receives equal treatment
regardless of gender, identity, race, ethnic or national origin, disability,
age, marital status, sexual orientation or religion or any other
characteristic protected by applicable laws.
70 Governance | Centrica plc Annual Report and Accounts 2023
We have created channels for colleagues to voice concerns
confidentially, through a Speak Up helpline that is operated by a
thirdparty.
Action like this helps to ensure that decisions relating to employment
practices are objective and based upon work criteria and individual
merit. See pages 45 for more information.
Colleagues with disabilities
It is our policy that current and prospective colleagues with a disability
have the same right to access and develop their careers as anyone
else, which is why we are actively targeting to grow disability
representation as part of our People & Planet Plan to ensure we reflect
the full diversity of our communities (see page 42). Colleagues with a
disability receive full and fair consideration when applying for all
vacancies and we interview thosewho meet the minimum criteria
required, whilst making all reasonable adjustments during recruitment
or during their employment with us. To help everyone reach their full
potential, we provide training, career development and promotion
opportunities that are open to anyone who works for us alongside
tailored programmes that specifically support colleagues with
disabilities to achieve the next steps in their career. We also endeavour
to retain colleagues in the workforce if they become disabled during
employment.
To support this approach, in 2017 we launched Diverse-ability, a
network that celebrates physiological and neurological diversity among
colleagues. Over the years, the network has grown from strength-to-
strength to become a family of networks including the neurodiversity
network and The Fertility Sanctuary. They are a vital source of support
and education for colleagues, whilst providing us with essential
feedback to help us evolve our business in a more inclusive way. As
part of our ambition to be a more inclusive business, we support The
Valuable 500 initiative to champion disability inclusion across the
business and beyond. We are also members of their Generation
Valuable mentoring programme to help identify and build a community
of disabled talent to develop their skills and share their experiences
upwards, informing the C-suite about how to make businesses more
inclusive. In addition to this, we are a Level 2 Disability Confident
Employer, partner with Scope and are members of the Business
Disability Forum, which offers support, toolkits and advice to
businesses around disability matters. In 2024, we plan to launch our
Great Minds programme to help normalise and better support
neurodiversity amongst other activities.
Human rights
We are fully committed to upholding the fundamental human rights and
freedoms of everyone who works for us, with us, or lives in the
communities where we operate. We uphold the UN Guiding Principles
on Business and Human Rights and are signatories of the United
Nations Global Compact. As set out in Our Code, we take steps to
ensure that we never knowingly cause or contribute to human rights
abuses through activities like employment checks and supplier due
diligence. We also aim to contribute positively to global efforts to ensure
human rights are understood and observed. Further information about
our efforts can be found in our People & Planet Plan on page 46, as
well as in our Modern Slavery Statement and Our Code available on our
website centrica.com.
Governance | Centrica plc Annual Report and Accounts 2023 71
AUDIT AND RISK COMMITTEE
MEMBERSHIP, MEETING ATTENDANCE
AND KEY FOCUS
Committee members
— Nathan Bostock (Chair) (with effect from
1March 2023)
— Kevin O’Byrne (Chair until 28 February
2023)
— Carol Arrowsmith
— Philippe Boisseau (with effect from
1September 2023)
— CP Duggal
All Committee members are independent
Non-Executive Directors. Nathan Bostock
and Kevin O’Byrne have recent and relevant
financial experience and the Committee has
sector relevant competence, as disclosed on
pages 59 to 63.
Carol Arrowsmith is connected to Deloitte
LLP (‘Deloitte’) as, historically, she was a
partner there. However, she had left Deloitte
prior to their appointment as the Group’s
external auditors. In addition to this, Deloitte
provides her with services in a personal
capacity. The Committee deems that this
does not affect the independence and
judgement of Deloitte, nor the Committee’s
oversight of Deloitte’s performance.
Meeting attendees by invitation
All other Non-Executive Directors, Group Chief
Executive, Group Chief Financial Officer, Group
General Counsel & Company Secretary, General
Counsel, Secretariat & Corporate Services,
Group Financial Controller, Group Head of
Accounting, Reporting and Tax, Group Head of
Treasury, Pensions and Insurance, Group Chief
Risk Officer and Group Head of Internal Audit,
and the External auditors.
Focus areas in 2023
¢ The Group’s published financial information.
¢ The effectiveness of the Group’s risk
management and internal controls
framework.
¢ The Enterprise Risk and Control Framework
including risks managed by the other Board
committees.
¢ The management of cyber risks.
¢ Ethical, legal and regulatory matters.
¢ Deep dives on Centrica Energy.
¢ Finance Systems Review and Finance
health check.
DEAR SHAREHOLDER
The Audit and Risk Committee is pleased to present its
report for the year ended 31 December 2023, which
summarises the Committee’s work to ensure the accuracy
of the Group’s published financial information and the
effectiveness of the Group’s risk management and internal
controls framework.
This report should be read in conjunction with the following
sections in the Annual Report and Accounts:
¢ Principal Risks and Uncertainties, pages 28 to 34
¢ Viability Statement, pages 35 to 37
¢ UK Corporate Governance Code application, page 64
COMMITTEE OVERVIEW
The Committee has a yearly agenda which is linked to the Company’s
financial calendar. The agenda is flexible, enabling in-depth reviews of
topics of particular importance to the Committee.
The core responsibilities of the Committee are to:
¢ monitor and review the adequacy and effectiveness of the
governance and oversight of the Company’s financial processing
and reporting, internal controls and risk management, including key
judgments and estimates;
¢ provide advice and assurance to the Board on whether it has
discharged its duties and whether the Annual Report and Accounts,
when taken as a whole, is fair, balanced and understandable and
provides all the necessary information for shareholders and other
stakeholders to assess the Company’s position, performance,
business model and strategy;
¢ monitor and review the operation and effectiveness of the Group’s
Internal Audit function, including its independence, strategic focus,
activities, plans and resources;
¢ supervise the appointments of the Group Chief Risk Officer and
Group Head of Internal Audit;
¢ manage the relationship with the Group’s external auditors on behalf
of the Board (including appointment, independence, effectiveness
and remuneration);
¢ conduct a tender for the external audit contract at least every
10years and make appointment recommendations to the Board;
¢ review the Company’s arrangements for its workforce/stakeholders
to raise concerns in confidence about possible improprieties in
financial reporting or other matters; and
¢ consider and review material legal and regulatory policy compliance
issues or risks, and maintain oversight of the arrangements in place
for the management of statutory and regulatory compliance in areas
such as financial crime.
72 Governance | Centrica plc Annual Report and Accounts 2023
Main activities during 2023
During the year, the Committee met four times and considered a broad
range of topics. Our key highlights are disclosed below:
¢ Accounting judgments, especially those related to Spirit Energy and
Centrica Energy Storage, the reversal of the onerous supply contract
provision, the impairment of the Nuclear asset, the Electricity
Generator Levy and the assessment of the downstream supply bad
debt provision.
¢ Viability and Going Concern assessments and related disclosures.
¢ Review of the 2022 financial results, the Annual Report and
Accounts, and the 2023 interim financial results, including any
relevant communications from Deloitte.
¢ Evaluation of the effectiveness of the external audit process and the
Internal Audit function.
¢ Continued oversight of the control environment and finance systems
maintenance and development, particularly regarding the migration
of British Gas Energy customers’ migration to a new technology
platform.
¢ Assessment of credit risk exposure amidst volatile commodity prices
and the broader impacts of high commodity price environments.
¢ Review of the Group’s pension schemes, including the forthcoming
triennial review and the impact of changes in gilt yields (see note 22).
¢ Monitoring of sanctions compliance, information systems, cyber
security and data security risk management, especially considering
geopolitical developments and updating the Board accordingly.
¢ Updates on legal, regulatory, and ethical compliance, with a focus on
energy trading and the sale and delivery of FCA-regulated products
and services, including the operation of Our Code and the Speak Up
helpline.
¢ Preparation for upcoming legal and regulatory changes, such as
reforms to the UK corporate governance regime.
¢ Regular reports and recommendations from Internal Audit and the
external auditors on risk, assurance, and controls.
¢ Regulatory compliance considerations regarding British Gas Energy,
including in relation to the installation of prepayment meters.
¢ Bad debt provisioning in the context of the cost of living crisis and
suspension of prepayment meter installations.
¢ In-depth reviews of the risks and controls environment across
various divisions of the Group, including British Gas Energy, British
Gas Services & Solutions, Centrica Business Solutions, Bord Gáis
Energy, and Centrica Energy, as well as the Group-wide financial
riskand definitions of capital employed.
¢ Report on the changes to the Government support schemes
forsuppliers.
¢ Evaluated risks and opportunities related to climate change
alongside the Safety, Environment and Sustainability Committee,
to ensure that the Annual Report and Accounts comprehensively
outlines the actions taken to effectively address major climate-
related concerns.
RISK MANAGEMENT AND INTERNAL CONTROLS
Internal Audit
The Committee oversees the Group’s Internal Audit function, ensuring
its efficiency, independence, and alignment with strategic objectives.
This includes regular reviews and approval of the annual Internal Audit
plan, which is developed in response to the Group’s evolving Principal
Risks (details on pages 28 to 34). The Group Head of Internal Audit
maintains direct communication with the Board Chair and Committee
Chair and is accountable to the Committee. Throughout the year, the
Committee is updated on Internal Audit’s findings. It also monitors the
implementation of follow-up actions by business units.
The independence, objectivity and effectiveness of the Internal Audit
function was reviewed by reference to the output from a combination of
self-assessment, independent assessment conducted by survey
involving the CLT and a broader group of senior managers, as well as
assessment by the Committee. The review concluded that the Internal
Audit function operated in accordance with the Institute of Internal
Auditors’ International Professional Practices and continued to be
independent, objective, and effective.
Review of the system of risk management and internal controls
Our risk management and internal controls are assessed through a
self-certification process, a Group Entity Level Controls assessment
program, and internal reviews by Internal Audit and the Committee.
TheCommittee oversees the work of Internal Audit, the functional
support teams, and the management teams, receiving regular updates
on Group Principal Risks and other Group frameworks. At every
meeting, the Committee receives an update on the Group’s Enterprise
Risk and Controls from the Chief Risk Officer and Group Head of
Accounting, Reporting & Tax. This details the key risks the Group
faces, the change in risk climate since the last meeting and any new
emerging risks. The update also highlights the control environment, any
changes in that environment as the control framework keeps pace with
business change, and any areas of weakness identified, together with
proposed mitigations. The Committee has confidence in its ability to
identify issues and the business units’ ability to remediate control gaps.
The risk management process and internal controls have been in place
throughout the year and remain effective, with ongoing review and
improvement.
The Committee has received regular reports throughout the year on the
status of the Group’s transition to the new billing system, Ensek. The
Committee was made aware of the evolving nature of the control
activities performed in relation to this in-development Software as a
Service (SaaS) environment. Given the controls were still developing,
the external auditors did not plan to place reliance on controls in this
area and, as expected, their control design and implementation work
led to certain control findings and observations. Notwithstanding these
findings, management and the Committee are satisfied with the manual
review controls that have been put in place, which include a significant
number of validations, checks, and other broad assurance activities,
providing financial integrity and ensuring we remain comfortable with
the financial results. The business is committed to evolving further the
manual and IT controls in place and the extent of automation, as the
platform continues its development. Alongside Ensek, the Committee
also noted external audit findings across some of the Group’s systems
around user access and oversight of service organisations, leading to
more substantive audit testing. The Committee discussed these
challenges with management and the mitigations and improvements in
these areas expected in 2024.
The Committee also noted that, in line with the culture of continuous
improvement in the business, there is an ongoing review being
undertaken on the Group Enterprise Risk Management framework.
Fair, balanced and understandable
In line with the UK Code, the Committee, on behalf of the Board,
reviews the Annual Report and Accounts to ensure it is compliant
withapplicable laws and regulations and provides shareholders and
stakeholders with the necessary information to assess the Company’s
position, performance, culture, business model, and strategy. The
Committee also considers the processes and controls involved in
theproduction of the Annual Report and Accounts, the governance
framework for review and the responsibilities of the Directors.
There is a robust governance framework around the production of
theAnnual Report and Accounts to ensure they have been critically
reviewed and verified by the key teams in the relevant businesses and
functions. This includes review and agreement by the Fair, Balanced
and Understandable Committee (comprising Heads of Function from
Finance, Corporate Communications, Investor Relations, Internal Audit,
People Function, Strategy and Corporate Legal & Secretariat) together
with review and input from other content owners and their managers.
Governance | Centrica plc Annual Report and Accounts 2023 73
EXTERNAL AUDITORS
External auditors and Effectiveness of the external audit process
The Committee manages the relationship with the Group’s external
auditors on behalf of the Board. The Committee considers annually the
scope, fee, audit plan, performance, objectivity and independence of the
external auditors. To maintain objectivity, principal members of the external
audit team are rotated off the Company's audit. Additionally, toprotect the
independence of the external auditors and the integrity ofthe audit
process, the Company prohibits hiring senior staff from its auditors for at
least two years after they stop providing services to the Company. Jane
Boardman was appointed as the lead audit partner after the completion of
the 2021 audit and has been serving in this role for two years.
To assess the effectiveness of the external audit process and
independence and objectivity of the external auditors, the Committee
carried out an assessment, as in prior years, primarily looking at the key
areas of:
¢ robustness of the audit process
¢ quality of people and service
¢ quality of delivery
¢ independence and objectivity
¢ value added advice
This assessment included an internal questionnaire, which was
completed by the Chair of the Board, Committee members and senior
members of management on their views of Deloitte's performance. The
questionnaire covered a review of the audit partner and team, the audit
scope and approach, audit plan execution, auditor independence and
objectivity and robustness of challenge of management. Separately,
Deloitte also provided an assessment, via an internal management
questionnaire, of management's controls, judgements and
engagement throughout the audit process. The feedback was
reviewed by management and reported to the Committee.
The Committee and the Board confirm that they have taken all the
necessary steps to become aware of any relevant audit information and
to pass that information onto Deloitte. The Committee was satisfied
with the external auditors' commitment to audit quality, the robust and
professional working relationship with management and demonstration
of strong technical knowledge and professional scepticism. In addition,
to ensure the independence of the external auditors, and in accordance
with International Standards on Auditing (UK & Ireland) 260 and Ethical
Standard 2019 issued by the Accounting Practices Board and as a
matter of best practice, Deloitte has confirmed its independence as
auditors of the Company. On the basis of Deloitte's confirmation and
report on their approach to audit quality and transparency, the
Committee concluded that Deloitte possesses the appropriate
qualifications and expertise; remains independent of the Group; and,
coupled with effective management engagement, that the audit
process was effective.
The re-appointment of Deloitte as auditors for the 2023 financial year
was approved by shareholders atthe AGM in June 2023 and Deloitte
has been recommended for re-appointment again in 2024. The
Committee confirms that this recommendation is free from influence by
any third party and no contractual term of the kind mentioned in Article
16(6) of the Audit Regulation has been imposed on the Company.
Deloitte has been the Company’s auditor since 2017. The Committee
has considered the timing of a competitive tender and has decided to
conduct the tender in early 2025. This will allow sufficient time for audit
firms otherwise working with Centrica in any capacity to become
independent in advance of taking on the audit in 2027. Deloitte will be
invited to participate in the tender.
The Company has complied with the Statutory Audit Services Order
2014 for the financial year under review.
Non-audit fees
To safeguard the objectivity and independence of the external auditors,
the Committee is responsible for the policy on the award of non-audit
services to the external auditors. A copy of this policy is available on our
website centrica.com. The Chair of the Committee must approve all
requests to utilise Deloitte for non-audit services. There is an annual cap
on non-audit work during the ordinary course of business of £1 million,
which is assessed each year for appropriateness in the context of
external guidance and regulation.
Overall total non-audit fees incurred in 2023 were £0.7 million (2022:
£0.9 million), including £0.5 million for the review of the interim results.
All non-audit fees relate to assurance services (e.g. Interim review or
local regulatory requirements). In line with the non-audit fees policy,
approval for this expenditure was sought and received from the
Committee in advance of the work commencing and Deloitte were best
placed to provide these services on a timely and cost efficient basis,
given their position as the external auditor. The amount incurred in the
year is well below the legal cap of 70% of non-audit fees (for services
not required by regulation) compared to the three-year average of
statutory audit fees, amounting to approximately 9%.
In normal circumstances, all significant non-audit work is put out to
tender and Deloitte is only appointed if their experience and knowledge
makes them the most appropriate supplier and it is clear another firm
could not undertake the work without adversely impacting the
businesses. For further information, see note S9 to the accounts on
page220.
Corporate Reporting Review
The Audit and Risk Committee assists the Board in fulfilling its oversight
responsibilities by reviewing and monitoring the integrity of the financial
information provided to shareholders and other stakeholders. The
Committee oversees financial reporting and related risks and internal
controls and has a role in overseeing the internal and external auditors,
as well as interacting with other members of management and external
stakeholders as required.
The FRC’s Corporate Reporting Review (‘CRR’) team carried out a
review of the Company’s Annual Report and Accounts (‘ARA’) for the
year-ended 31 December 2022. The Committee was pleased to note
that the CRR team did not raise any questions or queries with the
Company in relation to compliance with reporting requirements.
Whilstthe CRR team do not benefit from a detailed knowledge of the
business or underlying transactions and therefore their review does not
provide an assurance that the ARA is correct in all material respects,
itis nonetheless a positive outcome.
In advance of the Audit, Reporting and Governance Authority being
created, the Committee, during the year, complied with the majority of
the FRC's Audit Committees and the External Audit: Minimum Standard.
UK Corporate Governance Code preparedness
The Board regularly receives updates from the Group General
Counsel& Company Secretary about important developments and
upcoming changes in UK Corporate Governance. During the year,
theCommittee, aided by the Group General Counsel & Company
Secretary, considered the changes to the UK Corporate Governance
Code and considered how these changes affect the roles and terms
ofreference of the Board Committees.
Committee effectiveness
The Committee reviews its terms of reference annually to ensure they
remain appropriate in light of legal, regulatory and best practice
changes. No material changes were made to the Committee’s terms
ofreference in the year under review (available on centrica.com).
The effectiveness and performance of the Committee was evaluated
aspart of the overall evaluation of the Board and its Committees.
Feedback from that process indicated that the Committee was
performing effectively. Read page 66 for further information. Focus
areas for the Committee in the year ahead include the review and
update of the Group Enterprise Risk Management framework,
alongside relevant Controls; the continued scrutiny of cyber risks,
therotational deep dives into material businesses and preparation
forthe audit tender in 2025.
Nathan Bostock
on behalf of the Audit and Risk Committee
14 February 2024
74 Governance | Centrica plc Annual Report and Accounts 2023
Key judgements and financial reporting matters in 2023 Audit and Risk Committee reviews and conclusions
Electricity Generator Levy
The Electricity Generator Levy (EGL) applies a tax rate of 45% on
revenues from sales exceeding a benchmark price of £75/MWh on
electricity generated from nuclear sources. It applies from 1 January
2023 to 31 March 2028. Because EGL is a tax on revenue and not
profits, it falls under IFRIC 21: Levies and is not in the scope of IAS 12:
Income Taxes. This means that EGL is not recognised in the tax line but
instead reduces the Group’s adjusted operating profit.
EGL is chargeable within the Group’s associate accounted 20% nuclear
investment for its sale of electricity, as well as on 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 £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 year and this expense has been recorded within 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. As such, the extent of the levy that will ultimately be due
in this regard is not yet certain, and a different amount (up to the £285
million paid to date) may ultimately be determined. If this were the case,
the Group would be due repayment of excess monies paid to HMRC
and at the point at which such repayment became probable, a tax
deposit asset would be recorded on the Group’s balance sheet, and as
a credit within Cost of Sales in the income statement, 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).
The Committee reviewed and discussed the complexity around the
interpretation of the Electricity Generator Levy legislation.
It also held discussions with the external auditors to confirm their view
and the appropriateness of the accounting treatment adopted.
The Committee concluded that the judgement reached was appropriate
and concurred with the accounting approach.
The Committee also noted the disclosures included in the financial
statements to highlight the key source of estimation uncertainty in this
area.
Further detail is provided in notes 1 and 3 on pages 132 to 133 and 136
to 142.
Determination of forecast commodity prices and
their use in valuing long-lived assets and derivative contracts
Commodity price forecasts are a key assumption in the valuation of the
Group’s long-lived assets and derivative contracts. For short-term
commodity prices over the next four years, observable liquid market
prices (as at 31 December 2023) are taken as the best view of expected
price. For the longer-term period thereafter, the Group uses a ‘P50’
median price curve, derived from a collection of third-party forecasts.
This approach is deemed to align to pricing that a reasonable market
participant would use. The Group has used these price curves in its
asset impairment testing and contract valuations.
The Group has also obtained commodity price forecasts which are
intended to be consistent with net zero by 2050. These are lower than
the ‘P50’ curves the Group has adopted for NBP Gas but broadly similar
for baseload power. The Group has shown the impact of such price
forecasts on the gas assets and Nuclear assets in note 7 of the financial
statements.
The Committee noted the fall in short-term commodity prices during the
year, with year-end prices well below 2022 levels. It also observed the
flattening of summer/winter gas price spreads. The Committee
understood that these outputs impact many of the other judgements
listed below.
The Committee reconfirmed continued support for the longer-term ‘P50’
median curve (derived from third parties) approach. It noted that the
‘P50’ long-term commodity price forecasts were broadly similar year-on-
year for all commodities and that these prices movements were
insignificant compared with the near-term falls.
As a result of the above, the Committee was comfortable the curves
were reasonable.
Sensitivities of the asset impairment tests to changes in price forecasts
are provided in note 7 on page 152 to 156.
The Committee noted the use of a price curve intended to be consistent
with net zero by 2050 in the impairment sensitivities and believed the
output provided useful information to readers of the accounts.
The Committee also noted the continued inclusion of a Climate Change
accounting considerations section in note 3.
Governance | Centrica plc Annual Report and Accounts 2023 75
Key judgements and financial reporting matters in 2023 Audit and Risk Committee reviews and conclusions
Energy derivatives – classification and valuation
The Group enters into numerous commodity contracts in its ordinary
course of business. This can be to procure load for its downstream
business, sell output from its upstream/infrastructure assets, to trade
around its other commodity exposures or to make money from
proprietary activities. Onentering into these contracts, the business
assesses each of the individual trades and classifies them as either:
(i) Out of scope of IFRS 9:
For ‘own use’ contracts (i.e. customer contracts, contracts to take
delivery and meet customer demand or sell upstream/infrastructure
output) and contracts that cannot be net settled.
(ii) In scope of IFRS 9:
Contracts for commodities which have the ability to be and practice of
being net settled.
Energy contracts outside the scope of IFRS 9 are accruals accounted.
Those contracts considered to be within the scope of IFRS 9 are treated
as derivatives and are marked-to-market (fair valued). If the derivatives
are for proprietary energy trading, they are recorded in the business
performance column of the Group Income Statement. If they are entered
into to protect and optimise the value of underlying assets/contracts or
to meet the future downstream demand needs, they are recorded as
certain re-measurements.
The fair-value of derivatives are estimated by reference to published
liquid price quotations for the relevant commodity. Where the derivative
extends into illiquid periods, the valuation typically uses the ‘P50’
median price curves (see Determination of long-term commodity prices
and their use valuing long-lived assets).
Judgement is required in all aspects of both the classifications and
valuations.
One of the Group’s critical accounting judgements is that its LNG
contracts are outside the scope of IFRS 9 because they are entered into
for its own purchase and sale requirements (‘own use’).
The Committee noted that the Group’s policy and methodologies in
classifying and valuing energy derivatives were unchanged from
previous periods.
The Committee also reviewed and understood the breakdown by
business of the movement in IFRS 9 energy derivative valuations in the
Group Income Statement.
They reflected on the fact the certain re-measurement derivative net gain
of £3.6 bn was predominantly as a result of the unwind of prior year out-
of-the money positions. Although commodity prices fell during the year,
the timing of each business (e.g. UK supply book, Upstream/
infrastructure asset books) entering into new hedge trades was
important, such that the net movement on unrealised trades was small in
comparison to the unwind.
The Committee noted that following the extremely volatile prices in
2022, all of the books had moved into more normal closing derivative
positions, with Supply load books (buy books) being out-of-the-money
following a period of falling prices, and Upstream/infrastructure asset
and Centrica Energy (sell books) being in-the-money. These closing
positions are also at significantly lower values compared with the prior
period, with the consequent expectation that the future 2024 certain re-
measurement unwind will also be at significantly lower levels than seen
in 2022 and 2023.
The Committee noted the link between the derivative certain
re-measurements for the UK supply books and the onerous supply
contract provision certain re-measurements, as discussed below.
Further detail is provided in notes 2 and 7 on pages 134 to 135 and 152
to 156.
The Committee noted and continued to concur with the specific
judgement around LNG contract own use classifications.
Onerous energy supply contract provision
The Group’s residential and business energy supply contracts are
accruals accounted. The Group operates and manages a hedging
strategy to ensure that the future costs of supplying these customer
portfolios are appropriately managed.
These hedges are generally in the scope of IFRS 9 and are measured at
fair value (see ‘Energy Derivatives – classification and valuation’ above).
They are recognised as certain re-measurements in the Group income
statement until the point at which the related costs to purchase
electricity and gas are incurred.
At the end of 2022, business supply hedges were significantly in-the-
money, following previous increases in near-term commodity prices.
Because of this hedge value recognition, the assessment of whether the
business supply contracts were onerous had to be calculated based on
the cost of fulfilling these arrangements, including the reversal of
previous mark-to-market gains.
Accordingly, the Group determined that at 31 December 2022, the future
costs to fulfil business customer contracts including mark-to-market
reversals would exceed the charges recovered from customers because
the associated hedging gains had already been recognised in the
Income Statement. The Group therefore retained an onerous supply
contract provision of c.£1 billion at that date.
During 2023, the business supply hedges moved to being out-of-the-
money and consequently, the costs to fulfil the customer contracts
including mark-to-market reversals no longer exceed the charges
expected to be recovered from the customer. Therefore no onerous
supply contract provision is required and the previous provision has
been unwound.
The movement in the onerous provision has been reflected as a certain
re-measurement in the Income Statement because these supply
contracts are economically related to the fair value movements on the
hedges (note that the certain re-measurement Income Statement
movement is £0.8 billion, because a £0.2 billion onerous provision was
acquired as part of the Avanti Gas purchase).
The Committee reviewed the change in the underlying derivative hedge
values of the business books and therefore the movement in the
onerous energy supply contract provision.
The Committee noted that this movement is mainly driven by the unwind
of the previous hedges.
The Committee observed that an onerous provision could come back
in2024 if derivative hedges moved back into the money but this is
dependent on energy prices and the hedged position.
The Committee noted the disclosures included in the financial
statements to highlight this area.
The Committee held discussions with the external auditors to re-confirm
the appropriateness of the accounting treatment and to confirm their
views of the assumptions used.
Further detail is provided in notes 2, 3 and 7 on pages 134 to 142 and
152 to 156.
76 Governance | Centrica plc Annual Report and Accounts 2023
Key judgements and financial reporting matters in 2023 Audit and Risk Committee reviews and conclusions
Impairment of long-lived assets
The Group makes judgements and estimates in considering whether the
carrying amounts of its assets are recoverable:
Upstream (Power assets and Gas assets (including gas storage))
For Upstream/infrastructure assets, discounted cash flows are prepared
from projected production profiles of each field or power asset, taking
into account forecast future commodity prices, to assess their
recoverable amount. When deriving forecast cash flows, market prices
are used for the period when a commodity is liquid. For the longer-term
illiquid period, the ‘P50’ median price curve is used (see ‘Determination
of forecast commodity prices and their use valuing long-lived assets and
derivatives’, above).
Judgement is also required around production volumes. For Nuclear,
individual station information and recent availability data is factored in to
the overall asset valuation. The expected operating life of Sizewell has
continued to be reflected to 2055 in the modelling, beyond the original
design life. During 2023, the expected closure dates for Heysham 1 and
Hartlepool stations were extended by two years to March 2026, with a
plus or minus one year window either side of this date. For Gas assets,
each fieldhas specific reservoir and field characteristics and is modelled
independently. 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 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.
Consistent with previous years, taxes and levies are also included in the
discounted cash flow modelling. For Nuclear, the Electricity Generator
Levy (see ‘Electricity Generator Levy’ above) applies a tax rate of 45%
on revenues exceeding a benchmark price of £75/MWh and applies from
1 January 2023 to 31 March 2028. For Gas assets, the Energy Profits
Levy applies a rate of 35% (bringing the headline rate on Gas asset
profits to 75%) and also continues until 31 March 2028.
Predominantly as a result of the year-on-year decrease in forecast
commodity prices, an exceptional impairment of £549 million has been
booked in relation to the Nuclear investment.
For Gas assets, the Rough gas storage field has booked an exceptional
impairment of £82 million as a result of both the fall in forecast gas
prices and the flattening of summer/winter gas spreads. All other gas
fields retained impairment headroom.
The Committee challenged management and the external auditors on
the key inputs to the impairment models including price, outage rates,
assumed lives, tax and discount rates, and were comfortable with the
conclusions reached.
The Committee reviewed the Nuclear investment impairment and noted
that the decrease in near-term commodity prices had more than offset
the benefit of life extensions at Heysham and Hartlepool.
It also considered the Rough gas storage field impairment, following
price and summer/winter spreads falls and highlighted the difficulty in
assessing option value.
The Committee noted that price sensitivity disclosures have been
included in the financial statements.
Further detail on impairments and the assumptions used in determining
the recoverable amounts is provided in notes 7 and S2 on pages152 to
156 and 191 to 203.
Credit provisions for trade and other receivables
The IFRS 9 impairment model requires credit provisions (‘bad debt’) for
trade and other receivables to be based on an expected credit loss
model, as opposed to an incurred loss basis. The economic effects of
the inflationary pressures on household income, not least energy prices,
and the wider cost of living crisis will likely impact the ability of the
Group’s customers to pay amounts due. Accordingly, there is significant
judgement around the levels of forecast bad debt and the provisioning
required at the year-end.
The Group’s residential and business energy supply customers account for
the majority of the Group’s credit exposure (with balances associated with
our trading business generally received within 30 days). Expected default
rates in these areas are calculated initially on a matrix basis by considering
recent historical loss experience, the nature of the customer, payment
method selected and, where relevant, the sector in which they operate.
Management has then also factored in forward-looking economic
assumptions, taking into account inflation and affordability forecasts.
In the prior year a high-level macroeconomic provision of £125 million
was maintained to cover inflationary concerns. During 2023, the deemed
quality and relative ageing of the Group’s debt has declined with
difficulties in field debt recovery following the suspension of prepayment
meters and the fragile economic climate. Given these issues and the
economic environment, the high level macroeconomic provisions have
been increased by £50 million (to £175 million) to cover these concerns.
For UK Downstream energy supply, the bad debt charge as a
percentage of revenue increased to 2.7% (2022: 2.1%). The closing bad
debt provision moved to 34% (2022: 26%) of UK energy supply gross
receivables.
Due to the significant estimation uncertainty in this area, management
continues to provide detailed analysis and sensitivities in note 17 to the
Financial Statements.
The Committee reviewed management’s groupings of receivables by
thekey factors affecting recoverability (e.g. payment method, nature of
customers) and considered the levels of provisions booked against each
grouping, at the year-end.
The Committee discussed the approach with the external auditors.
The Committee was comfortable with the provisions booked, including
the increase in the macroeconomic provisions, whilst noting the
significant estimation uncertainty in this area.
The Committee noted the continued enhanced disclosure in note 17,
setting out the judgemental nature of the provisioning and the sensitivity
analysis to allow users of the accounts to model different outcome
scenarios.
Governance | Centrica plc Annual Report and Accounts 2023 77
Key judgements and financial reporting matters in 2023 Audit and Risk Committee reviews and conclusions
Classification and presentation of 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 this in a clear and consistent presentation, the effects of certain
re-measurements of financial instruments and onerous supply contract
provisions, and exceptional items are reported separately in a different
column in the Group Income Statement.
The classification of items as exceptional and specific trades as certain
re-measurements (see ‘Onerous energy supply contract provision’ and
‘Energy Derivatives – classification and valuation’ sections above) are
subject to defined Group policies. These policies are reviewed annually
by management.
At the year-end, exceptional items included the Nuclear and Rough gas
storage asset impairments noted above. Also included is a write-off of
£14 million predominantly associated with a battery storage asset and a
gas engine in Centrica Business Solutions.
Certain re-measurements totalled an overall c.£4.4 billion gain – being
£3,573 million gain from derivatives and £833 million gain from the
onerous supply contract provision movement.
The Committee noted that the policy on certain re-measurements and
exceptional items remains unchanged from the prior year.
The Committee had formally reviewed and approved the Group’s policy
on exceptional items in previous years and, in the current year, it used
this policy to help inform the appropriateness of the proposed
classifications. It challenged the items classified as exceptional items,
considering their size, nature and incidence and in the context of the
Group policy. The Committee concluded that separate disclosure of
these items as exceptional was appropriate in the Financial Statements.
The Committee ultimately agreed that presenting certain re-measurements
and exceptional items separately continues to allow underlying performance
to be reflected on a consistent and comparable basis through the use of the
adjusted alternative performance measures (e.g. adjusted operating profit).
Further detail is provided in notes 2, 3 and 7 on pages 134 to 142 and
152 to 156.
Energy supply revenue recognition
The Group’s revenue for energy supply activities includes an estimate of
energy supplied to customers between the date of the last meter reading
and an estimated year-end position. This 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. An assessment is also made of any factors that are
likely to materially affect the ultimate economic benefits which will flow
to the Group, including bill cancellation and re-bill rates. To the extent
that the economic benefits are not expected to flow to the Group,
revenue is not recognised.
At the year-end, unread energy income for the continuing supply
businesses was £3.0 billion (2022: £2.9 billion).
The Committee has reviewed the level of unread revenue and unbilled
accrual made during the year and discussed with management and the
external auditors.
The Committee noted that the Ensek platform uses a different process
to calculate the unbilled accrual compared with the legacy SAP system.
Data from smart meters, industry information and from customers on the
SAP system was utilised to finalise the Ensek revenue adjustment and
the external auditors had independently reperformed this calculation to
within an immaterial difference.
More details on unread energy income are provided in note 3 on pages
136 to 142 and on unbilled energy income in note 17 on pages 168 to
174.
Pensions
The assets and liabilities, and the cost associated with providing
benefits under defined benefit schemes is determined separately for
each of the Group’s schemes. Judgement is required in setting the key
assumptions used for the actuarial valuation which determines the
ultimate cost of providing post-employment benefits, especially given
the length of the Group’s expected liabilities.
The net Group pension liability position was £117 million (2022: £40
million asset). The UK defined benefit schemes used a nominal discount
rate of 4.6% (2022: 4.7%) and inflation of 2.9% (2022: 3.0%)
Following the Liability Driven Investment (LDI) crisis in the pensions
arena in late 2022, the Group continues to provide a £400 million
interest-bearing loan to the UK Registered Pension Schemes to ensure
the schemes can maintain a high level of interest and inflation hedging
and meet any collateral requirements.
The Group judged that this should be accounted for as a loan (within
Securities) in the books of the Group and as a reduction in scheme
assets for the Pension Schemes.
As a consequence of the LDI issues, the pension scheme continue to have a
greater proportion of unquoted assets in its asset portfolio. As a result the
Group undertakes more detailed reviews of these valuations, whilst
acknowledging the inherent uncertainty compared with quoted assets.
The Committee noted the key pension assumptions and disclosures
inthe Financial Statements.
It noted that these assumptions were derived on a consistent basis
toprevious periods.
The Committee recognised the role of the independent actuary, who is
consulted on the appropriateness of the assumptions, and discussions
were also held with the external auditors.
The Committee also understood the need to continue to provide extra
funding to the schemes to ensure they remained appropriately hedged.
It also noted the greater proportion of unquoted assets in the scheme
portfolio and welcomed the greater scrutiny on these valuations.
Further details on pensions are set out in note 22 on pages 178 to 182.
Fair, balanced and understandable
The Board is required to confirm that the Annual Report and Financial
Statements are fair, balanced and understandable. To enable the Board
to make this declaration, there is a year-end review process to ensure
that the Committee and the Board have access to all relevant
information, including management’s papers on significant issues.
The Committee reviewed the key factors considered in determining
whether the Annual Report is fair, balanced and understandable. The
Committee and all Board members received a draft of the Annual Report
and Financial Statements in sufficient time to review and challenge the
disclosures therein. In addition, the Committee took into consideration
the external auditors’ reviews of the consistency between the reporting
narrative of the Annual Report and the Financial Statements.
78 Governance | Centrica plc Annual Report and Accounts 2023
NOMINATIONS COMMITTEE
MEMBERSHIP, MEETING ATTENDANCE
AND KEY FOCUS
Committee members
— Scott Wheway (Chair)
— Carol Arrowsmith
— Philippe Boisseau (with effect from
1September 2023)
— Nathan Bostock
— CP Duggal
— Jo Harlow (with effect from 1 December 2023)
— Heidi Mottram
— Kevin O’Byrne
— Amber Rudd
— Sue Whalley (with effect from 1 December
2023).
Biographical details of the Committee Chair
and members can be found on pages 59 to
62. Meeting attendance of the Committee
members can be found on page 68.
Meeting attendees by invitation
Group Chief Executive, Group General
Counsel & Company Secretary, Group Chief
People Officer and Group Chief Financial
Officer.
Focus areas in 2023
¢ Board skills.
¢ Board diversity.
¢ Independent Non-Executive Director
succession planning.
¢ Executive Director succession planning.
¢ Board Committee composition.
¢ Independent Non-Executive Director
recruitment.
¢ Approach to workforce engagement.
¢ Board training requirements.
¢ Election and re-election of Directors at the
2023 AGM.
¢ Approach to, and findings arising from,
anannual Board effectiveness evaluation
(see page 66).
¢ Oversight of Directors’ external
appointments.
DEAR SHAREHOLDER
On behalf of the Board, I am pleased to present the
Nominations Committee report for 2023 which explains
theCommittee’s focus and activities during the year.
COMMITTEE OVERVIEW
The Nominations Committee is responsible for ensuring that the Board
and its Committees have the appropriate balance of skills, knowledge,
and experience to effectively lead the Company both now and in the
future. This is achieved through a formal procedure for the appointment
of new Directors to the Board, an effective succession planning
process, reviewing Board composition and Board skills, and assessing
Board training requirements.
MAIN ACTIVITIES DURING 2023
Board succession planning and Board skills
The Committee is responsible for leading the succession planning
process and making recommendations to the Board. The Committee
takes a long-term view to succession planning, regularly reviewing
Board tenure, Board diversity (particularly diversity of gender, cultural
background and experience) and assessing the skills required by the
Board to best support the Company’s strategy on a multi-year look
ahead as well as in the near term. Details of the wide range of skills,
backgrounds and experience possessed by the Board today can be
found in the Directors’ biographies.
The Committee’s work on succession planning directly informed
recruitment in 2023. A focus area for the Committee in 2024 will remain
ensuring the Company continues to have appropriate succession plans
for different time horizons.
Independent Non-Executive Director recruitment
A primary focus area for the Committee in 2023 was independent
Non-Executive Director recruitment that would continue to strengthen
the Board’s existing capabilities in a way that would further support the
delivery of the Company’s strategy.
Centrica has a thorough and robust search process for the selection
ofindependent Non-Executive Directors involving the engagement of
specialist external search firms. In identifying and nominating
candidates to fill Board vacancies, the Committee considers
candidates from a wide range of backgrounds, assessing them on
merit against objective criteria and with due regard for the benefits of
diversity on the Board. The Committee therefore takes particular
interest in the recruitment process of its independent search firms to
ensure that a diverse pool of candidates is considered for anyvacancy.
A shortlist of candidates is shared with the Committee, meetings are
scheduled with Directors and members of management, and then
once the candidates have been identified, and their ability to meet the
necessary time commitment is confirmed, a recommendation is made
to the Board.
Governance | Centrica plc Annual Report and Accounts 2023 79
Lygon Group supported the search processes that led to the
appointments of Philippe Boisseau in September 2023 and Jo Harlow
and Sue Whalley in December 2023. Philippe brings significant
experience of the energy sector, particularly energy assets, energy
infrastructure and renewable energy transition, all of which is immensely
valuable and relevant to Centrica. Jo has extensive knowledge on the
use of technology and data to enhance development and drive growth
in consumer businesses and Sue brings a blend of experience in
people and cultural transformation, as well as strategic, technological
and operational evolution in large, complex organisations. The collective
experience and contribution from each of these Directors will
undoubtedly be of great benefit to Centrica. Further information about
Philippe, Jo and Sue can be found in their biographies.
There are no connections between Lygon Group, the Company and its
individual Directors.
Executive Director succession
As disclosed in last year’s Annual Report and Accounts, Russell
O’Brien was appointed Group Chief Financial Officer and Executive
Director with effect from 1 March 2023, bringing broad experience
across the energy value chain. Following an orderly transition to Russell,
KateRingrose stepped down as Chief Financial Officer and Executive
Director on 28February 2023. Further information about Russell can be
found inhis biography.
Board training
The Committee reviewed the training received by the Board during
2023 as well as the training requirements for the Board in 2024.
Indoing so, the Committee sought to ensure the Board remained
equipped with the latest knowledge and understanding to support
effective decision-making. Board training in 2023 included sessions
ondirectors’ duties and models of economic regulation for hydrogen
production and storage as well as carbon capture and storage. The
Committee also identified further areas of training that will inform the
Board’s training programme in 2024. Further details of training,
development and induction for all new Directors are on page 66.
Oversight of Director external appointments
To ensure that Directors will continue to have sufficient time to commit
to their Centrica responsibilities, any additional external appointments
taken up require advance consultation with the Chair and, where
appropriate, approval by the full Board.
The Committee considered Kevin O’Byrne’s external appointment
toInternational Flavors & Fragrances, Inc. which took effect from
10March 2023. The Committee was satisfied that following his
stepping down from the board of J Sainsbury plc in March 2023 that
Kevin would continue to have sufficient time to commit to his Centrica
responsibilities.
A focus on diversity, equity and inclusion
We operate in increasingly diverse communities and this diversity is
evident in our workforce and our customers, suppliers, and other
stakeholders.
As set out in our Board diversity policy, we know that being inclusive
ofthe diversity we have in our business will give us a competitive
advantage.
We updated our Board diversity policy in December 2023 to clarify that
it extends to key Board Committees, and to provide for consideration
of a wider list of diversity characteristics, including ethnicity, sexual
orientation, disability and socio-economic background.
The purpose of the Board diversity policy is to guarantee that both the
Board and the Nominations Committee adopt an inclusive approach
during the nomination and appointment processes.
The revised Board diversity policy can be found on our website at
centrica.com.
The Committee therefore continues to embrace the strategic
importance of diversity, equity and inclusion, including as part of the
Board’s own succession planning. The Committee will report in the
2024 Annual Report and Accounts how the updated Board diversity
policy was implemented and the results thereof.
As at 31 December 2023, 41.7% of the Board and 55.6% of
independent Non-Executive Directors (excluding the Chair of the Board)
were women, and the Board composition met, and continues to meet,
the Listing Rules target for ethnic minority representation. As noted in
the Governance introduction on page 57, the Board is fully aware that it
currently does not meet the expectation that one of the following four
roles, Chair, Group Chief Executive, Group Chief Financial Officer and
Senior Independent Director is held by a woman. Through steps taken
as part of its succession planning arrangements, the Board is fully
committed to addressing this situation at the earliest possible
opportunity. Further information on compliance with Board diversity
targets can be found in the Governance introduction on page 57,
andset out in the table on page 81.
As disclosed in the table on page 81, there was a decline in the
proportion of ethnically diverse individuals on the Board from 11%
in2022 to 8% in 2023. This decrease is attributed to the Board’s
expansion from nine members in 2022 to 12 members in 2023, which
enhanced the Board’s gender diversity whilst the number of individuals
from an ethnically diverse background remained unchanged.
Further information on the steps that the Company is taking to create
adiverse and inclusive workplace can be found in the Chief People
Officer’s Report on pages 38 to 40.
Workforce engagement
The Committee reviewed the Board’s approach to workforce
engagement pursuant to the expectations of Provision 5 of the UK
Corporate Governance Code. The Committee supports the Board’s
view that workforce engagement is a collective responsibility shared
amongst the Directors of the Board and therefore ultimately decided to
adopt a collective approach to workforce engagement involving all
Directors and leveraging a combination of different types of
engagement, including listening sessions with colleagues; meetings
with senior leaders and future talentwhere they discuss opportunities
for improving colleague performance and Company growth; and
dedicated engagement sessions with the Chairs of the employee-led
colleague networks suchas the Women’s network and the Diverse-
Ability network. The Board believes this approach enables it to
effectively fulfil its responsibility of staying engaged and informed about
the workforce’s interest and matters.
Committee effectiveness
The Committee conducted its annual review of its terms of reference
and concluded that no material changes were required. The
Committee’s terms of reference are available on our website
centrica.com.
The effectiveness and performance of the Committee was evaluated
aspart of the overall evaluation of the Board and its Committees.
Feedback from that process indicated that the Committee was
performing effectively. Succession planning at Board, executive and
senior management levels and developing a talent pipeline continue
tobe key priorities for the Committee in the year ahead. Read page 66
for further information.
Scott Wheway
on behalf of the Nominations Committee
14 February 2024
80 Governance | Centrica plc Annual Report and Accounts 2023
BOARD AND SENIOR
LEADERSHIP DIVERSITY
SEX/GENDER REPRESENTATION
Number of
Board members
Percentage
of the Board
Number of
senior positions
on the Board*
Percentage of
senior positions
on the Board*
Number in
executive
management
Percentage of
executive
management
Men 7 58% 4 100% 7 70%
Women 5 42% — — 3 30%
Other/not Specified — — — — — —
Prefer not to say — — — — — —
*There are 4 senior positions on the Board (Group Chief Executive, CFO, SID and Chair).
ETHNICITY REPRESENTATION
Number of
Board members
Percentage
of the Board
Number of
senior positions
on the Board*
Percentage of
senior positions
on the Board*
Number in
executive
management
Percentage of
executive
management
White British or other White 11 92% 4 100% 8 80%
Mixed/Multiple Ethnic Groups — — — — — —
Asian/Asian British 1 8% — — 2 20%
Black/African/Caribbean/Black British — — — — — —
Other ethnic group, including Arab — — — — — —
Not specified/prefer not to say — — — — — —
*There are 4 senior positions on the Board (Group Chief Executive, CFO, SID and Chair).
READ MORE ABOUT BOARD DIVERSITY ON PAGE 80
Explanatory notes
(1) The information above is stated as at 31 December 2023.
(2) We recognise the importance of driving greater diversity across the full breadth of our business – from the Boardroom to our customer-facing colleagues and we therefore
actively track, monitor and work towards our diversity goals to reflect the communities we serve.
(3) As at 31 December 2023, we met the Parker Review target to have at least one Director from a minority ethnic background. We also made good progress towards the
Board diversity targets set out in Listing Rule 9.8.6(9). This included (i) at least 40% female representation on the Board (2023: 42%) and (iii) at least one Director being
ethnically diverse (2023: 1 person) which aligns with the Parker Review. However with Kate Ringrose stepping down from being Chief Financial Officer on 28 February
2023, and Russell O’Brien joining the Board on 1 March 2023, we did not meet target (ii) to have at least one senior position held by a woman.
(4) To grow our diversity further, we have taken positive action which includes succession planning and mandating diverse candidates for senior roles. By the end of 2030,
itis our goal for our Board, executive management and senior leaders to be 48% women and 18% ethnically diverse. As part of our commitment to the Parker Review in
setting a senior leader ethnic diversity target by 2027, in 2023 we decided to bring our 18% goal forward by three years.
(5) Our diversity data is collated through our HR management system. We encourage all colleagues to self-report information such as gender, gender identity, ethnicity, age,
sexual orientation, disability and military background, whilst also including a ‘prefer not to say’ option. We continued to run our #ThisIsMe campaign to encourage more
people to share who they are in 2023, which helps us better understand who is working for us and where we need to target action to grow greater diversity.
Governance | Centrica plc Annual Report and Accounts 2023 81
SAFETY, ENVIRONMENT AND
SUSTAINABILITY COMMITTEE
MEMBERSHIP, MEETING ATTENDANCE
AND KEY FOCUS
Committee members
— Heidi Mottram (Chair)
— Philippe Boisseau (witheffect from
1September 2023)
— Nathan Bostock
— Amber Rudd
— Scott Wheway
Biographical details of the Committee Chair
and members can be found on pages 59 to
63. Meeting attendance of the Committee
members can be found on page 68.
Meeting attendees by invitation
All other Non-Executive Directors, Group Chief
Executive, Group General Counsel & Company
Secretary, Group Chief People Officer, Group
HSE Director, Group Head of Environment, Chief
Procurement Officer, Head of Business Ethics
and Compliance and Deputy Head of Secretariat.
Focus areas in 2023
¢ Health and safety risks.
¢ Environment.
¢ Emerging climate reporting requirements and
climate matters.
¢ Responsible sourcing including human
rights and modern slavery risk.
¢ Societal contribution.
¢ Reputation.
DEAR SHAREHOLDER
On behalf of the Board, I present the Safety, Environment
and Sustainability Committee (SESC) report forthe year
ended 31 December 2023.
COMMITTEE OVERVIEW
The Committee’s role and responsibilities, on behalf of the Board, is to
review and monitor the culture, practices, risks and performance of
Centrica with respect to health and safety, climate, environment and
broader responsible business matters. This is achieved through a
rigorous review of performance data, and the Company’s goals and
initiatives in these areas. As part of its focus, the Committee also
provides input to, and review of, the Company’s annual climate
reporting disclosure requirements.
MAIN ACTIVITIES DURING 2023
The Committee considered a broad range of topics in 2023 and the
key highlights are disclosed below.
Health and Safety
The Committee’s standing health and safety agenda items focused on
relevant performance metrics, assurance activity and the approach to
HSE risk management in specific business unit reviews. During these
discussions, taking into account the needs of customers and
employees, the Committee considered risk identification, appropriate
HSE controls and processes.
At each meeting, the Committee invited management to discuss
occupational and process safety reviews, outcomes and improvements
derived from targeted interventions and future action plans. Examples
included a thorough review of the British Gas Services & Solutions
health and safety performance, a maturity assessment for Bord Gáis
Energy and external process safety audits for Centrica Energy Storage+
and Spirit Energy, during which any concerns or incidents were
considered in detail and, where appropriate, remedial actions proposed
by management were scrutinised to assess their effectiveness.
The Committee acknowledged the Group’s positive safety mindset
driven by highly engaged employees throughout 2023.
Environment
The Committee provides oversight of the Company’s continued
commitment to, and role in, the drive to net zero. During 2023, the
Committee reviewed progress made against the Company’s People &
Planet Plan and the Climate Transition Plan, and specifically the
implications of recent strategic investment decisions against Climate
Transition Plan targets and ambitions and the Company’s strategic
framework.
Key focus areas for the Committee in 2023 were reviewing emerging
voluntary and mandatory climate reporting requirements, both in the
UK and in the EU, including Task Force on Climate related Financial
Disclosures (TCFD) and Climate-Related Financial Disclosure (CFD)
regulations. The Committee considered the application of these
requirements to the Company, taking into account changing
stakeholder expectations, and assessing how the Company would
ensure compliance and governance with impending reporting
requirements. The Committee also received regular updates and
training on relevant legal and policy developments and trends regarding
climate matters.
82 Governance | Centrica plc Annual Report and Accounts 2023
Responsible business
Throughout the year, the Committee considered the Company’s
responsible sourcing approach focusing on the supply chain that carry
potentially higher inherent risk due to the associated jurisdiction and/or
nature of the product, in particular in relation to issues such as the
manufacture of solar panels, batteries or garments. The Committee
reviewed the 2023 strategy for visits to supplier sites and the results of
supplier audits.
During discussions, the Committee assessed on a regular basis human
rights and the risk of modern slavery occurring in Centrica’s operations,
taking into account the increasing expectations of stakeholders and
enhanced modern slavery disclosures. Further details of the
Company’s management of modern slavery risk can be found on our
website at centrica.com/modernslavery. The Committee also received
training on emerging responsible sourcing supply chain requirements
and considered changes that might be required to the Company’s
current approach.
The Committee continued to oversee societal contribution including the
Company’s approach to charitable partnerships, its role in local
communities and its People Goals including, in that context, the
Company’s performance against its diversity and inclusion targets, its
apprenticeship and volunteering ambitions. The Committee also
reviewed perceptions of the Company’s reputation amongst a wide
range of stakeholders in relation to topics such as the Company’s role in
providing energy security in the markets in which it operates as well as
supporting customers and communities in their transition to net zero in
an affordable and secure way.
Governance
In addition to the above areas of focus, the Committee also reviewed
relevant disclosures in the Annual Report and Accounts within the
Committee’s remit, as well as the TCFD and CFD regulations. The
Committee also considered and recommended to the Board the
Modern Slavery Act statement, which can be found on our website.
Committee effectiveness
The Committee undertakes an annual review of its terms of reference to
ensure that it accurately reflects the role carried out by the Committee,
taking into account any new internal and external developments and
responsibilities. The Committee’s terms of reference are available on
our website, centrica.com. The Committee considers that it has
continued to discharge its oversight role effectively in an area where
expectations and requirements are constantly evolving with insightful
and regular engagement and support from management. Read more
about the Committee’s effectiveness on page 66.
Heidi Mottram
on behalf of the Safety, Environment and Sustainability Committee
14 February 2024
Governance | Centrica plc Annual Report and Accounts 2023 83
READ MORE ABOUT OUR PEOPLE &
PLANET PLAN ON PAGES 41 TO 55
REMUNERATION REPORT
MEMBERSHIP, MEETING ATTENDANCE
AND KEY FOCUS
Committee members
— Carol Arrowsmith (Chair)
— CP Duggal
— Jo Harlow (with effect from 1 December
2023)
— Heidi Mottram
— Amber Rudd
— Sue Whalley (with effect from 1 December
2023)
Biographical details of the Committee Chair
and members can be found on pages 59 to
63. Meeting attendance of the Committee
members can be found on page 68.
Meeting attendees by invitation
All other Non-Executive Directors, Chair of the
Board, Group Chief Executive, Group Chief
People Officer, People Director, Reward,
Benefits and Wellbeing
Focus areas in 2023
¢ Executive Directors’ salary reviews
¢ Gender and ethnicity pay gap report
¢ Review of pay issues across the wider
workforce
¢ Closure CUPS-DC pension scheme
¢ Review of total remuneration packages for
the Centrica Leadership Team
¢ Review and approve 2023 financial and
business targets and individual objectives.
¢ Recruitment of new senior executives
¢ Review Executive Directors shareholding
¢ Review and approve Director Expenses
DEAR SHAREHOLDER
On behalf of the Board, I am pleased to present the
Remuneration Report for the year ended 31 December 2023.
BUSINESS CONTEXT FOR 2023
Centrica has delivered strong financial and operational performance
including EPS performance of 33.4 pence. Centrica was also one of
the best performing shares in the FTSE 100 with our share price
increasing by more than 45% in 2023. At the same time, the Company
has supported our customers through the cost of living crisis including
£140m committed since 2022 to help them with their energy costs.
The turnaround of the Company over the last three years is credit to
themanagement team led by Chris O’Shea, the Group Chief Executive.
The team has simplified the business, strengthened and de-risked the
balance sheet, and improved operational performance especially in
ourRetail businesses. As a uniquely integrated energy company,
ourOptimisation and Infrastructure businesses have contributed
significantly towards Group profitability by applying their expertise in
trading and storing energy in turbulent markets particularly during 2022
and 2023. The Company now has a solid foundation and clear purpose
of energising for a greener, fairer future. This means we can invest in
the future for the benefit of all our stakeholders, including our
customers, colleagues, communities and shareholders. Some
examples of these investments are:
Customers: We have invested in supporting customers by providing
new on-demand services to install and maintain their home heating
systems, and improved customer service by employing an extra 700
colleagues across customer contact centres in Stockport, Leicester,
Leeds, Edinburgh, and Cardiff. During the year, we remained acutely
aware of the cost of living pressures that our customers faced, and we
have committed a total of £140m during 2022-23 to continue to help
customers with their energy costs. This included creating an Energy
Support Fund managed by the British Gas Energy Trust, which has so
far helped over 25,000 customers while funding new drop-in centres
and advisors across the UK to support people with their finances. We
have launched new innovative tariffs, which aim to be greener and fairer
suchas ‘Peak Save’ to help our customers manage their energy usage
through the day and save money on their bills, and our offer of free
Electric Vehicle charging at home for a year for customers that buy
anEV charger from British Gas.
Colleagues: We have hired over 1,000 new colleagues. We have
launched our “Pathway to Parenthood” benefit to support colleagues
through fertility treatment, adoption, or surrogacy. We have rewarded
employees with £2,640 in free shares through our profit share plan to
recognise our performance in 2023. This means that, over the last
three years, we have paid a total of £5,886 in profit share to each
colleague to ensure they share in our success. We maintained our
focus on fair reward practices – from paying at least the Real Living
Wage in the UK and working to reduce pay gaps. The average salary
increase across the wider workforce in the UK was 6%, with our lowest
paid colleagues receiving an average salary increase of between 7.8%
to 9.5%.
Communities: We have invested in improving energy storage and
security for the UK, including doubling the gas storage capacity at
Rough, which now provides half the UK’s gas storage capacity or
enough gas to heat over three million homes. As part of our People &
Planet Plan, our colleagues gave 7,200 days volunteering to help the
communities and causes they are passionate about.
Shareholders: The financial strength of the business has also allowed
us to deliver value to our shareholders with a 33% increase in the 2023
interim dividend to 1.33 pence per share, and a proposed final dividend
of 2.67 pence per share, alongside the £450m extension of our share
buyback programme to be completed by around July 2024.
84 Governance | Centrica plc Annual Report and Accounts 2023
REMUNERATION OUTCOMES FOR 2023
In deciding the remuneration outcomes for 2023, the Remuneration
Committee has focused on balancing the views and experiences of all
our stakeholders with our responsibility to attract and retain high-
performing executives to lead a highly complex organisation. Our
remuneration principles for Executive Directors are consistent with the
wider workforce and can be found on page 96.
ANNUAL INCENTIVE PLAN (AIP)
Pay-outs under the AIP for members of the Centrica Leadership Team
are based on financial and business performance (75%) and individual
performance against strategic objectives (25%).
The financial and business performance element for the year was split
equally between Earnings Per Share (EPS) and the outcome of a
balanced scorecard of financial and operational measures critical to the
success of the organisation in 2023.
The EPS measure had defined threshold, target and maximum levels
that were set at the start of the financial year. During the first half of the
year, market conditions were materially better than expected when the
targets were set. Therefore, when reviewing progress against the EPS
target during the year, the Committee determined that the original
targets were no longer appropriate and should be increased to reflect
these improved market conditions. Reflecting the strong performance
of the business, Centrica achieved earnings performance of 33.4pence,
resulting in an outturn of 100% of maximum against the revised targets
for this part of the AIP.
Excellent performance across the Group also meant the majority of
customer, colleague and financial targets in the balanced scorecard
were met in full, including delivering operating profits of £2,752m and
free cash flow of £2,207m. We were particularly pleased to see a
reduction in rescheduled appointments for customers in Services and
Solutions and an improvement in our customer satisfaction scores.
Given the cost of living challenges faced by our customers, we have
seen an increase in our bad debt charges, and we will continue to
engage with those customers who are struggling to pay their bills using
a variety of mechanisms including payment spreading and utilising the
£140m we have committed so far to help the most vulnerable and in
need. We have made significant progress against both our goal to be a
net zero business by 2045, and our goal to help our customers be net
zero by 2050. Performance against the balanced scorecard measures
resulted in an outturn of 85% of maximum for this part of the AIP. This
gave a combined financial and business performance outturn of 185%
of target.
In response to shareholder feedback in previous years, we have
provided more detail on each executive’s individual objectives in the
body of the remuneration report on page 91. Chris O’Shea achieved an
individual performance outturn of 87.5% of maximum, and Russell
O’Brien, Group Chief Financial Officer, achieved an individual
performance outturn of 82.5% of maximum for this part of the AIP.
In determining the overall AIP outcome for 2023, the Committee
considered the impact of a national newspaper undercover
investigation in February 2023 into the fitting of prepayment meters
under court warrant by a third-party contractor working for British Gas.
The Group Chief Executive was deeply concerned when he observed a
lack of empathy and respect in some of these cases; he apologised
unreservedly and immediately commissioned an investigation into the
issue, overseen by external compliance consultants. We ceased all
warrant activity with the third-party contractor immediately.
This investigation found no wide-ranging systemic issues with the
installation of prepayment meters under warrant and noted the high
degree of complexity involved in the assessment of each case.
However, it did highlight that in some cases the Company had fallen
short of the high standards of behaviour that we set for ourselves when
engaging with customers and identified where improvements should be
made to existing processes.
In addition to implementing all the recommended actions identified in
the investigation and fully endorsing Ofgem’s new Code of Practice
onthe installation of prepayment meters under warrant, Centrica has
re-affirmed its commitment to prepayment customers in the following
ways:
¢ Bringing this work in-house, giving British Gas direct oversight of the
process and ensuring our agents benefit from training at British Gas’
award-winning academies.
¢ Swiftly introduced the cheapest prepayment meter tariffs of any
supplier in the country, in line with the cost of energy for direct debit
customers.
¢ Extended our scheme of direct customer support for prepayment
customers to £20m, offering up to £250 in free credit to those
who are struggling with energy costs.
After considering the findings of the investigation, the Remuneration
Committee determined that the payment under the Annual Incentive
Plan should be reduced. Therefore, the Committee reduced the outturn
of the financial and business performance by 10% from 185% to 175%
of target. This resulted in a reduced AIP payment for the Group Chief
Executive and Group Chief Financial Officer to reflect the impact of the
prepayment meter investigation.
Overall, after combining the outturn for financial and business
performance with the outturn for individual performance, and after
deducting 10% for the prepayment meter investigation, the total AIP for
Chris O’Shea was 87.5% of the maximum opportunity, which equated
to 175% of salary or £1,426,250. The AIP for Russell O’Brien, who
joined part way through the year, was 86.3% of the maximum
opportunity (pro-rated for time served), which equated to 118.6% of
salary or £640,606. Kate Ringrose, our previous Group Chief Financial
Officer who served for part of the year, received an AIP of 78.1% of
maximum (pro-rated for time served), which equated to 19.5% of salary
or £90,088. The Committee was satisfied that the overall AIP outcome
was fair and reasonable given the strong shareholder experience and
financial performance, and that the outcome also reflected the wider
stakeholder experience. Half of the AIP was paid in cash and half of the
AIP was deferred into shares for a further three years.
LONG-TERM INCENTIVE PLAN
In line with our previous Remuneration Policy, a Long-Term Incentive
Plan (LTIP) award was granted in 2021 to Chris O’Shea and Kate
Ringrose, our former Chief Financial Officer. The maximum award
granted was 300% of salary in Centrica shares for Chris O’Shea and
175% of salary for Kate Ringrose. The LTIP awards were subject to the
achievement of performance conditions over three financial years
ending 31 December 2023. The performance targets for the LTIP
award included relative Total Shareholder Return (TSR), cumulative
EPS, cash conversion (conversion of EBITDA into Operating Cash
Flows), and key non-financial performance indicators (KPIs) focused on
safety, customer and colleague engagement.
TSR performance over the three-year period was outstanding with
Centrica having the highest TSR in the FTSE 100 comparator group.
Centrica’s TSR was 267.4%, which compared to 47.1% for the upper
quartile TSR of the FTSE 100. Performance against the financial
measures was near maximum vesting and performance against the
non-financial KPIs was around target vesting.
The overall formulaic outcome was therefore 85% of the maximum.
Kate Ringrose’s award was also pro-rated to reflect time served.
As a matter of course, the Committee reviews the formulaic vesting
outcome against the overall underlying performance of the Group and
considers whether there have been any windfall gains. The 2021 LTIP
was granted to the Centrica Leadership Team at a share price of
52.46p, compared to the 2020 LTIP award, which was granted at
55.0p. As there was no significant reduction in the share price between
grants, the Committee concluded it was not necessary to make an
adjustment for windfall gains.
Governance | Centrica plc Annual Report and Accounts 2023 85
Additionally, as highlighted above, management has delivered excellent
performance over the period, not only in respect of key underlying
financial metrics but also in our share price, with Centrica significantly
outperforming the market over the period. The Committee therefore
concluded that the formulaic outturn was appropriate, and no
adjustment was necessary.
The value of the LTIP award for the Group Chief Executive was £5.9m
as at the end of the performance period, 31 December 2023, and this
has been included in the single figure for total remuneration table on
page 89.Of this amount, share price growth accounted for £3.9m
(or66% of the total value). The vested shares are subject to an
additional two-year holding period.
OVERALL SINGLE FIGURE OF TOTAL REMUNERATION
FOROUR GROUP CHIEF EXECUTIVE
Having determined that the LTIP outcome was a fair reflection of
business performance, the Committee also felt it appropriate to review
the overall single figure of total remuneration earned by the Group Chief
Executive in respect of 2023. The Group Chief Executive’s single figure
in 2023 was £8.23m, which compares to £4.49m in 2022. The year-
on-year increase is due to continued improvements in underlying
performance and substantial share price growth. Since his appointment
as Group Chief Executive, Chris O’Shea has helped create significant
value for shareholders with Centrica’s TSR outperforming the FTSE100;
his cumulative single figure of total remuneration over the same period
is broadly in line with the median cumulative single figure for CEOs in
the FTSE 100. The Committee believes that the single figure
appropriately reflects the performance of both Chris O’Shea and the
business over the relevant period. It is worth noting that the single figure
of total remuneration for the Group Chief Executive over the next two
years is likely to be lower to reflect outcomes of long-term incentive
awards made under our Restricted Share Plan (RSP), where the
maximum awards were discounted by 50% compared to previous
LTIP awards.
REMUNERATION FOR 2024
For Executive Directors, we benchmark salaries and total
compensation against companies in the FTSE 100. We use this
comparator group as it provides a broad group of organisations where
we compete for talented executives. Centrica is a uniquely integrated
energy company, with over 21,000 employees operating in a highly
regulated and highly unionised environment. The FTSE 100 includes
companies that operate in similar sectors and are of comparable size
and complexity (e.g. the energy sectors, retail & consumer companies,
support services, utilities, insurance and commodity trading
companies). In terms of size, Centrica is also a constituent of the FTSE
100 index and is currently positioned around the median of the FTSE in
terms of market capitalisation. The ‘At a Glance’ section on page 88
shows how our Executive Director salaries and target total direct
compensation (salary plus target annual bonus plus expected value of
long-term incentives plus pensions) compares to the median FTSE 100
benchmark.
In determining salary increases for the Executive Directors for 2024, the
Committee considered both the average salary increases awarded to
the wider workforce and the performance and development of the
executives in their roles throughout the year.
With effect from 1 April 2024, Chris O’Shea’s salary will increase
by4.9% to £855,000. Given this year’s overall single figure of
remuneration for the Group Chief Executive, the Committee decided to
increase Chris’ salary at a rate that was below the average for the wider
workforce of 6%. Russell O’Brien’s salary will increase by 9.3% to
£590,000. The Committee awarded a higher salary increase to Russell
to recognise his performance and development in the role since joining
Centrica. Even after these increases, the salary and target total direct
compensation for Chris and Russell are below the median benchmarks
for similar roles in the FTSE 100. The Committee will keep the
competitiveness of the remuneration packages for Executive Directors
under review to ensure we can continue to attract and retain the talent
we need to deliver the business strategy.
We have simplified some of our legacy reward arrangements and,
witheffect from 31 December 2023, we have closed the Centrica
Unapproved Pension Scheme Defined Contribution Section (CUPS DC)
to future contributions. Chris O’Shea was a member of CUPS DC, and
because of the scheme closing, he has elected to receive his 10% of
salary as a cash allowance in lieu of pension.
There are no changes to the AIP or RSP awards to be granted in 2024.
The maximum AIP will be 200% of salary for the Group Chief Executive
(and 150% of salary for the Chief Financial Officer). The maximum RSP
award will be 150% of salary for the Group Chief Executive (and 125%
of salary for the Group Chief Financial Officer).
NON-EXECUTIVE DIRECTOR FEES
In the year, the Board welcomed Philippe Boisseau, Jo Harlow, and
Sue Whalley as new Non-Executive Directors. They bring excellent skills
and experiences, and I very much look forward to working with them.
The Committee undertook an annual review of the fees payable to
Scott Wheway, Chair of the Board. With effect from 1 April 2024,
Scott’s fees will increase to £440,000, which is a 4.6% increase and
lower than the average increase payable to the wider workforce of 6%.
The Chair of the Board, the Executive Directors, and the Chief People
Officer conducted an annual review of non-executive director fees and
concluded there should be no change in 2024. The review recognised
that the role of a non-executive director is becoming more complex,
and the time commitment is becoming increasingly demanding.
However, it was decided that Non-Executive fees would be reviewed
again as part of the next Remuneration Policy review during 2024.
CONCLUSION
In 2024, the Committee will conduct a comprehensive review of our
Remuneration Policy in preparation for shareholder approval at the
AGM in 2025. As part of this review, we will continue to have an open
and transparent dialogue with our shareholders on our remuneration
arrangements and any future changes.
We try to make our Remuneration Report comprehensive and
transparent and have provided additional information in support of this,
including details on how the Committee benchmarks executive
remuneration, insights into Centrica’s remuneration policies across the
wider workforce, as well as enhanced information on each Executive
Director’s individual objectives. We hope shareholders will find this
additional information useful.
Centrica’s performance and the executive team’s leadership in
challenging conditions are reflected in the remuneration outcomes and
the decisions the Committee has made in 2023. It is also consistent
with the objectives of our Remuneration Policy to deliver remuneration
that attracts and retains high calibre executives in a competitive global
business environment in return for the achievement of our strategic
objectives and the delivery of sustainable long-term shareholder value
and returns. I hope you will give us your support.
Carol Arrowsmith
on behalf of the Remuneration Committee
14 February 2024
86 Governance | Centrica plc Annual Report and Accounts 2023
REMUNERATION AT A GLANCE
SINGLE FIGURE OF TOTAL REMUNERATION IN FY 2023
GROUP CHIEF EXECUTIVE GROUP CHIEF FINANCIAL OFFICER
Further details on page 89 | ¢ Salary ¢ Pension and Benefits ¢ AIP ¢ LTIP
Kate Ringrose stepped down from the Board on 28 February 2023. Russell O’Brien was
appointed to the Board on the 1 March 2023.
FY2023 AIP PERFORMANCE 2021 LTIP OUTCOMES
The table below sets out details of the relevant measures in the Annual
Incentive Plan and their link to our group priorities, and the resulting outcome
The table below sets out details of the relevant measures in the Long-Term
Incentive Plan and their link to our group priorities, and the resulting outcome.
MEASURE Weighting Outcome MEASURE Weighting
Vesting Outcome
(% of max)
EPS 37.5% 100 %
Relative TSR
33% 100 %
BG Cost to Serve
37.5% 85 %
Cumulative EPS
22% 100 %
Customers to Ensek
Cash conversion
22% 75 %
BG complaints
Employee engagement
22% 57 %
BG reschedules
Aggregate Brand NPS
BG complaints
Complaints
Centrica cost/income
Total Recordable Injury Frequency
Rate (TRIFR)
CBS order intake
Overall outcome
85 %
Bord Gáis Cost to Serve
Unique customer numbers
Colleague engagement
Climate transition plan progress
Adjusted operating Profit
Free Cash Flow
Net debt/cash
Individual measures 25%
Group Chief Executive 87.5 %
Group Chief Financial Officer 82.5 %
Deduction for prepayment meter
investigation
(10) %
OVERALL OUTCOME (% MAXIMUM)
Group Chief Executive 87.5 %
Group Chief Financial Officer 86.3 %
Governance | Centrica plc Annual Report and Accounts 2023 87
£140m
£100k
4.0p
Support given to help customers with
their energy costs since 2022
Contributions to colleagues via the
Colleague Support Foundation
Full year dividend per share
25,000
1,000
£613m
Customers supported through the British
Gas Energy Trust since the start of the
energy crisis
Professional colleagues joined our
business
Shares repurchased in 2023
700
3ppt
45%
Extra colleagues hired across our
customer contact centres
Increase in colleague engagement
Increase in share price over
thefinancial year
FYE 2022
FYE 2023
0
2,500
5,000 7,500
£,000
790 1,422 2,262
810 1,426 5,902
4,490
8,231
FYE 2022
(Kate Ringrose)
FYE 2023
(Russell O’Brien)
0
500
1,000 1,500
£,000
459 576
498 640
1,084
1,196
HOW WE’VE SUPPORTED OUR STAKEHOLDERS IN 2023
MARKET COMPETITIVE BENCHMARKS
When we set the remuneration levels, one of the factors we consider is the competitiveness of the total compensation package for the role in the relevant market.
For the Group Chief Executive and Group Chief Financial Officer, we benchmark their roles against companies in the FTSE 100. The table below shows the
competitiveness of salary and total compensation for target performance versus the median of the FTSE 100.
GROUP CHIEF EXECUTIVE GROUP CHIEF FINANCIAL OFFICER
Chris O'Shea
Median FTSE 100
benchmark
Russell O'Brien
Median FTSE 100
benchmark
Salary £815,000 £935,000 Salary £540,000 £596,000
Target Total Compensation
(1)
£2,934,000 £3,533,000 Target Total Compensation
(1)
£1,674,000 £2,097,000
(1) Salary + target annual bonus + expected value of long-term incentives + pension
EXECUTIVE DIRECTOR SHAREHOLDINGS % OF BASE SALARY
The chart below sets out the minimum shareholding requirements and the shareholdings of the Executive Directors. The shareholding requirement must be
built up over five years and then subsequently maintained. For unvested shares with no performance conditions, we have assumed shares net of tax.
FURTHER DETAIL REGARDING THE EXECUTIVE DIRECTORS’ OUTSTANDING SHARE AWARDS CAN BE FOUND ON PAGE 94
GROUP CHIEF EXECUTIVE
¢ Vested and owned shares ¢ Unvested shares with no performance conditions
GROUP CHIEF FINANCIAL OFFICER
¢ Vested and owned shares ¢ Unvested shares with no performance conditions
Shareholding as % of salary Shareholding as % of salary
2024 REMUNERATION
The table below sets out a summary of the implementation of the Policy for 2024.
FURTHER DETAILS CAN BE FOUND ON PAGE 101
Base Salary Benefits Pension Short-term incentive Long-term incentive
CEO: £855,000 (+4.9%)
CFO: £590,000 (+9.3%)
The average increases for the
wider workforce in the UK was
6%.
No change and remains in line
with the wider workforce
10% of salary in line with the
wider workforce
With effect from 31 December
2023, we have closed the
Centrica Unapproved Pension
Scheme Defined Contribution
Section (CUPS DC) to future
contributions. Chris O'Shea will
no longer be eligible contribute
his 10% of salary pension
contribution to CUPS DC.
Instead, he has elected to receive
10% of salary as a cash
allowance in lieu of pension.
CEO: 200% of salary at max
100% of salary at target
CFO: 150% of salary at max
75% of salary at target
Measured 75% against financial
and business measures and with
25% against individual objectives.
50% of any bonus earned is
deferred into shares that vest
after three years.
Restricted Share Plan award
subject to underpin framework.
CEO: 150%of salary
CFO: 125% of salary
Awards vest after three years and
plus a two year additional holding
period.
88 Governance | Centrica plc Annual Report and Accounts 2023
Goal
Actual
31/12/2023
Actual
31/12/2022
300
0% 100% 200% 300%
224 222
69 83
446
152
Goal
Actual
31/12/2023
Actual
31/12/2022
200
82
0% 50% 150% 250% 300%400% 500%
48
100% 200%
130
DIRECTORS’ ANNUAL REMUNERATION REPORT
DIRECTORS’ REMUNERATION IN 2023
This report sets out information on the remuneration of the Directors for the financial year ended 31 December 2023.
Single figure for total remuneration (audited)
Executives
£000
Salary/
fees
Bonus
(cash)
Bonus
(deferred)
(1)
Benefits
(2)
LTIPs
(3)
Pension
(4)
Total
Total fixed
remuneration
Total variable
remuneration
2023
Chris O’Shea 810 713 713 16 5,902 77 8,231 903 7,328
Russell O’Brien
(5)
498 320 320 13 — 45 1,196 556 640
Kate Ringrose
(6)
77 45 45 3 1,833 — 2,003 80 1,923
Total 1,385 1,078 1,078 32 7,735 122 11,418 1,527 9,891
2022
Chris O’Shea 790 711 711 16 2,262 — 4,490 806 3,684
Kate Ringrose
(6)
459 288 288 16 — 33 1,084 508 576
Total 1,249 999 999 32 2,262 33 5,574 1,314 4,260
(1) In accordance with the Remuneration Policy, 50% of the bonus is deferred into shares and will vest after three years.
(2) Taxable benefits include car allowance, health and medical benefits. Non-taxable benefits include matching shares received under the Share Incentive Plan (SIP).
Bothtaxable and non-taxable benefits are included in the table.
(3) The estimated value of the LTIP award that was granted in respect of the 2021-23 performance period is included in the table above, based on a share price of 150 pence
(the 3 month average share price for the period ending 31 December 2022). Of the £5.9m for Chris O’Shea, £3.9m (or 66% of the value) was due to share price growth.
The award will vest in June 2024 and the shares will then be subject to an additional two-year holding period. Further details of the performance outcomes are set out on
page 90. Dividend equivalents of £230K and £71K have been included.
(4) Notional contributions to the Centrica Unapproved Pension Scheme defined contribution section (CUPS DC) for Chris O’Shea and Kate Ringrose have been included in
this table as if CUPS DC was a cash balance scheme. This includes a deduction in respect of an allowance for CPI inflation on the opening balance of 11.1% in 2023
(4.1% in 2022). CUPS DC was closed on 31 December 2023 and Chris O’Shea will receive his pension contribution as cash in lieu.
(5) Russell O’Brien was appointed to the Board on 1 March 2023.
(6) Kate Ringrose stepped down from the Board on 28 February 2023.
Single figure for total remuneration (audited)
Non-Executives
Salary/fees Total
£000 2023 2022 2023 2022
Scott Wheway 418 410 418 410
Carol Arrowsmith 96 93 96 93
Nathan Bostock
(1)
97 47 97 47
CP Duggal
(2)
76 3 76 3
Heidi Mottram 96 93 96 93
Kevin O’Byrne 100 109 100 109
Amber Rudd
(3)
76 71 76 71
Philippe Boisseau
(4)
25 N/A 25 N/A
Jo Harlow
(5)
6 N/A 6 N/A
Sue Whalley
(6)
6 N/A 6 N/A
Total 996 826 996 826
(1) Nathan Bostock joined the Board on 9 May 2022
(2) CP Duggal joined the Board on 16 December 2022
(3) Amber Rudd joined the Board on 10 January 2022
(4) Philippe Boisseau joined the Board on 1 September 2023
(5) Jo Harlow joined the board on 1 December 2023
(6) Sue Whalley joined the board on 1 December 2023
Governance | Centrica plc Annual Report and Accounts 2023 89
BASE SALARY / FEES
With effect from 1 April 2024, the Group Chief Executive’s salary will increase by 4.9% to £855,000 per annum. The increase is below the average
salary increase for the wider workforce in the UK of 6%. Please see page 96 for further details on Reward Across the Wider Workforce. The rate of
increase was set lower than the wider workforce to reflect the increase in single figure for total remuneration in 2023. The salary for the Group Chief
Financial Officer will increase by 9.3% to £590,000 per annum. A higher than average workforce increase was given to the Group Chief Financial
Officer to reflect his performance and development in role since joining Centrica. Both the salaries of the Group Chief Executive and the Group
Chief Financial Officer remain below the median benchmarks for similar roles in the FTSE 100.
The fees for the Chair of the Board were reviewed by the Remuneration Committee and increased by 4.6% to £440,000 per annum with effect
from 1 April 2024. The increase is below the increase for the wider workforce in the UK. Non-Executive Director fees were also reviewed but there
will be no increase in 2024. The Non-Executive Director fees will be reviewed again as part of the next Remuneration Policy review to ensure
Centrica is able to continue to attract and retain Non-Executive Directors with the right skills, knowledge and experience, and to reflect the
increasing time commitment and complexity of the role.
FY23 ANNUAL INCENTIVE PLAN (AIP)
In line with the Remuneration Policy, 75% of the award was based on a mix of financial and business measures based on Centrica’s priorities for
2023 and 25% was based on individual objectives.
The financial and business performance element for 2023 was split equally between Earnings Per Share (EPS) and the outcome of a balanced
scorecard of financial and operational measures critical to the success of the organisation in 2023.
The EPS measure had defined threshold, target and maximum levels that were set at the start of the financial year. During the first half of the year,
market conditions were materially better than expected when the targets were set. Therefore, when reviewing progress against the EPS target
during the year, the Committee determined that the original targets were no longer appropriate and should be increased to reflect these improved
market conditions. This resulted in EPS targets for the FY23 AIP as follows:
Threshold Target Max Outcome
Adjusted EPS 17.6p 22.0p 26.4p 33.4p
Reflecting the strong performance of the business in the year against these revised targets, Centrica achieved earnings performance above the
maximum with an EPS of 33.4 pence, resulting in an outturn of 100% for this part of the AIP.
In addition, the Committee determined a balanced scorecard for the remaining financial and business elements of the AIP. It was agreed that there
would be no formula to translate the scorecard to a bonus outcome and no formal weighting of individual measures. The Committee monitored
performance against the scorecard at regular points during the year. At the end of the year, the Committee took a holistic assessment of overall
performance to determine an outturn. The balanced scorecard of measures, targets and outcomes are noted below.
Measure Target Outcome
Group Adjusted Operating Profit £1,878m £2,752m
Free Cash Flow £672m £2,207m
Net (Debt)/Cash £1,089m £2,744m
British Gas Energy Complaints 11.5% 13.3%
British Gas Services & Solutions Complaints 10.8% 8.5%
British Gas Services & Solutions Reschedules 5.0% 3.1%
Bord Gáis Cost to serve €212 per customer €187 per customer
British Gas Energy Cost to serve
(1)
£127 per customer £142 per customer
Centrica Business Solutions Order Intake £264m £225m
Centrica Energy Opex: Gross Margin Ratio 33.5% 33.3%
Customer numbers 10,228,00 unique customers 10,264,000 unique customers
Colleague engagement 7.7 7.7
Progress towards climate transition plan
– see People and Planet plan for further
details. See page 47.
Goal 4 – helping our customers be net
zero by 2050
Goal 5 – be a net zero business by 2045
Make good progress against the
interim climate targets including;
Centrica carbon emissions
Low carbon and transition
assets
Electric vehicles in fleet
Reduction in property emissions
CAPEX allocated to green
activities
Hive active heating units sold
SMART meters installed
EV charger points installed
Heat pumps installed
On target for emissions reduction in
line with the long-term glidepath but
mixed performance against customer
reduction ambitions. See page 47 for
further details.
Customers on Ensek 5m 5.4m
(1) British Gas Energy cost to serve per customer excluding bad debt was £84, against a target of £83.
90 Governance | Centrica plc Annual Report and Accounts 2023
Excellent performance across the Group also meant the majority of customer, colleague and financial targets in the balanced scorecard were met
in full, including delivering operating profits of £2,752m and free cash flow of £2,207m. We were particularly pleased to see a reduction in
rescheduled appointments for customers in Services and Solutions and an improvement in our customer satisfaction scores. Given the cost
ofliving challenges faced by our customers, we have seen an increase in our bad debt charges, and we will continue to engage with those
customers who are struggling to pay their bills using a variety of mechanisms including payment spreading and utilising the £140m we have
committed so far to help the most vulnerable and in need. We have made significant progress against both our goal to be a net zero business by
2045, and our goal to help our customers be net zero by 2050. Performance against the balanced scorecard measures resulted in an outturn
of85% for this part of the AIP. The Committee is satisfied that the current incentive structure for senior executives does not drive unintended risks
or ESG concerns.
The Committee carefully considered the outcomes against the EPS target and the balanced scorecard measures, determining an outcome of
100% against the EPS target and 85% against the balanced scorecard. Achievement against the overall financial and business performance
element of the AIP was 185% of target. However, as outlined in the Remuneration Committee Chair’s statement, the Remuneration Committee
determined that the financial and business performance part of the AIP should be reduced by 10% to 175% of target to reflect the findings of the
prepayment meter investigation.
Individual Objectives
Each Executive Director had a set of stretching individual objectives which included key non-financial and strategic performance indicators (KPIs)
that were important to thesuccess of the business in 2023. The KPIs were cascaded to business and functional leaders to ensure a strong line
ofsight to key priorities throughout the organisation. The Committee assessed that the majority of individual objectives were met in full and good
progress was made against others. Based on an assessment of performance against Chris O’Shea’s individual objectives, the Committee
determined an outcome of 87.5% of maximum was appropriate. The Committee determined for Russell O’Brien an outcome of 82.5% of
maximum under the individual objectives part of the Annual Incentive Plan. For Kate Ringrose, who served for two months of the financial year
asCFO, the Committee determined an outcome of 50% of maximum of the individual objectives part of the AIP.
The table below summarises the key individual objectives for Executive Directors during the year:
Key objectives
Personal objectives
Outturn (as % of
maximum)
Chris O’Shea
Chris delivered further improvements in capability, culture, and operational delivery, including the launch of
our new corporate purpose, established a new business operating model to support strategic plans for
commercial and customer growth, investment in infrastructure and net zero, and a step change in our
approach to health & safety. Achieved objective to return Services and Solutions to profitability and
operational improvements continue to be delivered. With the team, Chris developed a compelling strategic
plan and investment caseto deliver shareholder returns including dividends and share buy backs. Launched
new customer propositions in the year, including PeakSave and continued to provide customer support
with over £140m of committed funds to help customers during the energy crisis since 2022.
87.5%
Russell O’Brien
Smooth transition from former CFO. Refreshed capital allocation and investment framework and new risk
capital framework. Developed new strategic plan and investment narrative, which was well received by
investors at interim results in 2023. Reviewed the finance function with a focus on improving the efficiency
and effectiveness of the function.
82.5%
Kate Ringrose
Kate’s focus was to complete the financial year-end reporting process for FY2022 and to provide an
effective handover to Russell O’Brien, the incoming CFO.
50%
Governance | Centrica plc Annual Report and Accounts 2023 91
Overall AIP outcome
Overall, after combining the outturn for financial and business performance with the outturn for individual performance, and after deducting 10%
forthe prepayment meter investigation, the total AIP for Chris O’Shea was 87.5% of maximum, which equated to 175% of salary or £1,426,250.
The table below summarises the outcomes under the AIP for all Executive Directors:
Measure Chris O’Shea Russell O’Brien Kate Ringrose
EPS 100% 100% 100%
Balanced scorecard 85 % 85% 85%
Deduction for prepayment meter
investigation (10%) (10%) (10%)
Individual objectives 87.5% 82.5% 50%
Total AIP (as % of maximum) 87.5% 86.3% 78.1%
Total AIP (£) £1,426,250 £640,406
(1)
£90,088
(2)
(1) Prorata for the employment period.
(2) Prorata for the employment period.
Half of the AIP earned was paid in cash and half of the AIP was deferred into shares, vesting in three years.
LONG-TERM INCENTIVE AWARDS RELATING TO THE PERFORMANCE PERIOD 2021-23
The performance conditions relating to the three-year period ending in 2023 are set out below, together with the achievement against these
performance conditions. Vesting between stated points is on a straight-line basis.
Financial targets and
outcomes
Targets
Measures Weightings Threshold (25%) Maximum (100%) Outcomes Vesting
Relative Total Shareholder Return
(TSR)
33.3% FTSE 100
median
FTSE 100
upper quartile
Ranked first
at 267.4%
100%
Cumulative EPS 22.2% 7.5p 10.5p
(1)
72.4p 100%
Cash conversion 22.2% EBITDA to
OCF of 85%
EBITDA to
OCF of 100%
95.0% 75.5%
Non-financial KPI improvement
22.2% See below See below 57.3%
Overall
100% 85%
(1) 3-year cumulative EPS
Centrica’s TSR was outstanding over the three-year performance period being ranked in first position relative to the FTSE 100. Our TSR was
267.4% compared to 47.1% for the upper quartile of the FTSE 100, therefore the TSR portion of the LTIP will vest at 100%.
Financial performance across the three-year performance period was strong, resulting in above maximum outcome against the Cumulative EPS
target (vesting at 100%) and above target performance for cash conversion (vesting at 75.5%).
92 Governance | Centrica plc Annual Report and Accounts 2023
Non-financial KPI targets and outcomes
The KPI measures, targets and outcomes for the 2021-23 cycle were:
Targets
Threshold Maximum Outcomes Vesting
Safety
Total recordable injury frequency rate (TRIFR)
(1)
0.85 0.65 0.84 29%
Customer satisfaction
Aggregate brand NPS across our customer businesses weighted by customer
numbers
+10.52 +12.35 +18.3 100%
Complaints per 100,000 customers across our customer businesses weighted
bycustomer accounts
2,820 2,600 6,010 0%
Colleague engagement (percentage favourable) 45% 54% 77% 100%
(1) Per 200,000 hours worked.
Performance against the non-financial KPIs across the performance period was mixed with not all measures meeting threshold. The Committee
determined that the outcome for this portion of the award would vest at 57.25%.
Overall performance outcome
The LTIP award was granted in June 2021 and will vest in June 2024, after which the shares are then subject to a mandatory holdingperiod of
two years. Taking into account the achievement against the financial performance targets, and the agreed outcome against thenon-financial
targets, the Committee approved the overall vesting outcome of 85% of the maximum award.
The estimated value of the shares that will vest in respect of the three-year performance period, which ended in December 2023, has been
included in the single figure for total remuneration on page 89. The shares will be released at the end of the holding period, in June 2026.
As stated in the Remuneration Committee Chair’s statement, as a matter of course, the Committee reviews the formulaic vesting outcome against
the overall underlying performance of the group. The Committee considered whether there have been any windfall gains and determined there
were none, and no adjustment was made.
Pension
In 2020, it was agreed that the pension contributions for the new and existing Executive Directors would be 10% of base salary to align them with
the wider UK workforce. In 2023 the pension contribution rate across the UK workforce was 10-14%, depending on the pension scheme.
Chris O’Shea and Kate Ringrose participated in the Centrica Unapproved Pension Scheme Defined Contribution section (CUPS DC), until
31December 2023 when we closed the scheme to future contributions. For the period to 31 December 2023, notional contributions to the CUPS
DC scheme have been included in the single figure for total remuneration table as if it was a cash balance scheme and therefore notional
investment returns for the year have also been included. The notional pension fund balances for each Executive are disclosed below:
CUPS DC Scheme
(1)
Total notional
pension fund as at
31 December 2023
£
Total notional
pension fund as at
31 December 2022
£
Chris O’Shea
(1)
431,775 319,407
Kate Ringrose
(1)
79,500 78,761
(1) The retirement age for the CUPS DC scheme is 62.
Governance | Centrica plc Annual Report and Accounts 2023 93
Following 31 December 2023 when the CUPS DC scheme closed to future contributions Chris O’Shea chose to take his pension contribution of
10% of salary as cash in lieu of pension. Upon appointment Russell O’Brien similarly received his pension contribution of10% of salary as cash in
lieu of pension.
% of salary
Chris O’Shea
10% cash in lieu of pension
Russell O’Brien 10% cash in lieu of pension
Taxable benefits
Taxable benefits include car allowance, health and medical benefits. Non-taxable benefits include matching shares received under the Share
Incentive Plan (SIP) on the same terms as all employees. Both taxable and non-taxable benefits are included in the table of single figure for total
remuneration.
DIRECTORS’ INTERESTS IN SHARES (NUMBER OF SHARES) (AUDITED)
The table below shows the interests in the ordinary shares of the Company for all Directors who served on the Board during 2023.
For the Group Chief Executive the minimum shareholding requirement is 300% of base salary and for the Chief Financial Officer the minimum
shareholding requirement is 200% of base salary. The achievement against the requirement is shown below.
Executive Directors have a period of five years from appointment to the Board, or from any material change in the minimum shareholding
requirement, to build up the required shareholding. A post-cessation shareholding requirement of 100% of the in-employment shareholding
requirement (or full actual holding if lower) is applicable for two years post-cessation of employment. The Committee continues to keep both the
shareholding requirement, and achievement against the shareholding requirement, under review and will take appropriate action should they feel
itnecessary.
Beneficially
owned
(1)
Shares subject to
performance
conditions
Shares vested but
unexercised
Shares subject to
continued service
only
(2)
Shares
exercised
in the year
Shareholding
requirement
(% of salary)
Current
shareholding
(% of salary)
(3)
Executives
Chris O’Shea
(5)
1,295,884 7,954,419 — 1,289,274 — 300 224
Russell O’Brien
(5)
185,511 — — 314,566 — 200 48
Kate Ringrose
(4)
550,940 1,501,143 — 348,139 — 200 126
Non-Executives
Carol Arrowsmith 49,286 — — — — — —
Phillippe Boisseau
(7)
2,669 — — — — — —
Nathan Bostock 27,000 — — — — — —
CP Duggal 15,000 — — — — — —
Jo Harlow — — — — — — —
Heidi Mottram 10,000 — — — — — —
Kevin O'Byrne 40,000 — — — — — —
Amber Rudd
(6)
42,559 — — — — — —
Sue Whalley 13,868 — — — — — —
Scott Wheway 110,187 — — — — — —
(1) These shares are owned by the Director or a connected person and they are not, save for exceptional circumstances, subject to continued service or the achievement of
performance conditions. They include shares purchased by the Executive Director in March with deferred AIP funds which have mandatory holding periods of three years
and which will be subject to tax at the end of the holding periods.
(2) Shares owned subject to continued service include RSP shares awarded and SIP free and matching shares that have not yet been held for the three-year holding period.
The values are net of tax.
(3) The share price used to calculate the achievement against the guideline was 1.4065 pence, the price on 31 December 2023.
(4) Kate Ringrose stepped down from the Board on the 28 February 2023 and the number reflects her holding on this date.
(5) During the period 1 January 2024 to 15 February 2024 both Chris O’Shea and Russell O’Brien acquired 264 shares through the SIP.
(6) During the period 1 January 2024 to 15 February 2024 Amber Rudd acquired 1,580 shares through the NED Share Purchase Agreement.
(7) During the period 1 January 2024 to 15 February 2024 Phillippe Boisseau acquired 1,459 shares through the NED Share Purchase Agreement.
94 Governance | Centrica plc Annual Report and Accounts 2023
SHARE AWARDS GRANTED IN 2023 (AUDITED)
Set out below are details of share awards granted in 2023 to Executive Directors.
2023 RSP
Plan Award Type
Number
of shares
(1)
Basis of
award
% of salary
Face value
of award
£
Vesting
date
Release
date
Chris O’Shea RSP Conditional 1,186,547 150% 1,222,500 March 2026 March 2028
Russell O’Brien RSP Conditional 655,148 125% 675,000 March 2026 March 2028
(1) The number of shares awarded under the RSP was calculated by reference to a price of 103.03 pence, being the average of the Company’s share price over the five
trading days immediately preceding the date of grant of 21 March 2023.
The RSP award is subject to an underpin. If the Committee is not satisfied the underpin has been met, the Committee may scale back the awards
(including to zero). In assessing the underpin, the Committee will consider the following:
¢ a review of overall financial performance over the three-year vesting period;
¢ whether there have been any sanctions or fines issued by a Regulatory Body (participant responsibility may be allocated collectively or
individually);
¢ whether a major safety incident has occurred which may or may not have consequences for shareholders;
¢ whether there has been material damage to the reputation of the Company (participant responsibility may be allocated collectively or
individually);
¢ whether there has been failure to make appropriate progress against our Climate Transition Plan which sets out our ambition to be a net zero
business by 2045 and help our customers be net zero by 2050;
¢ return on capital with reference to the cost of capital;
¢ TSR performance over the vesting period, including with reference to the wider energy sector;
¢ management of customer numbers over the vesting period; and
¢ progress against broader ESG commitments.
2023 DEFERRED AIP
The 2023 AIP award was delivered 50% in cash and 50% in deferred shares, which were awarded on 21 March 2023. The face value of the
award is based on the share price on the date of award, which was 102.30 pence. Deferred shares are not subject to further performance
conditions and vest in three years.
Plan Award Type
Number
of shares
Face value
of award
£000
Vesting
date
Chris O’Shea AIP Deferred shares 694,925 710,965 March 2026
Kate Ringrose AIP Deferred shares 281,073 287,561 March 2026
Governance | Centrica plc Annual Report and Accounts 2023 95
To staff
To Directors
To government
To shareholders
Investing activities
To staff
To Directors
To government
To shareholders
Investing activities
2023 CASH FLOW DISTRIBUTION TO STAKEHOLDERS
The Committee monitors the relationship between the Directors’ total remuneration and cash outflows to other stakeholders. As demonstrated by
the chart, the Directors’ aggregate total remuneration for the year equates to 0.0004% (2022: 0.04%) of the Group’s operating cash flow.
Reward Across The Wider Workforce
Centrica comprises 21,000 diverse colleagues with different roles in different business units across different countries. Our approach to reward
aims to unify us as a team working with a common purpose and values. To achieve this, we have established some key reward principles across
the workforce that balance the needs of our colleagues with the needs of the business and our customers. The same principles apply to Executive
Directors and members of the Centrica Leadership Team:
For our colleagues, we aim to provide reward that is: For our business, we aim to provide reward that is:
Market competitive Sustainable
Fair and consistent Agile
Simple Flexible
Supports wellbeing Compliant
Total reward at Centrica consists of more than just salary. All colleagues receive fixed pay comprising a salary plus a wide range of pensions &
benefits (see table below for more detail). In addition, all colleagues are eligible to earn variable pay subject to performance (such as annual
bonuses, recognition awards, and Profit Share). For frontline colleagues in the organisation, they can expect a higher proportion of their total
reward to be fixed pay. The variable pay element is often based on individual performance and is typically paid in cash quarterly or annually.
Atsenior executive levels, colleagues have a higher proportion of variable pay linked to the financial and business performance of the Company.
This variable pay is often paid in shares that vest over multiple years. Therefore, our approach to total reward is to vary the fixed pay and variable
pay mix depending on the individual’s role, responsibilities, and performance compared to competitive market practice for comparable roles.
96 Governance | Centrica plc Annual Report and Accounts 2023
2023 2022
20%
0%
32%
4%
44%
27%
0.04%
23%
1%
48%
Performance measures applying to Executive Directors and the Centrica Leadership Team are cascaded through the organisation to ensure a
clear line-of-sight and alignment around performance in categories of ‘Colleagues’, ‘Customers’ and ‘Cash’.
The table below summarises some key highlights of wider workforce reward in the UK. Executive Directors and the Centrica Leadership Team
participate in the same benefits and on the same terms as the wider workforce.
Fair pay
Centrica is an accredited member of the Real Living Wage Foundation, and we pay at least the Real Living Wage in the UK.
During the cost of living crisis, we have focused on improving the pay of our lowest paid colleagues, through salary increases
and one-off payments. The average salary increase across the wider workforce in the UK is 6%, with our lowest paid
colleagues receiving an average salary increase of between 7.8% to 9.5%.
Salary levels for the wider workforce are negotiated with our recognised trade union partners to ensure fair living standards.
Salary levels for management reflect the individual’s role, experience and performance compared to competitive market rates.
Looking after colleagues
andtheir loved ones
All employees in the UK receive comprehensive health and medical cover and can purchase additional cover for their
dependants. This includes 24-hour access to a GP, eye care; support for parents with fertility, adoption, and surrogacy; life
assurance; and personal accident insurance.
Saving for the future
The Company has various legacy pension arrangements. While our Defined Benefit pension is closed to new members it is still
open to future accrual for existing members. Our Defined Contribution Scheme provides a generous employer contribution of
10% of salary or cash in lieu of pension. Our Lifestyle Savings offer discounts from everyday shopping to one-off big
purchases.
Recognising colleague
contribution
In 2023, we recognised colleagues over 258,000 times through our Recognition platform. This allows anyone in the Company
to recognise the performance or values of a colleague or team, or simply say “thank you”.
We operate a number of performance-related incentives plans across the Group. 5,500 employees participate in an annual
bonus plan aligned to the bonus for executives and senior management. All of our field engineers and customer facing teams
participate in incentives aligned to their individual performance.
Sharing in our success
All employees in the UK are eligible to participate in our Share Incentive Plan, where they can purchase shares in the Company
and receive free matching shares, provided they hold them for at least three years. In addition, all colleagues are eligible to an
award of free shares every year via our Profit Share plan depending on our performance over the prior year. Field and
Customer Support colleagues participate in quarterly and annual incentives linked to their performance. Senior managers are
eligible to receive annual bonuses and long-term restricted share awards aligned to the performance of the business.
Being an Ambassador for
Centrica products & services
We provide discounts on colleagues’ energy bills if they are a Centrica customer, as well as discounts on new boilers,
HomeCare cover, and our new energy efficient products for example, Electric Car charging points, solar & battery storage,
andhome insulation.
Making a difference in the
world
Colleagues are given time off to volunteer for local communities and causes they are passionate about. We also operate a
Give As Your Earn scheme, where colleagues can donate in a tax-efficient way. The Colleague Support Foundation aims to
provide additional support for those experiencing extreme financial difficulties, where existing financial support mechanicians
have been explored and exhausted.
Governance | Centrica plc Annual Report and Accounts 2023 97
ANNUAL PERCENTAGE CHANGE IN REMUNERATION OF DIRECTORS AND COLLEAGUES
The table below shows the percentage changes (on a full-time equivalent basis) in the Executive and Non-Executive Directors’ remuneration over
the last three financial years compared to the amounts for full-time colleagues of the Group for each of the following elements of pay:
Percentage change from
2019 to 2020
Percentage change from
2020 to 2021
Percentage change from
2021 to 2022
Percentage change from
2022 to 2023
Executive Directors Salary/fees Benefits Bonus Salary/fees Benefits Bonus Salary/fees Benefits Bonus Salary/fees Benefits Bonus
Chris O’Shea
(1)
6.3 — — — -28.0 — 2.5 -11.1 100 2.6 — 0.3
Russell O’Brien
(2)
— — — — — — — — — — — —
Kate Ringrose
(11)
2.5 6.7 18.7 -83.3 -81.2 -84.4
Non-Executive Directors
Scott Wheway 268.8 — — — — — — — — 2.6 — —
Carol Arrowsmith — — — — — — — — — 3.8 — —
Nathan Bostock
(3)
— — — — — — — — — 32.9 — —
CP Duggal
(4)
— — — — — — — — —
— — —
Heidi Mottram — — — 27.8 — — — — — 3.8 — —
Kevin O’Byrne
(5)
— — — — — —
— — — -20.7 — —
Amber Rudd
(6)
— — — — — — — — — — — —
Philippe Boisseau
(7)
— — — — — —
— — — — — —
Jo Harlow
(8)
— — — — — — — — — — — —
Sue Whalley
(9)
— — — — — — — — — — — —
Average per
colleague (excluding
Directors)
(10)
— 1.1 236.4 1.8 -10.3 16.3 1.9 — — 4.4 — 42.3
(1) Chris O’Shea was appointed to the Centrica Board as Group Chief Financial Officer on 1 November 2018 and became interim Group Chief Executive with effect from
17March 2020. He was appointed as Group Chief Executive on 14 April 2020. From 17 March until 31 December 2020, he elected to waive £100,000 of his salary.
(2) Russell O’Brien was appointed to the Board on 1 March 2023.
(3) Nathan Bostock was appointed to the Board on 9 May 2022.
(4) CP Duggal was appointed to the Board on 16 December 2022.
(5) Kevin O’Byrne took on the role of Senior Independent Director from 1 June 2022.
(6) Amber Rudd was appointed to the Board on 10 January 2022.
(7) Philippe Boisseau joined the Board on 1 September 2023.
(8) Jo Harlow joined the board on 1 December 2023.
(9) Sue Whalley joined the board on 1 December 2023.
(10) The comparator group includes all management and technical or specialist colleagues based in the UK in Level 2 to Level 6 (where Level 1 is the Executive and Non-
Executive Directors). There are insufficient colleagues in the Centrica plc employing entity to provide a meaningful comparison. The colleagues selected have been
employed in their role for full years to give meaningful comparison. This group has been chosen because the colleagues have a remuneration package with a similar
structure to the Executive Directors, including base salary, benefits and annual bonus.
(11) Kate Ringrose stepped down from the Board on the 28 February 2023.
98 Governance | Centrica plc Annual Report and Accounts 2023
The chart below shows the ratio of remuneration of the CEO to the
average UK colleague of the Group.
CEO pay ratio
25th
percentile
50th
percentile
75th
percentile
2023 Option B 198:1 142:1 120:1
2022 Option B 128:1 77:1 70:1
2021 Option B 29:1 24:1 15:1
2020 Option B 32:1 15:1 14:1
2019 Option B 34:1 29:1 22:1
2018 Option B 72:1 59:1 44:1
For 2020,the CEO total remuneration figure includes the single figure chart combined
earnings of both Iain Conn and Chris O’Shea for the period that they were in the
CEO role during2020.
2023
Salary Total pay and benefits
CEO remuneration 810,000 8,231,007
Colleague 25th percentile 26,484 41,514
Colleague 50th percentile 41,415 58,029
Colleague 75th percentile 47,970 68,439
The Company has used its gender pay gap data (Option B in the
Directors’ Reporting Regulations) to determine the colleagues whose
remuneration packages sit at the lower, median and upper quartile
positions across the UK workforce. This is deemed the most
appropriate methodology for Centrica given the different pension and
benefit arrangements across the diverse UK workforce. To ensure this
data accurately reflects individuals at each quartile position, a sensitivity
analysis has been performed. The approach has been to review the
total pay and benefits for a number of colleagues immediately above
and below the identified employee ateach quartile within the gender
pay gap analysis. We have determined our 25th, 50th, and 75th
percentile individual using data from our gender pay gap as of the
5April 2023.
The annual remuneration for the three identified colleagues has been
calculated on the same basis as the CEO’s total remuneration for the
same period in the single figure table on page 89 to produce the ratios.
The ratio of CEO pay compared with the pay for the average colleague
has increased in the last two years due to the strong vesting of the LTIP
awards that were granted in 2021 and will be released in shares in
2026. As a large proportion of CEO remuneration was delivered
through the LTIP which was measured over a three-year performance
period, from 2021-2023 the CEO ratio will be impacted by any long
term incentive outcomes. Under the current Remuneration policy, long-
term incentives will be delivered to the CEO through the Restricted
Share Plan which has a lower overall quantum, at 50% of the previous
LTIP. The Company believes the ratios are appropriate given financial
and business performance outcomes in 2023, and the size and
complexity of the business.
Pay for performance
The table below shows the CEO’s total remuneration over the last
10years and the achieved annual short-term and long-term incentive
pay awards as a percentage of the plan maximum.
Chief Executive
single figure for
total remuneration
£000
Annual short-term
incentive payout
against max
opportunity
%
Long-term incentive
vesting against max
opportunity
%
Chris O’Shea
2023 8,231 87.5 85
2022 4,490 89.5 76
2021 875 0 0
2020 765 0 0
Iain Conn
2020 239 0 0
2019 1,186 0 0
2018 2,335 41 18
2017 1,678 0 26
2016 4,040 82 0
2015 3,025 63 0
Sam Laidlaw
2014 3,272 34 35
For 2020 the single figure for total remuneration for both Iain Conn and Chris O’Shea
are shown. The total remuneration figure for Chris O’Shea includes his earnings
during 2020 asCFO and CEO.
The performance graph below shows Centrica’s TSR performance
against the performance of the FTSE 100 Index over the 10-year period
to 31 December 2023. The FTSE 100 Index has been chosen as it is
an index of similar-sized companies and Centrica has been a
constituent member for the majority of the period.
Total return indices – Centrica and FTSE 100
Centrica Total Return Index FTSE 100 Total Return Index
2013 2014
2015 2016 2017 2018 2019 2020 2021 2022 2023
0
50
100
150
200
FEES RECEIVED FOR EXTERNAL APPOINTMENTS
OFEXECUTIVE DIRECTORS
There were no fees received for external appointments. Kate Ringrose
represented Centrica as a non-executive director of EDF Energy
Nuclear Generation Group Limited and Lake Acquisitions Limited.
Shereceived no fees or remuneration relating to these external
appointments in 2023.
Governance | Centrica plc Annual Report and Accounts 2023 99
RELATIVE IMPORTANCE OF SPEND ON PAY
The table below shows the percentage change in total remuneration paid to all colleagues compared to expenditure on dividends and share
buyback for the years ended 31 December 2022 and 2023.
2023
£m
2022
£m
%
Change
Share repurchase
(1)
613 43 1,326
Dividends 186 59 215
Staff and employee costs
(2)
1,400 1,440 (3)
(1) 510,787,195 shares were purchased during 2023 as part of the share buyback arrangement
(2) Staff and employee costs are as per note 5(b) in the notes to the Financial Statements.
PAYMENTS TO PAST DIRECTORS (AUDITED)
During 2023, no payments were made to past Directors with the exception of the payments disclosed in the single figure for total remuneration
table on page 89.
PAYMENTS FOR LOSS OF OFFICE (AUDITED)
Kate Ringrose stepped down from the Board as Chief Financial Officer on 28 February 2023 and she left employment with Centrica on 1 October
2023. Other than the treatment set out below, no further payments for loss of office will be made to Kate. Payments for loss of office to Kate
Ringrose were consistent with the Policy and her contract of employment.
Fixed remuneration
Kate Ringrose was paid salary and benefits for the duration of her employment to a total of £279,163.
Annual Incentive Plan (AIP)
Kate Ringrose was eligible for an AIP award for the period worked as Chief Financial Officer during the 2023 financial year, details in respect of the
achievement of which can be found on page 91. Kate’s FY2023 bonus was paid 50% in cash and 50% in shares deferred for a further three
years. Kate’s deferred bonus of £243k from FY2021 and £288k from FY2022 will be subject to the three year deferral period in line with the usual
policy. The Remuneration Committee considers that ‘good leaver’ treatment is appropriate in recognition of Kate’s contribution to the business.
Long-term Incentive Awards
The Remuneration Committee determined Kate Ringrose was a ‘good leaver’ in respect of her 2021 LTIP and 2022 RSP awards. Awards will be
pro-rated based on the performance period that has elapsed at the point Kate ceased employment and will vest on the normal vesting dates,
subject to relevant performance conditions and underpins. Holding periods of two years will apply to any vested shares. Kate did not participate in
the FY2023 RSP award.
Post-employment shareholding requirement
Kate Ringrose is subject to a two-year post-employment shareholding requirement. On cessation of employment, Kate had a shareholding in
excess of 200% of salary. Therefore, Kate is required to maintain a shareholding of 200% of salary for a period of two years post-employment.
ADVICE TO THE REMUNERATION COMMITTEE
Following a competitive tender process, PwC was appointed as independent external advisor to the Committee in May 2017.
PwC also provided advice to Centrica globally during 2023 in the areas of employment taxes, regulatory risk and compliance issues and additional
consultancy services.
PwC’s fees for advice to the Committee during 2023 amounted to £134,450 which included the preparation for and attendance at Committee
meetings. The fees were charged on a time spent basis in delivering advice that materially assisted the Committee in its consideration of matters
relating to executive remuneration.
The Committee takes into account the Remuneration Consultants Group’s (RCG) Code of Conduct when dealing with its advisors. PwC is a
member of the RCG and the Committee is satisfied that the advice it received during the year was objective and independent and that the
provision of any other services by PwC in no way compromises their independence.
STATEMENT OF VOTING
Shareholder voting on the resolutions to approve the Directors’ Remuneration Policy put to the 2022 AGM, and the Directors’ Remuneration
Report, put to the 2023 AGM, was as follows:
Resolution AGM
Votes
for
Votes for
%
Votes
against
Votes against
%
Votes
withheld
Directors’ Remuneration Policy 2022 3,132,342,144 83.48% 619,903,528 16.52% 1,275,033
Directors’ Remuneration Report 2023 3,463,208,517 93.19% 252,986,960 6.81% 1,244,130
100 Governance | Centrica plc Annual Report and Accounts 2023
IMPLEMENTATION IN THE NEXT FINANCIAL YEAR
The table below sets out details of how we implemented our remuneration policy in 2023, and how we intend to implement the policy in 2024.
Remuneration element Implementation in 2023 Implementation in 2024
Base salary With effect from 1 April 2023, salaries for Executive Directors were:
¢ Group Chief Executive: £815,000
¢ Group Chief Financial Officer: £540,000
With effect from 1 April 2024,
salaries for Executive Directors
are:
¢ CEO: £855,000 (+4.9%)
¢ CFO: £590,000 (+9.3%)
The average increase across
with wider workforce in the UK
is 6%. A lower increase was
given to the CEO to reflect his
single figure remuneration.
Ahigher increase was given
tothe CFO to reflect his
performance and development
in role since joining Centrica
Annual Incentive
Plan(AIP)
Maximum opportunity:
¢ Group Chief Executive: 200% of salary (100% of salary at target)
¢ Group Chief Financial Officer: 150% of salary (75% of salary at target)
The performance measures and their weighting as a percentage of maximum opportunity were
¢ EPS: 37.5%
¢ Balanced Scorecard: 37.5%
¢ Individual objectives: 25%
EPS payout ranges were as follows (as a percentage of maximum opportunity):
¢ Threshold performance: 25%
¢ On-target performance: 50%
¢ Maximum performance: 100%
No change
Restricted Share
Plan(RSP)
RSP awards were granted at the following levels:
¢ Group Chief Executive: 150% of salary
¢ Group Chief Financial Officer: 125% of salary
For the 2023 award, the underpin factors that the Committee will consider include, but are not limited to the
following:
¢ a review of overall financial performance over the three-year vesting period;
¢ whether there have been any sanctions or fines issued by a Regulatory Body (participant responsibility may
be allocated collectively or individually);
¢ whether a major safety incident has occurred which may or may not have consequences for shareholders;
¢ whether there has been material damage to the reputation of the Company (participant responsibility may
beallocated collectively or individually);
¢ whether there has been failure to make appropriate progress against our Climate Transition Plan which sets
out our ambition to be a net zero business by 2045 and help our customers be net zero by 2050;
¢ return on capital with reference to the cost of capital;
¢ TSR performance over the vesting period, including with reference to the wider energy sector;
¢ management of customer numbers over the vesting period;
¢ progress against broader ESG commitments including customer service, colleague engagement and our
transition to net zero.
No change
Pensions The maximum benefit for Executives is 10% of base salary earned during the financial year. This compares
with the average pension benefit across the wider UK workforce, currently 10-14% of salary.
No change
Benefits Benefits to be provided in line with the Policy No change
All-employee
shareplan
Executives were entitled to participate in all-employee share plans on the same terms as all other eligible
employees.
No change
Shareholding
requirements
Group Chief Executive: 300% of salary
Group Chief Financial Officer: 200% of salary
Post-employment, Executive Directors will continue to be expected to retain the lower of the shares held at
cessation of employment and shares to the value of 300% of base salary for the CEO and 200% of base
salaryfor the CFO for a period of two years.
No change
NED Fees With effect from
1 April 2023
With effect from 1 April 2024
Chair of the Board £420,500 £440,000 (+4.6%)
Basic fee for Non-Executives £76,000 No change
Additional fees
Chair of Audit and Risk Committee £25,000 No change
Chair of Remuneration Committee £20,000 No change
Chair of Safety, Environment and Sustainability Committee £20,000 No change
Senior Independent Director £20,000 No change
Employee Champion £20,000 No change
The Remuneration Report has been approved by the Board ofDirectors and signed on its behalf by:
Raj Roy
Group General Counsel & Company Secretary
14 February 2024
Governance | Centrica plc Annual Report and Accounts 2023 101
DIRECTORS’ REMUNERATION POLICY
The Remuneration Policy was approved by shareholders at the AGM
on 7 June 2022.
This section contains a summary of Centrica’s Directors’ Remuneration
Policy (Policy) that will govern and guide the Group’s future
remuneration payments. The full version can be found on our website
at centrica.com.
The Policy operated as intended in 2023.
OBJECTIVES OF THE POLICY
The Policy aims to deliver remuneration arrangements that:
¢ attract and retain high-calibre Executives in a challenging and
competitive global business environment;
¢ place strong emphasis on both short-term and long-term
performance;
¢ are strongly aligned to the achievement of strategic objectives and
the delivery of sustainable long-term shareholder value through
returns and growth; and
¢ seek to avoid creating excessive risks in the achievement of
performance targets.
Summary of Policy design
Fixed remuneration
Annual Incentive Plan (AIP) Restricted Share Plan (RSP)
Mix of financial, business and strategic measures Underpin aligned to strategic priorities
50% of award deferred into
shares for three years
Three-year performance period followed
by two-year holding period
Malus and clawback
HOW THE POLICY LINKS TO OUR STRATEGY
Our strategy is driven by our Purpose “energising a greener, fairer
future”, and our enduring values at Centrica underpin our culture.
Further information on our Purpose and values is set out on page 9.
We need to engage our leadership team to fulfil our Purpose and to
ensure Centrica is focused on delivery and positioned for growth.
The AIP focuses the Executives on the delivery of our near-term
objectives, with at least 75% of the award based on a mix of financial
and business measures based on Centrica’s priorities for the
forthcoming year and up to 25% based on individual strategic and
personal objectives for the year. All targets align with the Group
AnnualPlan.
At the time of the last remuneration policy review, the Remuneration
Committee identified the RSP as the appropriate long term incentive
vehicle for our Executive Directors as it reduces the upper limit of
payment and is aligned with our goal to simplify all aspects of our
business. Potential payouts from restricted shares are far less variable
than conventional long-term incentives.
The RSP has a three-year vesting period and the Committee will
consider the Company’s overall financial and non-financial performance
during this period. Consideration will be given to elements such as
revenue, profitability, shareholder experience and Centrica’s progress
towards a net zero future.
As we continue to restore shareholder value, the RSP will ensure a
large proportion of our Executives’ pay is based on direct and
uninhibited share price movement.
We operate an RSP for leaders below the most senior management
and this approach therefore creates alignment between our Executives
and our senior colleagues.
102 Governance | Centrica plc Annual Report and Accounts 2023
Pension
Base
pay
Benefits
REMUNERATION POLICY TABLE FOR EXECUTIVE DIRECTORS
The following table summarises each element of the Remuneration Policy for the Executive Directors, explaining how each element operates and
the link to the corporate strategy.
Purpose and
link to strategy
Operation and
clawback
Maximum
opportunity
Performance
measures
Base pay/salary
Reflects the scope and
responsibility of the role
and the skills and
experience of the
individual.
Salaries are set at a level
sufficient for the Group to
compete for international
talent and to attract and
retain Executives of the
calibre required to
develop and deliver our
strategy.
Base salaries are reviewed annually
taking into account individual and
business performance, market
conditions and pay in the Group as
awhole.
When determining base salary levels,
the Committee will consider factors
including:
¢ remuneration practices within the
Group;
¢ change in scope, role and
responsibilities;
¢ the performance of the Group;
¢ experience of the Executive Director;
¢ the economic environment; and
¢ when the Committee determines a
benchmarking exercise is
appropriate, salaries within the ranges
paid by the companies which the
Committee believe are appropriate
comparators for the Group.
Usually, base salary increases in
percentage terms will be within the
range of increases awarded to other
employees of the Group.
Increases may be made above this level
to take account of individual
circumstances such as a change in
responsibility, progression/development
in the role or a significant increase in the
scale or size of the role.
Not applicable.
Annual Incentive Plan (AIP)
Designed to incentivise
and reward the
performance of individuals
and teams in the delivery
of short-term financial and
non-financial metrics.
Performance measures
are linked to the delivery
of the Group’s long-term
financial goals and key
Group priorities.
In line with the Group’s annual
performance management process,
each Executive has an agreed set of
stretching individual objectives for each
financial year.
Following the end of the financial year,
to the extent that performance criteria
have been met, up to half ofthe AIP
award is paid in cash.
To further align the interests of
Executives with the long-term interests
of shareholders, the remainder is paid in
deferred shares which are held for three
years. No further performance
conditions will apply to the deferred
element of the AIPaward.
Dividend equivalents may be paid as
additional shares or cash.
Malus and clawback apply to the cash
and share awards.
Maximum of 200% of base salary
earned during the financial year.
For threshold performance, up to 25%
of the maximum opportunity will pay
out. For on-target performance, 50% of
the maximum opportunity will pay out.
At least 75% based on a mix
of financial performance and
business measures aligned to
Centrica’s priorities for the
forthcoming financial year and
up to 25% based on individual
objectives aligned to the
Group’s priorities and
strategy.
Performance is assessed over
one financial year.
Governance | Centrica plc Annual Report and Accounts 2023 103
Purpose and
link to strategy
Operation and
clawback
Maximum
opportunity
Performance
measures
Restricted Share Plan (RSP)
Designed to reward and
incentivise the delivery of
long-term performance
and shareholder value
creation.
RSP awards granted to Executive
Directors will normally vest after three
years subject to the achievement of an
underpin, and are subject to a two-year
post-vesting holding period during
which the Executive Directors may not
normally dispose of their vested shares
except as is necessary to pay tax and
social security contributions arising in
respect of their RSP awards.
Dividend equivalents are accrued during
the vesting period and calculated on
vesting on any RSP share awards.
Dividend equivalents are paid as
additional shares or as cash.
Malus and clawback apply to the
awards.
The maximum opportunity for RSP
awards will be 150% of salary earned
during the financial year for Executive
Directors.
The RSP will be subject to an
underpin framework. In
assessing the underpin, the
Committee will consider the
Company’s overall
performance, including
financial and non-financial
performance measures over
the course of the vesting
period as well as any material
risk or regulatory failures
identified.
Financial performance can
include elements such as
revenue, profitability,
shareholder experience and
return on capital. Non-
financial performance can
include a range of operational
and strategic measures critical
to the Company’s long-term
sustainable success.
The Committee may scale
back the awards (including to
zero) if it is not satisfied the
underpin has been met.
Pensions
Positioned to provide a
market competitive post-
retirement benefit, in a
way that manages the
overall cost to the
Company.
Executives are entitled to participate in a
Company money purchase pension
arrangement or to take a fixed salary
supplement (calculated as a percentage
of base salary, which is excluded from
any AIP calculation) in lieu of pension
entitlement.
The Group’s policy is not to offer
defined benefit arrangements to new
employees at any level, unless this is
specifically required by applicable
legislation or an existing contractual
agreement.
The maximum benefit for Executives is
10% of base salary earned during the
financial year. This compares with the
average pension benefit across the
wider UK workforce, currently 10-14%
of salary.
Not applicable.
Benefits
Positioned to support
health and wellbeing and
to provide a competitive
package of benefits that is
aligned with market
practice.
The Group offers Executives a range of
benefits including (but not limited to):
¢ a company-provided car and fuel, or
a cash allowance in lieu;
¢ life assurance and personal accident
insurance;
¢ health and medical insurance for the
Executive and their dependants; and
¢ health screening and wellbeing
services.
Cash allowance in lieu of company car –
currently £15,120 per annum.
The benefit in kind value of other
benefits will not exceed 5% of base
salary.
Not applicable.
All-employee share plans
Provides an opportunity
for employees to
voluntarily invest in the
Company.
Executives are entitled to participate in
all-employee share plans on the same
terms as all other eligible employees.
Maximum contribution limits are set by
legislation or by the rules of each plan.
Levels of participation apply equally to
all participants.
Not applicable.
104 Governance | Centrica plc Annual Report and Accounts 2023
Purpose and
link to strategy
Operation and
clawback
Maximum
opportunity
Performance
measures
Shareholding requirements
To align the interests of
Executive Directors with
shareholders over a long-
term period including after
departure from the Group.
In-employment requirement
During employment, the Group Chief
Executive and Group Chief Financial
Officer are required to build and
maintain a minimum shareholding of
300% and 200% of their base salary
respectively.
Executives must also hold 100% of
vested incentive shares (net of tax) until
the shareholding requirement is met.
Post-employment requirement
Executive Directors are required to hold
shares after cessation of employment to
the full value of the shareholding
requirement (or the existing shareholding if
lower at the time) for a period of two years.
Shares purchased by Executives with their
own monies are excluded from the post-
employment requirement.
In-employment requirement
The current shareholding requirement is
maintained at 300% of base salary for
the Group Chief Executive and 200% of
base salary for the Group Chief Financial
Officer.
Post-employment requirement
Executive Directors will be expected to
retain the lower of the shares held at
cessation of employment and shares to
the value of 300% of base salary for the
Group Chief Executive and 200% of
base salary for the Group Chief Financial
Officer for a period of two years.
Only shares earned from vested
incentives will be included within the
post-employment shareholding
requirement.
Not applicable.
Notes to the Remuneration Policy Table
The Committee reserves the right to make any remuneration payments
and payments for loss of office, notwithstanding that they are not in line
with the Policy set out above, where the terms of the payment were
agreed before the Policy came into effect, at a time when the relevant
individual was not an Executive Director of the Company and, in the
opinion of the Committee, the payment was not in consideration for
theindividual becoming a Director of the Company. For these purposes
payments include the amounts paid in order to satisfy awards of
variable remuneration and, in relation to an award over shares, the
terms of the payment are agreed at the time the award is granted. The
Committee may make minor amendments to the Policy (for regulatory,
exchange control, tax or administrative purposes or to take account
ofa change in legislation) without obtaining shareholder approval for
that amendment.
Malus and clawback
In line with UK corporate governance best practice, the Committee
canapply malus (that is reduce the number of shares in respect of
which an award vests) or delay the vesting of awards. In addition,
where an award has vested, the resulting shares will generally be held
for a periodduring which they may be subject to clawback. The
following provisions apply:
¢ AIP – cash awards: malus will apply up to the payment of the cash
AIP award and clawback will apply for a period of 3 years after the
cash AIPpayment.
¢ AIP – deferred shares: clawback will apply during the period of three
years following the payment of the cash AIP award the deferred
share relates to.
¢ historic LTIP awards: malus will apply during the vesting period and
up to the date of vesting and clawback will apply for a period of two
years post-vesting.
¢ RSP awards: malus will apply during the vesting period and up to the
date of vesting and clawback will apply for a period of two years
post-vesting.
Legacy awards are governed by the malus and clawback provisions
within the respective policy and plan rules. For awards granted under
the proposed policy malus and clawback provisions may be applied
inthe following circumstances:
¢ material financial misstatement;
¢ where an award was granted, or performance was assessed, based
on an error or inaccurate or misleading information;
¢ action or conduct of a participant amounts to fraud or gross
misconduct;
¢ events or the behaviour of a participant have led to censure of the
Company or Group by a regulatory authority or cause significant
detrimental reputational damage;
¢ material failure of risk management; or
¢ corporate failure.
During the year, the Remuneration Committee has not needed to apply
clawback or malus to any payments to Executive Directors orother
members of the Centrica Leadership Team.
Pension arrangements applying to Executives
All registered scheme benefits are subject to HMRC guidelines and the
Lifetime Allowance.
The Centrica Unapproved Pension Scheme (CUPS) defined
contribution (DC) section provides benefits for individuals not eligible
tojoin the CUPS defined benefit (DB) section and for whom registered
scheme benefits are expected to exceed the Lifetime Allowance.
TheCUPS DC section is offered as a direct alternative to a cash
salarysupplement.
CUPS is unfunded but the benefits are secured by a charge over
certain Centrica assets. An appropriate provision in respect of the
accrued value of these benefits has been made in the Company’s
balance sheet. CUPS was closed to future contributions from 31
December 2023.
Governance | Centrica plc Annual Report and Accounts 2023 105
Discretion and judgement
It is important that the Committee maintains the flexibility to apply discretion and judgement to achieve fair outcomes as no remuneration policy
and framework, however carefully designed and implemented, can pre-empt every possible scenario. The Committee needs to be able to exercise
appropriate discretion to determine whether mechanistic or formulaic outcomes are fair, in context and can be applied in an upward or downward
manner when required.
Judgement is applied appropriately by the Committee, for example when considering the political and social pressures on the business, theimpact
of significant movements in external factors such as commodity prices, in setting and evaluating delivery against individual and non-financial
performance targets to ensure they are considered sufficiently stretching and that the maximum and minimum levels are appropriate and fair.
The Committee has absolute discretion to decide who receives awards, the level of the awards under the incentive plans and the timing, within the
parameters set in the rules and the limits in the Policy table.
Recruitment Policy
The Committee will apply the same remuneration policy during the policy period as that which applies to existing Executives when considering the
recruitment of a new Executive in respect of all elements of remuneration as set out in the Remuneration Policy table.
Whilst the maximum level of remuneration which may be granted would be within plan rules and ordinarily subject to the maximum opportunity
setout in the Remuneration Policy table, in certain circumstances, an arrangement may be established specifically to facilitate recruitment of a
particular individual up to 25% above the maximum opportunity, albeit that any such arrangement would be made within the context of minimising
the cost to the Company.
The policy for the recruitment of Executives during the policy period includes the opportunity to provide a level of compensation for forfeiture of AIP
entitlements and/or unvested long-term incentive awards (at an expected value no greater than what is forfeit) from an existing employer, if any,
and the additional provision of benefits in kind, pensions and other allowances, as may be required in order to achieve a successful recruitment.
The Company has a clear preference to use shares wherever possible and will apply timescales at least as long as previous awards.
Details of the relocation and expatriate assistance that may be available as part of the recruitment process can be found in the table below.
Relocation and expatriate assistance
Purpose and link to strategy
Enables the Group to recruit or promote the appropriate individual into a
role, to retain key skills and to provide career opportunities.
Operation and clawback
Assistance may include (but is not limited to) removal and other
relocation costs, housing or temporary accommodation, education, home
leave, repatriation and tax equalisation.
Maximum opportunity
Maximum of 100% of base salary.
Performance measures
Not applicable.
Changes
No changes.
Service Contracts
Service contracts provide that either the Executive or the Company may terminate the employment by giving one year’s written notice. The
Committee retains a level of flexibility, as permitted by the UK Corporate Governance Code 2018, in order to attract and retain suitable candidates.
It reserves the right to offer contracts which contain an initial notice period in excess of one year, provided that at the end of the first such period
the notice period reduces to one year. All Executive and Non-Executive Directors are required to be re-elected at each AGM.
Executive Director Date of appointment to role Date of current contract Notice from the Group Notice from the individual
Chris O’Shea 1 November 2018 10 December 2020 12 months 12 months
Russell O’Brien 30 January 2023 30 January 2023 12 months 12 months
106 Governance | Centrica plc Annual Report and Accounts 2023
Termination policy
The Committee carefully considers compensation commitments in the event of an Executive Director’s termination. The aim is to avoid rewarding
poor performance and to reduce compensation to reflect the departing Executive’s obligations and to mitigate losses.
Remuneration
element
Scenario Payment
Base salary, pension
and other benefits
Dismissal with cause No further payments made except those that an individual may be contractually entitled to.
All other scenarios Either continue to provide base salary, pension and other benefits for any unworked
period of notice or, at the option of the Company, to make a payment in lieu of notice
comprising base salary only.
Typically any payment in lieu of notice will be made in monthly instalments and reduce,
orcease completely, in the event.
AIP
Dismissal with cause AIP award and any deferred awards will be forfeit.
Resignation Executives leaving as a result of resignation will forfeit any potential AIP award for the
performance year in which the resignation occurs.
Change of control The AIP award will be prorated for time (based on the proportion of the AIP period elapsed
at the date of change of control).
The Committee has discretion to determine that the AIP does not pay out on change of
control and will continue under the terms of the acquiring entity.
The Committee has discretion to dis-apply prorating in exceptional circumstances.
Deferred awards may vest immediately or be exchanged for new equivalent awards in the
acquirer where appropriate.
Exceptions* An AIP award for the year in which the termination occurs may be made following the
normal year end assessment process, subject to achievement of the agreed performance
measures and time apportioned for the period worked.
Any award would normally be payable at the normal time with a 50% deferral vesting in
line with the normal time-frame.
The Committee has discretion to accelerate the vesting of deferred awards.
LTIP and RSP
Dismissal with cause or
resignation
All unvested awards will lapse.
Change of control Existing awards will be exchanged on similar terms or vest to the extent that the
performance conditions have been met at the date of the event and be time-apportioned
to the date of the event or the vesting date, subject to the overriding discretion of the
Committee.
Exceptions* Any outstanding awards will normally be prorated for time based on the proportion of the
performance and/or vesting period elapsed.
Performance will be measured at the end of the performance period.
On death in service, awards may vest earlier than the normal date.
The Committee has the discretion to dis-apply prorating or accelerate testing of
performance conditions in exceptional circumstances.
* “Exceptions” are defined by the plan rules and include those leaving due to the following reasons: ill health, disability, redundancy, retirement (with agreement from
theCompany), death, or any other reason that the Committee determines appropriate.
Following termination, awards continue to be subject to malus and clawback provisions in line with those set out in the rules and the policy.
Pay fairness across the Group
The Group operates in a number of different environments and has many employees who carry out a range of diverse roles across a number of
countries. In consideration of pay fairness across the Group, the Committee believes that ratios related to market competitive pay for each role
profile in each distinct geography are the most helpful.
The ratios of salary to the relevant market median are compared for all permanent employees across the Group and are updated using salary
survey benchmarking data on an annual basis.
Unlike the significant majority of the workforce who receive largely fixed remuneration, mainly in the form of salary, the most significant component
of Executive compensation is variable and dependent on performance. As such, the Committee reviews total compensation for Executives against
benchmarks rather than salary alone.
A number of performance-related incentive schemes are operated across the Group which differ in terms of structure and metrics from those
applying to Executives.
The Group also offers a number of all-employee share schemes in the UK, Ireland, Europe and North America and Executives participate on the
same basis as other eligible employees.
Performance measures applying to Executives are cascaded down through the organisation and Group employment conditions include high
standards of health and safety and employee wellbeing initiatives.
No consultation in respect of the development of the Director's Remuneration Policy place with employees occurred.
Governance | Centrica plc Annual Report and Accounts 2023 107
External appointments of Executives
It is the Company’s policy to allow each Executive to accept one non-executive directorship of another company, although the Board retains the
discretion to vary this policy. Fees received in respect of external appointments are retained by the individual Executive and are set out in the
Directors’ Annual Remuneration Report each year.
Consideration of the UK Corporate Governance Code
As part of its review of the Policy, the Committee has considered the factors set out in provision 40 and provision 41 of the UK Corporate
Governance Code (the ‘Code’). In the Committee’s view, the proposed Policy addresses those factors as set out below:
Principles of the Code How the Policy aligns
Clarity
Remuneration arrangements should be transparent and promote effective
engagement with shareholders and the workforce
The Policy is simple and designed to support long-term, sustainable performance.
Shareholders were extensively consulted on the design of the Policy, and the key
rationale for the changes that were made. The Policy received shareholder approval
at the AGM in June 2022. The Committee proactively seeks engagement with
shareholders on remuneration matters on an ongoing basis.
During the year, consultation took place with recognised trade unions on pay
acrossthe wider workforce. No direct engagement with the workforce occurred
onexecutive remuneration.
In order to enhance the level of engagement with our employees, a Shadow Board,
comprising colleagues across the business and in different locations, was launched
in 2021. In 2023 a new Shadow Board was established and through the Shadow
Board, colleagues are able to share views with the Board on executive pay, wider
workforce terms & conditions, and people-related policies.
The Shadow Board will be our primary forum for engaging on executive pay. The
Remuneration Committee is actively exploring ways to enhance engagement across
all groups in 2024.
Simplicity
Remuneration structures should avoid complexity and their rationale and operation
should be easy to understand
The latest Policy results in a clear simplification of remuneration arrangements
through the replacement of a performance share plan, with a simpler restricted
shareplan.
We further operate an annual incentive (the AIP) with a straightforward deferral
structure to allow it to be easily understood.
The performance conditions for variable elements are clearly communicated to,
andunderstood by, participants and aligned with the Group strategy.
Risk
Remuneration arrangements should ensure reputational and other risks from
excessive rewards, and behavioural risks that can arise from target-based incentive
plans, are identified and mitigated
The majority of the Executive Directors’ total remuneration is weighted towards
variable pay (and provided in shares).
The changes result in a reduced risk of excessive reward, through lower quantum for
the Executive team alongside an increased discouragement of excessive risk-taking
behaviour through the use of a post-employment shareholding requirement.
The Committee also retains discretion to override formulaic outcomes for incentive
plans. Malus and clawback provisions mitigate behavioural risks by enabling
payments to be reduced or reclaimed in specific circumstances.
Predictability
The range of possible values of rewards to individual Directors and any other limits
or discretions should be identified and explained at the time of approving the Policy
The Policy sets out the maximum potential value for each element of remuneration
subject to the achievement of performance conditions.
The potential total remuneration outcomes are easily quantifiable and are set out in
the illustrations provided in the Policy.
As highlighted in Risk, the Committee has discretion to override formulaic outcomes
if they were deemed to be inappropriate.
Proportionality
The link between individual awards, the delivery of strategy and the long-term
performance of the Group should be clear. Outcomes should not reward poor
performance
Remuneration is appropriately balanced between fixed and variable pay.
Short-term performance targets are linked to the Group’s strategy and the use of
deferral in the AIP ensures a link to long-term performance through this element.
The introduction of an RSP ensures a strong link to long-term performance as
executive reward is directly linked to the share price of the Company.
Alignment to culture
Incentive schemes should drive behaviours consistent with the Group’s purpose,
values and strategy
The short-term incentive plans are measured against performance measures which
underpin the Group’s culture and strategy.
The incentive structure is cascaded through the top six levels of the organisation
ensuring that it drives the same behaviours across the Group.
108 Governance | Centrica plc Annual Report and Accounts 2023
NON-EXECUTIVE DIRECTORS’ REMUNERATION
Centrica’s policy on Non-Executive Directors’ (‘Non-Executives’) fees takes into account the need to attract the high-calibre individuals required to
support the delivery of our strategy.
Purpose and
link to strategy
Operation and
clawback
Maximum
opportunity
Performance
measures
Chair and Non-Executive Director Fees
Sufficient level to secure
the services of
individuals possessing
the skills, knowledge and
experience to support
and oversee the
Executive Directors in
their execution of the
Board’s approved
strategies and
operational plans.
Fees reflect market
practice as well as the
responsibilities and time
commitment required by
our Non-Executives.
The fee levels for the Chair are reviewed
by the Remuneration Committee.
The fee levels of the Non-Executives are
reviewed by the Chair of the Board,
Executive Directors and the Chief People
Officer.
Non-Executives are paid a base fee for
their services. Where individuals serve as
Chair of a Committee of the Board,
additional fees are payable. The Senior
Independent Director also receives an
additional fee.
The Company reserves the right to pay a
Committee membership fee in addition to
the base fees.
The maximum level of fees payable to
Non-Executives, in aggregate, is set out
in the Articles of Association.
Not applicable.
Recruitment policy
The policy on the recruitment of new Non-Executives during the policy period would be to apply the same remuneration elements as for the
existing Non-Executives. It is not intended that variable pay, day rates or benefits in kind be offered, although in exceptional circumstances such
remuneration may be required in currently unforeseen circumstances. The Committee will include in future Remuneration Reports details of the
implementation of the policy as utilised during the policy period in respect of any such recruitment to the Board.
Terms of appointment
Non-Executives, including the Chair, do not have service contracts. Their appointments are subject to Letters of Appointment and the Articles of
Association. All Non-Executives are required to be re-elected at each AGM. The date of appointment and the most recent re-appointment and the
length of service for each NED are shown in the table below:
Non Executive Director Date of appointment to role Date of current contract Notice from the Group Notice from the individual
Scott Wheway 1 May 2016 13 June 2023 6 months 6 months
Carol Arrowsmith 11 June 2020 13 June 2023 3 months 3 months
Amber Rudd 10 January 2022 13 June 2023 3 months 3 months
Nathan Bostock 9 May 2022 13 June 2023 3 months 3 months
CP Duggal 16 December 2022 13 June 2023 3 months 3 months
Heidi Mottram 1 January 2020 13 June 2023 3 months 3 months
Kevin O’Byrne 13 May 2019 13 June 2023 3 months 3 months
Phillippe Boisseau 1 September 2023 1 September 2023 3 months 3 months
Jo Harlow 1 December 2023 1 December 2023 3 months 3 months
Sue Whalley 1 December 2023 1 December 2023 3 months 3 months
Governance | Centrica plc Annual Report and Accounts 2023 109
OTHER STATUTORY
INFORMATION
Index to Directors’ Report and other disclosures
70 Annual General Meeting (AGM)
110 Articles of Association
114 to 126 Audit Information
59 to 63 Board of Directors
10 to 11 Business Model
66 Conflicts of Interest
111 Directors’ indemnities and insurance
109
Directors’ service contracts and letters of
appointment
94 Directors’ share interests
111
Disclosure required under Listing Rule
9.8.4 R
42, 57, 81 and 249 Diversity
Note 11
Page 160
Dividends
Note 26
Page 189
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
Page 219
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) tothe Financial Statements. The index on this page
includes matters contained in the Strategic Report that would otherwise
be required inthe Directors’ Report. The management report required
under Disclosure Guidance and Transparency Rule 4.1.5 R comprises
theStrategic 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
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
inthe Articles and in explanatory notes which accompany notices
ofgeneral meetings, all of which are available on our website
centrica.com. There are no shareholder agreements or restrictions
in2023.
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
29March 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,
theCompany 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
31December 2023, 72,049,447 shares were purchased (of which
70,465,051 shares had settled and were held as treasury shares).
Theshares 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.
Ofthe total number of shares purchased during the year, 66,123,754
were used for share schemes with the rest held as treasury shares.
Asat 31 December 2023, there were 490,250,737 shares held in
thetreasury 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
innote 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. Inrespect of allocated shares in both the
EBT and the SIP Trust, theTrustees 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
ofindemnity, to the extent permitted by law, to the Directors of the
Company. Qualifying third-party indemnity provisions (as defined
bySection 234 of the Act) were in force during the year ended
31December 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
inthe 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
theyear.
Payments policy
We recognise the importance of good supplier relationships to the
overall success of our business. We manage dealings with suppliers
ina 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
ofnuclear 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
ofcontrol 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,
EDFGroup is able to require Centrica to sell out its investments
toEDF 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
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
112 Governance | Centrica plc Annual Report and Accounts 2023
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
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
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 reflectsthe 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.
Financial Statements | Centrica plc Annual Report and Accounts 2023 115
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that thedirectors’ use of the going concern basis of accounting in thepreparation
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 ofaccounting 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
thisreport.
116 Financial Statements | Centrica plc Annual Report and Accounts 2023
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.
Financial Statements | Centrica plc Annual Report and Accounts 2023 117
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 ENSEK-
driven 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.
118 Financial Statements | Centrica plc Annual Report and Accounts 2023
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
CO
2
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
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 non-
recognition of a tax deposit asset at this stage is appropriate and that the disclosures within the financial statements relating to EGL are
appropriate.
120 Financial Statements | Centrica plc Annual Report and Accounts 2023
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 re-
measurement 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.
Weincreased 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.
Financial Statements | Centrica plc Annual Report and Accounts 2023 121
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
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 climate-
related 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
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 ofthe 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
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.
Financial Statements | Centrica plc Annual Report and Accounts 2023 125
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
126 Financial Statements | Centrica plc Annual Report and Accounts 2023
GROUP INCOME STATEMENT
2023 | 2022 | ||||||
| Exceptional items | Exceptional items | ||||||
| Business | and certain re- | Results for the | Business | and certain re- | Results for the | ||
| performance | measurements | year | performance | measurements | year | ||
Year ended 31 December | Notes | £m | £m | £m | £m | £m | £m |
| Group revenue | 4,7 | ( | ( | ||||
| Insurance services revenue | 4, S7 | ||||||
Total Group revenue | ( | ( | |||||
| Cost of sales | 5,7 | ( | ( | ( | ( | ||
| Insurance services cost of sales | 5,S7 | ( | ( | ( | ( | ||
| Re-measurement and settlement of derivative | |||||||
| energy contracts | 7 | ( | ( | ( | ( | ||
| Gross profit | 4,7 | ( | |||||
| Operating costs before insurances services | |||||||
| operating costs, exceptional items and credit | |||||||
| losses on financial assets | 5 | ( | ( | ( | ( | ||
| Insurance services operating costs | 5,S7 | ( | ( | ( | ( | ||
| Credit losses on financial assets | 5,17 | ( | ( | ( | ( | ||
Exceptional items – (impairment)/write-back of power assets | 7 | ( | ( | ||||
| Exceptional items – impairment of gas storage | |||||||
| asset | 7 | ( | ( | ||||
| Exceptional items – net loss on significant | |||||||
| disposals | 7 | ( | ( | ||||
| Operating costs | 5 | ( | ( | ( | ( | ( | ( |
Share of profits/(losses) of joint ventures and associates, net of interest and taxation | 6 | ( | |||||
| Group operating profit/(loss) | 4 | ( | ( | ||||
| Financing costs | 8 | ( | ( | ( | | ( | |
| Investment income | 8 | | | ||||
| Net finance cost | 8 | ( | ( | ( | | ( | |
Profit/(loss) before taxation | ( | ( | |||||
| Taxation on profit/(loss) | 7,9 | ( | ( | ( | ( | | ( |
Profit/(loss) for the period | ( | ( | |||||
| Attributable to: | |||||||
Owners of the parent | ( | ( | |||||
| Non-controlling interests | | ||||||
| Earnings per ordinary share | Pence | Pence | |||||
| Basic | 10 | ( | |||||
| Diluted | 10 | ( | |||||
| Interim dividend paid per ordinary share | 11 | ||||||
| Final dividend proposed per ordinary share | 11 |
(i)
(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.
Financial Statements | Centrica plc Annual Report and Accounts 2023 127
GROUP STATEMENT OF COMPREHENSIVE INCOME
| 2023 | 2022 | ||
Year ended 31 December | Notes | £m | £m |
Profit/(loss) for the period | ( | ||
| 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 | ( | ( |
| Exchange differences on translation of foreign operations | S4 | ( | ( |
| Exchange differences reclassified to the Group Income Statement on disposal | S4 | | |
| Items that will not be reclassified to the Group Income Statement: | |||
| Net actuarial losses on defined benefit pension schemes, net of taxation | S4 | ( | ( |
Gains on revaluation of equity instruments measured at fair value through other comprehensive income, net of taxation | S4 | ||
| Share of other comprehensive loss of associates, net of taxation | 14,S4 | ( | ( |
Other comprehensive loss, net of taxation | ( | ( | |
Total comprehensive income/(loss) for the period | ( | ||
| Attributable to: | |||
Owners of the parent | ( | ||
| Non-controlling interests | S11 |
(i)
(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
GROUP STATEMENT OF CHANGES IN EQUITY
| Share | Share | Retained | Other | Non-controlling | Total | ||
| capital | premium | earnings | equity | Total | interests | equity | |
| £m | £m | £m | £m | £m | £m | £m | |
1 January 2022 | ( | ||||||
(Loss)/profit for the year | ( | ( | ( | ||||
Other comprehensive (loss)/income | ( | ( | ( | ||||
Total comprehensive (loss)/income | ( | ( | ( | ( | |||
Employee share schemes and other sharetransactions | ( | ( | |||||
Share buyback programme (note S4) | ( | ( | ( | ||||
Dividends paid to equity holders (note 11) | ( | ( | ( | ||||
Distributions to non-controlling interests | ( | ( | |||||
31 December 2022 | ( | ( | |||||
Profit for the year | |||||||
Other comprehensive loss | ( | ( | ( | ( | |||
Total comprehensive income/(loss) | ( | ||||||
| Employee share schemes and other share | |||||||
transactions | ( | ||||||
Share buyback programme (note S4) | ( | ( | ( | ||||
Dividends paid to equity holders (note 11) | ( | ( | ( | ||||
Distributions to non-controlling interests (note 12) | ( | ( | |||||
31 December 2023 | ( |
The notes on pages 132 to 228 form part of these Financial Statements.
Financial Statements | Centrica plc Annual Report and Accounts 2023 129
GROUP BALANCE SHEET
| 31 December | 31 December | ||
| 2023 | 2022 | ||
Notes | £m | £m | |
| Non-current assets | |||
| Property, plant and equipment | 13 | ||
| Interests in joint ventures and associates | 14 | ||
| Other intangible assets | 15 | ||
| Goodwill | 15 | ||
| Deferred tax assets | 16 | ||
| Trade and other receivables, and contract-related assets | 17 | ||
| Derivative financial instruments | 19 | ||
| Retirement benefit assets | 22 | ||
| Other investments | |||
| Securities | 24 | ||
| Current assets | |||
| Trade and other receivables, and contract-related assets | 17 | ||
| Other intangible assets | 15 | ||
| Inventories | 18 | ||
| Derivative financial instruments | 19 | ||
| Current tax assets | |||
| Securities | 24 | ||
| Cash and cash equivalents | 24 | ||
| Total assets | |||
| Current liabilities | |||
| Derivative financial instruments | 19 | ( | ( |
| Trade and other payables, and contract-related liabilities | 20 | ( | ( |
| Insurance contract liabilities | S7 | ( | ( |
| Current tax liabilities | ( | ( | |
| Provisions for other liabilities and charges | 21 | ( | ( |
| Bank overdrafts, loans and other borrowings | 24 | ( | ( |
( | ( | ||
| Non-current liabilities | |||
| Deferred tax liabilities | 16 | ( | ( |
| Derivative financial instruments | 19 | ( | ( |
| Trade and other payables, and contract-related liabilities | 20 | ( | ( |
| Provisions for other liabilities and charges | 21 | ( | ( |
| Retirement benefit obligations | 22 | ( | ( |
| Bank loans and other borrowings | 24 | ( | ( |
( | ( | ||
| Total liabilities | ( | ( | |
| Net assets | |||
| Share capital | 25 | ||
| Share premium | |||
| Retained earnings | ( | ||
| Other equity | S4 | ( | ( |
| Total shareholders’ equity | |||
| Non-controlling interests | S11 | ||
| Total shareholders’ equity and non-controlling interests |
Centrica plc Registered No: 03033654
130 Financial Statements | Centrica plc Annual Report and Accounts 2023
GROUP CASH FLOW STATEMENT
| 2023 | 2022 | ||
Year ended 31 December | Notes | £m | £m |
Group operating profit/(loss) including share of results of joint ventures and associates | ( | ||
| Deduct share of profits of joint ventures and associates, net of interest and taxation | 6 | ( | ( |
Group operating profit/(loss) before share of results of joint ventures and associates | ( | ||
| Add back/(deduct): | |||
| Depreciation and amortisation | 13,15 | ||
| Write-downs, impairments and write-backs | 4,7 | ( | |
Loss on disposals | |||
Decrease in provisions | ( | ( | |
Cash contributions to defined benefit schemes in excess of service cost income statement charge | ( | ( | |
Employee share scheme costs | |||
Unrealised (gains)/losses arising from re-measurement of energy contracts | ( | ||
| Operating cash flows before movements in working capital relating to business performance and payments | |||
| relating to taxes, exceptional charges and operating interest | |||
Decrease/(increase) in inventories | ( | ||
Decrease/(increase) in trade and other receivables and contract-related assets relating to business performance | ( | ||
(Decrease)/increase in trade and other payables and contract-related liabilities relating to business performance | ( | ||
Operating cash flows before payments relating to taxes, exceptional charges and operating interest | |||
| Taxes paid | 9 | ( | ( |
| Operating interest paid | 8 | ( | ( |
| Payments relating to exceptional charges in operating costs | 7 | ( | ( |
Net cash flow from operating activities | |||
| Purchase of businesses, net of cash acquired | 12 | ( | |
| Sale of businesses, including receipt of deferred consideration | 12 | ||
| Purchase of property, plant and equipment and intangible assets | 4 | ( | ( |
Sale of property, plant and equipment and intangible assets | |||
| Investments in joint ventures and associates | 14 | ( | ( |
| Dividends received from joint ventures and associates | 14 | ||
Interest received | |||
Net purchase of other investments | ( | ||
| Settlement of securities | 24 | ||
| Purchase of securities | 24 | ( | ( |
Net cash flow from investing activities | ( | ||
| Proceeds from exercise of share options | S4 | ||
| Payments for own shares | S4 | ( | |
| Share buyback programme | S4 | ( | ( |
| Cash inflow from borrowings | 24 | ||
| Distributions to non-controlling interests | 12 | ( | ( |
| Financing interest paid | 24 | ( | ( |
| Cash outflow from repayment of borrowings and capital element of leases | 24 | ( | ( |
| Equity dividends paid | 11 | ( | ( |
Net cash flow from financing activities | ( | ( | |
Net increase/(decrease) in cash and cash equivalents | ( | ||
Cash and cash equivalents including overdrafts, and cash classified as held for sale at 1 January | |||
| Effect of foreign exchange rate changes | 24 | ( | |
| Cash and cash equivalents including overdrafts at 31 December | 24 | ||
| Included in the following line of the Group Balance Sheet: | |||
| Cash and cash equivalents | 24 | ||
| Overdrafts included within current bank overdrafts, loans and other borrowings | 24 | ( | ( |
The notes on pages 132 to 228 form part of these Financial Statements.
Financial Statements | Centrica plc Annual Report and Accounts 2023 131
NOTES TO THE FINANCIAL
STATEMENTS
Notes to the Financial Statements provide additional
information required by statute, accounting standards
orListing 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 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
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 fixed-
fee 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.
132 Financial Statements | Centrica plc Annual Report and Accounts 2023
1. BASIS OF PREPARATION AND SUMMARY
OF SIGNIFICANT NEW ACCOUNTING
POLICIES AND REPORTING CHANGES
(c) Standards and amendments that are issued but
not yet applied by the Group
Financial Statements | Centrica plc Annual Report and Accounts 2023 133
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.
134 Financial Statements | Centrica plc Annual Report and Accounts 2023
2. CENTRICA SPECIFIC ACCOUNTING
MEASURES
Financial Statements | Centrica plc Annual Report and Accounts 2023 135
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 non-
controlling 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.
136 Financial Statements | Centrica plc Annual Report and Accounts 2023
3. CRITICAL ACCOUNTING JUDGEMENTS
ANDKEY 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
3. CRITICAL ACCOUNTING JUDGEMENTS
ANDKEY 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 write-
down (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
3. CRITICAL ACCOUNTING JUDGEMENTS
ANDKEY 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 non-
current 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
3. CRITICAL ACCOUNTING JUDGEMENTS ANDKEY 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 | Transition away from fossil fuelled | Risk: Reduced GM from the sale and servicing of natural gas residential | |
| Technology | heating | 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 | Growth in low carbon heating market | Opportunity: Increased sales and servicing of electric and hydrogen | |
| Technology | fuelled heating systems, and associated opportunities in energy | ||
| efficiency at BG S&S, CBS and Bord Gáis | |||
| Transition: Policy, Markets and | Transition away from natural gas | Risk: Reduced GM from the sale of natural gas from fuel switching and | |
| Technology | energy efficiency at British Gas Energy (BGE), CBS and Bord Gáis | ||
| Transition: Policy, Markets and | Growth in low carbon heating market | Opportunity: Increased sales of electricity and green/low carbon | |
| Technology | 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
3. CRITICAL ACCOUNTING JUDGEMENTS ANDKEY 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:
| Investment in | Property, plant & | Deferred tax | Decommissioning | |||
As at 31 December 2023 related to (£m): | Goodwill | Intangibles | associates | equipment | assets | 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 | 145 | |||||
| Derivatives deferred tax | 343 | |||||
| Other | 82 | (57) | ||||
Total (notes 13-16 and 21) | 405 | 340 | 903 | 1,846 | 456 | (1,527) |
(i)
(i)
(i)
(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
3. CRITICAL ACCOUNTING JUDGEMENTS ANDKEY 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
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 & | ¢ | The installation, repair and maintenance of domestic central heating and related appliances, and the provision of |
| Solutions | 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
4. SEGMENTAL ANALYSIS
2023 | 2022 | |||||
| Gross | Less inter- | Total | Gross | Less inter- | Total | |
| segment | segment | Group | segment | segment | Group | |
| revenue | revenue | revenue | revenue | revenue | revenue | |
Year ended 31 December | £m | £m | £m | £m | £m | £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 |
| 2023 | |||||
| Revenue from | |||||
| fixed-fee service | |||||
| and insurance | Revenue in | ||||
| contracts in | business | ||||
| Revenue from | scope of IFRS | performance | Total Group | ||
| contracts with | 17, and leasing | arising from | revenue included | ||
| customers in | contracts in | Total Group | contracts in | in business | |
| scope of IFRS 15 | scope of IFRS 16 | revenue | scope of IFRS 9 | performance | |
Year ended 31 December | £m | £m | £m | £m | £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 |
144 Financial Statements | Centrica plc Annual Report and Accounts 2023
4. SEGMENTAL ANALYSIS
| 2022 | |||||
| Revenue from | |||||
| fixed-fee service | |||||
| and insurance | Revenue in | ||||
| contracts in | business | ||||
| Revenue from | scope of IFRS 17, | performance | Total Group | ||
| contracts with | and leasing | arising from | revenue included | ||
| customers in | contracts in | Total Group | contracts in | in business | |
| scope of IFRS 15 | scope of IFRS 16 | revenue | scope of IFRS 9 | performance | |
| Year ended 31 December | £m | £m | £m | £m | £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 |
| Total Group revenue | Non-current assets | |||
| (based on location of customer) | (based on location of assets) | |||
| 2023 | 2022 | 2023 | 2022 | |
| Year ended 31 December | £m | £m | £m | £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 |
Financial Statements | Centrica plc Annual Report and Accounts 2023 145
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 equity-
accounted interests.
This note also details adjusted gross margin. Both measures are reconciled to their statutory equivalents.
Adjusted gross margin | Adjusted operating profit/(loss) | |||
| 2023 | 2022 | 2023 | 2022 | |
| Year ended 31 December | £m | £m | £m | £m |
British Gas Services & Solutions | 616 | 504 | 47 | (9) |
| British Gas Energy | 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 | (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)
(ii)
(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
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 | Amortisation, write-downs and | ||||
| property, plant and equipment | impairments of intangibles | ||||
| 2023 | 2022 | 2023 | 2022 | ||
| Year ended 31 December | £m | £m | £m | £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
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, | Capital expenditure on intangible | |||
| plant and equipment | assets other than goodwill | |||
| 2023 | 2022 | 2023 | 2022 | |
| Year ended 31 December | £m | £m | £m | £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) | — | — | (780) | (799) |
| Net cash outflow | 282 | 312 | 53 | 59 |
(i)
(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
4. SEGMENTAL ANALYSIS
| 2023 | 2022 | ||
| Year ended 31 December | £m | £m | |
British Gas Services & Solutions | 64 | (19) | |
| British Gas Energy | 302 | 1,283 | |
Bord Gáis Energy | (146) | 81 | |
Centrica Business Solutions | 220 | (48) | |
| Centrica Energy | 1,354 | 199 | |
| Upstream | 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 |
Financial Statements | Centrica plc Annual Report and Accounts 2023 149
5. COSTS
This section details the types of costs the Group incurs and the number of employees in each of our operations.
2023 | 2022 | |||||
| Cost of sales | Cost of sales | |||||
| and settlement | and settlement | |||||
| of certain | of certain | |||||
| energy | Operating | Total | energy | Operating | Total | |
| contracts | costs | costs | contracts | costs | costs | |
| Year ended 31 December | £m | £m | £m | £m | £m | £m |
| Transportation, distribution, capacity market and metering | ||||||
| costs | (4,813) | — | (4,813) | (4,694) | — | (4,694) |
| Commodity costs | (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 | (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) |
| 2023 | 2022 | |
| Year ended 31 December | £m | £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
Number | ||
2023 | 2022 | |||||
| Share of | Share of | |||||
| exceptional | exceptional | |||||
| Share of | items and | Share of | Share of | items and | Share of | |
| business | certain re- | results for the | business | certain re- | results for the | |
| performance | measurements | year | performance | measurements | year | |
| Year ended 31 December | £m | £m | £m | £m | £m | £m |
Income | 680 | — | 680 | 592 | — | 592 |
Expenses before exceptional items and certain re- measurements | (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 |
Financial Statements | Centrica plc Annual Report and Accounts 2023 151
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.
| 2023 | 2022 | |
| Year ended 31 December | £m | £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 | 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)
(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).
| 2023 | 2022 | |
| Year ended 31 December | £m | £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:
| 2023 | 2022 | |
| Year ended 31 December | £m | £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
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.
| 2023 | 2022 | |
| Year ended 31 December | £m | £m |
Loss on disposal of E&P Norway | — | (362) |
| Impairment of gas storage asset | (82) | — |
| (Impairment)/write-back of power assets | (563) | 207 |
| Exceptional items included within Group operating profit | (645) | (155) |
| Net exceptional item taxation (note 9) | 54 | (207) |
Total exceptional items recognised after taxation | (591) | (362) |
(i)
(ii)
(iii)
(iv)
(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
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
| Recoverable | ||||
| amount | Impairment | |||
Segment | Asset/CGU | Basis for impairment assessment | £m | £m |
Upstream | Nuclear | The decrease in short-term baseload power prices has more than offset | 903 | 549 |
| the impact of life extensions at Heysham 1 and Hartlepool stations |
(i)
(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) | ||||||||
| Five-year liquid and blended- | Ten-year long-term | |||||||
| period price | average price | +10% | -10% | |||||
2024-2028 | 2023-2027 | 2029-2038 | 2028-2037 | |||||
| 31 December | 31 December | 31 December | 31 December | 31 December | 31 December | 31 December | 31 December | |
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |
£/MWh | £/MWh | £/MWh | £/MWh | £m | £m | £m | £m | |
| Baseload power | 71 | 164 | 56 | 68 | 148 | 198 | (191) | (198) |
+50% | -50% | |||||||
Five-year liquid | Five-year liquid | |||||||
and blended- | and blended- | |||||||
period only | period only | |||||||
325 | (672) |
(ii)
(i)
(i)
(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 CO
2
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
7. EXCEPTIONAL ITEMS AND CERTAIN RE-MEASUREMENTS
| Ten-year | Change in | |
| long-term | pre/post-tax | |
| average price | impairment | |
| 2029-2038 | ||
2023 | £m | |
Baseload power (£/MWh) | 56 | (15) |
| Recoverable | |||||
| amount | Impairment | ||||
Segment | Asset/CGU (or group of CGUs) | Basis for impairment assessment | £m | FV hierarchy | £m |
Upstream | Rough gas storage asset | The reduction in both forecast NBP gas prices and | (183) | L3 | 82 |
| forecast summer/winter NBP gas price spreads |
Change in post-tax write-back/(impairment) (ii) | ||||||||
| Five-year liquid and blended- | Ten-year long-term | |||||||
| period price | average price | +10% | -10% | |||||
2024-2028 | 2023-2027 | 2029-2038 | 2028-2037 | |||||
| 31 December | 31 December | 31 December | 31 December | 31 December | 31 December | 31 December | 31 December | |
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |
£m | £m | £m | £m | |||||
| NBP (p/th) | 71 | 155 | 61 | 75 | 6 | — | (5) | — |
| +50% | -50% | |||||||
| Five-year liquid | Five-year liquid | |||||||
| and blended- | and blended- | |||||||
| period only | period only | |||||||
32 | (269) | |||||||
Financial Statements | Centrica plc Annual Report and Accounts 2023 155
7. EXCEPTIONAL ITEMS AND CERTAIN RE-MEASUREMENTS
Furthermore, there is also uncertainty due to climate change and international governmental intervention to reduce CO
2
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.
(i)
| Change in | ||
| Ten-year | post-tax | |
| long-term | write-back/ | |
| average price | (impairment) | |
| 2029-2038 | ||
2023 | £m | |
NBP (p/th) | 57 | — |
(ii)
(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.
2023 | 2022 | |||||
Financing | Investment | Financing | Investment | |||
costs | income | Total | costs | income | Total | |
Year ended 31 December | £m | £m | £m | £m | £m | £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 | (20) | — | (20) | (31) | — | (31) |
| Capitalised borrowing costs | 2 | — | 2 | 4 | — | 4 |
| Financing (cost)/income | (308) | 269 | (39) | (220) | 77 | (143) |
156 Financial Statements | Centrica plc Annual Report and Accounts 2023
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 | |||||
| Exceptional | Exceptional | |||||
| items and | items and | |||||
| Business | certain re- | Results for | Business | certain re- | Results for | |
| performance | measurements | the year | performance | measurements | the year | |
| Year ended 31 December | £m | £m | £m | £m | £m | £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 | (838) | (1,595) | (2,433) | (1,046) | 793 | (253) |
(i)
(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
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 | |||||
| Exceptional | Exceptional | |||||
| items | items | |||||
| Business | and certain | Results for | Business | and certain | Results for | |
| performance | re-measurements | the year | performance | re-measurements | the year | |
| Year ended 31 December | £m | £m | £m | £m | £m | £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
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 | Non-UK | Total | UK | Non-UK | Total | |
Year ended 31 December | £m | £m | £m | £m | £m | £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
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 | |||
| Pence per | Pence per | |||
Year ended 31 December | £m | ordinary share | £m | ordinary share |
Earnings – basic | 3,929 | 70.6 | (782) | (13.3) |
| Net exceptional items after taxation (notes 2 and 7) | 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 | 3,929 | 69.4 | (782) | (13.3) |
| Earnings – adjusted diluted | 1,859 | 32.8 | 2,050 | 34.5 |
(i)
(ii)
(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.
2023 | 2022 | |||||
| Pence per | Date of | Pence per | Date of | |||
| £m | ordinary share | payment | £m | ordinary share | 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 |
160 Financial Statements | Centrica plc Annual Report and Accounts 2023
Financial Statements | Centrica plc Annual Report and Accounts 2023 161
| 2023 | 2022 | |||||||||
| Plant, | Gas | Plant, | Gas | |||||||
| equipment | production | equipment | production | |||||||
| Land and | and | Power | and | Land and | and | Power | and | |||
| buildings | vehicles | generation | storage | Total | buildings | vehicles | generation | storage | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| Cost | ||||||||||
1 January | 235 | 691 | 199 | 11,517 | 12,642 | 259 | 575 | 205 | 11,339 | 12,378 |
| Acquisitions | 1 | 7 | 70 | — | 78 | — | — | — | — | — |
| Additions and capitalised | 53 | 123 | 108 | 89 | 373 | — | 117 | 12 | 123 | 252 |
| borrowing costs | ||||||||||
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 | 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 |
162 Financial Statements | Centrica plc Annual Report and Accounts 2023
13. PROPERTY, PLANT AND EQUIPMENT
| 2023 | 2022 | |
| 31 December | £m | £m |
| Plant, equipment and vehicles | 99 | 33 |
| Gas production and storage | 29 | 61 |
| Power generation | 166 | 27 |
2023 | 2022 | |||||||||
| Plant, | Gas | Plant, | Gas | |||||||
| equipment | production | equipment | production | |||||||
| Land and | and | Power | and | Land and | and | Power | and | |||
| buildings | vehicles | generation | storage | Total | buildings | vehicles | generation | storage | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £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 |
Financial Statements | Centrica plc Annual Report and Accounts 2023 163
2023 | 2022 | |
| Investments in | Investments in | |
| joint ventures | joint ventures | |
| and associates | and associates | |
| £m | £m | |
1 January | 1,580 | 1,628 |
| Additions | 9 | 18 |
| (Impairments)/write-backs | (549) | 195 |
Share of profit for the year | 208 | 93 |
| Share of other comprehensive loss | (95) | (293) |
Dividends | (220) | (60) |
| Disposals | (28) | — |
Other movements | (2) | (1) |
31 December | 903 | 1,580 |
2023 | 2022 | |||
| Associates | ||||
| Nuclear | Other | Total | Total | |
| 31 December | £m | £m | £m | £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 |
164 Financial Statements | Centrica plc Annual Report and Accounts 2023
2023 | 2022 | |||||||||||
| Exploration | Exploration | |||||||||||
| Customer | Application | EUA/ | and | Customer | Application | EUA/ | and | |||||
| relationships | software | ROC/ | evaluation | relationships | software | ROC/ | evaluation | |||||
| and brands | (i)(ii) | REC | expenditure | Goodwill | Total | and brands | (i)(ii) | REC | expenditure | Goodwill | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| Cost | ||||||||||||
1 January | 208 | 1,510 | 280 | 121 | 680 | 2,799 | 201 | 1,584 | 213 | 121 | 665 | 2,784 |
| Additions and capitalised | — | 49 | 780 | — | — | 829 | — | 44 | 799 | — | — | 843 |
| borrowing costs | ||||||||||||
Acquisitions | 4 | — | — | — | — | 4 | 11 | — | — | — | — | 11 |
| Disposals/retirements | (46) | (38) | (767) | (121) | — | (972) | (9) | (129) | (732) | — | — | (870) |
| and surrenders | ||||||||||||
| 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 | 16 | 107 | — | — | — | 123 | 17 | 142 | — | — | — | 159 |
| Disposals/retirements | (46) | (38) | — | (121) | — | (205) | (9) | (129) | — | — | — | (138) |
| and surrenders | ||||||||||||
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 |
Financial Statements | Centrica plc Annual Report and Accounts 2023 165
15. OTHER INTANGIBLE ASSETS AND GOODWILL
2023 | 2022 | ||||||
| Carrying | Carrying amount of | Carrying | Carrying amount of | ||||
| Principal acquisitions to which | amount of | indefinite-lived | amount of | indefinite-lived | |||
| goodwill and intangibles with | goodwill | intangible assets | Total | goodwill | intangible assets | Total | |
| 31 December | indefinite useful lives relate | £m | £m | £m | £m | £m | £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 |
166 Financial Statements | Centrica plc Annual Report and Accounts 2023
| Retirement | ||||||||
| benefit | ||||||||
| Accelerated tax | Losses | Marked-to- | obligation and | |||||
| depreciation | Net | carried | Other timing | market | Net deferred | other | ||
| (corporation tax) | decommissioning | forward | differences | positions | PRT (iii) | provisions | Total | |
| £m | £m | £m | £m | £m | £m | £m | £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 |
2023 | 2022 | |||
| Assets | Liabilities | Assets | Liabilities | |
| 31 December | £m | £m | £m | £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) |
Financial Statements | Centrica plc Annual Report and Accounts 2023 167
| 2023 | 2022 | |||
| Current | Non-current | Current | Non-current | |
| 31 December | £m | £m | £m | £m |
| Financial assets: | ||||
Trade receivables | 2,991 | — | 2,207 | — |
Unbilled downstream energy income | 1,065 | — | 1,281 | — |
| Trading and energy procurement accrued income | 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 | 323 | 106 | 294 | 83 |
5,409 | 210 | 8,450 | 129 |
2023 | 2022 | |||
| Current | Non-current | Current | Non-current | |
| 31 December | £m | £m | £m | £m |
| Financial assets by business type: | ||||
| Residential customers | 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 |
168 Financial Statements | Centrica plc Annual Report and Accounts 2023
17. TRADE AND OTHER RECEIVABLES AND CONTRACT-RELATED ASSETS
2023 | 2022 | |||||||
| Treasury, | Treasury, | |||||||
| trading | trading | |||||||
| and energy | and energy | |||||||
| Residential | Business | procurement | Residential | Business | procurement | |||
| customers | customers | counterparties | Total | customers | customers | counterparties | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | |
1 January | (567) | (305) | — | (872) | (426) | (207) | — | (633) |
| Increase in impairment of trade receivables | ||||||||
| (predominantly related to credit impaired trade | ||||||||
| receivables) | (396) | (198) | (16) | (610) | (234) | (124) | — | (358) |
| Receivables written off | 113 | 60 | — | 173 | 93 | 26 | — | 119 |
31 December | (850) | (443) | (16) | (1,309) | (567) | (305) | — | (872) |
| 2023 | 2022 | |
| Year ended 31 December | £m | £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) |
Financial Statements | Centrica plc Annual Report and Accounts 2023 169
17. TRADE AND OTHER RECEIVABLES AND CONTRACT-RELATED ASSETS
| 2023 | 2022 | |
| 31 December | £m | £m |
| Balances that are not past due | 4,403 | 7,414 |
| Balances that are past due | 1,992 | 1,614 |
6,395 | 9,028 |
170 Financial Statements | Centrica plc Annual Report and Accounts 2023
17. TRADE AND OTHER RECEIVABLES AND CONTRACT-RELATED ASSETS
| Trade receivables due | ||||||||||
| from British Gas | ||||||||||
| residential energy | ||||||||||
customers as at 31 December | 2023 | 2022 | ||||||||
| <30 days | 30-90 days | >90 days | Total | Percentage | <30 days | 30-90 days | >90 days | Total | Percentage | |
| Days beyond invoice date | £m | £m | £m | £m | of credit risk | £m | £m | £m | £m | of credit risk |
| Risk profile | ||||||||||
| Direct debits | ||||||||||
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 | ||||||||||
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 | ||||||||||
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% |
Financial Statements | Centrica plc Annual Report and Accounts 2023 171
17. TRADE AND OTHER RECEIVABLES AND CONTRACT-RELATED ASSETS
| Trade receivables due | ||||||||||
| from British Gas small | ||||||||||
| business energy | ||||||||||
customers as at 31 December | 2023 | 2022 | ||||||||
| <30 days | 30-90 days | >90 days | Total | Percentage | <30 days | 30-90 days | >90 days | Total | Percentage | |
| Days beyond invoice date | £m | £m | £m | £m | of credit risk | £m | £m | £m | £m | 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% |
| Trade receivables due | ||||||||||
| from Centrica Business | ||||||||||
| Solutions business energy | ||||||||||
customers as at 31 December | 2023 | 2022 | ||||||||
| <30 days | 30-90 days | >90 days | Total | Percentage | <30 days | 30-90 days | >90 days | Total | Percentage | |
| Days beyond invoice date | £m | £m | £m | £m | of credit risk | £m | £m | £m | £m | of credit risk |
| Risk profile | ||||||||||
| Commercial and industrial | ||||||||||
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% |
172 Financial Statements | Centrica plc Annual Report and Accounts 2023
17. TRADE AND OTHER RECEIVABLES AND CONTRACT-RELATED ASSETS
| 31 December | 31 December | |
| 2023 | 2022 | |
| £m | £m | |
| Trade receivables | 2,991 | 2,207 |
| Provision | (1,240) | (822) |
| Net balance | 1,751 | 1,385 |
| 31 December | 31 December | |
| 2023 | 2022 | |
| % | % | |
| Provision coverage | 41 | 37 |
| Sensitivity | £m | £m |
| Impact on billed receivables/operating profit from 1 percentage point (increase)/decrease in provision coverage | (30)/30 | (22)/22 |
Financial Statements | Centrica plc Annual Report and Accounts 2023 173
17. TRADE AND OTHER RECEIVABLES AND CONTRACT-RELATED ASSETS
| 31 December | 31 December | |
| 2023 | 2022 | |
| £m | £m | |
| Gross unbilled receivables | 1,065 | 1,281 |
| Provision | (69) | (50) |
| Net balance | 996 | 1,231 |
| 31 December | 31 December | |
| 2023 | 2022 | |
| % | % | |
| Provision coverage | 6 | 4 |
| Sensitivity | £m | £m |
| Impact on unbilled receivables/operating profit from 1 percentage point (increase)/decrease in provision coverage | (11)/11 | (13)/13 |
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.
| 2023 | 2022 | |
| 31 December | £m | £m |
| Gas in storage and transportation | 824 | 1,076 |
| Other raw materials and consumables | 120 | 114 |
| Finished goods and goods for resale | 135 | 79 |
| 1,079 | 1,269 |
(i)
(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
2023 | 2022 | |||
| Assets | Liabilities | Assets | Liabilities | |
| 31 December | £m | £m | £m | £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) |
| 2023 | 2022 | |
| 31 December | £m | £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) |
2023 | 2022 | |||
| Income | Income | |||
| Statement | Equity | Statement | Equity | |
| 31 December | £m | £m | £m | £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
2023 | 2022 | |||
| Current | Non-current | Current | Non-current | |
| 31 December | £m | £m | £m | £m |
| Financial liabilities: | ||||
| Trade payables | (474) | (4) | (481) | (4) |
| Deferred income | (1,178) | — | (538) | — |
| Capital payables | (152) | — | (158) | — |
| Cash collateral received | (184) | — | (601) | — |
| Other payables | (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 | (761) | — | (701) | (1) |
| Contract liabilities | (30) | (3) | (37) | (7) |
| Deferred income | (107) | (3) | (508) | (3) |
(7,000) | (207) | (10,016) | (165) |
| 2023 | 2022 | |
| 31 December | £m | £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
| Unused and | |||||||||
| Charged in the | Notional | reversed in | Revisions and | Exchange | 31 December | ||||
| 1 January 2023 | year | interest | the year | Utilised | additions | Transfers | adjustments | 2023 | |
| £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| Current | |||||||||
Restructuring costs | (15) | (6) | — | 6 | 3 | — | (1) | 2 | (11) |
| Decommissioning | |||||||||
| costs | (216) | — | — | — | 173 | — | (89) | — | (132) |
| Onerous contracts | |||||||||
| provision | (937) | (19) | — | 359 | 568 | — | — | (1) | (30) |
| Other | (45) | (89) | — | 7 | 26 | — | (4) | (1) | (106) |
Total | (1,213) | (114) | — | 372 | 770 | — | (94) | — | (279) |
| Unused and | ||||||||
| Charged in the | Notional | reversed in | Revisions and | Exchange | 31 December | |||
| 1 January 2023 | year | interest | the year | additions | Transfers | adjustments | 2023 | |
| £m | £m | £m | £m | £m | £m | £m | £m | |
| Non-current | ||||||||
Restructuring costs | (5) | — | — | — | — | 1 | — | (4) |
| Decommissioning costs | (1,298) | (80) | (21) | 7 | (94) | 89 | 2 | (1,395) |
| Onerous contracts provision | (99) | (2) | — | 75 | — | — | 1 | (25) |
| Other | (44) | (7) | — | 5 | (4) | 4 | 1 | (45) |
Total | (1,446) | (89) | (21) | 87 | (98) | 94 | 4 | (1,469) |
2023 | 2022 | |||
| Current | Non-current | Current | Non-current | |
| 31 December | £m | £m | £m | £m |
Restructuring costs | (11) | (4) | (15) | (5) |
Provisions other than restructuring costs | (123) | (60) | (973) | (132) |
(134) | (64) | (988) | (137) |
| 2023 | |
| 31 December | £m |
| 2024-2028 | (445) |
| 2029-2033 | (908) |
| 2034-2038 | (162) |
| 2039-2043 | (10) |
| 2044-2048 | (1) |
2049-2053 | (1) |
| (1,527) |
Financial Statements | Centrica plc Annual Report and Accounts 2023 177
| Number of | |||||
| active | Total | ||||
| members | membership | ||||
| as at | as at | ||||
| 31 December | 31 December | ||||
Name of scheme | Type of benefit | Status | Country | 2023 | 2023 |
| Centrica Engineers Pension | Defined benefit final salary pension | Closed to new members in 2006 | UK | 1,483 | 8,402 |
| Scheme | 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 | Republic | ||||
Defined Benefit Pension Scheme | Defined benefit final salary pension | Closed to new members in 2014 | of Ireland | 89 | 169 |
| Bord Gáis Energy Company | Republic | ||||
Defined Contribution Pension Plan | Defined contribution pension | Open to new members | of Ireland | 317 | 455 |
178 Financial Statements | Centrica plc Annual Report and Accounts 2023
22. POST-RETIREMENT BENEFITS
Financial Statements | Centrica plc Annual Report and Accounts 2023 179
22. POST-RETIREMENT BENEFITS
| 2023 | |
| 31 December | % |
Actives – final salary – capped | 11 |
Actives – final salary – uncapped and crystallised benefits | 5 |
Actives – career average | 4 |
Deferred pensioners | 38 |
Pensioners | 42 |
| 100 |
| 2023 | 2022 | |
| 31 December | % | % |
| 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 |
2023 | 2022 | |||
| Male | Female | Male | Female | |
| 31 December | Years | Years | Years | Years |
Currently aged 65 | 22.0 | 23.5 | 22.4 | 23.9 |
Currently aged 45 | 23.2 | 24.6 | 23.6 | 25.0 |
2023 | 2022 | |||
| Indicative | Indicative | |||
| Increase/ | effect on | Increase/ | effect on | |
| decrease in | scheme | decrease in | scheme | |
| 31 December | assumption | liabilities % | assumption | 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 |
180 Financial Statements | Centrica plc Annual Report and Accounts 2023
22. POST-RETIREMENT BENEFITS
| 2023 | 2022 | |
| 31 December | £m | £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) |
2023 | 2022 | |||
| Pension | Pension | Pension | Pension | |
| liabilities | assets | liabilities | assets | |
| £m | £m | £m | £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 | (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 |
Financial Statements | Centrica plc Annual Report and Accounts 2023 181
22. POST-RETIREMENT BENEFITS
2023 | 2022 | |||||
| Quoted | Unquoted | Total | Quoted | Unquoted | Total | |
| 31 December | £m | £m | £m | £m | £m | £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 |
182 Financial Statements | Centrica plc Annual Report and Accounts 2023
| 2023 | 2022 | |
| 31 December | £m | £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 | 414 | 459 |
| Commodity purchase contract commitments | ||||
| Fixed price | Commodity commitments | |||
| commodity commitments | that float with indices | |||
| 2023 | 2022 | 2023 | 2022 | |
| 31 December | £bn | £bn | £bn | £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
23. LEASES, COMMITMENTS AND CONTINGENCIES
| 2023 | 2022 | |
| Year ended 31 December | £m | £m |
Expense related to short-term leases | 71 | 82 |
Expense related to variable lease payments | 9 | 9 |
184 Financial Statements | Centrica plc Annual Report and Accounts 2023
| 2023 | 2022 | |
| 31 December | £m | £m |
| Gross debt | 3,408 | 3,570 |
| Shareholders’ equity | 3,877 | 1,017 |
| Capital | 7,285 | 4,587 |
Financial Statements | Centrica plc Annual Report and Accounts 2023 185
24. SOURCES OF FINANCE
| 2023 | 2022 | |
| 31 December | £m | £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 | 164 | 270 |
Net collateral posted (ii) | 240 | 823 |
186 Financial Statements | Centrica plc Annual Report and Accounts 2023
24. SOURCES OF FINANCE
| Other assets and liabilities | |||||||
| Current and | |||||||
| non-current | Cash and cash | ||||||
| borrowings, | equivalents, net | Current and | Adjusted | ||||
| leases and | of bank | non-current | Sub-lease | net (debt)/ | |||
| interest accruals | Derivatives | Gross debt | overdrafts | securities | assets | cash | |
| £m | £m | £m | £m | £m | £m | £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 | 1,482 | — | 1,482 | (1,482) | — | — | — |
| Cash inflow from short-term borrowings | (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 | — | — | — | — | (27) | — | (27) |
| Acquisition of businesses | (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 | 1,155 | — | 1,155 | (1,155) | — | — | — |
| Cash inflow from borrowings | (930) | — | (930) | 930 | — | — | — |
Cash inflow from operating activities | — | — | — | 2,752 | — | — | 2,752 |
| Cash inflow from other investing activities | — | — | — | 106 | — | — | 106 |
| Cash outflow from other financing activities | — | — | — | (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 |
Financial Statements | Centrica plc Annual Report and Accounts 2023 187
24. SOURCES OF FINANCE
2023 | 2022 | |||||||
| Coupon rate | Principal | Current | Non-current | Total | Current | Non-current | Total | |
| 31 December | % | m | £m | £m | £m | £m | £m | £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 | 4.375 | £552 | — | (497) | (497) | — | (471) | (471) |
| 5 January 2032 | Zero | €50 | — | (71) | (71) | — | (69) | (69) |
| 19 September 2033 | 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) |
188 Financial Statements | Centrica plc Annual Report and Accounts 2023
| 2023 | 2022 | |
| 31 December | £m | £m |
5,907,846,138 ordinary shares of 6 14/81 pence each (2022: 5,907,846,138) | 365 | 365 |
| Own shares | Treasury shares | |||
| 2023 | 2022 | 2023 | 2022 | |
| million shares | million shares | million shares | 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 | — | — | 512.3 | 45.7 |
| 31 December | 46.8 | 30.4 | 492.0 | 45.7 |
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
Supplementary information includes additional information and disclosures we are required to make by accounting
standards or regulation.
S1. GENERAL INFORMATION
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
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.
Financial Statements | Centrica plc Annual Report and Accounts 2023 191
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
192 Financial Statements | Centrica plc Annual Report and Accounts 2023
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
| Closing rate at | Average rate for the year ended | |||
| 31 December | 31 December | |||
| Exchange rate per pounds sterling (£) | 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 |
Financial Statements | Centrica plc Annual Report and Accounts 2023 193
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
194 Financial Statements | Centrica plc Annual Report and Accounts 2023
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
Financial Statements | Centrica plc Annual Report and Accounts 2023 195
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
| Centrica | |||||||
| Centrica | Business | ||||||
| Business | Solutions | ||||||
| British Gas | Solutions | (turbines/ | |||||
| Services & | British Gas | Energy | Bord Gáis | engines/ | Centrica | ||
| Solutions | Energy | Supply | Energy | battery/solar) | Energy | Nuclear (i) | |
| 2023 | % | % | % | % | % | % | % |
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 | 12.0 | 17.3 |
| Centrica | |||||||
| Centrica | Business | ||||||
| Business | Solutions | ||||||
| British Gas | Solutions | (turbines/ | |||||
| Services & | British Gas | Energy | Bord Gáis | engines/ | |||
| Solutions | Energy | Supply | Energy | battery/solar) | Centrica Energy | Nuclear | |
| 2022 | % | % | % | % | % | % | % |
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 | 11.3 | 24.8 |
196 Financial Statements | Centrica plc Annual Report and Accounts 2023
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
CGU | Gross margin | Revenues | Operating costs |
| All – base | Existing customers: based on | Existing customers: based on | Wages: projected headcount in line |
| assumptions | contractual terms. | contractual terms. | with expected efficiency programme. |
| Losses are forecast based on historic | Losses are forecast based on historic | Salary increases based on inflation | |
| data and future expectations of | data and future expectations of | expectations. | |
| the market. | the market. | Credit losses: historical assumptions | |
| New customers and renewals: based | Adjusted for: growth forecasts which | regarding realised cash losses have | |
| on gross margins achieved in the | are based on sales and marketing | been updated to reflect the current | |
| period leading up to the date of the | activity, recent customer acquisitions | environment. | |
| business plan. Both adjusted for | and the current economic environment | ||
| current market conditions and cost of | in the relevant geography. | ||
| goods inflation. | Gas and electricity revenues based | ||
| For the Services business, future sales | on forward market prices. | ||
| and related gross margins are based | Market share: percentage immediately | ||
| on planned future product sales and | prior to business plan. | ||
| contract losses based upon past | |||
| performance and future expectations | |||
| of the competitive environment. | |||
Centrica Energy | Existing and new markets: | As above. | Future development: increase in costs |
| management’s estimate of future | to support growth forecasts, adjusted | ||
| trading performance. | for planned business process | ||
| efficiencies. | |||
| Centrica Business | Based on forecast revenues, | Based on forward and contracted | Based on run-rate and forecast |
| Solutions (turbines/ | operations and maintenance costs, | prices for commodity, capacity market | changes, including expected inflation |
| engines/battery/solar) | grid network and balancing system | and grid ancillary service contracts for | for the asset life. |
| charges for the asset life. | the asset life. |
Financial Statements | Centrica plc Annual Report and Accounts 2023 197
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
198 Financial Statements | Centrica plc Annual Report and Accounts 2023
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
Financial Statements | Centrica plc Annual Report and Accounts 2023 199
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
200 Financial Statements | Centrica plc Annual Report and Accounts 2023
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
Financial Statements | Centrica plc Annual Report and Accounts 2023 201
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
202 Financial Statements | Centrica plc Annual Report and Accounts 2023
S2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
Financial Statements | Centrica plc Annual Report and Accounts 2023 203
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.
204 Financial Statements | Centrica plc Annual Report and Accounts 2023
S3. FINANCIAL RISK MANAGEMENT
Financial Statements | Centrica plc Annual Report and Accounts 2023 205
S3. FINANCIAL RISK MANAGEMENT
| 2023 | 2022 | |
| Impact on | Impact | |
| profit | on profit | |
| Incremental profit/(loss) | £m | £m |
| US dollar – increase/(decrease) | 102/(54) | 139/(180) |
Euro – increase/(decrease) | (56)/128 | 36/(38) |
2023 | 2022 | |||
| Reasonably | Reasonably | |||
| possible | possible | |||
| change in | change in | |||
| variable | variable (ii) | |||
| Energy prices | Base price | % | Base price | % |
| 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
S3. FINANCIAL RISK MANAGEMENT
| 2023 | 2022 | |
| Impact on | Impact on | |
| profit | profit | |
| Incremental profit/(loss) | £m | £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) |
| 2023 | 2022 | ||
| Impact on | Impact on | ||
| profit | (i) | profit (i) | |
| Incremental profit/(loss) | £m | £m | |
| Level 3 proprietary trades – increase/(decrease) | 24/(24) | 891/(877) |
Financial Statements | Centrica plc Annual Report and Accounts 2023 207
S3. FINANCIAL RISK MANAGEMENT
| 2023 | ||||||||
| Financial assets at | ||||||||
amortised cost | Financial assets at fair value | |||||||
| Receivables | ||||||||
| including | Derivative | |||||||
| treasury, trading | financial | |||||||
| and energy | instruments with | |||||||
| procurement | Cash and cash | Cash and cash | positive | Other | ||||
| counterparties | (i) | Securities | equivalents | equivalents | fair values | Securities | investments | |
| 31 December | £m | £m | £m | £m | £m | £m | £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 | 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 | ||||||
| Receivables | |||||||
| including | |||||||
| treasury, | Derivative | ||||||
| trading and | financial | ||||||
| energy | instruments | ||||||
| procurement | Cash and cash | Cash and cash | with positive | ||||
| counterparties | Securities | equivalents | equivalents | fair values | Securities | Other investments | |
| 31 December | £m | £m | £m | £m | £m | £m | £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 | 4,534 | 403 | — | — | 719 | 27 | — |
9,074 | 403 | 1,864 | 2,978 | 7,427 | 122 | — | |
208 Financial Statements | Centrica plc Annual Report and Accounts 2023
S3. FINANCIAL RISK MANAGEMENT
Financial Statements | Centrica plc Annual Report and Accounts 2023 209
S3. FINANCIAL RISK MANAGEMENT
| <1 | 1 to 2 | 2 to 3 | 3 to 4 | 4 to 5 | >5 | |
| year | years | years | years | years | years | |
| Due for payment 2023 | £m | £m | £m | £m | £m | £m |
Energy and interest derivatives in a loss position that will be settled on a net basis | (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: | ||||||
Minimum lease payments | (99) | (91) | (78) | (44) | (25) | (99) |
Capital elements of leases | (98) | (80) | (68) | (38) | (21) | (79) |
| <1 | 1 to 2 | 2 to 3 | 3 to 4 | 4 to 5 | >5 | |
| year | years | years | years | years | years | |
| Due for payment 2022 | £m | £m | £m | £m | £m | £m |
Energy and interest derivatives in a loss position that will be settled on a net basis | (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: | ||||||
Minimum lease payments | (89) | (79) | (70) | (55) | (26) | (29) |
Capital elements of leases | (88) | (69) | (67) | (51) | (24) | (26) |
210 Financial Statements | Centrica plc Annual Report and Accounts 2023
| Merger, | ||||||||
| Foreign | Actuarial | Financial | Treasury | Share- | capital | |||
| Cash flow | currency | gains and | asset at | and own | based | redemption | ||
| hedging | translation | losses | FVOCI | shares | payments | and other | ||
| reserve | reserve | reserve | reserve | reserve | reserve | reserves | Total | |
| £m | £m | £m | £m | £m | £m | £m | £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) |
Financial Statements | Centrica plc Annual Report and Accounts 2023 211
S4. OTHER EQUITY
| Number | Authorised | |||
| of shares | purchases | |||
| purchased under | unutilised at | |||
| share buyback | Average price paid | Total cost | month end | |
| Period | programme | Pence | £m | £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 | — |
| Number | Authorised | |||
| of shares | purchases | |||
| purchased under | unutilised at | |||
| share buyback | Average price paid | Total cost | month end | |
| Period | programme | Pence | £m | £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 | — |
| Number | Authorised | |||
| of shares | purchases | |||
| purchased under | unutilised at | |||
| share buyback | Average price paid | Total cost | month end | |
| Period | programme | Pence | £m | £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
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 | ||||||
| Change in | Change in | ||||||
| Assets | Liabilities | fair value | Assets | Liabilities | fair value | ||
31 December | Hedge | £m | £m | £m | £m | £m | £m |
Interest rate risk | Fair value | — | (136) | 48 | 37 | (221) | (228) |
Foreign exchange risk | Cash flow hedge | 36 | (18) | (13) | 37 | (6) | (10) |
| Cumulative | ||||||||
| amount of | ||||||||
| fair value | ||||||||
| Change in | hedge | |||||||
| fair value | adjustments | Accumulated | ||||||
| Timing of | of hedged item | on hedged | (losses)/gains | |||||
| nominal | in year | item | in equity | |||||
2023 | Hedge | amount | Average rate | Nominal value | Hedged item | £m | £m | £m |
Interest rate risk | Fair value | 2025-2033 | Fixed to | £50 million- | Bonds | (59) | 138 | N/A |
| floating | £550 million | |||||||
| at Fallback | ||||||||
| LIBOR + | ||||||||
| 2%-5% | ||||||||
Foreign exchange risk | Cash flow hedge | 2032 | GBP to euro | €50 million | Euro bonds | (1) | N/A | 3 |
| at 1.171 | ||||||||
Cash flow hedge | 2036-2038 | GBP to yen | ¥20 billion | Yen bank | 7 | N/A | (21) | |
| at 158.87 | loans |
(i)
(ii)
| Cumulative | ||||||||
| Change in | amount of fair | |||||||
| fair value | value hedge | Accumulated | ||||||
| Timing of | of hedged item | adjustments on | gains/(losses) in | |||||
| nominal | in year | hedged item | equity | |||||
2022 | Hedge | amount | Average rate | Nominal value | Hedged item | £m | £m | £m |
Interest rate risk | Fair value | 2022-2033 | Fixed to floating | £50 million- | Bonds | 228 | 158 | N/A |
| at LIBOR/US | £550 million, | |||||||
| IBOR + 1%-5% | $250 million | |||||||
Foreign exchange risk | Cash flow hedge | 2032 | GBP to euro | €50 million | Euro bonds | 7 | N/A | 26 |
| at 1.171 | ||||||||
Cash flow hedge | 2036-2038 | GBP to yen | ¥20 billion | Yen bank | 3 | N/A | (23) | |
| at 157.33 | loans |
(i)
(ii)
(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
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
2023 | 2022 | |||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |
| 31 December | £m | £m | £m | £m | £m | £m | £m | £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) |
2023 | 2022 | |||
| Financial | Financial | Financial | Financial | |
| assets | liabilities | assets | liabilities | |
| £m | £m | £m | £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 | (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) |
Financial Statements | Centrica plc Annual Report and Accounts 2023 215
Active period of markets | Gas | Power | Coal | Emissions | Oil |
| UK (years) | 4 | 4 | 3 | 3 | 3 |
| 2023 | 2022 | |
| Day-one gains deferred | £m | £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 |
2023 | 2022 | |||||||
| Carrying value | Fair value | Fair value | Carrying value | Fair value | Fair value | |||
31 December | Notes | £m | £m | hierarchy | £m | £m | 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 |
216 Financial Statements | Centrica plc Annual Report and Accounts 2023
S6. FAIR VALUE OF FINANCIAL INSTRUMENTS
| Related amounts not offset in | ||||||
| the Group Balance Sheet | ||||||
| Gross | Gross amounts of | |||||
| amounts | recognised financial | Net amounts | ||||
| of recognised | instruments offset | presented | ||||
| financial | in the Group | in the Group | Financial | |||
| instruments | Balance Sheet | Balance Sheet | instruments | Collateral | Net amount | |
| 31 December 2023 | £m | £m | £m | £m | £m | £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 | ||||||
| Gross amounts of | ||||||
| Gross amounts | recognised financial | Net amounts | ||||
| of recognised | instruments offset | presented | ||||
| financial | in the Group | in the Group | Financial | |||
| instruments | Balance Sheet | Balance Sheet | instruments | Collateral | Net amount | |
| 31 December 2022 | £m | £m | £m | £m | £m | £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) |
Financial Statements | Centrica plc Annual Report and Accounts 2023 217
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.
| 2023 | 2022 | |
| 31 December | £m | £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
2023 | 2022 | |||
| Purchase of | Purchase of | |||
| goods and | Amounts | goods and | Amounts | |
| services | owed to | services | owed to | |
| 31 December | £m | £m | £m | £m |
| Associates: | ||||
| Nuclear | (655) | (94) | (564) | (102) |
| Joint ventures | (1) | — | — | — |
(656) | (94) | (564) | (102) |
| 2023 | 2022 | |
| Year ended 31 December | £m | £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 |
| 2023 | 2022 | |
| Year ended 31 December | £m | £m |
| Total emoluments | 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 |
Financial Statements | Centrica plc Annual Report and Accounts 2023 219
| 2023 | 2022 | |
| Year ended 31 December | £m | £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 | 0.7 | 0.9 |
| Total fees | 8.5 | 7.4 |
| Fees in respect of pension scheme audits | 0.1 | 0.1 |
220 Financial Statements | Centrica plc Annual Report and Accounts 2023
| Country of incorporation/ | ||||
31 December 2023 | Principal activity | registered address key | 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 | Dormant | United Kingdom | A | Ordinary shares |
Rhodes Holdings HK Limited | Non-trading | Hong Kong | C | Ordinary shares |
| Country of incorporation/ | ||||
31 December 2023 | Principal activity | registered address key | Class of shares held | |
| Accord Energy (Trading) Limited | 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 | 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 | Construction of battery storage | United Kingdom | A | Ordinary shares |
| CBS Services Holdings Limited | 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 | 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
S10. RELATED UNDERTAKINGS
| Country of incorporation/ | ||||
31 December 2023 | Principal activity | registered address key | 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 | Demand response aggregation | United Kingdom | A | Ordinary shares |
| Limited | ||||
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 | Dormant | United Kingdom | A | Ordinary shares |
| Limited | ||||
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 | 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 | Dormant | United Kingdom | A | Ordinary shares |
| Centrica Energy Storage Limited | 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 | 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 | 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 | 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 | Metering assets and services | United Kingdom | A | Ordinary shares |
222 Financial Statements | Centrica plc Annual Report and Accounts 2023
S10. RELATED UNDERTAKINGS
| Country of incorporation/ | ||||
31 December 2023 | Principal activity | 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 | Z | Ordinary shares |
| Tobago | ||||
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 | 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 | In liquidation | United Kingdom | AA | Ordinary shares |
| GF Two Limited | In liquidation | United Kingdom | AA | Ordinary shares |
| Goldbrand Development Limited | Dormant | United Kingdom | A | Ordinary shares |
| Greener Ideas Limited | Development of flexible power generation | Republic of Ireland | B | Ordinary shares |
| sites | ||||
Home Assistance UK Limited | Dormant | United Kingdom | A | Ordinary shares |
| Leicestershire Solar 1 Limited | 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 | 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 | 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
S10. RELATED UNDERTAKINGS
| Country of incorporation/ | ||||
31 December 2023 | Principal activity | registered address key | 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 | Dormant | United Kingdom | AE | Ordinary shares |
| Spirit Energy Hedging Limited | 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 | Netherlands | AF | Ordinary shares |
| infrastructure | ||||
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 |
224 Financial Statements | Centrica plc Annual Report and Accounts 2023
S10. RELATED UNDERTAKINGS
| Country of incorporation/ | |||||
31 December 2023 | Principal activity | registered address key | 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 |
| Indirect | |||||
| interest | |||||
| Country of incorporation/ | and voting | ||||
31 December 2023 | Principal activity | registered address key | Class of shares held | rights (%) | |
| Joint ventures | |||||
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 | |||||
Lake Acquisitions Limited | Holding company | United Kingdom | AO | Ordinary shares | 20.0% |
Financial Statements | Centrica plc Annual Report and Accounts 2023 225
S10. RELATED UNDERTAKINGS
| Registered | ||||
address key | Address | |||
A | Millstream, Maidenhead Road, Windsor, SL4 5GD, United Kingdom | |||
B | 1 Warrington Place, Dublin 2, Republic of Ireland | |||
| C 5/F, Manulife Place, 348 Kwun Tong Road, Kowloon, Hong Kong | ||||
| 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 | United States | 06901, | |
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 | |||
226 Financial Statements | Centrica plc Annual Report and Accounts 2023
S10. RELATED UNDERTAKINGS
2023 | 2022 | |||||||
Associate | Associate | |||||||
information | Fair value | information | Fair value | |||||
reported to | Unadjusted | and other | Group | reported to | Unadjusted | and other | Group | |
Group | 20% share | adjustments | share | Group | 20% share | adjustments | share | |
| Year ended 31 December | £m | £m | £m | £m | £m | £m | £m | £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) |
2023 | 2022 | |||||||
Associate | Associate | |||||||
information | Fair value | information | Fair value | |||||
reported to | Unadjusted | and other | Group | reported to | Unadjusted | and other | Group | |
Group | 20% share | adjustments (i) | share | Group | 20% share | adjustments (i) | share | |
| 31 December | £m | £m | £m | £m | £m | £m | £m | £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 |
31 December 2023 | Location | Percentage holding |
Cygnus | UK North Sea | 61% |
Financial Statements | Centrica plc Annual Report and Accounts 2023 227
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 | |||||||||
| Distributions | Distributions | |||||||||
| Non- | Total | to non- | Non- | Total | to non- | |||||
| controlling | Profit for | comprehensive | Total | controlling | controlling | Profit for | comprehensive | Total | controlling | |
| interests | the year | income | equity | interests | interests | the year | income | equity | interests | |
| Year ended 31 December | % | £m | £m | £m | £m | % | £m | £m | £m | £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
| 2023 | 2022 | |
| Year ended 31 December | £m | £m |
| Revenue | 974 | 1,667 |
| Profit for the year | 357 | 371 |
| Other comprehensive (loss)/income | (1) | 116 |
| Total comprehensive income | 356 | 487 |
(i)
(i)
(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
| 2023 | 2022 | |
| 31 December | £m | £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
| 2023 | 2022 | |
| Year ended 31 December | £m | £m |
| Net decrease in cash and cash equivalents | (13) | (73) |
228 Financial Statements | Centrica plc Annual Report and Accounts 2023
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 sharetransactions
(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
COMPANY BALANCE SHEET
2023
£m
2022
£m31 December Notes
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
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 isthe 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
theyear.
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
amaterial 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
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
31December 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
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 orconstruction 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
10years.
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 ofimpairment. 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. Inassessing 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
theyear.
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 infull 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.
Themodel 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 £15million (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 post-
employment 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 iscalculated 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
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, itcan 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
orsettled.
The tax expense for the year comprises current and deferred tax. Tax is recognised in the Income Statement, except to the extent that
itrelates 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
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
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
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, asdetailed 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
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
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
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 IAS19, 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
tocontracts for property services.
The Company has provided guarantees and letters of credit relating to its subsidiaries’ trading activities and decommissioning obligations.
At31 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
thesebalances.
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
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
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
SHAREHOLDER INFORMATION
GENERAL ENQUIRIES
Centrica’s share register is administered and maintained by
Equiniti, our Registrar, whom you can contact directly if you
haveany questions about your shareholding which are not
answered here or on our website. You can contact Equiniti
usingthe following details:
Address: Equiniti, Aspect House, Spencer Road, Lancing,
WestSussex 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
atrelayuk.bt.com
* Calls to an 03 number cost no more than a national rate call to an 01 or
02number. Lines open 8.30am to 5.30pm, Monday to Friday (UK time),
excludingpublic 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
aconvenient 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
thisonline 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
pleasecontact:
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: shrrelations@cpshareownerservices.com
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
oncentrica.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
visitcentrica.com/investors/financial-calendar
Other Information | Centrica plc Annual Report and Accounts 2023 243
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
aperformance 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
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 re-
measurements
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
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
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
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
tobusinessperformance
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
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
Fieldengineers
l
– 41% excluding
Fieldengineers
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
Fieldengineers
l
– 32%excluding
Fieldengineers
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
of2025
1,198 apprentices
l
1,033 apprentices
l
Inspire colleagues to give 100,000 days
tobuildinclusive 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
of2030
10% reduction
l
6% reduction
l
Be a net zero business by 2045
(v)
(base year 2019)
40% GHG reduction by the end
of2034
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 seniorleaders, 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 183gCO
2
e/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 2,132,680mtCO
2
e. 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
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
ofsupport
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
andreinforcing a strong safety culture whilst advancing controls
andmonitoring
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
andeffective 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
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 whichincludes £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 whichincludes £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)
andenergy
Total GHG emissions
(scope 1 and 2)
(i)
1,681,475tCO
2
e
(ii)†
2,009,885tCO
2
e
(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 by2050
Scope 1 emissions
1,674,829tCO
2
e
(vi)†
2,004,693tCO
2
e
(iv)(v)(vii)
Scope 2 emissions
6,647tCO
2
e
(viii)†
5,193tCO
2
e
(iv)(v)(ix)
Scope 3 emissions
(x)
21,180,922tCO
2
e 24,330,208tCO
2
e
Total GHG intensity
by revenue
(xi)
64tCO
2
e/£m
(xii)
85tCO
2
e/£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
335,512m
3
317,760m
3
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 547,542tCO
2
e and non-UK 1,133,933tCO
2
e.
(iii) Comprises UK 726,891tCO
2
e and non-UK 1,282,994tCO
2
e.
(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 2,007,655tCO
2
e, scope 1 1,994,153tCO
2
e and scope 2
13,502tCO
2
e.
(vi) Comprises UK 542,244tCO
2
e and non-UK 1,132,585tCO
2
e.
(vii) Comprises UK 722,810tCO
2
e and non-UK 1,281,883tCO
2
e.
(viii) Market-based, comprises UK 5,299tCO
2
e and non-UK 1,348tCO
2
e. Location-based is 17,041tCO
2
e.
(ix) Market-based, comprises UK 4,082tCO
2
e and non-UK 1,111tCO
2
e. Location-based is 16,275tCO
2
e.
(x) Includes emissions from the following scope 3 categories defined by the Greenhouse Gas Protocol: purchased goods and services, capital goods, fuel and energy-
related activities, waste generated in operations, business travel, employee commuting, upstream and downstream transportation and distribution, use of sold
productand investments. All emissions are calculated in line with the methodologies set out by the Greenhouse Gas Protocol’s technical guidance, apart from
workingfrom 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
toour 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 25tCO
2
e/£m and non-UK 267tCO
2
e/£m.
(xiii) Comprises UK 42tCO
2
e/£m and non-UK 203tCO
2
e/£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
tonotify 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
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
CO
2
e Universal unit of measurement of the global warming potential
(GWP) of greenhouse gases (GHG) expressed in terms of the GWP
of one unit of CO
2
e (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 (CO
2
) being emitted into the atmosphere and the
CO
2
taken out
NGO Non-governmental organisation
NPS Net promoter score
Ofgem The government regulator for gas and electricity markets in
GreatBritain
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
tCO
2
e 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
Under-
represented
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
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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
thedate that this Annual Report and Accounts was approved and can be identified by the
useof 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
beplaced 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
entirelyat 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
impliedin 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 newinformation 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 orregulation.
Further when considering the information contained in, or referred to in this Annual Report
andAccounts, 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
theefficient 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.
Centrica plc
Registered office:
Millstream
Maidenhead Road
Windsor
Berkshire
SL4 5GD
Company registered
in England and Wales
No. 3033654
centrica.com