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Registration number: 02366942 (England and Wales)
Northern Electric plc
Annual Report and Consolidated Financial Statements
for the Year Ended 31 December 2025
Northern Electric plc
Contents
Company Information 1
Strategic Report 2 to 24
Directors' Report 25 to 36
Consolidated Income Statement 45
Consolidated Statement of Comprehensive Income 46
Consolidated Statement of Financial Position 47 to 48
Statement of Financial Position 49 to 50
Consolidated Statement of Changes in Equity 51
Statement of Changes in Equity 52
Consolidated Statement of Cash Flows 53
Notes to the Financial Statements 54 to 121
Northern Electric plc
Company Information
Directors
J N Reynolds
J C Riley
A P Jones
S J Lockwood
Com pany Secretary
J C Riley
Registered office
Lloyds Court
78 Grey Street
Newcastle upon Tyne
Ty ne and Wear
NE1 6AF
Registration number
02366942 (England and Wales)
Auditor
KPMG LLP
110 Quayside House
Newcastle upon Tyne
United Kingdom
NE1 3DX
Page 1
Northern Electric plc
Strategic Report for the Year Ended 31 December 2025
The directors present their annual report and audited consolidated financial statements for the year ended 31 December
2025 of Northern Electric plc (the "Company"), which have been draw n up and are presented in accordance with the
Companies Act 2006 (the “CA06”).
Business mo del
The Company is part of the Northern Powergrid Holdings Company and its subsidiaries group of companies (the
“Northern Powergrid Group”) and acts as a holding company of Northern Pow ergrid (Northeast) plc (“NPg Northeast”),
Integrated Utility Services Limited (“IUS”) and Northern Pow ergrid Metering Limited (“NPg Metering”), alongside other
smaller companies, collectively, (the “Group”).
NPg Northeast is an authorised distributor under the Electricity Act 1989 and holds a licence granted by the Secretary of
State. As a distribution network operator (“DNO”), NPg Northeast is regulated by the Office of Gas and Electricity
Markets (“Ofgem”), which in turn, is governed by the Gas and Electricity Markets Authority (“GEMA”). Ofgem requires
the DNOs to operate within a regulatory framework known as a price control, the purpose of which is to protect the
interests of end consumers by setting an upper limit on the amount the DNOs can charge for the use of their networks. On
31 March 2025, NPg Northeast completed the second year of the RIIO-ED2 price control, which became effective on 1
April 2023, and will conclude on 31 March 2028 (the “ED2 period”).
The principal activity of NPg Northeast is the distribution of electricity to approximately 1.6 million customers connected
to its electricity distribution network (the “Network”) within its distribution services area in the northeast of England,
which extends from North Northumberland, south to York and west to the Pennines. The Network includes over 42,000
kilometres (“km”) of overhead and underground cables and over 28,000 substations. Electricity is received from National
Grid's transmission system and from generators connected directly to the Network, and is then distributed at voltages of up
to 132 kilovolts.
Revenue generated by NPg Northeast is primarily controlled by a distribution price control formula which is set out in the
electricity distribution licence. The price control formula does not directly constrain profits from year-to-year but is a
control on revenue that operates independently of a significant portion of the NPg Northeast’s costs. Allowed revenue is
recovered from electricity suppliers via the application of Distribution use of System charges. These charges account for
approximately 8% of the electricity end users' overall electricity bill. NPg Northeast’s opening base allowed revenue
(excluding the effects of incentive schemes, volume or legislative driven adjustment mechanisms, any contract liabilities
from the prior price control, and real price effects) has been set and provides NPg Northeast with some stability in terms of
its income during the ED2 period. Opening base allowed revenues increased in line with inflation (as measured by CPI-H).
IUS provides engineering contracting services and NPg Metering rents meters to energy suppliers.
Strategy
In common with the Northern Pow ergrid Group, the Group operates a strategy based on six core principles (the "Core
Principles"), which comprise Financial Strength, Customer Service, Operational Excellence, Employee Commitment,
Environmental Respect and Regulatory Integrity. The Core Principles (w hich are applied by the Northern Powergrid
Group’s parent company, Berkshire Hathaway Energy Company ("Berkshire Hathaway Energy"), set out the basis on
which the Company generates shareholder value over the longer-term and defines the standards by which the Northern
Pow ergrid Group holds itself accountable. Each Core Principle is defined by a strategic objective which is linked to the
commitments made in the Company’s business plan (available via the Northern Pow ergrid Group we bsite) for the ED2
period (the “Business Plan”). The directors refer to the values established by the Core Principles and the commitments
contained within the Business Plan when considering the consequence of decisions they make.
The delivery of the Business Plan is supported by an annual business plan (the “Annual Plan”) which is submitted to the
Northern Pow ergrid Group’s shareholder each financial year and is designed to phase progress tow ards the achievement of
each commitment over the ED2 period. This ensures that the deliverables in both plans can be measured effectively by
using a mix of financial and non-financial Key Performance Indicators (“KPIs”).
The Strategic Report focuses on each Core Principle and the performance of the associated KPIs throughout the year in
order to provide a summary of the success in achieving each strategic objective, progress made against certain Business
Plan commitments and performance in relation to the Annual Plan.
As the largest contributor to the Group in terms of revenue, the Strategic Report primarily concentrates on the performance
and progress of NPg Northeast throughout the reporting year.
Page 2
Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
FINANCIAL STRENGTH
Strategic objective:
Strong finances that enable improvement and growth.
KPI 2025
(As restated)*
2024
Operating Profit £ 228.6 million £ 314.5 million
Cash from operating activities £ 300.3 million £ 389.6 million
Cash used in investing activities £ 468.7 million £ 303.9 million
Credit Rating (Standard & Poor's) A- A-
*Further detail can be found under 'Restatement of Cash Flow Statement' in Note 3.
Business Plan commitment
: To build on the strong financial base by delivering embedded efficiencies equivalent to 11%
of forecast total expenditure.
Perform ance during the year:
The Group continued to maintain good control in respect of both its capital and operating
costs by effectively managing the financial risks that could have had an adverse impact on its business. At the end of
year-two of the ED2 period. NPg Northeast is forecasting to deliver expenditure in line with allow ances for the full ED2
period, the Company’s and Northern Pow ergrid (Yorkshire) plc’s (its “affiliate”) expenditure was broadly in line with
allow ances, but below phased total expenditure allow ances. Consequently, a number of wo rk programmes we re re-phased
in support of achieving the 11% efficiency savings.
Revenue:
The Group's revenue at £586.1 million was £84.6 million low er than the prior year primarily due to a decrease
in tariffs with the average tariff decreasing by circa 30% when compared with 2024 tariffs, driven by reduced revenue
allow ances.
Operating profit and position at the year-end:
The Group's operating profit of £228.6 million was £85.9 million lower
than the previous year, primarily reflecting lower revenue detailed above alongside an increase in IT related expenditure.
The statement of financial position shows that, as at 31 December 2025, the Group had total equity of £1,462.3 million
(2024: £1,402.7 million). The decrease in net assets was driven by fair valuation re-measurements on pensions and cash
flow hedges of £40.5 million, offset by profits in the year of £135.2 million and higher capital expenditure, mainly on asset
resilience and decarbonisation-enabling investment on the network.
Finance costs and investm ents:
Finance costs net of investment income at £45.4 million were £11.7 million higher than
the prior year mainly reflecting lower finance income relating to the intercompany loans and higher interest paid to group
undertakings.
Taxation
: The effective tax rate in the year was 25%. Tax charge for the year was £48.7 million which was £24.8 million
low er than prior year of £73.5 million primarily due to low er profits. Details of the income tax expense are provided in
Note 10 to the financial statements.
Share capital:
The Company has one class of ordinary shares which carries no right to fixed income. Details of
cumulative non-equity preference shares are contained in the borrowings Note 20. There we re no changes to the
Company's share capital during the year.
Cash flow:
The Group aims to collect from customers and pay suppliers within contracted terms. Any surplus cash held is
remitted to Yorkshire Electricity Group plc ("YEG"), a company in the Northern Powergrid Group, and invested
accordingly, generating a market rate of return for the Northern Pow ergrid Group. Movements in cash flows were as
follows:
•
Operating activities:
Net cash flow from operating activities at £300.3 million was £89.3 mllion lower than the
previous year due to fewer cash receipts from customers.
•
Investing activities:
Cash flow used in investing activities at £468.7 million was £164.8 million higher than the
previous year mainly driven by mo vement in intercompany treasury account and higher capital expenditure, mainly on
asset resilience and decarbonisation-enabling investment on the network.
•
Financing activities:
Cash flow from financing activities at £176.7 million was £263.6 million higher than the
previous year, mainly due to higher net proceeds from borrow ings.
Page 3
Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
Pensions:
The Company is a participating and sponsoring employer in the Group of the Electricity Supply Pension
Scheme (the "DB Scheme"), a defined benefit scheme. Further details of the Group's commitments to the DB Scheme and
the associated deficit repair payments are provided in Note 25 to the financial statements. The Group also participates in
the Northern Pow ergrid Pension Scheme, which is a defined contribution scheme.
Insurance:
As part of its insurance and risk strategy, the Group has in place insurance policies, which cover risks
associated with employees, third party mo tor and public liability. The Group carries appropriate excesses on those policies
and is effectively self-insured up to the level of those excesses.
CUSTOMER SERVICE
Strategic objective:
Delivering exceptional customer service.
KPI 2025 2024
Broad Measure of Customer Satisfaction ("BMCS") 90.4% 91%
BMCS Rank (out of 14)
10 9
BMCS Pow er Cuts 89.4% 89.5%
BMCS General Enquiries 93.5% 94.8%
BMCS Connections 89.7% 90.3%
Business Plan commitment:
To provide a reliable, better communicated and faster customer service offering through a
range of channels to suit stakeholder needs.
Perform ance during the year:
In respect of the BMCS, an independent market research company carried out telephone
surveys with NPg Northeast’s customers to find out how satisfied they were with services related to unplanned or planned
pow er cuts, quotations and subsequent connections, and general enquiries. A decline was recorded in overall satisfaction
scores at 90.4% compared to the prior year (91.0%), resulting in the BMCS rank of 10 out of 14. Satisfaction scores we re
impacted in part as a result of the increased activity and demand around low carbon technology (“LCT”) connections, as
we ll as numerous weather-related events affecting the Network. Regardless, NPg Northeast will strive to continue to
achieve its Business Plan commitments during the ED2 period by continuing to focus on the ways it can improve the
service it provides to its customers.
To enhance the service provided to customers, NPg Northeast wo rked closely with new contractors to embed service
standards and ensure consistency through stronger accountability. Key initiatives from the customer service improvement
plan we re implemented, including refining management routines for connections processes and improving the consistency
of communications, particularly for those customers impacted by pow er cuts. In addition, an enhanced Operational Design
model wa s introduced to support the delivery of 2026 improvement priorities.
Improvement activity scheduled for 2026 includes the development of guidance to facilitate managing key scenarios and
customer interactions, an increased focus on areas of poor Network performance, and a review of the extra care support
provided to the mo st vulnerable customers.
Page 4
Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
Connections to the network
Business Plan commitment:
To deliver a cost-effective, efficient and personalised service for all connections customers,
with smarter, mo re flexible solutions that support the connection of LCTs onto the Network in support of the transition to
net zero.
Perform ance during the year:
The time to connect continued to be challenging due to the increase in connections
applications around service upgrades. How ever, time to quote remained on track as a result of increasing operational
delivery capacity in response to the increased volumes. The overall customer satisfaction score for connections declined
marginally year-on-year at 89.7% (2024: 90.3%).
The Major Connections programme has been significantly shaped by industry reforms designed to deliver the
Government’s decarbonisation ambitions through the Clean Pow er 2030 Action Plan, which addresses an increasingly
over-subscribed connections queue by ensuring that only strategically aligned, deliverable projects progress. NPg
Northeast has played an active role by participating in working groups and wo rkshops, and influencing key policy
decisions, while trading the impact of reform through a broad programme of customer engagement, including face-to-face
sessions, social media posts and we binars.
As part of the reform, new project readiness and strategic alignment requirements were applied to existing accepted
customer projects, driving significant investment in customer-facing improvements. This included the development and
launch of an online customer evidence submission portal, enhancements to the existing online pipeline tool, and the
introduction of a new customer enquiry portal. Together, these provided a mo re streamlined and efficient route for
responding to customers.
Corporate responsibility
Business Plan commitment:
To build effective relationships with stakeholders, especially those customers who are
vulnerable and hard to reach.
Perform ance during the year
: NPg Northeast worked closely with key partners, including the local government, to
support their decarbonisation plans, while continuing to champion inclusive services for those mo st at risk. As a
consequence, support was scaled up with over 20,000 customers receiving tailored fuel poverty advice, and a further 5,868
customers we re provided with guidance on their transition to net zero, generating (w ith its affiliate) £3.0 million in social
benefit, as per Ofgem's output delivery incentive assessment.
Customer resilience initiatives we re also strengthened with Priority Services Membership expanded to 76% of eligible
households, 95.5% of the most vulnerable customers being contacted within one hour of a power cut, and enhanced winter
kits being made available. Alongside, bespoke ‘safe-talk’ training equipped staff to support customers through difficult
situations, while the new Community Energy Team worked with local groups to cut energy bills and boost impact.
Additional support activity included a donation to Community Action Northumberland to sponsor their Warm Hubs
programme, the Net Zero Community Energy Fund provided grant funding to nine organisations totalling £50,000, and
NPg Northeast established the Community Energy Team to support community energy groups. Alongside, NPg Northeast
and all funded partners routinely promoted Priority Services Membership and shared energy efficiency materials and
winter preparedness information to customers.
OPERATIONAL EXCELLENCE
Strategic objective:
High-quality, efficient operators running a smart reliable energy system.
2024/25 2023/24
KPI Actual Target Actual Target
Customer minutes lost ("CML") 46.8 <41.1 49.5 <42.0
Customer interruptions ("CI") 51.0 <46.7 48.6 <47.7
KPI 2025 2024
High voltage restoration time (minutes) 58.5 64.1
Network investment (million) £293.7 £228.5
Business Plan commitment:
To achieve 12% fewer unplanned pow er cuts and reduce the average length of unplanned
pow er cuts by 25%.
Page 5
Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
Perform ance during the year:
CML and CI are the KPIs set by Ofgem to measure (on a regulatory year basis) the quality
of supply and system performance. CML measures the average number of supply minutes lost for every connected
customer due to both planned and unplanned pow er cuts that last for three minutes or longer. CI measures the average
number of supply interruptions per every 100 connected customers due to planned and unplanned power cuts that last for
three minutes or longer. Performance was below target for CI and CML due to adverse weather conditions and increased
planned wo rks to remediate non-compliant equipment containing Polychlorinated Biphenyls (“PCB’s”). How ever, the
duration of the NPg Northeast’s (together with its affiliate) power cuts decreased by 4.8% when compared to 2024.
From a high voltage restoration perspective, NPg Northeast averaged 58.5 minutes (2024: 60.2 minutes), after allowing for
severe we ather incidents and other exemptions, which was an improvement from the prior year.
NPg Northeast invested £274.5 million during the year through its approved Network investment strategy (2024: £228.5
million), which was designed to improve Network performance and increase resilience. Various major projects were
undertaken to reinforce the primary Network, refurbish transformers, rebuild overhead lines, replace oil-filled cables,
change deteriorated poles, replace switchgear and install and commission new remote-control points.
Further Network enhancements included the continued roll-out of the automatic pow er restoration system on the high
voltage Network. At low voltage, the implementation of next generation technology devices continued with the addition of
sensors and mo nitoring which detect developing faults so that they can be proactively managed.
Looking ahead to 2026, initiatives will be implemented as part of the Network Performance Improvement Plan. These
include the continuation of the risk-based vegetation management programme which, will be refocussed to incorporate the
findings from the Network Light Detection and Ranging surveys completed in 2025, additional ground-mounted and
pole-mounted automation, the installation of fault management devices on the low voltage Network and further developing
the operational incident response mo del.
CLIMATE CHANGE ADAPTATION
Strategic objective:
Operate a highly reliable and resilient Network
Business Plan com mitment:
To adapt the Network and operations to build resilience against the effects of climate
change.
Page 6
Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
Perform ance during the year:
The climate is changing and, despite international efforts to reduce greenhouse gas
emissions, it is expected to continue to change over the course of the century. The Northern Powergrid Group has taken
steps to understand the risks and opportunities presented by climate change and has established a number of programmes
in response including flood mitigation, vegetation management, and overhead line resilience. In relation to performance
against the KPIs established for the ED2 period, NPg Northeast and its affiliate installed one further substation defence.
There are two sites where additional wo rks are required to ensure that they meet the requirements for flood resilience.
These sites have both had adequate mitigation measures put in place. However further permanent wo rks are necessary to
achieve full compliance. This resulted in a combined investment on flood mitigation works of £0.66 million in 2024/25.
From a vegetation management perspective, a total of £18.0 million was invested by NPg Northeast and Northern
Pow ergrid (Yorkshire) plc on works to clear spans and make the Network mo re resilient, including by creating corridors
betw een vegetation and the Network to accommodate the falling distance of trees. The targets set at the beginning of ED2
we re increased to reflect the actual volumes of work undertaken given a large number of surveys are undertaken which
confirm continued compliance, and therefore cutting is not required. In addition, increased growth wa s observed, driven by
we tter winters. The acceleration of the vegetation management programme will be supported by the use of Light Detection
and Ratings (“LiDAR”) to help mo re effectively target the wo rk. The first full LiDAR survey of the Network will be
completed during the 2025/26 Regulatory Year.
Collaboration with LRFs was positive with NPg Northeast and its affiliate attendance at meetings with 64 quarterly tactical
business groups for each of the seven LRFs in the operating areas.
Governance Arrangements
In respect of the management of climate-related risks and opportunities, the Northern Powergrid Group has well-defined
and mature governance arrangements in place, which are defined by its risk management policy and processes and are
overseen by the Risk Advisory Board (“RAB”) with the support of the Internal Audit function (see ‘Risk Management’
and ‘Internal Control’ for further details). Each subsidiary is responsible for the assessment and management of its ow n
risks and opportunities, with risks then being reported via the processes set out below including being tracked and
monitored at a Northern Pow ergrid Group level via the RAB.
As is the case for all types of risk across the Northern Pow ergrid Group, climate related risks and opportunities are
identified, assessed and managed at a variety of levels with escalation points incorporated at various stages of the process.
Risks that are identified via NPg Northeast’s operational working groups are put forward to the Asset Serviceability
Review steering group where appropriate actions and controls are mo nitored by senior management. Risks can then be
further escalated to the Asset Risk Management Executive Review Group for further oversight by a subset of the
Executive Leadership team.
When identified at a subsidiary or directorate level, risks are reviewed and monitored by the relevant Senior Management
team and are escalated through the quarterly risk identification process run by the Internal Audit team. In all scenarios,
where risks are identified as being above the Northern Pow ergrid Group’s risk appetite, they are reported to the RAB.
The Northern Pow ergrid Group’s risk management process (including for climate related risks) takes place on a quarterly
basis and includes the Chair of the RAB reporting risks and opportunities to the Audit Committee and the board. In
addition, an annual risk submission is made to the Northern Powergrid Group’s shareholder, noting that Berkshire
Hathaway Energy is routinely made aw are of risks via regular dialogue with members of the Executive Leadership team
and the board.
Given the significance upon the Northern Pow ergrid Group and its stakeholders, the board considers climate related risks
and opportunities via routine reporting (including scrutinising performance against KPIs) and in-focus updates on at least a
quarterly basis. Whilst always being guided by the Core Principles, the board is also cognisant of the impact of risks and
opportunities on the Northern Powergrid Group’s strategy and business mo del and, has regard to this when making
decisions such as reviewing and approving business plans and mo nitoring performance.
Page 7
Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
Risk Management
In terms of identification, climate related risks and opportunities are typically detected via a number of channels, including
at the operational, subsidiary and directorate level (as outlined above), as a result of detailed risk assessments based on
climate projections, by investigations into exceptional events, from reviewing the macro environment for trends, or via
shared learning from other Berkshire Hathaway Energy subsidiary companies or collaborative work with other DNOs. In
relation to the latter, the DNOs typically wo rk with the ENA to establish a sector wide perspective and have used this
approach to implement regulatory requirements such as those under the Climate Change Act 2008 and the National
Adaptation Plan.
Regardless of the source, all risks are integrated into the Northern Powergrid Group’s overall risk management process,
are recorded within a central risk register and are categorised by likelihood and impact. Supplementary to this, all climate
related risks are also recorded and tracked through the Northern Powergrid Group’s climate risk register.
Once identified, all risks (including climate related) are allocated to an ow ner and are assessed to determine if they are to
be tolerated, influenced or mitigated. If the risk is to be mitigated, appropriate actions are developed to reduce or eliminate
the impact of the risk over an appropriate timescale. As outlined above, all risks that are above the Northern Powergrid
Group’s risk appetite are mo nitored by the RAB and are allocated to a member of the Executive Leadership team to
mitigate or manage. Innovation projects and opportunities (including any that are Climate related) are typically reviewed
by the Science and Technology Advisory Panel in conjunction with the Executive Leadership team ahead of scoping
options to maximise the benefits and progressing to implementation as relevant.
Strategy
Following the publication by the Department for Environment, Food & Rural Affairs (“Defra”) of the supplementary
Green Book Guidance on ‘Accounting for the Effects of Climate Change’ in November 2020, a thorough assessment of
the impact of climate change and severe we ather upon NPg Northeast and its affiliate wa s undertaken in collaboration with
other gas and electricity network operators through the ENA. The results of the review and associated adaption, recovery
and transform plans we re published in the NPg Northeast and its affiliates ‘Adapting to Climate’ strategy in November
2021. An update to the actions laid out in the report was published in December 2024 as part of the fourth round of
adaptation reporting (ARP4).
In line with Defra’s recommended approach, the assessment wa s performed at the operational and asset base level and
followed the specific guidance for projects, policies and programmes that have a lifespan that goes beyond 2035. This
included using two climate scenarios (as utilised by the Climate Change Commission) to:
• Consider options which include all adaptation measures which would mitigate the known impacts of the 2°C scenario;
and
• Make decisions based on the Northern Pow ergrid Group’s risk appetite about whether to consider adaptation measures
aligned with the 4°C global wa rming scenario.
Using outputs from the work that the ENA had commissioned from the Met Office, potential climate related hazards,
including high temperatures, heavy rain, droughts, storms, sea level changes, snow, ice, wildfires and lighting - or a
combination of these, we re identified. The hazards we re then reviewed against other variables such as regional climate
change considerations (known events and topography), asset configuration and interdependencies on other national
infrastructure to identify a range of impact scenarios.
The risk assessment was carried out across three timescale horizons, short term: current climate, medium term: 2050’s and
long term: 2080’s, for both the 2°C and 4°C scenario and was applied to each of NPg Northeast and Northern Pow ergrid
(Yorkshire) plc’s six operating zones. The three time periods we re aligned with the UK Climate Projections 2018 and the
most recent guidance from Defra (ARP4). This allowed the Northern Pow ergrid Group to understand how each impact
scenario affected the whole of NPg Northeast and its affiliates geographic operating locations, including those where
known vulnerabilities already exist such as in coastal areas, flood plains and exposed areas, and over what period, so as to
establish and prioritise the key areas of risk and identify relevant opportunities.
Page 8
Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
Clim ate Change Adaptation
From an overall business model and strategy resilience perspective, the risk assessments (and corroborated via the findings
from other DNOs through the wo rk of the ENA) identified that there was no significant divergence in the climate
projections, the impact scenarios or key risks themselves, we re observed between the three timescales until beyond 2050.
Whilst this provides some comfort during the short term, adapting to climate change requires an understanding of how to
better resist the challenges and how to absorb the impact to minimise it as when events do occur and how to utilise the
opportunities this creates.
Accordingly, where the risk assessments identified that risks were more likely to occur (at any point over the three
timescales) and/or that the impact was potentially greater, these we re categorised as the highest priority risk areas and
programmes covering bespoke adaptation, recovery actions and longer-term transformations we re developed accordingly.
It wa s identified that the highest priority risk areas included:
• Flooding presented by changes in precipitation rates and sea level rise; and
• Changes in grow th rates and patterns of trees due to changes in temperature and precipitation.
As referenced in ‘further information’ below, the impact of climate related issues upon the Northern Powergrid Group,
particularly NPg Northeast, are incorporated into the five-year regulatory Business Plan. This includes an assessment of
the impact of investing in mitigation programmes and undertaking innovation projects with climate change acting as a key
driver, particularly in Network investment decisions. These plans are fully incorporated into the Northern Powergrid
Group’s financial planning process (including with consideration of the impact on areas such as the Northern Pow ergrid
Group’s supply chain) and the impact of climate related issues will continue to be included in regulatory business plans for
the relevant time periods in question. Climate related risk assessment scenarios that feed into financial and strategic
planning are included in the NPg Northeast and Northern Powergrid (Yorkshire) plc’s third round Adapting to Climate
Change report and its supporting annex (available via the Northern Powergrid Group’s we bsite). An update to this report is
available in the fourth round Adapting to Climate Change update report (which is also available via the we bsite).
Principal climate-related opportunities and risks arising in connection with the Group’s operations
1. Physical risk (long term - acute/chronic)
: Precipitation (extreme prolonged rainfall) - long periods of above average
precipitation or intense rainfall events resulting in flooding and erosion.
Assessment assumptions: data wa s used concerning the accumulation of rainfall over a month and where it exceeds the
90th and 95th percentile of today’s climate, the Soil Moisture Deficit and for heavy daily rainfall events, the percentage
changes in the 99th percentile of seasonal daily mean precipitation.
Findings: There wa s a large regional variation in how the frequency of climate related hazards we re expected to change in
future periods. How ever, in autumn and winter mo nths, instances of prolonged rainfall, heavy daily rainfall events and
heavy hourly precipitation were projected to increase across most of the UK. Assets located in coastal areas were more
vulnerable to changes in sea level, notably in the Humber Estuary and Seal Sands.
Impact: Access issues, asset damage and reduced performance, predominantly as a result of Grid and Primary Substations
being adversely affected.
Serious flooding in particular wa s likely to result in the most severe consequences, including the loss of electricity supply
to thousands of people, as well as to other types of infrastructure. This in turn had the potential to lead to additional costs
as a result of replacing or repairing damaged equipment, as we ll as increasing the number of customer interruptions,
thereby having a negative effect on service and performance levels.
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Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
As set out in ‘Operational Excellence’, Network reliability is recorded via Ofgem’s Interruptions Incentive Scheme (“IIS”)
through targets in relation to CML and CI. If IIS targets are exceeded, there is a reward. Conversely, in the event targets
are missed, there is a penalty. In addition, if Guaranteed Standards or service levels that are agreed by Ofgem are failed,
payments must be made to those customers affected. Therefore, unless there is an exemption applied for an extreme
we ather event, NPg Northeast is susceptible to an increase in costs if service and performance levels reduce.
Mitigation: Flood defences programme - designed to comply with national guidance on how to improve the resilience of
electricity substations to flooding.
Mitigation activity:
• Improve and maintain flood resilience through targeted adaptations in civil defences and install additional substation
defences.
• Improve flood resilience at distribution substations, either by mo ving them out of the line of flooding risk or by
implementing mitigation measures.
2. Physical risk (long term - acute/chronic): Temperature
(extreme heat) - high temperatures that may reduce the
performance and efficiency of assets.
Assessment assumptions: Thresholds to understand the frequency of days which constitute ‘extreme temperatures’ across
the UK and how these may change under future climate projections we re used. This included the frequency with which the
daily maximum temperature exceeded 28°C, 30°C and 35°C and the frequency with which the daily maximum
temperature exceeded 28°C for 3 consecutive days.
Findings: Trends in observational records confirmed that the UK climate is wa rming with high temperature thresholds
being exceeded each year and expected to increase in line with Representative Concentration Pathway 8.5 (being the
wo rst-case climate change scenario). Met Office climate projections identified that the frequency of hot summer periods is
becoming increasingly common.
The rate of change for extreme heat wa s expected to be slower for cooler regions of the UK such as the North of England.
How ever, by the 2060s the frequency with which extreme heat occurred in the North of England wo uld be the equivalent
to that of the wa rmest areas of the UK at the time of the assessment.
Impact: A reduction in the performance and efficiency of assets. This in turn has the potential to increase fault volumes,
leading to additional costs being incurred as a result of repairs and maintenance, reduce service levels and customer
satisfaction, and could cause delays to other wo rk planned for delivery.
Whilst the likelihood of global temperature rise is accepted, the impacts on DNOs has not yet begun to be realised.
Because of this, networks do not currently see any drivers to invest ahead of the need to offset risks.
Mitigation activity:
• Network and asset performance will continue to be mo nitored and will be mo dified once climate change begins to have a
direct and longer-term impact.
• Standards and specifications will be updated to include projected changes in temperatures and ground movements. This
includes reviews and changes to asset ratings and construction and design specifications as appropriate.
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Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
3. Physical risk (long term - acute/chronic): Precipitation
(storms) - Strong winds are a significant hazard, especially
when experienced in conjunction with heavy rain.
Assumptions: As for Precipitation (extreme prolonged rainfall)
Findings: There was no clear evidence within climate projections that there wo uld be a change in the frequency or power
of storms. Accordingly, the risk of strong winds was assessed in line with the climate conditions at that time. It was also
recognised that research into the effects of wind had been carried out between 2011 and 2015 under the Resilient
Electricity Networks for Great Britain project and learnings had been incorporated into the NPg Northeast’s specifications.
Impact: A number of storms have affected the Network since the initial risk assessment, notably storm Arwen. It is
therefore recognised that storms can lead to operational failure of above ground assets, resulting in increased faults and
loss of supply to customers, which in turn affects customer service. The potential for damage to telecommunications
infrastructure, leading to the inability to communicate with staff in the field or control technology, can also impact repair
efforts further.
Mitigation: Resilience programme - Resilience programme - Maintain operational resilience and embed long-term
resilience across the asset programmes, working with others to better understand future risks.
Mitigation activity:
• Utilise drones for storm damage assessments.
• Undertake collaborative exercises to test operational response.
• Major Incident procedures in place.
• Embed resilience across asset programme designs and specifications to deliver long-term synergistic resilience.
• Improved resilience of the Network.
• Vegetation management programme (see below).
4. Physical risk (long term - chronic): Temperature / Precipitation
(gradual increase in temperature and rainfall) -
wa rmer and we tter conditions may extend vegetation growing seasons, resulting in increased or accelerated growth of
vegetation.
Assumptions: The length of the grow ing season wa s calculated using mean daily temperatures beginning at the start of a
period of five successive days where the daily-average temperature wa s greater than 5°C and ending on the day before a
period of five successive days when the daily-average temperature wa s less than 5°C.
Findings: The average grow ing season length had increased by approximately 30 days per year over the course of the last
60 years and wa s reported as being largely due to an earlier onset of spring. As a result, the combined effect of temperature
and precipitation wa s likely to lead to increased vegetation growth.
Impact: Interference to overhead lines could cause a variety of power supply issues ranging from transient interruptions,
due to vegetation touching the line, through to severe damage from trees, or parts of trees, falling onto the lines. This may
result in increased levels of investment being required in order to maintain Network resilience, additional costs associated
with maintenance and cutting cycles and performance and customer service related issues.
Under abnormal we ather conditions there is also the potential for large scale power outages with some supply restorations
taking many days.
Mitigation: Vegetation management programme - improving the resilience of the overhead Network under abnormal
we ather conditions using a risk-based methodology.
Mitigation activity:
• Undertake enhanced resilience cuts in line industry standards on the overhead Network to comply with enhanced
resilience requirements.
• Establish and maintain clearance corridors.
• Assess and tackle the issues anticipated from ash tree dieback through the management of affected spans.
• Undertake a vegetation clearance programme for substations and tower bases.
• Utilise Light Detection and Ratings (“LiDAR”) technology to ensure efficient targeting for vegetation management.
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Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
5. Transition risk: Enabling the Energy Transition - see Principal Risks and Uncertainties
6. Opportunity: Innovation
- participating in and leading innovation projects as a way of developing creative solutions to
mitigate the risks of climate change and enhance responsiveness in the event an incident does occur.
A number of projects are planned for the ED2 period including:
• Optimising the use of LiDAR data in order to carry out mo re effective and efficient clearance and vegetation
management by prioritising cutting responses;
• Reviewing the link between rainfall and underground cable faults to understand and quantify the risk;
• Research into substation design specifications and innovative materials to mitigate risks associated with
high-temperatures and assets;
• Investigations to understand the performance limitations of outdoor control equipment during periods of extreme heat;
• Estimate the extent of Ash tree dieback and its impacts on the Network; and
• Review of flood risk at distribution substation sites and the introduction of monitoring.
Further detail of innovation supporting decarbonisation can be found in the ‘Environmental Sustainability’ section of the
Strategic Report.
7. Opportunity: Decarbonisation
-adapting and evolving the Network to facilitate the UK’s net zero strategy.
There are many benefits associated with decarbonisation, not just for the Northern Pow ergrid Group, but for the areas it
serves and the people who live and wo rk there. This includes developing the Network to accommodate additional
connections to enable mo re electric vehicle chargers to be installed, to allow greener heating solutions, to provide a
mechanism for local electricity production and to facilitate the grow th of renewable energy sources by offering greater
flexibility.
Further detail of the initiatives underway to facilitate decarbonisation can be found in the ‘Environmental Sustainability’
section of the Strategic Report.
8. Opportunity: Collaboration
- working with stakeholders including industry partners and energy networks to find
solutions to mitigate the risk of climate change and improve resilience through collaborative wo rk on interdependencies to
reduce the risk of cascade failures across systems.
The Northern Pow ergrid Group works closely with its stakeholders and partners to share best practice, evolve new
protocols, develop industry guidance and adopt measures to prevent or manage the impact of climate change. This includes
wo rking with Local Authorities and regional bodies to evolve their climate resilience and decarbonisation plans and
collaborating on specific issues to generate practical solutions - such as with the ENA as outline above.
Initiatives planned in this area include collaboration with:
• Other regional infrastructure operators to identify and mitigate interdependencies.
• The Environment Agency and local authorities on the implementation of their regional flood risk management plans and
establish support for these where appropriate.
Further information
Given the likely impact of climate related opportunities and risks on the Network, the NPg Northeast and its affiliates
various mitigation programmes (including KPIs and the methodology for determining these) we re fully scoped and costed
as part of the Business Plan submission to Ofgem for the ED2 Period, details of which can be found via the Northern
Pow ergrid Group’s website.
In addition to the information contained above, the Northern Pow ergrid Group has published a ‘Climate Resilience
Strategy’ and an ‘Adapting to Climate Change Report’, the former having been submitted to Ofgem and part of the
Business Plan for 2023 to 2028 and the latter having been submitted to Defra in line with the requirements of the Climate
Change Act (2008). The Northern Powergrid Group’s most recent report wa s published as part of the fourth round in 2024
and is an update report which should be read in conjunction with the third-round report published in 2021. Copies of both
reports can be found on the Northern Powergrid Group’s website.
The Northern Powergrid Group is currently wo rking with Ofgem to complete a stress testing exercise which is focussed on
the risks from extreme heat, wind and flooding. The outputs from this are anticipated in 2026 and will form the basis of the
Business Plan and Climate Resilience Strategy for the ED3 period (2028-2033).
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Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
EMPLOYEE COMMITMENT
Strategic objective:
High-performing people doing rewarding jobs in a safe and secure wo rkplace
2025 2024
KPI Actual Target Actual Target
Northern Powergrid Group occupational safety and
health administration ("OSHA") rate 0.28 <0.09 0.23 <0.09
Preventable vehicle accidents (PVAs) 13 <11 7 <11
Lost time accidents 1 0 1 0
Contractor OSHA incidents 3 <3 2 <3
Medical treatment accidents 2 <1 2 <1
Operational incidents 5 <3 2 <4
Absence rate 3.46% 3.52%
Health and safety
Business Plan commitment
: To maintain industry leading safety performance and achieve a 50% reduction in contractor
accident rates.
Perform ance during the year
: In common with the Berkshire Hathaway Energy group, the Northern Powergrid Group
measures its safety performance using the OSHA rate, which is a measure used to capture safety incidents down to minor
levels of medical treatment. The Northern Pow ergrid Group failed to meet its target of 0.09 having achieved an OSHA rate
of 0.28 (2024: 0.68), which equated to eight recordable incidents against a goal of two or fewer. NPg Northeast’s PVA
performance wa s disappointing with 13 accidents recorded in the year (2024:11). In terms of the Business Plan
commitment, the number of contractor OSHA incidents wa s higher when compared to the prior year, resulting in further
improvement actions being initiated.
In relation to the OSHA incidents, the majority were minor in nature (cuts, slips and trips and slow manoeuvring vehicle
accidents), but the increase relative to the prior year reinforced the importance of NPg Northeast’s health and safety
performance improvement plan which covered colleague safety, contractor safety, health and we ll-being and public safety.
Accordingly, initiatives undertaken and planned for 2026 included the continuation of driver training, enhancing personal
protective equipment, the completion of an assurance programme on high -risk activities, safety training for all first line
managers, and the renewal of the fleet vehicle telematics contract to equip drivers with the latest technology.
During the year, NPg Northeast successfully completed the ISO 45001 re-accreditation audit of our occupational health
and safety management system.
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Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
Employees
Business Plan com mi tment:
High-performing people doing rewarding jobs in a safe and secure workplace.
Perform ance during the year
: Building capacity remained a key priority, with a focus on expanding the intake of
apprentices and engineers, in addition to enhancing working arrangements to ensure seamless customer support. This
included increasing time spent together as teams, improving onboarding experiences and focusing on talent pipelines to
facilitate retention and build capacity. NPg Northeast continued to foster strong relationships with the trade unions through
established wo rking groups.
Employee development continued via the CORE programme, designed to enhance leadership and management skills,
leadership apprenticeships, and an approach to identifying and developing individual contributors. Routine training also
took place in key areas such as customer service, cyber security and management development, and the rollout of the Core
Leadership Expectations 360 programme was completed for senior leaders. A mentoring platform was also introduced to
connect colleagues across the Northern Pow ergrid Group focussing on professional development.
Opportunities for learning and development will be expanded throughout 2026, with the launch of new skills mo dules.
During the year, 56 new recruits (2024: 89) joined NPg Northeast’s and Northern Pow ergrid (Yorkshire) plc’s Workforce
Renewal Programme. At 31 December 2025, the Group had 1,802 employees (2024: 1,639).
The Northern Powergrid Group’s gender pay gap report is available via the Northern Powergrid Group’s website.
Employee engagement
The board and senior management team continue to keep employees and trade union representatives informed of and
involved as appropriate in developments that may impact them now or in the future. Consultation for collectively
bargained employees is agreed with trade union representatives in the form of a constitutional framework. In addition, the
Group utilises focus groups and colleague panels to consult on improvements and changes.
In support of this process, the Director of People and Change routinely reports to the board and the Health and Safety
Committee to ensure that the views of employees are considered and to facilitate the discussion of and any subsequent
decision making in respect of employee related concerns or issues.
During the year, the President and Chief Executive Officer, members of the board and members of the senior management
team provided regular updates on financial, organisational, safety and customer service performance. The executive
directors engaged directly with employees during operational and office-based site visits and induction events.
Communication with employees wa s delivered via various channels including text messages and virtual meetings,
alongside regular briefings, line manager conversations, meetings with trade union representatives and utilising the
Northern Powergrid Group's intranet.
The Berkshire Hathaway Energy code of business conduct ("Code of Conduct")
The Northern Pow ergrid Group has adopted the Code of Conduct, which details the commitment to ethics and compliance
with the law, provides reporting mechanisms for known or suspected ethical or legal violations, and establishes minimum
standards of behaviour expected of all employees. In support of this, a "speaking up" process is in place enabling all
employees to raise concerns of unethical acts, malpractice or impropriety (including bribery or corruption), and an
anonymous help line operated by an independent company is also available. All colleagues complete an annual online
training programme covering the requirements of the Code of Conduct. This also requires all employees to declare any
conflicts of interest and unspent criminal convictions.
Employment of disabled persons
The Group’s policy is to provide all protected groups, including disabled people, with equality at work in respect of
employment, training, career development and promotion, having regard to their aptitudes and abilities. Should any
member of staff become disabled during their employment, reasonable adjustments will be made, wherever possible.
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Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
ENVIRONMENTAL RESPECT
Strategic objective:
Leaders in environmental respect and low carbon technologies.
2025 2024
KPI Actual Target Actual Target
Total oil/fluid lost (litres) 7,229 <9761 6,108 <10,073
SF6 gas discharges (kg) 14.55 <11.4 21.4 <11.8
Environmental incidents 1 <3 1 <3
KPI 2025 2024
Carbon footprint (tonnes) 6,561 6,791
KWh Energy Consumed 20,885,501 20,325,432
Business carbon footprint Tonnes Per km² Tonnes Per km²
Scope 1 2,636 0.18 2,497 0.17
Scope 2 2,248 0.16 2,682 0.18
Scope 3 1,677 0.12 1,612 0.11
Total carbon footprint (tonnes) 6,561 0.46 6,791 0.46
Notes:
KWh energy consumed relates to depot energy and fleet fuel usage.
Contractor emissions are based on fuel usage and is the best available information at the time of publishing.
The chosen business carbon footprint intensity ratio is based on the NPg Northeast’s licence area which equals 14,394km2
The methodology adopted to calculate energy and business carbon footprint data is aligned with international standards, those required by Defra and
BEI S and is audited annually and certified through the Certified Emissions Measurement and Reduction Scheme (“CEMARS”) for compliance with ISO
14064-1:2006.
Business Plan com mi tm ent:
To reduce carbon emissions, pollution, and wa ste, and wherever possible, enhance the local
environments in which we operate.
Perform ance during the year:
The Group is committed to using natural resources responsibly and safeguarding the
environment for future generations. This commitment is outlined in the Environmental RESPECT Policy (Responsibility,
Efficiency, Stewardship, Performance, Evaluation, Communication, and Training) and delivered through the
Environmental Action Plan, which addresses twelve key impact areas including Scope 1, 2, and 3 carbon emissions, SF₆
losses, visual amenity, biodiversity, and wa ste.
NPg Northeast’s overall business carbon footprint Scope 1 and 2 emissions (excluding losses) totalled 4,735 tonnes CO₂e
for the year, an improvement on the prior year. Whilst NPg Northeast and its affiliate achieved reductions in Scope 1 and 2
emissions throughout ED1 and into the ED2 period, the current level remains marginally above the science-based target
for reaching net zero, indicating that further action is needed to drive additional reductions.
Improvement initiatives include cutting emissions from the operational fleet by replacing diesel vehicles with Ultra-Low
and Zero-Emission models, exploring emerging technologies such as hydrogen fuel cells, adopting alternative renewable
fuels, and improving energy efficiency through facility upgrades at operational sites.
For Scope 3 emissions, NPg Northeast continued its partnership with the Supply Chain Sustainability School and
implemented its carbon calculator to measure supply chain emissions, laying the groundwork for a reduction strategy in
2026. In addition, NPg Northeast collaborates with other DNOs to share expertise, insights, and ensure a consistent
approach.
SF₆ losses totalled 14.55 kg, reflecting a year-on-year reduction, though still above target. In response, NPg Northeast
continued to implement operational routines, address leaks promptly, and collaborate with other DNOs through the Energy
Networks Association (“ENA”) to share best practices and trial innovative SF₆-free technologies.
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Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
During the year, total fluid loss from the Network of 7,229 litres, was within the target of 9,761 litres. How ever, to further
minimise losses, NPg Northeast remains committed to replacing 3,400 km of cable during the ED2 period and continued
to advance the use of perfluorocarbon tracer technology for leak detection and self-healing cable solutions.
To meet the requirement of identifying and removing or remediating non-compliant equipment containing PCBs by 31
December 2025, NPg Northeast and its affiliate collaborated with the Environment Agency and the ENA to develop a
statistical mo del for determining non-compliant pole-mounted transformers. The mo del has been highly effective in
reducing the overall burden and cost of the programme. Delivery in 2025 was significant, albeit, NPg Northeast will
continue wo rking with the Environment Agency during 2026, until compliance is achieved.
In relation to NPg Northeast’s broader environmental impact, plans have been established to achieve zero wa ste to landfill
by 2035 and divert 90% of wa ste from all operations by 2028. Network operations remain the largest source of wa ste, with
excavations and related activities accounting for over 95% of total wa ste generated. Measures to improve performance
include increased recycling and reuse of materials, with a target to recycle and reuse 85% of all materials by 2028,
covering the additional volumes arising from Network investment projects and decarbonisation initiatives. Challenges
remain around assessing and classifying materials from unplanned utility excavations as hazardous or non-hazardous prior
to transport and disposal, which impacts the NPg Northeast’s goal of reducing landfill waste. To address this, the
Streetworks UK protocol wa s introduced during the year, implementing an industry-wide compliance obligation.
From a supply chain perspective, NPg Northeast will continue collaborating with suppliers to reduce Scope 3 emissions.
To support this, an embodied carbon mo del will be developed to guide investment decisions, including material sourcing.
At office locations, wa ste segregation facilities have been expanded by implementing “Simpler Recycling”.
The impact of NPg Northeast’s operations was mitigated, where possible, through a range of biodiversity, natural capital,
and visual amenity initiatives. This includes fulfilling the duty to enhance designated areas such as National Parks and
improving biodiversity at 200 sites throughout the ED2 period.
At present, NPg Northeast has no plans to use carbon offsetting to achieve its ED2 targets. The focus remains on reducing
physical carbon emissions, as additional investment in the Network to enable decarbonisation delivers greater value for
customers. However, at an initiative level, NPg Northeast may pursue ad-hoc offsetting opportunities where appropriate.
From an environmental compliance perspective, NPg Northeast operates under a United Kingdom Accreditation Service
(UKAS) scheme for environmental management and is certified to ISO 14001:2015-a standard designed to enhance
environmental performance, meet compliance obligations, and achieve environmental objectives, all of which support NPg
Northeast’s KPIs. NPg Northeast’s carbon footprint reporting framework is certified under CEMARS for compliance with
ISO 14064-1:2006. Additionally, NPg Northeast holds ‘Energy & Utility Skills’ certification for its Competence
Management System for wa ste management.
To date, NPg Northeast’s performance against several challenging KPIs aimed at reducing carbon usage and minimising
environmental and stakeholder impacts has been largely positive. How ever, achieving carbon targets, while collaborating
with suppliers and partners presents significant challenges and risks. Consequently, NPg Northeast will continue to refine
its ambitions and strengthen the implementation of environmental plans throughout ED2, into ED3, and beyond. Details of
phased targets for wa ste to landfill, recycling, noise pollution, and biodiversity, along with descriptions of all key
measures, are provided in Annex 1.4 of the Business Plan, available via the Northern Powergrid Group’s website (Our
Business Plan).
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Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
Environm ental Sustainability
Strategic focus:
Enable growth in customers connecting low carbon technologies and support pathways to net zero.
Perform ance during the year:
As the country takes action to reduce carbon emissions in line with the net zero target by
2050, the wa y in which electricity is produced and used is expected to have a substantial impact on the Network over time.
Accordingly, NPg Northeast continues to implement its Distribution System Operator (“DSO”) strategy, and act as a key
facilitator in the transition by placing decarbonisation at the heart of its investments and actions.
The operation of flexibility on the Network has continued to mature in 2025. In the past year, NPg Northeast increased
tendering opportunities, improved market access for Flexibility Service Providers and established new forecasting and
dispatch processes. By enabling customers to change their energy consumption and generation patterns, NPg Northeast
facilitated a mo re efficient and greener Network by providing an alternative to both Reinforcement and generation
curtailment requirements.
From an innovation perspective, NPg Northeast runs a portfolio of projects in the priority areas of customer vulnerability,
resilience, and decarbonisation. Notably, the Community DSO project, a £3.2 million trial delivering smart local energy
systems, wa s expanded in 2025 with the mobilization of two further trial sites to explore how consumer energy resources
and flexibility can be utilised in communities.
To better understand how to prepare the Network for the future needs of its customers and the potential pathways to net
zero, NPg Northeast published its updated Distribution Future Energy Scenarios. NPg Northeast also published its
Energising Grow th strategy, setting out how larger industrial and commercial customers are being supporting alongside
Local Authority stakeholders to drive regional decarbonisation, and in turn enable economic regional growth. This wa s
further supported by the launch of our LAEP+ tool, which provided Local Authorities with key functionality to develop
their Local Area Energy Plans, through enhanced conversations, and regional specific insight. Both publications are
available via the Northern Powergrid Group’s website.
In delivering its Business Plan commitments, NPg Northeast engaged with stakeholders on its DSO Strategy to achieve a
number of outcomes and benefits including enabling open energy data sharing, transforming the wa y decisions and plans
are made, supporting the development of new flexible energy markets, increasing customer and Network flexibility and
facilitating a whole system energy system. NPg Northeast’s Energy Systems directorate centralises responsibility for
delivering DSO plans including major connections to the Network.
In conjunction, and with the support of the Independent Stakeholder Group (“ISG”), NPg Northeast operated its DSO
Review Panel (“DRP”) for the purpose of making its decisions transparent and to allow the independent members to
comment on and challenge NPg Northeast’s major investment decisions.
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Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
REGULATORY INTEGRITY
Strategic objective:
Trustw orthy, fair and balanced.
KPI:
Completion of a quarterly regulatory compliance affirmation process.
Business Plan commitment:
To manage the Group's business to the highest behavioural standards and adhere to a policy
of strict compliance with all relevant standards, legislation and regulatory conditions.
Perform ance during the year:
In order to assure compliance with distribution licence and other regulatory obligations,
NPg Northeast operates a regulatory compliance affirmation process. Responsible managers are required to review
compliance with approximately 3,700 obligations on a quarterly basis and report on any identified non-compliances or
perceived risks which are then addressed by members of the senior management team. To minimise the risk of NPg
Northeast breaching its licence conditions and other statutory requirements (w hich could lead to financial penalties), the
board reviews the outcomes of each exercise. Each quarterly regulatory compliance affirmation process wa s completed
satisfactorily during the year.
NPg Northeast submitted its annual Data Assurance Report to Ofgem in March 2025, which included risk assessments of
the regulatory returns to be submitted during the Regulatory Year ahead (April 2025 to March 2026), together with a
report detailing the assurance wo rk carried out in the Regulatory Year ended 31 March 2025.
On 6 November 2024, Ofgem initiated the process for determining the arrangements for the next electricity distribution
price control period, which will begin on 1 April 2028, by issuing a consultation on the framework for ED3. Ofgem
envisages that ED3 will have a critical role in the path to achieving net zero by 2050, which could involve a significant
change in the level of Network investment. In that respect, Ofgem has stated that it will aim to keep the costs of the
infrastructure needed for net zero as low as possible through maintaining a low cost of capital and driving further
efficiency. NPg Northeast submitted its response to the consultation on the framework on 15 January 2025 and began the
process of preparing its draft ED3 Business Plan, which, it is currently expected, will be submitted to Ofgem in July 2026
and will be followed, in December 2026, by submission of the final version.
Ofgem published the methodology consultation to further develop arrangements for ED3 on 08 October 2025, which wa s
clear on the need to attract equity capital to secure the step-up in investment. NPg Northeast submitted its response to the
methodology consultation on 03 December 2025. The process will culminate with Ofgem expected to issue its Draft
Determinations in June 2027 and its Final Determinations in December 2027
Page 18
Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
PRINCIPAL RISKS AND UNCERTAINTIES
The Northern Pow ergrid Group operates a structured and disciplined approach to the management of risk as part of its
overall risk management policy and in support of its financial reporting practices. A system is in place to facilitate the
identification of new and emerging opportunities and risks, including those associated with the achievement of the
Northern Powergrid Group’s strategic objectives and Core Principles. This includes regular reviews of the macro
environment as we ll as risks that arise from within functional business areas.
Once identified, key risks and their respective controls and mitigation plans are continually assessed and formally
reviewed on a quarterly basis by the Risk Advisory Board ("RAB") in order that they are managed to an acceptable level
in accordance with the Northern Pow ergrid Group’s risk appetite, which is determined by a process based on risks, issues
and consequences. The level of tolerance varies in accordance with the pursuit of objectives and with caution or
acceptance adopted depending on whether risks can be influenced or mitigated fully, partly or not at all. The RAB
routinely reports its findings to the board to ensure the directors are sufficiently appraised of the risk exposure associated
with the pursuit of the Group’s long-term strategy.
The risk management programme includes regular reviews of the crisis management, disaster recovery and major incident
plans. To determine the level of disaster preparedness and responsiveness against threats to business continuity, risk
management plans and processes are periodically tested. This self-evaluation approach is reinforced by Berkshire
Hathaway Energy, which benchmarks risk management activities across its business units and shares significant lessons
learned. The business continuity and disaster recovery plans are tested regularly to ensure that as required, operational
performance can remain resilient and employees are able to perform their duties safely.
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Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
Principal Risks
During the year, no notable changes have taken place. The Northern Powergrid Group’s principal risks are not ranked or
prioritised in any particular order. Given their sensitivity and ever-changing nature, the board has elected not to disclose
the risk appetite associated with each risk.
Cyber and Information Security
Unauthorised access or compromise of the Information Technology or Operational Technology networks, resulting in loss
of Network control and availability. Unauthorised access or loss of large volumes of data or sensitive data.
Mitigations:
•
Robust cyber security risk mitigation programme is in place.
• Accreditation under the ISO 27001 Information Security standard for operational, customer, employee and financial
information.
• Compliant to the Network Information Security Directive and the Basic Cyber Assessment Frameworks.
•
Compliance with the Centre for Internet Security Critical Security Controls.
Regulatory and policy positioning
Decisions taken resulting in negative impacts to our business mo del.
Mitigations:
•
Continued dialogue and engagement with Ofgem.
•
Active involvement in consultations on price controls.
•
Robust budgetary and financial position.
• Optimising price control reopener mechanisms.
Network resilience
Loss of the Network due to significant weather events, targeted physical attack or catastrophic asset failure resulting in
sustained or widespread loss of essential supply.
Mitigations:
•
Major incident and crisis management policies, plans and governance arrangements in place.
•
An industry mutual aid agreement exists.
•
Grid resilience programme and audits.
• Vulnerable site protocols.
Safety
Fatality or serious harm caused to an employee or a third party.
Mitigations:
•
Overseen by the Health and Safety Committee.
• Safety Health and Improvement Plan and associated policies and procedures.
•
Health and safety training, enhanced audit programme and inspection regimes are in place.
•
ISO45001 safety management system in place.
Page 20
Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
Environm ent and climate protection
Failure to prevent network assets from having a significant negative impact on the environment.
Mitigations:
•
Programme to reduce fluid loss, business carbon footprint and remove assets containing PCBs.
• Environment improvement plan, Environment Action Plan and science-based targets.
• Path to carbon neutrality by 2040.
• Incident response, wa ste management and habitat protection programmes.
•
ISO14001 environmental management system in place.
Resource availability
Access to and availability of skilled resource resulting in an inability to deliver wo rk programmes.
Mitigations:
•
Mix of direct labour and contracted resource is used.
•
Workforce renewal programmes in place to recruit and retain employees.
•
Ongoing training and development builds internal capability.
•
Employee engagement, health and well-being initiatives and a diversity, equality and inclusion plan in place.
•
Good relationships with trade unions representatives.
Enabling the energy transition
The Network either becomes, or is perceived to have become, an obstacle to decarbonisation and energy transition.
Mitigations:
•
Overseen by a steering group.
•
Change programme in place to improve customer connection lead times and customer communication.
•
Part of an industry wo rk programme through the ENA.
•
Policy team engages and with Government and Ofgem.
•
Stakeholder engagement programme scrutinised by the ISG and DRP.
Custom er Service
Loss of reputation, financial penalties.
Mitigations:
•
Customer service improvement plan.
•
Engagement with ISG and DRP.
•
Relationship with customer support partners and organisations.
•
Employee training and development.
Efficiency and output performance
Failure to maintain cost and output performance competitiveness in the industry.
Mitigations:
•
Robust business planning process.
•
Robust financial controls in place.
•
Monthly executive business performance review.
•
Comprehensive “Efficient Output Delivery” programme.
Page 21
Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
Financial risks
The exposure to interest rate, tax, liquidity and treasury risks.
Mitigations:
• Financed by long-term borrow ings at fixed rates and has access to short-term borrowing facilities at floating rates of
interest.
• As at 31 December 2025, 99% of the Group's long-term borrowings we re at fixed rates and the average maturity for the
long-term borrowings wa s 20 years.
•
Financial covenant mo nitoring is in place.
•
Regulatory adjustments control the effect of taxation changes.
Internal control
The Group’s internal control exists to support the financial reporting process, including regular reporting, a series of
operational and financial policies, investigations undertaken by internal audit and a stringent process for ensuring the
implementation of internal audit recommendations. In addition, the Group utilises comprehensive business planning
procedures, regularly reviews KPIs to assess progress towards its goals, and the internal audit function provides
independent scrutiny. Financial controls include centralised treasury operations and established procedures for the
planning, approving and mo nitoring of major capital expenditure.
The RAB mo nitors the effectiveness of internal controls and reports on its findings to the Audit Committee and Berkshire
Hathaway Energy.
Controls which are applicable to financial decisions are governed via a schedule of delegations of authority which are
approved by the board (and applies to the Northern Pow ergrid Group) for the purpose of enabling the senior management
team to make decisions up to certain financial limits, above which point the decision making reverts to the directors. These
limits reflect the board’s level of risk appetite and are reviewed regularly.
In accordance with Berkshire Hathaway Energy’s requirements to comply with the Sarbanes-Oxley Act, the Group
undertakes a quarterly risk control assessment confirming that the effectiveness of the system of internal controls have
been reviewed during the year. A self-certification process is in place, in support of this review, requiring certain senior
managers to confirm that the system of internal control in their area of the business is operating effectively. Consequently,
the directors believe that a robust system of risk assessment and management is in place.
The Northern Powergrid Group does not have a specific human rights policy. However, in accordance with the Core
Principles, it remains fully committed to operating ethically and responsibly and with fairness and integrity. This is
implemented through its policies and procedures, which are applicable to all stakeholder groups and encompasses
employees’ health, safety and welfare, dealings with customers (particularly those who are vulnerable), the impact of the
Northern Powergrid Group on the environment and the contribution to sustainability.
To ensure that the Northern Pow ergrid Group maintains the highest level of ethical standards Berkshire Hathaway
Energy's Code of Conduct has been adopted (See ‘Employees’). The Northern Pow ergrid Group has robust procedures in
place to meet the requirements of the Bribery Act 2010 for which every employee undertakes annual training.
Section 172(1) statement
Decision-m aking at the Board
All matters which under the Company and Group’s governance arrangements are reserved for decision by the directors are
presented at board meetings. Directors are briefed on any potential impacts and risks for customers, and other stakeholders
and how they are to be managed. The directors take these factors into account before making decisions, which together
they believe are in the best interests of the Company and Group and its member.
Page 22
Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
Long-term sustainability
As referenced throughout the Strategic Report, NPg Northeast’s business model is to make sufficient profit in order to
invest in the Network thereby, ensuring the integrity of the electricity supply for its customers. To achieve this objective,
NPg Northeast delivers its service to fulfil the needs of the stakeholders with whom it interacts and in doing so, ensures all
business relationships are conducted in an open and transparent manner. Consequently, fostering business relationships is a
prerequisite of the activity performed by the Group in the pursuit of its goals and the long-term sustainability of the Group
is at the forefront of decision-making.
The Group’s policy in respect of engaging with stakeholders is governed by the Core Principles and the Code of Conduct.
The Core Principle of ‘Regulatory Integrity’ defines the Northern Powergrid Group’s commitment to comply with all laws
wherever it does business and the expectation that all employees (including directors) manage their activities in a manner
that is compliant with all standards, regulations and corporate policies. In addition, the Code of Conduct requires
adherence to the highest level of ethical conduct and fair dealings with all customers, suppliers and competitors.
Employees
As detailed in ‘Employee Commitment’, the Group wo rks hard to ensure the health and safety of employees and to provide
them with opportunities for advancement alongside fair terms whilst remunerating appropriately. Activities undertaken by
the board in the year included reviewing health and safety performance, monitoring key appointment changes and
reviewing the Northern Pow ergrid Group’s gender pay gap report.
Custom ers
Customers, whether they are domestic or commercial, are the primary stakeholder group served by the Group and
therefore the services offered are all tailored to provide a benefit or enhance an experience. During the year, the board
regularly reviewed performance levels, closely monitored the response in respect of major storms and associated Network
resilience and engaged with the Chair of the ISG. Further detail of NPg Northeast’s relationship with customers and the
support programmes provided is discussed in ‘Customer Service’.
Producers and suppliers
The Group wo rks closely with its supply chain and has measures in place to ensure the treatment of all suppliers is fair and
equitable. Relations with suppliers is managed using a supplier registration system which supports a robust and transparent
procurement process and ensures strict compliance with the prevention of slavery and human trafficking. As a
consequence, the system allows the Group to make informed decisions which align with its values when awarding
contracts. When considering suppliers, the board advocates prompt payment practices, which are reviewed regularly by the
internal audit function, and the implementation of procedures to reduce the risk of mo dern slavery in supply chains - as set
out in the Northern Pow ergrid Group’s annual mo dern slavery statement.
Financial stakeholders
Financial information is routinely made available to financial stakeholders, including relationship banks and bondholders.
Directors engage with stakeholders when entering into new financial arrangements. During the year, the board approved an
interim dividend, the annual accounts and the tax strategy and met representatives from the Northern Pow ergrid Group’s
external auditor.
Com munity and environment
Each director is required to take all reasonable steps to minimise any detrimental impact the Group’s operations may have
on the environment (see ‘Environmental Respect’). NPg Northeast provides a range of charitable and community activities
to support customers with fuel poverty and safety around electricity (‘Corporate Responsibility’). During the year, the
directors routinely reviewed environmental performance and made decisions pursuant to Environmental Respect.
Regulator
NPg Northeast is in regular dialogue with Ofgem concerning new policy development and emerging risks or opportunities
within the sector. As outlined in ‘Regulatory Integrity’, to meet its licence conditions, NPg Northeast and the directors
provide regular reporting to Ofgem (including annual regulatory certificates), contribute to various regulatory
consultations and monitor regulatory compliance. Given the implications on the NPg Northeast’s long-term strategy, the
relationship with Ofgem and the evolving ED3 framework we re regular items on the board agenda throughout the year.
Acting fairly between the Company’s owners
The Company has one class of ordinary shares which are all held by Northern Pow ergrid Limited, a company ow ned by
Northern Pow ergrid UK Holdings. The Company also has one class of preference shares, further details of which can be
found in Note 17. As outlined in ‘Strategy’, the Northern Powergrid Group is ow ned by Berkshire Hathaway Energy.
Further details of the shareholder relationship is set out in the ‘Corporate Governance Statement’.
Page 23
Northern Electric plc
Strategic Report for the Year Ended 31 December 2025 (continued)
Statem ent pursuant to Listing Rule 14.3.27R Task Force on Climate-related Financial Disclosures (“TCFD”)
The non-financial reporting information pursuant to Section 414CA of the CA06 has been reported throughout the
Strategic Report and principal risks and uncertainties. The climate-related financial disclosures pursuant to Section 414CB
(2A) can be found in the ‘Adapting to Climate Change’ and ‘Environmental Respect’ sections of the Strategic Report.
The Company has complied with all of the requirements of LR 14.3.27R by including climate related financial disclosures
consistent with the TCFD recommendations and recommended disclosures, with the exception of the scope 3 greenhouse
emissions disclosures relating Metrics and Targets (b). The Company has reported scope 3 emissions in relation to certain
categories (being those required by Ofgem’s reporting framework). However, it is accepted that further wo rk is required to
develop the disclosures.
The steps the Company plans to take in order to be able to make the relevant disclosures in the future, and the timeframe
within which it expects to be able to make those disclosures, is set out in Ofgem’s ‘Environmental Reporting Guidance’,
sections 3.8 to 3.13, a copy of which can be found via Ofgem’s we bsite. This includes a recommendation for the energy
industry to wo rk collaboratively to develop an appropriate methodology for reporting scope 3 emissions during the
remainder of the ED2 period. In addition, the Northern Pow ergrid Group is working in conjunction with Berkshire
Hathaway Energy to enhance its carbon emission reporting as a result of the California Air Resources Board obligations.
Approved by the Board on 19 May 2026 and signed on its behalf by:
A P Jones
Director
Page 24
Northern Electric plc
Directors' Report for the Year Ended 31 December 2025
The directors present their annual report and the audited consolidated financial statements for the year ended 31 December
2025.
Dividends
During the year, an interim dividend of £35.2 million was paid (2024: £277.4 million). The directors recommend that no
final dividend be paid in respect of the year (2024: £nil).
An interim dividend of £160.0 million was received (2024: £300.0 million) from NPg Northeast to the Company.
During October 2025, the Company declared and paid an interim dividend to Northern Powergrid Limited which was an
unlawful distribution due to failure to comply with the procedural requirements of Part 23 of the Companies Act 2006. As
a result, the Company has categorised the amount paid in excess of distributable reserves as a debt due from Northern
Pow ergrid Limited to the Company (see Note 30). The Company is in the process of implementing steps to remedy the
potential consequences of the unlawful distribution.
The Group's dividend policy is that dividends will be paid only after having due regard to available distributable reserves,
available liquid funds and the financial resources and facilities needed to enable the Company and Group to carry on its
business for at least the next year, with the Company and Group’s long-term prospects and viability in mind. In addition,
the level of dividends is set to maintain sufficient equity in the Northern Pow ergrid Group so as not to jeopardise any
investment grade credit ratings. These strict parameters align with the conditions set out in NPg Northeast’s distribution
licence and are considered carefully by the board so as to ensure that the payment of any dividend does not cause NPg
Northeast to breach any licence obligations in the future.
Directors of the Company
The directors who held office during the year under review and to the date of signing this report were:
A P Jones
S J Lockwood
J N Reynolds
J C Riley
During the year, none of the directors had an interest in any contract which was material to the business of the Company or
Group. During the year and up to the date of approval of the Directors' Report, an indemnity contained in the Company's
(and each company within the Northern Powergrid Group’s) Articles of Association was in force for the benefit of the
directors of the Company and as directors of associated companies, which was a qualifying indemnity provision for the
purposes of the CA06.
Future developments
The financial position of the Group, as at 31 December 2025, is shown in the consolidated statement of financial position.
There have been no significant events since the year end and the directors intend that:
• NPg Northeast will continue to develop its business by efficiently investing in the Network and improving the quality
of supply and service provided to customers. NPg Northeast intends to continue to embrace the role of DSO by
expanding its energy systems operations in order to allow its Network to form a key part of a whole energy system,
which fosters flexibility and facilitates decarbonisation.
• IUS will concentrate on its core skills of engineering contracting thereby delivering a high standard of service to its
existing clients and pursuing opportunities to increase its portfolio.
• NPg Metering will retain its focus on pursuing opportunities in the market for meter asset provision.
There are no plans to change the existing business model of the Company, or any of the companies within the Group.
Page 25
Northern Electric plc
Directors' Report for the Year Ended 31 December 2025 (continued)
Research and development
The Group supports a programme of research that is expected to contribute to higher standards of performance and a more
cost-effective operation of its business. During the year, the Group invested £1.3 million (2024: £5.6 million) in its
research and development activities.
Financial instruments
Financial risk management
Details of financial risks are included in the Principal Risks and Uncertainties, found in the Strategic Report and in Note
29 to the financial statements.
Financial derivatives
As at 31 December 2025 the Group held two derivative financial instruments (2024: two) to mitigate the interest rate risk
on a floating interest rate loan. More details on derivative financial instruments are available in Note 30 to the financial
statements.
Page 26
Northern Electric plc
Directors' Report for the Year Ended 31 December 2025 (continued)
Stakeholder engagement and environmental disclosures
In accordance with Paragraphs 10, 11 and 20 of Schedule 7 of the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008, details concerning the employment of disabled persons, the relationship and
engagement with employees and those with whom the Company and Group does business, in addition to information
concerning greenhouse gas emissions can be found in the Section 172 Statement and the Strategic Report (Environmental
Respect and Employee Commitment).
Vote holder and issuer notification
There have been no disclosures to the Company under Disclosure and Transparency Rule 5 (Vote Holder and Issuer
Notification Rules).
Directors' biographies
Alex P Jones
Mr Jones joined the Northern Pow ergrid Group in January 2015 and became Finance Director in March 2022. He is a
Chartered Accountant having completed his training with KPMG, spending seven years in their Restructuring practice.
Prior to becoming Finance Director, Mr Jones wa s the Director of Performance and Planning, leading on the development
of the Northern Powergrid Group’s Business Plan. He has also spent time leading the Northern Pow ergrid Group’s
engineering and major projects operations teams.
Stephen J Lockwood
Appointed in April 2022, Mr Lockwood joined the Northern Pow ergrid Group in 1983 and became Group Financial
Controller in 2016 before taking on the role of Head of Technical Accounting and Quality in 2023. Prior to this he held a
number of finance roles in the Northern Powergrid Group. Mr Lockwood is a qualified Chartered Management Accountant
and Chartered Tax Advisor.
John N Reynolds OBE
Mr. Reynolds was appointed in January 2011 as a director of Northern Powergrid Holdings Company and in October 2017
as Chairman of the audit committee and a director of the Company. Mr Reynolds is the Chief Executive Officer of Castle
Water. He is a Fellow of the Institution of Engineering & Technology, a Fellow of the Energy Institute and is a former
commission member of the Water Industry Commission for Scotland. Mr Reynolds chaired the Church of England Ethical
Investment Advisory Group, and is a former council member of the Central Finance Board of the Methodist Church. He is
the author of a number of books and articles on business ethics. Mr. Reynolds previously held senior management roles at
HSBC and Houlihan Lokey.
Jennifer C Riley
Mrs Riley was appointed in October 2024 as a director of Northern Electric plc. Mrs Riley joined the Northern Pow ergrid
Group in 2016 as the Company Secretary. Prior to this, she had held a number of roles at Farnell UK (formerly Premier
Farnell plc). Mrs Riley is a Chartered Governance Professional and Company Secretary.
Board diversity
Of the four board directors of the Company, one is female (25%). Mrs Riley does not hold any of the positions outlined in
Listing Rule 16.3.29 (ii). No members of the board are from a minority ethnic background.
All appointments are based on merit with due regard for diversity, inclusion and equal opportunity. The Northern
Pow ergrid Group does not set diversity targets.
Page 27
Northern Electric plc
Directors' Report for the Year Ended 31 December 2025 (continued)
CORPORATE GOVERNANCE STATEMENT
The Company has sought to apply the UK Corporate Governance Code 2024 (the "Code") and report on the application of
the Principles and supporting Provisions. Given the nature of the securities in issue, the Company (nor any Company
within the Northern Pow ergrid Group) is not required to adopt the Code, and it has not been voluntarily applied. However,
the board has elected to operate within the spirit of the Code and explain below how the Company’s and Northern
Pow ergrid Group’s governance framework aligns with the Principles and Provisions.
The directors confirm that the governance framework in place is appropriate to the circumstances of the Company and the
Northern Powergrid Group. The framework is agreed with the Northern Powergrid Group’s shareholder, Berkshire
Hathaway Energy. The Company and the Northern Powergrid Group has not complied with Provisions 4, 9, 12, 17, 18, 19,
20, 23, 26, 32, 33, 35, 38, 40 and 41 as they are deemed not to be relevant to the Company’s or the Northern Pow ergrid
Group’s circumstances (given it is privately owned) or for the reasons explained in the pages that follow. Consequently,
the Company and Northern Powergrid Group do not intend to put actions in place in order to comply with the
aforementioned provisions at this time. A copy of the Code can be found at https://frc.org.uk/.
BOARD LEADERSHIP AND COMPANY EXPOSURE
Strategic Ownership
The board (of the Company and the Northern Powergrid Group throughout) is collectively responsible for generating value
for the Northern Pow ergrid Group’s shareholder and wider society which is achieved through the delivery of a strategy
which corresponds to Berkshire Hathaway Energy’s six Core Principles. The strategy is set out in two forms of business
plan (the Business Plan and Annual Plan), both of which are approved and mo nitored by the board and are designed to
promote the long-term sustainable success of the Company and the Northern Pow ergrid Group whilst achieving the
commitments developed to address stakeholder requirements.
For the purpose of scrutinising performance in respect of both business plans, the board review a range of financial and
non-financial KPIs which correspond to the Core Principles and have been established to operate within a framework of
internal controls.
The deliverables set out in the business plans shape the allocation of both financial and operational resource for which the
board delegates the responsibility to a single senior management team who have specific functional responsibilities in
respect of operations, safety, health and environment, asset management, customer service, business development, energy
systems, regulation, economic analysis, human resources, information systems, legal and finance.
Page 28
Northern Electric plc
Directors' Report for the Year Ended 31 December 2025 (continued)
Engagem ent and Values
The Company and Northern Powergrid Group have an established relationship with its shareholder, reflected by the
leadership structure, whereby the President and Chief Executive Officer of the Northern Pow ergrid Group reports directly
to the President and Chief Executive Officer of Berkshire Hathaway Energy. Frequent interaction and dialogue with
Berkshire Hathaway Energy (which is maintained through regular governance reporting and meetings with the Northern
Pow ergrid Group’s President and Chief Executive Officer and senior management team) ensures that strategic views and
board decisions are understood and aligned, and that appropriate values, standards and a desired culture of integrity,
openness and transparency are set. Demonstrated by the adoption of Berkshire Hathaway Energy’s ‘Core Leadership
Expectations’, required behaviour and standards include the delivery of quality and improvement (for which all employees
are responsible) to developing individuals and teams, building stakeholder relationships and establishing strategic direction
(predominantly responsibilities of the senior management team and the board).
Employee engagement (and the investment therein) is implemented through consistent messaging and regular training
which commences with the induction programme, during which colleagues are introduced to the Northern Powergrid
Group, its business model, strategy and the Core Leadership Expectations. Throughout the year, every employee has
regular meetings with line management and communications from the President and Chief Executive Officer in addition to
having access to the board and senior leadership team during events (whether virtual or physical), via engagement visits
and as a result of rotational working locations. Whilst there is direct exposure, given the Northern Powergrid Group’s large
and disparate workforce, the board elect to engage with employees via the senior management team and the reporting
hierarchy which is deemed to be very effective. However, to supplement the existing arrangement, the board engages
directly with members of each of the trade unions which represent the wo rkforce.
A number of policies such as the Code of Conduct and Code of Practice and Business Ethics support the employee
engagement programme and underpin the onward dissemination of the values, desired culture and expected standards of
behaviour to the wider employee population. The board is able to reassure itself that corporate messaging concerning
behaviour and culture is provided on an annual basis in the form of training on the aforementioned policies. In addition,
the Northern Powergrid Group’s non-executive directors and independent member routinely challenge the executive team
on topics that are mo re difficult to track, including cultural change and diversity to establish how embedded the culture is.
In the event employees have concerns regarding behaviour, ethics or compliance related matters, they are able to raise
these confidentially via either internal or externally facilitated independent channels.
Throughout the year, the board routinely mo nitored the effectiveness of engagement with the Northern Powergrid Group’s
various stakeholders via updates and bespoke briefings. In addition, the directors participate in direct engagement with the
Northern Powergrid Group’s shareholder, Chair of the ISG, the external auditor, employees (as detailed above) as well as
various political and regulatory representatives. Further detail concerning the way in which the Company and Northern
Pow ergrid Group participate in engagement with stakeholders can be found in the Strategic Report.
DIVISION OF RESPONSIBILITIES
The role of the President and Chief Executive Officer
The President and Chief Executive Officer combines the executive responsibility of running the Company and Northern
Pow ergrid Group’s business with the responsibility for the leadership of Northern Powergrid Group’s various boards of
directors, which includes directing the Company and the Northern Pow ergrid Group, ensuring its effectiveness and
facilitating a constructive and open board culture. The Northern Pow ergrid Group’s shareholder supports the role
undertaken by the President and Chief Executive Officer and, through the shareholder’s regular interaction with the
President and Chief Executive Officer and input into and oversight of the principles governing to whom the board of the
Company (and the wider Northern Pow ergrid Group) delegates its authority, ensures no one person has unfettered pow ers
of decision. Chairpersons and senior independent non-executive directors are not routinely appointed to the Northern
Pow ergrid Group’s boards.
Page 29
Northern Electric plc
Directors' Report for the Year Ended 31 December 2025 (continued)
Non-executive directors
The board of the Company comprises three executive directors and one non-executive director. There are two additional
non-executive directors appointed within the Northern Powergrid Group. Each of the Northern Powergrid Group’s
non-executive directors and Mr Knowles (a member of the Northern Pow ergrid Group’s audit committee) are considered
to be independent. Although the board of the Company (nor that of any other Northern Pow ergrid Group company) does
not include a balanced number of executive and non-executive directors, the board believes that the combination is
appropriate, and it possesses the requisite skills and experience necessary to provide effective leadership, stewardship and
control of the Company and the Northern Powergrid Group. The non-executive directors of the Company and the Northern
Pow ergrid Group constructively challenge the executive board and senior management team on the delivery of the
Company’s and the Northern Pow ergrid Group’s strategic objectives. In accordance with their individual areas of
specialism, the non-executive directors chair a number of the Northern Powergrid Group’s board sub-groups, which
combined with the guidance and challenge they provide during routine board meetings, gives them additional opportunity
to hold the executive directors and senior management team to account.
Time Com mi tm ent and Resources
To facilitate the delivery of their duties, the directors continually update their knowledge of and familiarity with the
operations of the Company and the Northern Pow ergrid Group. This is supported by robust reporting arrangements, access
to the Northern Powergrid Group's operations and interaction with its staff. Under the direction of the President and Chief
Executive Officer, information is provided to the board in a timely manner to enable directors to commit sufficient time to
the preparation for and attendance at board meetings. In addition, updates and briefings are circulated during the course of
the regular board meeting cycle. The directors are able to utilise the advice and services of the Company Secretary and her
team. Upon request, the directors have access to independent professional advice. A register of situational conflicts is held
centrally to ensure independent judgment is maintained and time commitment is not jeopardised. Conflicts of interests are
declared as a matter of routine pursuant to individual director’s duties.
The board of NPg Northeast meet on a quarterly basis to review business performance, strategic initiatives and operational
and risk-related issues. Additional board meetings are held as required. Meetings of the board are chaired by the President
and Chief Executive. The board of the Company meet on a regular basis, with meetings predominantly aligned with
reporting financial cycles.
Board committees and sub-groups
During the year, there we re a number of committees and board sub-groups in operation, acting under delegated terms of
reference which oversee the Company and Northern Powergrid Group and report regularly on their activities. Attendance
at meetings by the Company and Northern Powergrid Group’s appointed representatives during the year wa s as follows:
Page 30
Northern Electric plc
Directors' Report for the Year Ended 31 December 2025 (continued)
The senior leadership team attend meetings of the RAB and relevant members also attend meetings of the Health and
Safety Committee and STAP. A number of independent members are also appointed to the STAP.
Health and Safety Committee
Role: Meets bi-annually to manage the health and safety policy and performance of the Company and Northern Pow ergrid
Group.
Duties:
• Oversee the implementation and review the effectiveness of health and safety policy;
• Develop the strategy for managing health and safety issues;
• Monitor health and safety performance consider policy changes; and
• Report to the board.
STAP
Role: Meets quarterly to provide independent and expert challenge and assurance to the Group’s plans, as the sector
transitions to the low-carbon energy future embodied in the national targets for decarbonisation.
Duties:
• Provide strategic oversight and challenge of the Group’s science, data and technology programmes, initiatives or
projects, and promote a culture of change, creativity and innovative thinking;
• Keep under review progress against ED2 (including decarbonisation) commitments;
• Monitor the level of risk and opportunity associated with the programme; and
• Report to the board.
Further detail concerning the Audit Committee and RAB can be found in ‘Audit, risk and internal control’ below.
Appointm ents
Given the nature of the relationship betw een the Northern Powergrid Group and its shareholder, a nominations committee
has not been established for the purpose of identifying board appointments, or indeed considering the removal of directors.
Instead, this function is undertaken by the appropriate representative of Berkshire Hathaway Energy and the President and
Chief Executive Officer of the Northern Powergrid Group. All board appointments are subject to a formal and rigorous
process and are considered with due regard to the board’s overall composition including the balance of skills, experience
and the promotion of diversity, inclusion and equal opportunity, ahead of recommendations being put to the board.
Succession plans are in place for all board and senior management positions and are reviewed and agreed by the President
and Chief Executive Officer of Berkshire Hathaway Energy. Prior to appointment, the commitments already held by
directors are considered so as to ensure each individual has sufficient time to discharge their duties.
Evaluation
The board of the Company (and that of each Northern Pow ergrid Group subsidiary) is subject to thorough evaluation as a
consequence of its performance being continually mo nitored and assessed by Berkshire Hathaway Energy through the
delivery of the Annual Plan. In addition, each year, the President and Chief Executive Officer of the Northern Pow ergrid
Group considers the composition of the board as a whole and its effectiveness in achieving strategic objectives during the
annual performance evaluation process. Off cycle reviews of the Northern Powergrid Group’s governance arrangements
(including the composition or board and sub-board groups) is also undertaken periodically to ensure its structure remains
fit for purpose and evolves to reflect changes to strategic priorities. The Northern Pow ergrid Group does not and is not
required to undertake external evaluation of its boards.
As a matter of routine, the committees and sub-groups that have been constituted on behalf of the Northern Pow ergrid
Group have historically been evaluated through the activity delivered in accordance with their terms of reference. In
addition, board committees and sub-groups are also subject to the aforementioned off-cycle governance reviews, whereby
the scope, purpose, duties and membership are revisited so as to ensure they remain effective, are refreshed as appropriate
and have the requisite level of skill and expertise.
The Company’s Articles of Association requires the periodic retirement and re-election of directors. Appointments and
reappointments are therefore put to the shareholders at the Company’s Annual General Meetings. The notice period for all
board members is less than one year.
Page 31
Northern Electric plc
Directors' Report for the Year Ended 31 December 2025 (continued)
Diversity policy
The Company and Northern Pow ergrid Group has adopted a number of policies (including the policy on diversity at wo rk
and the Code of Conduct) that collectively comprise the policy on diversity. Diversity is actively supported through
recruitment, educational programmes, employee opportunities and the Global Days of Service charitable support
programme. All appointments (w hich includes board, board committee, and senior management appointments) are based
on merit with due regard for diversity, inclusion and equal opportunity. The Northern Pow ergrid Group does not set
diversity targets. Further information concerning how the Northern Pow ergrid Group is supporting gender diversity in the
energy industry can be found in the Northern Powergrid Group’s gender pay gap report via the Northern Pow ergrid
Group’s website.
AUDIT, RISK AND INTERNAL CONTROL
Each of the Company’s and Northern Powergrid Group’s directors is responsible for the management of risk and the
internal control environment which is designed to address Berkshire Hathaway Energy’s United States Sarbanes-Oxley
Act requirement. As part of this responsibility, the board has established and maintains robust procedures and processes
which ensure the effectiveness of both the internal and external audit functions.
Audit com mittee
The audit committee meets at least twice a year to consider the application of corporate reporting, risk management and
internal control principles. Membership comprises, an independent non-executive director (chair), an independent member
and the Finance Director. All members are considered to have relevant financial experience. Its duties include:
• Carrying out the functions required by DTR 7.1.3R;
• Overseeing the RAB;
• Monitoring the internal audit plan;
• Sub-delegating activities to another person or body as seen fit; and
• Reporting to the board.
As referenced above, the performance of the audit committee is evaluated each year via a review process whereby its
remit, terms of reference and the attributes of its members is assessed by the board and through the process whereby
Berkshire Hathaway Energy’s Finance team retains a degree of oversight of a number of duties including the financial
audit process.
Internal Audit
The internal audit team operates in an independent and objective manner without interference from the Company or the
Northern Pow ergrid Group. This provides the flexibility to refocus the scope of the annual internal audit plan to align with
changing priorities if required. Internal audit findings including the resilience of internal controls are reported to the board
on a quarterly basis in order to keep the directors sufficiently apprised of areas of risk. An external assessment of the
activity of the internal audit team confirmed it operates at the highest level in accordance with the Institute of Internal
Audit standards.
External Audit
An appropriate relationship is maintained with the Northern Powergrid Group’s external auditor to ensure independence
and rigour is preserved. The Audit Engagement Lead has regular interaction with the Finance Director and routinely
attends two Audit Committee meetings per year to present the audit plan for the forthcoming year and subsequently
disseminate the findings. It is at such meeting where the Audit Committee consider the effectiveness of the external audit
process, in terms of quality, timeliness, preparation and insight into technical matters and discuss any comments and issues
raised. Matters raised by KPMG and considered by the Audit Committee during the year included capitalisation of plant,
property and equipment, revenue recognition, deferred revenue and the valuation of the defined benefit obligation. Any
control findings raised by the external auditor are allocated to an ow ner and are tracked by the Finance Director or
managed via the internal audit team, both of whom report their findings to the board.
KPMG staff have full access to the Northern Pow ergrid Group’s systems and premises for the purpose of conducting their
audit wo rk in a robust and efficient manner.
Page 32
Northern Electric plc
Directors' Report for the Year Ended 31 December 2025 (continued)
RAB
The RAB is chaired by one of the Northern Powergrid Group’s independent non-executive directors and meets quarterly to
ensure effective risk management and internal control processes are in place. Its duties include:
• contributing to the setting of the Northern Pow ergrid Group’s risk tolerance and appetite;
• keeping under review current business risks and the effectiveness of internal controls;
• overseeing the processes for the identification of emerging risks; and
• reporting to the board, Berkshire Hathaway Energy and the Audit Committee.
Further detail concerning the procedures to manage risk, oversee the internal financial reporting control framework, set the
board’s risk appetite and the Company's principal risks can be found in the Strategic Report.
REMUNERATION
As outlined above, the board has not elected to establish a remuneration committee for the purpose of determining
executive directors’ and senior managers’ compensation. However, this does not reflect a lack of policy or rigour given the
process is instead managed by the Northern Powergrid Group’s shareholder. As a consequence, remuneration is strictly
aligned to both the Company’s and the Northern Pow ergrid Group’s long-term strategy, the delivery of sustainable grow th
and Berkshire Hathaway Energy’s values as defined by the Core Principles. No individual is involved in determining their
ow n remuneration.
The Company’s and the Northern Pow ergrid Group’s executive directors’ and senior managers’ remuneration is
considered on an annual basis and is explicitly linked to the employee performance evaluation process. Each individual’s
effectiveness is measured against both personal and Berkshire Hathaway Energy goals with all resulting awards based on
merit and linked to the delivery of stretching accountabilities. Only basic salary is pensionable.
Non-executive director remuneration is also reviewed on an annual basis and is reflective of time commitment and level of
responsibility. Any increases are made in line with the wider Northern Powergrid Group’s employee population and is
subject to continued satisfactory performance.
Page 33
Northern Electric plc
Directors' Report for the Year Ended 31 December 2025 (continued)
Going Concern
A review of the Company's business activities during the year, together with details regarding its future development,
performance and position, its objectives, policies and processes for managing its capital, its financial risk management
objectives and details of its exposures to trading risk, credit risk and liquidity risk are set out in the Strategic Report, the
Directors' Report and the appropriate notes to the financial statements.
The Company’s financial statements have been prepared on a going concern basis which the directors consider to be
appropriate for the following reasons.
The directors have responsibility over performing a going concern assessment and when considering continuing to adopt
the going concern basis in preparing the annual reports and financial statements, they have considered a number of factors,
including:
• The Company is profitable with strong underlying cash flows;
• The Company benefits from strong investment-grade credit ratings;
• The Company meets its day to day wo rking capital requirements from intercompany loans (via the current account
mechanism) with the Northern Powergrid Group;
• Northern Pow ergrid Holdings Company, being the ultimate UK parent company, has indicated its intention to make
available such funds as are needed by the Company through the intercompany current account mechanism. . As with
any company placing reliance on other group entities for financial support, the directors acknowledge that there can be
no certainty that this support will continue although, at the date of approval of these financial statements, they have no
reason to believe that it will not do so;
• The Northern Pow ergrid Group as a whole is financed both in its operating companies and in other entities within the
Northern Pow ergrid Group through the use of the current account mechanism. For that reason, financial health is also
considered with reference to the Northern Powergrid Group, the directors therefore take into consideration a number of
factors affecting the wider group:
• The Northern Pow ergrid Group's main subsidiaries, Northern Powergrid (Northeast) plc and Northern Pow ergrid
(Yorkshire) plc, are stable electricity distribution businesses operating an essential public service and are regulated
by the Gas and Electricity Markets Authority (“GEMA”). In carrying out its functions, GEMA has a statutory duty
under the Electricity Act 1989 to have regard to the need to secure that licence holders are able to finance the
activities, which are the subject of obligations under Part 1 of the Electricity Act 1989 (including the obligations
imposed by the electricity distribution licence) or by the Utilities Act 2000;
• The Northern Pow ergrid Group is financed by long-term borrowings with an average maturity of 19 years and
has access to short-term committed borrow ing facilities of £242 million provided by Barclays Bank plc, Lloyds
Bank plc, HSBC UK Bank plc and Royal Bank of Canada;
• The Northern Pow ergrid Group benefits from strong investment-grade credit ratings which allow access to a
range of financing options including the capital markets. Based on the directors evaluation of current market
conditions, they understand successful bond issuances by the Northern Pow ergrid Group during 2025,
demonstrates that the Northern Powergrid Group’s bonds remain attractive to investors and there is an active
market with strong appetite to invest. The Northern Pow ergrid Group plans to issue debt in the form of bonds in
going concern period to support the continued funding of its planned capital expenditure programme;
• The Northern Powergrid Group has prepared forecasts which consider reasonable possible dow nside
sensitivities. This indicates that the Northern Pow ergrid Group has sufficient covenant headroom and adequate
resources to settle its liabilities as they fall due for at least the 12 mo nths from the date of these accounts; and
• Consideration was also given to the obligations contained in Northern Powergrid (Northeast) plc and Northern
Pow ergrid (Yorkshire) plc licences to provide Ofgem with annual certificates, confirming that the directors have a
reasonable expectation that the Northern Powergrid Group will have sufficient financial and operational resources
available for the continuation of business for a period of at least 12 mo nths.
Consequently, after making their assessment, the directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence and meet its liabilities as they fall due for at least 12 mo nths from the date of
approval of these financial statements. Accordingly, they continue to adopt the going concern basis in preparing the annual
report and financial statements.
Page 34
Northern Electric plc
Directors' Report for the Year Ended 31 December 2025 (continued)
Disclosure of information to the auditor
Each director has taken steps that they ought to have taken as a director in order to make themselves aw are of any relevant
audit information and to establish that the group's auditor is aware of that information. The directors confirm that there is
no relevant information that they know of and of which they know the auditor is unaware. This confirmation is given and
should be interpreted in accordance with the provisions of s418 of the CA06.
Reappointm ent of auditor
A resolution to re-appoint KPMG LLP as the Company’s auditor and authorise the directors to determine their
remuneration will be proposed at the annual general meeting.
Non-financial and sustainability information statement
In accordance with Section 414CA(7) of the CA06, the directors have set out the information required by Section 414CB
(1) to (6) in Strategic Report.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare Group and parent Company financial statements for each financial year.
Under that law they are required to prepare the Group financial statements in accordance with UK-adopted international
accounting standards and applicable law and are required to prepare the parent Company financial statements on the same
basis.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In
preparing each of the Group and parent Company financial statements, the directors are required to:
•
Select suitable accounting policies and then apply them consistently;
•
Make judgements and estimates that are reasonable, relevant and reliable;
•
State whether they have been prepared in accordance with UK-adopted international accounting standards;
• Assess the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern; and
• Use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to
cease operations, or have no realistic alternative but to do so.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent Company
and enable them to ensure that its financial statements comply with the CA06. They are responsible for such internal
control as they determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to
them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors’ Report,
and Corporate Governance Statement that complies with that law and those regulations.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s we bsite. Legislation in the UK governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
In accordance with Disclosure Guidance and Transparency Rule (“DTR”) 4.1.16R, the financial statements will form part
of the annual financial report prepared under DTR 4.1.17R and 4.1.18R. The auditor’s report on these financial statements
provides no assurance over whether the annual financial report has been prepared in accordance with those requirements.
Page 35
Northern Electric plc
Directors' Report for the Year Ended 31 December 2025 (continued)
Approved by the Board on 19 May 2026 and signed on its behalf by:
A P Jones
Director
Page 36
Northern Electric plc
Independent Auditor's Report to the Members of Northern Electric plc
1 Our opinion is unmodified
We have audited the financial statements of Northern Electric plc (“the Company”) for the year ended 31 December 2025
which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the
Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated
Statement of Cash Flows, the parent Company Statement of Financial Position, the parent Company Statement of Changes
in Equity and the related notes, including the accounting policies in Note 2.
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at
31 December 2025 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with UK-adopted international accounting
standards;
• the parent Company financial statements have been properly prepared in accordance with UK accounting standards,
including FRS 101 Reduced Disclosure Framework; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and
appropriate basis for our opinion. Our audit opinion is consistent with our report to the audit committee.
We we re first appointed as auditor by the shareholders on 26th June 2024. The period of total uninterrupted engagement is
for the two financial years ended 31 December 2025. We have fulfilled our ethical responsibilities under, and we remain
independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to
listed public interest entities. No non-audit services prohibited by that standard we re provided.
Page 37
Northern Electric plc
Independent Auditor's Report to the Members of Northern Electric plc (continued)
2 Key audit ma tters: our assessm ent of risks of ma terial misstatement
Key audit matters are those matters that, in our professional judgement, were of mo st significance in the audit of the
financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in
the audit; and directing the efforts of the engagement team. We summarise below the key audit matters (unchanged from
2024), in decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit
procedures to address those matters and, as required for public interest entities, our results from those procedures. These
matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose
of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to
that opinion, and we do not provide a separate opinion on these matters.
Retirem ent Benefit Obligations
Gross Defined Benefit Obligations: £878.5m (2024: £850.9m).
Refer to page 57 (critical accounting estimates and judgements), page 63 (accounting policies) and pages 104-112
(financial disclosures)
The risk - Subjective valuation
The Company is the principal employer of a defined benefit pension scheme, Northern Powergrid Group of the ESPS, that
is material in the context of the overall balance sheet and the results of the Group and Company.
Significant assumptions, including the discount rate, the inflation rate and the mortality rate, are made in valuing the
Group’s and Company’s defined benefit pension obligations (before deducting the scheme assets). Small changes in the
assumptions and estimates with respect to the obligation would have a significant effect on the financial position of the
Group and Company. The Group and Company engages external actuarial specialists to assist them in selecting
appropriate assumptions and calculate the obligations.
The effect of these matters is that, as part of our risk assessment, we determined that the valuation of the defined benefit
obligations has a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than our
materiality for the financial statements as a whole, and possibly many times that amount.
Our response
We performed the tests below rather than seeking to rely on any of the Group’s or Company’s controls because the nature
of the balance is such that we would expect to obtain audit evidence primarily through the detailed procedures described.
Our procedures included:
•
Benchm arking financial assum ptions:
involved our actuarial specialists to develop an independent expectation over the
key financial assumptions, including the discount rate and inflation rate, to compare the key financial assumptions against
the market data.
•
Benchm arking demographic assumptions:
involved our actuarial specialists to assess management's process for
development of key demographic assumptions, including the mortality, and the resulting assumptions, to compare the key
demographic assumptions against market data.
•
Actuary's credentials:
assessed the competence, capabilities and objectivity of the Group's and Company’s actuarial
expert.
•
Sensitivity analysis
: assessed the sensitivity of the defined benefit obligation to changes in key assumptions.
•
Assessing transparency:
considered adequacy of the Group's and Company’s disclosures in respect of the sensitivity of
the gross obligation to changes in key assumptions.
Our Results
We found the valuation of the gross defined benefit obligation to be acceptable.
Page 38
Northern Electric plc
Independent Auditor's Report to the Members of Northern Electric plc (continued)
The allocation of total costs between operating and capital expenditure and the assessment of what is directly
attributable to property, plant and equipment
Expenditure allocated to property, plant and equipment: £61.6m (2024: £58.6m).
Refer to page 57 (critical accounting estimates and judgements).
The risk - Accounting treatment
The Group undertakes major capital projects, including enhancements to the distribution network.
The determination of costs as capital or operating expenditure, in line with IAS 16 Property, Plant and Equipment, depends
on the ability to distinguish betw een enhancement and maintenance wo rks. Under IAS 16, expenditure is capitalised when
it is probable that the future economic benefits associated with the item will flow to the entity where such expenditure
enhances or increases capacity of the network.
We determined that there is an elevated level of judgement involved in determining the costs to be capitalised or expensed,
and an elevated level of estimation uncertainty involved, with a potential range of reasonable outcomes greater than our
materiality for the financial statements as a whole.
Our response
We performed the tests below rather than seeking to rely on any of the Group’s controls because the nature of the balance
is such that we wo uld expect to obtain audit evidence primarily through the detailed procedures described.
Our procedures included:
Accounting analysis:
assessed the Group’s capitalisation policy for compliance with IAS 16.
Test of details:
critically assessed the capital nature of a sample of additions against the capitalisation policy;
Methodology im plementation:
assessed the mathematical accuracy of the model used to calculate the level of
expenditure capitalised, for a sample of costs capitalised;
Test of details:
challenged the Group on the selection and application of methods and performed sensitivity analysis on
the percentage of expenditure that is capitalised, based on our understanding of the business and the nature of the costs;
and
Assess transparency:
assessed the adequacy of the Group's disclosures with respect to its capitalisation policy, including
the judgement involved in determining whether expenditure is capital in nature and the estimation involved in setting the
effective capitalisation rate of 44.4%. (2024: 41.8%).
Our Results:
We found the Group’s capitalisation of expenditure to be acceptable.
Page 39
Northern Electric plc
Independent Auditor's Report to the Members of Northern Electric plc (continued)
3 Our application of ma teriality and an overview of the scope of our audit
Our application of materiality
Materiality for the Group financial statements as a whole was set at £19.0m (2024: £7.8m), determined with reference to a
benchmark of Group total assets, of which it represents 0.5% (2024: 3.8% of normalised Group profit before tax.).
The benchmark in the previous period was profit before tax normalised by averaging over the last three years. We selected
Group total assets as the benchmark in the current period because we have concluded that total assets are mo re relevant to
the users of the financial statements in determining the performance of the Group.
Materiality for the parent Company financial statements as a whole was set at £3.6m (2024: £3.6m) determined with
reference to a benchmark of the parent Company’s total assets of which it represents 1.0% (2024: 0.8%).
In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a
low er threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material amount across the financial statements as a whole.
Performance materiality was set at 65% (2024: 65%) of materiality for the financial statements as a whole, which equates
to £12.3m (2024: £5.1m) for the Group and £2.3m (2024: £2.3m) for the parent Company. We applied this percentage in
our determination of performance materiality based on the level of identified misstatements and control deficiencies during
the prior period.
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £1.0m
(2024: £0.4m) in addition to other identified misstatements that wa rranted reporting on qualitative grounds.
The Group team performed the parent Company audit. The audit wa s performed using the materiality levels set out above.
Overview of the scope of our audit
We performed risk assessment procedures to determine which of the Group’s components are likely to include risks of
material misstatement to the Group financial statements and which procedures to perform at these components to address
those risks.
In total, we identified 8 (2024: 8) components, having considered our evaluation of the Group’s operational and legal
structure, and our ability to perform audit procedures centrally. Of those, we identified 2 (2024: 1) quantitatively
significant components which contained the largest percentage of either total revenue or total assets of the Group, for
which we performed audit procedures.
We also identified 1 (2024: 1) component as requiring special audit consideration, ow ing to the Group risk relating to the
gross defined benefit pension obligations residing in the component.
Additionally, we selected 1 (2024: 2) component with accounts contributing to the specific risks of the Group financial
statements.
Accordingly, we performed audit procedures on 4 (2024: 4) components, including the audit of the parent Company.
We set the component materialities, ranging from £5.7m to £16.5m (2024: £3.1m to £6.2m), having regard to the mix of
size and risk profile of the Group across the components.
Our audit procedures covered 94% (2024: 93%) of Group revenue. We performed audit procedures in relation to
components that accounted for 94% (2024: 93%) of Group profit before tax, and 95% (2024: 95%) of Group total assets.
The Group auditor performed the audit of the parent Company.
The scope of the audit wo rk performed was predominately substantive as we placed limited reliance upon the Group’s
internal control over financial reporting.
Page 40
Northern Electric plc
Independent Auditor's Report to the Members of Northern Electric plc (continued)
4 Going concern
The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the
Group or the Company or to cease their operations, and as they have concluded that the Group’s and the Company’s
financial position means that this is realistic. They have also concluded that there are no material uncertainties that could
have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of
the financial statements (“the going concern period”).
We used our knowledge of the Group, its industry, and the general economic environment to identify the inherent risks to
its business model and analysed how those risks might affect the Group and parent Company’s financial resources or
ability to continue operations over the going concern period. The risks that we considered mo st likely to adversely affect
the Group and parent Company’s available financial resources over this period are refinancing risks, uncertainties around
inflationary rises in operating costs and regulatory price control outcomes.
We considered whether these risks could plausibly affect the liquidity or covenant compliance in the going concern period
by comparing severe, but plausible dow nside scenarios that could arise from these risks individually and collectively
against the level of available financial resources and covenants thresholds indicated by the Group’s financial forecasts.
Given the purpose of the Group, and since the entity is reliant on financial support from its intermediate parent Company,
Northern Powergrid Holdings Company, we assessed the risk that this support wo uld not be available. Our procedures on
going concern also included:
• Inspecting letters received by the directors indicating the intermediate parent Company’s intentions to provide this
support;
• Inspecting and critically assessing the internally provided cash flow projections over the going concern assessment
period for the wider group, and the level of available financial resources indicated by those financial projections to assess
the ability of the intermediate parent Company to make necessary repayments to the Group, including repayments in line
with the Group’s external debt obligations; and
• Assessing the business reasons why the intermediate parent Company may or may not choose to provide this support.
We also assessed the completeness of the going concern disclosure.
Our conclusions based on this wo rk:
• we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements
is appropriate;
• we have not identified, and concur with the directors’ assessment that there is not, a material uncertainty related to events
or conditions that, individually or collectively, may cast significant doubt on the Group’s or Company's ability to continue
as a going concern for the going concern period; and
• we found the going concern disclosure in note 2 to be acceptable.
How ever, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they we re made, the above conclusions are not a guarantee
that the Group or the Company will continue in operation.
Page 41
Northern Electric plc
Independent Auditor's Report to the Members of Northern Electric plc (continued)
5 Fraud and breaches of laws and regulations - ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate
an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures
included:
• Enquiring of directors, the audit committee, and internal audit, and inspection of policy documentation as to the Group’s
high-level policies and procedures to prevent and detect fraud, including the internal audit function, and the Group’s
channel for “whistleblowing”, as we ll as whether they have knowledge of any actual, suspected or alleged fraud.
• Reading Board minutes and attending Group audit committee meetings.
• Considering remuneration incentive schemes and performance targets for management and directors.
• Using analytical procedures to identify any unusual or unexpected relationships.
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud
throughout the audit.
As required by auditing standards, and taking into account possible pressures to meet profit targets and our overall
knowledge of the control environment, we perform procedures to address the risk of management override of controls, in
particular the risk that Group management may be in a position to make inappropriate accounting entries and the risk of
bias in accounting estimates and judgements such as the defined benefit pension assumptions. On this audit we do not
believe there is a fraud risk related to revenue recognition because the lack of material judgement or estimation and, due to
the nature of the industry, the Group operates in a stable, regulated market where the energy volumes are mo nitored and
supplied by an independent third party.
We did not identify any additional fraud risks.
We performed procedures including:
• Identifying journal entries and other adjustments to test based on risk criteria and comparing the identified entries to
supporting documentation. These included journal entries with unusual characteristics compared to the total journal
population, with consideration to entries recognised at the end-of-period.
• Assessing whether the judgements made in making accounting estimates are indicative of a potential bias.
Identifying and responding to risks of material misstatement related to compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial
statements from our general commercial and sector experience, through discussion with the directors and others
management (as required by auditing standards), and from inspection of the Group’s regulatory and legal correspondence
and discussed with the directors and other management the policies and procedures regarding compliance with laws and
regulations.
As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment including
the entity’s procedures for complying with regulatory requirements.
We communicated identified laws and regulations throughout our team and remained alert to any indications of
non-compliance throughout the audit.
The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial
reporting legislation (including related companies’ legislation), distributable profits legislation, pensions legislation,
taxation legislation, and regulatory requirements governing distribution revenue and we assessed the extent of compliance
with these laws and regulations as part of our procedures on the related financial statement items.
Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have
a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or
litigation or the loss of the Group’s licence to operate. We identified the following areas as those most likely to have such
an effect: health and safety, data protection laws, anti-bribery, employment law, environmental, Ofgem regulations and
certain aspects of company legislation recognising the nature of the Group’s activities and its legal form.
Page 42
Northern Electric plc
Independent Auditor's Report to the Members of Northern Electric plc (continued)
Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to
enquiry of the directors and other management and inspection of regulatory and legal correspondence, if any. Therefore, if
a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect
that breach.
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have properly planned and performed our audit in accordance
with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing
standards wo uld identify it.
In addition, as with any audit, there remained a higher risk of non-detection of fraud, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed
to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to
detect non-compliance with all laws and regulations.
6 We have nothing to report on the other information in the Annual Report
The directors are responsible for the other information presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements
audit wo rk, the information therein is materially misstated or inconsistent with the financial statements or our audit
knowledge. Based solely on that wo rk we have not identified material misstatements in the other information.
Strategic report and directors’ report
Based solely on our wo rk on the other information:
• we have not identified material misstatements in the strategic report and the directors’ report;
• in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
• in our opinion those reports have been prepared in accordance with the Companies Act 2006.
7 We have nothing to report on the other ma tters on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent Company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
Page 43
Northern Electric plc
Independent Auditor's Report to the Members of Northern Electric plc (continued)
8 Respective responsibilities
Directors’ responsibilities
As explained mo re fully in their statement set out on page 35, the directors are responsible for: the preparation of the
financial statements including being satisfied that they give a true and fair view; such internal control as they determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud
or error; assessing the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the
Group or the parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s we bsite at www.frc.org.uk/auditorsresponsibilities.
The Company is required to include these financial statements in an annual financial report prepared under Disclosure
Guidance and Transparency Rule 4.1.17R and 4.1.18R. This auditor’s report provides no assurance over whether the
annual financial report has been prepared in accordance with those requirements.
9 The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit wo rk 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 wo rk, for this report, or for the opinions we have formed.
Andrew Williamson (Senior Statutory Auditor)
For and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
110 Quayside House
Newcastle upon Tyne
NE1 3DX
19 May 2026
Page 44
Northern Electric plc
Consolidated Income Statement for the Year Ended 31 December 2025
Note
2025
£ 000
2024
£ 000
Revenue
3, 4 586,076 670,688
Cost of sales (56,236) (54,476)
Gross profit
529,840 616,212
Distribution costs
3 (155,687) (154,203)
Administrative expenses
(145,528) (147,512)
Operating profit
5 228,625 314,497
Other gains
679 456
Finance income
6 12,674 20,537
Finance costs
6
(58,045) (54,243)
Profit before tax
183,933 281,247
Income tax expense
10
(48,738) (73,529)
Profit for the year
135,195 207,718
Profit attributable to:
Owners of the Company
135,195 207,718
The above results we re derived from continuing operations.
The notes on pages 54 to 121 form an integral part of these financial statements.
Page 45

Northern Electric plc
Consolidated Statement of Comprehensive Income for the Year Ended 31 December 2025
Note
2025
£ 000
2024
£ 000
Profit for the year
135,195 207,718
Item s that will not be reclassified subsequently to profit or loss
Remeasurements of post employment benefit obligations (net)
25 (36,775) (11,825)
Item s that may be reclassified subsequently to profit or loss
Loss on cash flow hedges (net)
10
(3,692) (1,027)
Total comprehensive income for the year
94,728 194,866
Total comprehensive income attributable to:
Owners of the Company
94,728 194,866
The notes on pages 54 to 121 form an integral part of these financial statements.
Page 46

Northern Electric plc
(Registration number: 02366942)
Consolidated Statement of Financial Position as at 31 December 2025
Note
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Assets
Non-current assets
Property, plant and equipment
11 3,458,169 3,309,787
Right of use assets
12 12,852 12,013
Intangible assets
13 56,550 54,300
Equity accounted investments
14 3,435 3,289
Defined benefit pension scheme surplus
25 96,200 138,700
Trade and other receivables
16 - 8,051
Other non-current financial assets
30
- 8,827
3,627,206 3,534,967
Current assets
Inventories
15 43,793 29,388
Trade and other receivables
16 339,485 178,254
Tax receivable
10 6,757 -
Cash and cash equivalents
17 21,659 13,440
Contract assets
4 6,005 10,286
Other current financial assets
30
8,400 4,496
426,099 235,864
Total assets
4,053,305 3,770,831
Equity and liabilities
Equity
Share capital
18 (72,173) (72,173)
Share premium
(158,748) (158,748)
Capital redemption reserve
(6,185) (6,185)
Cash flow hedging reserve
19 (6,300) (9,992)
Retained earnings (1,218,848) (1,155,598)
Equity attributable to owners of the Company (1,462,254) (1,402,696)
Non-current liabilities
Lease liabilities
21 (10,915) (9,632)
Trade and other payables
23 (4,368) (6,548)
Loans and borrowings
20 (1,307,187) (1,119,735)
Provisions
22 (540) (983)
Deferred revenue from contracts with customers
3, 24 (703,912) (693,396)
Deferred tax liabilities
10
(171,251) (171,291)
(2,198,173) (2,001,585)
The notes on pages 54 to 121 form an integral part of these financial statements.
Page 47
Northern Electric plc
(Registration number: 02366942)
Consolidated Statement of Financial Position as at 31 December 2025 (continued)
Note
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Current liabilities
Lease liabilities
21 (2,970) (2,942)
Trade and other payables
23 (174,394) (188,609)
Loans and borrowings
20 (178,556) (134,763)
Income tax liability
10 - (5,655)
Deferred revenue from contracts with customers
3, 24 (34,115) (32,181)
Provisions
22
(2,843) (2,400)
(392,878) (366,550)
Total liabilities (2,591,051) (2,368,135)
Total equity and liabilities
(4,053,305) (3,770,831)
Approved by the board on 19 May 2026 and signed on its behalf by:
.........................................
A P Jones
Director
The notes on pages 54 to 121 form an integral part of these financial statements.
Page 48

Northern Electric plc
(Registration number: 02366942)
Company Statement of Financial Position as at 31 December 2025
Note
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Assets
Non-current assets
Property, plant and equipment
11 2,001 1,534
Right of use assets
12 606 742
Investments in subsidiaries, joint ventures and associates
14 242,903 242,903
Defined benefit pension scheme surplus
25
96,200 138,700
341,710 383,879
Current assets
Trade and other receivables
16 178,088 71,743
Income tax asset
10
6,866 844
184,954 72,587
Total assets
526,664 456,466
Equity and liabilities
Equity
Share capital
18 (72,173) (72,173)
Share premium
(158,748) (158,748)
Capital redemption reserve
(6,185) (6,185)
Retained earnings (249,161) (139,195)
Total equity (486,267) (376,301)
Non-current liabilities
Lease liabilities
21 (450) (697)
Loans and borrowings
20 (1,117) (1,117)
Provisions
22 (659) (983)
Deferred tax liabilities
10
(23,740) (34,357)
(25,966) (37,154)
Current liabilities
Lease liabilities
21 (157) (153)
Trade and other payables
23 (5,543) (35,853)
Loans and borrowings
20
(8,731) (7,005)
(14,431) (43,011)
Total liabilities (40,397) (80,165)
Total equity and liabilities
(526,664) (456,466)
Approved by the Board on 19 May 2026 and signed on its behalf by:
A P Jones
Director
The notes on pages 54 to 121 form an integral part of these financial statements.
Page 49
Northern Electric plc
(Registration number: 02366942)
Company Statement of Financial Position as at 31 December 2025 (continued)
The Directors have taken the exemption offered under section 408 of the Act from publishing a separate statement of profit
or loss. The Company reported a profit for the financial year ended 31 December 2025 of £84.4 million (2024: £311.1
million).
The notes on pages 54 to 121 form an integral part of these financial statements.
Page 50

Northern Electric plc
Consolidated Statement of Changes in Equity for the Year Ended 31 December 2025
Share capital
£ 000
Share
prem ium
£ 000
Capital
redem ption
reserve
£ 000
Cash flow
hedging
reserve
£ 000
Retained
earnings
£ 000
Total
£ 000
At 1 January 2025
72,173 158,748 6,185 9,992 1,155,598 1,402,696
Profit for the year
- - - - 135,195 135,195
Other comprehensive expense - - - (3,692) (36,775) (40,467)
Total comprehensive income
- - - (3,692) 98,420 94,728
Dividends - - - - (35,170) (35,170)
At 31 December 2025
72,173 158,748 6,185 6,300 1,218,848 1,462,254
Share capital
£ 000
Share
prem ium
£ 000
Capital
redem ption
reserve
£ 000
Cash flow
hedging
reserve
£ 000
Retained
earnings
£ 000
Total
£ 000
At 1 January 2024
72,173 158,748 6,185 11,019 1,237,104 1,485,229
Profit for the year
- - - - 207,719 207,719
Other comprehensive expense - - - (1,027) (11,825) (12,852)
Total comprehensive income
- - - (1,027) 195,894 194,867
Dividends - - - - (277,400) (277,400)
At 31 December 2024
72,173 158,748 6,185 9,992 1,155,598 1,402,696
The notes on pages 54 to 121 form an integral part of these financial statements.
Page 51
Northern Electric plc
Company Statement of Changes in Equity for the Year Ended 31 December 2025
Share capital
£ 000
Share
prem ium
£ 000
Capital
redem ption
reserve
£ 000
Retained
earnings
£ 000
Total
£ 000
At 1 January 2025 72,173 158,748 6,185 139,195 376,301
Profit for the year
- - - 184,361 184,361
Other comprehensive income - - - (39,225) (39,225)
Total comprehensive income
- - - 145,136 145,136
Dividends - - - (35,170) (35,170)
At 31 December 2025
72,173 158,748 6,185 249,161 486,267
Share capital
£ 000
Share
prem ium
£ 000
Capital
redem ption
reserve
£ 000
Retained
earnings
£ 000
Total
£ 000
At 1 January 2024 72,173 158,748 6,185 119,570 356,676
Profit for the year
- - - 311,050 311,050
Other comprehensive income - - - (14,025) (14,025)
Total comprehensive income
- - - 297,025 297,025
Dividends - - - (277,400) (277,400)
At 31 December 2024
72,173 158,748 6,185 139,195 376,301
The notes on pages 54 to 121 form an integral part of these financial statements.
Page 52

Northern Electric plc
Consolidated Statement of Cash Flows for the Year Ended 31 December 2025
Note
2025
£ 000
(As restated)
2024
£ 000
GROUP
Cash flows from operating activities
Cash receipts from customers
688,822 789,750
Cash paid to suppliers and employees
(344,109) (334,277)
Income taxes paid (44,431) (65,923)
Net cash from operating activities 300,282 389,550
Cash flows from investing activities
Acquisition of PPE
(281,405) (264,640)
Acquisition of intangible assets
(19,044) (15,259)
Cash paid to related parties
(169,670) (25,923)
Interest received
589 803
Dividends received 814 1,083
Net cash flows used in investing activities (468,716) (303,936)
Net cash flows from/(used in) financing activities
Interest paid
(37,636) (39,254)
Financing transaction costs
(172) (25)
Movement in short-term borrowings
13,976 (2,688)
Preference dividends paid
(8,982) (8,983)
Payment of lease liabilities
(4,086) (3,430)
Proceeds from loans and borrowings
248,212 9,200
Repayment of borrowings
(34,659) (41,754)
Net cash flows from/(used in) financing activities 176,653 (86,934)
Net increase/(decrease) in cash and cash equivalents
8,219 (1,320)
Cash and cash equivalents at 1 January 13,440 14,760
Cash and cash equivalents at 31 December
21,659 13,440
Further detail can be found under 'Restatement of Cash Flow Statement' in Note 3.
FRS 101 disclosure exemptions have been taken for the Company to not present a statement of cash flows.
The notes on pages 54 to 121 form an integral part of these financial statements.
Page 53

Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025
1 General information
The Company is a public company limited by share capital, incorporated in England and Wales and dom iciled in the
United Kingdom and is part of the Northern Pow ergrid Holdings Company and its subsidiaries group of companies (the
"Northern Pow ergrid Group").
The principal activities of the Group is split between the following three areas:
• NPg Northeast is the distribution of electricity to approximately 1.6 million customers connected to its electricity
distribution network.
• IUS provides engineering contracting services.
• NPg Metering rents meters to energy suppliers.
The address of its registered office is Lloyds Court, 78 Grey Street, Newcastle upon Tyne, Tyne and Wear, NE1 6AF.
2 Accounting policies
Statem ent of compliance
The consolidated financial statements have been prepared in accordance with United Kingdom adopted international
accounts standards as issued by the IASB.
Summary of ma terial accounting policies and key accounting estimates
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherw ise stated.
Basis of consolidation
The Group financial statements consolidate the financial statements of the Company and its subsidiary undertakings draw n
up to 31 December 2025.
A subsidiary is an entity controlled by the Company. Control is achieved where the Company has the pow er to govern the
financial and operating policies of an entity so as to obtain benefits from its activities.
Inter-company transactions, balances and unrealised gains on transactions betw een the Company and its subsidiaries,
which are related parties, are eliminated in full.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by
the Group.
Page 54
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
2 Accounting policies (continued)
Basis of preparation
The consolidated financial statements of the group have been prepared in accordance with UK-adopted international
accounting standards and under historical cost accounting rules.
The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting
policies.
The Company financial statements we re prepared in accordance with Financial Reporting Standard 101 Reduced
Disclosure Framework (“FRS 101”). In preparing these financial statements, the Company applies the recognition,
measurement and disclosure requirements of UK-adopted international accounting standards (“UK-adopted IFRS”), but
makes amendments where necessary in order to comply with Companies Act 2006 and has set out below where advantage
of the FRS101 disclosure exemptions has been taken. In the transition to FRS 101 from UK-adopted IFRS, the Company
has made no measurement and recognition adjustments.
In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following
disclosures:
• The statement of cash flows;
• Certain disclosures regarding revenue;
• Certain disclosures regarding leases;
• Comparative period reconciliations for tangible fixed assets;
• Disclosures in respect of transactions with wholly owned subsidiaries;
• Disclosures in respect of capital management;
• Disclosures in respect of the compensation of Key Management Personnel; and
• Disclosures of transactions with a management entity that provides key management personnel services to the Company;
• Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial
Instrument Disclosures.
Clim ate change
No material impact on the judgements and estimates made in the preparation of the financial statements has been identified
Principal activity
The nature of the Company's business model, strategic objectives, operations and activities are set out in the Strategic
Report.
Page 55
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
2 Accounting policies (continued)
Going Concern
A review of the Company's business activities during the year, together with details regarding its future development,
performance and position, its objectives, policies and processes for managing its capital, its financial risk management
objectives and details of its exposures to trading risk, credit risk and liquidity risk are set out in the Strategic Report, the
Directors' Report and the appropriate notes to the financial statements.
The Company’s financial statements have been prepared on a going concern basis which the directors consider to be
appropriate for the following reasons.
The directors have responsibility over performing a going concern assessment and when considering continuing to adopt
the going concern basis in preparing the annual reports and financial statements, they have considered a number of factors,
including:
• The Company is profitable with strong cash generation;
• The Company benefits from strong investment-grade credit ratings;
• The Company meets its day to day wo rking capital requirements from intercompany loans (via the current account
mechanism) with the Northern Powergrid Group;
• Northern Pow ergrid Holdings Company, being the ultimate UK parent company, has indicated its intention to make
available such funds as are needed by the Company through the intercompany current account mechanism. As with any
company placing reliance on other group entities for financial support, the directors acknowledge that there can be no
certainty that this support will continue although, at the date of approval of these financial statements, they have no
reason to believe that it will not do so;
• The Northern Pow ergrid Group as a whole is financed both in its operating companies and in other entities within the
Northern Pow ergrid Group through the use of the current account mechanism. For that reason, financial health is also
considered with reference to the Northern Powergrid Group, the directors therefore take into consideration a number of
factors affecting the wider group:
• The Northern Pow ergrid Group's main subsidiaries, Northern Powergrid (Northeast) plc and Northern Pow ergrid
(Yorkshire) plc, are stable electricity distribution businesses operating an essential public service and are regulated
by the Gas and Electricity Markets Authority (“GEMA”). In carrying out its functions, GEMA has a statutory duty
under the Electricity Act 1989 to have regard to the need to secure that licence holders are able to finance the
activities, which are the subject of obligations under Part 1 of the Electricity Act 1989 (including the obligations
imposed by the electricity distribution licence) or by the Utilities Act 2000;
• The Northern Pow ergrid Group is financed by long-term borrowings with an average maturity of 19 years and
has access to short-term committed borrow ing facilities of £242 million provided by Barclays Bank plc, Lloyds
Bank plc, HSBC UK Bank plc and Royal Bank of Canada;
• The Northern Pow ergrid Group benefits from strong investment-grade credit ratings which allow access to a
range of financing options including the capital markets. Based on the directors' evaluation of current market
conditions, they understand successful bond issuances by the Northern Pow ergrid Group during 2025,
demonstrates that the Northern Powergrid Group’s bonds remain attractive to investors and there is an active
market with strong appetite to invest. The Northern Pow ergrid Group plans to issue debt in the form of bonds in
going concern period to support the continued funding of its planned capital expenditure programme;
• The Northern Powergrid Group has prepared forecasts which consider reasonable possible dow nside
sensitivities. This indicates that the Northern Pow ergrid Group has sufficient covenant headroom and adequate
resources to settle its liabilities as they fall due for at least the 12 mo nths from the date of these accounts; and
• Consideration was also given to the obligations contained in Northern Powergrid (Northeast) plc and Northern
Pow ergrid (Yorkshire) plc licences to provide Ofgem with annual certificates, confirming that the directors have a
reasonable expectation that the Northern Powergrid Group will have sufficient financial and operational resources
available for the continuation of business for a period of at least 12 mo nths.
Consequently, after making their assessment, the directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence and meet its liabilities as they fall due for at least 12 mo nths from the date of
approval of these financial statements. Accordingly, they continue to adopt the going concern basis in preparing the annual
report and financial statements.
Page 56
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
2 Accounting policies (continued)
Judgem ents, estimation and uncertainties
Management may be required to make a number of judgements and assumptions regarding the future and about other
sources of estimation uncertainty at the end of the reporting period that may have a significant risk of resulting in a
material adjustment to the reported amounts of assets and liabilities within the next financial year.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the end of
the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year:
• Assumptions used when evaluating long-term pension plans - these assumptions and their possible impacts are
disclosed in Note 25.
• Useful lives of property, plant and equipment - The useful economic lives of distribution system assets and other
network related facilities, which principally comprise distribution equipment and other technical installations, are
estimated based on management experience. When management identifies that actual useful economic lives differ
materially from the estimates used, they are adjusted prospectively. This estimation uncertainty creates a risk of a
material adjustment to the asset lives, and therefore the depreciation charge in the next financial year. The depreciation
charge on these distribution system assets for the year is £114.4m. Income for connections is recognised over the useful
life of the associated distribution system asset, the amount recognised in the financial year wa s £32.8m.
Additionally, consideration has been given to any estimates over the longer-term which should be disclosed to allow for an
understanding of the financial statements. The Group has no estimates of this nature to disclose.
Critical Judgements
The following are the critical judgements, that the directors have made in the process of applying the Northern Pow ergrid
Group's accounting policies and that have the mo st significant effect on amounts recognised in the consolidated financial
statements:
The split of total costs between operating and capital expenditure and the assessment of what is directly attributable to
property, plant and equipment.
The allocation of expenditure to property, plant and equipment which results in higher capital expenditure and a reduction
in operating costs. Costs are capitalised where it is probable that future economic benefits associated with the asset will
flow to the enterprise; and the cost of the item can be reliably measured.
The allocation of expenditure to capital is derived from a detailed analysis of the costs and their relevant cost drivers,
which is reviewed on an annual basis. This portion of costs that are capitalised is an estimation, however there has been no
change in the methodology since the prior year.
The amount of expenditure capitalised in the year was £61.6 million out of total costs of £138.9 million (2024: £58.6
million out of a total cost of £140.3 million), this is a capitalisation rate of 44.4% (2024: 41.8%).
Page 57
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
2 Accounting policies (continued)
Changes in accounting policy
The Directors reviewed all new and amended IFRS standards effective during the year and those issued but not yet
effective, noting no material impact on the Company’s results or financial position. This review included IFRS 18, which
has been issued and adopted in the UK, effective for periods beginning on or after 1 January 2027 with early adoption
permitted; while it will change certain presentation and disclosure requirements, it is not expected to materially affect the
Company’s recognition or measurement of transactions.
Leases
The Group applies IFRS 16 to all leases (except as noted below) which include buildings, land and fleet vehicles. The
right-of-use assets are initially measured at the amount of the lease liability plus any initial direct costs incurred by the
lessee, discounted at the rate implicit in the lease if that can be readily determined. If that rate cannot be readily
determined, the lessee shall use their incremental borrow ing rate.
The Group has taken practical expedients as per below:
- For short-term leases (lease term of 12 months or less) and leases of low-value assets less than £5k (which includes
personal computers, small items of office furniture and telephones), the Group has opted to recognise a lease expense on a
straight-line basis as permitted by IFRS 16. This expense is presented within ‘administrative expenses’ in the Statement of
Profit or Loss.
- Applies the implicit rate in the lease and uses the incremental borrowing rate ("IBR") when this isn't readily available;
Lessee
The weighted average lessee's incremental borrowing rate is applied to determine the present value of the lease liabilities
during the current period was 5.5% in comparison to the incremental borrow ing rate used in 2024 of 5.55%.
The Group recognises deprecation of right-of-use assets (w ithin administration expenses) and interest on lease liabilities
(w ithin finance costs) in the Statement of Profit and Loss.
Right-of-use assets are depreciated over the shorter of the useful life of the asset or the lease term. For information
regarding the depreciation charge per class of asset and carrying value, please refer to Note 13 Right of use assets.
Page 58
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
2 Accounting policies (continued)
Lessor
All items included within metering equipment are subject to operating leases where the Northern Powergrid Metering is
the lessor.
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating
lease.
To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks
and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then
it is an operating lease. As part of this assessment, the Company considers certain indicators such as whether the lease is
for the major part of the economic life of the asset.
The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease
term.
Northern Transport Finance Limited (“NTFL”), a wholly owned subsidiary, provides motor vehicle finance arrangements
to Group employees. All agreements are in sterling, with vehicles typically leased for 3-5 years and returned at contract
end. Early terminations require a customer settlement reflecting shared risk.
The agreements carry fixed interest rates for the full term, with an average effective rate of approximately 6.5% (2024:
6.5%). Lease income is recognised on a straight‑line basis over the lease term and presented within “Other revenue”.
Following a review, the Group determined that it retains the risks and rew ards of ownership of the leased vehicles.
Accordingly, the arrangements have been reclassified as operating leases, with related balances at 31 December 2025
reclassified from finance lease receivables to property, plant and equipment. The impact on the prior year is immaterial
and no adjustment to opening reserves wa s required.
Revenue recognition
Recognition
The Group earns revenue from the provision of services which are recognised by the following means:
- Distribution use of system income is recognised on a per unit (volumetric i.e. kWh and capacity (kVA)) and fixed (per
'customer' per day) basis;
- Work for related parties relates to revenue generated from services provided to related parties within the Northern
Pow ergrid Holdings group;
- Customer contributions income for connections is recognised over the life of the corresponding distribution system asset;
- Contracting revenue is recognised in line with expenditure;
- Intercompany recharges for services provided are based on costs incurred;
- Other revenue includes assessment and design fees and disconnections from the network and are recognised by reference
to the proportion of total costs of providing the service; and
- Revenue relating to the provision of meter assets is accounted for under IFRS 16 Leases and is outside the scope of IFRS
15.
Revenue is recognised in the accounting period when the services are rendered at an amount that reflects the consideration
to which the entity expects to be entitled in exchange for fulfilling its performance obligations to customers.
Any under/over-recovery in the regulatory year is trued up in subsequent years’ revenue allowances in line with the
regulatory framework. Hence, no accounting adjustments are made for under/over-recoveries in the year that they arise as
they are contingent on future events. Due to the nature of the national electricity settlements processes billed revenue
includes the reconciliations of data for prior periods. Invoices are raised one month in arrears and typically settles within
the month.
Page 59
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
2 Accounting policies (continued)
The principles in IFRS are applied to revenue recognition criteria using the following 5 step mo del:
1. Identify the contracts with the customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in the contract
5. Recognise revenue when or as the entity satisfies its performance obligations
Fee arrangements
Below are details of fee arrangements and how these are measured and recognised, for revenue from the provision of
services:
• For regulated use of system income the revenue for the service is recognised on the basis of agreed charging
methodologies which is recognised on a per unit (volumetric i.e. kWh and capacity (kVA)) and fixed (per 'customer' per
day) basis.
• For fixed price contracted service, the input method is used. Revenue is recognised based on the stage of completion and
performance obligations met for actual services provided as a proportion of the total fixed fee agreed in the contract.
• For stage payment on long-term contracts, the output method is used. Revenue is recognised by reference to stage of
manufacture at the year end date using contractual rates specified in the contract. Revenue on materials is measured at the
actual amount of the material used on the contract at the price specified in the contract.
The performance obligations involved in engineering contracting wo rk are accounted for as follows:
• Where the outcome of a contract can be estimated reliably, revenue and costs are recognised by reference to the stage
of completion of the contract activity at the end of the reporting period, based on the proportion of contract costs
incurred for wo rk performed to date relative to the estimated total contract costs, except where this would not be
representative of the stage of completion.
• Variations in contract wo rk, claims and incentive payments are included to the extent that they have been agreed with
the customer.
• Where the outcome of a contract cannot be estimated reliably, contract revenue is recognised to the extent of the costs
incurred where it is probable they will be recoverable. Contract costs are recognised as expenses in the period in which
they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is
recognised as an expense immediately.
• When revenue recognised on the contract exceeds amounts billed, the excess is recognised as a contract asset.
Other performance obligations include but are not limited to:
- Provision of vehicles over a specified period accounted for under lease accounting; and
- Passage of milestones and completion of installation of equipment for engineering contracting.
Page 60
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
2 Accounting policies (continued)
Contract modifications
The Group’s contracts are often amended for changes in contract specifications and requirements. Contract modification
exists when the amendment either creates new or changes the existing enforceable rights and obligations. The effect of a
contract mo dification on the transaction price and the Group’s measure of progress for the performance obligation to
which it relates, is recognised as an adjustment to revenue in one of the following ways:
a. Prospectively as an additional separate contract:
b. Prospectively as a termination of the existing contract and creation of a new contract;
c. As part of the original contract using a cumulative catch up; or
d. As a combination of b) and c).
The facts and circumstances of any contract mo dification are considered individually as the types of mo difications will
vary contract by contract and may result in different accounting outcomes. Judgement is applied in relation to the
accounting for such mo difications where the final terms or legal contracts have not been agreed prior to the period end as
management need to determine if a mo dification has been approved and if it either creates new or changes existing
enforceable rights and obligations of the parties. Depending upon the outcome of such negotiations, the timing and amount
of revenue recognised may be different in the relevant accounting periods. Modification and amendments to contracts are
undertaken via an agreed formal process. For example, if a change in scope has been approved but the corresponding
change in price is still being negotiated, management use their judgement to estimate the change to the total transaction
price.
The results and assets and liabilities of joint ventures are incorporated in these consolidated financial statements using the
equity method of accounting. Investments in joint venture entities are initially recognised at cost and adjusted thereafter to
recognise the Group's share of profit or loss and other comprehensive income of the joint venture. When the Group's share
of losses of a joint venture exceeds the Group's interest in that joint venture, the Group discontinues recognising its share
of future losses.
Investm ents in subsidiaries
Investments in subsidiaries are accounted for at cost less impairment. Where the recoverable amount is estimated to be less
than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is
recognised immediately in profit or loss.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Trade receivables
Trade receivables are amounts due from customers for services performed in the ordinary course of business. If collection
is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current
assets. If not, they are presented as non-current assets.
Trade receivables are recognised initially at the transaction price. They are subsequently measured at transaction price less
provision for impairment. The Group applies the simplified mo del for the calculation of expected credit losses which may
result in a provision for impairment.
Inventories
Inventory is not held for sale and consists primarily of spare parts and expected to be consumed in the normal course of
operating and maintaining the network assets. Cost is determined using an average cost basis.
Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal
operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade payables are recognised initially at the transaction price and subsequently measured at amortised cost using the
effective interest method.
Page 61
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
2 Accounting policies (continued)
Borrowings
All borrowings are initially recorded at the amount of proceeds received, net of transaction costs. Borrowings are
subsequently carried at amortised cost, with the difference betw een the proceeds, net of transaction costs, and the amount
due on redemption being recognised as a charge to the income statement over the period of the relevant borrowing.
Deferred financing costs include all incremental costs directly attributable to the issuance of debt instruments, such as legal
fees, underwriting fees, and other professional fees are recognized as part of the carrying amount of the financial liability
Interest expense is recognised on the basis of the effective interest method and is included in finance costs.
Borrow ings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 mo nths after the reporting date, the right to defer settlement must have substance and exist at the
reporting date. The terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of
equity instruments do not affect its classification as current or non-current
Intercom pany short-term loans (Current Accounts)
The Northern Powergrid group operates a central treasury function operated through its subsidiary Yorkshire Electricity
Group plc. As a result, every company within the Northern Pow ergrid group has a relationship with Yorkshire Electricity
Group plc as either an intercompany debtor or creditor.
Interest periods are for a duration of one mo nth, and the interest is applied to an intercompany debtor balance on the last
day of the preceding month at the compounded reference rate (currently SONIA) applicable under the mo st recent
revolving facility agreement to which Northern Powergrid Holdings Company is a party.
Monthly interest is applied to an intercompany creditor balance on the last day of the preceding month at the aggregate of
the compounded reference rate (currently SONIA) and the margin (currently 20bps) applicable under the mo st recent
revolving facility agreement to which Northern Powergrid Holdings Company is a party.
The Intercompany debtor or creditor balance will be repaid at the end of each mo nth, or if still required will be rolled over
for a further period of one mo nth.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is
probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the
obligation.
Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the reporting
date and are discounted to present value where the effect is material.
Impairment of non-financial assets
At the balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any). Where the asset does
not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs.
An intangible asset with an indefinite useful life is tested for impairment at least annually and whenever there is an
indication that the asset may be impaired.
Where the recoverable amount is estimated to be less than its carrying amount, the carrying amount of the asset is reduced
to its recoverable amount. An impairment loss is recognised immediately in profit or loss.
Page 62
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
2 Accounting policies (continued)
Share capital
Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources
received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of
money is material, the initial measurement is on a present value basis.
Dividends
Dividend distribution to the Company’s shareholders is recognised as a liability in the Company’s financial statements in
the period in which the dividends are approved by the Company’s shareholders.
Defined benefit pension obligation
The Group contributes to the Northern Powergrid Group of the Electricity Supply Pension Scheme (the "DB Scheme"), a
defined benefit scheme that shares risk between various entities under common control. There is no contractual agreement
or stated policy for charging the net defined benefit cost for the plan as a whole to individual group entities and
accordingly the Group financial statements account for the Northern Pow ergrid Group of the ESPS as if it we re a defined
contribution scheme.
Contributions to the Northern Pow ergrid Group of the ESPS are charged to the statement of profit or loss or capitalised as
part of property, plant and equipment. Contributions are agreed through agreement between the Trustees of the DB
Scheme and the Northern Pow ergrid Group. The capital costs of ex-gratia and supplementary pensions are normally
charged to the statement of profit or loss in the period in which they are granted.
The Group also participates in a defined contribution scheme. Contributions payable to the defined contribution scheme
are charged to the statement of profit or loss in the year. Differences betw een contributions payable in the year and
contributions actually paid are shown as either accruals or prepayments in the statement of financial position.
Tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except that a change
attributable to an item of income or expense recognised as other comprehensive income is also recognised directly in other
comprehensive income.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively
enacted by the reporting date in the countries where the Group operates and generates taxable income.
Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements and on unused tax losses or tax credits in the Group. Deferred
income tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.
The carrying amount of deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised. Any such reduction is reversed when the probability of future
taxable profits improves.
Financial instruments
Initial recognition
The Group recognises financial assets and financial liabilities in the statement of financial position when, and only when,
the Group becomes party to the contractual provisions of the financial instrument.
Financial assets are initially recognised at fair value. Financial liabilities are initially recognised at fair value, representing
the proceeds received net of premiums, discounts and transaction costs that are directly attributable to the financial
liability.
Subsequent to initial measurement, financial assets and financial liabilities are measured at either amortised cost or fair
value.
Page 63
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
2 Accounting policies (continued)
Classification and me asurement
Financial instruments are classified at inception into one of the following categories, which then determine the subsequent
measurement methodology:
Financial assets are classified into one of the following three categories:
· financial assets at amortised cost;
· financial assets at fair value through other comprehensive income (FVTOCI); or
· financial assets at fair value through the profit or loss (FVTPL).
Financial liabilities are classified into one of the following two categories:
· financial liabilities at amortised cost; or
· financial liabilities at fair value through the profit or loss (FVTPL).
The classification and the basis for measurement are subject to the Group’s business mo del for managing the financial
assets and the contractual cash flow characteristics of the financial assets, as detailed below:
Financial assets at amortised cost
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at
FVTPL:
· the assets are held within a business model whose objective is to hold assets in order to collect contractual cash flows;
and
· the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
If either of the above two criteria is not met, the financial assets are classified and measured at fair value through the profit
or loss (FVTPL).
Financial assets at fair value through other comprehensive income
A financial asset is measured at FVTOCI only if it meets both of the following conditions and is not designated as at
FVTPL:
· the asset is held within a business mo del whose objective is achieved by both collecting contractual cash flows and
selling financial assets; and
· the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Financial assets at fair value through the profit or loss
Financial assets not otherwise classified above are classified and measured as FVTPL.
Financial liabilities at amortised cost
All financial liabilities, other than those classified as financial liabilities at FVTPL, are measured at amortised cost using
the effective interest rate method.
Financial liabilities at fair value through the profit or loss
Financial liabilities not measured at amortised cost are classified and measured at FVTPL. This classification includes
derivative liabilities.
Page 64
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
2 Accounting policies (continued)
Derecognition
Financial assets
The Group derecognises a financial asset when:
- the contractual rights to the cash flows from the financial asset expire;
- it transfers the right to receive the contractual cash flows in a transaction in which substantially all of the risks and
rew ards of ow nership of the financial asset are transferred; or
- the Group neither transfers nor retains substantially all of the risks and rew ards of ownership and it does not retain
control of the financial asset.
On derecognition of a financial asset, the difference between the carrying amount of the asset and the sum of the
consideration received is recognised as a gain or loss in the profit or loss.
Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled, or expire.
Modification of financial assets and financial liabilities
Financial assets
If the terms of a financial asset are mo dified, the Group evaluates whether the cash flows of the mo dified asset are
substantially different. If the cash flows are substantially different, then the contractual rights to the cash flows from the
original financial asset are deemed to expire. In this case the original financial asset is derecognised and a new financial
asset is recognised at either amortised cost or fair value.
If the cash flows are not substantially different, then the mo dification does not result in derecognition of the financial asset.
In this case, the Group recalculates the gross carrying amount of the financial asset and recognises the amount arising from
adjusting the gross carrying amount as a mo dification gain or loss in the statement of income.
Financial liabilities
If the terms of a financial liabilities are mo dified, the Group evaluates whether the cash flows of the modified asset are
substantially different. If the cash flows are substantially different, then the contractual obligations from the cash flows
from the original financial liabilities are deemed to expire. In this case the original financial liabilities are derecognised
and new financial liabilities are recognised at either amortised cost or fair value.
If the cash flows are not substantially different, then the modification does not result in derecognition of the financial
liabilities. In this case, the Group recalculates the gross carrying amount of the financial liabilities and recognises the
amount arising from adjusting the gross carrying amount as a mo dification gain or loss in the statement of income.
Impairment of financial assets
For trade receivables, the Group applies the simplified approach, which requires expected lifetime losses to be recognised
from initial recognition of the receivables.
To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk
characteristics and the days past due. The contract assets relate to unbilled work in progress and have substantially the
same risk characteristics as the trade receivables for the same types of contracts. The Group has therefore concluded that
the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.
The expected loss rates are based on the payment profiles of sales over a period of 36 mo nth before 31 December 2025 and
the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect
current and forw ard-looking information on macroeconomic factors affecting the ability of the customers to settle the
receivables. The company has identified GDP growth in the UK to be the mo st relevant factor, and accordingly adjusts the
historical loss rates based on expected changes to this.
Page 65
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
2 Accounting policies (continued)
Definition of default
The Group considers the following as constituting an event of default for internal credit risk management purposes as
historical experience indicates that financial assets that meet either of the following criteria are not recoverable:
• when there is a breach of financial covenants by the debtor; and
• information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its
creditors, including the Group, in full.
Derivative financial instruments
Derivative financial instruments are contracts, the value of which is derived from one or more underlying financial
instruments or indices, and include futures, forw ards, swaps and options in the interest rate, foreign exchange, equity and
credit markets.
Derivative financial instruments are recognised in the statement of financial position at fair value. Fair values are derived
from prevailing market prices, discounted cash flow mo dels or option pricing mo dels as appropriate.
In statement of financial position, derivative financial instruments with positive fair values (unrealised gains) are included
as assets and derivative financial instruments with negative fair values (unrealised losses) are included as liabilities.
The changes in the fair values of derivative financial instruments entered into for trading purposes are included in trading
income.
Hedge accounting
Derivatives held for risk management purposes include all derivative assets and liabilities that are not classified as trading
assets and liabilities.
The Group designates certain derivatives held for risk management as hedging instruments in qualifying hedging
relationships. On initial designation of the hedge, the Group formally documents the relationship between the hedging
instruments and hedge items, including the risk management objective and strategy in undertaking the hedge, together with
the method that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both
at inception of the hedge relationship and on an ongoing basis, of whether the hedging instruments are expected to be
highly effective in offsetting that changes in the fair value or cash flows of the respective hedged items during the period
for which the hedge is designated.
These hedging relationships are discussed below.
Cash flow hedges
The Group makes an assessment for a cash flow hedge of a forecast transaction, of whether the forecast transaction is
highly probable to occur and presents an exposure to variations in cash flows that could ultimately affect profit or loss.
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a
particular risk associated with a recognised asset or liability that could affect profit or loss, then the effective portion of
changes in the fair value of the derivative is recognised in OCI and presented in the hedging reserve within equity. Any
ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. The amount
recognised in OCI is reclassified to profit or loss as a reclassification adjustment in the same period as the hedged cash
flows affect profit or loss, and in the same line item in the statement of profit or loss and OCI.
If the hedging derivative expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for cash flow
hedge accounting, or the hedge designation is revoked, then hedge accounting is discontinued prospectively. However, if
the derivative is novated to a central clearing counterparty by both parties as a consequence of laws or regulations without
changes in its terms except for those that are necessary for the novation, then the derivative is not considered expired or
terminated.
Page 66
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
2 Accounting policies (continued)
Property, plant and equipment
Property, plant and equipment is stated in the statement of financial position at cost, less any subsequent accumulated
depreciation and subsequent accumulated impairment losses. The cost of property, plant and equipment includes directly
attributable incremental costs incurred in their acquisition and installation along with costs from transfer of inventories
used in capital projects. Overheads are allocated to property, plant and equipment which are derived from a detailed
analysis of operating costs.
Assets in the course of construction are carried at cost, less any recognised impairment loss. Costs include professional
fees, and, for qualifying assets, borrowing costs capitalised in accordance with the Company's accounting policy. Such
assets are classified to the appropriate categories of property, plant and equipment when completed and ready for intended
use. Depreciation on these assets, on the same basis as other assets, commences when the assets are commissioned and
ready for use.
Adopted assets and associated contributions are recorded upon completion where such assets are adopted by the Company
under a Deed of Gift adoption agreement. Assets are derecognised when they are disposed of, profit or loss on disposal is
recognised in other gains or losses in the statement of profit or loss.
Leased vehicles are provided to employees under lease arrangements and are treated as operating leases, as the Group
retains the associated risks and rewards. These vehicles are included within Motor Vehicles in Property, Plant and
Equipment. Refer to Lessor accounting note for further information.
Relief vehicles are vehicles held by the company for temporary or contingency use by the users of the lease scheme. These
vehicles are included within Property, Plant and Equipment.
Page 67
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
2 Accounting policies (continued)
Depreciation
Depreciation is charged so as to write off the cost of assets, other than land and properties under construction over their
estimated useful lives, as follows:
Asset class Depreciation me thod and rate
Distribution system:
- Generation assets 15 years
- Conventional metering equipment up to 5 years
- Information technology equipment up to 10 years
- Land not depreciated
- Other system assets 45 years
Land and buildings:
- Freehold buildings up to 60 years
- Leasehold buildings low er of lease period or 60 years
- Non-operational land not depreciated
Furniture, fittings and equipment up to 10 years
Metering equipment up to 15 years
Leased vehicles 33% straight line
Relief vehicles 20% straight line
Intangible assets
Software development activities undertaken by the Group, including internally generated software and software acquired
for internal use are recognised if the conditions set out in IAS 38 relating to the recognition of intangible assets are met.
The amount initially recognised for internally generated software is the sum of expenditure incurred from the date when
the intangible asset first meets the recognition criteria. Intangible assets acquired separately are measure on initial
recognition at cost.
Other intangible assets that are acquired by the Company are stated at cost less accumulated amortisation and less
accumulated impairment losses.
Software as a service (‘SAAS’) contract costs are expensed to the income statement. For SAAS and cloud based
technology, assessment is made as to whether the Group controls the software or whether the software is controlled by the
third-party provider. Where the Group does not control the software, any configuration and customisation costs are
expensed.
Amortisation
Amortisation is provided on intangible assets so as to write off the cost, less any estimated residual value, over their
expected useful economic life as follows:
Asset class Am ortisation me thod and rate
Software development up to 10 years
Derecognition
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal.
Gains or losses arising from derecognition of an intangible asset, measured as the difference betw een the net disposal
proceeds and the carrying amount of the asset, are recognised in the profit or loss when the asset is derecognised.
Page 68
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
2 Accounting policies (continued)
Finance income and costs policy
Interest income or expense is recognised using the effective interest method. The effective interest method is the rate that
exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the
gross carrying amount of the financial asset to the amortised cost of the financial liability.
Capitalised interest costs are presented within interest paid in the financing activities section of the cash flow statement.
In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the
financial asset (w hen the asset is not credit-impaired) or to the amortised cost of the liability.
How ever, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is
calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer
credit-impaired, then the calculation of interest income reverts to the gross basis.
3 Prior period adjustments
Restatem ent of Cash Flow Statement
During the current year, the Company identified that certain cash flows relating to payments to suppliers and employees,
and payments to related parties, amounting to £200.6 million, were incorrectly classified in the prior year consolidated
cash flow statement. Accordingly, the comparative cash flow information has been restated, with the relevant amounts
reclassified to the appropriate line items to better reflect the nature of the underlying cash flows.
This restatement has no impact on profit, equity, or retained earnings.
Consolidated Cash Flow Statement:
2024
(As restated)
£'000
2024
(Previous)
£'000
Difference
£ 000
Cash flows from operating activities
Cash paid to suppliers and employees (334,277) (133,664) (200,613)
Cash flows from investing activities
Cash paid to related parties
(25,923) (226,536) 200,613
Page 69
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
4 Revenue & Segmental Analysis
The analysis of the Group's revenue for the year from continuing operations is as follows:
2025
£ 000
2024
£ 000
Distribution revenue
386,832 470,438
Work for related parties
37,766 34,002
Connections revenue
32,806 31,355
Contracting revenue
36,744 40,851
Meter asset rental
81,020 90,723
Other revenue 10,908 3,319
586,076 670,688
Other revenue includes assessment and design fees, disconnections from the network and operating lease income.
Connections revenue is recognised over the life of the corresponding item of property, plant and equipment against which
the contribution wa s received.
The tables below represent the internal information provided to the President and Chief Executive Officer of the Group
who is the Chief Operating Decision Maker for the purposes of resource allocation and segmental performance appraisal.
The Group operates in three principal areas of activity, those of the distribution of electricity, engineering contracting, and
smart meter rental in the United Kingdom.
Reportable segments are those that meet two or mo re of the following criteria under IFRS 8:
- Its reported revenue is 10% or mo re of the combined revenue of all segments;
- The absolute measure of its profit or loss is 10% or mo re of the combined reported profit; and
- Its assets are 10% or mo re of the combined assets of all segments.
The Group is separated into the following segments:
Regulated Networks (Distribution): Northern Pow ergrid (Northeast) plc
Contracting: Integrated Utility Services Limited
Metering: Northern Powergrid Metering Limited
Other: Includes intercompany recharges for services provided
Page 70
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
4 Revenue & Segmental Analysis (continued)
2025
Distribution
£ 000
Contracting
£ 000
Metering
£ 000
Other
[1]
£ 000
Total
£ 000
Revenue
457,404 36,744 81,020 10,908 586,076
Inter-segment sales 491 6,712 - (7,203) -
Total revenue
457,895 43,456 81,020 3,705 586,076
Operating profit
162,463 2,622 33,662 29,878 228,625
Other gains
679
Finance costs
(58,045)
Finance income 12,674
Profit before tax
183,933
Capital additions
306,331 108 8,640 22,854 337,934
Depreciation and amortisation
132,212 196 46,141 110 178,659
Segment assets
3,349,982 19,408 264,219 144,704 3,778,313
Segment liabilities
(815,944) (9,348) (162,662) (104,807) (1,092,762)
Unallocated corporate liabilities (1,495,397)
Total liabilities
(2,588,159)
Segment net assets
2,534,037 10,060 101,557 39,897 2,685,551
Unallocated net corporate liabilities
(1,394,032)
Total net assets
1,291,519
Page 71
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
4 Revenue & Segmental Analysis (continued)
2024
Distribution
£ 000
Contracting
£ 000
Metering
£ 000
Other
[1]
£ 000
Total
£ 000
Revenue
535,795 40,851 90,723 3,319 670,688
Inter-segment sales 388 7,475 - (7,863) -
Total revenue
536,183 48,326 90,723 (4,544) 670,688
Operating profit
264,146 2,427 38,711 9,213 314,497
Other gains
456
Finance costs
(54,243)
Finance income 20,537
Profit before tax
281,247
Capital additions
242,231 58 40,301 8,796 291,386
Depreciation and amortisation
109,430 336 49,972 8,553 168,291
Segment assets
3,210,680 15,773 297,052 242,813 3,766,318
Unallocated corporate assets 4,514
Total assets
3,770,832
Segment liabilities
(818,931) (9,684) (163,259) (99,936) (1,091,810)
Unallocated corporate liabilities (1,276,326)
Total liabilities
(2,368,136)
Segment net assets
2,391,749 6,089 133,793 142,877 2,674,508
Unallocated net corporate liabilities (1,271,812)
Total net assets
1,402,696
Page 72
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
4 Revenue & Segmental Analysis (continued)
[1]: Included in Other are the Company and consolidation adjustment balances.
Contract assets arise where goods or services are transferred to the customer before the customer pays consideration, or before payment is due. All contract assets relate to engineering
contracting wo rk within Integrated Utility Services. Contracts in progress at statement of financial position date:
Assets recognised from costs to fulfil a contract with customers
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Contract costs incurred plus recognised profit less recognised losses to date
111,930 92,566
Less: progress billings (100,606) (82,280)
11,324 10,286
At 31 December 2025, no retentions are held by customers for contract wo rk (2024: £nil).
The Group recognised £11.3 million contract assets at 31 December 2025 (2024: £10.3 million).
Page 73
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
5 Operating profit
Arrived at after charging/(crediting)
2025
£ 000
2024
£ 000
Depreciation expense
158,006 153,082
Depreciation of right-of-use assets
3,426 3,583
Amortisation expense
17,227 11,509
Research and development
1,300 5,600
Trade and other receivables loss allowance
5,551 5,458
6 Finance income and costs
2025
£ 000
2024
£ 000
Finance income
Other finance income
12,674 20,537
Finance costs
Interest on borrowings at amortised cost
(58,396) (54,560)
Interest expense on leases
(643) (440)
Borrow ing costs included in cost of qualifying asset 994 757
Total finance costs (58,045) (54,243)
Net finance costs
(45,371) (33,706)
Borrow ing costs included in the cost of qualifying assets during the year arose on the general borrowing pool and are
calculated by applying a capitalisation rate of 3.23% (2024: 3.23%) to expenditure on such assets.
7 Staff costs
Group
2025
£ 000
2024
£ 000
Salaries
105,857 88,384
Social security costs
12,022 10,625
Defined benefit pension cost/(credit)
(4,041) (4,160)
Defined contribution pension cost 8,312 7,731
122,150 102,580
Less capitalised to property plant and equipment (61,146) (52,510)
61,004 50,070
A proportion of the Group's employees are members of the DB Scheme, details of which are given in the Employee
Benefit Obligations Note 25.
Page 74
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
7 Staff costs (continued)
The average mo nthly number of persons employed by the Group (including directors) during the year, analysed by
category wa s as follows:
2025
No.
2024
No.
Distribution
1,571 1,451
Engineering contracting
187 175
Other 15 13
1,773 1,639
The Company had an average mo nthly number of 13 employees during the year ended 31 December 2025 (2024: 13).
Page 75
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
8 Directors' remuneration
The directors' remuneration for the year wa s as follows:
2025
£
2024
£
Highest paid
Short-term employee benefits
122,209 117,907
Post retirement benefits - defined benefit
4,003 -
Post retirement benefits - defined contribution
- 4,748
Other long-term benefits 13,234 -
139,446 122,655
Total
Short-term employee benefits
267,078 273,558
Post retirement benefits - defined benefit
- 13,674
Post retirement benefits - defined contribution
11,650 12,101
Other long-term benefits 13,234 16,500
291,962 315,833
Post retirement benefits
No. of Directors who were members of a defined contribution scheme in the year
2 2
No. of Directors who were members of a defined benefit scheme in the year
1 1
2025
£
2024
£
Key personnel remuneration
Short-term employee benefits
1,370,041 1,325,119
Post retirement benefits - defined benefit
26,831 26,050
Post retirement benefits - defined contribution
116,317 115,373
Other long-term benefits 255,039 50,000
1,768,228 1,516,542
2025
£
2024
£
Total directors and key personnel:
Short-term employee benefits
1,637,119 1,598,677
Post retirement benefits - defined benefit
26,831 39,724
Post retirement benefits - defined contribution
127,967 127,474
Other long-term benefits 268,273 66,500
2,060,190 1,832,375
Other key personnel includes a number of senior functional managers who, whilst not board directors, have authority and
responsibility for planning, directing and controlling activities of the Group. The total director and key personnel
remuneration for the year amounts £2.6 million (2024: £1.8 million).
Page 76
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
9 Auditor's remuneration
The auditor's remuneration for the year was as follows:
2025
£ 000
2024
£ 000
Fees payable to the auditor for audit of the Company's annual accounts
232 50
Fees payable to the auditor for the audit of the Company's subsidiaries
1,360 303
Agreed upon procedures - regulatory reporting 88 -
Total audit fees
1,680 353
Current year audit fees include £0.93 million (2024: £0.35 million) in respect of the audit of these financial statements and
£0.66 million of additional fees in respect of the audit of the financial statements for year ended 31 December 2024.
10 Incom e tax
Tax charged in the income statement
2025
£ 000
2024
£ 000
Current taxation
UK corporation tax
34,980 65,132
UK corporation tax adjustment to prior periods (508) (2,406)
34,472 62,726
Deferred taxation
Arising from origination and reversal of temporary differences
13,365 8,560
Deferred tax expense from unrecognised temporary difference from prior period 901 2,243
Total deferred taxation
14,266 10,803
Tax expense in the income statement
48,738 73,529
Page 77
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
10 Incom e tax (continued)
The tax on profit before tax for the year is higher than the standard rate of corporation tax in the UK (2024: higher than)
than the standard rate of corporation tax in the UK of 25% (2024 - 25%)
The differences are reconciled below:
2025
£ 000
2024
£ 000
Profit before tax
183,933 281,247
Corporation tax at standard rate
45,983 70,312
Tax effect of result of joint venture entities
(241) (193)
Decrease in current tax from adjustment for prior periods
(508) (2,406)
Permanent differences (including non-taxable dividends)
(1,935) (1,262)
Pension contributions recognised in other comprehensive income
2,450 2,200
Increase in deferred tax from adjustment for prior periods
901 2,243
Non-deductible interest
2,250 2,250
Other tax effects for reconciliation between accounting profit and tax
(income)/expense (162) 385
Total tax charge
48,738 73,529
Finance Act 2025 confirmed that the corporation tax rate will remain at 25% from 1 April 2025 as previously enacted.
Deferred tax balances are therefore measured at 25% at 31 December 2025.
There is no uncertainty over the acceptable income tax treatment. Should any uncertainties arise the Company will apply
adopted amendments to IFRIC 23
Amounts recognised in other comprehensive income
2025
Before tax
£ 000
Tax (expense)
benefit
£ 000
Net of tax
£ 000
Loss on cash flow hedges
(4,923) 1,231 (3,692)
Remeasurement of post employment benefit obligations (52,300) 15,525 (36,775)
(57,223) 16,756 (40,467)
2024
Before tax
£ 000
Tax (expense)
benefit
£ 000
Net of tax
£ 000
Loss on cash flow hedges
(1,369) 342 (1,027)
Remeasurement of post employment benefit obligations (18,700) 6,875 (11,825)
(20,069) 7,217 (12,852)
Page 78
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
10 Incom e tax (continued)
Deferred tax
Group
Deferred tax mo vement during the year:
At 1 January
2025
£ 000
Recognised in
incom e
£ 000
Recognised in
other
com prehensive
incom e
£ 000
At
31 Decem ber
2025
£ 000
Accelerated tax depreciation
134,676 11,582 - 146,258
Pension benefit obligations
34,430 2,503 (13,075) 23,858
Other items
2,182 181 (1,231) 1,132
Holdover relief 3 - - 3
171,291 14,266 (14,306) 171,251
At 1
January
2024
£ 000
Reclassification
£ 000
Recognised
in income
£ 000
Recognised
in other
com prehensive
incom e
£ 000
At
31
Decem ber
2024
£ 000
Accelerated tax depreciation
132,530 (6,061) 8,207 - 134,676
Pension benefit obligations
30,929 6,061 2,115 (4,675) 34,430
Other items
2,043 - 481 (342) 2,182
Holdover relief 3 - - - 3
165,505 - 10,803 (5,017) 171,291
A reclassification has been processed in the year which has moved deferred tax in relation to pension benefit obligations
capitalised from pension benefit obligations to accelerated depreciation.
The other items of £1.1 million (2024: £2.2 million liability) includes the deferred tax impact of cash flow hedges,
provisions and employee benefits which are deductible on a paid basis. Within pension benefit obligations the movement
in the year represents pension costs on the movement in retirement benefit obligation/asset. A proportion of the mo vement
has been capitalised in property, plant and equipment.
Page 79
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
10 Incom e tax (continued)
Com pany
Deferred tax mo vement during the year:
At 1 January
2025
£ 000
Recognised in
incom e
£ 000
Recognised in
other
com prehensive
incom e
£ 000
At
31 Decem ber
2025
£ 000
Accelerated tax depreciation
(5) 1 - (4)
Pension benefit obligations 34,362 2,457 (13,075) 23,744
34,357 2,458 (13,075) 23,740
Deferred tax mo vement during the prior year:
At 1 January
2024
£ 000
Recognised in
incom e
£ 000
Recognised in
other
com prehensive
incom e
£ 000
At
31 Decem ber
2024
£ 000
Accelerated tax depreciation
(7) 2 - (5)
Pension benefit obligations 36,809 2,228 (4,675) 34,362
36,802 2,230 (4,675) 34,357
Page 80
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
11 Property, plant and equipment
Group
Land and
buildings
£ 000
Distribution
system
£ 000
Metering
equipment
£ 000
Furniture,
fittings
and
equipment
£ 000
Motor
vehicles
£ 000
Total
£ 000
Cost
At 1 January 2024
6,534 4,294,557 547,325 94,066 - 4,942,482
Additions
- 228,463 40,301 7,419 - 276,183
Disposals - (10,221) (11,293) - - (21,514)
As at 31 December 2024
6,534 4,512,799 576,333 101,485 - 5,197,151
sam ple
At 1 January 2025
6,534 4,512,799 576,333 101,485 - 5,197,151
Additions
- 267,974 8,639 12,366 19,219 308,198
Disposals - (17,565) (25,246) - (3,436) (46,247)
At 31 December 2025 6,534 4,763,208 559,726 113,851 15,783 5,459,102
Depreciation
At 1 January 2024 6,534 1,388,381 276,774 84,062 - 1,755,751
At 1 January 2024
6,534 1,388,381 276,774 84,062 - 1,755,751
Charge for year
- 99,393 49,967 3,722 - 153,082
Eliminated on disposal - (10,221) (11,248) - - (21,469)
As at 31 December 2024
6,534 1,477,553 315,493 87,784 - 1,887,364
sam ple
At 1 January 2025
6,534 1,477,554 315,493 87,784 - 1,887,365
Charge for the year
2 104,314 46,141 3,953 3,596 158,006
Eliminated on disposal (589) (17,565) (25,246) - (1,038) (44,438)
At 31 December 2025 5,947 1,564,303 336,388 91,737 2,558 2,000,933
Carrying am ount
At 31 December 2024
- 3,035,246 260,840 13,701 - 3,309,787
At 31 December 2025
587 3,198,905 223,338 22,114 13,225 3,458,169
Page 81
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
11 Property, plant and equipment (continued)
Expenditure recognised in the carrying amount of property, plant and equipment in the course of construction wa s as
follows:
31
Decem ber
2025
£ 000
31
Decem ber
2024
£ 000
Distribution system 189,010 187,867
Contractual commitments for the acquisition of property, plant and equipment we re as follows:
31
Decem ber
2025
£ 000
31
Decem ber
2024
£ 000
Distribution system 56,681 35,543
Com pany
Land and
buildings
£ 000
Distribution
system
£ 000
Furniture,
fittings and
equipment
£ 000
Total
£ 000
Cost
s
At 1 January 2025
280 1,259 3,634 5,173
Additions - - 474 474
At 31 December 2025 280 1,259 4,108 5,647
Depreciation
s
At 1 January 2025
91 - 3,548 3,639
Charge for the year 7 - - 7
At 31 December 2025 98 - 3,548 3,646
Carrying am ount
At 31 December 2025
182 1,259 560 2,001
Page 82
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
12 Right of use assets
Group
Fleet
£ 000
Property
£ 000
Land
£ 000
Total
£ 000
Cost or valuation
At 1 January 2024
17,617 3,838 1,923 23,378
Additions
2,623 1,744 - 4,367
Disposals (2,400) (435) - (2,835)
At 31 December 2024 17,840 5,147 1,923 24,910
s
At 1 January 2025
17,840 5,147 1,923 24,910
Additions
3,177 1,088 - 4,265
Disposals (4,953) (603) - (5,556)
At 31 December 2025 16,064 5,632 1,923 23,619
Depreciation
At 1 January 2024
9,896 2,034 219 12,149
Charge for year
2,926 593 64 3,583
Eliminated on disposal (2,400) (435) - (2,835)
At 31 December 2024 10,422 2,192 283 12,897
s
At 1 January 2025
10,422 2,192 283 12,897
Charge for the year
2,691 671 64 3,426
Eliminated on disposal (4,953) (603) - (5,556)
At 31 December 2025 8,160 2,260 347 10,767
Carrying am ount
At 31 December 2025
7,904 3,372 1,576 12,852
At 31 December 2024
7,418 2,955 1,640 12,013
Page 83
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
12 Right of use assets (continued)
Com pany
Property
£ 000
Total
£ 000
Cost or valuation
At 1 January 2025 1,366 1,366
At 31 December 2025 1,366 1,366
Depreciation
At 1 January 2025
624 624
Charge for the year
137 137
At 31 December 2025 761 761
Carrying am ount
At 31 December 2025
605 605
Page 84
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
13 Intangible assets
Group
Software
developm ent
£ 000
Total
£ 000
Cost or valuation
At 1 January 2024
164,041 164,041
Additions 15,203 15,203
At 31 December 2024 179,244 179,244
s
At 1 January 2025
179,244 179,244
Additions 19,477 19,477
At 31 December 2025 198,721 198,721
Am ortisation
At 1 January 2024
113,435 113,435
Amortisation charge 11,509 11,509
At 31 December 2024
124,944 124,944
s
At 1 January 2025
124,944 124,944
Amortisation charge 17,227 17,227
At 31 December 2025 142,171 142,171
Carrying am ount
At 31 December 2025
56,550 56,550
At 31 December 2024
54,300 54,300
As at year-end, the amount of contractual commitments for the acquisition of intangible assets amounted to £5.1 million
(2024: £5.2 million).
The majority of the costs classified under intangible assets relate to the development and implementation of IT software
systems. These systems are integral to the Company's operations, enhancing efficiency and supporting the management of
our energy distribution network.
Page 85
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
14 Investm ents
Investm ent in
joint ventures
£ 000
Share in other
undertakings
£ 000
Total
£ 000
At 1 January 2024
3,612 21 3,633
Profit from investments
739 - 739
Dividends paid by investments (1,083) - (1,083)
At 31 December 2024
3,268 21 3,289
Profit from investments
1,229 - 1,229
Dividends paid by investments (1,083) - (1,083)
At 31 December 2025
3,414 21 3,435
Page 86
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
14 Investm ents (continued)
More information on the joint venture can be found on page 97.
Summary of the Company investments
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Investments in subsidiaries
242,903 242,903
Group subsidiaries
Details of the Group subsidiaries as at 31 December 2025 are as follows:
Page 87
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
14 Investm ents (continued)
Nam e of subsidiary Principal activity
Registered office and country
of incorporation
Proportion of
ownership interest
and voting rights
held
2025 2024
CE Electric Services Limited Dormant
England and Wales
100% 100%
Central PowerGrid Limited Dormant
England and Wales
100% 100%
East PowerGrid Limited Dormant
England and Wales
100% 100%
Eastern PowerGrid Limited Dormant
England and Wales
100% 100%
Infrastructure North Limited Dormant
England and Wales
100% 100%
Integrated Utility Services
Limited
Engineering contracting
England and Wales
100% 100%
IUS Limited Dormant
England and Wales
100% 100%
Midlands PowerGrid Limited Dormant
England and Wales
100% 100%
NEDL Limited Dormant
England and Wales
100% 100%
North East PowerGrid Limited Dormant
England and Wales
100% 100%
North Eastern PowerGrid Limited Dormant
England and Wales
100% 100%
North Pow erGrid Limited Dormant
England and Wales
100% 100%
North West PowerGrid Limited Dormant
England and Wales
100% 100%
North Western PowerGrid
Limited
Dormant
England and Wales
100% 100%
Northern Electric Distribution
Limited
Dormant
England and Wales
100% 100%
Northern Electric Properties
Limited (02522939)*
Property holdings &
management company
England and Wales
100% 100%
Northern Electric Share Scheme
Trustee Limited
Dormant
England and Wales
100% 100%
Northern Electricity (North East)
Limited
Dormant
England and Wales
100% 100%
Northern Electricity (Yorkshire)
Limited
Dormant
England and Wales
100% 100%
Northern Electricity Limited Dormant
England and Wales
100% 100%
Northern Electricity Networks
Company (North East) Limited
Dormant
England and Wales
100% 100%
Northern Electricity Networks
Company (Yorkshire) Limited
Dormant
England and Wales
100% 100%
Northern Electricity Networks
Company Limited
Dormant
England and Wales
100% 100%
Northern Electrics Limited Dormant
England and Wales
100% 100%
Page 88
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
14 Investm ents (continued)
Nam e of subsidiary Principal activity
Registered office and country
of incorporation
Proportion of
ownership interest
and voting rights
held
2025 2024
Northern Energy Funding
Company Limited
Dormant
England and Wales
100% 100%
Northern Powergrid Metering
Limited
Meter asset provider
England and Wales
100% 100%
Northern Powergrid (Northeast)
plc
Distribution of
electricity
England and Wales
100% 100%
Northern Powergrid (North West)
Limited
Dormant
England and Wales
100% 100%
Northern Power Networks
Company (North East) Limited
Dormant
England and Wales
100% 100%
Northern Power Networks
Company (Yorkshire) Limited
Dormant
England and Wales
100% 100%
Northern Power Networks
Company Limited
Dormant
England and Wales
100% 100%
Northern Transport Finance
Limited
Car finance company
England and Wales
100% 100%
Northern Utility Services Limited Dormant
England and Wales
100% 100%
Pow erGrid (Central) Limited Dormant
England and Wales
100% 100%
Pow erGrid (East) Limited Dormant
England and Wales
100% 100%
Pow erGrid (Eastern) Limited Dormant
England and Wales
100% 100%
Pow erGrid (Midlands) Limited Dormant
England and Wales
100% 100%
Pow erGrid (North East) Limited Dormant
England and Wales
100% 100%
Pow erGrid (North Eastern)
Limited
Dormant
England and Wales
100% 100%
Pow erGrid (North West) Limited Dormant
England and Wales
100% 100%
Pow erGrid (North Western)
Limited
Dormant
England and Wales
100% 100%
Pow erGrid (North) Limited Dormant
England and Wales
100% 100%
Pow erGrid (Northern) Limited Dormant
England and Wales
100% 100%
Pow erGrid (South East) Limited Dormant
England and Wales
100% 100%
Pow erGrid (South Eastern)
Limited
Dormant
England and Wales
100% 100%
Pow erGrid (South West) Limited Dormant
England and Wales
100% 100%
Pow erGrid (South Western)
Limited
Dormant
England and Wales
100% 100%
Page 89
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
14 Investm ents (continued)
Nam e of subsidiary Principal activity
Registered office and country
of incorporation
Proportion of
ownership interest
and voting rights
held
2025 2024
Pow erGrid (South) Limited Dormant
England and Wales
100% 100%
Pow erGrid (Southern) Limited Dormant
England and Wales
100% 100%
Pow erGrid (West) Limited Dormant
England and Wales
100% 100%
Pow erGrid (Western) Limited Dormant
England and Wales
100% 100%
Pow erGrid (Yorkshire) Limited Dormant
England and Wales
100% 100%
South East PowerGrid Limited Dormant
England and Wales
100% 100%
South Eastern Pow erGrid Limited Dormant
England and Wales
100% 100%
South PowerGrid Limited Dormant
England and Wales
100% 100%
South West PowerGrid Limited Dormant
England and Wales
100% 100%
South Western Pow ergrid Dormant
England and Wales
100% 100%
Southern Pow erGrid Limited Dormant
England and Wales
100% 100%
West PowerGrid Limited Dormant
England and Wales
100% 100%
Western Pow erGrid Limited Dormant
England and Wales
100% 100%
YEDL Limited Dormant
England and Wales
100% 100%
Yorkshire Electricity Distribution
Limited
Dormant
England and Wales
100% 100%
Yorkshire PowerGrid Limited Dormant
England and Wales
100% 100%
Northern Electric Finance plc** Finance company
England and Wales
100% 100%
*T hese companies have taken advantage of s479A Companies Act exemption from audit.
**T hese companies are indirectly owned subsidiaries, with the rest of the above being directly ow ned.
All dormant companies have taken advantage of s480 (dormant entities) exemption from audit.
The class of shares related to the above companies are ordinary shares.
Unless otherwise stated the registered office of the above companies is: Lloyds Court, 78 Grey Street, New castle upon
Ty ne, Tyne and Wear, NE1 6AF.
Page 90
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
14 Investm ents (continued)
Group joint ventures
Details of the Group joint ventures as at 31 December 2025 are as follows:
Nam e of Joint-ventures Principal activity Registered office
Proportion of
ownership interest and
voting rights held by
the Group
2025 2024
Vehicle Lease and Service
Limited
Transport services Centre for Advanced Industry,
3rd Floor, Coble Dene, North
Shields, NE29 6DE
England and Wales
50% 50%
VLS Limited Dormant Centre for Advanced Industry,
3rd Floor, Coble Dene, North
Shields, NE29 6DE
England and Wales
50% 50%
The class of shares related to the joint ventures above are ordinary shares.
Summarised financial information in respect of the Group's joint venture is set out below:
Joint ventures and associates are not strategic to the Group’s activities.
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Current assets
33,996 31,231
Non-current assets
10,604 9,497
Current liabilities
(15,706) (14,690)
Non-current liabilities
(22,060) (19,506)
Net assets
6,834 6,532
Group's share of net assets
3,417 3,268
Revenue
21,208 20,453
Profit for the year
1,791 1,478
Groups share of profit for the year
896 739
15 Inventories
Group Com pany
31 December
2025
£ 000
31 December
2024
£ 000
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Raw materials and consumables
42,567 28,536 - -
Vehicle inventory 1,226 852 - -
43,793 29,388 - -
Page 91
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
16 Trade and other receivables
Group Com pany
31 December
2025
£ 000
31 December
2024
£ 000
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Distribution use of system receivables and
accrued income*
57,090 75,264 - -
Trade receivable
25,690 23,067 - 67
Lease receivable
- 3,934 - -
Loss allowance (5,551) (5,458) - -
Net trade receivables
77,229 96,807 - 67
Receivables from related parties
236,384 68,769 172,958 70,998
Social security and other taxes
2,459 - 1,770 443
Prepayments
8,198 7,594 272 235
Other receivables 15,215 5,084 3,088 -
339,485 178,254 178,088 71,743
Non-current lease receivables - 8,052 - -
339,485 186,306 178,088 71,743
Page 92
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
16 Trade and other receivables (continued)
* All accrued income relates to distribution revenue.
The average credit period on receivables is 30 days. No interest is charged on outstanding trade receivables.
Within Distribution use of system receivables and accrued income above is £32.3 million of distribution accrued income
(2024: £43.7 million).
Trade receivables include wo rk in progress, representing recoverable amounts due from third parties for damage to our
network that have not yet been invoiced.
More information on receivables from related parties can be found within Note 2 and Note 31.
The Group always measures the loss allowance for trade receivables at an amount equal to lifetime expected credit loss.
The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default
experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to
the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current
as we ll as the forecast direction of conditions at the reporting date.
There has been no change in the estimation techniques or significant assumptions made during the current reporting
period.
As the Company’s historical credit loss experience does shows significantly different loss patterns for different customer
segments, the provision for loss allowance based on past due status is distinguished as follows:
• Distribution businesses: DUoS receivables, damages receivables, and other receivables;
• Metering: contracted meters, contracted churn, and non-contracted churn; and
• Engineering contracting: construction contracts receivables.
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
At 1 January
5,458 8,150
Amounts utilised/written off in the year
(604) (3,542)
Amounts recognised in the income statement 697 850
At 31 December
5,551 5,458
The loss allow ance is made on amount due net of VAT which wo uld be recoverable from His Majesty's Revenue and
Customs when the debt is wr itten off.
Significant increase in credit risk
In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the
Company compares the risk of a default occurring on a financial instrument at the reporting date with the risk of a default
occurring on the financial instrument at the date of initial recognition. In making this assessment the Company considers
historical experience as we ll as forward-looking information that is available without undue cost or effort.
Forw ard-looking information includes the future prospects of the industries in which the Company's debtors operate
obtained from economic expert reports, financial analysts, government bodies, relevant think-tanks and other similar
organisations. In particular the following information is taken into account when assessing whether credit risk has
increased significantly since initial recognition:
Page 93
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
16 Trade and other receivables (continued)
• existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a
significant decrease in the debtor's ability to meet its debt obligations;
• an actual or expected significant deterioration in the operating results of the debtor;
• significant increases in credit risk on other financial instruments of the same debtor; and
• an actual or expected significant adverse change in the regulatory, economic, or technological environment of the
debtor that results in a significant decrease in the debtor's ability to meet its debt obligations.
Distribution use of system receivables
The customers served by the Group’s distribution network are supplied predominantly by a number of electricity supply
businesses (circa 110) with the E.ON group accounting for approximately 15.5% of distribution revenues in 2025 (2024:
16.2%) and British Gas plc accounting for approximately 14.0% of distribution revenues in 2025 (2024: 13.5%). Ofgem
under Code Governance arrangements, set out a framework known as Credit Cover within the Distribution Connection and
Use of System Agreement (DCUSA), which sets credit limits for each supply business based on its credit rating (taken
from a credit agency). If no score is available, then they can build up their credit limit through good payment history. In
addition, suppliers can provide other forms of collateral to cover their value at risk (measured as being equivalent to 45
days usage) or if their credit rating alone is not sufficient to cover their value at risk. Acceptable collateral typically is
provided in the form of a parent company guarantee, letter of credit, cash or an escrow account. Included within other
payables are customer cash deposits of which there was £2.5m as at 31st December 2025 (2024: £2.5m).
Provided the Group has implemented credit control, billing and collection processes in line with Ofgem’s best practice
guidelines and can demonstrate compliance with the guidelines or is able to satisfactorily explain departure from the
guidelines, any bad debt losses arising from supplier default will be recovered through an increase in future years allow ed
income. Included in the Group's use of system (“UoS”) receivables are 0 debtors with a carrying value of £nil, which have
been placed into administration (2024: £nil).
Other distribution trade receivables
Sales of goods and services comprise all income streams which are not classified as DUoS income. Examples of
non-DUoS income streams wo uld be service alterations/disconnections, assessment and design fees, and recovery of
amounts for damage caused by third parties to the distribution system. The average credit period on sales of goods and
services is 30 days. Interest is not generally charged on the trade receivables paid after the due date.
Engineering contracting receivables
The average credit period on Engineering contracting receivables is 30 days. Interest is not generally charged on
receivables paid after due date. Included in the Group’s construction contracts balance are debtors with a carrying amount
of £4.7 million (2024: £2.8 million), which are past due at the reporting date for which the Group has provided for an
irrecoverable amount of £0.6 million (2024: £0.8 million) based on past experience. The Group does not hold any
collateral over these balances. The average age of these receivables is 74 days (2024: 60 days).
Included in the Group's construction contracts balance are debtors with a carrying amount of £nil (2024: £nil) which are
past due at the reporting date for which the Group has not provided as there has not been a significant change in credit
quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances.
Lease receivables
Meter asset provision
Included in lease receivables are balances relating to the provision of meters through Northern Pow ergrid Metering
Limited with a carrying amount of £15.5 million (2024: £18.3 million). The average credit period on these receivables is
30 days. Interest is not generally charged on receivables paid after the due date.
The Group wr ites off a lease receivable when there is information indicating that the debtor is in severe financial difficulty
and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation or has entered into
bankruptcy proceedings, or when the debtor is over 1 year past due. None of the trade receivables that have been wr itten
off are subject to enforcement activities.
For receivables where there is no specific provisions, a provision is made for debts past their due date based on lifetime
expected credit loss determined by reference to past default experience.
Page 94
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
16 Trade and other receivables (continued)
Operating lease receivables
Operating leases relate to the metering assets ow ned by the Group with lease terms of 10-15 years, these are disclosed in
Note 11. The lessee does not have an option to purchase the meters at the expiry of the lease period.
The total future value of minimum lease payments is as follows:
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Within one year
74,688 84,045
In two to five years
155,935 198,959
Over five years 167,743 186,288
398,366 469,292
The Group's exposure to credit and market risks, including maturity analysis, relating to trade and other receivables is
disclosed in Note 29 "Financial risk review".
17 Cash and cash equivalents
Group Com pany
31 December
2025
£ 000
31 Decem ber
2024
£ 000
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Cash at bank
509 2,240 - -
Other cash and cash equivalents 21,150 11,200 - -
21,659 13,440 - -
Included in other cash and cash equivalents is the mo ney market funds.
Page 95
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
18 Share capital
Allotted, issued, and fully paid:
The Company has one class of ordinary shares which carries no right to fixed income. Details of cumulative non-equity
preference shares are contained in the borrowings Note 20.
Share value No. of shares
2025
£ 000
2024
£ 000
Ordinary shares 56 12/13p 127,689,809
72,173 72,173
19 Reserves
Group
The changes to each component of equity resulting from items of other comprehensive income for the current year were as
follows:
Cash flow
hedging
reserve
£ 000
Retained
earnings
£ 000
Total
£ 000
Loss on cash flow hedge (net)
(3,692) - (3,692)
Remeasurements of post employment benefit obligations (net) - (36,775) (36,775)
(3,692) (36,775) (40,467)
There had been no mo vement on share premium and capital redemption reserve.
Prior period
The changes to each component of equity resulting from items of other comprehensive income for the prior year were as
follows:
Cash flow
hedging
reserve
£ 000
Retained
earnings
£ 000
Total
£ 000
Loss on cash flow hedge (net)
(1,027) - (1,027)
Remeasurements of post employment benefit obligations - (11,825) (11,825)
(1,027) (11,825) (12,852)
Page 96
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
19 Reserves (continued)
Com pany
The changes to each component of equity resulting from items of other comprehensive income for the current year were as
follows:
Retained
earnings
£ 000
Total
£ 000
Remeasurements of post employment benefit obligations
(39,225) (39,225)
The changes to each component of equity resulting from items of other comprehensive income for the prior year were as
follows:
Retained
earnings
£ 000
Total
£ 000
Remeasurements of post employment benefit obligations
(14,025) (14,025)
20 Loans and borrowings
Group Com pany
2025
£ 000
2024
£ 000
2025
£ 000
2024
£ 000
Non-current loans and borrowings
1,307,187 1,119,735 1,117 1,117
Current loans and borrow ings
178,556 134,746 8,731 7,005
1,485,743 1,254,481 9,848 8,122
Page 97
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
20 Loans and borrowings (continued)
Group
Carrying value Fair value
2025
£ 000
2024
£ 000
2025
£ 000
2024
£ 000
Short-term loans
93,682 79,260 93,682 79,260
Amortising loan 2026 - 2.3012%*
61,283 94,920 61,835 96,117
Bond 2035 - 5.125%
153,748 153,647 153,483 150,467
Bond 2049- 2.75%
150,291 150,225 92,428 92,098
Bond 2052 - 3.25%
355,176 355,096 236,728 233,823
Bond 2062 - 1.875%
297,933 297,837 126,181 132,772
European Investment Bank 2027 - 2.564%
120,128 120,128 116,147 111,524
Northern Powergrid (Northeast) plc 2037
5.375% Bond
250,134 - 249,573 -
Cumulative preference shares 3,368 3,368 150,203 140,153
1,485,743 1,254,481 1,280,260 1,036,214
The group's exposure to market and liquidity risks, including maturity analysis, relating to loans and borrow ings is
disclosed in Note 29 "Financial risk review".
Included within short-term loans is a £75m capital expenditure facility which is 80% swapped at a fixed rate of 2.6005%,
with the remaining 20% floating at SONIA plus 1.75%
*2026 £218m Amortising Loan is 80% swapped at a fixed rate of 2.4455%, with the remaining 20% floating at SONIA
plus 1.75%.
Com pany
Carrying value Fair value
2025
£ 000
2024
£ 000
2025
£ 000
2024
£ 000
Short-term loans
6,522 3,968 6,522 3,968
Cumulative preference shares 3,368 3,368 150,203 140,153
9,890 7,336 156,725 144,121
Of the total financial liabilities of £1,485.7 million, £1,392.0 million (2024: £1,254.5 million) relates to external
borrow ings and preference shares (111,662,378 shares) whose fair value is determined with reference to quoted market
prices. The directors' estimates of the fair value of internal borrow ings are determined in accordance with generally
accepted pricing mo dels based on discounted cash flow analysis using prices from observable current market transactions
or dealer quotes for similar instruments. The valuation of liabilities set out above is based on Level 1 inputs.
The terms of the cumulative preference shares:
Page 98
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
20 Loans and borrowings (continued)
• entitle holders, in priority to holders of all other classes of shares, to a fixed cumulative preferential dividend of 8.061p
(net) per share per annum payable half-yearly in equal amounts on 31 March and 30 September;
• on a return of capital on a winding up, or otherw ise, will carry the right to repayment of capital together with a
premium of 99p per share and a sum equal to any arrears or accruals of dividend. This right is in priority to the rights of
ordinary shareholders;
• carry the right to attend a general meeting of Northern Electric plc and vote if, at the date of the notice convening the
meeting, payment of the dividend to which they are entitled is six mo nths or mo re in arrears, or if a resolution is to be
considered at the meeting for the winding-up of Northern Electric plc or abrogating, varying or modifying any of the
special rights attaching to them; and
• are redeemable in the event of the revocation by the Secretary of State of Northern Electric plc's Public Electricity
Supply Licence at the value given above.
During the year ended 31 December 2001, under the terms of the Northern Electric plc's transfer scheme, as approved by
the Secretary of State in accordance with the provisions of the Utilities Act 2000, the Northern Electric plc's Public
Electricity Supply Licence was converted into an Electricity Distribution Licence and an Electricity Supply Licence.
21 Obligations under leases
Group
Lease liability
Lease commitments relate to fleet vehicles from Vehicle Lease and Service Limited, a joint venture, with terms of up to 7
years and land and buildings with terms of up to 50 years.
The total future value of minimum lease payments is as follows:
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Within one year
3,515 3,285
In two to five years
8,516 7,870
In over five years 3,475 3,504
Total lease payment
15,506 14,659
Unearned interest
(1,620) (2,085)
Total lease liability
13,885 12,574
The discounted amount due within one year totalled £3.52 million (2024: £3.23 million).
Unearned interest is future interest on leases not yet earned at the balance sheet date.
Page 99
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
21 Obligations under leases (continued)
Com pany
Lease Liability
The Company holds one single lease relating to the main office building within New castle upon Tyne.
The total future value of minimum lease payments is as follows:
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Within one year
172 172
In two to five years
515 687
In over five years 48 48
Total lease payment
735 907
Unearned interest
(129) (57)
Total lease liability
606 850
22 Provisions
Group
Legal
proceedings
£ 000
Other
£ 000
Total
£ 000
At 1 January 2025
993 2,391 3,384
Additional provisions
2,932 981 3,913
Provisions used (1,911) (2,003) (3,914)
At 31 December 2025
2,014 1,369 3,383
Non-current liabilities
- 540 540
Current liabilities
2,014 829 2,843
Legal proceedings: Provision has been made to cover costs arising from utility damages, public liability, fines and
motoring third party claims. Settlement is expected substantially within 12 mo nths.
The provisions are not discounted on the grounds of materiality. The impact of discounting is immaterial to the financial
statements, as the effect on the present value of the provision is not significant enough to influence the economic decisions
of users of the financial statements. Therefore, the provisions are presented at their nominal value.
Other: Primarily consists of a provision for future safe disposal of transformers which contain oil contaminated with
Polychlorinated Biphenyls (PCBs), and for an amount to cover claims made under Section 74 of the New Road and Street
Works Act 1991.
Also included within 'other' are pension provisions which relate to the Group's share of expected settlements of liabilities
relating to pension deficit repair of Electricity Association Technology Limited ("EATL") and are expected to be settled
over a period of approximately one year. As at 31 December 2025 the provision relating to EATL is £0.2 million (2024:
£0.2 million).
Page 100
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
22 Provisions (continued)
Com pany
Other
provisions
£ 000
Total
£ 000
At 1 January 2025
983 983
Decrease in existing provisions (324) (324)
At 31 December 2025
659 659
The Company's provisions relate to the actuarial assessment of the costs of unfunded pension arrangements in respect of
former employees. This is expected to be realised over the next 20 years.
Also included above are pension provisions which relate to the Group's share of expected settlements of liabilities relating
to pension deficit repair of Electricity Association Technology Limited ("EATL") and are expected to be settled over a
period of approximately one year. As at 31 December 2025 the provision relating to EATL is £0.2 million (2024: £0.2
million).
23 Trade and other payables
Group Com pany
31 December
2025
£ 000
31 Decem ber
2024
£ 000
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Current liabilities
Payments on account
69,668 71,329 - -
Trade payables
28,142 16,231 440 1,795
Accrued expenses
54,154 38,721 3,759 2,909
Amounts due to related parties
- 30,200 - 30,200
Social security and other taxes
- 12,925 106 116
Other payables 22,430 19,203 1,238 834
174,394 188,609 5,543 35,854
Non-current liabilities
Payments on account 4,368 6,549 - -
Non-current liabilities
4,368 6,549 - -
Page 101
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
23 Trade and other payables (continued)
Payments on Account are primarily advanced customer contributions for which no associated distribution asset has been
constructed or yet to be completed.
The Group's exposure to market and liquidity risks, including maturity analysis, related to trade and other payables is
disclosed in the financial risk review Note 28.
Included within the Payment on Account line is innovation funding received from the National Energy System Operator
(NESO) for the Community DSO project of £10.1 million (2024: £10.5 million). The funding will be released over a
period of time until 2028. This funding wa s successfully bid for and is aimed at supporting the development and
implementation of a decentralised system operator model within the community. The performance obligations associated
with this funding include the establishment of infrastructure, engagement with local stakeholders and reporting on project
progress and outcomes across the industry. Based on the latest project schedule, £3.9 million has been classified as current
and £6.6 million as non-current as at the reporting date. For the comparative year, the total amount was incorrectly
included in current other payables. As the Directors do not consider the effect on the prior period financial statements to be
material, this has not been adjusted. The related income recognised in the current year was £1.5 million (2024: £1.5
million).
The directors consider that the carrying amount of other financial liabilities approximates their fair value, calculated by
discounting future cash flows at market rate at the statement of financial position date. The valuation is based on Level 1
inputs. Trade creditors and accruals principally comprise amounts outstanding for trade purchases and on-going costs.
Invoices are paid at the end of the month following the date of the invoice. The Group has financial risk management
policies in place to ensure that all payables are paid within the credit timeframe. The standard payment term for trade
payables is net mo nthly.
Page 102
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
24 Contract Liabilities (Deferred Revenue)
Group
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Opening balance
725,576 702,953
Additions
45,257 54,105
Amortisation (32,806) (31,482)
Closing balance
738,027 725,576
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Current
34,115 32,181
Non-current 703,912 693,395
738,027 725,576
Contract liabilities are deferred customer contributions payments for distribution system assets where wo rk has
commenced or is completed. The Group's policy is to credit the customer contribution to revenue on a straight-line basis,
in line with the useful life of the associated distribution system asset.
Page 103
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
25 Pension and other schemes
Defined benefit pension schemes
Electricity Supply Pension Scheme
The Group contributes to two pension schemes, which it operates on behalf of the participating companies within the
Group. Those pension schemes are:
- The Northern Powergrid Group of the ESPS (the "DB Scheme"); and
- The Northern Powergrid Pension Scheme.
The Northern Pow ergrid Pension Scheme wa s introduced for new employees of the Group from July 1997 and is a money
purchase arrangement accounted for as a defined contribution scheme.
The DB Scheme is a defined benefit scheme for directors and employees, which provides pension and other related
retirement benefits based on final pensionable pay. The DB Scheme closed to staff commencing employment with the
Group on or after 23 July 1997. Active members who joined before this date, including some active members under The
Electricity (Protected Persons) (England and Wales) Pension Regulations 1990, continue to build up future pension
benefits.
Under the DB Scheme, employees are typically entitled to annual pensions on retirement at age 63 of one-eightieth of final
pensionable salary for each year of service plus an additional tax-free cash lump sum at retirement of three times pension.
Benefits are also payable on death and following other events such as withdrawing from active service.
No other post-retirement benefits are provided to members of the DB Scheme.
The Group agrees the defined benefit pension scheme contribution rate applied to pensionable pay as part of the triennial
valuation. The agreed rates are applied consistently to all contributing employees.
The assets and liabilities of the scheme are recorded in the Company, with individual companies recording contribution
paid. Differences between pension costs calculated in accordance with IAS19 and employee benefit contributions paid by
individual companies are recorded in the Company.
Pension regulation
The UK pensions market is regulated by the Pensions Regulator whose key statutory objectives in relation to UK defined
benefit plans are to:
- protect the benefits of members;
- promote and to improve understanding of good administration;
- reduce the risk of situations arising which may lead to compensation being payable from the Pension Protection Fund
("PPF"); and
- minimise any adverse impact on the sustainable grow th of an employer.
The Pensions Regulator has various powers including the power to:
- wind up a scheme where winding up is necessary to protect members' interests;
- appoint or remove a trustee;
- impose a schedule of company contributions where trustees and company fail to agree on appropriate contributions; and
- impose contributions where there has been a detrimental action against the scheme.
Page 104
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
25 Pension and other schemes (continued)
Role of Trustees
The DB Scheme is administered by a board of Trustees which is legally separate from the Company. The assets of the DB
Scheme are held in a separate trustee-administered fund. The board of Trustees is made up of Trustees appointed by the
company, as the Principal Employer of the DB Scheme, Trustees elected by the membership and an independent trustee.
The Company are required by law to act in the interest of all relevant beneficiaries and are responsible in particular for the
asset investment strategy plus the day-to-day administration of the benefits payable. They also are responsible for jointly
agreeing with the Principal Employer the level of contributions due to the DB Scheme.
Funding requirements
UK legislation requires that pension schemes are funded prudently (i.e. to a level in excess of the current expected cost of
providing benefits). The next actuarial valuation of the DB Scheme will be carried out by the Trustee's actuarial advisors,
Aon, at a date no later than 31 March 2028. Such valuations are required by law to take place at intervals of no mo re than
three years. Following each valuation, the Trustees and the Northern Pow ergrid Group must agree the contributions
required (if any) such that the DB Scheme is fully funded over time on the basis of suitably prudent assumptions.
At the latest funding valuation as at 31 March 2025, the funding surplus wa s assessed to be £2.3 million. In light of this,
the Company are not currently paying any deficit contributions. The next actuarial valuation will be at 31 March 2028 and
is expected to be completed by 30 June 2029, by which time a new contribution schedule will be agreed.
The contributions payable by the Northern Pow ergrid Group to the DB Scheme in respect of future benefits which are
accruing, reduced from 46.1% to 24.9% of pensionable pay with effect from 1 January 2026. These contributions we re
determined as part of the 31 March 2025 actuarial valuation and will remain in place until such a time as a new schedule of
contributions is agreed between the Trustees and the Company as part of the 31 March 2028 valuation.
The Northern Pow ergrid Group's total contributions to the DB Scheme for the next financial year are expected to be £4.7
million.
The Trust Deed provides the Northern Powergrid Group with an unconditional right to a refund of surplus assets assuming
the gradual settlement of plan liabilities over time. Furthermore, in the ordinary course of business the Trustees have no
right to unilaterally wind up, or otherwise augment the benefits due to members of the DB Scheme. Based on these rights,
any net surplus in the plan is recognised in full.
Profile of the scheme
The Defined Benefit Obligation (DBO) includes benefits for current employees, former employees and current pensioners.
The overall duration of the DB Scheme's obligation wa s assessed to be about 12 years based on the results of the 31 March
2025 funding valuation. This is the we ighted-average time over which benefit payments are expected to be made.
At 31 March 2025, broadly, about 22% of the liabilities are attributable to current employees (duration about 17 years), 5%
to former employees (duration about 16 years) and 73% to current pensioners (duration about 10 years). We anticipate that
the overall duration of the Scheme’s obligation will have remained around 12 years at 31 December 2025, due to the
minimal movements in yields.
Page 105
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
25 Pension and other schemes (continued)
Investm ent objectives for the DB Scheme
The Trustees aim to achieve the DB Scheme's investment objectives through investing partly in a diversified mix of
growth assets which, over the long term, are expected to grow in value by more than low risk assets like cash and gilts.
This is done with a broad liability driven investing framework that uses cash, gilts and other hedging instruments like
swaps in a capital efficient wa y. In combination this efficiently captures the Trustees' risk tolerances and return objectives
relative to the DB Scheme's liabilities.
Investm ent objectives for the DB Scheme
The Trustees aim to achieve the DB Scheme's investment objectives through investing partly in a diversified mix of
growth assets which, over the long term, are expected to grow in value by more than low risk assets like cash and gilts.
This is done with a broad liability driven investing framework that uses cash, gilts and other hedging instruments like
swaps in a capital efficient wa y. In combination this efficiently captures the Trustees' risk tolerances and return objectives
relative to the DB Scheme's liabilities.
The Company and Trustees have agreed a long-term strategy for reducing investment risk as and when appropriate. This
includes the use of Liability Driven Investment (LDI) to more closely match the nature and duration of the DB Scheme's
liabilities through the use of derivatives such as swaps and repurchase agreements. The portfolio is designed to hedge a
proportion of the interest rate and inflation risk inherent in the DB Scheme's liabilities. The target hedging level is
currently 99% (2024: 99%) of the DB Scheme's liabilities as measured on the basis used for the funding valuation.
The Trustees ensure certain benefits which are payable on death before retirement.
Risks
Volatile asset returns
The DBO is calculated using a discount rate set with reference to corporate bond yields. If assets underperform this
discount rate, this will create an element of deficit. The DB scheme currently holds a proportion (20%) of its assets in
return-seeking assets, which, although expected to outperform corporate bonds in the long term, create volatility and risk
in the short term.
Mitigation
The allocation to return-seeking assets is monitored to ensure it remains appropriate given the DB scheme's long-term
objectives. The Trustees regularly review the strategy from return-seeking assets and have diversified return-seeking assets
from equities into Reinsurance, Listed Infrastructure and Insurance-linked securities to reduce overall risk.
Changes in bond yields
A decrease in corporate bond yields will increase the value placed on the DBO for accounting purposes, although this will
be partially offset by an increase in the value of the DB Scheme's bond holdings.
Mitigation
The DB scheme currently holds a substantial proportion of its assets (80%) as bonds, Asset Backed Securities, and
Liability Driven Investment (LDI), which provide a significant hedge against falling bond yields (falling yields which
increase the DBO will also increase the value of the bond assets). There are some differences in the credit quality of bonds
held by the DB Scheme and the bonds analysed to decide the DBO discount rate, such that there remains some risk should
yields on different quality bond/swap assets diverge.
Inflation risk
A significant proportion of the DBO is indexed in line with price inflation (specifically UK Retail Price Index) and higher
inflation will lead to a higher DBO.
Mitigation
The DB Scheme currently aims to invest around 42% in LDI (included in the 80% bond allocation above) which provides
a hedge against higher-than-expected inflation increases on the DBO (rising inflation will increase both the DBO and the
value of the LDI portfolio).
Life expectancy risk
The majority of the DB scheme’s obligations are to provide benefits for the life of the member, so increases in life
expectancy will result in an increase in the liabilities.
Page 106
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
25 Pension and other schemes (continued)
Mitigation
The DB Scheme regularly reviews actual experience of its membership against the actuarial assumptions underlying the
future benefit projections and carries out detailed analysis when setting an appropriate scheme specific mo rtality
assumption.
Other risks
There are a number of other risks associated with the DB Scheme including operational risks (such as paying out the
wr ong benefits), legislative risks (such as the government increasing the burden on pension schemes through new
legislation) and other demographic risks (such as a higher proportion of members dying than assumed with a dependant
eligible to receive a survivor's pension from the DB Scheme).
Page 107
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
25 Pension and other schemes (continued)
Legislative risk
The risk that new legislation, or clarification to existing legislation, increases the benefits due to members. In June 2023,
the High Court handed down a decision in the case of Virgin Media Limited v NTL Pension Trustees II Limited and others
relating to the validity of certain historical pension changes due to the lack of actuarial confirmation required by law. On 2
September 2025, the Government published draft amendments to the Pensions Scheme Bill which would give affected
pension schemes the ability to retrospectively obtain wr itten actuarial confirmation that historic benefit changes met the
necessary standards. The draft legislation will need to be agreed by both Houses of Parliament before it passes into law.
Following the publication of draft legislation, the Directors do not expect the Virgin Media ruling to give rise to any
additional liabilities and so the DBO has not been adjusted and continues to reflect the benefits currently being
administered
Reporting at 31 December 2025
For the purposes of this disclosure, the current and future pension costs of the Northern Powergrid Group have been
assessed by Aon, a qualified independent actuary, using the assumptions set out below, which the actuary has confirmed
represent a reasonable best estimate of those costs. The review has been based on the same membership and other data as
at 31 March 2025. The board of Northern Powergrid Holdings Company has accepted the advice of the actuary and
formally approved the use of these assumptions for the purpose of calculating the pension cost of the Northern Powergrid
Group.
The results of the latest funding valuation at 31 March 2025 have been adjusted to 31 December 2025. Those adjustments
take account of experience over the period since 31 March 2025, changes in market conditions, and differences in the
financial and demographic assumptions. The present value of the DBO and the related current service cost we re measured
using the Projected Unit Credit Method.
For schemes closed to new members, such as the DB Scheme, the current service cost (as a percentage of pensionable pay)
calculated under the Projected Unit Credit Method is expected to increase as the members of the DB Scheme approach
retirement.
Principal actuarial assumptions
The significant actuarial assumptions used to determine the present value of the defined benefit obligation at the statement
of financial position date are as follows:
31 Decem ber
2025
%
31 Decem ber
2024
%
Discount rate
5.50 5.50
Future salary increases
2.95 3.30
Future pension increases
2.60 2.85
Inflation - RPI
2.70 3.05
Inflation- CPI
2.35 2.70
Proportion of pension exchanged for additional cash at retirement
10.00 10.00
The financial assumptions reflect the nature and term of the DB Scheme's liabilities.
Post retirement mortality assumptions
31 Decem ber
2025
Years
31 Decem ber
2024
Years
Life expectancy for male currently aged 60
26.60 26.00
Life expectancy for female currently aged 60
28.40 28.00
Life expectancy at 60 for male currently aged 45
27.70 26.90
Life expectancy at 60 for female currently aged 45
29.30 29.30
Page 108
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
25 Pension and other schemes (continued)
Reconciliation of scheme assets and liabilities to assets and liabilities recognised
The amounts recognised in the statement of financial position are as follows:
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Fair value of scheme assets
974,700 989,600
Present value of scheme liabilities (878,500) (850,900)
Defined benefit pension scheme surplus
96,200 138,700
Scheme assets
Changes in the fair value of scheme assets are as follows:
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Fair value at start of year
989,600 1,098,300
Interest income
53,000 48,900
Re-measurement (loss) on scheme assets
(11,800) (101,800)
Employer contributions
8,700 9,200
Contributions by scheme participants
400 400
Benefits paid
(62,200) (62,900)
Administrative expenses paid (3,000) (2,500)
Fair value at end of year
974,700 989,600
Page 109
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
25 Pension and other schemes (continued)
Analysis of assets
The major categories of scheme assets are as follows:
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Developed market equity
- 72,000
Emerging market equity
- 2,100
Property
106,000 103,100
Reinsurance
54,300 70,000
Listed infrastructure
50,000 47,000
Investment grade corporate bonds
- 100,700
Other debt (non-investment grade)
- 153,600
Fixed interest gilts
- 8,100
Liability driven investments
332,000 342,100
Asset backed securities
72,500 -
Absolute return bonds
330,200 -
Cash and cash equivalents including derivatives 29,700 90,900
974,700 989,600
The pension scheme has not invested in any of the Company's ow n financial instruments or in properties or other assets
used by the Company.
Scheme liabilities
Changes in the present value of scheme liabilities are as follows:
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Present value at start of year
(850,900) (949,700)
Current service cost
(3,700) (4,400)
Actuarial (losses)/gains arising from changes in demographic assumptions
(26,300) 2,700
Actuarial gains arising from changes in financial assumptions
23,800 80,900
Actuarial losses arising from experience adjustments
(38,000) (500)
Interest cost
(45,200) (42,400)
Benefits paid
62,200 62,900
Contributions by scheme participants (400) (400)
Present value at end of year
(878,500) (850,900)
Page 110
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
25 Pension and other schemes (continued)
Amounts recognised in the income statement
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Current service cost
3,700 4,400
Administrative expenses
3,000 2,500
Net interest (7,800) (6,500)
Amounts recognised (1,100) 400
Costs included in cost of qualifying assets (1,070) (2,030)
Total recognised in the income statement
(2,170) (1,630)
Amounts taken to the Statement of Comprehensive Income
31 Decem ber
2025
£ 000
31 Decem ber
2024
£ 000
Actuarial losses/(gains) arising from changes in demographic assumptions
26,300 (2,700)
Actuarial gains arising from changes in financial assumptions
(23,800) (80,900)
Actuarial losses arising from experience adjustments
38,000 500
Return on plan assets in excess of that recognised in net interest 11,800 101,800
Amounts recognised in the Statement of Comprehensive Income
52,300 18,700
Sensitivity analysis
Significant actuarial assumptions for determination of the defined benefit obligation are discount rate, inflation, and
mortality. The sensitivity analyses below have been determined based on reasonably possible changes of the respective
assumptions occurring at the end of the reporting period, while holding all other assumptions constant:
31 Decem ber
2025
31 Decem ber
2024
Adjustm ent to discount rate
+ 0.1%
£ 000
0.0%
£ 000
- 0.1%
£ 000
+ 0.1%
£ 000
0.0%
£ 000
- 0.1%
£ 000
Present value of total obligation
868,900 878,500 888,200 840,800 850,900 861,100
31 Decem ber
2025
31 Decem ber
2024
Adjustm ent to rate of inflation
+ 0.1%
£ 000
0.0%
£ 000
- 0.1%
£ 000
+ 0.1%
£ 000
0.0%
£ 000
- 0.1%
£ 000
Present value of total obligation
883,700 878,500 869,800 860,700 850,900 845,200
31 Decem ber
2025
31 Decem ber
2024
Adjustm ent to mo rtality age rating
assumption
+ 1 Year
£ 000
None
£ 000
- 1 Year
£ 000
+ 1 Year
£ 000
None
£ 000
- 1 Year
£ 000
Present value of total obligation
911,300 878,500 844,800 880,400 850,900 820,500
Page 111
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
25 Pension and other schemes (continued)
The sensitivity analysis presented above may not be representative of the actual change in defined benefit obligation as it
is unlikely that the changes in assumptions wo uld occur in isolation of one another as some of the assumptions may be
correlated.
26 Dividends
31 Decem ber
2025
31 Decem ber
2024
£ 000 £ 000
Dividend of £0.33 (2024 - £2.17) per ordinary share
35,170 277,400
27 Net debt reconciliation
Group
At 1 January
2025
£ 000
Net cash flows
£ 000
Other changes
£ 000
At 31
Decem ber
2025
£ 000
Cash and cash equivalents
13,440 8,219 - 21,659
Lease liabilities
(12,574) (570) - (13,144)
Borrow ings
(1,254,498) (231,245) - (1,485,743)
(1,253,632) (223,596) - (1,477,228)
At 1 January
2024
£ 000
Net cash flows
£ 000
Other changes
£ 000
At 31
Decem ber
2024
£ 000
Cash and cash equivalents
14,760 (1,320) - 13,440
Lease liabilities
(11,626) 3,430 (4,378) (12,574)
Borrow ings (1,288,352) 35,242 (1,388) (1,254,498)
(1,285,218) 37,352 (5,766) (1,253,632)
Other changes include accrued interest mo vement and amortisation of borrowings.
Interest and preference dividends paid of £46.6 million (2024: £48.2 million) as shown in the Statement of Cash Flows is
not shown in the reconciliation above as it is approximately equal to the interest expense.
Page 112
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
28 Classification of financial assets and financial liabilities
Group
The classification of financial assets and financial liabilities by accounting categorisation for the year ended 31 December
2025 was as follows:
Financial
assets at
am ortised cost
£ 000
Financial
assets at fair
value - hedging
instrum ents
£ 000
Financial
liabilities at
am ortised cost
£ 000
Current assets
Trade and other receivables
328,698 - -
Cash and cash equivalents
21,659 - -
Other current financial assets (Note 29) - 8,400 -
350,357 8,400 -
Non-current liabilities
Long term lease liabilities
- - (10,915)
Loans and borrowings - - (1,307,187)
- - (1,318,102)
Current liabilities
Current portion of long term lease liabilities
- - (2,970)
Trade and other payables
- - (174,394)
Loans and borrowings - - (178,556)
- - (355,920)
Total financial liabilities
- - (1,674,022)
Page 113
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
28 Classification of financial assets and financial liabilities (continued)
The classification of financial assets and financial liabilities by accounting categorisation for the period ending 31
December 2024 was as follows:
Financial
assets at
am ortised cost
£ 000
Financial
assets at fair
value - hedging
instrum ents
£ 000
Financial
liabilities at
am ortised cost
£ 000
Assets
Non-current assets
Trade and other receivables
8,052 - -
Other non-current financial assets (Note 29) - 8,827 -
8,052 8,827 -
Current assets
Trade and other receivables
170,530 - -
Cash and cash equivalents
13,440 - -
Other current financial assets (Note 29) - 4,496 -
183,970 4,496 -
Total financial assets
192,022 13,323 -
Liabilities
Non-current liabilities
Long term lease liabilities
- - (9,632)
Loans and borrowings - - (1,119,735)
- - (1,129,367)
Current liabilities
Current portion of long term lease liabilities
- - (2,942)
Trade and other payables
- - (175,684)
Loans and borrowings - - (134,763)
- - (313,389)
Total financial liabilities
- - (1,442,756)
Fair values are derived from level 1 inputs.
Page 114
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
29 Financial risk review
Capital ma nagem ent
The Group manages its capital centrally to ensure that entities in the Group will be able to continue as going concerns
while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall
strategy remains unchanged from 2020.
The capital structure of the Group consists of net debt (borrow ings as detailed in Note 20 offset by equity of the Company
(comprising issued capital, reserves and retained earnings as detailed in Notes 18 and 19).
At 31 December 2025, 99% of the Group's long-term borrow ings were at fixed rates (2024: 98%) and the average maturity
for these borrowings wa s 20 years (2024: 23 years).
During the year all obligations under the various debt covenants have been complied with.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. The Group has adopted a policy of only dealing with creditw orthy counterparties. The Group's exposure and the
credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread
amongst approved counterparties. The carrying amount of financial assets recorded in the financial statements, which is
net of impairment losses, represents the Group's maximum exposure to credit risk as no collateral or other credit
enhancements are held.
The Group's income is primarily generated from use of system revenue from electricity suppliers; suppliers are credit
checked by independent ratings agencies. Impaired income from DUoS will be recovered in future periods through system
charges and is therefore of no material risk to the Group. The Group's credit risk exposure is shown below:
Group
2025 Notes
Gross carrying
am ount
£ 000
Loss allowance
£ 000
Net carrying
am ount
£ 000
Trade and other receivables
16 334,379 (5,551) 328,828
Cash and short-term deposits
17 21,659 - 21,659
Contract assets
16 6,005 - 6,005
Other current financial assets
8,400 - 8,400
370,443 (5,551) 364,892
2024 Notes
Gross carrying
am ount
£ 000
Loss allowance
£ 000
Net carrying
am ount
£ 000
Trade and other receivables
16 184,171 (5,459) 178,712
Cash and short-term deposits
17 13,440 - 13,440
Contract assets
16 10,286 - 10,286
Other non-current financial assets
8,827 - 8,827
Other current financial assets 4,496 - 4,496
16
221,220 (5,459) 215,761
For trade receivables the Group has applied the simplified approach in IFRS 9 to measure the loss allowance at lifetime
ECL. The Group determines the expected credit losses on these items by using a provision matrix, estimated based on
historical credit loss experience based on the past due status of the debtors, adjusted as appropriate to reflect current
conditions and estimates of future economic conditions. Accordingly, the credit risk profile of these assets is presented
based on their past due status in terms of the provision matrix. The expected credit loss (ECL) has been assessed as
immaterial for related parties and contract assets.
Page 115
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
29 Financial risk review (continued)
The carrying amount of the Group’s financial assets at FVTPL as disclosed in Note 28 best represents their respective
maximum exposure to credit risk. The Group holds no collateral over any of these balances.
Amounts due from Group undertakings are regarded as low credit risk as the Group has a strong capacity to meet its
contractual cash flow obligations and maintains an investment grade credit rating.
Page 116
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
29 Financial risk review (continued)
Liquidity risk
Ultimate responsibility of liquidity risk management rests with the board of directors, which has established an appropriate
liquidity risk management framework for the management of the Group's short, medium, and long-term funding and
liquidity management requirements. The Group manages liquidity by maintaining adequate reserves, banking facilities and
reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity
profiles of financial assets and liabilities.
The Group has access to a £100 million revolving credit facility provided by Barclays Bank plc, Lloyds Bank plc, HSBC
UK Bank plc and Royal Bank of Canada. The facility wa s renewed in December 2025 for a period of three years, expiring
December 2028, with two 1-year extension options. In addition, the facility includes up to 2 accordion options to request
an increase in the facility by a maximum of £50m. The Group also has access to further short-term borrowing facilities
provided by YEG and to a £22 million overdraft facility provided by Lloyds Bank plc, which is reviewed annually, these
borrow ings are repayable on demand.
Maturity analysis for financial liabilities
The following table sets out the remaining undiscounted contractual cash flows of financial liabilities by type.
Group
2025
Less than 3
mo nths
£ 000
3 mo nths -
1 year
£ 000
1-5 years
£ 000
More than
5 years
£ 000
Total
£ 000
Non-interest bearing
120,289 - 4,368 - 124,657
Short-term interest bearing
6,618 75,694 - - 82,312
Long-term interest bearing - 108,952 292,077 1,841,125 2,242,154
126,907 184,646 296,445 1,841,125 2,449,123
2024
Less than 3
mo nths
£ 000
3 mo nths -
1 year
£ 000
1-5 years
£ 000
More than
5 years
£ 000
Total
£ 000
Non-interest bearing
104,355 - - - 104,355
Short-term interest bearing
4,220 75,632 - - 79,852
Long-term interest bearing - 78,436 341,159 1,752,019 2,171,614
108,575 154,068 341,159 1,752,019 2,355,821
Market risk
Market risk is the risk of loss arising from mo vements in market variables such as interest rates, exchange rates and
commodity prices. Risks are mitigated by utilising appropriate risk management products.
The Group's policy on interest rate risk is designed to limit the Group's exposure to floating interest rates. Consistent with
this policy, at 31 December 2025 the Group had 99% (2024: 98%) of long term debt at fixed rates. Short-term loans under
the multicurrency revolving credit facility are charged at a floating rate of interest at SONIA plus 0.20%. In aggregate,
circa 23% of the amortising long-term loan and the capital expenditure facility loans are at a floating rate of interest at
SONIA plus 1.75% and 1.90% respectively, thus exposing the Group to cash flow interest rate risk. A 1% mo vement in
interest rates wo uld subject the Group to an approximate change in interest costs of £0.4 million per year. This is
considered an acceptable level of risk. All other loans are at fixed interest rates and expose the Group to fair value interest
rate risk.
The interest rate swaps are settled on a quarterly basis and are based on receiving a floating rate of interest based on
SONIA and paying a fixed rate of 0.8955% on the amortising long-term loans and 0.8505% on the capital expenditure
facility loans. The Group settles the difference between the fixed and floating interest rate on a net basis.
Financial risk
The Group is not subject to significant risk relating to foreign exchange.
Page 117
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
30 Derivatives held for risk ma nagem ent and hedge accounting
Derivatives held for risk ma nagem ent
Derivatives are financial instruments that derive their value from the price of an underlying item such as interest rates,
foreign exchange rates, credit spreads, commodities, equity or other indices. In accordance with Board approved policies,
derivatives are transacted to manage our exposure to fluctuations in interest rate. The Group uses derivatives to manage
these risks from our financing portfolio to optimise the overall cost of accessing the debt capital markets.
The following table provides a reconciliation by risk category of components of equity and analysis of other
comprehensive income items (net of tax) resulting from hedge accounting. All derivative financial instruments relate to
cash flow hedges.
2025 2024
Assets
£ 000
Liabilities
£ 000
Assets
£ 000
Liabilities
£ 000
Non-current
- - 8,827 -
Current 8,400 - 4,496 -
8,400 - 13,323 -
The maturity of financial instruments was as follows:
3 mo nths to 1
year
£ 000
1 to 5 years
£ 000
More than 5
years
£ 000
Total
£ 000
2025
Notional principal
105,657 - - 105,657
Cash flow hedge
8,400 - - 8,400
114,057 - - 114,057
2024
Notional principal
31,246 105,657 - 136,903
Cash flow hedge
4,496 8,827 - 13,323
35,742 114,484 - 150,226
All interest rate swap contracts exchanging floating rate interest amounts for fixed rate interest amounts are designated as
cash flow hedges to reduce the Group’s cash flow exposure resulting from variable interest rate borrowings. The interest
rate swaps and interest payments on the underlying loan occur simultaneously and the amount accumulated in equity is
reclassified to profit or loss over the period that the floating rate interest payments on debt affect profit or loss.
The interest rate swaps are settled on a quarterly basis and are based on receiving a floating rate of interest based on
SONIA and paying a fixed rate of 0.8955% on the amortising long-term loans and 0.8505% on the capital expenditure
facility loans. The Group will settle the difference between the fixed and floating interest rate on a net basis.
Effectiveness testing
The Group is using regression analysis to assess the effectiveness of the interest rate swap on a retrospective and
prospective basis throughout the term of the hedging relationship. The dollar offset method wa s also performed at
inception, showing zero ineffectiveness.
Nature of the risk being hedged
Page 118
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
30 Derivatives held for risk ma nagem ent and hedge accounting (continued)
The Group is hedging the risk of variability in cash flows indexed to SONIA. Further details of the Group's risk
management is available in the strategic report, pages 19 to 24, and in financial risk review, Note 29.
31 Related party transactions
Directors' advances, credits and guarantees
During the year, 1 directors (2024: 2) and 2 key personnel (2024: 2) utilised the services provided by Northern Transport
Finance Limited. The amounts included in lease receivables owed by these directors and key personnel were £60,305
(2024: £61,912).
Rem uneration of key ma nagement personnel
Remuneration of key management personnel is disclosed in Note 7.
Group
2025
Sales to
£ 000
Purchases
(from)/to
£ 000
Am ounts
owed (to)/
from
£ 000
Finance
(incom e)/
cost
£ 000
Borrowings
to/(from)
£ 000
Dividends
paid
£000
Integrated Utility Services
(Eire)
- (1,835) - - - -
CE Gas Limited
960 - - - - -
Northern Powergrid Limited
- - 170,708 9,001 - 35,170
Northern Powergrid
(Yorkshire) plc
40,703 (15,250) (452) (906) - -
Vehicle Lease and Service
Limited
65 (6,298) - 965 - -
Yorkshire Electricity Group
- (61) - (2,545) 65,852 -
Berkshire Hathaway Energy
- (5,456) - - - -
Northern Powergrid
Holdings Company
482 - - - - -
42,210 (28,900) 170,256 6,515 65,852 35,170
Amounts owed to the Group by Northern Powergrid Limited include £170.5 million relating to a receivable arising from
unlawfully declared dividends. Further details are provided in the Directors’ Report.
Page 119
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
31 Related party transactions (continued)
2024
Sales to
£ 000
Purchases
from
£ 000
Am ounts
owed
from/(to)
£ 000
Finance
(incom e)/
costs
£ 000
Borrowings
to/(from)
£ 000
Dividends
paid/
(received)
£000
Integrated Utility Services
(Eire)
1,806 (2,279) 152 - - -
CE Gas Limited
832 - - - - -
Northern Powergrid Limited
- - - - - 277,400
Northern Powergrid
(Yorkshire) plc
40,028 (13,376) (2,590) (809) - -
Vehicle Lease and Service
Limited
61 (4,894) (560) 773 - (1,083)
Yorkshire Electricity Group
- - (490) (13,825) 68,769 -
Berkshire Hathaway Energy
- - (30,200) - - -
Northern Powergrid
Holdings 476 - - - - -
43,203 (20,549) (33,688) (13,861) 68,769 276,317
Intercompany balances with Yorkshire Electricity Group relate to intercompany current account transactions.
32 Non-cash investing and financing activities
The following items were settled by other entities within the Northern Pow ergrid Group through the intercompany current
account mechanism.
2025
£ 000
2024
£ 000
GROUP
Non-cash investing activities
Interest received 9,784 18,107
Non-cash financing activities
Interest paid
(7,247) (4,289)
Dividends paid (35,170) (277,400)
Total non-cash financing activities
(32,633) (263,582)
Page 120
Northern Electric plc
Notes to the Financial Statements for the Year Ended 31 December 2025 (continued)
33 Parent and ultimate parent undertaking
The Company's immediate parent is Northern Powergrid Limited.
The ultimate parent and controlling party is Berkshire Hathaway Inc.. These financial statements are available upon
request from 3555 Farnam Street, Omaha, Nebraska 68131.
Relationship between entity and parents
The parent of the largest group in which these financial statements are consolidated is Berkshire Hathaway Inc.,
incorporated in United States of America.
The registered address of Berkshire Hathaway Inc. is:
3555 Farnam Street, Omaha, Nebraska 68131
The parent of the smallest group in which these financial statements are consolidated is Northern Pow ergrid Holdings
Company, incorporated in England and Wales.
The registered address of Northern Powergrid Holdings Company is:
Lloyds Court, 78 Grey Street, Newcastle upon Tyne, Tyne and Wear, NE1 6AF
34 Other reserves
At the Company's Annual General Meeting in August 1994, the shareholders gave approval to on-market purchases of up
to 10% of its shares and this was given effect on 21 September 1994 when 12,370,400 shares were purchased. This
transaction resulted in the creation of a capital redemption reserve of £6.2 million. Under section 831(4) of the Companies
Act 2006 this reserve is treated as an un-distributable reserve.
Page 121
Northern Electric plc
Unaudited Pro Forma Supplementary Group Cash Flows
2025
£ 000
2024
£ 000
GROUP
Cash flows from/(used in) operating activities
Profit for the year
135,194 207,718
Depreciation and amortisation
175,233 164,697
Depreciation on right of use assets
3,426 3,593
Amortisation of deferred revenue
(32,806) (31,301)
Profit on disposal of property plant and equipment
(679) (456)
Retirement benefit obligation
(6,732) (8,800)
Finance income
(12,674) (20,537)
Finance costs
58,045 54,243
Income tax expense 48,738 73,529
Net cash from operating activities
367,745 442,686
Increase in inventories
(14,405) 516
Decrease in trade and other receivables
2,454 (10,859)
Decrease in trade and other payables
(27,739) 66,957
Increase in contract assets
4,281 (3,234)
Receipt of customer contributions
40,567 51,737
Decrease in provisions - (555)
Cash generated from operations
372,903 547,248
Income tax paid (44,431) (58,116)
Net cash flow from operating activities
328,472 489,132
Cash flows from/(used in) in investing activities
Acquisitions of property plant and equipment
(281,405) (301,773)
Proceeds from sale of property plant and equipment
1,696 1,419
Acquisition of intangible assets
(19,044) (15,259)
Interest received
11,709 19,702
Dividend income 814 1,179
Net cash flows used in investing activities (286,230) (294,732)
Cash flows from/(used in) in financing activities
Repayment of long-term borrowing
(34,659) (40,431)
Movement in short-term borrowing
14,381 6,391
Repayment of lease liabilities
(4,086) (3,430)
Movement in intercompany treasury account
(167,615) 173,964
Interest expense on leases
(643) (440)
Interest paid
(53,865) (54,374)
Dividends paid
(35,170) (277,400)
Proceeds from issuance of long-term borrowings 247,634 -
Net cash flows from/(used in) financing activities (34,023) (195,720)
Net increase/(decrease) in cash and cash equivalents
8,219 (1,320)
Cash and cash equivalents at 1 January 13,440 14,760
Cash and cash equivalents at 31 December
21,659 13,440
This page does not form part of the statutory financial statements.
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