Moyle Interconnector (Financing) plc

Strategic report for the year ended 31 March 2024

Strategic objectives

Our strategy is made up of four strategic themes:

•Operate assets safely and cost effectively

•Generate and return savings to Northern Ireland consumers

•Accelerate decarbonisation

•Manage risk on Northern Ireland consumers’ behalf

These objectives and related KPIs are outlined in more detail over the subsequent pages.

Operate assets safely and cost effectively

Operate assets safely and cost effectively, outsourcing where appropriate.

As an owner operator of vital assets, one of our key objectives is to operate our assets safely and cost effectively. To achieve this we manage a range of key outsourced contractors who provide services such as 24/7 control rooms, routine maintenance, major overhauls and comprehensive emergency responses.

Generate and return savings to consumers

Deliver savings to current and future Northern Ireland consumers over the life of the assets

The generation of savings for Northern Ireland consumers is a core part of the business. This is primarily achieved by creating a financing structure attractive to large pension fund investors prepared to provide 100% debt funding.

We measure our success via KPI 1 (see page 4), which compares the financing costs charged to consumers by the Mutual Energy Group companies to those that would have been charged by an alternative regulated entity.

Manage risk on behalf of consumers

Manage market change and regulatory development to minimise risks to the Northern Ireland consumer

The business achieves low cost finance via licence conditions that allow for the pass through of costs to customers. Our key focus is to ensure, so far as possible, that changes driven by EU, national or other bodies do not impact negatively on our business, our financing arrangements or energy consumers in Northern Ireland, who are ultimately bearing these risks. We seek to achieve this by managing our assets in line with best practice, actively engaging with stakeholders who determine market arrangements and by assisting the regulators and relevant government departments to identify and address issues particularly relevant to Northern Ireland.

Availability (KPI 1)

𝑪𝒂𝒑𝒂𝒄𝒊𝒕𝒚 𝑨𝒗𝒂𝒊𝒍𝒂𝒃𝒍𝒆

𝑯𝒐𝒖𝒓𝒔 𝑨𝒗𝒂𝒊𝒍𝒂𝒃𝒍𝒆

𝑻𝒐𝒕𝒂𝒍 𝑷𝒍𝒂𝒏𝒕 𝑪𝒂𝒑𝒂𝒄𝒊𝒕𝒚

𝑯𝒐𝒖𝒓𝒔 𝒊𝒏 𝒀𝒆𝒂𝒓

NB unavailability excludes upstream outages Total plant capacity relates to capacity under existing connection agreements

Cost of capital v an NI comparator (KPI 3)The Mutual Energy Group incurs financing costs in respect of debt entered into for the purpose of the business. The Group’s average cost of capital is compared to the costs which would have been incurred if financed at the rates charged by a Northern Ireland energy utility comparator over this period. The KPI is the savings made as a result of the lower cost of capital than the comparator company. The savings are calculated as the cost which would have been incurred by a comparator financing the Group’s debt compared to the costs actually incurred.

Cash generated from operations (KPI 4)Cash generated in the business post tax.

Lost time incidents (KPI 2)Lost time incidents are calculated as the number of lost time incidents per 100,000 hours worked by staff and contractors.

Moyle Interconnector (Financing) plc

Strategic report for the year ended 31 March 2024

Accelerating Decarbonisation

Take an active role in collaboration with key stakeholders in the acceleration of decarbonisation through interventions and investments which benefit Northern Ireland energy consumers.

Part of the Group’s strategy is to adapt its structure and focus of the business to rise to the challenge of facilitating the decarbonisation of the electricity networks in Northern Ireland and facilitating customers who wish to use the networks as a means of decarbonising other sectors.

We will also target the CO2 content of the electricity transported on our networks.

We measure success by monitoring the annual savings on CO2 that we facilitate by importing electricity with a lower CO2 (e.g. renewable electricity) from one market to another.

Finally, on a business operating level, the Group will seek to minimise the emissions from its own operations, encompassing operational activity, transport and other activities ancillary to running the business.

Further information on our strategy, operations and governance arrangements with respect to climate related issues, as well as carbon emissions reporting, is included within Mutual Energy’s annual report.

CO2 savings (KPI 5)Greening the existing networks – developing options for lower or zero emission fuels to transport through the networksElectricity interconnectorTo calculate the CO2 savings associated with the Moyle Interconnector, the calculation determines the carbon intensity of each system by weighting the carbon emissions per MW of the marginal unit by the proportion of non-renewable generation on the system in each hour time period. It then multiplies this difference in the carbon emissions per MW by the actual flow on Moyle. This gives the total carbon savings of Moyle each hour. We then sum these hourly figures across the year to give total CO2 savings resulting from Moyle.CO2 saved in Group operations CO2 usage is calculated using UK Government greenhouse gas reporting conversion factors published by the Department for Energy Security and Net Zero, in line with the 2019 HM Government Environmental Reporting Guidelines.

Moyle Interconnector (Financing) plc

Strategic report for the year ended 31 March 2024

Performance against strategy

Operate assets safely and cost effectively

Operate assets safely and cost effectively, outsourcing where appropriate

The most important maintenance project expected in an electrical interconnector’s lifetime is the replacement of the control system, a project which was successfully completed in 2022 and the interconnector performance has been consistently good since the new controls became operational.

The main annual outage was 4.5 days, with some work deferred, at SONI’s request, to the 2024 outage which will, as a result, be 3 days longer. The key work undertaken during the outage this year was transformer condition testing on pole 1 and the initial stages of the Fire Control replacement project. Routine maintenance on pole 1 was also completed, along with some control system updates.

The program of works for the next few years is clearly much less, but will encompass the refurbishment or replacement of circuit breakers at the station, a regular inspection of the transformer and the installation of solar panels to provide low carbon electricity for part of the load at the Ballycronanmore station.

99.7

98.9

79.9

99.5

100

2020

2021

2022

2023

2024

KPI 1: Moyle Availability (%)

Availability remained excellent with 99.5% achieved in the year (KPI 1), a key driver of financial performance.

There were no lost time incidents in the year (KPI 2).

Moyle Interconnector (Financing) plc

Strategic report for the year ended 31 March 2024

Generate and return savings to consumers

Deliver savings to current and future Northern Ireland consumers over the life of the assets.

The main method of achieving savings for customers is to acquire energy infrastructure and finance it at a lower rate than traditional regulated utilities. This generates significant savings over time as outlined by the Mutual Energy Group savings below (KPI 3).

Group strategy involves returning all savings or cash surpluses to Northern Ireland consumers over the life of the assets.

In doing so, where possible, we seek to build up reserves to smooth future cash flows and minimise energy price increases and fluctuations associated with our assets.

Where appropriate, reserves will be used to provide capital for future investments.

Returns to customers

During the year we were pleased to return over £6m to electricity customers, split evenly between a general tariff rebate and donations to charity providing assistance to those struggling with energy costs. The Board have committed to return £30m to consumers over the next 5 years, with our ability to return cash to customers re-

assessed every year as part of our business planning process.

Returns via tariffs

£3.25m was set aside for returns via tariffs this year, compared with £3.0m set aside for the previous tariff year. The final amount returned varies with the volume of electricity used and amounted to £3.0m in the 2022-23 tariff year.

Donations to electricity relief scheme

£3.25m was contributed to a support scheme for those living in fuel poverty, administered by the Bryson Charitable Group.

The contribution provided by Mutual Energy was directed in two ways. Firstly, it provided emergency electricity cost relief for low income households, enabling them to avert immediate crisis. In this aspect the scheme exceeded its targets, providing an average of £200 per household emergency electricity relief to over 28,000 vulnerable customers in Northern Ireland against a target of 27,500.

The second target was to provide a range of longer-term interventions to tackle the root causes of fuel poverty in localities experiencing multiple deprivation. This part of the scheme supported approximately 5,500 people against a targeted 4,150. Interventions included support with energy efficiency measures, financial advice, essential skills and employment.

100

150

200

250

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

Cumulative saving (current prices)

Mutual Energy group

Typical utility

KPI 3: Mutual Energy Group cost of capital savings vs comparator

cost of capital

£m cumulative customer saving

year

9.4

2.5

15.6

6.9

34.0

2020

2021

2022

2023

2024

KPI 4: Moyle cash generated in the year

£m

Moyle Interconnector (Financing) plc

Strategic report for the year ended 31 March 2024

Accelerating Decarbonisation

Take an active role in collaboration with key stakeholders in the acceleration of decarbonisation through interventions and investments which benefit Northern Ireland energy consumers.

Our approach

Given the nature of our business as an electricity transmission system operator, a significant quantity of carbon emissions associated with the fuel we transport are recorded downstream of our operations when the fuel is ultimately used, therefore the facilitation of CO2 savings by others is the key contribution the Mutual Energy Group can make to achieving net zero. We see our ability to impact on the environment across 4 key areas, both strategic and operational:

The strategic areas are a key focus of the business since these provide opportunities to reduce emissions to a much greater extent than can be achieved through reductions in our own business operations.

Strategic Focusa)Enabling access to lower carbon fuels – facilitating our customers to move from higher CO2 emitting fossil fuels to lower emitting fossil fuels with new industrial, commercial and domestic connections facilitated.b)Greening the existing networks – ensuring we are fit for purpose to allow the transport of lower or zero carbon emissions fuels, such as renewable electricity across the Moyle Interconnector.c)Influencing policy and participating in projects which further decarbonisation – working to develop and promote the larger, secure, decarbonised energy system; new ways of working; whole system integration of electricity and gas; and different technologies needed to allow decarbonisation to happen.

Operational Focusd)Business operating carbon footprint – reducing emissions from our own day to day operations to continually improve our business carbon footprint.

Moyle Interconnector (Financing) plc

Strategic report for the year ended 31 March 2024

Performance

Enabling access to lower carbon fuels

The target for this KPI is to achieve a rising trend.

Our electricity interconnector provides a core tool in managing the electrical system to accommodate intermittent generation such as wind and solar. In times of high wind in Ireland the wholesale electricity price tends to fall and the interconnectors tend to export to GB. When intermittent generation produces low levels of output, the wholesale price generally rises and the interconnectors tend to import power from GB, often essential to keeping the system operating.

This process consistently results in saving CO2 emissions.1

Key highlights during the financial year include:

•c277,000 tonnes of CO2 emissions avoided in the year due to the use of Moyle Interconnector to allow connected Transmission System Operators (‘TSOs’) to access cleaner generation in the neighbouring market; and

•14.5% of Northern Ireland’s electricity from wind generation exported by Moyle Interconnector (0.3TWh) allowing more wind energy to be produced and displacing higher carbon alternatives in GB.

1 We use an outside party electricityMap, © tmrow.com to provide data on the marginal emissions of the plant on the electrical systems in GB and in Ireland at any point in time, from which we can determine, on an hour-by-hour basis, the CO2 content and the effect the interconnector has.

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2019-20

2020-21

2021-22

2022-23

2023-24

Moyle

KPI 5: CO2 savings

tonnes

Moyle Interconnector (Financing) plc

Strategic report for the year ended 31 March 2024

Moyle Interconnector (Financing) plc

Strategic report for the year ended 31 March 2024

Review of the year

Financial performance - Revenue

The electricity business has two types of revenue sources: i) commercial revenues from contracts with electricity market participants and operators; and ii) revenues from the tariff mechanism (charged by SONI, the System Operator for Northern Ireland, to electricity suppliers and passed through to Moyle Interconnector Limited).

Commercial revenues - Electricity

Within commercial revenues there are three distinct streams:

•Market difference revenue;

•System services; and

•Capacity market revenue

The following chart shows the evolution of the commercial revenue streams over the last five years:

1Market difference revenue

Trading in the GB and Irish market, electricity is scheduled to flow automatically from the lower priced system to the higher priced system, and Moyle generates revenue related to this price difference.

The market difference revenue shown in the graph includes €12,062,000, €11,422,000 and €182,000 respectively for 2022, 2023 and 2024 in respect of compensation claimed from SONI for restricting the power flows on the interconnector. These amounts have now been provided for pending the outcome of the arbitration. Further information on the judgements in respect of this revenue can be found within critical accounting estimates and judgements on pages 41 and 42.

The predominant flow for 2023-24, and indeed in most of Moyle’s history, was from East to West and SONI have not been restricting these flows. Revenue from market difference payments (excluding SONI constraints) amounted to £40.1m for the year (2023: £28.0m).

System services revenue

Moyle provides a range of system services to the Irish and GB electricity systems under various constantly changing arrangements or agreements. These usually entail injections of power or cessation of power flows in very short timeframes.

System services revenue amounts to £15.0m (2023: £10.5m). The service provided to the system operator proved to be exceptionally reliable. The increase is largely due to market conditions, with the tariff arrangements paying more when the percentage of traditional generating plant on the system is low.

2020

2021

2022

2023

2024

Market difference revenue (SONI constraints)

Market difference revenue (exc SONI constraints)

Capacity market revenue

System services revenue

Commercial revenue trend

£m (nominal)

Moyle Interconnector (Financing) plc10

Strategic report for the year ended 31 March 2024 (continued)

Capacity market revenue

This revenue stream recognises Moyle’s contribution to security of supply on both islands with payments from both GB and SEM markets. Moyle receives significant additional revenue from these markets, but penalties are potentially very high in the SEM where there is non-performance at a time of system stress.

Capacity market revenue has increased to £12.0m (2023: £10.1m). The increasing trend in this area continues with contracts currently in place for 2024/25 year totalling £13.3m and

contracts through to 2027/28 in place, with contracted revenue for 2027/28 of £40.7m.

Tariff revenues - Electricity

A key part of the low cost financing for the Moyle Interconnector is the right to charge a tariff to recover its’ costs. The excellent operating performance and prevailing market conditions meant that this was not required. During the year the electricity tariff revenue was negative, with the company returning £3.0m to customers via the tariff.

Moyle Interconnector (Financing) plc11

Strategic report for the year ended 31 March 2024 (continued)

Costs and operational performance

Operational performance - Electricity

Costs in the electricity business are heavily impacted by a £20.2m allowance for bad debt in relation to income due from SONI to compensate us for constraints imposed upon our interconnector. Further information on this can be found on page 42.

Costs for the electricity business totalled £43.9m (2023: £28.5m), made up of: £20.2m allowance for bad debt as discussed above (2023: £Nil); business costs of £14.2m (2023: £13.6m); amortisation and depreciation of £6.5m (2023: £7.4m); and finance costs of £8.6m (2023: £9.9m), reduced by £5.6m finance income (2023: £2.3m).

Depreciation of the Moyle Interconnector and amortisation of the licence will continue until 2042 and 2037 respectively. These non-cash costs amounted to £6.5m in the year.

The finance costs have decreased to £8.6m, with only £60.2m outstanding on the Moyle bond which is due to be fully repaid by 2033. Increased interest rates and cash balances resulted in interest income of £5.6m.

S.172 statement

The Directors have acted in good faith to promote the success of the Company for the benefit of its members as a whole. In doing so, they have given regard, amongst other matters, to the matters set out in Section 172(1)(a) to (f) of the Companies Act 2006.

Engagement with stakeholders is key to ensuring stakeholders needs are fully understood. An overview of our stakeholders and engagement with them is found on pages 12 to 13.

A summary of how the Board has fulfilled its duty in respect of s.172 matters is set out on the following page.

Business Expenses, 14.19

Bad Debt Allowance, 20.24

Amortisation and Depreciation, 6.53

Net Finance Costs, 2.92

Electricity business costs 2023-24, £m

Moyle Interconnector (Financing) plc12

Strategic report for the year ended 31 March 2024 (continued)

S.172 statement (continued)

s.172 factor

Summary

Relevant disclosures

a) The likely consequences of any decision in the long term

Long term consequences are core to our strategic objectives which aim to invest in assets in the long-term, deliver savings over the life of the assets, manage risks and accelerate decarbonisation. Long-term targets are set for directors and senior management to align with the Group’s long-term interests.

Strategic objectives: pages 2-7.

Stakeholders, relationships and resources: pages 12-13.

b) the interests of the company's employees

The interest of the Company’s employees are taken into account through regular employee engagement, whole company participation in annual planning meetings, training and development, health and wellbeing, volunteering and other initiatives.

Staff: pages 12-13.

Social, community and human rights issues: page 13.

c) the need to foster the company's business relationships with suppliers, customers and others

The Board recognises the importance of fostering relationships with stakeholders and the Group works in partnership with contractors to whom key services are outsourced. More information on our stakeholders and engagement can be found on pages 12-13.

Strategic objectives: pages 2-7.

Stakeholders, relationships and resources: pages 12-13.

Social, community and human rights issues: page 13.

d) the impact of the company's operations on the community and the environment

The Board’s consideration of the Group’s impact on the community and environment is evidenced through the Group’s strategic objectives which aim to return savings to NI consumers, protect them from market risks and accelerate decarbonisation. During the year the Group donated £3.25m to support those living in fuel poverty and participated in volunteering with Business in the Community.

Strategic objectives: pages 2-7.

Accelerating decarbonisation: pages 3 and 6-7.

Social, community and human rights issues: page 13.

e) the desirability of the company maintaining a reputation for high standards of business conduct

The Board and management set the tone of how business should be conducted. The Group is committed to integrity and consistently high ethical standards, with trust, openness, partnership and teamwork being key to our dealings with our stakeholders.

Risk management: pages 14-18.

Social, community and human rights issues: page 13.

f) the need to act fairly as between members of the company

The Board considers the impact on our stakeholders when making business decisions, with the impact on NI consumers being a core concern.

Strategic objectives: pages 2-7.

Moyle Interconnector (Financing) plc13

Strategic report for the year ended 31 March 2024 (continued)

Stakeholders, relationships and resources

The policies adopted by the Moyle Interconnector (Financing) plc group are those of the ultimate Mutual Energy Group.

The interests of Mutual Energy’s stakeholders are considered through interactions with shippers at shipper forums and through face-to-face meetings. Formalised reporting to and regular calls and meetings with financiers and rating agencies are carried out. Regular engagement is carried out with key contractors in line with each contract management plan. Meetings are held with the NI Consumer Council to ensure consumer interests are taken into consideration. More information on our stakeholders is set out below.

Customers, partners and contractors

Rather than individual end consumers, all Mutual Energy businesses supply to either the large gas shippers or electricity system operators and wholesale market participants in the energy markets. The System Operator for Northern Ireland (SONI) continues to oversee the operation and administration of the Moyle Interconnector, with Siemens plc undertaking the long-term maintenance of the electricity convertor stations.

Regulators and government departments

The Mutual Energy Group works closely with Northern Ireland Authority for Utility Regulation (NIAUR) and the Department for the Economy (DfE), where appropriate, to ensure that the interests of Northern Ireland’s energy consumers are protected. Following the publication of DfE’s Energy Strategy in December 2021 the Group continues to work with the Department to determine how Mutual Energy can assist with this move towards a low carbon environment.

Bondholders and financiers

The Directors are very conscious of their obligations to the bondholders and noteholders in the finance documents. In addition to complying with their other reporting obligations, they make available to financiers copies of the Annual Report. Our key financiers for Moyle are Assured Guaranty UK Limited as controlling creditor and the Bank of New York Mellon as trustee.

Staff

The Mutual Energy Group is committed to maintaining a high quality and committed workforce. Our vision is to have an innovative corporate culture and employees who will look to constantly improve all aspects of the business to achieve the corporate strategy.

The Mutual Energy Group employs a personal performance evaluation system with assessment of targets and training needs to encourage performance. Succession planning is periodically reviewed by the Board. Remuneration is linked to performance throughout the organisation.

Employee diversity

The Mutual Energy Group recognises the importance of diversity amongst its employees and is committed to ensuring that employees are selected and promoted on the basis of merit and ability, regardless of age, gender, race, religion, sexual orientation or disability.

The Group have engaged with Diversity Mark and established a Diversity Mark Charter showing a commitment to advancing diversity and inclusion in the workplace. The Group plans to gain accreditation in due course.

Moyle Interconnector (Financing) plc14

Strategic report for the year ended 31 March 2024 (continued)

Stakeholders, relationships and resources (continued)

Employee diversity (continued)

The gender split across the Mutual Energy Group and the Moyle Interconnector Group as at 31 March is illustrated in the table below:

Mutual Energy

Moyle Interconnector

2024

2023

2024

2023

	Male	Female	Male	Female	Male	Female	Male	Female
Board	7	1	6	1	2	-	2	-
Senior Management	8	1	8	1	2	-	3	-
All employees & Board	34	15	30	11	9	-	11	-

Social, community and human rights issues

The Mutual Energy Group has a fundamental community focus through its purpose: to own and operate energy infrastructure in the long-term interest of energy consumers in Northern Ireland. This is also reflected through all of our strategic objectives which include cost effective operation to deliver savings and minimise risks of market change to Northern Ireland consumers. More information on how the Group delivers these objectives can be found on pages 2 to 7.

The Mutual Energy Group also continues to consider its impact on the environment and remains committed to reducing our energy consumption and related emissions where possible, as well as reducing our wider impacts such as resource use and waste to landfill.

The Mutual Energy Group ensures robust Health & Safety systems are in place for the benefit of employees, contractors and the wider public. A Royal Society for the Prevention of Accidents

(RoSPA) Quality Safety Audit was carried out during the year and findings are expected to be reported in Q2 2024.

We comply with the Employments Rights Act, Modern Slavery Act and all other applicable UK law as an absolute minimum and recognise the importance of treating all of our employees fairly.

We are committed to conducting business in an honest and ethical manner and act according to our Code of Ethics, which is integral to our business and sets out a range of principles we adhere to. We do not tolerate bribery or corruption of any kind and are committed to acting professionally, fairly and with integrity in all our business dealings and relationships.

The Mutual Energy Group is a member of Business in the Community and continues to explore options for positive improvements to our environment, community and workforce.

Moyle Interconnector (Financing) plc15

Strategic report for the year ended 31 March 2024 (continued)

Risk management

Risk management is overseen by Mutual Energy on behalf of the whole Mutual Energy Group, with Moyle staff involved in the process.

Risk identification and management process

The risk process is both a bottom-up and top-down system. With the Board setting risk appetite and carrying out periodic strategic horizon scans for risk, allied to a formal quarterly risk review at team level in the business. The bottom-up reviews are quarterly, involve peer review as they are distilled and presented to the Asset Oversight Committee or Audit and Risk Committee as appropriate. Assessment of risk was carried out, throughout the year ended 31 March 2024 and up to the date of approval of the annual report and financial statements, in line with this process. The Board, during its annual review of the effectiveness of the Group’s internal control and risk management systems, did not identify, nor was advised of, any failings or weaknesses which it has determined to be significant.

Control is maintained through a management structure with clearly defined responsibilities, authority levels and lines of reporting; the appointment of suitably qualified staff in specialised business areas; a comprehensive financial planning and accounting framework and a formal reporting structure. These methods of control are subject to periodic review as to their continued suitability.

The Group’s system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable, and not absolute, assurance against material misstatement or loss. The principal risks of the Group are set out on the following pages.

2023/24 Risk review outcomes

The existing risk categorisation reflects the risks identified by the business. There were no newly identified risks, but the existing risks were continually reviewed and updated. In particular, three risks were deemed to have increased:

Market risk has increased with a regulatory decision suggesting that, in certain circumstances, system operators could prevent interconnectors from flowing without paying any compensation.

Adverse compliance regulatory change risk has increased as the requirements of the compliance aspects of regulations relating to cyber threat resilience have developed, requiring substantial effort to demonstrate compliance.

Inadequate corporate strategy risk has increased to reflect the need for our strategy to align with NI government strategy, which has not yet been formulated in many respects.

None of these risks are outside the risk appetite set by the Board.

Full details of the Group’s principal risks are contained in the following section.

Moyle Interconnector (Financing) plc16

Strategic report for the year ended 31 March 2024 (continued)

Principal Risks

Operational risk

The risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. The risk encompasses internal failures, such as poor processes or insufficient or untrained staff, and external actions such as cyber threats, or 3rd party accidental or malicious actions which restrict the ability of our assets to operate, either physically or commercially.

Risk description and potential impact

Mitigations and actions taken

Risk trend

Third party interference

Ineffective processes, procedures or management of third party activities enable ignorant or negligent third parties to cause catastrophic failure of cables onshore or offshore leading to unavailability of Moyle, costly and lengthy repairs and reputational damage.

Experienced qualified maintenance subcontractors are used and are managed through the contractual process, frequent performance monitoring, and maintaining a high standard of eligibility for tendered work. As part of this process, we require the contractors to work under a set of processes and procedures which enable us to manage the associated risks of the networks.

Reliance upon third parties

Reliance on 3rd Parties to supply business critical services can result in counterparty risk. Exposure to a limited number of counterparties interested in providing services could lead to uncompetitive pricing.

Contract management plans are in place which identify key deliverables and ensure regular reporting and meetings with contractors. Due diligence is performed where required to ensure financial stability. Termination rights and exit planning are in place where appropriate.

Health & safety risk

Failure to maintain robust and effective health and safety practices, or failure to identify and manage wellbeing in the workforce may lead to injury to staff, contractor or public or have an adverse impact on the organisation’s operations.

A Health & Safety policy, management system, and plans are in place which are reviewed annually. Risk assessments, method statements, audits, inspections and training are regularly performed.

People and HR risk

The failure to effectively manage talent, ensure appropriate training and resourcing, retain and motivate competent staff and plan for leadership succession could impede the realisation of strategic objectives.

The business operates a performance-based culture with competitive pay and conditions benchmarked against the market, engaging closely with staff and utilising performance management and development programmes and succession planning. Human Resource policies are in place, the operation of which mitigate risks in this area.

Business continuity risk

One-off events or public health emergencies, epidemics or pandemics, have the potential to significantly impact the Group's operations through a fall in demand for the Group's products/services, a reduction in staff availability and business interruption.

Risks associated with long term weather, or ground condition, flooding etc associated with climate change are included in this risk.

A business continuity plan is in place, with key tasks identified and more than one individual trained in each. This system was thoroughly tested by the Covid pandemic and is proven to work well.

IT and cyber risk

The Group is dependent on information and operational technology systems to support its business activities. Any significant operational event, whether caused by external attack, insider threat or error, could lead to loss of access to systems or data, adversely impacting business operations across both the Information Technology and Operational Technology networks.

A business continuity plan is in place with resilient infrastructure and disaster recovery environments available. A Cyber Security Policy is in place along with access security and protocols. Penetration testing is carried out at regular intervals. The business liaises with the National Centre for Cyber Security and the Centre for the Protection of National Infrastructure and utilises security consultants as required.

Financial risk

Moyle Interconnector (Financing) plc17

Strategic report for the year ended 31 March 2024 (continued)

The risk of failing to safeguard the organisation’s assets, financial impropriety or financial misreporting. Inadequate financing, liquidity problems, non-compliance with covenants, market changes or failure of counterparties could lead to failure of financial structure. It includes fraud risk which is seen as the risk of internal or external fraud leading to financial loss, service disruption and reputational damage.

Risk description and potential impact

Mitigations and actions taken

Risk trend

Poor financial management

Poor financial management could result in breach of financing covenants, compliance failure or financial loss.

Controls are in place which cover authority limits, budgeting and financial processes and the overall governance structure. A strict ring back process is in place to verify payee changes.

Financing structure is inappropriate

Inadequate financing, liquidity problems, non-compliance with covenants, market changes or failure of counterparties could lead to failure of financial structure.

Financing costs from borrowing arrangements are fully recovered through income allowances, reducing the Group’s exposure to inflation risk. Processes are in place to monitor covenant compliance and there is active management of market changes. Treasury policies are aimed at minimising the risks associated with the Group’s financial assets and liabilities and financial counterparty failure clauses are included in financing documents. The Group has low liquidity risk due to its strong cash flows and the reserve accounts and liquidity facilities required by its financing documents. The required reserve accounts remain fully funded and £10m of liquidity facilities were in place throughout the year. Business planning processes are in place to identify cash requirements in advance.

Business environment and market risk

The risk to the organisation of potentially failing to meet its objectives following significant changes or negative events within the external environment in which it operates. Examples of external risk include but are not limited to: sectoral risks such as Brexit; the impact of global factors and market conditions such as economic slowdown; external political environment or ‘global shocks’ such as terrorist attacks; extreme weather events, third party damage to assets etc.

Risk description and potential impact

Mitigations and actions taken

Risk trend

Market risk

Market changes for gas and electricity in Northern Ireland could result in reduced volumes transported through the assets, insufficient revenue recovery, default on debt, damage to reputation of mutual model or fines.

Longer term the market changes could be driven by climate change and net zero targets.

Licence provisions implementing a collection agency agreement are designed to offset the impact of such changes. An influencing strategy is in place to positively impact market developments.

Risk has increased in the period due to the potential impact of regulatory decisions in respect of future compensation arrangements and the ongoing SONI dispute as discussed on page 42.

Moyle Interconnector (Financing) plc18

Strategic report for the year ended 31 March 2024 (continued)

Political and regulatory risk

Risks driven by regulatory or political attitudes to the industry generally or the Mutual Energy Group in particular.

Risk description and potential impact

Mitigations and actions taken

Risk trend

Adverse economic regulatory change

As the Group contains a regulated business it is exposed to regulatory risk. Changes in economic regulation or government policy could have an adverse impact on our financial position.

The Group’s relationships with NIAUR and DfE are managed at senior level through frequent meetings and correspondence in line with the Group’s communication strategy. The Group coordinates with other EU system operators on EU issues. A proactive approach is taken to consultations on any issue which could affect the Group’s business interests, with legal advice sought where appropriate.

Adverse compliance regulatory change

As the Group is subject to growing number of laws and regulations, the cost of compliance or the failure to comply with current and future laws/regulations may negatively affect the Group’s business and our financial position.

There is a full suite of processes in place to ensure compliance. Our asset management systems, Health and Safety management and environmental systems are essential in ensuring legislative compliance.

Cyber compliance is prevalent given the ongoing Cyber Assessment Framework (CAF) workplan which stems from the NIS directive. We are currently actively engaged with the Competent Authority and actions are ongoing to meet the requirements of the CAF workplan.

The business is actively engaged with the Competent Authority for the NIS (Network and Information Systems) Directive and is working through their process of assessment leading to modifications in processes and policies.

The risk trend is evaluated as increased because cyber threats have become more and more pervasive and the workload to achieve best practice is ever increasing.

Project delivery risk

The risk of an event or occurrence that may negatively impact on the delivery of a project. This could be as a result of poor contracting or management, insufficient resources or extreme weather could cause project delays resulting in financial losses, reputational damage, and damage to assets or loss of availability.

Risk description and potential impact

Mitigations and actions taken

Risk trend

Failure of project management

Poor contracting or management, insufficient resources or extreme weather could cause project delays resulting in financial losses, reputational damage, damage to assets or loss of availability.

Controls are project specific, but centre round project execution plans and project governance arrangements for each project. Contractors are closely monitored and stakeholder engagement plans and insurance are in place.

Moyle Interconnector (Financing) plc19

Strategic report for the year ended 31 March 2024 (continued)

Corporate strategy and communication risk

The risk associated with failure to achieve the strategic and business objectives. Inadequate corporate strategy and communication with external stakeholders could result in reputational damage, regulatory action, loss of support from members or lost growth opportunities.

Risk description and potential impact

Mitigations and actions taken

Risk trend

Inadequate corporate strategy

Inadequate corporate strategy and communication with external stakeholders could result in reputational damage, regulatory action, loss of support from members or lost growth opportunities.

The Board retains responsibility for strategy as a reserved matter and manages communications directly in line with its communication plan, using outsourcing as appropriate. A member of staff has been appointed to have oversight of the day-to-day operation of Mutual Energy Group communications and management of the external consultant.

The increased risk in this area is a reflection of the need for our strategy to align with NI government strategy, which has not yet been formulated in many respects.

Risk of failure to develop brand

Risk of failure to develop brand and reputation to successfully deliver on strategic objectives.

The key control in this area is the communications plan and Board’s involvement in this. As part of the execution of the current communications plan, there has been extensive recent engagement with the relevant politicians.

Failure to prepare for energy transition

Failure to prepare for energy transition and/or inadequate operating model to support the energy transition could result in significant financial, operational and reputational impacts.

The Group’s decarbonisation strategic objective ensures the Board’s cycle of strategy evaluation and business planning gives explicit regard to energy transition. This, along with investment in energy transition staff, seeks to involve the business as much as possible in future developments and manage the risk in this area.

Forward-looking statements

The Chair’s statement and Strategic report contain forward-looking statements. Due to the inherent uncertainties, including both economic and business risk factors underlying such forward-looking information, the actual results of operations, financial position and liquidity may differ materially from those expressed or implied by these forward-looking statements.

By order of the Board

Gerard McIlroy

Director

27 June 2024

Moyle Interconnector (Financing) plc20

Directors’ report for the year ended 31 March 2024

The directors present their annual report and the audited financial statements of the Group and Parent Company for the year ended 31 March 2024.

General information on the Company can be found on page 1 and within note 1 to the financial statements.

Results

The Group’s profit for the financial year is £15,338,000 (2023: £22,736,000).

A review of our operational and financial performance, research and development activity, current position and future developments is included in our Strategic report and this is included in this report by cross-reference.

Directors

The directors, who served the Group during the year, and up to the date of signing the financial statements, were:

Patrick Larkin

Gerard McIlroy

Going concern

The Group is cash generative and is forecast to remain cash positive. The forecast cash generated is adequate to meet the Group’s liabilities as they fall due for a period of at least 12 months from the date of approval of the financial statements, including the scheduled bond payments, and to comply with financing covenants, including the required Annual Debt Service Cover Ratio. Reserve accounts are fully funded and £10m of liquidity facilities are in place. Accordingly, the directors consider it appropriate to adopt the going concern basis in the preparation of the financial statements.

Financial risk management

Please refer to note 23 to these financial statements for a description of the financial risks that the Group faces and how it addresses those risks.

Post balance sheet events

The directors approved a dividend of £2,050,000 on 15th May 2024. There were no other subsequent events that need to be brought to the attention of the users of the financial statements.

Corporate Governance

The Company is subject to and complies with UK law comprising the Companies Act 2006 and the Disclosure and Transparency Rules, and the Listing Rules of the UK Listing Authority. The Company does not apply additional requirements to those required by the above. Each of the service providers engaged by the Company is subject to their own corporate governance requirements.

The directors are responsible for establishing and maintaining adequate internal control and risk management systems of the Company in relation to the financial reporting process. Such systems are designed to manage rather than eliminate the risk of failure to achieve the Company’s financial reporting objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The Board has established processes regarding internal control and risk management systems to ensure its effective oversight of the financial reporting process.

For further details, refer to the notes to the financial statements, particularly note 23 on financial risk management.

Moyle Interconnector (Financing) plc21

Directors’ report for the year ended 31 March 2024 (continued)

Political contributions

Neither the Company nor its subsidiary have any political donations or incurred any political expenditure in the year (2023: £nil).

Streamlined Energy & Carbon Report

Mutual Energy Limited, the ultimate parent undertaking, reports energy and carbon information on behalf of the entire Mutual Energy group, including the Group and Company. This information can be found in Mutual Energy’s Strategic Report within their Annual Report.

Other information

An indication of likely future developments in the business have been included in the Strategic Report on pages 2 to 18.

Directors indemnities

The Group has made a qualifying third party indemnity provision for the benefits of its directors during the year and it remained in force at the date of this report.

Statement of directors' responsibilities in respect of the annual report and the financial statements

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 have elected to prepare the 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 the Group and 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 applicable Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; •assess the Group and 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 Company or to cease operations, or have no realistic alternative but to do so.The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal controls as they determine are 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.The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements and other information included in the Directors report may differ from legislation in other jurisdictions.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.

Moyle Interconnector (Financing) plc22

Directors’ report for the year ended 31 March 2024 (continued)

Responsibility statement of the directors in respect of the annual financial report

Each of the Directors, whose names and functions are listed on page 1 of this annual report, confirm that, to the best of each person’s knowledge and belief:

•the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

•the strategic report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Auditor

In accordance with section 489 of the Companies Act 2006, a resolution for the re-appointment of Grant Thornton (NI) LLP as auditor of the Company is to be proposed at the forthcoming Annual General Meeting.

Statement of disclosure of information to auditor

So far as each of the directors in office at the date of approval of these financial statements is aware:

•there is no relevant audit information of which the Group and Company’s auditor is unaware; and

•they have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the Group and Company’s auditor is aware of that information.

On behalf of the Board

Gerard McIlroy27 June 2024

Director

First Floor

The Arena Building

85 Ormeau Road

Belfast

BT7 1SH

Independent auditor’s report to the members of Moyle Interconnector Financing plc

Report on the audit of the financial statements

Opinion

We have audited the financial statements of Moyle Interconnector Financing plc (“the Company”) and its subsidiary (“the Group’’), which comprise the Consolidated statement of profit and loss and other comprehensive income, the Consolidated and Parent Company balance sheet, the Consolidated and Parent Company statement of changes in equity and the Consolidated and Parent Company cash flow statements for the year ended 31 March 2024, and the related notes to the financial statements, including a summary of significant accounting policies.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and accounting standards including UK-adopted international accounting standards (UK-adopted IAS).

In our opinion, Moyle Interconnector Financing plc’s financial statements:

•give a true and fair view in accordance with UK-adopted IAS of the financial position of the Group and the Company as at 31 March 2024 and of the Group financial performance and the Group and Parent Company cash flows for the year then ended; and

•have been properly 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 under those standards are further described in the ‘Responsibilities of the auditor for the audit of the financial statements’ section of our report. We are independent of the Group and Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the FRC’s Ethical Standard and the ethical pronouncements established by Chartered Accountants Ireland, applied as determined to be appropriate in the circumstances for the entity. We have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors’ use of going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the validity of the directors’ assessment of the Group and Company’s ability to continue to adopt the going concern basis of accounting included:

•We assessed and challenged the key assumptions used by management in prospective financial information, namely budgets and forecasts which covered at least 12 months from date of approval of the

Independent auditor’s report to the members of Moyle Interconnector Financing plc

financial statements. In particular we carried out an analysis on the key assumptions within the model to determine the level of working capital head room available for the Group and the Company under normal trading conditions;

•We compared budgeted financial results to actual financial results for the current year to critically assess management’s point of estimate;

•We inspected the financing agreement from the lender of the level of committed financing, and the associated covenant requirements where applicable; and

•We inspected the financing agreement to assess the restriction on the use of funds and compared these with the restrictions to management’s model.

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

We have nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current financial period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and the directing of efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and therefore we do not provide a separate opinion on these matters.

Overall audit strategy

We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgements, for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. We also addressed the risk of management override of internal controls, including evaluating whether there was any evidence of potential bias that could result in a risk of material misstatement due to fraud.

Independent auditor’s report to the members of Moyle Interconnector Financing plc

Based on our considerations as set out below, our areas of focus included:

•Valuation of intangible assets;

•Valuation of investment in subsidiary; and

•Recoverability of unpaid amounts in relation to revenue constraints.

How we tailored the audit scope

The Group has one operating segment being the operation of the Moyle Interconnector which links the electricity transmission systems of Northern Ireland and Scotland. We tailored the scope of our audit taking into account the areas where the risk of misstatement was considered material to the Group and Company, taking into account the nature of the Group and Company’s business and the industry in which it operates. We performed an audit of the complete financial information of the Group’s component. Components represent business units across the Group considered for audit scoping purposes.

In establishing the overall approach to our audit, we assessed the risk of material misstatement at a Group and Company level, taking into account the nature, likelihood and potential magnitude of any misstatement. As part of our risk assessment, we considered the control environment in place at Moyle Interconnector Financing plc.

Materiality and audit approach

The scope of our audit is influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, such as our understanding of the entity and its environment, the history of misstatements, the complexity of the Group and Company and the reliability of the control environment, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the Group financial statements as a whole to be £670k (2023: £629k) for the year ended 31 March 2024, determined as being 0.25% of total assets (2023: 0.25%). We have applied this benchmark because the main objective of the Group is to operate the Moyle Interconnector and associated assets, and to repay loans used to purchase the assets which serve the principal activity of the business.

We have set Performance materiality for the Group at 75% of materiality, being £503k (2023: £377k), having considered the risk of misstatements in prior years, business risks and fraud risks associated with the entity and it’s the control environment. This is to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements in the financial statements exceeds materiality for the financial statements as a whole.

Independent auditor’s report to the members of Moyle Interconnector Financing plc

We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above 5% of overall Group materiality.

Independent auditor’s report to the members of Moyle Interconnector Financing plc

Materiality and audit approach (continued)

Based on our professional judgement, we determined materiality for the Parent Company financial statements as a whole to be £179k (2023: £184k) for the year ended 31 March 2024, determined as being 0.25% of total assets (2023: 0.25%). We have applied this benchmark because the main objective of the company is to operate the Moyle Interconnector asset and to repay loans used to purchase the assets which serve the principal activity of the business.

We have set Performance materiality for the Parent Company at £134k (2023: £46k), being 75% of materiality, having considered the risk of misstatements in prior years, business risks and fraud risks associated with the entity and it’s the control environment. This is to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements in the financial statements exceeds materiality for the financial statements as a whole.

We agreed with the Audit and Risk committee that we would report to them misstatements identified during our audit above 5% of overall Parent Company materiality.

Significant matters identified

The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are set out below as significant matters together with an explanation of how we tailored our audit to address these specific areas in order to provide an opinion on the financial statements as a whole. This is not a complete list of all risks identified by our audit.

Valuation of intangible asset (Group) £22m (2023: £23m)

Description of significant matter

Our audit approach

There is a risk that the intangibles held by the Group are not carried at their realisable value on the statement of financial position, in line with the requirements of UK-adopted IAS. The Group has intangible assets of £22m which were created in the consolidation of the Parent and the Subsidiary undertaking. The carrying value of these intangible assets are material to the user of the financial statements.

Significant auditor’s attention was deemed appropriate because of the materiality of the

Our procedures included, but not limited to:

•Obtaining an understanding and evaluation of the design and implementation of key controls relevant to the valuation processes;

•Obtaining an understanding of the license, and direction with the Group’s regulator. The license allows the Group to operate the electricity network;

•Obtaining financial projections of the Group and critically assessing the key assumptions

Independent auditor’s report to the members of Moyle Interconnector Financing plc

intangible assets. The recoverability of the carrying value the Group’s intangible assets are supported by the overall performance of the business, including consideration of prospective information.

Impairment is considered annually at the reporting date by the directors.

As a result, we considered this to be a key audit matter.

Information on the intangible asset can be found in note 8 to the financial statements.

made by the directors in respect of predicting the expected revenue receipts and costs incurred for the remaining life of the license;

•Reviewing and challenging the assumptions regarding the remaining useful economic life of the licence, and assessed the accuracy of the closing balance and amortisation charged in the year;

•Assessing the level of headroom available between the projected discounted surplus at the end of the life of the license and the carrying value of the license; and

•Reviewing the accounting treatment and associated disclosures in the financial statements for conformity with the requirements of UK-adopted IAS.

We completed our planned audit procedures, with no exceptions noted.

Independent auditor’s report to the members of Moyle Interconnector Financing plc

Valuation of investment in subsidiary undertaking (Parent Company) £21m (2023: £21m)

Description of significant matter

Our audit approach

The Parent Company has an investment in a subsidiary undertaking of £21m. There is no observable market price quoted for this investment. There is a risk that the investment held by the Parent Company is not carried at realisable value on the statement of financial position, in line with the requirements of UK-adopted IAS.

Significant auditor’s attention was deemed appropriate because of the materiality of the investment. The recoverability of carrying value the Parent Company’s investment is supported by the overall performance of the business, including consideration of prospective information.

Impairment is considered annually at the reporting date by the directors.

As a result, we considered this to be a key audit matter.

Information on the investment can be found in note 9 to the financial statements.

Our procedures included, but not limited to:

•Obtaining an understanding and evaluation of the design and implementation of key controls relevant to the valuation processes;

•Obtaining an understanding of the underlying investment in the subsidiary and how this links to the overall performance of the Group;

•Obtaining financial projections for the subsidiary and Group and critically assessing the key assumptions made by the directors in respect of predicting the expected revenue receipts and costs; incurred for the remaining life of the assets;

•Assessing the level of headroom available between the projected discounted surplus at the end of the life of the subsidiary’s assets and the carrying value of the investment in subsidiary; and

•Reviewing the accounting treatment and associated disclosures in the financial statements for conformity with the requirements of UK-adopted IAS.

We completed our planned audit procedures, with no exceptions noted.

Independent auditor’s report to the members of Moyle Interconnector Financing plc

Recoverability of unpaid amounts in relation to revenue constraints (Group)

Description of significant matter

Our audit approach

Included within revenue of the Group is for the year ended 31 March 2024 is an amount of £155k (2023: £9,817k ).

Included within trade and other receivables is an amount of £20,241k sterling equivalent plus £4,042k VAT (2023: £20,655k plus £4,131k VAT) which is due from SONI in relation to capacity restraints imposed by SONI against Moyle Interconnector Limited during the period from September 2021 for March 2024.

SONI has not, to date, settled any of the revenue or debtor balances noted above. There is currently a live arbitration case to settle the ongoing dispute. Management have included a provision for an amount of £24,283k against this specific receivable balance at the year end (2023: £nil).

Significant auditor’s attention was deemed appropriate because of the materiality of the trade and other receivable balance and the uncertainty with regards to the outcome of the legal proceedings.

As a result, we considered this to be a key audit matter.

Information on the provision can be found in note 1(e) to the financial statements.

Our procedures included, but not limited to:

•Obtaining an understanding and evaluation of the design and implementation of key controls relevant to the valuation processes;

•Obtaining an understanding of the underlying process and controls by the directors’ in respect of determining whether a provision is necessary in respect of the amounts recognised as revenue relating to capacity constraints;

•Discussions with management and the directors in respect of the recognition of the provision in the year, including understanding the circumstances which gave rise to a provision in the financial year;

•Recalculation of the provision and comparison to the receivable balance at the year end 31 March 2024;

•Review of board minutes and other internal information held by the company in relation to the matter;

•Reviewing the accounting treatment and associated disclosures in the financial statements for conformity with the requirements of UK-adopted IAS.

We completed our planned audit procedures, with no exceptions noted.

Other information

Independent auditor’s report to the members of Moyle Interconnector Financing plc

Other information comprises information included in the annual report, other than the financial statements and our auditor’s report thereon, including the Directors’ Report and the Strategic Report.

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

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies in the financial statements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

•the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

•the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.

Independent auditor’s report to the members of Moyle Interconnector Financing plc

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified any material misstatements in the Strategic Report and the Directors’ Report. We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

•adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

•the financial statements are not in agreement with the accounting records and returns; or

•certain disclosures of directors’ remuneration specified by law are not made; or

•we have not received all the information and explanations we require for our audit.

Responsibilities of management and those charged with governance for the financial statements

As explained more fully in the Directors' responsibilities statement, management is responsible for the preparation of the financial statements which give a true and fair view in accordance with UK-adopted IAS, and for such internal control as directors determine necessary to enable the preparation of financial statements are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Group and 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 management either intends to liquidate the Group or company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group and Company’s financial reporting process.

Responsibilities of the auditor for the audit of the financial statements

The objectives of an auditor are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes their opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of an auditor’s responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of

our auditor’s report.

Independent auditor’s report to the members of Moyle Interconnector Financing plc

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. Owing to the inherent limitations of an audit, there is an unavoidable risk that material misstatement in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.

Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations related to compliance with Stock Exchange Listing Rules, Prudential Regulatory Authority, and FCA Handbook, Data Privacy law, Employment Law, Environmental Regulations, Pensions Legislation, Health & Safety and the Utilities Regulator in Northern Ireland, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006 and UK tax legislation. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to manipulate financial performance and management bias through judgements and assumptions in significant accounting estimates, in particular in relation to significant one-off or unusual transactions. We apply professional scepticism through the audit to consider potential deliberate omission or concealment of significant transactions, or incomplete/inaccurate disclosures in the financial statements.

Independent auditor’s report to the members of Moyle Interconnector Financing plc

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud (continued)

In response to these principal risks, our audit procedures included but were not limited to:

•enquiries of management, the board, and the Audit and Risk committee on the policies and procedures in place regarding compliance with laws and regulations, including consideration of known or suspected instances of non-compliance and whether they have knowledge of any actual, suspected or alleged fraud;

•inspection of the Group’s regulatory and legal correspondence and review of minutes of board and Audit and Risk committee meetings during the year to corroborate inquiries made;

•gaining an understanding of the entity’s current activities, the scope of authorisation and the effectiveness of its control environment to mitigate risks related to fraud;

•discussion amongst the engagement team in relation to the identified laws and regulations and regarding the risk of fraud, and remaining alert to any indications of non-compliance or opportunities for fraudulent manipulation of financial statements throughout the audit;

•identifying and testing journal entries to address the risk of inappropriate journals and management override of controls;

•designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing;

•challenging assumptions and judgements made by management in their significant accounting estimates, including estimating the useful economic life of assets, judgements made in the continuing implementation of IFRS 16: leases;

•review of the financial statement disclosures to underlying supporting documentation and inquiries of management; and

•the audit engagement partner considered the experience and expertise of the engagement team to ensure that the team had appropriate competence and capabilities to identify or recognise non-compliance with the laws and regulation.

The primary responsibility for the prevention and detection of irregularities including fraud rests with those charged with governance and management. As with any audit, there remains a risk of non-detection or irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations or override of internal controls.

The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the company’s members, as a body, in accordance with chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Independent auditor’s report to the members of Moyle Interconnector Financing plc

Report on other legal and regulatory requirements

We were appointed by the Board of Directors on 11 January 2024 to audit the financial statements for the year ended 31 March 2024.

This is the second year in which Grant Thornton (NI) LLP have carried out the external audit of the Group and the Company.

The audit opinion is consistent with the additional report to the Audit and Risk committee.

Ms. Louise Kelly (Senior Statutory Auditor)

For and on behalf of

Grant Thornton (NI) LLP

Chartered Accountants & Statutory Auditors

Belfast

27 June 2024

Moyle Interconnector (Financing) plc

Consolidated statement of profit and loss and other comprehensive income for the year ended 31 March 2024

2024

2023

Note

£’000

Revenue

67,417

58,395

Revenue rebate

(3,008)

(1,581)

Revenue – continuing operations

64,409

56,814

Operating expenses

(40,963)

(20,929)

Operating profit

23,446

35,885

Finance income

5,647

2,257

Finance expenses

(8,565)

(9,854)

Finance expenses - net

(2,918)

(7,597)

Profit before tax

20,528

28,288

Taxation

(5,190)

(5,552)

Profit and total comprehensive income for the year attributable to the owners of the parent

15,338

22,736

All results arise from continuing operations.

The notes on pages 33 to 58 are an integral part of these consolidated financial statements.

Moyle Interconnector (Financing) plc

Consolidated and Parent Company balance sheet as at 31 March 2024

The notes on pages 33 to 58 are an integral part of these consolidated financial statements.

The Group financial statements on pages 29 to 58 were authorised for issue by the Board of Directors on 27 June 2024 and were signed on its behalf by:

Patrick Larkin	Gerard McIlroy
Director	Director

Moyle Interconnector (Financing) plcRegistered number: NI045625

			Group	Company
2024 2023 2024 2023

	Note	£’000	£’000	£’000	£’000
Assets
Non-current assets
Property, plant and equipment	7	97,994	103,653	-	-
Intangible assets	8	21,596	23,257	-	-
Investment in subsidiary undertaking	9	-	-	20,950	20,950
Other investments	10	212	212	-	-
Trade and other receivables	11	-	-	44,060	46,400
		119,802	127,122	65,010	67,350
Current assets
Trade and other receivables	12	13,206	31,592	6,620	6,345
Tax receivable		9,038	851	-	-
Cash and cash equivalents	13	126,026	91,994	150	15
		148,270	124,437	6,770	6,360
Total assets		268,072	251,559	71,780	73,710
Equity and liabilities
Equity attributable to the owners of the
parent
Share capital	14	200	50	200	50
Retained earnings	15	160,389	145,051	(133)	(68)
Total equity 160,589 145,101 67 (18)

Liabilities
Non-current liabilities
Interest bearing loans and borrowings	16	54,403	57,194	52,492	55,224
Provisions	18	2,960	3,117	-	-
Deferred tax liabilities	19	15,522	15,614	-	-
Government grant	20	16,777	17,764	-	-
		89,662	93,689	52,492	55,224
Current liabilities
Trade and other payables	21	8,980	4,280	11,471	11,095
Interest bearing loans and borrowings	16	7,854	7,502	7,750	7,409
Government grant	20	987	987	-	-
		17,821	12,769	19,221	18,504
Total liabilities		107,483	106,458	71,713	73,728
Total equity and liabilities		268,072	251,559	71,780	73,710

Moyle Interconnector (Financing) plc

Consolidated and Parent Company statement of changes in equity for the year ended 31 March 2024

Group

Share capital

£’000

Retained earnings

£’000

Total equity

£’000

At 1 April 2022

122,315

122,365

Profit and total comprehensive income for the year

22,736

At 31 March 2023

145,051

145,101

Issue of ordinary shares

150

Profit and total comprehensive income for the year

15,338

At 31 March 2024

200

160,389

160,589

Share capital

Retained earnings

Total equity

Company

£’000

At 1 April 2022

Loss and total comprehensive expense for the year

(108)

At 31 March 2023

(68)

(18)

Issue of ordinary shares

150

Loss and total comprehensive expense for the year

(65)

At 31 March 2024

200

(133)

The notes on pages 33 to 58 are an integral part of these consolidated financial statements.

Moyle Interconnector (Financing) plc

Consolidated and Parent Company cash flow statements for the year ended 31 March 2024

Group

Company

2024

2023

2024

2023

Note

£’000

Cash flows from operating activities

Profit before tax

20,528

28,288

Adjustments for:

Finance expenses - net

2,918

7,597

7,699

9,726

Depreciation of property, plant and equipment

5,853

7,200

Amortisation and release of government grant

(987)

(1,506)

Amortisation of intangible assets

1,661

Movement in trade and other receivables

17,724

(4,791)

2,066

347

Movement in trade and other payables

2,444

(7,894)

(9,778)

(10,075)

Income tax paid

(10,500)

(6,000)

Net cash from/(used in) operating activities

39,641

24,555

(13)

(2)

Cash flows from investing activities

Interest received

5,583

1,407

Amounts received from related parties

10,088

10,056

Purchases of property, plant and equipment

(1,059)

(8,627)

Net cash (used in)/from investing activities

4,524

(7,220)

10,090

10,056

Cash flows from financing activities

Interest and indexation paid (including borrowing fees)

(6,298)

(6,017)

(6,244)

(5,817)

Repayment of borrowings

(3,848)

(4,239)

(3,848)

(4,239)

Lease payments

(137)

(157)

Issue of shares

150

Net cash used in financing activities

(10,133)

(10,413)

(9,942)

(10,056)

Net increase/(decrease) in cash and cash equivalents

34,032

6,922

135

(2)

Cash and cash equivalents at 1 April

91,994

85,072

Cash and cash equivalents at 31 March

126,026

91,994

150

The notes on pages 33 to 58 are an integral part of these consolidated financial statements.

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

1Accounting policies and critical accounting estimates/judgements

General information

The Group’s principal activity during the year was the financing and operation (through its subsidiary undertaking) of the Moyle Interconnector which links the electricity transmission systems of Northern Ireland and Scotland. The Company is a public company limited by shares, incorporated, registered and domiciled in Northern Ireland. The registered number of the company is NI045625 and the address of its registered office is First Floor, The Arena Building, 85 Ormeau Road, Belfast, BT7 1SH.

The Group financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£’000) except when otherwise indicated. All of the Group and Company’s assets and liabilities are denominated in Sterling with the exception of certain payables and receivables in relation to Euro sales contracts.

The Group financial statements consolidate those of the Company and its subsidiary (together referred to as the “Group”). The Parent Company financial statements present information about the Company as a separate entity and not about its Group.

The Group financial statements were authorised for issue by the Board of Directors on 27 June 2024 and were signed on their behalf by Patrick Larkin and Gerard McIlroy. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparation

The Group financial statements have been prepared and approved by the directors in accordance with UK adopted international accounting standards (“UK-adopted IFRS”) as applied in accordance with the provisions of the Companies Act 2006 and have elected to prepare the Company financial statements on the same basis. The financial statements have been prepared on a going concern basis, under the historical cost convention except for certain financial instruments as per the accounting policies below.

The preparation of financial statements in conformity with UK Adopted 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 areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed on pages 41 and 42. The Company has availed of the exemption permitted by Section 408 of the Companies Act 2006, and so the Parent Company’s statement of profit and loss and other comprehensive income has not been included in these financial statements.

Going concern

The Group is cash generative and is forecast to remain cash positive. The forecast cash generated is adequate to meet the Group’s liabilities as they fall due for at least 12 months from the date of approval of the financial statements including the scheduled bond payments, and to comply with financing covenants, including the required Annual Debt Service Cover Ratio. Reserve accounts are fully funded and £10m of liquidity facilities are in place. Accordingly, the directors consider it appropriate to adopt the going concern basis in the preparation of the financial statements.

New standards, amendments or interpretations

Newly adopted standards

The Group has adopted the following IFRSs in these financial statements:

•IFRS 17 Insurance Contracts (effective date 1 January 2023)

•Amendments to IFRS 17 ‘Insurance Contracts’ (Amendments to IFRS 17 and IFRS 4)

•Deferred tax related to assets and liabilities arising from a single transaction (effective date 1 January 2023)

•Definition of accounting estimates (effective date 1 January 2023)

•Disclosure of accounting policies (amendments to IAS 1 and IFRS Practice Statement 2) (effective date 1 January 2023)

•International Tax Reform – Pillar Two Model Rules (Amendments to IAS 12)

The adoption of these amendments to IFRSs did not result in material changes to the Group or Parent Company financial statements.

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

1Accounting policies and critical accounting estimates/judgements (continued)

Adopted IFRS not yet applied

The following Adopted IFRSs have been issued but have not been applied by the Group or Parent Company in these financial statements. Their application is not expected to have a material effect on the financial statements unless otherwise indicated and no disclosures have been made:

•Classification of liabilities as current or non-current (Amendments to IAS 1)

•Lease liability in a Sale and Leaseback (Amendments to IFRS 16)

•Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)

•Non-current liabilities with Covenants (Amendments to IAS 1)

•Lack of exchangeability (Amendments to IAS 21)

Basis of consolidation

The consolidated financial statements consolidate the financial statements of Moyle Interconnector (Financing) plc and its subsidiary undertaking drawn up to 31 March 2024. Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights. The acquisition date is the date on which control is transferred to the acquirer. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Segment reporting

The Group has one business segment, the selling of capacity on the Moyle Interconnector for the transmission of electricity between Scotland and Northern Ireland and one geographical segment, the United Kingdom. Accordingly segment reporting is not deemed to be applicable.

Foreign exchange

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

1Accounting policies and critical accounting estimates/judgements (continued)

Revenue

Revenue is made up of two parts: commercial revenue and tariff revenue. All revenue is generated within the United Kingdom and is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group. Revenue is recognised in the period in which the services are provided to the System Operators or customers.

Commercial Revenue

Commercial revenue, totalling £67,296,000 (2023: £58,371,000), comprises the fair value of the consideration received or receivable for making available the capability of the interconnector to the System Operators, SONI and National Grid ESO via the overarching market arrangements. This capability is provided to the System Operators via either direct contracts for services or industry wide contractual arrangements. The revenues are accounted for in line with the delivery of the services provided under the overarching market arrangements. Commercial revenue includes an amount of €182,000 (£155,000 Sterling equivalent) (2023: €11,422,000 (£9,817,000 Sterling equivalent)), which remains due from SONI in relation to capacity constraints imposed by SONI against Moyle Interconnector Limited during the period from September 2021 to March 2024. A provision of £20,241,000 has been made against this debt (2023: £nil). Further information on the judgements in respect of this revenue can be found within Critical accounting estimates and judgements on pages 41 and 42.

Tariff Revenue

The interconnector is entitled to collect revenue via a tariff known as the Collection Agency Income Requirement (CAIRt). CAIRt revenue is recognised in line with the income recovered by SONI on Moyle’s behalf via Northern Ireland electricity tariffs, as provided for in Moyle’s Collection Agency Agreement. No CAIRt revenue was required throughout the current or prior year.

Tariff Revenue Rebate

When there is an agreement in place to rebate revenue via a tariff reduction, tariff revenue rebates are recognised in line with the rebates passed through to Northern Ireland electricity tariffs by SONI, on Moyle’s behalf. In the current year a revenue rebate of £3,008,000 (2023: £1,581,000) was paid (see note 2a for further details).

Finance income and finance expenses

Finance income comprises interest income on funds invested, negative interest on leases and net foreign exchange gains. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Finance expenses include interest expense on borrowings, unwinding of the discount on provisions, net foreign exchange losses and interest expense on amounts owed by related parties. Interest expense is recognised as it accrued in profit or loss using the effective interest method. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Intangible assets

Acquired licences are shown at historical cost. Licences have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of licences over their estimated useful lives. The estimated remaining useful economic life of the licences is 13 years. The useful economic life of the licence is linked to the regulatory direction which allows for the recovery of repayment of debts through Moyle’s licence.

Property, plant and equipment

Property, plant and equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses. The initial cost of an asset comprises purchase cost plus any costs directly attributable to bringing the asset into operation and an estimate of any decommissioning costs. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. An asset is derecognised upon disposal or when no future economic benefit is expected to arise from the asset. All other repairs and maintenance are charged to the statement of profit and loss during the financial period in which they are incurred.

The charge for depreciation is calculated so as to write off the depreciable amount of assets over their estimated useful economic lives on a straight line basis.

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

1Accounting policies and critical accounting estimates/judgements (continued)

Property, plant and equipment (continued)

The useful economic lives of each major class of depreciable asset are as follows:

Interconnector assets25 - 40 years*

Control equipment 15 - 20 years**

Plant & Machinery 15 years

Right-of-use assets12 years

*The weighted useful economic life of the interconnector assets is 35.5 years.

** The weighted useful economic life of the control system assets is 15.0 years.

The assets’ residual values and useful economic lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Assets under construction are stated at historical cost less any impairment in value. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying value amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. Assets under construction are not depreciated until commissioned.

Leases

The Group does not act as a lessor on any leases. The accounting policies presented below set out the policies for recognising leases where the Group acts as a lessee.

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.

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

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

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. The Group uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

-fixed payments;

-variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

-lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option; and

-penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, or if the Group changes its assessment of whether it will exercise a purchase extension or termination option.

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

1Accounting policies and critical accounting estimates/judgements (continued)

Leases (continued)

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

The Group presents right-of-use assets in ‘property, plant and equipment’ and lease liabilities in ‘interest bearing loans and borrowings’ in the balance sheet (see notes 7 and 16 respectively).

Short-term leases and leases of low-value assets

The Group has elected not to recognise right-of-use assets and lease liabilities for lease of low-value assets and short-term leases. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

Investments

Investments in subsidiaries are recognised initially at fair value and subsequently measured at cost less impairment. Investments in other unquoted companies are recorded at cost, which is the consideration paid. These assets are subsequently measured at fair value.

Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset or CGU. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses of continuing operations are recognised in the statement of profit and loss in those expense categories consistent with the function of the impaired asset.

Reversal of impairment losses

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Financial instruments

(i)Recognition and initial measurement

Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument.

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

(ii)Classification and subsequent measurement

Financial assets

(a)Classification

On initial recognition, a financial asset is classified as measured at: amortised cost; or fair value through other comprehensive income (FVOCI) – equity investment. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortised cost if it meets both of the following conditions:

-it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

-its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

1Accounting policies and critical accounting estimates/judgements (continued)

Financial instruments (continued)

(ii)Classification and subsequent measurement (continued)

Financial assets (continued)

(a)Classification (continued)

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income (OCI). This election is made on an investment-by-investment basis.

Investments in subsidiaries are carried at cost less impairment.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose only of the cash flow statement.

(b)Subsequent measurement and gains and losses

Financial assets at amortised cost - these assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.

Equity investments at FVOCI - these assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.

Financial liabilities and equity

Financial instruments issued by the Group are treated as equity only to the extent that they meet either of the following two conditions:

(a)they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; or

(b)where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will be settled by the Company’s exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Company’s own shares, the amounts presented in these financial statements for called up share capital and share premium account exclude amounts in relation to those shares.

Financial liabilities are classified as measured at amortised cost. Financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

1Accounting policies and critical accounting estimates/judgements (continued)

Financial instruments (continued)

(iii)Impairment

The Group recognises loss allowances for expected credit losses (ECLs) on financial assets and contract assets measured at amortised cost.

The Group measures loss allowances at an amount equal to lifetime ECL, except for bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition which are measured as 12-month ECL.

Loss allowances for trade receivables and contract assets are always measured at an amount equal to lifetime ECL.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

Credit-impaired financial assets

At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Write-offs

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery.

Derecognition - financial assets

The Group derecognises a financial asset when:

•the contractual rights to the cash flows from the financial asset expire; or

•it transfers the rights to receive the contractual cash flows in a transaction in which either:

•substantially all of the risks and rewards of ownership of the financial asset are transferred; or

•the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

Derecognition - financial liabilities

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expired. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

1Accounting policies and critical accounting estimates/judgements (continued)

Financial liabilities at amortised cost (financial instruments)

(a) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of profit and loss over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

(b) Trade and other 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. If not, they are presented as non-current liabilities. Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Decommissioning provision

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation.

Decommissioning costs are provided at the present value of the expenditures expected to settle the obligation, using estimated cash flows based on current prices. The unwinding of the decommissioning provision is included within finance expenses in the statement of profit and loss. The estimated future costs of the decommissioning obligations are regularly reviewed and adjusted as appropriate, through property, plant and equipment, for new circumstances or changes in law or technology. The decommissioning costs have been capitalised within property, plant and equipment and depreciated in line with Group policy.

Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the profit and loss account except to the extent that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised directly in equity or other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for the:

•initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and

•differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to property, plant and equipment are included in current and non-current liabilities as deferred government grants and are credited to the profit or loss on a straight-line basis over the expected useful economic lives of the related assets.

Employee benefits

The Group and Company have no directly employed staff of their own. Amounts included in staff costs relate to costs directly charged from Mutual Energy in respect of employees performing asset management activities for the Group.

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

1Accounting policies and critical accounting estimates/judgements (continued)

Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying value of assets and liabilities within the next financial year are discussed below:

Estimates

(a) Estimate of useful economic life of assets

The Group assesses the useful economic life of assets on an annual basis.

The remaining useful economic life of the interconnector was assessed at 19 years at the beginning of the year. If the remaining useful economic life had been assessed as one year more depreciation would have decreased by £200,000 (2023: £196,000) and if the remaining useful economic life had been assessed as one year less depreciation would have increased by £223,000 (2023: £217,000). The net book value of the Moyle Interconnector assets is disclosed in note 7.

The remaining useful economic life of the licences was determined as approximately 14 (2023: 15) years at the beginning of the year. If the remaining useful economic life had been assessed at 15 (2023: 16) years amortisation would have decreased by £111,000 (2023: £104,000) and if the remaining useful economic life had been assessed at 13 (2023: 14) years amortisation would have increased by £128,000 (2023: £119,000).

(b) Estimate of assumptions used in the calculation of the decommissioning provision

The decommissioning provision has been estimated at current prices and has therefore been increased to decommissioning date by an inflation rate of 3.20% (2023: 3.32%) based on expected time of expenditure of 18 years (2023: 19 years). The decommissioning provision has been discounted using a rate of 4.34% (2023: 3.84%). The effect of changing the discount rate, inflation rate and timing of expenditure on the decommissioning provision is disclosed in the table below.

Increase/(decrease) in provision

	2024	2023
	£’000	£’000
Increase in inflation rate by 1%	561	626
Decrease in inflation rate by 1%	(476)	(526)
Increase in discount rate by 1%	(467)	(519)
Decrease in discount rate by 1%	560	629
Increase in useful economic life of the asset by one year	(32)	(16)
Decrease in useful economic life of the asset by one year	33	16

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

1Accounting policies and critical accounting estimates/judgements (continued)

Critical accounting estimates and judgements (continued)

Judgements

The remaining useful lives of the right of use assets in respect of the Group’s Crown Estate lease was determined to be in line with the useful life of the Moyle Interconnector, which aligns with the non-cancellable period of the lease used to determine the lease liability.

(d) Contractual arrangements under EU market coupling

Revenue, which will vary dependent on market circumstances, is recorded in line with the services provided to the system operators in each financial year. The movement of power across the interconnector is effectively predefined by the market rules and will move from the lower priced market to the higher priced market in accordance with a schedule provided by the System Operator in Northern Ireland (SONI), unless this is inconsistent with a system support contract in which case the power will move for a short period in line with separate contractual arrangements with National Grid ESO or SONI.

We do not sell directly to market participants, rather our base entitlement is to the value of the power flown across the interconnector, which is the difference in market price between the two markets multiplied by the amount of power moved after adjusting for losses. We are obliged to make available to Eirgrid and SONI, operating as a body known as SEMOpx, the full capacity, subject to restrictions imposed by the System Operators, of the Interconnector for this purpose. SEMOpx make the capacity available in intraday auctions bilaterally coupled with the GB market. The scheduling of the physical movement of power across the interconnector in the majority of conditions is subject to the requirements of the System Operators (albeit in accordance with pre-defined rules). The schedule is amended in line with defined responses in certain conditions based upon independent contracts with National Grid ESO and SONI. The activities of the interconnector are therefore subject to the requirements of Eirgrid, SONI and National Grid ESO for the majority of time, however the Company is still exposed to the risks of financial loss from outages and to variations in revenue driven by the power price differential between GB and Ireland. Revenue recognition is therefore aligned with the services provided to the system operators in each period.

(e) Recoverability of unpaid amounts in relation to revenue constraints

Included within Group revenue is an amount of €182,000 (£155,000 Sterling equivalent) (2023: €11,422,000 (£9,817,000 Sterling equivalent)) and trade and other receivables is an amount of €23,666,000 plus €4,733,000 VAT (£20,241,000 Sterling equivalent plus £4,042,000 VAT) (2023: €23,484,000 plus €4,697,000 VAT (£20,655,000 Sterling equivalent plus £4,131,000 VAT)), which is due from SONI in relation to capacity constraints imposed by SONI against Moyle Interconnector Limited during the period from September 2021 to March 2024. The interpretation of the commercial agreements in respect of the capacity constraints imposed by SONI against Moyle Interconnector Limited are currently subject to legal dispute between the two parties and the case is currently in arbitration. A provision of £24,283,000 has been made against this debtor (2023: £nil). The determination of the provision is subject to judgement which has been made after taking into consideration the current status of the cases, our experience of other arbitration cases and advice from our legal experts. Should this debtor be written off in future the associated VAT of £4,042,000 will be recoverable and therefore this amount has been included within other debtors at 31 March 2024 (2023: £nil).

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

2a Revenue from contracts with customers

Moyle Interconnector Limited sells interconnector services including the rights to transmit electricity between Scotland and Northern Ireland along with ancillary services to support the electricity networks in Northern Ireland and Great Britain. All revenue is generated within the United Kingdom. Revenue is shown net of value-added tax and rebates and after eliminating income within the group. Revenue is recognised in accordance with the terms of the licence issued by the regulatory authority, namely in line with the applicable costs incurred by the Group over the same period.

The Group’s accrued income meets the definition of a contract asset. The Group’s accrued income is disclosed in note 12.

Disaggregation of revenue

	2024	2023
Group	£’000	£’000
Commercial revenue:
Revenue from power transfers	40,125	27,989
Revenue from power transfers which were constrained	155	9,817
System services	15,028	10,468
Capacity market	11,988	10,097
Total commercial revenue	67,296	58,371
Tariff revenue	-	10
Other	121	14
Revenue	67,417	58,395
Tariff revenue rebate	(3,008)	(1,581)
Net revenue	64,409	56,814

As noted on page 42, in critical accounting judgments and estimates section (d), the scheduling of the physical flow of power on the Moyle Interconnector is subject to the requirements of the system operators. The market arrangements are enduring and have no end date. The resulting revenue from power transfers is variable income depending upon the difference in market spreads. The Group’s system services and capacity market revenue split by customer (for those exceeding 10% of total revenues) is as follows:

	2024	2023
	£’000	£’000
Customer A	23,694	18,620

Revenue from power transfers which were constrained relates to an amount of €182,000 (£155,000 Sterling equivalent) (2023: €11,422,000 (£9,817,000 Sterling equivalent)), which is due from SONI in relation to capacity constraints imposed by SONI against Moyle Interconnector Limited during the period from September 2021 to March 2024 and remains unpaid. A provision of £20,241,000 (excluding VAT) has been made against this debt (2023: £nil). Further information in this respect can be found within the critical estimates and judgements section (e) on page 42.

The tariff revenue rebate relates to a rebate of revenue previously recovered through the tariff mechanism in order to reduce costs for energy consumers.

Commercial revenue includes £40.4m (2023: £38.0m) which was receivable in Euro.

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

2b Operating expenses

Group

2024

£’000

2023

£’000

Staff costs (note 3)

755

799

Depreciation and amortisation (excluding right-of-use assets)

7,400

8,726

Depreciation of right-of-use assets

114

135

Amortisation of deferred government grants (note 20)

(987)

(1,506)

Auditors’ remuneration:

Audit of these financial statements

Audit of financial statements of subsidiary

Other services

Allowance for doubtful debt

20,241

Maintenance and insurance

4,900

5,692

Other expenses

8,485

7,041

Total operating expenses

40,963

20,929

Other expenses include a fuel poverty donation of £3.25m (2023: £3.0m) and costs incurred for rates and group overheads, together with administrative expenses.

3Staff numbers and costs

2024

2023

Group

£’000

Wages and salaries

608

644

Social security costs

Pension costs

755

799

The average monthly number of employees during the year (including directors holding contracts of service with the Group) was 10 (2023: 10). All staff perform asset management activities. Amounts included above relate to costs recharged in respect of employees of the wider Mutual Energy Group which are directly attributable to the Moyle Interconnector Financing Group and does not include directors’ emoluments which are disclosed separately below. The Parent Company and its subsidiary undertaking have no directly employed staff of their own.

The Group’s directors were not remunerated for their services to the Company but instead received emoluments for their services to the Mutual Energy Group of companies. The portion of these costs recharged to the Moyle Interconnector Financing Group are set out below:

	2024	2023
	£’000	£’000
Directors’ emoluments
Aggregate emoluments	288	255

The portion of remuneration and amounts receivable under long term incentive schemes of the highest paid director attributable to the Group was £159,000 (2023: £140,000), of which £9,000 (2023: £7,000) related to company contributions to a defined contribution pension scheme.

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

4Finance income and expense

2024

2023

Group

£’000

Finance expense:

Borrowings (including borrowing fees)

7,701

9,725

Bank charges

Lease interest expense

Foreign exchange loss

616

Unwinding of discount on decommissioning provision (note 18)

120

Finance expenses

8,565

9,854

Finance income:

Short-term bank deposits

(5,633)

(1,633)

Lease interest

Foreign exchange gain

(624)

Other interest income

(14)

Finance income

(5,647)

(2,257)

Finance expense – net

2,918

7,597

5Taxation

Recognised in profit and loss	2024	2023
Group	£’000	£’000
Current income tax:
Current tax on profits for the year	2,267	5,238
Group relief claimed	2,969	-
Adjustments in respect of prior years	46	4
Total current income tax	5,282	5,242
Deferred income tax:
Origination and reversal of temporary differences	(50)	311
Adjustments in respect of prior years	(42)	(1)
Total deferred income tax (note 19)	(92)	310
Tax charge	5,190	5,552

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

5Taxation (continued)

The tax charge in the statement of profit and loss for the year is higher than the standard rate of corporation tax in the UK of 25% (2023: 19%). The differences are reconciled below:

Reconciliation of effective tax rate

2024

£’000

2023

£’000

Profit before tax

20,528

28,288

Tax calculated at the UK standard rate of corporation tax of 25% (2023: 19%)

5,132

5,375

Effects of:

Tax exempt revenue

Impact of change in tax rates

150

Adjustments in respect of prior years

Tax charge

5,190

5,552

Future tax changes

The corporation tax rate increased to 25% from 1 April 2023 for companies generating taxable profits of more than £250,000. Deferred tax has been calculated at the rate at which the balances are expected to be settled, based on tax rates that have been substantively enacted at the balance sheet date (see note 19).

6Loss attributable to members of the Parent Company

As permitted by Section 408 of the Companies Act 2006, the Parent Company’s statement of profit and loss has not been included in these financial statements. The loss dealt with in the financial statements of the Parent Company is £65,000 (2023: £108,000).

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

7Property, plant and equipment

Interconnector

assets

Controlequipment

Plant & Machinery

Assets under construction

Right-of-use assets

Total

Group

£’000

Cost

At 1 April 2022

176,336

3,890

192

17,357

1,698

199,473

Movement in decommissioning provision

(175)

Additions

830

7,797

985

9,612

Disposals

(3,785)

Transfer into Use

25,154

(25,154)

At 31 March 2023

176,161

26,089

192

2,683

205,125

Movement in decommissioning provision

(277)

Additions

424

471

Disposals

(37)

At 31 March 2024

175,884

26,089

192

424

2,693

205,282

Accumulated depreciation

At 1 April 2022

93,925

3,716

411

98,057

Depreciation charge for the year

6,113

939

135

7,200

Disposals

(3,785)

31 March 2023

100,038

870

546

101,472

Depreciation charge for the year

3,992

1,734

114

5,853

Disposals

(37)

At 31 March 2024

104,030

2,604

623

107,288

Net book value

At 31 March 2024

71,854

23,485

161

424

2,070

97,994

At 31 March 2023

76,123

25,219

174

2,137

103,653

At 1 April 2022

82,411

174

187

17,357

1,287

101,416

Depreciation expense of £5,853,000 (2023: £7,200,000) has been charged fully to operating expenses.

The borrowings of the Company are secured on the property, plant and equipment of the Group.

As noted on page 42, the activities of the interconnector asset set out above are subject to the requirements of the system operators under the overarching market arrangements.

Assets under construction relates to control equipment. At 31 March 2024, the Group had no capital commitments (31 March 2023: £nil).

The Parent Company has no Property, Plant and Equipment (inclusive of no Right-of-Use Assets) in either year presented.

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

8Intangible assets

	Licences
Group	£’000
Cost
At 1 April 2022, 31 March 2023 and at 31 March 2024	56,477
Accumulated amortisation
At 1 April 2022	31,559
Amortisation for the year	1,661
At 31 March 2023	33,220
Amortisation for the year	1,661
At 31 March 2024	34,881
Net book value
At 31 March 2024	21,596
At 31 March 2023	23,257
At 1 April 2022	24,918

Licences include intangible assets acquired through business combinations. Licences have been granted for a minimum of 35 years. The Parent Company has no intangible assets.

The Group has concluded that these assets have a remaining useful economic life of 13 years as at 31 March 2024 (14 years as at 31 March 2023). Amortisation expense of £1,661,000 (2023: £1,661,000) has been fully charged to operating expenses.

9Investment in subsidiary undertaking

Company	£’000
Cost and carrying amount
At 1 April 2022, 31 March 2023 and at 31 March 2024	20,950

Investments in subsidiaries are recognised initially at fair value and subsequently measured at cost less impairment.

The Company’s subsidiary undertaking which is incorporated in Northern Ireland and whose registered address is First Floor, The Arena Building, 85 Ormeau Road, Belfast, BT7 1SH, is:

Name of company

Holding

Proportion

held

Nature of

Business

Moyle Interconnector Limited

Ordinary shares

100%

Operation of Moyle Interconnector

10Other investments

	Other investments
Group	£’000
Cost and carrying amount
At 1 April 2022, 31 March 2023 and at 31 March 2024	212

Other Investments represent an amount the subsidiary invested in a 5% share in Joint Allocation Office (JAO) S.A., at a cost of £212,000. The investments are held at fair value which equates to the cost paid.

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

11Trade and other receivables (non-current)

Group

Company

	2024	2023	2024	2023
	£’000	£’000	£’000	£’000
Loans due from subsidiary undertaking	-	-	50,590	52,652
Trade receivables due from fellow subsidiary undertaking	13	13	-	-
Trade receivables due from parent undertaking	-	-	-	-
	13	13	50,590	52,652
Loans due from subsidiary undertaking (current assets) (note 12)	-	-	(6,530)	(6,252)
Trade receivables due from fellow subsidiary undertaking (current assets) (note 12)	(13)	(13)	-	-
Trade receivables due from parent undertaking (current assets) (note 12)	-	-	-	-
	-	-	44,060	46,400

All of the Company’s non-current loans are denominated in Sterling. None of the Company’s loans are past due. The Company has no history of default in respect of its loans. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The fair value of the Company’s loans is £55,219,000 (2023: £56,975,000). This fair value has been calculated by discounting the future contracted interest cash flows using a discount rate of 1.37% (2023: 1.74%) that reflects the maturity profile of the Company’s loans. If the discount rate had been 2.00% the fair value would have been £53,819,000. In calculating fair value, RPI interest is excluded from the loan’s future cash flows and excluded from the related discount rate. The current effective interest rate, inclusive of interest and Retail Price Index indexation, for the loan is 3.34%.

12Trade and other receivables (current)

Group

Company

	2024	2023	2024	2023
	£’000	£’000	£’000	£’000
Trade receivables	152	24,799	-	-
Trade receivables due from fellow subsidiary undertakings	13	13	-	-
Loans due from subsidiary undertakings	-	-	6,530	6,252
Prepayments	2,307	2,137	87	90
Accrued income	5,372	3,227	-	-
Other receivables	5,360	1,391	1	-
VAT receivable	2	25	2	3
	13,206	31,592	6,620	6,345

All of the Group’s and Company’s trade and other receivables are denominated in Sterling with the exception of certain balances receivable in Euro as a result of Euro sales contracts as follows: i) trade receivables includes €178,000 due (£152,000 Sterling equivalent) (2023: includes €28,181,000 due (£24,786,000 Sterling equivalent)); and ii) accrued income includes €865,000 due (£739,000 Sterling equivalent) (2023: includes €61,000 due (£54,000 Sterling equivalent)); and iii) other receivables includes €2,000 (£2,000 Sterling equivalent) (2023: €1,000 (£1,000 Sterling equivalent).

Included within trade receivables is €23,666,000 plus €4,733,000 VAT (£20,241,000 Sterling equivalent plus £4,042,000 VAT) (2023: €23,484,000 plus £4,697,000 VAT (£20,655,000 Sterling equivalent plus £4,131,000 VAT)) which is due from SONI in relation to capacity constraints imposed by SONI against Moyle Interconnector Limited during the period from September 2021 to March 2024 and remains unpaid. A provision of £24,283,000 has been made against this debtor (2023: £nil). Should this debtor be written off in future the associated VAT of £4,042,000 will be recoverable and therefore this amount has been included within other receivables at 31 March 2024 (2023: £nil). Further information in this respect can be found within the critical estimates and judgements on pages 41 and 42.

Apart from those balances identified in the paragraph above, none of the remaining Group’s or Company’s trade and other receivables are impaired or past due and no impairment losses on trade and other receivables were recognised in profit and loss in the year (2023: £nil). No provisions, apart from the provision identified above, were deemed to be required at the reporting date as the Group and Company has no history of default in respect of its trade and other receivables and no current expectation of such.

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

12Trade and other receivables (current) (continued)

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The fair value of the Group’s and Company’s trade and other receivables is not materially different to their carrying values.

Loans due from subsidiary undertakings are unsecured and carry interest at a rate of 3.52% (2023: 3.52%) and are receivable within 12 months. Trade receivables due from fellow subsidiaries are unsecured, interest free and are repayable on demand.

13Cash and cash equivalents

Group

Company

	2024	2023	2024	2023
	£’000	£’000	£’000	£’000
Cash and cash equivalents	126,026	91,994	150	15

Cash and cash equivalents earn interest at a range from Bank of England base rate less 0.55% to Bank of England base rate less 0.05%, or nil if higher. During the year some cash and cash equivalents were placed on deposits with maturities great than 90 days but less than 364 days. These financial assets earned interest at a range from Bank of England base rate less 0.2% to Bank of England base rate plus 0.30%. None of the cash and cash equivalents are restricted.

14Share capital

	2024	2023
Group and Company	£’000	£’000
Allotted, called up and fully paid
50,000 ordinary shares of £1 each	-	50
150,000 ordinary A shares of £1 each	150	-
50,000 ordinary B shares of £1 each	50	-
	200	50

On 6th September 2023, the Company’s existing 50,000 ordinary shares were converted to 50,000 ordinary B shares and the Company issued 150,000 new ordinary A shares. The holders of ordinary A shares are entitled to receive dividends, as declared from time to time by the Company and are entitled to one vote per share at meetings of the Company. The holders of ordinary B shares are not entitled to receive dividends but are entitled to one vote per share at meetings of the Company. Prior to 6th September 2023, the holders of ordinary shares were entitled to receive dividends, as declared from time to time by the Company and were entitled to one vote per share at meetings of the Company.

15Retained earnings

Group	£’000
At 1 April 2022	122,315
Total comprehensive income for the year	22,736
At 31 March 2023	145,051
Total comprehensive income for the year	15,338
At 31 March 2024	160,389
Company	£’000
At 1 April 2022	40
Total comprehensive expense for the year	(108)
At 31 March 2023	(68)
Total comprehensive expense for the year	(65)
At 31 March 2024	(133)

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

16Interest bearing loans and borrowings

Group

Company

	2024	2023	2024	2023
	£’000	£’000	£’000	£’000
Non-current
2.9376% Index linked guaranteed secured bond	52,492	55,224	52,492	55,224
Lease Liabilities	1,911	1,970	-	-
Total Non-current	54,403	57,194	52,492	55,224
Current
2.9376% Index linked guaranteed secured bond	7,750	7,409	7,750	7,409
Lease liabilities	104	93	-	-
Total Current	7,854	7,502	7,750	7,409
Total borrowings	62,257	64,696	60,242	62,633

Changes in liabilities from financing activities

Group

Company

	Loans and borrowings	Lease liabilities	Total	Loans and borrowings
	£’000	£’000	£’000	£’000
Balance at 1 April 2022	62,964	1,216	64,180	62,964
Changes from financing cash flows
Repayment of borrowings	(4,239)	-	(4,239)	(4,239)
Lease payments	-	(157)	(157)	-
Interest paid	(5,817)	-	(5,817)	(5,817)
Total changes from financing cash flows	(10,056)	(157)	(10,213)	(10,056)
Other changes
Lease interest income	-	19	19	-
Interest and indexation expense	9,725	-	9,725	9,725
Lease revaluation	-	985	985	-
Total non cash changes	9,725	1,004	10,729	9,725
Balance at 31 March 2023	62,633	2,063	64,696	62,633
Changes from financing cash flows
Repayment of borrowings	(3,848)	-	(3,848)	(3,848)
Lease payments	-	(137)	(137)	-
Interest and indexation paid	(6,244)	-	(6,244)	(6,244)
Total changes from financing cash flows	(10,092)	(137)	(10,229)	(10,092)
Other changes
Lease addition		47	47	-
Lease interest expense	-	42	42	-
Interest and indexation expense	7,701	-	7,701	7,701
Total non cash changes	7,701	89	7,790	7,701
Balance at 31 March 2024	60,242	2,015	62,257	60,242

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

16Interest bearing loans and borrowings (continued)

The 2.9376% guaranteed secured bond 2033 was issued to finance the acquisition of Moyle Interconnector Limited and to repay indebtedness owed to members of Viridian Group PLC and are indexed linked to the Retail Price Index. The bond is listed on the London Stock Exchange and is secured by fixed and floating charges over all the assets of the Group, and also by way of an unconditional and irrevocable financial guarantee given by Assured Guaranty (Europe) Limited as to scheduled payments of principal and interest, excluding default interest. In return for this guarantee, every six months the Group pays an index linked fee of 0.125% of the outstanding balance of the bond. The fair value of the bond is £64,622,000 (2023: £66,539,000). This fair value has been calculated by discounting the future contracted interest cash flows using a discount rate of 1.37% (2023: 1.74%) that reflects the maturity profile of the Group’s and the Company’s borrowings. Increasing/decreasing the discount rate by 0.5% would result in a fair value of £63,300,000/£65,989,000 respectively. In calculating fair value, RPI interest is excluded from the bond’s future cash flows and excluded from the related discount rate. The current effective interest rate, inclusive of interest and Retail Price Index indexation, for the bond is 2.91% (2023: 2.94%). The undiscounted maturity profile of the Group’s and the Company’s borrowings are shown in note 23.

Lease liabilities represent future payments in respect of Crown Estate leases (see note 17).

17Leases

The Group holds a Crown Estate lease, entered into in 2001, which gives exclusive right to use and maintain the cables which are on or under the seabed. The lease runs to 31 March 2100, with a right to cancel with 12 months’ notice from 31 March 2031. Lease payments are subject to review in 2027 and 2057. The lease provides for uplifts on rent payments every 5 years in line with changes in the Retail Prices Index. There are no extension options for any period after 31 March 2100. The Group is restricted from entering into any sub-lease arrangements in relation to this lease.

The Group leases wayleaves which are short-term and has elected not to recognise right-of-use assets and lease liabilities for these leases.

Information about leases for which the Group is a lessee is presented below.

Right-of-use assets

The right-of-use assets, as presented in property, plant and equipment (see note 7), relate to the Crown Estate lease noted above.

Amounts recognised in the profit or loss

The following amounts have been recognised in profit or loss for which the Group is a lessee:

Group

2024

£’000

2023

£’000

Depreciation expense in respect of right-of-use assets

114

135

Lease liabilities interest expense/(income)

Expenses relating to short-term leases

Amounts recognised in statement of cash flows

Group

2024

£’000

2023

£’000

Total cash outflow for leases

137

157

The Parent Company does not have any right-of-use assets or liabilities.

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

18Provisions

Decommissioning

provision

Group	£’000
At 31 March 2022	3,240
Cost adjustments through property, plant and equipment	(175)
Unwinding of discount during the year	52
At 31 March 2023	3,117
Cost adjustments through property, plant and equipment	(277)
Unwinding of discount during the year	120
At 31 March 2024	2,960

Provision has been made for expenditure to be incurred in meeting the expected costs arising from the future decommissioning of the Interconnector in 18 years, at the end of its useful economic life. This provision is expected to be utilised within 18 years. The provision represents the present value of the current estimated costs of dismantling the connections to the main electricity grids in Scotland and Northern Ireland. The provision has been discounted at a rate of 4.34% (2023: 3.84%).

19Deferred tax liabilities

The gross movement on the deferred tax liability is as follows:

Group	£’000
At 1 April 2022	15,304
Recognised in profit and loss	310
At 31 March 2023	15,614
Recognised in profit and loss	(92)
At 31 March 2024	15,522

Movement in deferred tax liabilities during the year is as follows:

Accelerated capital allowances

Valuation of intangible assets

Total

Group

£’000

At 1 April 2022

9,173

6,131

15,304

Profit and loss credit for the year

626

(316)

310

At 31 March 2023

9,799

5,815

15,614

Profit and loss charge for the year

323

(415)

(92)

At 31 March 2024

10,122

5,400

15,522

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

20Government grant

Group	£’000
At 1 April 2022	20,257
Amortised during the year	(1,506)
At 31 March 2023	18,751
Amortised during the year	(987)
At 31 March 2024	17,764

Moyle Interconnector Limited, a subsidiary of the Group, was awarded a government grant in 1999 in respect of the costs of construction of the project. All obligations in respect of this grant have now been met. The current portion of the government grant is £987,000 (2023: £987,000). The non-current portion is £16,777,000 (2023: £17,764,000).

21Trade and other payables

Group

Company

2024

2023

2024

2023

£’000

Trade payables

380

178

Trade payables due to related parties

3,413

308

11,454

11,072

Accruals

2,542

2,910

VAT

707

Other payables

1,938

884

8,980

4,280

11,471

11,095

All of the Group’s and Company’s trade and other payables are denominated in Sterling with the exception of certain balances payable in Euro in relation to Euro sales contracts as follows: i) Trade payables includes €nil owed (£nil sterling equivalent) (2023: includes €26,000 owed (£22,000 sterling equivalent)) ii); and other payables includes €2,067,000 owed (£1,768,000 sterling equivalent) (2023: consists of €812,000 owed (£714,000 sterling equivalent)).

The fair value of trade and other payables is not materially different from their carrying value.

Trade payables due to related parties are unsecured, interest free and are repayable on demand.

Included in accruals are capital creditors of £1,274,000 (2023: £1,909,000).

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

22Related party transactions

The ultimate controlling party of the Group are the members of Mutual Energy Limited.

During the year the Group entered into transactions, in the ordinary course of business, with related parties.

Transactions entered into, and balances outstanding at 31 March with related parties, are as follows:

Value of transaction

		2024	2023
Group	Nature of transaction	£’000	£’000
Parent undertakings	Charges payable	(2,313)	(2,016)
Fellow subsidiary undertakings	Survey and security costs payable	(159)	(1,592)

Value of transaction

		2024	2023
Company	Nature of transaction	£’000	£’000
Subsidiary undertaking	Interest receivable	7,752	9,760
Subsidiary undertaking	Receipts in respect of investing activities	10,088	10,056

Key management compensation

Key management personnel are considered to be the directors, being those persons having authority and responsibility for planning, directing and controlling the activities of the Group, both directly and indirectly. Key management compensation is given in note 3.

Amount owed (to)/from

related party

	2024	2023
Group	£’000	£’000
Fellow subsidiary undertakings – current assets	13	13
Parent undertakings – current liabilities	(411)	(225)
Fellow subsidiary undertakings – current liabilities	(3,002)	(83)

Amount owed (to)/from

related party

2024

2023

Company

£’000

Subsidiary undertakings – non-current assets

44,060

46,400

Subsidiary undertakings – current assets

6,530

6,252

Fellow subsidiary undertakings – current liabilities

(36)

Subsidiary undertakings – current liabilities

(11,417)

(11,072)

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

23Financial instruments

The Group and Company’s financial instruments are classified as follows:

Assets and liabilities	Category of financial instrument
Other investments	Equity instruments at fair value through other comprehensive income
Trade and other receivables	Financial assets at amortised cost
Cash and cash equivalents	Financial assets at amortised cost
Interest bearing loans and borrowings	Financial liabilities at amortised cost
Trade and other payables	Financial liabilities at amortised cost

The Group’s and the Company’s contractual undiscounted cash flows (including principal and interest payments) of its financial liabilities are as follows:

At 31 March 2024

Within

1 year

1-2

years

2-3

years

3-4

years

4-5

years

than 5

years

Total

Group

£’000

2.9376% bond

9,543

9,027

8,692

8,105

8,068

25,057

68,492

Lease liabilities

104

106

108

111

1,475

2,015

Trade and other payables*

8,273

17,920

9,133

8,800

8,216

8,179

26,532

78,780

At 31 March 2023

Within

1 year

1-2

years

2-3

years

3-4

years

4-5

years

than 5

years

Total

Group

£’000

2.9376% bond

9,286

8,752

8,279

7,972

7,434

30,381

72,104

Lease liabilities

101

1,578

2,063

Trade and other payables*

4,280

13,659

8,847

8,376

8,071

7,535

31,959

78,447

At 31 March 2024

Within

1 year

1-2

years

2-3

years

3-4

years

4-5

years

than 5

years

Total

Company

£’000

2.9376% bond

9,543

9,027

8,692

8,105

8,068

25,057

68,492

Trade and other payables

11,471

21,014

9,027

8,692

8,105

8,068

25,057

79,963

At 31 March 2023

Within

1 year

1-2

years

2-3

years

3-4

years

4-5

years

than 5

years

Total

Company

£’000

2.9376% bond

9,286

8,752

8,279

7,972

7,434

30,381

72,104

Trade and other payables

11,095

20,381

8,752

8,279

7,972

7,434

30,381

83,199

*The Group’s Trade and other payables excludes deferred income and taxation and social security.

Moyle Interconnector (Financing) plc

Notes to the financial statements for the year ended 31 March 2024

23Financial instruments (continued)

Financial risk management

Other price risks

The Group operates the interconnector which links the electricity transmission systems of Northern Ireland and Scotland under a licence agreement with the Northern Ireland Authority for Utility Regulation. The Group earns its revenue from providing capability to transfer power between two markets, selling services to grid operators and from payments for making the asset available. In the event that the Group does not earn sufficient revenues to cover its operating expenses, interest on borrowings and repayment of borrowings, the Group’s licence allows the Group to make a call on its customers for any shortfall. Accordingly, the Group has limited financial risk.

(a) Interest rate risk

The Group’s interest rate risk arises from its long-term borrowings. These borrowings are index linked to the Retail Price Index and expose the Company to interest rate risk. A change in the Retail Price Index by 1% would have increased/decreased finance expenses, profit and equity during the year by £645,000 (2023: £650,000). A recurring annual retail price index of 2% would increase the total repayments on the 2.9376% bond by £21,604,000 over the remaining lifetime of the bond, which would be recovered from customers under the Group’s license. The Group does not need to actively manage its exposure to interest rate risk as a result of its licence agreement mentioned in the preceding paragraph. The Group issued its long-term borrowings to refinance its transmission assets at the lowest possible rates in order to reduce the costs of transmission to the consumers of Northern Ireland.

(b) Credit risk

The Group has limited exposure to credit risk as its customers are high profile electricity suppliers, who provide designated levels of security by way of parent company guarantees or letters of credit.

Included within trade and other receivables is an amount €23,666,000 plus €4,733,000 VAT (£20,241,000 Sterling equivalent plus £4,042,000 VAT) (2023: €23,484,000 plus €4,697,000 VAT (£20,655,000 Sterling equivalent plus £4,131,000 VAT)), which is due from SONI in relation to capacity constraints imposed by SONI against Moyle Interconnector Limited during the period from September 2021 to March 2024. A provision of £24,283,000 has been made against this debtor (2023: £nil). Should this debtor be written off in future the associated VAT of £4,042,000 will be recoverable and therefore this amount has been included within other debtors at 31 March 2024 (2023: £nil). Further information in this respect can be found within the critical estimates and judgements on pages 41 and 42.

Apart from those balances identified in the paragraph above, the Group’s trade and other receivables, including amounts due from related parties, are not impaired or past due and management does not expect any losses from non-performance by its customers.

As a result of the option under the Group’s licence agreement to call on customers in the event of any liquidity shortfall the Group has limited liquidity risk. The Group holds significant cash reserves which are only placed on deposit to the extent that these funds are not expected to be required. Should additional funds be required, for example if additional costs arise, counterparties default on payment, or revenue is lower than expected, these deposits can be returned. A £10m liquidity facility with an A – rated bank is also in place to manage any short-term liquidity risk.

Capital risk management

The Group has no obligation to increase member’s funds as the company’s ultimate parent undertaking is a company limited by guarantee. The company’s management of its borrowings and credit risk is referred to in the preceding paragraphs.

24Ultimate parent undertaking

Until 6th September 2023 the immediate parent undertaking was Moyle Holdings Limited, a company incorporated in Northern Ireland. On 6th September 2023, Moyle Holdings No. 2 Limited, a company incorporated in Northern Ireland, became the immediate parent of Moyle Interconnector (Financing) plc.

The ultimate parent undertaking, and the only undertaking for which Group financial statements are prepared, is Mutual Energy Limited, a company incorporated in Northern Ireland. Group financial statements for that company are available to the public from First Floor, The Arena Building, 85 Ormeau Road, Belfast, BT7 1SH.