SCOTTISH POWER UK PLC

ANNUAL REPORT AND ACCOUNTS

FOR THE YEAR ENDED 31 DECEMBER 2023

Registered No. SC117120

CONTENTS

1 STRATEGIC REPORT

56 DIRECTORS’ REPORT

63 INDEPENDENT AUDITOR’S REPORT

128 COMPANY STATEMENT OF FINANCIAL POSITION

129 COMPANY STATEMENT OF COMPREHENSIVE INCOME

129 COMPANY STATEMENT OF CHANGES IN EQUITY

130 NOTES TO THE COMPANY ACCOUNTS

Some of the statements contained herein are forward looking statements about Scottish Power UK plc and its subsidiaries, and Iberdrola, S.A.’s

strategic plans. Although Scottish Power UK plc and Iberdrola, S.A. believe that the expectations reflected in such statements are reasonable, the

statements are not guarantees as to future performance and undue reliance should not be placed on them.

Scottish Power UK plc Annual Report and Accounts 2023

Scottish Power UK plc (“the Company”), registered company number SC117120, acts as the

holding company of the Scottish Power UK plc Group (“the Group”) whose activities comprise the

generation, transmission and distribution of electricity, energy management and the supply of

electricity and gas principally in the United Kingdom (“UK”). The Company is a wholly-owned

subsidiary of lberdrola, S.A. (“Iberdrola”), one of the largest utility companies in the world and a

leader in renewable energy.

Scottish Power Limited (“SPL”) is the UK holding company of the Scottish Power Limited Group

(“ScottishPower”) of which the Company is a member.

The three divisions operated by the Group during the year were Energy Networks, Renewable

Further information regarding the corporate governance and board structure of ScottishPower is set

out in the ‘Corporate Governance section’ of the Directors’ Report’ on page 56.

The Group has three divisions:

1

(2022 £930.1m)

2

(2022 (£5,360.2)m)

Our Customer business is responsible for the supply of electricity and gas to almost five million

domestic and business customers throughout the UK, including customer registration, billing and

handling enquiries in respect of these services. The division is also responsible for the associated

to the UK wholesale electricity and gas markets and the optimisation of gas storage.

1

We were the first integrated energy utility in the UK to have 100% of its generation of electricity derived from renewable energy sources. Our focus is on

wind energy, smart grids, and driving the change to a cleaner, electric future. We are playing a leading role in the delivery of a clean, low-carbon system

for the UK, currently investing £8 million every working day between 2023 and 2025 to create a better future, quicker. Increased investment in

renewable energy and the electricity grid, alongside measures to support the electrification of heat and transport, remain crucial pillars in achieving the

UK’s climate targets and energy security goals.

With our plans to invest significantly in renewables generation and the electricity network infrastructure that will support the green transition, we are

well-placed to contribute to the UK achieving its net zero ambitions. With more than £1.8 billion invested in the UK as part of a previously announced

£6.7 billion programme for the years 2023 to 2025, the Group plans to build on this with investments of over £7 billion more in the years 2026 to 2028.

This amounts to a £12 billion investment programme for the years 2024 to 2028.

The UK has led the world in decarbonising the power sector. In September 2023, Prime Minister Rishi Sunak set out the UK Government’s updated

Significant innovations and investments continue to be made in our Energy Networks business. Our business plan, ‘Enabling the path to net zero’,

which was developed as part of the RIIO-ED2 (Revenue = Incentives + Innovation + Outputs) second regulatory distribution price control process and

implemented in April 2023, will run until March 2028. In addition to setting out how Energy Networks will develop a network that is ready for net zero,

the plan sets out how we will act as a trusted partner for communities, customers and stakeholders, and ready our business for a digital and sustainable

future. The salience of the need for grid infrastructure investment to deliver the required renewables capacity to homes and businesses across the

country has increased significantly during 2023. In January 2024, Energy Networks unveiled £5.4 billion worth of contract opportunities in its next

phase of electricity network investment, providing a boost for the supply chain and helping to unlock growth in the wider economy.

In a challenging economic environment, there continues to be a focus on measures to address the cost of living challenges being experienced by many

in society. In the year ending 31 December 2022, Customer business gross margins were materially adversely impacted as the price cap methodology

did not allow suppliers to fully recover high energy costs. In the first half of 2023, Customer business domestic revenues benefitted from specific price

solar panels, batteries, EVs or heat pumps get the maximum benefit from them.

In our interactions with the UK Government and the devolved administrations, we have highlighted the need to streamline the planning and consenting

process for major new energy infrastructure projects, including updating the National Policy Statements governing planning applications in England

and Wales. In August 2023, we also welcomed the UK Government’s first Electricity Networks Commissioner's report which recommended to accelerate

the integration of renewables generation by speeding up the delivery of strategic transmission lines, including its recommendations on reforming the

planning regime in Scotland to better align it with the more streamlined regime in England and Wales. In November 2023, the Department of Energy

2

3

We have five key stakeholder categories: people, energy customers, government and regulators, suppliers and contractors, and community and

environment. Behind these stakeholders are millions of people, and thousands of institutions, organisations and groups. All of them, with their

decisions and opinions, influence the Group and, in turn, are affected by our activities. In addition, these stakeholders interact with each other, creating

a universe of relationships that the Group needs to manage in order to achieve a better understanding of our operating environment and to deliver a

more sustainable performance across our activities.

4

Employment regulation

Training

work. Areas of opportunity to improve employee engagement included organisation of work, idea-sharing and innovation and employee communications.

Inclusion and diversity

5

We recognise the importance of work-life balance, and many of our roles offer hybrid working, allowing employees to split their time between the

office and home. Additionally, as part of our recruitment process, we encourage discussions on flexible working.

We published our latest Gender Pay Report on 8 March 2024 in which we reiterated our commitment to pay for performance equally and fairly. This

continued our focus on breaking down barriers across the employee lifecycle, as over time this will improve our gender pay gap position whilst

widening the inclusion of other under-represented groups. For more information, the latest Gender Pay Report is published at www.scottishpower.com

(“the Corporate website”) under ‘Careers’/ ‘Inclusion at ScottishPower’/ ‘Gender Pay Report’. As part of our commitment to closing our gender pay gap,

and as a Group which has a common framework in all the countries in which it operates on diversity and inclusion, Iberdrola set two targets in 2022 to

break down the barriers for women:

• increase in the proportion of women in senior management positions to exceed 35% by 2030; and

• Inclusive recruitment principles such as balanced shortlisting and gender-balanced interviewing are now incorporated into all our external

recruitment campaigns. Recruitment consultants encourage all hiring managers to adopt these inclusive recruitment principles.

• All of our job advertisements are reviewed using gender de-coding (i.e. highlighting masculine and feminine language).

• We continue to share best practice through the Energy Leaders Coalition which comprises 16 of the leading chief executive officers (“CEOs”) from the

UK’s energy sector who have made a public declaration to improve gender diversity in their groups and in the sector as a whole.

• We are a corporate partner of the Women’s Engineering Society to help with the important work that they do in supporting women engineers and

encouraging girls to see engineering as a career option.

• We continue to provide Maternity/Parent Coaching to females within our talent population who are on the maternity journey, whether that be

preparing for, or on, leave, or returning to work. The coaching blends practical support and advice to both the participants and the line mangers as

well as focused career coaching to maximise the participant’s potential for future progression.

In 2023 we launched our first ScottishPower Executive Diversity and Inclusion (“D&I”) Committee, a group of senior executives created to lead and

champion diversity across the business. This committee is driving progress on the organisation’s work to reduce the gender pay gap and challenge

unconscious bias. The ScottishPower Executive D&I Committee works in collaboration with the Iberdrola D&I Committee and our D&I working group

made up of our employee-led network chairs and business stakeholders.

In addition, we are promoting gender equality through the STEM engagement initiative. Throughout 2023, we have delivered our STEM message to

primary, secondary, college and university pupils and students via face-to-face events and workshops. We work with a range of partners and events to

communicate our early careers programmes to school children and their families.

The STEM Returners programme aims to help employees returning to work after a lengthy career break to grow and develop their career, offering the

time and support needed to refresh and redevelop their skills to help them in returning to employment on a more permanent basis. The 2023 cohort

saw 14 new returners commence the programme. Four have secured a permanent role within the company.

with learning disabilities and provide equal opportunities to access university courses. During 2023, six learners aged between 18 and 24 studied for a

Certificate in Applied Business Skills at the University of Strathclyde Business School. As part of this experience, the learners gained valuable skills and

work experience as part of a placement with the group.

The Group continues to support the growth of our existing employee-led networks:

• Future Connections – to bring people together from across the Group with an appetite to communicate and learn about activities in other business

areas;

• Connected Women – a confident and vibrant network for ScottishPower women;

• SPACE – to give employees access to support and guidance on all aspects of being a parent or carer;

• In-Fuse – to represent LGBT+ colleagues and allies alike;

• VIBE – focussed on ethnicity;

6

Health and safety

7

The table below provides key financial information relating to our performance during the year. Further detail is provided in the individual divisional

sections of the Strategic Report.

(a) The Group’s revenue and operating profit as presented on the Consolidated income statement on page 74.

ScottishPower’s capital investment increased by £914 million to £1,844 million in 2023, primarily reflecting increased Renewable production investment

in offshore development sites as well as a step-up in Energy Networks spend (particularly the transmission business) as we progress through RIIO-T2

and also into RIIO-ED2.

Net assets of the Group increased by £317 million in the year to £7,384 million. This reflects the impact of the statutory profit of £1,127 million

and favourable movements in the hedge reserve of £516 million due to the unwind of adverse positions offset by total dividends paid of £1,220

million to the parent and non-controlling interests.

During 2023, balances created during 2022 due to the energy market volatility and associated government support that was implemented have

unwound.

During the year, the net derivative liability position decreased by £783 million resulting in a net liability of £279 million at 31 December 2023. This

decrease reflects both the delivery of commodity derivative liabilities during 2023 and movements in the value of derivatives for future delivery.

Current trade and other receivables decreased by £346 million in the year. This includes a decrease in the value of collateral posted as a result of

commodity price movements, a decrease in receivables in respect of UK Government assistance schemes as well as a reduction in loans receivable

The Group’s net pension surplus decreased by £117 million. The defined benefit obligations increased by £50 million, principally due to decreases

in UK corporate bond yields as well as rates of observed inflation and salary increases being higher than the respective long-term assumptions,

offset to a degree by revisions to the mortality assumptions. The fair value of scheme assets decreased by £67 million, principally due to a reduction

in the fair value of the longevity swaps, offset to a degree by deficit reduction contributions and asset returns over the period. Refer to Note 10 for

further details.

We operate and manage a centralised cash management model within the UK, with liquidity being managed at the Company level. Our liquidity position

and short-term financing activities are integrated and aligned with Iberdrola’s.

The Iberdrola Group’s objective is to retain sufficient liquid resources and facilities to cover anticipated cash flow requirements for a period in excess of

debt increased by £955 million to £6,315 million principally due to utilisation of cash surplus.

(a) As detailed on the Consolidated statement of financial position on pages 72 and 73.

(b) As detailed in Note 13 on page 115.

(c) As detailed in Note 20(a) on page 120.

(d) As detailed in Note 19 on page 119.

Company holds investment grade ratings with Moody’s Investor Services (Baa1), S&P Global Ratings (BBB+) and Fitch Ratings (BBB+). There are no

financial covenant obligations in relation to our external debt. Details of our financial risk management policy are set out in Note 12.

The directors have had regard to the key principles of the Iberdrola, S.A. Shareholder Remuneration Policy, as noted by the Company, which include that

shareholder remuneration must: (i) be sustainable; (ii) be compatible with the maintenance of financial strength; and (iii) take account of the financial

profile of comparable companies. During 2023, interim dividends of £780 million were declared and paid to the parent (2022 £715 million).

The overall funding objective is to maintain a forecast debt position for the various Group entities at least in line with their current credit ratings. As

indicated above in the Capital and debt structure section, the ongoing support of the ultimate parent company for future funding and liquidity provides

a central underpinning for the directors in their assessments of ongoing funding for the Company and Group.

A ministerial-led working group has been created with senior Transmission Operator representatives to agree and implement the recommendations

from the UK’s Electricity Networks Commissioner published in August 2023. This focusses on items such as the need for a national campaign on the

need for transmission infrastructure, supply chain and order book reform, common standards and harmonisation spatial planning developments,

planning and consenting reform coupled with a community benefits framework and workforce growth. The UK Government published its response to

the Networks Commissioner Report, coinciding with the Chancellor’s Autumn Statement, which set out support for the recommendations. Planning

reform in Scotland was the significant omission from the UK Government’s publication, on which we are continuing to engage with Ofgem and UK

Government. SPT holds a senior seat upon the working group and is liaising with the Ofgem CEO office on all aspects of the national campaign.

Strategic connections development

Transmission

Distribution

Energy Networks is party to the Energy Network Association‘s (“ENA”) Strategic Connections Group (“SCG”) which focusses on distribution queue

management, boundary interface management, and the battery storage workstream which is being led by Energy Networks is making the most

significant progress. Energy Networks is leading this workstream. Ofgem and DESNZ have committed to reviewing and improving the enforcement of

existing connection milestones at distribution level and have acknowledged the work of the ENA’s working group. Again, this is a highly political subject

– network companies are at risk of becoming known as blockers. SCG oversees the process.

Renewable production is responsible for the origination, development, construction, operation and decommissioning of renewable generation plants,

principally onshore and offshore wind, with a growing presence in technologies such as battery storage and solar.

Renewable production currently has more than 40 onshore operational sites and our EA1 and WoDS offshore wind farms, totaling 3 GW of operational

capacity across our portfolio. We have taken positive investment decisions in 2023 resulting in us currently having five projects in construction phase

across on and offshore wind, battery storage and solar.

We also have a strong programme of future projects following expansion in 2023 of the UK pipeline out to 2035, including: more than 6 GW of potential

onshore wind, solar and battery storage projects; 2.9 GW of offshore wind within the East Anglia zone; and seabed rights for three offshore wind

projects in Scotland with a total capacity of 7 GW, being one fixed-bottom site and, in partnership with Shell, two floating sites. We continue to consider

Offshore wind

Renewable production continues to operate the EA1 (a 60/40 jointly-owned arrangement between Renewable production and Bilbao Offshore Holding

Limited respectively) and WoDS wind farms (a joint arrangement with Orsted) whilst developing the 2.9 GW East Anglia Hub (“EA Hub”) which consists of

three offshore wind farm projects: EA3, East Anglia One North (“EA1N”) and East Anglia Two (“EA2”). Updates in relation to these projects are outlined

overleaf.

electrical outfitting due to commence in Q2 2024.

The EA1N and EA2 development consent orders are subject to judicial reviews.

At COP28 in Dubai in 2023, Iberdrola and Masdar announced a €15 billion strategic partnership agreement to evaluate the joint development of offshore

wind and green hydrogen projects in key markets including Germany, the UK and the USA.

Renewable production took its FID on the Hagshaw Hill Repowering and Cumberhead West projects in June 2023 allowing preparatory construction

works to commence with the award of the turbine contracts for both projects. Decommissioning of the original Hagshaw Hill Windfarm has progressed

well and by repowering this site (which was Scotland’s first commercial wind farm) we will be replacing the original turbines with models that provide

five times the original generating capacity.

On 7 March 2023, we completed the purchase of 28% of the share capital in Cumberhead West Wind Farm Ltd, bringing the company 100% into

ScottishPower ownership.

Harestanes BESS is under construction with the main building civil works complete. The BESS and electrical installation works will continue throughout

2024. Other battery storage opportunities continue to be explored for both co-located and standalone sites.

The main construction works for Coldham solar, which is co-located with our Coldham wind farm, are complete, with final commissioning underway

ahead of expected commercial operation date at the end of Q1 2024.

company Douglas West Extension Limited (

2024 to the minority interest shareholder.

* Revenue for 2022 includes £682 million from the sale of the EA1 transmission asset which was classified as inventory.

(a) Output is a measure of the electrical output generated in the year, which in turn drives the revenues of the business.

(b) Installed capacity represents the total number of MW installed within the sites. This includes all sites constructed irrespective of whether they are generating or not.

(c) Availability is a measure of how effective the business is at ensuring wind generating plant is available and ready to generate.

(d) Solar capacity and output in respect of Carland Cross, which commenced operations in January 2022.

(e) Installed capacity relates to Gormans BESS, Whitelee BESS and Barnesmore BESS.

(“NPSs”) in parliament for final scrutiny and approval. In comparison with previous drafts the final NPSs provide for ‘Critical National Priority’ status in

the planning system for all forms of low-carbon energy generation and transmission networks. The updated NPSs are expected to play a crucial role,

underlined within the UK Government’s consenting Action Plan (2023), in facilitating the more efficient delivery of offshore wind projects through the

development consent order process, from 2024 onwards.

Following publication of the Scottish Government’s revised Onshore Wind Policy Statement in December 2022, we have led an Onshore Wind Sector

Working Group’s engagement with Scottish Ministers to agree an ’Onshore Wind Sector Deal’ which was published in September 2023. We are now

committed to working with the Scottish Government and other stakeholders to deliver on a range of commitments outlined in the Sector Deal aimed

at maximising the investment, supply chain growth, and employment opportunities from achieving Scotland’s ambition to deploy 20 GW of onshore

wind by 2030. The Scottish Government, alongside the industry, have now produced a delivery plan which will see the sector, government agencies

and relevant third parties deliver on agreed individual or collaborative milestones over the course of 2024 and 2025. Alongside the Strategic Leadership

million of the £796 million year-on-year improvement.

Countering the improved gross margin position, costs increases were seen in ECO scheme costs and in bad debt. Higher ECO costs reflect an increase

in delivery requirements for the ECO4 scheme as well as new obligations under the Great British Insulation Scheme (formerly known as ECO+ and which

commenced in July 2023). Higher bad debt costs reflect recent higher tariffs but are primarily as a result of the suspension of involuntary installations

of prepayment meters for the majority of 2023, as well as adherence to the rules for the protection of vulnerable customers.

Capital investment in the Customer business increased by £12 million mainly due to IT billing system spend.

(a) Reduced demand driven by customer behaviour and milder weather, in addition to lower customer numbers and the continued withdrawal from the I&C market.

(b) Based on the Citizens Advice Domestic Energy Suppliers’ Customer Service Report. Rankings reflect ScottishPower’s position relative to the other ‘Big Seven’ energy

(c) Percentage of relevant Customer business customer base with a smart meter.

(d) Customer numbers are based on the average number of Meter Point Administration Numbers for electricity customers and Meter Point Reference Numbers for gas

Throughout 2023 we have continued

to look to develop the portfolio and

make progress receiving consent to

Work has commenced to assess our

current steel position, and review

supply chain capability and readiness

to support the implementation of a

sustainable steel policy.

* Subject to finding a commercially viable solution.

of our people’s family and friends

in volunteering events.

Deliver over £100 million in

community benefit funding to

communities over the lifetime

of our onshore wind farms

In line with our planned projections,

for the 2023 year end, we have just

hit the £60 million milestone of

community benefit contributions.

Training has commenced and is

progressing on track, with over 31%

of line managers having undertaken

awareness training.

At the end of 2023 the proportion

of women in senior management

position was 33.7% (2022 32.9%).

SUSTAINABILITY continued

• identifying and managing climate risks and opportunities, and implementing adaptation measures where required;

• minimising energy consumption and use of natural and human-made resources;

• sourcing material resources responsibly, cutting waste and encouraging reuse and recycling; and

• protecting natural habitats and restoring biodiversity.

The Task Force on Climate-Related Financial Disclosures (“TCFD”) was established by the Financial Stability Board in 2015 to develop a set of

consistent, climate-related financial risk disclosures to be used by companies and certain other public-interest entities to provide meaningful

information to their investors and other stakeholders on the climate-related risks and opportunities facing their organisation. These recommendations

have been adopted by the UK Government as the basis for implementing climate-related financial disclosures across the economy, via amendment

of sections 414C, 414CA and 414CB of the Companies Act 2006 – The Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations

Governance Description of our governance arrangements in relation

Refer to pages 34 to 36

to assessing and managing climate-related risks and

opportunities.

Refer to pages 37 to 38

climate-related risks and opportunities.

Description of how the processes for identifying, assessing,

Refer to pages 37 to 38

and managing climate-related risks are integrated into our

overall risk management process.

business model and strategy.

Analysis of the resilience of our business model and

Refer to pages 42 to 46

strategy, considering different climate-related scenarios.

Refer to pages 47 to 48

related risks and to realise climate-related opportunities

and of our performance against those targets.

Description of the KPIs used to assess progress against

Refer to pages 47 to 50

targets used to manage climate-related risks and realise

climate-related opportunities and of the calculations on

action, Social commitment, and Corporate governance (the latter three chapters corresponding to ESG considerations respectively). Refer to the

‘Corporate governance system’ section of the Directors’ Report for further details on the SP GSS.

Each of the boards of the Heads of Business Sub-holding companies SPENH, SPREL and SPRH (as defined on page 1) approve their own Governance

and Sustainability System (“Business GSS”) for their division, Energy Networks, Renewable production, and the Customer business respectively. Each

Business GSS is directly modelled on the SP GSS, and principally adopts the core policies and documents of the latter as they relate to each division,

subject to specific business requirements and respecting each divisions’ corporate autonomy. For further information regarding these bodies, refer to

the ‘Administrative, management and supervisory bodies’ subsection under the ‘Corporate governance’ section of the Directors’ Report.

Policies for managing climate-related risks and opportunities

There are policies within the Purpose and Environment and climate action chapters adopted within the SP GSS that are used to assess and manage

Risk management

The SPL Board and senior management is strongly committed to, and engaged in, the management of ScottishPower’s risks including those related to

advice on issues related to the achievement

products/services to

(e.g., Internal control,

client; managing risk

Risk Management, UK

Delegation, direction,

Integration of climate risks into our Enterprise Risk Management (“ERM”) framework

As a Group principal risk, the identification, analysis and management of the risks and opportunities arising from climate change is integrated into our

established and mature ERM framework. Risks are identified and addressed through a multi-departmental and multi-level process coordinated by our

Risk Management department, involving significant collaboration between divisions and corporate functions.

The KRR is a repository for our risks representing our ERM framework to assist in achievement of both our short and long-term goals. Effective

application of the KRR facilitates the ongoing informed decision-making required to meet our business objectives. Risk reporting is well embedded

within the business, and climate change risks are identified and assessed as part of the KRR process and are considered in line and with the same

templates and standards as any other risk.

Each of the divisions and corporate functions compile their transition and physical climate change risks at least on a quarterly basis and submit to Risk

Management who review the initial assessment of each risk and the mitigation strategy. To assess each climate-related risk, information related to the

• Long-term impact – an estimate of the financial impact beyond the next twelve months, if any.

• Reputation – consider if there is a direct reputational impact for the business.

• Evolution – whether the risk has increased, decreased or remains the same since the last quarter.

• Risk Factor – consider if the risk manifests itself as market, operational, business, credit or regulatory.

• Priority – climate-related risks are ranked high, medium or low in the context the specific division or corporate function.

The KRRs are then consolidated by Risk Management, who provide consistency checks, and report based on materiality twice a year at the SP ACC,

and quarterly at Iberdrola Group Risk and Supervision Committee and SPMC.

• Reports to the SPL Board on the internal control and risk management systems

• Overall coordination

• Review assessment and mitigation strategy of risks

• Check consistency of submitted climate KRRs

• Consolidate and report based on materiality bi-annually to SP ACC and

quarterly to the SPMC and Iberdrola Risk and Supervision Committee

• Identify climate risks and opportunities

• Assign risk owner

• Assess and prioritise each climate risk

• Agree mitigation strategy considering any existing controls

decades, we have been a disruptor and innovator in the UK energy market. Our actions included spearheading the widespread adoption of onshore

and offshore wind generation, returning Scotland to a coal-free energy system with the closure of the Longannet and Cockenzie power stations and

becoming the first major UK energy firm to completely drop fossil fuel generation in favour of renewables, have enabled us to reduce climate risk and

realise opportunities to create sustainable value. We are now also driving the accelerated adoption of low-carbon storage, green hydrogen, EV charging

technologies, and smart solutions, supported by an increasingly flexible and smart electricity network.

Being an early mover in these areas has created an element of business and physical risk but has also enabled us to realise significant business

opportunities that otherwise would not have been open to us. As the impacts of climate change become ever more tangible, it is important that our

strategy for risk and opportunity management continues to evolve in order to maintain a strong and competitive business in the short, medium,

and long-term.

Our approach to the management of climate-related risks and opportunities considers all of the relevant time horizons for our divisions. The policies

be operational in 2040) and regulatory and planning timelines.

Our assessment and management of climate risk and opportunities considers risks over the short, medium, and long-term time horizons. Transition,

physical and other climate risks are managed using this process and mitigating actions carried out as required. Transition and physical risks and

opportunities are considered in the medium and long-term through a process of scenario analysis, with potential impacts indicated over the medium-

term (i.e. out to 2030) horizon for transition risks and opportunities, and over the medium to long-term (i.e. out to between 2030 and 2059) for

physical risks.

Our analysis in the short, medium, and long-term indicate that our business is in a strong position to respond to the potential effects of, and realise

the opportunities related to, climate change.

Principal risks and opportunities

Climate change represents business, systemic and global risks, and opportunities over a range of time horizons. These can be categorised into three

These may arise as a result of physical

and transition risks, including:

• those relating to deterioration in the

• legislation;

credit of counterparties (suppliers,

• policy;

banks, others);

• regulation;

• markets and supply chains;

• technology;

flooding re-occurrence;

• competition;

• financial;

• reputational developments;

transparency.

• demand; and

• reporting requirements.

Transition risks and opportunities

Our anticipation and management of transition risks and opportunities over the past decades has been central to cementing our position as a leader

in renewable energy and the fight against climate change. The following table outlines the high priority transition risks and opportunities identified

as the most relevant to our products and markets, and the most likely to materialise, together with a description of our current approach to mitigating

these risks and related strategic impacts. Relevant timeframes have been identified (short-term, medium-term and long-term), however, all of these

high priority risks and opportunities have the potential to crystallise over all timeframes.

• Broad and diverse supply chain with

Change in the cost and availability of

and preparing long-term paths with

around 3,000 suppliers, awarding

consideration of decarbonisation plans.

contracts with a cumulative value of

around £6 billion in 2023.

particularly with new suppliers and

• Strong relationships across our supply

technologies.

base with a focus on health and safety,

quality, cost and sustainability.

limit single sourcing.