Company Registration No. 02366949

ELECTRICITY NORTH WEST LIMITED

Annual Report and Consolidated Financial Statements

for the year ended 31 March 2024

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Introduction

Electricity North West Limited (“ENWL” or ‘’the Company’’) is the electricity distributor for the North

West of England. We are responsible for maintaining and upgrading the network of poles, wires,

transformers and cables which carry electricity from both the national grid and locally connected

generation to homes and businesses across the North West. Our job is to keep electricity flowing safely

and reliably to our customers’ homes and businesses, keeping the power on 24 hours a day, seven

days a week. We are proud of who we are, the essential role we play for our customers, the critical

role we play to support the move to Net Zero carbon, and the investment we make in the communities

we serve.

We recognise the role that electricity, and the electricity distribution networks such as ourselves, play

in leading and facilitating the Net Zero transition, managing power flows from a range of sources as

we move away from fossil fuels towards electricity for heating and transport. We do all this while

keeping costs as low as we can for customers.

We are pleased to present the Annual Report and Consolidated Financial Statements of the Company

and its subsidiaries (together referred to as “the Group”) to shareholders for the year ended 31 March

2024. Further information on the Company can be found by visiting our website: www.enwl.co.uk.

The Company is limited by shares and incorporated and domiciled in England, the United Kingdom

under the Companies Act 2006.

Notice regarding limitations on directors’ liability under English Law

The information supplied in the Strategic Report and Directors’ Report has been drawn up and presented in accordance with English Law.

The liabilities of the directors in connection with these reports shall be subject to the limitations and restrictions provided by such law.

Strategic Report

In preparing the Strategic Report, the directors have complied with s414 of the Companies Act 2006. The Strategic Report has been prepared

for the Electricity North West Group as a whole comprising Electricity North West Limited (‘’the Company’’) and its non-trading subsidiaries

(together, ‘‘the Group’’).

Cautionary statement regarding forward-looking statements

The Chairman’s Statement, Chief Executive Officer’s Statement and Strategic Report sections of the Annual Report and Consolidated

Financial Statements (‘‘the Annual Report’’) have been prepared solely to provide additional information to the shareholders to assess the

Group strategies and the potential for those to succeed. These sections and other sections of the Annual Report contain certain forward

looking statements that are subject to factors associated with, amongst other matters, the economic and business circumstances occurring

within the region and country in which the Group operates. It is believed that the expectations reflected in these statements are reasonable

but they may be affected by a wide range of variables which could cause actual results to differ materially from those anticipated at the date

of the Annual Report. The Group does not undertake any obligation to update or revise these forward-looking statements, except as may

be required by law or regulation.

Regulatory reporting and regulatory audits for the year ended 31 March 2024

Certain regulatory performance data contained in this Annual Report remain subject to regulatory audit by the Office of Gas and Electricity

Markets (‘’Ofgem’’). The final regulatory reporting pack for the year ended 31 March 2024 is not due for submission to Ofgem until July

2024, and will be reviewed by Ofgem after their submission.

Website and investor relations

The Company’s website, www.enwl.co.uk, gives additional information on the Company and Group. Notwithstanding the references we

make in this Annual Report to the website, none of the information made available on the website constitutes part of this Annual Report or

shall be deemed to be incorporated by reference herein. Interested institutional debt investors can also gain access to additional financial

information by visiting our website www.enwl.co.uk/about-us/investor-relations.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Contents

Chairman’s Statement ............................................................................................................................. 1

Chief Executive Officer’s Statement ........................................................................................................ 3

Strategic Report....................................................................................................................................... 6

- Company Background ....................................................................................................................... 6

- Corporate Social Responsibility ...................................................................................................... 16

- Non-Financial and Sustainability Information Statement ............................................................... 19

- Key Performance Indicators ............................................................................................................ 27

- Financial Performance .................................................................................................................... 31

- Risk Management ........................................................................................................................... 39

Corporate Governance Report .............................................................................................................. 45

- The Board ....................................................................................................................................... 45

- Board Committees .......................................................................................................................... 52

- Report of the Audit and Risk Committee ........................................................................................ 53

- Report of the Nominations Committee .......................................................................................... 55

- Report of the Remuneration Committee ........................................................................................ 55

- Report of the Safety, Health and Environment Committee ............................................................ 58

Directors’ Report ................................................................................................................................... 59

Statement of directors’ responsibilities in respect of the financial statements .................................... 62

Independent Auditor’s Report to the Members of Electricity North West Limited............................... 63

Financial Statements ............................................................................................................................. 73

- Consolidated and Company Statements of Profit or Loss and Other Comprehensive Income ....... 73

- Consolidated and Company Statements of Financial Position ........................................................ 74

- Consolidated Statement of Changes in Equity ................................................................................ 76

- Company Statement of Changes in Equity ...................................................................................... 77

- Consolidated and Company Statements of Cash Flows .................................................................. 78

Notes to the Financial Statements ........................................................................................................ 79

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Chairman’s Statement

I am pleased to introduce the Annual Report

and Consolidated Financial Statements for

Electricity North West Limited (ENWL) for the

year ended 31 March 2024.

This year I have been fortunate to spend time

with a number of key stakeholders including

investors, employees, suppliers, customers

and interest groups. I also recently met with

both the new Chair of Ofgem (our regulator)

and senior Government officials. Having

reflected on all these meetings, I am pleased to

report how well ENWL is regarded. As the only

singleton (single licensed area) of the network

companies (called DNOs) in Great Britain,

ENWL is seen as punching “far above its

weight” in key areas such as customer service

for vulnerable customers and communities,

innovations to assist towards Net Zero, and we

score one of the highest on network resilience

metrics. It is clear that DNOs continue to be

seen by policy makers (national, regional and

local) as key facilitators to Net Zero.

The Board at ENWL takes this responsibility

seriously and recognises that we need to seek

to be both the lowest cost possible and also

efficient, whilst being required to grow rapidly.

The national energy policy focusing on

promoting the uses of electricity means that

we expect to grow our business asset base by

nearly a third in the next five years.

In spite of a marked increase in both summer

and winter storm activity in 2023/24 and

having to cope with the commercial impacts of

the very high inflation and associated pricing

pressures, I am pleased to report that ENWL

has largely met or surpassed its internal

targets. The Board recognises that the

Customer Minutes Lost (CML) and Customer

Interruptions (CI) targets have been seriously

impacted by the significant number of named

storms experienced during the year, but the

Board remains confident with our sector

leading work on fault control and

management.

During such a period of dynamic change in the

sector, it is incumbent on the Board to ‘stay in

touch’ and we have focused on a number of

challenges:

- Staying in touch with our communities

The Board visited Lancaster as part of its fact

finding on storm and flood impacts and was

fully appraised of the events of Storm

Desmond (flood) and Storm Arwen (icy

weather). We also visited various electricity

substations and network hubs in the

Manchester area as part of the awareness of

the ‘growth pressures’ Net Zero will bring.

“Community” is not just about assets but very

much about understanding and caring for our

customers and ENWL’s outstanding ‘report

card’ from Ofgem (issued in early March 2024)

was a testament to our service teams and our

leadership; the latter including Board

Independent Non-executive director (INED)

Anne Baldock.

- Staying in touch with new business

challenges

Probably the greatest shift in business focus in

the last twelve months has been in the fields of

cyber, fraud, artificial intelligence and further

systems developments. The Board has looked

to INED Susan Cooklin to work with the

Executive team here. With the continued and

ever-changing nature of this risk, the team

have had to ‘come up the curve’ very quickly

and in this year have achieved the necessary

Ofgem and industry standards. Continued

focus and vigilance is required in the coming

year to maintain and achieve our regulatory

compliance and increasing targets.

- Staying in touch with cutting edge

innovation

ENWL is rightly regarded as ‘the innovation

DNO’ and this reputation has continued to be

fostered by the Board. In particular, in the last

year we have, for the first time since the COVID

hiatus, been able to really maximise on ideas

from our overseas investors. Not only have our

investors been able to join us in the North

West but we have travelled to Japan to

understand Kansai Electrics business better.

Our work on the innovation projects, QUEST

and Bi-trader, builds on our leadership

programmes such as CLASS (voltage

management scheme), the latter being a

breakthrough product which is also highly

profitable.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Chairman’s Statement (continued)

- Staying in touch with policy and policy

maker

With so much ‘change’ in energy policy, it is

essential that the Board seeks to understand

the direction of travel of policy makers. In the

last year the Board has met, amongst others,

with the most senior members of Greater

Manchester Council and key National policy

influencers. This supports the excellent work

initiated by the CEO in his extensive

stakeholder engagement programme. I have

also been involved in this by linking up with the

new Chair of our external consumer panel.

The Board’s essential governance roles have

not been neglected and in the last year we

have been active in:

- Hiring and working with a new CFO. I am

grateful to the leadership from INED Rob

Holden in this regard;

- Widening and deepening the roles of the

HS&E Committee;

- Supporting the extensive re-skilling of the

senior team by the CEO, notably in the

areas of IT, Cyber, new commercial

ventures, legal/secretarial and asset

management; and

- Encouraging the work of HR where we

hired the most apprentices ever in

2023/24 across a wider range of activities

than ever before, won a Bronze award for

inclusivity and a Gold award for working

with ex-armed forces personnel.

Last year saw the beginning of a new chapter

in our core business: a new five year price

control started in April 2023 with growth in

asset base as a major challenge for the future.

The Board and the wider Company continue to

prepare for and assess future needs and

potential challenges. As part of this, a strategic

review was announced in the second half of

2023 by our ultimate shareholders and is close

to being concluded. This review will support

our ability to meet future needs and we will

make sure we take the best ideas and views for

the benefit of the 5 million customers we

proudly serve in the North West.

Alistair Buchanan CBE

Chairman

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Chief Executive Officer’s (CEO)

Statement

I am pleased to present the Annual Report and

Consolidated Financial Statements (“the

Annual Report"), for the year ended 31 March

2024.

I joined the business in September 2022 and

presented the Annual Report for the year

ended March 2023 with a description of the

objectives and strategy for the business. We

have had our first full year of delivery against

this strategy which coincides with our first full

year of RIIO-ED2 our current price control

period.

Delivering our “license to operate”

Our legitimacy as an enterprise is derived not

just from Ofgem, our regulator, but directly

from the employees, customers and

communities we serve. This starts with safety

and after setting out a range of improvements

for safety performance, the business delivered

13 months without a Lost Time Injury (LTI). This

is the longest period the Company has

experienced without an LTI. Unfortunately we

had two injuries in October and November

2023 but since then we have not experienced

any further LTIs. The business is currently at

the frontier of safety performance in our

sector and is acutely aware of the pitfalls of

complacency.

With respect to public safety, it is with sadness

and regret that I must also mention that a

tragic incident occurred on the network in

October 2023 which resulted in a fatal injury to

a member of the public. The Company have

fully investigated the matter internally and are

assisting the Health and Safety Executive and

HM Coroner with their investigations, which

remain ongoing at the time of preparing this

Annual Report. On behalf of myself, and

everyone connected to Electricity North West,

our deepest sympathies and condolences go

out to all of the family and friends.

Legitimacy is also derived from our

performance serving the vulnerable and

poorest members of those communities for

whom energy costs are a disproportionate

element of their daily costs. Our sector has

been tested robustly in the last 18 months,

given a backdrop of rising energy prices, high

inflation levels experienced for the first time by

large swathes of the population, and increased

prices driven by global conflicts and costs

associated with adaptation to climate change.

During the last year we refocussed the

business to prioritise and better serve the

vulnerable and fuel poor in our communities.

We have transformed our performance in this

area and subsequently been ranked by Ofgem

as the second best DNO in the UK for

stakeholder engagement and customer

vulnerability (SECV). We have been

commended by Ofgem’s independent panel as

the most improved DNO. Importantly, we have

sustained this performance improvement into

the new price control and as part of the

Customer Satisfaction Fuel poverty incentive

introduced by Ofgem for ED2 have been

ranked

second in the DNO league table. Our

winter fuel poverty campaigns and our

partnerships with charities including the

Samaritans, Energy Saving Trust and Citizens

Advice, have attracted attention and received

plaudits.

Delivering a reliable network for our

customers

Our primary obligation is to deliver a safe,

reliable supply of electricity. The last year has

been characterised by volatile and extreme

weather. Despite this the business has

achieved the best storm performance on

record and has delivered the best Customer

Minutes Lost (CML) and second-best Customer

Interruptions (CIs) in our history. Although we

missed our Interruptions Incentive Scheme

(IIS) internal target, the extreme weather

patterns were recognised by Ofgem and the

business still earned substantial incentive

revenues of circa £1m.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Chief Executive Officer’s (CEO)

Statement (continued)

Re-openers are a significant feature of the ED2

regulatory framework and we have been

successful in our re-opener applications for

both Cyber and Storm Arwen this year. These

applications will help us enhance the reliability

and resilience of our network for the future in

light of the increasing threat from cyber-

attacks and extreme weather events.

Our relentless pursuit of operational efficiency

is reflected in the creation of the capital

delivery programme office, the reliability

performance team, and the centralisation of

the scheduling and planning function; these

are all interventions we have made to focus the

business on continuing to pursue positive

outcomes for our customers, earn incentive,

outperform totex and maintain our position as

the most reliable network in the UK.

Delivering stewardship and investment to

enable Net Zero

Our approach to asset management,

innovation and capital investment and delivery

is pragmatic and targeted. Our activities are

targeted to improve the performance of the

network, develop and reinforce the network

efficiently and deliver shareholder value.

The primary challenge facing the business is to

mature as a capital delivery organisation. Our

programme has been slow to mobilise in the

first year of ED2. Tightening of global supply

chains and increased costs are external factors

which have slowed the programme. In

response to these challenges we have

strengthened our capital delivery capability

and capacity.

Our new Asset and Investment Director was

recruited in the year and as well as establishing

the new capital programme management

office we have expanded and strengthened our

own labour force to deliver the enhanced

workbank through upskilling and investment in

training and accreditation. Our commercial

services function is also being enhanced and

we are improving our collaborative working

with network partners and our supply chain.

The changes put in place this year will enable

us to increase the speed of our capital delivery

to meet the demands of the much larger ED2

capital programme.

The UK has a clear vision to deliver Net Zero by

2050 and innovation is essential to deliver this

transition at an affordable cost. Our ED2

programme includes continued investment in

key innovation projects developed in ED1:

CLASS, Smart Street and LineSIGHT. We have

also been working on a number of new

innovation projects such as Quest and Bi-

trader to help continue our excellent track

record in this area. We are recognised as a

leader in innovation and our applied projects

will continue to enhance this reputation.

Delivering a resilient and diverse workforce

Our employee engagement is quantifiably

assessed annually in the Climate Survey which

is undertaken by an independent, respected,

expert organisation. Our score and level of

participation improved again this year.

Delivering a culture of high engagement is

critical for us and the agreement score of

82.8% is our highest ever. Gender pay gap

overall increased slightly from 10.6% to 11.6%

but importantly the gap between 18 to 30

years of age demographic reduced from 10% to

5%, which bodes well for the future shape of

our workforce. The recent revisions to parental

pay places us at the frontier for benefits for

maternity and primary care givers in our sector

and ensures we are well placed to retain the

diversity reflective of the communities we

serve.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Chief Executive Officer’s (CEO)

Statement (continued)

Financial performance in the year

The financial performance for the Company

continues to be strong, supported by the cost

efficiencies and incentive revenue earnings

that we have delivered in the year.

Overall, our revenue has grown by £61m, net

of the collection of Supplier of Last Resort

levies from which we make no profit, with the

full amount paid to suppliers immediately on

collection of the levy.

Supported by the increase in revenues, we

have increased the levels of capital

investment, improving network resilience and

capacity. Total capital expenditure during the

year was £291m, £28m higher than the prior

year.

Our income statement continues to show the

impacts of the macro-economic environment

on non-cash items in our accounts. In

particular, we have seen significant accounting

fair value gains on our derivative instruments

(£102.3m fair value gain in the year, compared

to £125.2m fair value gain in the prior year)

which results in a non-cash increase (2023:

increase) in profit before tax. A portion of this

non-cash fair value movement is offset by the

cash payment of accretion in the year of

£87.0m (2023: £20.1m), with the remainder

reflecting volatility in the markets and, in

particular, in interest and inflation forecasts.

Following the conclusion of the ED1 price

control in which ENWL delivered the best

operational performance of any UK DNO

group, the shareholders of North West

Electricity Networks (Jersey) Limited (“NWEN

(Jersey)”), the Company’s ultimate parent

undertaking, are undertaking a Strategic

Review of their investment in NWEN (Jersey).

It is possible that this review will result in the

sale by NWEN (Jersey)’s shareholders of some

or all of the share capital of NWEN (Jersey).

While the Strategic Review process is still

ongoing and we do not know the outcome of

it, the Company is in a strong financial position,

and our stakeholders should rest assured that

we are committed and will remain committed

to delivering an exceptional service to our

customers and to delivering the network

investment required to power the North West

to Net Zero.

In conclusion

We have had a good first year under the RIIO-

ED2 price control. Our pressing priority as a

business is to mature quickly as a capital

delivery organisation. Our strategy has been

tested robustly and it has delivered for

shareholders, customers and employees. The

business performance has improved in all

areas despite strong inflationary and cost

headwinds. Our focus is to ensure the energy

transition and the journey to Net Zero is

experienced safely and securely by everyone in

our communities.

Ian Smyth

Chief Executive Officer

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report

Electricity North West Limited (“ENWL”) is a

private company limited by shares and

incorporated and domiciled in England, the

United Kingdom, under the Companies Act

2006. It is ultimately owned by investors

composed of funds advised by Equitix, a

consortium led by KDM Power Limited and

Swingford Holdings Corporation Limited, as

shown in Note 32. The immediate parent

company is North West Electricity Networks

plc (“NWEN plc”), which is a company limited

by shares and incorporated in England, the

United Kingdom, under the Companies Act

2006.

Company Background

ENWL is the electricity distribution network

operator for the North West of England. We

are one of 14 distribution network operators

(“DNO”) in the UK regulated by Office of Gas

and Electricity Markets (Ofgem).

The Company serves approximately 5 million

customers at 2.4 million domestic and

industrial locations, has circa 2,100 employees

and provides a safe and reliable electricity

supply, 24 hours a day, seven days a week.

We own, invest in, operate and maintain the

network of poles, wires, transformers and

cables which carry electricity from both the

national grid and locally connected generation

to homes and businesses across the North

West, together with the telecommunications

network that controls the network remotely.

The role we play in serving our communities

continues to evolve as we seek to transition to

a low carbon economy and electricity

generation becomes more distributed across

our network. We have moved from a fairly

linear network operating model:

To one that is far more complex and multi

directional at the distribution level:

Electricity North West Limited is fundamental

to the Net Zero transition, managing power

flows from a range of sources in a wider whole

system as we move away from fossil fuels

towards electricity for heating and transport.

How we charge customers

We charge our customers through their

electricity suppliers, in the case of domestic

and small customers, or directly for larger

customers.

The prices that we charge our customers for

distributing electricity are regulated by the Gas

and Electricity Markets Authority (“GEMA”)

which operates through Ofgem, but we

recognise that ultimately it is our customers

that fund the business and its investments in

the network.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Regulatory framework

ENWL’s costs account for around 11% of the

typical domestic electricity bill charged by

suppliers to North West customers, equivalent

to £116 per home for the year ended 31 March

2024; this compared to an average DNO

customer bill impact of £115 per home.

Charges are regulated by Ofgem through its

RIIO model; Revenue = Incentives + Innovation

+ Outputs. This model determines how much

the Company is allowed to charge customers

to fund network investment and operating

costs in a regulatory price control period, with

allowed revenues adjusted up or down

depending on performance against regulatory

outputs and incentive mechanisms.

The price control in operation for the year

ended 31 March 2024 was RIIO-ED2, running

for a 5-year period from 1 April 2023 to 31

March 2028.

The RIIO price controls have been developed to

ensure that the revenues collected from

customers are linked to company

performance. The base income in each year is

largely fixed, being essentially to allow for the

operating costs of the Company and to provide

a return to investors for the capital invested in

the Company. However, income increases or

decreases depending on the Company’s

performance against the outputs set through a

number of incentive mechanisms.

These mechanisms incentivise excellent

customer service, stakeholder engagement,

delivery for connections customers and

network reliability, the latter based upon

minimising the number of interruptions that

customers suffer (CIs) and the average length

of those interruptions (CMLs). Performance is

assessed each year and any positive or

negative adjustments are fed annually into a

process which modifies revenues for

subsequent years.

The RIIO price control model also incentivises

cost reductions, through innovation and

efficiency, promoting the delivery of a well-

maintained and efficiently invested network

for the long-term. Cost savings are shared

between customers, via price reductions, and

shareholders, again after an annual review.

The Company also charges separately for new

connections to, and diversions of, the network.

This activity is also regulated by Ofgem.

Investment and innovation continue to ensure

the development and availability of the

appropriate technology to meet the changing

demands of electricity supply and to meet the

challenge of a low carbon future, at a price our

customers can afford.

External Factors

Transition to RIIO-ED2 and Net Zero

RIIO-ED2 regulatory period represents a

significant increase of expenditure compared

to the previous regulatory period, with further

potential increases through regulatory

“uncertainty mechanisms”. Delivering this

investment in the network and supporting the

transition to Net Zero are key challenges for

the Company.

The Net Zero transition will undoubtedly result

in very significant increases in network

demand by 2050 driven by both renewable

generation connections and new demand such

as electric vehicles and heat pumps. Our key

challenge in RIIO-ED2 is to provide the capacity

to allow customers to adopt these

technologies whenever they wish to, at a price

that is affordable.

Our RIIO-ED2 business plan sets out our clear

vision around Net Zero. Our plan sets out how

we will make sure that the network is not a

barrier to connecting electric vehicles or other

low carbon technologies. We also set out our

plans to improve network reliability and

resilience and to look after those in our area

who find themselves in vulnerable

circumstances, all at the lowest cost to the

customer.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

External Factors (continued)

Energy prices and supplier administrations

The unprecedented rise in energy prices since

the end of 2021 has put energy markets under

severe strain. Consequently, there were

significant numbers of energy suppliers who

entered administration during the year ended

31 March 2022. Although the position has

been more stable since then, we are still

collecting Supplier of Last Resort (SoLR)

charges through our revenue. As a result of

SoLR claims approved by Ofgem, our allowed

revenue for the year ended 31 March 2024 was

£22.0m (2023: £79.9m) higher than it would

otherwise have been, with the collection of

this levy, which is immediately paid to

suppliers.

When an energy supplier fails, the SoLR

process is triggered or, where this is not

possible, the Special Administration Regime is

used. The two regimes are overseen by Ofgem

to protect customers from significant harm.

When a SoLR takes on the customers of a failed

supplier, it has to finance the additional costs

of doing so (for example procuring the energy

it supplies to those customers, honouring any

credit balances the customers had with the

failed supplier or managing the costs of

onboarding those customers). The SoLR

process allows for the new supplier to recover

these costs through a SoLR levy agreed

between Ofgem and the new supplier. This

levy is collected through the distribution

network companies on a pass-through basis.

This cost will effectively be recovered through

future energy bills.

Political and economic backdrop

We also monitor the continuing environment

of political and economic volatility. Supply

chain management continues to be an area of

focus as we see the implications of the events

in Ukraine in particular. All of these have had a

limited direct impact, aside from a planned

increase in stock levels to manage supply chain

risk.

Having considered the factors noted above,

there are no material impacts on either the

going concern statement on page 35, or the

period covered by the viability statement page

37.

Purpose, Vision and Principles

Our Purpose “Together we have the energy to

transform our communities” reflects the

essential role we play in the North West and in

the lives of our customers, acknowledging how

our role is changing alongside our customers’

needs.

Transforming our communities is at the heart

of our Purpose, ensuring we take a responsible

approach in everything we do, including how

we treat and support:

• our customers;

• our environment;

• our communities; and

• our people.

Our Vision is to ‘Lead the North West to Net

Zero’. We do not say that lightly. The climate

challenge is the greatest of our age and

networks are uniquely positioned to enable

the transition from fossil fuels to low carbon

electricity to power our homes, businesses,

transport and heating.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Purpose, Vision and Principles (continued)

As the region’s DNO, we are key to leading the

region to Net Zero. We are focusing on three

things both to make it happen and to do so at

the lowest cost to customers:

1. Investing and innovating to make sure the

network is fit for the future;

2. Helping domestic customers and

businesses play their part, making new

connections as quick and easy as possible

while ensuring no one is left behind; and

3. Continuing to improve the reliability of the

network – something that is fundamental

as we all become even more reliant on

electricity.

Our Purpose and Vision are supported by our

Principles, setting the cultural framework

within which we operate.

The Principles, ‘We are switched on; We are

adaptable; We take pride’, capture the

cultural framework required for the Group to

deliver the purpose and vision.

The Group has four key focus areas: ‘Health,

Safety & Environment; Network Reliability;

Customer; and People’.

Health, Safety and Environment

The Company operates in a high hazard

industry and the safety of its people and

customers, and the protection of the

environment will always remain key priorities.

During the year we have strengthened the

team leadership with key appointments

enhancing our capabilities in this area.

Operational safety

The Company ensures that all people are well

trained and able to operate safely, backed by

policy driven procedures and compliance

assurance, alongside a behavioural approach

that seeks to ensure that all staff and

contractors approach any task with a strong

behavioural attitude to safety.

In the year ended 31 March 2024 we have

continued to review and improve our safety

management system which is certified to the

international standard ISO 45001.

We finished the year ended 31 March 2024

with a lost time injury frequency rate 0.023

(2023: 0.035) having had two LTI (2023: three).

This relatively low incident rate reflects the

sustained improvement since we embarked on

a company-wide initiative to create an

enhanced safety culture. The total reportable

incident rate was 0.034 (2023: 0.093).

We are never complacent about safety. In the

year to 31 March 2025, we will embed an

updated plan to further improve our safety

record, including working closely with our

contract partners.

As our safety journey continues, we are

increasingly focused on the quality of, and

learning from, safety observations and positive

challenges, rather than focusing on the volume

of these. Safety observations in the year were

recorded at 11,647 (2023: 14,725), with 2,778

positive challenges (2023: 3,011).

Asset safety

The safety of the Company’s employees,

delivery partners and the public from the

inherent risks of electrical assets is assured

through the Company’s ongoing asset

investment programme and the associated

asset risk management policies which define

the programme scope.

During the year ended 31 March 2024 the

Company continued to invest to reduce further

risks associated with link box failures and with

rising and lateral mains in multi occupancy

properties, such as blocks of flats.

Our link box inspection programme assesses

the risk of the asset which then, where

necessary, informs an intervention such as

blast mitigation protection, replacement or the

removal of the asset.

We continue to use innovation to target the

potential risks associated with electricity

supplies in multi occupancy properties. We

have installed innovative monitoring

equipment which helps identify abnormalities

and inform replacement decisions.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Health, Safety and Environment (continued)

With respect to public safety, a tragic incident

occurred on the network in October 2023

which resulted in a fatal injury to a member of

the public. The Company have fully

investigated the matter internally and are

assisting the Health and Safety Executive and

HM Coroner with their investigations, which

remain ongoing at the time of preparing this

Annual Report.

Environmental performance

The Company is dedicated to achieving the

highest standards of environmental

performance, not only by minimising the risks

created by our activities, but also through

targeted investment in outputs that deliver a

positive environmental impact. To achieve our

environmental objectives, we monitor

environmental related investments to ensure

that we are on track. We do, however, face

certain challenges in balancing a reduction in

the adverse environmental impacts of our

operations with the need to meet customer

and regulator demands to grow the network

and maintain supply.

In terms of our own direct operational impact

on the environment, our principal

performance indicator is the level of carbon

dioxide emissions equivalent (tCO

e). This

measure covers the environmental impact

both from the use of fossil fuels in vehicles and

generators and of energy in buildings, as well

as the impact of Sulphur Hexafluoride (SF6), a

greenhouse gas historically used as insulation

in electrical equipment. The table on page 11

shows an analysis of our Scope 1, 2 and 3

emissions over the current and prior years.

Our “Leading the North West to zero carbon

plan” sets out our target to decrease our

emissions by 10% year-on-year in order to

become zero carbon by 2038. This includes

some of the actions that we are taking to

decarbonise our operations but also provides

exemplars, research evidence and business

case information to inform the investment

decisions that stakeholders need to take to

decarbonise.

We have been working closely with key

stakeholders across the region and have

produced decarbonisation pathways for

Greater Manchester, Cumbria and Lancashire.

Our recently published electric vehicle (EV)

strategy sets out our plans to lead and support

stakeholders on the journey to decarbonise

the region’s transport. Our role is to facilitate

this journey by preparing the electricity

network for the rapid uptake of EVs and the

associated charging infrastructure needed to

support this. The accelerating uptake in low

carbon technologies will ultimately result in a

lot more demand being placed on our network,

and our main challenge is to manage the

change and keep the costs as low as we can

while ensuring that our network remains

resilient, reliable and meets customer's needs.

Recognising our critical role in leading

decarbonisation, we have made two of our

depots and two substations carbon neutral

using a range of low carbon technologies.

These modifications have the dual benefit of

reducing our own carbon emissions and can be

used as exemplars to other businesses across

the region, sharing our learnings. Our goal for

RIIO-ED2 is to decarbonise one of our twelve

depots each year or to make efficiency savings

that target our biggest emission sources from

our estate.

We have rolled out EV charging points at all our

depots and we are incentivising colleagues to

change to EVs. We have also engaged with

local authorities and businesses across the

region to support them with this transition,

promoting the mass adoption of EV

technology.

The transition to carbon neutrality is as much

about behavioural change as it is about

technologies. In that regard, we became the

first Bronze accredited carbon literate DNO

and achieved silver accreditation in 2022. We

have a goal to achieve Gold over the course of

RIIO-ED2 and, as a first step, are refining the

training to be delivered to our operational

teams as well as exploring partnership

opportunities to deliver Carbon Literacy

training to stakeholders.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Health, Safety and Environment (continued)

Business carbon footprint

2024

tCO

2023

tCO

Scope 1

Operational transport

5,893

6,190

Business transport -

road

589

733

Fugitive emissions

663

889

Fuel combustion

3,181

2,777

10,326

10,589

Scope 2

Buildings energy usage

3,630

3,384

Scope 3

Business transport - rail

5.0

Business transport - air

13.6

18.6

Business Carbon

Footprint (excl. losses)

13,999

13,992

Electrical losses

304,723

242,882

Business Carbon

Footprint (incl. losses)

318,722

256,874

The reported electrical losses figure is a snapshot of received

data as of the date of this report and will change as further

settlement reconciliation runs are carried out (up to 28 months

after each relevant settlement date).

The Company’s business carbon footprint

(excluding losses) for the year was 13,999

tCO

e, which is an increase of 0.06% from the

previous year (2023: 13,990 tCO

e). Despite

the various carbon reduction activities

undertaken by the Group, this increase was

primarily impacted by the number of named

storms in the year and the associated increase

in generator use to maintain supply and

protect vulnerable customers, especially in the

more remote areas of our network.

During the year the Company continued to

implement energy efficiency measures,

through the refurbishment of its buildings, and

the replacement of fleet vehicles and company

cars with more efficient vehicles.

Around 17,529,004 kWh of electricity, equal to

around 3,630 tCO

e, was purchased by the

Company for its own use, including for the

purposes of transportation. This tCO

e figure

was calculated by multiplying the total

consumption in kWh by the UK Government

Conversion Factors for greenhouse gas

emissions.

There was around 25,158,221 kWh of energy

consumed from the consumption of fuel for

operational transport. This is calculated by

multiplying the litres of gas oil and diesel

consumed by the conversion factor provided in

the UK Government Conversion Factors for

greenhouse gas emissions. To reduce our

carbon footprint with respect to operational

transport, we are developing a carbon

reduction road map to maximise the benefit of

EV options for our liveried fleet.

The Company’s annual emissions are

equivalent to 6.36 tCO

e per employee, a

reduction of 0.1 tCO

e per employee against

last year’s emissions.

Electricity losses are measured as the

difference between energy entering the

network (from generation) and energy exiting

the network (for demand). Whilst it is

impossible to eliminate these losses, we do

take steps to minimise them and we will be

taking measures to reduce losses as part of our

commitment to decarbonise our operations.

This is done through installing more efficient

assets in our network, particularly low loss

transformers and cables and through our

revenue protection activities, addressing the

issue of electricity theft. However, as

electricity demand over the network starts to

increase, maintaining losses at current

absolute levels will be impossible to achieve,

with the level of emissions being determined

by the amount of renewable generation in the

mix.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Network Reliability

Our customers and stakeholders continue to

feedback that our fundamental role is to keep

power flowing through network reliability.

This becomes ever more important as

customer dependence upon electricity

continues to grow as we move to a low carbon

future. Network reliability continued to be high

with a network availability of 99.993% (2023:

99.995%). FY24 is the first year of ED2 with

more stretching targets for reliability set by

Ofgem.

Reliable electricity supply is achieved by a

combination of three aspects. Network

investment ensures the underlying asset base

is reliable and supports quick restoration.

When interruptions occur, automatic

restoration – a combination of investment in

hardware, software and communication

systems restores customers autonomously

within three minutes. Finally, some

interruptions require physical attendance on

site to operate, restore or repair the network

to restore supplies.

In the year ended 31 March 2024, the average

number of interruptions per 100 customers

(CIs) was 26.2 (2023: 26.6). This has

outperformed the target of 29.9 set by Ofgem.

This represents our best ever CI position.

The average number of minutes for which

customers were without supply during the

year (CMLs) to 31 March 2024 was 26.8 (2023:

26.9), which was our best ever performance

and again represented an outperformance of

the target of 27.5 set by Ofgem.

Our network is designed and maintained to

withstand the external environment and other

risks to ensure it continues to operate reliably.

Reliability performance this year has been

unusually challenged by a higher volume of

named storms bringing increased volumes of

interruptions.

In 2024, there were 13 named storms in total

(2023: 1). We have been preparing for such

events over the past 18 months and this year

put into practice significantly bolstered

preparation protocols and responses. This has

delivered some best ever ENWL responses

during these events. The exceptional event

mechanism in our license protects DNOs from

extreme external events. We have submitted

three storm claims to Ofgem in line with the

exceptional event claim process in 2024.

Despite the weather there have been further

improvements in automation performance

and operational response. This performance

has been driven through a combination of

investment in automation and network

resilience, as well as improvements in

operational response when faults do occur.

This year saw further development of our

network management system (NMS),

providing a strong digital platform and offering

industry leading emergency responses whilst

protecting critical customers. PREsence and

LineSIGHT investments have been connected

through to our NMS system this year improving

visibility of our network and thus improving

our ability to respond to interruptions. Smart

meters were also integrated into NMS this year

providing visibility of customers status and

further enabling enhanced response.

We continue to improve resilience through

investment in flood defences and

interconnectivity to provide protection to a 1

in 1,000-year flood risk at key sites.

Most customers enjoy excellent levels of

reliability, but we recognise that there is

variability in the level of service experienced by

a small minority. A few customers experience

a level of service significantly worse than

average, usually by virtue of their location or

due to localised network issues. During the first

year of ED2 additional funding of £20m has

been made available to address these issues

and we commenced investment in schemes

that aim to reduce, in the long-term, the

numbers of worst served customers (WSC).

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Network Reliability (continued)

The number of customers meeting this Ofgem

definition increased by 322 in the year ended

31 March 2024 to 906 (2023: 584), as a result

of lower qualifying threshold in ED2. In RIIO-

ED2, Ofgem has defined a WSC as being one

who has experienced 12 or more unplanned

HV interruptions over a three-year period with

no less than two interruptions in any one year.

We continue to focus on our ambition to have

no customers meeting the Ofgem definition by

2028. To achieve this we are delivering a major

proactive investment programme, delivering

substantive and sustained improvements in

performance to 27 previously-qualified

circuits, benefiting 2,939 WSCs and 39,343

customers overall. Alongside this, we continue

with our tactical intervention programme,

which seeks to address any newly emerging

WSC performance issues.

Investment in an affordable and sustainable

network

In the year ended 31 March 2024, £122.4m of

the total capital expenditure of £290.9m

(2023: £263.4m) was invested directly in

network assets (2023: £115.0m). In addition to

investment to improve the automation of the

network and to increase capacity, we continue

to invest to maintain the relative health of the

network. The current network has been

installed over many decades and a significant

proportion of the investment programme

relates to replacing existing equipment at, or

approaching, the end of its life with modern

equivalents.

Innovation is essential to maintain our sector

leading network performance and reliability

levels and to meet the increasing demands on

electricity from the decarbonisation of energy,

at an affordable cost. We continue to develop

and deliver our cutting-edge engineering

innovations such as CLASS, Smart Street and

LineSIGHT that will keep the network reliable,

efficient and safe.

Customer

Supporting those customers in vulnerable

circumstances is core to our customer strategy.

Our “Electricity Users in Vulnerable

Circumstances Strategy” ensures that the

support we are giving customers in our region

is focused appropriately.

We have continued to increase support to

customers in vulnerable circumstances,

developing our Take Charge campaign with

Citizens Advice Manchester (“CAM”) and

Energy Saving Trust (“EST”). CAM and EST act

as our strategic partners to support fuel

poverty and energy efficiency, leveraging all

available financial support and grants to

enhance customers lives. We have doubled the

support provided this year from 12,362

customers in 2023 to 25,072. As part of the

Customer Satisfaction Fuel Poverty incentive,

our customers have rated the service 95.3%,

ranked second in the DNO league table.

We maintain a Priority Service Register (“PSR”)

to identify those customers who are most

dependent on our services and deliver

prioritised support to them in a power cut. In

the year ended 31 March 2024 we continued

to promote awareness of our free PSR service

and increase accessibility to it including

collaboration with funded partners has also

improved our view and reach of those who are

vulnerable.

We have over 800,000 households on our PSR.

Our enhanced contact campaign has increased

registration on our PSR from 73% to 82% of

those eligible in the region. Over 400

colleagues from across the business supported

the Contact Centre to contact our most

vulnerable customers 27,286 by phone and

3,600 through door knocking to ensure we

have the most up to date information on them

to enable the most appropriate support.

Through the continued use of partnerships,

associated referrals have increased to the

highest level to date with 92,243 customers

benefiting from the extra support provided.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Customer (continued)

Delivering excellent customer service is

incredibly important to us. Our overall

customer satisfaction score at the end of

March 2024 has seen a 2.6% increase

compared to last year at 92.0% (2023: 89.4%)

and ranked fifth in the DNO league tables. A

roadmap of key actions focused around

reducing customer effort, simplification,

owning what we do are developed from

customer feedback and root causes analysis.

The volume of complaints received are

tracking at the same volume as last year, with

the top three reasons relating to faults,

multiple interruptions, and quality of

reinstatements. Best practice sessions with

other DNO’s have been held this year and a

strategy is being developed to reduce

complaint volumes through ED2. The overall

complaints performance metric is delivering at

2.8, against Ofgem target of 2.8. The

complaint metric reflects the percentage of

complaints resolved within 24 hours,

combined with the percentage of complaints

resolved within 31 days.

People

The Company is one of the major employers in

the North West of England, employing

approximately 2,100 people in the region. We

also work with carefully selected local delivery

partners and the supply chain to deliver our

investment plan, providing even wider levels of

employment for the region. We are committed

to building careers for our people, providing

secure, long-term employment in an inclusive

environment where everyone feels a sense of

belonging.

Climate is the measure we use to quantify ‘how

it feels to work here’ and, in turn, makes the

link between this ‘feeling’ and how we

perform. Annual colleague climate surveys are

undertaken to measure engagement and levels

of agreement with our identified climate

priorities.

Colleague engagement scores in our January

2024 survey were the highest ever recorded by

the organisation, with an engagement rate of

82.8% (2023: 78.7%). This was 7.8% higher

than our target of 75% and a 4.1% increase on

our previous survey result. Our colleagues

rated health and safety, pride and customer

focus highest.

Following our Investors in People certification

which we achieved in April 2022, we continue

to make significant investment in training and

development for all our colleagues, providing a

learning and development portfolio to boost

their competencies.

We are committed to creating a great place to

work and influencing diversity and inclusion

(“D&I”) in the energy sector. Our D&I vision is

to “create a sense of belonging for our

colleagues and truly reflect the communities

we serve”. This vision is underpinned by four

key areas of strategic focus (belonging, talent,

leadership and community), supporting

inclusion in everything we do.

Included in our people strategy is a

commitment to increase the number of

women and people from minority groups in

the business. The work we are doing is laying

the foundations to achieve our goals by 2028

with 30% of female colleague across the

workforce.

To date we have seen a significant increase in

the number of colleagues from an ethnic

minority group has increased from 4.12% in

March 2021 to 6.20% in March 2024.

We are committed to creating a diverse and

inclusive environment where everyone feels

they belong and can reach their full potential.

We have been moving in the right direction

since we published our first gender pay gap

data. We benchmark well against other energy

companies and the UK average and we are

committed to closing the gap further.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

People (continued)

This is partly down to our investment in talent

programmes. On our last senior leadership

development programme female colleagues

made up 47% of participants. Our mean hourly

pay gap of 11.6% is 2.7% better than the

average UK gender pay gap of 14.3%.

In the last 18 months we have welcomed over

70 new apprentices into our award winning

programme. Approximately 90% of

apprentices successfully complete their

training with us and to date 100% of these have

been offered full time employment. Last year

22% of our apprentice intake were female and

11% were from an ethnic minority group. We

were proud that our apprenticeship

programme was recognised as the Diversity

and Inclusion Programme of the Year at the

Lancashire Apprenticeship Awards.

Over the last 12 months we have grown our

colleague network groups and have over 100

members over eight different network groups.

Recently we launched our parents and carers

network and our neuro-inclusive network. Our

colleague network groups play an instrumental

role in shaping our culture. For example, last

year our LGBTQ+ group and allies marched in

the Manchester Pride Parade for the first time.

Our menopause network group helped us to

shape our guidance document for supporting

colleagues with menopausal symptoms.

We have continued to build on our community

partnerships to build our brand awareness,

promote Science, Technology, Engineering and

Math (STEM) careers and ensure our job

opportunities are widely shared. As part of our

outreach work we were proud sponsors of the

Best Apprentice award at the One Voice

Blackburn community awards.

We work with schools and colleges to inspire

younger generations into STEM careers. We

have partnered with a number of schools and

colleges and for the third year running we are

providing work experience opportunities for

year ten students. Last year we provided work

experience for over 20 students; 60% of these

were female and 40% from an ethnic minority

group. We have also pledged our support to

the ‘10,000 Black Interns programme’ and had

our first placement in 2023.

Our efforts to create a diverse and inclusive

workforce have been recognised by various

institutions. In the last year we were awarded

the Bronze Inclusive Employers standard. We

have progressed to becoming a Gold Forces

Friendly company and are proud to now be a

Disability Confident employer.

We have been an accredited Real Living Wage

Employer since 2019 and contract with our

supply chain to honour the real living wage

commitments for their people. We are also

proud to be a member of the Greater

Manchester Combined Authority Good

Employer Charter, and a founding partner of

the Utilities National Work Group on Modern

Slavery.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Corporate Social Responsibility

Our Responsibility Framework

Sometimes referred to as ESG (environment,

social, governance) and social contract, our

Responsible Business Framework (“the

Framework”) sets out our ambition and

delivery around our people and partners, our

environment and our communities.

Under the Framework we have a number of

goals which are important to our business, our

stakeholders and our colleagues. Below each

goal are a series of commitments and

measures which are reported in our annual

Responsible Business Report.

The responsibility framework does not exist in

isolation. While it does not seek to include and

measure our core business and services as a

network operator, it does bring together a

number of the activities and strategies already

embedded in our operations and the business

plan. In doing so it provides an overarching

indication of our activities as a socially

responsible business and how we operate

within our communities.

With the start of the new price control period

and business commitments we have

undertaken a strategic review of the

Responsible Business Framework with

Business in the Community and this year we

have developed a new expanded framework.

In line with feedback and current best practise,

the new Framework, now has much greater

alignment to the United Nations Sustainable

Development Goals (UNSDG) and also has

greater recognition of the important role of

our core business activity in supporting

customers and delivering essential electricity

services. It also demonstrates greater

emphasis of strong governance. The new

Framework was launched in April 2024 and is

available to view on our website.

As part of our commitment to best practise and

benchmarking, we also participated in the

Business in the Community Responsible

Business Tracker in December 2023. The

Tracker is an in-depth diagnostic tool which

assesses a company’s performance as a

responsible business and is based on the

Sustainable Development Goals. Electricity

North West scored 83%, above the cohort

average of 48%. Electricity North West

consistently scored highly on governance

purpose, measurement and stakeholder

engagement. The insights from the report will

enable us to improve our approach and actions

further.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Corporate Social Responsibility

(continued)

Stakeholder engagement

We are committed to stakeholder engagement

and recognise that it has enabled many of our

initiatives to come to fruition and has been a

catalyst for improvements in our activities and

performance.

Over the last price control period RIIO-ED1

(2015-2023) we evolved and embedded our

stakeholder engagement programme and

were delighted to have been recognised by

Ofgem for our strong performance in this area.

In 2022/23 ENWL was awarded a score of 7.0,

second place in the SECV Incentive, the most

improved DNO.

Feedback from Ofgem stated “Some

companies were able to clearly evidence that

stakeholder engagement is thoroughly

embedded within their organisational culture

and that this is having a demonstrable effect

on the outcomes for customers, stakeholders

and indeed the DNO itself. ENW stood out for

the convincing evidence it provided of a step

change in the quality of stakeholder

engagement and the use the business is

making of the resulting insights”.

This year, we started the five-year RII0-ED2

(2023-28) investment programme. The

business plan was shaped by our extensive

stakeholder engagement and reviewed by our

Customer Engagement Group (“CEG”) and

stakeholder advisory panels throughout the

process. For the ED2 period we have taken the

opportunity this year to reinforce and refresh

the stakeholder advisory panel structure,

enshrining the Ofgem requirement for

enduring customer and stakeholder input in

decision making.

Our new stakeholder advisory panel structure

now includes six independently chaired panels

(Stakeholder Insight, Economic Growth,

Customers in Vulnerable Circumstances,

Environment and Sustainability, Distribution

System Operation (DSO) and Digital Futures)

which are all attended by a member of our

Executive Leadership Team. In addition, all the

independent panel chairs come together in an

Independent Oversight Group (IOG). The

stakeholder advisory panels meet quarterly

and continue to take membership from

regional experts in the field or representatives

of significant stakeholder groups and provide a

role as critical friend and help to track progress

against the business plan commitments.

We have over 130 stakeholders who regularly

give us their time and experience through our

advisory panel process. Following the quarterly

meeting of the IOG, the independent chair

meets with the ENWL CEO and Chairman to

ensure that any concerns and opportunities

can be raised directly with executive

management. The IOG chair is also a member

of a wider group of energy independent

stakeholder group (ISG) chairs ensuring

national coordination.

This year our annual regional stakeholder

workshops took place in November in Penrith,

Preston and Manchester. The collaboration

events aimed at local authorities and housing

associations, provided an opportunity to

explore how long-term capacity planning

aligned to local strategic economic plans and

the benefits of coordinated local area energy

planning. Additionally, there was an

opportunity to explore the connection process

and opportunities to improve the process

further.

Additional topic specific stakeholder

engagement took place including events

relating to the likes of connections process,

community and local energy, Net Zero and

decarbonisation support, flexibility services,

and DSO.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Corporate Social Responsibility

(continued)

Stakeholder engagement

ENWL has on once again undertaken an

independent stakeholder satisfaction survey to

continuously review and improve our

performance. This year we have continued to

show increased levels of overall satisfaction at

79% (2023: 77%). Nearly 180 participants

responded with a specific focus this year on

expanding participation among public sector

groups. The survey continued to indicate a

strong correlation between meaningful

engagement and frequency and overall

satisfaction, with 49% of stakeholders

considering themselves to be advocates for

Electricity North West Limited. Those with

dedicated contacts have the highest

satisfaction, highlighting the importance of

these relationships, being time poor was the

biggest barrier to engagement and

stakeholders are looking for engagement to be

tailored to their needs. Stakeholder Advisory

Panel members continue to have the strongest

relationship with Electricity North West

Limited that the new panel structure is working

well. This insight and information received on

stakeholder priorities and topics for

engagement will continue to feed into our

approach going forward.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Non-financial and sustainability

information Statement

A description of the principal risks relating to

the following non-financial information is

contained elsewhere in the Strategic Report, as

indicated below:

• Environmental matters – see pages 10 to 11

and page 19 to 22,

• Employees – see pages 14 to 15,

• Community issues and social matters – see

pages 16,

• Respect for human rights – see page 25 and

• Anti-corruption and bribery matters – see

page 26.

Climate related disclosures

Introduction and overview

This is the Group’s first year of reporting in

respect of section 414CB of the Companies Act

2006. The Group plans to make further

progress during the year ending 31 March 2025

in relation to this reporting, as outlined below.

This statement includes the climate-related

financial disclosures for the Group. The Group

has a responsibility to provide a safe, reliable

and resilient electricity distribution network in

the North West of England; this activity

necessarily both impacts and is impacted by

the environment and climate change.

The Group has developed three focus areas for

its approach to climate change:

• Our Mitigation – reducing the Group’s

emissions to help reduce the scale of

climate change in the future;

• Customers’ Mitigation – helping the

Group’s customers to reduce their

emissions by providing infrastructure

which enables them to be part of the net

zero economy; and

• Adaptation – ensuring the Group’s

network continues to perform effectively

and efficiently as climate changes.

In this first year of reporting, the main focus

has been on the adaptation of the network, but

where mitigation measures are being taken,

those have also been referred to. The Group

plans to expand the reporting in relation to

mitigation measures in future versions of this

statement.

The Group reports under Defra’s Climate

Change Adaptation Reporting requirements

established by the Climate Change Act 2008,

submitting reports in 2011, 2015 and 2021 as

required; these reports are available on our

website. In preparing these reports, the Group

was part of an Energy Networks Association

(ENA) working group that developed an

industry wide report on the threats to

networks from climate change and the

associated industry responses, with input from

experts from the Met Office and academia.

The working group identified 15 risks, all

relating to changing weather patterns and

temperatures. We have assessed these risks to

identify which are relevant to our distribution

area, and have used these as the basis for the

climate-related elements of our risk registers

(see the Risk Management section below).

The climate-related risks and opportunities

facing the Group are summarised in two

published documents, the ’Climate Change

Adaptation Report’ (as referenced above) and

the ‘Climate Resilience Strategy’. Both

documents were developed through a

consultative process, bringing together expert

knowledge from within the Group and insights

from stakeholders, industry peers, climate

experts and academia. We are committed to

updating these reports as our understanding of

climate-related risks and resilience continues

to develop.

The Group has also published its Board-

approved business plan for the RIIO-ED2

period, from 2023 to 2028, titled ‘Our Plan to

Lead the North West to Net Zero: 2023-2028’.

This plan sets out our commitment to develop

our network to enable customers to adopt low

carbon technologies.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Non-financial and sustainability

information Statement (continued)

Governance

This section describes the governance

arrangements of the Group in relation to

assessing and managing climate-related risks

and opportunities, in accordance with s414CB

(a).

The Group’s Board has overall responsibility

for the alignment of strategy and risk in all

areas, including climate-related matters. The

Board has delegated oversight of matters

relating to risk to the Audit and Risk Committee

(see pages 53 to 54), and matters relating to

environmental strategy to the Safety, Health

and Environment Committee (see page 58).

The Chief Executive Officer (CEO) and

Executive Leadership Team (ELT) also have

responsibilities in relation to strategy and risk.

More information on the governance of risk

can be found on pages 39 to 40 of the Risk

Management section.

Once potential projects to improve the

resilience of the network or facilitate growth in

the use of low carbon technologies have been

identified, they are subject to a well-defined

and documented approval process, including a

Capital Investment Committee (CIC) chaired by

the Chief Financial Officer (CFO). All

investment decisions, whether directly

climate-related or not, go through this process

and the potential climate impact of each

project is reviewed as part of the assessment.

The Group is also subject to scrutiny from the

regulator, Ofgem, with a range of conditions

under the Electricity Distribution Licence that

are required to be met.

Risk Management

This section describes how the Group

identifies, assesses and manages climate-

related risks and opportunities, including how

those processes are integrated into the overall

risk management process, in accordance with

s414CB (b) and (c).

The Group maintains directorate level risk

registers and a corporate level risk register.

These registers are reviewed quarterly, with

any risks assessed as requiring management by

ELT moved from the directorate level registers

to the corporate level register. More

information on the corporate risk register and

the risk management framework can be found

on pages 37 to 43 of the Risk Management

section. The identification and management of

climate-related risks is fully integrated into this

process.

Once identified, climate-related risks are

assessed with reference to a range of weather

scenarios and the specifications of the assets

on our network to identify areas of particular

risk.

Climate-related risks and opportunities

This section provides a description of the

principal climate-related risks and

opportunities arising in connection with the

Group’s operations, along with the time

periods against which they have been

assessed, in accordance with s414CB (d) and

(e).

As referred to above, in this first year of

reporting, the main focus has been on the

adaptation of the network to ensure it

continues to perform effectively and efficiently

as climate changes. If we fail to address these

risks, the consequence could be increasingly

frequent and prolonged interruptions to

supply.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Non-financial and sustainability information Statement (continued)

Physical Risk: Increased frequency of extreme weather events and changing long-term climate trends

Time horizon: short to long term

Likelihood: High

Potential Impact

Response/ mitigation

The Group has already been affected by the

increasing frequency of severe weather

events that have resulted from climate

change. In the year-ended 31 March 2024,

there were 13 named storms each of which

resulted in damage to the network and

interruption of supply for customers.

Storms have caused flooding in our

substations and wind damage to our

network, either directly or by blowing trees,

branches or other debris into our overhead

lines.

In addition to the increased prevalence of

storms, the Group has identified the

increased rate of vegetation growth as a risk

to the performance of the network.

The Group has not identified a credible

scenario where high temperatures would

stop the network performing.

Our strategy includes an action plan with the aim of

increasing the resilience of the network. The action

plan is reviewed each year by our Environment and

Sustainability Advisory Panel, a stakeholder led group.

We included resilience funding in our RIIO-ED2

submission to support this action plan.

As the flooding risk is viewed as immediate, we have

implemented a programme to protect all our major

substations against 1-in-1,000 year flood risk.

We anticipate that whilst the performance of some of

our assets will deteriorate as the climate changes, this

will be gradual and managed as part of our network

investment programme. In assessing the risks to the

network, we have used a range of UKCP09 and UKCP18

climate projections that look to the end of the century

to assess the replacement and refurbishment

requirements for the assets on our network.

Transition Risk: Net Zero transition and the uncertainty in the extent of electricity demand growth

Time horizon: medium to long term

Likelihood: Moderate

Potential Impact

Response/ mitigation

There is a risk of not meeting the

accelerated demand on the network

resulting from the uptake of low carbon

technologies driven by the political agenda

and the unpredictability of consumer

behaviour.

If the Group underestimates demand, there

is a risk that the distribution network may

not be sufficiently upgraded to deliver the

Net Zero targets set by the government. In

the opposite scenario where demand is

overestimated there may be a risk of

surplus assets being built at a cost to the

consumer where those assets may have low

utilisation.

Innovation is key to the success of our organisation and

is where novel techniques and potential solutions,

whether they be technological or commercial, are

analysed, developed, trialled and ultimately

transformed into practical solutions to deliver a better,

zero carbon service for our customers; improve

network performance and safety; and deliver ever

more efficient ways of working.

At the core of our innovation strategy is delivering

value to customers through maximising the use of

existing assets and offering new services and choice for

the future. We are generating value for customers now

by deploying proven technology providing innovative

solutions to real problems.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Non-financial and sustainability information Statement (continued)

Transition Opportunity: Increased demand for electricity in response to decarbonisation will open

new markets and will create opportunities to invest in the network.

Time horizon: short to long term

Likelihood: High

Potential Impact

Response/ mitigation

Growth in electricity demand to support the Net

Zero plans for the local and national economy

will create opportunities for the Group to invest

further in the existing network, to upgrade its

assets and to explore new markets. Investment

in the network will increase the Regulated Asset

Value (RAV), allowing us to earn higher returns

under the regulatory framework.

Business model and strategy

This section outlines the resilience of the

Company’s business model and strategy,

taking into consideration different climate-

related scenarios, in accordance with s414CB

(f).

The Company has published its ‘Climate

Resilience Strategy’ (see the Introduction and

overview section above). This strategy

includes an action plan aimed at increasing the

resilience of the network and is reviewed

annually. The RIIO-ED2 submission included an

element for resilience funding to support this

action plan.

An assessment of the resilience of the strategy

has been undertaken using a range of

scenarios. We have not identified any credible

scenario that would force us to change our

business model or our strategy. We do not

expect climate change to have a significant

impact on our business model, as the regulated

electricity distribution network operator in the

North West of England.

Metrics and targets

This section refers to the targets and key

performance indicators (KPIs) used by the

Company to manage climate-related risks and

to realise climate-related opportunities, in

accordance with s414CB (g) and (h).

In order to support the Net Zero transition of

the UK economy by 2050 at an affordable cost

we expect a number of targets to be achieved

in term of innovation and investment in the

network to increase capacity.

Environmental protection continues to be one

of our core values, and we remain committed

to achieving the highest possible standards of

environmental performance. The year ended

31 March 2024 saw a slight increase in our

carbon emissions (see page 11), despite the

various carbon reduction activities undertaken

by the Group.

This increase was primarily impacted by the

number of named storms in the year and the

associated increase in generator use to

maintain supply and protect vulnerable

customers, especially in the more remote

areas of our network. Opportunities to reduce

our carbon footprint will continue to be

implemented to continue the carbon reduction

trajectory of recent years (see page 22).

We minimise emissions and spills, and are

investing to remove potentially damaging

equipment, and to enhance the environment

by undergrounding overhead cables.

Further information on the environmental

performance can be found on pages 10 to 11.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Section 172 Statement

Introduction

Throughout this Annual Report, we illustrate

how the Board recognises the broader context

in which the Company operates. This extends

to considering things such as: the long-term

consequences of decisions, the interests of our

employees, fostering strong relationships with

customers and other stakeholders, the impact

of our activities on our communities and

environment, maintaining a reputation for

high standards of business and the need to act

fairly as between our shareholders.

This Statement provides specific examples of

how the Company acknowledges these wider

considerations in its approach to making

decisions.

Statement by the directors in performance of

their statutory duties in accordance with s172

Companies Act 2006

The Board of Directors of Electricity North

West Limited consider, both individually and

together, that they have acted in a way they

consider in good faith would be most likely to

promote the success of the Company for the

benefit of its members as a whole (having

regard to the stakeholders and matters set out

in s172(1)(a-f) of the Act) in decisions taken

during the year ended 31 March 2024.

Long term decision-making

Our business is all about the long-term, to

create the right electricity infrastructure for

the world of tomorrow. We are very aware

that what we do now will have an impact in the

future. Given that context, we pick out some

examples of how that longer term thinking has

influenced our decision making.

Transition into the RIIO-ED2 price control

period

The Board played a key role in the

development and conclusion of our RIIO-ED2

price control for the five year regulatory period

starting 1 April 2023 and then supporting and

monitoring preparedness and delivery during

the first year of the new period.

We recognised the crucial importance of

delivering against targets and milestones to

allow the business to deliver its ambitious

plans, both up to 2028 and beyond. At all

times, the Board look to balance the needs of

all its stakeholders and recognised the

Company’s role in enabling the significant

changes required by long-term goals such as

Net Zero. Further information is contained in

the Chairman’s Statement.

Supply chain continuity

Like all businesses, we continue to feel the

impact of pressures on our supply chains and

resources caused by global events such as the

war in Ukraine. In response, we have ensured

that we take the necessary actions and

maintain sufficient stock to mitigate these

challenges. Whilst this can increase related

costs and can accelerate the timing of incurring

those costs, these decisions have meant that

we have been able to continue to undertake

our operations and investment programmes

without disruption.

Our people

As directors, we are always aware of the

importance and efforts of our people. We

consider them in everything we do. This is

discussed further in the People section of the

Strategic Report on page 14 to 15.

Safety

The safety of our people and the public is our

highest priority. With the assistance of a

dedicated Board Committee (see page 58), we

continually monitor safety performance and

safety culture, including through a tailored set

of performance measures and via regular

engagement on safety with our people through

colleague surveys.

Diversity and inclusion

As explained in more detail in the People

section of the Strategic Report on page 14 to

15, we are constantly striving to ensure that we

create a sense of belonging for our colleagues

and truly reflect the communities we serve

through our diversity and inclusion strategy.

The Board regularly discusses the progress of

our strategy and initiatives in this area.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Section 172 Statement (continued)

Employee engagement

We are proud to maintain Investors in People

certification, recognising our efforts to

becoming an employer of choice in the North

West. We continue to work with Investors in

People to seek opportunities to continually

improve our colleagues’ experiences of

working at ENWL.

Annual colleague climate surveys are

undertaken to measure engagement and levels

of agreement with the Company’s identified

climate priorities. The results from the survey

and management approach to improving the

climate are discussed further in the People

section of the Strategic Report on page 14 to

15.

We recognise the value that trade unions bring

to our organisation and work closely with them

on key issues. This supplements wider

engagement activities that we undertake to

involve and inform colleagues in what is

happening across the organisation.

Future skills

We recognise the importance of investing in

our people to ensure that we develop existing

and future skills, behaviours and capabilities

across the organisation. Information on

training courses delivered in the year is

included in the Strategic Report on page 25.

Stakeholder relationships

Our relationships with stakeholders are

discussed extensively throughout this Annual

Report with more detailed information in the

Corporate and Social Responsibility section of

the Strategic Report on pages 17 to 18.

Customer service focus

Delivering excellent customer service is part of

our ‘licence to operate’ and an area that the

Board monitors closely to ensure our service

levels continuously improve. Providing

additional support to electricity users in

vulnerable circumstances and fuel poverty is

core to our customer strategy.

Further information on Customers is contained

on pages 13-14 of the Strategic Report.

Shareholders

As highlighted in our Corporate Governance

Report (see page 45 to 47), our business

benefits from the involvement of our

shareholders; not least, due to their

representation on the Board and through the

workshops and other meetings in which they

participate.

Impact of our operations

Our Purpose “Together we have the energy to

transform our communities” reflects the

essential role we play in the North West and in

the lives of our customers, acknowledging how

our role is changing alongside our customers’

needs.

Throughout the Annual Report, we discuss the

impact of our operations on our wider

communities, in particular by supporting

customers in vulnerable circumstances.

Leading the transition to Net Zero

The Net Zero transition will result in very

significant increases in network demand. As

the region’s electricity network operator, we

have a vital role to play, providing the capacity

to allow customers to adopt low carbon

technologies, at a price that is affordable.

Further information, including approach to the

decarbonisation of our own operations is

discussed in the Environment section of the

Strategic Report on pages 10 to 11.

The Board is very aware of its stewardship role

and the importance of protecting the North

West’s natural environment. We have put

these considerations at the heart of our

delivery plans for the RIIO-ED2 period and

beyond. Further information is contained in

our Corporate and Social Responsibility

statement on pages 16 to 18.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Section 172 Statement (continued)

Ethical business conduct

We expect the highest standards of conduct in

our business. This extends beyond our

Company and its people to all organisations

who work with us. During the year, the Audit

and Risk Committee in particular has overseen

the implementation of a number of new

policies and monitored ongoing compliance

with relevant legal and regulatory

requirements.

Supplier Compliance

As a business, we recognise that our customers

expect us to check the credentials of the

suppliers who work on our behalf. This is not

just about confirming that we select the right

contractors to do a given job, it is also about

making sure that the people employed by

them have completed the necessary checks to

work with us and our customers. We are now

working under a refreshed supplier vetting

processes and ongoing compliance

procedures.

Further information, including our

Whistleblowing policy and procedures and

Code of Conduct are discussed in the Anti-

corruption and anti-bribery section of the

Strategic Report on page 26.

Workforce composition and gender diversity

Information on the composition of the

workforce at the year end is summarised

below:

Turnover

2024 – 163 leavers (2023: 161 leavers)

Training courses delivered

2024 – 1,171 (2023: 851)

Training course attendee sessions

2024 – 19,132

(2023: 25,789)

These figures include e-learning courses,

operational and non-operational training. The

decrease is due to smaller number of refresher

training required in 2024.

Workforce

(Male/ Female)

2024

Number

2023

Number

Total employees

1,602/ 541

(75%/25%)

1,553/523

(75%/25%)

Senior managers

32/ 14

(70%/30%)

34/ 12

(74%/26%)

Executive leadership

team

6/ 2

(75%/25%)

5/ 2

(71%/29%)

Non-Executive

Directors

7/ 2

(78%/22%)

7/2

(78%/22%)

The Executive leadership team figure includes two

Executive Directors.

Respect for Human Rights

The Group operates exclusively in the UK and,

as such, is subject to the European Convention

on Human Rights, the UK Human Rights Act

1998 and the Modern Slavery Act 2015. The

Group seeks to anticipate, prevent and mitigate

any potential negative human rights impacts as

well as enhance positive impacts through

policies and procedures, in particular, regarding

employment, equality and diversity, treating

customers fairly and information security.

The Group is a founding partner of the Utilities

National Work Group on Modern Slavery and

we achieved our Forces Friendly silver award

this year.; the Modern Slavery Act Compliance

Statement is available on the website:

www.enwl.co.uk/misc/modern-slavery-act-

compliance-statement.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Section 172 Statement (continued)

Anti-corruption and anti-bribery

At ENWL, we are proud of our strong

commitment to high ethical standards in the

way that we work. The business takes a zero-

tolerance approach to bribery and corruption,

and is committed to acting professionally,

fairly and with integrity in all our business

dealings and relationships wherever we

operate, implementing and enforcing effective

systems to counter bribery. It is important that

our regulators and stakeholders have absolute

confidence in the arrangements and integrity

of the organisation.

The Company operates a number of policies

governing anti-bribery and anti-corruption

matters: Anti-Corruption and Bribery Policy,

Corporate Hospitality & Gifts Policy and

Conflict of Interest Policy. During 2022, we

also launched a revised ‘Ethics in our Business’

document. This includes our Ethical

Framework, setting out our expectations for all

those working with us, and a decision making

tool to assist colleagues if faced with an ethical

dilemma. Alongside this, we launched an

updated Speak Up (Whistleblowing) policy,

providing colleagues with a number of

channels to raise and escalate any concerns

they may have. An e-learning package was also

made available for all colleagues during the

year to increase understanding and awareness

of these important policies.

To support our Speak Up policy, we have in

place a confidential independent reporting

line, provided by Safecall.

During 2023, we launched our revised

Competition Law e-learning module. The aim

of this module was to familiarise our

colleagues with key aspects of competition law

as they apply to our business activities.

All of our corporate ethics policies apply to all

employees and officers of ENWL and form part

of our Code of Conduct. Other individuals

performing functions for the Company, such as

agency workers and contractors, are also

required to adhere to our policies.

Environment

Environmental protection continues to be one

of our core values, and we remain committed

to achieving the highest possible standards of

environmental performance. The year ended

31 March 2024 saw a slight increase in our

carbon emissions (see page 11), despite the

various carbon reduction activities undertaken

by the Group. This increase was primarily

impacted by the number of named storms in

the year and the associated increase in

generator use to maintain supply and protect

vulnerable customers, especially in the more

remote areas of our network. Opportunities to

reduce our carbon footprint will continue to be

implemented to continue the carbon reduction

trajectory of recent years (see page 22).

We minimise emissions and spills, and are

investing to remove potentially damaging

equipment, and to enhance the environment

by undergrounding overhead cables.

Further information on the environmental

performance can be found on pages 10 to 11.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Key Performance Indicators

KPI

Definition and comment

Performance

Safety

Lost time

incident

frequency

rate

Definition: The total number of reportable

incidents in the year divided by the number of

hours worked in that year (by employees and

contractors), multiplied by 100,000 hours.

Performance: Reflecting the increased focus on

safety, the Company saw a reduction in lost time

incidents in the year. There were two lost time

incidents in the year, with the corresponding lost

time incident frequency rate of 0.023 (2023: 0.035).

0.023

Customer

Overall

customer

satisfaction

Definition: The overall customer satisfaction score

is a composite score from Ofgem surveys that

assesses levels of customer satisfaction for

connections quotations and delivery, interruptions

and general enquiries.

Performance: Overall satisfaction increased to

92.0% for the year, up from 89.4% in the prior year.

The score for the year was the highest in six years,

and reflecting the ongoing focus on improvements

to customer service.

92.0%

Reliability

Customer

interrup-

tions (CIs)

Definition: CIs represent the number of

interruptions our customers experience. It is

calculated by taking the total number of customers

affected divided by the total number of customers

connected to the network, multiplied by 100. It

excludes interruptions during exceptional events,

although there were none of these in the year.

Performance: The result of 26.2 for the year

outperforms the Ofgem target of 29.9 and

represents the Company’s second best ever

performance.

26.2 CIs

Customer

minutes lost

(CMLs)

Definition: CMLs represent the time customers are

without power in the event of an interruption. It is

calculated by taking the sum of the customer

minutes lost for all restoration stages for all

incidents, excluding exceptional events, and

dividing by the number of connected customers.

Performance: The result of 26.8 for the year

outperforms the Ofgem target of 27.5 and

represents the Company’s best ever year.

26.8 CMLs

The year ended 31 March 2024 figure is yet to be audited by Ofgem.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Key Performance Indicators (continued)

KPI

Definition and comment

Performance

People

Colleague

engagement

Definition: Colleague engagement is measured

via an employee survey which, through a series

of questions, provides details of overall

colleague engagement and how colleagues feel

about the ‘working climate’.

Performance: Overall colleague engagement

achieved an agreement score of 82.8% for the

year, a 4.1% increase from 78.7% last year, and

the highest in the last five years.

82.8% Agreement score

Sustainability

Carbon

footprint

(excluding

electrical

losses)

Definition: Carbon footprint measures the

impact of our operations on the environment

and is calculated in line with Ofgem guidance.

The calculation excludes electrical losses arising

from the operation of the network which cannot

be directly controlled or accurately measured.

Performance: There was a slight increase in the

carbon footprint over the year despite the

various carbon reduction activities undertaken,

primarily due to the named storms in the year

and the associated increase in generator use to

maintain supply and protect vulnerable

customers, especially in the more remote areas

of our network.

13,999 tCO

Cost efficiency

Total

Expenditure

(Totex)

Definition: Totex is a key financial measure for

the business. It is a regulatory abbreviation

which stands for total expenditure. It includes

the money we spend on running our business

day-to-day, and the amount we invest in new

assets through our network investment

programme. We aim to deliver efficiencies in

Totex which we share with our customers and

which reduces customers’ bills.

Performance: Totex for the year ending 31

March 2024 was £359.4m compared to an

equivalent Ofgem allowance of £465.8m in

outturn prices largely due to phasing of planned

network investment programmes. Expenditure

was higher than the previous year due to

increased operational and support costs and

higher investment in operational assets.

£359.4m

Totex is calculated on a regulatory basis and reported to Ofgem annually on 31 July. For management reporting purposes an approximate

calculation of Totex is prepared to track performance. The final regulatory Totex figure may differ from this approximation when detailed

cost allocations are performed. The numbers for earlier years have been updated to reflect the annual submission to Ofgem.

359.4

334.5

269.8

241.5

252.6

2024

2023

2022

2021

2020

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Key Performance Indicators (continued)

KPI

Definition and comment

Performance

Financial KPIs

Revenue

(excluding

collection of

Supplier of

Last Resort

(SoLR levies)

Definition: Revenue is determined by Ofgem to allow

recovery of efficient costs to maintain and improve

the network, as determined as part of the price

control process. Actual revenue can vary as demand

over the network varies against forecast. Additional

revenue is generated through charges for new

connections, along with incentive revenues earned

for delivering improved performance.

As a result of SoLR claims approved by Ofgem, our

allowed revenue for the year ended 31 March 2024

was £22.0m (2023: £79.9m) higher than it would

otherwise have been, with the collection of this levy,

which is immediately paid to suppliers. Revenue in

the KPI table has been presented excluding the value

of SoLR levies collected.

Performance: Revenues have increased from the

prior year, primarily due to increases in Distribution

Use of System (DUoS) revenue. This reflects inflation

and other adjustments to allowed revenue including

the impact from incentive revenues previously

earned. The revenue under recovery for the year was

£43.8m (2023: £9.4m over recovery) compared to

allowed revenues, with the under recovery reflecting

reduction in volume consumption in the year. This

will be corrected through adjustments in pricing in

future periods.

£576.1m

Profit before

tax and fair

value

movements

(“PBTFV”)

Definition: The PBTFV of £59.5m is the profit before

tax of £161.8m (2023: £195.0m) after deducting the

£102.3m fair value gain (2023: £125.2m), per Note 9.

Performance: PBTFV has decreased to £59.5m (2023:

£69.8m), mainly a result of the accretion paid on

index-linked swaps (see Note 9) and an increase in

employee and operating costs. PBTFV excludes the

significant capital investment that we make in the

network each year. Financial performance is better

understood through comparing Totex with adjusted

allowances.

£59.5m

Capital

expenditure

Definition: This represents investment in the network

to maintain its reliability and resilience for future

customers. The figure includes total additions to

property, plant and equipment and software.

Performance: We continue to invest to improve the

capacity and reliability of the network. Investment

increased this year as a number of major investment

programmes were completed.

£290.9m

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Key Performance Indicators (continued)

KPI

Definition and comment

Performance

Financial KPIs

RAV gearing

Definition: RAV gearing is measured as

borrowings at nominal value, plus inflation-linked

debt accretion where applicable, net of cash and

short-term deposits divided by the estimated RAV

of £2,684.6m at March 2024 (2023: £2,481.8m),

using the definition in our Financing Agreements.

Performance: The RAV gearing is in line with

target and under the Ofgem guided level of 65%.

54.2%

Net debt

Definition: Net debt includes the total

borrowings, net of cash and cash equivalents and

money market deposits, as per Note 35.

Performance: The £96.6m increase in net debt is

due to the combined effect of net cash outflows of

£68.3m and the indexation of inflation-linked debt

of £31.0m. (See page 33)

£1,380.2m

Interest

cover

Definition: Interest cover is the number of times

the net interest expense, adjusted for indexation

and capitalisation of borrowing costs, is covered

by operating profit from continuing operations, as

defined by the Financing Agreements.

Performance: Interest cover has increased

primarily due to the increased operating profit

from £195.5m to £229.1m.

4.6 times

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Financial Performance

Overall performance reporting

Revenues are derived through the allowed

revenues set for the regulatory period,

adjusted for a number of factors including

under/over collection of revenues in earlier

years, movements in inflation and

performance incentives earned. Under the

RIIO framework, revenues are the cash funding

mechanism for the business, including current

investment requirements as well as the

repayment of past investments, rather than

the simple recognition of income resulting

from activities that financial statements

usually reflect.

Consequently, operating profit presented in

these financial statements represents the

combination of revenues that are only partly

related to actual activity during the year, less

those operating costs actually incurred, but

excluding capital expenditure.

Whilst the statutory measure that is most

closely aligned to the return to shareholders is

cash flow before financing activities (see the

Statement of Cash Flows), this has a limited

correlation to actual economic returns, as a

result of the factors noted above.

Financial reporting measures

Revenue

Revenue has increased to £598.1m (2023:

£594.7m) over the year. The increase in

Distribution Use of System (DUoS) revenue

reflects the increase in demand, inflation and

allowed revenue adjustments relating to the

under recovery of revenue in previous years.

Profit before tax and fair value movements compromises

profit before tax of £161.8m (2023: £195.0m profit) less fair

value gains of £102.3m (2023: fair value gains of £125.2m)

presented in Note 9.

Allowed revenue is recovered against an

estimated level of electricity demand across

the network. Given the difficulty of predicting

this demand, there is either an over or an

under recovery against planned revenue each

year. For the year ended 31 March 2024, there

was an under recovery of £43.8m (2023: £9.4m

under recovery), reflecting variability against

forecast consumption volumes. This under

recovery will be corrected through

adjustments to revenue to be received in two

years’ time, in accordance with Ofgem’s price

setting mechanism.

As a result of SoLR claims approved by Ofgem,

the allowed revenue for the year ended 31

March 2024 was £22.0m higher (2023:

£79.9m) than it would otherwise have been,

due to the collection of this levy. However,

immediately at the point the levy becomes

billable, the entire value of the levy is paid over

to suppliers, with networks making no profit

from their role in the process.

Profit before tax and fair value movements

(PBTFV) has decreased to £59.5m (2023:

£69.8m). Whilst operating profit and finance

income were £33.6m and £16.8m higher,

finance costs (excluding fair value) were also

higher, primarily due to the higher accretion

payment on index-linked swaps £87.0m (2023:

£20.1m) (Note 9).

Profit or loss before tax and fair value

movements provides a closer indication of

underlying performance due to the exclusion

of fair value movements on derivatives, which

do not directly relate to the underlying

operations of the business.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Financial Performance (continued)

Taxation

Corporation tax is calculated at 25% (2023:

19%) of the estimated assessable profit for the

year.

Deferred tax is calculated using the rate at

which timing differences are expected to

reverse. Accordingly, the deferred tax has

been calculated on the basis that they will

reverse in future at the 25% (2023: 25%) rate.

The overall taxation charge for the year has

decreased from £49.5m in 2023 to £41.7m in

2024. There was an impact increasing tax

charges in 2023 that resulted from revaluing

the deferred tax liability at 25% to reflect the

change in rate of corporation tax from 19%.

Property, plant and equipment and software

The Group’s business is asset intensive. The

Group allocates significant financial resources

to the renewal of its network in order to

maintain services, improve reliability and

customer service, and to meet the changing

demands of the UK energy sector.

The total original cost of the Group’s property,

plant and equipment at 31 March 2024 was

£6,147.5m (2023: £5,873.3m), with a net book

value of £3,785.8m (2023: £3,638.5m). In the

year ended 31 March 2024, the Group invested

£279.8m (2023: £252.9m) in property, plant

and equipment in a large number of projects to

reinforce and improve the network, and

£11.1m (2023: £10.5m) in IT systems.

New investment is financed through a

combination of operating cash flows and debt

funding.

Cash flow before financing activities

Net cash inflow before financing activities in

the year was £255.8m (2023: £290.1m

outflow). The significant inflow was a result of

the £305.7m investment of surplus cash in

money market deposits which was brought

into cash and used to repay external

borrowings.

Net debt

At 31 March 2024, the net debt was £1,380.2m

(2023: £1,283.6m), see Note 35 for more

information. The £96.6m increase was

primarily due to the £68.3m net cash outflow

and the £31.0m indexation of inflation-linked

debt.

Included in debt is an £109.8m loan from the

parent company North West Electricity

Networks plc (NWEN plc), due to mature in

March 2028 (2023: £96.5m due to mature in

March 2028), a £299.0m loan from a group

company ENW Finance plc, maturing in July

2030 (2023: £298.8m, maturing in July 2030),

plus a £422.9m loan from ENW Finance plc,

maturing in November 2032 (2023: £422.8m).

Of the external debt, £9.1m (2023: £221.7m) is

due to be repaid within the next year under the

European Investment Bank (EIB) loans, and

£1.8m (2023: £1.6m) of lease liabilities.

All other borrowings are repayable after more

than one year and include bonds with long-

term maturities of £656.9m (2023: £646.4m)

and bank loans of £67.4m (2023: £72.8m).

Note 20 provides more details on the

borrowings.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Financial Performance (continued)

Treasury policy and operations

The Group’s treasury function operates under

Board-approved policies without acting as a

profit centre or engaging in speculative trading

activities. Its primary objectives are to secure

adequate funding in accordance with the

treasury policy and maintain targeted

headroom on key financial ratios.

Long-term borrowings are mainly at fixed rates

that provide certainty of future cash flows, or

are indexed to inflation (RPI) to match the

inflation-linked accretion to the Regulatory

Asset Value (RAV) (Ofgem have now changed

this to a Consumer Prices Index including

owner occupiers’ housing costs (CPIH) basis).

The Group also holds some floating rate debt.

Derivative instruments are used to convert a

portion of the fixed rates to RPI-linked cash

flows, in order to better match the Ofgem debt

allowance structure (noting that Ofgem have

now changed this to a CPIH basis).

The proportion of post-hedging borrowings at

fixed, floating and index-linked rates of

interest is maintained in line with target levels

set in the Treasury Policy and is monitored by

the Board.

Cash flows are in sterling, other than sundry

purchases of plant denominated in foreign

currencies and some assets of the defined

benefit pension scheme managed by the

pension scheme investment managers. The

Group has no material exposure to foreign

currency exchange movements.

Liquidity

The Group’s funding position continues to be

strong, through focussed management of

liquidity and working capital. Budgets for the

year ending 31 March 2025, forecasts to the

end of the current regulatory period in 2028

and longer-term forecasts to 2048 are used to

assess the liquidity needs of the Group. These

forecasts demonstrate the availability of

sufficient liquidity, and headroom against all

financial compliance ratios.

Short-term liquidity requirements are met

from operating cash flows, cash balances,

short-term deposits and committed undrawn

borrowing facilities. Utilisation of undrawn

facilities is with reference to RAV gearing

restrictions; actual and forecast RAV gearing is

monitored by the Board.

At 31 March 2024, cash balances were

£189.8m (2023: £173.8m), money market

deposits greater than three months were £nil

(2023: £305.7m) and unutilised committed

facilities were £50.0m (2023: £50.0m).

Where a liquidity need cannot be met from

existing resources, for example refinancing

existing debt or demand for additional

borrowing, the Group’s treasury function

starts the process of raising new debt at least

12 months ahead of the requirement. The

Group’s long-term debt has a range of

maturities to avoid a concentration of

refinancing risk.

In February 2024, the £135m index-linked EIB

loan was repaid at maturity; the indexed

amount repaid was £223.9m. Additionally,

scheduled repayments of £9.0m were made

against the other two EIB loans.

At 31 March 2024, the £50m revolving credit

facility (RCF), which was nil drawn, was due to

expire in December 2024. In April 2024, this

was replaced with a new £250m RCF, expiring

in April 2027.

There are no further re-financing obligations

due in the next 12 months.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Financial Performance (continued)

Credit rating agencies

The Group issues debt in the public bond

markets and maintains credit ratings with

leading credit rating agencies. During the year,

the credit ratings were formally reviewed and

affirmed.

At 31 March 2024, ENWL was rated BBB+ with

negative outlook by Standard and Poor’s

(“S&P”), Baa1 with stable outlook by Moody’s

Investors Service (“Moody’s”) and BBB+ with

negative outlook by Fitch Ratings (“Fitch”).

The short-term debt ratings were A-2 and F2

with S&P and Fitch respectively.

Further details are available to credit investors

in the Financial Investor Relations section of

the Company’s website www.enwl.co.uk.

Derivatives

The Group uses two main groups of derivatives

to economically hedge exposure to fluctuations

in market rates over the medium to long-term;

interest rates swaps to manage interest rate risk

and inflation swaps to convert fixed rate debt to

index-linked borrowing in order to better match

the Ofgem debt allowance methodology. All

derivatives relate directly to underlying debt. At

31 March 2023 and 2024 there were no formal

hedge accounting relationships in the Group.

Fair values

The derivatives are accounted for at fair value

through profit or loss (“FVTPL”).

These fair value movements are non-cash and

will reverse over the life of the derivative but

can be significant and result in material

volatility in profit or loss. In the current year,

net fair value gains of £102.3m have been

recognised (2023: gains of £125.2m), primarily

driven by the £87.0m scheduled accretion

payment in July 2023 (see Note 9) and

significant changes in market expectations of

future interest and inflation rates.

Defined benefit pension

At 31 March 2024, the Group’s defined benefit

pension scheme had a net surplus, calculated

under IAS19 Employee Benefits, of £39.0m

(2023: £42.6m), resulting in a re-measurement

loss of £6.8m (2023: gain of £9.4m) booked

directly to other comprehensive income.

The main reasons for the decrease in the

accounting surplus were market movements

reducing the value of the scheme assets in

excess of the reduction in the value of the

defined benefit obligations which was mostly

impacted by changes in the demographic

assumptions.

The most recent triennial funding valuation of

the scheme was carried out as at 31 March

2022 and identified a shortfall of £19.4m

against the Pension Trustee Board’s statutory

funding objective. In addition to the timing of

the two valuations, the contributions made in

the period and the return on assets, the main

difference is due to the different assumptions

used by IAS19 and the funding valuation.

In the event of underfunding, the Group must

agree a deficit recovery plan with the Trustee

Board within statutory deadlines.

Dividends and dividend policy

The Group’s dividend policy is to distribute the

maximum amount of available cash, whilst

maintaining its targeted gearing level, in each

financial year at semi-annual intervals, with

reference to the forecast business needs, the

Group’s treasury policy on liquidity, financing

restrictions, applicable law and the Company’s

licence obligations.

During the year, the Company paid dividends

totalling £30.4m (2023: £23.0m). At the Board

meeting in May 2024, the directors proposed a

final dividend of £45.4m for the year ended 31

March 2024 (Note 31).

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Financial Performance (continued)

Going concern

When considering whether to continue to

adopt the going concern basis in preparing

these financial statements, the Directors have

taken into account a number of factors,

including the following:

• The Company’s electricity distribution

licence includes the obligation in standard

licence condition 40 to maintain an

investment grade issuer credit rating,

which has been met.

• Under section 3A of the Electricity Act

1989, GEMA has a duty, in carrying out its

functions, to have regard to the need to

secure that licence holders are able to

finance their activities, which are the

subject of obligations imposed by or under

Part 1 of the Electricity Act 1989 or the

Utilities Act 2000.

• Management has prepared, and the

Directors have reviewed and approved

Group budgets for the year ending 31

March 2025. These budgets include profit

projections and cash flow forecasts,

including covenant compliance

considerations. Inherent in forecasting is

an element of uncertainty and key

sensitivities are considered when budgets

are approved, including possible changes

in inflation and under recoveries of

allowed revenue as plausible downside

scenarios.

• Management has prepared forecasts

covering the full regulatory period out to

2028, based on Ofgem’s Final

Determination for RIIO-ED2. Forecasts

demonstrate that there is sufficient

headroom on key covenants and that there

are sufficient financial resources available

to the Group within the forecast period.

• Management has prepared liquidity

forecasts on a monthly basis, and

performed inflation sensitivities on

forecasts to July 2025, being at least 12

months from the date of approval of the

financial statements.

• Short-term liquidity requirements are

forecast to be met from the Group’s

operating cash flows and short-term

deposit balances. At 31 March 2024, there

was £50.0m of committed undrawn

borrowing facilities; these were replaced

with a new larger facility in April 2024

(Note 20). As a result, £250.0m of

committed undrawn facilities are available

for at least 12 months from the date of

approval of these financial statements.

• Though the Company is largely financed by

long-term external funding, any

uncommitted financing has been removed

from the assessment.

• Management prepared and considered

key sensitivities to the business plan model

when assessing going concern. These

sensitivities include removal of incentive

income, macro-economic factors including

inflation at +/-1% and DUoS revenue under

collection.

• External factors are also considered such

as, cost of living and high energy prices,

interest rates, Ukraine conflict and impact

on supply chain, and energy prices and

supplier administration.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Financial Performance (continued)

Going concern (continued)

The shareholders of North West Electricity

Networks (Jersey) Limited (“NWEN (Jersey)”),

the Company’s ultimate parent undertaking

(“ultimate parent”), are currently undertaking

a Strategic Review of their investment in

NWEN (Jersey) Group which includes ENWL,

following the conclusion of the ED1 price

control period in which ENWL delivered the

best operational performance of any UK DNO

group. It is possible that this Strategic review

will result in the sale by NWEN (Jersey)’s

shareholders of some or all of the share capital

of the ultimate parent.

Whether or not there is a sale, the Strategic

Review is expected to strengthen the

operational and financial position of the NWEN

(Jersey) Group over future years from its

already strong level, to support and optimise

the delivery of Net Zero for our customers in

the North West. The directors have however

considered the impact of the ongoing Strategic

Review on the appropriateness of the Going

Concern assumption for the Group and

Company. The Directors have considered the

two potential outcomes of the Strategic

Review:

• In the event there is no sale, the Directors

are satisfied that the going concern basis of

preparation remains appropriate, as the

Group and Company have adequate

resources to continue in operational

existence and meet their obligations as they

fall due for at least the next 12 months from

the date of approval of these financial

statements.

• In the event there is a sale, any potential

NWEN (Jersey) shareholders are expected

to continue to run the NWEN (Jersey)

Group, including the Company, as a going

concern. The Directors expect that any sale

made will only take place to reputable new

shareholders, recognising the Company’s

strong liquidity and regulatory licence

protections. Any potential sale may be

scrutinised by Ofgem, CMA and other

government bodies to ensure that any new

shareholders are fit and proper to own key

infrastructure assets. The delivery of

electricity to customers in the North West is

a critical service of national importance and

such scrutiny can cover many aspects,

including national security and financial

sustainability. The regulated assets in the

Company are protected by the regulatory

licence; the regulatory licence can only be

transferred with Ofgem’s approval. In

addition, any potential new shareholders

will be expected to run the business

prudently within the financial covenants

agreed with the lenders of the Group and as

such these afford protection against

potential increases in gearing of the

business above the lock-up ratio covenants.

No additional financial support from NWEN

(Jersey) shareholders is required for the

Group and Company to continue as a going

concern, and the Directors have a

reasonable expectation that the Company

has adequate resources to continue in

operational existence for the foreseeable

future in this scenario. However, at the date

of approval of these financial statements,

the Directors do not have certainty over the

future actions and strategy of the acquirer

including their funding arrangements.

These conditions indicate the existence of a

material uncertainty which may cast a

significant doubt on the Group and

Company’s ability to continue as a going

concern. These financial statements do not

include the adjustments that would result if

the Group and Company were unable to

continue as a going concern.

Notwithstanding this uncertainty, the directors

have a reasonable expectation that the

Company and the Group have adequate

resources to continue in operational existence

and meet their obligations as they fall due for

the foreseeable future. In making this

assessment, the directors have considered the

foreseeable future to be a period of at least 12

months from the date of approval of the

financial statements, per the FRC guidelines.

Accordingly, they continue to adopt the going

concern basis in preparing the Annual Report

and Consolidated Financial Statements.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Financial Performance (continued)

Viability statement

In accordance with provision 31 of the 2018 UK

Corporate Governance Code the directors have

assessed viability over a period longer than

that required for going concern and have

chosen the period to 31 March 2027.

Whilst the Board has no reason to believe the

Group will not be viable over a longer period,

the period over which the Board considers it

possible to form a reasonable expectation as to

the Group’s longer-term viability, based on the

risk and sensitivity analysis undertaken, is the

period to 31 March 2027.

The Board has considered whether it is aware

of any specific relevant factors and notes in

particular the outcome from the final

determination for RIIO-ED2 and subsequent

Ofgem consultations and work on detailed

aspects of the regulatory settlement, including

the treatment of inflation.

The Board has considered the current

economic environment including the recent

rise in interest rates and supply chain

disruption, the political environment including

impacts from the ongoing war in Ukraine in

making the viability assessment.

In reaching its conclusion, the Board has taken

into account Ofgem’s statutory duty to secure

that companies can finance their functions and

has assumed that there will be no changes to

the regulatory framework or Government

policy that will affect the Company’s viability.

The directors have conducted a robust

assessment of the principal risks facing the

Group and believe that the Group is in a strong

position to manage these risks.

In arriving at their conclusion, the directors

have considered the Group’s forecast financial

performance and cash flow over the viability

period to 2027. Headroom to compliance

ratios over the viability period has been

considered, as has the extent to which

deviations from forecast financial performance

may impact that headroom. The directors

have considered this headroom in assessing

the Group’s long-term viability.

On the basis of this assessment, and assuming

that the principal risks are managed or

mitigated as expected, the directors have a

reasonable expectation that the Company will

continue in operation and meet its liabilities as

they fall due over the three-year period of their

assessment.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Fair, balanced & understandable

The directors have reviewed the thorough

assurance process in place within the Group

with regards to the preparation, verification

and approval of financial reports. This process

includes:

• Detailed review and appropriate

challenge from key internal Group

functions, such as Risk, Control and

Assurance, senior managers and the Chief

Financial Officer (“CFO”);

• Formal sign-offs from the business area

senior managers, the finance managers

and CFO;

• Audit and Risk Committee oversight,

involving a review of key financial

reporting judgements, review and

appropriate challenge on matters such as

any changes to material accounting

policies and practices, significant

adjustments and the going concern

assumption;

• The involvement of qualified, professional

employees with an appropriate level of

expertise and experience throughout the

business; and

• Engagement of a professional and

experienced external auditor, a

framework for full transparent disclosure

of information during the audit process

and post-audit evaluation.

As a result of these processes together with

the information and assurance provided by

the day-to-day internal control processes, the

information provided by the Executive

Leadership Team (“ELT”) of ENWL and the in-

depth reporting required by Ofgem, both the

Audit and Risk Committee of ENWL and the

Board are satisfied that the Annual Report and

Consolidated Financial Statements taken as a

whole, provide a fair, balanced and

understandable assessment of the Group’s

position at 31 March 2024.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Risk Management

The Board, CEO and ELT are responsible for the

alignment of strategy and risk, and for

maintaining a sound system of risk

management and internal controls. Our

processes and systems are always evolving

with the needs of our business and have been

developed in accordance with the FRC’s

Guidance on Risk Management, Internal

Control and Related Financial and Business

Reporting.

Our Corporate Risk Register currently details a

wide range of risks. These risks are considered

in the context of the corporate goals – Safety,

Customer, Affordability, Reliability,

Sustainability and People and monitored by a

business wide network of Risk Champions and

Co-ordinators. In addition there are risks in

relation to System and Data and Global Events

and Regulation.

The Company's approach to risk appetite goes

to the heart of achieving our Company goals.

As with any business, the achievement of our

goals necessitates a certain level of risk being

taken. The key is ensuring that such a scale of

change is managed with a good understanding

of the risks involved, in a manner consistent

with the Company strategy, and importantly

making sure that these risks are managed

within agreed risk appetites.

The Company has a framework in place to

define the appetite for risk which is reviewed

annually by the ELT and agreed upon by the

Board. The framework enables the Board to

demonstrate its risk appetite for the overall

strategic direction of the business and maps

risk appetite for each of our company goals at

a tactical and operational level.

Risks are only accepted when within the risk

appetite criteria, and when further mitigation

of the risk is not considered cost effective (or is

not possible).

Risk appetite varies in these areas, but in line

with the framework, the Company generally

operates within a 'cautious' to ‘averse’ risk

range, given that the achievement of the

stretching business plan would not be possible

without a level of measured risk taking. In

Sustainability, a 'very cautious' risk appetite is

adopted, given our desire to ensure that the

company maintains its reputation for

compliance and an ethical way of doing

business, as well as the role the Company has

in the low carbon transition.

Similarly, in relation to Customer, a 'very

cautious' risk appetite is adopted. The

company is committed to achieving all

performance standards related to customer

satisfaction and reliability.

For People, the Company recognises the value

of its people and the organisational climate in

order to deliver effectively for our customers,

so a cautious approach is adopted.

In relation to Safety, the Company adopts an

averse position, placing the highest priority on

safety in all operations. Appropriate working

practices that protect our employees,

contractors and the general public are a key

priority for the business and an important part

of ensuring that we undertake our activities

safely.

In relation to Systems and Data the Board

adopts an ‘averse’ approach for this category,

recognising the strategic importance of these

to deliver for our customers and stakeholders.

Protection of systems and data is a priority for

uninterrupted business activities.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Risk Management (continued)

The key features of the risk management system include:

• Clear risk management strategy approved by the Board.

• Risk appetite framework, approved annually by the Board, in place that forms a key driver of the

strategic business plan.

• Board oversight in identifying and understanding significant risks (and opportunities) to the

Group in achieving strategic objectives.

• Dedicated Board and Executive Committees to oversee the management of risks for the Group.

• Appropriate operational and non-operational risks being managed within a corporate risk system.

• Target risk scores are in place for corporate risks, with actions in place for risk owners to progress

towards achieving the target risk scores.

• The underpinning of the corporate register with directorate risk registers across the business

with a network of Risk Champions and Co-ordinators which enhance the business-wide

monitoring process.

Principal risks and uncertainties

In addition to the normal operating risks such as our failure to meet customer expectations, wider

global events, the cyber security threat and potential changes to the regulatory regime are considered

the most significant risks that we face currently.

Climate change has the potential to increase risks and uncertainties for us in relation to our business

resilience and our ability to meet the expectations of our customers. We continue to be actively

considering what this might mean for our own activities, as well as supporting our customers to

consider their own plans to mitigate the risks this may present.

Risk

Mitigations

Global Events

and Regulat

ion

Global Events and supply chain:

Certain aspects of ENWL’s

activities are affected by the

impact of wider global events,

including the conflict in Ukraine,

along with the measures put in

place by the UK Government in

response, and other disruptions

in the wider supply chain. Our

supply chain continues to face

challenges arising from these

events, including inflation and

economic disruption, which also

present uncertainties for the

business.

• ENWL is recognised as a Critical National Infrastructure

provider and is in regular dialogue with both the UK

Government and the Regulator to minimise the effect of

the mitigation measures on its abilities to provide an

essential service to its customers.

• ENWL has a series of existing Business Continuity and

Emergency plans. These have been further developed in

response to the events that have unfurled in recent

years.

• Control measures have been implemented to the extent

possible to minimise the potential impact of the

situation on ENWL’s activities and are monitored by

members of the ELT.

• Analysis and monitoring of supply chain risk continues to

be used to understand particular challenges facing the

business in light of events such as, continued disruption

following the invasion in Ukraine, and challenges facing

key components such as microchips.

• Forward work planning and advance ordering of

materials, such as transformers, where there are

constraints in the availability of materials or component

parts and extended delivery lead times.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Risk Management (continued)

Risk

Mitigations

Global Events

and Regulation

Regulation and compliance risk:

The Company is subject to a high

degree of political, regulatory

and legislative intervention,

which can impact both the

current RIIO-ED2 period, and

future regulatory settlements.

The legal and compliance

framework can change, leading

to additional compliance

obligations, market conditions,

and reporting requirements. A

changing political focus on the

sector can have a significant

effect on profitability or risk.

Compliance failure leading to an

adverse effect on the business.

• The Company has dedicated Regulation and Legal

departments that provide advice and guidance

regarding the interpretation of political, regulatory and

legislative change.

• There is ongoing engagement by the Company with the

Regulator and Government.

• Parliament, in framing the Electricity Act, imposed

certain duties on Ofgem/GEMA to ensure that the

networks remain financeable for the long-term benefit

of customers.

• There is regular engagement with the Board on political

and regulatory developments which may impact the

Company.

• Overall governance and control framework in place,

including established compliance routines and

accountabilities, owned by the Executive Leadership

Team and ultimately the Board.

• Specialist teams in place to ensure compliance and

assurance is carried out.

• An internal audit programme focusing on the Group’s

key risk areas, including fraud, regulatory compliance

and business processes.

Safety

Health, Safety and the

Environment:

Risk associated with unsafe

working practices, man-made or

naturally occurring hazards that

could cause harm to employees

or the wider public, or the

environment.

• Board Health, Safety and Environment Committee

oversees this area.

• Extensive policy and procedures to ensure a safe system

of work and environmental management.

• Behavioural safety training programme across all areas

of the organisation.

• Simple ‘Golden Rules’ to ensure strong safety approach

throughout the Company’s operations.

• Robust ‘lessons learned’ exercises conducted to identify

root causes when safety or environmental issues occur.

• Robust authorisation processes, policies and procedures

to control who works on the network and the activities

that they perform.

• Annual programme of audits and an inspection regime.

• Well-established hazard and safety observation

(including near miss) reporting in place.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Risk Management (continued)

Risk

Mitigations

Customer

Meeting our customers’

expectations:

Failure to meet the required

level of customer satisfaction

performance and to achieve

output deliverables, costs and

efficiencies against the

commitments made to our

customers in the RIIO-ED2

period.

• A programme of improvement activities described in

more detail on pages 13 to 14 is being co-ordinated by

the Executive Leadership Team to optimise the

Company’s position against all elements of the

customer satisfaction measure.

• Robust plans in place to achieve other commitment

targets, or outperform where possible.

• Controls in place regarding the ongoing reporting of

performance against targets.

Affordability

Financial risks:

The business is subject to

treasury, tax, inflation and

liquidity risk exposures, and

under performance of the

pension scheme investments,

market impacts and/or an

increase in the scheme

liabilities which would give rise

to higher contributions.

• A formal treasury policy is in place to manage exposure

to counterparty, liquidity and market risk, overseen by

the Audit Committee.

• A well-established monthly banking covenant

monitoring process.

• Monitoring of inflation calculations on allowances,

compared to the actual inflation suffered on treasury

instruments and operations.

• Tax risk scoring.

• Active monitoring of the pension scheme’s investments

carried out on a quarterly basis.

• The pension scheme Trustee engages professional legal,

actuarial and investment advice for all decisions taken

and regularly consults with the Company, who also

engage professional advisors.

Macro-economic factors:

Factors, such as inflation rates

(including RPI-CPIH basis risk

between inflation measures)

may impact negatively on the

business.

• Monitoring the potential exposure to fluctuating factors

through forecasts from a range of financial institutions.

• Inflation sensitivities reported quarterly through the

business valuation process.

• A significant proportion of our Group debt is RPI-linked

to provide a partial economic hedge between allowed

inflation-linked revenues and our financing costs. The

move to a CPIH basis for revenue increases the Group’s

exposures to basis risk, which is monitored.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Risk Management (continued)

Risk

Mitigations

Sustainability and Reliability

Business resilience:

Events outside of our control, for

example extreme weather or

medical emergencies, affecting

large areas, may negatively

impact the business.

• The Company has comprehensive contingency plans

for network emergencies, including key contract

resources such as mobile generators and overhead

line teams.

• Business continuity testing on a regular basis.

• Reciprocal arrangements with other network

operators.

• Maintenance of inventory levels to cover larger

events.

Programme delivery including

change programmes:

Delays in the investment

programme or major business

change activity leading to an

adverse impact on the Company,

particularly relating to customer

interruptions (CIs) and customer

minutes lost performance

(CMLs).

• Established governance controls in place to oversee

the delivery of business change.

• Processes in place to support delivery of change

programmes, management of risks and achievement

of business benefits.

• For activity impacting CI and CML performance, the

following mitigation measures are in place:

o Fault response times and team performance are

closely monitored including time to despatch

and mobilise response teams;

o Supply interruptions are planned to minimise

customer impact;

o Network automation to minimise the effect of

faults;

• Significant expenditure on routine maintenance to

reduce the causes of network interruption.

People

Developing our people:

Having an inadequately skilled

and experienced workforce to

deliver current and future

business objectives.

• Resource and succession plans are in place, which are

subject to periodic Executive and Board level review.

• Training delivered throughout the Company to ensure

employees are equipped to do their roles safely,

competently and effectively.

• Robust resourcing model is in place to meet business

needs and mitigate potential difficulty in attracting the

resources we may need across ED2 and ED3

• Extensive policies are in place regarding ethical

conduct within the business, including Anti-Bribery

and Corruption; Conflict of Interests; Ethics; Equality;

Internal Control and Governance; Modern Slavery and

Speak Up (Whistleblowing).

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Strategic Report (continued)

Risk Management (continued)

Risk

Mitigations

Systems and Data

Cyber and physical security

threat:

Breach of our security regime

and access to key network

security systems by an

internal/external party leading

to disruption or loss of critical

systems, assets or data breach.

• Dedicated qualified personnel allocated to Cyber and IT

security.

• A comprehensive investment programme to address

any potential weaknesses and respond to arising

threats.

• A training programme in place to inform all users of the

risks of email and social engineering attacks.

• A cyber risk assessment methodology implemented

within the Group.

• Pre-employment screening and ongoing checks for all

colleagues, with enhanced requirements for critical

roles such as System Administrators.

• A strong governance and inspection regime to protect

infrastructure assets and operational capacity.

• Physical and technological security measures, including

encryption of key laptops, preventing the loss of data.

• Data Centre infrastructure providing enhanced security

monitoring and management tools, ‘next generation’

firewalls and network traffic analysis.

• Ongoing security patching of critical systems.

• Ongoing renewal and replacement programmes to

ensure hardware and software is refreshed on

appropriate timescales.

• Periodic internal and external security reviews.

• Key systems IT disaster recovery testing.

• Physical security measures are in place to limit access to

sites.

• Use of e-learning to promote awareness of Cyber issues

for all employees.

The Strategic Report, outlined on pages 6 to 44, has been approved by the Board of Directors and

signed on behalf of the Board on 11 July 2024.

Chris Johns

Director

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Corporate Governance Report

Under The Companies (Miscellaneous

Reporting) Regulations 2018, the Company has

chosen to report on how the principles and

provisions of the UK Corporate Governance

Code (“the Code”) have been applied during the

year. There are some limited areas of non-

compliance, all of which are considered

appropriate to the privately owned status of the

Company and are explained on pages 50 to 52.

The Board

Board Members as 31 March 2024 are as below:

Alistair Buchanan, CBE

Independent Non-Executive Director

Appointed on 25 July 2018

Alistair Buchanan has over 25 years’ experience

in the energy industry, including 10 years as

Chief Executive of Ofgem. In 2013 he joined

KPMG as Partner and UK Chairman of Power &

Utilities, returning to the firm where he trained

as a Chartered Accountant. During his career,

Alistair became an award-winning energy sector

analyst and head of research for banks in New

York and London.

Anne Baldock

Independent Non-Executive Director

Appointed on 26 September 2018

Anne Baldock was previously a partner for 22

years and global head of the Projects, Energy

and Infrastructure Group at the international

law firm Allen & Overy. She has extensive

experience in advising energy companies and

governmental boards on significant contracts

and projects. Now retired as a solicitor, Anne has

a portfolio of Non-Executive Director positions

which currently include Pantheon Infrastructure

plc, East West Rail Limited and Restoration and

Renewal Delivery Authority Limited.

Susan Cooklin

Independent Non-Executive Director

Appointed on 25 July 2018

Susan Cooklin has worked at Board level for over

12 years. Her last executive job was as

Managing Director, Route Services Network Rail

managing a complex portfolio of 60 services and

leading a directorate of 5,000 employees with a

budget of over £2 billion. She retired from this

role in 2022 to embark on her portfolio career

full time. From 2013 to 2017, Susan ran the

“Could IT Be You” campaign to raise awareness

of IT as a career for young women. Susan

currently serves as an Independent Non-

Executive Director on the Board of Netcompany

Group A/S which is listed on the Nasdaq

Copenhagen, the Spanish company, Nortegas

Energia Grupo SLU and the Restoration and

Renewal of the Houses of Parliament Delivery

Authority in the UK.

Rob Holden, CBE

Independent Non-Executive Director

Appointed on 1 January 2016

Rob Holden has, for the past decade, had a

portfolio career following his executive positions

as CEO of London & Continental Railways and

Crossrail. He is Chair of NNB Generation (SZC)

(more commonly known as Sizewell C) where he

has been a Non-Executive Director for several

years. Rob’s previous Non-Executive roles have

been with The Submarine Delivery Agency,

Nuclear Decommissioning Authority, Viridor,

High Speed 1 and Eurostar. Rob is a Chartered

Accountant who qualified with Arthur Young &

Co (now Ernst & Young) and since leaving the

accountancy profession has worked with

Governments here in the UK and overseas on

the delivery of long-term complex projects.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Corporate Governance Report

(continued)

The Board (continued)

Peter O’Flaherty

Non-Executive Director

Appointed on 17 September 2019

Peter O’Flaherty has over 25 years’ experience

gained in infrastructure investment and asset

management. His early career incorporated

roles in banking and project finance. He is

currently the head of Network Utilities and Data

Infrastructure at Equitix, responsible for

investments in both regulated and unregulated

utility networks across Electricity, Gas, Water,

Heat, Fibre and Tower Infrastructure

investments. In addition to Electricity North

West, he serves as a shareholder director on a

number of Boards managing investments across

Europe, North America, Latin America and Asia-

Pacific. Peter has a BEng in Civil Engineering, an

MSc in Property Development and Planning and

is a Chartered Company Director.

Siôn Jones

Non-Executive Director

Appointed on 20 August 2019

Siôn Jones is employed by Equitix Limited as

Chief Operating Officer. He is approved by the

Financial Conduct Authority and oversees the

portfolio of managed funds. Prior to joining

Equitix, Siôn was a partner at King Sturge where

he was responsible for asset and project

company management. While there he

established the Corporate Finance division of

King Sturge with responsibility for creating

institutional and private equity real estate

investment vehicles. Siôn has a BSc Honours in

Chemistry from the University of Southampton.

He is a CFA charter holder and holds an

Investment Management Certificate and a

Certificate in Securities from the Chartered

Institute for Securities & Investment.

Genping Pan

Non-Executive Director

Appointed 12 December 2019

Genping Pan is the Chief Investment Officer at

CNIC. He has been actively involved in overseas

investment projects and business operations

and management for over 10 years, and has

gained extensive experience in investment

management, capital operation and financial

management. Positions previously held by

Genping include Finance Manager of Oasis Oil

Co. Limited, Chief Accountant of PetroChina

(Venezuela) and Financial Director of China

Huaming International Investment Corporation.

Masahide Yamada

Non-Executive Director

Appointed on 7 July 2022

Masahide Yamada is employed by the Kansai

Electric Power Company Inc. which is an electric

utility with its operational area of Kansai region,

Japan. He is the General Manager for Asset

Management, Americas and Europe Region,

International Business Division. Masahide has 10

years’ experience in the field of power

distribution, with more than 10 years’

experience in overseas investment in power

assets including as a Finance Director of a

hydropower project in the Republic of

Indonesia, and some experience with Strategy,

Planning and Budget Management.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Corporate Governance Report

(continued)

The Board (continued)

Mitsuo Wada

Non-Executive Director

Appointed on 31 July 2023

Mitsuo Wada is employed by the Kansai

Transmission and Distribution Inc. which is a

power system operator covering the Kansai area

in Japan. His background is in electrical

engineering and he is currently the General

Manager for International Business and

Cooperation Group in the Company. During his

24 years of power sector experience, he

provided consulting services for several oversea

projects, and recently had experience of

managing assets as the Director of a 435MW

hydro power plant in the Philippines and a

440MW coal power plant in Australia.

Ian Smyth

Group CEO

Appointed on 5 September 2022

Ian Smyth has been Group CEO of Electricity

North West Limited since 2022. Prior to

Electricity North West Limited, Ian was a

Director of UK Power Networks, a Managing

Director of Navigant a global advisory and

dispute resolution consultancy and the lead

partner of the Utilities and Regulated Industries

practice for LCP. He has been a consultant for

Ernst & Young. Ian has worked internationally

for governments, regulators and utilities across

electricity, gas and water. Ian has a BA(Hons) in

philosophy, psychology and artificial intelligence

from Manchester Metropolitan University and

an MSc in Cognitive Science from the University

of Birmingham.

Chris Johns

Group CFO

Appointed on 25 May 2023

Chris joined Electricity North West Limited as

Group CFO (Chief Financial Officer) in May 2023.

Chris is a Chartered Accountant and has

previously been CFO of Yorkshire Water, a role

he held from June 2020. He has also previously

held the roles of Finance Director of both

Northumbrian Water Group and Northern Gas

Networks.

Shareholder appointed directors

Siôn Jones, Peter O’Flaherty, Mitsuo Wada,

Masahide Yamada and Genping Pan are

shareholder appointed directors and have

appointed alternate directors during their time

as Board members. Siôn Jones’ and Peter

O’Flaherty’s alternate is Aisha Hamid. Mitsuo

Wada’s alternate is Michiko Hara (replacing

Tatsuhiro Tamura on 4 July 2024) and Makoto

Murata is the alternate for Masahide Yamada.

Genping Pan’s alternate is Hailin Yu. Alternate

directors attend board meetings where the

principal director would be otherwise unable to

attend.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Corporate Governance Report (continued)

The Board (continued)

Attendance at Board meetings

At the discretion of the Board, senior management were invited to attend meetings when appropriate

specific items were subject to discussions. Where a director was unable to attend a Board meeting,

their views were canvassed by the Chairman prior to the meeting.

The table below shows Board attendance, and Board Committee attendance for committee members

only. Informal meetings to discuss board member replacements are not included, nor are attendances

by directors at committee meetings where they are not formal members.

Board Member

Attended / Scheduled

ENWL

Board

Audit and

Risk

Committee

Remuneration

Committee

Nominations

Committee

Safety, Health

and Environment

Committee

Alistair Buchanan

6/6

3/3

2/3

Anne Baldock

6/6

4/4

3/3

Susan Cooklin

6/6

3/4

3/3

Rob Holden

6/6

4/4

Peter O’Flaherty

6/6

3/3

Siôn Jones

6/6

2/3

Genping Pan

6/6

3/3

1/3

Ian Smyth

6/6

3/3

Masahide Yamada

6/6

3/3

Takeshi Tanaka

2/6

1/3

Mitsuo Wada

4/6

2/3

1/3

David Brocksom

1/6

Chris Johns

6/6

1/3

Diversity

The Board supports diversity in its broadest sense and accordingly aims to ensure that its number is

made up of a diverse range of experience, independence and expertise appropriate to the industry in

which it operates, its operational business model and the extensive financial, governance, regulatory

risk management and legal expertise required.

Diversity of the Board continues to be assessed on a case-by-case basis as vacancies arise. This is

principally a matter for the Nominations Committee.

Resigned as director on 31 July 2023 but had attended (or sent alternate to) all previous board meetings during the year until this date.

Appointed as director on 31 July 2023 and attended all subsequent Board meetings during the period.

Resigned as director on 25 May 2023 but had attended the previous board meeting during the period.

Appointed as director on 25 May 2023 and attended all Board meetings during the period.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Corporate Governance Report

(continued)

The Board (continued)

Composition

The Board comprises four Non-Executive

Directors considered under the Code to be

Independent (one of whom is the Chairman),

and five Non-Executive Directors representing

the four shareholders, together with two

Executive Directors. The Directors’ biographies

are on pages 45 to 47.

Two of the Independent Non-Executive

Directors, Susan Cooklin and Anne Baldock, have

been named to Ofgem as fulfilling the role of

Sufficiently Independent Directors as required

by Ofgem. The role of the Sufficiently

Independent Director was introduced from 1

April 2014 as part of a range of enhancements

made to the ring-fence conditions in the

Company’s licence to protect consumers, should

a distribution operator experience financial

distress.

The individual directors are regularly asked to

confirm that they are able to discharge their

responsibilities on appointment and thereafter,

in light of any other commitments or outside

appointments they may have.

Leadership

The Board provides leadership of the Company,

ensuring it continues to balance the needs of

stakeholders while delivering the Company’s

strategy. Individually the directors act in a way

that they consider will promote the long-term

success of the Company.

The role of the Chairman and the CEO is

separate, defined by clear role descriptions set

out in writing and agreed by the Board.

The Chairman is responsible for the leadership

and governance of the Board, and the CEO for

the operational management of the Company

and implementation of the strategy on the

Board’s behalf. The CEO is assisted by his ELT

that comprises the operational unit directors.

Advice

All directors are able to consult with the

Company Secretary, and the appointment and

removal of the Company Secretary is a matter

reserved for the Board.

Any individual director, or the Board as a whole,

may take independent professional advice

relating to any aspect of their duties at the

Company’s expense. This is clearly stated in the

Terms of Reference of the Board and of its

Committees.

How the Board operates

The Board’s role is to promote the long-term

success of the Company and provide leadership

within a framework of effective controls. The

Board is responsible for approving the strategy

and for ensuring that there are suitable

resources to achieve it. In doing so, the Board

takes into account all stakeholders, including its

shareholders, employees, suppliers and the

communities in which it operates.

The Board has matters specifically reserved for

its decision, including the approval of budgets

and financial results, assessment of new Board

appointments, dividend decisions, litigation

which is material to the Group, and directors’

remuneration.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Corporate Governance Report

(continued)

The Board (continued)

Training

The Chairman is responsible for ensuring that all

directors update their skills, knowledge and

familiarity of the Company.

Directors regularly receive reports facilitating

greater awareness and understanding of the

Company, its regulatory environment and the

industry. The Board aims to have at least two

workshops and one strategy meeting a year

aimed at developing a greater understanding of

the Company’s finances and operations and to

explore strategic matters in detail.

Committee members received detailed

presentations at meetings focusing on areas of

relevance to the Committee and Board

members are invited to workshops with

shareholder representatives which are able to

delve into areas of interest in greater detail.

The Chairman is also responsible for ensuring

that all new directors receive a tailored

induction programme that reflects their

experience and position as either an Executive

or Non-Executive Director. This involves

meetings with the Board, the Company

Secretary, other members of the Executive and

Senior Leadership Teams and site visits.

Additional documentation is provided as

appropriate.

Appointments

The four independent Non-Executive Directors

are provided with a detailed letter of

appointment and are appointed for an initial

three-year term, to be reviewed every three

years thereafter, if they are reappointed.

The five other Non-Executive Directors are

appointed by the Company’s shareholders as

their representatives. The expected time

commitment required from Non-Executive

Directors is (minimum) fifteen to twenty days

per year and is detailed in their letter of

appointment.

Conflicts of interest

The Board has appropriate processes in place to

assess and manage any potential conflicts of

interest. As part of these procedures the Board:

• Considers conflicts of interest as part of the

agenda for all meetings.

• Asks directors annually if there are any

changes to their conflict of interest

declarations, including appointments to the

Boards of other entities.

• Keeps records and Board minutes regarding

any decisions made.

• Maintains a company-wide conflicts of

interest register.

Areas of non-compliance with the Code

There are some areas where the Company does

not comply with the Code, all of which are due

to its privately-owned status and are discussed

below. The Company has endeavoured to

comply with the spirit of the Code; nevertheless,

as outlined below, compliance with certain

provisions is either impractical or inappropriate.

Senior Independent Director

The Board has not appointed a Non-Executive

Director as a Senior Independent Director under

the Code. The Board meets the objectives

behind this requirement through its shareholder

representation on the Board.

Composition of the Board

The Code states that half the Board should be

independent Non-Executive Directors. In light of

the composition of the Board explained above

on page 49, the Company does not satisfy this

requirement. However, as the Company is

privately-owned and all shareholders are

represented on the Board, it is felt that the

needs of shareholders are met through their

presence on the Board.

In addition to the two Sufficiently Independent

Directors required by Ofgem, there are two

further Independent Non-Executive Directors.

The Board considers that the four Independent

Non-Executive Directors offer an appropriate

perspective, meaningful individual participation

and effective collective decision making.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Corporate Governance Report

(continued)

The Board (continued)

Areas of non-compliance with the Code

(continued)

Annual election of directors

The Board does not require its directors to be re-

elected annually as the shareholder

representation on the Board allows the

opportunity to challenge a director’s

performance directly rather than at an Annual

General Meeting.

Publication of the terms and conditions of Non-

Executive Directors

As a privately-owned company, the Company is

not required to provide a remuneration report

in line with the Large and Medium Sized

Companies and Groups (Accounts and Reports)

(Amendment) Regulations 2013.

The purpose of the remuneration report is to

enable shareholders to exercise judgement over

directors’ remuneration. With the presence of

shareholder representatives on the

Remuneration Committee, this purpose is met

directly.

Engagement with stakeholders

As a privately-owned company, the Company

does not have a large or dispersed shareholder

base with which to communicate formally, nor

are there any minority shareholders. Therefore,

Annual General Meetings are not held.

Shareholders

In addition to formal Board meetings and

workshop sessions, the meeting cycle includes

quarterly workshops to focus on financial and

treasury matters and detailed periodic

workshops to meet the requirements of

strategic planning and more detailed

performance reviews. Board members are

invited to attend these meetings.

The Group works closely with its shareholders

and all shareholders endorse the UK

Stewardship Code and see their stewardship

commitments as a key feature of their

investment philosophy.

They are committed to maintaining the integrity

and quality of the markets in which they operate

and allocate investment capital to productive

purposes, while protecting and enhancing their

clients’ capital over the longer term.

Workforce

The Board has not utilised the methods in the

Code for engagement with the workforce.

However, the workforce has a strong Trade

Union representation and regular meetings of

engagement take place both with

representatives and directly through workforce

meeting with the leadership team. The Board

has however appointed Susan Cooklin as our

NED employee representative. Susan is able to

facilitate a two-way flow of communication and

information between the Board and the

workforce.

Stakeholders

The Company has strong and open relationships

with stakeholders, including Ofgem, MPs and

central government, local government, and

emergency services. There are a number of key

relationships and a vast range of public sector

stakeholders. The Company also engages across

the industry with electricity suppliers,

employees, contractors and other utilities, along

with research of customers’ opinions. Due to the

regulated nature of the industry the Company

has less flexibility to determine some of its

engagement mechanisms with stakeholders.

Our stakeholder engagement strategy is

outlined on pages 17 to 18.

Board evaluation

The Code requires boards to conduct an annual

evaluation of their effectiveness, with such

evaluation being externally facilitated every

three years for FTSE 350 companies. Although

the Company does not undertake an annual

exercise, externally led board evaluations are

performed every few years. The last one

conducted by Lintstock Limited was in 2021,

with the next evaluation to take place in 2024 or

2025.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Corporate Governance Report

(continued)

The Board (continued)

Areas of non-compliance with the Code

(continued)

Internal audit team

The Company’s internal audit team provides

independent, objective assurance and advisory

services designed to improve the Company’s

(and members of its group where applicable)

operations. Internal audit activity helps the

business achieve its objectives by evaluating and

improving the effectiveness of risk

management, control and governance

processes.

Nomination Committee

The Code requires a majority of the members of

the Nomination Committee to be independent

Non-Executive Directors.

Notwithstanding that the Company’s

Nomination Committee is not so constituted,

the Board considers that the Committee has the

necessary mix of skills, expertise and experience

to discharge its role of leading the process for

appointments and ensuring appropriate plans

are in place for succession to the Board and

senior management positions. Additionally, it is

felt that the interests of shareholders are

properly reflected by means of their

representation of the Committee.

Remuneration Committee

The Code also states that the Remuneration

Committee should comprise only independent

Non-Executive Directors.

Again, as the Company is privately-owned and

has no external shareholders, the Board believes

that the interests of shareholders are

appropriately represented on the Committee

and that the Committee is suitably constituted

to discharge its functions in relation to the

alignment of remuneration policies and

practices to the long-term sustainable success of

the Company.

Board Committees

The Board has an extensive workload and,

therefore, has delegated the detailed oversight

of certain items to five standing Committees and

two ad hoc Committees:

Standard Committees generally meeting on a

regular pre-planned cycle

Audit and Risk Committee

Remuneration Committee

Nominations Committee

Safety, Health, and Environment Committee

Use of Systems Pricing Committee

Ad hoc Committees meeting as required to

deal with their specific areas of business

Banking Committee

Finance Committee

The minutes of each Committee are made

available to the Board.

The Use of Systems Pricing Committee meets

annually (or more frequently as necessary) to

discuss customer bills, and the Finance

Committee meets on an ad hoc basis, to approve

detail about system pricing contained in Licence

Condition 14 and financing transactions

respectively.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Corporate Governance Report

(continued)

Report of the Audit and Risk Committee

The role and responsibilities of the Committee

are set out in its Terms of Reference which are

reviewed by the Committee and approved by

the Board annually. The Terms of Reference are

available on the Company’s website.

Membership and meetings

The Committee members are all Non-Executive

Directors. The Board is satisfied that the

Committee Chair, Rob Holden, as a Chartered

Accountant, has relevant financial experience.

The Committee as a whole have experience

relevant to the sector in which the Company

operates. Attendance by individual members is

detailed in the table on page 48.

The role of the Committee

The key responsibilities of the Audit and Risk

Committee are to:

• Monitor the integrity of the financial

statements, including annual and half-

yearly reports and to report to the Board

significant financial reporting issues and

judgements which they contain.

• Monitor the independence, effectiveness

and remuneration of the external auditor.

• Review the adequacy and effectiveness of

the Company’s internal financial controls

and internal control and risk management

stems and compliance with the Code.

• Monitor the effectiveness of the Company’s

internal audit function.

• Ensure that the Group’s treasury function is

effective and approve treasury transactions

in line with the Treasury policy.

• Conduct audit tender processes and make

recommendations regarding the

appointment and removal of the external

auditor and any engagement terms.

• Monitor and ensure the appropriate use of

the external auditor for any non-audit

services.

The significant matters considered by the

Committee during the year included:

• Review of the 31 March 2024 Annual

Report and Consolidated Financial

Statements and the FY24 half-year report.

• Evaluation of external audit work by

PricewaterhouseCoopers LLP (“PwC”)

(including discussion of fees and

management response to audit reports)

and developing the future audit

programme.

• Review and discussion on internal risk

management controls and enhanced

governance frameworks.

• Review of Treasury operations and Data

Protection Officer's reports.

External audit

The external auditor is engaged to express an

opinion on the Company and Group financial

statements. The audit includes the review and

testing of the data contained in the financial

statements to the extent necessary for

expressing an audit opinion on the truth and

fairness of the financial statements. This year’s

audit is undertaken by PwC, who has expressed

its willingness to continue in office as

independent auditor of the Group.

In accordance with UK regulations, the

Company’s auditor adheres to a mandatory

rotation policy and a new Group lead

engagement partner is appointed once their

predecessors have completed a term of five

years.

To assess the independence and effectiveness of

the external audit process, the Committee

reviewed the audit approach and strategy and

the final PwC report to the Committee, as well

as receiving verbal feedback from the Board.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Corporate Governance Report

(continued)

Report of the Audit and Risk Committee

(continued)

Auditor independence and the provision of

non-audit services

The Company has a formal policy on the use of

the auditor for non-audit work and the awarding

of such work is managed in order to ensure that

the auditor is able to conduct an independent

audit and are perceived to be independent by

our stakeholders.

In keeping with professional ethical standards,

PwC also confirmed their independence to the

Committee and set out the supporting evidence

in their report to the Committee prior to the

publication of the Annual Report and

Consolidated Financial Statements.

The non-audit services provided by the statutory

auditor during the year were in connection to

Ofgem regulatory requirements and financial

covenant compliance.

Internal control framework

The Committee, on behalf of the Board, is

responsible for reviewing the Company’s

internal control framework. This review is

consistent with the Code and covers all material

areas of the Group, including risk management

and compliance with controls. Further details of

risk management and internal controls are set

out on pages 39 to 44.

Committee effectiveness

The Committee formally reviewed its Terms of

Reference and its membership during the year

to ensure both remain fit for purpose and were

considered effective by the Board.

Fair, balanced and understandable

The Audit and Risk Committee was requested to

assist the Board in confirming that the Annual

Report is fair, balanced and understandable. As

part of its review, the Audit and Risk Committee

took into account the preparation process for

the Annual Report and Consolidated Financial

Statements:

• Detailed review and appropriate challenge

from key internal Group functions, such as

Risk, Control and Assurance, senior

managers and the CFO.

• Formal signoffs from the business area

senior managers, the finance managers and

CFO.

• Audit and Risk Committee oversight,

involving a review of key financial reporting

judgements, review and appropriate

challenge on matters such as any changes

to material accounting policies and

practices during the year, significant

adjustments and the going concern

assumption.

• The involvement of qualified, professional

employees with an appropriate level of

expertise and experience throughout the

business.

• Engagement of a professional and

experienced external auditor, a framework

for full transparent disclosure of

information during the audit process and

post audit evaluation.

The Directors’ Statement on a fair, balanced and

understandable Annual Report and

Consolidated Financial Statements is set out on

page 54.

Whistleblowing arrangements

The Committee is responsible for reviewing the

Company’s Disclosure (Whistleblowing) policy

and any concerns raised through these channels

and management actions taken in response. A

revised policy was approved by the Committee

in January 2021 and a new Speak Up policy was

approved in December 2021. A confidential

service is provided by an external company

whereby employees can raise concerns by email

or telephone in confidence. Any matters

reported are investigated and escalated as

appropriate.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Corporate Governance Report

(continued)

Report of the Nominations Committee

The role and responsibilities of the Committee

are set out in its Terms of Reference and these

are available on the Company’s website. The

Committee’s responsibilities include keeping

under review the composition of the Board and

senior executives, identifying and nominating

candidates for approval by the Board to fill any

vacancies and succession planning for directors

and other senior executives.

Membership and meetings

The Committee Chair is Alistair Buchanan,

Independent Non-Executive Director.

Composition of the Committee and attendance

by individual members at meetings is detailed

on page 48. The Chief Executive Officer and

external advisors attend meetings at the

invitation of the Chairman of the Committee.

The Nominations Committee held no meetings

during the year, however, relevant members of

the Board were consulted in relation to the

recruitment of all incoming senior managers and

executives.

Diversity

As described in the Corporate Governance

report on page 48, the Board is committed to

diversity in its broadest sense and the

Nominations Committee ensures this remains

central to recruitment and succession planning.

The Committee typically undertakes an annual

review to assess the Company’s planning for

succession to executive and senior management

roles.

Report of the Remuneration Committee

The Committee’s role is to determine the

remuneration structure for the Executive

Directors and Board to ensure that it balances

appropriate reward with the creation of long-

term value, customer performance and

sustainability of the network. The Terms of

Reference for the Committee are available on

the Company’s website.

It is also responsible for the review of the

remuneration of other members of the ELT to

ensure the structure and levels of remuneration

appropriately incentivise these individuals to

achieve the Company’s strategic objectives.

As required by the Code, the Company engages

directors on terms which do not reward poor

performance and, where necessary, require

directors to mitigate their losses.

Whilst the Company does not currently directly

engage its workforce in relation to executive

remuneration, there is information available

internally and externally regarding the key terms

of such remuneration.

The Committee has been joined by invitation

during the year by the CFO and the CFO. They do

not attend for any discussions in which they are

individually discussed.

Membership and meetings

The Committee Chair is Siôn Jones, Non-

Executive Director. Composition of the

Committee and attendance by individual

members is detailed on page 48.

The key areas of focus for the Remuneration

Committee during the year were:

• Company performance update and

executive incentive plan update.

• Executive bonus approvals and director

remuneration.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Corporate Governance Report (continued)

Report of the Remuneration Committee (continued)

Role of the Committee

The Committee reviews and approves the overall remuneration policies for employees below director

level but does not set remuneration for these individuals. This oversight role allows the Committee to

take into account pay policies and employment conditions across the Group.

The Committee has reviewed the appropriateness of the remuneration structure for the RIIO-ED2

regulatory period and, subject to some changes, determined that it continues to promote the long-term

success of the Company.

Share options are not offered as an incentive to either Executive or Non-Executive Directors as the

Company is privately-owned.

Nature of remuneration of Executive Directors

The table below sets out the nature of the remuneration of the Executive Directors:

Element

Purpose and link to strategy

Framework

Basic Salary

Basic salary provides the core reward

for the role. Salaries are set at a

sufficient level to attract and retain

high calibre individuals who can deliver

the Group’s strategic objectives.

External advice is taken on all

remuneration to ensure that it remains

effective and appropriate. Levels of

basic salary are benchmarked and will

also reflect the director’s experience

and time at director level.

Benefits

Other benefits provided are designed,

as with basic salary, to provide a

competitive but not excessive reward

package.

In addition to basic salary, directors are

provided with a car allowance and

private medical insurance.

Executive

Incentive Plan

(“EIP”)

Executive Directors are members of

the Executive Incentive Plan. This aims

to reward both in-year performance

and incentivise strategic and

innovative behaviours over the longer-

term, aligned to shareholder

objectives, including customer

performance.

Following Health & Safety best

practice, safety is considered to be an

essential part of any role. Therefore,

directors receive no Health & Safety

related incentives.

The EIP works on a balanced scorecard

approach, with measures scored on an

annual basis but set in line with longer

term ambitions, and bonus payouts in

part deferred into subsequent years, to

promote a strategic focus and

sustainable performance.

Pension

Directors are offered the same level of

defined contribution benefits as all

other employees, or a taxable payment

in lieu.

No director is a member of the defined

benefit scheme which is now closed to

new members.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Corporate Governance Report

(continued)

Report of the Remuneration Committee

(continued)

CEO pay ratio

In line with statutory requirements, effective

for financial years commencing on or after 1

January 2019, companies with more than 250

employees and which are quoted on the UK

Official List are required to publish information

on their CEO pay ratio. The requirement is to

publish total CEO remuneration compared to

the 25

, 50

and 75

percentile total

remuneration of full-time equivalent UK

employees.

There are three methodologies that companies

can choose to report their pay ratio, known as

Option A, B and C. The government preference,

and most accurate reporting method, is Option

A. Electricity North West Limited have elected

to use this method, consistent with previous

years, which enables us to compare total

remuneration for the financial year ended 31

March 2024, in line with the pay gap

requirements.

The following tables set out this information

for total remuneration

(which is inclusive of

bonus, long term executive incentive

payments, additional allowances or payments,

benefit in kind and employer pension

contributions).

Bonus payments are linked closely to Company

performance and the timing of maturity of

long-term incentive arrangements, so may

fluctuate year on year. We have, therefore,

also included a comparison of total

remuneration excluding bonus and long-term

incentive awards.

The total pay gap has decreased slightly from

2023, and our Executive Pay Gap is below the

national average in comparison.

The remuneration of employees who did not receive a full year’s pay have been

excluded to ensure the comparison is fair and equitable. For example, employees on

Employee remuneration amounts for each

percentile are shown in the table below.

percentile

2024 Pay

excluding

bonus

1:11

1:8

1:6

2024 Total

remuneration

including

bonus

1:22

1:16

1:12

2023 Pay

excluding

bonus

1:12

1:8

1:6

2023 Total

remuneration

including

bonus

1:24

1:17

1:13

Employee total remuneration is shown in the

table below.

percentile

2024 Pay

excluding

bonus

£44,756

£62,148

£84,529

2024 Total

remuneration

£46,219

£64,113

£87,661

2023 Pay

excluding

bonus

£42,092

£58,981

£79,350

2023 Total

remuneration

£43,307

£60,928

£82,575

reduced pay due to statutory absence those with part year service have been

excluded.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Corporate Governance Report

(continued)

Report of the Safety, Health and

Environment Committee

The Committee continues to develop the

Company’s safety, health and environment

strategies, agrees targets and monitors

Company performance in these areas. It

regularly challenges the executive and the

safety, health and environment team to look at

new initiatives and work with other

organisations.

Membership and meetings

The Committee Chair is Susan Cooklin,

Independent Non-Executive Director.

Composition of the Committee and attendance

by individual members is detailed on page 48.

Meetings are also attended by executives in

charge of operationally focused directorates.

During the year, there were two Board safety

visits, one in May 2023 to the Blackburn

Training Academy and Central Oil Reprocessing

(CORD) Depot, and the other in November

2023 to the flood alleviation scheme at a

Lancaster substation.

The role of the Committee

The Committee has delegated authority from

the Board set out in its Terms of Reference

which are published on the Company’s

website.

The primary purpose of the Committee is to:

• Set the corporate safety, health and

environment strategy, objectives, targets

and programmes.

• Monitor performance in these areas with a

view to:

- minimising risk;

- ensuring legal compliance;

- responding to significant events; and

- ensuring significant resources are

allocated for the control of safety,

health and environmental risks.

• Report to the Board developments, trends

and/or forthcoming legislation in relation

to the safety, health and environmental

matters which may be relevant to the

Company’s operations, assets or

employees.

• Review the Company’s external reporting

in this area and regulatory disclosures.

At every meeting, the Committee receives and

discusses in detail a Safety, Health and

Environment performance report for the

preceding period. Amongst other things, this

report covers case studies, key issues and

developments.

Additionally, the Committee considers

relevant risks (including a review of risk that

forms part of the Board’s overall annual

exercise) and oversees the Company’s

mitigation strategies.

This year the Committee focussed upon the

future safety target setting and health and

wellbeing activities. It also discussed the goals

of the Environmental Action Plan which

formed part of the previous ED2 business plan.

The Fatigue Risk Management Plan was also

discussed for the wellbeing of employees, as

was other safety, health and environment

challenges facing the business.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Directors’ Report

The directors present their report and audited consolidated financial statements of Electricity North

West Limited (“the Company”) and its subsidiaries (together referred to as “the Group”) for the year

ended 31 March 2024.

General information

The Company is a private company limited by

shares and incorporated and domiciled in

England, the United Kingdom under the

Companies Act 2006.

Information contained in Strategic Report

As permitted by section 414C of the Companies

Act 2006, certain information required to be

included in the Directors’ Report has been

included in the Strategic Report. Specifically,

this relates to:

• risk management, pages 39 to 44;

• how the directors have had regard to the

need to foster business relationships with

stakeholders, page 24;

• employee matters, page 14 to 15;

• greenhouse gas emissions, page 11; and

• future developments, page 7.

Parent, ultimate parent and controlling party

The immediate parent undertaking is North

West Electricity Networks plc (“NWEN plc”), a

company incorporated and registered in the

United Kingdom.

The ultimate parent undertaking is North West

Electricity Networks (Jersey) Limited (“NWEN

(Jersey)”), a company incorporated and

registered in Jersey.

At 31 March 2024 and 2023, the ownership of

the shares in NWEN (Jersey) was as follows:

• KDM Power Limited (40.0%);

• Equitix ENW 6 Limited (25.0%);

• Equitix MA North HoldCo Limited (15.0%);

and

• Swingford Holdings Corporation Limited

(20.0%).

As no individual shareholder owned over 50%,

there was no ultimate controlling party.

Dividends

During the year, the Company declared a final

dividend for the year ended 31 March 2023 of

£18.6m, paid in June 2023. An interim dividend

for the year ending 31 March 2024 of £11.8m

was paid in February 2024. In the prior year, the

Company declared a final dividend for the year

ended 31 March 2022 of £23.0m, paid in June

2022. No interim dividend was proposed for the

year ended 31 March 2023 (Note 31).

At the Board meeting in May 2024, the directors

proposed a final dividend of £45.4m for the year

ended 31 March 2024.

Details of the Group’s dividend policy can be

found in the Strategic Report, page 34.

Capital structure

The Group’s capital structure is set out in Note

30.

Financial instruments

The use of financial instruments and their

related risks are disclosed in the financial

review and risk sections of the Strategic Report

on pages 34 and 41, and in Note 22.

Financial risk management

Disclosure around the Group’s principal risks

can be found in the principal risks and

uncertainties section of the Strategic Report on

page 40, and in Note 23.

Employees

The Group’s policies on employee consultation

and involvement, the treatment of disabled

employees and on equality and diversity across

all areas of the business are contained within

the People section of the Strategic Report on

page 14 to 15.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Directors’ Report (continued)

Greenhouse gas emissions and energy use

Further details on greenhouse gas emissions

are provided in the Business Carbon Footprint

section of the Strategic Report on page 11.

Research and development

The Group is committed to developing

innovative and cost-effective solutions for

providing high quality services and reliability to

customers, and for the benefit of the wider

sector and the development of the network, as

further detailed in the Strategic Report. During

the year ended 31 March 2024 the Group

incurred £1.9m of expenditure on research and

development (2023: £3.0m), see Note 5.

Future developments

Details of the future developments of the

Company and Group can be found in the Chief

Executive Officer’s Statement and the Strategic

Report on page 7.

Events after the Balance Sheet date

At 31 March 2024, the £50m revolving credit

facility (RCF), which was nil drawn, was due to

expire in December 2024. In April 2024, this

was replaced with a new £250m RCF, expiring in

April 2027.

Corporate governance

The Group has established a governance

framework for monitoring and overseeing

strategy, conduct of business standards and

operations of the entire business. Details of the

internal control and risk management systems

which govern the Company are outlined in the

Corporate Governance Report of the ENWL

Annual Report and Consolidated Financial

Statements, which are available on the website

www.enwl.co.uk.

Directors

The directors of the Company who were, unless

otherwise stated, in office during the year and

up to the date of signing the financial

statements were:

Executive Directors

• Chris Johns (appointed 25 May 2023)

• Ian Smyth

• David Brocksom (resigned 25 May 2023)

Non-executive Directors

• Anne Baldock

• Alistair Buchanan

• Susan Cooklin

• Rob Holden

• Sion Jones

• Peter O’Flaherty

• Genping Pan

• Takeshi Tanaka (resigned 31 July 2023)

• Mitsuo Wada (appointed 31 July 2023)

• Masahide Yamada

Alternate Directors

• Aisha Hamid

• Michiko Hara (appointed 4 July 2024)

• Makoto Murata

• Tatsuhiro Tamura (resigned 4 July 2024)

• Hailin Yu

Directors served for the whole year, and to the

date of this report, except where otherwise

indicated.

At no time during the year did any director have

a material interest in any contract or

arrangement which was significant in relation

to the Group’s business.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Directors’ Report (continued)

Directors’ and officers’ insurance

The Group maintains an appropriate level of

directors’ and officers’ insurance whereby

directors are indemnified against liabilities to

the extent permitted by the Companies Act.

The insurance is a group policy, held in the

name of the ultimate parent, NWEN (Jersey),

and is for the benefit of that company and all its

subsidiaries and was in place throughout the

year and to the date of this report.

Independent auditor

PricewaterhouseCoopers LLP (“PwC”),

Statutory Auditor, Manchester, United

Kingdom has expressed its willingness to

continue in office as independent auditor of the

Group. In accordance with section 487 of the

Companies Act 2006, PwC are deemed to be

reappointed as independent auditor of the

Company.

Statement by the directors in performance of

their statutory duties in accordance with

s172(1) Companies Act 2006

The Board of Directors of the Company

consider, both individually and together, that

they have acted in a way they consider to be in

good faith and would be most likely to promote

the success of the Company for the benefit of

its members as a whole (having regard to the

stakeholders and matters set out in s172(1)(a-f)

of the Act) in decisions taken during the year

ended 31 March 2023. More details can be

found on pages 17 to 19 of the Strategic Report.

Registered address

The Company is registered in England, the

United Kingdom, at the following address:

Electricity North West Limited

Borron Street

Stockport

England

SK1 2JD

Registered number: 02366949

Approved by the Board on 11 July 2024 and

signed on its behalf by:

Chris Johns

Director

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Statement of directors’ responsibilities

in respect of the financial statements

The directors are responsible for preparing the

Annual Report and the financial statements in

accordance with applicable law and regulation.

Company law requires the directors to prepare

financial statements for each financial year.

Under that law the directors have prepared the

Group and the Company financial statements in

accordance with UK-adopted international

accounting standards.

Under company law, 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

Company and of the profit or loss of the Group

and Company for that period. In preparing the

financial statements, the directors are required

to:

• select suitable accounting policies and then

apply them consistently;

• state whether applicable UK-adopted

international accounting standards have

been followed, subject to any material

departures disclosed and explained in the

financial statements;

• make judgements and accounting

estimates that are reasonable and prudent;

and

• prepare the financial statements on the

going concern basis unless it is

inappropriate to presume that the Group

and Company will continue in business.

The directors are responsible for safeguarding

the assets of the Group and Company and

hence for taking reasonable steps for the

prevention and detection of fraud and other

irregularities.

The directors are also responsible for keeping

adequate accounting records that are sufficient

to show and explain the Group’s and Company’s

transactions and disclose with reasonable

accuracy at any time the financial position of

the Group and Company and enable them to

ensure that the financial statements comply

with the Companies Act 2006.

The directors are responsible for the

maintenance and integrity of the Company’s

website. Legislation in the United Kingdom

governing the preparation and dissemination of

financial statements may differ from legislation

in other jurisdictions.

Directors’ confirmations

Each of the directors, whose names and

functions are listed in Directors’ Report confirm

that, to the best of their knowledge:

• the Group and Company financial

statements, which have been prepared in

accordance with UK-adopted international

accounting standards, give a true and fair

view of the assets, liabilities, financial

position and profit of the Group and profit

of the Company; and

• the Strategic Report includes a fair review

of the development and performance of

the business and the position of the Group

and Company, together with a description

of the principal risks and uncertainties that

it faces.

In the case of each director in office at the date

the directors’ report is approved:

• so far as the director is aware, there is no

relevant audit information of which the

Group’s and the Company’s auditor is

unaware; and

• they have taken all the steps that they

ought to have taken as a director in order to

make themselves aware of any relevant

audit information and to establish that the

Group’s and Company’s auditor is aware of

that information.

Approved by the Board of Directors on 11 July

2024 and is signed on its behalf by:

Chris Johns

Director

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Independent auditors’ report to the members of

Electricity North West Limited

Report on the audit of the financial statements

Opinion

In our opinion, Electricity North West Limited’s group financial statements and company financial statements

(the “financial statements”):

• give a true and fair view of the state of the group’s and of the company’s affairs as at 31 March 2024 and of

the group’s and company’s profit and the group’s and company’s cash flows for the year then ended;

• have been properly prepared in accordance with UK-adopted international accounting standards; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements, included within the Annual Report and Consolidated Financial

Statements (the “Annual Report”), which comprise: the Consolidated and Company Statements of Financial

Position as at 31 March 2024; the Consolidated and Company Statements of Profit or Loss and Other

Comprehensive Income; the Consolidated Statement of Changes in Equity and Company Statement of Changes

in Equity; and the Consolidated and Company Statements of Cash Flows for the year then ended; and the notes

to the financial statements, comprising material accounting policy information and other explanatory

information.

Our opinion is consistent with our reporting to the Audit Committee.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable

law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of

the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient

and appropriate to provide a basis for our opinion.

Independence

We remained independent of the group in accordance with the ethical requirements that are relevant to our

audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed

public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these

requirements.

To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical

Standard were not provided.

Other than those disclosed in Note 5 - Operating Profit, in the Notes to the Financial Statements, we have

provided no non-audit services to the company or its controlled undertakings in the period under audit.

Material uncertainty related to going concern

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of

the disclosure made in note 2 to the financial statements concerning the group’s and the company’s ability to

continue as a going concern. The shareholders of North West Electricity Networks (Jersey) Limited (“NWEN

(Jersey)”), the company’s ultimate parent undertaking, are currently undertaking a Strategic Review of their

investment in the NWEN (Jersey) group, which includes the company and its subsidiaries. It is possible that this

Strategic Review will result in the sale by NWEN (Jersey)’s shareholders of their investment in NWEN (Jersey).

The Directors do not have certainty over the future actions and strategy of any potential acquirers, including

their funding arrangements. These conditions, along with the other matters explained in note 2 to the financial

statements, indicate the existence of a material uncertainty which may cast significant doubt about the group’s

and the company's ability to continue as a going concern. The financial statements do not include the

adjustments that would result if the group and the company were unable to continue as a going concern.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Independent auditors’ report to the members of

Electricity North West Limited (continued)

In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of

accounting in the preparation of the financial statements is appropriate.

Our evaluation of the directors’ assessment of the group's and the company’s ability to continue to adopt the

going concern basis of accounting included:

• Evaluating management's forecast base case and downside scenarios and challenging the appropriateness

of underlying assumptions.

• Reviewing management accounts for the financial period to date and comparing those with management's

scenarios.

• Evaluating the historical accuracy of management forecasts.

• Testing the mathematical integrity of management's going concern forecast models.

• Consideration of the status of the strategic review being undertaken by shareholders and its impact on the

going concern assessment.

• Reviewing the disclosures made in respect of going concern included in the financial statements.

In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, other than

the material uncertainty identified in note 2 to the financial statements, 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, or in respect of the directors’

identification in the financial statements of any other material uncertainties to the group's and the company’s

ability to continue to do so over a period of at least twelve months from the date of approval of 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.

Our audit approach

Overview

Audit scope

• The only component of the group included in the scope of our audit of the consolidated financial statements

was Electricity North West Limited.

• All audit work on the group and company was performed by the group audit engagement team.

Key audit matters

• Material uncertainty related to going concern (group and parent)

• Valuation of Derivative Financial Instruments (group and parent)

• Capitalisation of Costs (group and parent)

• Valuation of Defined Benefit Pension Assets and Obligations (group and parent)

Materiality

• Overall group materiality: £5,700,000 (2023: £4,915,000) based on 5% of three years average of profit before

tax, derivative fair value and accretion charges.

• Overall company materiality: £5,700,000 (2023: 4,900,000) based on 5% of three years average of profit

before tax, derivative fair value and accretion charges.

• Performance materiality: £4,275,000 (2023: £3,675,000) (group) and £4,275,000 (2023: £3,675,000)

(company).

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Independent auditors’ report to the members of

Electricity North West Limited (continued)

The scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the

financial statements.

Key audit matters

Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in

the audit of the financial statements of the current period and include the most significant assessed risks of

material misstatement (whether or not due to fraud) identified by the auditors, including those which had the

greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts

of the engagement team. These matters, and any comments we make on the results of our procedures

thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our

opinion thereon, and we do not provide a separate opinion on these matters.

In addition to going concern, described in the Material uncertainty related to going concern section above, we

determined the matters described below to be the key audit matters to be communicated in our report. This is

not a complete list of all risks identified by our audit.

Material uncertainty related to going concern is a new key audit matter this year. Otherwise, the key audit

matters below are consistent with last year.

Key audit matter

How our audit addressed the key audit matter

Valuation of Derivative Financial Instruments

(group and parent)

To assess the appropriateness of the valuation of derivative

financial instruments, we performed the following:

• We assessed the reasonableness of the risk adjustments

using independently sourced data points and models;

• We understood the underlying control environment applied

to the valuation of the instruments;

• We tested the accuracy and completeness of the derivative

population through agreeing key terms to underlying

agreements, and independently obtaining confirmations from

the external counterparties;

• We tested the models and key assumptions used by

management to value derivatives;

• We tested settlements made on the derivatives, as well as

other P&L impacts of derivatives including the amortisation

of day 1 derivative valuation; and

• We prepared independent valuations for derivatives within

the portfolio as at 31 March 2024 on a pre and post credit

risk basis, including independently calculating individual

credit risk adjustments.

We concluded that valuations of derivatives, including the

determination of credit risk adjustments within the valuations,

were in line with ranges and thresholds we independently

determined using independently sourced data points.

Refer to Note 21 in the Group and Company

financial statements. The Group and Company hold

derivative financial instruments with both external

and sister company counterparties.

At 31 March 2024 instruments held with external

parties comprised derivative liabilities of £352.4m

and derivative assets of £28.5m, whilst those held

with sister companies comprised derivative

liabilities and assets of £217.1m each.

These instruments are measured at fair value

through profit and loss. The valuations are

complex, and made up of underlying risk free

valuations, overlaid with credit risk adjustments.

We consider there to be a heightened risk of error

in the credit risk adjustments. This risk does not

extend to the underlying risk free valuations, as the

method, assumptions, and data used for their

valuations are all considered to be reliable and

appropriate to their nature and do not require

significant judgement.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Independent auditors’ report to the members of

Electricity North West Limited (continued)

Key audit matter

How our audit addressed the key audit matter

Capitalisation of Costs (group and parent)

To assess the value and nature of costs capitalised into property,

plant and equipment in the year, we conducted the following

procedures:

• We discussed with management to understand the process

by which capitalisation rates are determined and how costs

are then appropriately accounted for when incurred;

• We understood how activities by cost centre are used to

determine the percentage of costs capitalised;

• We sampled a selection of the cost categories, including

those which contribute to the most significant proportions of

capitalised cost as well as those where a judgemental

capitalisation percentage is applied;

• We performed procedures to confirm that costs are

appropriately allocated to the cost centre or centres to which

they relate; and

• We undertook procedures to corroborate the nature of

activities performed under each cost category being tested to

assess the appropriateness of the capitalisation rates applied.

We have concluded that management has applied appropriate and

consistent estimates to determine the overall level of costs to be

capitalised for the year, including in relation to those costs

capitalised based on a judgemental proportion of costs, where we

considered there to be a heightened level of audit risk.

Refer to Note 11 in the Group and Company

financial statements.

The Group continues to make significant capital

investment in Property, plant and equipment,

principally in relation to the development of the

distribution network. For the year ended 31

March 2024 capital additions were made to the

asset categories of operational structures and

assets under construction of £185.9m and

£70.9m respectively.

These additions include a significant proportion of

capitalised overhead costs. Certain categories of

overhead costs are capitalised based on

judgemental percentage rates.

We have identified a risk that the capitalisation

rates used do not appropriately reflect the nature

of activities to which the underlying costs relate,

resulting in an incorrect apportionment of

overhead costs between Property, Plant and

Equipment on the Consolidated and Company

Statements of Financial Position and expenses

recognised in the Consolidated and Company

Statements of Profit or Loss and Other

Comprehensive Income.

Valuation of Defined Benefit Pension Assets and

Obligations (group and parent)

To assess the appropriateness of the values of assets and

obligations in the defined benefit pension scheme, we performed

the following;

• We challenged, with the support of our own actuarial experts,

the key assumptions applied against externally derived data

and internally developed benchmarks;

• We assessed the appropriateness of recognition of the UK

surplus in line with accounting standards;

• We obtained evidence of the valuation of scheme assets,

including Level 3 financial instruments. To the extent deemed

necessary, our procedures included: Obtaining an

understanding of each fund and its underlying assets to

assess any complexities around pricing the fund; Obtaining

third party confirmations and reconciling them to the year-end

asset carrying values; Made use of available market

information to assess if any contradictory evidence to the

valuation of the assets existed; Challenged management on

the valuation of any assets where an independent valuation

was not available as at 31 March 2024; and Assessed the

assumptions used in the valuation of the annuity against our

understanding of the policy and the scheme.

• We assessed the membership data used in valuing the

defined benefit pension obligation;

• We reviewed the competency, independence, objectivity and

capability of management’s expert used in setting the liability

assumptions; and

• We considered the adequacy of the group's disclosures in

respect of reporting the key assumptions and sensitivities of

assumptions

Based on the results of our testing, we found the liability

assumptions made in the valuation of the UK defined benefit

pension scheme resulted in an overall acceptable valuation and

the valuation of the level 3 more complex assets were appropriate

taking into account the materiality level applied. We also consider

the disclosures made in the financial statements to be appropriate.

Refer to note 24 in the Group and Company

financial statements. The net defined benefit

pension asset at 31 March 2024 was £39.0m,

comprising gross assets of £894.0m and gross

liabilities of £855.0m.

Assets held by the scheme include certain Level

3 financial instruments, being an annuity

insurance policy and a number of holdings in

Pooled Investment Vehicles ('PIVs'). Valuations

of Level 3 financial instruments are more complex

due to them including unobservable inputs.

The determination of the value of liabilities

requires the application of an actuarial valuation

method, the attribution of benefits to periods of

service, and the use of significant actuarial

assumptions including in particular the discount

rate, inflation rates and the average life

expectancy of members.

Small changes in the assumptions used could

have a significant effect on the financial position

of the group. The present value of the gross

defined benefit liabilities is deducted from the

gross fair value of plan assets in determining the

net pension asset.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Independent auditors’ report to the members of

Electricity North West Limited (continued)

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on

the financial statements as a whole, taking into account the structure of the group and the company, the

accounting processes and controls, and the industry in which they operate.

The group consists of Electricity North West Limited, as the parent entity, and two dormant subsidiary

companies (Electricity North West Number 1 Company Limited and ENW (ESPS) Pensions Trustees Limited). The

group financial statements are a consolidation of these three entities. We note that all balances held by

subsidiary entities are eliminated on consolidation. Consequently, Electricity North West Limited was the only

entity in scope for the purpose of the group audit.

All audit work on the group and the company was performed by the group engagement team.

The impact of climate risk on our audit

As part of our audit we made enquiries of management to understand the process management adopted to

assess the extent of the potential impact of climate risk on the group’s financial statements and support the

disclosures made within the Annual Report and Consolidated Financial Statements.

We used our knowledge of the group, with assistance from our internal climate experts, to challenge the

completeness of management’s climate risk assessment by challenging the consistency of management’s

climate impact assessment with internal climate plans and board minutes, including whether the time horizons

management have used take account of all relevant aspects of climate change such as transition risks and

reading the entity’s website and communications for details of climate related impacts.

Using our knowledge of the business we evaluated management’s risk assessment, its estimates as set out in

Note 3 of the financial statements and resulting disclosures, where significant. We considered the only

financial area to be potentially materially impacted by climate risk to be the directors' impairment assessment.

To respond to the audit risk identified in this area we tailored our audit approach to address this, in particular,

we challenged management on how the impact of carbon reduction commitments would impact the

assumptions within the discounted cash flows prepared by management that are used in the Group's

impairment analysis.

We also considered the consistency of the disclosures in relation to climate change within the Annual Report

with the financial statements and our knowledge obtained from our audit.

Our procedures did not identify any material impact in the context of our audit of the financial statements as a

whole, or our key audit matters for the year ended 31 March 2024.

Materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds

for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit

and the nature, timing and extent of our audit procedures on the individual financial statement line items and

disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial

statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as

follows:

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Independent auditors’ report to the members of

Electricity North West Limited (continued)

Financial statements - group

Financial statements - company

Overall

materiality

£5,700,000 (2023: £4,915,000).

£5,700,000 (2023: 4,900,000).

How we

determined it

5% of three years average of profit before tax,

derivative fair value and accretion charges

5% of three years average of profit before tax,

derivative fair value and accretion charges

Rationale for

benchmark

applied

Profit before tax and fair value movements is a

primary measure reported to shareholders to indicate

the underlying performance of the group and

company. For the year ended 31 March 2024 we have

also excluded the impact of accretion charges, as we

do not consider these to relate directly to the

underlying operations and performance of the group

and company. The use of a three year average is

considered appropriate as this reduces volatility

caused by under or over recoveries of electricity

distribution revenue in a specific financial year.

Profit before tax and fair value movements is a

primary measure reported to shareholders to indicate

the underlying performance of the company. For the

year ended 31 March 2024 we have also excluded the

impact of accretion charges, as we do not consider

these to relate directly to the underlying operations

and performance of the company. The use of a three

year average is considered appropriate as this reduces

volatility caused by under or over recoveries of

electricity distribution revenue in a specific financial

year.

For each component in the scope of our group audit, we allocated a materiality that is less than our overall group

materiality. The range of materiality allocated across components was £5,404,000, being the component

materiality level applied to the audit of the financial information of Electricity North West Limited.

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of

uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance

materiality in determining the scope of our audit and the nature and extent of our testing of account balances,

classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality

was 75% (2023: 75%) of overall materiality, amounting to £4,275,000 (2023: £3,675,000) for the group financial

statements and £4,275,000 (2023: £3,675,000) for the company financial statements.

In determining the performance materiality, we considered a number of factors - the history of misstatements,

risk assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the

upper end of our normal range was appropriate.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit

above £0.28m (group audit) (2023: £0.25m) and £0.28m (company audit) (2023: £0.25m) as well as

misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.

Reporting on other information

The other information comprises all of the information in the Annual Report other than the financial statements

and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the

financial statements does not cover the other information and, accordingly, we do not express an audit opinion

or, except to the extent otherwise explicitly stated in this report, any form of assurance 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 an apparent

material inconsistency or material misstatement, we are required to perform procedures to conclude whether

there is a material misstatement of 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 based on these responsibilities.

With respect to the Strategic report and Directors' Report, we also considered whether the disclosures required

by the UK Companies Act 2006 have been included.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Independent auditors’ report to the members of

Electricity North West Limited (continued)

Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report

certain opinions and matters as described below.

Strategic report and Directors' Report

In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic

report and Directors' Report for the year ended 31 March 2024 is consistent with the financial statements and

has been prepared in accordance with applicable legal requirements.

In light of the knowledge and understanding of the group and company and their environment obtained in the

course of the audit, we did not identify any material misstatements in the Strategic report and Directors' Report.

Corporate governance statement

ISAs (UK) require us to review the directors’ statements in relation to going concern, longer-term viability and

that part of the corporate governance statement relating to the company’s compliance with the provisions of

the UK Corporate Governance Code, which the Listing Rules of the Financial Conduct Authority specify for review

by auditors of premium listed companies. Our additional responsibilities with respect to the corporate

governance statement as other information are described in the Reporting on other information section of this

report.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of

the corporate governance statement, included within the Strategic Report, Directors' Report and Corporate

Governance Report is materially consistent with the financial statements and our knowledge obtained during

the audit, and, except for the matters reported in the section headed ‘Material uncertainty related to going

concern’, we have nothing material to add or draw attention to in relation to:

• The directors’ confirmation that they have carried out a robust assessment of the emerging and principal

risks;

• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to

identify emerging risks and an explanation of how these are being managed or mitigated;

• The directors’ statement in the financial statements about whether they considered it appropriate to adopt

the going concern basis of accounting in preparing them, and their identification of any material uncertainties

to the group’s and company’s ability to continue to do so over a period of at least twelve months from the

date of approval of the financial statements;

• The directors’ explanation as to their assessment of the group's and company’s prospects, the period this

assessment covers and why the period is appropriate; and

• The directors’ statement as to whether they have a reasonable expectation that the company will be able

to continue in operation and meet its liabilities as they fall due over the period of its assessment, including

any related disclosures drawing attention to any necessary qualifications or assumptions.

Our review of the directors’ statement regarding the longer-term viability of the group and company was

substantially less in scope than an audit and only consisted of making inquiries and considering the directors’

process supporting their statement; checking that the statement is in alignment with the relevant provisions of

the UK Corporate Governance Code; and considering whether the statement is consistent with the financial

statements and our knowledge and understanding of the group and company and their environment obtained

in the course of the audit.

In addition, based on the work undertaken as part of our audit, we have concluded that each of the following

elements of the corporate governance statement is materially consistent with the financial statements and our

knowledge obtained during the audit:

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Independent auditors’ report to the members of

Electricity North West Limited (continued)

• The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and

understandable, and provides the information necessary for the members to assess the group’s and

company's position, performance, business model and strategy;

• The section of the Annual Report that describes the review of effectiveness of risk management and

internal control systems; and

• The section of the Annual Report describing the work of the Audit Committee.

We have nothing to report in respect of our responsibility to report when the directors’ statement relating to

the company’s compliance with the Code does not properly disclose a departure from a relevant provision of

the Code specified under the Listing Rules for review by the auditors.

Responsibilities for the financial statements and the audit

Responsibilities of the directors for the financial statements

As explained more fully in the Statement of directors’ responsibilities in respect of the financial statements, the

directors are responsible for the preparation of the financial statements in accordance with the applicable

framework and for being satisfied that they give a true and fair view. The directors are also responsible for such

internal control as they determine is necessary to enable the preparation of financial statements that are free

from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group’s and the company’s

ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the

going concern basis of accounting unless the directors either intend to liquidate the group or the company or to

cease operations, or have no realistic alternative but to do so.

Auditors’ responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free

from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our

opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in

accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise

from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be

expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures

in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities,

including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is

detailed below.

Based on our understanding of the group and industry, we identified that the principal risks of non-compliance

with laws and regulations related to Health and Safety regulation and regulations applicable to the operation of

electricity distribution networks in the UK, 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 financial statements such as UK tax laws and the Companies Act 2006. 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 inappropriate journal

entries to improve financial performance, and management bias within accounting estimates and judgements.

Audit procedures performed by the engagement team included:

• challenging assumptions and judgements made by management in their significant accounting estimates;

• discussions with the Audit Committee, management and internal audit including consideration of known or

suspected instances of non-compliance with laws and regulation or fraud;

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Independent auditors’ report to the members of

Electricity North West Limited (continued)

• reviewing minutes of meetings of those charged with governance;

• auditing the calculations supporting tax balances and disclosures; and

• reviewing financial statements disclosures and testing to supporting documentation, where appropriate, to

assess compliance with applicable laws and regulations.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of

instances of non-compliance with laws and regulations that are not closely related to events and transactions

reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is

higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by,

for example, forgery or intentional misrepresentations, or through collusion.

Our audit testing might include testing complete populations of certain transactions and balances, possibly using

data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather

than testing complete populations. We will often seek to target particular items for testing based on their size

or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the

population from which the sample is selected.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s

website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.

Use of this report

This report, including the opinions, has been prepared for and only for the company’s members as a body in

accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving

these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report

is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Other required reporting

Companies Act 2006 exception reporting

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not obtained all the information and explanations we require for our audit; or

• adequate accounting records have not been kept by the company, or returns adequate for our audit have

not been received from branches not visited by us; or

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

• the company financial statements are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Appointment

Following the recommendation of the Audit Committee, we were appointed by the members on

16 September 2022 to audit the financial statements for the year ended 31 March 2023 and subsequent

financial periods. The period of total uninterrupted engagement is 2 years, covering the years ended

31 March 2023 to 31 March 2024.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Independent auditors’ report to the members of

Electricity North West Limited (continued)

Other matter

The company is required by the Financial Conduct Authority Disclosure Guidance and Transparency Rules to

include these financial statements in an annual financial report prepared under the structured digital format

required by DTR 4.1.15R - 4.1.18R and filed on the National Storage Mechanism of the Financial Conduct

Authority. This auditors’ report provides no assurance over whether the structured digital format annual

financial report has been prepared in accordance with those requirements.

Simon White (Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

Manchester

11 July 2024

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Financial Statements

Consolidated and Company Statements of Profit or Loss and Other Comprehensive

Income

For the year ended 31 March 2024

		Group and	Group and
		Company	Company
		2024	2023
	Note	£m	£m
Revenue	4	598.1	594.7
Employee costs	5,6	(76.7)	(67.0)
Depreciation and amortisation expense	5	(146.7)	(140.7)
Other operating costs		(145.6)	(191.5)
Total operating costs		(369.0)	(399.2)
Operating profit	5	229.1	195.5
Finance income	8	21.0	4.2
Finance costs	9	(88.3)	(4.7)
Profit before income tax		161.8	195.0
Income tax expense	10	(41.7)	(49.5)
Profit for the financial year		120.1	145.5
Other comprehensive (expense)/income:
Items that will not be reclassified to profit or loss:
Remeasurement of retirement benefit scheme	24	(6.8)	9.4
Deferred tax on re-measurement of retirement benefit scheme	26	1.7	(2.3)
Other comprehensive (expense)/income for the financial year		(5.1)	7.1
Total comprehensive income for the financial year		115.0	152.6

The results for the current and prior year are derived from continuing operations.

The above consolidated and company statements of profit or loss and other comprehensive income

should be read in conjunction with the notes.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Consolidated and Company Statements of Financial Position

As at 31 March 2024

		Group	Company	Group	Company
		2024	2024	2023	2023
	Note	£m	£m	£m	£m
ASSETS
Non-current assets
Property, plant and equipment	11	3,785.8	3,785.8	3,638.5	3,638.5
Intangible assets and goodwill	13	52.1	52.1	55.2	55.2
Investment in subsidiaries	14	-	15.4	-	15.4
Derivative assets	21	245.6	245.6	327.4	327.4
Retirement benefit surplus	24	39.0	39.0	42.6	42.6
Total non-current assets		4,122.5	4,137.9	4,063.7	4,079.1
Current assets
Inventories	15	49.3	49.3	22.4	22.4
Trade and other receivables	16	102.5	102.5	97.8	97.8
Current income tax asset		-	-	2.8	2.8
Cash and cash equivalents	17	189.8	189.8	173.8	173.8
Money market deposits over three months	18	-	-	305.7	305.7
Total current assets		341.6	341.6	602.5	602.5
Total assets		4,464.1	4,479.5	4,666.2	4,681.6

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Consolidated and Company Statements of Financial Position (continued)

As at 31 March 2024

		Group	Company	Group	Company
		2024	2024	2023	2023
	Note	£m	£m	£m	£m
LIABILITIES
Current liabilities
Trade and other payables	19	(163.5)	(179.2)	(152.3)	(168.0)
Current income tax liability		(18.5)	(18.5)	-	-
Borrowings	20	(10.9)	(10.9)	(223.3)	(223.3)
Customer contributions	25	(81.0)	(81.0)	(76.6)	(76.6)
Provisions	27	(0.5)	(0.5)	(0.6)	(0.6)
Total current liabilities		(274.4)	(290.1)	(452.8)	(468.5)
Non-current liabilities
Borrowings	20	(1,559.1)	(1,559.1)	(1,539 .8)	(1,539.8)
Derivative liabilities	21	(569.5)	(569.5)	(753.6)	(753.6)
Customer contributions	25	(720.3)	(720.3)	(688.5)	(688.5)
Deferred tax	26	(262.2)	(262.2)	(237.3)	(237.3)
Provisions	27	(0.2)	(0.2)	(0.4)	(0.4)
Total non-current liabilities		(3,111.3)	(3,111.3)	(3,219.6)	(3,219.6)
Total liabilities		(3,385.7)	(3,401.4)	(3,672.4)	(3,688.1)
Net assets		1,078.4	1,078.1	993.8	993.5
EQUITY
Share capital	28,29	238.4	238.4	238.4	238.4
Share premium account	29	4.4	4.4	4.4	4.4
Revaluation reserve	29	70.0	70.0	72.0	72.0
Capital redemption reserve	29	8.6	8.6	8.6	8.6
Retained earnings	29	757.0	756.7	670.4	670.1
Total equity	29	1,078.4	1,078.1	993.8	993.5

The above consolidated and company statements of financial position should be read in conjunction

with the notes.

The financial statements on pages 73 to 78, were approved and authorised for issue by the Board of

Directors on 11 July 2024 and were signed on its behalf by:

Chris Johns

Director

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Consolidated Statement of Changes in Equity

For the year ended 31 March 2024

Share capital

Share premium

account

Revaluation reserve

Capital redemption

reserve

Retained earnings

Total Equity

	£m	£m	£m	£m	£m	£m
At 1 April 2022	238.4	4.4	74.1	8.6	538.7	864.2
Profit for the financial year	-	-	-	-	145.5	145.5
Other comprehensive income for the financial
year	-	-	-	-	7.1	7.1
Transfer from revaluation reserve	-	-	(2.1)	-	2.1	-
Total comprehensive income for the financial
year	-	-	(2.1)	-	154.7	152.6
Dividends (Note 31)	-	-	-	-	(23.0)	(23.0)
At 31 March 2023 and 1 April 2023	238.4	4.4	72.0	8.6	670.4	993.8
Profit for the financial year	-	-	-	-	120.1	120.1
Other comprehensive expense for the financial
year	-	-	-	-	(5.1)	(5.1)
Transfer from revaluation reserve	-	-	(2.0)	-	2.0	-
Total comprehensive income for the financial
year	-	-	(2.0)	-	117.0	115.0
Dividends (Note 31)	-	-	-	-	(30.4)	(30.4)
At 31 March 2024	238.4	4.4	70.0	8.6	757.0	1,078.4

The above consolidated statement of changes in equity should be read in conjunction with the notes.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Company Statement of Changes in Equity

For the year ended 31 March 2024

capital

Share premium

account

Revaluation reserve

Capital redemption

reserve

Retained earnings

Total Equity

£m

At 1 April 2022

238.4

4.4

74.1

8.6

538.4

863.9

Profit for the financial year

145.5

Other comprehensive income for the financial

year

7.1

Transfer from revaluation reserve

(2.1)

2.1

Total comprehensive income for the financial

year

(2.1)

154.7

152.6

Dividends (Note 31)

(23.0)

At 31 March 2023 and 1 April 2023

238.4

4.4

72.0

8.6

670.1

993.5

Profit for the financial year

120.1

Other comprehensive (expense) for the

financial year

(5.1)

Transfer from revaluation reserve

(2.0)

2.0

Total comprehensive income for the financial

year

(2.0)

117.0

115.0

Dividends (Note 31)

(30.4)

At 31 March 2024

238.4

4.4

70.0

8.6

756.7

1,078.1

The above company statement of changes in equity should be read in conjunction with the notes.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Consolidated and Company Statements of Cash Flows

For the year ended 31 March 2024

		Group and	Group and
		Company	Company
		2024	2023
	Note	£m	£m
Operating activities
Cash generated from operations	35	311.3	297.0
Customer contributions received	25	57.1	60.6
Interest paid		(75.4)	(58.8)
Interest portion of lease liabilities	20	(0.3)	(0.2)
Accretion on index-linked swaps	9	(87.0)	(20.1)
Income taxes received/(paid)		6.2	(10.3)
Net cash generated from operating activities		211.9	268.2
Investing activities
Interest received and similar income		22.6	2.0
Transfer from/(to) money market deposits over three months		305.7	(305.7)
Purchase of property, plant and equipment		(273.5)	(244.6)
Purchase of intangible assets		(11.1)	(10.5)
Proceeds from sale of property, plant and equipment		0.2	0.5
Net cash generated from/(used in) investing activities		43.9	(558.3)
Net cash flow before financing activities		255.8	(290.1)
Financing activities
Proceeds from external borrowings	20	-	37.0
Repayment of external borrowings	20	(232.9)	(45.3)
Repayment of lease liabilities	12	(1.8)	(1.5)
Increase in loan from parent	20	13.3	12.3
Increase in loan from group undertaking	20	-	425.0
Movement on cash collateral held	21,35	12.0	-
Dividends paid	31	(30.4)	(23.0)
Net cash (used in)/generated from financing activities		(239.8)	404.5
Net increase in cash and cash equivalents		16.0	114.4
Cash and cash equivalents at the beginning of the year	17	173.8	59.4
Cash and cash equivalents at the end of the year	17	189.8	173.8

The above consolidated and company statements of cash flows should be read in conjunction with

the notes.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements

Electricity North West Limited is a company incorporated and domiciled in the United Kingdom and

registered in England and Wales under the Companies Act 2006.

The financial statements are presented in sterling, which is the functional currency of the Company

and Group. All values are stated in million pounds (£’m) unless otherwise indicated.

The financial statements are prepared on the going concern basis. Further detail on the going concern

assessment is contained in the Strategic Report, page 35, and Note 2.

1. Adoption of new and revised standards

New and amended standards adopted by the Group

In the current year, the Group has applied the following amendments to IFRS Standards issued by the

International Accounting Standards Board (IASB) for an accounting period that begins on or after 1

January 2023; their adoption has not had any material impact on the disclosures or the amounts

reported in these financial statements:

• Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies;

• Amendments to IAS 8: Definition of Accounting Estimates; and

• Amendments to IAS 12: Deferred Tax related to Assets and Liabilities arising from a Single

Transaction.

New and revised standards not yet adopted

At the date of authorisation of these financial statements, the Group has not applied the following

new and revised IFRS Standards that have been issued but are not yet effective:

• Amendments to IAS 1: Classification of Liabilities as Current or Non-current, effective and will

be applied by the Group from year ending 31 March 2025;

• Amendments to IAS 1: Non-current Liabilities with Covenants, effective and will be applied by

the Group from year ending 31 March 2025;

• Amendments to IFRS 16: Lease Liability in a Sale and Leaseback, effective from year ending 31

March 2025 but is not applicable to the Group; and

• Amendments to IAS 7 and IFRS 7: Supplier finance arrangements, effective from year ending

31 March 2025 but is not applicable to the Group.

The directors do not expect that the adoption of the amendments listed above will have a material

impact on the financial statements of the Group in future periods.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

2. Material accounting policy information

The material accounting policies adopted in the preparation of these financial statements are set out

below. These policies have been applied consistently in the current year and the prior year.

Basis of preparation

The Group and Company financial statements have been prepared in accordance with United Kingdom

adopted international accounting standards and with the requirements of the Companies Act 2006 as

applicable to companies reporting under those standards.

The financial statements have been prepared on the historical cost basis, except for certain financial

instruments that are measured at fair value, retirement benefit scheme and certain property, plant

and equipment that were revalued in 1997. Historical cost is generally based on the fair value of the

consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date, regardless of whether that price

is directly observable or estimated using another valuation technique. More details on the fair value

measurements of financial instruments are given in Note 22.

Going concern

When considering whether to continue to adopt the going concern basis in preparing these financial

statements, the directors have taken into account a number of factors, including the following:

• The Company’s electricity distribution licence includes the obligation in standard licence

condition 40 to maintain an investment grade issuer credit rating, which has been met.

• Under section 3A of the Electricity Act 1989, GEMA has a duty, in carrying out its functions, to

have regard to the need to secure that licence holders are able to finance their activities, which

are the subject of obligations imposed by or under Part 1 of the Electricity Act 1989 or the Utilities

Act 2000.

• Management has prepared, and the directors have reviewed and approved Group budgets for

the year ending 31 March 2025. These budgets include profit projections and cash flow forecasts,

including covenant compliance considerations. Inherent in forecasting is an element of

uncertainty and key sensitivities are considered when budgets are approved, including possible

changes in inflation and under recoveries of allowed revenue as plausible downside scenarios.

• Management has prepared forecasts covering the full regulatory period out to 2028, based on

Ofgem’s Final Determination for RIIO-ED2. Forecasts demonstrate that there is sufficient

headroom on key covenants and that there are sufficient financial resources available to the

Group within the forecast period.

• Management has prepared liquidity forecasts on a monthly basis, and performed inflation

sensitivities on forecasts to July 2025, being at least 12 months from the date of approval of the

financial statements.

• Short-term liquidity requirements are forecast to be met from the Group’s operating cash flows

and short-term deposit balances. At 31 March 2024, there was £50.0m of committed undrawn

borrowing facilities; these were replaced with a new larger facility in April 2024 (Note 20). As a

result, £250.0m of committed undrawn facilities are available for at least 12 months from the

date of approval of these financial statements.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

2. Material accounting policy information

Going concern (continued)

• Though the Company is largely financed by long-term external funding, any uncommitted

financing has been removed from the assessment.

• Management prepared and considered key sensitivities to the business plan model when

assessing going concern. These sensitivities include removal of incentive income, macro-

economic factors including inflation at +/-1% and DUoS revenue under collection.

• External factors are also considered such as, cost of living and high energy prices, interest rates,

Ukraine conflict and impact on supply chain, and energy prices and supplier administration.

The shareholders of North West Electricity Networks (Jersey) Limited (“NWEN (Jersey)”), the

Company’s ultimate parent undertaking (“ultimate parent”), are currently undertaking a Strategic

Review of their investment in NWEN (Jersey) Group which includes ENWL, following the conclusion of

the ED1 price control period in which ENWL delivered the best operational performance of any UK

DNO group. It is possible that this Strategic review will result in the sale by NWEN (Jersey)’s

shareholders of some or all of the share capital of the ultimate parent.

Whether or not there is a sale, the Strategic Review is expected to strengthen the operational and

financial position of the NWEN (Jersey) Group over future years from its already strong level, to

support and optimise the delivery of Net Zero for our customers in the North West. The directors have

however considered the impact of the ongoing Strategic Review on the appropriateness of the Going

Concern assumption for the Group and Company. The directors have considered the two potential

outcomes of the Strategic Review:

• In the event there is no sale, the directors are satisfied that the going concern basis of

preparation remains appropriate, as the Group and Company have adequate resources to

continue in operational existence and meet their obligations as they fall due for at least the

next 12 months from the date of approval of these financial statements.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

2. Material accounting policy information

Going concern (continued)

• In the event there is a sale, any potential NWEN (Jersey) shareholders are expected to

continue to run the NWEN (Jersey) Group, including the Company, as a going concern. The

Directors expect that any sale made will only take place to reputable new shareholders,

recognising the Company’s strong liquidity and regulatory licence protections. Any potential

sale may be scrutinised by Ofgem, CMA and other government bodies to ensure that any new

shareholders are fit and proper to own key infrastructure assets. The delivery of electricity to

customers in the North West is a critical service of national importance and such scrutiny can

cover many aspects, including national security and financial sustainability. The regulated

assets in the Company are protected by the regulatory licence; the regulatory licence can only

be transferred with Ofgem’s approval. In addition, any potential new shareholders will be

expected to run the business prudently within the financial covenants agreed with the lenders

of the Group and as such these afford protection against potential increases in gearing of the

business above the lock-up ratio covenants. No additional financial support from NWEN

(Jersey) shareholders is required for the Group and Company to continue as a going concern,

and the Directors have a reasonable expectation that the Company has adequate resources

to continue in operational existence for the foreseeable future in this scenario. However, at

the date of approval of these financial statements, the Directors do not have certainty over

the future actions and strategy of the acquirer including their funding arrangements. These

conditions indicate the existence of a material uncertainty which may cast a significant doubt

on the Group and Company’s ability to continue as a going concern. These financial

statements do not include the adjustments that would result if the Group and Company were

unable to continue as a going concern.

Notwithstanding this uncertainty, the directors have a reasonable expectation that the Company and

the Group have adequate resources to continue in operational existence and meet their obligations

as they fall due for the foreseeable future. In making this assessment, the directors have considered

the foreseeable future to be a period of at least 12 months from the date of approval of the financial

statements, per the FRC guidelines. Accordingly, they continue to adopt the going concern basis in

preparing the Annual Report and Consolidated Financial Statements.“

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

2. Material accounting policy information (continued)

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and

entities controlled by the Company (its subsidiaries), made up to 31 March each year.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases

when the Company loses control of the subsidiary. There have been no acquisitions or disposals of

subsidiaries in the current or prior year.

Subsidiaries are entities controlled by the Group. The Group controls an entity when it 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.

The financial statements of subsidiaries are included in the consolidated financial statements from the

date that control commences until the date that control ceases.

Accounting policies are consistent in all Group companies.

All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions

between Group members are eliminated on consolidation.

Business combinations and goodwill

Acquisitions of subsidiaries are accounted for using the acquisition method. The consideration

transferred in a business combination is measured at fair value, which is calculated as the sum of the

acquisition-date fair value of assets transferred by the Group, liabilities incurred by the Group to the

former owners of the acquiree and the equity interest issued by the Group in exchange for control of

the acquiree. Acquisition related costs are recognised in profit or loss as incurred.

Goodwill is measured as the excess of the consideration transferred and acquisition date fair value of

any previous equity interest in the acquired entity over the net of the acquisition-date amounts of the

identifiable assets acquired and liabilities assumed and is recognised as an asset.

Goodwill is allocated to cash-generating units and is not amortised, but is reviewed for impairment

annually, or more frequently when there is an indication that it may be impaired.

Investments in subsidiaries (Company only)

Investments in subsidiary undertakings are stated at cost less any provisions for permanent diminution

in value. Dividends received and receivable are credited to the Company’s income statement to the

extent that they represent a realised profit for the Company.

Capitalisation of overheads

The costs are initially expensed to the income statement with a portion being capitalised based on

management's assessment of the costs incurred that are directly linked to the capital work performed.

This includes internal expenditure, such as staff costs incurred in implementing and supporting the

capital projects, which are capitalised along with an appropriate proportion of overheads. The internal

expenditure is capitalised only if it can be demonstrated that it is directly attributable to the asset,

provides probable economic benefit to the Group and can be reliably measured. The nature of costs

capitalised is a key judgement and this is based on an analysis of total costs that are considered as

directly attributable to capital work. An analysis of total cost split between capital and expense is

performed and reviewed on an annual basis.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

2. Material accounting policy information (continued)

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable primarily for the

distribution of electricity in the normal course of business, net of VAT.

Revenue from the distribution of electricity

The Company provides services under the Distribution Connection and Use of System Agreement

(DCUSA) with its customers and derives the majority of its revenue from Distribution Use of System

(“DUoS”) services. The recognition of revenue from the distribution of electricity is based on actual

volumes distributed through the network and includes an assessment of the volume of unbilled energy

distributed as at the year end. There is a single performance obligation whereby the Company is

required to deliver electricity using its distribution network. The performance obligation is satisfied

over time as the customer simultaneously receives and consumes the benefits and the Company has

the right to payment for the services provided. Revenue includes unbilled income recognised relating

to volumes distributed through the network but not yet invoiced at year end.

Electricity distribution revenue is determined in accordance with the regulatory licence. Where

revenue received or receivable in the year differs from the allowed revenue permitted by regulatory

agreement, adjustments will be made to future prices to reflect this over/under recovery. This will be

taken into account in future financial year’s allowed revenue. No accounting adjustments are

therefore made for the over/under recoveries in the year that they arise or in the year in which they

are recovered.

Incentive income earned or adjustments for under/over-spend against totex allowances , are not

adjusted within revenue reported in the year within which they arise. These adjustments are factored

into allowed revenue for future periods and consequently recognised as revenue when the associated

volumes are distributed and the performance obligation is met.

Government levies

Where the Company is directed to collect or pay levies by the Regulator, Ofgem, those levies are

accounted for under IFRIC 21: Levies. In accordance with IFRIC 21, levies such as Supplier of Last Resort

(SoLR) payment levies, are recognised progressively when an obligating event takes place. SoLR levies

are directed from time to time by Ofgem, with specified payment and collection periods. In accordance

with IFRIC 21 the liability associated with the levy is triggered progressively as the associated income

becomes billable, being the defined obligating event.

Revenue from SoLR levies and the associated costs are therefore recognised proportionately over time

in the income statement, with the levy collection being reflected in revenue and the corresponding

payment of the levy in operating costs.

Connections revenue

Connections revenue includes contract revenue for diversions and disconnections from the network

and is recognised by reference to the proportion of total costs of providing the service. The

performance obligation relates to completion of work per the terms of the contract. Consideration

received in advance of recognising the associated revenue from customers is recorded within contract

liabilities (deferred income). Customer contributions are treated as non-refundable once certain

milestones have been met. Any assets constructed in order to deliver the service are capitalised and

depreciated over their useful life.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

2. Material accounting policy information (continued)

Revenue recognition (continued)

Customer contributions

Customer contributions received towards distribution system assets are contract liabilities until the

performance obligations are completed. The amounts are deferred and credited to the income

statement over the estimated weighted average useful life of the underlying assets. The performance

obligation is considered to be the provision of an ongoing network connection to the customers.

The performance obligation is regarded as satisfied over time as the Company creates a bespoke asset

for which they have no alternative use other than to provide electricity to the customer’s premises.

The Company has an enforceable right to payment for the performance completed to date.

Refundable customer contributions received in respect of property, plant and equipment are initially

held as a liability within customer. The amounts can be refundable and repaid to the customer or

otherwise credited to customer contributions.

Dividend income

Dividend income is recognised when the Company’s right to receive payment is established.

Finance income

Interest income is accrued on a time basis, by reference to the principal outstanding and the effective

interest rate.

Leases

The Group assesses whether a contract is, or contains a lease, at inception of the contract. The

Company recognises a right-of-use asset and a corresponding lease liability with respect to all lease

arrangements in which it is the lessee, except for short-term leases and leases of low value assets. For

these leases, the Group recognises the lease payments as an operating expense on a straight-line basis

over the term of the lease unless another systematic basis is more representative of the time pattern

in which economic benefits from the leased assets are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at

the commencement date, discounted by using either the rate implicit in the lease, or our incremental

borrowing rate.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on

the lease liability and by reducing the carrying amount to reflect the lease payments made.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease

payments made at or before the commencement day, less any lease incentives received and any initial

direct costs. They are subsequently measured at cost less accumulated depreciation and impairment

losses.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the

underlying asset. The depreciation starts at the commencement date of the lease.

The Company applies IAS 36: Impairment of assets to determine whether a right-of-use asset is

impaired and accounts for any identified impairment loss as described in the ‘Property, Plant and

Equipment’ policy.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

2. Material accounting policy information (continued)

Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying

assets, which are assets that necessarily take a substantial period of time to get ready for their

intended use or sale, are added to the cost of those assets, until such time as the assets are

substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Retirement benefit costs

Payments to the defined contribution retirement benefit scheme are recognised as an expense when

employees have rendered service entitling them to the contributions.

The defined benefit pensions scheme is provided through a division of the Electricity Supply Pension

Scheme (ESPS). The most recent actuarial valuation for the scheme for funding purposes was carried

out at 31 March 2022; agreed actuarial valuations are carried out thereafter at intervals of not more

than three years.

Results are affected by the actuarial assumptions used, which are disclosed in Note 24. Actual

experience may differ from the assumptions made, for example, due to changing market and

economic conditions and longer or shorter lives of participants.

Defined benefit costs are split into three categories:

• current service cost, past service cost and gains and losses on curtailments and settlements,

recognised in employee costs (see Note 6) in the income statement;

• net interest expense or income, recognised within finance costs (see Note 9) in the income

statement; and

• re-measurement comprising actuarial gains and losses and the return on scheme assets

(excluding interest) are recognised immediately in the statement of financial position with a

charge or credit to other comprehensive income in the period in which they occur.

Defined benefit assets are measured at fair value while liabilities are measured at present value. The

difference between the two amounts is recognised as a surplus or obligation in the Statement of

Financial Position.

IFRIC14 IAS 19: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their

Interaction was published by the interpretations committee of the International Accounting Standards

Board in July 2007 and was adopted during the year ended 31 March 2008. IFRIC14 provides guidance

on the extent to which a pension scheme surplus should be recognised as an asset and may also

require additional liabilities to be recognised where minimum funding requirements exist. Legal

opinion was obtained that a pension surplus could be recovered on wind up of the scheme and could,

therefore, be recognised, along with associated liabilities.

The Group has concluded that, when a defined benefit asset exists, it can recognise the full amount of

this surplus on the grounds that it could gain sufficient economic benefit from the refund of the surplus

assets that would be available to it following the final payment to the last beneficiary of the Scheme.

Taxation

The tax expense represents the sum of current and deferred tax charges for the financial year,

adjusted for prior year items.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

2. Material accounting policy information (continued)

Current taxation

Current tax is based on taxable profit for the year and is calculated using tax rates and laws that have

been enacted or substantively enacted by the balance sheet date. Taxable profit differs from the net

profit as reported in the income statement because it excludes items of income or expense that are

taxable or deductible in other years, and it further excludes items that are never taxable or deductible.

Deferred taxation

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying

amounts of assets and liabilities in the financial statements and the corresponding tax bases used in

the computation of taxable profit and is accounted for using the balance sheet liability method.

Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax

assets are recognised to the extent that it is probable that taxable profits will be available against

which deductible temporary differences can be utilised. Such assets and liabilities are not recognised

if the temporary difference arises from the initial recognition of goodwill or from the initial recognition

(other than in a business combination) of other assets and liabilities in a transaction that affects

neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in

subsidiaries, except where the Group is able to control the reversal of the temporary difference and

it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is

settled, or the asset is realised based on tax rates and laws that have been enacted or substantively

enacted at the balance sheet date.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the

extent that it is no longer probable that sufficient taxable profits will be available to allow all or part

of the asset to be recovered. Deferred tax is charged or credited in the Income Statement, except

when it relates to items charged or credited in other comprehensive income, in which case the

deferred tax is also dealt with in other comprehensive income.

Intangible assets

Intangible assets with finite useful economic lives are measured initially at cost and are amortised on

a straight-line basis over their estimated useful lives. The carrying amount is reduced by any provision

for impairment where necessary.

Amortisation periods for categories of intangible assets are:

Computer software 1-12 years

Intangible assets under construction are not amortised. Amortisation commences from the date the

intangible asset is available for use.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

2. Material accounting policy information (continued)

Property, plant and equipment

Property, plant and equipment comprise: operational structures; non-operational land and buildings;

fixtures, equipment, vehicles and other assets, and right of use assets.

Operational structures

Infrastructure assets are depreciated by writing off their cost, less the estimated residual value, evenly

over their useful lives, which range from 5 to 85 years. Employee costs incurred in implementing the

capital schemes of the Group are capitalised within operational structure assets.

In 1997 the Company undertook a revaluation of certain assets following a business combination. This

resulted in the creation of a revaluation reserve of £234.9m. The additional depreciation, as a result

of the revaluation, is transferred from the revaluation reserve to retained earnings on an annual basis.

Assets other than operational structures

All other property, plant and equipment is stated at historical cost less accumulated depreciation and

accumulated impairment losses.

Historical cost includes expenditure that is directly attributable to the acquisition of the items and

includes costs directly attributable to making the asset capable of operating as intended. 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. All other repairs and maintenance are charged to

the income statement during the financial year in which they are incurred.

Assets under construction are carried at cost, less any recognised impairment loss. Such assets are

classified to the appropriate categories of property, plant and equipment when completed and ready

for intended use. When the asset is capitalised during the year, any spend in the year is directly

classified to the appropriate categories of property, plant and equipment. Depreciation on these

assets, on the same basis as other assets, commences when the assets are commissioned.

Freehold land and assets in the course of construction are not depreciated until the asset is available

for use.

Depreciation is provided on other assets on a straight-line basis over its expected useful life as follows:

Non-operational land and buildings 30-84 years

Fixtures, equipment, vehicles and other 2-40 years

Right of use assets 3-60 years

Depreciation methods and useful lives are re-assessed annually and, if necessary, changes are

accounted for prospectively.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference

between the sale proceeds and the carrying amount of the asset and is recognised in the income

statement.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

2. Material accounting policy information (continued)

Impairment of tangible and intangible assets

Tangible and intangible assets are assessed for impairment at each balance sheet date to determine

whether there is any indication that those assets have suffered an impairment loss. If any such

indication exists, the recoverable amount of the asset is estimated to determine the extent of the

impairment loss, if any. Where the asset does not generate cash flows that are independent from

other assets, the Group estimates the recoverable amount of the cash-generating unit to which the

asset belongs.

An intangible asset with an indefinite life is tested for impairment at least annually and whenever

there is an indication of impairment.

The recoverable amount is the higher of fair value less costs of disposal, and value in use. The fair

value represents the net present value of expected future cash flows, discounted using a rate that

reflects current market assessments of the time value of money and the risks specific to the asset for

which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying

amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable

amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the reversal is recognised immediately in profit or

loss and the carrying amount of the asset is increased to the revised estimate of its recoverable

amount, but not so as to exceed the carrying amount that would have been determined had no

impairment loss been recognised in prior years. Goodwill and other indefinite assets are never

reversed.

Research and development

Research costs are recognised in the income statement as incurred. Development expenditure on an

individual project is recognised as an intangible asset when the Group can demonstrate: the technical

feasibility of completing the intangible asset so that it will be available for use, its intention to

complete and its ability to use the asset, how the asset will generate future economic benefits, the

availability of resources to complete the asset and the ability to reliably measure the expenditure

incurred during development.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is based on weighted average

cost or actual cost and includes expenditure incurred in acquiring the inventories, conversion costs

and other costs in bringing them to their present location and condition. Net realisable value

represents the estimated selling price, net of estimated costs of selling.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

2. Material accounting policy information (continued)

Financial instruments

Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Group

becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are

directly attributable to the acquisition or issue of financial assets and financial liabilities (other than

financial assets and financial liabilities at fair value through profit or loss are added or deducted from

the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Transaction costs, directly attributable to the acquisition of financial assets or financial liabilities at fair

value through profit or loss, are recognised immediately in profit or loss.

If the transaction price differs from fair value at initial recognition, the Group will account for such

difference as follows:

• if fair value is evidenced by a quoted price in an active market for an identical asset or liability

or based on a valuation technique that uses only data from observable markets, then the

difference is recognised as a gain or loss on initial recognition (i.e. day 1 profit or loss); and

• in all other cases, the fair value will be adjusted to bring it in line with the transaction price

(i.e. day 1 profit or loss will be deferred by including it in the initial carrying amount of the

asset or liability).

After initial recognition, the deferred gain or loss will be released to profit or loss such that it reaches

a value of zero at the time when the contract can be valued using active market quotes or verifiable

objective market information. The Group policy for the amortisation of day 1 gain or loss is to release

it in a reasonable fashion based on the facts and circumstances (e.g. using a straight-line amortisation).

Financial assets

All regular way purchases or sales of financial assets are recognised and derecognised on a trade date

basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery

of assets within the time frame established by regulation or convention in the marketplace.

All recognised financial assets are measured subsequently in their entirety at either amortised cost or

fair value, depending on the classification of the financial assets.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

2. Material accounting policy information (continued)

Classification of financial assets

Financial assets that meet the following conditions are measured subsequently at amortised cost:

• the financial asset is held within a business model whose objective is to hold financial assets

in order to collect contractual cash flows; and

• the contractual terms of the financial asset give rise on specified dates to cash flows that are

solely payments of principal and interest on the principal amount outstanding.

Financial assets that meet the following conditions are measured subsequently at fair value through

other comprehensive income (FVTOCI):

• the financial asset is held within a business model whose objective is achieved by both

collecting contractual cash flows and selling the financial assets; and

• the contractual terms of the financial asset give rise on specified dates to cash flows that are

solely payments of principal and interest on the principal amount outstanding.

The Company and Group have no financial assets at FVTOCI.

By default, all other financial assets are measured subsequently at fair value through profit or loss

(FVTPL).

Amortised cost and effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and

of allocating interest income over the relevant period.

The effective interest rate is the rate that exactly discounts estimated future cash receipts (including

all fees and points paid or received that form an integral part of the effective interest rate, transaction

costs and other premiums or discounts) excluding expected credit losses, through the expected life of

the debt instrument, or, where appropriate, a shorter period, to the gross carrying amount of the debt

instrument on initial recognition.

The amortised cost of a financial asset is the amount at which the financial asset is measured at initial

recognition minus the principal repayments, plus the cumulative amortisation using the effective

interest method of any difference between that initial amount and the maturity amount, adjusted for

any loss allowance. The gross carrying amount of a financial asset is the amortised cost of a financial

asset before adjusting for any loss allowance.

Income is recognised using the effective interest method for debt instruments measured subsequently

at amortised cost and at FVTOCI. For financial assets other than purchased or originated credit-

impaired financial assets, interest income is calculated by applying the effective interest rate to the

gross carrying amount of a financial asset, except for financial assets that have subsequently become

credit-impaired. The Group has no financial assets purchased or originated credit-impaired, or that

have subsequently become credit-impaired.

Interest income is recognised in profit or loss and is included in the ‘Finance income’ line item.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

2. Material accounting policy information (continued)

Financial assets at FVTPL

Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI are

measured at FVTPL. Specifically, the financial assets held by the Group classified as at FVTPL are

derivatives and are stated at fair value, with any fair value gains or losses recognised in profit or loss

to the extent they are not part of a designated hedge accounting relationship. Fair value is determined

in the manner described in Note 22.

Impairment of financial assets

The Group recognises a loss allowance for expected credit losses on investments in debt instruments

that are measured at amortised cost or at FVTOCI, trade receivables and contract assets; the Group

holds no lease receivables or financial guarantee assets. The amount of expected credit losses is

updated at each reporting date to reflect changes in credit risk since initial recognition of the

respective financial instrument.

The Group always recognises lifetime expected credit losses (ECL) for trade receivables and contract

assets. The expected credit losses on these financial assets are estimated using a provision matrix

based on the Group’s historical credit loss experience, adjusted for factors that are specific to the

debtors, general economic conditions and an assessment of both the current as well as the forecast

direction of conditions at the reporting date, including time value of money where appropriate.

For all other financial instruments, the Group recognises lifetime ECL when there has been a significant

increase in credit risk since initial recognition. However, if the credit risk on the financial instrument

has not increased significantly since initial recognition, the Group measures the loss allowance for that

financial instrument at an amount equal to 12-month ECL.

Lifetime ECL represents the expected credit losses that will result from all possible default events over

the life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that

is expected to result from default events on a financial instrument that are possible within 12 months

after the reporting date.

a) Significant increase in credit risk

In assessing whether the credit risk on a financial instrument has increased significantly since initial

recognition, the Group compares the risk of a default occurring on the financial instrument at the

reporting date with the risk of a default occurring on the financial instrument at the date of initial

recognition. In making this assessment, the Group considers both quantitative and qualitative

information that is reasonable and supportable, including historical experience and forward-looking

information that is available without undue cost or effort.

Irrespective of the outcome of the above assessment, the Group presumes that the credit risk on a

financial asset has increased significantly since initial recognition when contractual payments are

more than 30 days past due, unless the Group has reasonable and supportable information that

demonstrates otherwise.

Despite the foregoing, the Group assumes that the credit risk on a financial instrument has not

increased significantly since initial recognition if the financial instrument is determined to have low

credit risk at the reporting date. A financial instrument is determined to have low credit risk if the

financial instrument has a low risk of default and the debtor has a strong capacity to meet its

contractual cash flow obligations in the near-term.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

2. Material accounting policy information (continued)

Impairment of financial assets (continued)

The Group regularly monitors the effectiveness of the criteria used to identify whether there has been

a significant increase in credit risk and revises them as appropriate to ensure that the criteria are

capable of identifying a significant increase in credit risk before the amount becomes past due.

b) Definition of default

The Group considers that default has occurred when a financial asset is more than 90 days past due,

unless the Group has reasonable and supportable information to demonstrate that a more lagging

default criterion is more appropriate.

c) Credit-impaired financial assets

A financial asset is credit-impaired when one or more events that have a detrimental impact on the

estimated future cash flows of that financial asset have occurred.

d) Measurement and recognition of expected credit losses

The measurement of expected credit losses is a function of the probability of default, loss given default

and the exposure at default. The assessment of the probability of default and loss given default is

based on historical data adjusted by forward-looking information. The exposure at default is

represented by the assets’ gross carrying amount at the reporting date.

For financial assets, the expected credit loss is estimated as the difference between all contractual

cash flows that are due to the Group in accordance with the contract and all the cash flows that the

Group expects to receive, discounted at the original effective interest rate.

If the Group has measured the loss allowance for a financial instrument at an amount equal to lifetime

ECL in the previous reporting period but determines at the current reporting date that the conditions

for lifetime ECL are no longer met, the Group measures the loss allowance at an amount equal to 12-

month ECL at the current reporting date, except for assets for which the simplified approach was used.

The Group recognises an impairment gain or loss in profit or loss for all financial instruments with a

corresponding adjustment to their carrying amount through a loss allowance account.

Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the

asset expire, or when it transfers the financial asset and substantially all the risks and rewards of

ownership of the asset to another entity.

On derecognition of a financial asset measured at amortised cost, the difference between the asset’s

carrying amount and the sum of the consideration received and receivable is recognised in profit or

loss.

Cash and cash equivalents

Cash and cash equivalents include cash at bank, deposits, other short-term highly liquid investments

which are readily convertible into known amounts of cash and have an original maturity of three

months or less and which are subject to an insignificant risk of change in value.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

2. Material accounting policy information (continued)

Money market deposits

Money market deposits with terms to maturity in excess of three months are not included as cash or

cash equivalents and are separately disclosed on the face of the Statement of Financial Position.

Financial liabilities and equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with

the substance of the contractual arrangements and the definitions of a financial liability and an equity

instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after

deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds

received, net of direct issue costs.

Financial liabilities

All financial liabilities are measured subsequently at amortised cost using the effective interest

method or at FVTPL.

Financial liabilities measured subsequently at FVTPL

Financial liabilities at FVTPL are measured at fair value, with any gains or losses arising on changes in

fair value recognised in profit or loss to the extent that they are not part of a designated hedging

relationship. The Group has no financial liabilities designated at FVTPL. Fair values is determined in

the manner described in Note 22.

Financial liabilities measured subsequently at amortised cost

Financial liabilities that are not at FVTPL are measured subsequently at amortised cost using the

effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial liability and

of allocating interest expense over the relevant period. The effective interest rate is the rate that

exactly discounts estimated future cash payments (including all fees and points paid or received that

form an integral part of the effective interest rate, transaction costs and other premiums and

discounts) through the expected life of the financial liability, or (where appropriate) a shorter period,

to the amortised cost of a financial liability.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

2. Material accounting policy information (continued)

Trade payables

Trade payables are initially recorded at fair value and subsequently at amortised cost.

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group’s obligations are

discharged, cancelled or have expired. The difference between the carrying amount of the financial

liability derecognised and the consideration paid and payable is recognised in profit or loss.

When the Group exchanges with the existing lender one debt instrument into another one with the

substantially different terms, such exchange is accounted for as an extinguishment of the original

financial liability and the recognition of a new financial liability. Similarly, the Group accounts for

substantial modification of terms of an existing liability, or part of it, as an extinguishment of the

original financial liability and the recognition of a new liability. It is assumed that the terms are

substantially different if the discounted present value of the cash flows under the new terms, including

any fees paid net of any fees received and discounted using the original effective rate is at least 10%

different from the discounted present value of the remaining cash flows of the original financial

liability.

Derivative financial instruments

The Group enters into a variety of derivative financial instruments to manage its exposure to interest

rate and inflation risk. Further details of derivatives are disclosed in Note 22.

Derivatives are recognised initially at fair value at the date a derivative contract is entered into and

are subsequently re-measured to their fair value at each reporting date. The resulting gain or loss is

recognised in profit or loss, in finance expenses, immediately unless the derivative is designated in a

hedging relationship.

A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a

negative fair value is recognised as a financial liability. A derivative is presented as a non-current asset

or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is

not expected to be realised or settled within 12 months. Other derivatives are presented as current

assets or current liabilities.

Embedded derivatives

An embedded derivative is a component of a hybrid contract that also includes a non-derivative host,

with the effect that some of the cash flows of the combined instrument vary in a way similar to a

stand-alone derivative.

Derivatives embedded in hybrid contracts with a financial asset host within the scope of IFRS 9:

Financial Instruments are not separated. The entire hybrid contract is classified and subsequently

measured as either amortised cost or fair value as appropriate.

Derivatives embedded in hybrid contracts with hosts that are not financial assets within the scope of

IFRS 9 are treated as separate derivatives when they meet the definition of a derivative, their risks

and characteristics are not closely related to those of the host contracts and the host contracts are

not measured at FVTPL.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

2. Material accounting policy information (continued)

Embedded derivatives (continued)

An embedded derivative is presented as a non-current asset or non-current liability if the remaining

maturity of the hybrid instrument to which the embedded derivative relates is more than 12 months

and is not expected to be realised or settled within 12 months.

Hedge accounting

The Group considers hedge accounting when entering any new derivative, however, there are

currently no formal hedge accounting relationships in the Group.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result

of a past event, it is probable that the Group will be required to settle that obligation and a reliable

estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the

present obligation at the reporting date, taking into account the risks and uncertainties surrounding

the obligation. Where a provision is measured using the cash flows estimated to settle the present

obligation, its carrying amount is the present value of those cash flows (when the effect of the time

value of money is material).

Contract liability

Contract liabilities are recognised when a customer has paid an amount of consideration prior to the

Group performing the transfer of the related good or service to the customer. An example would be

for deferred revenue in relation to receipts in advance from our capital projects, diversions and service

connections.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

3. Critical accounting judgements and key sources of estimation uncertainty

Critical judgements in applying the Group’s accounting policies

In the application of the Group’s accounting policies, which are described in Note 2, the directors are

required to make judgements (other than those involving estimations) that have a significant impact

on the amounts recognised and to make estimates and assumptions about the carrying amounts of

assets and liabilities that are not readily apparent from other sources. The estimates and associated

assumptions are based on historical experience and other factors that are considered to be relevant.

Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognised in the period in which the estimate is revised if the revision affects only that

period; or in the period of the revision and future periods if the revision affects both current and future

periods.

The following are the critical judgements, apart from those involving estimations (which are presented

separately below), that the directors have made in applying the Group’s accounting policies and that

have the most significant effect on the amounts recognised in the financial statements.

Capitalisation of overheads – nature of costs capitalised

The Group recognises infrastructure assets where the expenditures incurred enhance or increase the

capacity of the network. Capital projects often contain a combination of enhancement and

maintenance activity which are not distinct and, therefore the allocation of costs between capital and

operating expenditure requires a level of judgement. The costs are initially expensed to the income

statement with a portion being capitalised based on management’s assessment of the costs incurred

that are directly linked to the capital work performed. Any expenditure classed as maintenance is

expensed in the period incurred. The nature of costs to be included for capitalisation is a key

judgement and is based on an analysis of activities directly attributable to capital work.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty that may

have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities

within the next financial year, are outlined below.

Capitalisation of overheads – capitalisation rate

The Group recognises infrastructure assets where the expenditures incurred enhance or increase the

capacity of the network. The capitalisation rate is a key estimate as it is based on an analysis of total

costs and total labour costs, split between capital and expense. This includes an estimation of time

spent by support function staff. The capitalisation rate is reviewed on an annual basis. See Note 6 for

details on value of employee costs capitalised in the year.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

3. Critical accounting judgements and key sources of estimation uncertainty (continued)

Key sources of estimation uncertainty (continued)

Capitalisation of overheads – capitalisation rate (continued)

Information on sensitivity is as below:

	2024	2023
	Income	Income
	statement	statement
	(before tax)	(before tax)
	+/- £m	+/- £m
Change in rate +/- 1%	1.4	1.2
Change in rate +/- 5%	6.8	5.8

Impairment of tangible and intangible assets (including goodwill)

Management assesses the recoverability of tangible and intangible assets on an annual basis.

Determining whether any of those assets are impaired requires an estimation of the recoverable

amount of the asset to the Group. This calculation requires the Group to estimate the future cash

flows expected to arise from the asset and a suitable discount rate in order to calculate present value

for the asset and compare that to its carrying value. This concluded that no impairment loss is required

against those assets. Details of the impairment loss testing is set out in Note 11.

Fair value of derivative financial instruments

In estimating the fair value of derivative financial instruments, the Group uses market-observable data

(Level 1 and 2 inputs) to the extent it is available. Where such data is not available, certain estimates

(Level 3 inputs) regarding inputs to the valuation are required to be made. The inputs regarding the

Group’s credit risk are deemed to be Level 3 inputs, as there are no observable credit related inputs

for the Group at commonly quoted intervals or otherwise interpolated for substantially the full term

of the instruments. The credit risk profile of the Group has been based on a UK utility credit curve

provided by a third-party data provider. It is this assumption that is deemed to be Level 3. Level 3

inputs form a significant part of the fair value of the financial instruments held by the Group.

Information about the valuation techniques, inputs used and sensitivities are disclosed in Note 21 and

Note 23.

Retirement benefit schemes

The Group’s defined benefit obligation is derived using various assumptions, as disclosed in Note 24.

Results can be affected significantly by the assumptions used, which management decide based on

advice by a firm of actuaries.

Where available, market data is used to value assets, however for some less liquid assets, up-to-date

data is not available, certain estimates regarding inputs to the valuation are required to be made, as

disclosed in Note 24, along with sensitivities of certain key inputs.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

Notes to the Financial Statements (continued)

4. Revenue

	2024	2023
Group and Company	£m	£m
Revenue	598.1	594.7

Predominantly all Group revenues arise from one operating segment, electricity distribution in the

North West of England and associated activities. This is regularly reviewed by the Chief Executive

Officer and Executive Leadership Team.

Included within the above are revenues from three customers (2023: three), each of which

represented more than 10% of the total revenue. Revenue from these customers totalled £207.8m

(2023: £173.3m), which includes £82.5m from Customer A (2023: £51.1m), £63.9m from Customer B

(2023: £67.0m) and £61.4m from Customer C (2023: £55.2m). No other customer represented more

than 10% of revenues either this year or in the prior year.

Where the Company is directed to collect or pay levies by the Regulator, Ofgem, those levies are

accounted for under IFRIC21. For the year ended 31 March 2024, revenue includes £22.0m of SoLR

levies (2023: £79.9m). However, immediately at the point the levy becomes billable, the entire value

of the levy is paid over to suppliers, with the Company making no profit from its role in the process.

The costs of the levy are shown as an operating expense (Note 5).

In the current year £20.9m (2023: £20.2m) of customer contributions amortisation has been

amortised through revenue in line with IFRS 15 (Note 25 and 35).

Of the revenue recognised in the year, £2.3m (2023: £2.9m) was included in the contract liability at

the beginning of the year.

5. Operating profit

The following items have been included in arriving at operating profit:

Group and Company	2024	2023
Expense/(income)	£m	£m
Employee costs (Note 6)	76.7	67.0
Depreciation and amortisation expense
Depreciation of property, plant and equipment (Note 11 & 35)	130.7	125.0
Depreciation of right of use assets (Note 11)	1.8	1.5
Amortisation of intangible assets (Note 13 & 35)	14.2	14.2
	146.7	140.7
Supplier of Last Resort Levy (Note 4)	22.0	79.9
Loss allowance on trade receivables recognised (Note 16)	-	0.1
Profit on disposal of property, plant and equipment	(0.2)	(0.5)
Provision released to profit and loss (Note 27)	-	(0.4)
Research and development	1.9	3.0

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

100

Notes to the Financial Statements (continued)

5. Operating profit (continued)

Analysis of the auditor’s remuneration is as follows:

	2024	2023
Group and Company	£m	£m
Fees payable to the Company’s auditor for the audit of the Company’s annual financial statements 1	0.4	0.2
Audit-related assurance services	0.1	0.1
Total fees	0.5	0.3

All these fees relate to the audit of the Company; no fees are payable in relation to the subsidiaries

of the Company as they are dormant. In relation to year ended 31 March 2023, PwC charged an

additional audit fee of £97,924. Given the timing of the agreement of this fee, the amount was not

included within the audit fee disclosed in 2023. It has been added to the 2024 fee of £318,348.

Non-audit related services to the Group or Company were £16,200 (2023: £15,000).

6. Employee costs

	2024	2023
Group and Company	£m	£m
Wages and salaries	137.1	119.9
Social security costs	15.8	13.8
Pension costs – defined benefit schemes (Note 24)	7.9	13.5
Pension costs – defined contribution schemes (Note 24)	9.9	8.5
Total employee costs (including directors’ remuneration)	170.7	155.7
Costs transferred directly to fixed assets	(94.0)	(88.7)
Charged to operating expenses	76.7	67.0

All employees and employee costs relate to the Company.

The average monthly number of employees during the year (including Executive Directors):

	2024	2023
Group and Company	Number	Number
Craft, Technical and Engineering	1,114	1,065
Administration	989	977
Average number of employees	2,103	2,042

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

101

Notes to the Financial Statements (continued)

7. Directors’ remuneration

The number of directors during the year is set out and analysed by category in the table below:

	2024	2023
Group and Company	Number	Number
Remunerated directors	7	7
Non-remunerated directors*	6	6
Total number of directors	13	13

*There are 4 alternate directors (2023: 7 alternate directors) in addition to this as set out in page 60.

The compensation paid or payable to directors is shown in the table below:

	2024	2023
Group and Company	£m	£m
Salaries and other short-term employee benefits	1.4	1.3
Accrued bonus	0.9	1.0
Amounts receivable under long-term incentive schemes	0.7	0.9
Total emoluments	3.0	3.2

The aggregate emoluments of the directors in 2024 amounted to £3.0m (2023: £3.2m). Emoluments

comprise salaries, fees, taxable benefits, and the value of short-term and long-term incentive awards.

The aggregated emoluments of the highest paid director in 2024 in respect of services to the Group

amounted to £1.6m (2023: £1.1m). Under the Executive Incentive Plan bonuses are awarded and

either paid in the following financial year (accrued bonus) or paid in subsequent years (amounts

receivable under long-term incentive schemes); no shares were received or receivable by any director.

As at 31 March 2023 and 2024, there were no amounts payable for post-employment benefits, other

long-term benefits and termination benefits.

The pension contributions for the highest paid director for the year ended 31 March 2024 were £nil

(2023: £nil). The accrued pension at 31 March 2024 for the highest paid director was £nil (2023: £nil).

As at 31 March 2023 and 2024 the directors had no interests in the ordinary shares of the Company.

8. Finance income

	2024	2023
Group and Company	£m	£m
Interest receivable on short-term bank deposits	21.0	4.2

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

102

Notes to the Financial Statements (continued)

9. Finance costs

	2024	2023
Group and Company	£m	£m
Finance costs (excluding unrealised fair value movements):
Interest on group borrowings at amortised cost (Note 33)	29.6	10.6
Interest on borrowings at amortised cost	41.2	41.1
Net interest settlements on derivatives at fair value	5.4	4.3
Indexation of index-linked debt (Note 20 & 23)	31.0	55.2
Accretion paid on index-linked swaps	87.0	20.1
Reimbursement of inter-company loan impairment (Note 23 & 33)	(0.4)	0.4
Interest on leases (Note 12)	0.3	0.2
Net interest cost on pension plan (Note 24)	(2.2)	(0.8)
Amount capitalised 1 (Note 11)	(1.3)	(1.2)
	190.6	129.9
Unrealised fair value movements on financial instruments 2 :
Inter-company derivative asset (Note 33)	95.2	96.5
Inter-company derivative liability (Note 33)	(95.2)	(96.5)
Derivative assets	(13.4)	(15.1)
Derivative liabilities	(88.9)	(110.1)
	(102.3)	(125.2)
Total finance costs	88.3	4.7

The amount of borrowing costs capitalised was determined using a capitalisation rate of 4.13% (2023:

4.13%), derived from the total general borrowing costs for the year divided by the average total

general borrowings outstanding during the year.

Details on the valuation techniques used to derive the fair value can be found in Note 21.

There has been £87.0m (2023: £20.1m) accretion payments on the index-linked swaps in the year;

these are scheduled five-yearly, seven-yearly and ten-yearly with the next payment due in July 2027.

The amount of accretion accrued over the year was £24.9m (2023: £57.1m), split as follows:

	Five-yearly	Seven-yearly	Ten-yearly	Total
Group and Company	£m	£m	£m	£m
Accumulated Accretion
1 April 2022	14.8	51.9	22.7	89.4
Accrued in year	13.4	27.2	16.5	57.1
Paid in year	(20.1)	-	-	(20.1)
31 March 2023	8.1	79.1	39.2	126.4
Accrued in year	5.9	11.8	7.2	24.9
Paid in year	-	(87.0)	-	(87.0)
31 March 2024	14.0	3.9	46.4	64.3

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

103

Notes to the Financial Statements (continued)

10. Income tax expense

	2024	2023
Group and Company	£m	£m
Current tax
Current tax on profits for the year	21.0	2.9
Adjustment in respect of prior year	(5.9)	(1.7)
	15.1	1.2
Deferred tax (Note 26)
Current year	18.7	44.0
Adjustments in respect of prior year	7.9	4.3
	26.6	48.3
Income tax expense	41.7	49.5

Corporation tax is calculated at 25% (2023: 19%) of the estimated assessable profit for the year.

Deferred tax is calculated at 25% (2023: 25%) being the rate at which it is expected to reverse. There

is no unrecognised deferred tax in the Group.

The table below reconciles the tax charge at the UK statutory rate to the effective tax rate for the year:

	2024	2023
Group and Company	£m	£m
Profit before tax	161.8	195.0
Tax at the UK corporation tax rate of 25% (2023: 19%)	40.5	37.1
Non-taxable expense	(0.8)	(0.6)
Prior year tax adjustments	2.0	2.5
Accelerated capital allowances and other timing differences	-	10.5
Income tax expense	41.7	49.5

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

104

Notes to the Financial Statements (continued)

11. Property, plant and equipment

		Non-	Fixtures,
		operational	equipment,	Assets Right of use
	Operational	land and vehicles and		under	assets
	Structures	buildings		other construction	(Note 20)	Total
Group and Company	£m	£m	£m	£m	£m	£m
Cost or valuation
At 1 April 2022	5,242.2	36.6	195.1	142.4	6.7	5,623.0
Additions	163.6	1.0	7.6	78.8	1.9	252.9
Transfers	66.9	1.0	3.6	(71.5)	-	-
Disposals	(1.0)	-	(0.3)	-	(1.3)	(2.6)
At 31 March 2023	5,471.7	38.6	206.0	149.7	7.3	5,873.3
Additions	185.9	1.2	19.2	70.9	2.6	279.8
Transfers	56.6	0.4	18.4	(75.4)	-	-
Disposals	(3.2)	-	(1.1)	-	(1.3)	(5.6)
At 31 March 2024	5,711.0	40.2	242.5	145.2	8.6	6,147.5
Accumulated
depreciation
At 1 April 2022	1,948.5	13.4	145.9	-	3.1	2,110.9
Charge for the year	111.7	1.0	12.3	-	1.5	126.5
Disposals	(1.0)	-	(0.3)	-	(1.3)	(2.6)
At 31 March 2023	2,059.2	14.4	157.9	-	3.3	2,234.8
Charge for the year	114.0	1.2	15.5	-	1.8	132.5
Disposals	(3.2)	-	(1.1)	-	(1.3)	(5.6)
At 31 March 2024	2,170.0	15.6	172.3	-	3.8	2,361.7
Net book value
At 31 March 2024	3,541.0	24.6	70.2	145.2	4.8	3,785.8
At 31 March 2023	3,412.5	24.2	48.1	149.7	4.0	3,638.5

At 31 March 2024, the Group and Company had entered into contractual commitments for the

acquisition of property, plant and equipment amounting to £39.3m (2023: £22.3m).

During the year ended 31 March 2024, the Group had cash outflow amounting to £273.5m (2023:

£244.6m) on additions to property, plant and equipment as part of its capital programme. Included

in this figure are capitalised borrowing costs of £1.3m (2023: £1.2m) (see Note 9), determined using a

capitalisation rate of 4.13% (2023: 4.13%).

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

105

Notes to the Financial Statements (continued)

11. Property, plant and equipment (continued)

At 31 March 2024, had the property, plant and equipment of the Group been carried at historical cost

less accumulated depreciation and accumulated impairment losses, the carrying amount would have

been £3,692.6m (2023: £3,542.6m). The revaluation reserve is disclosed in Note 29, net of deferred

tax. The revaluation reserve arose following a review after North West Water’s acquisition of Norweb,

in 1997.

Impairment testing of intangible assets and property plant and equipment

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible

assets to determine whether there is any indication that those assets have suffered an impairment

loss or not. An intangible asset with an indefinite useful life and goodwill acquired in a business

combination are required to be tested for impairment at least annually and whenever there is an

indication that the asset may be impaired. All other assets are tested if an indication exists.

For the purposes of impairment testing the Group have determined that there is only one cash

generating unit (CGU), therefore we test annually for impairment on all non-current assets.

An asset’s recoverable amount is the higher of fair value less costs of disposal and value in use. In

assessing the fair value, the estimated future cash flows are discounted to their present value using a

discount rate that reflects current market assessments of the time value of money and the risks

specific to the asset for which the estimates of future cash flows have not been adjusted. The discount

rate is calculated at the year end solely from external sources of information.

The carrying value of the CGU at 31 March 2024 was £3,036.6m (2023: £2,928.6m) including goodwill

of £10.1m (2023: £10.1m). The key assumptions for the fair value calculations are those regarding

discount rates and the outcomes of future Ofgem price control settlements. The post-tax discount

rate for the year ended 31 March 2024 was 6.00% (2023: 5.85%).

It is considered appropriate to assess the cash flows over a 24 year period as this reflects the long-

term nature of the operation of the electricity distribution network and the importance of the

operations of the business in supporting the UK transition to net zero. The Group has prepared cash

flow forecasts for a 24 year period, including a terminal value, which represents the planning horizon

used for management purposes, being aligned to the end of a RIIO regulatory period. The terminal

value in assumes a disposal of the assets for 1.4x RAV at that point, and the assumption of 1.4x is

reflective of net proceeds on disposal.

No real growth in expenditure is assumed in projecting cash flows beyond the period covered by the

most recent budgets/forecast, however, the impact of inflation is included at 2% per annum, being

the governments long-term CPI inflation target and in line Ofgem methodology for costs and revenues.

In assessing the carrying value of the groups tangible and intangible assets, we have sensitised our

forecasts to factor in changes to key assumptions, such as an increase in the discount rate of 0.5% and

removal of incentive income. No reasonably possible changes to inputs to the impairment test

performed were identified as resulting in an impairment.

Based on the impairment testing performed, management believe that sufficient headroom exists

between the fair value and the carrying value of the assets such that no impairment loss is required

to be booked.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

106

Notes to the Financial Statements (continued)

12. Leases

	Group	Company	Group	Company
	2024	2024	2023	2023
	£m	£m	£m	£m
Right of use assets at net book value:
Land and buildings	2.0	2.0	1.9	1.9
Telecoms	0.1	0.1	0.1	0.1
Vehicles	2.7	2.7	2.0	2.0
Total (Note 11)	4.8	4.8	4.0	4.0
Lease liabilities:
Land and buildings	(1.9)	(1.9)	(1.8)	(1.8)
Telecoms	(0.1)	(0.1)	(0.1)	(0.1)
Vehicles	(2.9)	(2.9)	(2.2)	(2.2)
Total (Note 20)	(4.9)	(4.9)	(4.1)	(4.1)

The amount of short-term leases and low value assets as an expense in the year was £0.4m (2023:

£0.2m).

The Company’s leasing activities include land and buildings used for office space and substations,

telecoms fibre-optic cables for technical equipment communications, and vehicles for the use of

employees.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be

readily determined, the incremental borrowing rate is used. The lease liabilities have been discounted

at 5% (2023: 5%) for land and buildings, and telecoms; and at 6% (2023: 6%) for vehicles.

The following is an analysis of the maturity profile of the lease liabilities.

	<1	1 – 2	2 – 3	3 – 4	>4	Total
	year	years	years	years	years
Group and Company	£m	£m	£m	£m	£m	£m
At 31 March 2024	(1.8)	(1.3)	(0.5)	(0.6)	(0.7)	(4.9)
At 31 March 2023	(1.6)	(1.2)	(0.3)	(0.2)	(0.8)	(4.1)

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

107

Notes to the Financial Statements (continued)

13. Intangible assets and goodwill

		Computer	Assets under
	Goodwill	software	construction	Total
Group and Company	£m	£m	£m	£m
Cost
At 1 April 2022	10.1	137.4	5.0	152.5
Additions	-	1.5	9.0	10.5
Transfers	-	0.2	(0.2)	-
At 31 March 2023	10.1	139.1	13.8	163.0
Additions	-	5.5	5.6	11.1
Transfers	-	10.3	(10.3)	-
At 31 March 2024	10.1	154.9	9.1	174.1
Accumulated amortisation
At 1 April 2022	-	93.6	-	93.6
Charge for the year	-	14.2	-	14.2
At 31 March 2023	-	107.8	-	107.8
Charge for the year	-	14.2	-	14.2
At 31 March 2024	-	122.0	-	122.0
Net book value
At 31 March 2024	10.1	32.9	9.1	52.1
At 31 March 2023	10.1	31.3	13.8	55.2

In the Company, goodwill arose on the acquisition of assets and liabilities of Electricity North West

Number 1 Company Limited in the year ended 31 March 2011. This value reflects the excess of the

investment over the fair value of the trade and assets at the date of acquisition.

At 31 March 2024, the Group and Company had entered into contractual commitments for the

acquisition of software amounting to £2.1m (2023: £2.5m).

At each balance sheet date, the Group reviews the carrying amounts of its goodwill and intangible

assets to determine whether there is any indication that those assets have suffered an impairment

loss (Note 11).

Included in the net book value of computer software is £12.9m (2023: £18.1m) for an asset relating to

the network management system which has 3 years (2023: 4 years) of amortisation remaining.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

108

Notes to the Financial Statements (continued)

14. Investment in subsidiaries

	2024	2023
Company	£m	£m
Cost and net book value	15.4	15.4

Investment in subsidiaries is stated at cost less any provisions for permanent diminution in value. Cost

of investment relates wholly to the shareholding in the Company’s direct subsidiary, Electricity North

West Number 1 Company Limited.

Details of the investments at 31 March 2023 and 2024, all of which were incorporated in the UK and

have a principal place of business in the UK, are as follows:

					Proportion	Nature of
Company				Description of holding	held	business
Subsidiary undertakings
Electricity North West Number 1				Ordinary shares of £1 each	100%	Dormant
Company Limited
ENW	(ESPS)	Pensions	Trustees	Ordinary shares of £1 each	100%	Dormant
Limited

There have been no changes to these shareholdings during the year. The address of the registered

office of the investments above is Borron Street, Stockport, Cheshire, SK1 2JD.

15. Inventories

	2024	2023
Group and Company	£m	£m
Raw material and consumables	49.3	22.4

The cost of inventories recognised as an expense in the year was £3.4m (2023: £4.1m). Write-downs

of inventories to net realisable value amounted to £68,860 (2023: £33,958).

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

109

Notes to the Financial Statements (continued)

16. Trade and other receivables

	2024	2023
Group and Company	£m	£m
Financial assets:
Trade receivables (Note 22)	12.7	15.5
Amounts owed by group undertakings (Note 22 & 33)	5.8	5.7
Accrued income (Note 22)	61.3	55.9
	79.8	77.1
Non-financial assets:
Prepayments	22.7	20.7
Total trade and other receivables	102.5	97.8

The average credit period taken on trade receivables is 14 days (2023: 14 days). At 31 March 2024,

£6.5m (2023: £7.8m) of the trade receivables were past due, with £4.7m over 30 days past due (2023:

£6.5m).

Trade receivables and inter-company receivables do not accrue interest and are stated net of expected

credit losses (ECL). The recoverability of these assets is assessed using the simplified approach under

IFRS 9, based on lifetime ECL, with reference to known specific circumstances, past default experience

and an assessment of the current economic environment.

The table below shows the movement on the ECL:

	2024	2023
Group and Company	£m	£m
At 1 April	4.1	4.4
Amounts written off in the year	(3.3)	(0.4)
Amounts recognised in the income statement	-	0.1
At 31 March	0.8	4.1

Credit risk in relation to trade receivables is considered to be relatively low, with each customer being

contractually required to provide collateral in the form of a cash deposit, subject to the amounts due

and their credit rating. As at 31 March 2024, £2.9m (2023: £11.9m) of cash had been received as

security (see Note 19).

Under the terms of the contract, the maximum unsecured credit that the Group may be required to

give per customer is 2% of the Regulatory Asset Value (RAV) of the Company. The RAV is calculated

in accordance with Ofgem methodology. At 31 March 2024, the RAV was £2,684.6m (2023:

£2,481.8m) and has been indexed using the CPIH for March 2024. At 31 March 2024, £366.2m (2023:

£186.6m) of unsecured credit limits had been granted to customers and the highest unsecured credit

limit given to any single customer was £9.6m (2023: £8.3m). All customers granted the maximum

amount of unsecured cover must have a credit rating of at least BBB+ from Standard and Poor’s and

Baa1 from Moody’s Investor Services, or a guarantee from a parent company of an equivalent rating.

Alternatively, the customer must be able to prove their creditworthiness on an ongoing basis.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

110

Notes to the Financial Statements (continued)

16. Trade and other receivables (continued)

Whilst the loss of a principal customer could have a significant impact on the Group, the exposure to

such credit losses is mitigated by the protection Ofgem provides to cover such losses. Nonetheless,

credit management processes are in place and the credit worthiness of each customer is closely

monitored.

17. Cash and cash equivalents

	2024	2023
Group and Company	£m	£m
Cash in bank accounts	20.0	12.1
Cash in liquidity funds	120.4	43.1
Cash in short-term deposit accounts	-	0.1
Cash in short-term money market deposits under 3 months	49.4	118.5
Total cash and cash equivalents (Note 23 & 24)	189.8	173.8
Weighted average interest rate	5.33%	4.08%
Weighted average term	23.9 days	55.8 days

Cash and cash equivalents comprise cash at bank, deposits and other short-term highly liquid

investments which are readily convertible into known amounts of cash and have an original maturity

of three months or less, net of any bank overdrafts which are payable on demand. There was no

formal bank overdraft facility in place during the year (2023: none).

18. Money market deposits over three months

	2024	2023
Group and Company	£m	£m
Money market deposits over three months (Note 23 & 24)	-	305.7
Weighted average interest rate	-	4.46%
Weighted average term	-	178.5 days

Money market deposits with an original maturity over three months are not included as cash or cash

equivalents and are separately disclosed on the face of the Statement of Financial Position. The term

of these deposits is set with consideration of forecast liabilities ensuring this liquidity is available to

meet obligations as they fall due.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

111

Notes to the Financial Statements (continued)

19. Trade and other payables

	Group Company		Group Company
	2024	2024	2023	2023
	£m	£m	£m	£m
Financial liabilities:
Trade payables (Note 23)	18.4	18.4	17.3	17.3
Amounts owed to group undertakings (Note 23 & 33)	13.5	13.5	8.7	8.7
Amounts owed to subsidiary undertaking (Note 23 & 33)	-	15.5	-	15.5
Accruals (Note 20)	76.5	76.7	68.1	68.3
Refundable customer deposits (Note 16 & 23)	2.9	2.9	11.9	11.9
Cash collateral (Note 21)	12.0	12.0	-	-
	123.3	139.0	106.0	121.7
Non-financial liabilities:
Contract liabilities	10.0	10.0	12.3	12.3
Other taxation and social security	15.2	15.2	15.9	15.9
Deferred income	15.0	15.0	18.1	18.1
	40.2	40.2	46.3	46.3
Total trade and other payables	163.5	179.2	152.3	168.0

Trade payables and accruals principally comprise amounts outstanding for capital purchases and

ongoing costs. The average credit period in the year was 21.4 days from receipt of invoice (2023: 19.5

days). The directors consider that the carrying amount of trade and other payables approximates to

their fair value.

Refundable customer deposits are cash deposits held as a security in relation to distribution of

electricity customers.

Contract liabilities have decreased due to the progression of high value projects. Of the revenue

recognised in the year, £2.3m (2023: £2.9m) was included in the contract liability at the beginning of

the year (Note 4).

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

112

Notes to the Financial Statements (continued)

20. Borrowings

This note provides information about the contractual terms of the Group’s borrowings. For more

information about the Group’s financial risk management and exposure to credit risk, liquidity risk and

market risk see Note 23.

The carrying values by category of borrowing were as follows:

	2024	2023
Group and Company	£m	£m
Current liabilities:
Bank and other term borrowings (Note 23)	9.1	221.7
Lease liabilities (Note 12)	1.8	1.6
	10.9	223.3
Non-current liabilities:
Bonds (Note 23)	656.9	646.4
Bank and other term borrowings (Note 23)	67.4	72.8
Lease liabilities (Note 12)	3.1	2.5
Amounts owed to parent undertaking (Note 23 & 33)	109.8	96.5
Amounts owed to group undertaking (Note 23 & 33)	721.9	721.6
	1,559.1	1,539.8
Borrowings (Note 23)	1,570.0	1,763.1

The carrying values and key terms by instrument were as follows:

				2024	2023
	Nominal	Interest	Maturity	Carrying	Carrying
	value	rate		value	value
Group and Company	£m		year	£m	£m
Bond	200.0	8.875%	2026	199.0	198.6
Bond	250.0	8.875%	2026	263.6	269.6
Index-linked bond	100.0	1.4746%+RPI	2046	194.3	178.2
Index-linked loan	135.0	1.5911%+RPI	2024	-	213.0
Index-linked loan	50.0	0.38% +RPI	2032	36.2	38.9
Index-linked loan	50.0	0%+RPI	2033	40.3	42.7
Revolving credit facility	50.0	Sonia+0.35%	2024	-	(0.1)
Lease liabilities (Note 12)	-	-	-	4.9	4.1
Amounts owed to parent undertaking	175.0	4.10%	2028	109.8	96.5
Amounts owed to group undertaking	300.0	1.415%	2030	299.0	298.8
Amounts owed to group undertaking	425.0	4.893%	2032	422.9	422.8
Borrowings (Note 23)				1,570.0	1,763.1

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

113

Notes to the Financial Statements (continued)

20. Borrowings (continued)

At 31 March 2023 and 2024, all borrowings were unsecured and in sterling, and there were no formal

bank overdraft facilities in place. All borrowings were measured at amortised cost. See Note 22 for

more information on the fair value of the Group’s borrowings.

The Group has complied with all financial covenants under its financing agreements during the current

and prior year.

The following table provides a reconciliation of the opening and closing borrowings amounts. Where

applicable, interest on these amounts is included in accruals within trade and other payables on the

balance sheet and is, therefore, excluded from this table.

	2024	2023
Group and Company	£m	£m
At 1 April	1,763.1	1,286.1
Proceeds from external borrowings	-	37.0
Repayments of external borrowings	(232.9)	(45.3)
Lease liabilities capital repayment	(1.8)	(1.5)
Lease liabilities interest repayment	(0.3)	(0.2)
Lease liabilities interest charged (Note 12)	0.3	0.2
New lease liabilities (Note 12)	2.6	1.9
Increase in loan from parent	13.3	12.3
Increase in loan from group undertaking	-	425.0
Indexation (Note 9)	31.0	55.2
Transaction costs on new external borrowings	(0.1)	(2.3)
Amortisation of transaction costs, bond discounts and premiums	(5.2)	(5.3)
At 31 March (Note 23)	1,570.0	1,763.1

The Group’s committed undrawn borrowing facilities were as follows:

	2024	2023
Group and Company	£m	£m
£50m revolving credit facility – expiry December 2024 1	50.0	50.0

The £50m revolving credit facility was replaced in April 2024 with a £250m revolving credit facility –

expiry April 2027

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

114

Notes to the Financial Statements (continued)

21. Derivatives

This note provides information about the derivative financial instruments held by the Group, including

information on the methods and assumptions used in determining the fair value of these instruments.

The Board has authorised the use of derivatives by the Group to reduce the risk of loss arising from

changes in market risks, and for economic hedging reasons. Derivatives are used to hedge interest

rate risk and to change the basis of interest cash flows from fixed to either an alternative fixed profile,

or to an RPI inflation-linked basis to match the inflation-linked revenue profile (noting that Ofgem

have now changed this to a CPIH basis). The Board approves all new derivatives. The Group does not

use derivatives for speculative purposes. The accounting policy for derivatives is provided in Note 2

and more information on market risk is included in Note 23.

At 31 March 2023 and 2024, the Group and Company’s derivatives are not designated in formal hedge

accounting relationships, and are measured at fair value through profit or loss (FVTPL).

The Group has the following derivatives in the following line items in the statement of financial

position:

	2024	2023
Group and Company	£m	£m
Non-current assets:
Inter-company derivative asset	217.1	312.3
Inflation-linked swaps	28.5	15.1
Derivative assets (Note 23)	245.6	327.4
Non-current liabilities:
Inter-company derivative liability	(217.1)	(312.3)
Inflation-linked swaps	(310.9)	(395.6)
Interest rate swaps – fixed to floating	(41.5)	(45.7)
Derivative liabilities (Note 23)	(569.5)	(753.6)

The table below summarises the key terms of the various external derivatives held by the Group at 31

March 2024; each category includes multiple instruments and the rates stated are the aggregate rate

for that category. The table excludes the inter-company derivative asset and the inter-company

derivative liability as the cash flows on these instruments net to nil.

Notional	Number	Type	Maturity	Pay Leg	Receive Leg	Accretion
£200m	14	Index-linked	2038	3.56% + RPI,	6m Sonia,	5-yearly,
				semi-annual	semi-annual	next due July 2027
						7-yearly,
						next due July 2030
£100m 1	4	Index-linked	2050	1.51%+RPI,	8.875%,	10-yearly,
				semi-annual	annual	next due Sept 2030
£200m	1	Fix/ float	2030	6m Sonia,	0.283%,	None
				semi-annual	Semi-annual

8.875% up to and including the 26 March 2026 settlement date, then changes to 6m Sonia for the

remaining term of the instruments.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

115

Notes to the Financial Statements (continued)

21. Derivatives (continued)

In the Group and Company, no new derivatives were entered during the year, neither were any

derivatives closed out during the year.

The inter-company derivative asset and inter-company derivative liability are held by the Company,

with ENW Finance plc as counterparty. The first is a back-to-back swap, mirroring in aggregate the

terms of the £200m 2038 notional external index-linked swaps noted above. The second is a mirror

of that back-to-back swap, the terms of which are defined in an inter-company loan agreement

between the two entities, creating an embedded derivative that is bifurcated from the host contract

and recorded as a separate instrument in the Company. The cash flows and fair value of these two

instruments net to nil in the Company.

Whilst all derivatives are net-settled, no balances meet the offsetting criteria in IAS 32 paragraph 42

and all are, therefore, shown gross.

The Company has two one-way credit support annexes (CSAs) in place that define the terms for the

provision of cash collateral by the counterparty; under the CSAs, no cash collateral is required to be

provided by the Company. At 31 March 2024, £12.0m (2023: nil) cash collateral was held under these

CSAs (Note 19). The cash collateral does not meet the offsetting criteria in IAS 32 paragraph 42, but

it would be set off against the net amount of the derivatives in the case of default and insolvency or

bankruptcy, in accordance with the CSAs.

The following table presents the recognised financial instruments that are subject to the CSAs but not

offset in the financial statements. The ‘net amount’ shows the amount in the Company’s statement

of financial position if all set-off rights were exercised.

		Amounts
		subject to	Financial
		Gross master netting	instrument
	amount	arrangements	collateral	Net amount
Group and Company	£m	£m	£m	£m
At 31 March 2024:
Inter-company derivative asset	217.1	(217.1)	-	-
Inter-company derivative liability	(217.1)	217.1	-	-
Derivative assets	28.5	(19.6)	(8.9)	-
Derivative liabilities	(352.4)	19.6	-	(332.8)
	(323.9)	-	(8.9)	(332.8)
Other collateral not included above	-	-	(3.1)	(3.1)
Total	(323.9)	-	(12.0)	(335.9)
At 31 March 2023:
Inter-company derivative asset	312.3	(312.3)	-	-
Inter-company derivative liability	(312.3)	312.3	-	-
Derivative assets	15.1	(15.1)	-	-
Derivative liabilities	(441.3)	15.1	-	(426.2)
	(426.2)	-	-	(426.2)
Other collateral not included above	-	-	-	-
Total	(426.2)	-	-	(426.2)

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

116

Notes to the Financial Statements (continued)

21. Derivatives (continued)

Recognised fair value measurements

The derivatives are measured at fair value through profit or loss; those fair value measurements occur

on a recurring basis.

Financial instruments that are recognised in the statement of financial position at fair value are

classified into three levels, as prescribed under accounting standards, based on the degree to which

the inputs used in determining the fair value are observable:

• Level 1: includes financial instruments traded in active markets and the fair value is derived from

quoted market prices (unadjusted);

• Level 2: includes financial instruments not traded in an active market and the fair value is

determined using valuation techniques that maximise the use of observable market data and rely

as little as possible on entity-specific estimates. If all significant inputs are observable, the

financial instrument is included in level 2; and

• Level 3: if one or more significant inputs is not based on observable market data, the financial

instrument is included in level 3. This is the case for the majority of derivatives held by the Group.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

117

Notes to the Financial Statements (continued)

21. Derivatives (continued)

The following table presents the Group’s financial instruments that are measured and recognised at

fair value, grouped into the three levels outlined above to provide an indication as to the reliability of

the inputs used in determining the fair value. Each category includes multiple instruments.

	Level 1	Level 2	Level 3	Total
Group and Company	£m	£m	£m	£m
At 31 March 2024
Derivative assets:
Inter-company derivative asset	-	-	217.1	217.1
Inflation-linked swaps	-	20.9	7.6	28.5
	-	20.9	224.7	245.6
Derivative liabilities:
Inter-company derivative liability	-	-	(217.1)	(217.1)
Inflation-linked swaps	-	-	(310.9)	(310.9)
Interest rate swaps – fixed to floating	-	(41.5)	-	(41.5)
	-	(41.5)	(528.0)	(569.5)
Total	-	(20.6)	(303.3)	(323.9)
At 31 March 2023
Derivative assets:
Inter-company derivative asset	-	-	312.3	312.3
Inflation-linked swaps	-	3.5	11.6	15.1
	-	3.5	323.9	327.4
Derivative liabilities:
Inter-company derivative liability	-	-	(312.3)	(312.3)
Inflation-linked swaps	-	(15.9)	(379.7)	(395.6)
Interest rate swaps – fixed to floating	-	(45.7)	-	(45.7)
	-	(61.6)	(692.0)	(753.6)
Total	-	(58.1)	(368.1)	(426.2)

There were no transfers between levels 1 and 2 during the current or prior year. For transfers into

and out of level 3, see overleaf.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

118

Notes to the Financial Statements (continued)

21. Derivatives (continued)

The following table provides a reconciliation of the fair value amounts disclosed as Level 3.

	2024	2023
Group and Company	£m	£m
At 1 April	(368.1)	(517.1)
Transfers into Level 3 from Level 2	(15.9)	(7.7)
Transfers from Level 3 into Level 2	(11.6)	46.5
Total gains in profit or loss:
- On transfers into Level 3 from Level 2	9.5	14.5
- On instruments carried forward in Level 3	82.8	95.7
At 31 March	(303.3)	(368.1)

The transfers were principally due to a change in the significance of the unobservable inputs used to

derive the Group’s credit curve for the bilateral credit valuation adjustment (BCVA), as described in

the section below. Any transfers between levels are deemed to have occurred at the beginning of the

reporting period.

The following table shows the sensitivity of the fair value of derivatives to the Level 3 inputs,

determined by applying a 10bps shift to the credit curve used to calculate the BCVA. These sensitivities

have been performed on a portfolio basis to incorporate the effect of the CSAs (see above).

	2024	2024	2023	2023
	-10bps	+10bps	-10bps	+10bps
Group and Company	£m	£m	£m	£m
Impact on derivative portfolio	(3.7)	3.5	(3.8)	3.7

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

119

Notes to the Financial Statements (continued)

21. Derivatives (continued)

Valuation techniques used to determine fair value

Where available, quoted market prices have been used to determine fair value (Level 1 inputs). Where

not available, fair value have been calculated by discounting estimated future cash flows based on

observable interest and RPI curves sourced from market available data (Level 2 inputs). In accordance

with IFRS 13, an adjustment for non-performance risk (XVA) has then been made to give the fair value.

For the year ended 31 March 2024, the XVA has been quantified by calculating a BCVA based on both

the credit risk profile of the counterparty and the credit risk profile of the relevant group entity, using

market-available data where possible, and stochastic modelling.

Whilst the inputs to the BCVA in relation to the counterparty credit risk meet the criteria for Level 2

inputs, the inputs regarding the Group’s credit risk are deemed to be Level 3 inputs, as there are no

observable credit related inputs for the Group at commonly quoted intervals or otherwise

interpolated for substantially the full term of the instruments. The credit risk profile of the Group has

been based on a UK utility credit curve provided by a third-party data provider. It is this assumption

that is deemed to be Level 3.

For certain derivatives, the Level 3 inputs form an insignificant part of the fair value and, therefore,

these derivatives are disclosed as Level 2. Otherwise, the derivatives are disclosed as Level 3.

At 31 March 2024, the net adjustment for non-performance risk was £74.9m (2023: £87.3m), of which

£73.5m (2023: £87.1m) was classed as Level 3.

On entering certain derivatives, the valuation technique used resulted in a fair value loss. As this was

neither evidenced by a quoted price nor based on a valuation technique using only data from

observable markets, this loss on initial recognition was not recognised. This was supported by the

transaction price of nil. This difference is being recognised in profit or loss on a straight-line basis over

the life of the derivatives. At 31 March 2024, the aggregate difference yet to be recognised was

£45.0m (2023: £47.4m). The movement in the year all relates to the straight-line release to profit or

loss.

The following table provides an analysis of the component parts of the fair value of the derivative

assets and derivative liabilities.

	2024	2023
Group and Company	£m	£m
Fair value of derivatives pre IFRS 13 adjustment	302.6	393.3
XVA adjustment	(40.0)	(46.3)
Day 1 adjustment	(17.0)	(19.6)
Derivative assets (Note 23)	245.6	327.4
Fair value of derivatives pre IFRS 13 adjustment	(746.4)	(954.2)
XVA adjustment	114.9	133.6
Day 1 adjustment	62.0	67.0
Derivative liabilities (Note 23)	(569.5)	(753.6)

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

120

Notes to the Financial Statements (continued)

22. Financial instruments

This note provides an overview of the financial instruments held by the Group, with references to

other notes that include more specific information about each type of financial instrument.

The Group holds the following categories of financial instruments:

	Group	Company	Group	Company
	2024	2024	2023	2023
	£m	£m	£m	£m
Financial assets:
Derivative assets (Note 21)	245.6	245.6	327.4	327.4
Trade and other receivables (Note 16)	79.8	79.8	77.1	77.1
Cash and cash equivalents (Note 17)	189.8	189.8	173.8	173.8
Money market deposits over three months (Note 18)	-	-	305.7	305.7
	515.2	515.2	884.0	884.0
Financial liabilities:
Trade and other payables (Note 19)	(123.3)	(139.0)	(106.0)	(121.7)
Borrowings (Note 20)	(1,570.0)	(1,570.0)	(1,763.1)	(1,763.1)
Derivative liabilities (Note 21)	(569.5)	(569.5)	(753.6)	(753.6)
	(2,262.8)	(2,278.5)	(2,622.7)	(2,638.4)

The Group’s exposure to various risks associated with the financial instruments is outlined in Note 23.

The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each

class of financial assets in the table above.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

121

Notes to the Financial Statements (continued)

22. Financial instruments (continued)

Fair value of financial instruments

All financial instruments are held at amortised cost, except derivatives that are at FVTPL. Information

about the methods and assumptions used in determining the fair value of derivatives is included in

Note 21.

For the majority of the instruments at amortised cost, the fair value are not materially different to

their carrying values, since the interest receivable/ payable is either close to current market rates or

the instruments are short-term in nature, such as cash and cash equivalents, money market deposits,

trade and other receivables, and trade and other payables.

The instruments for which significant differences were identified, in either the current or prior year,

are presented in the following table:

	2024	2024	2023	2023
	Carrying	Fair	Carrying	Fair
	value	value	value	value
Group and Company	£m	£m	£m	£m
Financial liabilities:
Bonds 1 (Note 20)	(656.9)	(650.9)	(646.4)	(658.9)
Bank and other term borrowings 2 (Note 20)	(76.5)	(74.8)	(294.5)	(294.9)
Amounts owed to parent undertaking 2 (Note 20)	(109.8)	(109.2)	(96.5)	(93.8)
Amounts owed to group undertaking 1 (Note 20)	(721.9)	(685.8)	(721.6)	(654.0)

These fair value are derived from quoted market prices and, therefore, meet the Level 1 criteria.

These fair value are based on discounted cash flows using a current borrowing rate. They are

classified as Level 3 due to the use of unobservable inputs, including own credit risk.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

122

Notes to the Financial Statements (continued)

23. Financial risk management

This note explains the Group’s exposure to financial risks and how these risks could affect the Group’s

future financial performance. Current year profit and loss information has been included where

relevant to add further context.

The principal financial risks to which the Group is exposed and which arise in the normal course of

business include market risk, in particular interest rate risk and inflation risk, credit risk and liquidity

risk.

The Group has a formal risk management structure, designed to identify and analyse risks. There are

financial risk management policies and controls in place, including the use of risk limits, mandates,

and monitoring and reporting requirements, supported by reliable and up-to-date systems. The risk

management policies and systems are reviewed annually and amended to reflect changes in market

conditions and the associated levels of risk, as appropriate. The processes for managing risk and the

methods used to measure risk have not changed since the prior year.

It is the responsibility of the Board to set, approve and review the risk management policies,

procedures and controls. The Audit and Risk Committee is responsible for independently overseeing

the financial risk management activities of the Group. The Group treasury function, which is

authorised to conduct the day-to-day treasury activities of the Group, reports on a regular basis to the

Audit and Risk Committee.

Market risk

Market risk is the risk that future cash flows of a financial instrument, or the fair value of a financial

instrument, will fluctuate because of changes in market prices. Market prices include foreign

exchange rates, interest rates, inflation, equity and commodity prices. The main types of market risk

to which the Group is exposed are interest rate risk and inflation risk; the Group has no significant

foreign exchange, equity or commodity exposure.

The Board has authorised the use of derivative financial instruments to reduce the risk of loss arising

from changes in market risks, and for economic hedging reasons. Derivatives are used to hedge

interest rate risk and to change the basis of interest cash flows from fixed to either an alternative fixed

profile, or to an RPI inflation-linked basis to match the inflation-linked revenue profile (noting that

Ofgem have now changed this to a CPIH basis). The Board approves all new derivatives. The Group

and Company do not use derivatives for speculative purposes. More information on the derivatives

held by the Group is provided in Note 21.

Interest rate risk

The Group’s floating rate borrowings (see Note 20) and derivatives (see Note 21) are exposed to a risk

of change in cash flows due to changes in interest rates. The Group’s derivatives are exposed to a risk

of change in their fair value due to changes in interest rates. Investments in short-term receivables

and payables are not exposed to interest rate risk due to their short-term nature.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

123

Notes to the Financial Statements (continued)

23. Financial risk management (continued)

Sensitivity analysis on interest

Although the following analysis provides an indication of the Group’s exposure to interest rate risk,

such analysis is limited due to the long-term nature of many of the financial instruments and the

uncertainty over future market rates.

The sensitivity figures are calculated based on a downward parallel shift across the interest rate curve

of 0.5% and upward parallel shifts of 0.5% and 1%, a range in outcomes that management deem

reasonably possible within the next financial year.

The following table shows the amount by which the finance costs in the income statement would have

differed if interest rates over the course of the year had differed from actual rates; figures in brackets

represent a reduction to profit. The impact on the cash flows of the derivatives is excluded from this

analysis, as there would be an equal and opposite effect on the fair value movement, resulting a net

nil impact in the income statement.

	2024	2024	2024	2023	2023	2023
	-0.5%	+0.5%	+1%	-0.5%	+0.5%	+1%
Group and Company	£m	£m	£m	£m	£m	£m
Interest:
Floating rate borrowings	-	-	-	0.1	(0.1)	(0.1)
Total finance costs impact	-	-	-	0.1	(0.1)	(0.1)

The following table shows the amount by which the fair value of items recorded on the statement of

financial position at fair value would be adjusted for a given interest rate movement. As fair value

movements are taken to the income statement, there would be a corresponding adjustment to

finance costs; figures in brackets represent a reduction to profit.

	2024	2024	2024	2023	2023	2023
	-0.5%	+0.5%	+1%	-0.5%	+0.5%	+1%
Group and Company	£m	£m	£m	£m	£m	£m
Fair values:
Inter-company derivative asset	23.4	(21.8)	(43.6)	23.9	(22.5)	(43.6)
Inter-company derivative liability	(23.4)	21.8	43.6	(23.9)	22.5	43.6
Inflation-linked swaps	(44.7)	34.3	68.5	(39.1)	36.2	69.7
Interest rate swaps	6.4	(3.2)	(6.4)	5.7	(5.6)	(11.0)
Total finance costs impact	(38.3)	31.1	62.1	(33.4)	30.6	58.7

Inflation risk

The Group’s inflation-linked borrowings (see Note 20) and inflation-linked derivatives (see Note 21)

are exposed to a risk of change in cash flows due to changes in inflation rates. The Group’s index-

linked derivatives are exposed to a risk of change in their fair value due to changes in inflation rates.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

124

Notes to the Financial Statements (continued)

23. Financial risk management (continued)

Sensitivity analysis on inflation

Although the following analysis provides an indication of the Group’s exposure to inflation risk, such

analysis is limited due to the long-term nature of many of the financial instruments and the

uncertainty over future market rates.

The sensitivity figures are calculated based on a downward parallel shift across the inflation curve of

0.5% and upward parallel shifts of 0.5% and 1%, a range in outcomes that management deem

reasonably possible within the next financial year.

The following table shows the amount by which the finance costs in the income statement would have

differed if inflation rates over the course of the year had differed from the actual rates; figures in

brackets represent a reduction to profit. The change in indexation would have a corresponding impact

on the carrying value of the inflation-linked debt in the statement of financial position. The impact on

the cash flows of the derivatives is excluded from this analysis, as there would be an equal and

opposite effect on the fair value movement, resulting a net nil impact in the income statement.

	2024	2024	2024	2023	2023	2023
	-0.5%	+0.5%	+1%	-0.5%	+0.5%	+1%
Group and Company	£m	£m	£m	£m	£m	£m
Interest:
Inflation-linked borrowings	-	-	(0.1)	-	-	(0.1)
Indexation:
Inflation-linked borrowings	1.4	(1.4)	(2.7)	2.4	(2.4)	(4.7)
Total finance costs impact	1.4	(1.4)	(2.8)	2.4	(2.4)	(4.8)

The following table shows the amount by which the fair value of items recorded in the statement of

financial position at fair value would be adjusted for a given inflation rate movement. As fair value

movements are taken to the income statement, there would be a corresponding adjustment to

finance costs; figures in brackets represent a reduction to profit.

	2024	2024	2024	2023	2023	2023
	-0.5%	+0.5%	+1%	-0.5%	+0.5%	+1%
Group and Company	£m	£m	£m	£m	£m	£m
Fair values:
Inter-company derivative asset	(33.2)	35.0	69.9	(31.0)	33.8	65.6
Inter-company derivative liability	33.2	(35.0)	(69.9)	31.0	(33.8)	(65.6)
Inflation-linked swaps	54.4	(65.1)	(130.1)	51.3	(51.6)	(115.2)
Total finance costs impact	54.4	(65.1)	(130.1)	51.3	(51.6)	(115.2)

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

125

Notes to the Financial Statements (continued)

23. Financial risk management (continued)

Credit risk

The Group is exposed to credit risk, which is the risk that financial loss arises from the failure of a

customer or counterparty to meet its obligations under a contract as they fall due. Credit risk arises

principally from cash and cash equivalents, money market deposits, derivative assets, and trade and

other receivables.

The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each

class of financial assets, as shown in the table in Note 22.

The Group is potentially exposed to significant credit risk in relation to cash and cash equivalents,

money market deposits and derivative assets. For these counterparties, minimum credit ratings are

specified, and individual exposure limits are in place to reduce the concentration of risk and exposure

to any one counterparty. Management does not anticipate any of these counterparties will fail to

meet its obligations. At 31 March 2024, none (2023: none) of the Group’s treasury balances were

either past due or impaired, and no terms had been re-negotiated with any counterparty.

The table below shows an analysis of the ratings of the counterparties with which the Group holds

cash and cash equivalents, money market deposits and derivative assets.

	2024	2024	2023	2023
Group and Company	£m	%	£m	%
AAA	90.3	41.1	43.1	8.7
A+	49.6	22.6	122.0	24.6
A	79.6	36.3	330.1	66.7
	219.5	100.0	495.2	100.0

For more information on the credit risk and expected credit losses in relation to trade and other

receivables, see Note 16.

Liquidity risk

Liquidity risk is the risk that the Group will have insufficient funds to meet its financial obligations as

they fall due. The Group manages the maturity profile of its assets, liabilities and commitments so

that cash flows are appropriately balanced and all funding obligations are able to be met when due.

This is achieved through maintaining a prudent level of liquid assets and arranging funding facilities

well in advance of need. The Group uses derivatives to economically hedge certain cash flows (see

Note 21).

The Board is responsible for monitoring the maturity of liquidity and deposit funding balances and

taking any action as appropriate. A long-term view of liquidity is provided by Group financial models

which project cash flows out 24 years ahead, to the end of the Regulatory Period ending 31 March

2048. A medium-term view is provided by the Group business plan covering the period ending 31

March 2028, which is updated and approved annually by the Board. The Board has approved a

liquidity framework within which the business operates, including the maintenance of a minimum of

12 months liquidity.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

126

Notes to the Financial Statements (continued)

23. Financial risk management (continued)

The Group had access to the following liquid assets and undrawn borrowing facilities at 31 March:

	2024	2023
Group and Company	£m	£m
Cash and cash equivalents (Note 17)	189.8	173.8
Money market deposits over three months (Note 18)	-	305.7
Committed undrawn borrowing facilities (Note 20)	50.0	50.0
	239.8	529.5

The Group considers the timing of scheduled payments to avoid risks associated with the

concentration of large cash flows within particular time periods.

The table below shows the maturity profile of the contractual cash flows due under the Group’s

financial liabilities, on an undiscounted basis, estimated using prevailing interest and inflation rates at

the reporting date. Derivative cash flows include those on both derivative assets and derivative

liabilities and have been shown net; all other cash flows are shown gross.

				<1 year	1 – 2	2 – 3	3 – 4	>4 years	Total
					years	years	years
Group and Company				£m	£m	£m	£m	£m	£m
At 31 March 2024:
Trade payables				(18.4)	-	-	-	-	(18.4)
Refundable customer deposits				(2.9)	-	-	-	-	(2.9)
Leases				(1.8)	(1.3)	(0.5)	(0.6)	(0.7)	(4.9)
Amounts	owed	to	parent	(4.5)	(4.5)	(4.5)	(115.5)	-	(129.0)
undertaking
Amounts owed to group companies				(25.0)	(25.0)	(25.0)	(25.0)	(841.7)	(941.7)
Bonds				(42.9)	(492.9)	(2.9)	(2.9)	(251.8)	(793.4)
Borrowings and overdrafts				(9.2)	(9.2)	(9.2)	(9.2)	(41.0)	(77.8)
Derivatives				(5.6)	(5.6)	(8.9)	(32.1)	(350.5)	(402.7)
Total contractual cash flows				(110.3)	(538.5)	(51.0)	(185.3)	(1,485.7)	(2,370.8)
At 31 March 2023:
Trade payables				(17.3)	-	-	-	-	(17.3)
Refundable customer deposits				(11.9)	-	-	-	-	(11.9)
Leases				(1.6)	(1.2)	(0.3)	(0.2)	(0.8)	(4.1)
Amounts	owed	to	parent	(3.0)	(3.9)	(3.9)	(3.9)	(101.5)	(116.2)
undertaking
Amounts owed to group companies				(21.6)	(25.0)	(25.0)	(25.0)	(866.8)	(963.4)
Bonds				(42.7)	(42.7)	(492.7)	(2.8)	(243.7)	(824.6)
Borrowings and overdrafts				(227.7)	(8.8)	(8.8)	(8.8)	(48.0)	(302.1)
Derivatives				(123.4)	0.6	0.6	(3.9)	(360.3)	(486.4)
Total contractual cash flows				(449.2)	(81.0)	(530.1)	(44.6)	(1,621.1)	(2,726.0)

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

127

Notes to the Financial Statements (continued)

24. Retirement benefit schemes

Group and Company

Nature of Scheme

The Group’s retirement benefit arrangement is the Electricity North West Group of the Electricity

Supply Pension Scheme (“ESPS” or “the Scheme”) and forms part of the ESPS. The Scheme contains

both a defined benefit section and a defined contribution section. The defined benefit section of the

Scheme closed to new entrants on 1 September 2006, with new employees of the Group subsequently

provided with access to the defined contribution section. During the year the defined contribution

section of the Scheme was moved to a Master Trust arrangement and the respective assets were paid

across to the Master Trust.

The defined benefit section is a UK funded final salary arrangement providing pensions and lump sums

to members and dependants. The defined benefit section is a separate fund that is legally separated

from the entity. The Trustee board of the Scheme is composed of representatives from both the

employer and members of the Scheme. Under the Pensions Act 2004 at least one third of the Trustee

Board must be member nominated and the Trustee Board has made the necessary arrangements to

fulfil this obligation. The Trustee Board of the Scheme is required by law to act in the interest of the

Scheme and all relevant stakeholders of the Scheme, i.e., active employees, retirees and employers.

The Trustee Board is responsible for the operation, funding and investment strategy of the Scheme.

During the year the Group made contributions of £10.0m (2023: £28.2m) to the defined benefit

section of the Scheme. This includes £nil (2023: £20.0m) of defined contribution. The Group

estimates that contributions for the year ending 31 March 2025 will amount to around £9.8m. The

total defined benefit pension expense for the year was £6.8m (2023: £13.4m). No Executive Directors

were part of the defined benefit scheme.

As at 31 March 2024 contributions of £1.0m (2023: £2.4m) relating to the current year had not been

paid over to the defined benefit Scheme.

Defined benefit assets are measured at fair value while liabilities are measured at present value. The

difference between the two amounts is recognised as a surplus or obligation in the Statement of

Financial Position.

UK legislation requires the Trustee Board to carry out valuations at least every three years and to

target full funding against a basis that prudently reflects the Scheme’s risk exposure. The most recent

triennial funding valuation of the scheme was carried out as at 31 March 2022 and identified a shortfall

of £19.4m against the Trustee Board’s statutory funding objective. In addition to the timing of the

two valuations, the contributions made in the period and the return on assets, the main difference is

due to the different assumptions used by the IAS 19 Employee Benefits (revised 2011) and the funding

valuation. In the event of underfunding, the Group must agree a deficit recovery plan with the Trustee

Board within statutory deadlines. As part of the 2023 actuarial valuation, the Group agreed to

eliminate the shortfall by paying additional annual contributions in the period to 31 March 2023; no

further additional contributions are required after 31 March 2023 until at least the next triennial

valuation.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

128

Notes to the Financial Statements (continued)

24. Retirement benefit schemes (continued)

Funding the liabilities

The current and prior year defined benefit obligation has been calculated based on the results of the

31 March 2022 triennial funding valuation. The results of the 2022 funding valuation have been

projected forward by an independent actuary to take account of the requirements of revised IAS 19

in order to assess the position as at 31 March 2024 for the purpose of these financial statements. The

present value of the defined benefit obligation, the related current service cost and the past service

cost were measured using the projected unit credit method. A pension surplus under IAS 19 of £39.0m

is included in the statement of financial position at 31 March 2024 (2023: surplus of £42.6m).

The duration of the Scheme based on the results of the 31 March 2022 triennial funding valuation is

approximately 16 years (2023: 16 years). As at the current reporting date the Scheme actuary

estimates that the duration based on the 31 March 2022 triennial has since fallen to approximately

13 years (2023: 13 years) this has been used in the calculations as at 31 March 2024.

Investment risks

The Scheme has an investment strategy to aim to match pensioner and other liabilities with lower risk

cash flow investments and to invest liabilities in respect of active members into return seeking assets.

As active members retire, then a switch of investments would be carried out.

The Company recognises that the interests of customers, who ultimately fund pension costs, should

be given full recognition in determining the investment strategy. The Company works in collaboration

with the Scheme Trustee to ensure these interests are considered alongside those of the members of

the Scheme.

Other risks

In addition to investment risk, the Scheme exposes the Group to other risks, such as longevity risk,

inflation risk and interest rate risk. As the Scheme’s obligation is to provide lifetime pension benefits

to members upon retirement, increases in life expectancy will result in an increase in the Scheme’s

liabilities. Other assumptions used to value the defined benefit obligation are also uncertain.

These risks are managed through de-risking and hedging strategies and are measured and reported to

the Scheme’s Trustee. In particular, in October 2019 the Scheme completed a pensioner buy-in with

Scottish Widows for around 80% of the Scheme’s then pensioner liabilities. This buy-in asset now

represents 47.1% of the total Scheme assets as at 31 March 2024 (2023: 49.1%). This had the effect

of removing longevity and investment risks in respect of the liabilities for this part of the membership.

Winding up

Although currently there are no plans to do so, the Scheme could be wound up in which case the

benefits would have to be bought out with an insurance company. The cost of buying-out benefits

would be significantly more than the defined benefit obligation calculated in accordance with IAS 19.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

129

Notes to the Financial Statements (continued)

24. Retirement benefit schemes (continued)

Defined Contribution arrangements

All assets within the defined contribution section of the Scheme are held independently from the

Group. During the year the defined contribution section of the Scheme was moved to a Master Trust

arrangement and the respective assets were paid across to the Master Trust.

The total cost charged to the income statement in relation to the defined contribution section for the

year ended 31 March 2024 was £9.9m (2023: £8.5m) and represents contributions payable to the

Scheme at rates specified in the rules of the Scheme. As at 31 March 2024 contributions of £nil (2023:

£nil) due in respect of the current year had not been paid over to the Scheme.

Defined Benefits employee benefits

The reconciliation of the opening and closing statement of financial position is as follows:

	2024	2023
Group and Company	£m	£m
At 1 April	42.6	18.4
Expense recognised in the income statement	(6.8)	(13.4)
Contributions paid	10.0	28.2
Total re-measurement included in other comprehensive income	(6.8)	9.4
At 31 March	39.0	42.6

The balance recognised in the statement of financial position is as follows:

	2024	2023
Group and Company	£m	£m
Present value of defined benefit obligations	(855.0)	(873.7)
Fair value of plan assets	894.0	916.3
Net surplus arising from defined benefit obligation	39.0	42.6

Movements in the fair value of the defined benefit obligations are as follows:

	2024	2023
Group and Company	£m	£m
At 1 April	873.7	1,259.3
Current service cost	7.9	13.5
Interest expense	40.2	32.2
Member contributions	1.3	1.2
Re-measurement:
Effect of changes in demographic assumptions	(14.3)	(12.3)
Effect of changes in financial assumptions	(7.0)	(357.1)
Effect of experience adjustments	9.1	24.9
Benefits paid	(55.9)	(88.0)
At 31 March	855.0	873.7

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

130

Notes to the Financial Statements (continued)

24. Retirement benefit schemes (continued)

Movements in the fair value of the Pension Scheme assets were as follows:

	2024	2023
Group and Company	£m	£m
At 1 April	916.3	1,277.7
Interest income	42.4	33.1
Return on plan assets (net of interest income)	(19.0)	(335.1)
Employer contributions	10.0	28.2
Member contributions	1.3	1.2
Benefits paid	(55.9)	(88.0)
Administration expenses	(1.1)	(0.8)
At 31 March	894.0	916.3

The amount recognised in other comprehensive income is as follows:

	2024	2023
Group and Company	£m	£m
Return on scheme assets excluding interest income	(19.0)	(335.1)
Actuarial gain arising from changes in demographic assumptions	14.3	12.3
Actuarial gain arising from changes in financial assumptions	7.0	357.1
Experience loss on liabilities	(9.1)	(24.9)
Total (loss)/gain recognised in other comprehensive income	(6.8)	9.4

The net pension expense before taxation recognised in the income statement, before capitalisation,

in respect of the Scheme is summarised as follows:

	2024	2023
Group and Company	£m	£m
Current service cost	(7.9)	(13.5)
Interest income on plan assets	42.4	33.1
Interest expense on Scheme obligations	(40.2)	(32.2)
Administration expenses	(1.1)	(0.8)
Net pension expense before taxation	(6.8)	(13.4)

The above amounts are recognised in arriving at operating profit except for the interest on Scheme

assets and interest on Scheme obligations which have been recognised within finance expense (Note

9).

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

131

Notes to the Financial Statements (continued)

24. Retirement benefit schemes (continued)

The main financial assumptions used by the actuary (in determining the surplus) were as follows:

	2024	2023
Group and Company	%	%
Discount rate	4.80	4.75
Pensionable salary increases	3.05	3.45
Pension increases (RPI)	3.15	3.05
Price inflation (RPI)	3.40	3.45
Price inflation (CPI)	2.95	2.95

The mortality rates utilised in the valuation are based on the standard actuarial tables S3PA_M (SAPS3

combined amounts MIDDLE) (2023: S3PA_M) tables with a scaling of 109% for male pensioners (2023:

109%), 107% for female pensioners (2023: 107%), 109% for male non-pensioners/future pensioners

(2023: 109%) and 107% for female non-pensioners/future pensioners (2023: 107%). These scaling

factors allow for differences in expected mortality between the Scheme population and the

population used in the standard tables. A long-term improvement rate of 1.25% p.a. is assumed within

the underlying CMI 2022 model (2023: 1.25% CMI 2021 model).

The current life expectancies underlying the value of the accrued liabilities for the Scheme are:

	2024	2023
Group and Company	Years	Years
Male member - current age 45	25.8	26.4
Male member - current age 60	24.7	25.2
Female member - current age 45	28.9	29.4
Female member - current age 60	27.8	28.2

The following table presents a sensitivity analysis for each significant actuarial assumption, showing

how the defined benefit obligation would have been affected by changes in the relevant actuarial

assumption that were reasonably possible at the Statement of Financial Position date. The

calculations alter the relevant assumption by the amount specified, whilst assuming that all other

variables remained the same. The sensitivity analysis is for illustrative purposes and it is of note that

while the sensitivities below are based on isolated movements, in reality some assumptions are

interlinked and a movement in one may result in movements in others (e.g., inflation-based

assumptions).

	2024	2023
Group and Company	£m	£m
Increase in Defined Benefit Obligation:
Discount rate: decrease by 25 basis points	27.1	27.9
Price inflation: increase by 25 basis points	16.4	14.1
Life expectancy: increase longevity by 1 year	34.2	35.4

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

132

Notes to the Financial Statements (continued)

24. Retirement benefit schemes (continued)

As at 31 March 2024, the fair value of the Scheme’s assets and liabilities recognised in the Statement

of Financial Position were as follows:

Scheme

assets

Quoted

Unquoted

Total

Value

Scheme

assets

Quoted

Unquoted

Total

Value

	2024	2024	2024	2024	2023	2023	2023	2023
Group and Company	%	£m	£m	£m	%	£m	£m	£m
At 31 March
Cash	2.1	18.6	-	18.6	0.8	6.9	-	6.9
Debt instruments	30.3	195.6	75.1	270.7	29.0	155.3	110.8	266.1
Real estate	11.0	-	97.9	97.9	12.2	-	111.9	111.9
Distressed debt	0.5	-	4.4	4.4	0.7	-	6.2	6.2
Infrastructure Equity	9.0	-	80.8	80.8	8.2	-	75.0	75.0
Pensioner buy-in	47.1	-	421.6	421.6	49.1	-	450.2	450.2
Fair value of assets	100.0	214.2	679.8	894.0	100.0	162.2	754.1	916.3
Present value of liabilities				(855.0)				(873.7)
Net retirement benefit
surplus				39.0				42.6

The fair value of the assets set out above are as per the quoted market prices in active markets.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

133

Notes to the Financial Statements (continued)

25. Customer Contributions

Customer contributions are amounts received from a customer in respect of the provision of a new

connection to the network. Customer contributions are amortised through the Income Statement

over the expected lifetime of the relevant asset.

	2024	2023
Group and Company	£m	£m
At 1 April	765.1	724.7
Additions during the year	57.1	60.6
Amortised through revenue (Note 4 & 35)	(20.9)	(20.2)
At 31 March	801.3	765.1
Split:
Amounts due in less than one year	81.0	76.6
Amounts due after more than one year	720.3	688.5
At 31 March	801.3	765.1

Refundable customer contributions are those customer contributions which may be partly refundable,

dependent on contractual obligations.

	2024	2023
Group and Company	£m	£m
Refundable customer contribution	95.6	82.0
Non-refundable customer contribution	705.7	683.2
At 31 March	801.3	765.2

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

134

Notes to the Financial Statements (continued)

26. Deferred tax

The following are the major deferred tax liabilities and assets recognised by the Group and Company,

and the movements thereon, during the current and prior years.

Group and Company	Accelerated	Retirement	Other	Total
	tax	benefit
	depreciation	obligations
	£m	£m	£m	£m
At 1 April 2022	289.0	4.3	(106.6)	186.7
Charged to income statement (Note 10)	6.1	3.7	38.5	48.3
Deferred tax on re-measurement of defined benefit pension scheme	-	2.3	-	2.3
At 31 March 2023	295.1	10.3	(68.1)	237.3
Charged to income statement (Note 10)	16.5	0.8	9.3	26.6
Deferred tax on re-measurement of defined benefit pension scheme	-	(1.7)	-	(1.7)
At 31 March 2024	311.6	9.4	(58.8)	262.2

There are no significant unrecognised deferred tax assets or liabilities for either the Group or Company

in either the current or prior year.

Other timing differences relates primarily to derivative instruments, but also includes general

provision, pension contributions not paid, rollover relief, IFRS9 and IFRS16 transitional adjustments.

Deferred tax is calculated at 25% (2023: 25%), being the rate at which it is expected to reverse.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

135

Notes to the Financial Statements (continued)

27. Provisions

	2024	2023
Group and Company	£m	£m
At 1 April	1.0	1.6
Amounts released to the income statement (Note 5)	-	(0.4)
Utilisation of provision	(0.3)	(0.2)
At 31 March	0.7	1.0

At 31 March 2024, £0.5m (2023: £0.6m) of the balance is due in less than one year, £0.2m (2023:

£0.4m) is due after one year.

ENWL is part of a Covenanter Group which is party to a Deed of Covenant under which certain

guarantees over the benefits of members of the EATL Group of the Electricity Supply Pension Scheme

have been given. The closing provision at 31 March 2024 of £0.4m (2023: £0.6m) on a discounted

basis relates to the Company’s 6.7% share of the liabilities. £0.2m of this balance is due in less than

one year and £0.2m of it is due in after one year.

The remainder of the provision relates to onerous lease provisions and is all due in less than one year.

28. Share capital

	2024	2023
Group and Company	£	£
Authorised:
569,999,996 ordinary shares of 50 pence each	284,999,998	284,999,998
4 ‘A’ ordinary shares of 50 pence each	2	2
Special rights redeemable preference shares of £1	1	1
At 31 March	285,000,001	285,000,001

	2024	2023
Group and Company	£	£
Allotted, called up and fully paid:
476,821,341 ordinary shares of 50 pence each	238,410,671	238,410,671
4 ‘A’ ordinary shares of 50 pence each	2	2
At 31 March	238,410,673	238,410,673

The ‘A’ ordinary shares and the ordinary shares rank pari passu in all respects, save that dividends may

be declared on one class of shares without being declared on the other.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

136

Notes to the Financial Statements (continued)

29. Shareholders’ Equity

Called up share

capital

Share premium

account

Revaluation reserve

Capital redemption

reserve

Retained earnings

Total

equity

	£m	£m	£m	£m	£m	£m
Group:
At 1 April 2023	238.4	4.4	72.0	8.6	670.4	993.8
Profit for the year	-	-	-	-	120.1	120.1
Other comprehensive expense for the year	-	-	-	-	(5.1)	(5.1)
Transfer from revaluation reserve	-	-	(2.0)	-	2.0	-
	-	-	(2.0)	-	117.0	115.0
Transactions with owners recorded directly
in equity:
Dividends (Note 31)	-	-	-	-	(30.4)	(30.4)
At 31 March 2024	238.4	4.4	70.0	8.6	757.0	1,078.4
Company:
At 1 April 2023	238.4	4.4	72.0	8.6	670.1	993.5
Profit for the year	-	-	-	-	120.1	120.1
Other comprehensive expense for the year	-	-	-	-	(5.1)	(5.1)
Transfer from revaluation reserve	-	-	(2.0)	-	2.0	-
	-	-	(2.0)	-	117.0	115.0
Transactions with owners recorded directly
in equity:
Dividends (Note 31)	-	-	-	-	(30.4)	(30.4)
At 31 March 2024	238.4	4.4	70.0	8.6	756.7	1,078.1

In 1997 the Company undertook a revaluation of certain assets, following North West Water’s

acquisition of Norweb. This resulted in the creation of a revaluation reserve of £234.9m. The

additional depreciation created as a result of the revaluation is transferred from the revaluation

reserve to retained earnings on an annual basis.

The capital redemption reserve is a non-distributable reserve specifically for the purchase of own

shares.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

137

Notes to the Financial Statements (continued)

30. Capital structure

Details of the authorised and allotted share capital, together with details of the movements in the

Company’s issued share capital during the year are shown in Note 29. The Company has Ordinary

shares, which carry no right to fixed income. Each share carries the right to one vote at general

meetings of the Company. The Company also has ‘A’ ordinary shares which rank pari passu in all

respects, save that dividends may be declared on one class of shares without being declared on the

other.

There exists an unissued special rights redeemable preference share which does not carry any voting

rights and can only be held by one of His Majesty’s Secretaries of State, another Minister of the Crown,

the Solicitor for the affairs of His Majesty’s Treasury or any other person acting on behalf of the Crown.

This share is a legacy from the privatisation of the Company and was issued on 19 November 1990

and redeemed on 31 March 1995.

There are no specific restrictions on the size of a holding or on the transfer of shares which are both

governed by the general provisions of the Articles of Association (“the Articles”) and prevailing

legislation. The directors are not aware of any agreements between holders of the Company’s shares

that may result in restrictions in the transfer of securities or on voting rights.

No person has any special rights of control over the Company’s share capital and all issued shares are

fully paid up.

With regard to the appointment and replacement of directors, the Company is governed by its the

Articles, the Companies Act 2006 and related legislation. The Articles themselves may be amended

by special resolution of the shareholders. The powers of directors are described in the Articles, copies

of which are available on request, and in the Corporate Governance Report on pages 45 to 58.

Capital risk management

The capital structure of the Group consists of net debt, comprised of borrowings net of cash, and

equity, comprised of share capital and reserves.

The Group is subject to externally imposed capital requirements, by both Ofgem and financial lenders

and investors. These capital requirements include gearing levels, being the ratio of net debt to the

regulatory asset value (RAV). The forecast gearing position is closely monitored by the Board against

the external capital requirements (see page 33).

The RAV (2020/21 prices) is taken from the most recent Price Control Financial Model (PCFM)

published by Ofgem on its website and is calculated in accordance with the RIIO-ED2 methodology (1

April 2023 to 31 March 2028). For the year ended 31 March 2024, the RAV is £2,684.6m (2023:

£2,481.8m) and has been indexed using the CPIH for March 2024.

The Group manages its capital to ensure that entities in the Group will be able to continue as going

concerns while maximising the return to shareholders through the optimisation of the debt and equity

balance (see the dividend policy page 34), with regard to the externally imposed capital requirements.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

138

Notes to the Financial Statements (continued)

31. Dividends

Amounts recognised as distributions to equity holders in the year comprise:

	2024	2023
Group and Company	£m	£m
Final dividends for the year ended 31 March 2022 of 4.82 pence	-	23.0
per share (paid June 2022)
Final dividends for the year ended 31 March 2023 of 3.90 pence	18.6	-
per share (paid June 2023)
Interim dividends for the year ended 31 March 2024 of 2.47 pence	11.8	-
per share (paid February 2024)
Dividends	30.4	23.0

At the Board meeting in May 2024, the directors proposed a final dividend of £45.4m for the year

ended 31 March 2024, subject to approval by equity holders of the Company, that is not a liability in

the financial statements at 31 March 2024.

32. Ultimate parent undertaking and controlling party

The immediate parent undertaking is North West Electricity Networks plc (“NWEN plc”), a company

incorporated and registered in the United Kingdom. The registered address of the immediate parent

undertaking is Borron Street, Stockport, Cheshire, SK1 2JD. This is the smallest group in which the

results of the Company are consolidated and these consolidated financial statements can be obtained

from the above address.

The ultimate parent undertaking is North West Electricity Networks (Jersey) Limited (“NWEN

(Jersey)”), a company incorporated and registered in Jersey. The address of the ultimate parent

company is: 44 Esplanade, St Helier, Jersey, Channel Islands, JE4 9WG. This is the largest group in

which the results of the Company are consolidated.

At 31 March 2023 and 2024, the ownership of the shares in NWEN (Jersey) was as follows:

• KDM Power Limited (40.0%);

• Equitix ENW 6 Limited (25.0%);

• Equitix MA North HoldCo Limited (15.0%); and

• Swingford Holdings Corporation Limited (20.0%).

As no individual shareholder owned over 50%, there was no ultimate controlling party.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

139

Notes to the Financial Statements (continued)

33. Related party transactions

During the year the following transactions with related parties were entered into:

	Group	Company	Group	Company
	2024	2024	2023	2023
	£m	£m	£m	£m
Recharges to:
Electricity North West (Construction and Maintenance)	2.3	2.3	2.5	2.5
Limited
Electricity North West Services Limited	1.3	1.3	1.6	1.6
Electricity North West Property Limited	0.1	0.1	-	-
Recharges from:
Electricity North West (Construction and Maintenance)	(1.2)	(1.2)	(0.5)	(0.5)
Limited
Electricity North West Services Limited	(8.1)	(8.1)	(7.5)	(7.5)
Interest on group borrowings:
North West Electricity Networks plc	(4.2)	(4.2)	(2.3)	(2.3)
ENW Finance plc	(25.4)	(25.4)	(8.3)	(8.3)
Interest on group borrowings (Note 9)	(29.6)	(29.6)	(10.6)	(10.6)
Reimbursement of inter-company loan impairment on loan from ENW Finance plc (Note 9)	(0.4)	(0.4)	0.4	0.4
Fair value movement on inter-company derivative	95.2	95.2	96.5	96.5
asset with ENW Finance plc (Note 9)
Fair value movement on inter-company derivative	(95.2)	(95.2)	(96.5)	(96.5)
liability with ENW Finance plc (Note 9)
Dividends paid to North West Electricity Networks plc	(30.4)	(30.4)	(23.0)	(23.0)
(Note 31)
Directors’ remuneration (Note 7)	(3.0)	(3.0)	(3.2)	(3.2)

For disclosure relating to executive directors’ remuneration see Note 7. The Company’s key

management personnel comprise of its Executive Leadership Team.

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

140

Notes to the Financial Statements (continued)

33. Related party transactions (continued)

Amounts outstanding with related parties are as follows:

					Group	Company	Group	Company
					2024	2024	2023	2023
					£m	£m	£m	£m
Amounts owed by Group:
North West Electricity Networks plc					3.6	3.6	3.5	3.5
Electricity	North	West	(Construction	and	1.0	1.0	1.2	1.2
Maintenance) Limited
Electricity North West Services Limited					0.4	0.4	0.6	0.6
Electricity North West Property Limited					0.1	0.1	0.1	0.1
North West Electricity Networks (Finance) Limited					0.1	0.1	-	-
North West Electricity Networks (Jersey) Limited					0.2	0.2	0.1	0.1
North West Electricity Networks (Holdings) Limited					0.3	0.3	0.2	0.2
North West Electricity Networks (UK) Limited					0.1	0.1	-	-
Total amounts owed by Group (Note 16)					5.8	5.8	5.7	5.7
Amounts owed to subsidiaries:
Electricity North West Number 1 Company Limited					-	(15.5)	-	(15.5)
(Note 19)
Interest payable to Group:
North West Electricity Networks plc					(1.3)	(1.3)	(0.2)	(0.2)
ENW Finance plc					(10.7)	(10.7)	(7.7)	(7.7)
Other amounts payable to Group:
Electricity North West Services Limited					(0.9)	(0.9)	(0.5)	(0.5)
North West Electricity Networks (Holdings) Limited					(0.2)	(0.2)	(0.2)	(0.2)
North West Electricity Networks (Jersey) Limited					(0.1)	(0.1)	(0.1)	(0.1)
North West Electricity Networks plc					(0.1)	(0.1)	-	-
Electricity	North	West	(Construction	and	(0.2)	(0.2)	-	-
Maintenance) Limited
Total amounts owed to Group (Note 19)					(13.5)	(13.5)	(8.7)	(8.7)
Borrowings payable to:
North West Electricity Networks plc (Note 20)					(109.8)	(109.8)	(96.5)	(96.5)
ENW Finance plc (Note 20)					(721.9)	(721.9)	(721.6)	(721.6)
Group tax relief to:
North West Electricity Networks plc					(13.8)	(13.8)	(2.0)	(2.0)
North West Electricity Networks (Holdings) Ltd					(0.6)	(0.6)	-	-
North West Electricity Networks (UK) Ltd					(0.4)	(0.4)	-	-
Derivative asset with ENW Finance plc (Note 21)					217.1	217.1	312.3	312.3
Derivative liability with ENW Finance plc (Note 21)					(217.1)	(217.1)	(312.3)	(312.3)

The loan from North West Electricity Networks plc (“NWEN plc”) accrues weighted average interest at

4.10% (2023: 4.07%) and is repayable in March 2028. Of the loans from ENW Finance plc, £300m

accrues interest at 1.415% (2023: £300m at 1.415%) and £425m at 4.893% (2023: £425m at 4.893%).

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

141

Notes to the Financial Statements (continued)

34. Contractual commitments

At 31 March 2024, the Group and Company had entered into contractual commitments for the

acquisition of software amounting to £2.1m (2023: £2.5m). These have not been recognised as

liabilities in the financial statements.

At 31 March 2024, the Group and Company had entered into contractual commitments for the

acquisition of property, plant and equipment amounting to £39.3m (2023: £22.3m). These have not

been recognised as liabilities in the financial statements.

	2024	2023
Group and Company	£m	£m
Software (Note 13)	2.1	2.5
Property, plant and equipment (Note 11)	39.3	22.3
Contractual commitments	41.4	24.8

35. Cash flow information

Cash generated from operations

	2024	2023
Group and Company	£m	£m
Operating profit	229.1	195.5
Adjustments for:
Depreciation of property, plant and equipment (Note 5 & 11)	132.5	126.5
Amortisation of intangible asset (Note 5 & 13)	14.2	14.2
Amortisation of customer contributions (Note 4 & 25)	(20.9)	(20.2)
Profit on disposal of property, plant and equipment	(0.2)	(0.5)
Cash contributions in excess of pension charge to operating profit	(4.6)	(20.4)
Operating cash flows before movements in working capital	350.1	295.1
Changes in working capital:
Increase in inventories	(26.9)	(4.3)
Increase in trade and other receivables	(4.2)	(15.6)
(Decrease)/increase in trade and other payables	(7.7)	21.8
Cash generated from operations	311.3	297.0

Electricity North West Limited

Annual Report and Consolidated Financial Statements for the year ended 31 March 2024

142

Notes to the Financial Statements (continued)

35. Cash flow information (continued)

Net debt reconciliation

This section sets out an analysis of net debt and the movements in net debt.

	2024	2023
Group and Company	£m	£m
Cash and cash equivalents (Note 17 & 23)	189.8	173.8
Money market deposits over 3 months (Note 18 & 23)	-	305.7
Borrowings (Note 20 & 23)	(1,570.0)	(1,763.1)
Net debt	(1,380.2)	(1,283.6)

Change in liabilities arising from financing activities

This section sets out an analysis of the movements in the Group’s liabilities for which cash flows have

been, or will be, classified as financing activities in the statement of cash flows.

Borrowing

Cash and cash

equivalents

Money market

deposits

over

three

months

Total

Group and Company	£m	£m	£m	£m
Net debt at 1 April 2022	(1,286.1)	59.4	-	(1,226.7)
Financing cash flows	(427.5)	114.4	305.7	(7.4)
Indexation (Note 9)	(55.2)	-	-	(55.2)
New leases (Note 12)	(1.9)	-	-	(1.9)
Transaction costs on new borrowings (Note 20)	2.3	-	-	2.3
Amortisation of transaction costs, discounts and premiums (Note 20)	5.3	-	-	5.3
Net debt at 31 March 2023	(1,763.1)	173.8	305.7	(1,283.6)
Financing cash flows	221.4	16.0	(305.7)	(68.3)
Indexation (Note 9)	(31.0)	-	-	(31.0)
New leases (Note 12)	(2.6)	-	-	(2.6)
Transaction costs on new borrowings (Note 20)	0.1	-	-	0.1
Amortisation of transaction costs, discounts and premiums (Note 20)	5.2	-	-	5.2
Net debt at 31 March 2024	(1,570.0)	189.8	-	(1,380.2)

Where applicable, interest on borrowings is included in operating activities in the Statement of Cash

Flows and accruals within current liabilities on the Statement of Financial Position and is, therefore,

excluded from this analysis.

36. Post balance sheet events

At 31 March 2024, the £50m revolving credit facility (RCF), which was nil drawn, was due to expire in

December 2024. In April 2024, this was replaced with a new £250m RCF, expiring in April 2027.