Centrica plc plc Centrica Annual Report and Accounts 2012 INTEGRATED ENERGY CENTRicA PLC Registered office: Millstream, Maidenhead Road, Windsor, Berkshire SL4 5GD Company registered in England Annual Report and Accounts 2012 and Wales No. 3033654 centrica.com Centrica plc Annual Report and Accounts 2012 Centrica plc Annual Report and Accounts 2012 INTEGRATED ENERGY IS WHAT WE DO. It means constantly exploring new ways to source, procure and generate an affordable supply of energy. It means integrating innovation and technology into the home, giving our customers access to energy and services, whenever they need it. It means working with governments, regulators and partners to make the right things happen at the right time. Most important of all, it means empowering our customers to take control of their energy needs as we work towards a low carbon future. INTEGRATED ENERGY FROM CENTRicA. This report is printed on Revive 100 Silk which is made from 100% recycled post- consumer fibre that is Totally Chlorine Free. This paper has been independently certified according to the rules of the Forest Stewardship Council (FSC®). ONLINE Designed and produced by INTEGRATED ENERGY Photography by David Hares, Mike What it means to us How we achieve it Abrahams, Igor Emmerich, Charlie Fawell Disclaimer and David Partner. This Annual Report and Accounts does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any Centrica shares or other securities. Printed by CPI Colour Limited Use your smartphone or tablet This Annual Report and Accounts contains certain forward-looking statements with respect to the financial ISO14001, FSC certified and CarbonNeutral®. condition, results, operations and businesses of Centrica plc. These statements and forecasts involve risk and to scan this QR code for instant uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or access to the Centrica Annual implied by these forward-looking statements and forecasts. Report 2012 online Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser. Centrica plc Annual Report and Accounts 2012 1 Directors’ Report – Business Review Report Business – Directors’ Introduction Financial Statements You can find here a short summary of our business, Here you can understand the details behind our providing an overview of the Annual Report together financial performance. with the Group’s financial performance. 78 Group Financial Statements 2 Centrica at a Glance 82 Notes to the Financial Statements 4 Performance Highlights 135 Independent Auditors’ Report – Company 136 Company Balance Sheet 137 Notes to the Company Financial Statements Directors’ Report – Governance 143 Gas and Liquids Reserves 144 Five Year Record Directors’ Report – Business Review Directors’ Report – Appendix We discuss here how we have delivered our vision and This provides more detailed performance measures for strategy in 2012 and take the opportunity to introduce the business units and corporate responsibility. The the next step of our strategic direction. Directors’ biographies and statutory Directors’ Report disclosures are also included. 5 Chairman’s Statement 9 Chief Executive’s Review 146 Performance Measures 9 Marketplace 152 Biographies of the Board of Directors and Statements Financial 10 Our vision and strategic priorities Senior Executives 12 Our business model 154 Other Statutory Information 14 Review of the year 18 Key Performance Indicators 20 Our Businesses 22 Operating Review 36 Group Financial Review 39 Corporate Responsibility Review 44 Principal Risks and Uncertainties Directors’ Report – Governance Shareholder Information Report Appendix – Directors’ Read here to find out about our standards of If you need help with managing your shareholding or you governance in relation to Board leadership and want to know more about our financial calendar and effectiveness, remuneration, accountability and share register, then this information can be found here. relations with shareholders. 156 Financial Calendar 52 Corporate Governance Report 157 Shareholder Information 61 Remuneration Report 161 Glossary 76 Independent Auditors’ Report – Group 163 Index DELIVERING our OUR INTEGRATED Information Shareholder VISION BUSINESS MODEL See how we deliver at every Read about our strategic stage of the energy chain priorities on page 10 on page 12 2 Centrica plc Annual Report and Accounts 2012 Introduction CENTRICA AT A GLANCE The markets we operate in Our strategic priorities Our business model The energy world is constantly We have refreshed our strategy to A resilient, integrated business evolving. ensure we deliver our vision. model is key to our success. DOWNSTREAM INNOVATE to drive WE sourcE IT British Gas is the leading residential growth and service by finding and developing new gas energy and services provider in reserves across the world. Britain and Direct Energy is one of excellence North America’s largest energy and WE GENERATE IT energy related services providers. through our fleet of gas-fired power UPSTREAM INTEGRATE our natural stations and wind farms. Centrica Energy has upstream gas business, linked to WE ProcEss IT gas and oil operations in the UK, our core markets at our onshore gas terminals, making Norway, the Netherlands, North it safe for our customers to use. America and Trinidad and Tobago. The Company also owns gas-fired INCREASE our returns WE STorE IT power stations and has interests at our Rough storage field, the largest in nuclear and renewable generation through efficiency gas storage facility in the UK. in the UK. Centrica Storage operates and continued capital more than 70% of the UK’s total WE TRADE IT gas storage capacity. Securing discipline in the UK, North America and Europe our customers’ energy needs, to secure gas and power for our sustainably and affordably, is at customers. the core of what we do. WE suPPLY IT to our residential and commercial customers in the UK and North America. WE SERVICE IT through our energy services and installation businesses. WE SAVE IT by offering a range of low carbon products and services to our customers. ET PL IC PR ESS M RK A G IO IN O A C E R S D E T I E A T U M L R I B E T S S P PAG E 9 AG E 10 PAG E 12 Centrica plc Annual Report and Accounts 2012 3 Introduction Directors’ Report – Business Review Report Business – Directors’ Our vision is to be the leading integrated energy company with customers at our core Directors’ Report – Governance Measuring our progress Responsibility Our principal risks Our key performance indicators The impact our business To achieve our priorities, we need monitor our progress and keep activities have on society and to be aware of the principal risks our focus on delivery. the environment. that affect our business. We monitor our performance by Our corporate responsibility ambition The risks we face in a rapidly measuring and tracking key is to be the most trusted energy changing energy landscape continue performance indicators (KPIs) that company. We need to be trusted to evolve over time. A number of we believe are important to our by our customers, governments, measures helped to mitigate those longer-term success. Long-term regulators and investors by effectively factors in 2012 while 2013 presents sustainable performance of these managing our social and environmental our organisation with more KPIs is linked to the remuneration impacts. In achieving a broad challenges. Robust governance and arrangements of our Executive foundation of stakeholder trust, we a clear risk strategy prepare us for Statements Financial Directors and senior executives. can ensure long-term sustainable any uncertainties ahead. business success. FINANCIAL KPIs PRINCIPAL RISKS • Adjusted operating profit Go to centrica.com to see our • Health, safety, security and responsibility process in more detail. environment • Adjusted basic earnings per share • Brand and reputation • Total shareholder return • Legislation and regulation • Dividends per share • Strategic growth NON-FINANCIAL KPIs • Commodity costs • Lost time injury frequency rate • Change management • Process safety • Information security Report Appendix – Directors’ • Customer trust • People • Employee engagement Shareholder Information Shareholder MANCE R E S P O CIPAL R R IN E N N I S O D T S I K F A R I I S R C R B P E A O I P L T P I O Y T R R E Y O S K C P AG E 18 PAG E 3 9 PAG E 4 4 4 Centrica plc Annual Report and Accounts 2012 Introduction PERFormANCE HIGHLIGHTS Adjusted earnings Group revenue‡ Dividend per share £m £bn pence 1,406 23.9 16.4 1,333 1,297 15.4 22.8 22.4 14.3 1,111 22.0 911 20.9 12.8 12.2 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 ‡ From continuing operations • Adjusted earnings up 5% to £1,406 million; 27.1 pence adjusted basic EPS • Statutory earnings £1,273 million • Cooler weather saw average domestic gas consumption increase by 12% • Centrica Energy and Direct Energy benefiting from enhanced scale • Adjusted Group tax charge of £1.1 billion • Share repurchase of £500 million announced and full year dividend up 6% • £2.7 billion invested in 2012 Financial highlights 2012 2011 Revenue from continuing operations £23.9bn £22.8bn Total adjusted operating profit £2,743m £2,415m Total adjusted taxation charge £1,110m £891m Total adjusted