Centrica plc Registered office: Millstream, Maidenhead Road, Windsor, Berkshire SL4 5GD Company registered in England Report Annual and Wales No. 3033654 www.centrica.com and Accounts and 2010 Annual Report and Accounts 2010 Transporting personnel to the North Sea platforms UK: British Gas, Centrica Energy and Centrica Storage North America: Direct Energy PERFORMANCE ‡ ‡ ‡ Revenue Operating Profit* Employees 10% 16% 26% 7% 1% HIGHLIGHTS 4% 57% 51% 79% 1% Centrica’s main operations are in the UK and North America. 32% We have two types of business – downstream and upstream. 16% Downstream UK Upstream UK Storage UK North America Operating ◊ ‡ Adjusted earnings Group revenue Dividend per share Revenue‡ profit*‡ £m £m pence £m £m Downstream UK 1,297 14.30 22,423 21,963 1,111 12.80 1,122 20,872 12.20 Residential energy supply We are the biggest energy supplier in Britain’s domestic market. 8,355 742 11.57 911 9.92 Residential services We are Britain’s largest operator in the installation and maintenance of 16,065 15,893 707 domestic central heating and gas appliances. 1,464 241 Business energy supply We are Britain’s leading supplier of energy and related services and services to businesses. 2,906 233 06 07 08 09 10 06 07 08 09 10 06 07 08 09 10 Upstream UK With assets primarily in the UK and Norwegian continental shelf, our Financial highlights 2010 2009 Upstream gas and oil activities include gas and oil production, development and exploration. 864 581 ‡ Revenue £22.42bn £21.96bn We own and operate eight gas fired power stations, have a leading position Adjusted operating profit*‡ £2,390m £1,857m Power generation in offshore wind and a 20% stake in British Energy’s nuclear fleet. 1,105 226 Total taxation charge ^ £761m £548m We have a growing liquefied natural gas (LNG) business and also manage Industrial and commercial a number of legacy gas supply contracts. 1,594 (36) Adjusted effective tax rate^ 37% 33% ◊ Adjusted earnings £1,297m £1,111m Proprietary energy trading We buy and sell gas and power from a variety of sources. 2 – Adjusted basic earnings per share◊ 25.2p 21.7p Full-year dividend per share 14.3p 12.8p Storage UK Statutory results We are the owner and operator of Rough, the UK’s largest gas Storage storage facility. 232 169 Operating profit‡ £3,074m £1,175m Earnings £1,942m £856m North America Basic earnings per share 37.6p 16.5p We supply gas and power to residential and small business customers in Operating profit‡ includes net exceptional charges of £283m (2009: £568m) Residential energy supply chosen deregulated states and provinces in North America. 2,502 177 This report is printed on Greencoat 80 Silk which is made from 80% A definition of the profit measures used throughout these results is provided in the Chief Executive’s Review on We supply gas and power to commercial and industrial customers in recycled post-consumer fibre and 20% virgin fibre that is Elemental page 7. A reconciliation between operating profit and adjusted operating profit is provided in note 6(b) and a Business energy supply chosen deregulated markets across North America. 2,682 88 reconciliation between the earnings measures is provided in note 14. Chlorine Free. This paper has been independently certified according to the rules of the Forest Stewardship Council (FSC). * Including share of joint ventures and associates stated before interest and taxation, and before other costs and Residential and business We are the largest home services company in North America covering depreciation of fair value uplifts to property, plant and equipment from Strategic Investments and exceptional services 46 US states and all Canadian provinces. 485 15 Designed and produced by items and certain re-measurements. Strategic Investments are the acquisition of Venture and the investment in British Energy Upstream and We own and operate gas fired power stations in Texas and gas and oil ◊ As above, except after other costs and joint ventures and associates stated net of interest and taxation Photography by Mike Abrahams, David Hares, Charlie Fawell, wholesale energy assets in Alberta. We also have a wholesale energy trading business. 232 (46) ^ Includes taxation on profit from continuing operations and tax from joint ventures and associates as reconciled David Partner and Andy Wilson. in the Group Financial Review on page 23 ‡ From continuing operations Printed by St Ives Westerham Press Ltd, ISO14001, FSC certified and CarbonNeutral®. UK: British Gas, Centrica Energy and Centrica Storage North America: Direct Energy PERFORMANCE ‡ ‡ ‡ Revenue Operating Profit* Employees 10% 16% 26% 7% 1% HIGHLIGHTS 4% 57% 51% 79% 1% Centrica’s main operations are in the UK and North America. 32% We have two types of business – downstream and upstream. 16% Downstream UK Upstream UK Storage UK North America Operating ◊ ‡ Adjusted earnings Group revenue Dividend per share Revenue‡ profit*‡ £m £m pence £m £m Downstream UK 1,297 14.30 22,423 21,963 1,111 12.80 1,122 20,872 12.20 Residential energy supply We are the biggest energy supplier in Britain’s domestic market. 8,355 742 11.57 911 9.92 Residential services We are Britain’s largest operator in the installation and maintenance of 16,065 15,893 707 domestic central heating and gas appliances. 1,464 241 Business energy supply We are Britain’s leading supplier of energy and related services and services to businesses. 2,906 233 06 07 08 09 10 06 07 08 09 10 06 07 08 09 10 Upstream UK With assets primarily in the UK and Norwegian continental shelf, our Financial highlights 2010 2009 Upstream gas and oil activities include gas and oil production, development and exploration. 864 581 ‡ Revenue £22.42bn £21.96bn We own and operate eight gas fired power stations, have a leading position Adjusted operating profit*‡ £2,390m £1,857m Power generation in offshore wind and a 20% stake in British Energy’s nuclear fleet. 1,105 226 Total taxation charge ^ £761m £548m We have a growing liquefied natural gas (LNG) business and also manage Industrial and commercial a number of legacy gas supply contracts. 1,594 (36) Adjusted effective tax rate^ 37% 33% ◊ Adjusted earnings £1,297m £1,111m Proprietary energy trading We buy and sell gas and power from a variety of sources. 2 – Adjusted basic earnings per share◊ 25.2p 21.7p Full-year dividend per share 14.3p 12.8p Storage UK Statutory results We are the owner and operator of Rough, the UK’s largest gas Storage storage facility. 232 169 Operating profit‡ £3,074m £1,175m Earnings £1,942m £856m North America Basic earnings per share 37.6p 16.5p We supply gas and power to residential and small business customers in Operating profit‡ includes net exceptional charges of £283m (2009: £568m) Residential energy supply chosen deregulated states and provinces in North America. 2,502 177 This report is printed on Greencoat 80 Silk which is made from 80% A definition of the profit measures used throughout these results is provided in the Chief Executive’s Review on We supply gas and power to commercial and industrial customers in recycled post-consumer fibre and 20% virgin fibre that is Elemental page 7. A reconciliation between operating profit and adjusted operating profit is provided in note 6(b) and a Business energy supply chosen deregulated markets across North America. 2,682 88 reconciliation between the earnings measures is provided in note 14. Chlorine Free. This paper has been independently certified according to the rules of the Forest Stewardship Council (FSC). * Including share of joint ventures and associates stated before interest and taxation, and before other costs and Residential and business We are the largest home services company in North America covering depreciation of fair value uplifts to property, plant and equipment from Strategic Investments and exceptional services 46 US states and all Canadian provinces. 485 15 Designed and produced by items and certain re-measurements. Strategic Investments are the acquisition of Venture and the investment in British Energy Upstream and We own and operate gas fired power stations in Texas and gas and oil ◊ As above, except after other costs and joint ventures and associates stated net of interest and taxation Photography by Mike Abrahams, David Hares, Charlie Fawell, wholesale energy assets in Alberta. We also have a wholesale energy trading business. 232 (46) ^ Includes taxation on profit from continuing operations and tax from joint ventures and associates as reconciled David Partner and Andy Wilson. in the Group Financial Review on page 23 ‡ From continuing operations Printed by St Ives Westerham Press Ltd, ISO14001, FSC certified and CarbonNeutral®. Centrica plc Registered office: Millstream, Maidenhead Road, Windsor, Berkshire SL4 5GD Company registered in England Report Annual and Wales No. 3033654 www.centrica.com and Accounts and 2010 Annual Report and Accounts 2010 Transporting personnel to the North Sea platforms Directors’ Report – Business Review 4 Directors’ Report – Governance 37 Financial Statements 65 Shareholder Information 151 Our vision is to be the leading integrated energy company in our chosen markets. Energy for the demands of today, and for the future. Contents Our Performance Centrica at a glance 2 Chairman’s Statement 4 Directors’ Report – Overview of 2010 performance and 4 Chief Executive’s Review Business Review strategy for delivering long-term 8 Key Performance Indicators shareholder value. 10 Operating Review Review of each of our businesses in the context of our strategic priorities. 22 Group Financial Review 24 Corporate Responsibility Review 30 Principal Risks and Uncertainties 37 Directors’ Report – Introducing the Board of Directors 38 Board of Directors and Executive Team Governance and executive management team 40 Corporate Governance Report and explaining our approach to governance.