13. Property, plant and equipment cont.

(a) Analysis of property, plant and equipment


	Land and buildings £m	Plant and machinery £m	Assets in the course of construction £m	Motor vehicles and office equipment £m	Total £m
Cost at 1 April 2024	4,210	74,551	7,022	1,350	87,133
Exchange adjustments	(55)	(965)	(91)	(21)	(1,132)
Additions1	60	1,172	7,529	220	8,981
Disposals	(59)	(387)	(9)	(239)	(694)
Adjustment for change in discount rate on decommissioning provisions (note 26)	—	7	—	—	7
Reclassifications2	198	4,583	(4,876)	83	(12)
Reclassification to held for sale (note 10)	(110)	(1,195)	(502)	(19)	(1,826)
Cost at 1 April 2025	4,244	77,766	9,073	1,374	92,457
Exchange adjustments	(55)	(934)	(91)	(20)	(1,100)
Additions1	108	1,362	8,696	259	10,425
Disposals	(47)	(363)	(28)	(164)	(602)
Adjustment for change in discount rate on decommissioning provisions (note 26)	(22)	(66)	—	—	(88)
Reclassifications2	192	5,607	(5,834)	84	49
Cost at 31 March 2026	4,420	83,372	11,816	1,533	101,141
Accumulated depreciation at 1 April 2024	(758)	(16,730)	(67)	(671)	(18,226)
Exchange adjustments	12	200	—	11	223
Depreciation charge for the year3	(93)	(1,632)	4	(203)	(1,924)
Disposals	49	387	9	236	681
Reclassifications2	(32)	33	3	(5)	(1)
Reclassification to held for sale (note 10)	51	817	—	13	881
Accumulated depreciation at 1 April 2025	(771)	(16,925)	(51)	(619)	(18,366)
Exchange adjustments	12	197	—	11	220
Depreciation charge for the year3	(96)	(1,665)	2	(230)	(1,989)
Disposals	29	361	1	163	554
Reclassifications2	18	(44)	(16)	2	(40)
Accumulated depreciation at 31 March 2026	(808)	(18,076)	(64)	(673)	(19,621)
Net book value at 31 March 2026	3,612	65,296	11,752	860	81,520
Net book value at 31 March 2025	3,473	60,841	9,022	755	74,091

1.Additions include right-of-use assets recognised during the year.

2.Represents amounts transferred between categories, (to)/from other intangible assets (see note 12), (to)/from inventories.

3.Depreciation of assets in the course of construction relates to impairment provision adjustments.

(b) Asset useful economic lives

No depreciation is provided on freehold land or assets in the course of construction. Other items of

property, plant and equipment are depreciated, on a straight-line basis, at rates estimated to write off

their book values over their estimated UELs. In assessing UELs, consideration is given to any contractual

arrangements and operational requirements relating to particular assets. The assessments of estimated

UELs and residual values of assets are performed annually.

Certain network assets are depreciated using the group method of depreciation, in which a single

composite depreciation rate is applied to a particular class of property, plant and equipment. This method

pools similar assets together, and then depreciates each group as a whole over their respective useful

lives. In the US, the Company conducts independent depreciation studies on a periodic basis as part of

the regulatory ratemaking process to estimate group depreciation rates. These depreciation studies are

subject to review and approval by the US state and federal regulators, with the depreciation expense

recovered through rates charged to customers. Likewise in the UK, the composite depreciation rates are

benchmarked to internal engineering studies and known asset performance lives. Depreciation expense

includes a component for the original cost of assets and a component for estimated cost of future

removal, net of any salvage value at retirement. Upon retirement of components of the Company’s

network assets, the original cost of the retired assets, net of salvage value, is charged against

accumulated depreciation, with no gain or loss recognised.

Unless otherwise determined by operational requirements, the depreciation periods for the principal

categories of property, plant and equipment are shown in the table that follows split between the UK

and US, along with the weighted average remaining UEL for each class of property, plant and equipment

(which is calculated by dividing the net book value of that class of asset by the respective annual

depreciation charge).


		Years
	UK	US	Weighted average remaining UEL
Freehold and leasehold buildings	up to 65	up to 100	43
Plant and machinery:
Electricity transmission plant and wires	up to 100	10 to 85	32
Electricity distribution plant	14 to 99	5 to 85	46
Electricity generation plant	n/a	15 to 93	8
Interconnector plant and other	5 to 70	5 to 54	25
Gas plant – mains, services and regulating equipment	n/a	20 to 95	54
Gas plant – storage	n/a	20 to 60	24
Gas plant – meters	n/a	14 to 45	26
Motor vehicles and office equipment	up to 30	up to 34	3

13. Property, plant and equipment cont.

The role that our US gas networks play in the pathway to achieving the greenhouse gas emissions

reductions targets set in the jurisdictions in which we operate remains subject to uncertainty.

Policymakers in New York and Massachusetts continue to indicate an increase in electrification to meet

their respective decarbonisation targets, while as a Group we are committed in our transition to net zero.

However, developments during the current financial year indicate that, despite some regulation changes

and customer incentive schemes favouring electrification, the pathway to full electrification remains

uncertain due to barriers such as heightened affordability concerns and increased regulatory uncertainty.

As a result, there is a reduced risk that the UELs of certain elements of our gas networks may be

shortened in line with future policy, regulatory frameworks and planning systems aimed to support the

decarbonisation of the energy sector.

In the US, our gas distribution asset lives are assessed as part of detailed depreciation studies completed

as part of each separate rate proceeding. Depreciation studies consider the physical condition of assets

and the expected operational life of an asset. The weighted average remaining UEL for our US gas

distribution fixed asset base is circa 54 years; however, a proportion of our assets are assumed to have

UELs which extend beyond 2080. In assessing these UELs, we consider a range of different pathways

related to our gas assets. These pathways factor in the net zero ambitions of the Group and the jurisdictions

that we operate in, anticipated changes in customer behaviour, developments in new technology, the

feasibility and affordability of electrification, and the ability to decarbonise fuel through the use of renewable

natural gas (RNG) and green hydrogen. On balance of the different pathways considered, we continue

to believe the lives identified by rate proceedings are the best estimate of the assets’ UELs given the

need to provide safe, affordable and reliable heating services. We keep this assumption under review

and we continue to actively engage and support our regulators to enable the clean energy transition.

Asset depreciation lives feed directly into our US regulatory recovery mechanisms, such that any

shortening of asset lives and regulatory recovery periods as agreed with regulators should be recoverable

through future rates, subject to agreement, over future periods, as part of wider considerations around

ensuring the continuing affordability of gas in our service territories.

Given the uncertainty described relating to the UELs of our gas assets, below we provide a sensitivity

analysis for the depreciation charge for our New York and New England segments were a shorter UEL

presumed. It should be noted that the net zero pathways which we consider probable all suggest some

role for gas in heating buildings beyond 2050, so our sensitivity analysis for 2050 illustrates an unlikely

worst-case scenario.


	Increase in depreciation expense for the year ended 31 March 2026		Increase in depreciation expense for the year ended 31 March 2025
	New York £m	New England £m	New York £m	New England £m
UELs limited to 2050	277	90	235	78
UELs limited to 2060	130	37	110	32
UELs limited to 2070	64	11	54	9

Note that this sensitivity calculation excludes any assumptions regarding the residual value for our asset

base and the effect that shortening asset depreciation lives would be expected to have on our regulatory

recovery mechanisms. In the event that any of the US gas distribution assets are stranded, the Group

would expect to recover the associated costs. While recovery is not guaranteed and is determined by

regulators in the US, there are precedents for stranded asset cost recovery for US utility companies.

(d) Right-of-use assets

The Group leases various properties, land, equipment and cars. New lease arrangements entered into

are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset

is available for use by the Group. The right-of-use asset and associated lease liability arising from a lease

are initially measured at the present value of the lease payments expected over the lease term. The lease

payments include fixed payments, any variable lease payments dependent on an index or a rate, and any

break fees or renewal option costs that we are reasonably certain to incur. The discount rate applied is

the rate implicit in the lease or, if that is not available, the incremental rate of borrowing for a similar term

and similar security. The liabilities for the majority of the Group’s lease portfolio are calculated using the

incremental borrowing rate. This is determined based on observable data for borrowing rates for the

specific Group entity that has entered into the lease, with specific adjustments for the term of the lease

and any lease-specific risk premium. The lease term takes account of extension options that are at

our option if we are reasonably certain to exercise the option and any lease termination options unless

we are reasonably certain not to exercise the option. Each lease payment is allocated between the liability

and finance cost. The finance cost is charged to the income statement over the lease period using the

effective interest rate method. The right-of-use asset is depreciated over the shorter of the asset’s useful

life and the lease term on a straight-line basis. For short-term leases (lease term of 12 months or less)

and leases of low-value assets (such as computers), the Group continues to recognise a lease expense

on a straight-line basis.

The table that follows shows the movements in the net book value of right-of-use assets included within

property, plant and equipment at 31 March 2026 and 31 March 2025, split by category. The associated

lease liabilities are disclosed in note 21.


	Land and buildings £m	Plant and machinery £m	Assets in the course of construction £m	Motor vehicles and office equipment £m	Total £m
Net book value at 1 April 2024	293	128	—	307	728
Exchange adjustments	(6)	(2)	—	(7)	(15)
Additions	39	2	—	159	200
Reclassification to held for sale (note 10)	(2)	(15)	—	—	(17)
Disposals	—	—	—	(3)	(3)
Depreciation charge for the year	(21)	(12)	—	(87)	(120)
Net book value at 31 March 2025	303	101	—	369	773
Exchange adjustments	(6)	(2)	—	(6)	(14)
Additions	23	—	—	199	222
Disposals	(11)	—	—	(2)	(13)
Depreciation charge for the year	(24)	(6)	—	(102)	(132)
Net book value at 31 March 2026	285	93	—	458	836