Gladstone Commercial Corporation Annual Report 2017

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FY2017 Annual Report · Gladstone Commercial Corporation

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Good Energy’s vision is to
become an expert integrator of
green energy services in homes
and businesses.

Juliet Davenport
Chief Executive Officer

ANNUAL
REPORT
& ACCOUNTS
2017

Financial Statements

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Parent Company Statement of Financial Position

Consolidated Statement of Changes in Equity

Parent Company Statement of Changes in Equity

Consolidated Statement of Cash Flows

Parent Company Statement of Cash Flows

Notes to the Financial Statements

Contents

Strategic Report

Chairman’s Statement

Chief Executive’s Review

Strategic Review

Corporate Responsibility

Chief Financial Officer’s Review

Operating Review

Key Performance Indicators

Key Risks

Governance Report

Board of Directors

Governance & Directors’ Report

Remuneration & Nomination Report

Independent Auditors’ Report

2017 Highlights

Revenue, Gross Profit, EBITDA, PBT, and EPS reflect 2017 continuing operations and 2016 continuing operations restated to reflect the
discontinuation of the Generation Development business in 2017, 2013 to 2015 figures are as reported.

1. Total installed customer meters and FIT installations as at 31 December
2. Full year dividend per share for 2017 is based on the interim dividend of 1p (2016: 1p) plus the proposed final dividend of 2.3p (2016: 2.3p)
3. Volume supplied to half-hourly (business) and SME electricity customers
4. Generation output from owned and operated assets

Strategic ReportGovernance ReportFinancial StatementsSTRATEGIC
REPORT

Chairman’s Statement

Chief Executive’s Review

Strategic Review

Corporate Responsibility

Chief Financial Officer’s Review

Operating Review

Key Performance Indicators

Key Risks

STRATEGIC

REPORT

Chairman’s Statement

Good Energy has delivered another year of robust
growth, while focussing on improving operational
efficiency. These results demonstrate the underlying
strength of our business model given the tough
conditions in the UK energy supply market.

During the year Good Energy has made good
progress on its strategic evolution within an energy
market that is in transition.

Our Market: Opportunities & Challenges

In 2017, increased competition and wholesale
market volatility led to difficult market conditions
for UK consumer energy supply businesses. While
we expect these conditions to continue in 2018
in the consumer market, the business customer
market is less challenged by these factors
and is one where Good Energy is successfully
strengthening its position.

Addressing climate change remains a priority
for the developed and developing world. In 2017,
the UK government published its Clean Growth
Strategy, setting out a blueprint for Britain’s low
carbon future and increasing the market for Good
Energy and our zero-carbon focus.

The UK energy market is changing. Good Energy
is focussed on its strategic evolution within this
changing landscape, and believes that the future
value lies in the provision of integrated green
energy services within an increasingly
decentralised market.

Strategic Development

A key focus of management and the Board is
overseeing a strategy for growth and evolution
that will maximise the long term value we can
deliver to stakeholders and keep step with
changes in the market.

Our strategy centres on building on our success,
developing the long term profitability of Good
Energy, and investing in the future as an integrated
green energy services company.

In recent years the economics of generation
development have shifted in favour of large-scale
players. Our previously announced move away
from generation development frees up capital and
management time to allow the company to expand
into growing areas of demand that are consistent
with our purpose. Our pilot in battery storage and
electric vehicle charging activities at the end of
2017 are examples of this.

Good Energy has delivered
another year of robust growth,
while focussing on improving
operational efficiency

As Good Energy continues its strategic evolution,
I would like to thank our people, our customers
and shareholders for their ongoing support and
commitment to the company and our objectives.
We are proud that a significant number of our
customers also choose to invest in Good Energy as
shareholders, or as bond holders, or in many cases
as both.

Board update

Tim Jones joined the Board in December, replacing
Francesca Ecsery who stepped down as planned
following Tim’s appointment. Tim has over 20
years’ experience in leading digital innovation,
execution and operation at Moneysupermarket.com
Group PLC and Trader Media Group (now known
as Autotrader plc). His experience of delivering
business transformation through digital innovation
compliments Good Energy’s strategic focus.

On behalf of the Board I would like to thank
Francesca for her valued support to Good Energy
during her time with the company, and welcome Tim.

Denise Cockrem who has been Chief Financial
Officer and an Executive Director of the Board since
2014, will step down from these positions at the end
of March 2018. Rupert Sanderson, Good Energy’s
Finance Director will take over Denise’s leadership
of our financial functions from April in a smooth
transition, and will report to the Board on financial
matters. Stephen Rosser will take over responsibility
for Risk Management.

I would like to thank Denise for her valuable
contributions to Good Energy’s development over
recent years.

Strategic Report

Chairman’s Statement

Strategic ReportGovernance ReportFinancial Statements2017 Ecotricity General Meeting proposal

Dividend

In July the Company received a requisition on
behalf of Ecotricity Group Limited for a general
meeting of the Company’s members to consider
the appointment of two Ecotricity executives as
directors of the Company. Ecotricity withdrew
its requisition after the general meeting had
been convened but before the general meeting
took place.

As communicated to shareholders in August
2017, the Board unanimously recommended that
Shareholders vote against the proposal due to
the inherent conflict of interest and commercial
and strategic risks to Good Energy. We recognise
and thank customers, shareholders and other
stakeholders for the support we received
regarding the matter.

Governance

Good Energy has rigorous corporate governance,
exceeding the requirements for AIM listed
companies, and wherever appropriate aligning with
best practice of the UK Corporate Governance Code.

The Board has a strong mix of skills and experience
at a Non-Executive level to continue to provide
strong corporate governance and challenge
to management.

Good Energy aims to deliver a progressive ‘green’
dividend policy. The policy has the objective of
increasing the dividend over time as profitability
grows to provide an appropriate return to
shareholders while also maintaining and balancing the
ability to invest in long term growth opportunities.

The Board has recommended a final dividend for 2017
of 2.3p per ordinary share.

Looking ahead

In 2018 we expect to deliver a full year performance
in line with current market expectations, as we see
the benefits of management actions to evolve the
business and continue our strategic evolution as an
integrated green energy supplier.

John Maltby

Chairman
11 April 2018

Chief Executive’s Review

Good Energy has delivered robust revenue growth
in a challenging year for our sector while delivering
annualised cost savings of £1m through phase one of
our Fit for Growth (F4G) programme.

Building for the Future

In 2017 Good Energy has been responding to an
energy market in transition. In the competitive UK
supply market many newer entrants are competing
in a price war race to the bottom, which we do not
see as sustainable. We believe that the market is
undergoing fundamental change, where the
future value will be in energy services in a
decentralised market.

We are working on shifting our relationship with our
customers from that of a conventional supplier to
that of an integrator to support their wider range
of green energy needs into the future. We have
successfully proven this model as a decentralised
green energy integrator in our Feed In Tariff (FIT)
business, where we have an 18% market share.

Our focus is on evolving our offering to capture
where the future needs of this market are heading.

Our Customers

With the development of digital networks and
innovations in low-carbon technologies, based on
our insight we know that our customers want a more
enhanced and personalised service and to be able to
manage their green energy in a more intuitive way.
We know that our customers increasingly see us as
a partner that can support their wider needs. Good
Energy is doing the work needed now to be able to
incorporate solutions for customers’ wider energy
needs onto our platform and into our offering.

In 2017, through the roll-out of our new billing system
we have established a platform on which we can
build a truly digital customer experience and add
new propositions over time. I would like to thank our
customers for their support during the year as we
have transitioned onto the new system and for their
patience with us as we resolved issues arising during
that transition. Despite this, our customer care team
has continued to deliver consistently strong service.

We have significantly developed our offering to
business customers in 2017, creating a new sales team
and online tools for customers. We believe we are
uniquely positioned to help businesses achieve their
sustainability goals and their carbon reduction goals.

Our Strategy

Our strategy is to build on our successes and
growing our core business through retaining existing
domestic customers, continuing to grow our business
customers and enhancing services to FIT customers.

We continue to roll out our F4G programme ensuring
that we have a lean operating model to improve
margins, whilst increasing our technical capability
within operations to leverage the investment in our
systems, reduce our costs and improve service.
And, we are focussed on generating future business
opportunities by investing in new services, in our
digital platform and in research to drive new services
into our pipeline.

The development of our billing system in 2017
provides a platform to enhance customer experience,
reduce our costs to serve, and expand our customer
propositions. During the year we expanded our
services to business customers and small-to-medium
size enterprises, with new fixed tariffs and digital
online quoting tools for faster real-time quotes.

In implementing the first phase of F4G in 2017, we
have made changes to our organisational structure,
which included our discontinued generation
development business and a flatter Executive
management structure and accountabilities aligned
with F4G. We have continued to deliver on our cost
saving initiatives.

We streamlined our FIT service to our business
customers in 2017 to deliver an even better solution
to our customers, with weekly reporting and
rapid registration turnaround times compared to
the industry. As a result, we have added 10,595
installations (8% annual growth) in FIT this year.

Strategic Report

Chief Executive’s Review

Strategic ReportGovernance ReportFinancial StatementsF4G is a three-year programme, with further phases
of investment necessary in 2018 and 2019 to develop
our revenue, and operating model in order to realise
our strategic objectives. With the efficiency and
cost-to-serve saving initiatives underway, we are
making progress towards improving Good Energy’s
long term efficiency.

While we have stepped away from new generation
development in 2017, we are proud of what we have
achieved through these activities. Good Energy has
developed over 150MW of renewable generation
assets since 2013, which produce enough clean,
green energy to power over 37,000 homes. These
leave an ongoing legacy for our greener future. At
the same time, we have successfully sold six of our
sites since 2013 to deliver over £8m of profit back
from these sales.

Our People & Purpose

Good Energy’s purpose is to power the choice of
a greener, cleaner future together. This means we
are all about driving change in the way the UK
harnesses and consumes energy, from what we see
today to a world where demand for low-carbon
energy solutions are the preferred choice. As a
purpose-led organisation, we are focused on acting
in the interests of all of our stakeholders, from our
investors, customers and people, to the people who
we will deliver our environment to tomorrow; our
future stakeholders.

We believe that our people and culture are a driving
force in enabling us to reach our strategic goals. As
such, we strive to have a culture which inspires our
people, and where they know they are making a
real difference in powering the choice of a cleaner,
greener future together. We also want our people to
reflect our values as a company: be determined, fair,
inclusive and straightforward.

We welcomed the introduction in 2017 of Gender
Pay reporting, as we have a strong commitment
to gender balance and equality at all levels in our
business. Good Energy’s mean pay gap for 2017 is
8%, which is significantly lower than the UK average
and energy industry benchmarks.

I would like to thank our people for their
commitment to Good Energy as we continue to
evolve our organisation.

Good Energy is pivoting its
business to become an integrator
of green energy services

Our Impact

Good Energy puts sustainability at the heart of
our purpose. While we are focused on delivering
sustainable value to shareholders, as a progressive
business we understand that we have a wider role to
play in society too. We are committed to using our
business as a force for good and are proud of the
recognition we receive for the positive impact that we
make in communities, society and the environment.

Looking ahead

Good Energy is pivoting its business to become
an expert integrator of green energy and technical
services in the home and in businesses. 2017 marked
the commencement of Good Energy’s journey
towards this vision and a year of development
towards greater efficiency within our operations.

In 2018 we expect to perform in line with current
market expectations. As a purpose-led organisation
in a market that is moving towards a lower-carbon
future, Good Energy is pursuing a strategy to deliver
sustainable long term growth in shareholder value.
We will continue to work with all our stakeholders
towards our purpose of delivering on the promise of a
greener cleaner world.

Juliet Davenport

Chief Executive
11 April 2018

Strategic ReportGovernance ReportFinancial StatementsStrategic Review

Our Market

The energy market is in transition. With significant
production of energy from zero marginal cost
technologies like renewables, value in the energy
market is shifting with wholesale prices and
forward curves dropping. This disruption will
be significant and reshape the energy market in
the UK, and with it creating new opportunities.
Good Energy has a business model rooted in
decentralised energy and is well positioned to take
advantage of the opportunities that will arise in this
new market landscape.

Competitive Landscape

The drop in wholesale prices has created an
opportunity for an influx of lower-price renewable
energy providers, competing in a race to the
bottom approach to build volume in the domestic
market. To demonstrate this in the last two years
the number of green tariffs has increased four-fold.
In 2007 there were eight domestic suppliers, by the
end of 2017 this had risen to 66 with a further 17
white label suppliers, totalling 83 and an increase
of over 900%.

While the competitive trend has been to drop
prices to attract customers in the short term, we do
not see this as a sustainable approach in the long
term, nor where the future of the market is heading.
Good Energy’s focus is on offering customers an
energy services model, to deliver on environmental,
security and cost benefits to the customers.

Within the business and FIT customer markets
the competitive landscape has been steady. Many
business customers and SMEs place higher value
on bespoke solutions and on partnering with
suppliers whose green credentials and brands
mirror their own.

Within FIT, there is a more concentrated pool of
operators, split between the larger UK utility firms
and smaller operators such as Good Energy who
have achieved good market share by focussing
on leading service and support to these micro-
generator customers.

The publication of the Government’s long-awaited
Clean Growth Strategy in 2017 showed that
disappointingly the country is on route to failing
to meet the targets set in the 5th carbon budget.
These targets form part of the UK’s obligations
under the 2015 Paris Agreement and UN Framework
Convention on Climate Change and 2008 Climate
Change Act. This means they will need to find a way
to hit the heat and transport targets they are missing.

To address this, the Government’s Strategy outlines
a blueprint for increased Government investment
in low-carbon energy systems, innovations and
technologies. Investment in battery storage
development and smart energy system innovation,
as well as support for EVs by banning all new petrol
and diesel cars and vans from 2040, are all welcome
steps by the Government.

UK politicians have announced a planned price cap
on default tariffs for retail consumers, introducing
a draft bill for debate by parliamentary committees
in March 2018. We believe that the Government is
likely to exempt “green” tariffs which are making
a real difference in their support to the market on
innovation and their support to customers.

Increasing capacity and demand of renewables

Renewable energy generation in the UK continues
to grow, accounting for over 29% of electricity
generation in 2017, up from a quarter in 2016.
Renewable capacity has grown 35% since 2014.
During 2017, the UK achieved its first day without
coal generated energy since the industrial revolution.
We expect demand for energy generated from
renewables and renewable capacity itself will
continue to grow, driven by Government targets and
decreasing technology costs over time. For example,
today there are around 1 million customers in the UK
with solar panels in their homes, the new prosumers.
We believe that increasing electric vehicle use and
improving economics of solar will drive growth in
green energy prosumers.

Good Energy’s renewable generation portfolio of
52.5MW of installed capacity continues to deliver
good energy output and profit growth.

Regulatory & Political Environment

More green energy users

From 2015 to 2017, the UK government
downgraded its financial and policy support for
renewables construction and development. As
a result of this, along with changes in the asset
development finance environment, Good Energy
stepped away from new generation development
in 2017.

Businesses are under growing pressure to improve
the sustainability of their energy use and meet
corporate social responsibility targets, creating
a buoyant market for supply of green energy to
businesses. There is an ever-increasing realisation
among businesses and consumers that the choice of

their energy supplier can have a meaningful impact
towards tackling climate change.

our focus on enhancing and integrating our solutions
is a sustainable approach that positions us to grow
with our customers to meet their future demands.

More and more UK energy users are choosing to
buy services and products from organisations that
have a higher environmental and social purpose.
Most recent figures show that UK ethical spending
has been growing at 3% to over £80 billion annually.
Support for renewable energy increased to 79%,
from 74% over a year. Opposition to renewables
remained very low, at 4%.

Technology and Decentralisation

Developments in technology are an important
dynamic in Good Energy’s marketplace. From
advancements in generation technologies and
smart-home energy saving solutions, through to
innovations around local networking, low carbon
transportation and energy storage, our market is
rich with new and changing clean technologies.
These technologies, together with the digitisation of
energy networks, are changing the way that people
and businesses will use energy into the future. Over
time the costs of these technologies are expected
to lower and fuel adoption rates. For example, the
fully-installed cost for a 2 hour lithium ion battery is
expected to reduce by 25% by 2025.

Our Strategy

With these evolutions in the green energy market,
Good Energy believes that the future value of
the energy market lies in the provision of energy
services within a decentralised market. Our vision
is to become an expert integrator of green and
technical services in the home and in businesses.
To achieve this vision and to ensure that we evolve
Good Energy to capture the opportunities arising
from an energy market in transition, we are focussed
on three strategic objectives.

Build

Our first strategic objective is to build on our
success to grow our core businesses. As a pioneer
in the renewable energy market in the UK over the
past 18 years, Good Energy’s FIT business is one
of our most established and successful business,
supporting our customers as an integrator with
market-leading customer support and efficiency
and a strong share of this market. As we look into
the future, we will move away from a conventional
utility model and towards that of an integrator in an
increasingly decentralised market.

While we are committed to delivering our green
energy at a reasonable price, we do not believe
in fighting for customers solely by cutting price.
Customer needs are changing, and we believe that

Economise

Our second strategic objective is to economise
our operations through our Fit-for-Growth (F4G)
operating model. As we continue to grow, we
recognise the need to focus on our efficiency and
on enhancing our operations to evolve in an energy
market in transition.

We commenced our F4G in 2017 to reduce our long
term cost base by simplifying our operating model
and upgrading our systems and processes. This
will support our delivery of long term sustainable
profitable growth. After implementing our new
billing system, we have reviewed and identified
further processes that can be improved to drive
better efficiency and customer experience. This
allows us to invest in our people to ensure that we
will have great customer service, whilst reducing the
overall headcount.

Invest

Our third strategic objective is to invest in three key
areas to drive future growth: Digital; New Product
Design & Energy Services; and Research.

Investing in digital is central to development as a
green integrator. In 2017 we increased our capabilities
in digital and SMART with our CIS rollout and have
laid the ground work for SMART metering. We have
launched dedicated digital and SMART development
programmes with senior leaders to lead these
programmes going forward.

Good Energy is investing in new clean technology
propositions to integrate with our existing
propositions. In late 2017 we began a pilot project
working with EV charging specialists NewMotion,
to develop an EV charging proposition for Good
Energy’s business and retail customers. In the first
half of 2018, we will expand this to a trial working with
a small group of business and retail customers to test
different propositions.

We are developing our capacity to integrate energy
storage within our proposition. In November 2017, we
partnered with the Eden Project to deliver our first
bespoke battery service pilot.

As the green energy market continues to grow
and evolve, Good Energy will invest in growth
opportunities that are consistent with our
purpose, will generate revenue synergies with
our existing business and allow us to meet our
strategic objectives.

Strategic Report

Strategic Review

Strategic ReportGovernance ReportFinancial StatementsOUR PURPOSE

POWERING THE CHOICE OF A CLEANER,
GREENER FUTURE TOGETHER

Our Values:

STRAIGHTFORWARD

DETERMINED

FAIR

INCLUSIVE

Our Strategic
Challenges &
Opportunities:

PRICE WAR IN

RETAIL MARKET

BUSINESS MARKET

OPPORTUNITY IN GREEN

SOLAR AFFORDABILITY

DRIVING NEW POSSIBILITY

Our Vision

Good Energy will become an
expert provider of green
energy services to homes
and businesses.

Our Strategic
Direction

BUILD
Grow our core business
by retaining our
domestic customers,
continuing to grow our
business customers
and enhancing our
FIT services.

OUR BUSINESS
PRIORITIES
2018

Retain domestic
customers

Evolve FiT
services

Grow business
sales

PRICE WAR IN

RETAIL MARKET

BUSINESS MARKET

OPPORTUNITY IN GREEN

SOLAR AFFORDABILITY

DRIVING NEW POSSIBILITY

We will give :

OUR PEOPLE
A job to believe in.

OUR SHAREHOLDERS
A green dividend.

OUR CUSTOMERS
Green energy at a fair
and reasonable price.

OUR FUTUREHOLDERS
A sustainable, low carbon
business model.

ECONOMISE
Continue to roll out the Fit For
Growth programme, making sure
we have a lean operating model.
Invest in our technical capacity
to reduce our costs and improve
our service.

INVEST
Generate future business
opportunities by investing in
digital platforms and in
research and development of
new, green energy services.

Upskill technical
capability

Invest in
digital

Continue
Fit 4 Growth

Research & develop
new products

Strategic Report

Strategic Review

Strategic ReportGovernance ReportFinancial StatementsOur Strategy in Action: 2018 & Beyond

Business Model

Good Energy remains well positioned for future
growth. We anticipate on delivering this growth
by profitably building on business supply and FIT
business, providing a sustainable green yield for our
investors into the longer term.

Going forward we believe that we will deliver our
growth plans by focusing on three key areas;

Good Energy has two main business segments. In
Supply we act as an integrator to help households
and business meet either all or part of their
electricity demand directly from their own renewable
technology through our FIT business. We also supply
domestic and business customers by matching the
electricity used by them with power generated from
100% renewable sources.

• Building on our success and continuing to grow
our core business, as we focus on business
customers and energy services, with market
leading services to FIT customers.

Our Generation business delivers 100% renewable
electricity to the UK electricity grid from nine
renewable energy facilities across the UK that Good
Energy owns and operates.

• Economising the business, primarily through a

F4G lean operating model.

• Investing in the business to generate future

business opportunities, by focusing on research,
digital and new energy services evolving from
our FIT services business.

Operationally, our segments are supported by a
common central operating platform which provide
functional support to our businesses around areas
such as sales, IT and marketing. This allows us to
achieve efficient scalable growth and to use the
platforms to cross-sell different products and
capabilities to different customer types.

Strategic investment initiatives are continuing
to progress at pace and coupling with ongoing
innovation and our unique customer base of early
adopters, we believe this is already setting our
strategy up for success. Our future ambition is
that the company will be able to provide a yield
from the core business, with future value driven by
investment in new energy services.

Our business model relies on some important
partnerships. We have more than 250,000
customers who range from individual consumers
and households, small businesses through to large
corporations. While we generate our own renewable
electricity, we also purchase electricity from our
family of over 1,400 independent generators spread
right across the UK.

In summary, Good Energy is pivoting its business
to focus more on energy services such as FIT. It will
continue to operate in the supply market focusing
on digital customer experience and improved value
for supply customers, with growth expected to be
significant in the SME and business sectors. We
expect to begin to see the benefits of this transition
by the end of 2018, but do not expect to see
significant market penetration of energy services
until later in 2019 and 2020.

Communities are also important partners within
our business model. We work closely with local
communities around our generation sites, and where
possible we aim to sell generation assets back into
community hands. Some communities are bypassing
the national energy infrastructure by generating
their own renewable electricity and adopting new,
smarter technologies. We are working with various
local energy models to reward these communities and
encourage local energy networks.

This is an exciting position for Good Energy, aligned
with our purpose of delivering a cleaner, greener
world, as we work closely with our customers, our
people and our shareholders to achieve this.

Our proposition to our customers is to be a trusted
and fair customer-focused supplier of 100%
renewable electricity and carbon-neutral gas. Our
vision is to become an integrator to help meet their
entire green energy needs. We are driven by a clear
purpose to power the choice of a cleaner, greener
future together. Our unique proposition, this customer
model and our strong brand, are important elements
of our business model.

Corporate Responsibility

Good Energy has responsibility at its heart. As
a progressive and purpose-led business we
understand that our role in society is much more
than delivering profit for shareholders. From the
tea that we drink, to the power that we generate –
we are committed to using our business as a force
for good.

We are recognised as a leader for our continued
dedication to making a positive impact on
our customers, communities, society and
the environment.

Customers

Our 250,000 customers form a community of
homes, businesses, institutions and independent
generators right across the UK that buy 100%
renewable electricity and green gas. Many of them
generate their own power. Our customers are our
partners and are positively impacted by Good
Energy’s purpose and associated activities to reduce
carbon emissions.

Good Energy is unique in the energy market in
that it has more customers who generate their
own renewable electricity than those who only
buy electricity from Good Energy. And many of
our customers have also chosen to invest in Good
Energy to support our purpose. In fact, around three
quarters of our bond holders, and around two thirds
of our shareholders are customers.

We are lucky to work with some fantastic businesses
around the UK and were proud to welcome Neal’s
Yard Remedies, BAFTA, Hay Festival and Innocent
Drinks as customers in 2017.

Communities

Communities have long been the driving force
behind the renewables revolution and we’ve long
championed their role in securing our energy
future. We pioneered the process of getting small
generators to connect to the grid early in our
history, and now support dozens of community-
owned schemes through our Feed-In-Tariff and
power purchase services.

In addition Good Energy engages positively with
our local community around Chippenham HQ, for
example providing workplace visits for college
students, sponsoring a local engineering careers fair
and hiring local venues and caterers for company
meetings and events.

We’re proud to have an impact on our local
community, as well as communities around the UK.
In 2017, we began a sponsorship of Chippenham
Rugby Club Minis and Juniors teams, which bring
5-16 years olds into this active and successful club.
The club has a strong community ethos, has a
proud reputation of championing girls’ rugby and
welcomes everyone, regardless of ability or gender,
into the sport.

An estimated 800 plastic bottles are sent to landfill
every minute, damaging the environment. Good
Energy is proud to support Refill Chippenham, a
scheme that discourages waste by enabling people
to fill their water bottles at local cafes, shops and
businesses for free.

Strategic Report

Corporate Responsibility

Strategic ReportGovernance ReportFinancial StatementsAs well as protecting the environment, these
schemes also have important social benefits
such as improved gender equality, higher rates
of employment and education and reductions in
infant mortality and premature births.

As an ethical business, we select and perform
due diligence on all potential suppliers to ensure
that their business practices align with our own
and support our purpose. Consideration is given
to price, quality, timeliness of delivery and their
ethical credentials.

Good Energy is committed to reducing resource
consumption across the whole of the business. We
avoid the use of printed materials where possible
by encouraging digital forms of communication.
When we have to print we choose paper that
is certified by the Forest Stewardship Council
as being made from wood pulp sources from
sustainably managed forests and is totally chlorine
free or processed chlorine free.

Where possible, our printers use vegetable based
printing inks and avoid the use of Volatile Organic
Compounds, for print press cleaning and other
harmful chemicals.

Our People Wellbeing

We welcomed the introduction in 2017 of Gender
Pay reporting, as we have a strong commitment
to gender balance and equality at all levels in our
business. We are proud to have just over 50%
women in our business overall. Our mean pay
gap for the 2017 reporting period is 8%. This is
significantly lower than the UK average and the
energy industry benchmarks.

The reason the gap exists, is predominantly as a
result of us having more men than women in our
middle management roles, particularly in Science
Engineering Technology and Maths (STEM) related
functions. For more information on our gender
pay gap and the actions we are taking to close it,
you can read our full Gender Pay Report, found on
our website.

As part of its work as a responsible corporate
citizen within its own community, Good Energy has
instigated a volunteering scheme to enable our
people to work on local community projects around
the Chippenham HQ. In September 2017, a team
of 20 from the Marketing, Communications and
Partnerships teams volunteered their time at the
National Trust’s Dyrham Park estate near Bath.

In December 2017, we agreed to sell two of our
solar sites, Newton Downs Farm in Devon and
Brynwhilach Farm, near Llangyfelach, back into
community hands. We were thrilled to be able to do
this as was always our plan, in line with doing things
differently in the energy sector. We will continue
working with both sites, having committed to an
ongoing purchase of the power they produce. Both
farms will join our community of local, renewable
generators around the UK.

The sites were bought by community energy
partners Power To Change and Big Society Capital,
originally set up in response to the Government’s
reduction to feed-in tariffs which curtailed the
development of community energy projects.

At each of our renewable developments we also
have a programme of community engagement work,
with annual funds of around £175k going back into
local communities through a variety of projects put
forward by the community.

Environmental Impact

Good Energy recognises the environment is the
ultimate and most important ‘beneficiary’ of its
business activities. The company’s core business of
generating and supplying renewable energy helps
displace carbon emissions and reduce the negative
environmental impacts associated with other forms
of power generation.

Good Energy engages on climate change and a
range of environmental issues through dialogues
with our partners and customers as well as
Government and industry bodies.

In 2017, we achieved our IS0140001 accreditation,
which has given us independent confirmation
that we are meeting international standards
for measuring and continually improving our
environmental performance.

We are committed to reducing carbon emissions
from our operations. Since 2015, we’ve been
regularly measuring our Scope 1 and Scope 2 carbon
emissions and as many indirect Scope 3 emissions
as possible. Emissions that we are not yet able to
avoid are neutralised by carbon reduction schemes
in Malawi, Vietnam and Nepal.

1717

Strategic ReportGovernance ReportFinancial StatementsChief Financial Officer’s Review

Good Energy made good financial progress in
2017 with 16.6% growth in revenue from ongoing
activities, gross profit up 8.2%, and asset sales
completed during the year supporting an increase in
cash position of 118% to £13.2m.

2017 which has successfully raised £16.8m. In 2018,
following the repayment of Good Energy Bonds
I, finance costs will reduce with lower on-going
funding costs. As a result, profit before tax was
63.7% lower at £0.7m (2016: £2.0m).

Revenue

In 2017, revenue grew by 16.6% to £104.5m (2016:
£89.7m) driven by growth in the Supply segment
with an increase in business volumes and a return to
growth in the second half from domestic customers.

Business customer volume growth was due to
our increased sales and marketing focus on this
segment during the year, with the addition of new
business half hourly and small business customers.
Performance was also supported by FIT revenue
from new business sites, (FIT B2B) driven by our
strong customer service.

Profitability

Gross profit increased by 8.2% to £29.3m in 2017
(2016: £27.1m). EBITDA decreased by 4.3% to £9.9m
(2016: £10.1m), operating profit decreased by 9.8%
to £5.6m (2016: £6.2m). This was due to lower profit
in the Supply segment, which included £1.1m of
restructuring and one-off costs.

The Supply business also saw a reduction in gross
margins as a result of increased wholesale power
costs; the changing revenue mix and faster growth
with lower-margin business customers and our
decision to delay our customer price rise within the
first quarter.

The impact of the restructuring and investment
costs and lower gross margin, together with an
increased marketing and customer acquisition
costs in the competitive Supply market, meant that
operating profit in Supply was below 2016.

Gross profit margin was 28.1% (2016: 30.2%), and
operating margin 5.4% (2016: 6.9%).

Cost of sales increased 20.2% to £75.2m (2016:
£62.5m). This was driven by market-wide increased
wholesale power costs in 2017. Administration costs
increased 13.3% to £23.7m, (2016: £20.9m) and
included the £1.1m of restructuring and one off costs.

Fit for Growth: Restructuring and Investing for
the Future

Enhancing the efficiency and economics of our
operations and optimising the business for growth
is a key priority for the group. In 2017 we completed
the first phase of our Fit for Growth programme as
we transition to more efficient operations. These
activities included restructuring our business to
reduce our long term cost base, and reviewing our
asset base and investments to ensure that we are
optimising our allocation of capital.

We have also simplified our operating model and
upgraded systems and processes that will improve
our cost base, leverage the investment in our
systems and support profitable growth over the
long term. The annualised cost savings of our Fit for
Growth programme delivered in 2017 were £1m.

Generation Assets, Discontinued Operations and
Work in Progress

In 2017 we ceased all new generation development
activities, in response to changes in the UK
government subsidy schemes and our long term
capital allocation objectives. During the year, our
5MW Oaklands solar site was sold for £5.8m cash
consideration and our 5MW solar farm at Newton
Downs in Devon, sold for a cash consideration
of £5.8m.

We have also agreed terms for the sale of our 5MW
solar park at Brynwhilach Farm near Swansea in
December, and expect the transaction to complete
later in 2018 for a cash consideration of £5.6m.

We are pleased that the Newton Downs and
Brynwhilach sites have been sold into community
hands to realise the benefits of renewable
generation. The proceeds from these sales have
supported the repayment of Good Energy Bonds
I and will be reinvested in our other initiatives to
deliver shareholder value as outlined in this
annual report.

Our net finance costs increased 16.3% in 2017, due
to temporary phasing between the completion
and repayment of Good Energy Bonds I in March
2018 and the commencement of Bond II in June

Good Energy is exploring a number of options to
realise value from its portfolio of generation assets
that are still at development stage (‘WIP assets’).
This includes several development sites which have

not yet obtained planning permission and are at
different stages in the process.

The carrying value and treatment of these WIP
assets is reviewed against the likelihood of sale
or planning outcomes, which by their nature have
uncertainty on the timing and outcome of such
activities. A provision is made for any change in
value in accordance with the policy set out in note 4
to the Financial Statements.

As a matter of prudence, reflecting the changing
conditions in the market regimes for on-shore
renewable developments in England, the combined
carrying value of these assets of £5.8m has been
reduced by £3.6m to £2.2m, with £1.3m shown as
held for sale.

As a result, the discontinued generation business
reported an operating loss of £4.0m up from £0.2m
in 2016, driven by this increased provision against
the work in progress.

Cash Flow and Cash Generation

Good Energy has a cash generative business
model with an increase in cash position of 118%.
2017 operational cash outflow was £0.02m (2016:
operational cash inflow of £10.7m) which was
impacted by delays in the implementation of the
new customer information system (CIS), resulting in
customer billing delays.

Accrued income peaked during the year in June at
around £10m higher at the same time in the prior
year, with around 60% of customers billed. By
year end, accrued income was only £3m higher as
customer billing reached 95% and has now moved
into debt to be collected. The remaining accrued
income gap will largely be eliminated in the first half
of 2018, with billing on track to hit 99% and payment
collections normalising.

We recognise anticipated future bad debts as
well as those debts which we know are either
in dispute or unrecoverable. We have therefore
looked at the provision for bad debts in this
context. We have considered the impact that the
delay in billing has had on our likely future debt
recovery. In some cases customer repayments
of their delayed bills are being received over
12 months and we expect cash flow and cash
collection to further improve in 2018 as the
remaining delayed bill repayments are received.

We have continued to take a prudent approach by
providing for bad debts at around 2% of electricity
and gas revenue. We have reviewed the adequacy
of the provision and concluded that a further
£0.4m gross needs to be provided in 2017.

Financial Position and Capital Management

The Group continues to maintain a robust financial
position. We look to ensure we optimise our use
of capital by continually reviewing the returns
on our assets, balancing operating requirements,
investment for growth, and payment of dividends
back to shareholders.

Funding and Debt

Good Energy has good access to a range of
funding on good terms to support our growth.

Good Energy is proud of its history of inviting
customers to invest in the business through our
corporate bond programme. In 2013 we issued
our first corporate bond, Good Energy Bond
I. These reached initial maturity in November
2017 and will be repaid in March 2018, with the
option for existing bondholders to extend them
until November 2019 at a coupon rate of 4.25%
(effective 4.50% for Good Energy customers).

Strategic Report

Chief Financial Officer’s Review

Strategic ReportGovernance ReportFinancial StatementsWe launched Good Energy Bonds II in May allowing
existing bondholders to extend or rollover their
bonds, and to allow new investors to partake in
this offering. The bond has a coupon rate of 4.75%
(effective 5.00% for Good Energy customers) and a
four year term.

Together these bonds have raised over £25m.
Following the repayment of Bond I, the reduced
interest cost on Bond II will be around £0.3m lower
on a comparable annualised basis and is a positive
step towards lowering the Company’s ongoing
financing costs and reducing the gearing ratio over
the medium term.

Due to the phasing between the two bonds, Net
Debt increased by 1.7% to £53.0m (2016: £52.1m).
In December we reduced some of our working
capital overdraft facility with Lloyds Bank with
proceeds from the solar farm sale. The amount of
the facility is now £10m, which was undrawn as at
31 December 2017.

Assets

Total Assets increased 17.2% to £122.1m (2016:
£104.2m) due to increased trade receivables
which reflects a temporary increase in debtors and
accrued income due to the delays in billing following
the implementation of the new CIS and an increased
cash position.

Earnings & Dividend

In 2017, Basic Earnings Per Share (EPS) was down
37.2% to 8.1p (2016: 12.9p), due to the lower profit
in the Supply segment including restructuring and
investment costs and increased Finance costs as set
out previously. The Board has recommended a final
dividend of 2.3p per ordinary share which is in line
with 2016. Further detail on the Board’s dividend
policy can be found in the Chairman’s Statement.

Finance Director

On 1 March 2018, we announced that I would step
down as Chief Financial Officer from 31 March
2018. I am proud of the financial and corporate

development of the Company over the last four
years, including the significant progress we have
made in adapting our business model to address
our stakeholder needs in a highly competitive and
dynamic energy market.

Rupert Sanderson joined Good Energy in January
2017 and will lead the company’s financial direction
in its next stage of development as Finance Director
from April.

Financial Outlook

In 2018 we expect to perform in line with current
market expectations through growth momentum
in our business and FIT services segments
and continued progress of our Fit for Growth
programme. We will also see a reduction in our
funding costs, following the repayment of Good
Energy Bonds I and the lower coupon on Good
Energy Bonds II.

In the medium term, we expect to deliver improved
profitability from our Fit for Growth operating model
and strategic initiatives and as we transition to a
more cost-efficient operating model.

With a robust financial position, our continued
investment in growth and the transformation of our
cost base and efficiency underway, Good Energy is
well positioned to deliver sustainable growth in our
chosen segments and enhanced profitability in the
long term.

Denise Cockrem

Chief Financial Officer
29 March 2018

Operating Review

Supply

Good Energy is an established energy supplier,
with the core of the business being rooted in the
decentralised energy market. Since 2004 we have
been a key player in the decentralised energy
market, working with significant numbers of smaller,
renewable generators, delivering a market that
would otherwise not exist. We are currently the
third largest provider of Feed in Tariff (FIT) services
to this market with over 18% of the market with
potential to grow.

Our energy supply business, supplying electricity
and gas to business and domestic householders
is a relatively focused business, supplying 0.2% of
the domestic market and 0.1% of the business (half
hourly) market with 100% renewable electricity and
green gas, backed with a combination of green gas
and offset certificates.

The company has traditionally been well known for
our focus on good customer services historically
being ranked well in independent surveys like
Which? and money saving expert Martin Lewis. In
2017, we implemented a new billing system, which
impacted on our ability to deliver great customer
services, and we are only now beginning to see that
recover in 2018.

The proposition we promise to our customers is
100% renewable electricity, with customers being on
average no further than four miles from one of our
local, renewable generators.

Market conditions 2017

The UK retail supply market is fiercely competitive
with a significant number of new entrants chasing
low or negative margin, less sticky segment of
the market. 2017 saw record household customer
switching rates across the marketplace and the
maturing of many collective switching deals, with
overall switching at around 28% of customers.

Comparatively the business market has been stable,
with little change in competition, and a relatively
buoyant market for green supply, as businesses
consider closely their corporate social responsibility
targets and any commitments they have made to
the UN Sustainable Development goals.

The FIT market has continued to grow, albeit
relatively slowly in comparison to earlier years. It
has still seen an overall growth in this market of
around 3%. We expect this to continue and perhaps
accelerate in 2018 until the close of the scheme to
new sites in April 2019.

Performance in 2017

Supply revenue grew strongly by 16.7% to £99.3m
(2016: £85.1m) driven by strong growth in business
customer volumes. Electricity revenue grew by
24.4%, Gas revenue by 6.8%, while FIT revenue was
15.2% lower.

Strategic Report

Operating Review

Strategic ReportGovernance ReportFinancial Statements• Signed up leading brands as customers and

partners including Neal’s Yard Remedies, BAFTA,
Hay Festival and Innocent Drinks.

• Introduced offshore wind into our fuel mix for

the first time in 2017, through an agreement with
DONG, now Orsted, to buy power from their
Westermost Rough Wind Farm in the North Sea.

Outlook

We will continue to focus on the three key areas for
the core business and building on our success by:

• Retaining retail customers, through better

proposition, customer service and improved
content and communications;

• Grow business sales in the SME and medium

business sector, with an upskilled team, better
systems and data and improvements in customer
experience. This year the marketing team will
focus on lead generation for the business sector
and away from the retail sector; and

• Grow our FIT services business through organic
growth for retail customers, and portfolio
switching for business customers and portfolios.

Supply operating profit of £3.5m (2016: £4.9m) was
27.7% below the prior year, due to the changing
business mix as we saw faster growth with lower-
margin, higher-volume business customers. In
addition, the challenging market conditions in the
retail business, led us to increase investment in
marketing and customer support whilst maintaining
fair pricing. The anticipated decline in FIT profit was
due to lower new customer revenue which generates
a greater administration fee receivable in the first
year of sign up.

In 2017, the total volume of all energy delivered to
customers grew by 5.4% to 1.06m MWh (2016: 1.01m
MWh). We achieved significant growth in business
electricity supply volumes of over 46%. Total Supply
customer meter numbers were stable at just over
115,755 (2016: 115,593). The competitive environment
and high switching rates across the market led to
broadly flat growth in the retail business by volume
and by meters. Our strong customer service and
reputation in the FIT market enabled us to grow FIT
customer installations by 8.0%, adding 10,595 new
FIT installations to 143,607 in total.

Due to the implementation of our Customer
Information System (CIS) in 2017 we experienced
delays and disruption to billing through the systems
change, and restructured our customer support
team in the second half of 2017 to address these
issues. We are now back to 99% customer billed and
front line service levels are improving.

Highlights in 2017

Our FIT market share increased from 16.8% in 2016
to 17.6% in 2017 adding 10,595 new installations in
the year and achieving a strong NPS score with FIT
business customers. We have also increased our
customer and sales support to FIT during the year.

• Began our Smart and Digital rollout, with our
new CIS in 2017 and we began preparations to
roll-out SMART meters from 2018.

• Expanded our SME and business offering: During
the year we have set up a dedicated business
sales team, launched a new online quoting tool,
new fixed tariffs and our new CIS system is
delivering greater customer insights.

• Restructured our Executive team and the Senior
Leadership team to realign with our strategic
objectives of Build, Economise and Invest, with
further improvements in efficiency expected
in 2018.

Generation & Development

Good Energy owns and operates nine renewable
energy facilities across the UK that deliver 100%
renewable electricity to the UK electricity grid. There
are seven solar sites and two wind farms, with a total
of 52.5MW of installed capacity in our continuing
generation portfolio.

We use the renewable energy that we generate to
supply our customers with 100% renewable energy.

Until 2017 Good Energy also developed new
generation assets, which it either held as a
generation asset or sold these back into the market,
where possible into community hands.

Market conditions 2017

As previously announced, Government policy
changes over the last two years have led Good
Energy to stop new generation development
activities in 2017 and the development business is
now reported as a discontinued business. While
we have been successful in creating, utilising and
monetising energy generation assets, the market
has moved in favour of large scale developers with
better purchasing power for renewable assets and
access to low-cost finance.

The removal of government subsidies for many
renewable energy technologies however does not
affect the financial performance of Good Energy’s
continuing generation sites.

Performance in 2017

In 2017, revenue from continuing Generation
operations increased by 13.1% to £8.9m (2016:
£7.8m). Operating Profit in Generation increased by
14.6% to £3.7m (2016: £3.2m).

In 2017, the total output from our generation
portfolio increased by 8.5% to 87.6 GWh (2016: 80.7
GWh). Solar output increased by 11.4% to 38.6 GWh
(2016: 34.7 GWh) with output increase from the
two new sites being offset by the sale of Oaklands.
Wind output was 6.6% higher to 49.0 GWh (2016:
45.9 GWh)

In 2017, we reached agreements to sell three
generation sites for £17.2m combined. Our 5MW
Oaklands solar site was sold for £5.8m, and was our
first sale of a site fully constructed and developed
by Good Energy. Importantly Good Energy retains
an option to purchase up to 50% of the site’s
power and continue to provide management
services. In the second half of 2017, we sold Newton
Downs for £5.8m, and reached an agreement to
sell Brynwhilach for £5.6m which is expected to
complete in 2018 and returning these back into
community hands. We have the option to buy 100%
of the power from both of these sites.

2018 Outlook

Our continuing generation assets and 52.5 MGW
capacity forms an important part of our operating
portfolio, allowing us to match demand from our
Supply business from our own generation. We
expect continuing good energy production from our
continuing generation assets in 2018, in keeping with
local weather conditions.

Highlights in 2017

Development (Discontinued)

In 2017 we completed our development of two
new 5MW solar sites, “Newton Downs” in Devon
and “Brynwhilach” near Swansea. This was an
important step towards maximising the value of our
development activities over the past five years for
our stakeholders.

In 2017 we announced that our development
business was discontinued and restructured our
development team.

Further detail on this can be found in the Chief
Financial Officer’s Review.

Strategic Report

Operating Review

Strategic ReportGovernance ReportFinancial StatementsKey Performance Indicators

Good Energy measures its progress with a number
of key performance indicators (KPIs). In 2017,
EBITDA and Business Customer Volume growth
were added as KPIs reflecting their continued
importance as indicators of value.

Despite the expected long term benefits, we
saw a short term impact from the billing system
implementation issues as well as the ongoing F4G
restructuring programme on various employee and
customer KPIs.

2017 Performance

Good Energy grew both revenue and revenue per
employee, and saw increasing business customer
volumes and customer meters despite tough
market conditions in the retail supply market.
However, increased wholesale, restructuring and
investment costs as well as a changing revenue mix
adversely impacted certain financial and operating
KPIs in the period.

Further detail on the factors driving the KPI
performances below is set out in the Executive,
Financial and Operating Reviews within this
Strategic Report.

1. Total installed customer meters and FIT installations as at 31 December

2. 2017 Churn rate for our underlying Retail business, excluding the impact of switching under The Big Deal

3. In 2017, the company did not complete a NPS survey for the total business due to the restructuring and reorganisation changes being

undertaken in the year, however completed an NPS survey among FIT business customers. This 2017 score reflects FIT Business customer
NPS compared with 2016 Total Supply NPS

£’000

4. Revenue, Margin and EBITDA figures reflect continuing operations

5. Administration cost including depreciation and amortisation

Strategic Report

Key Performance Indicators

Strategic ReportGovernance ReportFinancial StatementsKey Risks

Good Energy recognises that effective risk
management is critical to enable it to meet its
strategic objectives.

The Company has a clear framework for identifying
and managing risk, both at an operational and
strategic level. Its risk identification and mitigation
processes have been designed to be responsive
to the changing environment in which it operates.
The impact of emerging risks on the Company’s
business model are also considered and used
to make informed decisions, including as to the
delivery and evolution of the Group’s strategy. The
risks below capture those risks that would have the
most significant, adverse impact – based on their
impact and, or, likelihood – on the Company. While
the risks are typical of the risks faced by other
energy suppliers, we believe the Company is well
positioned to mitigate through a combination of our
risk management processes, our control activity and
our evolving strategic direction.

Principal risks and uncertainties

Regulatory risk:

The energy industry is ever changing to keep up
with technology, consumer needs & demands as
well as government policy (e.g. SMART and EU
General Data Protection Regulation (GDPR) etc.).
With the move to principles based regulation some
more recent changes have provided opportunities
to Good Energy, removing some of the ‘red
tape’ which existed with prescriptive regulation.
However, not identifying external changes early
enough can reduce our ability to react quickly
to reduce implementation costs and maximise
efficiency. With the move away from prescriptive
regulation to principles, the risk of customer
detriment and noncompliance increases if we don’t
fully understand the objective of the principles.
In addition, regulations require the Company to
make various changes to its procedures within set
timelines and have already led and will continue
to lead to the Company incurring additional time
and cost in order to ensure compliance with these
new regulations. A significant volume of regulatory
change is a risk to the Company as it can divert time
and resource away from strategic initiatives as well
as the risk of not meeting regulatory deadlines.

For example, in December 2017, the Company
successfully completed its CIO SMART readiness
audit as mandated by the SMART Energy Code. The
audit assessed the information security credentials
of our planned systems to support SMART metering.

From May 2018, GDPR comes into effect which
increases the risk of non-compliance. The penalty
for failing to demonstrate compliance with the new
law can lead to fines of up to €20m or 4% of group
turnover. GDPR brings with it the requirement for
full accountability of data controllers managing
and processing data with data subjects having
increased rights over how their data is processed
by organisations. At Good Energy, a GDPR cross
functional Steering Group has been established to
deliver the required changes across the business.

Good Energy takes the security of all personal data
very seriously and manages the risk in a number of
ways to ensure our customer and employee data is
protected. There are a number of controls in place
to minimise the risks, such as system access rights,
mandatory training for all employees upon induction
with periodic refresher training appropriate to the
employee’s role. A schedule of assurance reviews
is planned on a yearly cycle to test our processes,
security measures and general awareness of
data protection. Our Guiding Principles set the
requirements for all employees and contractors
which include consequences for non-adherence.

Cyber-attack:

As we grow as a business and as technological
advances are made, we are increasingly exposed
to the threat of cyber-attack as seen by the 2017
attacks on the NHS. As with many businesses, a
successful cyber-attack on Good Energy’s network
could result in the Company being unable to deliver
service to its customers, potentially damaging its
reputation, and leading to consequential customer
and revenue loss. It could also lead to the imposition
of financial penalties.

What have we done?

Good Energy continually assesses its security
policies, standards and procedures and adjusts them
so they are proportionate to the threat profile the
Company faces. The Company actively monitors
our threat environment utilising the National Cyber
Security Centre (NCSC) which provides weekly
updates on the latest cyber landscape.

What have we done?

Political risk:

The Company has invested in its regulatory and
compliance capability and has enabled the Company
to respond effectively to the volume of change,
thereby reducing the risk.

The government is seeking to introduce a market-
wide Standard Variable Tariff (SVT) price cap. This
is a price cap, setting the maximum price that a
supplier is allowed to charge for electricity and gas

for domestic consumers, focused on consumers
that have not proactively engaged in the market
and chosen a tariff (and are therefore on the SVT,
or other default tariffs). While we are encouraged
to see that there will be a potential exemption for
green tariffs, there is a concern that other suppliers
will be able to use a regulatory loophole to legally
claim to offer green electricity without having
to buy any power from renewable generators. If
this concern is realised then the exemption may
be removed. Generally, there is a risk that Good
Energy’s retail supply business in particular operates
in conditions that might require increased capital
expenditure, increased operating costs or otherwise
hinder the development of the renewable energy
industry, through for example a detrimental impact
on returns and therefore the attractiveness of the
sector. The price cap relates to the domestic supply
part of the business only.

What have we done?

This risk is mitigated partly through the benefits
of the Company’s vertical integration, and partly
via the Company’s forward-looking and prudent
hedging policy. The Company has also diversified its
portfolio of counterparty relationships through 2017.

Weather, forecasting demand and generation:

On the supply side, temperature drives demand and
customer behaviour. From a generation perspective,
the annual variability of wind speeds and solar
radiation can result in year-to-year fluctuations. Any
material reduction could have an adverse impact on
financial results and, potentially, the future prospects
for the business.

What have we done?

While the implementation of the SVT price cap
is beyond our control, OFGEM will be consulting
on exactly what criteria should be use to exempt
suppliers from the cap and this is something Good
Energy will engage on.

Accurate forecasting is key in the long term, to allow
for informed hedging and thus mitigating against
adverse market movements, and in the short term
to avoiding imbalance risk. Investment in forecasting
systems has provided Good Energy with improved
visibility and improved forecasting performance.

Financial risk management:

This has been considered within note 3 in the Notes
to the Financial Statements.

Other OFGEM proposals such as the extended
vulnerable consumers price cap, designed to protect
an additional 2 million households over the current
interventions (Warm Home Discount price cap, and
Prepayment Meter price cap) remain in draft form.
With little clarity on how such consumers will be
identified, the extent to which this may impact Good
Energy is currently unclear.

What have we done?

The Company has continued its efforts to influence
policy makers and respond to relevant consultations.
The policy relates to the domestic supply part of the
business and as such the Company has sought to
segment its proposition to include and optimise its
non-domestic portfolio, such as FiT and Business to
Business (B2B) sales.

Wholesale market and price volatility:

Margin from energy sales may be affected by
fluctuations in price of wholesale gas and electricity
and the associated costs with buying in any
volatile marketplace. This impacts the price the
Company can offer to customers and could result
in a significant loss of customers if other energy
suppliers were able to absorb more of these costs
before needing to alter customer prices.

Strategic Report

Key Risks

Strategic ReportGovernance ReportFinancial Statements28

GOVERNANCE
REPORT

Board of Directors

Governance & Directors’ Report

Remuneration & Nomination Report

Independent Auditors’ Report

Board of Directors

Joined Board:
October 2012

Responsibilities:
Chairman of the Board
Member of Audit & Risk
Committee
Member of Nominations &
Remuneration Committee

Appointed CEO:
2002

Appointed CFO:
May 2014

Retired from Board:
March 2018

John Maltby – Non-Executive Chairman (Independent)

John holds a number of non-executive roles including Non-Executive
Director and Chairman of Risk for Bank of Ireland UK and Non-Executive
Director and Chairman of Audit and Risk for National Citizens Service
Trust. Previous roles include Chairman of the Swedish bank BlueStep Bank
AS, Non-Executive Director and Chairman of Risk & Audit for Tandem
Bank, CEO of Williams & Glyn, Group Director of Commercial Banking at
Lloyds Banking Group and several other senior positions in the financial
services sector.

Skills and Expertise: Has a wealth of experience with small businesses and
publicly listed companies and a reputation for delivering growth, which is
invaluable to the Company as it continues its development.

Juliet Davenport – Chief Executive Officer

Juliet started her career in renewable energy at Energy for Sustainable
Development Ltd (ESD) in 1995 and was appointed Executive Director
of both ESD (now CAMCO) and ESD Ventures Ltd in 1996. Passionate
about renewable energy and its potential to impact on climate change, in
2013 she was awarded the OBE for services to the sector. Juliet is highly
regarded in the renewable energy industry and has held positions on many
strategic and advisory boards, including DECC’s Renewable Advisory
Board, OFGEM’s Environmental Advisory Committee, Ministerial Smart
Metering, and Regen SW. She is also a council member of NERC.

Skills and Expertise: Worked for a year at the European Commission
on European energy policy, then at the European Parliament on carbon
taxation and holds a masters in environmental economics.

Denise Cockrem – Chief Financial Officer

Denise has held senior finance roles in FTSE 100 companies in the financial
services sector including Finance Director for RSA Insurance Group’s
UK & Western Europe region. She worked as Finance Director for Direct
Line Insurance, and her career includes finance roles with Royal Bank of
Scotland, Barclays Bank and Ernst & Young. Denise is a Non-Executive
Director of Skipton Building Society and an Independent Member for
Macintyre Academy Trust, a multi academy special education trust for
special schools and specialist alternative provision of education.

Skills and Expertise: A Chartered Accountant with an MA in Law from
Oxford, and broad experience in the financial services sector over the last
20 years.

Richard (Rick) Squires – Non-Executive Director (Independent)

Rick is an experienced Non-Executive director of companies with
investments in the renewable energy sector and is Non-Executive director
at Milford Haven Port Authority and Green Energy For Education Limited.
Previously, Rick was a non-executive director of Green Investment Bank
Financial Services and Non-Executive Chairman of Eclipse Energy Company
Ltd, a UK-based privately owned wind power company with a development
portfolio of approximately 250MW. Rick founded PiEnergy Ltd which
provides consultancy and management education services to the energy
sector. He has held senior commercial positions with Royal Dutch Shell
Group and InterGen, a US-based power developer and producer.

Skills and Expertise: Has extensive Non-Executive Director experience, and
an overview of the international energy sector with specific focus on the
development, construction and operation of renewable energy assets.

Emma Tinker – Non-Executive Director (Independent)

Emma is a private equity investment Director who brings a wealth of
investment experience. She is a Director of numerous renewable energy
companies, established the renewable energy business at HG Capital in 2002
and founded Asper Investment Management in 2016 as the spin-out of that
business. She has been a Director for renewable developers and independent
power producers, working across a range of renewable technologies. Emma
is also a Director of Gardeners’ Royalty Benevolent Society.

Skills and Expertise: Has substantial commercial experience spanning the
entire lifecycle of investments in energy businesses, and has worked across a
range of renewable technologies.

Timothy (Tim) Jones – Non-Executive Director (Independent)

Tim was appointed Non-Executive Director in December 2017. Tim
is an experienced Technology Executive who brings over 20 years
of digital innovation, execution and operation. Tim has been CIO of
Moneysupermarket Group PLC since 2013, Insurance Times CIO of the
Year in 2014 and a regular member in the top 20 of the annual CIO
100. Prior to joining MoneySupermarket, Tim was co-founder and an
Executive at AutoTrader UK, the internet media marketplace giant one
of the UK Digital ‘Unicorns’ alongside AO.com, Skyscanner and of course
MoneySupermarket.com.

Skills and Expertise: Depth of experience in leading digital development
with companies. Tim is currently responsible for delivering innovative
consumer propositions in the highly regulated verticals of insurance,
financial services, energy, telecommunications and travel.

Joined Board:
March 2008

Responsibilities:
Chair of Audit & Risk
Committee

Joined Board:
September 2016

Responsibilities:
Chair of Nominations &
Remuneration Committee

Member of Audit & Risk
Committee

Joined Board:
December 2017

Responsibilities:
Member of Audit & Risk
Committee

Member of Nominations &
Remuneration Committee

Board of Directors

Strategic ReportGovernance ReportFinancial StatementsGovernance ReportGovernance & Directors’ Report

The Board

Role of the Board

Chairman

John Maltby

• Setting Group strategy and
objectives in collaboration
with the Executive.

• Providing leadership,

knowledge and experience
to support and guide the
Executive.

• Engaging with shareholders.

• Overseeing and monitoring

business performance, internal
controls, governance and risk
management.

• Oversight of principal risks –
competitive position, political
risk, programme delivery.

• Effective running of the

Board and its committees
in accordance with the
principles of good corporate
governance.

• Setting the Board agenda.

• Managing the Board to ensure
adequate time for discussion
of all agenda items.

• Ensuring the Board receives
accurate, timely and clear
information.

Other non-executive directors

• Providing skills and external experience to support the Chairman

and the Executive.

Chief Executive

Juliet Davenport

• Overseeing the day-to-day
operation of the Group’s
business.

• Establishing and maintaining
formal and appropriate
delegations of authority.

• Developing and implementing

• Maintaining a close working

the Group’s strategy as
approved by the Board.

relationship with the Chairman.

Other executive directors

• Providing management and operational insight to support the

Board’s discussions and decision making.

Company Secretary

Stephen Rosser

• Overseeing the design,

• Providing governance,

suitability and effectiveness
of the Group’s governance
arrangements and supporting
implementation across the
Group.

• Acting as Secretary to the
Board and its committees,
ensuring compliance with
Board procedures and
corporate governance
requirements.

advisory and administrative
support to the Board, all
Directors and the Executive.

• Supporting the Nominations
& Remuneration Committee
with Board Composition,
succession planning, directors’
induction and ongoing training
requirements.

The Board’s Committees

Nominations &
Remuneration Committee

Audit & Risk
Management Committee

Funding & Investment
Committee

Board Composition

Corporate Governance

Funding strategy and execution

Succession planning

Financial Reporting

Overseeing capital and other
significant investment decisions

Board nominations

Internal Controls

Overseeing corporate transactions

Remuneration policy

Risk Management

Investor relations strategy

Incentive design and
target setting

External auditor

Executive remuneration review Oversight of principal risks

1. Data as at 31 December 2017

Governance & Directors’ Report

Strategic ReportGovernance ReportFinancial StatementsGovernance ReportThe Board has established three principal
committees which focus on particular areas as set
out opposite. The chairman of each committee
reports to the Board on its activities after each
committee meeting. Reports from each committee
are included later in this section.

Matters that are not reserved to shareholders, the
Board or one of its committees are the responsibility
of the Chief Executive who has established and
maintains a documented schedule of delegations
of authority to members of the Executive and
other management. This delegation of authority
is incorporated within the Company’s Guiding
Principles. The delegation of authority includes a
detailed authorisation matrix covering financial
limits and approvals needed when conducting
business on behalf of the Group.

The way in which principles of the UK Corporate
Governance Code (the Code) are applied, including
the role of the Board and the Chairman, Chief
Executive and Company Secretary, the matters
reserved to the Board, the terms of reference
of each of the Board committees, and details of
Directors’ induction and training have been agreed
by the Board and relevant information is set out in
this Governance Report.

Corporate Governance

Overview

Good Energy recognises the importance of robust
corporate governance practices and places good
governance at the heart of the business. Although
the Company is not required to comply with the
UK Corporate Governance Code (the Code) since
it is AIM listed, the Board recognises the Code
as a benchmark for best practice and applies the
principles of the Code as the Board considers
appropriate to the circumstances of the Company,
its size and nature.

The Board has implemented a number of
governance enhancements through the period,
as more particularly described in this section,
and expects to make further progress over the
coming year.

The Board and its committees

The Board is ultimately responsible to shareholders
for the direction, management and performance of
the Company and its business.

Biographies of the Board’s Directors are set
out pages 30 to 31. Details of the Directors’
remuneration, including share options are set out in
the remuneration report on pages 50 to 57. Details
of the Directors’ interests in ordinary shares in the
capital of the Company are set out on page 45
under Statutory and other information.

The Board maintains a list of matters reserved for its
approval, generally being those items which affect
the shape, risk profile or strategic direction of the
Group, as well as the key financial items. The Board
reviews this schedule annually and it is updated as
necessary. During the year, approximately half of the
matters on this list were considered by the Board.

Board and Committee composition

The following table sets out the composition of the Board and its committees as at 31 December 2017 and
those serving during the year:

Board

Nominations &
Remuneration

Audit & Risk
Management

Funding &
Investments

John Maltby (Chairman)

Juliet Davenport (CEO)

Denise Cockrem (CFO)

RickSquires (Non-Executive)

Emma Tinker (Non-Executive)

Tim Jones (Non-Executive)

Former Directors

David Brooks (MD, Supply)

Martin Edwards (Non-Executive)

Francesca Ecsery (Non-Executive)

Chair

Member

Not applicable/Invitation only

Board & Committee Changes

As part of its annual evaluation process and
otherwise as required, the Board reviews its
composition to ensure that the Group has access to
a balance of complementary skills and experience to
enable the Group to achieve its strategic ambitions
and wider purpose.

During the year, the Board was pleased to announce
the appointment of Tim Jones as independent
non-executive director following a market search
conducted in conjunction with recruitment

consultants. Tim’s experience in technology and
digital transformation complements the strategic
direction set out by the Board.

Martin Edwards and Francesca Ecsery both retired
as non-executive directors from the Board during
the year. As previously reported, David Brooks left
the Board on 7 April 2017 following a strategic
review focussed on streamlining Good Energy’s
operating model.

Governance & Directors’ Report

Strategic ReportGovernance ReportFinancial StatementsGovernance ReportEmma Tinker was appointed to the Audit & Risk
Committee in December 2017. Tim Jones was
appointed to the Audit & Risk Committee and the
Nominations & Remuneration Committee following
his appointment to the Board.

On 1 March 2018, the Company announced a
reorganisation of the finance function as part of
which Denise Cockrem would step down from the
Board and as CFO with effect from 31 March 2018.
The Company’s finance function will be led by
Rupert Sanderson as Finance Director. Although
not a board appointment, the Finance Director is a
member of the Executive team and will be invited
to attend proceedings of the Board. In assessing
proposals surrounding the reorganisation, the Board
carefully reviewed its management effectiveness
and independence. The Board remains satisfied
that it will continue to comprise a balance of skills,
experience and independence appropriate for the
Company and its strategic direction and that the
Board would continue to operate in such a way as to
actively encourage and constructively challenge the
Executive team.

Rick Squires has informed the Board of his
intention to retire during 2018 and he will not
stand for re-election at the Group’s 2018 Annual
General Meeting.

With the support of recruitment consultants, the
Nominations & Remuneration Committee has
conducted a market search to identify suitable
candidates for appointment as the Group’s first
Senior Independent Director. The calibre of
applications for the role has been very high. The
recruitment process is at an advanced stage and the
Group expects to make a further announcement in
due course.

The Board expects to review chairmanship of its
Committees once a Senior Independent Director has
been appointed.

The Funding & Investment Committee was newly
established during the period to support the Group
in executing its strategic transformation. A summary
of its activities is set out on pages 44.

Independence of the Non-Executive Directors

The Board conducts an internal review of the
independence of the Non-Executive Directors every
year, based on the principles of the Code. The
Board considers all of its non-executive directors,
representing two thirds of the Board, to be
independent in both character and judgement.

The Code does not consider the test of
independence to be appropriate to the chairman
of a company. However, John Maltby did meet the
Code’s independence criteria upon appointment to
the Board in October 2012.

Rick Squires holds 75,000 share options in
the Company. The Board considers Rick to be
independent in both character and judgement
notwithstanding his share options. The share
options were issued to Rick in March 2012, before
the Company listed on AIM. The share options
were granted at market value as part of Rick’s
appointment as interim Chairman and represented
the most effective method of incentivising
performance aligned to the interests of the
Company and shareholders. These options were
disclosed as part of the AIM listing and have also
been reported in the Annual Report and Accounts
each year since they were issued. Since the
Company listed on AIM, Rick has purchased shares
in the Company himself.

Directors’ Indemnities and Insurance

As permitted by the Company’s Articles of
Association, the Directors have the benefit of
an indemnity which is a qualifying third party
indemnity provision as defined by Section 234 of the
Companies Act 2006. The indemnity was in force
throughout the last financial year and is currently in
force. The Company also purchased and maintained
throughout the financial year Directors’ and Officers’
liability insurance in respect of itself and its Directors
and Officers.

Board and Committee Attendance

Executive Directors

Juliet Davenport

Denise Cockrem

Non-Executive Directors

John Maltby

Rick Squires

Emma Tinker

Tim Jones

Former Directors1

David Brooks (Executive)

Martin Edwards (Non-Executive)

Francesca Ecsery (Non-Executive)

Board

Audit & Risk
Committee

Nominations &
Remuneration
Committee

Funding &
Investment
Committee

9/9

2/2

4/4

9/9

4/4

1/1

4/4

3/3

9/10

10/10

3/3

10/10

6/10

3/3

9/10

1/1

3/3

Operations of the Board

Details of the number of scheduled Board meetings
and attendance of Directors is set out in the table
above1. The Group’s performance is reviewed
at these scheduled meetings and the Board is
responsible for agreeing and reviewing the strategy
for the Group, for which it maintains both short term
(12 months) and longer-term (five years) plans.

In addition, it is responsible for matters relating to
employee recruitment and remuneration, strategy,
health and safety and other specific subjects.

team and other senior leaders directly on relevant
initiatives. During 2017, the Board hosted a number
of evening events to which a variety of staff from
across the Group were invited. These events were
well-attended.

During the year, the Board and relevant Committees
convened for a number of unscheduled proceedings
to support the Group in developing, refining and
implementing initiatives in support of its strategic
ambitions, as well as to consider a member’s
requisition for a general meeting to consider the
appointment of two additional directors.

Where relevant, members of the Executive team
and other senior leaders within the business attend
Board and Committee discussions. Members of the
Board also engage with members of the Executive

In addition, the Board or relevant Committees held
regular informal discussions on a variety of topics
to consider the impacts of macro-economic events,

1. For members retiring during the year, the table reflects those meetings applicable to their tenure.

Governance & Directors’ Report

Strategic ReportGovernance ReportFinancial StatementsGovernance Reportdevelopments in Government policy and to provide
guidance and insight to support the Company in
delivering its short term and longer term objectives.

Director of Customer Services2, Director of Business
Services, Director of Marketing and Director of IT
and Transformation.

The Board conducts a formal review of the Group’s
strategy at least annually, at which all Board
members and all of the Executive team are present.

Board packs are generally circulated at least
one week ahead of scheduled meetings to allow
adequate time for the Board and/or Committee
Members to review information and prepare.

The Chairman and Chief Executive maintain regular
contact and the Chairman receives a briefing from
the Chief Executive before each scheduled Board
meeting. The Chairman provides a briefing to the
Non-Executive Directors before each scheduled
Board meeting to align priorities and maximise the
Board’s effectiveness at meetings. The Chairman
regularly de-briefs with the Non-Executive Directors
after meetings to capture feedback and identify
opportunities for improvement. The Executive
Directors do not attend these de-brief discussions.

All Directors have the right to request that any
concerns they have are recorded in the appropriate
Committee or Board minutes.

The Board reviews the operational and financial
performance of the Group for each month against a
pre-agreed set of performance targets. In addition,
the Board receives information through a system
of continuous financial planning which enables it to
better manage profit and cash flow forecasting, and
to inform investment decision making. The formal
financial plan for the forthcoming year is reviewed
and authorised by the Board.

The Board and each of its Committees has access to
the services of the Company Secretary and external
advisers as necessary.

Executive Team

The roles of Chief Executive and Chairman have
always been split, with the Chairman operating in a
Non-Executive capacity. An outline of the roles and
responsibilities of the Chairman, Chief Executive,
other Executive Directors, Non-Executive Directors
and Company Secretary are provided on page 32.

The Chief Executive is responsible for the day-
to-day management and running of the business,
supported by an Executive team. As at 31 December
2017 the Executive comprised the Chief Financial
Officer1, Finance Director, General Counsel &
Company Secretary, Director of People & Culture,

The Executive team is an executive-level forum of
the Group’s most senior leaders, chaired by the
Chief Executive. It comes together to communicate,
review and agree on issues and actions of
Group-wide significance. It helps to develop,
implement and monitor strategic and operational
plans, considers the continuing applicability,
appropriateness and impact of risks, leads the
Group’s culture and aids the decision-making of
the Chief Executive in managing the business in the
performance of her duties.

Board and Directors’ Performance Evaluation

The Board is committed to continually improving
its performance.

The Board implemented an annual process
of evaluating board performance in 2015.
Evaluations are carried out internally and the
Board is considering whether it would benefit from
conducting an externally facilitated review following
the conclusion of its current recruitment activity.

For internal reviews, Board members and other
regular Board attendees respond to a detailed
questionnaire co-ordinated and collated by the
Company Secretary. Where appropriate, Board
members are also interviewed privately by the
Chairman.

Feedback and insights from the review process are
collated and summarised for the Board and the
Chairman and Company Secretary facilitate an open
discussion with the whole Board, highlighting areas
that work well and agreeing actions in those areas
where the Board sees opportunity for improvement.

The Board has identified four clear priorities
through its most recent reviews: (i) ensuring that
the Board is able to draw upon an effective balance
of skills and experience to deliver the Company’s
strategic objectives, (ii) supporting the delivery
of strategic objectives through clear and effective
prioritisation of investment and resources, (iii)
continuing to enhance the Company’s approach to
corporate governance, including appointing a senior
independent director, and (iv) improving visibility for
members of the enhancements the Group is making
to corporate governance.

1. On 1 March 2018 the Company announced a reorganisation of the finance function as part of which the CFO will step down with effect from 31

March 2018

2. The Group engaged a consultant to support the design of its future operating model. This role was vacant at the end of the period pending

the outcome of the review. A new Director of Customer Services has been appointed and will take up the post in June 2018.

These four priorities are consistent with prior periods. Building on its achievements from 2016, during 2017
the Board is pleased to report its progress against 2017 Objectives as follows:

2017 Objective

2017 Update

Support the Group in executing its
strategic transformation

Funding & Investment Committee established.

Supplement the Board’s expertise through
appointment of an independent non-executive
director with digital transformation experience.

Tim Jones was appointed as independent non-
executive director in December 2017.

Determine whether the Group would benefit from
appointing a senior independent director.

The Board expects to appoint a senior independent
director during 2018. A market search has been
conducted with recruitment consultants and is well
progressed.

Benchmark the terms of reference for the Board
and each of its Committees with appropriate
external advisers.

The Group engaged Boudicca Consultants to
complete a review and provide advice on current
best practice.

Enhance the Board’s visibility and understanding
of key aspects of the Group’s business and
operations.

Effectively map initiatives against the Group
strategic objectives with clear resource planning
supported by improved investment proposals.

Aside from a small number of minor updates,
the review concluded that the existing terms of
reference for the Board and each of its Committees
remain fit for purpose.

The review recommended that the Group consider
a formal separation of the functions of the
Nominations & Remuneration Committees. The
Board agreed that this would be reviewed following
appointment of the senior independent director.

All Board members and all members of the
Executive team attended internal seminars covering
recent and forthcoming developments in wholesale
electricity and gas markets, renewable energy
forecasting and trading and the strategic outlook for
renewable generation, supply and demand.

Following the implementation of the customer
information system, enhanced reporting of core
operating performance (including customer service
metrics, billing, debt collection and complaints)
has been introduced. This will increase the Board’s
insight in this area.

The Group appointed a strategy partner to the
CEO and implemented a clear process for the
development and assessment of strategic initiatives,
including resource planning and prioritisation. This
has been further supplemented by the allocation
of a dedicated project manager to co-ordinate and
manage the inter-relationship between strategic
initiatives.

Maintain participation of senior leaders from across
the business in Board or Committee proceedings
wherever relevant and appropriate.

Members of the Executive team and other senior
leaders across the business regularly present
directly to the Board or relevant Committees.
Informal events also took place throughout the year.

Governance & Directors’ Report

Strategic ReportGovernance ReportFinancial StatementsGovernance ReportPerformance of Individual Directors

The individual performance of Executive and Non-
Executive Directors is reviewed annually.

The Chairman conducts an individual annual
appraisal with the Chief Executive. In 2017, the
appraisal process was extended to include each
Non-Executive Director. The cumulative time
commitments of Non-Executive Directors are
reviewed as part of the annual performance
evaluation to ensure that no Non-Executive
Director becomes over-committed. The Chairman’s
performance is reviewed by the Non-Executive
Directors, with input from the Executive Directors
and members of the Executive Team.

The performance of Executive Directors is discussed
at the Nominations & Remuneration Committee
during the first quarter each year and on an ad hoc
basis as required. Executive Directors do not attend
that discussion.

Investor Engagement

The Company is mindful of the AIM Rules, the
principles of the Code, MIFID and Market Abuse
Regulations when communicating with its
shareholders. Good Energy recognises and values
the importance of building strong relationships
with investors through a proactive communication
programme. The Company has established an
investor relations department which will focus on
maintaining strong and clear communication with
investors and potential investors.

The Company engages with institutional
shareholders via investor road shows twice a
year, held after the Company’s interim and full
year results. Meetings are held with current and
prospective shareholders to receive their feedback
on company initiatives and direction and their
requests for any additional information they would
like the Company to provide. In addition the
Company’s brokers provide feedback from any
institutional investors who use the brokers’ services.
This investor feedback is shared with the Board.

A large proportion of the Company’s shareholder
base is comprised of private shareholders, many of
whom are customers of the Company. The Company
takes steps to ensure that communications with
private shareholders are effective and appropriate
for that group. It continues to evolve this to provide
information about the Company’s activities and
performance quickly and easily, and has begun
enhancements to the Investor Relations website in
early 2018.

During the period the Company received a
requisition on behalf of Ecotricity Group Limited
for a general meeting of the Company’s members
to consider the appointment of two Ecotricity
executives as directors of the Company. Ecotricity
withdrew its requisition after the general meeting
had been convened but before the general meeting
took place. The requisitioned general meeting was
adjourned indefinitely on 6 September 2017.

Good Energy Bonds

Following a survey of bondholders and customers,
the results of which indicated that there was high
demand to invest further in the Company, the
Company raised its second corporate bond in June
2017. Investments exceeded expectations by over
50%. A number of bondholders elected to convert
their original investment in Good Energy Bonds I
into an investment in Good Energy Bonds II.

On 13 February 2018, the Group announced that
it would redeem Good Energy Bonds I in full on
29 March 2018. In response to feedback from
bondholders who had expressed a desire to
continue to support the work the Group does, the
Group offered holders of Good Energy Bonds I
the opportunity to continue their investment in
Good Energy Bonds I at an interest rate of 4.25%
per annum (4.50% effective for Good Energy
customers). Those continuing their investment will
be entitled to request repayment of their holding on
22 November 2019 or annually thereafter. All other
terms and conditions related to Good Energy Bonds
I will remain the same and investments in Good
Energy Bonds II will not be affected.

Annual General Meeting (AGM)

All holders of ordinary shares may attend the
Company’s AGM at which the Chairman and Chief
Executive present a review of the key business
developments during the year. The time and venue
for the 2018 AGM will be announced in the second
quarter of 2018.

At the meeting, shareholders can ask questions of
the Board on the business of meeting, including
the Annual Report and Accounts and the running
of the Company generally. To assist the proper and
effective conduct of the meeting, shareholders
wishing to ask questions are asked to submit these
in advance to the Company Secretary not less than
48 hours before the meeting.

All Directors are invited to attend each AGM. Unless
unforeseen circumstances arise, the chair of each
committee will be present to take questions at
the AGM.

Communication with all employees continues
through a variety of mechanisms, including regular
team briefs and twice-yearly off-site all-company
meetings. The Company engages an internal
network of employee champions which encourages
grassroots involvement and has made a significant
contribution to all aspects of working at Good
Energy during the year.

Further details relating to employees are set out in
the Corporate Responsibility report on pages 15
to 16.

The AGM notice will be circulated to members
through their preferred communication
methods and will also be available to view on
the Group’s website.

A poll is conducted on each resolution at all
Company general meetings. All shareholders have
the opportunity to cast their votes in respect of
proposed resolutions by proxy, either electronically
or by post. Following the AGM, voting outcomes
are published and are made available on the
Group’s website.

Shareholders unable to attend the AGM can vote on
the business of the meeting either by post or online.

Employees at Good Energy

The Group’s employment policies follow best
practice based on equal opportunities for all
employees, irrespective of race, gender, nationality,
colour, sexual orientation, disability, marital status,
religion or age. All decisions relating to employment
are objective, free from bias and based upon work
criteria and individual merit. The Company operates
on the principle that a workplace where people’s
differences are valued creates a more productive,
innovative and effective organisation. Consultation
with employees or their representatives has
continued at all levels, with the aim of ensuring
that views are taken into account when decisions
are made that are likely to affect their interests and
that all employees are aware of the financial and
economic performance of the business.

Governance & Directors’ Report

Strategic ReportGovernance ReportFinancial StatementsGovernance ReportAudit & Risk Management Report

Overview

Risk control environment and internal audit

Good Energy recognises that effective risk
management is critical to enable it to meet its
strategic objectives.

The Company has an internal audit function led by
the Head of Internal Risk and Audit.

A summary of the key risks facing the Group is set
out in the Strategic Review.

The Board retains overall responsibility for the
Company’s risk management and internal controls
framework. While the Board reviews the suitability
of the internal controls annually, responsibility for
reviewing the effectiveness of internal controls
is delegated to the Audit and Risk Management
Committee which reviews this on an annual
basis. The system of internal controls is designed
effectively to manage, rather than eliminate, the risk
of failure to achieve business objectives.

Audit & Risk Management Committee

The members of the Audit and Risk Management
Committee are Rick Squires (Chair), John Maltby,
Emma Tinker and Tim Jones. Francesca Ecsery was
a member of the committee prior to her retirement
from the Board in December 2017.

John Maltby and Emma Tinker are considered to
have recent, relevant financial experience. The
Chief Executive and Chief Financial Officer attend
meetings of the Committee by invitation only.

The primary duty of the Audit and Risk Management
Committee is to oversee the accounting and
financial reporting process, the internal accounting
practices, external audit arrangements and
effectiveness of the Group’s risk management and
internal control system.

The Audit and Risk Management Committee also
meets at least annually with the Group’s external
auditors to review and agree the auditor services
being provided to the Group, including any non-
audit services. It also meets with external auditors,
without management being present, to discuss the
audit process.

The internal audit and risk function is responsible
for Good Energy’s risk management activities,
and internal audits. As such, its activities include
ensuring the regular review of internal controls
relating to key risks, reporting on risk events to
the Audit & Risk Management Committee and
reviewing and testing the effectiveness of internal
controls through audit reviews.

In 2015, Good Energy completed a Groupwide
upgrade of the control environment - the Group’s
Code of Conduct, a ‘Guiding Principles’ approach
that is appropriate for a fast-growing business.
This ensures everyone who works at Good
Energy reflects the Company’s ethos when
working together.

The Guiding Principles provide a framework
to empower Good Energy employees to make
informed decisions that are in the best interests
of the Company and its customers and other
stakeholders, reflect the environment in which
the Company operates, mitigate risk, and explain
where to get advice. The Guiding Principles
demonstrate the Group’s commitment to working
with honesty, respect and transparency. They
also include policies relating to, amongst other
things, customer service, data handling, health &
safety, approvals & authorities, procurement, and
corporate responsibility.

The Guiding Principles are refreshed annually and
the Group continues to evolve the way in which it
secures engagement from employees at all levels
across the organisation.

The internal audit and risk management function
aims to build on initiatives such as the Company’s
Guiding Principles, to enhance the control
environment. Reporting into the Audit and Risk
Management Committee, the function has carried
out audit activity to provide assurance that key
risks are being identified and mitigated, and
associated controls are operating effectively.

Going concern and viability

The Group and Board closely monitor and manage
liquidity. The Directors have taken account of
the current financial position of the Group, its
anticipated future performance and investment

Audit and non-audit fees

The Audit and Risk Management Committee
reviewed the remuneration received by
PricewaterhouseCoopers LLP for non-audit work
conducted during the year prior to their retirement
as auditor. Fees for non-audit work payable to
PricewaterhouseCoopers LLP were lower than the
audit fees payable prior to their retirement. For
further details regarding fees paid, see note 7 to the
financial statements on page 94.

The Audit & Risk Management Committee reviewed
the remuneration received by Ernst & Young LLP for
non-audit work conducted during the period as part
of assessing their suitability for appointment as the
Group’s auditors. Fees for non-audit work payable
to Ernst & Young LLP were nominal and related to
technical accounting advice in relation to disposals
of assets. For further details regarding fees paid, see
note 7 to the financial statements on page 94.

Whistleblowing Policy

The Group’s whistleblowing policy is supported by
a clear process and includes a secure, independent
and anonymous third party helpline, through which
any person, from employees to casual contract
workers, may raise concerns about wrong doing,
poor practices, risks or dangers in relation to the
Company’s business dealings or activities.

The Whistleblowing Policy is reviewed annually by
the Audit and Risk Management Committee. Any
whistleblowing incidents and their outcomes are
reported to the Committee. No reports were made
during 2017.

plans in assessing the Group’s going concern status.
Consideration has also been given to the net current
liabilities position as at 31 December 2017, as set out
on pages 70 to 71 and in note 2.3 to the Financial
Statements. The Directors consider that the Group
has adequate resources to continue in operation for
the foreseeable future and continue to adopt the
going concern basis in preparing the 2017 financial
statements. Further details on this can be found in
note 2.3 to the Financial Statements.

External Audit

Auditor appointment

The audit of the Group’s financial statements for the
period ended 31 December 2016 represented the
fifth year of audit by PricewaterhouseCoopers LLP.

The Group initiated a competitive tender process
for its audit work, overseen by the Audit & Risk
Management Committee. The tender process
included a mixture of participants including
smaller independent audit firms, Top 10 and Big 4
accountancy firms. The process completed during
the period and the Group appointed Ernst & Young
LLP as its auditors following the retirement of
PricewaterhouseCoopers LLP in September 2017.
A resolution to affirm the appointment of Ernst &
Young LLP as auditors will be proposed at the 2018
Annual General Meeting.

The Committee will consider whether to re-tender
the audit after a five year period, or earlier if
appropriate.

Auditor independence

The Audit and Risk Management Committee
monitors the Group’s safeguards against
compromising the objectivity and independence
of the external auditors. It annually reviews the
non-audit services provided to the Group and their
cost, and whether the auditors believe there are any
relationships that may affect their independence and
obtaining written confirmation from the auditors
that they are independent.

The Audit and Risk Management Committee has
also reviewed its policy for awarding non-audit work.

For the financial year ended 31 December 2017, the
Committee has conducted its review of the auditors’
independence and concluded that no conflict of
interest exists between Ernst & Young LLP audit
and non-audit work, and that their involvement in
non-audit matters was the most effective way of
conducting the Company’s business during the year.

Governance & Directors’ Report

Strategic ReportGovernance ReportFinancial StatementsGovernance ReportPrior to the production of this report, the Committee
recommended to the Board the redemption of Good
Energy Bonds I on 29 March 2018.

In response to feedback from bondholders who had
expressed a desire to continue to support the work
the Group does, the Committee recommended that
the Company offer holders of Good Energy Bonds
I the opportunity to continue their investment in
Good Energy Bonds I at an interest rate of 4.25%
per annum (4.50% effective for Good Energy
customers). Those continuing their investment will
be entitled to request repayment of their holding on
22 November 2019 or annually thereafter. All other
terms and conditions related to Good Energy Bonds
I will remain the same and investments in Good
Energy Bonds II will not be affected.

These arrangements were announced on 13
February 2018.

Over the course of 2018, the Committee expects
to review and consider proposals for realisation
of further value from the Company’s discontinued
development business, as well as investments in
projects and initiatives to accelerate the delivery of
the Group’s strategic ambitions. The Committee may
also be required to consider proposals related to the
Group’s property strategy.

Funding & Investment Committee Report

Establishment of the Commitee

To support the Company in delivering its strategic
objectives, particularly through a period of
transition and transformation of its business
activities, the Board established the Funding &
Investment Committee.

Overview

The purpose of the Committee is to oversee
strategic and transactional matters relevant to
the delivery and evolution of the Group’s strategy.
Areas such as funding requirements, capital
and significant investment decisions, corporate
transactions and evolving the Group’s investor
relations strategy are also a focus.

The members of the Funding & Investment
Committee are John Maltby (Chair), Emma Tinker
and Rick Squires together with the Chief Executive
and Chief Financial Officer.

Operations of the Committee

During the period, the Funding & Investment
Committee convened to discuss, consider and
recommend to the Board the following:

• the creation of Good Energy Bonds II through

which the Company raised £16.7m, including the
conversion of a number of investments in Good
Energy Bonds I to Good Energy Bonds II;

• investment in a pilot project for behind-the-

meter battery storage in partnership with The
Eden Project in Cornwall;

• the disposal of the Company’s solar farm at

Newton Downs into community ownership and
the execution of an agreement to dispose of
the Company’s solar farm at Brynwhilach into
community ownership;

Statutory and other information

General company information

trading on the Social Impact segment of the NEX
Growth Market since 5 January 2016.

Good Energy Group PLC is a public limited company
incorporated in the United Kingdom under the
Companies Act 1985.

Significant shareholders

At 31 December 2017, the following shareholders
had notified an interest exceeding 3% of the issued
ordinary share capital of the Company (excluding
Directors and their respective families as defined
in the AIM rules, details of which are set out on
page 42):

The Company’s registered office and principal
place of business is: Monkton Reach, Monkton Hill,
Chippenham, Wiltshire, SN15 1EE and the registered
number is 04000623.

Share capital

On 31 December 2017, 16,516,170 ordinary shares of
5p each were in issue. The Company is listed on the
Alternative Investment Market (AIM) of the London
Stock Exchange, is a founding member of the Social
Stock Exchange (SSE) and its shares have been

Shareholder

Number of shares

Ecotricity Group Limited

4,169,948

Schroder & Co

743,874

25.3%

4.5%

Share class rights

Ordinary shares

The full share class rights are set out in the
Company’s Articles of Association (Articles)
which are available at goodenergygroup.co.uk and
summarised below:

Each member has one vote for each ordinary share
held. Holders of ordinary shares are entitled to:
receive the Company’s Annual Report and Accounts;
attend and speak at general meetings of the
Company; appoint one or more proxies or, if they
are corporations, corporate representatives; and
exercise voting rights. Holders of ordinary shares
may receive a dividend in cash or ordinary shares
under the Company’s scrip dividend scheme and on
liquidation may share in the assets of the Company.

Shareholder agreements and consent requirements

There are no known arrangements under which
financial rights carried by any of the shares in the
Company are held by a person other than the holder
of the shares and no known agreements between
the holders of shares with restrictions on the
transfer of shares or exercise of voting rights.

Authority to issue shares

At the AGM in 2017, authority was given to the
Directors to allot new ordinary shares up to a
nominal value of £271,998, equivalent to one-
third of the issued share capital of the Company.
The Directors were also authorised to allot up to
two thirds of the total issued share capital of the
Company, but only in the case of a rights issue.

These authorities are valid until the AGM in 2018,
and the Directors propose to renew each of them at
that AGM.

The Board believes that these authorities will allow
the Company to retain flexibility to respond to
circumstances and opportunities as they arise.

Deadlines for exercising voting rights

Electronic and paper proxy appointments, and
voting instructions, must be received by the
company’s Registrar not less than 48 hours before a
general meeting.

Governance & Directors’ Report

Strategic ReportGovernance ReportFinancial StatementsGovernance ReportDividends

Details relating to the proposed 2017 final dividend
are set out in the Chairman’s Statement on page 6.

Directors

The names of the Directors who held office during
the year are set out on page 37.

Directors’ interests and their interests in the
Company’s shares1

The interests (all of which are beneficial unless
otherwise stated) of the Directors and their families
as defined in the AIM Rules in the issued share
capital of Good Energy Group plc are:

No. shares as
at 31 December
2017

%age of issued
share capital

No. shares as
at 31 December
2016

%age of issued
share capital

Current Directors

Juliet Davenport2

569,086

3.45

569,086

John Maltby

180,703

1.09

122,703

Rick Squires3

40,371

0.24

39,759

Denise Cockrem4

Emma Tinker5

Former Directors

2,684

1,484

0.02

0.01

2,703

1,461

Martin Edwards6

669,827

4.06

669,827

Francesca Ecsery7

3,380

0.02

3,328

3.45

0.74

0.24

0.02

0.01

4.06

0.02

1. Certain of the Directors hold share options as detailed on pages 56 and 57 within the Remuneration Report.

2. Juliet Davenport holds 524,810 Ordinary Shares in the Company in her own name. Her husband owns 43,000 Ordinary Shares. One daughter

owns 638 Ordinary Shares and Juliet Davenport holds a further 638 Ordinary Shares on behalf of another daughter.

3. Rick Squires holds 37,616 Ordinary Shares in his own name. His holding increased during the year as a result of participation in the scrip
dividend. Rick Squires’ wife holds 2,755 Ordinary Shares, an increase during the year as a result of participation in the scrip dividend.

4. 19 shares were deducted from Denise Cockrem’s online holding in settlement of commission/brokerage charges.

5. Emma Tinker’s holding increased during the year as a result of participation in the scrip dividend.

6. In addition to Martin Edwards personal holding, his father Peter Dixon Edwards holds 127,700 Ordinary Shares as trustee of a discretionary trust

under which Martin Edwards is one of the potential beneficiaries.

7. Francesca Ecsery’s holding increased during the year as a result of participation in the scrip dividend.

Financial instruments

The Group’s financial instruments include bank loans
and other borrowings, a corporate bond, overdraft
and revolving credit facilities.

The principal objective of these instruments is to
raise funds for general corporate purposes and
to manage financial risk. Further details of these
instruments are given in note 24 in the Financial
Statements.

Future developments & research

Details of future developments are given in the
Chief Executive’s Review within the Strategic
Review. Innovation is key to the future development
of the Group’s business propositions. The Group
does not incur material research and development
expenditure but does undertake selected research,
development and innovation projects which are
often grant-funded.

Referral Arrangements/ Political Donations

The Company has operated and continues to
operate referral arrangements with certain political
parties. It considers these to be commercial
arrangements, with a referral payment made for
each customer referred to Good Energy. However,
the Companies Act 2006 definitions of the making
of political donations or the incurring of political
expenditure are capable of a wide interpretation. In
the interests of transparency, the Company obtained
shareholder approval for the referral arrangements
at its Annual General Meetings in 2015, 2016 and
2017, and anticipates requesting that authorisation
be refreshed at the Annual General Meeting in 2018.

Impact on the environment

The Company is committed to reducing its
environmental impact and the carbon emissions
from its operations. ISO14001 accreditation was
achieved during the year, providing independent
confirmation that the Group meets international
standards for measuring and continually improving
environmental performance. The Company regularly
measures its Scope 1 and Scope 2 emissions and as
many indirect Scope 3 emissions as possible. Where
it is not yet possible to avoid or eliminate emissions,
these are neutralised through international carbon
reduction projects. More information can be found in
the Group’s progress report on its website.

Gender Pay

The Board welcomed the introduction in 2017 of
Gender Pay reporting. The Group has a strong
commitment to gender balance and equality at
all levels of the business. The Board is proud to
have just over 50% women within the business
overall. The Group’s mean pay gap for 2017 is 8%.

This is significantly lower than the UK average
and benchmarks within the energy industry. The
gap predominantly arises because the Group
currently employs more men than women in
middle management roles, particularly in Science,
Engineering, Technology and Maths (STEM) related
functions. The Group’s full Gender Pay Report, which
also details the actions initiated by the Board to
close the Group’s gender pay gap, is published on
its website.

Modern Slavery

Although the Group considers the inherent risk of
encountering issues of modern slavery within its
business, supply chains and strategic affiliations
to be low, it is nonetheless an issue that the Group
and the Board takes very seriously. The Group’s full
statement under section 54 of the Modern Slavery
Act 2015 for the period ended 31 December 2017 is
published on its website.

Related Party Transactions

Related party transactions are set out in note 32 in
the Financial statements.

Disclosure of Information to Auditors

So far as each Director is aware, there is no
relevant audit information of which the Company’s
auditors are unaware, and each Director has 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 Company’s auditors are aware of that
information. This confirmation is given, and should
be interpreted, in accordance with the provisions of
Section 418 of the Companies Act 2006.

Events after the Balance Sheet date

On 13 February 2018 the Company announced
the repayment of Good Energy Bonds I offering
bondholders the option to continue their investment
at a revised interest rate of 4.25%, or 4.50% for
customers of the Group. £3.6m of valid continuation
forms were received at the deadline date. On 29
March 2019, £4.2m will be repaid to Good Energy
Bonds I bondholders.

On 1 March 2018 a reorganisation of the Group’s
finance function was announced. As part of this
work, Denise Cockrem, Chief Financial Officer (CFO)
since 2014, identified that the Company does not
need a CFO in addition to a Finance Director, and
that her role could be made redundant. The Board
has accepted this proposal, and Denise will step
down as CFO and as a director of Good Energy from
the 31 March 2018.

Governance & Directors’ Report

Strategic ReportGovernance ReportFinancial StatementsGovernance ReportStatement of directors’ responsibilities in respect of the annual
report and the financial statements

The Directors submit their Annual Report and
Financial Statements (Annual Report and Accounts)
for Good Energy Group plc for the year ended 31
December 2017. The directors’ report required under
the Companies Act 2006 comprises this Governance
& Directors’ Report and the Remuneration Report.

Financial Reporting Standards (IFRSs) as adopted by
the European Union and parent company financial
statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the
European Union.

The Company is required to set out a fair review
of the Group’s activities and a description of the
principal risks and uncertainties facing the business
as detailed in the Strategic Report. This requirement
includes an analysis of the development and
performance of the Group’s business during the
financial year, and the position of the Group at the
end of the reporting period consistent with its size
and complexity.

The Directors are responsible for preparing the
Annual Report and Accounts in accordance with
applicable law and regulation, including company
law which requires the Directors to prepare financial
statements for each financial year. Under company
law the 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 parent company and of the profit or loss of the
Group and parent 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 IFRSs as adopted by
the European Union have been followed for
the Group financial statements and IFRSs as
adopted by the European Union have been
followed for the Company financial statements,
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 parent company
will continue in business.

The Directors have prepared the Group financial
statements in accordance with International

The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group and parent company’s transactions
and disclose with reasonable accuracy at any time the
financial position of the Group and parent company.
These records must also enable them to ensure that
the financial statements comply with the Companies
Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.

The Directors are also responsible for safeguarding
the assets of the Group and parent company and
must take reasonable steps for the prevention and
detection of fraud and other irregularities.

The Directors of the ultimate parent company are
responsible for the maintenance and integrity of the
ultimate parent company’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.

The Directors consider that the Annual Report
and Accounts, taken as a whole, is fair, balanced
and understandable and provides the information
necessary for shareholders to assess the Group and
parent company’s performance, business model
and strategy.

Each of the Directors, whose names and functions are
listed in the Directors’ report confirm that, to the best
of their knowledge:

• the parent company financial statements, which
have been prepared in accordance with IFRSs as
adopted by the European Union, give a true and
fair view of the assets, liabilities, financial position
and result of the Company;

• the Group financial statements, which have been
prepared in accordance with IFRSs as adopted by
the European Union, give a true and fair view of
the assets, liabilities, financial position and profit
of the Group; and

• the Annual Report and Accounts includes a fair
review of the development and performance of
the business and the position of the Group and
parent company, together with a description of
the principal risks and uncertainties.

In the case of each Director in office at the date the
Governance Report is approved:

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

relevant audit information of which the Group
and parent company’s auditors are 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
and parent company’s auditors are aware of
that information.

The Annual Report and Accounts, including the
Strategic Report, Governance & Directors’ Report,
Remuneration Report and Financial Statements,
have been prepared and approved by the Board and
are published in accordance with, and with reliance
on, applicable English company law. The liabilities
of Directors in relation to the Annual Report
and Accounts are subject to the limitations and
restrictions provided by such law.

Stephen Rosser

Company Secretary
11 April 2018

Governance & Directors’ Report

Strategic ReportGovernance ReportFinancial StatementsGovernance ReportRemuneration & Nomination Report

Overview

Good Energy operates on the principle that a
workplace where people’s differences are valued
creates a more productive, innovative and effective
organisation. The Company also recognises that
attracting, retaining and incentivising key talent is
integral to its ability to meet its strategic objectives.

The Board retains overall responsibility for
the Company’s people and reward strategies.
While the Board reviews the suitability of these
strategies annually, responsibility for reviewing the
effectiveness of these strategies and underlying
plans is delegated to the Nominations
& Remuneration Committee.

The Nominations & Remuneration Committee

The members of the Nominations and Remuneration
Committee are Emma Tinker (Chair), John Maltby
and Tim Jones. Francesca Ecsery and Martin
Edwards were both members of the committee prior
to their retirement from the Board.

The primary duties of the Nominations &
Remuneration Committee are to:

• review the structure, size and composition of
the Board and its Committees to ensure that
they remain appropriate

• ensure that there is a formal, rigorous and

transparent process for the appointment of
new Directors to the Board

• to consider and develop succession plans

appropriate for the Group

• determine the Group’s approach to the

remuneration of the Executive Directors and
senior managers of the Group, on behalf of
the Board;

The functions of a nominations committee were
introduced to the pre-existing Remuneration
Committee during 2016 following the 2015 Board
evaluation. During the period, the Board received
and considered proposals to separate the functions
into a more traditional structure comprising two
separate committees. Given the inherent overlaps
between the functions of separately constituted
nominations and remunerations committees and
the expected composition of those committees
in the near to medium term, the Board concluded
that it remained appropriate for the functions to
be combined within a single committee. The Board
agreed that this would be reviewed periodically.

Nominations

The Committee will keep under review the
composition of the Board, the mix of skills and
experience of the Directors and the needs of the
business, having due consideration for the benefits
of diversity, and support the Group in developing
appropriate succession plans to meet its needs.
The Board remains focussed on gender diversity
across the organisation and notes that women and
men were equally represented at both Board and
Executive level during the period.

The Committee is responsible for reviewing the
time commitments of each Director both prior to
all appointments and annually, as part of the Board
Evaluation process, to ensure that all Directors
devote sufficient time to the Company to discharge
their duties effectively.

During the period, the Nominations Committee:

• received and considered proposals from

Ecotricity Group Limited to appoint two of its
executives as directors of the Company;

• oversaw the recruitment, appointment and

induction of Tim Jones; and

• conduct an annual appraisal of the performance

• recommended to the Board that a Senior

of the Chief Executive

• assess Company performance against

performance targets within reward schemes.

Indepdent Director be appointed and, following
the Board’s approval of that recommendation,
initiated the Company’s search for appropriate
candidates.

No Director may be involved in any decisions as to
their own remuneration.

Remuneration

The Nominations & Remuneration Committee also
oversees the group-wide remuneration strategy,
particularly with respect to diversity, inclusion and
gender pay.

Information about the remuneration of the Directors
of the Company for the year ended 31 December
2017 is set out in the following section. This report
is unaudited and has been prepared in accordance
with the requirements for AIM listed companies set
out in the Companies Act 2006 and the AIM rules.

Service agreements, notice periods and
termination payments

The service agreements for the Executive Directors
are not for a fixed term and may in normal
circumstances be terminated on the notice periods
listed on the following page.

The remuneration of the Chairman of the Company
and the Non-Executive Directors consists of fees
that are paid monthly in arrears.

The Chairman and the Non-Executive Directors did
not participate in any bonus scheme or long-term
incentive reward schemes, nor did they accrue any
pension entitlement during the period. Following
the publication in August 2015 of HMRC’s express
confirmation of the travel rules that apply to Non-
Executive Directors, the Company reimburses Non-
Executive Directors’ travel expenses between home
and the Company’s Head Office. The key terms of
the Non-Executives Directors’ appointments are set
out in the table on the following page.

The Group reviewed Non-Executive Director fees
and concluded that the existing annual fees and
structure remain appropriate. The fee for each Non-
Executive Director is £25,000, with an additional fee
of £5,000 for those that chair a committee. The fee
payable to the Chairman is £45,000.

Executive salaries were also benchmarked during
the year against AIM company data, adjusted to
reflect the size of the Company. Juliet Davenport’s
salary was increased by 4% as a result, which
increase was broadly in line with pay rises across
the Group. Following the review, Denise Cockrem’s
salary was increased by 7.1%.

Following a review of the Company’s remuneration
policy during 2015 and 2016, the Group replaced
the previous bonus and share-based incentive
schemes with new schemes that align with current
best practice. These are designed to motivate
and incentivise key talent to assist the Group in
achieving its strategic aims.

The Group appointed PricewaterhouseCoopers LLP
as external remuneration consultant to assist with
the review of the Company’s remuneration policy
and the implementation of a new share-based
incentive scheme for Executive Directors. During
2016, the Company consulted with its largest ten
shareholders with regard to the implementation of:

• a revised Annual Bonus Plan that encompasses

both financial and non-financial annual
performance targets, details of which are set out
on pages 54 and 55, and

• a new Performance Share Plan for Executive

Directors and members of the senior
management team, details of which are set out
on pages 55 and 56.

No changes have been made to the operation of
these schemes during the period.

Remuneration Policy

Details of the Company’s Nominations &
Remuneration Committee are set out on page 50.

The Nominations & Remuneration Committee
has designed and adopted a remuneration policy
to ensure that the Company is able to attract,
retain and motivate its Executive Directors and
senior management.

The Group operates in a competitive environment.
It therefore sets out to provide competitive
remuneration to all of its employees, appropriate to
the business environment, geographical location and
strategic aims of the Company.

The Group aims to align the interests of shareholders
with those of Executive Directors and senior
management by giving the latter the opportunity to
build up a shareholding interest in the Company.

Remuneration & Nomination Report

Strategic ReportGovernance ReportFinancial StatementsGovernance ReportName

Position

Date of contract

Notice period

Annual Salary /
Fee (£)

Executive Directors

Juliet Davenport

Chief Executive

02 August 2007

9 months

208,000

Denise Cockrem

Chief Financial Officer 22 January 2014

6 months

195,000

Non-Executive Directors

John Maltby

15 October 2012

Rick Squires

28 June 2011

Emma Tinker

02 September 2016

Tim Jones

01 December 2017

45,000

30,000

25,000

Former Directors

David Brooks

2 September 2016

175,000

Martin Edwards
(Non-Executive)

Francesca Ecsery
(Non-Executive)

7 May 2008

15 November 2012

25,000

Salaries/Fees, annual bonus and benefits

Name

Salary/fee
2017 (£)

Pension
2017 (£)

Benefits in Kind
2017 (£)

Annual Bonus
2017 (£)

Total
2017 (£)

Total
2016 (£)

Executive Directors

Juliet Davenport

207,358

25,750

19,046

40,0001

292,154

278,914

Denise Cockrem

191,750

19,175

11,862

36,4001

259,187

252,742

David Brooks2

151,763

12,677

7,449

171,889

80,209

Total

550,871

57,602

38,357

76,400

723,230

611,865

Non-Executive
Directors

John Maltby

45,000

Rick Squires

30,000

Martin Edwards3

11,780

Francesca Ecsery4

23,288

Emma Tinker5

31,800

Tim Jones6

2,083

Total

143,951

45,000

43,950

30,000

29,513

11,780

24,750

23,288

23,977

31,800

21,000

2,083

143,951

143,190

Overall total

694,822

57,602

38,357

76,400

867,181

755,055

1. As previoulsy reported, bonuses of £40,000 and £36,400 were paid during the year to Juliet Davenport and Denise Cockrem respectively

following the sale of a solar farm which commenced in 2016 but completed in early 2017.

2. Pro-rata for the period of directorship. Left the Board effective 7 April 2017. Of the £151,763 Salary/fee figure, £97,917 relates to compensation

for loss of office.

3. Pro-rata for the period of directorship. Retired from the Board effective 21 June 2017

4. Pro-rata for the period of directorship. Retired from the Board effective 6 December 2017

5. Includes an additional fee for work carried out by Emma Tinker to assists the Corporate Finance team with asset funding options

6. Pro-rata for the period of directorship. Joined the Board effective 6 December 2017

Remuneration & Nomination Report

Strategic ReportGovernance ReportFinancial StatementsGovernance ReportAnnual Bonus scheme

Operation of the scheme

No changes were made to the operation of the
bonus scheme during the period. All bonuses
under the bonus scheme are individually
capped. A maximum potential bonus of 75% of
Executive Directors’ salary is payable in relation
to the Company’s performance against four key
performance metrics. The performance metrics
and their relative weightings are shown in the
table below.

Maximum bonus will only be payable in the event
that stretch targets for all four of these performance
metrics are met. Performance against the targets
is measured on a sliding scale basis between the
achievement of threshold, on-target and stretch
targets, starting with one third of the potential
bonus being payable where threshold targets are
met. No bonus will be payable unless the Group’s

profit before tax meets the threshold targets unless
the Nominations & Remuneration Committee, in its
discretion, determines otherwise.

The Nominations & Remuneration Committee
also retains discretion, under the bonus scheme
rules, to adjust any payments in line with
individual performance.

Individual performance targets are set annually
and reviewed at the end of the relevant financial
year, and annual targets for each of the four
Company performance metrics will be set by the
Remuneration Committee.

The Group considers that the targets for 2018
are commercially sensitive and are not therefore
disclosed. However, retrospective disclosure of
performance against targets for the year ending 31
December 2017 is provided opposite.

Measure

Strategic objective

Weighting

Group profit before tax

Deliver profit growth

60%

Absolute net promoter score

Maintain customer satisfaction ratings

20%

Employee engagement

Attract and retain employees with the right
skills, knowledge and mind-set to help
deliver the Company’s growth plans

10%

Corporate CO2 reduction

Help to reduce carbon emissions

10%

2017 targets and performance

The Group’s performance against targets and actual
outturn for the financial year ended 31 December
2017 are set out in the table below.

The Group profit before tax was below threshold
for 2017 and accordingly no bonus is payable for
the period.

As reported in 2017, a bonus of £0.4m was paid in
the year in respect of 2016 performance following
the successful conclusion of the sale of a solar
farm which commenced in 2016 and completed in
early 2017. The in-year profit contribution from the
relevant disposal was discounted for the purposes of
the 2017 bonus calculation.

Measure

2017 outturn

2016 outturn

2017 performance
against target

Profit before tax

£(3.3)m

£1.4m

Below threshold

NPS

Not measured

N/A

Employee engagement

73%

82%

Below threshold

Corporate CO2
reduction

ISO 14001 achieved.
Emissions neutralised
wherever possible.

Set baseline for carbon
footprint of operations

Threshold

Performance Share Plan (“PSP”)

Operation of the scheme

The existing scheme was implemented during
2016 following advice from external remuneration
consultants and in consultation with the Company’s
ten largest shareholders. It is designed to enhance
alignment between Executive Directors and
shareholders, and better reflect current market
practice, including the addition of performance
conditions for the vesting of awards, which are
described in more detail below, where previously
there were none.

The usual policy is to grant awards to Executive
Directors over shares worth up to 50% of salary at
the time of grant. The maximum limit of an award
to any individual under the PSP in any financial
year would be 100% of annual salary, subject to the
Remuneration Committee’s discretion to increase to
150% of salary in exceptional circumstances.

Awards granted under the scheme shall vest three
years from the date of grant, subject to continued
employment and satisfaction of performance criteria
measured over a three year period.

Performance against targets is measured on a sliding
scale, with 20% of the relevant part of the award
vesting at threshold level, 50% vesting for on-target
performance through to 100% vesting for achieving
stretch targets. No award will vest unless Total
Shareholder Return is positive over the three year
measurement period.

The Nominations & Remuneration Committee may,
at any time up to and including vesting, reduce
the vesting level of awards where there has been,
amongst other things, a material mis-statement in
the accounts, an error in any information on which
performance targets were based, gross misconduct or
fraud by the employee.

Performance targets

The performance metrics and their relative weightings
for the 2017 grant of awards are shown in the table
below. The Group considers the targets themselves to
be commercially sensitive and these are not therefore
disclosed. However, retrospective disclosure of
performance against targets will be provided at the
end of the relevant measurement period.

Remuneration & Nomination Report

Strategic ReportGovernance ReportFinancial StatementsGovernance ReportMeasure

Strategic objective

Weighting

Earnings per share

Drive shareholder value

60%

Relative net promoter score
(relative to ‘Big 6’ energy
companies)

Maintain higher customer
satisfaction rating than ‘Big 6’
energy firms

20%

Customer CO2 reduction

Ensure long term sustainability of
our own operations

20%

Directors’ share options

Details of the Directors’ share options outstanding
at 31 December 2017 are shown below.

Name

Date option
granted

Number
of options
outstanding as
at 31 December
2017

Option
price

Exercised
during period

Cancelled/
surrendered
during period

Juliet Davenport

01/06/2004

35,000

£0.75

13/02/2012

86,956

£1.15

13/02/2012

17,390

£1.15

18/09/2012

189,052

£0.50

13/07/2013

144,000

£1.25

07/07/20151

80,350

£0

22/04/2016

88,496

£0.05

10/05/2017

42,363

£0.05

Sub-total

683,607

1. These awards vested 2 years from the date of grant. The Remuneration Committee resolved to grant the awards during the summer of 2014

but the awards were not made until July 2015 as a result of close periods and changes in the company secretariat function.

Name

Date option
granted

Number
of options
outstanding as
at 31 December
2017

Option
price

Exercised
during period

Cancelled/
surrendered
during period

Denise Cockrem

07/07/20151

21,822

£0

07/07/20151

200,000

£2.285

22/04/2016

80,531

£0.05

10/05/2017

39,715

£0.05

Sub-total

342,068

David Brooks

15/10/2015

100,000

£2.265

22/04/2016

38,717

£0.05

Sub-total

Rick Squires

13/02/2012

75,000

£1.15

Sub-total

75,000

100,000

38,717

1. These awards vested 2 years from the date of grant. The Remuneration Committee resolved to grant the awards during the summer of 2014

but the awards were not made until July 2015 as a result of close periods and changes in the company secretariat function.

Emma Tinker

Chair of Nominations and
Remuneration Committee
11 April 2018

Remuneration & Nomination Report

Strategic ReportGovernance ReportFinancial StatementsGovernance ReportIndependent auditors’ report to the members of
Good Energy Group PLC

Opinion

In our opinion:

• Good Energy Group plc’s group financial
statements and parent company financial
statements (the “financial statements”) give a
true and fair view of the state of the group’s
and of the parent company’s affairs as at 31
December 2017 and of the group’s loss for the
year then ended;

• the group financial statements have been

properly prepared in accordance with IFRSs as
adopted by the European Union;

• the parent company financial statements have
been properly prepared in accordance with
IFRSs as adopted by the European Union and as
applied in accordance with the provisions of the
Companies Act 2006; and

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

We have audited the financial statements of Good
Energy Group plc which comprise:

Group

Parent company

Consolidated Statement of Financial Position as at
31 December 2017

Parent Company Statement of Financial Position as
at 31 December 2017

Consolidated Statement of Comprehensive
Income for the year then ended

Consolidated Statement of Changes in Equity for
the year then ended

Parent Company Statement of Changes in Equity for
the year then ended

Consolidated Statement of Cash Flows for the
year then ended

Parent Company Statement of Cash Flows for the
year then ended

Related notes 1 to 35 to the financial statements,
including a summary of significant accounting
policies

The financial reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards to
the parent company financial statements, as applied in accordance with the provisions of the Companies
Act 2006.

Basis for opinion

We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities
under those standards are further described in
the Auditor’s responsibilities for the audit of the
financial statements section of our report below. We
are independent of the group and parent company
in accordance with the ethical requirements that
are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard as
applied to listed entities, and we have fulfilled our
other ethical responsibilities in accordance with
these requirements.

We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a
basis for our opinion.

Use of our report

This report is made solely to the company’s
members, as a body, in accordance with Chapter 3
of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state
to the company’s members those matters we are

required to state to them in an auditor’s report and
for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to
anyone other than the company and the company’s
members as a body, for our audit work, for this
report, or for the opinions we have formed.

Conclusions relating to going concern

We have nothing to report in respect of the
following matters in relation to which the ISAs (UK)
require us to report to you where:

• the directors’ use of the going concern basis of
accounting in the preparation of the financial
statements is not appropriate; or

• the directors have not disclosed in the financial
statements any identified material uncertainties
that may cast significant doubt about the
group’s or the parent company’s ability to
continue to adopt the going concern basis of
accounting for a period of at least twelve months
from the date when the financial statements are
authorised for issue.

Overview of our audit approach

Key audit matters

• Revenue recognition, specifically the estimated unbilled income
• Revenue recognition - non-metered revenue streams
• Valuation of the provision for doubtful debts
• Valuation of generation WIP and classification as discontinued operations

Audit scope

• We performed an audit of the full financial information of 3 components and

audit procedures on specific balances for a further 3 components.

• The net loss of the Group is split between 4 profit making entities of £4.1m
and 10 loss making entities of £6.8m. We performed procedures on 2 full
scope components and 1 specific scope component which accounted for 92%
of the profit making entities and procedures on 1 full scope component and
2 specific scope components which accounted for 73% of the loss making
entities.

• The components where we performed full or specific audit procedures

accounted for 97% of Revenue and over 63% of Total assets.

Materiality

• Overall group materiality of £0.8m which represents 0.8% of revenues.

Independent Auditors’ Report

Strategic ReportGovernance ReportFinancial StatementsGovernance ReportKey audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our
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) that we identified. These matters included 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 were addressed in the context of our audit of the
financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on
these matters.

Key observations
communicated to the
Audit Committee

We did not identify material
errors in the unbilled income
report, nor evidence of
management manipulation of
revenue within this report.

We concluded that the
basis of calculation of the
unbilled income accrual is
appropriate. We conclude that
management’s assumptions in
respect of customer demand
are within an acceptable range.

Risk

Our response to the risk

Revenue recognition,
specifically the estimated
unbilled income (£16.2m ,
PY comparative £13.3m)

Refer to our Audit
Committee Report;
Accounting policies (page
79); and Note 19 of the
Consolidated Financial
Statements (page 107)

The Group’s material
revenue streams relate to
the provision of gas and
electricity services.

This risk over revenue
recognition specifically
arises in income from
metered services which
requires an estimation of
the amount of unbilled
charges at the year end.
This is calculated using
a combination of system
generated information,
based on previous customer
volume usage, together with
management judgements
as to the likely impact on
usage of factors such as
seasonal variations.

Our procedures included:

• We obtained an understanding of

the process for the supply of gas and
electric services, meter reading and
related billing in order to challenge
the completeness of adjustments
to reflect the accrual or deferral
of revenue.

• We assessed the design of key

controls linked to system generated
information relating to the estimation
process for measured revenue.

• We tested the inputs into the billing
system, including meter reads, tariffs
and estimated average consumption.
This was to ensure that calculated
bills and the resultant revenues
reflected accurate contract agreed
prices and usage.

• We compared the accrued income to
bills raised post year end for a sample
of customers to confirm the accuracy
of the estimated usage and revenue
recorded.

• We corroborated the key assumptions
made by management in recognising
revenue, by obtaining internal and
external data on demand.

• We tested whether revenue was
recognised in the correct period.

• We performed analytical procedures
by comparing revenue balances for
the year against expectation from
industry consumption data and
obtaining support for significant
variances against that data.

Risk

Our response to the risk

Key observations
communicated to the
Audit Committee

We did not identify
material errors in the
revenue calculations for FIT
administration, ROCs and
generation development.

Based on the results of our
audit procedures performed
we considered that the
accounting treatment of
transactions is appropriate
and that revenue had been
recognised appropriately.

The risk has increased in
the current year due to the
implementation of a new
billing system in January
2017 which caused delays in
raising bills throughout the
year. Due to a reduction in
the number of bills raised,
the estimated income is
based on a longer time
period which is subject
to increased exposure to
fluctuations in underlying
data.

Revenue recognition – non-
metered revenue streams
(£9.2m, PY comparative
£10.8m)

Refer to the Audit
Committee Report (page
10); Accounting policies
(page 79); and Note 6 of
the Consolidated Financial
Statements (page 91)

Good Energy generates
revenue from Feed-in
Tariff (FIT) administration
services, FIT revenues,
Renewable Obligation
Certificates (ROCs) and
Power Generation.

Although the revenue
recognition process is not
complex, it is a manual
process and open to
manipulation through
the use of manual journal
entries.

We consider that there
is an opportunity for
management to override
controls around the
recording of revenue that
otherwise appear to be
operating effectively.

• In performing our journal testing, we
paid increased attention to entries
impacting revenue focusing on non-
system postings and those raised in
the last two weeks of the year.

We performed full scope audit procedures
over this risk area in 2 locations, which
covered 100% of the risk amount.

Our procedures included:

• We performed a walkthrough of the
process for non-metered revenue
streams and assessed the design
of key controls linked to these
revenue streams.

• We re-calculated revenue by obtaining
the inputs to the calculation from third
parties and signed agreements.

• We performed a review of year on
year movements to validate the
completeness and existence of
revenue that was calculated based
on the third party data.

• By assessing the completeness

of journal data, and agreeing the
closing position to the audited trial
balance, we ensured that any manual
adjustments to revenue included in the
revenue number were in line with our
assessment based on third party data.

• In performing our journal testing, we
paid increased attention to entries
impacting revenue focusing on non-
system postings and those raised in
the last two weeks of the year.

We performed full scope and specific
scope audit procedures over this risk area
in 4 locations, which covered 57% of the
risk amount. We also performed specified
procedures over the non-metered revenue
in 9 locations, which covered 42% of the
risk amount.

Independent Auditors’ Report

Strategic ReportGovernance ReportFinancial StatementsGovernance ReportKey observations
communicated to the
Audit Committee

We assessed management’s
judgments, including the
additional provision relating to
the unbilled income accrual as
a result of the implementation
of the new system.

We concluded that the
doubtful debt provision is
within an acceptable range
and reflects recent history
of collection of outstanding
debts.

Risk

Our response to the risk

Provision for
doubtful debts

Our procedures included:

Refer to the Audit
Committee Report (page
12); note 4.4 (page 90); and
Note 19 of the Financial
Statements (page 107)

As shown in note 19, there is
a provision of £4.5m (2016:
£3.9m) at the yearend
against gross amounts
receivable from customers
of £33.5m (2016: £17.6m).

The provision is calculated
using information provided
by their debt collector and
management’s judgement
of the future likely recovery
rates.

There is a risk that the
assumptions used by
management in calculating
the bad debt provision
may be susceptible to
management bias and the
valuation of the provision
against trade receivables
and unbilled income may
be misstated. There
is an increased risk of
unrecoverable debt in
unbilled income due to
delays in bills being raised
throughout the year.

• We performed a walkthrough of the
process for calculating the bad debt
provision and assessed the design
effectiveness of key controls.

• We tested the operating effectiveness
of key controls over the integrity
of data and the report utilised
to generate the ageing and
categorisation of debt within the
Company’s billing system.

• We corroborated assumptions made
by management on collection rates
and performed sensitivity analysis
on the impact of these rates on
the provision

• We formed a view that the

assumptions made by management
on collection rates were within our
expected range by agreeing to third
party confirmations over the rates
used and performed sensitivity
analysis on the impact of these rates
on the provision.

• We performed analysis against
debt held at year end compared
to cash collected post year end
disaggregated into the categorisation
of customers used by management in
the provision calculation to assess the
reasonableness of provisioning rates.

• We tested the appropriateness of
journal entries and adjustments
impacting the doubtful debt provision
in the particularly those raised close to
the balance sheet date.

We performed full scope audit procedures
over this risk area in 2 locations, which
covered 100% of the risk amount.

Key observations
communicated to the
Audit Committee

Good Energy are discontinuing
their Generation Development
segmental activities and
therefore the assets are
considered more susceptible to
impairment factors.

An impairment of £3.6m was
recorded by management to
reflect the impairment of three
sites to reduce carrying value
to the net realisable value of
assets held.

Based on the results of our
procedures performed over the
valuation of WIP, we concluded
that the impairment recorded
and remaining valuation of
generation WIP is fairly stated.

We confirmed that the
disclosures within note 5 met
the conditions of IFRS 5 Non-
current Assets Held for Sale and
Discontinuing Operations and
IFRS 8 Segmental Reporting.

Risk

Our response to the risk

Our procedures included:

• We performed a walkthrough of the
process for valuation of generation
WIP and assessed the design
effectiveness of key controls.

• We assessed the status of planning
permission and the impact of the
changing environment conditions
on all significant projects and
considered whether these provided
indicators of impairment.

• Where impairment indicators

were identified, we have verified
the valuation models and other
supporting documentation prepared
by management in their assessment
of fair value.

• We have assessed whether the

material projects met the criteria of
being held for sale at the year end
by reviewing board discussions
and sale activity.

• We reviewed account activity
and 100% of the entire journal
entry population using our data
analytics tools to look for unusual
transactions.

We performed specific scope audit
procedures over this risk area in 1
location, which covered 100% of the
risk amount.

Valuation of generation
WIP (£6.2m, PY
comparative £6.9m)
and classification as
discontinued operations

Refer to the Audit
Committee Report (page
13); note 4.5 (page 90);
and Note 5 and 18 of the
Financial Statements (page
91 & 106)

There is a risk that the
generation assets recorded
as WIP are overvalued and
should be impaired due
to the presence of
external factors.

Good Energy has historically
developed their own
generation sites, sourcing
the location, applying
for planning permission
and building the site for
renewable electricity
generation.

There have been changes
in recent times in the
generation environment;
with the government
changing their position
on climate change
incentives, many of the
subsidies that were put in
place to support building
renewable generation
sites have altered, with
ROC accreditation for new
sites being halted and the
changes to FiT scheme
making this less attractive.

The Group has also
discontinued their
Generation Development
activities and are exploring
options to achieve net
realisable value of
assets held.

Independent Auditors’ Report

Strategic ReportGovernance ReportFinancial StatementsGovernance ReportAn overview of the scope of our audit

Tailoring the scope

Our assessment of audit risk, our evaluation of
materiality and our allocation of performance
materiality determine our audit scope for each
entity within the Group. Taken together, this enables
us to form an opinion on the consolidated financial
statements. We take into account size, risk profile,
the organisation of the group and effectiveness of
group wide controls and changes in the business
environment when assessing the level of work to be
performed at each entity.

In assessing the risk of material misstatement to
the Group financial statements, and to ensure we
had adequate quantitative coverage of significant
accounts in the financial statements, of the 16
reporting components of the Group, we selected
6 components covering entities all within UK,
which represent the principal business units
within the Group.

Of the 6 components selected, we performed an
audit of the complete financial information of 3
components (“full scope components”) which were
selected based on their size or risk characteristics.
For the remaining 3 components (“specific scope
components”), we performed audit procedures
on specific accounts within that component that
we considered had the potential for the greatest
impact on the significant accounts in the financial
statements either because of the size of these
accounts or their risk profile.

The net profit of the Group is split between 4 profit
making entities of £4.1m and 10 loss making entities

of £6.8m. We performed procedures on 2 full scope
components and 1 specific scope component which
accounted for 92% of the profit and procedures
on 1 full scope component and 2 specific scope
components which accounted for 73% of the loss
making entities.

The reporting components where we performed
audit procedures accounted for 97% of the Group’s
Revenue used to calculate materiality and 63% of
the Group’s Total assets. For the current year, the full
scope components contributed 95% of the Group’s
Revenue used to calculate materiality and 8% of the
Group’s Total assets. The specific scope component
contributed 1% of the Group’s Revenue used to
calculate materiality and 55% of the Group’s Total
assets. The audit scope of these components may
not have included testing of all significant accounts
of the component but will have contributed to the
coverage of significant tested for the Group.

We also instructed 9 components to perform
specified procedures over certain aspects of WIP
valuation and generation revenue, as described in
the Risk section above.

The remaining 1 component represents 4% of
the Group’s revenue. For this component, we
performed other procedures, including analytical
review to respond to any potential risks of material
misstatement to the Group financial statements.

The charts below illustrate the coverage obtained
from the work performed by our audit teams.

Involvement with component teams

Performance materiality

All audit work performed for the purposes of the
audit was undertaken by the Group audit team.

Our application of materiality

We apply the concept of materiality in planning
and performing the audit, in evaluating the effect of
identified misstatements on the audit and in forming
our audit opinion.

Materiality

The magnitude of an omission or misstatement that,
individually or in the aggregate, could reasonably
be expected to influence the economic decisions
of the users of the financial statements. Materiality
provides a basis for determining the nature and
extent of our audit procedures.

We determined materiality for the Group to be £0.8
million, which is 0.8% of Revenue. Up until 2016,
Good Energy had a focus on revenue growth as
their main strategic objective, during this time their
profitability was fluctuating significantly. The Group
has recently changed their focus to sustainable
profit growth, however historically this basis for
this company has not been consistent and reliable.
Furthermore, with the previous objectives of the
company, and the use of revenue growth as a KPI in
the Annual Report it is likely that users will also still
consider this a KPI. On reviewing analyst reports,
revenue is one of the key focuses for the Group
along with EPS. Hence we have concluded that
revenue provides the most appropriate financial
measure that is responsive to the main value driver
for the shareholders of Good Energy Group plc. This
is also consistent with the prior year audit.

We determined materiality for the Parent Company
to be £0.3 million, which is 1.6% of Equity.

During the course of our audit, we reassessed
initial materiality and to update it to reflect actual
Revenue, having based our initial materiality on
forecast Revenue.

In the prior year audit, PricewaterhouseCoopers LLP
adopted a materiality of £0.9 million based on 1%
of revenues.

The application of materiality at the individual
account or balance level. It is set at an amount to
reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected
misstatements exceeds materiality.

On the basis of our risk assessments, together
with our assessment of the Group’s overall control
environment, our judgement was that performance
materiality was 50% of our planning materiality,
namely £0.4m. We have set performance materiality
at this percentage as our expectation, based on our
understanding of the Group and the past history
of misstatements, is that the likelihood of material
misstatement is higher.

Audit work at component locations for the purpose
of obtaining audit coverage over significant financial
statement accounts is undertaken based on a
percentage of total performance materiality. The
performance materiality set for each component
is based on the relative scale and risk of the
component to the Group as a whole and our
assessment of the risk of misstatement at that
component. In the current year, the range of
performance materiality allocated to components
was £0.08m to £0.3m.

Reporting threshold

An amount below which identified misstatements
are considered as being clearly trivial.

We agreed with the Audit Committee that we would
report to them all uncorrected audit differences in
excess of £0.04m, which is set at 5% of planning
materiality, as well as differences below that
threshold that, in our view, warranted reporting on
qualitative grounds.

We evaluate any uncorrected misstatements against
both the quantitative measures of materiality
discussed above and in light of other relevant
qualitative considerations in forming our opinion.

Independent Auditors’ Report

Strategic ReportGovernance ReportFinancial StatementsGovernance ReportOther information

The other information comprises the information
included in the Annual Report set out on pages
1 - 57, other than the financial statements and
our auditor’s report thereon. The directors are
responsible for the other information.

Our opinion on the financial statements does not
cover the other information and, except to the
extent otherwise explicitly stated in this report,
we do not express any form of assurance
conclusion 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 such material
inconsistencies or apparent material misstatements,
we are required to determine whether there is a
material misstatement in 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 the other
information, we are required to report that fact.

Matters on which we are required to report
by exception

In the light of the knowledge and understanding
of the group and the parent company and its
environment obtained in the course of the audit, we
have not identified material misstatements in the
strategic report or directors’ report.

We have nothing to report in respect of the
following matters in relation to which the
Companies Act 2006 requires us to report to you
if, in our opinion:

• adequate accounting records have not been kept
by the parent company, or returns adequate for
our audit have not been received from branches
not visited by us; or

• the parent company financial statements are not
in agreement with the accounting records and
returns; or

• certain disclosures of directors’ remuneration

specified by law are not made; or

• we have not received all the information and

explanations we require for our audit

We have nothing to report in this regard.

Responsibilities of directors

Opinions on other matters prescribed by the
Companies Act 2006

In our opinion, based on the work undertaken in the
course of the audit:

• the information given in the strategic report and
the directors’ report for the financial year for
which the financial statements are prepared is
consistent with the financial statements; and

• the strategic report and directors’ report have
been prepared in accordance with applicable
legal requirements.

As explained more fully in the directors’
responsibilities statement set out on page 44, the
directors are responsible for the preparation of the
financial statements and for being satisfied that
they give a true and fair view, and for such internal
control as the directors 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 and parent
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 parent company or to
cease operations, or have no realistic alternative but
to do so.

Auditor’s 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 auditor’s 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.

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

Financial Reporting Council’s website at https://
www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.

John Howarth
(Senior Statutory Auditor)

for and on behalf of Ernst & Young LLP, Statutory
Auditor
Bristol
11 April 2018

Independent Auditors’ Report

Strategic ReportGovernance ReportFinancial StatementsGovernance ReportFINANCIAL
STATEMENTS

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Parent Company Statement of Financial Position

Consolidated Statement of Changes in Equity

Parent Company Statement of Changes in Equity

Consolidated Statement of Cash Flows

Parent Company Statement of Cash Flows

Notes to the Financial Statements

FINANCIAL

STATEMENTS

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Parent Company Statement of Financial Position

Parent Company Statement of Changes in Equity

Consolidated Statement of Cash Flows

Parent Company Statement of Cash Flows

Notes to the Financial Statements

Consolidated Statement of Comprehensive Income
For the year ended 31 December 2017

REVENUE

Cost of Sales

GROSS PROFIT

Administrative Expenses

OPERATING PROFIT

Finance Income

Finance Costs

PROFIT BEFORE TAX

Taxation

PROFIT FOR THE YEAR FROM CONTINUING

OPERATIONS

DISCONTINUED OPERATIONS

(Loss) from discontinued operations, after

tax

(LOSS)/PROFIT FOR THE PERIOD

OTHER COMPREHENSIVE INCOME:

Other comprehensive income for the year,

net of tax

TOTAL COMPREHENSIVE INCOME FOR THE

YEAR ATTRIBUTABLE TO OWNERS OF THE

PARENT COMPANY

Earnings per share

- Basic

- Diluted

Earnings per share (continuing operations)

- Basic

- Diluted

Note

2017

£000’s

104,509

(75,178)

29,331

(23,739)

5,592

(4,860)

734

566

2016

£000’s

89,651

(62,538)

27,113

(20,914)

6,199

(4,195)

2,022

(51)

1,300

1,971

(4,033)

(2,733)

(588)

1,383

(2,733)

1,383

(17.1p)

8.1p

7.7p

9.1p

8.8p

12.9p

12.5p

Consolidated Statement of Changes in Equity

The notes on pages 76 to 120 form part of these Financial Statements.

Financial StatementsStrategic ReportGovernance ReportFinancial Statements

Consolidated Statement of Financial Position
As at 31 December 2017
Company registered no: 04000623

Non-current assets

Property, plant and equipment

Intangible assets

Restricted deposit accounts

Available-for-sale financial assets

Total non- current assets

Current assets

Inventories

Trade and other receivables

Current tax receivable

Cash and cash equivalents

Current assets held for sale

Total current assets

TOTAL ASSETS

Equity and Liabilities

Capital and reserves

Called up share capital

Share premium account

EBT shares

Retained Earnings

Total equity attributable to members of the parent company

Non- current liabilities

Deferred taxation

Borrowings

Provisions for liabilities

Total non- current liabilities

Current liabilities

Borrowings

Trade and other payables

Current liabilities held for sale

Total current liabilities

Total liabilities

TOTAL EQUITY AND LIABILITIES

Note

2017

£000’s

2.2

17b

52,973

3,544

3,220

500

60,237

9,881

32,698

13,720

5,553

61,852

122,089

826

12,652

(946)

5,553

18,085

145

56,044

1,250

57,439

13,894

32,671

46,565

104,004

122,089

2016

£000’s

Restated

59,497

3,801

2,831

500

66,629

9,799

16,204

167

6,289

5,095

37,554

104,183

825

12,546

(1,015)

8,689

21,045

684

40,277

1,250

42,211

20,981

19,936

40,927

83,138

104,183

The Financial Statements on pages 69 to 120 were approved by the Board of Directors on 11 April 2018 and
signed on its behalf by:

Juliet Davenport
Chief Executive
11 April 2018

The notes on pages 76 to 120 form part of these Financial Statements.

Parent Company Statement of Financial Position
As at 31 December 2017
Company registered no: 04000623

Non-current assets

Property, plant and equipment

Investments

Total non- current assets

Current assets

Trade and other receivables

Cash and cash equivalents

Total current assets

TOTAL ASSETS

Equity and Liabilities

Capital and reserves

Share capital

Share premium account

EBT shares

Retained Earnings

Total Equity

Non- current liabilities

Borrowings

Total non- current liabilities

Current liabilities

Borrowings

Trade and other payables

Total current liabilities

Total liabilities

TOTAL EQUITY AND LIABILITIES

Note

17a

2017

£000’s

391

41,694

42,085

178

568

746

42,831

826

12,652

(946)

3,858

16,390

17,185

8,922

334

9,256

26,441

42,831

2016

£000’s

387

42,256

42,643

266

340

42,983

825

12,546

(1,015)

6,997

19,353

211

23,089

330

23,419

23,630

42,983

The parent company’s loss for the financial year was £2,578,834 (2016: profit:£2,789,472).

The Financial Statements on pages 69 to 120 were approved by the Board of Directors on 11 April 2018 and
signed on its behalf by:

Juliet Davenport
Chief Executive
11 April 2018

The notes on pages 76 to 120 form part of these Financial Statements.

Financial StatementsStrategic ReportGovernance ReportFinancial StatementsConsolidated Statement of Changes in Equity
For the year ended 31 December 2017

At 1 January 2016

Profit for the year

Other comprehensive income for the year

Total comprehensive expense for the year

Share based payments

Tax charge relating to share option

scheme

Issue of ordinary shares

Exercise of options

Dividend Paid

Total contributions by and distributions
to owners of the parent, recognised
directly in equity

At 31 December 2016

At 1 January 2017

Loss for the year

Other comprehensive income for the year

Total comprehensive income for the year

Share based payments

Tax charge relating to share option

scheme

Issue of ordinary shares

Exercise of options

Dividend Paid

Total contributions by and distributions
to owners of the parent, recognised
directly in equity

Note

Called
Up Share
Capital

Share
Premium
Account

EBT
Shares

Retained
Earnings

Total
Equity

£000’s

£000’s £000’s

748

9,786

(1,074)

7,483

16,943

2,760

1,383

230

2,837

(14)

(491)

825

2,760

12,546

(177)

2,719

(1,015)

8,689

21,045

825

12,546

(1,015)

8,689

21,045

106

(2,733)

263

(106)

(31)

107

(529)

106

(403)

(227)

At 31 December 2017

826

12,652

(946)

5,553

18,085

The notes on pages 76 to 120 form part of these Financial Statements.

Parent Company Statement of Changes in Equity
For the year ended 31 December 2017

Note

Share
Capital

Share
Premium
Account

EBT
Shares

Retained
Earnings

Total
Equity

£000’s

£000’s £000’s

At 1 January 2016

748

9,786

(1,074)

4,713

14,173

Profit for the year and total
comprehensive income

Issue of ordinary shares

Exercise of options

Dividend Paid

At 31 December 2016

At 1 January 2017

Loss for the year and total

comprehensive income

Issue of ordinary shares

Exercise of options

Dividend Paid

At 31 December 2017

2,760

2,789

2,837

(14)

(491)

825

12,546

(1,015)

6,997

19,353

825

12,546

(1,015)

6,997

19,353

106

(2,579)

(31)

107

(529)

826

12,652

(946)

3,858

16,390

The notes on pages 76 to 120 form part of these Financial Statements.

Financial StatementsStrategic ReportGovernance ReportFinancial StatementsConsolidated Statement of Cash Flows
For the year ended 31 December 2017

Cash flows from operating activities

Cash generated from operations

Finance income

Finance cost

Income tax received

Net cash flows generated (used) in/from operating
activities

Cash flows from investing activities

Purchase of property, plant and equipment

Purchase of intangible fixed assets

Disposal of assets

Deposit into restricted accounts

Net cash flows used in investing activities

Cash flows from financing activities

Payments of dividends

Proceeds from borrowings

Repayment of borrowings

Capital repayments of finance lease

Proceeds from issue of shares

Proceeds from sale of share options

Net cash flows generated from financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Note

2017

£000’s

(5,125)

167

2016

£000’s

10,656

(4,208)

133

(4,929)

6,599

(4,828)

(752)

9,769

(389)

3,800

(459)

19,646

(10,518)

(147)

8,560

7,431

6,289

13,720

(4,958)

(1,851)

(29)

(6,838)

(491)

387

(951)

(50)

2,837

1,777

1,538

4,751

6,289

The notes on pages 76 to 120 form part of these Financial Statements.

Parent Company Statement of Cash Flows
For the year ended 31 December 2017

Note

Cash flows from operating activities

Cash used in operations

Finance cost

Net cash flows used in operating activities

Cash Flows from investing activities

Purchase of property, plant and equipment

Net cash flows used in investing activities

Cash flows from financing activities

Payment of dividends

Proceeds from borrowings

Repayment of borrowings

Intercompany loans movement

Capital repayments of finance lease

Proceeds from issue of shares

Proceeds from sale of share options

Net cash generated from financing activities

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

The notes on pages 76 to 120 form part of these Financial Statements.

2017

£000’s

(2,146)

(1,127)

(3,273)

(158)

(459)

17,638

(7,360)

(5,977)

(147)

3,733

302

266

568

2016

£000’s

(1,725)

(977)

(2,702)

(387)

(491)

780

(50)

2,837

3,121

234

266

Financial StatementsStrategic ReportGovernance ReportFinancial StatementsNotes to the Financial Statements
1. General Information

Good Energy Group PLC is listed on the Alternative Investment Market of the London Stock Exchange and
is incorporated and domiciled in the United Kingdom and whose shares are publicly traded. The registered
office is located at Monkton Reach, Monkton Hill, Chippenham, Wiltshire, SN15 1EE, United Kingdom.

The ultimate parent of the Group is Good Energy Group PLC. There is no ultimate controlling party of
the Group.

The principal activities of Good Energy Group PLC are those of a holding and management company to the
Group and a lender to, and seller of, generation development sites.

The principal activities of its subsidiaries are: the purchase, generation and sale of electricity from renewable
sources; the sale of gas; services relating to micro-renewable generation and the development of new
electricity generation sites.

The purpose of the Annual Report and Financial Statements is to provide information to members of
the company. It contains certain forward looking statements relating to the operations, performance
and financial condition of the Group. By their nature these statements involve uncertainty since future
events and circumstances can differ from those anticipated. Nothing in the Annual Report and Financial
Statements should be construed as a profit forecast.

These financial statements are presented in pounds sterling, which is the functional currency of the parent
company and the presentational currency of the Group, because that is the currency of the primary
economic environment in which the Group operates. All values are rounded to the nearest thousand (£000),
except when otherwise indicated.

The principal accounting policies applied in the preparation of these consolidated financial statements
are set out below. These policies have been consistently applied to all the years presented unless
otherwise stated.

2. Summary of Significant Accounting Policies

2.1 Basis of preparation of financial statements

These financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union and IFRS Interpretations Committee (IFRSIC) and with
those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The financial statements have been prepared on a going concern basis and under the historical cost
convention or historic cost modified by revaluation of financial assets and financial liabilities held at fair
value through profit or loss.

The preparation of financial statements in conformity with IFRSs requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the financial year.

Although these estimates are based on management’s reasonable knowledge of the amount, event or
actions, actual results ultimately may differ from those estimates. The critical accounting judgements,
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed in note 4 and the following
accounting policy notes: revenue recognition (2.6), property, plant and equipment (2.8), inventories (2.12)
including generation development sites (2.12.3) and credit risk (3.1.3).

Notes to the Financial Statements
2. Summary of Significant Accounting Policies (continued)

2.2 Restatement of prior year

Historically, the Group depreciated its property, plant and equipment (Generation assets) to a nil residual
value and had not established a decommissioning provision to restore land back to its original use. This
was on the basis that any such residual value would cover the decommissioning costs. The Group has now
re-assessed this practice against the requirements of IFRS and has restated the 2016 financial statements
to form a decommissioning provision of £1.25m – with a corresponding increase of property, plant and
equipment.

This restatement is a non cash adjustment and it has a neutral impact on current and prior year retained
earnings. Therefore there is no impact to earnings per share and there is no material change to the prior
year statements of comprehensive income, changes in equity or cash flows.

The restated balance at 1 January 2016 is not materially different from 31 December 2016 and therefore the
Group has not disclosed the balance sheet at 1 January 2016 on the statement of the financial position.

2.3 Going concern

The Group meets its day to day capital requirements through positive cash balances held on deposit
or through its bank facilities. The current economic conditions continue to create opportunities and
uncertainties which can impact the level of demand for the Group’s products and the availability of bank
finance for the foreseeable future. The Group’s forecasts and projections, taking account of the possible
changes in trading performance, show that the Group should be able to operate within the level of its
current facilities.

After making enquires, the Directors have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the
going concern basis in preparing its consolidated financial statements. Further information on the Group’s
borrowings can be found in note 24.

As a result of a new Corporate Bond issue in the year which included bonds rolled over from the 2013 bond
issue, the Group is in a net current asset position of £15.3m as at 31 December 2017, compared to a net
current liability position of (£3.4m) in 2016. The balance sheet is expected to retain it’s net current asset
position for the year ended 31 December 2018.

2.4 Change in accounting policies and disclosures

The following accounting standards have been issued but are not yet effective and have not been early
apodted by the Group:

IFRS 15 Revenue from contracts with customers
IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from
contracts with customers. Under IFRS 15 revenue is recognised at an amount that reflects the consideration
to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The
principles in IFRS 15 provide a more structured approach to measuring and recognising revenue. The new
revenue standard is applicable to all entities and will supersede all current revenue recognition requirements
under IFRS. Either a full or modified retrospective application is required for annual periods beginning on
or after 1 January 2018 with early adoption permitted. The Group plans to adopt the new standard on the
required effective date and on the basis of a detailed management review, this standard is not expected to
materially impact the value of the revenue streams of the Group’s existing operating segments.

Financial StatementsStrategic ReportGovernance ReportFinancial StatementsNotes to the Financial Statements
2. Summary of Significant Accounting Policies (continued)

IFRS 9 Financial instruments
This is effective for annual periods commencing on or after 1 January 2018. The introduction of this standard
is not expected to have a material impact on the net assets or results of the Group, but may result in
additional disclosures.

IFRS 16 Leases
This has a mandatory effective date from 1 January 2019. The new standard will eliminate the classification
of leases as either operating or financial leases with all leases being recognised on the balance sheet date
unless they qualify for exemptions. This will result in previously recognised operating leases being treated as
property, plant and equipment along with a leasing creditor. The introduction of this standard will increase
the value of property, plant and equipment and the leasing liability on the balance sheet but is unlikely to
have a material effect on the profit in any year.

2.5 Basis of consolidation

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries
as at 31 December 2017. Control is achieved when the Group is exposed, or has rights, to variable returns
from its involvement with the investee and has the ability to affect those returns through its power over the
investee. Specifically, the Group controls an investee if, and only if, the Group has:

• Power over the investee (i.e., existing rights that give it the current ability to direct the relevant

activities of the investee)

• Exposure, or rights, to variable returns from its involvement with the investee

• The ability to use its power over the investee to affect its returns

Generally, there is a presumption that a majority of voting rights result in control. To support this
presumption and when the Group has less than a majority of the voting or similar rights of an investee,
the Group considers all relevant facts and circumstances in assessing whether it has power over an
investee, including:

• The contractual arrangement with the other vote holders of the investee

• Rights arising from other contractual arrangements

• The Group’s voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there
are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when
the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary.
Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included
in the consolidated financial statements from the date the Group gains control until the date the Group
ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity
holders of the parent of the Group and to the non-controlling interests, even if this results in the non-
controlling interests having a deficit balance. When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies.
All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an
equity transaction.

Notes to the Financial Statements
2. Summary of Significant Accounting Policies (continued)

2.5 Basis of consolidation (continued)

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities,
non-controlling interest and other components of equity while any resultant gain or loss is recognised in
profit or loss. Any investment retained is recognised at fair value.

2.6 Revenue recognition

Revenue represents the fair value of the consideration received or receivable for the provision of goods
and services which fall within the Group’s ordinary activities, excluding transactions with or between
subsidiaries. All revenue and profit before tax arose within the United Kingdom.

Revenue represents amounts recoverable from customers for supply of electricity, gas, generation of power
and sale of generation development sites and is measured at the fair value of the consideration received or
receivable, stated net of discounts, returns and value added taxes. The Group recognises revenue when the
amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to
the Group; and when specific criteria have been met for each of the Group’s activities, as described below.

2.6.1 Power supply

Revenue for the supply of electricity is accrued based on industry data flows and National Grid data. These
include an estimate of power used, based on the estimated annual consumption of each customer. Accrued
income is superseded when customer meter reads are received at which point estimates are adjusted to
actual usage.

For gas, revenue is accrued based on information received from the Group’s gas shipper, Contract Natural
Gas Ltd, which includes details of all the sites held, their estimated annual quantities of gas used adjusted by
a pre-determined weather correction factor. This information is subsequently adjusted and invoiced based
on customer and industry meter reads.

For electricity and gas supply, payment is collected either as a direct debit or paid on receipt of bill in
arrears. Overdue amounts are reviewed regularly for impairment and provision made as necessary.

2.6.2 Feed-in Tariff (FIT) administration services

Good Energy Group Plc provides FIT administration services to micro-generators who are signed up to
the FIT scheme. For FIT services, revenue is earned from Ofgem for administering the scheme. For FIT
services, revenue is recognised in two parts; there is an initial fee paid by Ofgem for taking on a generator,
and then an ongoing amount that is received annually for provision of FIT services. The initial fee is spread
over the ‘take on’ period for a new customer and the ongoing fee that is received is spread over the 12
month compliance period.

2.6.3 Renewable Obligation Certificates (ROCs) revenue recognition

ROCs are awarded to the Group from Ofgem based on generation of power. These ROCs are sold on receipt
of certificates from Ofgem allowing transfer of title.

The amount of revenue recognised on sale is in accordance with a contractual agreement where the pricing
is based on Ofgem’s minimum ROC value (the buy-out) and a prudent estimate of the re-cycle element of
the final value of a ROC once all energy suppliers have complied or paid the penalty for non-compliance
with the renewables obligation (the recycle). A final adjustment to ROC revenue and profit is recognised
once Ofgem have announced the final out-turn ROC price.

Financial StatementsStrategic ReportGovernance ReportFinancial StatementsNotes to the Financial Statements
2. Summary of Significant Accounting Policies (continued)

2.6.4 Generation development site revenue recognition

Revenue is recognised on the completion date of the sale and purchase agreement pertaining to each site
sold. Where there is contingent revenue included in the sale and purchase agreement, revenue is recognised
based on management’s assessment of the likelihood of the contingent revenue being received based on
latest information available.

2.7 Goodwill, intangible assets and amortisation

Goodwill is measured as the difference between:

• the aggregate of (i) the value of consideration transferred (generally at fair value), (ii) the amount of any
non-controlling interest, and (iii) in a business combination achieved in stages, the acquisition-date fair
value of the acquirer’s previously-held equity interest in the acquiree, and

• the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed

2.7.1 Definite life intangible assets

Definite life intangible assets comprise software licences and website development costs, which meet the
criteria of IAS 38 “Intangible assets”. The software licences and website development costs are carried at
cost less accumulated amortisation and impairment losses. Cost comprises purchase price from third parties
as well as directly attributable internally generated development costs where relevant.

2.7.2 Indefinite life intangible assets The Power Supply Licence is held as an indefinite life intangible asset
according to the criteria of IAS 38 “Intangible assets”. The Power Supply Licence is carried at cost less
accumulated impairment losses. Cost comprises purchase price from third parties as well as directly
attributable internally generated development costs where relevant.

2.7.3 Amortisation

Amortisation on definite life intangible assets is charged to the Consolidated Statement of Comprehensive
Income on a straight-line basis over the estimated useful lives of intangible assets. The estimated useful lives
for intangibles with definite lives are as follows:

Software Licenses

between 3 and 10 years

Website development costs

between 2 and 5 years

Amortisation of intangible assets is included in the Consolidated Statement of Comprehensive Income in
‘administrative expenses’.

Notes to the Financial Statements
2. Summary of Significant Accounting Policies (continued)

2.7.4 Impairment

The Directors regularly review intangible assets for impairment and provision is made if necessary. Assets
with an indefinite useful life, eg goodwill and the Power Supply Licence are not subject to amortisation and
are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment
whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For
the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an
impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

2.8 Property, plant and equipment

Property, plant and equipment is stated at cost less depreciation. Cost includes the original purchase price
of the asset and the costs attributable to bringing the asset to its working condition for its intended use.
Depreciation is provided at rates calculated to write off the cost of fixed assets, less their estimated residual
value, over their expected useful lives on the following bases:

Fixtures, fittings and equipment

between 3 and 5 years

Leasehold improvements

over the life of the lease

Generation assets

between 20 and 29 years

Assets under construction

not depreciated

The useful economic lives of assets and their residual values are reviewed on an annual basis and
revised where considered appropriate. The carrying value of property, plant and equipment is reviewed
for impairment when events or changes in circumstance indicate that the carrying value may not be
recoverable.

2.9 Investments

An investor controls an investee if and only if the investor has all of the following elements:

• power over the investee, i.e. the investor has existing rights that give it the ability to direct the

relevant activities

• exposure, or rights, to variable returns from its involvement with the investee

• the ability to use its power over the investee to affect the amount of the investor’s return

2.10 Leases

Assets financed by leasing agreements that give rights approximating to ownership (finance leases) are
capitalised at their fair value and depreciation or amortisation is provided over the lower of the useful
life and term of the lease. The capital elements of future obligations under finance leases are included
as liabilities in the Statement of Financial Position and the current year’s interest element, having been
allocated to financial periods to give a constant periodic rate of charge on the outstanding liability, is
charged to the Statement of Comprehensive Income.

Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain
with the lessor are charged to the Statement of Comprehensive Income on a straight-line basis over the
term of the lease.

Financial StatementsStrategic ReportGovernance ReportFinancial Statements

Notes to the Financial Statements
2. Summary of Significant Accounting Policies (continued)

2.11 Pensions

The Group operates a defined contribution pension scheme. Under this scheme the Group pays
contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or
voluntary basis. The Group has no further payment obligations once the contributions have been paid. The
contributions are recognised as an employee benefit expense when they are due. The pension charge for
the year represents the amounts payable by the Group in respect of the year.

2.12 Inventories

2.12.1 Renewable Obligation Certificates (ROCs)

Under the provisions of the Utilities Act 2000, all electricity suppliers are required to procure a set
percentage of their supplies from accredited renewable electricity generators. This obligation can be
fulfilled by the purchase and surrender of ROCs originally issued to generators, or by making payments
to Ofgem who then recycle the payments to purchasers of ROCs. Notwithstanding that Good Energy
Limited, a subsidiary company, supplies electricity sourced entirely from renewable generation over a 12
month period, its percentage obligation to submit ROCs is set by Ofgem. The cost obligation is recognised
as electricity is supplied and charged as a cost of sale in the Consolidated Statement of Comprehensive
Income. Any gains or losses on disposal of ROCs which are in excess of the Group’s compliance obligations
are included as an adjustment to the compliance cost included within cost of sales. ROCs are valued at the
lower of purchase cost and estimated realisable value.

2.12.2 Levy Exemption Certificates (LECs)

The removal of Levy Exemption Certificates was announced by the Government in 2015, starting 1 August
2015. Excess inventory of LECs had been purchased by the company in the years prior to this date. The
cost of this inventory was written back to the income statement in 2015, resulting in a non-recurring credit.
During 2016 and part of 2017 inventories were utilised against the cost of Climate Change Levy for business
customers, with costs charged through the income statement. The inventory balance remaining at the
balance sheet date was nil.

2.12.3 Generation development sites

The Group incurred costs in respect of generation development sites up until this business segment was
discontinued in 2017. These are recognised as inventory at the lower of cost and net realisable value or
in held for sale assets where the costs relate to generation development sites which are being actively
marketed for sale.

2.13 Current and deferred taxation

The tax credit represents the sum of the tax currently receivable and deferred tax. Taxable profit differs
from net profit as reported in the Statement of Comprehensive Income 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. The Group’s liability for current tax is calculated by using tax rates that have been enacted or
substantively enacted by the end of each financial period.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying
amount 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 Statement of Financial Position liability
method. Deferred tax liabilities are 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.

Notes to the Financial Statements
2. Summary of Significant Accounting Policies (continued)

Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the
initial recognition (other than in a business combination) of other assets and liabilities in a transaction which
affects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable
temporary differences arising in 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.

The carrying amount of deferred tax assets is reviewed at the end of each financial period 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 calculated at the tax rates that are expected to apply to the
period when the asset is realised or the liability is settled.

Deferred tax is charged or credited in the Statement of Comprehensive Income, except when it relates
to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current
tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation
authority, and the Group intends to settle its current tax assets and liabilities on a net basis.

2.14 Available-for-sale financial assets

Equity instruments held by the Group and designated as available-for-sale are carried at fair value, with
movements in fair value recognised in other comprehensive income. Where fair value cannot be reliably
measured, the assets are approximated at cost. Cumulative fair value gains or losses on an asset are
recycled through the income statement when the asset is disposed or impaired. A significant or prolonged
decline in the fair value of a security below its cost is considered as an indicator that the securities are
impaired. Impairments are recognised in the income statement.

2.15 Assets and liabilities classified as held for sale

Assets and liabilities are classified as held for sale when their carrying amount is to be recovered
principally through a sale transaction and the sale is highly probable. Assets and liabilites classified as held
for sale are stated at the lower of carrying amount and fair value less costs to sell. They are not depreciated
or amortised.

2.16 Financial instruments

The Group uses certain financial instruments in its operating and investing activities that are deemed
appropriate for its strategy and circumstances.

Financial instruments recognised on the Consolidated Statement of Financial Position include cash and
cash equivalents, trade receivables, trade payables and borrowings. Financial assets and liabilities are
recognised on the Consolidated Statement of Financial Position when the company has become a party to
the contractual provisions of the instrument.

2.16.1 Loans and receivables

The Group’s loans and receivables comprise trade and other receivables and cash and cash equivalents
in the Consolidated Statement of Financial Position. These assets are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market. They arise principally through the
provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of
contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly
attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective
interest rate method, less provision for impairment. Trade receivables are shown inclusive of unbilled
amounts to customers and of payments made in advance by customers, reflecting the underlying nature of
customer account balances.

Financial StatementsStrategic ReportGovernance ReportFinancial StatementsNotes to the Financial Statements
2. Summary of Significant Accounting Policies (continued)

Impairment provisions are recognised when there is objective evidence (such as significant financial
difficulties on the part of the counter-party or default or significant delay in payment) that the Group will be
unable to collect all of the amounts due under the terms receivable, the amount of such a provision being
the difference between the net carrying amount and the present value of the future expected cash flows
associated with the impaired receivable. For trade receivables, which are reported net, such provisions are
recorded in a separate allowance account with the loss being recognised within administrative expenses in
the Consolidated Statement of Comprehensive Income. On confirmation that the trade receivable will not be
collectable, the gross carrying value of the asset is written off against the associated provision.

Cash and cash equivalents comprise cash on hand and on demand deposits, and other short term, highly
liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant
risk of changes in value.

Restricted deposits are held by financing providers to cover debt service and maintenance expenses on
generation sites to which the funding relates.

Short-term security deposits are held by trading exchanges to cover short term electricity trades.

2.16.2 Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a residual interest in the
assets of the Group after deducting all of its liabilities.

2.16.3 Trade and other payables

Trade payables are obligations to pay for goods or services that have been acquired in the course of
ordinary business from suppliers. Accounts payable are classified as current liabilities if payment is due
within one year or less. If not, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value and subsequently held at amortised cost.

2.16.4 Borrowings

The Group expenses borrowing costs over the term of the loan facility. Where borrowing costs are
attributable to the acquisition, construction or production of a qualifying asset, such costs are capitalised as
part of the specific asset. Details of the Group’s borrowings are included in note 24.

2.17 Decommissioning costs

Liabilities for decommissioning costs are recognised when the group has an obligation to dismantle
and remove the generation assets and restore the land on which it is located. Liabilities may arise upon
construction of such facilities, upon acquisition or through a subsequent change in legislation or regulations.
The amount recognised is the estimated present value of expenditure determined in accordance with
local conditions and requirements. A corresponding tangible item of property, plant and equipment to the
provision is also created.

Any changes in the present value of the estimated expenditure is added to or deducted from the cost of the
assets to which it relates. The adjusted depreciated amount is then depreciated prospectively over its useful
economic life. The unwinding of the discount on the decommissioning provision is included as a finance
cost. The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate.

Notes to the Financial Statements
2. Summary of Significant Accounting Policies (continued)

2.18 Share based payments

The Group applies IFRS 2 to share based payments. The Group operates a share based payment compensation
plan, under which the entity grants key employees the option to purchase shares in the company at a specified
price maintained for a certain duration.

The Group operates an equity-settled, share-based compensation plan, under which the entity receives services
from employees as consideration for equity instruments (options) of the Group. The fair value of the employee
services received in exchange for the grant of the options is recognised as an expense. The total amount to be
expensed is determined by reference to the fair value of the options granted:

• including any market performance conditions; (for example, an entity’s share price)

• excluding the impact of any service and non-market performance vesting conditions (for example,

profitability, sales growth targets and remaining an employee of the entity over a specified time period) and

• including the impact of any non-vesting conditions (for example, the requirement for employees to save).

Non-market performance and service conditions are included in assumptions about the number of options that
are expected to vest. The total expense is recognised over the vesting period, which is the period over which all
of the specified vesting conditions are to be satisfied.

At the end of each financial period, the Group revises its estimates of the number of options that are expected
to vest based on the non-market vesting conditions. It recognises the impact of the revision to original
estimates, if any, in the Consolidated Statement of Comprehensive Income, with a corresponding adjustment
to equity.

When the options are exercised, and the company issues new shares to meet that obligation, the proceeds
received net of any directly attributable transaction costs are credited to share capital (nominal value) and
share premium.

2.19 Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision maker. The chief operating decision maker has been identified as the Board of Directors. The
Board of Directors review the Group’s internal reporting in order to assess performance and allocate resources.

2.20 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary
shares or options are shown in equity as a deduction, net of tax, from the proceeds.

2.21 Finance income

Finance income is received in respect of cash deposits and is recognised using the effective interest method.
When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount,
being the estimated future cash flow discounted at the original effective interest rate of the instrument, and
continues unwinding the discount as finance income. Finance income on impaired loan and receivables is
recognised using the original effective interest rates.

2.22 Dividend distribution

Dividend distribution to the company’s shareholders is recognised as a liability in the Group’s financial
statements in the period in which the dividends are approved by the company’s shareholders.

Financial StatementsStrategic ReportGovernance ReportFinancial StatementsNotes to the Financial Statements
3. Financial and Capital Risk Management

3.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: liquidity risk, market risk (including currency
risk, cash flow and fair value interest rate risk and commodity price risk) and credit risk. The Group’s overall
risk management programme focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group’s financial performance. The Group may use derivative financial
instruments to hedge certain risk exposures.

3.1.1 Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet cash flow
commitments associated with financial instruments. The Group has cash resources available to it and
prepares, in the operating entities of the Group, forecasts for the forthcoming year which indicate that in the
Directors’ opinion it will have sufficient resources to fund the continuation of trade.

The Group monitors cash flow forecasts on a ‘rolling forecast’ basis to ensure it has sufficient cash to meet
operational needs while maintaining enough headroom on its undrawn committed borrowing facilities at all
times so as not to breach borrowing limits or covenants.

A liquidity analysis of financial instruments based on contractual undiscounted cash flows is provided below:

Parent Company
31 December 2017

Less than
1 year

Between
1 and 2 years

Between
2 and 5 years

Over 5 years

Corporate bond

Borrowings

Loans from group companies

Trade and other payables

Total

£000’s

4,863

483

188

334

5,868

£000’s

4,587

425

£000’s

18,527

112

5,012

18,639

£000’s

Parent Company
31 December 2016

Less than
1 year

Between
1 and 2 years

Between
2 and 5 years

Over 5 years

Corporate bond

Loan from group companies

Trade and other payables

Total

£000’s

16,075

7,874

330

24,279

£000’s

Notes to the Financial Statements
3. Financial and Capital Risk Management (continued)

Consolidated
31 December 2017

Less than
1 year

Between
1 and 2 years

Between
2 and 5 years

Over 5 years

Corporate bond

Borrowings

Trade and other payables

Total

£000’s

4,863

8,867

32,671

46,401

£000’s

4,587

5,162

9,749

£000’s

18,527

14,358

32,885

£000’s

46,132

Consolidated
31 December 2016

Less than
1 year

Between
1 and 2 years

Between
2 and 5 years

Over 5 years

£000’s

9,765

16,075

17,657

43,497

£000’s

4,527

£000’s

14,171

£000’s

50,660

4,527

14,171

50,660

Borrowings

Corporate bond

Trade and other payables

Total

3.1.2 Market Risk

3.1.2a Currency risk

The Group is exposed to foreign exchange risk arising from certain generation asset maintenance contracts
which are payable in euros. Management have set up a policy, that when it is deemed appropriate, the
Group will forward buy euros against these contracts to reduce foreign exchange exposure. As at 31
December 2017 no euros (2016: no euros) were purchased forward. The annual exposure to sterling euro
exchange rate movements is currently £9,000 per one percent movement in the exchange rate.

3.1.2b Cash flow and fair value interest rate risk

The financial risk is the risk to the Group’s earnings that arises from fluctuations in interest rates and the
degree of volatility of these rates. For short-term bank overdraft facilities, the Group does not use derivative
instruments to reduce its exposure to interest rate fluctuations as the policy of the Group is not to rely on
short-term borrowing facilities for any significant duration. The Directors use interest rate swaps if they
consider their exposure to interest rate risk to be material. For long term borrowings, the Group may use
interest rate swaps to fix the interest rate payable on these material balances in order to mitigate the risk of
any fluctuations in interest rates.

3.1.2c Commodity price risk

The Group’s operations results in exposure to fluctuations in energy prices. Management monitors energy
prices and analyses supply and demand volumes to manage exposure to these risks. The Group typically
buys power forwards in order to mitigate some of the risk of commodity price fluctuations.

If the wholesale market moves significantly upwards or downwards, the price risk to the Group will depend
upon a number of factors including the excess or deficiency of power being supplied by renewable power
purchase contracts in place at the time. The Group may be required to pass on the price risk to customers.
Retail prices can be amended with 30 days’ advance notification to customers. The Group closely
monitors movements in the wholesale market and assesses trends so it is ready to take necessary action
when required.

Vertical integration of the Group helps further mitigate exposure to to changes in power prices.

Financial StatementsStrategic ReportGovernance ReportFinancial Statements
Notes to the Financial Statements
3. Financial and Capital Risk Management (continued)

3.1.3 Credit risk

The Group’s exposure to credit risk arises from its receivables from customers. At 31 December 2017 and
2016, the Group’s trade and other receivables were classed as due within one year, details of which are
included in note 19. The Group’s policy is to undertake credit checks where appropriate on new customers
and to provide for doubtful debts based on estimated irrecoverable amounts determined by reference to
specific circumstances and past default experience. Credit risk is also in part mitigated by the policy to
offer direct debit as a preferred method of payment for customers. At the end of the reporting period the
Directors have provided for specific doubtful debts and believe that there is no further credit risk. Should
the level of bad debt increase by 0.25 per cent, this would have an impact of £11,000 (2016: £10,000) on the
Statement of Comprehensive Income.

Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions. The
Directors monitor credit quality of the institutions used when considering which banks and financial
institutions funds should be placed with.

3.2 Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern in order to provide returns to shareholders, and to maintain an optimal capital structure.

The Group monitors capital on the basis of the gearing ratio calculated as net debt divided by total capital.
Net debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the
Consolidated Statement of Financial Position) less cash and cash equivalents. Total capital is calculated as
‘equity’ as shown in the consolidated statement of financial position plus net debt. The capital structure of
the Group is as follows:

Total borrowings

Less: cash in restricted deposit accounts

Less: cash and cash equivalents

Net debt*

Total equity

Total capital

Gearing ratio

Note

2017

£000’s

69,938

(3,220)

(13,720)

52,998

18,085

71,083

74.6%

2016

£000’s

61,258

(2,831)

(6,289)

52,138

21,045

73,183

71.2%

During 2017, the Group’s strategy, which was unchanged from 2016, was to seek debt funding at appropriate
margins from lenders against long term power generation assets. These assets have highly predictable
revenue streams and are considered stable for long term borrowing. In future, in order to maintain or adjust
its capital structure, the Group may re-structure its debt, issue new shares or sell assets.

The Group’s borrowings are subject to maintaining covenants as defined by the debt funders. Throughout
the year ended 31 December 2017 the Group complied with all external borrowing covenants and
management monitors the continued compliance with these covenants on a monthly or quarterly basis.

*Net debt was misprinted in preliminary results as £53.1m. The correct net debt figure is £53.0m.

Notes to the Financial Statements
3. Financial and Capital Risk Management (continued)

3.3 Fair value estimation

The table below presents the Group’s financial assets that are measured at fair value, by valuation method at
31 December 2017. The different levels have been defined as follows:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
• Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,

either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2);

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable

inputs) (Level 3);

If one or more of the significant inputs is not based on observable market data, the instrument is included in
Level 3.

The unlisted securities in the table below relate solely to a £500,000 investment in 556 ordinary shares
of Tidal Lagoon (Swansea Bay) plc. The specific valuation technique used to value the unlisted securities
are a six monthly review by the Board of the current status of the tidal lagoon development project and a
review of any changes to circumstances since the initial acquisition of shares. Although the project timeline
for this development has extended beyond original targets, the Board considers that the fair value of the
investment remains at the value paid. There are a number of future events in the project timeline which
could affect fair value significantly, the next one of note being government’s decision on the value of the
contract for difference (CFD) subsidy the project will qualify for.

All financial instruments with the exclusion of the amounts below are classified as level 2 per the fair
value hierarchy

2017

Assets

Available for sale financial assets

Unlisted securities

Total assets

2016

Assets

Available for sale financial assets

Unlisted securities

Total assets

Level 1

£000’s

Level 2

£000’s

Level 3

£000’s

Total

£000’s

500

Level 1

£000’s

Level 2

£000’s

Level 3

£000’s

500

Total

£000’s

500

There were no changes in Level 3 instruments for the year ended 31 December 2017.

Financial StatementsStrategic ReportGovernance ReportFinancial Statements
Notes to the Financial Statements
4. Critical Accounting Estimates

In the process of applying the Group’s accounting policies, management has to make judgements and
estimates that have a significant effect on the amounts recognised in the financial statements. These
estimates and judgements are evaluated continually and are based on historical experience and other factors,
including expectations of future events. The most critical of these accounting judgements and estimates are
detailed below. Given the nature of the estimates and judgements made, unless explicitly stated otherwise, it
is not appropriate to provide a sensitivity analysis of the judgements and estimates noted.

4.1 Revenue recognition

Revenue calculated from energy sales includes an estimate of the value of electricity or gas supplied to
customers between the date of the last meter reading and the end of the reporting period. This will have
been estimated by using historical consumption patterns and data available, and takes into consideration
industry reconciliation processes, upon which the Group takes a prudent position until final reconciliation
data is available from the industry fourteen months after the supply date.

4.2 Power purchase costs

Power purchase costs can typically take 14 months from the date of supply to be finalised due to the
processes that the energy market has to complete in order to finalise generation and consumption data for
any one particular month. Therefore there is an element of power purchase costs that needs to be estimated
based on a combination of in-house and industry data that is available at any particular point in time.

4.3 Inventories

The Group carries ROCs as stock in its balance sheet. These are valued at the lower of cost or estimated
realisable value. Gains or losses made on ROCs which are subsequently sold, are only recognised in the
Statement of Comprehensive Income when they crystallise.

The final out-turn value of a ROC is only published by Ofgem in October following the compliance year (April
to March) which may require a final adjustment to gains or losses on the sale or purchase of ROCs previously
recognised in the Consolidated Statement of Comprehensive Income.

4.4 Provisions for bad and doubtful debt

The assessments undertaken in recognising provisions have been made in accordance with IAS 39. A
provision for impairment of trade receivables is established when there is objective evidence that the group
will not be able to collect all amounts due according to the original terms of the receivables. Significant
financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation,
and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade
receivable is impaired.

The amount of any loss is recognised in the income statement within administrative expenses.
Subsequent recoveries of amounts previously written off are credited against administrative expenses in the
income statement.

4.5 Recoverability of capitalised generation project costs and generation assets

Generation project costs capitalised in inventory are reviewed by management on a monthly basis. Where
management deem at the balance sheet date that on the balance of probability, the likely planning outcome
for a given generation site will prevent it being constructed or sold, a write off provision is made for the
full amount of the inventory relating to that site after excluding an assessment of recoverable costs. Where
possible, recoverable costs will be estimated based on known market values.

The carrying value of the generating sites is considered in relation to the value in use and a provision will be
recognised for any excess. For the current year no provision was deemed necessary.

Notes to the Financial Statements
5. Discontinued operations

The group is discontinuing its Generation Development activities but is exploring a number of potential
options to realise value from the portfolio, through partnerships or sales to external parties who will
continue to develop the sites. The results of this segment are shown in the segmental analysis of the Group
statement of comprehensive income in note 6.

The major classes of assets of the Generation Development segment are classified as assets held for
distribution (see note 21) or Generation development site inventories (see note 18).

There is no income tax expense related to the discontinued operations. There is no gain or loss on the
remeasurement to Fair Value Less Costs to Sell and its related income tax expense.

The net cash flows of the discontinued operations in the year are as follows:-

Operating

Investing

Financing

Net cash inflow/(outflow)

Earnings per share

2017

£000’s

(262)

267

2017

£000’s

2016

£000’s

147

(127)

(20)

2016

£000’s

Basic and diluted, loss for the year from discontinued
operations

(25.2p)

(3.9p)

6. Segmental Analysis

The chief operating decision-maker has been identified as the Board of Directors (the ‘Board’). The Board
reviews the Group’s internal reporting in order to assess performance and allocate resources. Management
has determined the operating segments based on these reports. The Board considers the business from
a business class perspective, with each of the main trading subsidiaries accounting for each of the
business classes.

The main segments are:-

• Supply Companies (including electricity supply, FIT administration and gas supply);
• Electricity Generation Companies (including wind and solar generation companies);
• Generation Development (29 early stage development companies)
• Holding companies, being the activity of Good Energy Group PLC.

No operating segments have been aggregated to form the above reportable operating segments.

The Board assesses the performance of the operating segments based primarily on summary financial
information, extracts of which are reproduced below. An analysis of profit and loss, assets and liabilities and
additions to non-current asset, by class of business, with a reconciliation of segmental analysis to reported
results follows.

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions
with third parties.

Financial StatementsStrategic ReportGovernance ReportFinancial StatementsNotes to the Financial Statements
6. Segmental Analysis (continued)

Year ended 31
December 2017

Electricity
Supply

FIT
admin-
istration

Gas
Supply

Total
Supply
Companies

Electricity
Generation

Holding
Companies/
Consolidation
Adjustments

Total -
Continuing
Operations

Generation
Development
(Discontinued)

Total

£000’s £000’s £000’s

£000’s

£000’s £000’s

Revenue

Revenue
from external
customers

Inter-segment
revenue

68,801

5,006

25,517

99,324

5,185

104,509

17 104,526

Total revenue

68,801

5,006

25,517

99,324

Expenditure

3,688

8,873

(3,688)

104,509

17 104,526

Cost of sales

(52,139)

(505) (17,710)

(70,354)

(4,824)

(75,178)

(3,700) (78,878)

Inter-segment
cost of sales

(3,688)

3,688

Gross profit

12,974

4,501

7,807

25,282

4,049

29,331

(3,683) 25,648

Administrative
expenses

Depreciation &
amortisation

Operating
profit/(loss)

Net finance
income/
(costs)

Profit/(loss)
before tax

Segments assets & liabilities

Segment
assets

Segment
liabilities

Net assets/
(liabilities)

Additions to
non- current
assets

(20,529)

(391)

(1,436)

(22,356)

(328) (22,684)

(1,229)

(154)

(1,383)

(1)

(1,384)

3,524

3,658

(1,590)

5,592

(4,012)

1,580

(32)

(4,947)

121

(4,858)

3,492

(1,289)

(1,469)

734

(4,012)

(3,278)

59,756

106,195

(52,315)

113,636

8,453 122,089

52,348

111,947

(72,741)

91,554

12,450 104,004

7,408

(5,752)

20,426

22,082

(3,997)

18,085

817

5,677

159

6,653

Notes to the Financial Statements
6. Segmental Analysis (continued)

Year ended 31
December 2016

Electricity
Supply

FIT
admin-
istration

Gas
Supply

Total
Supply
Companies

Electricity
Generation
(Restated)

Holidng
Companies/
Consolidation
Adjustments

Total -
Continuing
Operations

Generation
Development
(Discontinued)

Total
(Restated)

£000’s £000’s £000’s

£000’s

55,324

5,904 23,903

85,131

4,520

89,651

786

90,437

Revenue

Revenue from
external
customers

Inter-segment
revenue

3,324

7,844

(3,324)

89,651

786

90,437

Total Revenue

55,324

5,904 23,903

85,131

Expenditure

Cost of sales

(40,559)

(1,415) (16,269)

(58,243)

(4,295)

(62,538)

(367)

(62,905)

Inter-segment
cost of sales

Gross Profit/
(loss)

Administrative
expenses

Depreciation &
amortisation

Operating
profit/(loss)

Net finance
income/(costs)

Profit/(loss)
before tax

(3,324)

3,324

11,441

4,489

7,634

23,564

3,549

27,113

419

27,532

(17,080)

(357)

(1,868)

(19,305)

(666)

(19,971)

(1,609)

(2)

(1,611)

4,875

3,192

(1,868)

6,199

(249)

5,950

140

(5,352)

1,035

(4,177)

(339)

(4,516)

5,015

(2,160)

(833)

2,022

(588)

1,434

Segments assets & liabilities

Segment assets

45,704

117,587

11,162

174,453

(70,270)

104,183

Segment
liabilities

Net assets/
(liabilities)

Additions to
non- current
assets

38,008

118,198

17,205

173,411

(90,273)

83,138

7,696

(611)

(6,043)

1,042

20,003

21,045

2,264

1,120

3,725

7,109

387

7,496

All turnover arose within the United Kingdom.

Consolidation adjustments relate to inter-company sales of generated electricity and the elimination of
inter-company balances.

Financial StatementsStrategic ReportGovernance ReportFinancial Statements

Notes to the Financial Statements
7. Operating Profit and Administrative Expenses

The operating profit is stated after charging:

Depreciation of property, plant and equipment

Amortisation of intangible assets

Operating lease rentals

Auditors’ Remuneration

Audit of parent and consolidated financial statements

Audit of subsidiaries

Subtotal (audit)

Other services - financial statement preparation

Other services

Tax services

Subtotal (non-audit)

The administrative expenses comprise the following:

Staff costs

Rent and office costs

Marketing costs

Professional fees and bank charges

Bad Debts

Depreciation and amortisation

Gain on disposal

Total

8. Profit of the Parent Company

Note

2017

£000’s

3,233

1,009

1,191

125

10,929

5,421

2,660

3,292

2,041

1,230

(1,505)

24,068

2016

£000’s

2,809

1,367

1,078

126

9,286

4,514

1,987

2,383

1,801

1,611

21,582

As permitted by Section 408 of the Companies Act 2006, the Statement of Comprehensive Income of the
parent company is not presented as part of these financial statements.

Notes to the Financial Statements
9. Staff Costs

Staff costs, including Directors’ remuneration, were as follows:

Wages and salaries

Social security costs

Share based payments

Other pension costs

Total staff costs

Capitalised staff costs

Total expensed staff costs

2017

2016

£000’s

11,628

1,103

263

472

13,466

(148)

13,318

10,258

1,062

230

433

11,983

(677)

11,306

Details of share based payments can be found in note 29.

The average monthly number of employees, including the Directors, during the year was as follows:

Operations

Business services

Total management and administration

2017

2016

Number

132

199

331

165

154

319

The total numbers of employees, including the Directors, at the year end were as follows:

Operations

Business services

Total management and administration

2017

2016

Number

129

188

317

168

161

329

Financial StatementsStrategic ReportGovernance ReportFinancial StatementsNotes to the Financial Statements
10. Directors’ and Key Management Remuneration

Directors’ and Key Management emoluments

Short term employee benefits

Post employment benefits

Share based payments

Total

2017

2016

£000’s

1,470

115

262

1,847

872

224

1,169

Key management are considered to be the directors of Good Energy Group PLC and the executive team.
The emoluments relating to these teams are included in the table above.

During the year retirement benefits were accruing to 3 Directors of the Group (2016: 3) in respect of money
purchase pension schemes.

In respect of the highest paid Director, the Group paid remuneration of £252,154 (2016: £235,951), including
contributions to the money purchase pension scheme of £25,750 (2016: £25,000).

Individual remuneration for the Directors is set by the Remuneration Committee of the Board which consists
entirely of Non-Executive Directors. Appropriate keyman insurance policies are in place.

During the year, no share options were exercised by Directors or key management (2016: nil). The
aggregate amount of gains made by directors or key management on the exercise of share options was nil
(2016: nil).

Details of the directors’ remuneration as required by AIM rule 19 are given in the table in the directors’
remuneration report on page 53 and are included in this note by cross reference.

11. Finance Income

Bank and other interest receivables

12. Finance Costs

On bank loans and overdrafts

On corporate bond

Other interest payable

Amortisation of debt issue costs

Total finance costs

Less: amounts capitalised on qualifying assets

Total

2017

2016

£000’s

2017

2016

£000’s

3,082

1,345

203

230

3,072

1,113

336

4,860

4,534

4,860

4,534

Notes to the Financial Statements
13. Taxation

Analysis of tax charge in year

Current tax (see note below)

Current Tax

Adjustments in respect of prior years

Total current tax

Deferred tax

Origination and reversal of temporary differences

Adjustments in respect of prior years

Total deferred tax (see note 23)

Tax on (loss)/profit on ordinary activities

2017

£000’s

2016

£000’

(732)

187

(545)

(164)

217

(2)

215

Adjustments in respect of prior years’ deferred tax amounts are from updated assumptions regarding
capital allowances claimed.

Income tax (credit)/expense reported in the statement of profit and loss -
continuing operations

Income tax attributable to a discontinued operation

Total tax (credit)/charge for year

Factors affecting the tax credit for the year

(566)

(545)

The tax assessed for the year is lower (2016: lower) than the standard rate of corporation tax in the UK of
19.25% (2016: 20.00%). The differences are explained as follows:

Accounting profit before tax from continuing operations

Loss before tax from discontinued operations

Accounting (loss)/profit before income tax

(Loss)/profit before tax multiplied by the standard rate of
Corporation Tax in the UK of 19.25% (2016: 20.00%)

Tax effects of:

Expenses not deductible for tax purposes

Non-taxable gain on sale of investment

Effects of changes in tax rate

Restricted interest costs deduction

Prior year adjustment - current tax

Prior year adjustment - deferred tax

Total tax (credit)/charge for year

2017

2016

£000’s

734

(4,012)

(3,278)

2,022

(588)

1,434

(631)

287

(298)

187

(545)

(73)

(39)

(164)

(2)

Financial StatementsStrategic ReportGovernance ReportFinancial StatementsNotes to the Financial Statements
13. Taxation (Continued)

Factors that may affect future tax charges

Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2015 (on 26
October 2015) and Finance Bill 2016 (on 7 September 2016). These include reductions to the main rate to
reduce the rates to 19% from 1 April 2017 and to 17% from 1 April 2020. Deferred taxes at the balance sheet
date have been measured using these enacted tax rates and reflected in these financial statements.

Corporation tax payable/(recoverable) as per Statement of Financial Position

UK Corporation Tax on profits for the year

(167)

Parent Company

Consolidated

2017

2016

2017

2016

£000’s

14. Earnings/(loss) Per Ordinary Share

Basic

Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to owners of the
company by the weighted average number of ordinary shares during the year after excluding 463,239 (2016:
495,739) shares held by Clarke Willmott Trust Corporation Limited in trust for the Good Energy Group
Employee Benefit Trust.

Profit/(loss) attributable to owners of the Company (£000’s)

Basic weighted average number of ordinary shares (000’s)

Basic earnings/(loss) per share

Continuing operations

Profit/(loss) attributable to owners of the Company (£000’s)

Basic weighted average number of ordinary shares (000’s)

Basic earnings/(loss) per share

Diluted

Consolidated

2017

(2,733)

16,006

(17.1p)

Consolidated

2017

1,300

16,006

8.1p

2016

1,383

15,239

9.1p

2016

1,971

15,239

12.9p

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares
to assume conversion of all potentially dilutive ordinary shares. Potentially dilutive ordinary shares arise
from awards made under the Group’s share-based incentive plans. Where the vesting of these awards is
contingent on satisfying a service or performance condition, the number of potentially dilutive ordinary
shares is calculated based on the status of the condition at the end of the period. Potentially dilutive
ordinary shares are actually dilutive only when the average market price of the Company’s ordinary shares
during the period exceeds their exercise price (options) or issue price (other awards). The greater any such
excess, the greater the dilutive effect. In accordance with IAS 33 ‘Earnings per share’, for the purposes of
calculating diluted loss per share, the effect of potentially dilutive ordinary shares has not been taken into
account for the year ended 31 December 2017 due to there being a loss for the year. The average market
price of the Company’s ordinary shares during the year was 230p (2016: 223p). The dilutive effect of share-
based incentives was nil (2016: 563,595 shares). The dilutive effect of share-based incentives for continuing
operations was 918,989 shares (2016: 563,595 shares).

Notes to the Financial Statements
14. Earnings/(loss) Per Ordinary Share (Continued)

Profit/(loss) attributable to owners of the Company (£000’s)

Weighted average number of diluted ordinary shares (000’s)

Diluted earnings/(loss) per share

Continuing operations

Profit/(loss) attributable to owners of the Company (£000’s)

Weighted average number of diluted ordinary shares (000’s)

Diluted earnings/(loss) per share

15. Property, Plant and Equipment

Consolidated

2017

(2,733)

16,006

(17.1p)

Consolidated

2017

1,300

16,925

7.7p

2016

1,383

15,802

8.8p

2016

1,971

15,802

12.5p

Consolidated
Year ended 31
December 2017

Leasehold
improvements

Furniture,
fittings &
equipment

Generation
assets

Assets under
construction

Total

£000’s

Cost

At 1 January 2017

Assets held for sale

Transfer of assets under
construction

Additions

Disposals

At 31 December 2017

Accumulated depreciation

At 1 January 2017

Assets held for sale

Charge for the year

Disposals

510

532

(334)

(60)

988

180

552

(71)

5,341

(4,848)

1,649

62,051

(826)

(7,003)

137

(300)

(2,873)

At 31 December 2017

(394)

(1,126)

(9,739)

65,982

(4,424)

180

67,660

(4,424)

(180)

5,915

(4,919)

64,232

(8,163)

137

(3,233)

(11,259)

Net book value

At 1 January 2017

At 31 December 2017

176

138

162

523

58,979

52,312

180

59,497

52,973

Financial StatementsStrategic ReportGovernance ReportFinancial StatementsNotes to the Financial Statements
15. Property, Plant and Equipment (continued)

Consolidated
Year ended 31 December 2016

Leasehold
improvements

Furniture,
fittings &
equipment

Generation
assets
(Restated)

Assets under
construction

Total

£000’s

Cost

At 1 January 2016 (Restated)

Assets held for sale

Additions

Disposals

At 31 December 2016 (Restated)

Accumulated depreciation

At 1 January 2016

Assets held for sale

Charge for the year

Disposals

At 31 December 2016

Net book value

At 1 January 2016 (Restated)

At 31 December 2016 (Restated)

429

510

(274)

(60)

(334)

155

176

875

118

(5)

66,497

(5,308)

4,848

(55)

180

67,801

(5,308)

5,227

(60)

988

65,982

180

67,660

(625)

(4,668)

213

(206)

(2,601)

(826)

(7,003)

250

162

61,829

58,979

(5,567)

213

(2,867)

(8,163)

62,234

180

59,497

The Generation assets relate to electricity generating assets (wind turbines, solar panels and ancillaries).
Those assets held within the company’s subsidiaries: Good Energy Delabole Wind Farm Limited; Good Energy
Hampole Wind Farm Limited; Good Energy Woolbridge Solar Park Limited; Good Energy Creathorne Solar
Park Limited, Good Energy Rook Wood Solar Park Limited, Good Energy Carloggas Solar Park Limited, Good
Energy Lower End Solar Park Limited and Good Energy Cross Roads Solar Park Limited have been pledged
as security against bank and other loan liabilities.

Assets reclassified to assets held for sale are disclosed in note 21.

Furniture, fittings and equipment includes computer hardware which is held under finance leases. The finance
leased assets had a book cost and accumulated depreciation at 31 December 2017 totalling £311,000 (2016:
£169,000) and £108,000 (2016: £23,000) respectively.

100

Notes to the Financial Statements
16. Intangible Assets

Consolidated
Year ended 31
December 2017

Power
supply
Licences

Software
Licences

Website
development
costs

Goodwill Assets under
the course of
development

Total

£000’s

Cost

At 1 January 2017

180

3,462

1,446

1,740

6,837

Transfer of
assets course of
development

Additions

1,597

401

At 31 December 2017

180

5,460

143

152

1,446

(1,740)

351

752

7,589

(3,027)

(1,009)

(4,036)

(9)

(3,036)

(1,009)

(4,045)

180

435

1,424

143

1,446

1,740

351

3,801

3,544

Total

Consolidated
Year ended 31
December 2016

Power
supply
Licences

Software
Licences

Website
development
costs

Goodwill Assets under
the course of
development

£000’s

Accumulated
amortisation

At 1 January 2017

Charge for the year

At 31 December 2017

Net book value

At 1 January 2017

At 31 December 2017

Cost

At 1 January 2016

Additions

At 31 December 2016

Accumulated
amortisation

At 1 January 2016

Charge for the year

At 31 December 2016

Net book value

At 1 January 2016

At 31 December 2016

1,446

1,740

4,986

1,851

6,837

180

3,351

111

3,462

(1,660)

(1,367)

(3,027)

(9)

180

1,691

435

1,446

1,740

(1,669)

(1,367)

(3,036)

3,317

3,801

101

Financial StatementsStrategic ReportGovernance ReportFinancial StatementsNotes to the Financial Statements
16. Intangible Assets (continued)

Assets under the course of development relate to the implementation of a new billing system and the
launch of a new website.

All amortisation amounts are included within administration expenses.

Goodwill of £1,446,453 (2016: £1,446,453) comprises £1,060,996 (2016: £1,060,996) arising from the original
acquisition of Good Energy Limited, and £385,457 (2016: £385,457) from the original acquisition of the wind
farm at Delabole.

The carrying values of indefinite life assets included in intangible assets are: goodwill of £1,446,453
(2016: £1,446,453) and Power Supply Licence of £180,000 (2016: £180,000) which relates to the subsidiary,
Good Energy Limited. In arriving at the conclusion that these assets have an indefinite life, management
considers the fact that the Group is a profitable business and expects to hold and support these assets for an
indefinite period.

An impairment review is undertaken annually or more frequently, using value in use calculations, based
on pre tax cash flow projections over a five year period approved by management and discounted at
appropriate rates.

The result of this review was that no impairment is required in respect of the carrying values of the indefinite
life assets. The key assumptions for value in use are as follows:

Value in use assumptions

Gross margin*

Growth rate beyond five year plan

Pre tax discount rate

2017

2016

20%-30%

11%

*annual margins have been modelled in the five year cashflow at varying levels.

Sensitivity analysis has been performed on the impairment review. It has been noted that an increase in the
discount rate by 10% would not result in an impairment of the goodwill. Management believe any increase in
discount rates above 10% to be remote and therefore the Directors believe there to be significant headroom.

102

Notes to the Financial Statements
17a. Investments and Subsidiaries

Parent Company
Year ended 31 December 2017

Shares in Group
undertakings

Loans to Group
undertakings

Total

Cost and net book value

At 1 January 2017

Additions

Provisions

Repayments

At 31 December 2017

£000’s

4,646

37,610

23,861

(4,000)

(20,423)

37,048

42,256

23,861

(4,000)

(20,423)

41,694

Parent Company
Year ended 31 December 2016

Shares in Group
undertakings

Loans to Group
undertakings

Total

Cost and Net book value

At 1 January 2016

Additions

Repayments

At 31 December 2016

£000’s

4,646

30,560

17,464

(10,414)

37,610

35,206

17,464

(10,414)

42,256

Loans to Group undertakings are on terms appropriate to the activities of the subsidiary which are being
funded. Interest rates charged on these loans range from 2.75% to 8.85%.

A provision for £6,000,000 was recorded against the intercompany receivable loan for Good Energy
Generation Limited in 2015. An additional provision of £4,000,000 has been recognised in 2017. This has no
impact on the consolidated results of the Group.

103

Financial StatementsStrategic ReportGovernance ReportFinancial StatementsNotes to the Financial Statements
17a. Investments and Subsidiaries (continued)

The Group had the following subsidiaries at 31 December 2017 (all of which have the same registered
address as Good Energy Group PLC, which can be found within the Directors and Corporate Resources
section on the final page of this report):

Name

Country of
incorporation and
place of business

Proportion of
ordinary shares
directly held by
Parent

Nature of business

Good Energy Limited

Good Energy Gas Limited

Good Energy Generation
Limited

Good Energy Generation Holding
Company No.1 Limited

Good Energy Generation Assets
No.1 Limited*

Good Energy Hampole Windfarm
Limited*

Good Energy Woolbridge Solar
Park Limited*

Good Energy Creathorne Solar
Park Limited*

Good Energy Rook Wood Solar
Park Limited*

Good Energy Carloggas Solar
Park Limited*

Good Energy Lower End Solar
Park Limited*

Good Energy Cross Roads
Plantation Solar Park Limited*

Good Energy Delabole Wind
Farm Limited

Good Energy Cedar Windfarm
Limited

Good Energy Lanyon Solar Park
Limited

Good Energy Mapperton Solar
Park Limited

Good Energy Brynwhilach Solar
Park Limited

Good Energy Tidal Limited

Good Energy Development
(No.1) Limited

Good Energy Development
(No.2) Limited

100%

85%

100%

supply of renewably sourced
electricity and FIT administration

supply of gas

an investor in potential new
generation sites

holding company for a
generating asset sub group

holding company for generating
assets subsidiaries

generation of electric power by
wind turbine machinery

generation of electric power by
solar panels

generation of electric power by
wind turbine machinery

development of an energy
generating asset

investment holding company

development of an energy
generating asset

104

Notes to the Financial Statements
17a. Investments and Subsidiaries (continued)

Good Energy Development
(No.3) Limited

Good Energy Development
(No.4) Limited

Good Energy Development
(No.5) Limited

Good Energy Development
(No.6) Limited

Good Energy Development
(No.7) Limited

Good Energy Development
(No.8) Limited

Good Energy Development
(No.9) Limited

Good Energy Development
(No.10) Limited

Good Energy Development
(No.12) Limited

Good Energy Development
(No.14) Limited

Good Energy Development
(No.15) Limited

Good Energy Development
(No.16) Limited

Good Energy Development
(No.17) Limited

Llangyfelach Community Solar
Farm C.I.C

Worminster Down Somerset
Community Solar Farm C.I.C

Good Energy Development
(No.20) Limited

Good Energy Development
(No.21) Limited

Good Energy Development
(No.22) Limited

Good Energy Development
(No.24) Limited

Good Energy Development
(No.25) Limited

Good Energy Development
(No.26) Limited

Good Energy Development
(No.27) Limited

Good Energy Development
(No.28) Limited

100%

development of an energy
generating asset

105

Financial StatementsStrategic ReportGovernance ReportFinancial Statements
Notes to the Financial Statements
17a. Investments and Subsidiaries (continued)

Good Energy Development
(No.29) Limited

Good Energy Development
(No.30) Limited

Homegrown Energy Limited

100%

development of an energy
generating asset

dormant

*Entities indirectly owned by Good Energy Group PLC.

The subsidiaries above have all been included in the consolidated financial statements.

17b. Available-for-sale Financial Assets

Consolidated
Year ended 31 December 2017

Cost and Net book value

At 1 January 2017

Additions

At 31 December 2017

Available-for-sale financial
assets

£000’s

500

Available-for-sale financial assets comprise £500,000 (2016: £500,000) of unlisted securities denominated
in sterling.

18. Inventories

Renewable Obligation Certificates

Levy Exemption Certificates

Generation development sites

Total

Parent Company

Consolidated

2017

2016

£000’s

2017

£000’s

8,927

954

9,881

2016

£000’s

2,530

328

6,941

9,799

As at 31 December 2017 there were Renewable Obligation Certificates (ROCs) of £5,804,944 (2016:
£771,559) included in the above amount that were unissued for generation that had already taken place and
therefore these ROCs were not available for sale before the end of the financial year.

As at 31 December 2017 there were Levy Exemption Certificates (LECs) of nil (2016: 327,852) included in the
above amount.

During the year the Generation Development business was discontinued. Development projects which
are being actively marketed for sale have been transferred to Assets held for sale. Remaining Generation
develoment sites have been impaired to their minimum recoverable value based on the market value of
saleable assets. The cost of inventories recognised as an expense, including the impairment value, and
included in ‘cost of sales’ amounted to £3.7m (2016: £0.3m).

106

Notes to the Financial Statements
19. Trade and Other Receivables

Gross trade receivables and accrued income

Provision for impairment/non-payment of trade receivables

Net trade receivables and accrued income

Prepayments

Other taxation

Total

Parent Company

Consolidated

2017

2016

2017

2016

£000’s

163

178

33,526

17,571

(4,535)

(3,932)

28,991

13,639

1,647

2,060

552

2,013

32,698

16,204

Due to improved systems and reporting capability, trade receivables including debt and accrued income can
now be analysed on a per customer account basis. Where a customer account is in credit this is included in
deferred income in note 26 ‘Trade and other payables’. Comparative trade receivables are net of customer
balances in credit as the improved reporting capabaility was not present in this period.

The Group has a provision in place to set aside an allowance to cover potential impairment and non-
payment of trade receivables. Those debts which are neither past due nor impaired are considered to be
good and are expected to be recoverable. Some trade receivables are with customers who do not have
externally available credit ratings.

The movements on the provision for impairment and non-payment of trade receivables is shown below:

Movement on the provision for impairment and non-payment of trade
receivables

Balance at 1 January

Increase in allowance for impairment/non-payment

Impairment/non-payment losses recognised

Balance at 31 December

Ageing analysis of trade receivables past due but not impaired

Current and not past due

1 to 2 months

2 to 3 months

Over 3 months

Total

2017

£000’s

3,932

2,041

(1,438)

4,535

2017

£000’s

16,806

3,970

3,283

4,932

28,991

2016

£000’s

2,131

1,801

3,932

2016

£000’s

10,031

1,485

965

1,158

13,639

Trade receivables past due but not impaired relate entirely to a number of independent customers for whom
there is no recent history of default.

Trade receivables are all financial assets designated as loans and receivables.

107

Financial StatementsStrategic ReportGovernance ReportFinancial StatementsNotes to the Financial Statements
20. Cash and Cash Equivalents

Cash at bank and in hand

Short-term bank deposits

Security deposits

Total

Parent Company

Consolidated

2017

2016

2017

2016

£000’s

568

266

9,878

831

3,011

568

266

13,720

2,296

2,879

1,114

6,289

As part of the bank loan agreements, the lenders require a minimum cash balance to be held in separate
reserve accounts, these balances are disclosed as Restricted deposit accounts in Non-current assets on
the Statement of financial position. Included within cash at bank and in hand for both the parent company
and the consolidated position is £200,321 (2016: £162,676) in respect of monies held by the Good Energy
Employee Benefits Trust. The credit quality of cash and cash equivalents can be assessed by reference to
external credit ratings as follows:-

AA-

A+

B-

BBB+

Total

Parent Company

Consolidated

2017

2016

2017

2016

£000’s

200

274

568

163

103

266

200

9,882

450

627

2,561

13,720

163

4,447

450

1,229

6,289

Cash and cash equivalents are all financial assets designated as loans and receivables.

21. Assets and liabilities classified as held for sale

Property, plant and equipment

Inventories

Total assets

Deferred taxation

Total liabilities

Carrying value

Consolidated

2017

£000’s

4,288

1,265

5,553

2016

£000’s

5,095

(10)

5,553

5,085

The property, plant and eqipments assets held for sale at 31 December 2017 relate to Good Energy
Brynwhilach Solar Park Limited, sale contracts were exchanged before the the balance sheet date.

Held fo sale inventory costs relate to a wind development project within Good Energy Development (No.7)
Limited. This entity was actively marketed for sale in the year end 31 December 2017 and various offers are
under consideration.

108

Notes to the Financial Statements
22. Share Capital and Share Premium

Parent Company & Consolidated

Number of
authorised
shares

Number of
shares issued
and fully paid

Share
Capital

Share
Premium
Account

Total

At 1 January 2016

20,000,000

14,970,680

Proceeds from shares issued

1,514,023

At 31 December 2016

20,000,000

16,484,703

Proceeds from shares issued

32,457

At 31 December 2017

20,000,000

16,517,160

£000’s

748

825

826

9,786

2,760

12,546

106

10,534

2,837

13,371

107

12,652

13,478

The ordinary shares are the only class of shares in the Company. Holders of ordinary shares are entitled to
vote at general meetings of the Company and receive dividends as declared. The Articles of Association of
the Company do not contain any restrictions on the restrictions on the transfer of shares or on voting rights.

In 2017, the company issued 32,457 ordinary shares of 5p each for total consideration of £69,741 resulting in
a share premium of £68,118. This relates to two scrip dividend issues in lieu of full year and interim dividend
cash payments of 22,071 and 10,386 shares respectively (2016: 10,763 and 7,361 shares respectively). Share
premium in the period includes a further credit of £37,472 in relation to the final costs incurred against the
2016 share issue.

Clarke Willmott Trust Corporation Limited holds in trust 463,239 (2016: 495,739) ordinary shares of the
company for the present and the future beneficiaries of the Good Energy Group Employee Share Option
Scheme. These are deducted from equity as shown in the Consolidated and Parent Company Statements of
Changes in Equity. During the year the Trust disposed of 32,500 (2016: 20,000) shares as a result of options
exercised and acquired nil (2016: nil) shares.

The Directors recommend a final dividend of 2.3p per share (2016: 2.3p) subject to shareholder approval at
the Company’s AGM.

109

Financial StatementsStrategic ReportGovernance ReportFinancial StatementsNotes to the Financial Statements
23. Deferred Taxation

The provision for deferred taxation is made up as follows:

Consolidated

At 1 January

(Credited)/charged to the Consolidated Statement of Comprehensive Income

Elimination on disposal of subsidiaries

Charged to equity

At 31 December

Deferred tax asset to be recovered after more than 12 months

Deferred tax asset to be recovered within 12 months

Sub total-deferred tax assets

Deferred tax liabilities to be settled after more than 12 months

Deferred tax liabilities to be settled within 12 months

Sub total- deferred tax liabilities

Total net deferred tax liabilities

Deferred tax assets

On short term timing differences

Losses

Total

Deferred tax liabilities

On accelerated capital allowances

Accelerated
capital
allowances

Short-term
timing
differences

2017

2016

£000’s

684

(545)

(100)

106

145

567

215

(98)

684

2017

2016

£000’s

(1,811)

(123)

(1,934)

2,079

145

(722)

(236)

(958)

1,642

1642

684

2017

2016

£000’s

123

1,809

1,932

236

722

958

2017

2016

£000’s

2,077

1,642

Losses

Total

Deferred tax assets/(liabilities)

£000’s

At 1 January 2016

(Charged) to income statement

Credited to equity

At 31 December 2016

Credited/(charged) to the income statement

Elimination on disposal of subsidiaries

(Charged) to equity

At 31 December 2017

(895)

(747)

(1,642)

(537)

100

(2,079)

186

(48)

236

142

580

722

(7)

1,089

(106)

123

1,811

(567)

(215)

(684)

545

100

(106)

(145)

110

Notes to the Financial Statements
23. Deferred Taxation (continued)

Deferred tax assets have not been recognised in respect of restricted interest cost deductions in the period
due to the range of factors which will determine when or if the restricted costs can be deducted in future
periods. If the Group were able to recognise the deferred tax asset the profit would increase by £74,000.

24. Borrowings and Other Financial Liabilities

Current:

Bank and other borrowings

Bond

Loans from Group companies

Total

Non current:

Bank and other borrowings

Bond

Total

Parent Company

Consolidated

2017

2016

2017

2016

£000’s

447

8,288

187

8,922

125

15,090

7,874

23,089

5,606

8,288

5,891

15,090

13,894

20,981

Parent Company

Consolidated

2017

2016

2017

2016

£000’s

519

16,666

17,185

211

39,378

16,666

40.277

56,044

40.277

The Group has undrawn bank overdraft facilities of £10,000,000 (2016 : £6,757,144) as at 31 December
2017 and undrawn revolving credit facilities of £822,140 (2016 : £822,140). These facilities are secured by
guarantees from Good Energy Limited, Good Energy Gas Limited and other group entities.

At 31 December 2017, £6,834,591 (2016: £7,279,171) of the bank loans relate to the company’s subsidiary,
Good Energy Delabole Wind Farm Limited and is secured by a mortgage debenture on that company
dated 16 January 2010 incorporating a fixed and floating charge over all current and future assets of that
subsidiary. The facility will be repaid from future cash flows arising from the wind farm of this company.
On 7 January 2011, the loan balance was transferred from the build phase to the repayment phase, with
repayments of capital and interest scheduled bi-annually over 15 years.

As part of the facility Good Energy Delabole Wind Farm Limited entered into a floating rate to fixed rate
interest swap. They were entered into at the same time and in contemplation of one another, have the same
counter-party, relate to the same risk and amortise concurrently. Given these circumstances and the fact
that there is no economic need or substantive business purpose for structuring the transactions separately
that could not also have been accomplished in a single transaction these instruments are treated as one
fixed rate loan instrument in accordance with IAS 39. The fixed rate interest is payable at an annual rate
of 7.15%.

At 31 December 2017, £35,704,211 inclusive of £nil of accrued interest (2016: £37,399,386 inclusive of
£627,985 of accrued interest) of the bank loans relate to the company’s subsidiary, Good Energy Generation
Assets No. 1 Limited. The loan is secured by a mortgage debenture on that company and its subsidiaries
dated 17 December 2014 incorporating charges over the shares of that company and those of its
subsidiaries. The facility will be repaid from future cash flows arising from the subsidiaries of that company
with repayments of capital and interest scheduled quarterly over a period of 18 years commencing

111

Financial StatementsStrategic ReportGovernance ReportFinancial Statements
Notes to the Financial Statements
24. Borrowings and Other Financial Liabilities (continued)

17 December 2014. Interest is payable at 6.85% and the outstanding principal balance is partially exposed if
annual RPI inflation exceeds 3%. Costs incurred in raising finance were £2,754,299 (2016: £2,754,299) and
are being amortised over the life of the loan in accordance with IAS39.

On 2 October 2013 Good Energy Group launched a corporate bond which closed on 24 October 2013 with
subscriptions having reached the maximum target of £15,000,000. The bond was issued to bondholders on
22 November 2013 with interest scheduled bi-annually. The coupon rate is 7.25% or 7.50% for bondholders
that are customers of the Group. Capital repayment of the bond is payable following notice being received
from the bondholder no earlier than 4 years from inception. The total costs of issue were £770,879 which
are being amortised over the life of the bond. As at 31 December 2017 the amortisation recognised in
‘finance costs’ totalled £199,563 (2016: £191,248).

On 10 May 2017 Good Energy Group launched a second corporate bond with online applications closing on
5 June 2017 and paper applications closing on 12 June 2017. Total valid applications reached £16.8 million
(the maximum target was £20 million). The bond was issued to bondholders on 30 June 2017 with interest
scheduled bi-annually. The interest rate is 4.75% or 5.00% for bondholders that are customers of the Group.
Capital repayment of the bond is payable following notice being received from the bond holder no earlier
than 4 years from inception.

Good Energy Bonds I holders were able to roll over their first bond and this amounted to £6,509,750 of the
total amount.

On 13 February 2018 we announced the repayment of Good Energy Bonds I offering bondholders the option
to continue their investment at a revised interest rate of 4.25% or 4.50% for customers of the Group. £3.6m
of valid continuation forms were received at the deadline date. On 29 March 2019, £4.2m will be repaid to
Good Energy Bonds I bondholders.

Parent Company

Inter-company
loan

Bond

Bank and
other
borrowings

Finance
Lease

Total

£000’s

31 December 2017

Due less than 1 year

Due between 1 and 5 years

Total

188

Parent Company

Inter-company
loan

8,288

16,666

24,954

Bond

124

213

357

395

752

Bank and
other
borrowings

Finance
Lease

8,922

17,185

26,107

Total

31 December 2016

Due less than 1 year

Due between 1 and 5 years

Total

£000’s

7,874

15,090

7,874

15,090

119

189

147

23,089

211

23,300

112

Notes to the Financial Statements
24. Borrowings and Other Financial Liabilities (continued)

Consolidated

31 December 2017

Due less than 1 year

Due between 1 and 5 years

Due more than 5 years

Total

Consolidated

31 December 2016

Due less than 1 year

Due between 1 and 5 years

Due more than 5 years

Total

Bank and other
borrowings

Bond

Total

£000’s

5,606

8,121

31,257

8,288

16,666

44,984

24,954

13,894

24,787

31,257

69,938

Bank and other
borrowings

Bond

Total

£000’s

5,753

7,204

33,211

15,090

20,843

7,204

33,211

61,258

46,168

15,090

The fair values of borrowings have been calculated taking into account the interest rate risk inherent in the
loans and the bond. The fair value estimates and carrying values of borrowings (excluding issue costs) in
place at 31 December 2017 are:

2017

2016

Fair value Carrying value Fair value Carrying value

£000s

Good Energy Delabole Wind farm Ltd

Good Energy Generation Assets No. 1 Limited

Corporate bond

6,867

36,300

24,776

6,835

35,883

24,637

7,351

37,839

15,099

7,279

37,399

15,090

Borrowings are designated as other financial liabilities held at amortised cost.

25. Provisions for liabilities

A provision has been recognised for decommissioning costs associated with wind farms and solar parks
owned and operated by the Group. The value of the provision at 31 December 2017 is £1.25m (2016: £1.25m).

113

Financial StatementsStrategic ReportGovernance ReportFinancial Statements
Notes to the Financial Statements
26. Trade and Other Payables

Trade payables

Accruals and deferred income

Social security and other taxes

Total

Parent Company

Consolidated

2017

£000’s

2016

£000’s

272

334

234

330

2017

£000’s

2,405

28,719

1,547

32,671

2016

£000’s

4,934

14,104

898

19,936

Trade payables, accruals and other payables are designated as other financial liabilities held at
amortised cost.

27. Dividends

Amounts recognised as distributions to shareholders in the year (based on the number of shares in issue at
the record date):

Consolidated

Final dividend prior year of 2.30p per share (2016: 2.30p)

Interim dividend current year of 1.00p per share (2016: 1.00p)

Sub-total

Dividends waived

Total

2017

£000’s

2016

£000’s

379

165

544

(15)

529

368

140

508

(17)

491

Dividends waived represent dividends that would accrue on shares held by the Good Energy Group Employee
Benefits Trust were they not held by the Trust.

A final dividend of 2.3p per share was proposed on 21 March 2018, subject to shareholder approval at the
company’s AGM.

Of the total dividend distributed for the year, £69,254 (2016: £42,288) was paid in the form of scrip dividends
with the balance of £459,163 (2016: £448,792) settled in cash.

114

Notes to the Financial Statements
28. Cash Generated from Operations

Reconciliation of net income to net cash provided by operating activities:

Parent Company

Consolidated

2017

2016

2017

£000’s

2016

£000’s

(Loss)/profit before tax from
continuing operations

(2,579)

2,966

Loss before tax from discontinuing operations

(Loss)/profit before income tax

(2,579)

2,966

Adjustments for:

Depreciation

Amortisation

Gain on assets disposals

Write down of generation develoment
work in progress

Provision against investments in and loans to
subsidiaries

Share based payments

154

4,000

Dividend income from subsidiaries

(3,500)

(3,800)

734

(4,012)

(3,278)

3,329

1,008

(1,048)

3,651

263

Finance (income)/costs - net

(121)

(1,036)

4,858

Changes in working capital (excluding the effects
of acquisition and exchange differences on
consolidation)

Inventories

Trade and other receivables

Trade and other payables

(104)

(52)

197

(4,998)

(16,494)

12,736

Cash (outflow)/inflow from operations

(2,146)

(1,725)

2,022

(588)

1,434

2,808

1,368

230

4,516

(517)

(4,605)

5,422

10,656

115

Financial StatementsStrategic ReportGovernance ReportFinancial StatementsNotes to the Financial Statements
29. Share Based Payments

In order to retain the services of key employees and to incentivise their performance, the Parent Company
operates the Good Energy Employee Share Option Scheme under which certain employees of the Group are
granted options to acquire Ordinary 5p Shares at future dates. Costs in respect of these options of £263,259
(2016: £229,921 are recognised in the Consolidated Statement of Comprehensive Income. As at 31 December
2017, the following options had been issued:

Number of options Weighted average
exercise price

Total exercise
consideration

2017

2016

2017

2016

2017

2016

(Number)

(£)

£000’s

Outstanding at beginning of year

1,735,071

1,540,070

Granted

Exercised

143,891

270,001

(30,000)

(20,000)

Cancelled/surrendered

(440,615)

(55,000)

Outstanding at the end of year

1,408,347

1,735,071

1.09

0.05

1.25

1.11

0.97

1.28

0.05*

1.25

1.16

1.09

1,889

1,964

(38)

(491)

(25)

(64)

1,367

1,889

*Prior year shares granted are corrected to an exercise price of 5.0p.

In order to partially fulfil the options granted, 463,239 (2016: 495,739) shares representing approximately
33% (2016: 29%) of the options outstanding have already been issued and held by Clarke Willmott Trust
Corporation Limited as the Trustee of the Good Energy Group Employee Benefits Trust. Dividends have
been waived on these shares.

The options expire at various dates up to September 2029. Share options outstanding at the end of the
year have the following expiry date and exercise price:

Share options

(thousands)

2017

2016

189

179

229

102

200

100

206

144

189

179

259

102

100

150

200

270

1,408

1,484

Grant-vest

Expiry year Exercise price in £ per

share options

2019

2025

2026

2027

2028

2029

2030

0.75

0.50

1.15

1.25

0.00

2.29

0.00

2.25

2.27

2.29

0.05

2004-2007

2012-2015

2013-2016

2015-2017

2015-2018

2016-2019

2017-2020

116

Notes to the Financial Statements
29. Share Based Payments (continued)

The weighted average fair value of options granted during the year determined using the Black-Scholes
valuation model was £2.28 per option. The significant inputs into the model were weighted average share
price of £2.44 at the grant date, exercise price shown above, volatility of 13%, dividend yield of 3%, an
expected option life of three years and an annual risk-free interest rate of 0.3%. The volatility measured at
the standard deviation of continuously compounded share returns is based on statistical analysis of daily
share prices over the last year. See note 10 for the total expense recognised in the income statement for
share options granted to Directors and employees.

30. Pensions

The Group operates a defined contributions pension scheme. The assets of the scheme are held separately
from those of the Group in an independently administered fund. The pension cost represents contributions
payable by the Group to the fund and amounted to £472,457 (2016: £433,320).

Contributions totalling £60,217 (2016: £51,823) were payable to the fund at the end of the financial year and
are included in other payables.

The Group has no further pension liability either realised or contingent and in line with the Group’s
environmental position all employer contributions are invested within a suitable fund.

31. Commitments

31.1 Operating Lease Commitments

The future aggregate minimum lease payments are as follows:

Land and Buildings

Leases as lessee:

Less than one year

Between one and five years

More than five years

Total

Other operating leases

Leases as lessee:

Less than one year

Between one and five years

More than five years

Total

2017

£000’s

2016

£000’s

754

2,103

6,731

9,588

724

2,296

6,410

9,430

2017

£000’s

2016

£000’s

117

Financial StatementsStrategic ReportGovernance ReportFinancial StatementsNotes to the Financial Statements
31. Commitments (continued)

31.2 Capital Commitments

At 31 December 2017, the total capital commitments amount is nil (2016: £5,702,212). Of this nil (2016:
£4,910,212) related to contracts agreed on solar generation projects.

The figure for solar generation projects represents the maximum liability assuming sites continue
in development.

31.3 Finance lease and hire purchase commitments

The Group has finance leases and hire purchase contracts for various items of computer hardware. The
Group’s obligations under finance leases are secured by the lessor’s title to the leased assets. Future
minimum lease payments under finance leases and hire purchase contracts together with the present value
of the net minimum lease payments are, as follows:

2017

2016

Minimum
payments

Present value
of payments

Minimum
payments

Present value
of payments

£000’s

133

229

(16)

213

124

213

156

(9)

147

Within on year

After one year but not more than five years

More than five years

Total minimum lease payments

Less amounts representing finance charges

Present value of minimum lease payments

32. Related Party Transactions

The Group maintains processes to identify related party transactions which include ensuring that all
meetings of the Board of Directors begin with a declaration of interest in the matters arising. When related
party transactions are identified, steps are taken to ensure they are transparent and contracted on an arm’s
length basis. Dependent on the perceived risk and materiality of the transaction, these steps may include
forming an independent sub-committee of the board to consider the transaction and requesting that the
Group’s nominated advisor reviews the contractual terms.

The company’s significant subsidiary undertakings, including the name and proportion of ownership interest
for each, are disclosed in note 17a. Transactions between subsidiaries and between the company and its
subsidiaries are eliminated on consolidation. During the year the company had inter-company balances with
its subsidiaries. Interest is charged on these balances at either 2.5% above the Bank of England base rate
or at 8.85%. The higher rate is charged on inter-company loans drawing on the GCP loan which carries an
external rate of interest of 6.85%. Details of the amounts outstanding and received during the year on inter-
company loans are contained in note 17a.

In January 2010 Good Energy Delabole Wind Farm Limited, a subsidiary company, entered into an
agreement with Windelectric Management Limited, a company in which Martin Edwards (a director of the
company) has a controlling interest, to provide site management for the new wind farm at Delabole. The
amount payable each year is £75,000 index linked. The amount payable under this agreement during the
current year was £86,406 (2016: £84,481). No amounts were outstanding at the end of the financial year
(2016: £nil).

118

Notes to the Financial Statements
32. Related Party Transactions (continued)

In January 2010, Good Energy Delabole Wind Farm Limited entered into a 25 year lease with Martin Edwards
and other parties, in respect of the land which some of the new turbines occupy. For the first 10 years of
operation the rent will be the higher of an annual base rent of £50,240 or 3.25% of gross income from the
wind farm and from the 10th anniversary onwards it will be 4.5% of gross income from the wind farm.

The amount payable under this agreement during the current year was £56,373 (2016: £57,915). Of these
figures £17,373 was outstanding at the end of the financial year (2016: £nil).

In 2012, the Group entered in to an agreement in connection with generation development activities
with Shire Oak Energy Limited, a company wholly owned by Mark Shorrock who is the husband of Juliet
Davenport. During 2017 the Generation Development business segment was discontinued, no payments
were made to Shire Oak under the terms of the agreement in 2017 (2016: nil). No further payments remain
to be paid as a final payment, capped at £150,000, is no longer due as it relates to a solar farm development
which will not be energised.

In April 2014, Good Energy Tidal Lagoon Limited, a subsidiary of the Group, made a £500,000 investment
into Tidal Lagoon (Swansea Bay) plc. Mark Shorrock (the husband of Juliet Davenport) is employed as its
Chief Executive. The investment is structured with an option to purchase up to 10% of the power output
from the Tidal Lagoon project at market rates once completed.

33. Subsequent Events

On 1st March 2018 a reorganisation of the Group’s finance function was announced. As part of this work,
Denise Cockrem, Chief Financial Officer (CFO) since 2014, identified that the Company does not need a CFO
in addition to a Finance Director, and that her role could be made redundant. The Board has accepted this
proposal, and Denise will step down as CFO and as a director of Good Energy from the 31st March 2018.

34. Subsidiary Undertakings Exempt From Audit

Good Energy Group PLC has provided the necessary parental guarantees under section 479A of the
Companies Act 2006, to enable the following companies exemption from audit:

Good Energy Mapperton Solar Park (007) Limited
Good Energy Lanyon Solar Park (011) Limited
Llangyfelach Community Solar Farm C.I.C.
Worminster Down Somerset Community
Solar Farm C.I.C.
Good Energy Development (No.1) Limited
Good Energy Development (No.3) Limited
Good Energy Development (No.4) Limited
Good Energy Development (No.5) Limited
Good Energy Development (No.6) Limited
Good Energy Development (No.8) Limited
Good Energy Development (No.9) Limited
Good Energy Development (No.10) Limited
Good Energy Development (No.12) Limited
Good Energy Development (No.14) Limited

Good Energy Development (No.15) Limited
Good Energy Development (No.16) Limited
Good Energy Development (No.17) Limited
Good Energy Development (No.20) Limited
Good Energy Development (No.21) Limited
Good Energy Development (No.22) Limited
Good Energy Development (No. 24) Limited
Good Energy Development (No.25) Limited
Good Energy Development (No.26) Limited
Good Energy Development (No.27) Limited
Good Energy Development (No.28) Limited
Good Energy Development (No.29) Limited
Good Energy Development (No.30) Limited

119

Financial StatementsStrategic ReportGovernance ReportFinancial StatementsNotes to the Financial Statements
35. Generation assets – technical data

Wind farms

Solar farms (continued)

Hampole, South Yorkshire
Turbine manufacturer: Senvion
No. of turbines: 4
Installed capacity: 8.2MW
Turbine power output: 2.05 MW

Delabole, Cornwall
Turbine manufacturer: Enercon
No. of turbines: 4
Instlled capacity: 9.2MW
Turbine power output: 2.3 MW

Solar farms

Woolbridge, Dorset
Solar modules: Yingli
Nominal capacity DC: 4,996 kWp

Creathorne, Cornwall
Solar modules: Yingli
Nominal capacity DC: 1,841 kWp

Rook Wood, Wiltshire
Solar modules: ReneSola
Nominal capacity DC: 4,981 kWp

Lower End, Wiltshire
Solar modules: Jinko Solar
Nominal capacity DC: 4,999 kWp

Crossroads, Dorset
Solar modules: Jinko Solar
Nominal capacity DC: 4,999 kWp

Carloggas, Cornwall
Solar modules: ReneSola
Nominal capacity DC: 8,304 kWp

Brynwhilach, Swansea
Solar modules: Canadian Solar
Nominal capacity DC: 4,994 kWp

120

Directors and Corporate Resources

Directors

John Maltby (Non-Executive Chairman)

Juliet Davenport (Chief Executive)

Richard Squires (Non-Executive Director)

Emma Tinker (Non-Executive Director)

Timothy Jones (Non-Executive Director)

Company Secretary

Stephen Rosser

and Registered Office

Monkton Reach

Monkton Hill, Chippenham

Wiltshire SN15 1EE

Company Number

04000623

Principal place of business Monkton Reach

Monkton Hill, Chippenham

Wiltshire SN15 1EE

Independent Auditors

The Paragon, 32 Counterslip

Bristol BS1 6BX

Financial Advisors

Investec Bank plc

2 Gresham Street

London, EC2V 7QP

Bankers

Lloyds Bank

PO Box 112, Canons House, Canons Way

Bristol BS99 7LB

The Co-operative Bank PLC

PO Box 101, 1 Balloon Street

Manchester M60 4EP

Legal Advisors

Norton Rose LLP

3 More London, Riverside

London, SE1 2AQ

Registrars

Computershare Investor Services PLC
The Pavilions, Bridgwater Road

Bristol BS99 6ZY