Feedback – what do you think of this report?
Notes for this page
Refers to US dollars unless specified otherwise
- <1 year
Less than 1 year
- >1 year
Greater than 1 year
Proven and probable
An entity in which the Group has an equity interest and over which it has the ability to exercise significant influence
Certified emissions reduction (carbon emissions certificate)
Carbon emissions reduction target
Cash generating unit
Consumer Price Index
Earnings before interest, tax, depreciation and amortisation
European Union allowance (carbon emissions certificate)
Financial Services Authority
- FTSE 100
Financial Times Stock Exchange 100 share index, an average of share prices in the 100 largest, most actively traded companies on the London Stock Exchange
Fair value less costs to sell
- g CO2/kWh
Grammes of carbon dioxide per kilowatt hour
Group Financial Risk Management Committee
- IAS 19
The International Accounting Standard related to Employee Benefits. These financial reporting rules include requirements related to pension accounting
- IAS 39
The International Accounting Standard related to financial instruments (recognition & measurement)
International Financial Reporting Standard
- Jointly controlled entity
A joint venture which involves the establishment of an entity to engage in economic activity, which the Group controls jointly with its fellow venturers
- Level 1
Fair value is determined using observable inputs that reflect unadjusted quoted market prices for identical assets and liabilities, for example exchange-traded commodity contracts valued using close-of-day settlement prices. The adjusted market price used for financial assets held by the Group is the current bid price
- Level 2
Fair value is determined using significant inputs that may be either directly observable inputs or unobservable inputs that are corroborated by market data, for example over-the-counter energy contracts within the active period valued using broker-quotes or third-party pricing services and foreign exchange or interest rate derivatives valued using market-based data
- Level 3
Fair value is determined using significant unobservable inputs that are not corroborated by market data and may be used with internally developed methodologies that result in management's best estimate of fair value, for example energy contracts within the inactive period valued using in-house valuation techniques
Liquefied natural gas
Comprised of Treasury gilts designated at fair value through profit or loss on initial recognition and available-for-sale financial assets. The fair values of securities are based on quoted market prices, when available. If quoted market prices are not available, fair values are estimated using observable market data
Supplementary charge associated with UK Corporation Tax
- Spark spread
The difference between the price of a unit of electricity and the cost of the gas used to generate it
You do not have any pages or notes saved.
You can create your own list of important report pages and accompanying notes here. You can then print your selected pages and notes, download them as a PDF, or email a list of the pages you've saved.
To save a page, click the "Add+" button at the top of any report page.
To add a note to a page, click on the 'Notes' tab and fill out the form. If you want to add another note to the page, simply add it to the same form.
Your list of saved pages and notes will appear in this window.
Rewarding success fairly
The Remuneration Report up to this statement has not been audited. From this point until the end of the Report below, the disclosures, with the exception of the TSR graphs, have been audited by the Company's auditors, PricewaterhouseCoopers LLP.
|Date of appointment||Base pay/fees
|Cash AIS £000 (i)||Cash payments in lieu of pension
|Benefits and other cash £000 (ii)||Total emoluments 2011
|Total emoluments 2010
£000 (iii) (iv)
|Sam Laidlaw||1 July 2006||950||–||279||63||1,292||2,045|
|Phil Bentley||13 September 2000||635||–||–||46||681||1,299|
|Mark Hanafin||14 July 2008||575||160||230||34||999||1,427|
|Nick Luff||1 March 2007||610||66||244||20||940||1,433|
|Chris Weston||1 July 2009||510||125||–||435||1,070||1,380|
|Sir Roger Carr||1 January 2001||490||–||–||–||490||470|
|Dame Helen Alexander||1 January 2003||85||–||–||–||85||79|
|Margherita Della Valle||1 January 2011||65||–||–||–||65||–|
|Mary Francis||22 June 2004||105||–||–||–||105||99|
|Andrew Mackenzie||1 September 2005||65||–||–||–||65||63|
|Ian Meakins||1 October 2010||65||–||–||–||65||16|
|Paul Rayner||23 September 2004||88||–||–||–||88||83|
Annual Incentive Scheme (AIS)
The annual performance metrics in place for 2011 were designed to reward the delivery of our key strategic priorities for that year. Health, Safety & Environment (HS&E) performance was assessed against a corporate responsibility scorecard that includes HS&E performance indicators and incident rates. If overall business performance is not deemed satisfactory, the individual's bonus for the year may be reduced or forfeited, at the discretion of the Committee.
For 2011, the Committee set AIS targets to drive delivery of the annual operating plan. Delivery of the operating plan in each of the major business units and the Group as a whole would have resulted in AIS awards equivalent to half of the maximum opportunity. Achievement substantially in excess of the level required to meet the targets set would have been required to warrant the maximum award level.
Targets were set against a number of key measures including Group and business unit EP, operational metrics, HS&E performance and individual objectives.
The chart below illustrates the extent to which the targets set were achieved and accordingly the aggregate AIS award for each Executive Director.
Deferred and Matching Share Scheme (DMSS)
Part of the bonus earned under the AIS for the previous year is compulsorily deferred in to Centrica shares (deferred shares). During 2011, 40% of AIS earned in respect of 2010 for the Chief Executive and 30% for the other executives was compulsorily deferred, details of which can be found under DMSS for Executive Directors below.
Executives may make an additional voluntary deferral of AIS into Centrica shares (investment shares). The maximum total deferral that may be made, including the compulsory deferral, is 50% of the maximum AIS opportunity which may be earned for a year.
Deferred and investment shares that are held for three years will be matched to the extent that a long-term performance condition is met, details of which can be found under the Total remuneration package.
For awards made from 2010, matching shares were structured as nil-cost options for all UK resident participants.
2012 aggregate deferral amounts
Executive Directors participated in the AIS during 2011 and will defer in aggregate as follows in 2012:
|Director||Aggregate value of deferrals at award date £000|
Structure of deferrals and performance measures
EP is adjusted operating profit (after share of joint venture interest), less a tax charge based on the tax rate relevant to the different business segments and after deduction of a capital charge. The capital charge is calculated as capital employed multiplied by the Group's weighted average cost of capital. Where appropriate, expenditure on assets (and related costs) that are not yet in use (pre-productive capital) is excluded from capital employed.
Directors' interests in shares (number of shares)
The following table and the tables below show the interests of the Directors who held office at the end of the year in the ordinary shares of the Company and, for the Executive Directors, their interests in the Company's share schemes.
|Shareholdings as at 31 December
|Shareholdings as at 1 January
|DMSS total matching shares as at 31 December
|DMSS total matching shares as at 1 January
|LTIS total allocations of shares as at 31 December
|LTIS total allocations of shares as at 1 January
|Sam Laidlaw (i) (ii)||2,249,985||1,859,419||1,770,346||1,707,182||2,032,379||2,129,974|
|Phil Bentley (i) (ii)||1,995,871||2,184,946||769,198||588,285||1,361,477||1,408,432|
|Mark Hanafin (i) (ii)||488,941||319,259||859,269||599,594||1,209,126||1,229,137|
|Nick Luff (i) (ii)||639,791||624,534||914,752||865,804||1,280,733||1,322,949|
|Chris Weston (i) (ii)||591,361||552,344||762,580||652,367||1,086,610||1,043,752|
|Sir Roger Carr||58,361||26,441||–||–||–||–|
|Dame Helen Alexander||3,465||3,465||–||–||–||–|
|Margherita Della Valle||5,000||–||–||–||–||–|
From 1 January 2011 to 23 February 2012, none of the Directors had any interests in the securities of the Company's subsidiaries or associated undertakings.
Changes since 1 January 2012
During the period from 1 January to 23 February 2012, the only changes to the Directors' interests in shares were in respect of shares acquired through the SIP: 125 shares in respect of Sam Laidlaw, 126 shares in respect of Mark Hanafin, Nick Luff and Chris Weston and 127 shares in respect of Phil Bentley.
DMSS for Executive Directors
DMSS allocations (number of shares)
|Deferred and investment shares held as at 1 January 2011 (i) (ii)||Deferred and investment shares acquired during the year||Deferred shares released and investment shares transferred during the year||Deferred and investment shares held as at 31 December 2011 (iii)||Conditional matching shares held as at 1 January 2011 (iv)||Conditional matching and dividend shares awarded during the year (iv) (v)||Conditional matching shares vested during the year (vi)||Conditional matching shares held as at 31 December 2011|
Dates of allocation, prices and performance periods for outstanding DMSS awards
|Date of allocation of deferred shares||Market price at date of allocation of deferred shares
|Date of allocation of investment shares||Market price at date of allocation of investment shares
|Vesting date||Market price at vesting date
|2008 (i)||13 Oct 08||255.50||13 Oct 08||255.50||4 Apr 11||331.60|
|2009 (ii)||3 Apr 09||221.75||26 May 09||248.25||3 Apr 12||–|
|2010||6 Apr 10||296.89||6 Apr 10||296.89||8 Apr 13||–|
|2011||4 Apr 11||331.60||4 Apr 11||331.60||4 Apr 14||–|
Long Term Incentive Scheme (LTIS)
In 2011, LTIS allocations equal to 200% of base pay were awarded to Executive Directors and, at lower levels, to other senior executives. The performance measures attaching to the outstanding LTIS awards are shown in the table below.
|Vesting criteria 2010 and 2011||Performance condition over three-year period|
|One half on EPS growth against RPI growth(i)||Full vesting for EPS growth exceeding RPI growth by 30%
Zero vesting if EPS growth does not exceed RPI growth by 9%
Vesting will increase on a straight-line basis between 25% and 100% between these points
|One half on TSR measured as a percentage out-performance of the FTSE 100 Index||Full vesting for TSR out-performance of the FTSE 100 Index by 7% per annum
Zero vesting if TSR out-performance of the FTSE 100 Index does not exceed 0.1% per annum
Vesting will increase on a straight-line basis between 25% and 100% for TSR out-performance of the FTSE 100 Index between these points
|Vesting criteria 2009|
|One half on EPS growth against RPI growth(i)||As above|
|One half on TSR measured against a comparator group of the FTSE 100 as constituted at the beginning of the performance period||Full vesting for upper-quintile ranking
Zero vesting for sub-median ranking
Vesting will increase on a straight-line basis between 25% and 100% for ranking between these points
LTIS and SLTIS allocations for Executive Directors (number of shares)
|Vested during 2011||In performance period|
|Date of allocation||3 Apr 08 (i) (ii) (iv)||1 Sep 08 (i) (iii) (iv)||3 Apr 09||9 Sep 09||6 Apr 10 (v)||4 Apr 11 (v)|
|Chris Weston (vi)||85,039||–||330,614||98,000||345,458||312,538|
|Market price at allocation date||271.08p||292.00p||221.75p||257.40p||296.89p||331.60p|
|Vesting date||4 Apr 11||1 Sep 11||3 Apr 12||10 Sep 12||8 Apr 13||4 Apr 14|
|Market price at vesting date||331.60p||300.50p|
In assessing the extent to which the performance conditions have been met, the Committee uses data provided by Alithos Limited (an independent third party) for comparative TSR performance and audited results for EPS performance. The Committee also considers whether the extent to which the performance conditions have been achieved is a genuine reflection of the Company's underlying financial performance. The number of shares released will be increased to reflect the dividends that would have been paid on those shares during the three-year performance period.
In respect of LTIS awards from 2010 these were structured as nil-cost options for all UK resident participants.
The TSR graph for the three-year performance of the LTIS awards that vested in April 2011 is shown below, together with a comparison of the Company's TSR performance with that of the FTSE 100 Index for the five years ended 31 December 2011.
TSR – three year comparator group
Centrica and FTSE 100 Comparator Companies
Source: Alithos Limited, 3 April 2008 = 100
TSR – five year FTSE 100 Index
Centrica and FTSE 100 Index
Source: Alithos Limited, 31 December 2006 = 100
- These graphs have been provided by Alithos Limited (an independent third party) and have not been audited by the Company's auditors, PricewaterhouseCoopers LLP.
- The five year comparator graph is required by Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008. A rolling definition of the FTSE 100 has been used. This is not the same as the definition used for the purposes of the LTIS.
Directors' interests in share options
Full details of the options over ordinary shares in the Company held by Executive Directors who served during the year, and any movements in those options in the year, are shown below.
|Options held as at 1 January 2011||Options granted during the year||Options exercised during the year||Options lapsed during the year||Options held as at 31 December 2011||Exercise price (pence) (i)||Date from which exercisable||Expiry date|
|Sharesave||3,977||–||–||–||3,977||228.16||Jun 13||Nov 13|
|Sharesave||3,977||–||–||–||3,977||228.16||Jun 13||Nov 13|
|SESOS||336,012||–||–||–||336,012||255.94||Sep 08||Sep 18|
|Sharesave||4,727||–||–||–||4,727||193.54||Jun 12||Nov 12|
|Sharesave||7,392||–||–||–||7,392||227.24||Jun 13||Nov 13|
|ESOS||112,330||–||–||–||112,330||130.50||Mar 06||Mar 13|
|ESOS||120,379||–||–||–||120,379||199.36||Mar 07||Mar 14|
|ESOS||130,187||–||–||–||130,187||203.55||Apr 08||Mar 15|
|ESOS||267,920||–||–||–||267,920||253.80||Apr 09||Apr 16|
|Sharesave||4,727||–||–||–||4,727||193.54||Jun 12||Nov 12|
Executive Share Option Scheme (ESOS)
- Outstanding ESOS options held by Chris Weston were granted on 24 March 2003, 18 March 2004, 1 April 2005 and 3 April 2006.
- No options have been granted under the ESOS since 2006.
- The performance criteria have now been met in respect of all of the outstanding grants under ESOS and Chris Weston has a 10 year period from each date of grant during which he can exercise his options.
Special Executive Share Option Scheme (SESOS)
- Outstanding SESOS options held by Mark Hanafin were granted on 26 September 2008.
- The grant is not subject to any performance conditions and Mark Hanafin has a 10 year period from the date of grant during which he can exercise his options.
Nil-cost share options
- Nil-cost options were granted to the Executive Directors excluding Chris Weston on 6 April 2010 and 4 April 2011 and are disclosed under DMSS for Executive Directors.
- Grants under the LTIS are subject to TSR and EPS performance, as outlined under Total remuneration package and under Long Term Incentive Scheme (LTIS).
- Grants under the DMSS are subject to EP performance, as outlined under Total remuneration package and under DMSS for Executive Directors.
- Recipients will have a 10 year period from each date of grant during which to exercise any such options that may vest.
- Once vested, share options will be disclosed in the table above.
- Outstanding Sharesave options held by the Executive Directors were granted on 3 April 2008, 7 April 2009 and 6 April 2010.
- The closing price of a Centrica ordinary share on the last trading day of 2011, which was 30 December 2011, was 289.30 pence. The range during the year was 278.80 pence and 345.80 pence.
Phil Bentley and Chris Weston are members of the CPP. Sam Laidlaw, Mark Hanafin and Nick Luff, who all joined the Company in recent years, are not members of any of Centrica's pension schemes.
Centrica Pension Plan (CPP)
The CPP is a funded, HMRC-registered, final salary, contributory occupational pension scheme. Its rules have the following main features:
- normal retirement at age 62;
- right to an immediate, unreduced pension on leaving service after age 60 at own request with employer consent or on leaving service at the Company's request after age 55;
- life assurance cover of four times base pay for death in service;
- spouse's pension on death in service payable at the rate of 50% of the member's prospective pension and, on death after retirement, half of the accrued pension. Children's pensions on death are also payable at 25% of the member's prospective pension at normal retirement age;
- members' contributions payable at the rate of 6% of pensionable earnings. Contributions made by the Executive Directors who are also members of the CUPS are payable at the rate of 6% of their total pensionable earnings above the scheme earnings cap;
- pension payable in the event of retirement due to ill health;
- pensions in payment guaranteed to increase in line with the increase in RPI (a maximum of 6% applies to pension accrued after 1 April 2002 or the date of joining the CPP if later) and in deferment pensions are increased in line with statutory requirements (broadly CPI from January 2011 with a maximum of 2.5% per annum) but with a maximum rate of 6% per annum in respect of benefits accrued prior to 29 February 2012; and
- no discretionary practices are taken into account in calculating transfer values.
Centrica Unfunded Pension Scheme (CUPS)
All registered scheme benefits are subject to HMRC guidelines. As a result of the changes introduced by Centrica following the 2004 Finance Act, benefits at 6 April 2006 from the registered scheme, the CPP, could not exceed the Lifetime Allowance after taking account of retained benefits from all other sources notified to Centrica at this time. The CUPS provides any additional benefits in excess of the maximum amount that could be provided through the CPP on the members' uncapped pensionable earnings. The benefits that arise under CUPS are treated as being subject to the same rules as apply in respect of the registered portion of members' benefits. No individuals will receive benefits from Centrica which, when added to their retained benefits elsewhere at 6 April 2006, exceed two-thirds of their final pensionable earnings. CUPS is unfunded but the benefits are secured by a charge over certain Centrica assets. An appropriate provision in respect of the accrued value of these benefits has been made in the Company's balance sheet. Pensionable pay increases will be limited to pay reviews up to a maximum of 2% per annum with effect from 1 March 2012 for members of the CPP and CUPS.
Pension benefits earned by Directors in the CPP and CUPS
|Accrued pension as at 31 December 2011
|Accrued pension as at 31 December 2010
|Increase in accrued pension less inflation
|Transfer value as at 31 December 2011
|Transfer value as at 31 December 2010
|Contribution paid in 2011
|Difference in transfer value less contributions
|Transfer value of increase in accrued pension excluding inflation
This Report on remuneration has been approved by the Board of Directors and signed on its behalf by:
General Counsel & Company Secretary
23 February 2012