Centrica PLC — AGM Information 2020

Jul 31, 2020

THIS DOCUMENT AND ANY ACCOMPANYING DOCUMENTS ARE IMPORTANT AND REQUIRE YOUR IMMEDIATE ATTENTION.

If you are in any doubt as to the action you should take, you are recommended to seek your own financial advice immediately from your stockbroker, bank manager, fund manager, solicitor, accountant or other appropriate independent financial adviser duly authorised under the Financial Services and Markets Act 2000 if you are resident in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.

If you sell or have sold or otherwise transferred all of your Centrica Shares, please forward this document, together with the accompanying documents as soon as possible to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected, for delivery to the purchaser or the transferee. If you receive this document from another person, as a purchaser or transferee, please contact the Registrar for a Proxy/Voting Form using the contact on page 3 (Corporate details and advisers) of this document or go online at sharevote.co.uk. If you sell or have sold or otherwise transferred only part of your holding of Centrica Shares, you should retain this document and the accompanying documents and consult with the bank, stockbroker or other agent through whom the sale or transfer was effected as to the action you should take. However, neither this document nor any accompanying documents should be released, published, distributed, forwarded or transmitted, in whole or in part, in, into or from any jurisdiction in which to do so would constitute a breach of the relevant laws of such jurisdiction.

Any person (including, without limitation, custodians, nominees and trustees) who may have a contractual or legal obligation or may otherwise intend to forward this document to any jurisdiction outside the United Kingdom should seek appropriate advice before taking any such action. The distribution of this document and any accompanying documents into jurisdictions other than the United Kingdom may be restricted by law. Any person not in the United Kingdom into whose possession this document and any accompanying documents come should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

CENTRICA PLC

(Incorporated and registered in England and Wales with registered number 03033654)

Proposed sale of Direct Energy and Notice of General Meeting

Your attention is drawn to the letter from the Chairman of the Company which is set out in Part I (Letter from the Chairman) of this document and which contains the unanimous recommendation from the Board that you vote in favour of the Resolution to be proposed at the General Meeting referred to below.

Please read the whole of this document. In particular, your attention is drawn to the risk factors set out in Part II (Risk factors) of this document.

Notice of a General Meeting of the Company to be held at Millstream, Maidenhead Road, Windsor, Berkshire SL4 5GD at 2.00 p.m. on 20 August 2020 is set out at the end of this document. A Proxy/Voting Form for use at the General Meeting accompanies this Circular.

In line with recent U.K. legislation in relation to holding company meetings during the COVID-19 pandemic, the General Meeting will be convened with a minimum quorum of Shareholders (which will be facilitated by Centrica's management) in order to conduct the business of the General Meeting. Therefore, instead of attending the General Meeting, we ask Shareholders to vote by proxy on the Resolution. In the interests of health and safety, Shareholders (and any appointed proxies (other than the chairman of the General Meeting) or corporate representatives) will not be admitted to the General Meeting.

We will continue to closely monitor the developing impact of COVID-19, including the latest guidance from the U.K. Government. Should it become necessary or appropriate to revise the current arrangements for the General Meeting, this will be notified to Shareholders on our website and/or via a Regulatory Information Service.

To be valid, the enclosed Proxy/Voting Form should be completed, signed and returned in accordance with the instructions printed thereon as soon as possible and, in any event, so as to reach Centrica's registrars, Equiniti, by no later than 2.00 p.m. on 18 August 2020. The Proxy/Voting Form can be delivered: (i) by post or by hand to Equiniti, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA; (ii) electronically at sharevote.co.uk or (iii) in the case of Shareholders who hold their shares through CREST, utilising the CREST electronic proxy appointment service in accordance with the procedures set out in this Circular.

This document is a circular relating to the Transaction which has been prepared in accordance with the Listing Rules and approved by the Financial Conduct Authority.

Goldman Sachs International ("Goldman Sachs"), which is authorised by the Financial Conduct Authority and the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting as sponsor and joint financial adviser to Centrica and for no one else in connection with the Transaction and will not be responsible to anyone other than Centrica for providing the protections afforded to clients of Goldman Sachs or for providing advice in relation to the Transaction, the contents of this document or any transaction, arrangement or other matter referred to in this document.

Robey Warshaw LLP ("Robey Warshaw"), which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting as joint financial adviser to Centrica and for no one else in connection with the Transaction and will not be responsible to anyone other than Centrica for providing the protections afforded to clients of Robey Warshaw or for providing advice in relation to the Transaction, the contents of this document or any transaction, arrangement or other matter referred to in this document.

This document is dated 31 July 2020.

PRESENTATION OF INFORMATION

FORWARD-LOOKING STATEMENTS

This document includes statements that are, or may be deemed to be, forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms anticipates, believes, could, estimates, expects, intends, may, plans, projects, should or will, or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions.

These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this document and include, but are not limited to, statements regarding Centrica and its intentions, beliefs or current expectations concerning, among other things, the business, results of operations, prospects, growth and strategies of the Group, Direct Energy and the Retained Group.

By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the actual results of operations of the Group, Direct Energy or the Retained Group, and the developments in the industries in which they operate, may differ materially from those described in, or suggested by, the forward-looking statements contained in this document. In addition, even if the results of operations of the Group, Direct Energy or the Retained Group and the developments in the industries in which they operate are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods. A number of factors could cause results and developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, changes in law and regulation, currency fluctuations, changes in business strategy and political and economic uncertainty.

Forward-looking statements may, and often do, differ materially from actual results. Any forward-looking statements in this document reflect Centrica's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Group and its operations, results of operations and growth strategy. Shareholders should specifically consider the factors identified in this document which could cause actual results to differ before making a decision on the Transaction.

Other than in accordance with its legal or regulatory obligations (including under the Listing Rules, the Disclosure Guidance and Transparency Rules and the Prospectus Rules), Centrica is not under any obligation and Centrica expressly disclaims any intention or obligation (to the maximum extent permitted by law) to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The above explanatory wording regarding forward-looking statements does not in any way seek to qualify the statement regarding working capital that can be found at paragraph 11 of Part VI (Additional information) of this document.

ROUNDING

Percentages in tables have been rounded and accordingly may not add up to 100 per cent. Certain financial data have also been rounded. As a result of this rounding, the totals of data presented in this document may vary slightly from the actual arithmetic totals of such data.

PRESENTATION OF FINANCIAL INFORMATION

The historical financial information relating to Direct Energy presented in this document has been extracted without material adjustment from the consolidation schedules and supporting analysis that underlie the audited consolidated financial information of the Group for the financial years ended 31 December 2017, 31 December 2018 and 31 December 2019 and the Group's unaudited consolidated financial statements for the six-month period ended 30 June 2020. Unless otherwise indicated, financial information in this document relating to Centrica has been prepared in accordance with IFRS.

Pro forma financial information

In this document, any reference to "pro forma" financial information is to information which has been extracted without material adjustments from the Unaudited Pro Forma Financial Information contained in Part V (Unaudited Pro Forma Financial Information of the Retained Group) of this document. The Unaudited Pro Forma Financial Information is presented in millions of Pounds Sterling. The Unaudited Pro Forma Financial Information has been prepared to illustrate the effect of the Transaction on the consolidated net assets of the Retained Group as if the Transaction has occurred on 30 June 2020.

The Unaudited Pro Forma Financial Information is shown for illustrative purposes only and because of its nature addresses a hypothetical situation. It does not represent the actual financial position of the Retained Group. Furthermore, it does not purport to represent what the Retained Group's financial position would actually have been if the Transaction had been completed on the indicated date and is not indicative of the results that may or may not be expected to be achieved in the future.

The Unaudited Pro Forma Financial Information has been prepared in accordance with Annex 20 of the Prospectus Delegated Regulation and on the basis of the financial information of the Group as at 30 June 2020, the date to which the latest unaudited financial information in relation to the Group was prepared. The Unaudited Pro Forma Financial Information has been prepared pursuant to Listing Rule 13.3.3R in a manner consistent with the accounting policies of the Group.

Non-IFRS measures

The Directors and the Group's management believes that reporting adjusted measures provides additional useful information on business performance and underlying trends. These measures are not defined terms under IFRS and may not be comparable with similarly titled measures reported by other companies.

In the ordinary course of the Group's reporting, the Directors and the Group's management use "Adjusted Revenue" and "Adjusted Operating Profit" to evaluate segment performance.

Adjusted Revenue is defined as revenue adjusted for certain derivative re-measurements. Adjusted Operating Profit is defined as operating profit before exceptional items and certain derivative re-measurements.

Exceptional items and certain derivative re-measurements are excluded because these items are considered by the Directors and the Group's management to distort the Group's core business performance.

The Direct Energy Adjusted Operating Profit and Direct Energy Adjusted Revenue have been extracted from the first column entitled "Business performance" of the historical income statement information for Direct Energy for the year ended 31 December 2019 as set out in Part IV (Historical financial information relating to Direct Energy) of this document.

In addition, this document also makes reference to "Underlying Adjusted EBITDA". Underlying Adjusted EBITDA has been calculated by taking Adjusted Operating Profit of Direct Energy of £221 million (\$282million) and adding back: (i) an amount of £27 million (\$34 million), being the net amount of central overhead costs allocated to Direct Energy in the preparation of the Group's accounts and the historical income statement information for Direct Energy for the year ended 31 December 2019 (as set out in Part IV (Historical financial information relating to Direct Energy) of this document) which will not transfer with the Direct Energy perimeter as part of the Transaction; (ii) an amount of £20 million (\$26 million) of bonus accruals subsequently cancelled in July 2020 and not paid, taken into account in calculating the operating costs of Direct Energy in the preparation of the Group's accounts and the historical income statement information for Direct Energy for the year ended 31 December 2019 (as set out in Part IV (Historical financial information relating to Direct Energy) of this document); and (iii) an amount of £90 million (\$115 million) of depreciation and amortisation taken into account in calculating the operating costs of Direct Energy in the preparation of the Group's accounts and the historical income statement information for Direct Energy for the year ended 31 December 2019 (as set out in Part IV (Historical financial information relating to Direct Energy) of this document).

Underlying Adjusted EBITDA is reconciled to the IFRS measure of Direct Energy Group operating profit of £(97) million in the table below.

Calculation of Underlying Adjusted EBITDA for the 12 months ended 31 December 2019

	£m	\$m
Direct Energy Group Operating Profit	(97)	(124)
Adjusted for:
Exceptional items	(19)	(24)
Derivatives and certain re-measurements	337	430
Direct Energy Adjusted Operating Profit	221	282
Adjusted for:
Central overhead allocation	27	34
Bonus cancellation	20	26
Depreciation and amortisation	90	115
Direct Energy Underlying Adjusted EBITDA	358	457

EXCHANGE RATES

Throughout this document, unless otherwise stated, the USD to GBP exchange rate used in this document is as derived from Eikon on 24 July 2020 (the date on which the Transaction was signed and announced), being \$1.27 to £1.00. For Direct Energy's 2019 income statement financials, the USD to GBP exchange rate used is the average over 2019, being \$1.28 to £1.00.

CURRENCIES

Unless otherwise indicated in this Circular, all references to "£", "GBP", "pounds", ''Pound Sterling'', "Sterling'', "p", "penny" or ''pence'' are to the lawful currency of the U.K.

Unless otherwise indicated in this Circular, all references to "\$", "US\$", "USD", "U.S. Dollars", "U.S. Dollar" or "cents" are to the lawful currency of the United States.

DEFINITIONS

Certain terms used in this document, including capitalised terms and certain technical terms, are defined and explained in Part VIII (Definitions) of this document.

INCORPORATION BY REFERENCE

Certain information in relation to the Company is incorporated by reference into this document. Further information is set out in Part VII (Information incorporated by reference) of this document. Without limitation, unless expressly stated herein (in particular as stated in Part VII (Information incorporated by reference)), the contents of the websites of the Group and any links accessible through the websites of the Group do not form part of this document.

NO PROFIT FORECAST OR ESTIMATES

Unless otherwise stated (in particular, see paragraph 13 of Part VI (Additional Information) of this document), no statement in this document is intended as a profit forecast or estimate for any period and no statement in this document should be interpreted to mean that earnings, earnings per share or income, cash flow from operations or free cash flow for the Group, Direct Energy or the Retained Group, as appropriate, for the current or future financial years would necessarily match or exceed the historical published earnings, earnings per share or income, cash flow from operations or free cash flow for the Group, Direct Energy or the Retained Group, as appropriate.

NO OFFER OR SOLICITATION

This document is not a prospectus and it does not constitute or form part of any offer or invitation to purchase, acquire, subscribe for, sell, dispose of or issue, or any solicitation of any offer to sell, dispose of, purchase, acquire or subscribe for, any security.

CONTENTS

Expected timetable of principal events	2
Corporate details and advisers	3
Part I Letter from the Chairman	4
Part II Risk factors	14
Part III Summary of the principal terms of the Transaction Documents	20
Part IV Historical financial information relating to Direct Energy	31
Part V Unaudited Pro Forma Financial Information of the Retained Group	35
Part VI Additional information	40
Part VII Information incorporated by reference	53
Part VIII Definitions	54
Notice of General Meeting	65

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Each of the times and dates in the table below is indicative only and may be subject to change by Centrica, in which event details of the new times and dates will be notified to the Financial Conduct Authority and, where appropriate, to Shareholders by announcement through a Regulatory Information Service.

All references to the times in the timetable below are to London times.

EVENTS	TIME AND/OR DATE
Announcement of the Transaction	24 July 2020
Publication of this document, the Notice of General Meeting and the Proxy/Voting Form	31 July 2020
Posting of this document, the Notice of General Meeting and the Proxy/Voting Form	4 August 2020
Latest time and date for receipt of Proxy/Voting Forms, CREST Proxy Instructions and electronic registration of proxy appointments	2.00 p.m. on 18 August 2020
Record time for entitlement to vote at the General Meeting	close of business on 18 August 2020
General Meeting	2.00 p.m. on 20 August 2020
Expected timing of Completion	Q4 2020

CORPORATE DETAILS AND ADVISERS

Registered office	Millstream Maidenhead Road Windsor Berkshire SL4 5GD
Sponsor and joint lead financial adviser	Goldman Sachs International Plumtree Court 25 Shoe Lane London United Kingdom EC4A 4AU
Joint lead financial adviser	Robey Warshaw LLP 9 Grosvenor Square London W1K 5AE
U.K. legal adviser to the Company	Slaughter and May One Bunhill Row London EC1Y 8YY
U.S. legal adviser to the Company	Cravath, Swaine & Moore LLP Worldwide Plaza 825 Eighth Avenue New York, NY 10019 United States
Auditor and reporting accountants	Deloitte LLP 1 New Street Square London EC4A 3HQ
Registrar	Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA

PART I LETTER FROM THE CHAIRMAN

Centrica plc (Incorporated and registered in England and Wales with No 03033654)

Directors Scott Wheway Chris O'Shea Johnathan Ford Joan Gillman Stephen Hester Pam Kaur Heidi Mottram Kevin O'Byrne Carol Arrowsmith

Registered Office Millstream Maidenhead Road Windsor Berkshire SL4 5GD

31 July 2020

Dear Shareholder,

Proposed sale of Direct Energy for \$3.625 billion to NRG Energy

1. Introduction

On 24 July 2020, Centrica announced that it had entered into an agreement to sell its North American energy supply, services and trading business, Direct Energy, to NRG Energy for \$3.625 billion in cash (equivalent to approximately £2.85 billion) on a debt free, cash free basis.

2. Background to and reasons for the Transaction

Since Centrica's entry into North America in 2000, Direct Energy has been a valuable and strategically important part of the Centrica Group. However, having received a highly compelling unsolicited offer from NRG Energy to acquire Direct Energy, Centrica entered into a limited period of exclusive negotiations with NRG Energy to explore further the basis for a transaction.

The Board believes the Transaction at the agreed price of \$3.625 billion (equivalent to approximately £2.85 billion) is an attractive value for Direct Energy, representing a multiple of 7.9x 2019 Underlying Adjusted EBITDA of \$457 million. The Board therefore unanimously agreed that the Transaction is in the best interests of Shareholders and other stakeholders as a whole.

The Transaction enables Centrica to simplify further its business, which alongside its plans announced in June 2020 for a significant restructure and a revised operating model, will create a simpler, leaner Group focused on delivering for its customers. Following Completion, Centrica will primarily be a U.K. and Ireland focused energy services and solutions company with a large customer base and attractive market positions.

The simplification of the Group is expected to allow Centrica to deliver high quality customer service and a more competitive cost base, to enable growth from its core energy and services offerings and from targeted opportunities in related newer low-carbon services and solutions. The Group's strategy remains to exit its 69 per cent. shareholding in the Spirit Energy oil and gas exploration and production business and its minority interest in the U.K.'s Nuclear fleet, to create a wholly customer focused company.

The Retained Group will have a more stable financial profile with an increased proportion of its cash flows generated from contracted services. By divesting Direct Energy Business, the Transaction will also remove a source of earnings volatility for Centrica, which currently occurs as a result of the trading and optimisation activities from contracted assets (such as gas pipeline contracts) that form part of Direct Energy Business, which will no longer form part of the Group following the Transaction. The Transaction will allow Centrica to strengthen its balance sheet through a significant reduction in net debt and a material contribution to the Pension Schemes. The Board remains committed to maintaining a level of net debt that is commensurate with the cash flow generation of the Group and maintaining corporate investment grade credit ratings.

It is expected the Transaction will have a dilutive effect on earnings per share. However, the Board believes that the Company's simplified and more stable financial profile will result in greater predictability of earnings with the ability to generate attractive profits and operating cash flows. The Group's intention is to re-commence dividends for shareholders when it is prudent to do so.

3. Information on Direct Energy

Direct Energy is one of North America's largest retail providers of electricity, natural gas and home and business energy-related services. Direct Energy is headquartered in Houston, Texas, with regional offices across the U.S. and Canada.

Direct Energy comprises two business units:

• "Direct Energy Home": Supplies competitive and reliable energy and provides home services to customers in North America. Direct Energy Home is one of North America's largest energy retailers with more than 3.3 million residential customers. Direct Energy Home also offers customers whole-home warranties and system-level protection plans with Home Warranty of America and Direct Energy Protection Plans. Direct Energy Home's other residential brands include CPL Retail Energy, WTU Retail Energy, First Choice Power, Gateway Energy, Bounce Energy, Airtron and America's Water Heater Rentals. Direct Energy Home currently operates in all 50 states in the U.S. and one Canadian province; and
• "Direct Energy Business": Supplies competitive and reliable electricity and natural gas and energy services to retail and wholesale customers across North America. Direct Energy Business is one of the largest commercial and industrial retail energy providers in North America, serving around 160,000 retail customers across almost 500,000 locations. Direct Energy Business delivered approximately 81TWh of power and approximately 775Bcf of gas to retail customers in 2019. Direct Energy Business is a leading natural gas and power wholesale provider in North America, with significant trading and optimisation positions, a large contracted asset base and established long-term customer relationships. Direct Energy Business currently operates in 27 states in the U.S. and 6 Canadian provinces.

4. Information on NRG Energy

NRG Energy is an integrated power company, generating electricity and providing energy and related services to residential, industrial and commercial customers through various brands and sales channels across the U.S. and Canada. NRG Energy serves approximately 3.7 million customers, making it one of the largest competitive energy retailers in the U.S. NRG Energy owns a diversified power generation portfolio with approximately 23,000 MW of fossil fuel, nuclear and renewable generation capacity at 32 plants.

For the year ended 31 December 2019, NRG Energy reported income from continuing operating activities of \$4.1 billion and cash flows from continuing operating activities of \$1.4 billion. The financial information set out in this paragraph has been extracted without material adjustment from NRG Energy's audited consolidated financial statements for the year ended 31 December 2019.

5. Key terms of the Transaction

The key terms and conditions of the Transaction are that:

• Centrica will, on the terms and subject to the conditions in the Purchase Agreement, sell to NRG Energy the shares in the entities comprising Direct Energy;
• Centrica will, on Completion (subject to customary adjustments to reflect the cash and debt being transferred as part of Direct Energy and a customary working capital adjustment mechanism) receive \$3.625 billion in cash (equivalent to approximately £2.85 billion);
• the Transaction is conditional on, among other things, Shareholders passing a vote on the Resolution by a simple majority at the General Meeting as required under the Listing Rules, and receipt of certain antitrust and regulatory approvals in the U.S. and Canada (which the Parties have, subject to certain exceptions, agreed to use a "reasonable best efforts" standard to obtain, including committing to make required divestments within specific parameters);
• Centrica has agreed to pay NRG Energy a termination fee of \$30,027,250 if the Transaction fails to complete as a result of (i) the Purchase Agreement automatically terminating upon the Board modifying or withdrawing its recommendation that Shareholders approve the Transaction, (ii) Centrica validly terminating the Purchase Agreement in order to enter into a definitive agreement that Board determines constitutes a Superior Proposal, prior to the passing of the Resolution at the General Meeting, or (iii) either Centrica or NRG terminating the Purchase Agreement upon the Resolution failing to be approved by Shareholders at the General Meeting;
• Centrica has agreed that it will not solicit any proposals from a third party to acquire Direct Energy. However, Centrica is permitted, prior to the Resolution being passed at the General Meeting, to engage with third parties in relation to any unsolicited proposal which the Board determines, in good faith, constitutes or is reasonably likely to lead to a Superior Proposal;
• NRG Energy has agreed to pay Centrica a termination fee of \$180 million if the Transaction fails to complete as a result of (i) either Centrica or NRG Energy terminating the Purchase Agreement at the Outside Date as a result of one or more conditions to Completion relating to the receipt of specified antitrust or regulatory

approvals not having been satisfied or waived, (ii) either Centrica or NRG Energy terminating the Purchase Agreement as a result of a final judgment of a Governmental Entity issued with respect to specified antitrust or other review laws that permanently restricts the Transaction from proceeding to Completion, (iii) NRG Energy terminating the Purchase Agreement as a result of a final judgment of a Governmental Entity being issued or a law being enacted that imposes a burdensome condition in connection with specified antitrust or other review laws or (iv) Centrica terminating the Purchase Agreement as a result of NRG Energy failing to use its "reasonable best efforts" to satisfy the conditions with respect to specified antitrust or regulatory approvals;

• NRG Energy has obtained representation and warranty insurance which, following Completion, will be its sole recourse for any claim in respect of the representations and warranties given by Centrica, CBHL and CGHL in the Purchase Agreement, subject to limited exceptions; and
• notwithstanding the fact they do not form part of Direct Energy Home or Direct Energy Business, certain assets and liabilities related to Centrica Business Solutions and Centrica Innovations are currently owned (in part) by entities belonging to the Direct Energy Group. The Purchase Agreement contains provisions setting out certain pre-Completion re-organisation steps to ensure such assets and liabilities, as well as assets and liabilities relating to Centrica's legacy exploration and production activities in Canada and its U.S. solar business, are carved-out from the Direct Energy Group prior to Completion and retained by the Retained Group.

The Transaction is expected to complete in the fourth quarter of 2020.

In addition, Centrica and NRG have agreed to cooperate to finalise the terms of the Transition Services Agreement to be entered into at Completion, pursuant to which Centrica will provide or procure the provision of certain services relating to Direct Energy. Centrica will retain the North American operations of Centrica Business Solutions, and Direct Energy will provide or procure the provision of certain services relating to Centrica Business Solutions for a transitional period following Completion while separation is taking place.

A more detailed summary of the terms and conditions of the Transaction, including details of the Purchase Agreement and the Transition Services Agreement, is set out in Part III (Summary of the principal terms of the Transaction Documents) of this document.

6. Agreement with the Group's Pension Scheme Trustees

The issued share capital of Direct Energy U.S. is currently pledged up to a fixed amount of £1.235 billion in favour of the Pension Schemes as security for Centrica's obligations to make payments to the Pension Schemes. The trustees of the Pension Schemes have agreed to relinquish this security on or prior to Completion and in return, Centrica has agreed to provide an alternative security package on or prior to Completion comprising the posting of letters of credit in the amount of £745 million and a payment of £250 million from the Net Cash Proceeds into an escrow account secured in favour of the Pension Schemes. In addition, Centrica has agreed to pay an amount of up to £240 million from the Net Cash Proceeds relating to payments which Centrica would have to make as a result of redundancies which take place between 1 July 2019 and 30 June 2021 (in respect of which a deferral agreement is currently in place).

Centrica and the trustees of the Pension Schemes have also agreed it is their mutual intention to agree terms on which Centrica will, following Completion, make a contribution to the Pension Schemes out of the Net Cash Proceeds arising from the Transaction. Pending the conclusion of these discussions, Centrica has agreed not to make any distributions to Shareholders in excess of the Retained Group's Free Cash Flow (as defined in paragraph 9.1 of Part VI (Additional information) of this document) or to prepay any external financial indebtedness before its scheduled repayment date in an amount exceeding £150 million (subject to certain permitted exceptions). The release of the security described above is not conditional upon having agreed the amount of any contribution.

The latest actuarial valuation for the Pension Schemes as at 31 March 2018, agreed with the Pension Trustees during 2019, was a technical provisions deficit of £1.4 billion. The Group committed to additional annual cash contributions to fund this deficit of £233 million in 2019 and £175 million per annum from 2020 to 2025, with a balancing payment of £93 million in 2026. The next triennial review is scheduled for 31 March 2021. On a pure rollforward basis from 31 March 2018, using the same methodology and consequent assumptions, the technical provisions deficit would be approximately £2.4 billion as at 30 June 2020 (an increase from approximately £1.6 billion as at 31 December 2019, as previously disclosed in Centrica's 2019 Annual Report and Accounts). At the next triennial review, the valuation methodology and assumptions may differ from those previously used. It is expected that both the valuation methodology and the contribution described above will be agreed in the context of the next triennial review.

7. Use of proceeds and financial effects of the Transaction on the Retained Group

The net cash proceeds arising from the Transaction are expected to be approximately £2.7 billion after adjustment for estimated debt-like items of approximately £0.1 billion and estimated Transaction costs, including taxation costs of restructuring prior to disposal, of approximately £0.1 billion (the "Net Cash Proceeds"). Centrica will retain cash generated by Direct Energy between signing and Completion.

The Board intends to use the Net Cash Proceeds to make a significant reduction in net debt and to make a material contribution to the Pension Schemes.

As set out in paragraph 6 of this Part I above, pending agreement on the amount of such contribution to the Pension Schemes, Centrica has agreed that £250 million of the Net Cash Proceeds will be placed into an escrow account secured in favour of the Pension Schemes. Centrica has also agreed that up to £240 million of the Net Cash Proceeds will be used to make payments to the Pension Schemes which Centrica would have to make as a result of redundancies which take place between 1 July 2019 and 30 June 2021 (in respect of which a deferral agreement is currently in place).

The Board remains committed to maintaining a strong balance sheet and liquidity position with no material covenants on any of the Group's existing debt. In addition, the Board intends to ensure that Centrica has a level of net debt commensurate with the cash flow generation of the Group and with maintaining corporate investment grade credit ratings, which will allow Centrica to efficiently procure energy and secure collateral lines to support its core businesses, as well as providing access to cost effective, short term sources of liquidity.

Centrica expects that the Net Cash Proceeds applied to reduce net debt will initially be held as cash on Centrica's balance sheet. However, Centrica intends to carry out a liability management exercise post-Completion, which may allow Centrica to reduce its interest charge by opportunistically retiring gross-debt in a value accretive manner.

The strengthened balance sheet resulting from the reductions in net debt and the contribution to the Pension Schemes, and the cash flows generated by the Retained Group are expected to result in an attractive proposition for Centrica's stakeholders, with the potential for growth in earnings and operating cash flows. The Board also recognises the importance of dividends to Shareholders, and intends to recommence dividends when it is prudent to do so.

Financial effects of the Transaction on the Retained Group

In the financial year ended 31 December 2019, the Direct Energy Group contributed Adjusted Operating Profit of £221 million (\$282 million) to the Group and profit for the year of £105 million (\$134 million) to the Group. As at 30 June 2020, Direct Energy reported gross assets of £4.0 billion.

Following Completion, the Retained Group will no longer receive the contribution that Direct Energy currently makes to the consolidated trading profit of the Group. The reduction in profitability will be partially offset by lower net interest costs on the Retained Group's outstanding net debt. However, it is expected that the Transaction will have a dilutive effect on earnings per share, with reduced profitability for the Retained Group following Completion.

On 28 July 2020, Moody's affirmed Centrica's 'Baa2' long and 'P-2' short-term issuer credit ratings following announcement of the Transaction. Moody's also announced that it was placing Centrica's rating on negative outlook, given the Group's evolving business profile and uncertainty regarding the final shape of the Group and its financial profile, in light of the Company's strategy of divesting its interests in Spirit Energy and Nuclear, and the persistently difficult operating environment. On 30 July 2020, Standard & Poor's also affirmed Centrica's 'BBB' long and 'A-2' short-term issuer credit ratings following announcement of the Transaction. It also announced that it was placing Centrica's rating on negative outlook, reflecting the ongoing challenging market conditions due to high competitive pressure in the U.K. energy market and the uncertain effect of the COVID-19 pandemic over the next two years. Standard & Poor's also noted that, in its view, should the Transaction be cancelled or materially delayed, this would likely weaken the Group's credit profile.

The financial information in this paragraph 7 has been extracted without material adjustment from the financial information contained in Part IV (Historical financial information relating to Direct Energy) of this document. The effects of the Transaction upon the net assets of the Group are set out in Part V (Unaudited Pro Forma Financial Information of the Retained Group) of this document.

During the current and following financial years, Centrica may incur restructuring and incremental costs relating to the separation of Direct Energy from the Retained Group that are in addition to any restructuring costs relating to the Group's revised operating model as announced in June 2020. The Group expects any incremental costs to arise principally from services that were provided to Direct Energy by the Group's central functions that will not transfer with the business, however these costs are not expected to be material. Centrica would expect to eliminate these costs over time and will benefit from additional cost efficiencies as a result of further rationalisation of Group functions and simplification of the operating model.

8. Information on the Retained Group

The Group's focus is on being an energy services and solutions company, focused on satisfying the changing needs of its customers and enabling the transition to a lower carbon future. Centrica has previously announced its intention to exit from its oil and gas exploration and production and Nuclear activities, an intention that remains, though the Board is mindful that market conditions may not currently be conducive to realising appropriate value for these businesses.

Centrica announced plans for a significant restructure of the Group's operating model in June 2020, designed to create a simpler, leaner Group focused on delivering for its customers.

This revised operating model is expected to accelerate the delivery of the Group's targeted annualised cost savings of £1 billion between 2019 and 2022 first announced at Centrica's interim financial results in July 2019 and reconfirmed at the preliminary results in February 2020. The majority of the remaining restructuring is expected to take place in the second half of 2020. It is planned to lead to a reduction of around 5,000 roles across the Group, with over half of the departures expected to come from management layers. The large majority of the remaining restructuring is expected to take place in the U.K., and therefore delivery of the cost savings is not anticipated to be materially impacted by the Transaction.

These organisational changes are expected to allow Centrica to deliver high quality customer service and a more competitive cost base, and to enable growth from its core energy and services offerings and from targeted opportunities in related newer lowcarbon services and solutions.

Following Completion, Centrica will primarily be a UK and Ireland focused company. The Group will continue to own Centrica Business Solutions and Centrica Innovations operations in North America, which are separate from the Direct Energy business and represent a small part of Centrica's current North American presence. The ongoing organisation restructure will result in fewer customer-facing business units, focused on the Group's strengths of energy supply and its optimisation, and on services and solutions, with a continued strong focus on delivering high levels of customer service and cost-efficient operations:

• In the U.K., British Gas is the largest energy supplier to households, the largest provider of contract energy services, and the largest installer of boilers and smart thermostats. It has 9.2 million customers across its U.K. residential businesses.

• In Ireland, Bord Gáis is the largest gas supplier and the second largest energy supplier overall with 0.5 million customers.
• Centrica Business Solutions provides energy insight and solutions and optimisation services such as demand response to customers internationally. The U.S. is one of the most important markets in the world for the distributed energy solutions provided by Centrica Business Solutions, and will remain a focus area for growth. Centrica Business Solutions also supplies energy to business customers in the U.K.
• Centrica Energy Marketing & Trading is the trading and optimisation arm of Centrica. It is responsible for managing commodity risk and providing wholesale market access for Centrica. It also trades energy and commodities, provides route-to-market services to third-party asset owners across Europe, and has global positions in LNG.

Other businesses

• As announced previously, consistent with Centrica's strategic focus on energy services and solutions, Centrica's interests in Spirit Energy and Nuclear (comprising a 20 per cent. interest in EDF Energy's operating U.K. nuclear power generation fleet) are no longer seen as strategically core and Centrica has announced its intention to divest these interests. Both processes are currently paused, with the Group intending to restart the Spirit Energy process when financial and commodity markets have settled.

The Board believes that the Company's simplified and more stable financial profile resulting from the reorganisation and the Transaction will result in an attractive earnings and cash flow stream. The Group intends to recommence dividends to shareholders when it is prudent to do so.

9. Current trading, financial position and future prospects of the Group

The Group published its interim financial results on 24 July 2020 for the six-month period ended 30 June 2020. The results announcement included the following summary of significant trends in the financial performance of the Group for this period:

Centrica delivered a resilient performance overall against the backdrop of COVID-19. Customer satisfaction levels were broadly maintained through the COVID-19 pandemic, with all businesses reacting flexibly to continue to meet customer needs. Group revenue included in business performance reduced by £1.3 billion or 9 per cent. to £12.5 billion (2019: £13.8 billion). Adjusted Operating Profit was down £56 million or 14 per cent. to £343 million (2019: £399 million). Adjusted EPS was up 4 per cent. to 2.5p, reflecting a reduction in the Group adjusted effective tax rate from 47 per cent. to 35 per cent. with a shift in profit mix away from highly taxed E&P activities.

The impact from COVID-19 on Adjusted Operating Profit is estimated at around £220 million before mitigating actions, with approximately £100 million of the impact related to the combined effects of reduced overall energy consumption, the related sell back to the market of commodity not required, and higher balancing costs. Of the remainder, around £60 million was driven by gross margin lost due to reduced services and solutions activity as only essential work was undertaken, and around £60 million from increased bad debt provisions. Mitigating actions of approximately £160 million meant the net impact of COVID-19 was approximately £60 million. The largest element of these mitigating actions was due to our decision not to pay senior management bonuses relating to 2019 performance, which resulted in the release of an accrual made last year. The mitigating actions also included discretionary cost savings and the use of government job retention schemes.

In addition, falling commodity prices impacted the Upstream (E&P) division, with an estimated negative impact of approximately £190 million compared to H1 2019, and warmer than normal weather impacted the energy supply businesses by an estimated £60 million. However, Centrica benefited from the non-recurrence of a one-off cost of £70 million incurred in 2019 due to Ofgem's revision to the methodology calculating supplier wholesale costs during the transitional period in Q1 2019. In addition, underlying performance was resilient, with improved underlying gross margins in North America Business, benefits from efficiency delivery, in particular in UK services and Centrica Home Solutions, and strong trading performance in Energy Marketing & Trading.

Centrica is not providing any specific financial guidance for the full year given the continuing COVID-19 related uncertainties.

There has been no significant change to the current trading of the Group since this statement was made.

10. Risk factors and further information

You should read the whole of this document and should not just rely on the summarised information contained in this Part I. In particular, your attention is drawn to the risk factors set out in Part II (Risk factors) of this document.

11. General Meeting

The Transaction is of sufficient size relative to Centrica to constitute a class 1 transaction for Centrica under the Listing Rules. As such, the sale is conditional upon the approval of Shareholders at the General Meeting.

A notice convening the General Meeting, to be held at Millstream, Maidenhead Road, Windsor, Berkshire SL4 5GD at 2.00 p.m. on 20 August 2020, is included on page 65 of this document. In line with recent U.K. legislation in relation to holding company meetings during the COVID-19 pandemic, the General Meeting will be convened with the minimum quorum of Shareholders (which will be facilitated by Centrica's management) in order to conduct the business of the General Meeting. The health and safety of our Shareholders and colleagues is always our utmost priority. Therefore, the General Meeting will be held as a closed meeting, and Shareholders (and any appointed proxies (other than the chairman of the General Meeting) or corporate representatives) will not be granted access to the General Meeting in person. We strongly urge Shareholders to vote by proxy on the Resolution as early as possible, and the Board recommends that Shareholders appoint the chairman of the General Meeting as their proxy.

A dedicated facility is available on our website to allow Shareholders to ask questions that they would have raised at the General Meeting. Questions should be submitted via our website at https://www.centrica.com/GM820. All questions will be read and where appropriate responses provided.

The Resolution will be decided on a poll. The Board believes a poll is more representative of Shareholders' voting intentions because Shareholders' votes are counted according to the number of shares held and all votes tendered are taken into account. The results of the General Meeting will be published on the Company's website (https://www.centrica.com/GM820) and will be released via a Regulatory Information Service as soon as practicable following the closing of the General Meeting.

12. Action to be taken

Your support is important to us. You can appoint a proxy (including the chairman of the General Meeting) and submit voting instructions in any of the following ways:

• by logging on to sharevote.co.uk;
• via CREST; or
• by completing and returning the paper Proxy/Voting Form if one has been sent to you.

Please read the notes to the Notice of General Meeting on pages 66 to 68 of this document for further details of the General Meeting, including the appointment of proxies.

13. Financial advice

The Board has received financial advice from Goldman Sachs and Robey Warshaw in relation to the Transaction. In providing their advice to the Board, Goldman Sachs and Robey Warshaw have relied on the Board's commercial assessment of the Transaction.

14. Recommendation to Shareholders

The Board considers the Transaction (and the Resolution necessary to implement the Transaction) to be in the best interests of Centrica and its Shareholders as a whole and unanimously recommends that Shareholders vote in favour of the Resolution, as the Directors intend to do in respect of their own individual beneficial holdings, which amount to 385,537 Centrica Shares in aggregate, representing approximately 0.0066 per cent. of the total voting rights in Centrica as at the Latest Practicable Date.

Yours faithfully,

Scott Wheway Chairman

PART II RISK FACTORS

Prior to making any decision to vote in favour of the Resolution at the General Meeting, Shareholders should consider the factors and the risks associated with the Transaction, together with all other information contained in this document, including, in particular, the risk factors described below. The risks disclosed are those that the Company considers: (i) are material risks relating to the Transaction; (ii) will be material new risks to the Retained Group as a consequence of the Transaction; or (iii) are existing material risks for the Group that will be impacted by the Transaction.

The risk factors set out in this document are those that are required to be disclosed under the Listing Rules, and do not seek to cover all of the material risks which generally affect the Group. Further information on the material risks which generally affect the Group are set out in Centrica's 2019 Annual Report.

The following is not an exhaustive list or explanation of all the risks that may affect Centrica Shares or the Group. Additional risks and uncertainties relating to Centrica Shares and the Group that are not currently known to the Directors, or that the Directors currently deem immaterial, may, individually or cumulatively, also have a material adverse effect on the business, financial results or financial condition and prospects of the Group, and, if any such risk should materialise, the price of Centrica Shares may decline and investors could lose all or part of their investment.

The information given is at the date of this document and, except as requested by the FCA or required by the Listing Rules or any other applicable law, will not be updated. Any forward-looking statements are made subject to the reservations specified under "Forward-looking statements" at the beginning of this document.

1. Risks relating to the Transaction

1.1 The Transaction may be delayed or may not proceed to Completion

Completion of the Transaction is subject to certain conditions under the Purchase Agreement, including (without limitation) the receipt of certain antitrust and regulatory approvals and the passing of the Resolution at the General Meeting prior to the Outside Date. Completion is also subject to the representations and warranties made in the Purchase Agreement being true and correct as at the date of Completion (subject to certain exceptions relating to materiality) and each party to the Purchase Agreement having complied in all material respects with the covenants and agreements applicable to such party prior to or on the date of Completion.

Whilst the parties have, in the majority of cases, agreed to use their "reasonable best efforts" to satisfy these conditions as promptly as reasonably practicable, there is no guarantee that each of these conditions will be satisfied. The Transaction may therefore be delayed or may not complete at all. The obligation to use "reasonable best efforts" to obtain the required antitrust and regulatory approvals includes an obligation on the Purchaser to make any divestures required by, and accept any limitations on its rights to control or operate its own business or the business of the Direct Energy Group imposed by, relevant governmental or regulatory authorities, though only to the extent that such divestures or limitations would not have a material adverse effect on either Direct Energy's or NRG Energy's businesses.

Under the terms of the Purchase Agreement, NRG Energy will have a termination right if the warranty given by Centrica that there has been no material adverse change to the financial condition or results of operation of Direct Energy since 31 December 2019 is no longer accurate at Completion. The performance of Direct Energy may be impacted by a number of factors up to Completion beyond those contemplated and disclosed as at the date of signing. For example, Direct Energy may continue to be impacted by the on-going effects of the outbreak and global spread of the COVID-19 pandemic, including through reduced energy demand and weaker economic conditions, in turn impacting customers' continuing ability to pay for their energy services and in a timely manner (although, under the Purchase Agreement, the effects of the COVID-19 pandemic are only considered for these purposes to the extent that Direct Energy is disproportionately impacted compared with other businesses in the sectors in which Direct Energy operates). If the aggregate effect of those impacts meets the standard of a "material adverse effect" under the laws of Delaware, the Purchaser may seek to exercise its termination right.

If the Transaction does not proceed to Completion, the Group will not receive the cash proceeds from the Transaction and will not realise any of the potential benefits of the Transaction. The Group will have incurred material costs in connection with the Transaction, and there is no guarantee that the circumstances in which the Purchase Agreement is terminated will require the Purchaser to pay Centrica any termination fees. Further, the Purchase Agreement provides for circumstances in which Centrica itself is required to pay the Purchaser a termination fee. In addition, the position and prospects of the Direct Energy Group (and, in turn, its potential future value to the Group) may be materially harmed by any disruptive impact that Direct Energy experiences as a result of the Transaction, in particular if the Transaction fails to complete (see paragraph 1.2 of this Part II for further details).

1.2 The Transaction may have a disruptive impact on Direct Energy

Consummation of the Transaction will require significant work and resource among Direct Energy's senior management and employees that could otherwise be spent productively operating Direct Energy's business in the ordinary course. Direct Energy's management, employees, suppliers and customers may become distracted by the Transaction and any perceived uncertainty as regards the future ownership of Direct Energy and may become reluctant to make long-term commitments to Direct Energy. If suppliers or customers delay, defer or change commitment decisions, the revenues of Direct Energy could be adversely impacted and Direct Energy could incur increased cost of sales. If key management and employees of Direct Energy decide to leave, Direct Energy may encounter additional costs in recruiting and attempting to recruit appropriate replacements, and there is no guarantee that Direct Energy will be able to identify suitably talented or qualified replacements. Any disruption to Direct Energy as a result of the Transaction could impact the value, position and prospects of Direct Energy, in particular if the Transaction does not proceed to Completion.

1.3 Third party interference with the Transaction

Centrica may receive unsolicited competing offers for Direct Energy in the period between publication of this document and the date of the General Meeting. The Directors might consequently be required (in accordance with their fiduciary duties and subject to the terms of the Purchase Agreement) to amend or withdraw their recommendation in favour of the Resolution and the Transaction, postpone or cancel the General Meeting, and, if applicable, exercise one of Centrica's rights to terminate the Purchase Agreement. Centrica's rights to terminate the Purchase Agreement in such circumstances apply only to competing offers that are received before the Resolution is passed at the General Meeting. Therefore, if a competing offer for Direct Energy is received after the Resolution has been passed at the General Meeting, Centrica will be obliged to proceed with the Transaction on the terms set out in the Purchase Agreement (unless a separate termination right becomes applicable), notwithstanding that any such competing offer may be on terms more favourable to Centrica than the Transaction.

In addition, as a listed company, Centrica could be exposed to approaches from third parties seeking to instigate a public takeover of Centrica and, prior to the General Meeting, the Directors might consequently be required (in accordance with their fiduciary duties and subject to the terms of the Purchase Agreement) to withdraw their recommendation in favour of the Resolution and the Transaction, which may result in the Transaction not proceeding to Completion.

1.4 Centrica and Direct Energy's reputations may be harmed if the Transaction does not proceed to Completion

Centrica and Direct Energy face high levels of media and public scrutiny in the countries in which they operate and as such the Transaction is likely to receive extensive media coverage in the U.K. and the U.S. If the Transaction does not proceed to Completion, the reputations of Centrica and Direct Energy may be adversely impacted as a result of public scrutiny in connection with the attempted Transaction. This could, in turn, have a material adverse effect on the Group's business, results of operations and overall financial condition.

1.5 Centrica may incur liability under the Purchase Agreement

The Purchase Agreement contains customary warranties, indemnities and other contractual protections given by Centrica in favour of the Purchaser. Centrica has undertaken a customary due diligence and disclosure exercise against the warranties, and, in addition, the Purchaser has obtained representation and warranty insurance which, following Completion, will be its sole recourse for any claim in respect of the warranties given by Centrica in the Purchase Agreement (save in respect of claimed for fraud). Notwithstanding this, any liability to make a payment arising from a successful claim by the Purchaser under any of the relevant provisions of the Purchase Agreement (that is not covered by the Purchaser's representation and warranty insurance) would reduce the net sale proceeds from the Transaction and could have an adverse effect on the business and financial condition of the Group, or if the Transaction proceeds to Completion, the Retained Group. Centrica's liability in relation to the indemnities it gives in the Purchase Agreement is uncapped.

The Purchase Agreement also contains warranties, indemnities and other contractual protections given by the Purchaser in favour of Centrica. The extent to which the Purchaser may be required to make payments in respect of a breach of these contractual provisions is uncertain. However, if the Purchaser's financial condition deteriorates in the period leading up to and after Completion, any payment due to the Retained Group in respect of any breach by, or indemnity of, the Purchaser may be put at risk.

1.6 The consideration payable in respect of the Transaction is exposed to currency exchange fluctuations

The consideration payable in respect of the Transaction is denominated and payable in U.S. Dollars. Centrica is considering a range of risk management strategies intended to hedge the risks of exchange rate fluctuations associated with the Transaction. Notwithstanding this, there is a risk that exchange rate fluctuations will result in the Sterling proceeds from the Transaction being lower than Centrica currently anticipates, which may have an adverse impact on the Retained Group's intended use of the proceeds from the Transaction.

2. New material risks relating to the Retained Group

2.1 The Retained Group will be less diversified and will be more dependent on the performance of the relevant members of the Retained Group

Following Completion, the Retained Group's operations will be less diversified, including geographically, and as a consequence the Retained Group will be more susceptible to adverse developments in the remaining markets and segments in which its businesses operate. The Retained Group's operations will consist of fewer customer-facing business units (British Gas, Bord Gáis Energy, Centrica Business Solutions and Energy Marketing & Trading), as well as E&P and Nuclear. The Retained Group will, following the Transaction, become more dependent on the financial performance of these remaining business divisions and will therefore become more exposed to the risks faced by those divisions.

In particular, the operations of the Retained Group following the Transaction will be more exposed to British Gas and Centrica Business Solutions. These businesses operate in highly competitive markets that are subject to frequent political and regulatory interventions. For example, British Gas operates in the U.K. domestic energy supply market, which, in 2018, became subject to a U.K. Government imposed cap on standard variable and default energy tariffs. The introduction of this cap resulted in a material adverse impact on the Group's business, results of operations and overall financial condition in the financial year ended December 2019 and may continue to do so. Regulators including Ofgem and the Competition and Markets Authority have also led a number of initiatives in recent years aimed at increasing competitive tension in the domestic energy supply market, focussing predominantly on increasing customer engagement and encouraging customer churn. Any future interventions of this nature have the potential to result in a significant loss of customers for British Gas and therefore a significant adverse impact on its overall financial condition.

The potential impact of the Retained Group being less diversified may become more pronounced if Centrica is able to further deliver on its stated intention to divest of its noncore assets, for example by disposing of its interests in Spirit Energy and Nuclear.

2.2 The Retained Group's income stream will be reduced

Following Completion, the Retained Group will no longer receive the contribution that Direct Energy makes to the consolidated trading position of the Group. For the financial year ended 31 December 2019, Direct Energy contributed Adjusted Revenue of £10,874 million and Adjusted Operating Profit of £221 million which represented 41 per cent. and 25 per cent. of Group revenues and Adjusted Operating Profit respectively. As a result of its reduced income stream following the Transaction, the Retained Group's debt capacity will be reduced and the operating cash flow, before taking into account lower interest costs on the Retained Group's outstanding debt balance, will be lower which could impact the Retained Group's ability to pay dividends in the future.

2.3 The process of separating Direct Energy will be complex and the Retained Group may incur unexpected costs

The process of separating Direct Energy from the Group (including the separation of the North American elements of Centrica Business Solutions and Centrica Innovations from the Direct Energy Group) will involve the separation of a number of significant business systems and certain group reorganisation steps.

The parties have entered into the Transition Services Agreement, pursuant to which Centrica has agreed to provide or procure the provision of certain services relating to Direct Energy, and Direct Energy has agreed to provide or procure the provision of certain services to Centrica Business Solutions for a period of up to 24 months following Completion while separation is taking place. Under the terms of the Transition Services Agreement, the relevant service provider is paid a fee calculated on a monthly basis by reference to the services provided during the relevant charging period. The Retained Group could suffer material loss in the event that the Purchaser fails to make payments due under the Transition Services Agreement for services which the Retained Group has provided and incurred cost and/or if Direct Energy fails to provide services it is required to provide to Centrica Business Solutions.

In addition, the Retained Group could incur unexpected material additional costs or adverse impacts on the operational functionality of its business divisions as a result of the Transaction separation process and the fulfilment of its obligations under the Transition Services Agreement. The Retained Group may not be able to eliminate all of the costs allocated to Direct Energy at a Group level, and, longer-term, it may not be possible to fully separate every aspect of, on the one hand, Direct Energy from the Retained Group and on the other, Centrica Business Solutions from Direct Energy. If this were to occur, the Retained Group's operational functionality could continue to be adversely impacted and the Retained Group could continue to incur material additional costs beyond Completion.

3. Existing material risks to the Group that will be impacted by the Transaction

3.1 The market price of Centrica Shares may fluctuate on the basis of market sentiment surrounding the Transaction

The value of an investment in Centrica may go down as well as up. The price of Centrica Shares will be influenced by a large number of factors, some specific to the Retained Group and its operations and some which may affect the markets and segments in which the Retained Group operates as a whole. The sentiment of the stock market regarding the Transaction is one such factor. The other factors that may affect Centrica's share price include (but are not limited to) (i) actual or anticipated fluctuations in the financial performance of the Retained Group, (ii) market fluctuations, and (iii) legislative or regulatory changes in the markets and segments in which the Retained Group operates.

3.2 The Group's credit ratings may not be sustained

The Group benefits from its corporate investment grade credit ratings (long term debt: Baa2 negative outlook (Moody's), BBB negative outlook (Standard & Poor's); short term debt: P-2 negative outlook (Moody's), A-2 negative outlook (Standard & Poor's)). Given the Group's current level of net financial indebtedness, there is a risk that, in the current economic climate and trading conditions, the Group's current ratings will not be preserved. Whilst the Group intends, following Completion, to apply a portion of the Net Cash Proceeds to make a significant reduction in net financial indebtedness, the rating agencies are likely to weigh any such actions against the fact that the Group will be deemed to be less diversified and more dependent on the performance of members of the Retained Group, meaning there is no guarantee that the reduction in net financial indebtedness will enable the Group to preserve its current ratings.

On 28 July 2020, Moody's announced that it was placing Centrica's rating on negative outlook, given the Group's evolving business profile and uncertainty regarding the final shape of the Group and its financial profile, in light of the Company's strategy of divesting its interests in Spirit Energy and Nuclear, and the persistently difficult operating environment. On 30 July 2020, Standard & Poor's announced that it was placing Centrica's rating on negative outlook. Standard & Poor's noted that the Transaction weakens the Group's business risk profile, reducing its scale and increasing business concentration on its challenging core U.K. energy market. It stated that its negative outlook reflected the ongoing challenging market conditions due to high competitive pressure in the U.K. energy market and the uncertain effect of the COVID-19 pandemic over the next two years. Standard & Poor's also noted that, in its view, should the Transaction be cancelled or materially delayed, this would likely weaken the Group's credit profile.

Any deterioration in the Group's credit ratings may increase its cost of funding or otherwise affect its ability to obtain credit from other counterparties. The Group may also need to increase its levels of margin or other security in its wholesale commodity contracts or face limits on its ability to trade in commodity markets and to implement its hedging strategy, including as a result of no longer being able to post parent company guarantees to support some of the Group's activities and liabilities relating to E&P. Any of these factors could have a material adverse effect on the Group's business, results of operations and overall financial condition.

3.3 The Retained Group's potential growth in the markets in which it operates may be constrained given its positions in those markets

The Retained Group's businesses benefit from their existing positions in a number of the markets in which they operate. For example, British Gas is one of the largest residential energy suppliers, installer of boilers and energy suppliers to SME customers in the U.K., and Bord Gáis is a significant gas supplier in Ireland. The Group is taking steps to grow earnings and cash flows of the businesses operating in these markets, through increasing the range of products available to existing customers and reducing costs. However, the Group's ability to grow and acquire new customers and enter new markets may be constrained by its narrower focus following the Transaction.

3.4 The Group may fail to attract and retain senior management, skilled personnel and capabilities

The attraction, development, retention, reputation and succession of senior management and individuals with key skills are critical factors in the successful execution of the Group's strategy, and operation of the Group's businesses. This is especially relevant in the highly competitive markets in which the Group currently operates or plans to operate and at times when the business is subject to high levels of public scrutiny. The reduction in size and diversification of the Retained Group following the Transaction and/or any negative publicity associated with the Transaction may make it more difficult for the Group to attract and retain talented employees, which could compromise the achievement of the Group's strategic objectives.

PART III

SUMMARY OF THE PRINCIPAL TERMS OF THE TRANSACTION DOCUMENTS

1. Purchase Agreement

1.1 Parties and structure

The Purchase Agreement was entered into on 24 July 2020 by and among Centrica, NRG Energy (the "Purchaser"), U.S. Seller, Canadian Seller, Direct Energy U.S. and Direct Energy Canada (together the "Parties") for the sale and purchase of the entire issued share capital of Direct Energy U.S. and Direct Energy Canada. The Purchase Agreement is governed by the laws of the state of Delaware.

Direct Energy U.S. and Direct Energy Canada are the parent companies of the Direct Energy Group. Prior to the sale, certain assets and liabilities (comprising primarily the North American elements of Centrica Business Solutions and Centrica Innovations, as well as the subsidiaries which carried out Centrica's legacy exploration and production activities in Canada and its U.S solar business) will be carved out from the Direct Energy Group ahead of Completion (see paragraph 1.4 of this Part III below for further details) and will therefore not be sold as part of the Transaction.

1.2 Consideration

The consideration payable by the Purchaser comprises the base consideration of \$3.625 billion, subject to customary adjustments to reflect the cash-free, debt-free nature of the Transaction and to ensure a normalised level of working capital in the Direct Energy Group (such consideration, as adjusted, being the "Consideration"). The adjustments will also account for changes in the Direct Energy Group's actual working capital, cash and debt positions measured as at Completion, as against Centrica's estimates of such positions prior to Completion.

1.3 Conditions to Completion

The Transaction is conditional upon satisfaction or waiver of certain conditions, including:

• (A) specified antitrust and regulatory approvals having been obtained, and any statutory waiting periods in respect of those approvals having terminated, expired or been waived by the applicable Governmental Entity, including the approvals required by (i) the U.S. anti-trust authorities in accordance with the requirements of the HSR Act, (ii) the Federal Energy Regulatory Commission ("FERC") pursuant to section 203 of the FPA, and (iii) section 114 of the Competition Act (Canada) (the "Antitrust & Regulatory Condition");
• (B) no court of competent jurisdiction or other Governmental Entity having issued any judgment or enacted any law, and no agreement with a Governmental Entity having been entered into (including a timing agreement), that is in effect and prohibits, delays enjoins or makes illegal the consummation of the Transaction; and
• (C) the passing of the Resolution at the General Meeting (the "Shareholder Approval Condition").

Each of Centrica and the Purchaser's obligation to complete the Transaction is also subject to certain other conditions, including:

• (D) the representations and warranties of the other Party being true and correct as at the date of Completion, subject to certain exceptions relating to materiality;
• (E) the other Party having performed or complied in all material respects with the covenants and agreements applicable to such Party in the Purchase Agreement prior to or on the date of Completion; and
• (F) delivery by the Parties of customary Completion deliverables.

The Purchaser's obligation to complete the Transaction is also subject to:

(G) none of the specified antitrust and regulatory approvals that are obtained imposing, and no court of competent jurisdiction or other Governmental Entity having issued a judgment or enacted any law that imposes, a requirement or restriction that would, or would reasonably be expected to, result (individually or in aggregate) in a material adverse effect on the assets, properties, financial condition or results of operations of the Purchaser Group (deemed for this purpose to be the same size as Direct Energy) or the Direct Energy Group, after taking into account the proceeds to be received in connection with any such requirement or restriction (a "Burdensome Condition").

The Parties have, subject to certain exceptions, agreed to use a "reasonable best efforts" standard to consummate the Transaction as promptly as reasonably practicable following the date of the Purchase Agreement. In the case of the Antitrust & Regulatory Condition, the "reasonable best efforts" of the Purchaser include, among other things, the Purchaser making all necessary or advisable notifications, registrations and filings required to obtain the required antitrust and regulatory approvals, including promptly making the appropriate filing of a notification and report form pursuant to the HSR Act, the notifications required under section 114 of the Competition Act (Canada) (together with an application for an Advance Ruling Certificate) and the notifications and other filings that may be required by FERC under the FPA. In addition, the Purchaser has agreed to divest parts of its own business or the Direct Energy Group and to accept limitations on its right to control or operate its own business or the Direct Energy Group, in each case to the extent such divestures or limitations may be imposed by any Governmental Entity as a condition to granting any regulatory approval required pursuant to any antitrust, trade, foreign investment regulation, customer protection, rate-setting, market concentration or market share (or the accumulation thereof) law ("Review Laws"), so long as such divestures or limitations do not constitute a Burdensome Condition.

In the case of the Shareholder Approval Condition, Centrica has agreed to include in this document the unanimous recommendation of the Board of Directors that Shareholders vote in favour of the Resolution, which is set out in paragraph 14 of Part I (Letter from the Chairman) of this document (the "Seller Parent Recommendation"). The obligation to include and make the Seller Parent Recommendation is subject to the fiduciary or statutory duties of the Board of Directors from time to time. If the Board of Directors determines in good faith, after consultation with its financial advisers and outside legal advisers, that the failure to withdraw or modify the Seller Parent Recommendation would be inconsistent with such fiduciary or statutory duties, the Board of Directors may so withdraw or modify the Seller Parent Recommendation (a "Change in Recommendation"), subject to first providing the Purchaser with a five business day notice period, during which time Centrica will be required to negotiate in good faith with the Purchaser (if the Purchaser wishes to do so) such revisions to the Transaction that would cause the failure to make such Change in Recommendation to no longer be inconsistent with such fiduciary or statutory duties. Upon a Change in Recommendation, the Purchase Agreement would automatically terminate, and such termination would require the payment of a termination fee (see paragraphs 1.13 and 1.14 of this Part III for further details of the termination right).

1.4 Pre-Completion Transfers

The Purchase Agreement contains provisions setting out certain pre-Completion reorganisation steps (the "Pre-Completion Transfers"), which are intended to ensure that, as of Completion, (i) the Direct Energy Group generally holds all assets and liabilities, and only such assets and liabilities, that are primarily related to Direct Energy Home and Direct Energy Business and (ii) the Retained Group generally holds all other assets and liabilities of Centrica and its Subsidiaries.

As part of the Pre-Completion Transfers, certain assets and liabilities that are currently owned by entities comprising the Direct Energy Group but which do not form part of Direct Energy Home or Direct Energy Business, will be transferred to entities comprising the Retained Group. These assets and liabilities include the assets (including equity interests in certain Subsidiaries of Direct Energy U.S. and Direct Energy Canada) and liabilities related to (i) Centrica's legacy exploration and production activities in Canada, (ii) Centrica's U.S. solar business and (iii) the North American elements of Centrica Business Solutions and Centrica Innovations.

The Pre-Completion Transfers are required to be effected in accordance with a detailed steps plan agreed among the Parties and attached to the Purchase Agreement (the "Pre-Completion Transfer Plan"). The Pre-Completion Transfer Plan may be amended by Centrica from time to time upon written notice to the Purchaser, subject to Centrica irrevocably agreeing to indemnify the Purchaser for any adverse commercial, financial or economic (including tax-related) effect on the Purchaser Group (including Direct Energy) resulting from such amendment.

1.5 Centrica's warranties, indemnities and limitations of liability

Centrica, U.S. Seller, Canadian Seller, Direct Energy U.S. and Direct Energy Canada have given warranties and made representations to the Purchaser that are customary for a transaction of this nature, including a warranty that that there has been no material adverse change to the financial condition or results of operation of Direct Energy since 31 December 2019. In the case of Centrica, U.S. Seller and Canadian Seller, these also include, among other things, a representation and warranty that U.S. Seller owns the shares in Direct Energy U.S. and Canadian Seller owns the shares in Direct Energy Canada, in each case free and clear from any encumbrances. In the case of Direct Energy U.S. and Direct Energy Canada, these also include, among other things, representations and warranties in respect of those entities' capital structures, financial statements, tax affairs, employees, litigation, legal and regulatory compliance, environmental matters, real estate, intellectual property, data privacy and security, insurance matters and material contracts.

The Purchaser has obtained a representation and warranty insurance policy (the "R&WI Policy"). Following Completion, the Purchaser's sole and exclusive recourse for any inaccuracy in or breach of the warranties and representations given by Centrica, U.S. Seller, Canadian Seller, Direct Energy U.S. and Direct Energy Canada will be against the R&WI Policy (other than in respect of claims for fraud).

Centrica has agreed to indemnify the Purchaser in respect of any liability that the Purchaser incurs in connection with certain matters including, (i) the Excluded Liabilities, (ii) any breach of the covenants given by Centrica, U.S. Seller, Canadian Seller, Direct Energy U.S. or Direct Energy Canada (a) that require performance following Completion or (b) in relation to the Pre-Completion Transfers or the transactions to be effected at Completion, (iii) liabilities to the extent arising out of, or relating to, the business of the Retained Group, and (iv) liabilities to the extent arising out of, or relating to, the Pre-Completion Transfer Plan or the consummation of the Pre-Completion Transfers. Centrica's liability in respect of the matters covered by these indemnities is uncapped.

1.6 Purchasers' warranties, indemnities and limitations of liability

The Purchaser has given certain representations and warranties to Centrica that are customary for a transaction of this nature. These include, among other things, a representation and warranty that the Purchaser has or will have sufficient funds available to pay the Consideration and any other amounts it is required to pay in connection with the consummation of the Transaction.

The Purchaser has agreed to indemnify members of the Retained Group in respect of any liability that Centrica incurs in connection with certain matters including: (i) liabilities of the Direct Energy Group (to the extent unrelated to the Excluded Liabilities), (ii) any NA Credit Support Obligation, and (iii) any breach of the covenants given by the Purchaser (a) that require performance following Completion or (b) in relation to the transactions to be effected at Completion. The Purchaser's liability in respect of the matters covered by these indemnities is uncapped.

1.7 "No shop"

Centrica has agreed that it will not (and will not authorise or permit any of its Subsidiaries or representatives to):

• (A) solicit, initiate or knowingly encourage, or take any other action to knowingly facilitate, the making of any inquiry, offer or proposal that constitutes or is reasonably likely to lead to an Acquisition Proposal;
• (B) initiate, enter into, continue or otherwise participate in any discussions regarding any Acquisition Proposal;
• (C) furnish to any person any information (confidential or otherwise) relating to Direct Energy or the Purchase Agreement, in each case in connection with any Acquisition Proposal; or
• (D) enter into any confidentiality agreement, letter of intent, term sheet, agreement in principle, acquisition agreement, share purchase agreement or other similar agreement contemplating or constituting, or that is reasonably likely to lead to, an Acquisition Proposal.

Notwithstanding the above, if, prior to the Resolution being passed at the General Meeting, Centrica receives an unsolicited Acquisition Proposal that did not result from a breach of the provisions of the "no shop" described above or the Exclusivity Agreement, which the Board of Directors determines in good faith, after consultation with its financial advisers and legal counsel, constitutes or is reasonably likely to lead to a Superior Proposal (as described below), Centrica may (i) engage in or otherwise participate in discussions or negotiations with any person making such proposal and (ii) provide such person (after having executed a confidentiality agreement meeting certain requirements) with information (including non-public information) relating to Direct Energy and the Group.

Centrica is obliged to (i) promptly (and in any event within 24 hours) notify the Purchaser of the receipt of any Acquisition Proposal and the identity of the person(s) making such Acquisition Proposal, (ii) disclose to the Purchaser the material terms and conditions of any such Acquisition Proposal, and (iii) upon the request of the Purchaser, keep the Purchaser reasonably informed of any material developments. Nevertheless, Centrica shall not be required to take any actions described in the immediately preceding sentence if the taking of such actions (a) is prohibited by applicable law or (b) would require Centrica or any other person to publicly announce any matter related to an Acquisition Proposal (subject, in the case of clause (b), to Centrica and the Purchase cooperating to permit Centrica to take such actions in a manner where such public announcement would not be so required).

A "Superior Proposal" is a bona fide written Acquisition Proposal, which did not result from any breach of the provisions of the "no shop" described above or the Exclusivity Agreement, that the Board of Directors has determined in its good faith judgment, after consultation with its outside legal counsel and financial advisers:

• (A) would (a) be more favourable to the Group and the Shareholders from a financial point of view or (b) consistent with the Board of Directors' fiduciary and statutory duties, otherwise be on terms and conditions more favourable to the Group and the Shareholders, in each case, than the Transaction (taking into account any amendment or modification proposed by the Purchaser in accordance with the procedure described immediately below); and
• (B) is reasonably likely to be completed in accordance with its terms, taking into account all terms and conditions of such proposal and the legal, regulatory, financial (including financing terms) and other aspects of such proposal and of the Purchase Agreement (taking into account any amendment or modification proposed by the Purchaser in accordance with the procedure described immediately below).

Prior to the passing of the Resolution, Centrica may terminate the Purchase Agreement in order to enter into a definitive agreement providing for an Acquisition Proposal, where such Acquisition Proposal did not result from a breach of the "no-shop" described above or in the Exclusivity Agreement, if the Board of Directors has determined in good faith, after consultation with its financial advisers and outside legal advisers, that such Acquisition Proposal constitutes a Superior Proposal.

However, before taking such action, Centrica must, provide the Purchaser with at least five business days' prior notice of its intention to do so. During this notice period, Centrica is required to negotiate in good faith with the Purchaser (if the Purchaser wishes to do so) such revisions to the Transaction that would cause the Superior Proposal to cease being a Superior Proposal. Following the end of such notice period, the Board of Directors must have considered in good faith any binding offer from the Purchaser, and have determined that the Superior Proposal would continue to constitute a Superior Proposal if the revisions proposed in such binding offer were to be given effect. In the event of any material changes to the material terms of such Superior Proposal, Centrica must notify the Purchaser of such changes and a further notice period of three business days shall commence.

1.8 Purchaser debt financing

The Purchaser has agreed to use "reasonable best efforts" to take all actions and to do all things necessary, proper and advisable to consummate and obtain certain debt financing (the "Debt Financing") in the amounts specified in a debt commitment letter (the "Debt Commitment Letter") which the Purchaser has entered into with certain financial institutions. This includes, amongst other things, using "reasonable best efforts" to negotiate and enter into definitive agreements in respect of the Debt Financing as promptly as possible and subject only to the conditions (including the market flex provisions) that are set out in the Debt Commitment Letter, and to satisfy those conditions on a timely basis. The Purchaser has agreed to keep Centrica informed of the status of its efforts to arrange the Debt Financing and to inform Centrica promptly of, amongst other things, any actual or potential breach or termination of the Debt Commitment Letter or any definitive agreement relating to the Debt Financing.

The Transaction is not conditional upon the Purchaser obtaining the Debt Financing. In the event of the Purchaser failing to obtain the Debt Financing, the Purchaser will not have the right to terminate the Purchase Agreement and will (subject to no other Purchaser termination right having arisen) continue to be bound by the terms of the Purchase Agreement.

1.9 Conduct of business between signing and Completion

Centrica has agreed in the period up to Completion to (i) with respect to Direct Energy only, use commercially reasonable efforts to (a) conduct the business of Direct Energy in the ordinary course of business, (b) preserve substantially intact its business organisation and maintain its rights and ongoing operations, (c) maintain its relationships with employees, customers, suppliers and others who may have business dealings with it in the ordinary course of business and (d) maintain its tangible assets in good operating condition and repair, and (ii) comply with certain customary restrictions, in each case subject to negotiated exceptions.

Notwithstanding the foregoing, the Group is permitted to take, following advance notice and consultation to the extent reasonably practicable, any action to the extent reasonably necessary and prudent (i) in response to any operational emergencies with respect to equipment failures or outages or that present an immediate and material threat to the health and safety of any employees or customers of Direct Energy, or (ii) to prevent material and adverse harm to Direct Energy or to the health and safety of any employees, customers or other representatives of Direct Energy, as may be reasonably necessary to mitigate the adverse effects that occur following the date of the Purchase Agreement caused by the COVID-19 pandemic, to the extent consistent with actions taken to date.

1.10 Replacement of Centrica credit support obligations

Centrica and the Purchaser have each agreed to use "reasonable best efforts" to obtain, prior to and effective upon Completion, a full and unconditional release of all of the obligations of any member of the Retained Group under: (i) each credit support obligation in existence as at the date of the Purchase Agreement and (ii) each credit support obligation issued after the date of the Purchase Agreement in the ordinary course of business, in each case that is issued by or on behalf of any member of the Retained Group for the benefit of Direct Energy (each, an "NA Credit Support Obligation").

If any NA Credit Support Obligations are unable to be replaced at Completion, Centrica has agreed to keep such NA Credit Support Obligations in place for at least 18 months following Completion. As noted in paragraph 1.6 of this Part III, the Purchaser has agreed to indemnify Centrica in respect of any liabilities the Retained Group incurs under any NA Credit Support Obligation which remains in place post-Completion.

1.11 Non-solicitation of employees

The parties have agreed to customary restrictions on the solicitation of employees in the three year period following Completion. In the case of Centrica, members of the Retained Group may not (i) solicit for employment or engagement or hire, or (ii) engage any person who, immediately upon Completion, remains an employee of the Direct Energy Group. In the case of the Purchaser, members of the Purchaser Group may not (i) solicit for employment or engagement or hire, or (ii) engage any person employed by the Retained Group who, prior to the Pre-Completion Transfers and Completion, was employed by the Direct Energy Group. Limited carve-outs have been agreed for hiring individuals whose employment has been terminated by Centrica or the Purchaser (as applicable) or who have resigned their employment.

1.12 Non-competition

Centrica has agreed, for a period of three years following Completion, not to (and to cause each of its Subsidiaries not to) engage in (i) the supply, pursuant to a wholesale or competitive retail supplier licence, of natural gas or electricity to residential or business customers in the United States or Canada, (ii) the installation and maintenance of residential heating, ventilation and air conditioning equipment, (iii) the rental of residential water heaters and appliances and (iv) the provision of protection, maintenance, repair and breakdown services and home warranty and insurance contracts to residential customers in the United States or Canada (any such actions being "Competitive Activities").

Notwithstanding the foregoing, the Retained Group will be permitted to, among other things, (i) engage in the type of activities or businesses conducted by Centrica Business Solutions as of the date of the Purchase Agreement, (ii) offer any bundled product, service or solution, so long as a material portion thereof does not involve Competitive Activities, (iii) acquire or own, as a passive investment, up to 10 per cent. of the outstanding equity or indebtedness of any person engaging in Competitive Activities and (iv) acquire or own any business or person so long as the Competitive Activities of such business or person do not exceed 15 per cent. of such acquired business's or person's total revenue in the 12-month period prior to such acquisition (subject to, in some cases, certain divestiture obligations).

1.13 Termination

The Purchase Agreement may be terminated (i) by mutual written consent of the Parties, (ii) in specified circumstances as summarised below, at the sole option of Centrica or the Purchaser, or (iii) automatically as summarised below.

Termination rights of either Centrica or the Purchaser

The Purchase Agreement may be terminated at the option of Centrica or the Purchaser (as applicable) with immediate effect in any of the following scenarios:

• (A) Completion having not occurred on or before 24 July 2021 (as extended in accordance with the provisos below, the "Outside Date"), unless the failure to consummate the Transaction is the result of a breach on the part of the Party seeking to exercise this right to terminate, provided that, if all of the conditions to Completion have been satisfied or waived as of the Outside Date (other than those that by their nature are to be satisfied at Completion) except for any of the conditions described in paragraph 1.3(A), 1.3(B) or 1.3(G) of this Part III (but, in each case, solely with respect to the Review Laws), the Outside Date shall automatically be extended to 24 October 2021; provided, further, that if all of the conditions to Completion have been satisfied or waived as of 24 October 2021 (other than those that by their nature are to be satisfied at Completion) except for any of the conditions described in paragraph 1.3(A), 1.3(B) or 1.3(G) of this Part III (but, in each case, solely with respect to the Review Laws), the Outside Date shall automatically be extended to 24 January 2022;
• (B) any Governmental Entity having enacted a law that prohibits or makes illegal the consummation of the Transaction;
• (C) any court of competent jurisdiction or other Governmental Entity having issued a judgment that permanently restrains, enjoins or otherwise prohibits the consummation of the Transaction, and any such judgment having become final and non-appealable; and
• (D) the Resolution failing to achieve the number of Shareholder votes required for it to be passed at the General Meeting.

Centrica termination rights

The Purchase Agreement may be terminated at the option of Centrica with immediate effect in either of the following scenarios:

• (E) the Purchaser having breached any warranty or representation or failed to comply with any covenant in such a manner that would give rise to the failure of one or both of the conditions summarised in paragraphs 1.3(D) and 1.3(E) of this Part III which is not capable of remedy (or is not remedied within 30 days) and provided that each of Centrica, U.S. Seller, Canadian Seller, Direct Energy U.S. or Direct Energy Canada is not then itself in breach of any representation, warranty or covenant; or
• (F) prior to the passing of the Resolution at the General Meeting, Centrica validly exercising its right to enter into a definitive agreement concerning a Superior Proposal (as described in paragraph 1.7 of this Part III).

Purchaser termination rights

The Purchase Agreement may be terminated at the option of the Purchaser with immediate effect in either of the following scenarios:

• (G) Centrica, U.S. Seller, Canadian Seller, Direct Energy U.S. or Direct Energy Canada having breached any representation or warranty or failed to comply with any covenant in such a manner that would give rise to the failure of one or both of the conditions summarised in paragraphs 1.3(D) and 1.3(E) of this Part III which is not capable of remedy (or is not remedied within 30 days) and provided that the Purchaser is not then itself in breach of any representation warranty or covenant; or
• (H) any Governmental Entity requiring or imposing, or issuing a judgment that has become final and non-appealable or enacting a law that requires or imposes, any action, restriction, condition or commitment that, individually or in the aggregate, constitutes or is reasonably likely to constitute a Burdensome Condition.

Automatic termination

The Purchase Agreement shall terminate automatically in the following scenario:

(I) on the expiry of any applicable notice period described in paragraphs 1.3 or 1.7 of this Part III, if a Change in Recommendation is made and not withdrawn at the end of such applicable notice period.

1.14 Termination fees

Under the Purchase Agreement, termination fees are payable by Centrica or the Purchaser upon exercise of certain of the termination rights described in paragraph 1.13 of this Part III.

Purchaser termination fees

The Purchaser shall be liable to pay Centrica a termination fee in the amount of \$180 million in the event of:

(A) Centrica or the Purchaser exercising the termination right described in paragraph 1.13(A) of this Part III or Purchaser exercising the termination right described in paragraph 1.13(H) of this Part III, provided that, at the time of such termination, (i) all of the conditions described in paragraphs 1.3(C) to (F) of this Part III have been satisfied in so far as each were required to be satisfied by Centrica at the relevant time (or in the case of conditions that by their nature are to be satisfied on Completion, were capable of being satisfied if Completion had occurred on the date of such termination) or waived and (ii) one or more of the conditions described in paragraphs 1.3(A), (B) or (G) has not been satisfied, in each case, solely as a result of (x) a judgment of a Governmental Entity issued with respect to any Specified Review Law, (y) a failure to obtain the Specified Governmental Approvals of the applicable Governmental Entity (without the imposition of a Burdensome Condition) or (z) a failure of any applicable waiting period to have expired or terminated as required under the HSR Act or the Competition Act (Canada) by the Outside Date;

• (B) Centrica or the Purchaser exercising the termination right described in paragraph 1.13(C) of this Part III as a result of a judgment of a Governmental Entity issued with respect to any Specified Review Law; or
• (C) Centrica exercising the termination right described in paragraph 1.13(E) of this Part III as a result of the Purchaser's breach of its obligations to use its "reasonable best efforts" to obtain the Specified Governmental Approvals, provided that, at the time of such termination, (i) all of the conditions described in paragraphs 1.3(C) to (F) of this Part III have been satisfied and continue to be satisfied (other than those conditions that by their nature are to be satisfied at Completion, each of which are capable of being satisfied if Completion were then to occur) and (ii) one or more of the conditions described in paragraphs 1.3(A), (B) or (G) has not been satisfied, in each case, solely with respect to a Specified Review Law, and such conditions would have been satisfied but for the Purchaser's breach of such obligations.

Centrica termination fees

Centrica shall be liable to pay the Purchaser a termination fee in the amount of approximately \$30,027,250 in the event of:

• (D) Centrica or the Purchaser exercising the termination right described in paragraph 1.13(D) of this Part III;
• (E) Centrica exercising the termination right described in paragraph 1.13(F) of this Part III; and
• (F) an automatic termination as described in paragraph 1.13(I) of this Part III.

2. Transition Services Agreement

The Transition Services Agreement will be entered into at Completion between Centrica and the Purchaser. Under the terms of the Transition Services Agreement, Centrica and the Purchaser will each agree to provide or procure the provision of a range of transition services to, in the case of Centrica, Direct Energy U.S. and Direct Energy Canada and, in the case of the Purchaser, to the Retained Group, following Completion.

2.1 Transition services

Centrica and the Purchaser have agreed to cooperate to determine the specific scope of services to be provided under the Transition Services Agreement as promptly as reasonably practicable following the date of the Purchase Agreement. In general, (i) Centrica will provide services that are necessary to allow the Purchaser to operate Direct Energy in substantially the same manner in which Direct Energy operated immediately prior to Completion and (ii) the Purchaser will provide services that are necessary to allow Centrica to operate the North American businesses of the Retained Group in substantially the same manner in which such businesses operated immediately prior to Completion.

Following Completion, if either Centrica or the Purchaser becomes aware of a service that had been provided (i) in the case of Centrica, by Direct Energy to the Retained Group or (ii) in the case of the Purchaser, by the Retained Group to Direct Energy, which in either case was omitted from the services to be provided under the Transition Services Agreement, and Centrica or the Purchaser, as the case may be, reasonably needs such omitted service to operate the North American businesses of the Retained Group or Direct Energy, respectively, in substantially the same manner in which such businesses were operated in the twelve month period prior to Completion, then such service shall be included as part of the Transition Services Agreement.

Each of Centrica or the Purchaser may also request additional services related to and reasonably necessary in connection with the provision of other services under the Transition Services Agreement, and each of them will negotiate in good faith regarding such additional services.

2.2 Term and termination

Each transition service will be provided for a specified service term, which may be extended by the receiving Party on a month-to-month basis for up to 12 additional months, subject to certain conditions, provided that the maximum service term for any service (other than services for the provision of historical data) will be 24 months.

Notwithstanding the agreed term of any service, the receiving Party of such service shall be permitted to terminate such service on not less than 60 days prior written notice.

2.3 Service standard

Each transition service provided under the Transition Services Agreement will be required to be performed in substantially the same manner and at a level of service and quality that is consistent in all material respects with the standard at which such services were provided in the 12 month period prior to Completion.

2.4 Fees

Prior to Completion, Centrica and the Purchaser will negotiate in good faith to determine the fees payable by the receiving Party with respect to the services provided under the Transition Services Agreement. Such fees will be intended to (i) reflect the actual and demonstrable cost of providing such services or, with respect to services provided by third parties, the fee charged by the applicable third party, in each case without any mark-up or profit component and (ii) be consistent with the costs incurred by Centrica in providing the services to Direct Energy or the businesses of the Retained Group in the 12-month period prior to Completion.

Notwithstanding the foregoing, if any service is provided for a period of longer than 12 months, the fees payable with respect to such service will automatically increase to (i) 110 per cent. of such fees for months 13 through 15, (ii) 120 per cent. of such fees for months 16 through 18 and (iii) 150 per cent. of such fees for months 19 through 24.

2.5 Liability

Each of Centrica and the Purchaser have agreed to indemnify the other Party and its affiliates and representatives for all losses arising out of or in any way related to the performance of services to the extent arising out of the bad faith, gross negligence or wilful misconduct of the indemnifying Party (or its affiliates and representatives).

The maximum aggregate liability of each Party under the Transition Services Agreement is capped at the greater of (i) the amount of fees paid or payable to it by the other Party, as the receiving Party, under the Transition Services Agreement or (ii) six months of fees, other than with respect to losses arising from such first Party's fraud, bad faith, gross negligence or wilful misconduct. Neither Centrica nor the Purchaser will be liable for consequential, incidental, exemplary, special, indirect or punitive damages, including lost profits, arising under or in connection with the Transition Services Agreement.

PART IV

HISTORICAL FINANCIAL INFORMATION RELATING TO DIRECT ENERGY

The following unaudited historical financial information relating to Direct Energy has been extracted without material adjustment from the consolidation schedules and supporting analysis that underlie the audited consolidated financial information of the Group for the financial years ended 31 December 2017, 31 December 2018 and 31 December 2019.

For the six months ended 30 June 2020, the unaudited financial information relating to Direct Energy has been extracted without material adjustment from the consolidation schedules and supporting analysis that underlie the Group's unaudited condensed interim financial statements for the six month period ended 30 June 2020.

The financial information in this Part IV has been prepared using the accounting policies of the Group, as adopted in the published consolidated financial statements for each of the financial years presented, with the exception of a change to the line item presentation within gross profit of commodity contracts in the scope of IFRS 9 in financial year 2019, which required the restatement of the 2018 comparatives (see footnote)¹ and the adoption of IFRS 15 in financial year 2018, which required the restatement of 2017 comparatives (see footnote).²

The financial information reflects, therefore, Direct Energy's contribution to the Group during this period, applying the relevant accounting policies.

The financial information contained in this Part IV does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act 2006. The consolidated statutory accounts of the Group in respect of years ended 31 December 2017, 31 December 2018 and 31 December 2019 have been delivered to the U.K. registrar of companies.

Deloitte LLP was the auditor of the Group in respect of the years ended 31 December 2017, 31 December 2018 and 31 December 2019.

Shareholders should read the whole of this document and not rely solely on the information contained in this Part IV.

¹ In March 2019, the International Financial Reporting Interpretations Committee (IFRIC) issued an agenda decision on the Physical Settlement of Contracts to Buy or Sell a non-Financial Item. This decision necessitated a change in the line item presentation of the Group's commodity contracts in the scope of IFRS 9. Further details are provided in the Group's published consolidated financial statements for 2019 in note 1(d). For the purposes of the Historical Financial Information within this Circular, this presentation is reflected in the Income Statement for the periods ended 31 December 2019 and 30 June 2020. The year ended 31 December 2018 has been presented on both the historic and restated bases. The year ended 31 December 2017 has not been represented.

² Adoption of IFRS 15: 'Revenue from contracts with customers' necessitated a change to the accounting treatment of: (i) commissions paid on acquisition of energy supply contracts - so they are capitalised as a cost to obtain a contract rather than expensed immediately and; (ii) consideration received from franchisees – so it is deferred and recognised over the life of the franchise agreement rather than recognised as income immediately. For the purposes of the Historical Financial Information within this Circular, this presentation is reflected in the Income Statement for the periods ended 31 December 2018, 31 December 2019 and 30 June 2020. The year ended 31 December 2017 has been presented on both the historic and restated bases.

1. Historical income statement information for Direct Energy

1.1 12 months ended 31 December 2017 (unaudited)

	Pre-adoption of IFRS 15 Pre-adoption of IFRIC agenda decision Exceptional items & certain			Post-adoption of IFRS 15
				Pre-adoption of IFRIC agenda decision
				Exceptional items & certain
	Business performance	re measurements	Result for the period	Business performance	re measurements	Result for the period
	£m	£m	£m	£m	£m	£m
Revenue	10,885	0	10,885	10,885	0	10,885
Cost of sales	(9,818)	278	(9,540)	(9,823)	278	(9,545)
Remeasurement / Settlement of energy contracts	0	0	0	0	0	0
Gross Profit	1,067	278	1,345	1,062	278	1,340
Operating costs before exceptionals and credit losses on financial assets	(859)	0	(859)	(859)	0	(859)
Credit losses on financial assets	(42)	0	(42)	(42)	0	(42)
Exceptional items	0	(23)	(23)	0	(23)	(23)
Operating costs	(901)	(23)	(924)	(901)	(23)	(924)
Share of joint ventures and associates, net of interest and taxation	0	0	0	0	0	0
Operating profit / (loss)	166	255	421	161	255	416
Net external finance cost	(3)	0	(3)	(3)	0	(3)
Net intercompany finance cost	(80)	0	(80)	(80)	0	(80)
Profit / (loss) before taxation	83	255	338	78	255	333
Taxation on profit / (loss)	20	(92)	(72)	20	(92)	(72)
Profit for the year	103	163	266	98	163	261

1.2 12 months ended 31 December 2018 (unaudited)

	Post-adoption of IFRS 15 Pre-adoption of IFRIC agenda decision			Post-adoption of IFRS 15 Post-adoption of IFRIC agenda decision
	Exceptional items & certain			Exceptional items & certain
	Business performance	re measurements	Result for the period	Business performance	re measurements	Result for the period
	£m	£m	£m	£m	£m	£m
Revenue	11,358	0	11,358	11,358	(1,371)	9,987
Cost of sales	(10,347)	59	(10,288)	(10,347)	2,577	(7,770)
Remeasurement / Settlement of energy contracts	0	0	0	0	(1,147)	(1,147)
Gross Profit	1,011	59	1,070	1,011	59	1,070
Operating costs before exceptionals and credit losses on financial assets	(764)	0	(764)	(764)	0	(764)
Credit losses on financial assets	(52)	0	(52)	(52)	0	(52)
Exceptional items	0	(9)	(9)	0	(9)	(9)
Operating costs	(816)	(9)	(825)	(816)	(9)	(825)
Share of joint ventures and associates, net of interest and taxation	0	0	0	0	0	0
Operating profit / (loss)	195	50	245	195	50	245
Net external finance cost	(5)	0	(5)	(5)	0	(5)
Net intercompany finance cost	(18)	0	(18)	(18)	0	(18)
Profit / (loss) before taxation	172	50	222	172	50	222
Taxation on profit / (loss)	(50)	(14)	(64)	(50)	(14)	(64)
Profit for the year	122	36	158	122	36	158

1.3 12 months ended 31 December 2019 (unaudited)

	Post-adoption of IFRS 15
	Post-adoption of IFRIC agenda decision
		Exceptional items & certain
	Business	re	Result for
	performance	measurements	the period
	£m	£m	£m
Revenue	10,874	(1,187)	9,687
Cost of sales	(9,861)	2,412	(7,449)
Remeasurement / Settlement of energy contracts	0	(1,562)	(1,562)
Gross Profit	1,013	(337)	676
Operating costs before exceptionals and credit losses on financial assets	(707)	0	(707)
Credit losses on financial assets	(85)	0	(85)
Exceptional items	0	19	19
Operating costs	(792)	19	(773)
Share of joint ventures and associates, net of interest and taxation	0	0	0
Operating profit / (loss)	221	(318)	(97)
Net external finance cost	(4)	0	(4)
Net intercompany finance cost	(52)	0	(52)
Profit / (loss) before taxation	165	(318)	(153)
Taxation on profit / (loss)	(60)	87	27
Profit for the year	105	(231)	(126)

1.4 Six month period ended 30 June 2020 (unaudited)

	Post-adoption of IFRS 15
	Post-adoption of IFRIC agenda decision
	Business	Exceptional items & certain re	Result for
	performance	measurements	the period
	£m	£m	£m
Revenue	4,795	(433)	4,362
Cost of sales	(4,400)	721	(3,679)
Remeasurement / Settlement of energy contracts	0	(172)	(172)
Gross Profit	395	116	511
Operating costs before exceptionals and credit losses on financial assets	(279)	0	(279)
Credit losses on financial assets	(64)	0	(64)
Exceptional items	0	8	8
Operating costs	(343)	8	(335)
Share of joint ventures and associates, net of interest and taxation	0	0	0
Operating profit / (loss)	52	124	176
Net external finance cost	(4)	0	(4)
Net intercompany finance cost	(23)	0	(23)
Profit / (loss) before taxation	25	124	149
Taxation on profit / (loss)	(7)	(29)	(36)
Profit for the year	18	95	113

2. Unaudited net asset statement for Direct Energy

	As at 31 December 2019	As at 30 June 2020
	£m	£m
Non-current assets
Goodwill	1,525	1,617
Other intangible assets	236	355
Property, plant and equipment	83	87
Deferred tax assets	26	22
Trade and other receivables, and contract-related assets	18	15
Derivative financial instruments	73 3	133 4
Securities	1,964	2,233
Total non-current assets
Current assets
Inventories	100	88
Current tax assets	28	35
Trade and other receivables, and contract-related assets	1,692	1,435
Intercompany receivables	467	691
Derivative financial instruments	178	151
Cash and cash equivalents	68	60
Total current assets	2,533	2,460
Total assets	4,497	4,693
Current liabilities
Trade and other payables, and contract-related liabilities	(1,310)	(1,301)
Bank overdraft, loans and other borrowings	(11)	(12)
Derivative financial instruments	(337)	(262)
Provisions for other liabilities and charges	(30)	(24)
Total Current Liabilities	(1,688)	(1,599)
Net Current Assets & Liabilities	845	861
Non-current liabilities
Trade and other payables, and contract-related liabilities	(1)	(1)
Intercompany payables	(754)	(808)
Bank loans and other borrowings	(27)	(26)
Derivative financial instruments	(79)	(75)
Deferred tax liabilities	(29)	(56)
Retirement benefit obligations	(21)	(20)
Provisions for other liabilities and charges	(27)	(19)
Total Non-Current Liabilities	(938)	(1,005)
Net assets	1,871	2,089

PART V

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RETAINED GROUP

SECTION A – PRO FORMA INFORMATION

The unaudited pro forma statement of net assets of the Retained Group set out below (the "Unaudited Pro Forma Financial Information") has been prepared in accordance with Annex 20 of the Prospectus Regulation and on the basis of the notes set out below to illustrate the effect of the Transaction on the consolidated net assets of the Retained Group as if the Transaction has occurred on 30 June 2020.

The Unaudited Pro Forma Financial Information has been prepared on the basis of the financial information of the Group as at 30 June 2020, the date to which the latest unaudited financial information in relation to the Group was prepared. The Unaudited Pro Forma Financial Information has been prepared pursuant to Listing Rule 13.3.3R in a manner consistent with the accounting policies of the Group.

The Unaudited Pro Forma Financial Information is shown for illustrative purposes only and because of its nature addresses a hypothetical situation. It does not represent the actual financial position of the Retained Group. Furthermore, it does not purport to represent what the Retained Group's financial position would actually have been if the Transaction had been completed on the indicated date and is not indicative of the results that may or may not be expected to be achieved in the future. The Unaudited Pro Forma Financial Information set out in this section does not constitute financial statements within the meaning of section 434 of the Companies Act 2006.

Shareholders should read the whole of this document and not rely solely on the Unaudited Pro Forma Financial Information contained in this Section A of this Part V.

Deloitte's report on the Unaudited Pro Forma Financial Information is set out in Section B of this Part V.

1. Retained Group unaudited consolidated pro forma statement of net assets as at 30 June 2020

	Transaction Adjustments
	Group	Direct Energy	Settle Inter Group	Proceeds net of tax and fees	Pension Contribution	Retained Group Pro Forma
	£m	£m	£m	£m	£m	£m
	Note 1	Note 2	Note 3	Note 4	Note 5
Non-current assets
Goodwill	2,689	(1,617)	-	-	-	1,072
Other intangible assets	1,603	(355)	-	-	-	1,248
Property, plant and equipment	2,635	(87)	-	-	-	2,548
Interests in joint ventures and
associates	889	-	-	-	-	889
Deferred tax assets	616	(22)	-	-	-	594
Trade and other receivables, and contract-related assets	166	(15)	-	-	-	151
Derivative financial instruments	560	(133)	-	-	-	427
Securities	134	(4)	-	-	-	130
Total non-current assets	9,292	(2,233)	-	-	-	7,059
Current assets
Inventories	399	(88)	-	-	-	311
Current tax assets	165	(35)	-	-	11	141
Trade and other receivables,
and contract-related assets	3,923	(1,435)	-	-	-	2,488
Intercompany receivables	-	(691)	691	-	-	-
Derivative financial instruments	1,225	(151)	-	-	-	1,074
Cash and cash equivalents	1,603	(60)	-	2,692	(240)	3,995
Assets of disposal groups
classified as held for sale	17	-	-	-	-	17
Total current assets	7,332	(2,460)	691	2,692	(229)	8,026
Current liabilities
Trade and other payables, and
contract-related assets	(4,829)	1,301	-	-	-	(3,528)
Current tax liabilities	(266)	-	-	-	-	(266)
Bank overdraft and loans and
other borrowings	(442)	12	-	-	-	(430)
Derivative financial instruments	(1,168)	262	-	-	-	(906)
Provisions for other liabilities
and charges	(317)	24	-	-	-	(293)
Liabilities of disposal groups classified as held for sale	(52)	-	-	-	-	(52)
Total current liabilities	(7,074)	1,599	-	-	-	(5,475)
Non-current liabilities
Trade and other payables, and contract-related assets	(284)	1	-	-	-	(283)
Intercompany payables	-	808	(808)	-	-	-
Bank loans and other
borrowings	(4,718)	26	-	-	-	(4,692)
Derivative financial instruments	(263)	75	-	-	-	(188)
Deferred tax liabilities	(207)	56	-	-	(11)	(162)
Retirement benefit obligations	(522)	20	-	-	240	(262)
Provisions for other liabilities
and charges	(2,137)	19	-	-	-	(2,118)
Total non-current liabilities	(8,131)	1,005	(808)	-	229	(7,705)
Net assets	1,419	(2,089)	(117)	2,692	-	1,905

Notes:

(1) The net assets have been extracted without material adjustment from the unaudited condensed interim financial statements of the Group as at 30 June 2020, which were prepared in accordance with IFRS.

(2) These adjustments remove the assets and liabilities of the Direct Energy Group and were sourced without material adjustment from the historical financial information of the Direct Energy Group as at 30 June 2020 contained in Part IV (Historical financial information relating to Direct Energy) of this document.

(3) At Completion, any Inter-Group balances between Direct Energy and the Retained Group will be settled. This will be deemed settled out of the disposal proceeds, described in note 4.

(4) At Completion, Centrica is expected to receive approximately £2.7 billion of net cash proceeds, after adjustment for estimated debt-like items of approximately £66 million and the estimated transaction costs, including taxation costs of restructuring prior to disposal, of approximately £96 million. As noted in paragraph 1.2 of Part III (Summary of the principal terms of the Transaction Documents) of this document, the exact consideration is subject to certain adjustments to reflect the cash-free, debt-free nature of the Transaction and to ensure a normalised level of working capital in the Direct Energy Group at Completion.

(5) On Completion, Centrica has agreed to pay an amount of up to £240 million in respect of previously deferred pension strain payments. On payment, Centrica will be entitled to current tax relief spread over a four year period, commencing in the financial year the contribution is made. It will also procure the posting of letters of credit in the amount of £745 million and to pay £250 million into an escrow account secured in favour of the Pension Schemes. The likelihood of these letters of credit being called is deemed remote and accordingly there are no accounting entries associated with this in the above table. The cash in escrow remains in the cash and cash equivalents line item of the Retained Group Pro Forma above. See paragraph 7 of Part I (Letter from the Chairman) for further details on Centrica's intended use of proceeds.

(6) No account has been taken of any trading or results of the Group or the Direct Energy Group since 30 June 2020.

(7) This unaudited consolidated pro forma statement of net assets does not constitute a financial statement within the meaning of section 434 of the Companies Act 2006.

SECTION B – ACCOUNTANTS REPORT

Deloitte LLP 1 New Street Square London EC4A 3HQ

The Board of Directors on behalf of Centrica plc Millstream Maidenhead Road Windsor, Berkshire SL4 5GD

Goldman Sachs International Plumtree Court 25 Shoe Lane London United Kingdom EC4A 4AU

31 July 2020

Dear Sirs/Mesdames,

Centrica plc (the "Company")

We report on the pro forma financial information (the "Pro Forma Financial Information") set out in Part V of the class 1 circular dated 31 July 2020 (the "Class 1 Circular"), which has been prepared on the basis described in the notes 1-7, for illustrative purposes only, to provide information about how the Transaction might have affected the financial information presented on the basis of the accounting policies adopted by the Company in preparing the financial statements for the period ended 30 June 2020. This report is required by the Commission delegated regulation (EU) 2019/980 (the "Prospectus Delegated Regulation") applied by Listing Rule 13.3.3R and is given for the purpose of complying with that requirement and for no other purpose.

Responsibilities

It is the responsibility of the directors of the Company (the "Directors") to prepare the Pro forma financial information in accordance with Annex 20 sections 1 and 2 of the Prospectus Delegated Regulation as applied by Listing Rule 13.3.3R.

It is our responsibility to form an opinion, as to the proper compilation of the Pro forma financial information and to report that opinion to you in accordance with Annex 20 section 3 of the Prospectus Delegated Regulation as applied by Listing Rule 13.3.3R.

Save for any responsibility which we may have to those persons to whom this report is expressly addressed and which we may have to Shareholders as a result of the inclusion of this report in the Class 1 Circular, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with Listing Rule 13.4.1R (6), consenting to its inclusion in the Class 1 Circular.

In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the Pro forma financial information, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue.

Basis of Opinion

We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. The work that we performed for the purpose of making this report, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Pro forma financial information with the Directors.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Pro forma financial information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of the Company.

Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in jurisdictions outside the United Kingdom, including the United States of America, and accordingly should not be relied upon as if it had been carried out in accordance with those standards or practices.

Opinion

In our opinion:

• (a) the Pro forma financial information has been properly compiled on the basis stated; and
• (b) such basis is consistent with the accounting policies of the Company.

Yours faithfully

Deloitte LLP

Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at 1 New Street Square, London EC4A 3HQ, United Kingdom. Deloitte LLP is the United Kingdom affiliate of Deloitte NSE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL"). DTTL and each of its member firms are legally separate and independent entities. DTTL and Deloitte NSE LLP do not provide services to clients.

PART VI ADDITIONAL INFORMATION

1. Responsibility

Centrica and the Directors, whose names are set out in paragraph 3 of this Part VI below, accept responsibility for the information contained in this document. To the best of the knowledge and belief of Centrica and the Directors (each of whom has taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.

2. Incorporation and registered office

The Company's legal and commercial name is Centrica plc. The Company is a public limited company and was incorporated and registered in England and Wales on 16 March 1995 as a public company limited by shares. The Company's registered office is at Millstream, Maidenhead Road, Windsor, Berkshire, SL4 5GD (telephone number +44 (0) 1753 494 000).

The principal legislation under which Centrica operates is the Companies Act 2006.

3. Directors

Name	Position	Appointed
Scott Wheway	Chairman	May 2016 (1)
Chris O'Shea	Group Chief Executive	November 2018 (2)
Johnathan Ford	Group Chief Financial Officer	June 2020
Joan Gillman	Non-Executive Director	October 2016
Stephen Hester	Senior Independent Director	June 2016
Pam Kaur	Non-Executive Director	February 2019
Heidi Mottram	Non-Executive Director	January 2020
Kevin O'Byrne	Non-Executive Director	May 2019
Carol Arrowsmith	Non-Executive Director	June 2020

(1) Scott Wheway was first appointed to the Board in May 2016 and became Chairman in March 2020 (2) Chris O'Shea was first appointed to the Board in November 2018 and became Group Chief Executive in April 2020

4. Company Secretary

Justine Campbell is Centrica's Group General Counsel and Company Secretary and was appointed to her current role in April 2019.

5. Directors' shareholdings and options

5.1 Holdings in Centrica Shares

The total direct interests of the Directors in Centrica Shares as at the Latest Practicable Date are set out below:

Name	Number of shares	% of total voting rights in Centrica
Scott Wheway	10,187	0.0002
Chris O'Shea	314,650(1)	0.0054
Johnathan Ford	0	0
Joan Gillman	0	0
Stephen Hester	20,700	0.0004
Pam Kaur	0	0
Heidi Mottram	0	0
Kevin O'Byrne	40,000	0.0007
Carol Arrowsmith	0	0

(1) includes 170,050 ordinary shares held by a connected person (which are not, save for exceptional circumstances, subject to continued service or the achievement of performance conditions)

5.2 Awards granted to Centrica Directors

As at the Latest Practicable Date, the Directors have outstanding awards over Centrica Shares as set out below.

Long Term Incentive Plan

The Long Term Incentive Plan ("LTIP") is designed to retain Directors and to encourage sustainable high performance.

Awards are granted each year based on a percentage of base salary at the point of award. Shares vest at the end of a three-year performance period, depending on the achievement against the performance target, but are not released until the fifth anniversary of the award date. LTIP awards are usually delivered as conditional shares. It is a requirement of the LTIP that the net shares are held for a further two years following the vesting date. Malus applies to the shares during the three-year performance period and clawback applies to the shares during the two-year holding period.

Director	Date of grant	Interest	Vesting date	Release date
Chris O'Shea	Apr 2019	1,332,530	Apr 2022	Apr 2024
	Sept 2018	979,818	Sept 2021	Sept 2023

Annual Incentive Plan

The Annual Incentive Plan ("AIP") is designed to incentivise and reward the annual performance of individuals and teams in the delivery of short-term financial and nonfinancial metrics.

In line with the Group's annual performance management process, each Executive Director has an agreed set of stretching individual objectives each year. Following measurement of the individual and Centrica's financial performance outcome, AIP awards are made. Half of the AIP award is paid in cash, and the other is required to be deferred into shares which are held for three years, to further align the interests of Executive Directors with the long-term interests of shareholders. If overall business performance is not deemed satisfactory, an individual's AIP payment for the year may be reduced or forfeited, at the discretion of the Remuneration Committee. Malus and clawback apply to the cash and share awards.

Director	Date of Grant	Interest	Release date
Chris O'Shea	Apr 2019	68,689	Apr 2022

Share Incentive Plan

The Share Incentive Plan ("SIP") is an incentive scheme offered to all eligible employees in the U.K. The SIP enables employees to purchase shares in Centrica using their pretax salaries, subject to certain caps (the lower of £150 per month or 10 per cent. of salary). Shares (known as partnership shares) acquired by the Executive Directors under the SIP and not subject to continued service are included in the figures set out in paragraph 5.1 of this Part VI.

Additionally, Centrica matches share purchases made under the SIP in certain circumstances (for every two shares purchased under the SIP, Centrica awards one free partnership share, up to a maximum of 22 shares per month). These shares are known as matching shares. Any matching Shares awarded to employees are not released to the relevant employee until after a period of continued service of three years following the date of the award. Partnership shares and matching awards made to the Executive Directors as at the Latest Practicable Date are set out below.

Director	Partnership shares	Matching shares	Date of award of matching shares	Release date of matching shares
Chris O'Shea	4,167(1)	418	Jan 2019 to	Jan 2022 to
			July 2020(2)	July 2023

(1) Includes 105 partnership shares acquired through the SIP's dividend re-investment option. (2) Chris O'Shea has received the maximum matching share award for each month in the period stated (22 shares per month).

Sharesave Scheme

The Sharesave Scheme ("SAYE") is a share option scheme offered to all eligible employees in the U.K. and Ireland. The SAYE enables employees to save a fixed amount each month for periods of three years, five years (or both). Employees can choose to save up to £500 a month (such cap applying across all SAYE schemes, whether existing or cancelled until their normal maturity date), or as little as £5 a month.

Savings are taken from participating employees' net pay each month and paid directly into their designated SAYE savings account. Participating employees are committed to saving the same amount for the full period. At the end of the particular period, participating employees can use their savings to buy Shares at the option price, which includes a 20 per cent. discount. Any Shares purchased can be kept or sold without restriction (subject to applicable law and to the Company's dealing manual). Participating employees also have the option of withdrawing the money in their SAYE savings account.

Details of the Directors' participation in the SAYE scheme as at the Latest Practicable Date are set out below.

Director	Date of grant	No. of Share options	Exercise price	Earliest realisation date	Expiry date
Chris O'Shea	Mar 2019	30,395	£0.987	June 2024	Nov 2024

6. Directors' service contracts and letters of appointment

Key details on the terms of the Directors' service contracts and letters of appointment providing for benefits upon termination of employment are summarised below.

6.1 Executive Directors

The Executive Directors are engaged under rolling contracts of employment with no fixed term which entitle them to 12 months' notice from the Company in the event of termination other than for cause. Executive Directors' contracts allow for termination with contractual notice from the Company or an enforced period of garden leave of up to six months, or termination with a payment in lieu of notice, in each case at the Company's discretion. Each Executive Director is required to mitigate any loss by seeking appropriate alternative employment during any notice period.

The Executive Directors are required to give the Company 12 months' notice.

There are no agreements between the Company and its Executive Directors providing for additional compensation for loss of office or employment that occurs as a result of a public takeover bid for Centrica.

Any entitlement to variable remuneration upon the cessation of a Director's office or employment under the AIP or LTIP, are governed by the rules of the respective scheme or plan.

6.2 Non-Executive Directors

The Non-Executive Directors are engaged under letters of appointment which provide for a rolling term between each Centrica annual general meeting, and terminate automatically if the relevant Non-Executive Director fails to be re-elected at an annual general meeting. The letters of appointment also terminate automatically if the relevant Non-Executive Director's office as director is vacated, or if the relevant Non-Executive Director otherwise stops being a director in accordance with the Articles of Association.

The letters of appointment are terminable on three months' written notice by either party (except in the case of the Chairman, whose letter of appointment specifies six written months' notice), or summarily by Centrica in the event of the relevant Non-Executive Director materially breaching the terms of his or her letter of appointment or other obligations to Centrica, including statutory, contractual, fiduciary and common-law duties. The Non-Executive Directors are not entitled to compensation or other payment for loss of office on termination of their letters of appointment.

7. Major shareholders

As at the Latest Practicable Date, Centrica had been notified (in accordance with Chapter 5 of the Disclosure Guidance and Transparency Rules) of the following underlying investors with a notifiable interest in the issued ordinary share capital of the Company.

Shareholder	% of Centrica Shares in issue
Schroders Investment Management Limited	11.133
Majedie Asset Management Limited	4.99
Newton Investment Management	4.99
Standard Life Aberdeen plc	4.99

8. Key individuals

The following individuals are deemed by Centrica to be key to the operations of Direct Energy.

Name	Position
John Schultz	President, Direct Energy and Direct Energy Business
Bruce Stewart	President, Direct Energy Home
Thomas Smith	Executive Vice President and General Counsel
Stuart Phillips	Chief Financial Officer, Direct Energy Business
Dana Mason	Chief Financial Officer, Direct Energy Home

9. Material contracts

9.1 The Retained Group

No contracts have been entered into by the Retained Group (other than contracts entered into in the ordinary course of business): (i) within two years immediately preceding the date of this document that are, or may be, material to the Retained Group, or (ii) that contain provisions under which any member of the Retained Group has an obligation or entitlement that is, or may be, material to the Retained Group as at the Latest Practicable Date, save as disclosed below.

Purchase Agreement and Transition Services Agreement

A summary of the principal terms and conditions of the Purchase Agreement and Transition Services Agreement is set out in Part III (Summary of the principal terms of the Transaction Documents) of this document.

Deed of Release

On 23 July 2020, Centrica (and certain of its Subsidiaries) entered into a deed of release (the "Deed of Release") with Centrica Engineers Pension Trustees Limited, Centrica Pension Plan Trustees Limited and Centrica Pension Trustees Limited (together the "Pension Trustees") pursuant to which the Pension Trustees have agreed to release the security they hold over Direct Energy U.S. (and related security) effective from such date (the "Discharge Date", expected to be immediately prior to Completion) as, by way of replacement security:

• (A) up to 10 letters of credit issued by banks or financial institutions having a rating of A or higher by Standard & Poor's (or the equivalent Moody's rating) (an "Acceptable Bank") in a customary form in the aggregate amount of £745 million are issued in favour of the Pension Schemes;
• (B) the aggregate sum of £250 million is deposited by CBHL into accounts held with Acceptable Banks over which the Pension Schemes are granted a first fixed charge under the terms of an account security charge; and
• (C) Centrica has delivered in favour of each of the Pension Schemes three parent company guarantees guaranteeing all of Centrica's present and future obligations and liabilities to make payments to the respective Pension Schemes, such parent company guarantees to become effective only in circumstances where: (i) any letter of credit referred to in (A) above has not been renewed 30 days prior to its expiry date; or (ii) the Company grants security to the issuer of any letter of credit referred to (A) above, in respect of the Company's obligations to the issuer under that letter of credit.

The release of security contemplated by the Deed of Release does not take effect in the event that Centrica confirms publicly or to the Pension Trustees that the Transaction will not proceed to Completion.

Side Letter to Deed of Release

In a side letter to the Deed of Release dated 23 July 2020 (the "Side Letter"), Centrica and the Pension Trustees have further agreed that it is their mutual intention to agree terms on which Centrica will, following Completion, make a contribution to the Pension Schemes out of the Net Cash Proceeds arising from the Transaction.

The Side Letter provides that, in consideration of the Pension Trustees entering into the Deed of Release and pending the conclusion of discussions around the contribution to the Pension Schemes described above, from the Discharge Date until the earlier of (i) the date on which the terms of Centrica's contribution to the Pension Schemes is agreed and (ii) 30 June 2022 (or, if the agreement of the actuarial valuations of the Pension Schemes as at 31 March 2021 have not been agreed by such date, such later date up to 31 December 2022 as discussed in good faith by Centrica and the Pension Trustees), Centrica shall not:

• (D) pay any dividends or make any other distributions to Shareholders, whether in cash or otherwise (except for any issue of bonus shares, or any distribution of assets to shareholders on a winding up), in excess of the Group's Free Cash Flow in the then current financial year (in the case of an interim dividend or distribution) or the financial year ending prior to the date on which the dividend or distribution is made (in the case of a final dividend or distribution) and in each case including any positive post-dividend Free Cash Flow retained from the previous year; and
• (E) prepay any external financial indebtedness existing at the Discharge Date owing under its credit facility agreements or note issuances or other listed debt

("Existing Debt") before its scheduled repayment date in an amount exceeding (in aggregate) £150 million (or its equivalent in another currency or currencies) without the consent of the Pension Trustees. The payment of the following amounts does not constitute a "prepayment" for these purposes: (i) any payment made pursuant to mandatory prepayment terms provided for in the Existing Debt, provided such terms existed as at the date of the Side Letter; (ii) any repayment of or rollover of any amounts drawn under revolving facilities; or (iii) any payment made pursuant to or in connection with a refinancing or restructuring of Existing Debt.

The term "Free Cash Flow" is defined as the Group's net cash flow from operating and investing activities, excluding: (i) sale or purchase of securities; (ii) movements in variation margin and cash collateral (that are included in the Group's definition of net debt); and (iii) any disposal proceeds; but including (iv) financing interest paid; and (v) adding back an amount equal to the deferred redundancy strain payments made to the Schemes of up to £240 million.

In addition, the Pension Trustees have agreed that, if the Free Cash Flow or projected Free Cash Flow of the Group in the financial year ending 31 December 2021 and/or the financial year ending 31 December 2022 is negative, they will consider, in good faith, and assuming no dividends have been declared and that any disposal proceeds are not being used to fund the payment of dividends that have previously been declared, any request by the Company to defer the cash element of the deficit repair contributions due to the Schemes in 2021 and/or 2022 (as applicable) under the existing recovery plans for the Pension Schemes. When considering Centrica's request, the Pension Trustees will take account of relevant guidance issued by The Pensions Regulator.

Covenant to Pay Deed

Centrica and the Pension Trustees additionally entered into a replacement covenant to pay deed dated 23 July 2020 (the "Covenant to Pay Deed"). The Covenant to Pay Deed replaces the existing covenant to pay deed between the relevant parties entered into on 7 December 2016 and last amended on 29 July 2019.

Under the Covenant to Pay Deed, Centrica agrees to make payments to the Pension Schemes totalling £995 million if a demand is made by the Pension Trustees following the occurrence of certain default events. Centrica has also agreed to make payments of up to £240 million to the Pension Schemes in respect of previously deferred redundancy strain payments. The deferred redundancy strain payments are to be paid in full following Completion.

Disposal of King's Lynn

On 20 December 2019, GB Gas Holdings Limited ("GBGH", a wholly owned subsidiary of Centrica) entered into an agreement (the "King's Lynn SPA") for the sale of its 382 MW King's Lynn combined cycle gas turbine power station to RWE Generation UK plc ("RWE") for total consideration of £105 million, based on a valuation date of 31 December 2019 and subject to customary adjustments to reflect changes to net debt and working capital as at completion. The disposal completed on 12 February 2020.

In the King's Lynn SPA, GBGH gave certain representations, warranties and indemnities that are customary for a transaction of this nature. GBGH is not aware of any actual or threatened material claim in connection with these provisions. GBGH's aggregate liability under the King's Lynn SPA is subject to customary caps and time limits for RWE bringing claims.

9.2 Direct Energy

No contracts have been entered into by Direct Energy (other than contracts entered into in the ordinary course of business): (i) within two years immediately preceding the date of this document that are, or may be, material to Direct Energy or (ii) that contain provisions under which any member of Direct Energy has an obligation or entitlement that is, or may be, material to Direct Energy as at the Latest Practicable Date, save as disclosed below.

Disposal of Clockwork Inc

On 15 February 2019, Direct Energy entered into an agreement (the "Clockwork SPA") for the sale of Clockwork Inc. and certain of its affiliates to Authority Brands, LLC ("Authority Brands") for total consideration of \$300,000,000, exclusive of working capital adjustments. The disposal completed on 30 April 2019.

In the Clockwork SPA, Direct Energy gave certain representations, warranties and indemnities that are customary for a transaction of this nature. Authority Brands agreed to obtain a representation and warranty insurance policy which, following completion, is its sole and exclusive recourse for any inaccuracy in or breach of the warranties and representations given by Direct Energy in the Clockwork SPA (except in the case of fraud on the part of Direct Energy).

10. Legal or arbitration proceedings

10.1 The Retained Group

There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which Centrica is aware), during a period covering at least the previous 12 months which may have, or have had in the recent past, significant effects on the financial position or profitability of the Retained Group.

10.2 Direct Energy

Save as disclosed below, there are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which Centrica is aware), during a period covering at least the previous 12 months which may have, or have had in the recent past, significant effects on the financial position or profitability of Direct Energy.

Telephone Consumer Protection Act proceedings relating to Direct Energy Home

The Direct Energy Group is defending a small number of proceedings relating to Direct Energy Home arising from alleged violations of the Telephone Consumer Protection Act (the "TCPA"), including three matters where the plaintiff is seeking to represent a class of similarly situated plaintiffs. These proceedings have been brought in the following states: Ohio (Dickson), Texas (Burk) and Pennsylvania (Perrong). A class of plaintiffs is yet to be certified in each of these proceedings.

The TCPA is a federal U.S. law that imposes restrictions on, among other things, unsolicited telemarketing through residential landlines, wireless lines, and facsimile (fax) lines, and the use of automated telephone dialling systems and artificial or pre-recorded voice messages without the recipient's consent. The alleged communications in respect of the Dickson and Burk proceedings relate to a marketing campaign carried out on Direct Energy's behalf by a marketing agency, Total Marketing Concepts LLC ("TMC"). Direct Energy has asserted claims against TMC in relation to both matters. All proceedings are being rigorously investigated and defended by Direct Energy.

As at the Latest Practicable Date, given that discovery is ongoing and key procedural steps have not yet been completed, it is not possible to accurately estimate Direct Energy's potential financial exposure and costs in each of these proceedings, and no provision relating to such proceedings has been made in the Direct Energy Group's financial statements.

11. Working capital

In the opinion of Centrica, taking into account the net proceeds of the Transaction, the working capital available to the Retained Group is sufficient for its present requirements; that is, for at least the next 12 months following the date of this document.

12. Significant changes

12.1 The Retained Group

There has been no significant change to the financial position or financial performance of the Retained Group since 30 June 2020, the date to which Centrica's last published unaudited interim financial information was prepared.

12.2 Direct Energy

There has been no significant change to the financial position or financial performance of Direct Energy since 30 June 2020, the date to which Centrica's last published unaudited interim financial information was prepared.

13. Profit forecast

13.1 NRG Energy Guidance

As is market practice for U.S. public companies, NRG Energy has historically provided full year earnings and cash flow guidance in its unaudited quarterly earnings press releases, as well as targets for leverage metrics in order to guide on its expected credit ratings. As part of the announcement of its proposed acquisition of Direct Energy on 24 July 2020 (the "NRG Announcement"), NRG Energy updated this financial guidance and included a statement on the future contribution of Direct Energy:

"The transaction on closing is expected to generate approximately \$740 million in annual run-rate Adjusted EBITDA, while enhancing free cash flow strength and stability and providing earnings diversification."

In addition, to enable its shareholders to understand the evolution of the contribution of Direct Energy to NRG Energy's EBITDA, in an "NRG Business Update" presentation issued in connection with the NRG Announcement (the "NRG Presentation"), NRG Energy provided an illustrative overview of Direct Energy's potential contribution in the financial years ending 31 December 2021 and 2022, before reaching the \$740 million run rate referred to the NRG Announcement in the financial year ending 31 December 2023.

	2021	2022	Pro forma 2023 Run Rate
	\$m	\$m	\$m
Direct Energy Base Adj. EBITDA1	440	440	440
Synergies	135	225	300
Direct Energy COVID-19 impact2	(75)	(35)	-
Incremental Adj. EBITDA	500	630	740

¹ "Adj. EBITDA forecasts are based on NRG's own estimates"

²"Based on NRG forecast of potential COVID-19 impact without involvement of Centrica or Direct Energy Management"

The presentation of Direct Energy Base Adj. EBITDA and Incremental Adj. EBITDA for the financial years ended 31 December 2021, 2022 and 2023 (together "NRG Energy Guidance") may be considered to be profit forecasts for the purpose of the Listing Rules.

Although the Company understands from NRG Energy that the NRG Energy Guidance was prepared based on the U.S. GAAP accounting policies used by NRG Energy in its consolidated financial statements, neither NRG Energy's independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the NRG Energy Guidance, nor have they expressed any opinion or any other form of assurance on such information or its achievability.

13.2 NRG Energy Guidance is not valid and Shareholders should not rely on the NRG Energy Guidance when deciding how to vote

For the reasons set out below, the Directors consider that the NRG Energy Guidance is not valid and Shareholders should not rely on the NRG Energy Guidance when assessing the merits of the Transaction and deciding how to vote.

The NRG Energy Guidance has been prepared solely and independently by NRG Energy based on their own investigations and views on the operations, financial and operating condition and future prospects of Direct Energy under the ownership of NRG Energy, without discussion with or involvement of Centrica or Direct Energy. In particular, the Directors note:

• (A) NRG Energy's financial statements and financial guidance are prepared and presented in accordance with U.S. GAAP, whereas Centrica's financial statements are prepared and presented in accordance with IFRS. There are a number of differences between NRG Energy and Centrica's accounting policies including revenue recognition and resulting capitalisation of commissions vs. expense, accounting for leases and accounting for intangibles;
• (B) COVID-19 has had a material impact on a broad range of companies globally and the recovery timeline and medium term impact for Direct Energy is uncertain. The

NRG Energy Guidance includes "NRG forecast of potential COVID-19 impact" which NRG Energy states has been prepared "without involvement of Centrica or Direct Energy Management" and does not reflect Centrica's assessment of the impact of COVID-19. Neither Centrica nor Direct Energy has been involved in producing or evaluating the COVID-19 forecasts produced by NRG Energy; and

(C) as stated in its interim results announcement on 24 July 2020, Centrica has not provided full year guidance for its current financial year due to the uncertainty caused by COVID-19, and has not provided and does not consider that it would be in a position to provide any guidance for future years.

Accordingly, the Directors do not consider the NRG Energy Guidance to be reliable information or an accurate forecast of the future performance of the Direct Energy business.

Further, the Directors consider that the NRG Energy Guidance is not a valid forecast for Direct Energy were it to remain under Centrica's ownership. In the NRG Presentation, NRG Energy stated that in order to achieve its estimated synergies, it intends to integrate Direct Energy within its existing business and intends to extract significant financial synergies from SG&A, O&M and capex including: (i) applying NRG Energy's culture of cost excellence; (ii) integrating IT, billing, accounting, HR, customer care and infrastructure; (iii) extracting facility savings with significant employee geographic overlap, co-loaded headquarters and branch offices; (iv) extracting procurement and retail generation savings; and (v) corporate shared services optimisation. In addition, NRG Energy has a different financial model and credit profile to Centrica, as an integrated energy provider with a sub-investment grade credit rating. As a result, the financial risk management and collateral requirements of Direct Energy will differ under the ownership of NRG Energy compared to the current ownership of Centrica, which has investment grade credit ratings.

The NRG Energy Guidance is forward-looking in nature and Centrica understands it is based on a significant number of critical assumptions. Although the NRG Energy Guidance is presented with numerical specificity, it reflects numerous estimates and assumptions as to future events that NRG Energy's management believed were reasonable at the time the NRG Energy Guidance was prepared and used, taking into account the relevant information available to NRG Energy's management at the time. The NRG Energy Guidance does not take into account any circumstances or events occurring after the date on which it was prepared. Except to the extent required by applicable law, NRG Energy does not intend, and expressly disclaims any responsibility, to update or otherwise revise the NRG Energy Guidance to reflect the occurrence of future events or changes in general economic or industry conditions.

The unaudited NRG Energy Guidance was prepared to provide NRG Energy's shareholders with guidance on the potential future contribution of Direct Energy to the enlarged NRG Energy businesses, and likely leverage and credit metrics for the enlarged NRG Energy, and was not prepared with a view towards providing Shareholders with the level of robustness of information required to assist Shareholders with assessing the merits of the Transaction. Neither NRG Energy's independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the NRG Energy Guidance as provided by NRG Energy, nor have they expressed any opinion or any other form of assurance on such information or its achievability.

Neither the Company, the Directors or their respective advisers accept any responsibility for the accuracy, reasonableness, validity or completeness of the NRG Energy Guidance, as they had no involvement in either: (i) the preparation of the NRG Energy Guidance; or (ii) the adequacy or otherwise of the assumptions underpinning the NRG Energy Guidance.

Accordingly, for the reasons above, the Directors consider that the NRG Energy Guidance is not valid.

13.3 Reassessment of the NRG Energy Guidance is not necessary

The Directors do not consider the NRG Energy Guidance to represent information necessary for Centrica Shareholders to make an informed decision as to how to vote at the General Meeting because, given the reasons set out above, it would not be possible to accurately predict the future performance of Direct Energy within the Group.

The Directors believe that Shareholders should only consider reliable information when making their assessment of the Transaction and when considering how to vote at the General Meeting. Consequently, the Directors believe that a reassessment of the NRG Energy Guidance for the purposes of the Listing Rules is not necessary because, as noted above, it would not be possible to provide accurate or reliable forecasts for the future performance of Direct Energy within the Group, in particular over the period covered by the NRG Energy Guidance. Shareholders should not rely upon the NRG Energy Guidance in deciding whether or not to approve the proposed sale of Direct Energy.

14. Related party transactions

Save as disclosed (in accordance with the respective standard adopted according to Regulation (EC) No. 1606/2002) in the information incorporated by reference below, Centrica has not entered into any related party transactions (which, for these purposes, are those set out and adopted according to Regulation (EC) No. 1606/2002) during the period from 1 January 2017 up to the date of this document:

• (A) Note S8 of the notes to the audited consolidated financial statements, which can be found at page 180 of the Centrica 2017 Annual Report, which is incorporated by reference into this document as set out in Part VII (Information incorporated by reference) and available for inspection as set out in paragraph 16 of this Part VI;
• (B) Note S8 of the notes to the audited consolidated financial statements, which can be found at page 199 of the Centrica 2018 Annual Report, which is incorporated by reference into this document as set out in Part VII (Information incorporated by reference) and available for inspection as set out in paragraph 16 of this Part VI;
• (C) Note S8 of the notes to the audited consolidated financial statements, which can be found at page 186 of the Centrica 2019 Annual Report, which is incorporated by reference into this document as set out in Part VII (Information incorporated

by reference) and available for inspection as set out in paragraph 16 of this Part VI; and

(D) Note 18 of the notes to the unaudited interim financial information for the six months ended 30 June 2020, which can be found at page 53 of the Centrica 2020 Interim Results, which is incorporated by reference into this document as set out in Part VII (Information incorporated by reference) and available for inspection as set out in paragraph 16 of this Part VI.

15. Consents

Goldman Sachs, who has acted as sponsor and joint financial adviser to Centrica in connection with the Transaction, has given and has not withdrawn its written consent to the inclusion in this document of references to its name in the form and context in which it appears.

Robey Warshaw, who has acted as joint financial adviser to Centrica in connection with the Transaction, has given and not withdrawn its written consent to the inclusion in this document of references to its name in the form and context in which it appears.

Deloitte, registered to carry out audit work in the U.K. and Ireland by the Institute of Chartered Accountants in England and Wales, has given and not withdrawn its written consent to the inclusion of its accountant's report on the Unaudited Pro Forma Financial Information of the Retained Group set out in Section B of Part V (Unaudited Pro Forma Financial Information of the Retained Group), in the form and context in which it appears.

16. Documents available for inspection

Copies of the following documents will be available for inspection during normal business hours on any business day during the period beginning with (and including) the date of this document and ending on (and including) the date of the General Meeting at Centrica's registered office at Millstream, Maidenhead Road, Windsor, Berkshire, SL4 5GD and at the offices of Centrica's legal adviser, Slaughter and May, at One Bunhill Row, London, EC1Y 8YY:

• (A) the Articles of Association;
• (B) this Circular;
• (C) the Purchase Agreement;
• (D) the written consents referred to in paragraph 15 of this Part VI;
• (E) the consolidated audited accounts of the Group for the financial years ended 31 December 2017, 31 December 2018 and 31 December 2019;
• (F) the consolidated unaudited interim financial results of the Group for the six month period ended 30 June 2020; and
• (G) the report by Deloitte set out in Section B of Part V (Unaudited Pro Forma Financial Information of the Retained Group).

Copies of these documents will also be made available on Centrica's website: https://www.centrica.com/GM820.

PART VII INFORMATION INCORPORATED BY REFERENCE

The table below sets out the various information incorporated by reference into this document, so as to provide the information required under the Listing Rules.

Document	Information incorporated by reference	Page number(s) in this document
Centrica's 2017 Annual Report and Accounts	Details of related party transactions that Centrica has entered into for the financial year ended 31 December 2017.	51-52
Centrica's 2018 Annual Report and Accounts	Details of related party transactions that Centrica has entered into for the financial year ended 31 December 2018.	51-52
Centrica's 2019 Annual Report and Accounts	Details of related party transactions that Centrica has entered into for the financial year ended 31 December 2019.	51-52
Centrica's 2020 unaudited interim financial results for the period ended 30 June 2020	Details of related party transactions that Centrica has entered into in the six month period ended 30 June 2020.	51-52

A copy of each of the documents listed is available for inspection in accordance with paragraph 16 of Part VI (Additional information) of this document above (including on the Centrica website).

Information that is itself incorporated by reference in the above documents is not incorporated by reference into this document. It should be noted that, except as set forth above, no other portion of the above documents are incorporated by reference into this document and those portions which are not specifically incorporated by reference in this document are either not relevant for Shareholders or the relevant information is included elsewhere in this document.

PART VIII DEFINITIONS

The following definitions apply throughout this document, unless the context requires otherwise:

"Acquisition Proposal"	any proposal for a Covered Transaction involving, contemplating, providing for or resulting in any sale, assignment, transfer or other disposition of shares of Direct Energy U.S. or Direct Energy Canada or substantially all of the assets falling within the Transaction perimeter made by any person other than the Purchaser or its authorised representatives, excluding (i) the Transaction and (ii) any Covered Transaction involving, contemplating, providing for or resulting in the acquisition or sale of any shares of Centrica or all or substantially all of the assets of the Group, taken as a whole;
"Advance Ruling Certificate"	an advance ruling certificate issued by the Commissioner of Competition (appointed under the Competition Act (Canada)) pursuant to subsection 102(1) of the Competition Act (Canada) in respect of the Transaction;
"AIP"	as defined in paragraph 5.2 of Part VI (Additional information) of this document;
"Antitrust & Regulatory Condition"	as defined in paragraph 1.3(A) of Part III (Summary of the principal terms of the Transaction Documents) of this document;
"Articles of Association"	the articles of association of Centrica as at the date of this document;
"Authority Brands"	as defined in paragraph 9.2 of Part VI (Additional information) of this document;
"Board" or "Board of Directors"	Centrica's board of directors, whose details are set out at paragraph 3 of Part VI (Additional information) of this document;
"Bord Gáis Energy"	Centrica's Irish energy supply business unit;
"British Gas"	Centrica's U.K. energy supply business unit;

"Burdensome Condition"	as defined in paragraph 1.3(G) of Part III (Summary of the principal terms of the Transaction Documents) of this document;
"CBHL" or "U.S. Seller"	Centrica Beta Holdings Limited, a company registered in England and Wales with company number 4710850 having its registered office at Millstream, Maidenhead Road, Windsor, Berkshire, SL4 5GD;
"Centrica Business Solutions" or "CBS"	Centrica's "Business Solutions" business unit;
"Centrica Innovations" or "CI"	Centrica's "Innovations" business;
"Centrica Shares"	ordinary shares of 614/81 pence each in the capital of the Company;
"Centrica Storage"	Centrica Storage Limited, a wholly-owned subsidiary of Centrica which produces and processes gas from the Rough gas field in the southern North Sea;
"CGHL" or "Canadian Seller"	Centrica Gamma Holdings Limited, a company registered in England and Wales with company number 4710840 having its registered office at Millstream, Maidenhead Road, Windsor, Berkshire, SL4 5GD;
"Chairman"	the chairman of the Company;
"Change in Recommendation"	as defined in paragraph 1.3 of Part III (Summary of the principal terms of the Transaction Documents) of this document
"Circular"	this document;
"Clockwork SPA"	as defined in paragraph 9.2 of Part VI (Additional information) of this document;
"Company" or "Centrica"	Centrica plc, a public limited company incorporated in England and Wales with registered number 03033654, whose registered office is at Millstream, Maidenhead Road, Windsor, Berkshire, SL4 5GD;
"Competition Act (Canada)"	the Competition Act of 1985;
"Competition and Markets Authority"	the Competition and Markets Authority of the United Kingdom;

"Competitive Activities"	as defined in paragraph 1.12 of Part III (Summary of the principal terms of the Transaction Documents) of this document;
"Completion"	completion of the Transaction in accordance with the terms of the Purchase Agreement;
"Consideration"	as defined in paragraph 1.2 of Part III (Summary of the principal terms of the Transaction Documents) of this document;
"Covered Transaction"	any merger, consolidation, share exchange, business combination, reorganisation, liquidation, dissolution, amalgamation, arrangement, takeover bid, purchase or sale of assets, purchase or sale of stock, recapitalisation or other similar transaction,
"CREST"	the paperless settlement procedure operated by Euroclear enabling system securities to be evidenced otherwise than by certificates and transferred otherwise than by written instrument;
"CREST Manual"	the rules governing the operation of CREST as published by Euroclear;
"CREST Proxy Instruction"	a proxy appointment or instruction made via CREST, authenticated in accordance with Euroclear's specifications and containing the information set out in the CREST Manual;
"Debt Commitment Letter"	as defined in paragraph 1.8 of Part III (Summary of the principal terms of the Transaction Documents) of this document;
"Debt Financing"	as defined in paragraph 1.8 of Part III (Summary of the principal terms of the Transaction Documents) of this document;
"Deed of Release"	as defined in paragraph 9.1 of Part VI (Additional information) of this document;
"Direct Energy" or "Direct Energy Group"

"Direct Energy Business"	as defined in paragraph 3 of Part I (Letter from the Chairman) of this document;
"Direct Energy Canada"	the holding company for Direct Energy's Canadian business, Direct Energy Marketing Ltd, a company incorporated under the laws of Canada, having its registered address at 25 Sheppard Avenue, Suite 1400, Toronto, ON M2N 6S6, Canada;
"Direct Energy Home"	as defined in paragraph 3 of Part I (Letter from the Chairman) of this document;
"Direct Energy U.S."	the holding company for Direct Energy's U.S. business, Centrica US Holdings Inc, a company incorporated under the laws of the state of Delaware having its registered address at 1105 North Market Street, Suite 1300, Wilmington DE, 19801 United States;
"Directors"	the directors of the Company at the date of this document, whose details are set out in paragraph 3 of Part VI (Additional information) of this document and "Director" means any one of them;
"Discharge Date"	as defined in paragraph 9.1 of Part VI (Additional information) of this document;
"Disclosure Guidance and Transparency Rules"	the disclosure guidance and transparency rules made under Part VI of FSMA (and contained in the FCA's publication of the same name), as amended from time to time;
"Energy Marketing & Trading"	Centrica's "Energy Marketing & Trading" business unit;
"E&P"	Centrica's "Exploration and Production" business unit, comprising Centrica Storage and its 69 per cent. interest in Spirit Energy;
"EPS"	earnings per share;
"Euroclear"	Euroclear U.K. & Ireland Limited, the operator of CREST;
"Excluded Liabilities"	certain liabilities which the Parties have agreed do not form part of the Transaction perimeter, comprising predominantly the

	liabilities being transferred under the Pre Completion Transfer Plan;
"Exclusivity Agreement"	the letter agreement between Centrica and NRG Energy, providing for a limited period of exclusive negotiations to explore further the basis for a transaction;
"Executive Directors"	the executive directors of the Company at the date of this document and "Executive Director" means any one of them;
"Existing Debt"	as defined in paragraph 9.1(E) of Part VI (Additional information) of this document;
"FCA" or "Financial Conduct Authority"	the Financial Conduct Authority of the United Kingdom and, where applicable, any successor body or bodies carrying out the functions currently carried out by the Financial Conduct Authority;
"FERC"	as defined in paragraph 1.3(A) of Part III (Summary of the principal terms of the Transaction Documents) of this document;
"FPA"	the Federal Power Act of U.S., as amended, and FERC's implementing regulations thereunder;
"Free Cash Flow"	as defined in paragraph 9.1 of Part VI (Additional information) of this document;
"FSMA"	the Financial Services and Markets Act 2000, as amended from time to time;
"GBGH"	GB Gas Holdings Limited, a company registered in England and Wales with company number 3186121 having its registered office at Millstream, Maidenhead Road, Windsor, Berkshire, SL4 5GD;
"General Meeting"	the general meeting of Centrica to be held at Millstream, Maidenhead Road, Windsor, Berkshire. SL4 5GD at 2.00 p.m. on 20 August 2020, as described in the Notice of General Meeting;
"Governmental Entity"	any government or any political subdivision thereof, court of competent jurisdiction, regulatory or administrative agency,

commission or other governmental authority or instrumentality, department, board, bureau, agency, arbitrator, court, tribunal (including self-regulated organisations or other nongovernmental regulatory or quasigovernmental authority (to the extent that the rules, regulations or orders of such nongovernmental or quasi-governmental organisation or authority have the force of law)), public international organisation, or any entity exercising executive, legislative, judiciary, regulatory, taxing or administrative functions of or pertaining to government, in each case, whether federal, state, provincial, local, domestic, foreign or multinational; "Group" or "Centrica Group" Centrica together with its Subsidiaries; "HSR Act" the U.S. Hart-Scott-Rodino Antitrust Improvement Act of 1976; "Investment Canada Act" the Investment Canada Act of 1985; "King's Lynn SPA" as defined in paragraph 9.1 of Part VI (Additional information) of this document; "Latest Practicable Date" close of business on 28 July 2020 (being the latest practicable date prior to the publication of this document); "Listing Rules" the listing rules made under Part VI of FSMA (and contained in the FCA's publication of the same name), as amended from time to time; "LNG" liquefied natural gas; "LTIP" as defined in paragraph 5.2 of Part VI (Additional information) of this document; "NA Credit Support Obligation" as defined in paragraph 1.10 of Part III (Summary of the principal terms of the Transaction Documents) of this document; "Net Cash Proceeds" as defined in paragraph 7 of Part I (Letter from the Chairman) of this document; "Non-Executive Directors" the non-executive directors of the Company at the date of this document (including, for the

	avoidance of doubt, the Chairman) and "Non Executive Director" means any one of them;
"Notice of General Meeting"	the notice of the General Meeting which is set out at the end of this document;
"NRG Announcement"	as defined in paragraph 13.1 of Part VI (Additional information) of this document;
"NRG Energy" or the "Purchaser"	NRG Energy, Inc., a company incorporated under the laws of New Jersey having its registered office at 804 Carnegie Center, Princeton, NK 08540, United States;
"NRG Energy Guidance"	as defined in paragraph 13.1 of Part VI (Additional information) of this document;
"NRG Presentation"	as defined in paragraph 13.1 of Part VI (Additional information) of this document;
"Nuclear"	Centrica's "Nuclear" business unit, comprising its 20 per cent. interest in EDF Energy's operating nuclear power generation fleet in the U.K.;
"Ofgem"	the Office of Gas and Electricity Markets of the United Kingdom;
"O&M"	operations & maintenance;
"Outside Date"	as defined in paragraph 1.13(A) of Part III (Summary of the principal terms of the Transaction Documents) of this document;
"Party" or "Parties"	as defined in paragraph 1.1 of Part III (Summary of the principal terms of the Transaction Documents) of this document;
"Pension Schemes" or "Schemes"	the Centrica Pension Plan, the Centrica Pension Scheme and the Centrica Engineers Pension Scheme;
"Pension Trustees"	as defined in paragraph 9.1 of Part VI (Additional information) of this document;
"PRA" or "Prudential Regulation Authority"	the Prudential Regulation Authority of the United Kingdom and, where applicable, includes any successor body or bodies

carrying out the functions currently carried out by the Prudential Regulation Authority; "Pre-Completion Transfer Plan" as defined in paragraph 1.4 of Part III (Summary of the principal terms of the Transaction Documents) of this document; "Pre-Completion Transfers" as defined in paragraph 1.4 of Part III (Summary of the principal terms of the Transaction Documents) of this document; "Prospectus Delegated Regulation" as defined in Section B of Part V (Unaudited Pro Forma Financial Information of the Retained Group) of this document; "Prospectus Rules" the prospectus rules made under Part VI of FSMA (and contained in the FCA's publication of the same name), as amended from time to time; "Proxy/Voting Form" the form of proxy enclosed with this document, for use by Shareholders in connection with the General Meeting; "Purchase Agreement" the purchase agreement between Centrica and NRG Energy as described in paragraph 1 of Part III (Summary of the principal terms of the Transaction Documents) of this document; "Purchaser Group" the Purchaser together with its Subsidiaries; "R&WI Policy" as defined in paragraph 1.5 of Part III (Summary of the principal terms of the Transaction Documents) of this document; "Registrar" or "Equiniti" Equiniti Limited, a limited company incorporated in England and Wales with registered number 6226088, whose registered office is at Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA; "Regulatory Information Service" one of the regulatory information services authorised by the FCA to receive, process and disseminate regulatory information from listed companies; "Remuneration Committee" the Board's remuneration committee;

"Resolution"	the ordinary resolution of the Company seeking approval for the Transaction at the General Meeting, as set out in the Notice of General Meeting;
"Retained Group"	the Company, its Subsidiaries and subsidiary undertakings (for the avoidance of doubt, excluding Direct Energy), being the continuing businesses of the Group following the Transaction;
"Review Laws"	as defined in paragraph 1.3 of Part III (Summary of the transaction documents) of this document;
"RWE"	as defined in paragraph 9.1 of Part VI (Additional information) of this document;
"SAYE"	as defined in paragraph 5.2 of Part VI (Additional information) of this document;
"Seller Parent Recommendation"	as defined in paragraph 1.3 of Part III (Summary of the principal terms of the Transaction Documents) of this document;
"SG&A"	selling, general & administrative expenses;
"Shareholder(s)"	holders of Centrica Shares;
"Shareholder Approval Condition"	as defined in paragraph 1.3(C) of Part III (Summary of the principal terms of the Transaction Documents) of this document;
"Side Letter"	as defined in paragraph 9.1 of Part VI (Additional information) of this document;
"SIP"	as defined in paragraph 5.2 of Part VI (Additional information) of this document;
"SME"	small and medium enterprise;
"Specified Governmental Approval"	any approvals required pursuant to the Specified Review Laws, including such approvals under the HSR Act and the Competition Act (Canada);
"Specified Review Law"	the HSR Act, the Clayton Antitrust Act of 1914, the Federal Trade Commission Act of 1914, the Competition Act (Canada) and all other antitrust, competition and merger control laws,

and any similar laws (whether national, federal, state, provincial, local or otherwise) related to competition, consolidation, market concentration or market share (or the accumulation thereof); provided that, for the avoidance of doubt, this term does not include any energy regulatory laws administered by FERC or any state or local energy regulatory authority to the extent not related to competition, consolidation, market concentration or market share (or the accumulation thereof); "Spirit Energy" Spirit Energy Limited, the full-cycle exploration and production business formed as a joint venture between Centrica and Stadtwerke München in 2017, with a portfolio of offshore gas and oil assets in Norway, UK

"Subsidiary" or "Subsidiaries" has the meaning given in section 1159 of the Companies Act 2006;

and the Netherlands and in which Centrica

has a 69 per cent. controlling interest;

"Superior Proposal" as defined in paragraph 1.7 of Part III (Summary of the principal terms of the Transaction Documents) of this document;

"TCPA" as defined in paragraph 10.2 of Part VI (Additional information) of this document;

"The Pensions Regulator" the regulator of work-based pension schemes in the U.K.;

"TMC" as defined in paragraph 10.2 of Part VI (Additional information) of this document;

"Transaction" the proposed sale of Direct Energy on the terms set out in the Purchase Agreement;

"Transaction Documents" the Purchase Agreement and the Transition Services Agreement;

"Transition Services Agreement" the transition services agreement to be entered into between Centrica and the Purchaser as described in paragraph 2 of Part III (Summary of the principal terms of the Transaction Documents) of this document;

"Unaudited Pro Forma Financial	as defined in Section A of Part V (Unaudited
Information"	Pro Forma Financial Information of the
	Retained Group) of this document;
"United Kingdom" or "U.K."	the United Kingdom of Great Britain and Northern Ireland; and
"United States" or "U.S."	the United States of America.

CENTRICA PLC

(registered in England and Wales with registered number 03033654)

NOTICE OF GENERAL MEETING

NOTICE IS HEREBY GIVEN that a GENERAL MEETING of Centrica plc (the "Company") will be held at Millstream, Maidenhead Road, Windsor, Berkshire SL4 5GD at 2.00 p.m. on 20 August 2020, for the purposes of considering and, if thought fit, passing the following resolution which will be proposed as an ordinary resolution.

For the purposes of this resolution, capitalised terms used but not defined herein shall (unless the context otherwise requires) have the meaning ascribed to them in the Company's Circular to Shareholders dated 31 July 2020, of which this notice forms part.

ORDINARY RESOLUTION

THAT the proposed sale of Direct Energy as described in the Circular on the terms and subject to the conditions contained in the Purchase Agreement and various associated and ancillary documents be and are hereby approved, and that the directors of the Company (or a duly authorised person) be and are hereby authorised to:

• 1. take all such steps, execute all such agreements, and make all such arrangements as may seem to them necessary, expedient or desirable for the purpose of giving effect to, or otherwise in connection with, this Resolution, the Transaction, the Purchase Agreement and/or the associated and ancillary documents relating thereto; and
• 1. agree and make such modification, variations, revisions, waivers and/or amendments in relation to any of the foregoing (provided that such modifications, variations, revisions, waivers or amendments are not material for the purposes of Listing Rule 10.5.2) as they may in their absolute discretion deem necessary, expedient or desirable.

By order of the Board

Justine Campbell

General Counsel and Company Secretary 31 July 2020

Registered office

Centrica plc

Millstream Maidenhead Road Windsor Berkshire SL4 5GD

Notes to the Notice of General Meeting

The following notes explain your general rights as a member and your right to attend and vote at the General Meeting or to appoint someone else to vote on your behalf.

What is my entitlement to vote?

The Company, pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 and section 311 of the Companies Act 2006, specifies that only those Shareholders listed on the Register of Shareholders as at 6.30 p.m. on 18 August 2020 (or, if the General Meeting is adjourned, 6.30 p.m. on the date two working days before the time fixed for the adjourned general meeting) shall be entitled to vote at the General Meeting in respect of the number of shares registered in their name at that time. In each case, changes to entries on the Register after such time shall be disregarded in determining the rights of any person to vote at the General Meeting.

Why can Shareholders not attend the General Meeting, and how do I appoint a proxy?

In line with recent U.K. legislation in relation to holding company meetings during the COVID-19 pandemic, the General Meeting will be convened with the minimum quorum of Shareholders (which will be facilitated by Centrica's management) in order to conduct the business of the General Meeting. The health and safety of our Shareholders and colleagues is always our utmost priority. Therefore, the General Meeting will be held as a closed meeting, and Shareholders (and any appointed proxies (other than the chairman of the General Meeting) or corporate representatives) will not be granted access to the General Meeting in person. In the interests of health and safety, any: (i) proxy who is not the chairman of the General Meeting; or (ii) Shareholder attending the General Meeting in person, will be denied access to the General Meeting. We strongly urge Shareholders to vote by proxy on the Resolution as early as possible, and the Board recommends that Shareholders appoint the chairman of the General Meeting as their proxy. You can do this, and submit voting instructions, in any of the following manners:

• by logging on to sharevote.co.uk;
• via CREST; or
• by completing and returning the paper Proxy/Voting Form if one has been sent to you. Please read the instructions carefully to ensure you have completed and signed the form correctly. Any alterations must be initialled.

Unless you own a share jointly, if you return more than one proxy appointment relating to the same share within your holding, either by paper or electronic communication, that which is received last by the Company's Registrar before the latest time for the receipt of proxies will take priority. If a paper communication and an online communication are received on the same day, the online communication will be followed.

Where you own shares jointly, any one Shareholder may sign the Proxy/Voting Form. If more than one joint holder submits a card, the instructions given by the first listed holder on the Register of Shareholders will prevail.

By when do I have to submit my proxy appointment?

The Proxy/Voting Form and, where applicable, the original or duly certified copy (by a notary or in some other way approved by the Directors, or an office copy) of the power of attorney or other authority (if any) under which it is signed or authenticated, should be: (a) deposited by post or (during normal business hours only) by hand with the Company's Registrar at the address shown on the Proxy/Voting Form or received via sharevote.co.uk, no later than 2.00 p.m. on 18 August 2020, or 48 hours (excluding non-working days) before the time for holding any adjourned general meeting or (in the case of a poll not taken on the same day as the General Meeting or adjourned general meeting) for the taking of the poll at which it is to be used; or (b) lodged using the CREST proxy voting service.

Please note that if you are returning a Proxy/Voting Form in respect of shares held in FlexiShare or the Share Incentive Plan this must be received by the Company's Registrar by no later than 2.00pm on 17 August 2020.

I am a CREST member – can I use the CREST system to vote?

CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service for the General Meeting or any adjournment may do so by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.

In order for a proxy appointment or instruction made using the CREST service to be valid, the CREST Proxy Instruction must be properly authenticated in accordance with Euroclear's specification, and must contain the information required for such instruction, as described in the CREST Manual.

The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid for the General Meeting and any adjournment(s) thereof, be transmitted so as to be received by the Company's Registrar, Equiniti (ID RA19), no later than 2.00 p.m. on 18 August 2020 or, if the General Meeting is adjourned, 48 hours (excluding non-working days) before the time fixed for the adjourned general meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the time stamp applied to the message by the CREST Application Host) from which Equiniti is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.

CREST members and, where applicable, their CREST sponsors, or voting service providers, should note that Euroclear does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider, to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.

The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. The submission of any CREST Proxy Instruction will not prevent you as a Shareholder from attending the General Meeting and voting in person.

I am a Nominated Person – how can I vote?

Any person to whom this General Meeting notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy information rights (a "Nominated Person") may, under an agreement between themselves and the Shareholder by whom he or she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the General Meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he or she may, under any such agreement, have a right to give instructions to the Shareholder as to the exercise of voting rights.

The statement of the rights of Shareholders in relation to the appointment of proxies set out on pages 67 to 68 does not apply to Nominated Persons. The rights described in these notes can only be exercised by a member of the Company.

How do I appoint a corporate representative?

Any corporation which is a member can appoint one or more corporate representative who may exercise on its behalf all of its powers as a member provided that, if two or more representatives purport to vote in respect of the same shares:

• (a) if they purport to exercise the power in the same way as each other, the power is treated as exercised in that way; and
• (b) in other cases, the power is treated as not exercised.

Where a single corporate member appoints multiple corporate representatives to exercise powers over different shares, those same corporate representatives may vote differently from one another in relation to any particular resolution.

Can I ask a question at the General Meeting?

Although it will not be possible for Shareholders to ask questions at the General Meeting itself, a dedicated facility is available on our website to allow Shareholders to ask questions that they would have raised had it been possible for them to attend the General Meeting. Questions should be submitted via our website at https://www.centrica.com/GM820. All questions will be read and where appropriate responses provided.

When will the General Meeting results be published?

It is expected that the total of the votes cast by Shareholders for or against or withheld on each resolution will be announced via a Regulatory Information Service and published at www.centrica.com/GM820 on 20 August 2020.

What is the Company's number of issued shares and total voting rights?

As at 28 July 2020 the Company's issued ordinary share capital consists of 5,839,597,044 ordinary shares which, excluding treasury shares, carry one vote each. The total voting rights in the Company as at 28 July 2020 are 5,838,426,604 ordinary shares. This figure excludes 1,170,440 shares held in treasury.