Centrica Warns of Challenging Conditions in Power Generation

UK’s Centrica warns of challenging market conditions in gas-fired power generation and in UK-gas storage, confirming its intention to maintain its North Sea portfolio despite the recent disinvestment.

According to a note released on Thursday, the production side is nearly as forecasted: output from the York project is slightly below estimates, while gas production from Kew and Grove is expected in 2014. The company also confirmed its strategy to invest selectively in assets around its existing hubs while managing costs, and looking to divest non-core assets.

RESIDENTIAL & POWER GENERATION

British Gas Residential increased domestic gas and electricity tariffs by 8.4% and 10.4% respectively, effective from 23 November. In the note, Centrica explained the decision claiming that British Gas Residential was ‘loss-making for a number of months.’

The company adds that the main challenge stems from the market conditions in the UK power generation.

‘Market conditions for our gas-fired fleet remain challenging, with very low market spark spreads. The load factor for our gas-fired fleet was 25%, with generation volumes of 7.2TWh over the first ten months of the year, 4% lower than for the same period in 2012.  We currently expect our gas-fired power generation assets to make a loss of around £130 million in 2013,’ reads the note.

The company also noted the difficulties in gas storage projects, mentioning its decision not to proceed with the Baird offshore project and to put on hold the onshore project at Caythorpe.