Centrica Loses UK Market Share, To Divest Nuclear

UK leading energy marketer Centrica said February 22 it will cut 4,000 jobs between now until 2020 to offset weak margins and declining customer count in its core UK residential market.

Its UK energy residential customer count fell by 10% to 12.9mn at end-2017, so 1.4mn fewer than a year before, and their average energy use per customer declined by 5%. Centrica sells gas and power in Britain under the 'British Gas' brand.

“The combination of political and regulatory intervention in the UK energy market, concerns over the loss of energy customers in the UK, and the performance issue in North America have created material uncertainty around Centrica,” said CEO Iain Conn.

Net profit attributable to shareholders fell by 80% year on year to £333m ($465mn) in 2017. Pre-tax earnings (Ebitda) were 9% lower at £2.14bn, while adjusted earnings were 22% lower at £698mn.

Centrica said it had achieved its target £750mn cost efficiency programme three years early, but heralded further restructuring to come – including the 4,000 job losses over the next three years. Centrica merged its upstream with Bayerngas Norge to form Spirit Energy late last year and, in its results, Centrica said that it would also be prepared to reduce its current Spirit Energy stake from 69% to below 50% "if the right value-creating opportunity came along."

Nuclear to be divested

Centrica also announced plans, "subject to ensuring alignment with our partner and being sensitive to UK government interests" to divest its 20% stake in British Energy, which owns eight nuclear power plants, by end-2020. The other 80% is owned by French giant EDF.  Net power generated by Centrica in 2017 was 7.47 terawatt-hours in 2017 of gas-fired electricity, down 26% year on year, largely because of power plants (CCGTs) divested; its net nuclear generation was only 2% lower at 12.8 TWh.

Centrica divested two large CCGTs at Langage and South Humber Bank and the Kings Lynn B CCGT development project for £314m, resulting in a total pre-tax exceptional profit of £8m (post-tax £5m), comprising an impairment plus a small loss on disposal.

100th cargo trade, Rough storage plans

In energy trading, Centrica said that in November 2017 it traded its 100th LNG cargo outside the UK, just three years after trading its first – and that it expects to receive its first US cargo under its term contract with Cheniere in September 2019.

In January 2018 the UK Oil and Gas Authority cleared Centrica’s storage business to produce any remaining gas and liquids from the Rough storage field in the North Sea, ahead of its final closure, having secured the necessary approval from the UK's competition regulator the previous month. Preliminary consent to produce initial amounts from Rough was in September 2017 and it sold 25bn ft³ (708mn m³) gas - effectively cushion gas - from Rough in 2017, with production expected to be 56bn ft³ during 2018.