UK utility Centrica on Track for 2016 Goals

UK utility Centrica expects adjusted operating cash flow to exceed £2bn (€2.51bn) this year and to spend around £500mn on exploration and production acquisitions, it said in a trading update April 18, confirming it was on track to achieve its targets for the year. Its upstream gas and its power generation divisions were operating well, despite low commodity prices. But despite the UK carbon price floor it had to close down its 665-MW Killingholme gas-fired power plant in March. It has paid down debt to £4.4bn in the first quarter, benefiting from strong working capital management and seasonal phasing of cash flows.

It expects to save £200mn in efficiency gains as part of its £750mn/yr programme, with like-for-like operating costs expected to be lower in 2016 than in 2015. It has already lost 800 staff this year, with payroll expected to end the year 3000 lower than December.

CEO Ian Conn said customer service was improving and the company was launching new products to help customers manage their energy use.

Its UK Business division was set to return to profitability and its North American energy supply and services did well considering the “exceptionally warm winter. A cloud on the horizon is the Competition & Markets Authority probe into the UK retail sector. In March, the CMA announced the provisional decision on remedies, much of which related to billing and metering rather than wholesale market reform. Centrica has submitted its formal response ahead of the final report due in June.

William Powell