Centrica plc

Type	Public limited company
Traded as	LSE: CNA
Industry	Utilities
Founded	17 February 1997
Headquarters	Windsor, United Kingdom
Key people	Sir Roger Carr (Chairman) Sam Laidlaw (Chief Executive)
Revenue	£22,824 million (2011)[1]
Operating income	£2,208 million (2011)[1]
Net income	£421 million (2011)[1]
Subsidiaries	See below
Website	www.centrica.com

Centrica plc (LSE: CNA) is a British multinational utility company headquartered in Windsor, United Kingdom. Its principal activities are the supply of electricity and gas to businesses and consumers in the United Kingdom and North America. It is the largest supplier of gas to domestic customers in the UK, and one of the largest suppliers of electricity, operating under the trading names "Scottish Gas" in Scotland and "British Gas" in the rest of the UK. It is also active in the exploration and production of natural gas, electricity generation, and the provision of household services including plumbing.

Centrica is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index. It had a market capitalisation of approximately £15 billion as of 23 December 2011, the 26th-largest of any company with a primary listing on the London Stock Exchange.^[2]

History[link]

Origins[link]

British Gas plc demerged on 17 February 1997 to form two separate companies: Centrica plc and BG plc.

Centrica took over gas sales and gas trading, services and retail businesses, together with the gas production operations in the North and South Morecambe gas fields.

BG plc was renamed BG Group plc in December 1999. BG Group plc uses the British Gas name overseas but it is a separate company to Centrica and has no involvement with the British Gas retail brand in the UK

In 1998, Centrica’s supplier monopoly for gas came to an end. Centrica maintained the British Gas retail brand but is only allowed to use this brand name in the UK. The electricity market also opened up to competition and, through the British Gas brand, the company started supplying its first domestic electricity customers.

1998 to 2010[link]

In late 1998, under CEO Sir Roy Gardner and Finance Director Mark Clare, Centrica attempted to diversify – firstly by developing the Goldfish credit card,^[3] then in 1999 by acquiring the AA for £1.1 billion.^[4] In 2000 Centrica further diversified with the opportunistic purchase of OneTel in the UK, a residential telecoms operator.^[5] Soon afterwards Centrica acquired the Dyno franchise group (best known for its Dyno-Rod drains unblocking service).^[6] Centrica also moved into the North American energy-supply market through the acquisition of the Canada-based company Direct Energy in 2000 for £406 million.^[7] Direct Energy's operations were subsequently considerably expanded through a number of further acquisitions, including of Enbridge Services for £437 million in January 2002.^[8]

This strategy of diversification changed in mid 2003, possibly under pressure from major city shareholders to deliver better returns and/or possibly anticipating pressure on the core UK energy supply business. The change of strategy started with the sale of the Goldfish business to Lloyds TSB Bank^[9] (who subsequently sold it to Morgan Stanley Bank International Limited).^[10] Then in 2004 Centrica sold the AA to two private equity firms; Luxembourgish CVC and British Permira for £1.75 billion.^[11] Then in 2005 Centrica sold their OneTel business to Carphone Warehouse.^[12]

Since 2005 Centrica has declared a strategy of consolidating within the energy sector, upstream and downstream, including expanding operations overseas. New Chairman Roger Carr replaced retiring chairman Sir Michael Perry in 2005, whilst new CEO Sam Laidlaw picked up the reins from retiring CEO Sir Roy Gardner in 2006.^[13] Sam Laidlaw brought significant experience of 'upstream' operations, securing supplies of energy which can then be sold on through Centrica's consumer business.

In January 2006, it was rumoured that the Russian state-owned utility company Gazprom was seeking a takeover of Centrica. This created controversy in the media, while the Department for Trade and Industry stated any deal would be subject to "intense scrutiny". Tony Blair announced in April that he would not block any potential deal.^[14]

In September 2008 the Company acquired the Caythorpe gas-producing field near Bridlington to use for storage purposes.^[15] It also agreed to buy 20% of British Energy from EDF, financing this with a £2.2 billion, 3 for 8 rights issue.^[16][17] The rights issue offered shares at 160 pence per share and closed on 12 December 2008.^[18]

In August 2009, Centrica took over Venture Production, a North Sea gas producer.^[19]

2010 to present[link]

On 17 November 2010, Centrica acquired the assets of heat pump installation company Cool Planet Technologies Ltd. for GBP0.5 million in cash. This will give a boost to company’s strategy of developing a broad range of low carbon technologies and advice.^[20]

In February 2011 Centrica signed a £2 billion three-year contract with Qatargas for the purchase of 2.4 million tonnes a year of liquefied natural gas.^[21] In March 2011 Centrica agreed the sale of the electricity and gas supply business of its Netherlands-based subsidiary Oxxio to Eneco BV for €72 million (£63 million) in cash.^[22] The sale completed Centrica's exit from the supply of electricity and gas in Continental Europe, following the earlier disposal of its supply businesses in Belgium and Spain.^[22]

In November 2011, Centrica agreed to buy $1.6 billion stakes of 8 fields on the Norwegian continental shelf from Statoil ASA. In a second deal, Centrica agreed to buy 5 billion cubic meters a year gas from the same company from 2015 to 2025 as equal to 5 percent of U.K. gas consumption.^[23]

Centrica's Germany-based trading division Centria Energie GmbH was closed in April 2012.^[24]

Operations[link]

Centrica's operations are principally focused on the supply of electricity and gas to businesses and consumers in the United Kingdom and North America. Centrica Energy also generates electricity in the United Kingdom and has gas exploration and production operation in Norway and gas exploration activities in Nigeria. Centrica has some back office functions located in India and South Africa.

Principal divisions and subsidiaries[link]

Continental Europe[link]

• Centrica Energi (Norway)

North America[link]

• Direct Energy - one of North America's largest energy and energy-related services providers with more than 5 million residential and commercial customers
• Direct Energy Business Services
• WTU Retail Energy
• CPL Retail Energy

United Kingdom[link]

• British Gas Business - supplies gas and electricity to UK business customers
  • Energy360
• British Gas New Heating Limited - provides central heating and gas appliance installation and maintenance and low-carbon and energy efficient products and services^[25]
  • Dyno-Rod - Drains, plumbing, locks, alarms and glazing
• British Gas Services Limited - this Centrica subsidiary, trading as British Gas (and as Scottish Gas in Scotland), is market leader in the supply of energy to UK households. In recent years the UK wholesale energy market has become more volatile, leading to increasing energy prices. Consequently the core residential energy business of British Gas has been running at a loss according to results released by parent, Centrica plc. British Gas supplies gas and electricity to over 20 million customers in the UK. Centrica does not own or operate any of the gas transmission or electricity distribution networks in the UK.^[25]
• British Gas Insurance Limited ^[25]
• Centrica Energy - sources gas and electricity from Centrica’s own production and third parties to supply residential and industrial customers in Great Britain and continental Europe
  • Gas fields
  • Power stations - Centrica currently operates eight gas-fired power stations in the UK:
    • Barry
    • Glanford Brigg
    • Killingholme
    • King's Lynn
    • Langage (885MW)
    • Peterborough
    • Roosecote
    • South Humber Bank
  • Wind farms - in 2009, Centrica completed its 180MW Lynn and Inner Dowsing offshore wind farm development and announced plans to build the £725m Lincs offshore wind farm capable of generating over 270MW. Centrica has also submitted applications for consent for two offshore wind farms, Docking Shoal and Race Bank, totalling 1160MW. Subject to approval and construction, by the middle of the next decade these three projects, together with existing operational wind assets, would give Centrica more than 1.75GW of generating capacity in the UK, capable of meeting the annual needs of more than 1.2m homes.
  • Microgeneration - Centrica has secured acquisitions and exclusive access and distribution agreements in microgeneration technologies to build a varied portfolio of low carbon products and services. This includes Solar Technologies, Semplice Energy Ltd and interests in Ceres Power Holdings plc and Econergy.
• Centrica Storage - the UK’s largest gas storage company, it operates the Rough gas storage facility which provides approximately 70% of current UK storage capacity
• Newfield Exploration UK

Shareholdings[link]

In 2009, Centrica purchased a 20% stake in nuclear power generator British Energy from EDF Energy. The company now produces 14.3% of its electricity from nuclear (the second highest rate in the UK), helping it to achieve the lowest carbon emissions of the major providers.^[26] Centrica has also acquired an option to purchase a 20% stake in EDF's subsidiary, NNB Generation Company (NNB GenCo).^[27] NNB GenCo is planning to build an additional 6.4GW of nuclear capacity in the UK.

Senior management[link]

Sam Laidlaw has been the Chief Executive of Centrica since 1 July 2006. In the 2010 financial year Laidlaw received a total compensation of £1,841,000 from Centrica, comprising a salary of £941,000 and a bonus of £900,000.^[28]

Controversies[link]

Greenwash[link]

British Gas was accused of greenwashing in the advertising of its Zero Carbon tariff in 2008 after the Advertising Standards Association upheld a complaint about the 'greenest domestic tariff' claim.^[29]

Following this adjudication, British Gas signed up to Ofgem's Green Supply Guidelines which aim to give an objective interpretation of 'green tariffs' and raise the standard of industry products. British Gas supported the stipulation that a green tariff must deliver an additional environmental benefit and not simply charge a premium for renewable electricity that would have been generated anyway under the Renewables Obligation. The company continues to offer Zero Carbon which is based on this principle of additionality.

Customer complaint response[link]

In July 2011, British Gas was fined £2.5m by the energy regulator Ofgem for failing to deal properly with customer complaints.^[30] After a year-long investigation into the British Gas, Ofgem found it had breached regulations on how energy companies should handle disputes. Ofgem found that British Gas failed to re-open complaints from customers who indicated they felt the matter was not resolved adequately, failed to provide sufficient information to complainants about the energy ombudsman service, and failed to deal properly with complaints from micro-businesses because it had not implement the necessary processes and practices.^[30]

A spokesperson for British Gas said the company felt that finding it in breach of rules for failing to provide adequate information to consumers about the energy ombudsman was "disproportionate to the mistake".^[30]

British Gas Business was fined £1m in July after Ofgem's investigation found the company had misreported the amount of electricity supplied under the British government's renewables obligation.^[30] British Gas claims it spotted the problem – it said an over-reporting of the amount of renewable energy it was supplying caused by human error – and notified the regulator.^[30]

See also[link]

Companies portal

• Helmont House

References[link]

External links[link]

• Centrica website
• Profile of British Gas on Gas Guide
• British Gas Fuel Mix for 2006

Video clips[link]

• Centrica YouTube channel
• British Gas YouTube channel

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