Disclaimer This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any Centrica shares or other securities. This presentation contains certain forward-looking statements…
Agenda 09:00 Introduction Sam Laidlaw Update on strategy and progress Chris Weston Financial context James Spence Q&A All 10:45 Coffee break 11:30 Market environment Badar Khan & Maura Clark 12:30 Lunch 13:30 Line of Business…
Our Strategic Priorities 1 Grow British Gas . . . leading the transition to low carbon homes and businesses 2 Deliver value from our growing upstream business . . . securing sustainable energy for our customers 3 Build an…
Centrica and the role of North America Large profit pools Attractive growth Key positions in evolving competitive markets opportunity Continued demand and household growth Managing a vertically integrated business Leverages…
Good progress to date Over 10 years experience in North America Contributing c.10% of Group operating profit and delivering above cost of capital returns Profitable downstream businesses in key markets Transformation of the…
Well positioned for further growth Strong financial track record under new management Successful integration of value adding acquisitions Good progress towards doubling the size of the business through organic growth and…
Economic environment Year on year GDP growth (%) Steady economic growth 8 recent US unemployment figures 4 US have raised some concerns that 0 recovery may be slowing -4 UK -8 2008 2009 2010 2011 Political focus on debt and…
Upstream gas Annual gas production (Bcf/d) Commodity prices (p/therm) 70 60 80 50 NBP 60 40 30 40 20 Shale 20 10 Henry Hub 0 0 2000 2009 2025 2000 2009 2025 2008 2009 2010 2011 2012 2013 United States United Kingdom Profit…
Power generation Total US generation capacity (GW) 1,200 1,129 1,002 1,129 1,000 Other 800 Renewable US profit pool of c. US15 billion1 Nuclear 600 Natural Gas Reserve margins expected to fall Coal 400 Coal oversold; expected to…
Retail: dynamic regulatory landscape Restructured residential markets Three types of regulated market structure: regulated unbundled hybrid Growth is driven by restructuring and economic activity DC Unbundled pace of…
The US Northeast and Texas are key growth markets US Northeast 37% of US Largest energy market in the world population generating capacity: 340 GW gas demand: 4 Tcf DC Retail energy profit pool1 of 7 billion 8% of US Utility…
Direct Energy management team
Direct Energy: established expertise and platform in North America Downstream Upstream DE Residential Upstream Gas 3m customers in 4,600+ wells Canada, Texas, US 60 Bcfe/year production Northeast 618 Bcfe reserves (2P) DE Business…
Centrica capabilities, North American opportunities Regulatory/ Retail Managing an Positioning government operations integrated for a low carbon relationships excellence business future Established Sales & marketing Gas and power…
North American strategy: . . . building a scale, vertically integrated business IMPROVE returns from Drive operational excellence and cost efficiency existing Be the most recommended provider business GROW Achieve leadership in…
The value in vertical integration Upstream assets and retail positions provide an advantage across the cycle earnings stability and growth, during periods of volatility reduced transaction costs enhanced portfolio optimisation…
Doubling our business Double size of business through organic growth Operating profit (m) and acquisitions 400 300 200 Growth 100 0 2009 3-5 years 2010 from 2009 -100 Downstream Upstream Note: 2009 operating…
North America platform for growth A strong set of growth drivers supplemented by further acquisitions Capitalise on Energy / commodity Operational services price upside Market overlap Growing excellence penetration market…
DE Residential Progress Challenges Opportunities Texas transformation Largest in North America, Further leveraging North consolidated platforms but neither number 1 or 2 America scale reconfigured channels in core markets…
DE Business Progress Challenges Opportunities Strong profit growth Competition intensifying Small business growth operating profit more consolidating market, product portfolio than doubled in 2010 with competitors catering to…
DE Services Progress Challenges Opportunities Transformation through Weak housing market, in Large market: 130 million Clockwork acquisition new build and in housing households and a number 1 services prices potential services…
DE Upstream Progress Challenges Opportunities Increased gas asset cover Low commodity price Further upstream gas to c.35% environment investments in the Wildcat Hills: C367m impact on near term Western Canadian further Wildcat…
North America platform for growth A strong set of growth drivers supplemented by further acquisitions Capitalise on Energy / commodity Operational services price upside Market overlap Growing excellence penetration market Pan…
Build an integrated North American business . . . with leading positions in deregulated markets Good progress to-date Organic growth, operational efficiencies, and value-adding acquisitions Well positioned for further growth Increase…
Energy prices AECO and Henry Hub gas prices ERCOT South on-peak power price (US/MMBtu) (US/MWh) 14 500 Henry Hub 12 250 10 200 8 150 6 100 4 AECO 50 2 0 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Note:…
DE Residential (m) Operating profit (m) and ROCE (%) (%) (bn) Revenue (bn) and operating margin (%) (%) 200 20 6 8 ROCE 150 15 Operating 6 4 margin 100 10 4 2 50 5 2 0 0 0 0 2008 2009 2010 2008 2009 2010 Operating profit…
DE Business (m) Operating profit (m) and ROCE (%) (%) (bn) Revenue (bn) and operating margin (%) (%) 100 25 3 4 80 20 Operating margin 3 2 60 15 ROCE 2 40 10 1 1 20 5 0 0 0 0 2008 2009 2010 2008 2009 2010 Operating…
DE Services (m) Operating profit (m) and ROCE (%) (%) (m) Revenue (bn) and operating margin (%) (%) 30 6 500 5 ROCE 400 4 20 4 Operating 300 3 margin 200 2 10 2 100 1 0 0 0 0 2008 2009 2010 2008 2009 2010 Operating profit…
DE Upstream (m) Operating profit (m) and ROCE (%) (%) Gas production costs1 (C/mcfe) 60 7 6 40 ROCE 5 5 3 20 4 1 0 3 -1 -20 2 -3 -40 -5 1 -60 -7 0 2008 2009 2010 2008 2009 2010 2010 Operating profit Wildcat Hills (bcf)…
History of successful acquisitions, contributing to growth Strategic Energy Clockwork Wildcat Hills Jul 2008: US300m (151m) Jul 2010: US183m (122m) Oct 2010: C367m (218m) Scalable platform for growth Established brands Gas…
Build an integrated North American business with leading positions in deregulated markets Good progress to-date Earning returns above Group cost of capital Strong cash flow Well positioned for further growth Profitable, organic…
Upstream power and natural gas: Summary Large domestic resource base shale phenomenon driving excess supply North America has disconnected from global gas prices Growing natural gas and electric power demand gas-fired generation…
North America has the worlds largest gas and power markets Annual gas production1 (Tcf) Annual generation (TWh) 25 5,000 20 4,000 15 3,000 10 2,000 5 1,000 0 0 USA Iran Germany China S Arabia USA Japan India Germany Brazil UK…
North America has disconnected from global gas prices 14 2008: 70 Shale production Mid-Late 1990s: expands out of Texas 12 View of gas as plentiful and cheap 65 leads to CCGT build-out; development US gas production (bcf/d)…
Shale has changed the game . . . North American natural gas (Tcf) Over one-third of natural gas resources have been 1,200 3,000 identified since 2006 North America has secure natural gas supplies for the 100+yrs foreseeable…
. . . and natural gas producers are increasingly turning to shale . . . US gas production (Bcf/d) Canada gas production (Bcf/d) 80 25 20 60 15 40 10 20 5 0 0 2008 2015 2025 2035 2006 2010 2015 2020 Lower 48 onshore Coalbed…
. . . the Western Canadian Sedimentary Basin (WCSB) continues to be attractive WCSB is a low cost basin Multiples at relative lows 2010 per unit F&D and lifting costs (US/mcfe) WCSB reserve value metrics P+P (C/mcfe) 8 5 50 mmboe…
Power generation driving North American natural gas demand growth North American gas demand (Bcf/d) 100 Other Total natural gas demand projected to rise c.40% from 80 2009 to 2030 Power Power generation demand 60 expected to be…
US generation mix is evolving due to a number of factors . . . Coal Natural gas Nuclear Renewables 1,772 TWh (45%) 931 TWh (23%) 799 TWh (20%) 420 TWh (11%) EPA Increase in There has been No federal requirements demand no new…
... however, both coal and gas fired generation expected to remain significant . . . US capacity (GW) US generation (TWh) 1,129 5,166 1,002 Other 3,981 Renewable Nuclear Natural gas Coal 2009 2035 2009 2035 Sources:…
... to meet growing power demand US electric power demand (TWh) 5,000 Transportation Demand expected to increase at 1% CAGR for next 25 years 4,000 Industrial major drivers are population growth and transition to services…
North American competitive power markets Installed ISO/RTO capacity (GW) Ontario 200 Alberta Electric Independent System Operator Midwest ISO Electricity System Operator Regulated 290 GW 160 Unregulated 330 GW New Brunswick…
Energy only vs. capacity markets There are two approaches to ensure adequacy of generation, to maintain reserve margins and to compensate generating resources Energy only markets Capacity markets Energy prices to send correct price A…
Regional power markets vary by price Prices are different Prices have different volatilities Average daily on-peak power prices Average daily on-peak power prices May 2011 (US/MWh) June 2010 June 2011 (US/MWh) 80 350 ERCOT South…
Regional power markets vary by resource adequacy and fuel mix Reserve margins (%) Installed capacity by fuel (%) 30 100 2010 25 2015 80 Target Other 20 60 Hydro 15 Wind 40 Nuclear 10 Gas 20 Coal 5 0 0 NY ERCOT PJM ISO…
Upstream power and natural gas: Summary Large domestic resource base shale phenomenon driving excess supply North America has disconnected from global gas prices Growing natural gas and electric power demand gas-fired generation…
Retail: Summary Dynamic competitive landscape with a range of business models strong competition, but no truly dominant national players 80m addressable residential customers across North America The US Northeast is a growing…
Large retail energy market Restructured residential markets Residential energy: 80m addressable customers Business energy: largely competitive for both gas and power addressable volumes: 1,000 TWh, 6 Tcf Home services: DC…
Competitive landscape Business models Major competitors Utility affiliate Dominion Retail Residential Competitive integrated Reliant Independent Just Energy Utility affiliate FirstEnergy Commercial / Competitive integrated…
Many market participants, however no truly dominant national players Residential electricity Business electricity (%) 100 Others (c.50) 90 80 Ambit Others (90+) Stream 70 Direct Energy Others (10+) 60 Others (20+) Others…
Texas: the largest state power market Market overview Regulatory and competitive landscape No utility default provider; fully competitive gas is not open to competition Dallas 30+ residential competitive retailers Houston Outside…
Canada: a large market, however, with regulatory challenges Market overview Regulatory landscape Ontario - hybrid market structure Market structure does not encourage competition Utility default providers dominate Calgary…
US Northeast: improving regulatory environment in a densely populated area Market overview Regulatory and competitive landscape A region open to competition, spanning 16 US states and DC Over 50 gas and power utilities utilities…
US Northeast: large market with increasing switching US Northeast switching expected to increase, especially amongst residential customers (15% CAGR, 2010-16) Residential volumes switched by state (TWh) 20 2006 2010 2016 16…
Large home services market . . . North America home services North America households (millions) potential market revenue* (Cbn) 140 80 130 Plan 120 Canada 60 110 Maintenance 100 and repair 40 90 US Replacement 80 20 70 60 0…
. . . although the housing market has not yet recovered US housing prices (US 000s) US housing starts (millions) 200 2.4 180 2.0 160 1.6 140 1.2 120 0.8 100 80 0.4 60 0.0 1989 1992 1996 1999 2003 2006 2010 1989 1992 1996…
Changing landscape: consolidation continues Top 30 NA utility and retail energy companies Consolidation for scale Duke/Progress and earnings stability Exelon/Constellation Dominion NextEra AES/DPL FirstEnergy/Allegheny Hess…
Retail: Summary Market is consolidating, driven by companies looking to increase scale acquire of regulated businesses for earnings stability increase vertical integration to balance upstream and retail 80m addressable residential…
DE Residential: summary Large and growing market with 80m addressable customers across North America 67m addressable customers in DE core markets 53m addressable customers in US Northeast markets DE is the largest retailer in North…
The residential energy market Large market . . . and growing1 Residential power volumes Canada United States switched by state (TWh) 100 80 (%) 35 80 Rest of Rest of 30 country country 2006 2010 2016 60 25 20 40 15…
DE Residential overview 3m gas and electricity customers in core markets in Canada, Texas, and US Northeast Sales through door-to-door, Electricity Natural Gas web, and inbound/outbound Electricity & Natural Gas telesales…
Leveraging British Gas, the most successful competitive energy retailer British Gas Residential Direct Energy Residential Number 1 supplier of gas and Top 3 in each core market electricity in the UK Operating in worlds largest gas and…
Historical performance (m) Operating profit (m) and ROCE (%) (%) 200 20 ROCE Built positions in core markets 150 15 Building the base in Texas 100 10 Texas platform consolidation 50 5 launched prepaid product 0 0 Growing US…
Vision and strategy Our vision: to build on our leading position by being the provider of choice in our chosen markets and extending our lead over the competition Innovation Increase penetration in existing US Northeast markets…
The Ontario challenge Consumer protection Implications for Direct Energy Hybrid market structure The impact Market structure does not Reduced customer numbers encourage competition Lower profitability Utility default providers…
Delivering growth Operational excellence Value proposition Investment and growth Fully harness scale Present value Continue to drive value full integration of propositions tailored to from Texas platform operations leading each…
Texas: building the business Improve CTA efficiency CTA reduction Leverage scale Segmentation Operating Customer Consolidate Pricing costs retention platforms Building the Expand channels business and partners Prepay…
Innovation: Texas prepaid Prepaid is changing the way customers use electricity by giving them flexibility, convenience, awareness and ultimately choice Benefits to customers no deposit, credit check, or contract term updates via…
Innovation: new energy opportunities are being enabled by smart technologies Planned smart meter deployments by 2020 Smart meter rollout in different stages depending on market utilities own and deploy the meters 25m expected to be…
The US Northeast opportunity Residential volumes switched by state (TWh) Size of opportunity: 53m power and 20 gas customers 2006 2010 2016 16 Increased switching 12 Competitive activity 8 low commodity prices and 4 improved…
DE Residential: summary Large and growing market with 80m addressable customers across North America 67m addressable customers in DE core markets 53m addressable customers in US Northeast markets DE is the largest retailer in North…
DE Business: Summary Top three in a large and growing, but highly competitive market across North America Strong organic growth trajectory with good profit fundamentals Leveraging best practice between DE Business and British Gas…
DE Business overview Top three supplier to small, medium and large businesses/governments Dual commodity offering across all competitive markets Direct sales force and brokers industry leading sales productivity Leading supplier…
Strong market fundamentals support growth Stable commodity and policy environments in the US US C&I power market expected to grow at 6% CAGR to 2015 Sector reporting healthy levels of profitability; competitive intensity returning…
British Gas comparison British Gas Business Direct Energy Business A leading player 19 TWh Third largest player 40 TWh strength in SME segment strength with larger C&I Strong brand awareness at all levels customer segment Customer…
Historical performance (m) Operating profit (m) and ROCE (%) (%) 100 25 The journey 80 20 2007: sub-scale 15 2008: acquired Strategic Energy 60 ROCE 2009-2010: integration and 40 10 optimisation 20 5 Strategic Energy…
Vision and strategy Our vision: to be a leading provider of energy and services to business customers Our strategy Profitable growth by delivering the right product, to the right customer, at the right price improve sales…
A range of growth opportunities Markets Sales Innovation Customer segments Sales productivity Broker portal small business Improved channels PowerChannel segment under- field sales, telesales, 360Direct served web demand response…
The Small Business opportunity Small businesses are very focused on Key competitors low price and good performance on the basics Competitors are mainly regional players, extending their residential and/or C&I strategies to small…
The Small Business vision and strategy Vision: to be the leading small business retailer in NA Strategy Management agenda 1. Profitably grow our Continue to build and increase yield of sales customer portfolio channels Launch…
The 360Direct opportunity Non-commodity product and service offerings facilitate energy management improve stickiness and value of energy customers provide a non-capital intensive source of growth Developing a robust product…
DE Business: Summary Top three in a large and growing, but highly competitive market across North America Strong organic growth trajectory with good profit fundamentals Leveraging best practices between DE Business and British Gas…
DE Services: Summary Large and growing home services market 90% of market served by local contractors Acquisition of Clockwork makes DE the largest national home services provider in 74 of the top 100 US metro regions Significant…
Home services market is very large, despite unprecedented lows in new home starts North America home services potential market revenue (Cbn) US housing starts (millions) 80 2.4 Plan 2.0 60 1.6 Maintenance and repair 40 1.2…
Home services market is highly fragmented, with majors capturing only 12% share North America home service providers (%) 100 Other Major / Cross Country National 90 Old Republic BGE Home Del-Air 80 Large First American Locals…
DE Services is the largest home services provider in North America Operates in 45 US states plus DC, and all 10 Canadian provinces Product offerings on demand service and repair: - heating, ventilation and air conditioning -…
We have a presence in 74 of the top 100 high density US metropolitan regions 1) Increase scale in current regions 2) Expand into new regions 3) Expand service breadth DE Residential Energy Metro region with DE Services Metro region…
Opportunity to export relevant UK experience to spearhead the North American model British Gas Services Direct Energy Services Proven leadership talent in the Transferred several leaders to key services industry roles in North…
2010: a turning point through the acquisition of a platform for growth Clockwork (m) Operating profit (m) and ROCE (%) (%) 30 6 2010 ROCE 20 4 Acquired Clockwork Home Services as a platform for growth in a fragmented 10 2…
Loading...
