Interim Management Statement and British Energy Investment May 2009
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…
Interim Management Statement Good start to the year for British Gas UK upstream impacted by low wholesale gas price and narrow spark spreads Strong performance in Centrica Storage North America performing well in challenging…
Investment in British Energy
Why vertical integration Reduces exposure to volatile wholesale commodity prices Delivers more robust Group earnings through cycle Reduces requirement for capital for procurement support Why y nuclear Source of power for British…
Proposed Transaction
Deal terms Net cash consideration of 1.1bn 20% equity stake in British Energy Average price per share 710p cash plus 0.242 CVRs cash consideration of 2.3bn Partly financed through sale of SPE for 1.325bn 20% stake in new nuclear…
Drivers of value
Wholesale power prices have fallen 90 80 e (/MWh) 70 UK Power Price 60 50 40 30 May-2009 May-2010 May-2011 May-2012 May-2013 Sep 2008 May 2009 9
British Energy output has increased 8,000 pacity (MW) 7,000 6,000 Monthly average cap 5,000 4,000 3,000 2,000 1,000 0 Sept '08 Oct '08 Nov '08 Dec '08 Jan '09 Feb '09 Mar '09 April '09 Source: Exelon…
Governance Package Joint venture is a long term partnership Centrica is a 20% investor in Lake Acquisitions EDF has day-to-day operational control Centrica rights Board representation on both Lake Acquisitions and British Energy…
Nuclear new build opportunity Centrica has the right to participate in EDFs new nuclear build programme in the UK final investment decision on 1st reactor in 2011 British Energy sites best positioned for building new nuclear…
SPE sale
Disposal of SPE Landscape for energy retailing in Europe remains difficult Short term profit outlook reduced by lower commodity prices Attractive sale price Remaining European positions are under strategic review Will retain a…
Impact of the Transaction
Substantially increases the upstream hedge Power cover ratio (%) Energy hedge ratio (%) 100 50 Drax contract 80 Drax contract 40 BGY 60 30 BGY Wind & renewables Wind 40 20 North Sea Gas 20 10 Morecambe 0 0 2009 2006…
Earnings impact Key variables output, power prices, operating costs, synergies Forward power sales: 2010: 46TWh, 2011: 28TWh, 2012: 14TWh Based on prices achieved plus current forward curve for remaining output, acquisition (net of…
2010 / 2011 earnings impact Starting from pre Starting from post Rights Issue Rights Issue Before Fair Value accounting neutral eu a accretive acc e e After Fair Value accounting dilutive neutral 18
Group structure going forward Reduced Group earnings volatility More balanced portfolio of upstream and downstream positions Business concentrated in UK and North America Investment opportunities Nuclear new build North Sea gas…
Timetable
Timetable for completion of transaction Sign and announce transactions 11 May Commence regulatory processes mid May British Energy acquisition subject to UK competition approval SPE sale requires q EC approval pp Post Circular…
Summary
Summary Significant reduction in scale of net transaction Improved terms reflect commodity price environment Joint venture delivers value for Centrica shareholders Positions Centrica strongly improves business risk profile reduces…
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