Agenda 09:00 Main presentation - Context and strategic direction Sam Laidlaw - British Gas Phil Bentley - Centrica Energy Mark Hanafin - Direct Energy Chris Weston - Financial overview Nick Luff - Wrap-up and Q&A 11:35 Breakout…
2006-2009: the first step in the journey Our Strategic Priorities 1 Transform British Gas 2 Sharpen the organisation and reduce costs 3 Reduce risk through increased integration 4 Build on our growth platforms
The market environment Key trends Centrica competitive advantages 1 Energy efficiency Only utility with large-scale services capability 2 Electricity decarbonisation Low carbon power generation 3 Volatile commodity prices Integrated…
The next stage: our vision Our vision is unchanged: To be the leading integrated energy company in our chosen markets
The next stage: 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…
Market opportunity Imperative to transform energy efficiency of Britains homes Substantial growth in demand for insulation and energy related services Commercialisation of green technologies, e.g. microgeneration Smart meters…
British Gas is uniquely placed to capitalise on the market opportunity 12 million homes, half of UK households Customers No.1 domestic gas supplier, No.1 domestic electricity supplier One million businesses, No.1 in SME gas and…
Over the past three years, we have transformed customer service.. Contact Net Promoter Score (NPS) Customer satisfaction +60 25 2009 2007 20 +40 Services 15 +20 Energy 10 0 5 (20) 0 EDF SSE E.ON Scottish Npower Sources: ICM…
.. and consumers trust in the British Gas brand has been restored Net PR score 2009 - New brand campaign 10% 175 Value for money Index (Jan 09 = 100) 0% 150 (10%) 125 Launch of Q: Thinking about the newswhich Planet Home…
We are leading on price and growing customer numbers and value Energy price position vs customer growth British Gas households ('000) 1,200 120 Price differential vs average BG Dec Dec Net movement in energy competitor (Dual…
British Gas is able to deliver sustainable profits even with volatile wholesale markets Operating profit (2004-09) 1,200 70 1,000 Operating profit (m) 60 MAH gas price (p/therm) 800 50 600 40 30 400 Gas price (MAH) 20…
We will build on the transformation of British Gas to deliver our new strategic priorities Capture new markets The Energy Take the lead Experts at the heart of Combine British Make the and work Optimise the business homes and…
Optimise the business Deliver sustainable profits in Residential Energy Energy churn Energy sales - optimised by channel 20% 20% 150% Energy churn down Joint customers churn 46 33% since 2006 30% less (2009 data) 36 15% 15% 100%…
Optimise the business Realise cost synergies to invest in future growth Heating Services (Back office FTE per 100,000 contracts) Operating costs (Residential Energy & Services excl. bad debt) 60 Heating Services efficiency…
Take the lead Innovate to drive step change in online Online penetration 25 45% % Customers Registered Online 40% Online Transactions (m) Online customers as % total 20 35% Online transactions 30% 15 25% 20% 10 15%…
Take the lead Transform Heating Services growth British Gas households Market opportunities 100% 0.7bn 1.3bn Market revenue (estimated) 75% Market Share Energy Services 8.2m 50% BG share of UK households 2.1m 1.9m 25%…
Take the lead Access new channels in Electricals & Plumbing Product holdings Product penetration of energy base 20% All in millions British Gas HomeServe % of Energy customers 15% Plumbing & Drains 1.86 4.15 2008-09 growth 11%…
Take the lead Build on the current momentum to sustain growth in British Gas Business SME retention Business customer segmentation 92% Consumption per customer Supermajors 94% Large industrials Build margin via Fix or exit…
Capture new markets Capitalise on opportunities from transition to low carbon homes Insulation - domestic market forecast Microgeneration installation revenues market forecast 1.6 12 Source: DECC, British Gas Source: DECC, British…
Capture new markets Forge strategic relationships with local authorities Local Authority spend on property services (2009) We are setting out a new strategic role for local authorities. 15 1.8bn White collar management: tenant liaison…
Capture new markets Leverage smart as a platform for Home of the Future Smart meter roll out: British Gas 2.0 Smart Meters (m) 1.5 1.0 0.5 0.0 2009 2010e 2011e 2012e Adopting go early strategy with smart meter…
Grow British Gas: good growth prospects with low capital requirements Take the Lead Capture New Markets Op Profit m New Energy Build insulation business, partner Business Business: with Local Grow Electricals & segmentation,…
Market opportunity Upstream Gas Power Generation UK and Norway gas remain lowest cost for Medium term shift to low carbon generation UK gas delivery Government focus on renewable energy Majors exiting the North Sea (offshore wind) to…
Our distinctive capabilities and ability to execute strategy are key to delivering value from our growing upstream business Distinctive capabilities Strategy Transformed scale and capability Deliver value from our existing assets . .…
The CE Upstream gas strategy has transformed the scale and capability of the business Upstream Gas strategy Benefits realised UK, Netherlands Offshore Experienced Venture team with industry leading skills commercial, geoscience and Be…
While our gas and oil reserves have increased by 50%, the change in their composition has also brought key benefits CE Upstream 2P Oil and Gas reserves Benefits of changes in portfolio composition 400 400 Lower effective tax rate…
Our pre-Venture production profile Upstream Oil and Gas production profiles Production (bcfe) 400 350 300 250 200 150 Pre-Venture Production Pre-Venture Production Others Others 100 50 Morecambe 0 2010 2011…
Our production profile is now sustainable, both in the near and long term . . . Upstream Oil and Gas production profiles Production (bcfe) 400 350 300 Target Band 250 Development Options 200 Core Future Prospects /…
. . . the combined portfolio has enough scale to present significant opportunities to target and time investments Development optionality Bulk of our portfolio and has lower finding 100m capex Existing and development costs and lifting…
Our recent acquisition of gas assets in Trinidad has given us our first producing LNG position and further options Upstream Oil and Gas production profiles Production (bcfe) 400 350 300 Trinidad NCMA Target 250 Development…
As the largest UK storage facility, Centrica Storage is focusing on improving flexibility . . . Centrica Storage key facts Historical profile (2004-2009) Rough operationally strong BCF 140 98% reliability 120 increased storage…
. . . while developing three more storage assets that will make a significant contribution to UK storage capacity CSL storage capacity (BCF) CSL withdrawal capability (BCF/day) 186.50 3.02 7.50 0.27 42.00 +101% +58% 0.94 128.00…
On the power generation side, Centrica CCGT plants will continue to benefit from market conditions Key market trends Longer term, declining reserve margin CCGT fleet benefiting from short term due to plant closures market conditions…
Our power generation strategy will lead to increased generation cover and a more balanced fleet . . . Strategy aims for increased Strategy leads to a mix more closely aligned cover and balanced fleet to the market but with lower carbon…
. . . and we have strong advantages across all key elements of the offshore wind value chain Leaders along key elements of the offshore wind value chain Tendering, Design Economics & Construction & Operations & & Acquisition Financing…
The performance of the BE nuclear fleet is improving Historical output of BE nuclear fleet TWh 60 2008 was a technically 55.5 55.1 challenging year 50 51.9 Significant improvement in 40 2009 output from the British 40.2 Energy…
Scope for possible life extensions but committed government engagement is needed for future new build Current position of BE station lifetimes New build trends New build FID in 2011 Dungeness B Increasing recognition of the role of…
A well-defined and robust platform for growth 2008 2009 2010+ options 8 CCGT British Energy NUCLEAR NEW GAS development & exploration GAS Morecambe Langage CCGT 2 more Round 2 WIND farms & and non-operated JVs Venture GAS potential…
Market opportunity Downstream energy market growing with new states opening and increasing customer switching Services recovering with US economy and buoyed by efficiency incentives Attractive fundamentals in power generation with…
Chosen markets offer attractive potential for growth Deregulated DE target Profit pool in UK markets markets target markets market Residential Energy 65m 40m C4bn 48m (accounts) Business 1,000 TWh 975 TWh 190 TWh Energy C3bn…
Direct Energy has a strong platform on which to build. Direct Energy businesses Core markets 3m customers: Canada Residential largest retailer in US Northeast Energy North America MI MA AB ON NY CT 33 TWh and 690 mmth RI Business…
. . . and a distinctive set of capabilities North American platform Relevant Centrica UK capabilities Strong downstream position in key Customer care systems & processes residential deregulated markets Managing full requirements energy…
Our strategy will build an integrated energy business Reduce costs and improve efficiency Improve returns from Leverage scale of existing positions existing business Be the most recommended energy and services provider Achieve…
DE Residential: transformation will enable growth DE DE market Key Improving returns customers position competitors (millions) (rank) In-sourced Texas operations enabling cost and churn reduction Just Energy Stabilise Ontario in…
DE Business: continuing to gain share US power market share (TWh) Improving returns 80 Leveraged platform and scale following 70 combination with Strategic Constellation Reduce costs 60 Price for credit/capital utilisation 50…
DE Services: increasing efficiency, focus and energy linkage Services market share1 Improving returns 100% Major/ Optimising costs National Other Leveraging scale in procurement 80% Large Reliance Local Growing scale Sears…
DE Upstream gas: a strong base from which to build DE upstream production (mmcf/d) 120 90 Shallow/Tight Competitively positioned Western Gas Canadian (WCSB) business 60 Coalbed methane top quartile cost position 30 Conventional Using…
DE Power generation: capabilities are foundation for growth DE CCGT generation assets Power Start Capacity Heat-rate Year Acquisition Station year (MW) (BTU/kWh) acquired cost (US/kW) Low current spark spreads but Bastrop 2002 525…
Potential to increase integration benefits DE peak load and generation (MW) 12 Currently asset cover of 10% of power load and Other 10 20% of gas demand Canada 8 Aim to better balance downstream and upstream US NE 6 positions…
We will build on the DE platform to create an integrated North American business Invest in upstream integration Material Grow scale and leadership downstream contribution to Centrica Establish leading Strengthen Improve returns from…
Capital intensity has increased 4,000 2008 2009 3,500 Tangible Fixed Assets (m) 3,000 2,500 2,000 1,500 1,000 500 0 Downstream Power Gas Storage Downstream Power Gas UK North America Note: (1) Based on closing…
Optionality in investment programme 2,500 2,000 Committed Cash Flow (m) North America 1,500 British Gas 1,000 Storage UK Power 500 UK Gas 0 2010 Committed 2011 Committed 2012 Committed Baird, Caythorpe, Bains, Race…
Capital discipline ensures high returns Identification and prioritisation of opportunity pipeline Business Business level screening Development Assessment of risks e.g. commodity, financial, operational Ensure investments are on…
Case study Lincs offshore wind 2008 2009 Business case developed Improved cost base through supplier Business Based on LID development, negotiation Development area knowledge, and expertise Flexibility on timing with vessel…
Capital deployed to generate earnings Year Projects contributing to earnings 2010 Langage, F3FA, Chiswick, Eris, Ceres 2011 Sycamore, Christian 2012 Lincs, York, Ensign, Carna, Kew, Caythorpe 2013+ Bains, Baird, Cygnus, Race Bank,…
What if gas prices stay low Impact Levers to mitigate / opportunities Lower gas production profits Asset flexibility to preserve reserves Upstream (some offset from oil production and lower Optionality in investment programme taxes)…
What if gas prices go up Impact Levers to mitigate / opportunities + Higher gas production profits Additional value in investment Upstream + Higher returns from nuclear (post hedges) programme Pressure on CCGT CCGTs switch to…
Centrica: The next 3 to 5 years Double the number of high value joint energy & services customers Lead the transition to low carbon (2m Smart Meters, leading microgen installer in UK) UK Strong penetration of new markets e.g. local…
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