Centrica
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| Type | Public (LSE: CNA) |
|---|---|
| Founded | 17 February 1997 |
| Headquarters | Windsor, England, UK |
| Key people | Roger Carr Chairman Sam Laidlaw CEO |
| Industry | Utilities |
| Revenue | £21,345 million (2008) |
| Operating income | £1,942 million (2008) |
| Net income | £(144) million (2008) |
| Subsidiaries | See below |
| Website | www.centrica.com For consumers: www.britishgas.co.uk |
Centrica plc (LSE: CNA) is a large multinational utility company, based in the United Kingdom but also with interests in North America and Europe. It is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.
Contents |
History
Demerger of British Gas
Centrica was created in 1997 when British Gas plc demerged into Centrica plc and BG plc (later BG Group plc).[1] The demerger grouped British Gas's gas supply, services, retail businesses and gas production business of the Morecambe gas fields under Centrica. Centrica 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.
Acquisitions
In late 1998, under CEO Sir Roy Gardner and Finance Director Mark Clare, Centrica attempted to diversify - firstly by developing the Goldfish credit card,[2] then in 1999 by acquiring the AA for £1.1 billion.[3] In 2000 Centrica further diversified with the opportunistic purchase of OneTel in the UK, a residential telecoms operator.[4] Soon afterwards Centrica also bought the Dyno franchise group (best known for its Dyno-Rod drains unblocking service).[5]
In September 2008 the Company acquired the Caythorpe gas-producing field near Bridlington to use for storage purposes.[6] It also agreed to buy 20% of British Energy from EDF, financing this with a £2.2 billion, 3 for 8 rights issue.[7][8] The rights issue offered shares at 160 pence per share and closed on 12 December 2008.[9]
In August 2009, Centrica took over Venture Production, a North Sea gas producer.[10]
Asset selling
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[11] (who subsequently sold it to Morgan Stanley Bank International Limited).[12] Then in 2004 Centrica sold the AA to two European private equity firms, CVC and Permira for £1.75 billion.[13] Then in 2005 Centrica sold their OneTel business to Carphone Warehouse.[14]
Consolidation
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.[15] Sam Laidlaw brought significant experience of 'upstream' operations, securing supplies of energy which can then be sold on through Centrica's consumer business.
Senior management
For the role of chief executive, Sam Laidlaw receives an annual compensation of £1,535,000. This total consists of £906,000 salary and a £629,000 bonus.[16]
Operations in the domestic energy market
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It has been suggested that this section be split into a new article. (Discuss) |
British Gas
Centrica plc, 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.
Energy assets
To help to manage price volatility, Centrica announced a variety of investments in new sources of supply that may help wholesale prices to come down in the future. During 2005, the company estimated that nearly £600 million was spent on new gas, power and renewable energy assets, with a further £400 million committed to help import more gas into the country.[17] Since 40% of electricity is generated by gas-powered stations, this investment was predicted to reduce the cost of electricity. In parallel, British Gas announced in July 2006 that they intend to improve customer service.
By early 2007 market reports suggested that UK wholesale energy prices had stabilised and started to fall. In March 2007 British Gas (and Scottish Gas) implemented the first price reductions in the UK residential energy market for six years, a move followed by other major energy suppliers.[18] In late April 2007 British Gas again reduced prices, highlighting that some competitors had yet to reduce prices in 2007. Having suffered heavy losses of customers as prices were rising, British Gas claimed that the new environment of falling prices would allow them to grow their customer base.[19]
Price fixing
Meanwhile, the EU is investigating alleged malpractice in the wholesale market for gas and electricity supply across Europe. Allegations include the suggestion that gas supplies to the UK are restricted, contributing to increases in the wholesale price of gas in the UK. The conclusions of a competition inquiry into the EU energy sector were published in December 2006.
The draft conclusions, published in February 2006, confirmed fears by Brussels that former state monopolies in the major European markets (though not in the UK) were keeping a stranglehold on home markets, allowing them to control pricing - against the interests of consumers. Competition commissioner Neelie Kroes criticised excessive concentration in what she said reflects the "old market structure of national or regional monopolies".[20]
In May 2006, Kroes showed real commitment to addressing the issues by launching a series of surprise inspections at the offices of major power utilities in Germany, Italy, France, Belgium and Austria on suspicion of antitrust practices and abuse of dominant market position in the gas sector (E.ON, RWE, Gaz de France, Distrigas, OMV were among the companies targeted).[21][22]
In the final report issued in January 2007 Kroes was highly critical of the lack of market conditions supporting competition.[23][24]
Divisions
Europe
- Luminus (Belgium)
- Oxxio (Netherlands)
- Luseo Energia (Spain)
- Centrica Energie GmbH (Germany)
- Centrica Energi (Norway)
Centrica North America
- Direct Energy
- Direct Energy Business Services
- WTU Retail Energy
- CPL Retail Energy
United Kingdom
- Centrica Energy
- Gas fields
- Power stations
- British Gas Services
- British Gas Residential
- British Gas (England & Wales)
- Nwy Prydain (Wales)
- Scottish Gas
- British Gas Business
- Energy360
- Centrica Storage
- Rough gas storage facility
- Newfield Exploration UK
See also
References
- ^ City shocked by £500m cost of demerger
- ^ Centrica pays £85m for Goldfish data
- ^ Power firm buys AA
- ^ Centrica purchase builds up telecoms business
- ^ Dyno-Rod in Centrica's sights?
- ^ Centrica buys old gas field
- ^ Centrica looks to raise £2.2bn, BBC, 31 October 2008, http://news.bbc.co.uk/1/hi/business/7701407.stm
- ^ Approval from the OFT of Centrica’s acquisition of 20% of British Energy from EDF, Centrica, 7 August 2008, http://www.centrica.com/index.asp?pageid=39&newsid=1845
- ^ Centrica (November 2008). Provisional Allotment Letter.
- ^ "Venture offer - Centrica achieves 58.7 per cent. level". Centrica Plc. 24 August 2009. http://www.centrica.co.uk/index.asp?pageid=39&newsid=1856.
- ^ Rough ruling and Goldfish sale boost Centrica
- ^ Lloyds TSB sells Goldfish brand
- ^ Centrica gets bumper price for AA
- ^ Carphone buys One-tel for £132m
- ^ Centrica's new Chief Executive is outsider Sam Laidlaw
- ^ "Sam Laidlaw: Executive Profile & Biography". BusinessWeek. McGraw-Hill. http://investing.businessweek.com/research/stocks/people/person.asp?personId=1477130&ric=CNA.L. Retrieved 2009-09-02.
- ^ "Centrica signs Drax supply deal". BBC © BBC 2006. April 11, 2006. http://news.bbc.co.uk/1/hi/england/north_yorkshire/4899668.stm.
- ^ "British Gas cuts energy tariffs". BBC © BBC 2007. March 12, 2007. http://news.bbc.co.uk/1/hi/business/6434891.stm.
- ^ "British Gas cuts its energy bills". BBC © BBC 2007. April 26, 2007. http://news.bbc.co.uk/1/hi/business/6594427.stm.
- ^ "Energy firms 'holding back gas'". BBC © BBC 2006. February 16, 2006. http://news.bbc.co.uk/1/hi/business/4718776.stm.
- ^ "Spanish energy tussle hots up". BBC © BBC 2006. 2006-08-07. http://news.bbc.co.uk/1/hi/business/5253596.stm.
- ^ "Centrica raps French gas merger". BBC © BBC 2006. May 21, 2006. http://news.bbc.co.uk/1/hi/business/5002672.stm.
- ^ "Energy sector inquiry". European Commission © European Communities, 1995-2007. January 2007. http://ec.europa.eu/comm/competition/sectors/energy/inquiry/index.html.
- ^ "Summary of Energy sector inquiry". European Commission © European Communities, 1995-2007. January 2007. http://ec.europa.eu/commission_barroso/kroes/index_en.html.
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