Centrica Plc · LSE:CNA
Centrica — Investor Day (June 2017)
94 slides from Centrica's investor day presentation, Jun 21, 2017
Slide 1: Centrica plc Capital Markets Day
centrica Centrica plc Capital Markets Day 21 June 2017
Slide 2: Disclaimer
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 with respect to the financial condition, results, operations and busi
Slide 3: Iain Conn, Group Chief Executive
centrica lain Conn Group Chief Executive —_
Slide 4: Centrica management team
centrica Centrica management team 4 Capital Markets Day June 2017
Slide 5: Objectives for today
centrica Objectives for today * Update on where and what Centrica is today * Provide a deeper understanding of our Consumer and Business divisions, strategy and growth potential * Demonstrate our capabilities and technology to underpin growth * Evidence our ability to deliver long-term value through
Slide 6: Agenda
Agenda 09:00-11:15 11:15-11:40 11:40-13:20 13:20-14:00 14:00-15:40 15:40-16:30 Presentation and O&A Coffee break Breakout sessions Lunch Breakout sessions Wrap up and O&A centrica 6 Capital Markets Day June 2017
Slide 7: Agenda
centrica Agenda 09:00-11:15 11:15-11:40 11:40-13:20 Breakout sessions Customer data in action 13:20-14:00 > Offer Innovation 14:00-15:40 > Hive Connected Home 15:40-16:30 > Energy Supply, Wholesale & Optimisation > Energy Insights & Solutions > Technology & Innovation 7 Capital Markets Day June 2017
Slide 8: Agenda
Agenda 09:00-11:15 11:15-11:40 11:40-13:20 13:20-14:00 14:00-15:40 15:40-16:30 Presentation and O&A Coffee break Breakout sessions Lunch Breakout sessions Wrap up and O&A centrica 8 Capital Markets Day June 2017
Slide 9: Centrica's purpose
Centrica’s purpose “To provide energy and services to satisfy the changing needs of our customers” centrica 9 Capital Markets Day June 2017
Slide 10: Fundamental trends in energy and services
centrica Fundamental trends in energy and services * Decentralisation of the energy system * Increased choice and power shifting to the customer * Advancements in digital and technology 10 Capital Markets Day June 2017
Slide 11: Centrica's strategy
centrica Centrica's strategy * Energy and services company * Deliver for the changing needs of our customers * Delivering long-term shareholder value through returns and growth * Trusted corporate citizen * Employer of choice * ‘21st Century energy and services company’ 11 Capital Markets Day June 2
Slide 12: Competitive landscape
Competitive landscape Consumer eon Asse fits a thiy ; Traditional iy SCOTTISHPOWER Se a rg wl DUKE = Sparie € ENERGY, a enercare “onus Ss @DFENERGY Zeer —_ CNGiC Bord Gais ner ye Energy a a British Gas wag Direct Energy, @e centrica = _DYNO HIVE me Centrica amazon ORACLE’ | OPQWER _ HomeServe [rated
Slide 13: Centrica's strategic objectives to 2020
centrica Centrica’s strategic objectives to 2020 * Customer-led growth - Energy Supply, Services, Connected Home, DE&P and EM&T Smaller and more focused E&P business £1.5bn resource re-allocation from E&P and Central Power Generation to customer-facing businesses 2015-20 £750m p.a. efficiency progra
Slide 14: Group progress
centrica Group progress * Executing on all aspects of our strategy * First phase of portfolio transformation will be complete by end 2017 - Asset businesses repositioned - Centrica Consumer and Centrica Business established * ~£450m capital and revenue investment in growth areas in 2016 * 14% underl
Slide 15: Centrica portfolio and business units
centrica Centrica portfolio and business units Asset _ Energy Services and New businesses _ Supply Trading businesses * E&P __ * UK Home (energy) * UK Home (services) * Connected Home * Central Power » * NA Home (energy) * NA Home (services) * DE&P Generation + UK Business + EM&qT *CentricaStorage =
Slide 16: Centrica portfolio and business units
Centrica portfolio and business units Gross revenue (2016) Like-for-like market CAGR (2017-25) Asset _ Energy Services and businesses Supply Trading ° E&P * UK Home (energy) * UK Home (services) * Central Power » * NA Home (energy) * NA Home (services) Generation "© UK Business + EM&qT *CentricaStor
Slide 17: Consumer and Business divisions
Consumer and Business divisions * Customer needs are global, and seeking more than just energy New capabilities built, helped by targeted acquisitions * Centrica more scalable and replicable; expanding geographically, organically and through acquisition Large market opportunity in growth areas - Att
Slide 18: Consumer strategic framework
centrica Consumer strategic framework ee Energy Services Peace Home energy Home Supply of mind management automation * Gas supply * Cover products * Home insurance * Energy insight * Home control * Electricity supply (protection plans, *Home securityand —* Energy efficiency * Appliances control warr
Slide 19: Business strategic framework
centrica Business strategic framework ee Energy Wholesale Energy Energy Energy Supply Energy Insight Optimisation Solutions * Gas supply * Trading partner * Energy resource * Asset optimisation * Multi-technology * Electricity supply * Energy management & * Aggregation and solutions commodities & mo
Slide 20: Asset businesses
Asset businesses * Disposal proceeds delivered or announced within the £0.5-£1.0bn targeted range * E&P focused on European assets - Continue to evaluate all options to strengthen and improve sustainability * Power portfolio shifting to distributed assets - Remaining CCGTs and Nuclear considered as
Slide 21: UK energy supply market
centrica UK energy supply market Do not believe in any form of price regulation Centrica competitively well-positioned focusing on - Customer engagement - Price competitiveness - Cost efficiency and cost leadership - Customer service - Rewarding loyalty - Innovative propositions Cash flow flexibilit
Slide 22: Summary
centrica Summary * Clear purpose and strategy * Executing on all aspects of our strategy Company fundamentally re-positioned by end 2017 Stronger and more resilient * Capable of delivering customer-led growth Confident in delivering returns and growth 22 Capital Markets Day June 2017
Slide 23: Mark Hodges, Chief Executive, Centrica Consumer
centrica Mark Hodges Chief Executive, Centrica Consumer
Slide 24: Centrica Consumer management team
centrica Centrica Consumer management team 4 / ie Mark Hodges Chief Executive, Centrica Consumer Dave Kirwan Managing Director Bord Gais Energy /] Nina Bhatia Managing Director Managing Director Connected Home Sarwjit Sambhi UK Home Claire Miles Managing Director UK Customer Operations rN Manu Astha
Slide 25: Consumer market trends
Consumer market trends * Global demographic changes Adoption of technology Mobile first Self-service Traditional competitive boundaries blurring Growth of data and analytics centrica 25 Capital Markets Day June 2017
Slide 26: Consumer needs
Consumer needs Value for money Solutions not just products Frictionless service Trusted brands Responsible use of data centrica British Gas = Bord Gais our Energy HIVE Re Direct Energy. 26 Capital Markets Day June 2017
Slide 27: Our Consumer business today
centrica Our Consumer business today We have made significant progress Key facts * Improving service _. . 4 26m' . Realising synergies Geographies Customer * Reducing cost accounts * Building capability £13bn £2bn 2016 revenue 2016 ; * Embedding digital and data science operating costs £4 bn’ >40m B
Slide 28: Consumer strategic framework
centrica Consumer strategic framework ee Energy Services Peace Home energy Home Supply of mind management automation * Gas supply * Cover products * Home insurance * Energy insight * Home control * Electricity supply (protection plans, *Home securityand —* Energy efficiency * Appliances control warr
Slide 29: Consumer future focus
trica Consumer future focus * Cross-selling to customer base oe Ga ee oe * Bundling across pillars * Developing replicable business models * International expansion UK Home and Ireland Nor dawrentons * Using data to personalise offer ConnectedHome 29 Capital Markets Day June 2017
Slide 30: Energy Supply
Energy Supply Services Peace of mind | Home energy management | Home automation centrica Energy Supply Focus areas Market dynamics *° Gas supply * Total gross margin market size of current markets ~£20.5bn in 2025' e Electricity supply - UK&l £5.3bn, NA £15.2bn? * Price driven * Highly competed * En
Slide 31: Energy Supply propositions and business model
Energy Supply Services Peace of mind | Home energy management | Home automation centrica Energy Supply propositions and business model . . . Offer innovation Key facts’ - Personalisation Re Wd rd S FINANCIAL | OPERATIONAL | SERVICE - Tariff innovation £11 bn 17m +3 - ] 2016 UK H Bundling A016 revenu
Slide 32: Energy Supply value management case study
Energy Supply Services Peace of mind Home energy management Home automation trica Energy Supply value management case study Example customer value distribution Customer : Contribution High value segment * High consumption . : Mid value segment * 20% less likely to churn High Low value segment * Aver
Slide 33: Services
Energy Supply Peace of mind Home energy management — Home automation centrica Services Focus areas Market dynamics * Cover products * Medium growth, 4% CAGR' (protection plans, . * Total global revenue market size ~£200bn by 2025' warranties) * On demand repair * Supply fragmented and maintenance *
Slide 34: Services propositions and business model
Energy Supply Peace of mind Home energy management — Home automation trica Services propositions and business model * Offer innovation - Personalisation - Product modularisation Key facts’ FINANCIAL OPERATIONAL SERVICE . £2.1bn 8m Down 17% - Bundling 2016 revenue Total customer UK Services accounts
Slide 35: Local Heroes case study
sry Suh s A centrica Local Heroes case study Online platform matching customers with tradespeople - Agile development Provides access to - Large and growing on demand market - New services and trades Attractive customer proposition - Quick and easy matching, online payment - Trusted brand, work back
Slide 36: Services pricing case study
sry Suh s A centrica Services pricing case study From > To * Using 2 rating factors (risk only) * Using 10+ rating factors (risk and * Relatively flat pricing at acquisition behavioral) and renewal * Differentiated optimised pricing at * Infrequent pricing updates acquisition and renewal - ~2 annual
Slide 37: Connected Home led pillars business model
Eneray Supply Services Home eneray management trica Connected Home led pillars business model Approach Attractiveness * Global opportunities * Clear customer need | * Solution led * High growth ns * Technology embedded * Attractive margins * Recurring revenue model * Diverse competition — © Gwelliar
Slide 38: Hive subscription economics case study
Energy Supply Services centrica Hive subscription economics case study Illustration of cash flow for one customer from one-off device sale vs. subscription model Cumulative cash flow Positive Subscription model One-off device sale Negative Subscription contract - Cash break-even in 18 months - Cash
Slide 39: Peace of mind
Energy Supply Services Home energy management — Home automation trica Peace of mind Focus areas Market dynamics * Home insurance * High growth, 6.5% CAGR’ * Home security - Excluding home insurance >10% CAGR' and monitoring * Total global revenue market size £300-330bn by 2025' * Remote * Technology
Slide 40: Peace of mind propositions
Eneray Supply Services Home energy management || Home automation trica Peace of mind propositions * Reassurance everything in the een home is working as it should ey tacts * Disrupting home insurance . 73k >35k ap UK Home UK Boiler 10 * Remote diagnostics insurance Installations . customers since la
Slide 41: Home energy management
Energy Supply Services Peace of mind Home energy management [Misteue Niele trica Home energy management Focus areas Market dynamics * Energy insight * Nascent but growing market, 11% CAGR' *° Energy efficiency * Total global revenue market size £22-24bn by 2025' ° Energy * Closely synergistic with E
Slide 42: Home energy management propositions
Energy Supply Services Peace of mind Home energy management [iNseMeietemEieg Home energy management propositions * Engaging customers in energy saving * Providing insights - Smart - ‘My Energy’ and ‘Direct Your Energy’ * Providing energy control - Hive Active thermostat Hive Active Thermostat 1. As
Slide 43: 'Direct Your Energy' case study
Services Peace of mind Energy Supply Home energy management [iNseMeietemEieg ‘Direct Your Energy’ case study centrica * Available to Direct Energy customers pres gy DirectYoureneRcy fal SAVE! . Personalised functionality SUMMARY USAGE ALERTS —-«TEMIZEDUSAGE «PEER COMPARISC-—_-MOMIE PROFILE _ Applian
Slide 44: Home automation
Energy Supply Services Peace of mind Home energy management centrica Home automation Focus areas Market dynamics * Home control * High growth, 9.5% CAGR’ * Appliances * Total global revenue market size £30-40bn by 2025° control Solutions to control the home environment Gateway for connected technolo
Slide 45: Home automation propositions
Energy Supply Services Peace of mind Home energy management centrica Home automation propositions * Effortless setup of the home ’ environment oO) Key facts * Simple propositions, based on | ~1m ~550k consumer needs > i) Total Hive i products thermostats * ‘Welcome Home’ plan Hive Active Plug vole s
Slide 46: Geographic expansion — Ireland
Geographic expansion — Ireland * 2014 acquisition centrica Bord Gais Ener x gy * Alignment of Consumer strategy Key facts! - Retention, rewards, service improvement AINARTaAL * Leveraged Centrica knowledge, scale, capabilities €210m Acquisition price paid by Centrica * Maintained local entrepreneuri
Slide 47: What you can expect from Centrica Consumer
centrica What you can expect from Centrica Consumer * Service improvement and cost reduction * Energy and Services remain core * Growth through Connected Home - 1m Hive installed hubs by the end of 2017 - Connected Home break-even as early as 2019 * Global focus, building capabilities for expansion
Slide 48: Mark Hanafin, Chief Executive, Centrica Business
centrica Mark Hanafin Chief Executive, Centrica Business
Slide 49: Centrica Business management team
centrica Centrica Business management team 49 Capital Markets Day June 2017
Slide 50: Business market trends
Business market trends Volumes per customer reducing Margins under pressure Gas becoming global Mega-trends impacting energy sector Electricity system becoming more local centrica 50 Capital Markets Day June 2017
Slide 51: Business customers need
Business customers need Reduced cost and increased productivity Supply security and resilience An expert partner to guide them through complexity A trusted and credible counterpart Not to be distracted from their main activity centrica 51 Capital Markets Day June 2017
Slide 52: Business strategic framework
centrica Business strategic framework ee Energy Wholesale Energy Energy Energy Supply Energy Insight Optimisation Solutions * Gas supply * Trading partner * Energy resource * Asset optimisation * Multi-technology * Electricity supply * Energy management & * Aggregation and solutions commodities & mo
Slide 53: Integrated solutions platform
centrica Integrated solutions platform Our vision is to create a single customer portal User Experience Mobile interface Actionable reports Configurable Customer Applications t t Communications & Control t t Power generation (4) and DSR Solar Sensors Battery Storage CHP 53 Capital Markets Day June 2
Slide 54: Energy Supply
Eee «Wholesale Energy | Energy Insight Energy Optimisation _ Energy Solutions centrica Energy Supply Focus areas Market dynamics — UK and North America ° Gas supply * Large markets with cash flow generation potential ° Electricity supply * Low growth market driven by - Margin pressure - Falling cons
Slide 55: North America business energy supply
Eee «Wholesale Energy | Energy Insight Energy Optimisation _ Energy Solutions centrica North America business energy supply Many markets allow retail choice te Legacy distribution companies the default supplier’ - limited to variable price products with regulated prices Retail competitors able to of
Slide 56: Energy Supply business model
Eee «Wholesale Energy | Energy Insight Energy Optimisation _ Energy Solutions Energy Supply business model We are growing our energy supply businesses by Improving our propositions, such as managed and wholesale products, and a fully digital experience Pursuing proactive retention strategies Tailori
Slide 57: Wholesale Energy
Energy Supply [QSESSGENSENM © Energy Insight Energy Optimisation _ Energy Solutions centrica Wholesale Energy Focus areas ° Trading partner ° Energy commodities & risk products * Central Power Generation Market activities EM&T and North America Business Internal Portfolio External Customers Own Acco
Slide 58: Wholesale Energy business model
Energy Supply Energy Insight Energy Optimisation _ Energy Solutions . centrica Wholesale Energy business model We are growing our energy trading businesses by Key facts ° Expanding our route-to-market business FINANCIAL OPERATIONAL - Income from management fees, sharing £3.3bn 19 4.2mtpa optimisatio
Slide 59: Energy Supply & Wholesale Energy case study
Energy Supply Wholesale Energy Energy Insight Energy Optimisation _ Energy Solutions trica Energy Supply & Wholesale Energy case study * A leader in North American plastics * Switched from a traditional contract to Energy Portfolio, $250K savings * Additional $45K in net savings by enrolling in dema
Slide 60: Our capabilities
SESE SICYa Energy Insight | Energy Optimisation] Energy Solutions eo centrica Our capabilities Customer journey What do customers want ? 2015 2017 . . . Enhanced . * Insights into energy usage, operations and . Consultation potential solutions Y JY technical capabilities Define & Design * Simple, ta
Slide 61: Energy Insight
Energy Supply Wholesale Energy [ERGRNUESERGEEN Energy Optimisation Energy Solutions centrica Energy Insight Focus areas Market dynamics ° Energy resource * Total revenue market size ~£10bn by 2025; 18% CAGR' ETE SSS & * Internet of Things and Big Data unlocking new markets monitoring ° Operational *
Slide 62: Energy Insight proposition
Energy Supply Wholesale Energy [ERGRNUESERGEEN Energy Optimisation Energy Solutions centrica Energy Insight proposition Device level monitoring — giving energy and operational efficiency insights ,| Mobile interface Proprietary sensors and monitoring “| Web analysis TLR “3 Actionable ee WW 47 report
Slide 63: Energy Insight business model
Energy Supply Wholesale Energy [ERGRNUESERGEEN Energy Optimisation Energy Solutions eo centrica Energy Insight business model * Enhance customer relationships and build trust Key facts? * Deepen understanding of customer operations and FINANCIAL OPERATIONAL OTHER provide solutions tailored to each i
Slide 64: Energy Insight case study
centrica Energy Insight case study CLIENT CHALLENGE One of the Lacked real-time visibility world’s largest into energy use building materials suppliers SOLUTION RESULTS ‘ » . SAVINGS Installed over Identified inefficient Reduced annual energy in motor that was tripping costs by identifying Panoramic
Slide 65: Energy Optimisation
Energy Supply | Wholesale Energy | Energy Insight [ERGRENKOREIEEen | Energy Solutions centrica Energy Optimisation Focus areas Market dynamics ° Asset * Total revenue market size ~£6bn by 2025; 18% CAGR' optimisation * Renewables growth drives increasing flexibility opportunity, * Aggregation and fo
Slide 66: Energy Optimisation proposition
Energy Supply Wholesale Energy Energy Insight Energy Solutions e centrica Energy Optimisation proposition anes) Assets @) bens, Flexible Load Generators © Batteries Utilising flexible energy assets Energy Suppliers Network Operators : Energy Markets Optimisation Engine Control : Interface Providing
Slide 67: Energy Optimisation business model
Energy Supply | Wholesale Energy | Energy Insight [ERGRENKOREIEEen | Energy Solutions centrica Energy Optimisation business model * Develop new products that capture value from Key facts! capacity, energy and growing flexibility markets y FINANCIAL OPERATIONAL OTHER * Use trading capabilities to cap
Slide 68: Energy Optimisation case study
Energy Supply Wholesale Energy Energy Insight Energy Solutions e centrica Energy Optimisation case study SLIENT CHALLENGE Owner of large Provide efficient route-to-market solution for entire portfolio of gas portfolio — assets must run when economi€ to do Soy. peaking plant - = ‘wp aN wanted to bene
Slide 69: Energy Solutions
Energy Supply | Wholesale Energy | Energy Insight Energy Optimisation [ERR uSeliiens centrica Energy Solutions Focus areas Market dynamics ° Multi-technology — * Total revenue market size £80bn by 2025; 3% CAGR' solutions a . a, * Distributed energy resources increasing in both developed * Design, i
Slide 70: Energy Solutions proposition
Energy Supply | Wholesale Energy | Energy Insight Energy Optimisation [ERR uSeliiens centrica Energy Solutions proposition 6) CHP Solar A one-stop shop for energy solutions ° Design Energy Efficiency * Construction * Project management Power generation OOO ©O® © and DSR * Operations and maintenance
Slide 71: Energy Solutions business model
Energy Supply | Wholesale Energy | Energy Insight Energy Optimisation [ERR uSeliiens centrica Energy Solutions business model * End-to-end energy infrastructure solutions for Key facts' our customers FINANCIAL OPERATIONAL OTHER e Customer, not product led £128m A80mw 2,700+ + wage + . 2016 revenue C
Slide 72: Energy Solutions case studies
Energy Supply | Wholesale Energy | Energy Insight Energy Optimisation [ERR uSeliiens centrica Energy Solutions case studies ener) Cathedral Village - Senior Living (US) Coca Cola Enterprises (Marcianese, Italy) 20 year $8.5 million ESA contract Contract lifetime value SS Capital Purchase 1,300 tonne
Slide 73: Our ability to win
centrica Our ability to win * Global presence * Large existing customer base * Existing, proven capabilities being extended and deepened * Credible long-term partner * Ability to provide financing solutions 73 Capital Markets Day June 2017
Slide 74: What you can expect from Centrica Business
centrica What you can expect from Centrica Business * Energy Supply - Growth through focus on new propositions and customer service * Wholesale Energy - Expand footprint of route-to-market services, LNG and Trading * Distributed Energy & Power - Revenue growth — ~£1bn within 5 years - Customer site
Slide 75: Business summary
centrica Business summary * Market trends are clear Large global market opportunity Centrica Business is strategically well positioned We have some unique capabilities and are rapidly building others Centrica Business has significant growth potential 75 Capital Markets Day June 2017
Slide 76: centrica
centrica
Slide 77: Financial framework
centrica Financial framework Targets Metric Adjusted operating cash flow * 3-5% underlying growth p.a. on average Dividend * Progressive in line with adjusted operating cash flow Controllable costs * Operating cost growth < inflation * Investment <70% of adjusted operating cash flow Capital re-inves
Slide 78: Sources and uses
Sources and uses 2016 UKB working capital inflow @ AOCF excluding 2016 UKB working capital inflow ® Equity placing ®@ Disposals 2014 2015 2016 2017e Closing net debt £5.2bn £4.7bn £3.5bn £2.5-£3.0bn 2018+ centrica @ Capital expenditure @ Material acquisitions @ Dividends @ Other © Interest 78 Capita
Slide 79: Investment
centrica Investment OEE Uhl) . @ Additional potential investment consistent with financial framework @ Growth areas @ Rest of Group maintenance capex @ E&P (including maintenance) 2015 2016 2017 2018 2019 2020 Note: Excludes material acquisitions. 79 Capital Markets Day June 2017
Slide 80: Investment in growth
centrica Investment in growth 2015 Strategic Review 2016 2017-2020 Expected ~£1.5bn over 5 years Actual p 50/50 capex / revenue investment ~~ £450m Other ~£250-350m p.a. @ Energy Marketing & Trading | ain © Services : @ Material acquisitions @ Distributed Energy & Power _ © Capital expenditure @ Con
Slide 81: AOCF growth
Slide 82: Iain Conn, Group Chief Executive
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Slide 85: Q&A
Slide 86: Iain Conn, Group Chief Executive
Slide 87: Q&A
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