Slide 1: Centrica in North America
Centrica in North America London, 17th April 2008 1
Slide 2: Disclaimers
Disclaimers 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 bus
Slide 3: Agenda
Agenda • Introductions • Update on Centrica in North America • Q&A and discussion 3
Slide 4: Direct Energy introductions
Direct Energy introductions Deryk King Chief Executive Officer David Clarke Chief Financial Officer Bill Cronin President, Upstream & Wholesale Energy Lois Hedg-peth Chief Operating Officer, Downstream Businesses 4
Slide 5: Market entry to present: Why we are in North America
Market entry to present: Why we are in North America Households 123m • A huge market opportunity in a stable political environment North America • Key element of Centrica strategic priority #4, 25m “Build on our growth platforms” UK Annual Power Consumption • c.40% of Centrica’s revenue growth since
Slide 6: Market entry to present: Our businesses
Market entry to present: Our businesses Direct Energy Home and Upstream and Mass Markets C&I Business Wholesale Energy Energy Services Energy Natural gas and Natural gas and • HVAC installation • Natural gas prodn electricity sales to electricity sales to • Protection plans • Power generation reside
Slide 7: Market entry to present: Where we operate
Market entry to present: Where we operate 3 million residential energy customers; 2 million home services customers 55 TWhe C&I volumes Dual Fuel Gas only Power only Home Services Principal offices Power stations Wind PPAs Principal gas fields • 1,260MW CCGT • 5 contracts • 395bcfe 2P reserves • 302
Slide 8: Market entry to present: Why this portfolio makes sense
Market entry to present: Why this portfolio makes sense • There are linkages between the businesses – Wide market spread mitigates regulatory and other market risks – Upstream & Wholesale Energy advantaged by our positions to support downstream – Cross-selling of energy and services – C&I energy pos
Slide 9: Market entry to present: Direct Energy has delivered strong growth
Market entry to present: Direct Energy has delivered strong growth Revenues, C$m EBITDA, C$m Op Profit, C$m 9,000 600 450 8,000 400 500 7,000 350 6,000 400 300 5,000 250 300 4,000 200 3,000 200 150 2,000 100 100 1,000 50 0 0 0 20 0 20 1 20 2 03 20 4 20 5 20 6 07 00 01 02 03 04 05 06 07 00 01 02 03 0
Slide 10: Market entry to present: We have delivered on our December 2005 promises
Market entry to present: We have delivered on our December 2005 promises 250 10% £m “North America offers 200 8% double-digit revenue growth, robust 150 6% operating margins and a progressive return on capital” 100 4% Investor Seminar December 2005 50 2% 0 0% 2005 2006 2007 2008F 2009F 2010F EBIT (a
Slide 11: Market entry to present: Value creation
Market entry to present: Value creation EV (£bn) 3.0 • Present value of net investment in North 2.5 Current America is £1.6bn1 2.0 • Analysts’ consensus SOTP valuation of DE is 1.5 Nov 2005 £2.5bn1 1.0 • Three recent investments totaling 0.5 £0.2bn have not yet been valued 0.0 Present value of Analy
Slide 12: Market entry to present: How success has been achieved
Market entry to present: How success has been achieved • High quality selection from large opportunity suite • Expansion through “adjacencies” • Successful execution and integration of acquisitions • Cautious attitude to risk • Centrica corporate reputation and credit support • Seasoned management t
Slide 13: Current Landscape: Downstream
Current Landscape: Downstream • Rising energy prices and poor market rules have reduced political appetite for deregulation, especially in the residential sector – Roll-off of price freezes has required “fixes” – Need for $900bn investment in infrastructure development • But there have been signific
Slide 14: Current Landscape: Upstream and wholesale
Current Landscape: Upstream and wholesale • Upstream gas markets undergoing structural changes – Declining conventional production in US lower-48 states – Strong growth in unconventional gas – Increasing LNG import volumes • Power assets remain expensive – New build costs rising – Continued uncertai
Slide 15: Looking ahead: "Invest to Grow" Strategy
Looking ahead: “Invest to Grow” Strategy • Our overarching strategic purpose: – Develop and maintain a business portfolio in North America that is able to sustain value-creating growth through commodity price cycles and evolving regulatory scenarios. • “Invest to Grow” – Organic growth supported by
Slide 16: Looking ahead: Strategic priorities
Looking ahead: Strategic priorities • Optimize Mass Markets Energy to rekindle growth and influence regulatory progress to maximise value of core markets (ON, AB, TX, OH, NY) and open up new opportunities (eg BC, CT, IL, CA) • Deliver value from C&I Energy through rapid integration of Strategic Ener
Slide 17: Looking ahead: Mass markets energy
Looking ahead: Mass markets energy Strategy: • Optimize business to rekindle growth and influence regulatory progress to maximise value of core markets and open up new opportunities Recent • Reversal of net customer losses successes: • Positive regulatory moves in Connecticut & Illinois • Defence of
Slide 18: Looking ahead: C&I energy
Looking ahead: C&I energy Strategy: • Deliver value through rapid integration of Strategic Energy and aggressive organic growth, supported by services and technology offering Recent • Strong organic growth successes: • Profitable in 2007 • #3 player following acquisition of Strategic Energy Challeng
Slide 19: Looking ahead: Home and business services
Looking ahead: Home and business services Strategy: • Continue to increase Services market penetration in Canada and extend geography in United States Recent • Profitability turnaround successes: • Demand Response launch in Ontario • Growth in US consumer service Challenges to • US housing crisis ad
Slide 20: Looking ahead: Upstream and wholesale
Looking ahead: Upstream and wholesale Strategy: • Pursue attractive investments both to support retail businesses and open up new profit centres in adjacent businesses Recent • Profits more than doubled in 2007 successes: • Gas reserves up 37% in past year • Rockyview and TransGlobe acquisitions • P
Slide 21: Looking ahead: Business unit contribution
Looking ahead: Business unit contribution Whilst Mass Markets remains a core value-creator, growth in other businesses is creating a more balanced portfolio Revenues Operating Profit 2005: Mass Markets C&I Services Upstream & Wholesale 2009: Note: Includes Q1 2008 acquisitions of Rockyview, Strategi
Slide 22: Summary
Summary • Successful investment track record • Delivered on 2005 promises • Created value • Further opportunities for significant growth • Clear strategy • Great people 22
Slide 23: Questions?
Questions? 23