Slide 1: Preliminary Results: Year ended 31 December 2011
For the year ended 31 December 2011 1
Slide 2: Preliminary Results disclaimer
Preliminary Results Year ended 31 December 2011 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 co
Slide 3: Chairman
Chairman 3
Slide 4: Group Finance Director
Group Finance Director 4
Slide 5: Average oil and gas prices; winter gas and power prices
Preliminary Results Year ended 31 December 2011 Average oil and gas prices Oil NBP Gas 20 ($/barrel) (p/therm) 110 Clean Dark Spread (£/MWh) 15 78 10 58 39 5 Clean Spark Spread (£/MWh) 0 2010 2011 2010 2011 2012 Average winter gas and power prices 70.6 60.0 51.2 52.4 46.4 48.1 31.7 36.4 4.7 4.0 3.0
Slide 6: Group financial results 2011
Preliminary Results Year ended 31 December 2011 Year ended 31 December 2011 2010 Continuing operations: Revenue (£m) 22,824 22,423 Adjusted operating profit (£m) 2,415 2,390 Adjusted effective tax rate 40% 37% Group result: Adjusted earnings (£m) 1,333 1,297 Adjusted earnings per share (p) 25.8 25.2
Slide 7: Adjusted operating profit by segment
Preliminary Results Year ended 31 December 2011 Year ended 31 December (£m) 2011 2010 Downstream UK 1,005 1,216 Upstream UK 1,023 771 Storage UK 75 169 North America 312 234 Adjusted operating profit 2,415 2,390 Share of JV / associates’ interest and taxation (102) (78) Depreciation of FV uplifts to
Slide 8: Downstream UK
Preliminary Results Year ended 31 December 2011 Downstream UK Year ended 31 December (£m) 2011 2010 Downstream UK 1,005 1,216 Upstream UK 1,023 771 Storage UK 75 169 North America 312 234 Adjusted operating profit 2,415 2,390 Above figures include share of joint ventures and associates before intere
Slide 9: Downstream UK operating profit & key drivers
Preliminary Results Year ended 31 December 2011 Operating profit & key drivers Operating Profit Year ended 31 December (£m) 2011 2010 Residential energy 522 742 Residential services 264 241 Business 219 233 Downstream UK 1,005 1,216 Residential energy revenue Residential services Business revenue (£
Slide 10: Upstream UK
Preliminary Results Year ended 31 December 2011 Upstream UK Year ended 31 December (£m) 2011 2010 Downstream UK 1,005 1,216 Upstream UK 1,023 771 Storage UK 75 169 North America 312 234 Adjusted operating profit 2,415 2,390 Above figures include share of joint ventures and associates before interest
Slide 11: Upstream UK operating profit & key drivers
Preliminary Results Year ended 31 December 2011 Operating profit & key drivers Operating Profit Year ended 31 December (£m) 2011 2010 Gas 769 566 Power 254 205 Upstream UK 1,023 771 Average sales price Gas & oil Power generation (TWh) / production volumes achieved CSS / nuclear power price (£/MWh) G
Slide 12: Storage UK
Preliminary Results Year ended 31 December 2011 Storage UK Year ended 31 December (£m) 2011 2010 Downstream UK 1,005 1,216 Upstream UK 1,023 771 Storage UK 75 169 North America 312 234 Adjusted operating profit 2,415 2,390 Above figures include share of joint ventures and associates before interest
Slide 13: North America
Preliminary Results Year ended 31 December 2011 North America Year ended 31 December (£m) 2011 2010 Downstream UK 1,005 1,216 Upstream UK 1,023 771 Storage UK 75 169 North America 312 234 Adjusted operating profit 2,415 2,390 Above figures include share of joint ventures and associates before intere
Slide 14: North America operating profit & key drivers
Preliminary Results Year ended 31 December 2011 Operating profit & key drivers Operating Profit Year ended 31 December (£m) 2011 2010 Residential energy 161 177 Business energy 110 88 Services 28 15 Upstream & Wholesale 13 (46) North America 312 234 Residential energy Business energy Upstream and wh
Slide 15: Exceptional items and certain re-measurements
Preliminary Results Year ended 31 December 2011 Year ended 31 December (£m) 2011 Impairment of UK power generation assets (226) Restructuring costs (154) Pensionable pay cap 333 Contract termination costs (63) European gas transportation / Rijnmond (221) Taxation on exceptional items 69 Effect of ch
Slide 16: Net debt movement
Preliminary Results Year ended 31 December 2011 Year ended 31 December (£m) 2011 2010 Opening net debt (3,312) (3,136) EBITDA 3,128 3,181 Working capital movements 165 (251) Margin calls (26) 466 Interest and tax (862) (819) Net capex (1,601) (1,669) Dividends (762) (668) Pension deficit payments (2
Slide 17: Net capital expenditure
Preliminary Results Year ended 31 December 2011 Year ended 31 December (£m) 2010 2011 2012e3 UK upstream gas and oil 475 613 750 UK upstream power1 233 300 300 North America 87 70 100 UK gas storage 63 59 50 British Gas 150 211 150 Other 39 48 50 Total pre-acquisitions 1,047 1,301 1,400 Acquisitions
Slide 18: Cash flow and adjusted debt metrics
Preliminary Results Year ended 31 December 2011 Year ended 31 December 2011 (£m) Cash flow Debt % EBITDA / Net debt 3,128 (3,435) Interest / tax / dividends from JVs (715) - Lease adjustment - (950) Restricted cash - (344) Other adjustments (12) 97 Funds from operations / adjusted debt 2,401 (4,632)
Slide 19: Full year earnings growth and 2012 outlook
Preliminary Results Year ended 31 December 2011 Full year earnings growth • Energy supply profit down due to higher wholesale prices, warmer weather; BGB also impacted by the economy • BGS profit up 10% in a difficult economic environment • Upstream profit up 33%; higher gas and power prices and goo
Slide 20: Chief Executive
Chief Executive 20
Slide 21: Challenging market conditions in 2011
Preliminary Results Year ended 31 December 2011 Challenging market conditions in 2011 • Rapidly rising wholesale prices in H1, post Fukushima and Arab Spring • Global economic weakness • Mild UK weather • Low clean spark and storage spreads • Regulatory environment – upstream tax, Ofgem, Ontario • L
Slide 22: British Gas
Preliminary Results Year ended 31 December 2011 British Gas • Delivering for customers Accounts (’000) Dec 11 Dec 10 Change – 4 star rating from Consumer Focus Residential energy 15,881 15,978 -97 Residential services – Nectar, Sainsbury’s, online 8,862 8,718 +144 Business energy 999 1,044 -45 • War
Slide 23: Centrica Energy
Preliminary Results Year ended 31 December 2011 Centrica Energy • Good asset performance Upstream UK 2P Reserves (mmboe) • Deploying distinctive capabilities – further progress on gas and oil projects 175 – production replacement ratio of 112% reflecting upgrades of existing fields 434 440 Recent 20
Slide 24: Production profile, February 2011
Preliminary Results Year ended 31 December 2011 February 2011 Production (mmboe) 80 70 60 50 40 Under development Exploration 30 Future developments Producing fields 20 10 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 24
Slide 25: Production profile, February 2012
Preliminary Results Year ended 31 December 2011 February 2012 Production (mmboe) 80 70 60 Exploration Future developments 50 2011 Prelims 40 Under development production profile 30 Producing fields 20 10 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Producing fields – includes production from
Slide 26: North America
Preliminary Results Year ended 31 December 2011 North America • Increased scale in residential energy North America residential – Gateway, First Choice Power and customer accounts (million) Vectren acquisitions 4 – US North East organic growth +18% – difficult Ontario regulatory environment 3 • Furt
Slide 27: Maximise returns from existing assets
Preliminary Results Year ended 31 December 2011 Maximise returns from existing assets • Maintain efficiency and service levels downstream – leadership through scale and brand • Deploy distinctive capabilities upstream – strong portfolio of operational assets – deliver existing projects Group-wide co
Slide 28: £0.5bn cost reduction programme
Preliminary Results Year ended 31 December 2011 £0.5bn cost reduction programme • £0.4bn reduction in controllable cash 2.5 operating costs1 • Further £0.1bn reduction in cost of £2.3bn £0.4bn sales £0.1bn 2.0 • Half of total reduction expected in 2012 £0.1bn £2.0bn Investment in growth Cost Inflati
Slide 29: Cost reduction split by business
Preliminary Results Year ended 31 December 2011 British Gas £0.5bn cost reduction split by business • 10% reduction in underlying operating costs1 over % next two years 100 Corporate Centre • Reap benefits of systems investment, back office Direct Energy 80 efficiencies and streamlined organisation
Slide 30: British Gas: build trust and understanding
Preliminary Results Year ended 31 December 2011 • Build trust – tariffs simplified, clearer bills – making it easier for customers to check their tariff – widest eligibility for Warm Home Discount • Build understanding – commodity costs, non-commodity costs, green levies all increasing – affordabili
Slide 31: Centrica Energy: investment and growth options
Preliminary Results Year ended 31 December 2011 • Significant investment required in the UK – clarity and assurance over investment climate – much to be resolved through EMR process • Centrica well placed in an uncertain environment – strong cash flows – wide range of opportunities, aligned to capab
Slide 32: Direct Energy: growth priorities
Preliminary Results Year ended 31 December 2011 • Good progress towards doubling profitability • Organic and acquisition growth opportunities in energy supply – increase scale and deliver cost efficiencies • Leverage Clockwork and Home Warranty of America to drive growth – develop insurance offering
Slide 33: Summary and conclusions
Preliminary Results Year ended 31 December 2011 • Delivering value in challenging external environment • Good progress on our investment programme – Upstream UK and North America – geographic diversity – attractive investment options, aligned to strategy and capability • Competitive advantage throug