Centrica Plc · LSE:CNA
Centrica — Investor Day (December 2005)
94 slides from Centrica's investor day presentation, Dec 6, 2005
Slide 1: Centrica in North America
Centrica in North America London, 6th December 2005
Slide 2: Disclaimers
Disclaimers This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any Centrica shares. This presentation contains certain forward-looking statements with respect to the financial condition, results, operations and businesses of Centrica
Slide 3: Introduction
Introduction Phil Bentley Group Finance Director
Slide 4: Objective for Today
Objective for Today To make the investment case for North America by: − Providing insight into our North American business − Supplying data that will help you better value this part of our business 4
Slide 5: Background and Strategic Rationale
Background and Strategic Rationale Deryk King President & CEO
Slide 6: Presenters
Presenters Deryk King President & CEO, Centrica North America Maura Clark Senior Vice President, Strategy and M&A Phil Tonge President, Texas Retail Operations Bob Huggard President, Canadian Retail Operations & CEO Consumers’ Waterheater Income Fund Mike Hogan Senior Vice President, Upstream Gas &
Slide 7: Agenda
Agenda Objective and Welcome Phil Bentley Background and Strategic Rationale Deryk King Regulation and Competition Maura Clark Business Unit Reviews: Canadian Retail Operations Bob Huggard First Q&A Session Coffee Break Business Unit Reviews (continued): United States Retail Operations Phil Tong
Slide 8: Turnover and profitability have grown steadily since entry into North America
Turnover and profitability have grown steadily since entry into North America Revenues, C$m EBITDA, C$m Op Profit, C$m 6,000 500 400 450 350 5,000 400 300 350 4,000 300 250 3,000 250 200 200 150 2,000 150 100 100 1,000 50 50 0 0 0 0 1 2 3 4 1 0 1 '02 3 '0 4 1 0 1 2 3 '0 4 1 '0 '0 '0 '0 '0 '0 '0 '0 '
Slide 9: The market is huge, diverse and complex
The market is huge, diverse and complex… Annual Revenues £bn Gas & Power 160 Home Services >50 Business Services 25 123 million households 21 million commercial and small Energy Statistics business customers Peak Power Demand 800GW Over 120 regulatory jurisdictions Annual Power 4,100TWh Consumption
Slide 10: … and different from the UK
… and different from the UK Annual Power Annual Natural Gas Households Consumption Consumption 123m 4,100 TWh 25.5 Tcf North America 25m 3.5 Tcf 370 TWh UK 10
Slide 11: Regulatory landscape on an upswing
Regulatory landscape on an upswing 2001 2002 2003 2004 2005 Enter via Organic Acquire Increase asset Accelerate acquisition growth incumbent focus; enter business markets; augmented by customers; build business optimize services & acquisitions home services markets residential markets C&I Ontario Wh
Slide 12: Track record demonstrates ability to create value regardless of macro environment
Track record demonstrates ability to create value regardless of macro environment Record of growth and performance in often difficult environment Have built a large, diversified scaleable business; profitable since inception Value-creating acquisitions, successfully integrated Largest non-ut
Slide 13: Strategy of development through adjacencies testifies to low risk profile
Strategy of development through adjacencies Time testifies to low risk profile of the business Ontario Plumbing Alberta Home & Drains Services Ontario Auto Texas Renewable Alberta Upstream Technology Energy Gas E&P, CBM Ontario US Business Texas Business Alberta Business Business Services Services S
Slide 14: Sustained, fast pace of development
Sustained, fast pace of development Acquisitions Disposals Direct Energy Consumers’ Waterheater Fund Avalanche Energy Georgia gas customers Energy America Enbridge Services Inc Closures NewPower gas customers Maryland gas customers CPL & WTU Retail Energy, Texas Pennsylvania home services Integrated
Slide 15: Our current businesses
Our current businesses BUSINESS UNIT TARGET CUSTOMER PRODUCT OFFERING Natural Gas Electricity Heating & Cooling Protection Plans Residential MASS MARKETS RETAIL Water heater Rentals Small Commercial Plumbing & Drains Duct Cleaning Home Comfort Natural Gas Big Box Retail Electricity Hotels & Restaura
Slide 16: Current business footprint
Current business footprint Canada Calgary US North EMG offices Texas Houston Gas Fields Power Stations 16
Slide 17: Our Core Strategy – Optimize and Grow
Our Core Strategy – “Optimize and Grow” Influence regulatory progress in Residential Energy markets and maximise value of core markets Continue to build Home Services business in Canada and extend geography and product suite in United States Deliver value from Business Markets through rapid en
Slide 18: A strong and integral part of the Centrica Group
A strong and integral part of the Centrica Group Major growth platform for Centrica – 23% of Group EBIT growth since 2000 Common skill sets give competitive edge – both ways Sharing of business models and processes Interchange of people – both ways Key insights into global LNG trade; North
Slide 19: Strong synergies with Centrica in the UK
Strong synergies with Centrica in the UK Sales channel management Product design Home services operational processes Global natural gas markets/LNG Asset management Natural gas exploration and development Regulatory skills Energy trading and procurement Risk management Automation and energy manageme
Slide 20: Regulation and Competition
Regulation and Competition Maura Clark SVP Strategy and M&A
Slide 21: We are thriving in a difficult regulatory and competitive environment
We are thriving in a difficult regulatory and competitive environment Regulatory environment variable and evolving − Texas pre-eminent model for retail competition − Canadian landscape presents discrete challenges − Incremental residential opportunities will emerge in time − Attractive upside in B
Slide 22: Protracted period of restructuring in North America
Protracted period of restructuring in North America Federal legislation not primary driver of deregulation − Dictated by state legislation and/or regulatory mandate − No single authority; hundreds of LDCs/EDCs − Regulation for gas and electric differs − Lack of uniformity complicates operating env
Slide 23: Natural Gas Regulatory Landscape
Natural Gas Regulatory Landscape North American gas network is highly integrated All states and provinces open in large C&I sector Limited new economic residential market opportunities Open to all customers Some utilities open to C&I and residential customers Open to C&I, closed to residential
Slide 24: Electricity Regulatory Landscape
Electricity Regulatory Landscape Market reforms offer opportunities: − Ontario market re- opened − California rejected Proposition 80 − New York rapidly advancing rules and standards − Aggregation programs Significant progress in advancing C&I Open to all customers sector Some utilities open to
Slide 25: Trend in switched electricity volumes demonstrates continued support of competitive markets
Trend in switched electricity volumes demonstrates continued support of competitive markets Switched Volumes Volume switched in 2004 is 700 almost three times 2001 switched volumes: 600 − Market reforms driving market based pricing and exposure to 500 hourly pricing 400 − RTOs evolving aiding whol
Slide 26: Regulatory status has created differing opportunities across our businesses
Regulatory status has created differing opportunities across our businesses Ontario Alberta Texas US North Gas competition Gas rebates Price-to-beat is Mass markets well-established hampering gold standard for deregulation Renewed (dual growth deregulated making only fuel) growth “Mixed
Slide 27: No true peer to our unique model and geographic footprint
No true ‘peer’ to our unique model and geographic footprint Primary Competitors Residential Canada − Leading position in Canada Union Gas, ESC Enmax − Strong # 3 in Texas US − Smaller independents lack staying power TXU, Reliant and credit capacity FPL/Gexa Business Markets Constellation Strateg
Slide 28: Canadian Retail Operations
Canadian Retail Operations Bob Huggard President, Canadian Retail Operations
Slide 29: Canadian Retail Operations
Canadian Retail Operations 1.8m households taking 2.8m energy & services products 1m gas & electricity customers Calgary Toronto Market Size Gas Power 34,000 gas Over 12,000 Business (res cust) customers in Markets customers Alberta 1.0m 1.1m Manitoba throughout Canada Ontario 2.9m 4.2m Manitoba 0.2
Slide 30: Canada Mass Markets Energy – Highlights
Canada Mass Markets Energy – Highlights 12 months to June 30, 2005 Gas Power Branded, fixed price offer - #1 Customers (000s) 1,550 576 market share − Fixed price contracts, low risk, Volumes* 2,414 7,399 fully hedged, nominal weather Turnover (£m) 1,003 247 and attrition exposure − Utility bill o
Slide 31: DE's energy proposition emphasizes price stability
DE’s energy proposition emphasizes price stability 31
Slide 32: Fixed price proposition resonates with customers
Fixed price proposition resonates with customers Fixed Price Proposition 5-year contracts are core offer 35 1,200 Exploit market opportunities through: 30 1,000 – product innovation Cumulative Savings $ 25 800 – proactive sales Low risk product, with expected 3 Price ¢/m 20 600 requirements fu
Slide 33: Evolving channel mix to reach new customer segments
Evolving channel mix to reach new customer segments and increase CTA leverage Ontario Gas Channel Mix 100% D2D remains important channel Sales force excellence initiatives 80% have improved agent productivity Engineers cross-selling energy 60% contracts to home services customers 40% Outboun
Slide 34: Residential power margins revert to lower, but attractive levels with rebate expiry
Residential power margins revert to lower, but attractive and sustainable levels with rebate expiry in Ontario April 2006 marks the end of government payments under Market Power Mitigation Agreement – Decision to capture MPMA rebates contributed substantial value over 4-yr duration – MPMA expiry w
Slide 35: Alberta
Alberta The £37.5m ATCO Retail acquisition gave us: − 1 million regulated gas and power customers in Canada’s second largest and fastest-growing market − A profit growth opportunity by migrating these accounts to competitive offers − Ownership of the incumbent utility billing envelope to quickly e
Slide 36: Canada Home Services – Highlights
Canada Home Services – Highlights Largest Home Services business 12 months to Home Services June 2005 in Ontario: Customers (000s) 1,797 – Serves over 40% of all Ontario households Annual calls (000s) 735 – 780 engineers and installers – 60% growth in protection plans Turnover (£m) 132 since 2002
Slide 37: Restructuring of Enbridge Services established our services platform
Restructuring of Enbridge Services established our services platform with minimal invested capital Acquisition included: Gross - Water tanks We retained the following: Cost - Rental customers − relationships with >1.3m C$1.0bn - HVAC service relationships rental customers - Engineers − 35% of th
Slide 38: Knowledge transfer from British Gas is enabling us to extract more value
Knowledge transfer from British Gas is enabling us to extract more value from each customer relationship… Service Volumes (000) Jobs per Day 5.9 667 Transformation 541 created platform that: 5.2 – Supports incremental revenue 2002 2004 2002 Aug '05 at low marginal cost – Enables provision of high
Slide 39: Leading position in Ontario Services is being leveraged to pull through energy sales
Leading position in Ontario Services is increasingly being leveraged to pull through energy sales… Products combine premium price and high service, Service Relationships At June 30, (000s) 2005 creating strong loyalty Rental Water Heaters 1,320 Continue to grow volumes of core Ontario offer and
Slide 40: Canada Business Markets – Highlights
Canada Business Markets – Highlights Focus on mid-sized 12 months to June 30, Gas Power Services 2005 business customers Volumes* 323 2,397 n/a National services capability Turnover (£m) 108 65 28 Gross Profit (£m) 9 16 7 Successful growth following strategic emphasis in 2003 Gross Margin (%)
Slide 41: Canada Business Markets Strategy Summary
Canada Business Markets Strategy Summary Focus on customers with consumption above mass-market tariff thresholds, but below volumes requiring wholesale procurement Expand ‘blue chip’ customer base, raising profile and creating platform for future growth Leverage national services footprint to
Slide 42: Total Solutions approach gaining traction in Canada
Total Solutions approach gaining traction in Canada; plans to replicate in the US as appropriate SOURCE BUY CONVERT USE DISPOSE Heating, Cooling, Wind, Solar, Energy Regulatory tracking Equipment that Lighting, On-site, commodity and compliance, consumes and Scheduling, Gas generation, CFC, converts
Slide 43: Growing Success
Growing Success Sample Cross-selling gas and power Gas Power Services Customers Exploiting national services footprint to become provider of choice for multi-regional customers Winning with differentiated energy and energy related services and technology Expanding high-profile customer base
Slide 44: Significant growth opportunity
Significant growth opportunity 20bn therms 150TWh 100% 20 billion therms and 150 TWh of C&I volumes in 75% open markets in Canada Open C&I Volume Focusing on retail, light 50% industrial, property management, hospitality and public sectors 25% Large and fragmented markets present significant 0
Slide 45: Canada Retail Summary
Canada Retail Summary Ontario power market re-opening revitalizes residential dual fuel opportunity Opportunity to grow energy and services in under-penetrated segments Value creation in Alberta will focus on Business Markets and Services opportunities National footprint in both energy and s
Slide 46: Questions?
a Direct Energy. Questions?
Slide 47: United States Retail Operations
United States Retail Operations Phil Tonge President, Texas Retail Operations
Slide 48: US Retail Operations
US Retail Operations 4,000 business markets gas & electricity customers Stamford Dayton 300,000 residential & small commercial gas customers 900,000 residential & small commercial Houston electricity customers 40,000 residential services customers in 10 states 48
Slide 49: US Retail Agenda
US Retail Agenda Focus residential energy efforts in Texas power, Ohio gas and New York dual fuel Continue to grow the profitable RSG residential new construction business and build out home services from this platform – focusing initially on Texas and Ohio Achieve significant growth in US Nor
Slide 50: Texas has the 2nd largest energy consumption in the US
Texas has the 2nd largest energy consumption in the US, and is enjoying robust growth Residential Customers TXU 2.5m Reliant 1.7m CPL/WTU 0.8m First Choice 0.2m 50
Slide 51: Texas Residential Energy – Highlights
Texas Residential Energy – Highlights Mature branded incumbent and high growth insurgent in largest US 12 months to June 30, 2005 competitive market Customers (000s) 892 Attractive market structure, similar Volume (GWh) 12,871 to UK, with average power consumption twice that of UK Turnover (£m)
Slide 52: Texas Mass Markets – Strategy Summary
Texas Mass Markets – Strategy Summary Build on strong #3 position and narrow gap with market leaders Successfully manage through end of Price to Beat by: − Maintaining gross profit − Retaining high value customers Achieve continued growth in insurgent business through modest organic growth and
Slide 53: Effectively managed PtB dynamics to maximize profitability and customer retention
Effectively managed PtB dynamics to maximize profitability and customer retention Illustrative Composition of Rates are designed to leave Price-to-Beat headroom for competitive offers Headroom and cost of power Headroom Set by vary among territories, creating 20-day opportunities for nimble mark
Slide 54: Our proposition offers short-term price stability and guaranteed savings off the PtB
Our proposition offers short-term price stability and guaranteed savings off the PtB rate Award winning TV advertisement 54
Slide 55: Diversified channel mix and process improvements have improved sales performance
Diversified channel mix and process improvements have improved sales performance Insurgent Sales Channels 100% Exploiting direct marketing 90% opportunity with direct mail, 80% affinity programs, moves 70% Diversified channel mix to 60% better leverage scale and 50% scope: 40% – Builders 30% – A
Slide 56: Successful channel strategy has translated into sales wins against key competitors
Successful channel strategy has translated into sales wins against key competitors… Comparative Insurgent Net Growth 50 Focus on attracting and retaining higher-value 40 customers Customer Growth (000s) – In Houston and Dallas, 30 our average customer uses 106% of ERCOT 20 averages – Rolling out b
Slide 57: Reduced incumbent attrition has resulted in faster net growth
…and in combination with reduced incumbent attrition, has resulted in faster net growth Comparative Incumbent Attrition 5% Managed attrition in incumbent territories through: 4% – Rebates and price Quarterly Attrition (%) stability: passing on 3% savings – Energy subsidies for low 2% income consum
Slide 58: Grown net customers by 112,000 and maintained profitability through a 16% price increase
Grown net customers by 112,000 and maintained profitability through a 16% price increase Price-to-Beat Discounting $0.17 Recent commodity price Negotiated spikes have driven negative $0.16 discounts to mitigate price margins at competitors rise $0.15 – Discounting arrangements with the Average PtB
Slide 59: We believe Texas margins will remain attractive post PtB expiry
We believe Texas margins will remain attractive post PtB expiry PtB expiry offers the opportunity to tailor our pricing strategy to target acquisition and retention of high value customers The market is consolidating through a combination of acquisitions, exits and bankruptcies Evidence since
Slide 60: US North residential performance has improved with optimisation and growth
US North residential performance has improved with optimisation and growth “Cleaned up” acquired books, 12 months to June 30, 2005 shedding low value customers Customers 317,000 Retained larger customers with Volume (m.therms) 506 good renewal margins Turnover (£m) 199 Promising gas regulatory
Slide 61: RSG provides an excellent, profitable platform on which to build home services
RSG provides an excellent, profitable platform on which to build home services HVAC installation and services markets: − residential new construction − after-market service, maintenance and retrofit Integration with energy business going well Services an area covering ~50% of our energy custom
Slide 62: Home services has opened new, lower cost channels for energy sales
Home services has opened new, lower cost channels for energy sales not available to competitors… Partner with builders DE Energy Sell maintenance to sell power to new contracts to homes and extend energy install relationship customers into maintenance plans Texas Portfolio Builders Services X-
Slide 63: US Business Markets – Highlights
US Business Markets – Highlights 12 months to June 30, Power Gas Market entry in 2003 2005 Volumes* 1,321 44 Very strong growth to date Turnover (£m) 90 23 OP reflects market entry costs associated with early stage Gross Profit (£m) 9 2 Gross Margin (%) 10 9 Targeting ROCE in mid-teens OP (£
Slide 64: US Business Markets Strategy Summary
US Business Markets Strategy Summary Low risk, adjacency-driven strategy, leveraging Canadian experience to drive growth in Texas, the Northeast and Midwest Will build on early success of PJM and NEPOOL power market entries with New York market entry in 2006 Targeting 16 states by 2010 through
Slide 65: US North expansion will increase our Business Markets footprint
US North expansion will increase our Business Markets footprint three-fold in gas and five-fold in power Today Huge eligible power and gas business markets in the Northeast and Midwest Opportunity to leverage efficiencies from adjacent EMG and mass markets presence Target Capitalise on substan
Slide 66: Leveraging our Services and Technology knowledge to gain traction in Texas
Leveraging our Services and Technology knowledge to gain traction in Texas Sample Customers Power Services Dallas Early high-profile wins in Cowboys replicating our Canadian Stadium Business Services and Technology capabilities Texas Women’s in Texas are promising University Texas State Technical
Slide 67: US Retail Summary
US Retail Summary Strong number three incumbent position in Texas leveraged into number one insurgent operation, as we are: – Retaining more incumbent customers than peers – Acquiring more insurgent customers than peers Business markets represent substantial growth opportunity in Texas, Northeas
Slide 68: Upstream Gas & Power Generation
Upstream Gas & Power Generation Mike Hogan SVP Upstream Gas & Power
Slide 69: Upstream Gas Overview
Upstream Gas Overview Upstream Gas 3,400 producing wells; 93 compressors 1,200 wells drilled 2001-2005 P+P reserves of 320 bcfe (95% gas) Current production of 88 mmcfe/d Calgary Total land portfolio of 302k hectares Bastrop Toronto 69
Slide 70: Upstream Power Overview
Upstream Power Overview Bastrop Near Austin, TX 540 MW 2x1 GE 7FA CCGT Commissioned 2002 Frontera Mission, TX 477 MW 2x1 GE 7FA CCGT Commissioned 2000 Buffalo BastropGap Near Abilene, TX Buffalo Gap 120 MW Wind Farm Bastrop 15yr exclusive Houston agreement for all Frontera outp
Slide 71: Hedging Strategy
Hedging Strategy Risk tightly managed within prescribed limits established by Group Risk Management policy Procurement and hedging program executed by Energy Management Groups based in Calgary and Houston Highly experienced team with strong, independent risk management systems Natural gas ma
Slide 72: Upstream Gas and Power Asset Strategy
Upstream Gas and Power Asset Strategy Strategy guided by risk reduction through ownership of physical assets – but must also create stand-alone value Production targets as percentage of downstream requirements generally 20-30% for gas and 35%+ for power Upstream asset production transferred to
Slide 73: Well-timed acquisition of quality power assets
Well-timed acquisition of quality power assets ERCOT Merchant CCGT Mid merit plants acquired Transactions in 2004 for $265-280/kW 22 700 20 650 Well located to support New build band retail load 18 Frontera 600 T r a n s a c tio n p r ic e ($ /k W ) S p a r k s p re a d ($ /m W h ) 16 (TECO) 550
Slide 74: The UK market – a leading indicator
The UK market – a leading indicator UK Merchant CCGT Asset Transactions 700 20 Killingholme 600 Sutton Bridge Transaction price (£/kW) Spark spread (£/mWh) Corby Saltend New build band 500 15 Rye House 400 Humber I Spark Spread Humber II 10 Kings Lynn Damhead 300 Killingholme 200 5 Brigg Barry Medwa
Slide 75: Wholesale power markets vary by region
Wholesale power markets vary by region Reserve Margins* US Northeast markets 30% are large, with varying levels of transparency 25% and liquidity 20% Large shaped load in TX 15% makes asset ownership highly desirable 10% Addressing liquidity in 5% Ontario, limited despite 2005 2006 2007 2008 2
Slide 76: Upstream Gas – operational excellence
Upstream Gas – operational excellence DE Production 20 Strong track record in replacing Prod Rate (000 15 reserves boe/d) 10 Executed on ~1200 new wells 5 over past five years with 0 success rate >85% 2003 2004 2005 2006 2007 2008 2006 Base 2006 Budget 2007-2015 Growth Good production cost eff
Slide 77: Attractive gas asset position in Western Canadian Sedimentary Basin
Attractive gas asset position in Western Canadian Sedimentary Basin High working interests in existing lands Contiguous acreage in highly sought-after core areas in WCSB Production is 95% gas Proven plus probably reserve life index of10 years Attractive upside from coal bed methane, expand
Slide 78: Upstream Summary
Upstream Summary Physical and long-term positions are delivering real benefits to our procurement and risk management activities Assets add significant value in their own right Excellent track record of timely, targeted acquisitions complemented by profitable investment in organic growth Str
Slide 79: Financial Review & Valuation
Financial Review & Valuation David Clarke Chief Financial Officer
Slide 80: Recent Financial Results (as published)
Recent Financial Results (as published) H1 H2 H1 H2 H1 Turnover (£m) 2005 2004 2004 2003 2003 Canada residential energy 706 544 275 171 252 Texas residential energy 401 412 332 465 468 Other USA energy 130 69 122 78 167 Home Services 163 112 73 88 84 Business Markets 180 111 93 62 64 Energy trading
Slide 81: Operating Profit Trace – H1 2004 to H1 2005
Operating Profit Trace – H1 2004 to H1 2005 100 Operating Profit (£m) 80 60 40 s P P y y gy es kt le O O g rg M ic sa er er 4 e 5 rv En 10 10 En En ss le Se ho H H ne S es es W rU e si R R om Bu & TX da e th g H C in O ad Tr Residential businesses continue to grow while investing for future growth i
Slide 82: Canada Residential Energy: Financial Trends
Canada Residential Energy: Financial Trends H1 FY FY Customer numbers (period end 000s) 2005 2004 2003 Regulated gas 856 865 0 Deregulated gas 694 687 702 Regulated power 174 175 0 Deregulated power 402 402 459 Average consumption Gas (therms) 924 1,146 1,000 Power (kWh) 6,527 12,093 13,294 Financia
Slide 83: Texas Residential Energy: Financial Trends
Texas Residential Energy: Financial Trends H1 FY FY Customer numbers (period end 000s) 2005 2004 2003 CPL/WTU 625 639 731 Insurgent Business 267 190 128 Average consumption CPL/WTU (kWh) 7,150 14,614 16,768 Insurgent Business (kWh) 7,523 15,933 12,149 Financials (£m) Turnover - CPL/WTU 304 618 855 T
Slide 84: Other US Residential Energy: Financial Trends
Other US Residential Energy: Financial Trends H1 FY FY Customer numbers (period end 000s) 2005 2004 2003 Total 317 305 414 Average consumption Gas (therms) 1,016 1,548 1,369 Financials (£m) Turnover 130 191 245 Gross profit 17 15 24 Operating Profit 8 1 (2) Operating Margin Total 6% 1% -1% Other US
Slide 85: Home Services: Financial Trends
Home Services: Financial Trends H1 FY FY Customer numbers (period end 000s) 2005 2004 2003 Canada - Waterheaters 1,320 1,317 1,300 Canada - Protection Plans 477 447 390 US 40 36 0 Financials (£m) Turnover - Canada 66 124 138 Turnover - US 81 30 2 Gross profit - Canada 36 71 82 Gross profit - US 27 1
Slide 86: Business Markets: Financial Trends
Business Markets: Financial Trends H1 FY FY Sales volumes 2005 2004 2003 Gas (m.therms) 220 249 204 Power (GWh) 2,233 2,722 1,975 Financials (£m) Turnover - Gas 72 72 52 Turnover - Power 92 109 52 Turnover - Services & Technology 16 23 22 Gross profit - Gas 6 7 5 Gross profit - Power 12 25 16 Gross
Slide 87: Return on Invested Capital
Return on Invested Capital 12% 10.8% 10% 9.2% 9.2% 8% ROCE * 6% 4% 2% 0% 2003 2004 2005E Statutory Tax Rate Effective Tax Rate * NOPAT/average invested capital 87
Slide 88: North America Turnover Mix: 2005 and 2008
North America Turnover Mix: 2005 and 2008 2005(E) Turnover 2008(F) Turnover 2008 14% 29% 10% 36% 43% 6% 27% 19% 8% 8% Canada Energy Texas Energy Other US Energy Home Services Business Markets Geographic/segment turnover is forecast to become more balanced as C&I businesses grow 88
Slide 89: North America Operating Profit Mix: 2005 and 2008
North America Operating Profit Mix: 2005 and 2008 2005(E) Operating Profit 2008(F) Operating Profit 4% 2008 2005 25% 13% 27% 25% 29% 5% 41% 28% 3% Canada Energy Texas Energy Other US Energy Home Services Business Markets Operating profit will also become more balanced, although still weighted toward
Slide 90: Selected Valuation Benchmarks
Selected Valuation Benchmarks Trailing 12 months Business Unit Peers Ticker P/E EV/ EBITDA Canada Energy Savings Fund1 SIF.un-T n/a 19.7 Residential Energy Services UE Waterheater Fund UWE.un-T n/a 10.0 Consumers’ Waterheater CWI.un-T n/a 8.9 Income Fund Texas Residential TXU TXU 15.7 10.3 Energy Re
Slide 91: Financial Summary
Financial Summary Impressive financial track record Portfolio of businesses that reduces exposure to external factors or individual markets Improving mix of turnover and operating profit going forward Positive and improving spread on the Group WACC Business expected to be cash self-suffici
Slide 92: Summary and Questions
Summary and Questions Deryk King President & CEO
Slide 93: A compelling investment case
A compelling investment case Enhances Centrica’s growth profile by accessing opportunity-rich market Balanced footprint minimises exposure to market-specific risks Material synergies between UK and NA skill sets Leading residential energy and services positions in core markets Business mar
Slide 94: Direct Energy
4 + Direct Energy. y.