Centrica Plc · LSE:CNA
Centrica — Non-Deal Roadshow (June 2010)
55 slides from Centrica's roadshow presentation, Jun 11, 2010
Slide 1: Centrica plc - Reverse Roadshow
Centrica plc - Reverse Roadshow 11 June 2010
Slide 2: Nick Luff, Finance Director
Nick Luff Finance Director centrica
Slide 3: Agenda
Agenda 10:30 Welcome 10:45 Introduction to the Centrica investor story Nick Luff 11:15 Centrica Energy and Centrica Storage Mark Hanafin and Simon Wills 12:00 Direct Energy Chris Weston 12:45 Lunch 13:30 British Gas Phil Bentley 14:15 Summary and Q&A Sam Laidlaw 15:00 Close 3
Slide 4: 2006-2009: the first step in the journey
2006-2009: the first step in the journey Our Strategic Priorities 1 Transform British Gas 2 Sharpen the organisation and reduce costs 3 Reduce risk through increased integration 4 Build on our growth platforms 4
Slide 5: UK Downstream - British Gas
UK Downstream - British Gas • British Gas restructured to combine energy and services • Management team and support functions combined • Enhanced customer propositions – first bundled energy and services offering, „EnergyExtra‟ – wide range of energy efficiency products – FSA approval to sell insura
Slide 6: Energy hedge ratio
Energy hedge ratio 70% 60% 50% Venture 40% 20% of 30% British Energy Drax 20% Wind North Sea 10% Morecambe 0% 2006 2007 2008 2009 2010 2011 2012 2013 Note: proportion of UK floating gas and power demand covered by own assets. Floating gas demand includes non-fixed price residential energy and busine
Slide 7: The next stage: our strategic priorities
The next stage: our strategic priorities 1 Grow British Gas . . leading the transition to low carbon homes and businesses 2 Deliver value from our growing upstream business . . . securing sustainable energy for our customers 3 Build an integrated North American business . . . with leading positions
Slide 8: The investor story: Centrica Energy and Storage
The investor story: Centrica Energy and Storage Our pre-Venture production profile Case study – Lincs offshore wind Upstream Oil and Gas production profiles 2008 2009 Production (bcfe) • Business case developed • Improved cost base through supplier 400 Business • Based on LID development, negotiatio
Slide 9: The investor story: Direct Energy
The investor story: Direct Energy Direct Energy has a strong platform on which to build…. Direct Energy businesses Core markets 3m customers: Canada Residential largest retailer in US Northeast Energy North America MI MA AB ON NY CT 33 TWh and 690 mmth RI Business annual volumes: PA NJ OH MD Energy
Slide 10: The investor story: British Gas
The investor story: British Gas We will build on the transformation of British Gas to deliver our new strategic priorities „Capture new markets‟ The Energy „Take the lead‟ Experts at the heart of Combine British and work Optimise „Optimise the business the business‟ homes and Make the business work
Slide 11: Strong cash generation
Strong cash generation 2009 Pro-forma 3 £bn 2 Highly cash generative (~£1.5bn net) + Strong balance sheet EBITDA = Significant flexibility and investment choices Dividends 1 Tax & Interest 0 Sources Uses Note: (1) Includes Venture and 20% of British Energy on a full year proforma basis (2) 20% share
Slide 12: Optionality in investment programme
Optionality in investment programme 2,500 2,000 Committed Cash Flow (£m) North America 1,500 British Gas 1,000 Storage UK Power 500 UK Gas 0 2010 Committed 2011 Committed 2012 Committed Baird, Caythorpe, Bains, Race Bank, New Nuclear, Key Investment York, Sycamore, Peik, Cygnus, Kew, Heimdal East De
Slide 13: Case study: Lincs offshore wind
Case study: Lincs offshore wind 2008 2009 • Business case developed • Improved cost base through supplier Business • Based on LID development, negotiation Development area knowledge, and expertise • Flexibility on timing with vessel optionality • Aligned with power • Financing template established f
Slide 14: What if gas prices stay low?
What if gas prices stay low? Impact Levers to mitigate / opportunities – Lower gas production profits • Asset flexibility to preserve reserves Upstream (some offset from oil production and lower • Optionality in investment programme taxes) − defer gas exploration / development – Lower returns from n
Slide 15: What if gas prices go up?
What if gas prices go up? Impact Levers to mitigate / opportunities + Higher gas production profits • Additional value in investment Upstream + Higher returns from nuclear (post hedges) programme + I&C contracts unwind post 2010 • CCGT‟s switch to peaking – Pressure on CCGT Downstream – Downward pre
Slide 16: Centrica: The next 3 to 5 years
Centrica: The next 3 to 5 years • Double the number of high value joint energy & services customers • Lead the transition to low carbon (~2m Smart Meters, leading microgen installer in UK) UK • Strong penetration of new markets e.g. local housing authorities Downstream • Leading provider of energy e
Slide 17: Centrica Energy & Storage
Centrica Energy & Storage centrica
Slide 18: Agenda
Agenda • Recap from Capital Markets Day • Focus areas: – Upstream scale and capability – Strong generation capabilities with a differentiated low carbon mix – Potential investment opportunities across gas, gas storage, CCGT, wind and new nuclear 18
Slide 19: Upstream capabilities and strategy
Upstream capabilities and strategy Distinctive capabilities Strategy • Transformed scale and capability Deliver value from our existing assets . . . in upstream gas • Leading consolidator of mature and • Only „dual fuel‟ hedged UK supply orphaned assets in the UKCS business • Optimisation of power g
Slide 20: Our pre-Venture production profile
Our pre-Venture production profile Upstream Oil and Gas production profile Production (bcfe) 400 350 300 250 200 150 Pre-Venture Production Others 100 50 Morecambe 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20
Slide 21: Combined portfolio provides scale and opportunities
. . . combined portfolio provides scale and significant opportunities to target and time investments Upstream Oil and Gas production profile Production (bcfe) 400 Development Options 350 Longer-term 300 investment options Trinidad NCMA Target 250 Development Options Future prospects / Acquisitions B
Slide 22: A full service, leading operator of mature and orphaned fields
A full service, leading operator of mature and orphaned fields HSE, Commercial and Supply Chain expertise operates across the development life cycle Business Project Subsurface Operations Development Management Good relationships with the Experienced teams Industry leading drilling and Stron
Slide 23: Case study: Chiswick field development
Case study: Chiswick field development • Discovered in 1984 • Acquired in August 2006 • Chiswick drilling relied on understanding of complex carboniferous reservoir geometries and required a new technical solution for fraccing the wells • New industry project execution capability was also required t
Slide 24: Power generation strategy: increased cover, more balanced fleet
Our power generation strategy will lead to increased generation cover and a more balanced fleet Strategy aims for increased Strategy leads to a mix more closely aligned cover and balanced fleet to the market but with lower carbon risk • Target increased cover Generation cover (TWh) Generation mix (T
Slide 25: Advantages across the offshore wind value chain
We have strong advantages across all key elements of the offshore wind value chain Leaders along key elements of the offshore wind value chain Tendering, Design Economics & Construction & Operations & & Acquisition Financing Commissioning Maintenance Continued success in Efficient and prudent
Slide 26: Current nuclear fleet & framework for New Nuclear Build
Current nuclear fleet & framework for New Nuclear Build Current position of BE station lifetimes New build trends • Increasing recognition of the role of new nuclear Dungeness B in meeting low carbon and security of supply Hunterston B objectives Hinkley Point B • Regulatory and planning barriers be
Slide 27: Centrica Storage
Centrica Storage Rough Storage The case for new investment in the UK Strong financial & operational performance 30% Gas storage as a percentage of annual demand Construction GWh Historic Analysis 2005-2010 25% 40,000 Existing 20% 35,000 Rough 15% 30,000 10% 25,000 5% 20,000 0% 5yr Average (2005-2009
Slide 28: Significant investment opportunities to deliver Upstream growth
Significant investment opportunities to deliver Upstream growth Stavanger Existing CCGT Future CCGT Existing Wind Future Wind Existing Nuclear (20%) Future Nuclear (20%) Caythorpe Bains ‘Wash’ Offshore Existing Gas Storage Wind Portfolio Future Gas Storage (1.6GW) ‘East Irish Sea’ LNG Offshore Baird
Slide 29: Direct Energy
Direct Energy Jee Se lie centrica “
Slide 30: Agenda
Agenda • Recap from Capital Markets Day • Progress made on our strategic priorities – Residential energy: launch of prepaid product in Texas, targeting an under served market segment – Home services: Clockwork acquisition, transforming scale and capability of operations and providing a robust platfo
Slide 31: Direct Energy has a strong platform on which to build
Direct Energy has a strong platform on which to build…. Direct Energy businesses Core markets 3m customers: Canada Residential largest retailer in US Northeast Energy North America MI MA AB ON NY CT 33 TWh and 690 mmth PA RI Business NJ annual volumes: OH MD Energy IL 3rd largest retailer DC 2m cust
Slide 32: A distinctive set of capabilities
. . . and a distinctive set of capabilities North American platform Relevant Centrica UK capabilities • Strong downstream position in key • Customer care systems & processes residential deregulated markets • Managing full requirements energy risk • Local regulatory and wholesale market • 20 years co
Slide 33: Our strategy will build an integrated energy business
Our strategy will build an integrated energy business Improve returns from • Reduce costs and improve efficiency existing business • Be the most recommended energy and services provider • Achieve regional leadership positions in our Residential markets Grow scale and • Continue growth in Business ma
Slide 34: Doubling profits: organic growth and acquisitions
Doubling profits: organic growth and acquisitions close the gap Operating profit • DE Residential 2x OP – Texas transformation program – Prepaid launch in Texas – Growth opportunities in US Northeast • DE Business – Small commercial growth strategy • DE Services – Grow scale and local density • DE U
Slide 35: Prepaid: a Texas residential growth opportunity
Prepaid: a Texas residential growth opportunity 5m 1m US$1bn • Establish market leadership by accessing an 100% untapped customer base – Prepaid delivers the right value proposition 80% to this market segment – Smart meter deployment underway 60% • Other benefits of prepaid include – Improved bad de
Slide 36: Services: the growth opportunity and the vision
Services: the growth opportunity and the vision Services • Support the wider DE strategy through being North America’s leading vision: home services company – Making a material and growing contribution to DE‟s profitability – Redefining the customer experience for the industry – Extracting value thr
Slide 37: Clockwork: operator and franchisor of home services
Clockwork: a major operator and franchisor of heating & cooling, plumbing and electrical services Owned • 25 company owned locations in US and Canada operations • Providing heating & cooling, plumbing and electrical services • 470 franchises in the US providing the same services Franchises • Same br
Slide 38: Clockwork establishes DE as a leading residential services provider
Clockwork establishes DE as a leading residential services provider in North America Energy / services overlap 100% • Near doubling of services overlap with energy footprint 80% • Complementary assets: – DE‟s leadership in Canada and 60% protection plans – Clockwork strength in US and 40% industry l
Slide 39: Small Business: an emerging segment for DE Business
Small Business: an emerging segment delivering a significant growth opportunity for DE Business US power market share (TWh) 80 • Substantial Small Business operations today – 180k customers – US$45-50m in operating profit 60 Constellation • Under served segment with substantial profit pool in DE Bus
Slide 40: The path to vertical integration
The path to vertical integration DE peak load and generation (MW) 12 Other 10 Canada • Integration: better balance downstream and 8 upstream positions, move towards 35-40% cover 6 US NE – like the UK, vertical integration is a 4 competitive necessity 2 Texas – offset downstream price and collateral
Slide 41: British Gas
British Gas isalation ~| Savong & - edoun Ss |i
Slide 42: Agenda
Agenda • Recap from Capital Markets Day …… with relevant case studies – Delivering sustainable profits in Residential Energy – Transforming the core Services business – Building on current momentum to sustain British Gas Business growth – Positioning British Gas at the centre of the „Home of the Fut
Slide 43: Building on the transformation of British Gas
We are building on the transformation of British Gas to deliver our new strategic priorities „Capture new markets‟ The Energy „Take the lead‟ Experts at the heart of Combine British Make the and work „Optimise the business‟ homes and business work together businesses 2007-08 2009 2010 2011 2012 • ‘O
Slide 44: Optimise the business: Deliver sustainable profits in Residential Energy
Optimise the business: Deliver sustainable profits in Residential Energy Driving Energy-Services joint holdings Reducing churn Dec Dec 20% 20% Energy churn down Joint customers churn Households ('000) 2008 2009 Growth 33% since 2006 30% less (2009 data) 15% 15% Energy & Services 1,879 2,043 +164 Ser
Slide 45: Optimise the business: Realising cost synergies
Optimise the business: Realising cost synergies to invest in future growth Creating an efficient and stable operating cost base Innovating to drive step change in online Heating Services efficiency 25 45% % Customers Registered Online Front & back office 40% Online Transactions (m) Online customers
Slide 46: Take the Lead: Transforming the core Services business
Take the Lead: Transforming the core Services business Customers require greater availability Focus on getting jobs right first time Engineer Call volumes jobs (demand) 80% 25% 25% 80% % completed first time Intra day 20% job profile 20% 15% 15% 70% 10% 10% 70% 5% 5% 0% 0% <8am 8-10am 10-12am12-2pm
Slide 47: Take the Lead: Insurance roll out and CHI strategy
Take the Lead: Insurance roll out and CHI strategy generating significant growth Insurance Penetration Growth Doubling CHI Installations by 2012 100% • Price reduction rolled out Insurance penetration % nationally in June 2010 75% • Reduced lead times and 50% greater time slot availability • Convers
Slide 48: Take the Lead: Electrical and Dyno business
Take the Lead: Further growth in the Electrical and Dyno business E&DS: a strong profit business Opportunity for improved penetration 3,700 100 E&DS contracts ('000) 20% % of Energy customers 3,600 E&DS Op Profit (£m) 75 3,500 15% 3,400 50 3,300 10% 3,200 25 5% 3,100 0 3,000 0% 2007 2008 2009 Centra
Slide 49: Building on current momentum to sustain BGB growth
Take the Lead: Building on current momentum to sustain BGB growth BGB future growth from segmented approach… …to build on momentum gained from strategic changes New Segmentation • Six value creating acquisitions • Over 35% improvement in net margin 2006 to 2009 BMSi , eBMS • Scaleable solution for M
Slide 50: Capture New Markets: Home of the future
Capture New Markets: Positioning British Gas at the centre of the home of the future Home of the Future Capitalise on opportunities from transition to low carbon homes Insulation - domestic market forecast Microgeneration - installation revenues market forecast 1.6 12 Source: DECC, British Gas Sourc
Slide 51: Capture New Markets: Strategic relationships with local authorities
Capture New Markets: Forge strategic relationships with local authorities British Gas could target c.25-30% of Backed by brand credibility, experience and infrastructure property services spend Local Authority spend on property services (2009) 15 Plumbing Locks £1.8bn White collar management: tenant
Slide 52: Significant growth in sustainable profits across three year plan
We are targeting significant growth in sustainable profits across our three year plan Take the Lead Capture New Markets Op Profit £m New Energy Build insulation business, partner Business Business: with Local Grow Electricals & segmentation, Authorities, lead in Plumbing via cost efficiencies Grow s
Slide 53: Sam Laidlaw, Chief Executive
Sam Laidlaw Chief Executive centrica
Slide 54: The investor story: summary
The investor story: summary • Positioned for growth, upstream and downstream • Balanced business in both high and low commodity price environment • Well positioned to lead in the low carbon world • Strong cash generation, with significant flexibility and investment choices • Consistently delivering
Slide 55: centrica
centrica