Centrica Plc · LSE:CNA
Centrica — Debt Investor Presentation (October 2006)
33 slides from Centrica's debt investor presentation, October 2006
Slide 1: Centrica plc: A leading integrated energy company
Centrica plc A leading integrated energy company Presentation to bond investors October 2006
Slide 2: Disclaimers
Disclaimers Forward-looking statements: This presentation contains certain “forward-looking statements" with respect to Centrica’s financial condition, results of operations and business and certain of Centrica’s plans and objectives with respect to these items. By their very nature forward-looking
Slide 3: Contents
Contents • Business overview • Strategic overview • Financial position • Capital structure and debt • Contact details 3
Slide 4: Business overview
Business overview
Slide 5: Centrica: A leading integrated energy company
Centrica A leading integrated energy company UK downstream • Demerged from British Gas plc in 1997 • Market cap c. £12bn, 28th position in FTSE100 • Focus on energy & related services to homes and businesses: UK upstream • Largest supplier to the residential energy market in Britain • Largest domest
Slide 6: A growing portfolio of quality assets and customers
A growing portfolio of quality assets and customers Power station Gas field Wind farm Energy or Services customers 2005 year end and full year data UK N. America Europe* Total Residential Energy 17,051 3,347 2,130 22,528 Customer accounts (000) Business Energy **909 17 68 994 Services 6,894 1,885 -
Slide 7: Our energy activities are conducted through the following businesses
Our energy activities are conducted through the following businesses • British Gas Residential Energy (BGRE) Largest supplier of gas and electricity to residential customers in Britain • Centrica Energy UK upstream gas production, electricity generation, wholesale and industrial gas sales and energy
Slide 8: British Gas Residential Energy: The UK market leader
British Gas Residential Energy: The UK market leader, through the British Gas brand • 16.6 million customers • Consumers’ first choice energy brand • 4.7 million dual fuel customers • Targeting world-class cost-to-serve 8
Slide 9: Centrica Energy: Helps us meet our customers' energy needs
Centrica Energy: Helps us meet our customers’ energy needs • Gas: • We own the largest UK gas field – Morecambe Bay • We are increasing our stakes in other North Sea fields • Last year we met 24% of our total gas requirements from equity gas • Power: • Our seven gas-fired power stations and long- te
Slide 10: British Gas Business: No.1 commercial sector energy supplier
British Gas Business: No.1 commercial sector energy supplier (by supply points) • Operates through the British Gas Business brand • 916k customer supply points (June 06) • Strong focus on controllable costs • Business performing well considering high wholesale energy price environment • Customer ret
Slide 11: Centrica Storage: Provides valuable hedge
Centrica Storage: Provides valuable hedge • Rough gas storage facility, 18 miles off the Yorkshire coast • 75% of UK storage capacity • Storage price up 74% year-on-year • Field ready for winter production – now >98% full • Market consensus 2006 EBIT of £212m • Work ongoing to expand capacity 2006 S
Slide 12: British Gas Services: Strengthens loyalty
British Gas Services: Strengthens loyalty • Market leading national provider • CAGR 2001-2005: • 28% in turnover • 33% in operating profit • Market growth driven by ‘time poor’ customers • Delivery model is unique and difficult to replicate • On-demand market offers strong potential: • engineer reso
Slide 13: Centrica North America: Firmly established
Centrica North America: Firmly established • 5 million customer relationships across 30 states/provinces • Entered further 9 markets in last 12 months • 28% CAGR in operating profit 2001-2005 • Highly hedged and integrated business model • Business load doubled in past year • Further opportunities e
Slide 14: Europe: Deregulation gaining momentum
Europe: Deregulation gaining momentum • Focus on Western Europe • Growing position in Belgium and Holland • Major gas trader at border points across Europe • Commencement of Industrial & Commercial sales in Germany • Proposed European mergers provide opportunities 450 Europe Turnover (£m) 400 350 30
Slide 15: Strategic overview
Strategic overview
Slide 16: We are focussing on core strategic imperatives
We are focussing on 4 core strategic imperatives • Restore profitability of British Gas Residential • Retail pricing • Cost reduction • Customer service • Reduce commodity risk • Higher level of asset hedge • Advantaged supply contracts • Cost control • Substantial potential • Operational excellence
Slide 17: Retail pricing – Competitors are pricing rationally
Retail pricing – Competitors are pricing rationally • We are passing through increasing wholesale commodity prices to our customers • Our new Customer Relationship Management (CRM) system will enable us to: • implement customer tariff changes quicker • create innovative product offerings 100 % incre
Slide 18: Winter 06/07 wholesale gas prices have fallen over 30%
Winter 06/07 wholesale gas prices have fallen over 30% since their peak Wholesale gas forward prices (NBP) 100 95 90 85 p/thm 80 75 70 65 60 55 50 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Q4'06 Q1'07 Source: Bloomberg 18
Slide 19: Cost control is a priority across the business
Cost control is a priority across the business Centrica cost base - £12 billion • £3.6bn of controllable cost in 2005 100% Opex • A further £2.5bn of Transportation & Distribution cost 90% 80% Other COGS • Ongoing work to streamline processes and procedures 70% Transportation and • BGRE cost reducti
Slide 20: Asset hedge: a unique upstream position
Asset hedge: We have a unique upstream position built over many years… but patience is required at this point in the cycle 2000 2001 2002 2003 2004 2005 2006 Direct Energy N.Sea & Irish Central North Roosecote Brae, Skene & Paris Energy Statfjord (gas reserves) Sea assets Sea assets CCGT Buckland Ce
Slide 21: New infrastructure is coming on-stream
New infrastructure is coming on-stream Total UK demand: 105 BCM Total UKCS 2006:* 83 BCM Langeled: 27 BCM capacity by Oct 2006 Connection to Ormen Lange gas field by end 2007 First gas 27 Sept 2006 5 BCM pa contract with Statoil BBL: 16 BCM capacity by Dec 2006 8 BCM pa contract with Gasunie Milford
Slide 22: LNG increases options for supply
LNG increases options for supply LNG Liquefaction (under construction, probable and possible) Skikda Exp Marsa el Brega Snohvit Murmansk Pars LNG Skikda Persian LNG • 217 bcm of regasification Iran LNG being built around the Atlantic Arzew basin (by 2015)* NIOC LNG Das Island • 165 bcm of liquefacti
Slide 23: Financial position
Financial position
Slide 24: Interims: operating profit analysis
Interims : operating profit analysis Six months ended 30 June, £m 2006 2005 ∆£m ∆% British Gas Residential Energy (143 ) 165 (308 ) nm Centrica Energy 579 543 36 7% British Gas Business 11 55 (44 ) (80% ) Centrica Storage 93 57 36 63% British Gas Services 44 59 (15 ) (25% ) North America 121 87 34 3
Slide 25: Full year: operating profit analysis
Full year : operating profit analysis 12 months ended 31 December, £m 2007 * 2006 * 2005 2004 British Gas Residential Energy 252 19 90 242 Centrica Energy 1,000 1,031 903 773 British Gas Business 84 70 77 68 Centrica Storage 235 221 154 69 British Gas Services 147 110 111 72 North America 244 222 18
Slide 26: Financial headlines/customer numbers
Financial headlines/customer numbers 12 months ended 31 December 2006 2005 2004 Operating profit (£m) 1,665 * 1,513 1,362 Earnings (£m) 619 * 661 691 Net recourse debt (£m) <1,900 ^ 1,060 725 Gas customer numbers (000’s) 10,484 * 11,131 11,171 Electricity customer numbers (000’s) 5,850 * 5,920 5,950
Slide 27: We see near-term upside at this point in the cycle
We see near-term upside at this point in the cycle • Gas prices have peaked • Cost control is a priority across the business • Decline in Industrial & Commercial contract losses • Improving margins in Combined Cycle Gas Turbine (CCGT) fleet • Decreasing effective tax rate • Growth in North America,
Slide 28: Capital structure and debt
Capital structure and debt
Slide 29: Recourse net debt and other liabilities
Recourse net debt and other liabilities 31 December, £m 2005 2006 Actual Centrica estimate Bonds (public issues and private placements) 2008 Euro FRN – issued Sept ’06 0 (70) 2009 Sterling bond – issued Mar ’06 0 (250) 2012 Sterling bond – issued Nov ’01 (405) (405) 2013 Yen bond – issued Feb ’03 (1
Slide 30: Financial policy and credit ratings
Financial policy and credit ratings • Maintain strict financial disciplines • Reduce costs across the group • Mitigate impact of the rise in the gas price • Suspended share buy-back • Maintain conservative capital structure • Retained earnings to fund growth • Maintain commitment to single A credit
Slide 31: Details of bond offering
Details of bond offering • Issuer Centrica PLC • Credit ratings A (negative), A3 (stable) • Issue size Benchmark • Maturity Intermediate • Documentation Off EMTN programme • Terms & conditions Negative pledge Cross default Change of control (full text available) • Listing London • Denomination £50,0
Slide 32: Contact details
Contact details
Slide 33: Contact details
Contact details • Phil Bentley Group Finance Director 01753 494342 • Tony Kendall Group Treasurer 01753 494167 • Kieran McKinney Investor Relations Director 01753 494900 • Paul Waller Assistant Group Treasurer 01753 494164 33