Centrica Plc · LSE:CNA
Centrica — UBS Electricity and Gas Seminar (June 2006)
13 slides from Centrica's conference presentation, Jun 22, 2006
Slide 1: UBS Electricity and Gas Seminar
UBS Electricity and Gas Seminar Ian Wood Commercial Director Centrica Energy
Slide 2: Contents
CONTENTS • Oil price uncertainty • Delivery of new gas import infrastructure • Impact of carbon on generation investment • Outlook for new nuclear and clean coal • Need for new build CCGT • Commodity price convergence and the value of diversity • Concluding comments 1
Slide 3: Uncertainty on medium term on oil prices
Uncertainty on medium term on oil prices 70 Barcalys Cap Broker Credit 65 CAIC Citigroup Citigroup - WTI 60 Commodity Standards Chartered CSFB Daiw a 55 Deutsche Bank Economist Intelligence Unit $/bbl 50 EIA High EIA Low EIA Reference 45 Goldman Sachs JP Morgan 40 Merill Lynch Global Energy (US ligh
Slide 4: New UK Import Infrastructure will help to ease supply/demand balance
New UK Import Infrastructure will help to ease supply/demand balance Tampen link to FLAGS: 4 BCM capacity by Oct-2007 Contract awarded Langeled: 27 BCM capacity by end-2006 Connection to Ormen Lange gas field end-2007 Onshore link built at Easington Anglesey Up to 20 BCM BBL: from 2008 16 BCM capaci
Slide 5: Q1 UK Supply Availability vs Demand
Q1 UK Supply Availability vs Dem and (storage excluded from supply and dem and - circa 2.5 BCM ) 60 50 40 BCM 30 20 10 0 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 /0 /0 /0 /0 /0 /1 /1 /1 /1 /1 /1 /1 /1 /1 /1 /2 /2 /2 /2 /2 /2 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Indigenous
Slide 6: Carbon market oversupply will reinforce need for tight Phase II allocations
Carbon market oversupply will reinforce need for tight Phase II allocations PHASE I Price History of phase I and phase II EUA trading • Recent price volatility due to oversupply of carbon 35 • Not certain that Phase I recovery will last 30 25 PHASE II 20 • Phase I is a learning phase €/t • Now bette
Slide 7: Long-Term Carbon market is a key driver of future choices
Long-Term Carbon market is a key driver of future choices • Need for a long-term carbon price signal: – Governments and EC recognise long-term investments in carbon reductions can only happen if long term carbon mechanism – UK Gov’t 60% reduction target by 2050 – Potential for multilateral signals o
Slide 8: Nuclear New Build?
Nuclear New Build? • New nuclear capacity could play an important role in the generation sector given its low carbon nature • There are some fundamental issues that need to be addressed for new build nuclear to be a viable option: – Long term solution for waste disposal – Funding of decommissioning
Slide 9: Power reserve margins moving to historic lows
Power reserve margins moving to historic lows Declining Reserve Margins: Potential Nuclear, England and Wales Coal and Oil Plant Closures 25.0% 25 Closures without Nuclear life extension 20.0% 20 Industry view on Plant closure (GW) required Margin 15.0% 15 No new build 10.0% 10 Plant Closures 5.0% 5
Slide 10: Will new coal replace the capacity shortfall?
Will new coal replace the capacity shortfall? • All significant new entry, since 1990 has been gas-fired CCGTs • New drive for renewable generation, but deployment will be limited to levels determined by Renewables Obligation • Sustained high, volatile gas prices have challenged dominance of gas • N
Slide 11: Gas-fired generation: UK NBP Spark Spreads
Gas-fired generation UK NBP Spark Spreads • Available and proven 16 technology Clean 14 Standard • Lower risk with respect to carbon 12 New Build Spark Spread £/MWh Mid Market price 10 • Clean spark spreads 8 widening in the 6 forward market • Combined with benefit 4 of free allowances in 2 Phase 2,
Slide 12: Carbon makes energy commodities increasingly interrelated over long-term
Carbon makes energy commodities increasingly interrelated over long-term, but with significant short-term dislocations likely +/- 10p/therm +/- $15/bbl Gas ~£7/MWh ~ 10p/therm Oil +/- €10/tonne Electricity ~£3/MWh Carbon +/- $10/tonne ~£2/MWh Coal Portfolio diversity protects against short-term disl
Slide 13: Conclusions
CONCLUSIONS • Significant oil price uncertainty and gas security concerns – but massive increases in UK import infrastructure suggests premium over oil/continent unsupported • Overallocation has created short-term carbon price uncertainty – but we fundamentally believe that carbon will have an incre
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