Centrica Plc · LSE:CNA
Centrica — H1 2022 Earnings Presentation
55 slides from Centrica's earnings presentation, July 2022
Slide 1: Centrica plc Interim Results
Centrica plc Interim Results for the period ended 30 June 2022
Slide 2: Disclaimer
Disclaimer 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 condition, results, operations and busi
Slide 3: Chris O’Shea, Group Chief Executive
Chris O’Shea Group Chief Executive 3 Centrica plc Interim Results 2022
Slide 4: Good delivery and a positive outlook
Good delivery and a positive outlook Good operational performance – Investing in customer service and pricing Healthy financial performance – Reflecting our balanced portfolio Conclusion of Spirit Energy Norway disposal – Revised shareholder agreement and materially reduced decommissioning lia
Slide 5: Acting responsibly through the energy crisis
Acting responsibly through the energy crisis Customers Colleagues Communities Investing over £100m in 1,000 new engineer apprentice Repaid £27m furlough to UK customer service and pricing roles across 2021 and 2022 Government Taken on ~700k customers from 500 new UK based British Gas Add
Slide 6: The turnaround of Centrica
The turnaround of Centrica PHASE 1 PHASE 2 PHASE 3 Simplify and de-risk the Stabilise the business Deliver growth portfolio and strengthen and improve operational and position ourselves the balance sheet performance for net zero Portfolio simplification and Significant Group restructure Building on
Slide 7: The turnaround of Centrica
The turnaround of Centrica Phase 1 complete with the Company significantly de-risked Liabilities (£bn) Simplify and de-risk the 2 HY2019 FY2019 HY2020 FY2020 HY2021 FY2021 HY2022 portfolio and strengthen the balance sheet 0 Portfolio simplification and (2) de-risking materially complete (1.9) – Dire
Slide 8: The turnaround of Centrica
The turnaround of Centrica Phase 2 underway with focus moving increasingly to Phase 3 Simplify and de-risk the Stabilise the business Deliver growth portfolio and strengthen and improve operational and position ourselves the balance sheet performance for net zero Portfolio simplification and Signifi
Slide 9: Centrica today is focused on the UK & Ireland, participating selectively across the energy value chain
Centrica today is focused on the UK & Ireland, participating selectively across the energy value chain Focusing on delivery Positioned for growth Exploring optionality Nuclear Energy is Services & Bord Gáis is an CBS is focusing EM&T is an Centrica Storage Spirit has an We have a 20% focused on Solu
Slide 10: British Gas Energy and British Gas Services & Solutions are focused on delivery
British Gas Energy and British Gas Services & Solutions are focused on delivery Focusing on delivery… Positioned for growth Exploring optionality Nuclear Energy is Services & Bord Gáis is an CBS is focusing EM&T is an Centrica Storage Spirit has an We have a 20% focused on Solutions is established o
Slide 11: Gaining market share in Energy while investing in customer service
Gaining market share in Energy while investing in customer service British Gas Energy Investing in Customer Service Approaching 1m customers on new platform Energy Touchpoint NPS Building customer confidence 14 14 – Voluntary ring-fencing of deposits 12 9 Proposed regulation changes welcomed – Effic
Slide 12: Investment in Services is improving customer service
Investment in Services is improving customer service British Gas Services & Solutions Investing in Customer Service Improved customer service Engineer Recruitment – Lower reschedule rates 1,158 – Higher NPS Managing boiler supply chain issues 568 Recruiting engineers in a competitive 97 43 45 UK lab
Slide 13: Kate Ringrose, Chief Financial Officer
Kate Ringrose Chief Financial Officer 13 Centrica plc Interim Results 2022
Slide 14: Healthy financial performance from our balanced portfolio
Healthy financial performance from our balanced portfolio Period ended 30 June (£m) 2021 2022 From continuing operations: Adjusted revenue 8,154 14,302 Adjusted gross margin 1,154 2,263 Adjusted operating costs (856) (970) Adjusted operating profit 1 262 1,342 Net finance cost (96) (78) Group effect
Slide 15: Growth in adjusted operating profit
Growth in adjusted operating profit Operating profit Period ended 30 June (£m) 2021 2022 Retail 251 138 British Gas Services & Solutions 60 7 British Gas Energy 172 98 Bord Gáis Energy 19 33 Optimisation (64) 298 Centrica Business Solutions (24) 20 Energy Marketing & Trading (40) 278 Infrastructure
Slide 16: British Gas Services & Solutions adjusted operating profit
British Gas Services & Solutions adjusted operating profit Adjusted operating profit bridge ~(25) 50 ~(20) 60 ~(50) ~(10) 7 H1 2021 2021 2022 Customer Investment in Heating H1 2022 Covid-19 Covid-19 numbers / service and installs impact overhang mix pricing The above figures are before exceptional i
Slide 17: Further robust cash flow generation and continued balance sheet strength
Further robust cash flow generation and continued balance sheet strength Period ended 30 June (£m) 2021 2022 Period ended 30 June (£m) 2021 2022 EBITDA from continuing operations 682 1,660 Free cash flow from continuing operations 524 643 Tax 41 (367) Interest (109) (117) Dividends received 1 - Pens
Slide 18: Strong balance sheet and a lower and de-risked pension deficit
Strong balance sheet and a lower and de-risked pension deficit Net cash of £316m at June 2022 Pension hedging levels 100% Strong investment grade credit ratings 95% IAS19 pension surplus of £747m 80% 85% 75% Agreement in principle with trustees on technical provisions 60% deficit as at trien
Slide 19: H2 focus on further performance improvements
H2 focus on further performance improvements E&P and Nuclear hedging positions Healthy performance in H1 H2 2022 2023 Continued investment in operational improvement Average Average Volume hedged Volume hedged Uncertain impact on customer demand from hedged price hedged price economic environm
Slide 20: Balance sheet strength enables growth and shareholder returns
Balance sheet strength enables growth and shareholder returns Investment in Value accretive Efficient use Dividend organic growth investments of capital • Progressive policy with • Opex, capex and working • Focus on energy transition • Including returning EPS cover moving to ~2x capital investment i
Slide 21: Chris O’Shea, Group Chief Executive
Chris O’Shea Group Chief Executive 21 Centrica plc Interim Results 2022
Slide 22: Centrica is evolving into a new type of integrated energy company
Centrica is evolving into a new type of integrated energy company… Unlocking synergies across retail, optimisation, and infrastructure We are focused and flexible due to the dynamic nature of the environment we operate in We will only invest where the risk is compensated by the available returns We
Slide 23: …with the experience, data and expertise to know where to invest…
…with the experience, data and expertise to know where to invest… Centrica brings together hard to replicate capability across the entire value chain 1 Leading brands and positions 2 Capability & knowledge 3 Financial strength & flexibility We have trusted brands We have advanced risk We can be agil
Slide 24: …and growth opportunities across the energy value chain
…and growth opportunities across the energy value chain Focusing on delivery… Positioned for growth… Exploring optionality… Nuclear Energy is Services & Bord Gáis is an CBS is focusing EM&T is an Centrica Storage Spirit has an We have a 20% focused on Solutions is established on its strengths establ
Slide 25: Retail
Retail 25 Centrica plc Interim Results 2022
Slide 26: British Gas has the scale and expertise to help customers transition to net zero
British Gas has the scale and expertise to help customers transition to net zero Largest energy supplier and services provider in the UK UK total heating installs (%, by technology) 100% – 7.5 million energy customers – 3.3 million services customers 80% Largest energy services field force in th
Slide 27: Optimisation
Optimisation Energy Trading 27 Centrica plc Interim Results 2022
Slide 28: We have strong optimisation capabilities and positions…
We have strong optimisation capabilities and positions… Extensive expertise in managing commodity exposure and risk Power trading and optimisation capability a differentiator for Centrica – Proprietary optimisation software – Extensive data built up on grid behaviour ~15GW of third party asset
Slide 29: …with attractive positions and a deep understanding of the LNG market…
…with attractive positions and a deep understanding of the LNG market… LNG cargoes traded each year 150 GasLog vessel 125 charters Isle of Grain Sabine 100 Pass Qatar 75 Mozambique joint procurement 50 25 0 2018 2019 2020 2021 29 Centrica plc Interim Results 2022
Slide 30: …which give us unrivalled capabilities in power and gas optimisation
…which give us unrivalled capabilities in power and gas optimisation GasLog vessel charters Isle of Grain Sabine Pass Qatar Mozambique joint procurement Adding value through optimisation Construction and maintenance capabilities in CBS Deploying Centrica capital into flexible assets Helping
Slide 31: Infrastructure
Infrastructure Nuclear 31 Centrica plc Interim Results 2022
Slide 32: The UK requires major power investment which will create significant intermittency
The UK requires major power investment which will create significant intermittency….. UK electricity generation & hydrogen Intermittent renewables as a proportion of production investment (£bn, real 2021) UK electricity generation3 120 100+ 70% 100 60% Other 80 75 50% Nuclear 60 Hydrogen 40% Gas 30%
Slide 33: …and we have intimate knowledge of how our power systems will react to this…
…and we have intimate knowledge of how our power systems will react to this… Wind generated electricity per capita (kWh, 2021)1 Top 20 Countries Our deep understanding of these markets is well established 3,000 2,750 • Active in 12 of the top 20 countries 2,500 for wind power 2,250 2,000 • Many year
Slide 34: …giving us a significant opportunity…and we have the data to target our participation…
…giving us a significant opportunity…and we have the data to target our participation… Our robust framework Opportunities considers • Size and growth of market • Batteries • Investment returns • Gas peaking generation • Risk profile • Solar • Competitive advantage • Hydrogen • Portfolio benefits • C
Slide 35: …building on an already strong base of flexible power generation assets…
…building on an already strong base of flexible power generation assets… We already own operational flexible generation assets… 1 Battery 2 Gas peaking plant 3 CCGT 50 MW in Roosecote, UK 50 MW in Brigg, UK 445MW Whitegate plant 1 in Cork, Ireland 2 …and our experience managing third party assets me
Slide 36: …with investment choices aligned to existing knowledge and capabilities
…with investment choices aligned to existing knowledge and capabilities Including brownfield sites, we have the potential to invest in >1GW of We are working on a range of projects across a range of technologies… new capacity over the next 5 years 1 Solar farm 2 Battery 3 Gas peaking plant 18 MW in
Slide 37: Existing E&P and Nuclear positions are performing well and generating cash to invest…
Existing E&P and Nuclear positions are performing well and generating cash to invest… Nuclear Investment CLOSURE DATES Remaining reserves to be Remaining reserves to be produced this decade, with produced over next two years 2024: Heysham 1 & Hartlepool no new exploration 2028: Heysham 2 & Torness 2
Slide 38: …in opportunities such as the return of Rough to storage…
…in opportunities such as the return of Rough to storage… Development Concept • Phased return to storage – 30bcf 2022/3; 60bcf 2023/4 – 200bcf ultimate potential • Initially storing methane – Subsequently storing hydrogen Easington • ~£2bn investment over the long term Rough – ~£150m in 2023 • No go
Slide 39: …and the development of Morecambe Bay and Barrow
…and the development of Morecambe Bay and Barrow Development Concept • Suitable for CO2 storage – First CCS licensing round • Exploring further options including: – Wider industrial hub – Hydrogen – Power generation Morecambe Bay Barrow • Adjacent to Roosecote battery & Roosecote • Could extend life
Slide 40: A simpler, de-risked, more efficient company with attractive net zero opportunities
A simpler, de-risked, more efficient company with attractive net zero opportunities Significantly simplified and de-risked Centrica – A new type of integrated energy company engaged in Retail, Optimisation and Infrastructure – Capability and financial strength to invest in attractive opportunities
Slide 41: Appendix
Appendix 41 Centrica plc Interim Results 2022
Slide 42: Remeasurements and exceptional items
Remeasurements and exceptional items EXCEPTIONAL ITEMS AND STATUTORY PROFIT Six months ended 30 June (£m) 2022 Adjusted operating profit 1,342 Re-measurements - Energy supply 2,731 Onerous energy supply contract provision (1,869) Re-measurements - Upstream and EM&T (incl. share of associates) (3,398
Slide 43: Revenue
Revenue Six months ended 30 June (£m) 2021 2022 Continuing operations British Gas Services & Solutions 722 744 British Gas Energy 3,840 5,090 Centrica Business Solutions 871 1,295 Bord Gáis Energy 484 784 Energy Marketing & Trading 1,991 6,355 Upstream 838 1,695 Group revenue included in business pe
Slide 44: Adjusted gross margin
Adjusted gross margin Six months ended 30 June (£m) 2021 2022 Continuing operations British Gas Services & Solutions 266 255 British Gas Energy 530 551 Centrica Business Solutions 75 113 Bord Gáis Energy 69 97 Energy Marketing & Trading 26 337 Upstream 188 910 Group adjusted gross margin 1,154 2,263
Slide 45: EBITDA
EBITDA Six months ended 30 June (£m) 2021 2022 Continuing operations British Gas Services & Solutions 82 29 British Gas Energy 220 139 Centrica Business Solutions 1 39 Bord Gáis Energy 27 44 Energy Marketing & Trading (14) 298 Upstream 336 1,084 Other 30 27 Total Group EBITDA 682 1,660 45 Centrica p
Slide 46: Adjusted operating profit
Adjusted operating profit Six months ended 30 June (£m) 2021 2022 Continuing operations British Gas Services & Solutions 60 7 British Gas Energy 172 98 Residential energy supply 158 55 Business energy supply 13 43 Centrica Business Solutions (24) 20 Energy supply 3 33 Solutions (27) (13) Bord Gáis E
Slide 47: Net investment
Net investment Six months ended 30 June (£m) 2021 2022 Continuing operations British Gas Services & Solutions (16) (16) British Gas Energy (13) (6) Centrica Business Solutions (15) (25) Bord Gáis Energy (13) (17) Energy Marketing & Trading (3) (3) Upstream (122) (155) Other 1 (5) (7) Net investment
Slide 48: Free cash flow
Free cash flow Six months ended 30 June (£m) 2021 2022 Continuing operations British Gas Services & Solutions 46 (54) British Gas Energy (58) (507) Centrica Business Solutions 72 124 Bord Gáis Energy (7) 66 Energy Marketing & Trading 121 218 Upstream 255 1,151 Other 54 12 Segmental free cash flow 48
Slide 49: Upstream – Exploration & Production
Upstream – Exploration & Production E&P Upstream production Six months ended 30 June (£m) 2021 2022 (mmboe) Gas and liquids realisations 575 1,152 Adjusted operating profit 113 620 2021 17.1 1.4 Free cash flow 1 266 942 2022 15.6 2.4 Spirit Energy CSL Achieved gas sales price 2022 Achieved liquids s
Slide 50: Spirit Energy – P&L and KPIs
Spirit Energy – P&L and KPIs 2021 vs 2022 2022 KPIs 2021 2022 Retained Disposed Total Production Gas (mmboe) 10.4 11.4 8.6 2.8 11.4 Production Oil (mmboe) 6.7 4.2 0.7 3.5 4.2 Achieved gas price (p/th) 44 104 75 191 104 Achieved liquids price (£/boe) 39 60 44 64 60 Gas and liquids realisations (£m) 5
Slide 51: Spirit Energy disposal businesses cash flow phasing
Spirit Energy disposal businesses cash flow phasing H1 H2-2022 Disposal cash flows £m 2021 2022 / 2023 Total Operating profit 647 558 1,205 Hedges (91) (73) (164) Add: non-cash costs 247 247 EBITDA 803 485 1,288 Cash tax (53) (286) (12) (351) Capex (202) (119) (321) Other cash flows 23 (10) (105) (9
Slide 52: Upstream – Nuclear
Upstream – Nuclear NUCLEAR Six months ended 30 June (£m) 2021 2022 Adjusted operating profit (£m) (38) 286 Nuclear power generated (GWh) 4,171 4,648 Achieved power price (£/MWh) 46.5 110.4 Achieved power price Power generated (£/MWh) Total (GWh) 2021 46.5 2021 4,171 2022 110.4 2022 4,648 The above a
Slide 53: Market commodity prices
Market commodity prices Average Brent oil prices Average UK NBP gas prices Average UK baseload ($/bbl) (p/th) power prices (£/MWh) $42 $71 $105 $90 $84 25p 114p 313p 365p 229p £37 £129 £316 £342 £214 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 2020 and 2021 prices are
Slide 54: UK weather chart vs seasonal norms
UK weather chart vs seasonal norms 25 20 15 10 5 0 Jan Feb Mar Apr May Jun 54 Centrica plc Interim Results 2022
Slide 55: CDP and TCFD
CDP and TCFD CDP is a global non-profit that drives companies and governments to reduce their greenhouse gas emissions, safeguard water resources and protect forests. It was voted the number one climate research provider by investors. CDP’s annual environmental disclosure and scoring process is