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Direct Energy Parent Reports $110 Million Hit from Polar Vortex
Centrica, in an interim management update, confirmed that extreme weather conditions resulted in significant one-off additional costs at its North American business in the first quarter.
"[W]hile we were able to hedge most of our commodity price exposure during the exceptionally cold weather seen across much of North America earlier in the year, we incurred materially higher ancillary and other charges across the first quarter," Centrica said of its North American energy supply business
"Taking this into account, the total impact on operating profit from the Polar Vortex is now estimated at approximately $110 million," Centrica said.
"Although there are early indications that the extreme conditions have led to positive re-pricing of risk, which should improve margins over time, we expect 2014 full year operating profit for Direct Energy to be lower than in 2013. For 2015, we expect to deliver good underlying profit growth in the North American downstream business, in addition to the benefit of a return to normal weather conditions," Centrica said.
In the North American C&I energy supply business, Centrica said that the Hess Energy Marketing business is, "performing ahead of our investment case," with the integration proceeding well.
"However, as expected, margin pressures on sales made during the second half of 2013 in the legacy power business have continued to impact earnings in the current year," Centrica said.
Centrica also reported that its North American residential energy and services customer counts are both broadly unchanged since the start of the year.
"In North America, we have made good operational progress in a challenging market environment, although the business continues to face competitive market conditions. We remain on track to deliver $100 million of cost savings across Direct Energy," Centrica said.
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May 8, 2014
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Reporting by Paul Ring • ring@energychoicematters.com
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