Energy Choice
                            

Matters

Direct Energy Cites "Challenging" Sales Environment in Texas, Northeast for Profit Decline; C&I Margins Up Significantly in Second Half of 2014

February 19, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

Direct Energy operating profit fell by 46% for fiscal 2014, due in part to "challenging" market conditions in Texas and the U.S. Northeast

Direct Energy operating profit for fiscal 2014 was £150 million, versus £276 million in 2013, reflecting "challenging" competitive market conditions, "leading to a narrowing of margins in both residential and business energy supply, in particular in our legacy B2B power business, and additional ancillary and other charges incurred as a result of the polar vortex, estimated at approximately $110 million (£65 million)."

Excluding the impact from the polar vortex, fiscal 2014 profit of £215 million was down 22% versus the year-ago.

Residential energy supply profit fell by 45% and business energy supply profit fell by 58%.

While lower margin sales made in prior years impacted the results at Direct Energy Business, Centrica reported that margins on new B2B sales "materially" increased in 2014 compared to 2013, reflecting a re-pricing of risk following the polar vortex

Average C&I sold unit margins in the second half of 2014 were 35% higher for gas and 50% higher for power compared to the second half of 2013, reflecting a re-pricing of risk following the polar vortex

Market conditions remained "highly competitive" for Direct Energy Residential, particularly in the U.S. Northeast. EnergyChoiceMatters.com reported yesterday that Direct Energy saw a decline of 150,000 residential energy supply customers across the U.S. Northeast and Texas from June 30, 2014 to December 31, 2014 (click here for story)

To address these challenges, Direct has focused on differentiating its offerings to the more valuable customer segments through the development of innovative products and bundled energy and services offerings, "which we started selling in the first half of the year and now have over 189,000 joint residential and services customers with sales averaging around 6,000 per week during the fourth quarter," Direct said.

Direct has also sold over 39,000 smart thermostats through its partnerships with Nest and Honeywell.

Direct also completed around 600 residential solar installations in 2014 following the acquisition of Astrum Solar in July 2014, 50% more than Astrum Solar installed over the same period in 2013.

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