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Centrica Strategic Review Says Direct Energy "Important" Part of Group, Sees Opportunities To Increase Market Share; Group Emphasizing Its Customer-Facing Businesses

July 29, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Centrica released results of a strategic review that it had been conducting across its businesses, and said that its, "North America customer-facing businesses are an important part of the Group."

"The North American business is a strong and valuable part of the portfolio and the reason is because our customers’ needs on either side of the Atlantic are actually very similar and so by developing propositions on both sides of the Atlantic will benefit North America as it will our business in the UK," Badar Khan said.

"Given our market leading position, but in highly fragmented markets, we see opportunities to increase market share in both energy and services in the region," Centrica said.

"In this strategic review we are clearly focusing on developing and pulling together resources to focus on our offers to our customers as well as driving efficiency in the organisation both of which will allow to Direct Energy to accelerate organic growth in North America," Khan added

"In residential energy supply, we are focused on developing a more sustainable business model through the development of improved bundled propositions, greater focus on customer mix and achieving lower churn. In business energy supply, the acquisition of Hess Energy Marketing in 2013 has provided us with a market leading position and a strong base from which to deliver sustainable returns over the long term. In services, we are the US market leader, albeit with a small market share in a very fragmented market, and believe there is strong potential for growth from the wide range of products we are able to offer. We expect to invest an additional £250 million of operating costs into growing services over the next five years," Centrica said

As a result of the strategic review, Centrica said that its, "strength lies in being a customer-facing business. We are an energy and services company." Focus will be on energy supply, energy services, distributed energy, and connected homes, with a de-emphasis on upstream activities

"We believe that connected homes’ offerings will become increasingly important, with propositions linked to our core energy and services products in the UK, the Republic of Ireland and North America. These propositions will help to underpin better retention levels as well as provide growth opportunities in their own right ... To drive growth, we are investing £500 million in operating costs and capital expenditure in connected homes’ activity over the next five years," Centrica said

"Distributed energy, including energy efficiency, flexible generation and new technologies, alongside energy management and optimisation, is an activity which we believe could provide significant growth potential for Centrica in the long-term. This activity will be targeted at commercial and industrial (C&I) customers in all the geographies in which we operate, with customers seeking ways to drive energy efficiency. Although building up our capability in this area will require some additional investment, many of the skills associated with distributed energy already reside in the Group, both in British Gas and Direct Energy, and in the Centrica Energy power business. We have a good starting position and this is an attractive opportunity for Centrica. We would expect to invest up to £700 million of additional operating and capital resources to this area over the next five years," Centrica said.

"The emphasis on growth will be in our customer-facing businesses," resulting in reduced scale and capital intensity for its E&P and power generation sectors, Centrica said

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