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Direct Energy Sees Significantly Higher Profits

February 18, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Centrica reported "significant improvement" in Direct Energy's performance for fiscal 2015 with operating profit more than doubling compared to 2014.

Growth in margins in Direct Energy Business and increased product bundling and differentiated offers in Direct Energy Residential drove the improvement, which saw 2015 operating profit of £328 million, versus £150 million a year ago

"Much colder than normal weather at the start of 2015 benefited the business, as a more stable physical infrastructure, market redesign and management action meant we did not see a repeat of the additional network system charges resulting from the Polar Vortex in 2014, although this benefit was partially offset by un-seasonally warm weather in the fourth quarter of 2015. In addition, our C&I business benefitted from higher unit margins on contracts sold in prior years and our residential energy business benefitted from acquiring higher consuming customers. However, the services business reported an operating loss, primarily due to ongoing investments in residential solar," Centrica said

Direct Energy Residential Supply operating profit was £111 million for the year 2015, up from £90 million a year ago

Direct Energy Business operating profit was £251 million, up from £32 million a year ago

"Direct Energy Business reported a significant increase in operating profit in 2015, even after taking into account the absence of the one-off Polar Vortex costs in 2014. This reflects higher margins on contracts sold from 2014 onwards, lower amortisation costs related to the Hess Energy Marketing acquisition and a more balanced business between power and gas. In addition, natural gas pipeline and storage capacity contracts were utilised to deliver strong optimisation performance during periods of cold weather in the first quarter of the year," Centrica said

Direct Energy maintained its position as the largest C&I gas supplier and the second largest C&I power supplier in the United States. Unit margins on new C&I gas and power sales have remained broadly at the levels achieved in 2014, with increased margins on power sales and lower margins on gas sales, Centrica said

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