Direct Energy Records "Significantly Higher" Profit

Direct Energy reported, "significantly higher operating profit," during the first half of 2015, Centrica said this morning.

While Direct faced much colder than normal weather in the first half of 2015, "a combination of 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," Centrica said

Direct Energy operating profit was £192 million for the first half of 2015, versus £41 million in the year-ago period. Even excluding the impact of the prior-year polar vortex related charges, underlying operating profit increased 81% (the year-ago underlying profit excluding polar vortex costs was £106 million).

Residential energy supply profit increased by 40% as unit margins returned to a more normalized level. "Market conditions remained competitive for Direct Energy Residential, although underlying margins were broadly maintained," Centrica said. Residential energy supply operating profit was £67 million for the first half of 2015, versus £48 million a year ago

Business energy supply profit also benefited from increased unit margins sold in prior periods and strong results from optimizing transportation and gas storage positions. "In addition, Direct Energy Business is now benefitting from a focus on the quality of our portfolio mix and higher unit margins on contracts we sold in prior periods, while the Hess Energy Marketing acquisition is continuing to perform ahead of its investment case," Centrica said

"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

Business energy supply profit was £143 million, versus a loss of £21 million a year ago

Centrica reported that an increased number of Direct Energy customers are now taking both energy and services from the company, "with 42% of residential customers acquired in the first half of the year also taking a services protection plan or smart thermostat, up from 10% in the same period in 2014."

Direct Energy Residential saw organic growth in Texas, although this was more than offset by the expected decline in Ontario, with the Energy Consumer Protection Act (ECPA) continuing to make retention of customers difficult, and competitive market pressures in the US North East. As a result, the number of Direct Energy Residential customer accounts declined by 68,000 in the first half of 2015.

Direct Energy's residential energy supply customer count data is below:

                       12/31/14       6/30/15
Texas                  758,000        764,000
Canada regulated       744,000        736,000
Canada deregulated     411,000        383,000
US North East        1,343,000      1,305,000
Total                3,256,000      3,188,000

Centrica said that 21% of Direct Energy Residential customers acquired in the first half of 2015 were acquired through digital channels