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    UK Centrica Loses out on Covid, Markets


Output and prices were down but the sale of Direct Energy yielded a £600mn profit and it has shortened its time-frame for carbon neutrality.

by: William Powell

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UK Centrica Loses out on Covid, Markets

UK utility Centrica reported February 25 a 23% year-on-year drop in 2020 pre-tax earnings (Ebitda) to £1.635 ($2.28)bn while adjusted net income fell 31% to £447mn. It also announced a 2045 target date for net carbon neutrality, five years ahead of the government's and its own earlier target.

However, including £2.7bn received from the sale of US subsidiary Direct Energy, total statutory earnings attributable to shareholders were £41mn, compared with a loss of £1.023bn in 2019. 

Flush with cash, the company is planning to restructure and strengthen its balance sheet as it focuses on the UK and Ireland. Adding shareholder value through simplifying and modernising the group and improving the long-term quality, sustainability and level of earnings and cash flow are among its objectives.

CEO Chris O'Shea said the journey to transform "has only just started, as we seek to restore shareholder value by improving customer experience, retention and employee engagement, while maintaining a strong balance sheet."  

It took a pre-tax exceptional charge of £1.593bn, mainly in the first half of the year, as it lowered its commodity price forecasts. This included restructuring costs of £274mn and impairments of £1.319bn largely on Upstream, where  gas and power output fell. Nuclear impairments totalled £525mn.

Spirit Energy, its majority-owned joint venture, produced 44.9mn barrels of oil equivalent (boe), 2% down on 2019, with natural field decline and lower Morecambe Field up-time only partly offset by new production wells at Chiswick and Chestnut. But there was good production from the Cygnus field, and a first full year of production from the Oda field. Adjusted operating profit fell 7% to £84mn. This year's output is expected to be around 10% lower than in 2020. Centrica is still hoping to find a buyer for the stake.

Output from CSL’s Rough field of 3.9mn boe were 42% lower than in 2019, reflecting the natural decline of the late-life field. But it might take on a new lease of life as a storage site for CO2. Its adjusted profit was down 67% to £23mn. Nuclear output was also down in 2019, owing to outages at Hinkley Point B, Dungeness B and Hunterston B. After the £17mn loss, upstream's adjusted operating profit was £90mn, down 49% on 2019.

Centrica also announced the acceleration of its commitment to be net zero by 2045, five years ahead of its previous target and the UK deadline. The company is also announcing a new commitment to helping its customers be net zero by 2050.