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Centrica Boosts Power Generation Portfolio

Centrica plcCentrica plc has boosted its power generation portfolio by increasing its interest from 60 to 100 per cent in Humber Power Limited, which owns the gas fired 1260MW South Humber Bank power station in North Lincolnshire. Centrica will make a cash payment of £46.5 million to Chanter Petroleum, a subsidiary of Total. Taking into account the monies in Humber Power Limited and Chanter Petroleum's lease financing obligations, this is equivalent to a price paid of £150 million or £294/kW.

With the remaining 510MW of Humber Power added to its existing generation fleet and the output from the fixed price element of its Spalding tolling agreement, Centrica will now be able to access approximately 4GW of electricity output from its portfolio. With British Gas as the UK's leading residential electricity supplier, the acquisition increases the amount of electricity Centrica can generate for its customers, equivalent to supplying 54 per cent of its peak residential customer demand from its portfolio.

Over the course of the year, based on expected load factors, Centrica's portfolio and its British Energy supply contract will be capable of delivering enough power, in volume terms, to supply the equivalent of its forecast residential customer demand in 2006.

The acquisition will allow Centrica to extract maximum benefit from owning 100 per cent of the highly efficient plant. Centrica already employs the staff which operate the station on behalf of Humber Power. For the financial year ending 31 December 2004, Humber Power Limited reported profit before tax of £55 million, with gross assets, including cash, of £532 million.

The deal is in line with Centrica's strategy of increasing the amount of gas and electricity it provides to British Gas customers from its own sources. Centrica already operates the largest fleet of combined cycle gas turbine power stations in the UK and has invited tenders for the 1010MW Langage power station project in Devon, where it expects to make a final construction decision in the first half of 2006. It also completed its first coal linked power purchase agreement earlier this year.

Sir Roy Gardner, Chief Executive of Centrica, said: "As the UK's leading household electricity supplier, this is an important deal that enables us to increase the amount of generation we can call on to supply our British Gas customers.

"The agreement is in line with our strategy to acquire high quality upstream assets, enabling us to generate a higher proportion of our own electricity requirements. This will be supported by further contracts and tolling arrangements as part of our risk management strategy."

South Humber Bank power station was commissioned in two phases between 1997 and 1999 and represents one of the UK's most modern and efficient gas fired plants. Centrica acquired its 60 per cent interest in 2001.

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Posted 21/09/05

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