British utility Centrica Plc (CNA.L) said Wednesday in an interim management statement that its business is performing in line with market expectations, as lower effective tax rate and strong performance from the UK downstream business are offsetting lower gas production volumes and profitability. Assuming normal weather patterns and based on current forward commodity prices, the company expects full year adjusted earnings to be in line with current consensus.
Adjusted results will exclude certain re-measurements, exceptional items and additional depreciation as a result of fair value uplifts under acquisition accounting.
The company said British Gas continues to perform well. Number of Residential Energy accounts on supply increased by around 200,000 to 15.7 million, and the number of Services accounts were up by around 100,000 to 8.3 million between the end of June and the end of October. Centrica noted that it remains on track to exceed its target of £100 million of cost savings, with the integration of British Gas progressing well.
In North America, low wholesale energy prices continue to impact the financial performance of Direct Energy's upstream gas production business and the Texas gas fired power stations.
Centrica said it acquired a controlling interest in Venture Production Plc at the end of August and now owns 100% of the issued share capital.
Centrica's full year gas production, including four months' production from the Venture assets, is expected to be down around 25% from the previous year, although oil and condensate production volumes will be around 35% higher. Combined with lower average selling prices, lower production will lead to profits from the upstream business for the full year being less than half of those recorded in 2008.
"A decision from the European Commission on the sale of our 51% stake in Belgian business SPE to EDF is due imminently," said the company. This will allow the sale to be completed simultaneously with the acquisition by Centrica of a 20% stake in British Energy.
In Power Generation, operating performance of Centrica's gas fired power stations, or CCGTs, and wind farms has been good, with reliability for the CCGT fleet running at 96% so far this year. Centrica said financial close on the recent sale of a 50% equity stake in three of its existing wind farms, Glens of Foudland, Lynn and Inner Dowsing is expected before the year end.
According to the company, Storage continues to perform well operationally, with the Rough storage facility at the highest ever recorded storage stock level going into the winter.
Centrica's net interest charge is forecast to be around £175 million, reflecting the increased debt taken on to fund the Venture and British Energy transactions. At the end of the third quarter, net debt stood at £2.5 billion, with net margin cash held by counterparties of £700 million.
The company is scheduled to report its full year 2009 results on February 25, 2010.
CNA is currently trading at 244.50 pence per share, down 0.20%, on the London Stock Exchange.
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