Centrica CCGT sale could attract infrastructure funds

Specialist infrastructure funds are the most likely buyers for the three gas-fired power stations Centrica has put on the market, according to industry experts.

Centrica announced last week it wants sell its loss-making Langage, Humber and Killingholme combined cycle gas plants (CCGTs) and free up capital to upgrade three smaller “peaking” plants. It lost £130 million in gas-fired power generation last year.

The energy company could continue to operate the plants, worth a total of 2.7GW, under different ownership or in a joint venture, chief executive Sam Laidlaw said on Monday.

In a video interview published alongside the AGM, Laidlaw explained: “The aim of this is basically to release capital to invest… in upgrading the older power stations, so that actually we will be adding additional power generation capacity to the grid.”

Centrica would then bid its older Peterborough, Barry and Brig plants into the capacity auctions scheduled for December.

The book value of the three plants is around £500 million and Centrica will be unlikely to get a higher price for them, according to analyst John Musk of RBC Capital Markets. “There is not going to be a long line of buyers.”

The deal could attract infrastructure investors such as Brookfield and Macquarie, he suggested. Australian-owned Macquarie has bought three UK CCGTs in the past two years.

Martin Brough, analyst at Deutsche Bank, said other utilities would be unlikely to buy generation plant with a competition investigation into the sector looming. “It would be quite provocative for any of the major suppliers to increase their vertical integration at the moment.”

The planned investment in older plant suggests confidence in getting a high price for capacity contracts, Brough added. “Investment in the peaking plant will only pay back if Centrica gets a reasonable price in the capacity market.”