Centrica seeks buyers for three gas-fired power stations

Centrica is putting three large gas-fired power stations up for sale amid declining profits, it revealed in interim results on Thursday.

The energy company is seeking buyers for Langage, Humber and Killingholme plants, which have a combined capacity of 2.7GW and “book value” of £500 million. The stations have been running at low load factors in recent years, in what has been a tough market for gas generation.

Centrica intends to free up capital to upgrade its smaller Peterborough, Barry and Brig plants, which provide flexible generation to help balance the grid.

The strategic move away from large scale power generation was announced as Centrica downgraded its earnings forecast for the year to 22 to 23p a share.

British Gas, the energy giant’s retail business, saw a 10 per cent drop in income from households this winter on the back of mild weather. Residential gas consumption in the first four months of the year was 25 per cent lower than the same period in 2013.

The supplier does not expect to raise or cut household energy prices this year, “reflecting the competitive market and wholesale price environment,” it said.

The post-tax profit margin for British Gas Residential is expected to shrink to 4 per cent, below its long term guidance of 4.5 to 5 per cent.  

The company is continuing to invest in smart metering and large-scale agreements to secure wholesale gas supplies, including a stronger connection to Qatar Petroleum International. Centrica sold 40 per cent of its gas assets in North America to joint venture with QPI for around $200 million.

Sam Laidlaw, chief executive of Centrica, said: “The combination of mild weather, and our expectation that we will not change energy prices this year, means the average British Gas household energy bill is expected to be lower in 2014 than in 2013.

“Investment in security of supply remains a key priority. We continue to invest in new sources of gas for the UK and we have commitments totalling around £60 billion to help secure energy for our customers. We have further strengthened our relationship with Qatar Petroleum International through today’s transaction, and look forward to continuing to work with them as we consider investment opportunities in gas and power on both sides of the Atlantic. We are also refocusing our UK power generation investment towards more flexible plant, with a view to bidding into the capacity market.

“The decisions and actions that management is taking across the Group will leave the business well-placed for the long term. While earnings are anticipated to fall in 2014, we expect an improvement in 2015, assuming more normal weather conditions and reflecting the prospects for underlying growth in Direct Energy, UK gas storage, British Gas Services and British Gas Business.”