Final Results
Centrica plc
CENTRICA PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014
Financial summary
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Year ended 31 December
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2014
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2013
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Change
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Revenue
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£29.4bn
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£26.6bn
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11%
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Adjusted operating profit
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£1,746m
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£2,695m
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(35%)
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Adjusted effective tax rate
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30%
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43%
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(13ppt)
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Adjusted earnings
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£962m
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£1,370m
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(30%)
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Adjusted basic earnings per share (EPS)
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19.2p
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26.6p
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(28%)
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Full year dividend per share
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13.5p
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17.0p
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(21%)
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Group net debt (i)
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£5,196m
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£4,942m
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5%
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Group net investment
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£829m
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£2,565m
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(68%)
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Statutory operating (loss)/profit
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(£1,137m)
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£1,892m
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nm
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Statutory (loss)/profit for the year attributable to shareholders
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(£1,012m)
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£950m
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nm
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Net exceptional items after tax included in statutory (loss)/profit
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(£1,161m)
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(£667m)
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nm
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Basic earnings per share
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(20.2p)
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18.4p
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nm
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(i) The Group’s definition of net debt has been restated to include
cash collateral posted or received, to support wholesale energy
procurement.
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Unless otherwise stated, all references to operating profit or loss,
taxation, earnings and earnings per share throughout the
announcement are adjusted figures, reconciled to their statutory
equivalents in the Group Financial Review on pages 8 to 11.
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2014 Group results
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Group adjusted EPS down 28%, reflecting challenging trading
conditions, including extreme weather patterns and falling oil and gas
prices. Post-tax impairments of £1,385 million on E&P and power assets
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British Gas operating profit down, primarily
reflecting lower consumption in record warm year, with average
dual fuel profit per household falling to £42. Average actual
household energy bill around £100 lower than in 2013
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Direct Energy operating profit down due to impact of
polar vortex in Q1 and narrowing of energy supply margins in a
competitive environment
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Centrica Energy gas operating profit before tax
down, reflecting lower market prices. Post-tax earnings largely
protected by hedging, tax allowances on previous investments, and
strong midstream performance. Power profit impacted by unplanned
nuclear outages
2015 environment and response
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Since the November IMS, our forecast 2015 adjusted EPS has been
negatively impacted by about 2.5p, primarily due to changes in the
external environment. 2015 adjusted earnings are expected to be down
compared to 2014
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Taking action in a low commodity price environment
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40% reduction in E&P capex to £650 million by 2016
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Continued focus on competitiveness, service and efficiency
downstream
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Group-wide performance improvement plan, with a strong cost focus
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Dividend rebased by 30%, commencing with the 2014 final dividend.
2014 full year dividend of 13.5p per share
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Decision to retain UK CCGTs, with bids received significantly below
our internal valuation
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Strategic review launched, to be concluded by Interim Results in July
2015 covering; (i) outlook and sources of growth; (ii) portfolio mix
and capital intensity; (iii) operating capability and efficiency; (iv)
Group financial framework
Iain Conn, Centrica Chief Executive
“2014 was a very difficult year for Centrica and the recent fall in
oil and gas prices creates further challenge. We are cutting
investment and costs in response. However, it is with regret
that, along with reducing capital expenditure and driving efficiency
beyond planned levels, we have taken the difficult decision to rebase
the dividend by 30%, commencing with the final distribution for 2014.
In addition, given the changed external environment we are reviewing
the longer term strategy, and will conclude this by the Interim Results
in July. Despite the obvious current challenges, I am confident
in the quality of Centrica’s team and the platform which has been
established, and I believe the Group is well-placed to take advantage of
the longer term trends in the global energy markets. Our
priorities remain to serve our customers competitively and with
integrity, to develop new offers and services, to provide secure and
reliable energy supplies and to deliver long term value for
shareholders.”
DIVISIONAL OPERATING PROFIT
Adjusted operating profit
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Year ended 31 December
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2014
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2013
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Change
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British Gas
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Residential energy supply
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£439m
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£571m
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(23%)
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Business energy supply and services
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£114m
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£141m
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(19%)
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Residential services
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£270m
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£318m
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(15%)
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Total British Gas
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£823m
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£1,030m
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(20%)
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Direct Energy
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Residential energy supply
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£90m
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£163m
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(45%)
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Business energy supply
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£32m
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£77m
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(58%)
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Residential and business services
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£28m
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£36m
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(22%)
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Total Direct Energy
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£150m
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£276m
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(46%)
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Bord Gáis Energy
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£7m
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-
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nm
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Centrica Energy
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Gas
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£606m
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£1,155m
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(48%)
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Power
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£131m
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£171m
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(23%)
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Gas-fired
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(£120m)
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(£133m)
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nm
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Renewables (operating assets)
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£27m
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£36m
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(25%)
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Renewables (one-off write-offs, profit/loss on disposal)
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(£17m)
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(£11m)
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nm
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Nuclear
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£210m
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£250m
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(16%)
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Midstream
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£31m
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£29m
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7%
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Total Centrica Energy
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£737m
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£1,326m
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(44%)
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Gas – adjusted operating profit after tax
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£302m
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£325m
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(7%)
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Centrica Storage
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£29m
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£63m
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(54%)
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Total adjusted operating profit
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£1,746m
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£2,695m
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(35%)
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KEY PERFORMANCE INDICATORS
Key Operational Performance Indicators
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Year ended 31 December
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2014
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2013
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Change
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Group
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Lost time injury frequency rate (per 100,000 hours worked)
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0.14
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0.11
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27%
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British Gas
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Residential energy customer accounts (year end, ’000) (i)
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14,778
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15,146
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(2%)
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Residential services product holding (year end, ’000)
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7,970
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8,227
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(3%)
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Business energy supply points (year end, ’000) (ii)
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854
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916
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(7%)
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Total gas volumes (mmth)
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4,085
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5,126
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(20%)
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Total electricity volumes (TWh)
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39.1
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42.4
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(8%)
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Direct Energy
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Residential energy customer accounts (year end, ’000)
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3,256
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3,360
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(3%)
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Residential services product holding (year end, ’000) (iii)
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897
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2,608
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(66%)
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Business energy supply gas volumes (mmth)
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5,923
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1,839
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222%
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Business energy supply electricity volumes (TWh)
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96.9
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63.9
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52%
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Total gas volumes (mmth)
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8,163
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3,883
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110%
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Total electricity volumes (TWh)
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116.3
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83.4
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39%
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Bord Gáis Energy
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Residential energy customer accounts (year end, ’000)
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608
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–
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nm
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Total gas volumes (mmth)
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106
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–
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nm
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Total electricity volumes (TWh)
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1.4
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–
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nm
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Total power generated (TWh)
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0.9
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–
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nm
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Centrica Energy
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Gas production (mmth) (iv)
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3,772
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3,557
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6%
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Liquids production (mmboe) (iv)
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17.3
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18.7
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(7%)
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Total gas and liquids production (mmth) (iv)
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4,822
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4,690
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3%
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Total gas and liquids production (mmboe) (iv)
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79.5
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77.3
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3%
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Upstream proven and probable reserves (mmboe) (v)
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585
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711
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(18%)
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Total UK power generated (TWh)
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22.1
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21.7
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2%
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(i) British Gas 2013 residential energy customer accounts have been
restated to exclude 110,000 accounts subsequently reclassified as
dormant
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(ii) British Gas 2013 business energy supply points have been
restated to include 4,000 supply points to align to industry
reporting changes
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(iii) Direct Energy 2014 residential services product holding
reflects the disposal of the Ontario home services business, which
had 1.9 million product holdings at the time of disposal
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(iv) Includes 100% share of Canadian assets owned in partnership
with QPI
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(v) Centrica’s share of reserves, including a 60% share of Canadian
assets owned in partnership with QPI, and excluding Rough cushion
gas of 30mmboe. Includes the impact of QPI’s investment in 40% of
our wholly-owned Canadian gas and liquids assets in the year
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Interviews with Iain Conn (Chief Executive), Jeff Bell (Interim Chief
Financial Officer), Mark Hanafin (Managing Director, Centrica Energy)
and Ian Peters (Interim Managing Director, British Gas) are available on www.centrica.com
CHIEF EXECUTIVE’S STATEMENT
Overview
Centrica occupies a vital role in the energy affairs of the UK in
particular, and also in the US and the Republic of Ireland. We are a
customer facing business, and our principal role is to deliver
excellence in the supply and reliability of energy and services to those
customers. Although we are facing some significant challenges at
present, it is clear to me that Centrica has built a solid set of
positions, from which we will be able to continue to play an important
role in the developing energy markets on both sides of the Atlantic.
The 2014 environment was very difficult for Centrica, with record mild
weather in the UK, extreme cold weather in North America early in the
year and a highly competitive market environment on both sides of the
Atlantic. Upstream, the exploration and production (E&P) business faced
falling oil and gas prices, while Centrica Storage was impacted by lower
seasonal gas price spreads. Political uncertainty and the launch of the
Competition and Markets Authority investigation provided further
challenges in the UK.
Operationally, in British Gas these conditions translated into falls in
gas and electricity sales volumes of 20% and 8% respectively, and a 2%
fall in residential energy customer accounts, mostly in the first half
of the year. Direct Energy also saw a 3% fall in residential energy
customer accounts. In Centrica Energy, oil and gas production volumes of
79.5mmboe were up 3% compared to 2013, but realisations fell as a
consequence of lower oil and gas price levels. The power business
experienced unplanned outages on the nuclear fleet.
As a result, adjusted earnings per share fell by 28% compared to 2013.
We also recognised pre-tax exceptional items of £1,597 million, £1,161
million post-tax, which included substantial impairments on E&P and
power assets totalling £1,385 million post-tax, primarily as a result of
the current low commodity price environment. These were partially offset
by profits on disposal relating to the sale of the Texas gas-fired power
stations and the Ontario home services business totalling £224 million.
The Group continues to face a number of challenges as we enter 2015,
particularly the significant further reductions in wholesale oil and gas
prices since the middle of December and continuing low spark spreads.
While we plan for normal weather patterns in 2015, and relative to 2014
should see an associated improvement in earnings and cash flows in the
customer-facing businesses, the current forward price curves for oil and
gas are likely to more than offset this. It is not clear that the
forward price curves for oil and gas will improve in the near term, and
we therefore need to plan on the basis that lower wholesale prices will
persist for all of 2015 and potentially through 2016 and into 2017.
During this time we expect the E&P supply chain costs to respond to the
lower price environment. Until that time, the Group’s cash flows from
Centrica Energy will be materially impacted.
Centrica balances the significant energy commitments of our downstream
obligations to customers with two sources of supply: upstream assets,
whose cash flows have been materially impacted by current prices; and
our procurement, hedging and optimisation activities which require
strong investment grade credit ratings to ensure our supply of energy is
delivered efficiently.
We are taking immediate actions to improve cash flows, focusing on
reducing E&P capital expenditure relative to 2014 levels by around £250
million in 2015 and a further £150 million in 2016, and reducing cash
production costs. In addition, we have initiated Group-wide performance
improvement efforts, including a strong cost focus, and we will also pay
close attention to working capital management.
Despite these actions, with 2014 adjusted earnings per share of 19.2p,
and with 2015 adjusted earnings per share having been negatively
impacted by around 2.5p since the Interim Management Statement in
November and therefore expected to be down compared to 2014, the Group
has taken the very difficult decision to re-base the dividend,
commencing with the final payment for 2014. This reduction is driven by
three things:
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The need to operate with strong investment grade credit ratings
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The desire to balance sources and uses of cash in 2015
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Maintaining a healthy payout ratio
Going forward, the future level of dividend payments will be determined
by the health and growth of the Group’s operating cash flow after tax.
To underpin future growth in cash flows, we have launched a strategic
review to be concluded by the time of the Interim Results in July 2015.
The review will focus on four key areas:
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Outlook and sources of growth
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Portfolio mix and capital intensity
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Operating capability and efficiency
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Group financial framework
Despite the challenging current environment, my initial assessment of
the Group is that Centrica has an excellent and committed team, and has
established a strong platform from which to play an important part in
the evolution of energy supply and services in the UK, Republic of
Ireland and North America.
2014 business performance summary
The top priorities for the Group are safety, compliance and market
conduct. The lost time injury frequency rate (LTIFR) per 100,000 hours
worked was 0.14, up compared to the 2013 level of 0.11. No significant
process safety incidents were recorded during the year.
Downstream in the UK, British Gas faced continued political and
regulatory scrutiny, competitive market conditions in each division and
lower consumption due to the mild weather. Account numbers declined in
both energy and services. In residential services we also experienced a
shift in mix towards lower priced products, although we increased our
sales of services products in the fourth quarter of the year and
returned to account growth.
Overall we delivered improved service levels in British Gas, and we have
now completed the implementation of a new combined residential energy
and services customer relationship management (CRM) platform. We also
completed the implementation of a new billing system in British Gas
Business, although we have encountered some transitional issues
following the migration of accounts, which we are now resolving. We
continue to lead the industry in smart metering, innovation and
connected homes, having installed around 1.3 million residential smart
meters and we have now sold over 170,000 smart thermostats in the UK.
In North America, the business was impacted by extreme cold weather
caused by the polar vortex in early 2014, resulting in additional
network system charges. In addition, lower margin sales made in prior
years impacted Direct Energy Business. However margins on new B2B sales
materially increased in 2014 compared to 2013, reflecting a re-pricing
of risk following the polar vortex, and this will benefit the business
in 2015.
Market conditions remained highly competitive for Direct Energy
Residential, particularly in the US North. Against this backdrop, we are
differentiating our offering through innovative propositions that are
attractive to the most valuable customer segments. During the year we
delivered increased sales of protection plans, combined energy and
services products and smart thermostats, while also adding residential
solar capability through the acquisition of Astrum Solar. In Direct
Energy Services, our focus is now on delivering growth in the US and
Alberta following the disposal of our Ontario home services business in
October 2014.
At the end of June 2014, Centrica completed the acquisition of Bord Gáis
Energy, the incumbent gas supplier and largest dual fuel supplier in the
Republic of Ireland. The transaction added some 600,000 residential
energy accounts, giving us a leading position in an adjacent deregulated
market and providing a platform for growth. We will look to use our
experience from the UK and US to develop innovative propositions for our
customers in the Republic of Ireland, in both energy and services.
In Centrica Energy, upstream gas post-tax earnings in the year were
largely protected from falling wholesale prices by the impact of
hedging, tax allowances, and strong midstream performance. We delivered
increased E&P production, reflecting a full year of production from
assets acquired in Canada in 2013 in partnership with Qatar Petroleum
International (QPI). During the year we further strengthened our
important relationship with the State of Qatar, selling a 40% share of
our wholly owned gas assets in Western Canada to fully align our
interests in the region.
In power generation, nuclear output was lower reflecting the temporary
shut-down of four reactors following the discovery of a boiler spine
issue at Heysham 1 nuclear power station. All four reactors are now back
on-line, although at reduced power until modifications are made to the
boilers during planned maintenance periods.
In Centrica Storage, our Rough gas storage asset reached its highest
ever net reservoir volume in November 2014, reflecting mild UK weather
and good asset reliability. However the low seasonal gas price spreads
resulted in much reduced year-on-year profitability.
Disposal programme
We completed the disposal of our Texas gas-fired power stations for £411
million in January 2014, releasing capital from non-core assets. In
addition, during the year we announced a £1 billion programme of further
non-core asset disposals and we completed the sale of our Ontario home
services business for £270 million in October. We also ran a process to
dispose of our three larger UK CCGTs - Langage, Humber and Killingholme.
However, the bids we received were significantly lower than our internal
valuation and we have concluded that it is not in the best interest of
shareholders to proceed with the disposal of these stations. In
addition, the fall in oil and gas prices has made the proposed disposal
of our Trinidad and Tobago gas assets more challenging, although we will
continue to review our options to release capital from the assets.
Competition and Markets Authority Investigation
The Competition and Markets Authority investigation into the UK energy
market commenced in June, and we continue to engage constructively and
comprehensively with this full review by an independent body. The CMA
published their updated statement of issues on 18 February 2015 and is
expected to set out provisional findings in May or June 2015.
2015 environment and outlook
Against the low commodity price backdrop we are taking positive action
to improve earnings and cash flows in 2015 and 2016. We are focused on
reducing capital expenditure through driving efficiencies on in-flight
projects and putting a hold on certain new projects. Absent a material
change in commodity prices, we expect E&P capital expenditure to fall to
approximately £800 million in 2015 and to approximately £650 million in
2016, around 40% lower than 2014 levels. We will also maintain a tight
control on production costs, examining all internal and external supply
costs for our operated fields and working with our partners to reduce
costs where we are not the operator. Reflecting these actions, we are
targeting a 10% or £100 million reduction in our 2016 lifting and other
cash production costs compared to 2014 levels, including absorbing the
incremental costs of the Valemon and Cygnus fields which will be
on-stream.
In power, the Humber and Langage gas-fired stations are cash generative
at the operating level in the current environment. We will retain these
assets, however following a review we plan to close the Killingholme and
Brigg power stations. We will also be taking action to make the
management of our power portfolio more efficient.
Downstream, it is vital that we focus on competitive pricing, customer
service and operational efficiency. Early in 2015, we were able to
announce price reductions for both our British Gas and Bord Gáis Energy
residential customers, improving our competitive positions. In North
America, margins on new B2B sales improved during 2014, resulting in
much improved second half profitability and leaving the business well
placed for further profit growth in 2015. We also made good progress in
improving our service levels. However, there are further improvements we
can make, in part enabled by investment in our IT platforms on both
sides of the Atlantic.
We will continue to develop our leading position in smart metering,
innovation and connected homes in the UK, which will enable us to offer
enhanced customer offerings and drive greater customer engagement, while
also creating new skilled jobs. Smart meters are already providing
significant benefits to over 600,000 British Gas customers, providing an
end to estimated bills and a greater ability to monitor and reduce
consumption, while also delivering higher levels of customer
satisfaction.
We will also continue to drive sales of our Hive Active Heating smart
thermostat, which has extremely positive customer reviews, and we have a
strong development pipeline of further innovative products, including
time of use tariffs and a ‘connected boiler’. In February 2015 we agreed
to acquire AlertMe, the company that provides the technical platform
that underpins British Gas’ existing connected homes activity, including
Hive. The acquisition will enable further development of connected homes
products and services across the Group. In North America, we have also
focused on differentiating our offering to the more valuable customer
segments, through joint energy and services products, solar and
innovative partnership agreements.
Across the Group, we are reviewing our resource efficiency, with a focus
on cost to serve, overhead levels and working capital consumption, and
have initiated a Group-wide performance improvement plan, including a
strong cost focus.
Despite these actions, since our Interim Management Statement in
November 2014 the reductions in commodity prices and power margins, the
associated impact on our ability to make asset disposals in the current
environment and the impact of systems implementation delays in BGB are
estimated to have had a negative impact of about 2.5p on 2015 adjusted
EPS. As a result, we expect adjusted earnings to be down in 2015
compared to 2014. Earnings remain subject to the usual variables of
commodity prices, weather and asset performance.
We have also taken the very difficult decision to rebase the dividend
from the 2014 final payment. We are proposing a 2014 final dividend of
8.4 pence per share, 30% lower than the 2013 final dividend, which when
added to the interim dividend of 5.1 pence, gives a 2014 full year
dividend of 13.5 pence. We will also commence a scrip dividend programme
as an alternative to the cash dividend, commencing with the final
dividend, subject to shareholder approval.
Our primary role as a Group is to supply energy and services to our
customers, and we provide security for that energy both by owning gas
and electricity production and also in midstream by hedging, procurement
and optimisation activities. To do this, the Group requires a strong
investment grade credit rating.
The Group currently has an A3 credit rating with Moody’s and an A-
credit rating with S&P, with both agencies having placed their rating on
negative outlook in the summer. Since then, the fall in commodity prices
has impacted the Group’s cashflows, with a corresponding reduction in
its credit metrics. The actions we are taking to improve cashflow
through the reduction of capital expenditure and operating costs, and
the rebasing of the dividend, are therefore necessary both to balance
sources and uses of cash in 2015 and to underpin the financial metrics
necessary for strong investment grade credit ratings.
Summary
I joined Centrica at the start of the year and have spent my first weeks
visiting our operations, meeting people and deepening my understanding
of the Group. Despite the challenges we face, under Sam Laidlaw Centrica
has built attractive positions and good capabilities in the UK, Republic
of Ireland, Norway, Netherlands and North America. Given the current
commodity price environment, we are taking a number of immediate actions
and regrettably have had to take action to re-base the dividend. We are
also conducting a review of our longer term strategy, including the
financial framework for the Company. We will be in a position to share
our conclusions by the time of the Interim Results in July 2015.
Despite the current challenges, I am convinced that the Group is
well-placed to build on its existing strengths and be able to compete
and contribute materially against the emerging long term trends in
global energy markets.
Iain Conn
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Chief Executive
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19 February 2015
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GROUP FINANCIAL REVIEW
Group revenue
Group revenue increased by 11% to £29.4 billion (2013: £26.6 billion).
British Gas gross revenue decreased by 9%, reflecting the impact of
record mild weather in the UK in 2014 compared to colder than normal
temperatures in 2013. Residential energy supply gross revenue fell by
12%, with the warmer weather resulting in a 21% fall in total gas
consumption and a 9% fall in total electricity consumption. Residential
services gross revenue was broadly flat, with the impact of higher
central heating installation volumes and inflationary price increases
offset by lower product holdings and a shift towards lower priced
offerings. Business energy supply and services gross revenue fell by 3%,
with lower consumption due to the warm weather and lower average
accounts only partially offset by higher retail tariffs.
Direct Energy gross revenue increased by 62%. This primarily reflects a
full year of revenue from the Hess Energy Marketing acquisition,
completed in November 2013, with business energy supply gross revenue
more than doubling as a result. Residential energy supply gross revenue
increased by 2%, reflecting additional gas volume as a result of extreme
weather conditions across much of North America. Residential and
business services gross revenue fell by 8%, reflecting the disposal of
the Ontario home services business in October. Bord Gáis Energy reported
gross revenue of £391 million in the six months of trading following
completion of the acquisition at the end of June.
Centrica Energy gross revenue fell by 17%. Gas gross revenue fell by
21%, reflecting falling oil and gas prices and power gross revenue fell
by 3% primarily reflecting lower nuclear output. Centrica Storage gross
revenue fell by 21% reflecting lower seasonal gas price spreads.
Operating profit
Throughout the statement, reference is made to a number of different
profit measures, which are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
2013
|
Year ended 31 December
|
|
Notes
|
|
Business performance £m
|
|
Exceptional items and certain re-measurements £m
|
|
Statutory result £m
|
|
Business performance £m
|
|
Exceptional items and certain re-measurements £m
|
|
Statutory result £m
|
Adjusted operating profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
British Gas
|
|
|
|
823
|
|
|
|
|
|
1,030
|
|
|
|
|
Direct Energy
|
|
|
|
150
|
|
|
|
|
|
276
|
|
|
|
|
Bord Gáis Energy
|
|
|
|
7
|
|
|
|
|
|
–
|
|
|
|
|
Centrica Energy
|
|
|
|
737
|
|
|
|
|
|
1,326
|
|
|
|
|
Centrica Storage
|
|
|
|
29
|
|
|
|
|
|
63
|
|
|
|
|
Total adjusted operating profit
|
|
5c
|
|
1,746
|
|
|
|
|
|
2,695
|
|
|
|
|
Depreciation of fair value uplifts from Strategic Investments
(nuclear post-tax)
|
|
5c
|
|
(78)
|
|
|
|
|
|
(66)
|
|
|
|
|
Interest and taxation on joint ventures and associates
|
|
5c
|
|
(100)
|
|
|
|
|
|
(111)
|
|
|
|
|
Group operating (loss)/profit
|
|
5c
|
|
1,568
|
|
(2,705)
|
|
(1,137)
|
|
2,518
|
|
(626)
|
|
1,892
|
Net finance cost
|
|
7
|
|
(266)
|
|
–
|
|
(266)
|
|
(243)
|
|
–
|
|
(243)
|
Taxation
|
|
6,8
|
|
(375)
|
|
773
|
|
398
|
|
(942)
|
|
243
|
|
(699)
|
(Loss)/profit for the year
|
|
|
|
927
|
|
(1,932)
|
|
(1,005)
|
|
1,333
|
|
(383)
|
|
950
|
Attributable to non-controlling interests
|
|
|
|
(24)
|
|
|
|
|
|
–
|
|
|
|
|
Depreciation of fair value uplifts from Strategic Investments, after
taxation
|
|
10
|
|
59
|
|
|
|
|
|
37
|
|
|
|
|
Adjusted earnings
|
|
|
|
962
|
|
|
|
|
|
1,370
|
|
|
|
|
British Gas operating profit fell by 20%. Residential energy supply
operating profit fell by 23%, with lower revenue only partially offset
by lower total wholesale commodity costs. Residential energy supply
operating profit also included £46 million of costs from transportation
and LNG capacity, previously reported in Centrica Energy, which enables
the business to bring gas into the UK. Residential services profit fell
by 15% reflecting lower margins in challenging trading conditions and a
lower average number of contracts. Business energy supply and services
operating profit fell 19% reflecting the lower revenue, competitive
pressures resulting in lower margins, and a higher bad debt charge due
to the impact of the transition to a new billing system.
Direct Energy operating profit fell by 46%. This predominantly reflects
challenging competitive market conditions leading to a narrowing of
margins in both residential and business energy supply, in particular in
our legacy B2B power business, and additional ancillary and other
charges incurred as a result of the polar vortex, estimated at
approximately $110 million (£65 million). Residential energy supply
profit fell by 45% and business energy supply profit fell by 58%.
Residential and business services profitability fell by 22%, reflecting
the sale of the Ontario home services business.
Bord Gáis Energy made an operating profit of £7 million in the six
months post acquisition, including one-time acquisition-related costs.
Centrica Energy operating profit fell by 44%. In gas, despite increased
production, the benefits of prior year hedging, and strong midstream
performance, operating profit almost halved reflecting the impact of a
lower wholesale price environment. Power profitability fell by 23%,
reflecting lower output from the nuclear fleet, and higher net losses
associated with asset impairments and disposals.
Centrica Storage operating profit more than halved, reflecting the
impact of low seasonal gas price spreads.
Group finance charge and tax
Net finance cost increased to £266 million (2013: £243 million),
reflecting higher notional interest. The taxation charge reduced to £375
million (2013: £942 million) and after taking account of tax on joint
ventures and associates and the impact of fair value uplifts, the
adjusted tax charge was £432 million (2013: £1,022 million). The
resultant adjusted effective tax rate for the Group was 30% (2013: 43%),
reflecting a shift in the mix of profit towards the lower taxed
downstream businesses. In addition, a number of items acted to reduce
the rate, specifically upstream small field tax allowances, deferred tax
credits relating to the disposal of the Greater Kittiwake assets and a
re-organisation of Power legal entities. Without these allowances and
credits, the adjusted UK effective tax rate would have been 29%. An
effective tax rate calculation, showing the UK and non-UK components, is
shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
2013
|
Year ended 31 December
|
|
UK £m
|
|
Non-UK £m
|
|
Total £m
|
|
UK £m
|
|
Non-UK £m
|
|
Total £m
|
Adjusted operating profit
|
|
1,285
|
|
461
|
|
1,746
|
|
1,903
|
|
792
|
|
2,695
|
Share of joint ventures/associates interest
|
|
(62)
|
|
–
|
|
(62)
|
|
(60)
|
|
–
|
|
(60)
|
Net finance cost
|
|
(152)
|
|
(114)
|
|
(266)
|
|
(146)
|
|
(97)
|
|
(243)
|
Adjusted profit before taxation
|
|
1,071
|
|
347
|
|
1,418
|
|
1,697
|
|
695
|
|
2,392
|
Taxation on profit
|
|
125
|
|
250
|
|
375
|
|
493
|
|
449
|
|
942
|
Tax impact of depreciation on Venture fair value uplift
|
|
19
|
|
–
|
|
19
|
|
29
|
|
–
|
|
29
|
Share of joint ventures’/associates’ taxation
|
|
38
|
|
–
|
|
38
|
|
51
|
|
–
|
|
51
|
Adjusted tax charge
|
|
182
|
|
250
|
|
432
|
|
573
|
|
449
|
|
1,022
|
Adjusted effective tax rate
|
|
17%
|
|
72%
|
|
30%
|
|
34%
|
|
65%
|
|
43%
|
Group earnings and dividend
Reflecting all of the above, profit for the year fell to £927 million
(2013: £1,333 million) and after adjusting for profits attributable to
non-controlling interests and fair value uplifts, adjusted earnings were
£962 million (2013: £1,370 million). Adjusted basic earnings per share
(EPS) was 19.2 pence (2013: 26.6 pence).
The statutory loss attributable to shareholders for the year was £1,012
million (2013: profit of £950 million). The reconciling items between
Group profit for the year from business performance and statutory
loss/profit are related to exceptional items and certain
re-measurements. The change compared to 2013 is due to lower profit from
business performance, a net loss from certain re-measurements of £771
million (2013: profit of £284 million) and higher net exceptional
charges of £1,161 million (2013: £667 million). The Group reported a
statutory basic EPS loss of 20.2 pence (2013: profit of 18.4 pence).
In addition to the interim dividend of 5.1 pence per share, we propose a
final dividend of 8.4 pence, giving a total ordinary dividend of 13.5
pence for the year (2013: 17.0 pence).
Group cash flow, net debt and balance sheet
Group operating cash flow before movements in working capital was lower
at £2,726 million (2013: £3,737 million), reflecting the reduced profit
from business performance. After working capital adjustments, tax, and
payments relating to exceptional charges, net cash flow from operating
activities was £1,217 million (2013: £2,940 million), which includes the
impact of a net outflow of £640 million (2013: £82 million inflow) of
cash collateral due to falling commodity prices.
The net cash outflow from investing activities was lower at £651 million
(2013: £2,351 million), reflecting the disposal of the Texas gas-fired
power stations and Ontario home services business, and significant
acquisition spend in 2013 primarily related to the Hess Energy Marketing
acquisition.
The net cash outflow from financing activities was £663 million (2013:
£791 million). The outflow was lower than in 2013 due to the investment
by QPI in our Canadian upstream gas business and a lower cash outflow
from the purchase of treasury shares under the share repurchase
programme.
Reflecting all of the above, the Group’s net debt at 31 December 2014
was £5,196 million (2013: £4,942 million), which now includes within its
definition cash collateral posted or received, to support wholesale
energy procurement.
During the year net assets reduced to £3,071 million (2013: £5,257
million). This reflects the impact of dividend payments, the share
repurchase programme and the statutory loss in the year.
Exceptional items
Net exceptional pre-tax charges of £1,597 million were incurred during
the year (2013: £1,064 million). Taxation on these charges generated a
credit of £436 million (2013: £397 million) which resulted in
exceptional post-tax charges of £1,161 million (2013: £667 million).
Reflecting declining wholesale oil and gas prices, the Group recognised
a total pre-tax impairment charge of £1,189 million (post-tax charge
£712 million) on a number of E&P assets.
Reflecting declining clean spark spreads and capacity market auction
prices, the Group recognised a pre-tax impairment charge of £371 million
(post-tax charge £297 million) relating to Langage and Humber power
stations, and a pre-tax impairment charge of £164 million (post-tax
charge £162 million) on its other UK gas-fired power stations. The Group
also recognised an impairment charge of £214 million (post-tax charge
£214 million) on its nuclear investment, also due to declining power
prices and the capacity market auction prices.
On 22 January 2014 the Group disposed of its Texas gas-fired power
stations to Blackstone Group LP for consideration of $685 million (£411
million). As a result, an exceptional pre-tax gain of £219 million was
recognised during the year. Taxation on this gain generated a charge of
£77 million, resulting in an exceptional post-tax gain of £142 million.
On 20 October the Group disposed of the Ontario home services business
for cash consideration of C$426 million (£235 million) as well as shares
in the acquirer, Enercare Inc., of C$106 million (£59 million), which
are listed on the Toronto Stock Exchange (TSX). As a result, an
exceptional pre-tax gain of £122 million was recognised during the year.
Taxation on this gain generated a charge of £40 million, resulting in an
exceptional post-tax gain of £82 million.
Certain re-measurements
The Group enters into a number of forward energy trades to protect and
optimise the value of its underlying production, generation, storage and
transportation assets (and similar capacity or off-take contracts), as
well as to meet the future needs of our customers. A number of these
arrangements are considered to be derivative financial instruments and
are required to be fair-valued under IAS 39. The Group has shown the
fair value adjustments on these commodity derivative trades separately
as certain re-measurements, as they do not reflect the underlying
performance of the business because they are economically related to our
upstream assets, capacity/off-take contracts or downstream demand, which
are typically not fair valued. The operating loss in the statutory
results includes net pre-tax losses of £1,108 million (2013: net gains
of £438 million) relating to these re-measurements, largely as a result
of falling forward prices, particularly in the second half of the year.
The Group recognises the realised gains and losses on these contracts in
business performance when the underlying transaction occurs. The profits
arising from the physical purchase and sale of commodities during the
year, which reflect the prices in the underlying contracts, are not
impacted by these re-measurements. See note 6 for further details.
Acquisitions and disposals
On 30 June 2014, the Group acquired Bord Gáis Energy’s gas and
electricity supply business in the Republic of Ireland, including the
Whitegate gas-fired power station, for total consideration of €214
million (£172 million).
On 29 July 2014, the Group acquired a 100% equity interest in Astrum
Solar’s residential business for consideration of $53 million (£33
million).
On 27 June 2014, the Group acquired natural gas assets in the Foothills
region of Alberta from Shell Canada Energy for C$42 million (£23
million). The assets were acquired by CQECP, the 60:40 partnership with
QPI.
In addition to the disposals of the Ontario home services business and
the Texas gas-fired power stations, referenced in ‘Exceptional items’,
the Group disposed of the Barrow offshore wind farm to DONG Energy for a
consideration of £50 million.
Further details on acquisitions, plus details of asset purchases,
disposals and disposal groups are included in notes 5(f) and 15.
Events after the balance sheet date
On 13 February 2015, Centrica announced that British Gas will acquire
AlertMe, a UK-based connected homes company that provides innovative
energy management products and services. The net cost to British Gas
will be £44 million, taking into account an existing 21% holding in
AlertMe. It is anticipated that the transaction will close by the end of
the first quarter of 2015.
Further details of events after the balance sheet are described in note
17.
Risks and capital management
The Group’s principal risks and uncertainties as disclosed in 2013
remain largely unchanged however the combination of a number of
individual risks coming together in 2014 have impacted the results, as
outlined above. Details of how the Group has managed financial risks
such as liquidity and credit risk are set out in note 4. Details on the
Group’s capital management processes are provided under sources of
finance in note 11a.
Accounting policies
UK listed companies are required to comply with the European regulation
to report consolidated financial statements in conformity with
International Financial Reporting Standards (IFRS) as adopted by the
European Union. The Group’s specific accounting measures, including
changes of accounting presentation and selected key sources of
estimation uncertainty, are explained in notes 1, 2 and 3.
BUSINESS REVIEW
British Gas
|
|
|
|
|
|
|
|
Year ended 31 December
|
|
2014
|
|
|
2013
|
|
Change
|
Residential energy supply operating profit (BGR)
|
|
£439m
|
|
|
£571m
|
|
(23%)
|
Residential services operating profit (BGS)
|
|
£270m
|
|
|
£318m
|
|
(15%)
|
Business energy supply and services operating profit (BGB)
|
|
£114m
|
|
|
£141m
|
|
(19%)
|
Total British Gas operating profit
|
|
£823m
|
|
|
£1,030m
|
|
(20%)
|
BGR post-tax margin
|
|
4.1%
|
|
|
4.5%
|
|
(0.4ppts)
|
BGR customer accounts (year end, ’000) (i)
|
|
14,778
|
|
|
15,146
|
|
(2%)
|
BGS product holding (year end, ’000)
|
|
7,970
|
|
|
8,227
|
|
(3%)
|
BGB supply points (year end, ’000) (ii)
|
|
854
|
|
|
916
|
|
(7%)
|
BGR average gas consumption per customer (therms)
|
|
408
|
|
|
492
|
|
(17%)
|
BGR average electricity consumption per customer (kWh)
|
|
3,498
|
|
|
3,688
|
|
(5%)
|
British Gas total gas consumption (mmth)
|
|
4,085
|
|
|
5,126
|
|
(20%)
|
British Gas total electricity consumption (TWh)
|
|
39.1
|
|
|
42.4
|
|
(8%)
|
(i) 2013 residential energy customer accounts have been restated to
exclude 110,000 accounts subsequently reclassified as dormant
|
(ii) 2013 business energy supply points have been restated to
include 4,000 supply points to align to industry reporting changes
|
British Gas faced a challenging environment in 2014, with the warmest
year on record in the UK, difficult trading conditions, major systems
migrations, and continued political, regulatory and media focus. Against
this backdrop, British Gas has a clear strategy focused on three
priorities: deliver great service, transform to grow and engage our
stakeholders.
British Gas Residential
British Gas Residential operating profit fell, reflecting lower average
gas and electricity consumption predominantly due to the mild weather in
the UK in 2014 compared to colder than normal temperatures in 2013. The
average actual customer bill of £1,152 in 2014 was around £100 lower
than in 2013, and the average profit per customer of £42 was nearly £10
lower than last year.
The number of residential accounts on supply reduced by 368,000 in 2014
and ended the year at 14.8 million. At the end of the year, we reviewed
our definition of energy accounts on supply, which resulted in a
downwards restatement of the number of opening accounts by 110,000. We
experienced significant losses in the first quarter of the year,
following an increase in residential prices in November 2013. However
the rate of losses was reduced over the balance of the year, with
British Gas being the first energy company to reduce prices following
proposed changes to the Energy Company Obligation (ECO) programme
announced in December 2013, improved service levels, and the launch of
competitively priced offerings. The market remains highly competitive,
with recent reductions in standard tariffs and most suppliers also
offering a range of fixed price products.
Service levels in British Gas Residential improved with average call
answering times lower than 2013, helping drive a significant improvement
in our contact net promoter score (NPS). The British Gas brand NPS also
recovered during the year, ending in positive territory for the first
time since March 2012. In the fourth quarter we completed the migration
of all our residential customers onto a new customer relationship
management (CRM) platform, and the new system is helping deliver a more
integrated customer experience.
Innovation and smart connected homes
In the UK, we continue to lead the industry in technology, innovation
and smart connected homes. Around two thirds of our customer
interactions are made through digital channels, with around half of
those now initiated from a mobile or tablet device. Customer downloads
of our top-rated app have now surpassed 1.5 million, and we were
recently awarded ‘Most Popular Website’ in the utility category in the
‘Website of the Year’ 2014 awards.
We have installed around 1.3 million residential smart meters in the UK.
Over 500,000 British Gas customers with smart meters now regularly
receive our unique smart energy report, ‘my energy’, which provides a
comprehensive analysis of their energy consumption including a breakdown
by type of use, benchmarking against similar homes, personalised energy
saving tips and access to an online tool. The report is helping to
improve levels of customer satisfaction and the overall perception of
British Gas.
We have taken the lead in the roll-out of smart meters to prepayment
customers, and the ongoing trial of our SMETS1 capable prepayment meter
will enable us to commence the full roll-out by the end of 2015.
Additionally, leveraging our experience from Direct Energy, we have also
successfully trialled our smart meter enabled ‘Free Saturdays or
Sundays’ energy tariffs, with a full launch planned in the second half
of 2015.
We have now sold over 170,000 smart thermostats, with sales of our Hive
Active Heating product currently running at around 3,000 a week, and
have established retail partnerships with Apple, John Lewis and Amazon.
Hive has been received extremely positively with over 90% of customers
recommending the product and 96% saying they feel more in control of
their heating than before. In February 2015 we announced the acquisition
of AlertMe, the provider of the technical platform that underpins our
existing connected homes activity, including Hive, and will enable
ownership and control over a scalable technology platform, software
development capability, data analytics and a patent portfolio. We have a
strong development pipeline of further innovative products with a
‘connected boiler’ and ‘virtual in home display’ both currently on
commercial trial and with planned launch dates in the second half of
2015.
Helping people today
Helping customers to reduce and control their energy consumption is the
most sustainable way to keep bills down. We have made good progress in
delivering our commitments under the ECO programme and we completed our
March 2015 targets in December 2014, subject to Ofgem confirmation. To
date, we have delivered energy efficiency measures to over 350,000
households under the programme.
We continue to lead the industry in helping customers most in need and
in 2014 we helped nearly 1.8 million households. There are also fewer
residential energy customers in debt than a year ago, and on average
these customers have lower levels of debt. We have one of the widest
eligibility criteria among all energy suppliers for the Warm Home
Discount, which benefited over 500,000 customers during the year by up
to £140. The bills of our customers most in need were on average 13%
lower in 2014 than in 2013.
British Gas Services
British Gas Services operating profit reduced reflecting the decline in
the number of contract holdings, lower on-demand volumes due to warmer
weather, higher pension costs, and the change in product mix towards
flexible, cheaper product offerings.
While retention levels for contract customers remained high, the sales
environment has been challenging. As a result, the number of product
holdings fell by 257,000 in the year, to slightly under 8 million.
However we returned to growth in the final quarter of the year. This
follows the migration of all accounts onto the new billing and CRM
platform and the completion of comprehensive sales and conduct training
for our front line staff, as well as the development of an enhanced
digital offering and innovative customer propositions. The market for
central heating installations showed signs of recovery in the year and
the number of boilers installed increased by 3% in the year compared to
2013.
British Gas Services delivered very high levels of customer service in
2014, both in our contact centres and in customers’ homes. Customer
complaints fell by 14% compared to last year, while the NPS for our
engineers increased to a record high of +68 in December 2014. New terms
and conditions, aimed at delivering greater operational flexibility to
meet customer needs, were agreed with our engineers and their union in
2014 and are now in place.
British Gas Business
British Gas Business operating profit fell, primarily due to lower
average consumption as a result of the mild weather, competitive
pressures leading to lower margins and accounts, and a higher bad debt
charge due to the impact of the transition to a new billing system.
The number of business supply points fell by 62,000 in 2014 reflecting
the highly competitive conditions in the business energy market and our
decision to lead the industry in ending the auto-rollover of contracts
at renewal. Towards the end of the year, cleansing of data following the
implementation of the new billing system resulted in the removal of
49,000 supply points.
As a result of some transitional issues following the implementation of
a new billing system, which we are now resolving, we now expect to
deliver £100 million of targeted reductions in operating costs and bad
debt by the end of 2016, a year later than originally planned. These
savings will help to offset the margin pressures from a competitive
market.
To drive growth in BGB we are focusing our proposition development on
dual fuel, energy efficiency and joint energy and services offers. We
continue to develop our business services capabilities and revenues from
these activities grew by 10% in the year. In July we announced our
participation in the Generation Community scheme to deliver up to £60
million in solar photovoltaic solutions for Local Authority and Housing
Association properties. The ability to offer energy management services,
products and technologies is a key differentiator and will help us
retain existing customers and acquire new ones.
Direct Energy
|
|
|
|
|
|
|
|
Year ended 31 December
|
|
2014
|
|
|
2013
|
|
Change
|
Residential energy supply operating profit (DER)
|
|
£90m
|
|
|
£163m
|
|
(45%)
|
Business energy supply operating profit (DEB)
|
|
£32m
|
|
|
£77m
|
|
(58%)
|
Residential and business services operating profit (DES)
|
|
£28m
|
|
|
£36m
|
|
(22%)
|
Total Direct Energy operating profit
|
|
£150m
|
|
|
£276m
|
|
(46%)
|
Total Direct Energy operating profit (excluding polar vortex
impact)
|
|
£215m
|
|
|
£276m
|
|
(22%)
|
DER customer accounts (year end, ’000)
|
|
3,256
|
|
|
3,360
|
|
(3%)
|
DES product holding (year end, ’000) (i)
|
|
897
|
|
|
2,608
|
|
(66%)
|
DER average gas consumption per customer (therms)
|
|
1,403
|
|
|
1,296
|
|
8%
|
DER average electricity consumption per customer (kWh)
|
|
10,888
|
|
|
10,862
|
|
0%
|
DEB total gas volumes (mmth)
|
|
5,923
|
|
|
1,839
|
|
222%
|
DEB total electricity volumes (TWh)
|
|
96.9
|
|
|
63.9
|
|
52%
|
Direct Energy total gas volumes (mmth)
|
|
8,163
|
|
|
3,883
|
|
110%
|
Direct Energy total electricity volumes (TWh)
|
|
116.3
|
|
|
83.4
|
|
39%
|
(i) DES 2014 product holding reflects the disposal of the Ontario home
services business, which had 1.9 million product holdings at the time of
disposal
Direct Energy faced challenging conditions in 2014, with extreme weather
conditions caused by the polar vortex in the first quarter of the year,
estimated at approximately $110 million (£65 million), and margin
pressures across most of our markets in energy supply. Overall operating
profit fell by 46% compared to 2013, and on a constant currency basis
fell by 43%. However during the year we added significant value through
the completion of disposals of non-core assets, recognising a £219
million profit on disposal on the sale of our Texas gas-fired power
stations, and a £122 million profit on disposal from the sale of our
Ontario home services business.
A $100 million cost reduction programme was launched at the start of the
year, to help improve Direct Energy’s competitive position. The
programme was successfully completed towards the end of 2014.
The outlook for 2015 is more positive and we are positioned for growth,
with the effect of increased sold B2B unit margins in 2014 following the
polar vortex starting to positively impact profitability. We also
continue to develop a broad range of innovative energy and services
product offerings to improve customer retention and attract the highest
value customers in our residential energy business, to build innovative
partnership offerings in our B2B business in compressed natural gas
(CNG) and solar, and have additional growth opportunities in residential
services following our acquisition of Astrum Solar.
Direct Energy Residential
Direct Energy Residential operating profit fell due to additional costs
relating to the extreme weather conditions in early 2014, and a
competitive sales environment in both Texas and the US North East, which
led to a reduction in unit margins. The number of residential energy
accounts decreased by 104,000 over 2014, predominantly reflecting the
expected decline in Ontario, with the Energy Consumer Protection Act
(ECPA) making retention of customers difficult, and impact of the
competitive market in Texas. Against this challenging backdrop, we
remain focused on delivering high levels of customer service and higher
levels of customer retention, and we have now successfully implemented a
new residential billing platform in Alberta.
Sales through digital channels doubled in 2014 compared to 2013, with
the acquisition of Bounce Energy in 2013 having provided a leading
internet-based platform and digital marketing capabilities. We are also
focused on differentiating our offering to the more valuable customer
segments through the development of innovative products and bundled
energy and services offerings, which we started selling in the first
half of the year and now have over 189,000 joint residential and
services customers with sales averaging around 6,000 per week during the
fourth quarter. We have also sold over 39,000 smart thermostats through
our partnerships with Nest and Honeywell.
Direct Energy Business
The integration of the Hess Energy Marketing acquisition is now fully
completed and the business is performing ahead of our investment case.
Direct Energy is now the largest commercial and industrial (C&I) gas
supplier and the second largest C&I power supplier in the competitive US
retail market, as well as a top 10 wholesale gas marketer in North
America in the Platts third quarter rankings. In addition to enhanced
scale, the business is also set up to benefit from portfolio
diversification and expansion along the gas value chain.
Despite increased volumes resulting from the Hess Energy Marketing
acquisition, Direct Energy Business operating profit fell, reflecting
the one off impact of the polar vortex, lower margins on power sales
made in prior periods, and mild weather late in the year resulting in
low levels of commodity price volatility and leading to fewer
optimisation opportunities. However, average C&I sold unit margins in
the second half of 2014 were 35% higher for gas and 50% higher for power
compared to the second half of 2013, reflecting a re-pricing of risk
following the polar vortex, with second half profit being significantly
higher than in 2013. Combined with a lower amortisation charge relating
to the Hess acquisition, this leaves the business well placed for strong
underlying growth in 2015.
We continue to develop innovative propositions for our C&I customers. We
have a partnership agreement with Panoramic Power to offer wireless
energy sensors to help customers better understand their power
consumption. We are also helping our customers implement energy
efficiency projects through a network of partners across the US. In the
fourth quarter, we agreed a joint venture with Xpress Natural Gas on a
CNG station in New York State, that will enable us to transport CNG to
customers with no access to distributed natural gas. In solar, to date
we have deployed around 60% of our $125 million fund with SolarCity and
are expanding our offering, both in funds and the types of projects we
support.
In January 2014 we completed the sale of our three Texas gas-fired power
stations for £411 million. Following the sale we are supporting our
downstream demand needs in Texas through a combination of the liquid
physical and financial power markets and a three-year heat rate call
option for an equivalent amount of capacity.
Direct Energy Services
In Direct Energy Services we completed the sale of the Ontario home
services business for C$532 million (£294 million) in October. This was
an attractive opportunity to realise value from the business in a region
where joint energy and services opportunities are more limited, and
focus our attention on opportunities in the US and Alberta, where we see
good prospects for growth.
Total Direct Energy Services operating profit reduced by 22%, although
profit from the non-Ontario business remained flat. Excluding the
Ontario home services business, which had 1.9 million customer accounts,
the number of services accounts was up 23%. We now have over 312,000
protection plan customers across the US, while our HVAC (heating,
ventilation and air conditioning) leasing proposition continues to
perform well as customers are willing to undertake a higher value of
work when purchased through rental payments as opposed to upfront
payment. In addition, the future pipeline of work for our residential
new construction, commercial and solar business was $79 million, a
record for the business. The business continued to deliver high levels
of customer service, with NPS closing the year at +62.
In July, we entered the rapidly growing US residential solar market
through the acquisition of Astrum Solar. This transaction enables Direct
Energy to sell solar alongside its existing range of energy and services
products, as we look to develop further attractive propositions to
attract the highest value customers. We completed around 600 residential
solar installations in 2014 following the acquisition, 50% more than
Astrum Solar installed over the same period in 2013.
Bord Gáis Energy
|
|
|
|
|
|
|
|
Year ended 31 December
|
|
2014
|
|
|
2013
|
|
Change
|
Total Bord Gáis Energy operating profit
|
|
£7m
|
|
|
–
|
|
nm
|
Residential energy customer accounts (year end, ’000)
|
|
608
|
|
|
–
|
|
nm
|
Residential average gas consumption per customer (therms)
|
|
127
|
|
|
–
|
|
nm
|
Residential average electricity consumption per customer (kWh)
|
|
2,373
|
|
|
–
|
|
nm
|
Total gas volumes (mmth)
|
|
106
|
|
|
–
|
|
nm
|
Total electricity volumes (TWh)
|
|
1.4
|
|
|
–
|
|
nm
|
Total power generated (TWh)
|
|
0.9
|
|
|
–
|
|
nm
|
On 30 June 2014, Centrica completed the acquisition of Bord Gáis Energy
in the Republic of Ireland, a supply business with power generation
capacity in an adjacent deregulated market, providing a good platform
for growth. Bord Gáis Energy is the incumbent gas supplier and largest
dual fuel supplier in the Republic of Ireland with over 600,000
residential accounts and 30,000 business supply points.
The business made an operating profit of £7 million in the first six
months of Centrica’s ownership, including one-time integration and
acquisition costs and some unplanned outages at the Whitegate gas-fired
power station. In 2015 we expect the business to contribute around €40
million (£31 million) EBITDA, in line with the investment case.
Centrica Energy
|
|
|
|
|
|
|
|
Year ended 31 December
|
|
2014
|
|
|
2013
|
|
Change
|
Gas operating profit
|
|
£606m
|
|
|
£1,155m
|
|
(48%)
|
Power operating profit/(loss)
|
|
£131m
|
|
|
£171m
|
|
(23%)
|
Gas-fired
|
|
(£120m)
|
|
|
(£133m)
|
|
nm
|
Renewables (operating assets)
|
|
£27m
|
|
|
£36m
|
|
(25%)
|
Renewables (one off write-offs, profit/loss on disposal)
|
|
(£17m)
|
|
|
(£11m)
|
|
nm
|
Nuclear
|
|
£210m
|
|
|
£250m
|
|
(16%)
|
Midstream
|
|
£31m
|
|
|
£29m
|
|
7%
|
Total Centrica Energy operating profit
|
|
£737m
|
|
|
£1,326m
|
|
(44%)
|
Gas operating profit after tax
|
|
£302m
|
|
|
£325m
|
|
(7%)
|
Gas production (mmth) (i)
|
|
3,772
|
|
|
3,557
|
|
6%
|
Liquids production (mmboe) (i)
|
|
17.3
|
|
|
18.7
|
|
(7%)
|
Total gas and liquids production (mmth) (i)
|
|
4,822
|
|
|
4,690
|
|
3%
|
Total gas and liquids production (mmboe) (i)
|
|
79.5
|
|
|
77.3
|
|
3%
|
Upstream proven and probable reserves (mmboe) (ii)
|
|
585
|
|
|
711
|
|
(18%)
|
Total UK power generated (TWh)
|
|
22.1
|
|
|
21.7
|
|
2%
|
(i) Includes 100% share of Canadian assets owned in partnership with
QPI
|
(ii) Centrica’s share of reserves, including a 60% share of Canadian
assets owned in partnership with QPI, and excluding Rough cushion
gas of 30mmboe. Includes the impact of QPI’s investment in 40% of
our wholly-owned Canadian gas and liquids assets in the year
|
Centrica Energy’s diversified upstream and midstream portfolio and
hedging helped to mitigate against the impact of a falling wholesale oil
and gas price environment in 2014. However the lower wholesale price
environment creates a challenging backdrop, and we are enforcing strict
financial discipline, with the management team taking action to reduce
capital expenditure and costs and progressing asset disposals to release
capital.
Gas
Our E&P business continued to see good production from previous
investments in Norway and Canada, however production from the UK and
Netherlands was disappointing. Total gas and liquids production
increased by 3% to 79.5mmboe, with gas volumes up 6% and liquids volumes
down 7%.
Production in the Americas increased by 68% reflecting a full year of
production from the assets acquired from Suncor in September 2013, in
partnership with Qatar Petroleum International (QPI). During 2014, we
strengthened our relationship with QPI, who invested in 40% of our
wholly-owned Canadian gas and liquids assets in October for C$215
million (£119 million), fully aligning our interests in the region. The
partnership also acquired a package of natural gas assets in Alberta
from Shell Canada Energy for C$42 million (£23 million) and production
from these assets, combined with new production wells, helped the
Canadian business end the year at record high production volumes.
Production in Europe decreased by 16%, partly as a result of the
disposals of three packages of North Sea assets, all announced in late
2013. We experienced some production issues in the UK and Netherlands,
with gas export constraints in the Greater Markham Area (GMA) and lower
than expected flows from York. However production rates in the GMA
increased towards the end of the year, and a fourth well was brought
online at York in the second half. Our assets in Norway performed well,
with strong production from the Kvitebjorn asset, ahead of our original
investment case.
The large scale Valemon project in the Norwegian North Sea was brought
on-stream in January 2015, with further wells being drilled over 2015
and into 2016 to maximise the recoverable reserves from the field. The
Cygnus project in the Southern North Sea remains on schedule to produce
first gas around the end of 2015. We also produced first gas from the
Kew field at the start of 2014 and from an additional well drilled at
Grove in the second half of the year. Two wells drilled adjacent to the
Butch discovery, Butch East and Butch South West, did not find further
commercial hydrocarbons, however the results contributed valuable
information that will enable us to optimise the development of the main
Butch field.
On exploration, six out of seven wells drilled in Europe were successful
in finding hydrocarbons and three, Valemon North, Cepheus and Pegasus
were classified as commercial discoveries. We also wrote down
exploration costs in respect of [Solberg, Ivory and Novus drilled in
2014 and] Fulham and Olympus, which were drilled in previous years and
face significant development challenges to be commercial in the current
price environment. In addition we wrote off exploration licenses
originally acquired as part of the Venture acquisition, and impaired the
Bains asset and a recent failed well drilled on Buckland.
In the year we recognised exceptional post-tax impairments of £712
million relating to our E&P assets, predominantly as a result of
declining oil and gas prices, including £265 million on our assets in
Trinidad and Tobago. We will continue to review our options to release
capital from these assets.
Centrica Energy’s proven and probable (2P) reserves reduced by 18% to
585mmboe, reflecting production in the year and the sale of a 40% share
of our wholly-owned gas assets in Western Canada to QPI. This also
reflects a reduction in reserve expectations from some UK fields, with
updated production flow data as well as the lower price environment
making a number of future developments uneconomic and leading to an
earlier forecast cessation of production on some assets.
In view of the current oil and gas price levels, we have taken action to
scale back exploration and development expenditure across the portfolio,
particularly in Canada where we have flexibility to manage drilling
programmes in line with the sharp price drop. In 2014, total E&P capital
expenditure was above £1 billion and we expect this to reduce to
approximately £800 million in 2015. We have taken further steps to
reduce expenditure in 2016 to approximately £650 million, which is
substantially below previous guidance. Reflecting lower capital
expenditure, we expect total production in 2015 to be around 75mmboe.
Our midstream business performed well as we managed periods of wholesale
market volatility and falling commodity prices. We also optimised our
flexible gas contracts during the fall in summer gas prices to realise
additional value, resulting in a significant increase in the midstream
gas profit in 2014, partially offset by a consequential reduction in
expected results for 2015. In LNG, Federal Energy Regulatory Commission
(FERC) approval for the fifth train at Cheniere’s Sabine Pass export
facility is anticipated around the end of the first quarter of 2015, and
the project remains on course to enable the first commercial delivery
through our contract by the end of 2018. We also took delivery of our
first ‘Free on Board’ cargoes in the fourth quarter, as we look to
increase our presence and capability in LNG.
Gas operating profit fell by 48% despite increased production,
reflecting lower wholesale oil and gas prices. However profit after tax
was only down 7%, reflecting the benefits from forward hedging, a strong
midstream performance, production mix weighted towards lower taxed
assets, non-recurring small field tax allowances and a tax credit
relating to the disposal of the Greater Kittiwake assets. Unit lifting
and other cash production costs increased by 6%, principally reflecting
lower production from European fields.
In the low wholesale price environment, we have acted to manage our cost
base, examining all our internal and external supply costs for our
operated fields. We are also working with our partners to reduce costs
where we are not the operator. Reflecting these actions, we are
targeting our 2016 lifting and other cash production costs to be around
2013 levels. This requires a 10% reduction on 2014 as well as absorbing
the incremental costs of Valemon and Cygnus which will be on-stream.
Power
In December 2014, the UK’s first power capacity auction took place for
capacity in 2018/19. The auction clearing price was £19.40/kw/year,
significantly below market expectations. Our Humber and Langage
gas-fired power stations were both successful in the auction, as were
all the nuclear reactors in which we have a 20% equity interest. However
our remaining four operational gas-fired stations at Barry, Brigg,
Killingholme and Peterborough were unsuccessful, as was King’s Lynn
which is currently mothballed.
During the year, we commenced a process to dispose of our three larger
UK gas-fired power stations. However the low capacity auction price
resulted in an expected consequential decline in bidder confidence, and
we decided that a disposal was no longer highly probable. As a result,
the assets were reclassified out of assets held for sale as at 31
December. In 2015 we received bids that were lower than our internal
valuation, and we have concluded that it is not in the best interest of
shareholders to proceed with the disposal of these stations. Humber and
Langage are cash generative at the operating level in the current
environment. We will retain these assets, however following a review we
plan to close the Killingholme and Brigg power stations. We will also be
taking action to make the management of our power portfolio more
efficient.
Reflecting the result of the capacity auction and declining power
prices, we recognised a post-tax impairment of £459 million on our UK
gas-fired power generation assets and a post-tax impairment of £214
million on our investment in the UK nuclear fleet.
In 2014, output from our interest in the UK nuclear fleet was down 7%
compared to 2013, reflecting the temporary shut-down of four reactors at
the Heysham 1 and Hartlepool power stations following discovery of a
boiler spine issue at Heysham 1 in August. All reactors have now
returned to service following inspections of all boiler spines at the
affected reactors which found no further defects, however the four
affected reactors will operate at 75-80% power until modifications are
made to the boilers during standard maintenance periods in 2015 and
2016. Reflecting the lower output, nuclear operating profit fell 16%.
Gas-fired generation volumes were 12% higher than in 2013, although
market spark spreads remained low throughout the year, and the forward
market currently shows little sign of recovery in 2015. Our gas-fired
business reported a reduced operating loss of £120 million, which
includes a £39m depreciation saving as a result of the three larger
power stations being classified as held for sale assets for eight months
in 2014.
Our wind assets delivered generation volumes up 20%, reflecting a full
contribution from the Lincs offshore wind farm. Reflecting our focus on
capital discipline, at the half year we reviewed the economic viability
of the Round 3 Irish Sea Zone project, Celtic Array, following
discussions with The Crown Estate and our partners in the project, DONG
Energy, and have now handed the license back to the Crown Estate. As a
result we recognised a charge of £40 million, principally in respect of
writing off the total book value of the project. In November, the sale
of the Lincs transmission assets under the offshore transmission owner
(OFTO) regime was completed in line with book value, while in December
we sold our 50% non-operated interest in the Barrow offshore wind farm
to DONG Energy for £50 million, with Centrica recognising a £26 million
pre-tax profit from the disposal.
Renewables operating profit fell by 60% compared to 2013, reflecting a
reduced contribution from the disposal of assets and increased costs
associated with writing down developments.
Centrica Storage
|
|
|
|
|
|
|
|
Year ended 31 December
|
|
2014
|
|
|
2013
|
|
Change
|
Total Centrica Storage operating profit
|
|
£29m
|
|
|
£63m
|
|
(54%)
|
The Rough gas storage asset reached its highest ever net reservoir
volume (NRV) in November 2014, reflecting the lower level of withdrawal
in the first quarter due to the warmer than normal weather combined with
continued good asset reliability.
Seasonal gas price spreads fell to historic lows towards the end of 2013
due to the abundance of flexible supply across North West Europe and
warm weather. As a result the average Standard Bundled Unit (SBU) price
for the 2014/15 storage year fell to 20.0p, lower than the 23.3p
achieved in 2013/14 and the 33.9p achieved in 2012/13. This resulted in
a 21% reduction in SBU revenue in 2014 compared to 2013, and operating
profit fell by 54%.
At the start of 2014 we commenced a three year programme to deliver £15
million of cost reductions through operational improvements and capital
discipline. We are on track to deliver this with significant progress in
the year on business restructuring, reductions in capital expenditure
and improved maintenance planning.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Group Financial
Statements in accordance with applicable law, regulations and accounting
standards. In preparing the Group Financial Statements, the Directors
are required to:
-
select suitable accounting policies and then apply them consistently;
-
make judgements and accounting estimates that are reasonable and
prudent;
-
state whether IFRSs as adopted by the European Union have been
followed, subject to any material departures disclosed and explained
in the Group Financial Statements; and
-
prepare the Group Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company will continue
-in business.
Each of the Directors confirms that, to the best of their knowledge:
-
the Group Financial Statements, which have been prepared in accordance
with IFRSs as adopted by the EU, give a true and fair view of the
assets, liabilities, financial position and profit of the Group; and
-
the Strategic Report contained in the Annual Report and Accounts, from
which this narrative is extracted, includes a fair review of the
development and performance of the business and the position of the
Group, together with a description of the principal risks and
uncertainties that it faces.
By order of the Board
Iain Conn
|
Chief Executive
|
GROUP INCOME STATEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
2013
|
Year ended 31 December
|
|
Notes
|
|
Business performance £m
|
|
Exceptional items and certain re-measurements £m
|
|
Results for the year £m
|
|
Business performance £m
|
|
Exceptional items and certain re-measurements £m
|
|
Results for the year £m
|
Group revenue
|
|
5(b)
|
|
29,408
|
|
–
|
|
29,408
|
|
26,571
|
|
–
|
|
26,571
|
Cost of sales before exceptional items and certain re-measurements
|
|
|
|
(25,043)
|
|
–
|
|
(25,043)
|
|
(21,464)
|
|
–
|
|
(21,464)
|
Exceptional items – onerous provision
|
|
6
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(125)
|
|
(125)
|
Re-measurement of energy contracts
|
|
6
|
|
–
|
|
(1,134)
|
|
(1,134)
|
|
–
|
|
413
|
|
413
|
Cost of sales
|
|
|
|
(25,043)
|
|
(1,134)
|
|
(26,177)
|
|
(21,464)
|
|
288
|
|
(21,176)
|
Gross profit
|
|
|
|
4,365
|
|
(1,134)
|
|
3,231
|
|
5,107
|
|
288
|
|
5,395
|
Operating costs before exceptional items
|
|
|
|
(2,903)
|
|
–
|
|
(2,903)
|
|
(2,735)
|
|
–
|
|
(2,735)
|
Exceptional items – impairments
|
|
6
|
|
–
|
|
(1,938)
|
|
(1,938)
|
|
–
|
|
(939)
|
|
(939)
|
Exceptional items – gains on disposals
|
|
6
|
|
–
|
|
341
|
|
341
|
|
–
|
|
–
|
|
–
|
Operating costs
|
|
|
|
(2,903)
|
|
(1,597)
|
|
(4,500)
|
|
(2,735)
|
|
(939)
|
|
(3,674)
|
Share of profits of joint ventures and associates, net of interest
and taxation
|
|
12(a)
|
|
106
|
|
26
|
|
132
|
|
146
|
|
25
|
|
171
|
Group operating (loss)/profit
|
|
5(c)
|
|
1,568
|
|
(2,705)
|
|
(1,137)
|
|
2,518
|
|
(626)
|
|
1,892
|
Financing costs
|
|
7
|
|
(318)
|
|
–
|
|
(318)
|
|
(297)
|
|
–
|
|
(297)
|
Investment income
|
|
7
|
|
52
|
|
–
|
|
52
|
|
54
|
|
–
|
|
54
|
Net finance cost
|
|
|
|
(266)
|
|
–
|
|
(266)
|
|
(243)
|
|
–
|
|
(243)
|
(Loss)/profit before taxation
|
|
|
|
1,302
|
|
(2,705)
|
|
(1,403)
|
|
2,275
|
|
(626)
|
|
1,649
|
Taxation on (loss)/profit
|
|
6, 8
|
|
(375)
|
|
773
|
|
398
|
|
(942)
|
|
243
|
|
(699)
|
(Loss)/profit for the year
|
|
|
|
927
|
|
(1,932)
|
|
(1,005)
|
|
1,333
|
|
(383)
|
|
950
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the parent
|
|
|
|
903
|
|
(1,915)
|
|
(1,012)
|
|
1,333
|
|
(383)
|
|
950
|
Non-controlling interests
|
|
|
|
24
|
|
(17)
|
|
7
|
|
–
|
|
–
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per ordinary share
|
|
|
|
|
|
|
|
Pence
|
|
|
|
|
|
Pence
|
Basic
|
|
10
|
|
|
|
(20.2)
|
|
|
|
|
|
18.4
|
Diluted
|
|
10
|
|
|
|
(20.2)
|
|
|
|
|
|
18.3
|
Interim dividend paid per ordinary share
|
|
9
|
|
|
|
5.10
|
|
|
|
|
|
4.92
|
Final dividend proposed per ordinary share
|
|
9
|
|
|
|
8.40
|
|
|
|
|
|
12.08
|
The notes on pages 25 to 63 form part of these Financial Statements.
GROUP STATEMENT OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
Year ended 31 December
|
|
Notes
|
|
2014 £m
|
|
2013 £m
|
(Loss)/profit for the year
|
|
|
|
(1,005)
|
|
950
|
Other comprehensive income/(loss):
|
|
|
|
|
|
|
Items that will be or have been recycled to the Group Income
Statement:
|
|
|
|
|
|
|
Gains on revaluation of available-for-sale securities, net of
taxation
|
|
|
|
4
|
|
3
|
|
|
|
|
|
|
|
Net losses on cash flow hedges
|
|
|
|
(44)
|
|
(25)
|
Transferred to income and expense on cash flow hedges
|
|
|
|
46
|
|
34
|
Transferred to assets and liabilities on cash flow hedges
|
|
|
|
6
|
|
–
|
Taxation on cash flow hedges
|
|
|
|
(1)
|
|
(1)
|
|
|
|
|
7
|
|
8
|
Exchange differences on translation of foreign operations
|
|
|
|
(165)
|
|
(217)
|
Share of other comprehensive (loss)/income of joint ventures and
associates, net of taxation
|
|
|
|
(15)
|
|
18
|
|
|
|
|
(169)
|
|
(188)
|
Items that will not be recycled to the Group Income Statement:
|
|
|
|
|
|
|
Net actuarial losses on defined benefit pension schemes
|
|
|
|
(83)
|
|
(179)
|
Taxation on net actuarial losses on defined benefit pension schemes
|
|
|
|
18
|
|
31
|
|
|
|
|
(65)
|
|
(148)
|
Reversal of revaluation reserve, net of taxation and exchange
differences
|
|
|
|
(10)
|
|
(17)
|
Share of other comprehensive income/(loss) of joint ventures and
associates, net of taxation
|
|
|
|
21
|
|
(15)
|
Other comprehensive loss net of taxation
|
|
|
|
(223)
|
|
(368)
|
Total comprehensive (loss)/income for the year
|
|
|
|
(1,228)
|
|
582
|
Attributable to:
|
|
|
|
|
|
|
Owners of the parent
|
|
|
|
(1,234)
|
|
590
|
Non-controlling interests
|
|
|
|
6
|
|
(8)
|
GROUP STATEMENT OF CHANGES IN EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital £m
|
|
Share premium £m
|
|
Retained earnings £m
|
|
Other equity £m
|
|
Total £m
|
|
Non-controlling interests £m
|
|
Total equity £m
|
1 January 2013
|
|
321
|
|
929
|
|
4,186
|
|
491
|
|
5,927
|
|
–
|
|
5,927
|
Total comprehensive income/(loss)
|
|
–
|
|
–
|
|
950
|
|
(360)
|
|
590
|
|
(8)
|
|
582
|
Employee share schemes
|
|
–
|
|
2
|
|
(15)
|
|
70
|
|
57
|
|
–
|
|
57
|
Purchase of treasury shares
|
|
–
|
|
–
|
|
(2)
|
|
(500)
|
|
(502)
|
|
–
|
|
(502)
|
Amounts arising on acquisition
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
81
|
|
81
|
Distribution paid to non-controlling interests
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(8)
|
|
(8)
|
Dividends paid to equity holders (note 9)
|
|
–
|
|
–
|
|
(864)
|
|
–
|
|
(864)
|
|
–
|
|
(864)
|
Taxation on share based payments
|
|
–
|
|
–
|
|
–
|
|
(16)
|
|
(16)
|
|
–
|
|
(16)
|
31 December 2013
|
|
321
|
|
931
|
|
4,255
|
|
(315)
|
|
5,192
|
|
65
|
|
5,257
|
Total comprehensive (loss)/income
|
|
–
|
|
–
|
|
(1,012)
|
|
(222)
|
|
(1,234)
|
|
6
|
|
(1,228)
|
Employee share schemes
|
|
–
|
|
–
|
|
–
|
|
71
|
|
71
|
|
–
|
|
71
|
Purchase of treasury shares
|
|
–
|
|
–
|
|
(2)
|
|
(420)
|
|
(422)
|
|
–
|
|
(422)
|
Cancellations of shares held in treasury
|
|
(10)
|
|
–
|
|
(549)
|
|
559
|
|
–
|
|
–
|
|
–
|
Investment by non-controlling interests
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
283
|
|
283
|
Distribution paid to non-controlling interests
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(18)
|
|
(18)
|
Dividends paid to equity holders (note 9)
|
|
–
|
|
–
|
|
(867)
|
|
–
|
|
(867)
|
|
–
|
|
(867)
|
Taxation on share based payments
|
|
–
|
|
–
|
|
–
|
|
(5)
|
|
(5)
|
|
–
|
|
(5)
|
31 December 2014
|
|
311
|
|
931
|
|
1,825
|
|
(332)
|
|
2,735
|
|
336
|
|
3,071
|
The notes on pages 25 to 63 form part of these Financial Statements.
GROUP BALANCE SHEET
|
|
|
|
|
|
|
31 December
|
|
Notes
|
|
2014 £m
|
|
2013 £m |
Non-current assets
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
|
6,377
|
|
7,446
|
Interests in joint ventures and associates
|
|
12(d)
|
|
2,395
|
|
2,658
|
Other intangible assets
|
|
|
|
1,991
|
|
1,905
|
Goodwill
|
|
|
|
2,609
|
|
2,819
|
Deferred tax assets
|
|
|
|
354
|
|
105
|
Trade and other receivables
|
|
|
|
87
|
|
150
|
Derivative financial instruments
|
|
13
|
|
313
|
|
227
|
Retirement benefit assets
|
|
14
|
|
185
|
|
205
|
Securities
|
|
11(b)
|
|
263
|
|
202
|
|
|
|
|
14,574
|
|
15,717
|
Current assets
|
|
|
|
|
|
|
Trade and other receivables
|
|
|
|
6,226
|
|
5,446
|
Inventories
|
|
|
|
555
|
|
530
|
Derivative financial instruments
|
|
13
|
|
617
|
|
573
|
Current tax assets
|
|
|
|
88
|
|
151
|
Securities
|
|
11(b)
|
|
11
|
|
9
|
Cash and cash equivalents
|
|
11(b)
|
|
621
|
|
719
|
|
|
|
|
8,118
|
|
7,428
|
Assets of disposal groups classified as held for sale
|
|
|
|
–
|
|
301
|
|
|
|
|
8,118
|
|
7,729
|
Total assets
|
|
|
|
22,692
|
|
23,446
|
Current liabilities
|
|
|
|
|
|
|
Derivative financial instruments
|
|
13
|
|
(1,565)
|
|
(506)
|
Trade and other payables
|
|
|
|
(5,667)
|
|
(5,630)
|
Current tax liabilities
|
|
|
|
(348)
|
|
(645)
|
Provisions for other liabilities and charges
|
|
|
|
(395)
|
|
(258)
|
Bank overdrafts, loans and other borrowings
|
|
11(c)
|
|
(1,635)
|
|
(859)
|
|
|
|
|
(9,610)
|
|
(7,898)
|
Liabilities of disposal groups classified as held for sale
|
|
|
|
–
|
|
(99)
|
|
|
|
|
(9,610)
|
|
(7,997)
|
Non-current liabilities
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
(663)
|
|
(1,426)
|
Derivative financial instruments
|
|
13
|
|
(588)
|
|
(431)
|
Trade and other payables
|
|
|
|
(83)
|
|
(64)
|
Provisions for other liabilities and charges
|
|
|
|
(3,203)
|
|
(2,934)
|
Retirement benefit obligations
|
|
14
|
|
(123)
|
|
(165)
|
Bank overdrafts, loans and other borrowings
|
|
11(c)
|
|
(5,351)
|
|
(5,172)
|
|
|
|
|
(10,011)
|
|
(10,192)
|
Total liabilities
|
|
|
|
(19,621)
|
|
(18,189)
|
Net assets
|
|
|
|
3,071
|
|
5,257
|
Share capital
|
|
|
|
311
|
|
321
|
Share premium
|
|
|
|
931
|
|
931
|
Retained earnings
|
|
|
|
1,825
|
|
4,255
|
Other equity
|
|
|
|
(332)
|
|
(315)
|
Total shareholders’ equity
|
|
|
|
2,735
|
|
5,192
|
Non-controlling interests
|
|
|
|
336
|
|
65
|
Total shareholders’ equity and non-controlling interests
|
|
|
|
3,071
|
|
5,257
|
The Financial Statements on pages 21 to 63, of which the notes on pages
25 to 63 form part, were approved and authorised for issue by the Board
of Directors on 19 February 2015 and were signed below on its behalf by:
Iain Conn
|
Chief Executive
|
GROUP CASH FLOW STATEMENT
|
|
|
|
|
|
|
Year ended 31 December
|
|
Notes
|
|
2014 £m
|
|
2013 £m
|
Group operating (loss)/profit including share of results of joint
ventures and associates
|
|
|
|
(1,137)
|
|
1,892
|
Less share of profit of joint ventures and associates, net of
interest and taxation
|
|
12(a)
|
|
(132)
|
|
(171)
|
Group operating (loss)/profit before share of results of joint
ventures and associates
|
|
|
|
(1,269)
|
|
1,721
|
Add back/(deduct):
|
|
|
|
|
|
|
Depreciation, amortisation, write-downs and impairments
|
|
|
|
3,288
|
|
2,319
|
Profit on disposals
|
|
|
|
(372)
|
|
(21)
|
(Decrease)/increase in provisions
|
|
|
|
(37)
|
|
162
|
Defined benefit pension service cost and contributions
|
|
|
|
(83)
|
|
(87)
|
Employee share scheme costs
|
|
|
|
39
|
|
43
|
Unrealised losses/(gains) arising from re-measurement of energy
contracts
|
|
|
|
1,160
|
|
(400)
|
Operating cash flows before movements in working capital
|
|
|
|
2,726
|
|
3,737
|
Decrease in inventories
|
|
|
|
4
|
|
78
|
Increase in trade and other receivables (i)
|
|
|
|
(631)
|
|
(456)
|
(Decrease)/increase in trade and other payables (i)
|
|
|
|
(50)
|
|
697
|
Operating cash flows before payments relating to taxes, interest and
exceptional charges
|
|
|
|
2,049
|
|
4,056
|
Taxes paid
|
|
|
|
(707)
|
|
(892)
|
Payments relating to exceptional charges
|
|
|
|
(125)
|
|
(224)
|
Net cash flow from operating activities
|
|
|
|
1,217
|
|
2,940
|
Purchase of businesses
|
|
|
|
(131)
|
|
(1,115)
|
Sale of businesses
|
|
|
|
658
|
|
140
|
Purchase of property, plant and equipment and intangible assets
|
|
5(f)
|
|
(1,456)
|
|
(1,615)
|
Sale of property, plant and equipment and intangible assets
|
|
|
|
17
|
|
17
|
Investments in joint ventures and associates
|
|
|
|
(26)
|
|
(51)
|
Dividends received from joint ventures and associates
|
|
12(c)
|
|
138
|
|
193
|
Repayments of loans to, and disposal of investments in, joint
ventures and associates
|
|
|
|
109
|
|
59
|
Interest received
|
|
|
|
35
|
|
29
|
Sale/(purchase) of securities
|
|
11(b)
|
|
5
|
|
(8)
|
Net cash flow from investing activities
|
|
|
|
(651)
|
|
(2,351)
|
Issue and surrender of ordinary share capital for share awards, net
of payments for own shares |
|
|
|
25
|
|
20
|
Purchase of treasury shares under share repurchase programme
|
|
|
|
(422)
|
|
(502)
|
Investment by non-controlling interests
|
|
|
|
119
|
|
–
|
Distribution to non-controlling interests
|
|
|
|
(18)
|
|
(8)
|
Financing interest paid
|
|
|
|
(296)
|
|
(248)
|
Repayment of borrowings
|
|
11(b)
|
|
(518)
|
|
(400)
|
Cash received from borrowings, net of linked deposit
|
|
11(b)
|
|
1,311
|
|
1,209
|
Equity dividends paid
|
|
|
|
(864)
|
|
(862)
|
Net cash flow from financing activities
|
|
|
|
(663)
|
|
(791)
|
Net decrease in cash and cash equivalents
|
|
|
|
(97)
|
|
(202)
|
Cash and cash equivalents at 1 January
|
|
|
|
719
|
|
931
|
Effect of foreign exchange rate changes
|
|
|
|
(1)
|
|
(10)
|
Cash and cash equivalents at 31 December
|
|
|
|
621
|
|
719
|
Included in the following line of the Group Balance Sheet:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
11(b)
|
|
621
|
|
719
|
(i) Includes net outflow of £640 million of cash collateral in 2014
(2013: £82 million inflow). See note 11(b).
The notes on pages 25 to 63 form part of these Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
1. General information, basis of preparation and summary of
significant new accounting policies and reporting changes
|
This section details new accounting standards, amendments and
interpretations, whether these are effective in 2014 or later
years, and if and how these are expected to impact the financial
position and performance of the Group.
|
General Information
Centrica plc is a Company domiciled and incorporated in the UK. The
address of the registered office is Millstream, Maidenhead Road,
Windsor, Berkshire, SL4 5GD. The Company has its listing on the London
Stock Exchange.
The Financial Statements for the year ended 31 December 2014 included in
this announcement were authorised for issue in accordance with a
resolution of the Board of Directors on 19 February 2015.
The preliminary results for the year ended 31 December 2014 have been
extracted from audited accounts (with the exception of notes 19 to 23
which have not been audited) which have not yet been delivered to the
Registrar of Companies. The Financial Statements set out in this
announcement do not constitute statutory accounts for the year ended 31
December 2014 or 31 December 2013. The financial information for the
year ended 31 December 2013 is derived from the statutory accounts for
that year. The report of the auditors on the statutory accounts for the
year ended 31 December 2014 was unqualified and did not contain a
statement under Section 498 of the Companies Act 2006.
Basis of preparation
The accounting policies applied in these condensed Financial Statements
for the year ended 31 December 2014 are consistent with those of the
annual Financial Statements for the year ended 31 December 2013, as
described in those Financial Statements, with the exception of
standards, amendments and interpretations effective in 2014 and other
presentational changes.
(a) Standards, amendments, and interpretations effective or adopted
in 2014
(i) IFRIC 21
IFRIC 21: ‘Levies’ has been applied by the Group for the first time in
the current period. This interpretation clarifies the point at which an
entity should recognise a liability to pay a levy. The interpretation
provides a definition of a levy and states that an obligating event must
occur for a liability to be recognised – the obligating event being the
activity that triggers the payment of the levy. Economic compulsion
and/or preparation of the financial statements on the going concern
basis do not imply that the Group has a present obligation to pay a levy.
In 2014, this interpretation is applicable to a number of government
schemes including the Energy Company Obligation (ECO) and the Renewables
Obligation in the UK. However, IFRIC 21 has not materially changed the
accounting for these schemes in the Group’s consolidated Financial
Statements.
This interpretation will also apply to the funding of Contracts for
Difference (CfDs) which are being put in place as part of the
Electricity Market Reform (EMR) introduced by the UK Government.
Payments made by the CfD counterparty to qualifying generators will be
funded by all licensed electricity suppliers. The supplier payments will
be in the scope of IFRIC 21 when they commence from 1 April 2015.
(ii) Other amendments
In the current year, the Group has applied the following amendments to
IFRSs as issued by the International Accounting Standards Board (IASB)
as they are mandatorily effective for accounting periods beginning on or
after 1 January 2014:
-
Amendments to IAS 32: ‘Financial instruments: Presentation’ related to
offsetting financial assets and financial liabilities
-
Amendments to IAS 36: ‘Impairment’ related to recoverable amount
disclosures for non-financial assets
-
Amendments to IAS 39: ‘Financial instruments: Recognition and
measurement’ related to the novation of derivatives and continuation
of hedge accounting.
None of the above amendments have had a material impact on the Group
consolidated Financial Statements.
(b) Standards and amendments that are issued but not yet applied by
the Group
The Group has not yet applied the following standards and amendments as
these are not yet effective and remain subject to endorsement by the
European Union (EU):
-
IFRS 9: ‘Financial instruments’
-
IFRS 15: ‘Revenue from contracts with customers’
-
Amendments to IFRS 11: ‘Joint arrangements’ related to the acquisition
of interests in joint operations and the sale or contribution of
assets between an investor and its associate or joint venture
-
Amendment to IAS 16: ‘Property, plant and equipment’ and IAS 38:
‘Intangible assets’ related to the clarification of acceptable methods
of depreciation and amortisation
-
Annual Improvement Project 2012-2014
-
IAS 1: ‘Presentation of financial statements’.
The following standards and amendments are not yet effective but have
been endorsed by the EU:
-
Annual Improvement Project 2010-2012
-
Annual Improvement Project 2011-2013
-
Amendment to IAS 19: ‘Employee benefits’ related to employee
contributions to defined benefit plans.
The Directors do not anticipate that the application of the Annual
Improvement Projects and the Amendments to IAS 1, IAS 16, IAS 19, IAS 38
and IFRS 11 (in relation to the sale or contribution of assets between
an investor and its associate or joint venture) will have a material
impact on the amounts reported and disclosed.
The amendment to IFRS 11 in relation to acquisitions of interests in
joint operations, which will be effective in the 2016 Group consolidated
Financial Statements, clarifies that an acquisition of a joint operation
that meets the definition of a business is accounted for in accordance
with IFRS 3: ‘Business combinations’. This will lead to a change to the
Group’s current accounting policy for this type of acquisition. However,
the amendment is only applicable prospectively for acquisitions on or
after 1 January 2016 and therefore the accounting of acquisitions prior
to this date will not be restated.
The Group is currently in the process of assessing the impact of IFRS 9
and IFRS 15. The preliminary view for IFRS 9 is that it will not have a
material impact on the Group’s consolidated Financial Statements. In
respect of IFRS 15, it is too early to conclude what impact this
standard will have as a detailed impact assessment is required.
Particular focus will need to be given to customer contracts in the
Group’s International Downstream business.
At this stage, it is not practicable to provide a quantified estimate of
the effects of IFRS 9 and IFRS 15. This will be provided once the Group
has completed the detailed reviews.
2. Centrica specific accounting measures
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This section sets out the Group’s specific accounting measures
applied in the preparation of the consolidated Financial
Statements. These measures enable the users of the accounts
to understand the Group’s underlying and statutory business
performance separately.
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Use of adjusted profit measures
The Directors believe that reporting adjusted profit and adjusted
earnings per share provides additional useful information on business
performance and underlying trends. These measures are used for internal
performance purposes. The adjusted measures in this report are not
defined terms under IFRS and may not be comparable with similarly titled
measures reported by other companies.
The measure of operating profit used by management to evaluate segment
performance is adjusted operating profit. Adjusted operating profit is
defined as operating profit before:
-
exceptional items;
-
certain re-measurements;
-
depreciation resulting from fair value uplifts to property, plant and
equipment (PP&E) on the acquisition of the Strategic Investments
acquired in 2009;
but including:
-
the Group’s share of the results from joint ventures and associates
before interest and taxation.
Note 5 contains an analysis of adjusted operating profit by segment and
a reconciliation of adjusted operating profit to operating profit after
exceptional items and certain re-measurements. Note 5 also details an
analysis of adjusted operating profit after taxation by segment and a
reconciliation to the statutory result for the year. Adjusted operating
profit after taxation is defined as segment operating profit after tax,
before exceptional items, certain re-measurements and impact of fair
value uplifts from the Strategic Investments acquired in 2009. This
includes the operating results of equity-accounted interests, net of
associated taxation, before interest and associated taxation.
Adjusted earnings is defined as earnings before:
-
exceptional items net of taxation;
-
certain re-measurements net of taxation; and
-
depreciation of fair value uplifts to PP&E on the acquisition of
Strategic Investments, net of taxation.
A reconciliation of earnings is provided in note 10.
The Directors have determined that for Strategic Investments acquired in
2009, it is important to separately identify the earnings impact of
increased depreciation arising from the acquisition-date fair value
uplifts made to PP&E over their useful economic lives. As a result of
the nature of fair value assessments in the energy industry the value
attributed to strategic assets is a subjective judgement based on a wide
range of complex variables at a point in time. The subsequent
depreciation of the fair value uplifts bears little relationship to
current market conditions, operational performance or underlying cash
generation. Management, therefore, reports and monitors the operational
performance of Strategic Investments before the impact of depreciation
on fair value uplifts to PP&E and the segmental results are presented on
a consistent basis.
The Group has two Strategic Investments for which reported profits have
been adjusted due to the impact of fair value uplifts. These Strategic
Investments relate to the 2009 acquisitions of Venture Production plc
(Venture); the operating results of which are included within the
Centrica Energy – Gas segment and the acquisition of the 20% interest in
Lake Acquisitions Limited (Nuclear), which owns the former British
Energy Group nuclear power station fleet now operated by EDF; the
results of which are included within the Centrica Energy – Power segment.
(i) Venture
Significant adjustments have been made to the acquired PP&E to report
the acquired oil and gas field interests at their acquisition-date fair
values which are subsequently depreciated through the Group Income
Statement over their respective useful economic lives using the unit of
production method. Whilst the impact of unwinding the PP&E at their
acquisition-date fair values is included in overall reported profit for
the year, the Directors have reversed the earnings impact of the
increased depreciation and related taxation resulting from fair value
uplifts to the acquired oil and gas interests in order to arrive at
adjusted profit after taxation.
(ii) Nuclear
The 20% interest in Nuclear is accounted for as an investment in an
associate using the equity method. The Group reports its share of the
associate’s profit or loss, which is net of interest and taxation,
within the Group Income Statement.
The most significant fair value adjustments arising on the acquisition
of the 20% investment in Nuclear relate to the fair value uplifts made
to the nuclear power stations to report the PP&E at their
acquisition-date fair values and fair value uplifts made to energy
procurement contracts and energy sales contracts to report these at
their acquisition-date fair values.
Whilst the impact of increased depreciation and related taxation through
unwinding the fair value uplifts to the nuclear power stations is
included in the share of associate’s post-acquisition result included in
the overall reported Group result for the year, the Directors have
reversed these impacts in arriving at adjusted profit for the year. The
impact of unwinding the acquisition-date fair values attributable to the
acquired energy procurement and energy sales contracts is included
within certain re-measurements.
Exceptional items and certain re-measurements
The Group reflects its underlying financial results in the ‘business
performance’ column of the Group Income Statement. To be able to provide
readers with this clear and consistent presentation, the effects of
‘certain re-measurements’ of financial instruments, and ‘exceptional
items’, are reported in a different column in the Group Income Statement.
The Group is an integrated energy business. This means that it utilises
its knowledge and experience across the gas and power (and related
commodity) value chains to make profits across the core markets in which
it operates. As part of this strategy, the Group enters into a number of
forward energy trades to protect and optimise the value of its
underlying production, generation, storage and transportation assets
(and similar capacity or off-take contracts), as well as to meet the
future needs of our customers (downstream demand). These trades are
designed to reduce the risk of holding such assets, contracts or
downstream demand and are subject to strict risk limits and controls.
Primarily because some of these trades include terms that permit net
settlement (they are prohibited from being designated as ‘own use’), the
rules within IAS 39 require them to be individually fair valued. Fair
value movements on these commodity derivative trades do not reflect the
underlying performance of the business because they are economically
related to our upstream assets, capacity/off-take contracts or
downstream demand, which are typically not fair valued. Therefore, these
certain re-measurements are reported separately and are subsequently
reflected in business performance when the underlying transaction or
asset impacts profit or loss.
The arrangements discussed above and reflected as certain
re-measurements are all managed separately from proprietary energy
trading activities where trades are entered into speculatively for the
purpose of making profits in their own right. These proprietary trades
are included in the business performance column (in the results before
certain re-measurements).
Exceptional items are those items which are of a non-recurring nature
and, in the judgement of the Directors, need to be disclosed separately
by virtue of their nature, size or incidence. Again, to ensure the
business performance column reflects the underlying results of the
Group, these exceptional items are also reported in a separate column in
the Group Income Statement. Items which may be considered exceptional in
nature include disposals of businesses, business restructurings,
significant onerous contract charges and asset write-downs/impairments.
3. Critical accounting judgements and key sources of estimation
uncertainty
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This section sets out the key areas of judgement and estimation
that have the most significant effect on the amounts recognised in
the Group consolidated Financial Statements.
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(a) Critical judgements in applying the Group’s accounting policies
Such key judgements include the following:
-
the presentation of selected items as exceptional, see notes 2 and 6;
-
the use of adjusted profit and adjusted earnings per share measures,
see notes 2, 5 and 10; and
-
the classification of energy procurement contracts as derivative
financial instruments and presentation as certain re-measurements, see
notes 2, 6 and 13.
In addition, management has made the following key judgements in
applying the Group’s accounting policies that have the most significant
effect on the Group consolidated Financial Statements:
Wind farm disposals
In recent years, the Group has partially disposed of some of its wind
farm companies by selling 50% of the equity voting capital (and 50% of
the shareholder loans where relevant) in, for example, GLID Wind Farms
TopCo Limited and Lincs Wind Farm Limited.
Associated with some of these disposals, the Group contracted to
purchase a large percentage of the output produced by the wind farms
under arm’s length, 15-year off-take agreements. The Group also
contracted to provide management, operational and transitional support
services to these companies as directed by their boards (and
shareholders). Shareholders’ agreements were put in place which include
a number of reserved matters and provide for joint management of the
major decisions of the companies.
Accordingly, the Directors have judged that the partial disposals of
equity interests constituted a loss of control as the Group was no
longer able to exercise control over the relevant activities or
operating and financial policies of these companies. Therefore, the
remaining investments are equity accounted as investments in joint
ventures (see note 12) in accordance with IFRS 11 and IAS 28 (Revised
(2011)): ‘Investments in joint ventures and associates’.
The Directors have also judged that the 15-year off-take agreements are
not leasing arrangements. This is because the Group is not purchasing
substantially all of the economic output of the wind farms. These
contracts are considered to be outside the scope of IAS 39 apart from
the embedded derivatives arising from the pricing terms which are marked
to market separately.
The profits and losses arising on the disposal of equity interests in
wind farms are recognised within the ‘business performance’ column of
the Group Income Statement as part of the ‘Centrica Energy – Power’
segment. These divestments are in line with the Group’s established wind
farm strategy to realise value, share risk and reduce our capital
requirements as individual projects develop, which may involve bringing
in partners at an appropriate stage or full disposal.
Leases – third-party power station tolling arrangements
The Group has two long-term power station tolling contracts considered
to be leases: (i) Spalding in the UK and (ii) Rijnmond in the
Netherlands.
The arrangements provide Centrica with the right to nominate 100% of the
plant capacity for the duration of the contracts in return for a mix of
capacity payments and operating payments based on plant availability.
The Spalding contract runs until 2021 and Centrica holds an option to
extend the tolling arrangement for a further eight years, exercisable by
30 September 2020. If extended, Centrica is granted an option to
purchase the station at the end of this further period. The Directors
have determined that the arrangement should be accounted for as a
finance lease as the lease term is judged to be substantially all of the
economic life of the power station and the present value of the minimum
lease payments at the inception date of the arrangement amounted to
substantially all of the fair value of the power station at that time.
The Rijnmond contract runs until 2030 and Centrica does not have the
right to extend the agreement or any option to purchase the plant. The
Directors have determined that the arrangement should be accounted for
as an operating lease as the lease term is not judged to be
substantially all of the economic life of the power station and the
present value of the minimum lease payments at the inception date of the
arrangement did not amount to substantially all of the fair value of the
power station at that time. Details of the operating lease disclosures
are included in note 16.
Business combinations and asset acquisitions
Business combinations and acquisitions of associates and joint ventures
require a fair value exercise to be undertaken to allocate the purchase
price (cost) to the fair value of the acquired identifiable assets,
liabilities, contingent liabilities and goodwill.
As a result of the nature of fair value assessments in the energy
industry this purchase price allocation exercise requires subjective
judgements based on a wide range of complex variables at a point in
time. Management uses all available information to make the fair value
determinations.
During the year the Group has made one material acquisition – Bord Gáis
Energy Limited. This acquisition has been accounted for as a business
combination as set out in note 15.
The key areas of judgement were the value of customer relationships, the
favourable and unfavourable pricing terms of gas and power purchase
contracts and the value of the gas-fired power station. Customer
relationship valuations are based on anticipated retention rates as well
as expected margins for the customer extensions based on unit margins
for gas and power (these variables being key inputs for modelling
purposes). Customer relationship valuations have inherent risks as they
are based on estimates in respect of (i) customer performance, (ii)
future margin rates and (iii) future renewal rates (customer churn).
The value of the gas and power purchase contracts as well as the
valuation of the power station are based on forward market curves
derived from both liquid market data and internal predictions of future
prices. Any significant changes to these assumptions may have a material
impact on the valuation of the business acquired.
Consolidation of the CQ Energy Canada Partnership
The Suncor upstream acquisition in 2013 involved the formation of the CQ
Energy Canada Partnership (CQECP) to acquire Suncor Energy’s North
American oil and gas assets. CQECP is owned and funded by the Group and
Qatar Petroleum International (QPI) on a 60:40 basis. The partnership
provides the Group with the ability to control the business plan and
budgets and consequently the general operation of the assets.
Accordingly, this arrangement has been assessed under IFRS 10:
‘Consolidated financial statements’ and the conclusion has been reached
that the Group has power over the relevant activities of CQECP. This
entity has been fully consolidated into the Group’s Financial Statements
and QPI’s ownership share is represented as a non-controlling interest.
Energy Company Obligation
The Energy Company Obligation (ECO) order requires UK-licenced energy
suppliers to improve the energy efficiency of domestic households from 1
January 2013. Targets are set in proportion to the size of historic
customer bases and must be delivered by 31 March 2015 (for ECO phase 1)
and by 31 March 2017 (for ECO phase 2). The Group continues to judge
that it is not legally obligated by this order until 31 March 2015 and
31 March 2017 respectively. Accordingly, the costs of delivery are
recognised as incurred, when cash is spent or unilateral commitments
made resulting in obligations that cannot be avoided.
In prior periods, the Group had entered into a number of contractual
arrangements and commitments, and issued a public statement to underline
its commitment to deliver a specific proportion of the ECO requirements.
Consequently, the Group’s result included the costs of these contractual
arrangements and commitment obligations. The Group has now delivered in
excess of those commitments.
Metering contracts
The Department of Energy and Climate Change (DECC) has modified the UK
gas and electricity supply licences requiring all domestic premises to
be fitted with compliant smart meters for measuring energy consumption
by 31 December 2020. The Group has a number of existing rental contracts
for non-compliant meters that include penalty charges if these meters
are removed from use before the end of their deemed useful lives. The
Group considers that these contracts are not onerous until the meters
have been physically removed from use and, therefore, only recognises a
provision for penalty charges at this point.
As part of the smart meter roll-out, the Group has entered into new
meter rental arrangements with third parties. The Group judges these are
not leases because it does not have the right to physically or
operationally control the smart meters and other parties also take a
significant amount of the output from the assets.
Disposal groups classified as held for sale
On 8 May 2014, the Group announced that it had undertaken a strategic
review of its UK power station fleet and that it intended to focus its
UK gas-fired power generation on small flexible ‘peaking’ plants. The
Group sought to release capital from its three larger operating plants
(Langage, Humber and Killingholme) in order to focus on other investment
opportunities. These three power stations were classified as a disposal
group held for sale as at 8 May 2014 and at the half year as the Group
considered it highly probable that their value would be principally
recovered through a divestment and that this disposal would occur within
12 months. The Group ran a disposal process throughout the second half
of 2014 and continued to expect the value of the assets to be recovered
through a divestment. In December, the first capacity market auction
prices cleared at a level significantly below market expectations with
an expected consequential decline in bidder confidence. These events led
the Group to reassess the asset held for sale classification and decide
the disposal was no longer ‘highly probable’. Consequently, the assets
were reclassified out of assets held for sale as at 31 December. The
culmination of the bid process in February 2015 provided further
evidence of the conditions existing at 31 December, as the bid levels
were below the Group’s hold value. An impairment of £384 million was
recorded on reclassification to measure the assets at their recoverable
amounts at the date of transfer. See note 6 for further details.
(b) Key sources of estimation uncertainty
Revenue recognition – unread gas and electricity meters
Revenue for energy supply activities includes an assessment of energy
supplied to customers between the date of the last meter reading and the
year end (unread). Unread gas and electricity comprises both billed and
unbilled revenue. It is estimated through the billing systems, using
historical consumption patterns, on a customer by customer basis, taking
into account weather patterns, load forecasts and the differences
between actual meter reads being returned and system estimates. Actual
meter reads continue to be compared to system estimates between the
balance sheet date and the finalisation of the accounts. An assessment
is also made of any factors that are likely to materially affect the
ultimate economic benefits which will flow to the Group, including bill
cancellation and re-bill rates. To the extent that the economic benefits
are not expected to flow to the Group, the value of that revenue is not
recognised. The judgements applied, and the assumptions underpinning
these judgements, are considered to be appropriate. However, a change in
these assumptions would have an impact on the amount of revenue
recognised.
Industry reconciliation process – cost of sales
Industry reconciliation procedures are required as differences arise
between the estimated quantity of gas and electricity the Group deems to
have supplied and billed customers, and the estimated quantity industry
system operators deem the individual suppliers, including the Group, to
have supplied to customers. The difference in deemed supply is referred
to as imbalance. The reconciliation procedures can result in either a
higher or lower value of industry deemed supply than has been estimated
as being supplied to customers by the Group, but in practice tends to
result in a higher value of industry deemed supply. The Group reviews
the difference to ascertain whether there is evidence that its estimate
of amounts supplied to customers is inaccurate or whether the difference
arises from other causes. The Group’s share of the resulting imbalance
is included within commodity costs charged to cost of sales. Management
estimates the level of recovery of imbalance which will be achieved
either through subsequent customer billing or through developing
industry settlement procedures.
Decommissioning costs
The estimated cost of decommissioning at the end of the producing lives
of fields (including storage facility assets) is reviewed periodically
and is based on reserves, price levels and technology at the balance
sheet date. Provision is made for the estimated cost of decommissioning
at the balance sheet date. The payment dates of total expected future
decommissioning costs are uncertain and dependent on the lives of the
facilities, but are currently anticipated to be incurred until 2055,
with the majority of the costs expected to be paid between 2020 and 2030.
Significant judgements and estimates are also made about the costs of
decommissioning nuclear power stations and the costs of waste management
and spent fuel. These estimates impact the carrying value of our Nuclear
investment. Various arrangements and indemnities are in place with the
Secretary of State with respect to these costs.
Gas and liquids reserves
The volume of proven and probable (2P) gas and liquids reserves is an
estimate that affects the unit of production method of depreciating
producing gas and liquids PP&E as well as being a significant estimate
affecting decommissioning and impairment calculations. The factors
impacting gas and liquids estimates, the process for estimating reserve
quantities and reserve recognition are described on page 64.
The impact of a change in estimated 2P reserves is dealt with
prospectively by depreciating the remaining book value of producing
assets over the expected future production. If 2P reserves estimates are
revised downwards, earnings could be affected by higher depreciation
expense or an immediate write-down (impairment) of the asset’s book
value.
Determination of fair values – energy derivatives
Fair values of energy derivatives are estimated by reference in part to
published price quotations in active markets and in part by using
valuation techniques. Quoted market prices considered for valuation
purposes are the bid price for assets held and/or liabilities to be
issued, or the offer price for assets to be acquired and/or liabilities
held, although the mid-market price or another pricing convention may be
used as a practical expedient (where typically used by other market
participants).
Impairment of long-lived assets
The Group has several material long-lived assets that are assessed or
tested for impairment at each reporting date in accordance with the
Group’s accounting policy as described in note 6. The Group makes
judgements and estimates in considering whether the carrying amounts of
these assets or cash generating units (CGUs) are recoverable. The key
assets that are subjected to impairment tests are upstream gas and oil
assets, power generation assets, storage facility assets, Nuclear
investment (investment in associate) and goodwill.
Upstream gas and oil assets
The recoverable amount of the Group’s gas and oil assets is determined
by discounting the post-tax cash flows expected to be generated by the
assets over their lives, taking into account those assumptions that
market participants would take into account when assessing fair value.
The cash flows are derived from projected production profiles of each
field, based predominantly on expected 2P reserves and take into account
forward prices for gas and liquids over the relevant period. Where
forward market prices are not available, prices are determined based on
internal model inputs.
Further details of the assumptions used in determining the recoverable
amounts and the impairments booked during the year are provided in note
6.
Power generation assets
The recoverable amount of the Group’s power generation assets is
calculated by discounting the pre-tax cash flows expected to be
generated by the assets and is dependent on views of forecast power
generation and forecast power, gas, carbon and capacity prices (where
applicable) and the timing and extent of capital expenditure. Where
forward market prices are not available, prices are determined based on
internal model inputs. Further details of the impairments booked during
the year are provided in note 6.
Storage facility assets
The recoverable amount of our operational and planned storage facilities
is calculated by discounting the post-tax cash flows expected to be
generated by the assets based on predictions of seasonal gas price
differentials and shorter term price volatilities and the value from
extracting cushion gas at the end of the field life less any related
capital and operating expenditure.
Nuclear investment
The recoverable amount of the Nuclear investment is based on the value
of the existing UK nuclear fleet operated by EDF. The existing fleet
value is calculated by discounting post-tax cash flows derived from the
stations based on forecast power generation and power prices, whilst
taking account of planned outages and the possibility of life
extensions. Further details of the impairments booked during the year
are provided in note 6.
Goodwill
Goodwill does not generate independent cash flows and accordingly is
allocated at inception to specific CGUs or groups of CGUs for impairment
testing purposes. The recoverable amounts of these CGUs are derived from
estimates of future cash flows (as described in the asset classes above)
and hence the goodwill impairment tests are also subject to these key
estimates. The results of these tests may then be verified by reference
to external market valuation data.
Further detail on impairments arising and the assumptions used in
determining the recoverable amounts is provided in note 6.
Credit provisions for trade and other receivables
The methodology for determining provisions for credit losses on trade
and other receivables is based on an incurred loss model and is
determined by application of expected default and loss factors, informed
by historical loss experience and current sampling to the various
balances receivable from residential and business customers on a
portfolio basis, in addition to provisions taken against individual
accounts. Balances are written off when recoverability is assessed as
being remote. Although the provisions recognised are considered
appropriate, the use of different assumptions or changes in economic
conditions could lead to movements in the provisions and therefore
impact the Group Income Statement.
Pensions and other post-employment benefits
The cost of providing benefits under defined benefit schemes is
determined separately for each of the Group’s schemes under the
projected unit credit actuarial valuation method. Actuarial gains and
losses are recognised in full in the period in which they occur. The key
assumptions used for the actuarial valuation are based on the Group’s
best estimate of the variables that will determine the ultimate cost of
providing post-employment benefits, on which further detail is provided
in note 14.
Provisions for onerous contracts
The Group has entered into a number of commodity procurement and
capacity contracts related to specific assets in the ordinary course of
its business. Where the unavoidable costs of meeting the obligations
under these contracts exceed the associated, expected future net
benefits, an onerous contract provision is recognised. The calculation
of these provisions will involve the use of estimates. The key onerous
provisions are as follows:
Rijnmond power station operating lease
The onerous provision is calculated by taking the unavoidable costs that
will be incurred under the contract and deducting any estimated revenues.
European gas transportation capacity contracts
The onerous provision is calculated using capacity costs incurred under
the contracts, less any predicted income. The provision assumes that
contracts for capacity in Continental Europe are onerous but those that
enable gas to be transported directly back into the UK may be necessary
to achieve security of supply in the future. Therefore, no provision has
been recognised relating to these latter contracts.
Direct Energy wind farm power purchase agreements
The onerous nature of the power purchase agreements is measured using
estimates relating to wind forecasts, forward curves for energy prices,
balancing costs and renewable energy certificates.
4. Risk management
The Group’s normal operating, investing and financing activities expose
it to a variety of risks. The processes for managing these risks are set
out in the 2013 Annual Report and Accounts. Throughout the year, we
continued to develop the integrated approach to our risk and assurance
activities. Specifically the following improvements were implemented:
-
development of a combined risk and controls universe designed to
ensure a more consistent and comprehensive approach to risk
identification;
-
improved and more explicit consideration of business risk as part of
our capital allocation framework process;
-
refresh of our processes, to identify and assess ‘Black Swan’ and high
impact, low likelihood risks;
-
greater interaction with specialist risk areas, such as Information
Security and Health, Safety, Environment and Security, allowing for a
more consistent and granular approach to risk identification and
reporting;
-
greater engagement with the Executive through changes to the Group
risk report with inclusion of more diverse analysis; and,
-
increased resourcing in a number of second line of defence functions.
Financial risk management is overseen by the GFRMC according to
objectives, targets and policies set by the Board. Commodity price risk
management is carried out in accordance with individual business unit
Financial Risk Management Committees and their respective financial risk
management policies, as approved by the GFRMC under delegated authority
from the Board. Treasury risk management, including management of
currency risk, interest rate risk and liquidity risk is carried out by a
central Group Treasury function in accordance with the Group’s financing
and treasury policy, as approved by the Board.
The wholesale credit risks associated with commodity trading and
treasury positions are managed in accordance with the Group’s credit
risk policy and collateral risk policy. Downstream credit risk
management is carried out in accordance with individual business unit
credit policies.
Credit risk for financial assets
Credit risk is the risk of loss associated with a counterparty’s
inability or failure to discharge its obligations under a contract. The
Group continues to be vigilant in managing counterparty risks in
accordance with its financial risk management policies. In 2014 there
have been fewer credit rating downgrades of financial institutions and
European energy majors, than in 2013. The Group continually reviews its
rating thresholds for counterparty credit limits, and updates these as
necessary based on a consistent set of principles. It continues to
operate within its limits. In the US and Europe, ongoing regulatory
changes are increasing trading over exchanges or via zero threshold
margined contracts. This helps to reduce counterparty credit risk, but
carries increased liquidity requirements. The fall in oil prices towards
the end of 2014, if sustained, may add financial pressure to certain
counterparties which may in turn have a detrimental impact on their
financial strength and resulting credit risk profile. These pressures
will be taken into account in counterparty credit reviews.
Liquidity risk management and going concern
The Group has a number of treasury and risk policies to monitor and
manage liquidity risk. Cash forecasts identifying the Group’s liquidity
requirements are produced regularly and are stress-tested for different
scenarios, including, but not limited to, reasonably possible increases
or decreases in commodity prices and the potential cash implications of
a credit rating downgrade. The Group seeks to ensure that sufficient
financial headroom exists for at least a 12-month period to safeguard
the Group’s ability to continue as a going concern. It is the Group's
policy to maintain committed facilities and/or available surplus cash
resources of at least £1,200 million, raise at least 75% of its net debt
(excluding non-recourse debt) in the long-term debt market and to
maintain an average term to maturity in the recourse long-term debt
portfolio greater than five years.
At 31 December 2014, the Group had undrawn committed credit facilities
of £3,751 million (2013: £3,780 million) and £374 million (2013: £484
million) of unrestricted cash and cash equivalents. 112% (2013
(restated): 115%) of the Group’s net debt has been raised in the
long-term debt market and the average term to maturity of the long-term
debt portfolio was 12.8 years (2013: 13.8 years).
The Group’s liquidity is impacted by the cash posted or received under
margin and collateral agreements. The terms and conditions of these
depend on the counterparty and the specific details of the transaction.
Cash is generally returned to the Group or by the Group within two days
of trade settlement. Refer to note 11(b) for movement in cash posted or
received as collateral.
5. Segmental analysis
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The Group’s operating segments are those used internally by
management to run the business and make decisions. The Group’s
operating segments are based on products and services. The operating
segments are also the Group’s reportable segments.
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(a) Segmental structure
On 30 June 2014, the Group acquired 100% of Bord Gáis Energy’s gas and
electricity supply business in the Republic of Ireland, including the
Whitegate gas-fired power station. Bord Gáis Energy is reported as a
separate segment within International Downstream.
The types of products and services from which each reportable segment
derived its revenues during the year are detailed below.
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Segment
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Description
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International Downstream
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British Gas:
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Residential energy supply
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The supply of gas and electricity to residential customers in the UK
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Residential services
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Installation, repair and maintenance of domestic central heating,
plumbing and drains, gas appliances and kitchen appliances,
including the provision of fixed-fee maintenance/breakdown service
and insurance contracts in the UK
|
Business energy supply and services |
|
The supply of gas and electricity and provision of energy-related
services to business customers in the UK
|
Direct Energy:
|
|
|
Residential energy supply
|
|
The supply of gas and electricity to residential customers in North
America
|
Business energy supply
|
|
(i) The supply of gas, electricity and energy management solutions
to commercial and industrial customers in North America, (ii)
power generation, and (iii) procurement and trading activities in
the North American wholesale energy markets
|
Residential and business services
|
|
Installation and maintenance of heating, ventilation and air
conditioning (HVAC) equipment, water heaters, solar power generating
equipment and the provision of breakdown services, including the
provision of fixed-fee maintenance/breakdown service and insurance
contracts in North America
|
Bord Gáis Energy:
|
|
(i) The supply of gas, electricity and energy management solutions
to residential, commercial and industrial customers, and (ii) power
generation in the Republic of Ireland
|
International Upstream
|
|
|
Centrica Energy:
|
|
|
Gas
|
|
Production, processing, trading and optimisation of gas and oil
and the development of new fields to grow reserves
|
Power
|
|
Generation, trading and optimisation of power from thermal, nuclear
and wind sources
|
Centrica Storage
|
|
Gas storage in the UK
|
(b) Revenue
|
Gross segment revenue represents revenue generated from the sale of
products and services to both third parties and to other reportable
segments of the Group. Group revenue reflects only the sale of
products and services to third parties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
2013
|
Year ended 31 December
|
|
Gross segment revenue £m
|
|
Less inter- segment revenue £m
|
|
Group revenue £m
|
|
Gross segment revenue £m
|
|
Less inter- segment revenue £m
|
|
Group revenue £m
|
International Downstream
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential energy supply
|
|
8,328
|
|
(3)
|
|
8,325
|
|
9,487
|
|
–
|
|
9,487
|
Residential services
|
|
1,658
|
|
(156)
|
|
1,502
|
|
1,655
|
|
(149)
|
|
1,506
|
Business energy supply and services
|
|
2,981
|
|
(47)
|
|
2,934
|
|
3,084
|
|
(38)
|
|
3,046
|
British Gas
|
|
12,967
|
|
(206)
|
|
12,761
|
|
14,226
|
|
(187)
|
|
14,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential energy supply
|
|
2,571
|
|
–
|
|
2,571
|
|
2,517
|
|
–
|
|
2,517
|
Business energy supply
|
|
8,744
|
|
(6)
|
|
8,738
|
|
4,238
|
|
(55)
|
|
4,183
|
Residential and business services
|
|
523
|
|
–
|
|
523
|
|
570
|
|
–
|
|
570
|
Direct Energy
|
|
11,838
|
|
(6)
|
|
11,832
|
|
7,325
|
|
(55)
|
|
7,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bord Gáis Energy
|
|
391
|
|
–
|
|
391
|
|
–
|
|
–
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Upstream
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
|
|
3,644
|
|
(326)
|
|
3,318
|
|
4,596
|
|
(455)
|
|
4,141
|
Power
|
|
1,347
|
|
(343)
|
|
1,004
|
|
1,386
|
|
(402)
|
|
984
|
Centrica Energy
|
|
4,991
|
|
(669)
|
|
4,322
|
|
5,982
|
|
(857)
|
|
5,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Centrica Storage
|
|
149
|
|
(47)
|
|
102
|
|
188
|
|
(51)
|
|
137
|
|
|
30,336
|
|
(928)
|
|
29,408
|
|
27,721
|
|
(1,150)
|
|
26,571
|
|
The Group does not monitor and manage performance by geographic
territory, but we provide below an analysis of revenue and
certain non-current assets by geography.
|
|
|
|
|
|
|
|
Revenue (based on location of customer)
|
|
Non-current assets (based on location of assets) (i)
|
Year ended 31 December
|
|
2014 £m
|
|
2013 £m |
|
2014 £m
|
|
2013 £m |
UK
|
|
15,880
|
|
17,463
|
|
8,132
|
|
8,985
|
North America
|
|
11,996
|
|
7,530
|
|
3,421
|
|
3,534
|
Norway
|
|
478
|
|
695
|
|
1,564
|
|
1,813
|
Rest of the world
|
|
1,054
|
|
883
|
|
255
|
|
496
|
|
|
29,408
|
|
26,571
|
|
13,372
|
|
14,828
|
(i) Non-current assets include goodwill, other intangible assets, PP&E
and interests in joint ventures and associates.
(c) Operating profit and operating profit before taxation
|
The measure of profit used by the Group is adjusted operating
profit. Adjusted operating profit is operating profit before
exceptional items and certain re-measurements and before
depreciation on fair value uplifts on the Strategic Investments
acquired in 2009. This includes results of equity-accounted
interests before interest and taxation.
This note also details adjusted operating profit after taxation.
Both measures are reconciled to their statutory equivalents.
|
|
|
|
|
|
|
|
Adjusted operating profit (i)
|
|
Adjusted operating profit after taxation (ii)
|
Year ended 31 December
|
|
|
|
|
|
|
|
|
2014 £m
|
|
2013 £m |
|
2014 £m
|
|
2013 £m |
International Downstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential energy supply
|
|
|
|
|
|
|
|
|
439
|
|
571
|
|
344
|
|
423
|
Residential services
|
|
|
|
|
|
|
|
|
270
|
|
318
|
|
212
|
|
241
|
Business energy supply and services
|
|
|
|
|
|
|
|
|
114
|
|
141
|
|
91
|
|
113
|
British Gas
|
|
|
|
|
|
|
|
|
823
|
|
1,030
|
|
647
|
|
777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential energy supply
|
|
|
|
|
|
|
|
|
90
|
|
163
|
|
62
|
|
111
|
Business energy supply
|
|
|
|
|
|
|
|
|
32
|
|
77
|
|
17
|
|
53
|
Residential and business services
|
|
|
|
|
|
|
|
|
28
|
|
36
|
|
20
|
|
25
|
Direct Energy
|
|
|
|
|
|
|
|
|
150
|
|
276
|
|
99
|
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bord Gáis Energy
|
|
|
|
|
|
|
|
|
7
|
|
–
|
|
3
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Upstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas (iii)
|
|
|
|
|
|
|
|
|
606
|
|
1,155
|
|
302
|
|
325
|
Power (iii) (iv)
|
|
|
|
|
|
|
|
|
131
|
|
171
|
|
158
|
|
143
|
Centrica Energy
|
|
|
|
|
|
|
|
|
737
|
|
1,326
|
|
460
|
|
468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Centrica Storage
|
|
|
|
|
|
|
|
|
29
|
|
63
|
|
21
|
|
48
|
|
|
1,746
|
|
2,695
|
|
1,230
|
|
1,482
|
Share of joint ventures’/associates’ interest and taxation
|
|
(100)
|
|
(111)
|
|
|
|
|
Depreciation of fair value uplifts to property, plant and equipment
– Venture (iii)
|
|
(31)
|
|
(48)
|
|
|
|
|
Depreciation of fair value uplifts to property, plant and
equipment (net of taxation) – associates – Nuclear (iii)
|
|
(47)
|
|
(18)
|
|
|
|
|
|
|
1,568
|
|
2,518
|
|
|
|
|
Exceptional items (note 6)
|
|
(1,597)
|
|
(1,064)
|
|
|
|
|
Certain re-measurements included within gross profit (note 6)
|
|
(1,134)
|
|
413
|
|
|
|
|
Certain re-measurements of associates’ energy contracts (net of
taxation) (note 6)
|
|
26
|
|
25
|
|
|
|
|
Operating (loss)/profit after exceptional items and
certain re-measurements
|
|
(1,137)
|
|
1,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 £m
|
|
2013 £m |
Adjusted operating profit after taxation (ii)
|
|
|
|
|
|
1,230
|
|
1,482
|
Depreciation of fair value uplifts to property, plant and
equipment (net of taxation) (iii)
|
|
|
|
|
|
(59)
|
|
(37)
|
Impact of changes to UK corporation tax rates (note 8) (v)
|
|
|
|
|
|
(2)
|
|
64
|
Corporate and other taxation, and interest (net of taxation) (vi)
|
|
|
|
|
|
(242)
|
|
(176)
|
Business performance profit for the year
|
|
|
|
|
|
927
|
|
1,333
|
Exceptional items and certain re-measurements (net of taxation)
(note 6)
|
|
|
|
|
|
(1,932)
|
|
(383)
|
Statutory (loss)/profit for the year
|
|
|
|
|
|
(1,005)
|
|
950
|
(i) Segment operating profit before exceptional items, certain
re-measurements and impact of fair value uplifts from the Strategic
Investments acquired in 2009. This includes results of
equity-accounted interests before interest and taxation.
|
(ii) Segment operating profit after tax, before exceptional items,
certain re-measurements and impact of fair value uplifts from the
Strategic Investments acquired in 2009. This includes operating
results of equity-accounted interests, net of associated taxation,
before interest and associated taxation. Segment operating profit
after tax includes £28 million (2013: £1 million) attributable to
non-controlling interests.
|
(iii) See notes 2 and 10 for an explanation of the depreciation on
fair value uplifts to PP&E on the Strategic Investments acquired in
2009.
|
(iv) Power adjusted operating profit after taxation includes a
one-off deferred tax benefit of £44 million (2013: nil) following a
legal entity reorganisation.
|
(v) In 2014 there is no impact of equity accounted interests (2013:
£29 million credit).
|
(vi) Includes joint ventures’/associates’ interest, net of
associated taxation.
|
(d) Included within adjusted operating profit
|
Presented below are certain items included within adjusted operating
profit, including further details of impairments of property, plant
and equipment and write-downs relating to exploration and evaluation
assets.
|
|
|
|
|
|
|
|
|
|
Share of results of joint ventures and associates before
interest and taxation (i)
|
|
Depreciation and impairments of property, plant and equipment
|
|
Amortisation, write-downs and impairments of intangibles
|
Year ended 31 December
|
|
2014 £m
|
|
2013 £m |
|
2014 £m
|
|
2013 £m |
|
2014 £m
|
|
2013 £m |
International Downstream
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential energy supply
|
|
(1)
|
|
(7)
|
|
(17)
|
|
(16)
|
|
(57)
|
|
(48)
|
Residential services
|
|
–
|
|
–
|
|
(27)
|
|
(23)
|
|
(7)
|
|
(8)
|
Business energy supply and services
|
|
–
|
|
–
|
|
(2)
|
|
(2)
|
|
(8)
|
|
(7)
|
British Gas
|
|
(1)
|
|
(7)
|
|
(46)
|
|
(41)
|
|
(72)
|
|
(63)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential energy supply
|
|
–
|
|
–
|
|
(1)
|
|
(1)
|
|
(23)
|
|
(24)
|
Business energy supply
|
|
–
|
|
–
|
|
(1)
|
|
(16)
|
|
(77)
|
|
(36)
|
Residential and business services
|
|
–
|
|
–
|
|
(3)
|
|
(2)
|
|
(7)
|
|
(7)
|
Direct Energy
|
|
–
|
|
–
|
|
(5)
|
|
(19)
|
|
(107)
|
|
(67)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bord Gáis Energy
|
|
–
|
|
–
|
|
(1)
|
|
–
|
|
(3)
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Upstream
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas (ii)
|
|
–
|
|
–
|
|
(809)
|
|
(886)
|
|
(154)
|
|
(111)
|
Power (ii)
|
|
254
|
|
282
|
|
(55)
|
|
(93)
|
|
(2)
|
|
(4)
|
Centrica Energy
|
|
254
|
|
282
|
|
(864)
|
|
(979)
|
|
(156)
|
|
(115)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Centrica Storage
|
|
–
|
|
–
|
|
(34)
|
|
(30)
|
|
–
|
|
–
|
Other (iii)
|
|
–
|
|
–
|
|
(12)
|
|
(15)
|
|
(15)
|
|
(20)
|
|
|
253
|
|
275
|
|
(962)
|
|
(1,084)
|
|
(353)
|
|
(265)
|
(i) The share of results of joint ventures and associates is
before interest, taxation, certain re-measurements and
depreciation of fair value uplifts to PP&E on the Strategic
Investments acquired in 2009.
|
(ii) Depreciation of PP&E is stated before depreciation of fair
value uplifts for the Strategic Investments acquired in 2009.
|
(iii) The Other segment includes corporate functions.
|
Impairment of property, plant and equipment
During 2014, a £34 million (2013: nil) impairment charge was recognised
in the ‘Centrica Energy – Gas’ segment within business performance.
Write-downs of intangible assets
During 2014, £135 million (2013: £95 million) of write-downs relating to
exploration and evaluation assets were recognised in the ‘Centrica
Energy – Gas’ segment within operating costs before exceptional items.
(e) Average capital employed
|
Capital employed represents the investment required to operate
each of the Group’s segments. Capital employed is used by the
Group to calculate the return on capital employed for each of the
Group’s segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
2013
|
Year ended 31 December
|
|
Total average capital employed £m
|
|
Pre-productive capital employed £m
|
|
Productive capital employed £m
|
|
Total average capital employed £m
|
|
Pre-productive capital employed £m
|
|
Productive capital employed £m
|
International Downstream
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential energy supply
|
|
(7)
|
|
–
|
|
(7)
|
|
101
|
|
–
|
|
101
|
Residential services
|
|
173
|
|
–
|
|
173
|
|
218
|
|
–
|
|
218
|
Business energy supply and services
|
|
428
|
|
–
|
|
428
|
|
539
|
|
–
|
|
539
|
British Gas
|
|
594
|
|
–
|
|
594
|
|
858
|
|
–
|
|
858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential energy supply
|
|
982
|
|
–
|
|
982
|
|
820
|
|
–
|
|
820
|
Business energy supply
|
|
1,268
|
|
–
|
|
1,268
|
|
783
|
|
–
|
|
783
|
Residential and business services
|
|
333
|
|
–
|
|
333
|
|
384
|
|
–
|
|
384
|
Direct Energy
|
|
2,583
|
|
–
|
|
2,583
|
|
1,987
|
|
–
|
|
1,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bord Gáis Energy
|
|
54
|
|
–
|
|
54
|
|
–
|
|
–
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Upstream
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas (i)
|
|
3,761
|
|
(1,326)
|
|
2,435
|
|
3,932
|
|
(1,292)
|
|
2,640
|
Power
|
|
3,490
|
|
(24)
|
|
3,466
|
|
3,717
|
|
(282)
|
|
3,435
|
Centrica Energy
|
|
7,251
|
|
(1,350)
|
|
5,901
|
|
7,649
|
|
(1,574)
|
|
6,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Centrica Storage
|
|
256
|
|
–
|
|
256
|
|
435
|
|
(130)
|
|
305
|
Total average segmental capital employed
|
|
10,738
|
|
(1,350)
|
|
9,388
|
|
10,929
|
|
(1,704)
|
|
9,225
|
(i) Capital employed includes £133 million (2013: £35 million)
attributable to non-controlling interests.
Reconciliation of total average segmental capital employed to net
assets in the Group Balance Sheet
|
|
|
|
|
|
Year ended 31 December
|
|
|
2014 £m
|
|
2013 £m |
Total average segmental capital employed
|
|
|
10,738
|
|
10,929
|
Add back/(deduct):
|
|
|
|
|
|
Average intra-group, margin cash and cash balances
|
|
|
668
|
|
281
|
Effect of averaging
|
|
|
(336)
|
|
(81)
|
Total segmental net operating assets at 31 December
|
|
|
11,070
|
|
11,129
|
(Deduct)/add back:
|
|
|
|
|
|
Bank overdrafts and loans, securities and treasury derivatives
|
|
|
(6,641)
|
|
(5,785)
|
Certain derivative financial instruments including balances held by
joint ventures/associates
|
|
|
(1,302)
|
|
(257)
|
Corporate (liabilities)/assets
|
|
|
(118)
|
|
130
|
Net retirement benefit asset
|
|
|
62
|
|
40
|
Net assets in Group Balance Sheet
|
|
|
3,071
|
|
5,257
|
(f) Capital expenditure
|
Capital expenditure represents additions, other than assets
acquired as part of business combinations, to property, plant and
equipment, and intangible assets. Capital expenditure has been
reconciled to the related cash outflow.
|
|
|
|
|
|
|
|
Capital expenditure on property, plant and equipment |
|
Capital expenditure on intangible assets other than
goodwill
|
Year ended 31 December
|
|
|
|
|
|
|
|
|
2014 £m
|
|
2013 £m |
|
2014 £m
|
|
2013 £m |
International Downstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential energy supply
|
|
|
|
|
|
|
|
|
28
|
|
27
|
|
348
|
|
287
|
Residential services
|
|
|
|
|
|
|
|
|
33
|
|
59
|
|
13
|
|
12
|
Business energy supply and services
|
|
|
|
|
|
|
|
|
1
|
|
1
|
|
166
|
|
121
|
British Gas
|
|
|
|
|
|
|
|
|
62
|
|
87
|
|
527
|
|
420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential energy supply
|
|
|
|
|
|
|
|
|
24
|
|
9
|
|
24
|
|
33
|
Business energy supply
|
|
|
|
|
|
|
|
|
3
|
|
19
|
|
84
|
|
64
|
Residential and business services
|
|
|
|
|
|
|
|
|
4
|
|
3
|
|
–
|
|
1
|
Direct Energy
|
|
|
|
|
|
|
|
|
31
|
|
31
|
|
108
|
|
98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bord Gáis Energy
|
|
|
|
|
|
|
|
|
2
|
|
–
|
|
3
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Upstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
|
|
|
|
|
|
|
|
|
923
|
|
982
|
|
217
|
|
147
|
Power
|
|
|
|
|
|
|
|
|
62
|
|
32
|
|
67
|
|
74
|
Centrica Energy
|
|
|
|
|
|
|
|
|
985
|
|
1,014
|
|
284
|
|
221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Centrica Storage
|
|
|
|
|
|
|
|
|
21
|
|
37
|
|
2
|
|
3
|
Other (i)
|
|
11
|
|
15
|
|
15
|
|
39
|
Capital expenditure
|
|
|
|
|
|
1,112
|
|
1,184
|
|
939
|
|
781
|
Capitalised borrowing costs
|
|
(45)
|
|
(43)
|
|
(5)
|
|
(8)
|
Movements in payables and prepayments related to capital expenditure
|
|
3
|
|
123
|
|
(1)
|
|
9
|
Purchases of emissions allowances and renewable obligations
certificates
|
|
–
|
|
–
|
|
(547)
|
|
(431)
|
Net cash outflow (ii)
|
|
|
|
|
|
|
|
|
1,070
|
|
1,264
|
|
386
|
|
351
|
(i) The Other segment relates to corporate assets.
|
(ii) The £386 million (2013: £351 million) purchase of intangible
assets includes £201 million (2013: £121 million) relating to
exploration and evaluation of oil and gas assets.
|
6. Exceptional items and certain re-measurements
|
Exceptional items are those items which are of a non-recurring
nature and, in the judgement of the Directors, need to be disclosed
separately by virtue of their nature, size or incidence. Items which
may be considered exceptional in nature include disposals of
businesses, business restructurings, significant onerous contract
charges and asset write-downs.
|
(a) Exceptional items
|
|
|
|
|
Year ended 31 December
|
|
2014 £m
|
|
2013 £m |
Provision for onerous power procurement contract
|
|
–
|
|
(125)
|
Exceptional items included within gross profit
|
|
–
|
|
(125)
|
Impairment of Centrica Energy exploration and production assets (i)
|
|
(1,189)
|
|
(699)
|
Impairment of UK power generation assets (ii)
|
|
(535)
|
|
–
|
Impairment of Nuclear investment (iii)
|
|
(214)
|
|
–
|
Impairment of UK gas storage assets and associated provision for
onerous capacity contracts
|
|
–
|
|
(240)
|
Gain on disposal of Texas gas-fired power stations (note 15(c))
|
|
219
|
|
–
|
Gain on disposal of Ontario home services business (note 15(c))
|
|
122
|
|
–
|
|
|
(1,597)
|
|
(939)
|
Exceptional items included within Group operating profit
|
|
(1,597)
|
|
(1,064)
|
Taxation on exceptional items (note 8)
|
|
436
|
|
397
|
Net exceptional items after taxation
|
|
(1,161)
|
|
(667)
|
(i) Impairment of Centrica Energy exploration and production assets
has been recognised predominantly due to declining gas and oil
prices. The Group recognised a pre-tax impairment charge of £1,189
million (post-tax charge £712 million) in the ‘Centrica Energy –
Gas’ segment, which included a pre-tax impairment charge of £309
million (post-tax charge £265 million) on the Trinidad and Tobago
gas assets (including £70 million of goodwill), a pre-tax impairment
charge of £837 million (post-tax charge £410 million) on UK and
Norwegian gas and oil assets and a pre-tax impairment charge of £43
million (post-tax charge £37 million) on Canadian upstream assets.
Further details on how the recoverable amounts of fields are
calculated on a fair value less cost of disposal (FVLCD) basis are
provided below.
|
(ii) The Group’s larger UK gas-fired power stations, Langage, Humber
and Killingholme were classified as held for sale on 8 May 2014. The
Group reassessed the likelihood of the value of these assets being
recovered principally through a divestment at 31 December 2014 and,
since the disposal was no longer considered to be ‘highly probable’;
the assets have been reclassified out of held for sale, see note 3
for further details. A pre-tax impairment charge of £371 million
(post-tax charge of £297 million) has been recognised in the
‘Centrica Energy – Power’ segment (including £17 million of
goodwill), predominantly due to declining forecast capacity market
auction prices and clean spark spread prices together with other
changes in assumptions following information gained during the
disposal process. A further £13 million charge (£10 million net of
taxation) was recognised in other comprehensive income to reverse
previous upwards valuations of the impaired assets. The Group also
recognised a pre-tax impairment charge of £164 million (post-tax
£162 million) on its other UK gas-fired power stations based on the
same assumptions. Further details on how the recoverable amount of
the assets is calculated on a VIU basis are provided below.
|
(iii) The Group recognised an impairment charge of £214 million
(post-tax charge of £214 million) on its Nuclear investment within
the ‘Centrica Energy – Power’ segment due to declining forecast
power prices and capacity market auction prices. Further details on
how the recoverable amount of the investment is calculated on a
FVLCD basis are provided below.
|
|
Certain re-measurements are the fair value movements on energy
contracts entered into to meet the future needs of our customers
or to sell the energy produced from our upstream assets. These
contracts are economically related to our upstream assets,
capacity/off-take contracts or downstream demand, which are
typically not fair valued, and are therefore separately identified
in the current period and reflected in business performance in
future periods when the underlying transaction or asset impacts
the Group Income Statement.
|
(b) Certain re-measurements
|
|
|
|
|
Year ended 31 December
|
|
2014 £m
|
|
2013 £m |
Certain re-measurements recognised in relation to energy contracts
(note 2):
|
|
|
|
|
Net (losses)/gains arising on delivery of contracts
|
|
(63)
|
|
317
|
Net (losses)/gains arising on market price movements and new
contracts
|
|
(1,071)
|
|
96
|
Net re-measurements included within gross profit
|
|
(1,134)
|
|
413
|
Net gains arising on re-measurement of associates’ energy contracts
(net of taxation)
|
|
26
|
|
25
|
Net re-measurements included within Group operating profit
|
|
(1,108)
|
|
438
|
Taxation on certain re-measurements (note 8)
|
|
337
|
|
(154)
|
Net re-measurements after taxation
|
|
(771)
|
|
284
|
The Group is generally a net buyer of commodity, procuring gas and power
for our customers. Following significant decreases in commodity prices,
net losses arising on market price movements and new contracts of £1,071
million have been recorded.
(c) Impairment accounting policy, process and sensitivities
The Group reviews the carrying amounts of goodwill, PP&E and intangible
assets (with the exception of exploration assets) annually, or more
frequently if events or changes in circumstances indicate that the
recoverable amounts may be lower than their carrying amounts.
Exploration assets and interests in joint ventures and associates are
reviewed annually for indicators of impairment and tested for impairment
where such an indicator arises. Where an asset does not generate cash
flows that are independent from other assets, the Group estimates the
recoverable amount of the CGU to which the asset belongs. The
recoverable amount is the higher of VIU and FVLCD. At inception,
goodwill is allocated to each of the Group’s CGUs or groups of CGUs that
expect to benefit from the business combination in which the goodwill
arose. If the recoverable amount of an asset (or CGU) is estimated to be
less than its carrying amount, the carrying amount of the asset (or CGU)
is reduced to its recoverable amount. Any impairment is expensed
immediately in the Group Income Statement. Any CGU impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated
to the CGU and then to the other assets of the unit pro rata on the
basis of the carrying amount of each asset in the unit.
VIU calculations have been used to determine recoverable amounts for all
CGUs that include goodwill and indefinite-lived intangible asset
balances with the exception of the impairment tests for the Centrica
Energy – Upstream gas and oil CGUs, where FVLCD has been used. This
methodology is deemed to be more appropriate for this CGU as it is based
on the post-tax cash flows arising from the underlying assets and is
consistent with the approach taken by management to evaluate the
economic value of the underlying assets. Subsequently, the specific,
underlying Upstream gas and oil PP&E assets and, in addition, the
Group’s associate investment in Nuclear and the Storage PP&E assets have
also used the FVLCD impairment methodology. UK power generation assets
have used the VIU impairment methodology.
FVLCD discount rate and cash-flow assumptions
Centrica Energy – Gas – Upstream gas and oil production
An impairment charge of £1,189 million has been recorded within
exceptional items for Centrica Energy exploration and production assets.
The associated recoverable amounts (net of decommissioning costs) of
£552 million are categorised within Level 3 of the fair value hierarchy.
FVLCD is determined by discounting the post-tax cash flows expected to
be generated by the gas and oil production and development assets, net
of associated selling costs, taking into account those assumptions that
market participants would use in estimating fair value. Post-tax cash
flows are derived from projected production profiles of each field,
taking into account forward prices for gas and liquids over the relevant
period. Where forward market prices are not available, prices are
determined based on internal model inputs. The date of cessation of
production depends on the interaction of a number of variables, such as
the recoverable quantities of hydrocarbons, production costs, the
contractual duration of the licence area and the selling price of the
gas and liquids produced. As each field has specific reservoir
characteristics and economic circumstances, the post-tax cash flows for
each field are computed using individual economic models. Post-tax cash
flows used in the FVLCD calculation for the first three years are based
on the Group’s Board-approved three-year business plans and, thereafter,
are based on long-term production and cash flow forecasts.
The future post-tax cash flows are discounted using a post-tax nominal
discount rate of 9% (2013: 9%) to determine the FVLCD. The discount rate
and inflation rate used in the FVLCD calculation are determined in the
same manner as the rates used in the VIU calculations, with the
exception of the adjustment required to determine an equivalent pre-tax
discount rate.
The valuation of Centrica Energy – Gas goodwill is particularly
sensitive to the price assumptions made in the impairment calculations.
To illustrate this, the price assumptions for gas and oil have been
varied by +/–10%. Changes in price generate different production
profiles and in some cases the date that an asset ceases production and
this has been considered in the sensitivity analysis. Otherwise, all
other operating costs, life of field capital expenditure and abandonment
expenditure assumptions remain unchanged. For exploration and production
assets, an increase in gas and oil prices of 10% would reverse £142
million of post-tax impairment charges recorded at the year end. A
reduction of 10% would give rise to further post-tax impairments of the
underlying exploration and production assets of £254 million and an
impairment of goodwill of £251 million in the UK/Norway/Netherlands CGU.
Centrica Energy – Power – Nuclear
An impairment charge of £214 million has been recorded within
exceptional items for the Group’s associate investment in Nuclear. FVLCD
is determined by discounting the post-tax cash flows expected to be
generated by the investment, net of associated selling costs, taking
into account those assumptions that market participants would use in
estimating fair value. Post-tax cash flows are derived from projected
production profiles of the underlying nuclear power stations, planned
and unplanned outage assumptions and forward prices for power and
forecast capacity market auction prices. Where forward market prices are
not available, prices are determined based on internal model inputs.
Post-tax cash flows used in the FVLCD calculations for the first three
years are based on the Group’s Board-approved three-year business plans
and, thereafter, are based on long-term production and cash flow
forecasts.
The future post-tax cash flows are discounted using a post-tax nominal
discount rate of 8% (2013: 8%) to determine the FVLCD. The discount rate
and inflation rate used in the FVLCD calculation are determined in the
same manner as the rates used in the VIU calculations, with the
exception of the adjustment required to determine an equivalent pre-tax
discount rate.
The valuation of the Group’s investment in Nuclear, which is categorised
within Level 3 of the fair value hierarchy, is particularly sensitive to
assumptions/variations in the power price. To illustrate this,
sensitivities were performed at the year end to vary the power price
assumptions in the Group’s internal valuation model by +/–10%. An
increase in power prices of 10%, assuming all other assumptions remain
constant, would result in the reversal of the impairment of £214 million
recorded at the year end and would provide headroom of £310 million. A
reduction of 10% would give rise to a further impairment charge of £522
million.
VIU discount rate and cash-flow assumptions
Centrica Energy – Power – Upstream Power
An impairment charge of £535 million has been recorded within
exceptional items for the UK gas-fired power stations. The recoverable
amounts have been determined using value in use calculations, with
future cash flows discounted using a pre-tax nominal discount rate of
7.4% (2013: 7.4%). Cash inflows are based on forecast production
profiles, forward prices for power, gas and carbon and forecast capacity
market auction prices. Where forward market prices are not available,
prices are determined based on internal model inputs. Cash outflows for
operating and capital expenditure are based, for the first three years,
on the Group’s Board-approved three-year business plans and, thereafter,
are based on long-term production and cash flow forecasts.
7. Net finance cost
|
Financing costs mainly comprise interest on bonds, bank debt and
commercial paper, the results of hedging activities used to manage
foreign exchange and interest rate movements on the Group’s
borrowings, and notional interest arising on discounting of
decommissioning provisions. An element of financing cost is
capitalised on qualifying projects.
Investment income predominantly includes interest received on
short-term investments in money market funds, bank deposits,
government bonds and notional interest on pensions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
2013
|
Year ended 31 December
|
|
Financing costs £m
|
|
Investment income £m
|
|
Total £m
|
|
Financing costs £m
|
|
Investment income £m
|
|
Total £m
|
Cost of servicing net debt
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
–
|
|
46
|
|
46
|
|
–
|
|
43
|
|
43
|
Interest cost on bonds, bank loans and overdrafts (i)
|
|
(257)
|
|
–
|
|
(257)
|
|
(252)
|
|
–
|
|
(252)
|
Interest cost on finance leases
|
|
(16)
|
|
–
|
|
(16)
|
|
(17)
|
|
–
|
|
(17)
|
|
|
(273)
|
|
46
|
|
(227)
|
|
(269)
|
|
43
|
|
(226)
|
Net losses on revaluation (ii)
|
|
(14)
|
|
–
|
|
(14)
|
|
(6)
|
|
–
|
|
(6)
|
Notional interest arising from discounting and other interest
|
|
(81)
|
|
6
|
|
(75)
|
|
(73)
|
|
11
|
|
(62)
|
|
|
(368)
|
|
52
|
|
(316)
|
|
(348)
|
|
54
|
|
(294)
|
Capitalised borrowing costs (iii)
|
|
50
|
|
–
|
|
50
|
|
51
|
|
–
|
|
51
|
(Cost)/income
|
|
(318)
|
|
52
|
|
(266)
|
|
(297)
|
|
54
|
|
(243)
|
(i) During 2014 the Group increased its outstanding bond debt
principal by $200 million, ¥30 billion, €100 million and £51
million, and decreased it by $100 million and £315 million. See note
11(c).
|
(ii) Includes gains and losses on fair value hedges, movements in
fair value of other derivatives primarily used to hedge foreign
exchange exposure associated with inter-company loans, and foreign
currency gains and losses on the translation of inter-company loans.
|
(iii) Borrowing costs have been capitalised using an average rate of
4.0% (2013: 4.6%). Capitalised interest has attracted tax deductions
totalling £13 million (2013: £14 million), with deferred tax
liabilities being set up for the same amounts.
|
8. Taxation
|
The taxation note details the different tax charges and rates,
including current and deferred tax arising in the Group. The
current tax charge is the tax payable on this year’s taxable
profits. This tax charge excludes taxation on the Group’s share of
results of joint ventures and associates. Deferred tax represents
the tax on differences between the accounting carrying values of
assets and liabilities and their tax bases. These differences are
temporary and are expected to unwind in the future.
|
Analysis of tax charge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
2013
|
Year ended 31 December
|
|
Business performance £m
|
|
Exceptional items and certain re-measurements £m
|
|
Results for the year £m
|
|
Business performance £m |
|
Exceptional items and certain re-measurements £m |
|
Results for the year £m |
Current tax
|
|
|
|
|
|
|
|
|
|
|
|
|
UK corporation tax
|
|
(186)
|
|
–
|
|
(186)
|
|
(346)
|
|
(1)
|
|
(347)
|
UK petroleum revenue tax
|
|
(53)
|
|
–
|
|
(53)
|
|
(210)
|
|
–
|
|
(210)
|
Non-UK tax (i)
|
|
(234)
|
|
(130)
|
|
(364)
|
|
(504)
|
|
–
|
|
(504)
|
Adjustments in respect of prior years – UK
|
|
86
|
|
–
|
|
86
|
|
140
|
|
–
|
|
140
|
Adjustments in respect of prior years – non-UK
|
|
2
|
|
–
|
|
2
|
|
28
|
|
–
|
|
28
|
Total current tax
|
|
(385)
|
|
(130)
|
|
(515)
|
|
(892)
|
|
(1)
|
|
(893)
|
Deferred tax
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination and reversal of temporary differences – UK
|
|
109
|
|
538
|
|
647
|
|
(85)
|
|
370
|
|
285
|
UK petroleum revenue tax
|
|
(7)
|
|
8
|
|
1
|
|
37
|
|
–
|
|
37
|
Origination and reversal of temporary differences – non-UK
|
|
(6)
|
|
374
|
|
368
|
|
55
|
|
(121)
|
|
(66)
|
Change in tax rates
|
|
(2)
|
|
(17)
|
|
(19)
|
|
64
|
|
(5)
|
|
59
|
Adjustments in respect of prior years – UK
|
|
(72)
|
|
–
|
|
(72)
|
|
(94)
|
|
–
|
|
(94)
|
Adjustments in respect of prior years – non-UK
|
|
(12)
|
|
–
|
|
(12)
|
|
(27)
|
|
–
|
|
(27)
|
Total deferred tax
|
|
10
|
|
903
|
|
913
|
|
(50)
|
|
244
|
|
194
|
Total tax on (loss)/profit (ii)
|
|
(375)
|
|
773
|
|
398
|
|
(942)
|
|
243
|
|
(699)
|
(i) Non-UK tax on exceptional items and certain re-measurements
arose on the gains on disposal of the Texas gas-fired power stations
and Ontario home services business in 2014.
|
(ii) Total tax on (loss)/profit excludes taxation on the Group’s
share of profits of joint ventures and associates.
|
The Group earns the majority of its profits in the UK. Most activities
in the UK are subject to the standard rate for UK corporation tax, which
from 1 April 2014 was 21% (2013: 23%). Upstream oil and gas production
activities are taxed at a UK corporation tax rate of 30% (2013: 30%)
plus a supplementary charge of 32% (2013: 32%) to give an overall rate
of 62% (2013: 62%). In addition, certain upstream assets in the UK
attract petroleum revenue tax (PRT) at 50% (2013: 50%) which is
deductible against corporation tax, giving an overall effective rate of
81% (2013: 81%). Norwegian upstream profits are taxed at the standard
rate of 27% (2013: 28%) plus a special tax of 51% (2013: 50%) resulting
in an aggregate tax rate of 78%. Taxation for other jurisdictions is
calculated at the rates prevailing in those respective jurisdictions.
On 2 July 2013, the UK Government substantively enacted Finance Act 2013
which included a reduction in the main UK corporation tax rate to 20%
from 1 April 2015. At 31 December 2014, the relevant UK deferred tax
assets and liabilities included in these Financial Statements were based
on the reduced rate.
On 3 December 2014, the UK Government announced a 2% reduction to the
rate of supplementary charge from 32% to 30% effective 1 January 2015.
This reduction had not been substantively enacted at 31 December 2014
and so these financial statements have not applied the reduced rate. The
effect of the announced reduction would be to decrease net deferred tax
liabilities by £19 million.
9. Dividends
|
Dividends represent the cash return of profits to shareholders and
are paid twice a year; in June and November. Dividends are paid as
an amount per ordinary share held. The Group retains part of the
profits generated to meet future investment plans or to fund share
repurchase programmes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
2013
|
|
|
£m
|
|
Pence per share
|
|
Date of payment
|
|
£m
|
|
Pence per share |
|
Date of payment |
Prior year final dividend
|
|
610
|
|
12.08
|
|
11 Jun 2014
|
|
611
|
|
11.78
|
|
12 Jun 2013
|
Interim dividend
|
|
257
|
|
5.10
|
|
12 Nov 2014
|
|
253
|
|
4.92
|
|
13 Nov 2013
|
|
|
867
|
|
|
|
|
|
864
|
|
|
|
|
The Directors propose a final dividend of 8.4 pence per ordinary share
(totalling £417 million) for the year ended 31 December 2014. The
dividend will be submitted for formal approval at the Annual General
Meeting to be held on 27 April 2015 and, subject to approval, will be
paid on 25 June 2015 to those shareholders registered on 1 May 2015.
10. Earnings per ordinary share
|
Earnings per share (EPS) is the amount of loss or profit
attributable to each share. Basic EPS is the amount of loss or
profit for the year divided by the weighted average number of shares
in issue during the year. Diluted EPS includes the impact of
outstanding share options as if they were exercised at the year end.
|
Basic earnings per ordinary share has been calculated by dividing the
loss attributable to equity holders of the Company for the year of
£1,012 million (2013: £950 million profit) by the weighted average
number of ordinary shares in issue during the year of 5,022 million
(2013: 5,150 million). The number of shares excludes 82 million ordinary
shares (2013: 50 million), being the weighted average number of the
Company’s own shares held in the employee share trust and treasury
shares purchased by the Group as part of the share repurchase programme.
The Directors believe that the presentation of adjusted basic earnings
per ordinary share, being the basic earnings per ordinary share adjusted
for certain re-measurements, exceptional items and the impact of the
Strategic Investments acquired in 2009, assists with understanding the
underlying performance of the Group, as explained in note 2.
During the year, the Group purchased 132.1 million (2013: 137.3 million)
ordinary shares of 614/81 pence each, representing 2.6% of
the called up share capital as at 31 December 2014 (2013: 2.7%) at an
average price of £3.18 (2013: £3.64) per share for a total consideration
including expenses of £422 million (2013: £502 million). The current
year shares were purchased as part of the £420 million share repurchase
programme announced on 18 December 2013. The prior year shares were
purchased as part of the £500 million share repurchase programme
announced on 4 February 2013. These shares are held as treasury shares
once purchased and are deducted from equity, unless they are cancelled.
In addition to basic and adjusted basic earnings per ordinary share,
information is presented for diluted and adjusted diluted earnings per
ordinary share. Under this presentation, no adjustments are made to the
reported loss or profit for either 2014 or 2013, however, the weighted
average number of shares used as the denominator is adjusted for
potentially dilutive ordinary shares.
Weighted average number of shares
|
|
|
|
|
Year ended 31 December
|
|
2014 Million shares
|
|
2013 Million shares |
Weighted average number of shares – basic
|
|
5,022
|
|
5,150
|
Dilutive impact of share-based payment schemes (i)
|
|
27
|
|
33
|
Weighted average number of shares – diluted
|
|
5,049
|
|
5,183
|
(i) The dilutive impact of share based payment schemes is included in
the calculation of diluted EPS, unless it has the effect of increasing
the profit or decreasing the loss attributable to each share. Therefore,
these shares are excluded from the calculation of basic diluted EPS in
2014.
Basic to adjusted basic earnings per share reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
2013
|
Year ended 31 December
|
|
£m
|
|
Pence per ordinary share
|
|
£m
|
|
Pence per ordinary share |
(Loss)/earnings – basic
|
|
(1,012)
|
|
(20.2)
|
|
950
|
|
18.4
|
Net exceptional items after taxation (notes 2 and 6(i))
|
|
1,144
|
|
22.8
|
|
667
|
|
13.0
|
Certain re-measurement gains after taxation (notes 2 and 6)
|
|
771
|
|
15.4
|
|
(284)
|
|
(5.5)
|
Depreciation of fair value uplifts to property, plant and equipment
from the Strategic Investments acquired in 2009, net of taxation |
|
59
|
|
1.2
|
|
37
|
|
0.7
|
Earnings – adjusted basic
|
|
962
|
|
19.2
|
|
1,370
|
|
26.6
|
|
|
|
|
|
|
|
|
|
(Loss)/earnings – diluted
|
|
(1,012)
|
|
(20.2)
|
|
950
|
|
18.3
|
|
|
|
|
|
|
|
|
|
Earnings – adjusted diluted
|
|
962
|
|
19.1
|
|
1,370
|
|
26.4
|
(i) Net exceptional items after taxation of £1,161 million are reduced
by £17 million for the purpose of calculating adjusted basic and
adjusted diluted EPS. The adjustment reflects the share of net
exceptional items attributable to non-controlling interests.
Strategic Investments
During 2009, the Group acquired a 20% interest in Lake Acquisitions
Limited (Nuclear) and the entire share capital of Venture. As explained
in note 2, the depreciation relating to fair value uplifts of the
acquired Venture PP&E and associated taxation is excluded in arriving at
adjusted earnings for the year, which amounted to £31 million (2013: £48
million) depreciation and a taxation credit of £19 million (2013: £29
million) in the period. Additionally, the impact of depreciation arising
on fair value uplifts attributed to the nuclear power stations and
related taxation included within the Group’s share of the post-taxation
results of the associate is excluded in arriving at adjusted earnings
for the period, which amounted to £47 million (2013: £18 million) net of
taxation.
11. Sources of finance
(a) Capital structure
The Group seeks to maintain an efficient capital structure with a
balance of debt and equity as shown in the below table:
|
|
|
|
|
31 December
|
|
2014 £m
|
|
2013 (restated) (i) £m |
Net debt
|
|
5,196
|
|
4,942
|
Equity
|
|
2,735
|
|
5,192
|
Capital
|
|
7,931
|
|
10,134
|
(i) Net debt has been restated to include cash posted or received as
collateral under margin and collateral agreements to more accurately
reflect management’s view of net debt.
Debt levels are restricted to limit the risk of financial distress and,
in particular, to maintain a strong credit profile. The Group’s credit
standing is important for several reasons: to maintain a low cost of
debt, limit collateral requirements in energy trading, hedging and
decommissioning security arrangements; and to ensure the Group is an
attractive counterparty to energy producers and long-term customers.
The Group monitors its current and projected capital position on a
regular basis, considering a medium-term view of three to five years,
and different stress case scenarios, including the impact of changes in
the Group’s credit ratings and significant movements in commodity
prices. A number of financial ratios are monitored; including those used
by the credit rating agencies, such as debt to cash flow ratios and
adjusted EBITDA to gross interest expense. At 31 December 2014, the
ratio of the Group’s net debt to adjusted EBITDA was 1.8 (2013: 1.3).
Adjusted EBITDA to gross interest expense for the year ended 31 December
2014 was 8.8 (2013: 12.8).
British Gas Insurance Limited (BGIL) is required under PRA regulations
to hold a minimum capital amount and has complied with this requirement
in 2014 (and 2013). For the remainder of the Group, the level of debt
that can be raised is restricted by the Company’s Articles of
Association. Net debt is limited to the greater of £5.0 billion and a
gearing ratio of three times adjusted capital and reserves. Based on
adjusted capital and reserves as at 31 December 2014 of £3.1 billion,
the limit for net debt was £9.3 billion. The Group funds its long term
debt requirements through issuing bonds in the capital markets and
taking bank debt. Short term debt requirements are met primarily through
issuance of commercial paper. The Group maintains substantial committed
facilities and uses these to provide liquidity for general corporate
purposes, including short term business requirements and back-up for
commercial paper.
(b) Net debt summary
|
Net debt predominantly includes capital market borrowings offset by
cash, cash posted or received as collateral, securities and certain
hedging financial instruments used to manage interest rate and
foreign exchange movements on borrowings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (i) £m
|
|
Cash posted/(received) as collateral (ii) £m
|
|
Current and non-current securities (iii) £m
|
|
Current and non-current borrowings, net of related
deposits (iv) £m
|
|
Derivatives £m
|
|
Net debt £m
|
1 January 2013 (restated) (v)
|
|
931
|
|
102
|
|
206
|
|
(5,328)
|
|
144
|
|
(3,945)
|
Cash outflow from purchase of securities
|
|
(8)
|
|
–
|
|
8
|
|
–
|
|
–
|
|
–
|
Cash inflow from additional borrowings
|
|
1,209
|
|
–
|
|
–
|
|
(1,209)
|
|
–
|
|
–
|
Cash outflow from payment of capital element of finance leases |
|
(30)
|
|
–
|
|
–
|
|
30
|
|
–
|
|
–
|
Cash outflow from repayment of borrowings
|
|
(370)
|
|
–
|
|
–
|
|
370
|
|
–
|
|
–
|
Net cash outflow increasing net debt
|
|
(1,085)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(1,085)
|
Cash inflow from collateral received
|
|
82
|
|
(82)
|
|
–
|
|
–
|
|
–
|
|
–
|
Revaluation
|
|
–
|
|
–
|
|
(2)
|
|
87
|
|
(96)
|
|
(11)
|
(Increase)/decrease in interest payable and amortisation of
borrowings
|
|
–
|
|
–
|
|
–
|
|
(11)
|
|
4
|
|
(7)
|
Acquisition of businesses
|
|
–
|
|
93
|
|
–
|
|
–
|
|
–
|
|
93
|
Exchange adjustments
|
|
(10)
|
|
(6)
|
|
(1)
|
|
30
|
|
–
|
|
13
|
31 December 2013 (restated) (v)
|
|
719
|
|
107
|
|
211
|
|
(6,031)
|
|
52
|
|
(4,942)
|
Cash inflow from sale of securities
|
|
5
|
|
–
|
|
(5)
|
|
–
|
|
–
|
|
–
|
Cash inflow from additional borrowings (iv)
|
|
1,311
|
|
–
|
|
–
|
|
(1,311)
|
|
–
|
|
–
|
Cash outflow from payment of capital element of finance leases |
|
(32)
|
|
–
|
|
–
|
|
32
|
|
–
|
|
–
|
Cash outflow from repayment of borrowings
|
|
(486)
|
|
–
|
|
–
|
|
486
|
|
–
|
|
–
|
Net cash outflow increasing net debt
|
|
(255)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(255)
|
Cash outflow from collateral posted (ii)
|
|
(640)
|
|
640
|
|
–
|
|
–
|
|
–
|
|
–
|
Revaluation
|
|
–
|
|
–
|
|
8
|
|
(61)
|
|
21
|
|
(32)
|
(Increase)/decrease in interest payable and amortisation of
borrowings
|
|
–
|
|
–
|
|
–
|
|
(9)
|
|
16
|
|
7
|
Exchange adjustments
|
|
(1)
|
|
29
|
|
1
|
|
(62)
|
|
–
|
|
(33)
|
Other non-cash movements (vi)
|
|
–
|
|
–
|
|
59
|
|
–
|
|
–
|
|
59
|
31 December 2014
|
|
621
|
|
776
|
|
274
|
|
(6,956)
|
|
89
|
|
(5,196)
|
(i) Cash and cash equivalents includes £247 million (2013: £235
million) of restricted cash mostly held by the Group’s insurance
undertakings that is not readily available to be used for other
purposes within the Group.
|
(ii) Collateral is posted or received to support energy trading and
procurement activities. It is posted when contracts with marginable
counterparties are out of the money and is received when contracts
are in the money. These positions reverse when contracts are settled
and the collateral is returned. As a net procurer of energy, the
fall in commodity prices at the end of 2014 resulted in significant
out of the money energy contracts which required £640 million of
collateral to be posted during the year. Of the net cash collateral
posted at the year end, £185 million (2013: £53 million) is included
within trade payables and £961 million (2013: £160 million) within
trade receivables.
|
(iii) Securities balances include £129 million (2013: £126 million)
of index-linked gilts which the Group uses for short-term liquidity
management purposes and £86 million of available-for-sale financial
assets (2013: £85 million). The Group has posted £29 million (2013:
£28 million) of non-current securities as collateral against an
index-linked swap maturing on 16 April 2020.
|
(iv) A £30 million deposit with Societe Generale in relation to a
rolling credit facility is included within this category. The
deposit is classified as an other receivable but the matching loan
is included in borrowings.
|
(v) Net debt has been restated to include cash posted or received as
collateral under margin and collateral agreements, to more
accurately reflect management’s view of net debt. The items to which
the cash posted as collateral relate are not included within net
debt.
|
(vi) Shares in Enercare Inc. with a value of C$106 million (£59
million), were received as part consideration for the disposal of
Ontario home services. See note 15(c) for further details.
|
(c) Borrowings summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December
|
|
Coupon rate % |
|
Principal m |
|
Current £m
|
|
Non-current £m
|
|
2014 Total £m
|
|
Current £m |
|
Non-current £m |
|
2013 Total £m |
Bank overdrafts and loans (i)
|
|
|
|
|
|
(427)
|
|
(312)
|
|
(739)
|
|
(16)
|
|
(305)
|
|
(321)
|
Bonds (by maturity date):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 November 2014
|
|
Floating
|
|
$100
|
|
–
|
|
–
|
|
–
|
|
(60)
|
|
–
|
|
(60)
|
10 December 2014
|
|
5.125
|
|
£315
|
|
–
|
|
–
|
|
–
|
|
(323)
|
|
–
|
|
(323)
|
31 March 2015
|
|
Floating
|
|
$70
|
|
(45)
|
|
–
|
|
(45)
|
|
–
|
|
(42)
|
|
(42)
|
10 September 2015
|
|
0.320
|
|
¥30,000
|
|
(161)
|
|
–
|
|
(161)
|
|
–
|
|
–
|
|
–
|
11 September 2015
|
|
Floating
|
|
£51
|
|
(51)
|
|
–
|
|
(51)
|
|
–
|
|
–
|
|
–
|
12 September 2015
|
|
Floating
|
|
€100
|
|
(78)
|
|
–
|
|
(78)
|
|
–
|
|
–
|
|
–
|
24 October 2016
|
|
5.500
|
|
£300
|
|
–
|
|
(316)
|
|
(316)
|
|
–
|
|
(321)
|
|
(321)
|
14 April 2017
|
|
Floating
|
|
$200
|
|
–
|
|
(128)
|
|
(128)
|
|
–
|
|
–
|
|
–
|
19 September 2018
|
|
7.000
|
|
£400
|
|
–
|
|
(444)
|
|
(444)
|
|
–
|
|
(443)
|
|
(443)
|
1 February 2019
|
|
3.213
|
|
€100
|
|
–
|
|
(78)
|
|
(78)
|
|
–
|
|
(83)
|
|
(83)
|
25 September 2020
|
|
Floating
|
|
$80
|
|
–
|
|
(51)
|
|
(51)
|
|
–
|
|
(48)
|
|
(48)
|
22 February 2022
|
|
3.680
|
|
HK$450
|
|
–
|
|
(37)
|
|
(37)
|
|
–
|
|
(35)
|
|
(35)
|
10 March 2022
|
|
6.375
|
|
£500
|
|
–
|
|
(528)
|
|
(528)
|
|
–
|
|
(490)
|
|
(490)
|
16 October 2023
|
|
4.000
|
|
$750
|
|
–
|
|
(494)
|
|
(494)
|
|
–
|
|
(444)
|
|
(444)
|
4 September 2026
|
|
6.400
|
|
£200
|
|
–
|
|
(225)
|
|
(225)
|
|
–
|
|
(212)
|
|
(212)
|
16 April 2027
|
|
5.900
|
|
$70
|
|
–
|
|
(45)
|
|
(45)
|
|
–
|
|
(42)
|
|
(42)
|
13 March 2029
|
|
4.375
|
|
£750
|
|
–
|
|
(741)
|
|
(741)
|
|
–
|
|
(740)
|
|
(740)
|
5 January 2032 (ii)
|
|
Zero
|
|
€50
|
|
–
|
|
(41)
|
|
(41)
|
|
–
|
|
(46)
|
|
(46)
|
19 September 2033
|
|
7.000
|
|
£770
|
|
–
|
|
(762)
|
|
(762)
|
|
–
|
|
(762)
|
|
(762)
|
16 October 2043
|
|
5.375
|
|
$600
|
|
–
|
|
(379)
|
|
(379)
|
|
–
|
|
(356)
|
|
(356)
|
12 September 2044
|
|
4.250
|
|
£550
|
|
–
|
|
(536)
|
|
(536)
|
|
–
|
|
(536)
|
|
(536)
|
25 September 2045
|
|
5.250
|
|
$50
|
|
–
|
|
(32)
|
|
(32)
|
|
–
|
|
(30)
|
|
(30)
|
|
|
|
|
|
|
(335)
|
|
(4,837)
|
|
(5,172)
|
|
(383)
|
|
(4,630)
|
|
(5,013)
|
Commercial paper
|
|
|
|
|
|
(735)
|
|
–
|
|
(735)
|
|
(325)
|
|
–
|
|
(325)
|
Obligations under finance leases
|
|
|
|
(35)
|
|
(202)
|
|
(237)
|
|
(32)
|
|
(237)
|
|
(269)
|
Interest accruals
|
|
|
|
(103)
|
|
–
|
|
(103)
|
|
(103)
|
|
–
|
|
(103)
|
|
|
|
|
|
|
(1,635)
|
|
(5,351)
|
|
(6,986)
|
|
(859)
|
|
(5,172)
|
|
(6,031)
|
(i) Current bank overdrafts and loans include £300 million (2013:
nil) of short term borrowings drawn under committed facilities with
maturities of 1 April 2019.
|
(ii) €50 million of zero coupon notes have an accrual yield of
4.200%, which will result in a €114 million repayment on maturity.
|
|
|
|
|
|
Maturity analysis for non-current bank loans at 31 December
|
|
2014 £m
|
|
2013 £m |
1–2 years
|
|
–
|
|
–
|
2–5 years
|
|
(96)
|
|
(90)
|
>5 years
|
|
(216)
|
|
(215)
|
|
|
(312)
|
|
(305)
|
12. Joint ventures and associates
|
Share of results of joint ventures and associates represents the
results of businesses where we exercise joint control or
significant influence and generally have an equity holding of up
to 50%.
|
(a) Share of results in joint ventures and associates
The Group’s share of results of joint ventures and associates for the
year ended 31 December 2014 principally arises from its interests in the
following entities (predominantly reported in the Centrica Energy –
Power segment):
-
Wind farms – Barrow Offshore Wind Limited, Celtic Array Limited (Round
3), GLID Wind Farms TopCo Limited and Lincs Wind Farm Limited (i).
-
Nuclear – Lake Acquisitions Limited.
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 December
|
|
Joint ventures Wind farms £m |
|
Associates Nuclear £m |
|
Other £m |
|
2014 Total £m
|
|
2013 Total £m |
Income
|
|
96
|
|
620
|
|
6
|
|
722
|
|
735
|
Expenses excluding certain re-measurements (ii)
|
|
(104)
|
|
(416)
|
|
(7)
|
|
(527)
|
|
(521)
|
Certain re-measurements
|
|
–
|
|
25
|
|
–
|
|
25
|
|
23
|
|
|
(8)
|
|
229
|
|
(1)
|
|
220
|
|
237
|
Interest paid
|
|
(47)
|
|
(15)
|
|
–
|
|
(62)
|
|
(60)
|
Taxation excluding certain re-measurements (ii)
|
|
8
|
|
(35)
|
|
–
|
|
(27)
|
|
(8)
|
Taxation on certain re-measurements
|
|
–
|
|
1
|
|
–
|
|
1
|
|
2
|
Share of post-taxation results of joint ventures and associates
|
|
(47)
|
|
180
|
|
(1)
|
|
132
|
|
171
|
(i) As part of the finance arrangements entered into by GLID Wind
Farms TopCo Limited and Lincs Wind Farm Limited, the Group’s shares
in these companies are secured in favour of third parties. The
securities would only be enforced in the event that GLID Wind Farms
TopCo Limited or Lincs Wind Farm Limited default on any of their
obligations under their respective finance arrangements.
|
(ii) Includes £58 million (2013: £61 million) relating to
depreciation of fair value uplifts to PP&E on investment in Nuclear.
The associated tax impact is £11 million credit (2013: £43 million
credit).
|
Nuclear
In November 2009 the Group acquired a 20% interest in Lake Acquisitions
Limited (Nuclear). The Group’s share of profit arising from its
investment in Nuclear for the year to 31 December 2014, as set out in
the above table, includes the effect of unwinding the fair value uplifts
recognised at acquisition. As explained in note 2, the depreciation (net
of taxation) arising on fair value uplifts attributed to the nuclear
power stations, is reversed in arriving at adjusted profit for the
period as shown in the reconciliation table below and as set out in
notes 5(c) and 10.
(b) Reconciliation of share of results of joint ventures and
associates to share of adjusted results of joint ventures and associates
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 December
|
|
Joint ventures Wind farms £m |
|
Associates Nuclear £m |
|
Other £m |
|
2014 Total £m
|
|
2013 Total £m |
Share of post-taxation results of joint ventures and associates
|
|
(47)
|
|
180
|
|
(1)
|
|
132
|
|
171
|
Certain re-measurements (net of taxation)
|
|
–
|
|
(26)
|
|
–
|
|
(26)
|
|
(25)
|
Depreciation – Nuclear (net of taxation) (i)
|
|
–
|
|
47
|
|
–
|
|
47
|
|
18
|
Interest paid
|
|
47
|
|
15
|
|
–
|
|
62
|
|
60
|
Taxation (excluding taxation on certain re-measurements and
Nuclear depreciation)
|
|
(8)
|
|
46
|
|
–
|
|
38
|
|
51
|
Share of adjusted results of joint ventures and associates
|
|
(8)
|
|
262
|
|
(1)
|
|
253
|
|
275
|
(i) Relates to depreciation of fair value uplifts to PP&E on investment
in Nuclear.
(c) Interests in joint ventures and associates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
2013
|
|
|
Investments in joint ventures and associates £m
|
|
Shareholder loans £m |
|
Total £m
|
|
Investments in joint ventures and associates £m
|
|
Shareholder loans £m |
|
Total £m |
1 January
|
|
2,259
|
|
399
|
|
2,658
|
|
2,316
|
|
405
|
|
2,721
|
Additions
|
|
24
|
|
24
|
|
48
|
|
55
|
|
20
|
|
75
|
Disposals
|
|
(24)
|
|
–
|
|
(24)
|
|
(29)
|
|
(5)
|
|
(34)
|
Decrease in shareholder loans
|
|
–
|
|
(73)
|
|
(73)
|
|
–
|
|
–
|
|
–
|
Share of profits for the year
|
|
132
|
|
–
|
|
132
|
|
171
|
|
–
|
|
171
|
Share of other comprehensive income
|
|
6
|
|
–
|
|
6
|
|
3
|
|
–
|
|
3
|
Impairment (note 6)
|
|
(214)
|
|
–
|
|
(214)
|
|
(64)
|
|
(21)
|
|
(85)
|
Dividends
|
|
(138)
|
|
–
|
|
(138)
|
|
(193)
|
|
–
|
|
(193)
|
31 December
|
|
2,045
|
|
350
|
|
2,395
|
|
2,259
|
|
399
|
|
2,658
|
(d) Share of joint ventures’ and associates’ assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
31 December
|
|
Joint ventures Wind farms £m |
|
Associates Nuclear £m |
|
Other £m |
|
Total £m
|
|
Total £m |
Share of non-current assets
|
|
603
|
|
3,491
|
|
23
|
|
4,117
|
|
4,390
|
Share of current assets
|
|
58
|
|
639
|
|
2
|
|
699
|
|
689
|
|
|
661
|
|
4,130
|
|
25
|
|
4,816
|
|
5,079
|
Share of current liabilities
|
|
(130)
|
|
(189)
|
|
(2)
|
|
(321)
|
|
(450)
|
Share of non-current liabilities
|
|
(472)
|
|
(1,755)
|
|
(1)
|
|
(2,228)
|
|
(2,362)
|
|
|
(602)
|
|
(1,944)
|
|
(3)
|
|
(2,549)
|
|
(2,812)
|
Impairment (note 6)
|
|
–
|
|
(214)
|
|
–
|
|
(214)
|
|
–
|
Restricted interest on shareholder loan (i)
|
|
(8)
|
|
–
|
|
–
|
|
(8)
|
|
(8)
|
Share of net assets of joint ventures and associates
|
|
51
|
|
1,972
|
|
22
|
|
2,045
|
|
2,259
|
Shareholder loans
|
|
348
|
|
–
|
|
2
|
|
350
|
|
399
|
Interests in joint ventures and associates
|
|
399
|
|
1,972
|
|
24
|
|
2,395
|
|
2,658
|
|
|
|
|
|
|
|
|
|
|
|
Net (debt)/cash included in share of net assets
|
|
(453)
|
|
73
|
|
–
|
|
(380)
|
|
(534)
|
(i) The Group restricted an element of interest received on the
shareholder loan to Lincs Wind Farm Limited.
13. Derivative financial instruments
|
The Group uses derivative financial instruments to manage the risk
arising from fluctuations in the value of certain assets or
liabilities, associated with treasury management, energy sales and
procurement. These derivatives are held at fair value, and are
predominantly unrealised positions, expected to unwind in future
periods. The Group also uses derivatives for proprietary energy
trading purposes.
|
|
|
|
Purpose
|
|
Accounting treatment
|
Proprietary energy trading and treasury management
|
|
Carried at fair value, with changes in fair value recognised in
the Group’s results for the year before exceptional items and
certain re-measurements (i)
|
Energy procurement/ optimisaton
|
|
Carried at fair value, with changes in fair value reflected in
certain re-measurements (ii)
|
(i) With the exception of certain energy derivatives related to
cross-border transportation and capacity contracts.
|
(ii) Energy contracts designated at fair value through profit or
loss include certain energy contracts that the Group has, at its
option, designated at fair value through profit or loss under IAS 39
because the energy contract contains one or more embedded
derivatives that significantly modify the cash flows under the
contract.
|
In cases where a derivative qualifies for hedge accounting, derivatives
are classified as fair value hedges, or cash flow hedges. The carrying
values of derivative financial instruments by product type for
accounting purposes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
2013
|
31 December
|
|
Assets £m
|
|
Liabilities £m
|
|
Assets £m |
|
Liabilities £m |
Derivative financial instruments – held for trading under IAS 39:
|
|
|
|
|
|
|
|
|
Energy derivatives – for procurement/optimisation
|
|
644
|
|
(1,878)
|
|
512
|
|
(750)
|
Energy derivatives – for proprietary trading
|
|
44
|
|
(17)
|
|
56
|
|
–
|
Interest rate derivatives (i)
|
|
–
|
|
(30)
|
|
–
|
|
(26)
|
Foreign exchange derivatives (i)
|
|
58
|
|
(125)
|
|
106
|
|
(96)
|
Energy derivative contracts designated at fair value through profit
or loss
|
|
16
|
|
(14)
|
|
24
|
|
(1)
|
Derivative financial instruments in hedge accounting relationships:
|
|
|
|
|
|
|
|
|
Energy derivatives
|
|
–
|
|
–
|
|
–
|
|
(2)
|
Interest rate derivatives (i)
|
|
158
|
|
(2)
|
|
95
|
|
(22)
|
Foreign exchange derivatives (i)
|
|
10
|
|
(87)
|
|
7
|
|
(40)
|
Total derivative financial instruments
|
|
930
|
|
(2,153)
|
|
800
|
|
(937)
|
Included within:
|
|
|
|
|
|
|
|
|
Derivative financial instruments – current
|
|
617
|
|
(1,565)
|
|
573
|
|
(506)
|
Derivative financial instruments – non-current
|
|
313
|
|
(588)
|
|
227
|
|
(431)
|
(i) Included within these categories are £89 million (2013: £52 million)
of derivatives used to hedge movements in net debt. See note 11(b).
The contracts included within energy derivatives are subject to a wide
range of detailed specific terms but comprise the following general
components, analysed on a net carrying value basis:
|
|
|
|
|
31 December
|
|
2014 £m
|
|
2013 £m |
Short-term forward market purchases and sales of gas and electricity:
|
|
|
|
|
UK and Europe
|
|
(302)
|
|
(30)
|
North America
|
|
(721)
|
|
22
|
Structured gas purchase contracts
|
|
(105)
|
|
(54)
|
Structured gas sales contracts
|
|
(14)
|
|
(54)
|
Structured power purchase contracts
|
|
(67)
|
|
(41)
|
Other
|
|
4
|
|
(4)
|
Net total
|
|
(1,205)
|
|
(161)
|
14. Post retirement benefits
|
The Group manages a number of final salary and career average
defined benefit pension schemes. It also has defined contribution
schemes. The majority of these schemes are in the UK.
|
(a) Summary of main post retirement benefit schemes
|
|
|
|
|
|
|
|
|
|
|
Name of scheme
|
|
Type of benefit
|
|
Status
|
|
Country
|
|
Number of active members as at 31
December 2014
|
|
Total membership as at 31 December 2014
|
Centrica Engineers Pension Scheme
|
|
Defined benefit final salary pension |
|
Closed to new members in 2006
|
|
UK
|
|
4,358
|
|
8,695
|
|
Defined benefit career average pension |
|
Open to service engineers only
|
|
UK
|
|
3,783
|
|
4,716
|
Centrica Pension Plan
|
|
Defined benefit final salary pension |
|
Closed to new members in 2003
|
|
UK
|
|
4,119
|
|
8,770
|
Centrica Pension Scheme
|
|
Defined benefit final salary pension |
|
Closed to new members in 2003
|
|
UK
|
|
25
|
|
10,785
|
|
Defined benefit career average pension |
|
Closed to new members in 2008
|
|
UK
|
|
2,000
|
|
4,151
|
|
Defined contribution pension
|
|
Open to new members
|
|
UK
|
|
14,211
|
|
17,580
|
Bord Gáis Energy Company Defined Benefit Pension Scheme
|
|
Defined benefit final salary pension
|
|
Closed to new members in 2014
|
|
Republic of Ireland
|
|
171
|
|
175
|
Bord Gáis Energy Company Defined Contribution Pension Plan
|
|
Defined contribution pension
|
|
Open to new members
|
|
Republic of Ireland
|
|
117
|
|
124
|
Direct Energy Marketing Limited Pension Plan
|
|
Defined benefit final salary pension |
|
Closed to new members in 2004
|
|
Canada
|
|
48
|
|
413
|
Direct Energy Marketing Limited
|
|
Post retirement benefits
|
|
Closed to new members in 2012
|
|
Canada
|
|
162
|
|
366
|
The Centrica Engineers Pension Scheme (CEPS), Centrica Pension Plan
(CPP) and Centrica Pension Scheme (CPS) form the significant majority of
the Group’s defined benefit obligation and are referred to below as the
‘Registered Pension Schemes’. The other schemes are individually, and in
aggregate, immaterial.
Independent valuations
The Registered Pensions Schemes are subject to independent valuations at
least every three years, on the basis of which the qualified actuary
certifies the rate of employer contributions which, together with the
specified contributions payable by the employees and proceeds from the
schemes’ assets, are expected to be sufficient to fund the benefits
payable under the schemes.
The latest full actuarial valuations were carried out at the following
dates: the Registered Pensions Schemes at 31 March 2012 and the Direct
Energy Marketing Limited Pension Plan at 1 August 2014. These have been
updated to 31 December 2014 for the purposes of meeting the requirements
of IAS 19: ‘Employee Benefits’ (2011). Investments have been valued for
this purpose at market value.
Governance
The Registered Pension Schemes are managed by trustee companies whose
boards consist of both company-nominated and member-nominated Directors.
Each scheme holds units in the Centrica Combined Common Investment Fund
(CCCIF), which holds the majority of the combined assets of the
participating schemes. The board of the CCCIF is currently comprised of
nine Directors; three independent Directors, three Directors appointed
by Centrica plc (including the Chairman) and one Director appointed by
each of the three participating schemes.
Under the terms of the Pensions Act 2004, Centrica plc and each trustee
board must agree the funding rate for its defined benefit pension scheme
and a recovery plan to fund any deficit against the scheme-specific
statutory funding objective. This approach was first adopted for the
triennial valuations completed at 31 March 2006, and has been reflected
in subsequent valuations, including the 31 March 2012 valuations.
(b) Risks
The Registered Pension Schemes expose the Group to the following risks:
Asset volatility
The pension liabilities are calculated using a discount rate set with
reference to AA corporate bond yields; if the growth in plan assets is
lower than this, this will create an actuarial loss within other equity.
The CCCIF is responsible for managing the assets of each scheme in line
with the liability related investment objectives that have been set by
the trustees of the schemes, and invests in a diversified portfolio of
assets. The schemes are relatively young in nature (the schemes opened
in 1997 on the formation of Centrica plc on demerger from BG plc
(formerly British Gas plc), and only took on liabilities in respect of
active employees). Therefore, the CCCIF holds a significant proportion
of return seeking assets; such assets are generally expected to provide
a higher return than corporate bonds, but result in greater exposure to
volatility and risk in the short-term. The investment objectives are to
achieve a target return above a return based on a portfolio of gilts,
subject to a maximum volatility ceiling. If there have been advantageous
asset movements relative to liabilities above a set threshold, then
de-risking is undertaken, and as a consequence the return target and
maximum volatility ceiling are reduced. Whilst there is no explicit
target for the level or rate of de-risking, the pace of de-risking is
regularly monitored and is typically restricted to once a quarter.
Interest rate
A decrease in the bond interest rate will increase the net present value
of the pension liabilities. The relative immaturity of the schemes means
that the duration of the liabilities is longer than average for typical
UK pension schemes, resulting in a relatively higher exposure to
interest rate risk.
Inflation
Pensions in deferment, pensions in payment and pensions accrued under
the career average schemes increase in line with the Retail Price Index
(RPI) and the Consumer Price Index (CPI). Therefore scheme liabilities
will increase if inflation is higher than assumed, although in some
cases caps are in place to limit the impact of significant movements in
inflation. During the year the Group initiated a pension increase
exchange (PIE). This PIE offered retired pensioners the option to
receive a higher current pension in return for giving up certain future
increases linked to RPI. A past service credit of £10 million arose in
the year in relation to those pensioners that accepted the PIE.
Longevity
The majority of the schemes’ obligations are to provide benefits for the
life of scheme members and their surviving spouses; therefore increases
in life expectancy will result in an increase in the pension
liabilities. The relative immaturity of the schemes means that there is
comparatively little observable mortality data to assess the rates of
mortality experienced by the schemes, and means that the schemes’
liabilities will be paid over a long period of time, making it
particularly difficult to predict the life expectancy of the current
membership. Furthermore, pension payments are subject to inflationary
increases, resulting in a higher sensitivity to changes in life
expectancy.
Salary
For final salary schemes, the pension liabilities are calculated by
reference to the future salaries of active members, and hence salary
rises in excess of assumed increases will increase scheme liabilities.
During 2011 changes were introduced to the final salary sections of CEPS
and CPP such that annual increases in pensionable pay are capped to 2%,
resulting in a reduction in salary risk.
Foreign exchange
Certain of the assets held by the CCCIF are denominated in foreign
currencies, and hence their values are subject to exchange rate risk.
The CCCIF has long-term hedging programmes in place to manage interest
rate, inflation and foreign exchange risks. The table below analyses the
total liabilities of the Registered Pension Schemes, calculated in
accordance with accounting principles, by type of liability, as at 31
December 2014.
|
|
|
Total liabilities of the Registered Pension Schemes
|
|
2014
|
31 December
|
|
%
|
Actives – final salary – capped
|
|
30
|
Actives – final salary – uncapped and crystallised benefits
|
|
5
|
Actives – career average
|
|
4
|
Deferred pensioners
|
|
32
|
Pensioners
|
|
29
|
|
|
100
|
(c) Accounting assumptions
The accounting assumptions for the Registered Pension Schemes have been
given below:
|
|
|
|
|
Major assumptions used for the actuarial valuation
|
|
2014
|
|
2013
|
31 December
|
|
%
|
|
%
|
Rate of increase in employee earnings:
|
|
|
|
|
Subject to cap
|
|
1.7
|
|
1.7
|
Other
|
|
3.0
|
|
3.3
|
Rate of increase in pensions in payment
|
|
3.0
|
|
3.3
|
Rate of increase in deferred pensions:
|
|
|
|
|
In line with CPI capped at 2.5%
|
|
1.9
|
|
2.3
|
In line with RPI
|
|
3.0
|
|
3.3
|
Discount rate
|
|
3.9
|
|
4.6
|
The assumptions relating to longevity underlying the pension liabilities
at the balance sheet date have been based on a combination of standard
actuarial mortality tables, scheme experience and other relevant data,
and include an allowance for future improvements in mortality. The
longevity assumptions for members in normal health are as follows:
|
|
|
|
|
Life expectancy at age 65 for a member 31 December |
|
2014
|
|
2013
|
|
Male Years
|
|
Female Years
|
|
Male Years |
|
Female Years |
Currently aged 65
|
|
22.7
|
|
25.1
|
|
22.9
|
|
25.3
|
Currently aged 45
|
|
24.4
|
|
27.0
|
|
24.7
|
|
27.3
|
The other demographic assumptions have been set having regard to the
latest trends in scheme experience and other relevant data. The
assumptions are reviewed and updated as necessary as part of the
periodic actuarial valuations of the pension schemes.
Reasonably possible changes as at 31 December to one of the actuarial
assumptions would have affected the scheme liabilities as set out below:
|
|
|
|
|
Impact of changing material assumptions
31 December
|
|
2014
|
|
2013
|
|
Increase/ decrease in assumption
|
|
Indicative effect on scheme liabilities %
|
|
Increase/ decrease in assumption
|
|
Indicative effect on scheme liabilities %
|
Rate of increase in employee earnings subject to cap
|
|
0.25%
|
|
+/–1
|
|
0.25%
|
|
+/–1
|
Rate of increase in pensions in payment and deferred pensions
|
|
0.25%
|
|
+/–5
|
|
0.25%
|
|
+/–5
|
Discount rate
|
|
0.25%
|
|
–/+6
|
|
0.25%
|
|
–/+6
|
Inflation assumption
|
|
0.25%
|
|
+/–5
|
|
0.25%
|
|
+/–5
|
Longevity assumption
|
|
1 year
|
|
+/–3
|
|
1 year
|
|
+/–3
|
The indicative effects on scheme liabilities have been calculated by
changing each assumption in isolation and assessing the impact on the
liabilities. For the reasonably possible change in the inflation
assumption, it has been assumed that a change to the inflation
assumption would lead to corresponding changes in the assumed rates of
increase in uncapped pensionable pay, pensions in payment and deferred
pensions.
The remaining disclosures in this note cover all of the Group’s defined
benefit schemes.
(d) Amounts included in the Group Balance Sheet
|
|
|
|
|
31 December
|
|
2014 £m
|
|
2013 £m |
Fair value of plan assets
|
|
6,444
|
|
5,683
|
Present value of defined benefit obligation
|
|
(6,382)
|
|
(5,643)
|
Net asset recognised in the Group Balance Sheet
|
|
62
|
|
40
|
Pension asset presented in the Group Balance Sheet as:
|
|
|
|
|
Retirement benefit assets
|
|
185
|
|
205
|
Retirement benefit liabilities
|
|
(123)
|
|
(165)
|
Net pension asset
|
|
62
|
|
40
|
(e) Movement in the year
|
|
|
|
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
Pension liabilities £m
|
|
Pension assets £m
|
|
Pension liabilities £m
|
|
Pension assets £m
|
1 January
|
|
|
|
|
|
|
|
|
(5,643)
|
|
5,683
|
|
(5,045)
|
|
5,133
|
Items included in the Group Income Statement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current service cost
|
|
|
|
|
|
|
|
|
(115)
|
|
–
|
|
(103)
|
|
–
|
Contributions by employer in respect of employee salary sacrifice
arrangements (i)
|
|
|
|
|
|
|
|
|
(25)
|
|
–
|
|
(19)
|
|
–
|
Total current service cost
|
|
|
|
|
|
|
|
|
(140)
|
|
–
|
|
(122)
|
|
–
|
Past service credit
|
|
|
|
|
|
|
|
|
10
|
|
–
|
|
–
|
|
–
|
Interest (expense)/income
|
|
|
|
|
|
|
|
|
(260)
|
|
266
|
|
(242)
|
|
249
|
Items included in the Group Statement of Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Returns on plan assets, excluding interest income
|
|
|
|
|
|
|
|
|
–
|
|
467
|
|
–
|
|
187
|
Actuarial gain/(loss) from changes to demographic assumptions
|
|
|
|
|
|
|
|
|
67
|
|
–
|
|
(64)
|
|
–
|
Actuarial loss from changes in financial assumptions
|
|
|
|
|
|
|
|
|
(609)
|
|
–
|
|
(311)
|
|
–
|
Actuarial (loss)/gain from experience adjustments
|
|
|
|
|
|
|
|
|
(8)
|
|
–
|
|
9
|
|
–
|
Exchange adjustments
|
|
|
|
|
|
|
|
|
1
|
|
(2)
|
|
12
|
|
(6)
|
Items included in the Group Cash Flow Statement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
|
|
|
|
|
|
–
|
|
191
|
|
–
|
|
232
|
Contributions by employer in respect of employee salary sacrifice
arrangements (i)
|
|
|
|
|
|
|
|
|
–
|
|
25
|
|
–
|
|
19
|
Other movements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan participants’ contributions
|
|
|
|
|
|
|
|
|
(1)
|
|
1
|
|
(7)
|
|
7
|
Benefits paid from schemes
|
|
|
|
|
|
|
|
|
153
|
|
(153)
|
|
138
|
|
(138)
|
Acquisition/disposal of businesses
|
|
|
|
|
|
|
|
|
50
|
|
(34)
|
|
–
|
|
–
|
Transfers from provisions for other liabilities and charges
|
|
|
|
|
|
|
|
|
(2)
|
|
–
|
|
(11)
|
|
–
|
31 December
|
|
|
|
|
|
|
|
|
(6,382)
|
|
6,444
|
|
(5,643)
|
|
5,683
|
(i) A salary sacrifice arrangement was introduced on 1 April 2013 for
pension scheme members. The contributions paid via the salary sacrifice
arrangement have been treated as employer contributions, and included
within current service cost, with a corresponding reduction in salary
costs.
In addition to current service cost on the Group’s defined benefit
pension schemes, the Group also charged £37 million (2013: £32 million)
to operating profit in respect of defined contribution pension schemes.
This included contributions of £12 million (2013: £8 million) paid via a
salary sacrifice arrangement.
(f) Pension scheme assets
The market value of plan assets were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
2013
|
31 December
|
|
Quoted £m
|
|
Unquoted £m
|
|
Total £m
|
|
Quoted £m |
|
Unquoted £m |
|
Total £m |
Equities
|
|
1,950
|
|
211
|
|
2,161
|
|
1,636
|
|
163
|
|
1,799
|
Diversified asset funds
|
|
42
|
|
113
|
|
155
|
|
305
|
|
98
|
|
403
|
Corporate bonds
|
|
1,813
|
|
–
|
|
1,813
|
|
1,571
|
|
–
|
|
1,571
|
High-yield debt
|
|
182
|
|
275
|
|
457
|
|
155
|
|
207
|
|
362
|
Liability matching assets
|
|
1,052
|
|
415
|
|
1,467
|
|
1,012
|
|
258
|
|
1,270
|
Property
|
|
–
|
|
328
|
|
328
|
|
–
|
|
271
|
|
271
|
Cash pending investment
|
|
63
|
|
–
|
|
63
|
|
7
|
|
–
|
|
7
|
|
|
5,102
|
|
1,342
|
|
6,444
|
|
4,686
|
|
997
|
|
5,683
|
Included within equities are £2 million (2013: £2 million) of ordinary
shares of Centrica plc via pooled funds that include a benchmark
allocation to UK equities. Included within corporate bonds are £3
million (2013: £4 million) of bonds issued by Centrica plc held within
pooled funds over which the CCCIF has no ability to direct investment
decisions. Apart from the investment in the Scottish Limited
Partnerships described in note 14(g), no direct investments are made in
securities issued by Centrica plc or any of its subsidiaries or property
leased to or owned by Centrica plc or any of its subsidiaries.
Included within the Group Balance Sheet within non-current securities
are £75 million (2013: £67 million) of investments, held in trust on
behalf of the Group, as security in respect of the Centrica Unfunded
Pension Scheme. Of the pension scheme liabilities above, £49 million
(2013: £42 million) relate to this scheme.
(g) Pension scheme contributions
Based on the latest triennial valuations at 31 March 2012, the Group and
the trustees of the Registered Pension Schemes agreed to fund the
scheduled deficit payments using asset-backed contribution arrangements.
Under the arrangements, certain loans to UK Group companies were
transferred to Scottish Limited Partnerships established by the Group.
During 2012 and 2013 the Group made special contributions to the
Registered Pension Schemes of £444 million, which the schemes
immediately used to acquire interests in the partnerships for their fair
value of £444 million. The schemes’ total partnership interests entitle
them to distributions from the income of the partnerships over a period
of between 4 and 15 years. Between 2014 and 2016 this income will amount
to £77 million per annum but will reduce thereafter. The partnerships
are controlled by Centrica and their results are consolidated by the
Group. As the trustees’ interests in the partnerships do not meet the
definition of a plan asset under IAS 19, they are not reflected in the
Group Balance Sheet. Distributions from the partnerships to the schemes
will be recognised as scheme assets in the future as they occur.
Deficit payments are also being made in respect of the Direct Energy
Marketing Limited Pension Plan in Canada. £4 million was paid in the
year to 31 December 2014. £1 million is to be paid in 2015, £2 million
is to be paid in 2016 and £1 million is to be paid in 2017, 2018, and
2019.
The Group estimates that it will pay £100 million of ordinary employer
contributions during 2015 at an average rate of 20.5% of pensionable
pay, together with £25 million of contributions paid via the salary
sacrifice arrangement. At 31 March 2012 (the date of the latest full
actuarial valuations) the weighted average duration of the liabilities
of the Registered Pensions Schemes was 24 years.
15. Acquisitions and disposals
(a) Business combinations
|
During the period, the Group acquired Bord Gáis Energy’s gas and
electricity supply and generation business, Astrum Solar’s
residential solar installation business and certain upstream
Canadian natural gas assets. The business combinations section
details the consideration paid and/or payable, as well as the
provisional fair values of the net assets acquired.
|
The fair values are provisional unless stated otherwise. Note 3(a) sets
out the assumptions used to derive the fair values. Goodwill recognised
on these acquisitions is attributable to enhanced synergies, growth
opportunities and technical goodwill from items such as deferred tax.
Bord Gáis Energy
On 30 June 2014, the Group acquired 100% of Bord Gáis Energy’s gas and
electricity supply business in the Republic of Ireland, including the
Whitegate gas-fired power station, for consideration of €214 million
(£172 million). The transaction provides a platform for growth in an
adjacent downstream market to the UK. This business is a separate
reportable segment of International Downstream. Goodwill of €20 million
(£16 million) was recognised and is not tax deductible. The opening
balance sheet includes an amount of €153 million (£123 million) related
to the fair value of receivables with a gross contractual value of €183
million (£147 million).
Provisional fair value of the identifiable acquired assets and
liabilities
|
|
|
|
|
Bord Gáis Energy £m |
Balance Sheet items
|
|
|
Non-current assets
|
|
89
|
Current assets (including £62 million of cash and cash equivalents)
|
|
244
|
Current liabilities
|
|
(159)
|
Non-current liabilities
|
|
(18)
|
Net identifiable assets (i)
|
|
156
|
Goodwill (i)
|
|
16
|
Net assets acquired (i)
|
|
172
|
Consideration comprises:
|
|
|
Cash consideration paid
|
|
158
|
Contingent consideration (ii)
|
|
14
|
Total consideration (i)
|
|
172
|
|
|
|
Income Statement items (iii)
|
|
|
Revenue recognised since the acquisition date in the Group Income
Statement (iii)
|
|
391
|
Profit since the acquisition date in the Group Income Statement (iii)
|
|
3
|
(i) Net identifiable assets were disclosed in the interim accounts
as at 30 June 2014 totalling £160 million. Cash consideration paid
at the acquisition date was £150 million. Post-completion, a true-up
of working capital amounts resulted in an additional payment of £8
million. Together with updated valuations, predominantly of certain
commodity contracts, this gave rise to a goodwill balance of £16
million.
|
(ii) Contingent consideration is stated at fair value at the
reporting date and is classified as an other financial liability
(level 3 in terms of fair value hierarchy). Fair value is based on a
set of key assumptions which take into consideration the probability
of meeting underlying EBITDA targets between 2014 and 2016, as well
as the impact of the discount rate. Future developments may require
further revisions to the estimate. The maximum consideration to be
paid to the vendor amounts to €21 million (£17 million).
|
(iii) Revenue and profits from business performance between the
acquisition date and the balance sheet date exclude exceptional
items and certain re-measurements.
|
Acquisition-related costs of £12 million have been charged to operating
costs before exceptional items in the Group Income Statement for the
year ended 31 December 2014.
Astrum Solar
On 29 July 2014, the Group acquired a 100% equity interest in the
privately owned Astrum Solar’s residential business for consideration of
$53 million (£33 million). The business designs, installs and maintains
solar power generating equipment for use in the home. Goodwill of $50
million (£31 million) arose on acquisition, which is not tax deductible.
This business forms part of the ‘Direct Energy – Residential and
business services’ segment.
Canadian natural gas assets
On 27 June 2014, the Group acquired natural gas assets in the Foothills
region of Alberta from Shell Canada Energy for C$42 million (£23
million). The assets were acquired by CQECP, the 60:40 partnership with
QPI. As part of the transaction, the Group disposed of its interests in
the Burnt Timber gas processing plant and the Waterton undeveloped lands
in south-west Alberta. The Group has judged that the assets acquired
meet the definition of a business and that the Group has power over the
relevant activities; therefore the acquisition is treated as a business
combination of the Group. No goodwill arose on this transaction.
Pro forma information
The pro forma consolidated results of the Group, as if the acquisitions
had been made at the beginning of the year, would show revenue of
£29,898 million (compared to reported revenue of £29,408 million) and
profit after taxation before exceptional items and certain
re-measurements of £936 million (compared to reported profit after
taxation of £927 million). This pro forma information includes the
revenue and profits/losses made by the acquired businesses between the
beginning of the financial year and the date of acquisition, not
restated for accounting policy alignments and/or the impact of the fair
value uplifts resulting from purchase accounting considerations. This
pro forma aggregated information is not necessarily indicative of the
results of the combined Group that would have occurred had the
acquisitions actually been made at the beginning of the year presented,
or indicative of the future results of the combined Group.
2013 Business Combinations – fair value updates
The Group acquired Hess Energy Marketing (HEM) on 1 November 2013.
During the measurement period a true up of working capital was agreed
with the vendor, Hess Corporation, resulting in a repayment of $31
million (£21 million) cash consideration.
There have been no other significant updates during the measurement
period to the fair values recognised for businesses acquired in 2013,
although changes to the opening balance sheets of these previously
acquired businesses have offset the goodwill recognised on Astrum Solar
and Bord Gáis Energy by £31 million.
(b) Assets and liabilities of disposal groups classified as held for
sale
|
Assets and associated liabilities that are expected to be
recovered principally through a sale have been classified as held
for sale and are presented separately on the face of the Group
Balance Sheet.
|
UK power stations
On 8 May 2014, the Group announced that it had undertaken a strategic
review of its UK power station fleet and that it intended to focus its
UK gas-fired power generation on small flexible ‘peaking’ plants.
Consequently, the Group sought to release capital from its larger
operating plants, Langage, Humber and Killingholme in order to focus on
other investment opportunities. These assets and liabilities were
classified as a disposal group held for sale at the half year.
The Group ran a disposal process throughout the second half of 2014 and
continued to expect the value to be recovered through a divestment. In
December, the first capacity market auction prices cleared at a level
significantly below market expectations with an expected consequential
decline in bidder confidence. These events led the Group to reassess the
asset classification and decide the disposal was no longer ‘highly
probable’. Consequently, the assets were reclassified out of assets held
for sale as at 31 December. The culmination of the bid process in
February 2015 provided further evidence of the conditions existing at 31
December, as the bid levels were below the Group’s hold value. An
impairment of £384 million was recorded on reclassification to measure
the assets at their recoverable amounts at the date of transfer. See
note 6 for further details.
Other
The Ontario home services and Amethyst/Ravenspurn assets were classified
as held for sale in the second half of the year and subsequently
disposed of before year end.
(c) Disposals
|
The Group’s Texas gas-fired power stations and Greater Kittiwake
upstream gas assets classified as disposal groups held for sale at
31 December 2013 have now been disposed. This note details the
consideration received, the assets and liabilities disposed of and
the profit before and after tax arising on disposal. The Ontario
home services, Amethyst/Ravenspurn upstream gas assets and Barrow
Offshore Wind Farm businesses were also disposed of during the
year.
|
|
|
|
|
|
|
|
|
|
|
|
Date of disposal
|
|
22 January 2014
|
|
1 March 2014
|
|
30 September 2014
|
|
20 October 2014
|
|
19 December 2014
|
Business/assets disposed of by the Group
|
|
Texas gas-fired power stations(i)
|
|
Greater Kittiwake upstream gas assets(ii)
|
|
Amethyst/Ravenspurn upstream gas assets
|
|
Ontario home services(iii)
|
|
Barrow offshore wind farm(iv)
|
Sold to
|
|
Blackstone Group LP
|
|
Enquest Heather Limited
|
|
Perenco UK Limited
|
|
Enercare Inc.
|
|
DONG Energy
|
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
|
£m
|
Goodwill
|
|
–
|
|
–
|
|
–
|
|
150
|
|
–
|
Property, plant and equipment
|
|
186
|
|
89
|
|
10
|
|
–
|
|
–
|
Interest in joint ventures
|
|
–
|
|
–
|
|
–
|
|
–
|
|
24
|
Other assets
|
|
9
|
|
8
|
|
–
|
|
–
|
|
–
|
Other liabilities
|
|
–
|
|
(15)
|
|
–
|
|
(2)
|
|
–
|
Non-current provisions for other liabilities and charges
|
|
(3)
|
|
(46)
|
|
(35)
|
|
–
|
|
–
|
Net assets/(liabilities) disposed of
|
|
192
|
|
36
|
|
(25)
|
|
148
|
|
24
|
Cash consideration received
|
|
411
|
|
18
|
|
1
|
|
235
|
|
50
|
Other forms of consideration
|
|
–
|
|
–
|
|
2
|
|
59
|
|
–
|
Disposal costs
|
|
–
|
|
–
|
|
–
|
|
(24)
|
|
–
|
Profit/(loss) on disposal before tax
|
|
219
|
|
(18)
|
|
28
|
|
122
|
|
26
|
Taxation
|
|
(77)
|
|
31
|
|
(14)
|
|
(40)
|
|
(4)
|
Profit on disposal after tax
|
|
142
|
|
13
|
|
14
|
|
82
|
|
22
|
(i) The profit on disposal of the Texas gas-fired power stations has
been treated as an exceptional item. See note 6.
|
(ii) Further consideration of up to $130 million (£83 million) is
receivable from the vendor, contingent on approval of certain field
development plans by the Secretary of State. No amounts have been
recorded at the balance sheet date as the likelihood of receipt is
not yet considered probable.
|
(iii) The profit on disposal of the Ontario home services has been
treated as an exceptional item, as shown in note 6. The
consideration received comprises cash of C$426 million (£235
million) as well as shares in the acquirer, Enercare Inc., of C$106
million (£59 million), which are listed on the Toronto Stock
Exchange (TSX). The shares transferred as consideration upon
disposal of the Ontario home services business were valued at fair
value, which is their quoted market price discounted to reflect the
application of a lock-up period of 18 months to these financial
assets. The assets are classified as level 2 within the fair value
hierarchy. An amount of £15 million of disposal costs remained
unpaid as at the balance sheet date.
|
(iv) Consideration for the disposal of Barrow offshore wind farm
includes £19 million for the termination of the power purchase
agreement the Group had with Barrow offshore wind farm which is
shown in ‘Net cash flow from operating activities’ in the Group Cash
Flow Statement, with the remaining consideration included in
‘Repayments of loans to, and disposal of investments in, joint
ventures and associates’. Of the profit on disposal after tax, £2
million was allocated to the ‘British Gas – Residential energy
supply’ segment.
|
All other disposals undertaken by the Group were immaterial, both
individually and in aggregate, with net cash consideration of £2 million.
None of these disposals are shown as discontinued operations on the face
of the Group Income Statement as they do not represent a separate major
line of business or geographical area of operation.
16. Commitments and contingencies
(a) Commitments
|
Commitments are not held on the Group’s Balance Sheet as these are
executory arrangements, and relate to amounts that we are
contractually required to pay in the future as long as the other
party meets its contractual obligations.
|
The Group procures commodities through a mixture of production from gas
fields, power stations, wind farms and procurement contracts.
Procurement contracts include short-term forward market purchases of gas
and electricity at fixed and floating prices. They also include gas and
electricity contracts indexed to market prices and long-term gas
contracts with non-gas indexation. The commitments in relation to
commodity purchase contracts disclosed below are stated net of amounts
receivable under commodity sales contracts, where there is a right of
offset with the counterparty.
The total volume of gas to be taken under certain long-term structured
contracts depends on a number of factors, including the actual reserves
of gas that are eventually determined to be extractable on an economic
basis. The commitments disclosed below are based on the minimum
quantities of gas and other commodities that the Group is contracted to
buy at estimated future prices.
On 25 March 2013, the Group announced that it had entered into a 20 year
agreement with Cheniere to purchase 89bcf per annum of LNG volumes for
export from the Sabine Pass liquefaction plant in the US, subject to a
number of project milestones and regulatory approvals being achieved.
Under the terms of the agreement the Group is committed to make capacity
payments of up to £3.6 billion (included in ‘LNG capacity’ below)
between 2018 and 2038. The Group may also make up to £7 billion of
commodity purchases based on market gas prices and foreign exchange
rates as at the balance sheet date. The target date for first commercial
delivery is September 2018.
|
|
|
|
|
31 December
|
|
2014 £m
|
|
2013 £m |
Commitments in relation to the acquisition of property, plant and
equipment:
|
|
|
|
|
Development of Norwegian oil and gas assets
|
|
76
|
|
159
|
Development of Cygnus gas field
|
|
182
|
|
146
|
Other capital expenditure
|
|
23
|
|
51
|
Commitments in relation to the acquisition of intangible assets:
|
|
|
|
|
Renewable obligation certificates to be purchased from joint
ventures (i)
|
|
1,063
|
|
1,169
|
Renewable obligation certificates to be purchased from other parties
|
|
2,024
|
|
1,516
|
Other intangible assets
|
|
247
|
|
205
|
Other commitments:
|
|
|
|
|
Commodity purchase contracts
|
|
39,563
|
|
49,831
|
LNG capacity
|
|
4,388
|
|
4,452
|
Transportation capacity
|
|
942
|
|
939
|
Outsourcing of services
|
|
148
|
|
226
|
Commitments to invest in joint ventures
|
|
5
|
|
130
|
Energy Company Obligation
|
|
39
|
|
255
|
Power station tolling fees
|
|
110
|
|
125
|
Smart meters
|
|
67
|
|
62
|
Power station operating and maintenance
|
|
162
|
|
138
|
Heat rate call options
|
|
146
|
|
–
|
Other long-term commitments
|
|
396
|
|
333
|
Operating lease commitments:
|
|
|
|
|
Future minimum lease payments under non-cancellable operating leases
|
|
810
|
|
975
|
(i) Renewable obligation certificates are purchased from several joint
ventures which produce power from wind energy under long-term off-take
agreements (up to 15 years). The commitments disclosed above are the
gross contractual commitments and do not take into account the Group’s
economic interest in the joint venture.
At 31 December the maturity analyses for commodity purchase contract
commitments and the total minimum lease payments under non-cancellable
operating leases were:
|
|
|
|
|
|
|
Commodity purchase contracts commitments
|
|
Total minimum lease payments under non-cancellable operating
leases
|
31 December
|
|
2014 £billion
|
|
2013 £billion |
|
2014 £m
|
|
2013 £m |
<1 year
|
|
10.4
|
|
11.1
|
|
154
|
|
217
|
1–2 years
|
|
6.4
|
|
8.1
|
|
117
|
|
138
|
2–3 years
|
|
3.3
|
|
5.8
|
|
79
|
|
89
|
3–4 years
|
|
3.0
|
|
3.8
|
|
60
|
|
64
|
4–5 years
|
|
2.2
|
|
3.7
|
|
50
|
|
54
|
>5 years
|
|
14.3
|
|
17.3
|
|
350
|
|
413
|
|
|
39.6
|
|
49.8
|
|
810
|
|
975
|
Operating lease payments recognised as an expense in the year were as
follows:
|
|
|
|
|
Year ended 31 December
|
|
2014 £m
|
|
2013 £m |
Minimum lease payments (net of sub-lease receipts)
|
|
113
|
|
112
|
Contingent rents – renewables (i)
|
|
98
|
|
109
|
(i) The Group has entered into long-term arrangements with renewable
providers to purchase physical power, renewable obligation certificates
and levy exemption certificates from renewable sources. Payments made
under these contracts are contingent upon actual production and so there
is no commitment to a minimum lease payment (2013: nil). Payments made
for physical power are charged to the Group Income Statement as incurred
and disclosed as contingent rents.
(b) Guarantees and indemnities
|
This section discloses any guarantees and indemnities that the Group
has given, where we may have to provide security in the future
against existing and future obligations that will remain for a
specific period.
|
In connection with the Group’s energy trading, transportation and
upstream activities, certain Group companies have entered into contracts
under which they may be required to prepay, provide credit support or
provide other collateral in the event of a significant deterioration in
creditworthiness. The extent of credit support is contingent upon the
balance owing to the third party at the point of deterioration.
The Group has provided a number of guarantees and indemnities in respect
of decommissioning costs; the most significant indemnities relate to the
decommissioning costs associated with the Morecambe, Statfjord and
Kvitebjorn fields. These indemnities are to the previous owners of these
fields. Under the licence conditions of the fields, the previous owners
will have exposure to the decommissioning costs should these liabilities
not be fully discharged by the Group.
With regards to Morecombe the security is to be provided when the
estimated future net revenue stream from the associated gas field falls
below a predetermined proportion of the estimated decommissioning cost.
The nature of the security may take a number of different forms and will
remain in force until the costs of such decommissioning have been
irrevocably discharged and the relevant legal decommissioning notices in
respect of the relevant fields have been revoked.
Following legislation being executed, the UK Government is now signing
contracts (Decommissioning Relief Deeds – DRDs) with industry, providing
certainty on decommissioning tax relief via the tax code or DRD. These
deeds should permit industry to move to “post tax” Decommissioning
Security Agreements (DSAs), cutting the cost of these and freeing
capital for investment. Centrica now has a signed DRD, discussions are
ongoing on moving to a post-tax DSA, whilst we continue to analyse
options to update the South Morecambe DSA.
Security for Statfjord and Kvitebjorn is slightly different in this
respect as it was provided to the previous owners as part of the
acquisition of these fields.
(c) Contingent liabilities
On 13 June 2013, the Group acquired a 25% interest in the Bowland
exploration licence in Lancashire from Cuadrilla Resources Ltd and AJ
Lucas Group Ltd for £44 million in cash. The Group may pay up to £36
million additional costs under a carry arrangement which is contingent
on consents being received. Following the exploration and appraisal
phase, if the Group elects to continue into the development phase, a
further contingent consideration of £60 million will become payable.
There are no other material contingent liabilities.
17. Events after the balance sheet date
|
The Group updates disclosures in light of new information being
received, or a significant event occurring, in the period between
31 December 2014 and the date of this report.
|
Acquisition
On 13 February 2015, Centrica announced that British Gas will acquire
AlertMe, a UK-based connected homes company that provides innovative
energy management products and services. The net cost to British Gas
will be £44 million, taking into account an existing 21% holding in
AlertMe. It is anticipated that the transaction will close by the end of
the first quarter of 2015.
Dividends
The Directors propose a final dividend of 8.4 pence per ordinary share
(totalling £417 million) for the year ended 31 December 2014. The
dividend will be submitted for formal approval at the Annual General
Meeting to be held on 27 April 2015 and, subject to approval, will be
paid on 25 June 2015 to those shareholders registered on 1 May 2015.
18. Seasonality of operations
Certain activities of the Group are affected by weather and temperature
conditions. As a result of this, amounts reported for the six month
period ended 31 December 2014 may not be indicative of the amounts that
would be reported for a full year due to seasonal fluctuations in
customer demand for gas, electricity and services, the impact of weather
on demand and commodity prices, market changes in commodity prices and
changes in retail tariffs.
Customer demand for gas in the UK, Republic of Ireland and North America
is driven primarily by heating load and is generally higher in the
winter than in the summer, and higher from January to June than from
July to December. Customer demand for electricity in the UK and the
Republic of Ireland generally follows a similar pattern to gas, but is
more stable. Customer demand for electricity in North America is also
more stable than gas but is driven by heating load in the winter and
cooling load in the summer. Generally demand for electricity in North
America is higher in the winter and summer than it is in the spring and
autumn, and higher from July to December than it is from January to June.
Customer demand for home services in the UK is generally higher in the
winter than it is in the summer, and higher in the earlier part of the
winter as that is typically when heating systems tend to break down
most, so that customer demand from July to December is higher than from
January to June. Customer demand for home services in North America
follows a similar pattern, but is also higher in the summer as a result
of servicing of cooling systems.
Gas production volumes in the UK are generally higher in the winter when
gas prices are higher. Gas production volumes are generally higher from
January to June than they are from July to December as outages are
generally planned for the summer months when gas demand and prices are
at their lowest. Gas production volumes in North America are generally
not seasonal.
Power generation volumes are dependent on spark spread prices, which is
the difference between the price of electricity and the price of gas
multiplied by a conversion rate and, as a result, are not as seasonal as
gas production volumes in the UK, as wholesale prices for both gas and
electricity are generally higher in the winter than they are in the
summer.
The impact of seasonality on customer demand and wholesale prices has a
direct effect on the Group’s financial performance and cash flows.
19. Group Income Statement for the six months ended 31 December
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
2013
|
Six months ended 31 December
|
|
Notes
|
|
Business performance £m
|
|
Exceptional items and certain re-measurements £m
|
|
Results for the period £m
|
|
Business performance £m
|
|
Exceptional items and certain re-measurements £m
|
|
Results for the period £m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group revenue
|
|
21(a)
|
|
13,660
|
|
–
|
|
13,660
|
|
12,920
|
|
–
|
|
12,920
|
Cost of sales before exceptional items and certain re-measurements
|
|
|
|
(11,571)
|
|
–
|
|
(11,571)
|
|
(10,578)
|
|
–
|
|
(10,578)
|
Exceptional items – onerous provision
|
|
22(a)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
(125)
|
|
(125)
|
Re-measurement of energy contracts
|
|
22(b)
|
|
–
|
|
(988)
|
|
(988)
|
|
–
|
|
309
|
|
309
|
Cost of sales
|
|
|
|
(11,571)
|
|
(988)
|
|
(12,559)
|
|
(10,578)
|
|
184
|
|
(10,394)
|
Gross profit
|
|
|
|
2,089
|
|
(988)
|
|
1,101
|
|
2,342
|
|
184
|
|
2,526
|
Operating costs before exceptional items
|
|
|
|
(1,505)
|
|
–
|
|
(1,505)
|
|
(1,403)
|
|
–
|
|
(1,403)
|
Exceptional items – impairments
|
|
22(a)
|
|
–
|
|
(1,938)
|
|
(1,938)
|
|
–
|
|
(939)
|
|
(939)
|
Exceptional items – gains on disposals
|
|
22(a)
|
|
–
|
|
122
|
|
122
|
|
–
|
|
–
|
|
–
|
Operating costs
|
|
|
|
(1,505)
|
|
(1,816)
|
|
(3,321)
|
|
(1,403)
|
|
(939)
|
|
(2,342)
|
Share of profits in joint ventures and associates, net of interest
and taxation
|
|
22(b)
|
|
55
|
|
7
|
|
62
|
|
94
|
|
24
|
|
118
|
Group operating (loss)/profit
|
|
21(b)
|
|
639
|
|
(2,797)
|
|
(2,158)
|
|
1,033
|
|
(731)
|
|
302
|
Financing costs
|
|
|
|
(163)
|
|
–
|
|
(163)
|
|
(168)
|
|
–
|
|
(168)
|
Investment income
|
|
|
|
28
|
|
–
|
|
28
|
|
28
|
|
–
|
|
28
|
Net finance cost
|
|
|
|
(135)
|
|
–
|
|
(135)
|
|
(140)
|
|
–
|
|
(140)
|
(Loss)/profit before taxation
|
|
|
|
504
|
|
(2,797)
|
|
(2,293)
|
|
893
|
|
(731)
|
|
162
|
Taxation on (loss)/profit
|
|
|
|
(94)
|
|
832
|
|
738
|
|
(293)
|
|
262
|
|
(31)
|
(Loss)/profit for the period
|
|
|
|
410
|
|
(1,965)
|
|
(1,555)
|
|
600
|
|
(469)
|
|
131
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the parent
|
|
|
|
403
|
|
(1,948)
|
|
(1,545)
|
|
600
|
|
(469)
|
|
131
|
Non-controlling interests
|
|
|
|
7
|
|
(17)
|
|
(10)
|
|
–
|
|
–
|
|
–
|
Earnings per ordinary share
|
|
|
|
|
|
|
|
Pence
|
|
|
|
|
|
Pence
|
Basic
|
|
23
|
|
|
|
(30.9)
|
|
|
|
2.5
|
Diluted
|
|
23
|
|
|
|
(30.9)
|
|
|
|
2.5
|
20. Group Cash Flow Statement for the six months ended 31 December
(unaudited)
|
|
|
|
|
Six months ended 31 December
|
|
2014 £m
|
|
2013 £m |
Group operating (loss)/profit including share of results of joint
ventures and associates
|
|
(2,158)
|
|
302
|
Less share of profit of joint ventures and associates, net of
interest and taxation
|
|
(62)
|
|
(118)
|
Group operating (loss)/profit before share of results of joint
ventures and associates
|
|
(2,220)
|
|
184
|
Add back/(deduct):
|
|
|
|
|
Depreciation, amortisation, write-down and impairments
|
|
2,665
|
|
1,640
|
(Profit)/loss on disposals
|
|
(176)
|
|
9
|
(Decrease)/increase in provisions
|
|
(14)
|
|
189
|
Defined benefit pension service cost and contributions
|
|
(86)
|
|
(84)
|
Employee share scheme costs
|
|
13
|
|
20
|
Unrealised losses/(gains) arising from re-measurement of energy
contracts
|
|
1,049
|
|
(279)
|
Operating cash flows before movements in working capital
|
|
1,231
|
|
1,679
|
Increase in inventories
|
|
(55)
|
|
(71)
|
Increase in trade and other receivables (i)
|
|
(1,335)
|
|
(420)
|
Increase in trade and other payables (i)
|
|
679
|
|
924
|
Operating cash flows before payments relating to taxes, interest and
exceptional charges
|
|
520
|
|
2,112
|
Taxes paid
|
|
(294)
|
|
(491)
|
Payments relating to exceptional charges
|
|
(63)
|
|
(92)
|
Net cash flow from operating activities
|
|
163
|
|
1,529
|
Purchase of businesses
|
|
(18)
|
|
(1,113)
|
Sale of businesses
|
|
225
|
|
135
|
Purchase of property, plant and equipment and intangible assets
|
|
(715)
|
|
(826)
|
Sale of property, plant and equipment and intangible assets
|
|
8
|
|
11
|
Investments in joint ventures and associates
|
|
(16)
|
|
(17)
|
Dividends received from joint ventures and associates
|
|
95
|
|
90
|
Repayments of loans to, and disposal of investments in, joint
ventures and associates
|
|
96
|
|
–
|
Interest received
|
|
22
|
|
18
|
Sale/(purchase) of securities
|
|
7
|
|
(2)
|
Net cash flow from investing activities
|
|
(296)
|
|
(1,704)
|
Issue and surrender of ordinary share capital for share awards, net
of payments for own shares
|
|
5
|
|
11
|
Purchase of treasury shares under share repurchase programme
|
|
(215)
|
|
(299)
|
Investment by non-controlling interests
|
|
119
|
|
–
|
Distribution to non-controlling interests
|
|
(18)
|
|
(8)
|
Financing interest paid
|
|
(201)
|
|
(132)
|
Repayment of borrowings
|
|
(491)
|
|
(348)
|
Cash received from borrowings, net of linked deposit
|
|
984
|
|
1,137
|
Equity dividends paid
|
|
(259)
|
|
(255)
|
Net cash flow from financing activities
|
|
(76)
|
|
106
|
Net decrease in cash and cash equivalents
|
|
(209)
|
|
(69)
|
Cash and cash equivalents at beginning of period
|
|
815
|
|
800
|
Effect of foreign exchange rate changes
|
|
15
|
|
(12)
|
Cash and cash equivalents at 31 December
|
|
621
|
|
719
|
Included in the following line of the Group Balance Sheet:
|
|
|
|
|
Cash and cash equivalents
|
|
621
|
|
719
|
(i) Includes net outflow of £513 million of cash collateral in 2014
(2013: net inflow of £84 million).
21. Segmental analysis for the six months ended 31 December
(unaudited)
(a) Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
2013
|
Six months ended 31 December
|
|
Gross segment revenue £m
|
|
Less inter- segment revenue £m
|
|
Group revenue £m
|
|
Gross segment revenue £m
|
|
Less inter- segment revenue £m
|
|
Group revenue £m
|
International Downstream
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential energy supply
|
|
3,777
|
|
(3)
|
|
3,774
|
|
4,001
|
|
–
|
|
4,001
|
Residential services
|
|
854
|
|
(82)
|
|
772
|
|
850
|
|
(81)
|
|
769
|
Business energy supply and services
|
|
1,408
|
|
(9)
|
|
1,399
|
|
1,463
|
|
(36)
|
|
1,427
|
British Gas
|
|
6,039
|
|
(94)
|
|
5,945
|
|
6,314
|
|
(117)
|
|
6,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential energy supply
|
|
1,172
|
|
–
|
|
1,172
|
|
1,209
|
|
–
|
|
1,209
|
Business energy supply
|
|
3,930
|
|
–
|
|
3,930
|
|
2,629
|
|
(33)
|
|
2,596
|
Residential and business services
|
|
267
|
|
–
|
|
267
|
|
296
|
|
–
|
|
296
|
Direct Energy
|
|
5,369
|
|
–
|
|
5,369
|
|
4,134
|
|
(33)
|
|
4,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bord Gáis Energy
|
|
391
|
|
–
|
|
391
|
|
–
|
|
–
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Upstream
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
|
|
1,521
|
|
(143)
|
|
1,378
|
|
2,148
|
|
(44)
|
|
2,104
|
Power
|
|
686
|
|
(161)
|
|
525
|
|
720
|
|
(251)
|
|
469
|
Centrica Energy
|
|
2,207
|
|
(304)
|
|
1,903
|
|
2,868
|
|
(295)
|
|
2,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Centrica Storage
|
|
79
|
|
(27)
|
|
52
|
|
81
|
|
(32)
|
|
49
|
|
|
14,085
|
|
(425)
|
|
13,660
|
|
13,397
|
|
(477)
|
|
12,920
|
(b) Operating profit before and after tax
|
|
|
|
|
|
|
|
|
Adjusted operating profit (i)
|
|
Adjusted operating profit after taxation (ii)
|
Six months ended 31 December
|
|
|
|
|
|
|
|
|
2014 £m
|
|
2013 £m |
|
2014 £m
|
|
2013 £m |
International Downstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential energy supply
|
|
|
|
|
|
|
|
|
174
|
|
215
|
|
137
|
|
150
|
Residential services
|
|
|
|
|
|
|
|
|
141
|
|
183
|
|
111
|
|
138
|
Business energy supply and services
|
|
|
|
|
|
|
|
|
53
|
|
63
|
|
44
|
|
53
|
British Gas
|
|
|
|
|
|
|
|
|
368
|
|
461
|
|
292
|
|
341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential energy supply
|
|
|
|
|
|
|
|
|
42
|
|
64
|
|
32
|
|
49
|
Business energy supply
|
|
|
|
|
|
|
|
|
53
|
|
24
|
|
31
|
|
20
|
Residential and business services
|
|
|
|
|
|
|
|
|
14
|
|
23
|
|
10
|
|
17
|
Direct Energy
|
|
|
|
|
|
|
|
|
109
|
|
111
|
|
73
|
|
86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bord Gáis Energy
|
|
|
|
|
|
|
|
|
7
|
|
–
|
|
3
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Upstream
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas (iii)
|
|
|
|
|
|
|
|
|
141
|
|
472
|
|
67
|
|
143
|
Power (iii) (iv)
|
|
|
|
|
|
|
|
|
70
|
|
52
|
|
116
|
|
43
|
Centrica Energy
|
|
|
|
|
|
|
|
|
211
|
|
524
|
|
183
|
|
186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Centrica Storage
|
|
|
|
|
|
|
|
|
19
|
|
16
|
|
14
|
|
12
|
|
|
714
|
|
1,112
|
|
565
|
|
625
|
Share of joint ventures’/associates’ interest and taxation
|
|
(37)
|
|
(64)
|
|
|
|
|
Depreciation of fair value uplifts to property, plant and equipment
– Venture (iii)
|
|
(14)
|
|
(21)
|
|
|
|
|
Depreciation of fair value uplifts to property, plant and equipment (net
of taxation) – associates – Nuclear (iii)
|
|
(24)
|
|
6
|
|
|
|
|
|
|
639
|
|
1,033
|
|
|
|
|
Exceptional items (note 22)
|
|
(1,816)
|
|
(1,064)
|
|
|
|
|
Certain re-measurements included within gross profit (note 22)
|
|
(988)
|
|
309
|
|
|
|
|
Certain re-measurements of associates’ energy contracts (net of
taxation) (note 22)
|
|
7
|
|
24
|
|
|
|
|
Operating (loss)/profit after exceptional items and
certain re-measurements
|
|
(2,158)
|
|
302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 £m
|
|
2013 £m |
Adjusted operating profit after taxation (ii)
|
|
|
|
|
|
565
|
|
625
|
Depreciation of fair value uplifts to property, plant and equipment
(net of taxation) (iv)
|
|
|
|
|
|
(29)
|
|
(3)
|
Impact of changes to UK corporation tax rates (v)
|
|
|
|
|
|
(2)
|
|
64
|
Corporate and other taxation, and interest (net of taxation) (vi)
|
|
|
|
|
|
(124)
|
|
(86)
|
Business performance profit for the period
|
|
|
|
|
|
410
|
|
600
|
Exceptional items and certain re-measurements (net of taxation)
(note 22)
|
|
|
|
|
|
(1,965)
|
|
(469)
|
Statutory (loss)/profit for the period
|
|
|
|
|
|
(1,555)
|
|
131
|
(i) Segment operating profit before exceptional items, certain
re-measurements and impact of fair value uplifts from the Strategic
Investments acquired in 2009. This includes results of
equity-accounted interests before interest and taxation.
|
(ii) Segment operating profit after tax, before exceptional items,
certain re-measurements and impact of fair value uplifts from the
Strategic Investments acquired in 2009. This includes operating
results of equity-accounted interests, net of associated taxation,
before interest and associated taxation.
|
(iii) See notes 2 and 10 for an explanation of the depreciation on
fair value uplifts to PP&E on the Strategic Investments acquired in
2009.
|
(iv) Power adjusted operating profit after taxation includes a
one-off deferred tax benefit of £44 million (2013: nil) following a
legal entity reorganisation.
|
(v) In 2014 there is no impact relating to equity accounted
interests (2013: £29 million credit).
|
(vi) Includes joint ventures’/associates’ interest, net of
associated taxation.
|
22. Exceptional items and certain re-measurements for the six months
ended 31 December (unaudited)
(a) Exceptional items
|
|
|
|
|
Six months ended 31 December
|
|
2014 £m
|
|
2013 £m |
Provision for onerous power procurement contract
|
|
–
|
|
(125)
|
Exceptional items included within gross profit
|
|
–
|
|
(125)
|
Impairment of Centrica Energy exploration and production assets
(note 6)
|
|
(1,189)
|
|
(699)
|
Impairment of UK power generation assets (note 6)
|
|
(535)
|
|
–
|
Impairment on Nuclear investment (note 6)
|
|
(214)
|
|
–
|
Impairment of UK gas storage assets and associated provision for
onerous capacity contracts
|
|
–
|
|
(240)
|
Gain on disposal of Ontario home service business (note 15(c))
|
|
122
|
|
–
|
|
|
(1,816)
|
|
(939)
|
Exceptional items included within Group operating profit
|
|
(1,816)
|
|
(1,064)
|
Taxation on exceptional items
|
|
515
|
|
397
|
Total exceptional items after taxation
|
|
(1,301)
|
|
(667)
|
(b) Certain re-measurements
|
|
|
|
|
Six months ended 31 December
|
|
2014 £m
|
|
2013 £m |
Certain re-measurements recognised in relation to energy contracts:
|
|
|
|
|
Net gains arising on delivery of contracts
|
|
14
|
|
26
|
Net (losses)/gains arising on market price movements and new
contracts
|
|
(1,002)
|
|
283
|
Net re-measurements included within gross profit
|
|
(988)
|
|
309
|
Net gains arising on re-measurement of associates’ energy contracts
(net of taxation)
|
|
7
|
|
24
|
Net re-measurements included within Group operating profit
|
|
(981)
|
|
333
|
Taxation on certain re-measurements
|
|
317
|
|
(135)
|
Net re-measurements after taxation
|
|
(664)
|
|
198
|
23. Earnings per ordinary share for the six months ended 31 December
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
2013
|
Six months ended 31 December
|
|
£m
|
|
Pence per ordinary share
|
|
£m
|
|
Pence per ordinary share |
(Loss)/earnings – basic
|
|
(1,545)
|
|
(30.9)
|
|
131
|
|
2.5
|
Net exceptional items after taxation (note 22 (i))
|
|
1,284
|
|
25.7
|
|
667
|
|
12.9
|
Certain re-measurement gains after taxation (note 22)
|
|
664
|
|
13.3
|
|
(198)
|
|
(3.8)
|
Depreciation of fair value uplifts to property, plant and equipment
from Strategic Investments, after taxation |
|
29
|
|
0.6
|
|
3
|
|
0.1
|
Earnings – adjusted basic
|
|
432
|
|
8.7
|
|
603
|
|
11.7
|
|
|
|
|
|
|
|
|
|
(Loss)/earnings – diluted (ii)
|
|
(1,545)
|
|
(30.9)
|
|
131
|
|
2.5
|
|
|
|
|
|
|
|
|
|
Earnings – adjusted diluted
|
|
432
|
|
8.6
|
|
603
|
|
11.6
|
(i) Net exceptional items after taxation of £1,301 million are
reduced by £17 million for the purpose of calculating adjusted basic
and adjusted diluted EPS. The adjustment reflects the share of net
exceptional items attributable to non-controlling interests.
|
(ii) The dilutive impact of share based payment schemes is included
in the calculation of diluted EPS, unless it has the effect of
increasing the profit or decreasing the loss attributable to each
share. Therefore, these shares are excluded from the calculation of
basic diluted EPS in 2014.
|
GAS AND LIQUID RESERVES (UNAUDITED)
The Group’s estimates of reserves of gas and liquids are reviewed as
part of the half year and full year reporting process and updated
accordingly.
A number of factors affect the volumes of gas and liquids reserves,
including the available reservoir data, commodity prices and future
costs. Due to the inherent uncertainties and the limited nature of
reservoir data, estimates of reserves are subject to change as
additional information becomes available.
The Group discloses 2P gas and liquids reserves, representing the
central estimate of future hydrocarbon recovery. Reserves for
Centrica-operated fields are estimated by in-house technical teams
composed of geoscientists and reservoir engineers. Reserves for
non-operated fields are estimated by the operator, but are subject to
internal review and challenge.
As part of the internal control process related to reserves estimation,
an assessment of the reserves, including the application of the reserves
definitions is undertaken by an independent technical auditor. An annual
reserves assessment has been carried out by DeGoyler and MacNaughton for
the Group's global reserves. Reserves are estimated in accordance with a
formal policy and procedure standard.
The Group has estimated 2P gas and liquids reserves in Europe, Canada
and Trinidad and Tobago.
The principal fields in Europe are Kvitebjorn, Statfjord, Cygnus, South
Morecambe, Maria, Chiswick, Valemon, Butch, Rhyl, Grove and York. The
principal field in Trinidad and Tobago is NCMA-1. The principal field in
Centrica Storage is the Rough field. The European and Trinidad and
Tobago reserves estimates are consistent with the guidelines and
definitions of the Society of Petroleum Engineers, the Society of
Petroleum Evaluation Engineers and the World Petroleum Council’s
Petroleum Resources Management System using accepted principles.
The principal fields in Canada are Panther, Wildcat Hills, Alderson,
Stolberg, Hanlan and Ferrier. The Canadian field reserves estimates have
been evaluated in accordance with the Canadian Oil and Gas Evaluation
Handbook (COGEH) reserves definitions and are consistent with the
guidelines and definitions of the Society of Petroleum Engineers and the
World Petroleum Council.
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated net 2P reserves of gas (billion cubic feet)
|
|
Europe
|
|
Canada
|
|
Trinidad and Tobago (iv) |
|
Centrica Energy
|
|
Centrica Storage
|
|
Total
|
1 January 2014
|
|
2,011
|
|
1,130
|
|
128
|
|
3,269
|
|
182
|
|
3,451
|
Revisions of previous estimates (i)
|
|
(161)
|
|
(63)
|
|
–
|
|
(224)
|
|
–
|
|
(224)
|
(Disposals)/purchases of reserves in place (ii)
|
|
(9)
|
|
(152)
|
|
–
|
|
(161)
|
|
–
|
|
(161)
|
Extensions, discoveries and other additions (iii)
|
|
13
|
|
85
|
|
–
|
|
98
|
|
–
|
|
98
|
Production (v)
|
|
(223)
|
|
(91)
|
|
(19)
|
|
(333)
|
|
–
|
|
(333)
|
31 December 2014
|
|
1,631
|
|
909
|
|
109
|
|
2,649
|
|
182
|
|
2,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated net 2P reserves of liquids (million barrels)
|
|
Europe
|
|
Canada
|
|
Trinidad and Tobago (v) |
|
Centrica Energy
|
|
Centrica Storage
|
|
Total
|
1 January 2014
|
|
145
|
|
22
|
|
–
|
|
167
|
|
–
|
|
167
|
Revisions of previous estimates
|
|
–
|
|
(1)
|
|
–
|
|
(1)
|
|
–
|
|
(1)
|
(Disposals)/purchases of reserves in place
|
|
(4)
|
|
(4)
|
|
–
|
|
(8)
|
|
–
|
|
(8)
|
Extensions, discoveries and other additions (iii)
|
|
–
|
|
2
|
|
–
|
|
2
|
|
–
|
|
2
|
Production (v)
|
|
(15)
|
|
(2)
|
|
–
|
|
(17)
|
|
–
|
|
(17)
|
31 December 2014
|
|
126
|
|
17
|
|
–
|
|
143
|
|
–
|
|
143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated net 2P reserves (million barrels of oil equivalent)
|
|
Europe
|
|
Canada
|
|
Trinidad and Tobago (iv) |
|
Centrica Energy
|
|
Centrica Storage
|
|
Total
|
31 December 2014 (vi)
|
|
398
|
|
169
|
|
18
|
|
585
|
|
30
|
|
615
|
(i) Revision of previous estimates including those associated with
Seven Seas, Ensign, Olympus, Grove and York.
|
(ii) Reflects our share of the acquisition of producing natural gas
assets in the Foothills region of Alberta, Canada and the disposals
of Greater Kittiwake area and Amethyst/Ravenspurn. Also includes the
transfer of our wholly owned interests to the CQ Energy Canada
Partnership, in which the Group has a 60% interest which results in
a 40% decrease in the reported reserves associated with these
interests.
|
(iii) Recognition of reserves including the Statfjord fields and a
number of additional planned wells in Canada within Centrica Energy.
|
(iv) The Trinidad and Tobago reserves are subject to a production
sharing contract and accordingly have been stated on an entitlement
basis (including tax barrels).
|
(v) Represents total sales volumes of gas and oil produced from the
Group’s reserves.
|
(vi) Includes the total of estimated gas and liquid reserves at 31
December 2014 in million barrels of oil equivalent.
|
Liquids reserves include oil, condensate and natural gas liquids.
OFGEM CONSOLIDATED SEGMENTAL STATEMENT
The Ofgem Consolidated Segmental Statements (CSS) segments our Supply
and Generation activities and provides a measure of profitability,
weighted average cost of fuel, and volumes, in order to increase energy
market transparency for consumers and other stakeholders.
The following is an extract of the audited CSS and is prepared in
accordance with Standard Condition 19A of the Electricity and Gas Supply
Licences and Standard Condition 16B of Electricity Generation Licences.
This extract should be read in conjunction with the full CSS which
includes the Statement, the audit opinion and the basis of preparation.
These are available on www.centrica.com/prelims2014.
Ofgem consolidated segmental statement
|
Year ended 31 December 2014
|
|
|
|
|
Electricity Generation
|
|
|
|
Electricity Supply
|
|
Gas Supply
|
|
|
|
|
|
|
Unit
|
|
Nuclear (i)
|
|
Thermal (i)
|
|
Renewables
|
|
Aggregate Generation Business
|
|
Domestic
|
|
Non- Domestic |
|
Domestic
|
|
Non- Domestic |
|
Aggregate Supply Business
|
|
Midstream Power (ii)
|
Total revenue
|
|
£m
|
|
575.1
|
|
599.2
|
|
144.9
|
|
1,319.2
|
|
3,296.3
|
|
1,963.6
|
|
5,031.2
|
|
765.9
|
|
11,057.0
|
|
105.6
|
Sales of electricity & gas
|
|
£m
|
|
570.4
|
|
587.7
|
|
53.0
|
|
1,211.1
|
|
3,260.7
|
|
1,955.3
|
|
4,986.1
|
|
765.9
|
|
10,968.0
|
|
59.9
|
Other revenue
|
|
£m
|
|
4.7
|
|
11.5
|
|
91.9
|
|
108.1
|
|
35.6
|
|
8.3
|
|
45.1
|
|
–
|
|
89.0
|
|
45.7
|
Total operating costs
|
|
£m
|
|
(306.4)
|
|
(663.9)
|
|
(96.7)
|
|
(1,067.0)
|
|
(3,219.0)
|
|
(1,902.6)
|
|
(4,596.0)
|
|
(694.0)
|
|
(10,411.6)
|
|
(73.8)
|
Direct fuel costs
|
|
£m
|
|
(76.1)
|
|
(456.6)
|
|
–
|
|
(532.7)
|
|
(1,390.5)
|
|
(954.6)
|
|
(2,443.8)
|
|
(441.4)
|
|
(5,230.3)
|
|
–
|
Direct costs
|
|
£m
|
|
(212.1)
|
|
(150.3)
|
|
(31.7)
|
|
(394.1)
|
|
(1,371.5)
|
|
(747.4)
|
|
(1,452.6)
|
|
(152.5)
|
|
(3,724.0)
|
|
(58.1)
|
Network costs
|
|
£m
|
|
(34.7)
|
|
(39.3)
|
|
(4.9)
|
|
(78.9)
|
|
(870.7)
|
|
(471.7)
|
|
(1,147.5)
|
|
(136.5)
|
|
(2,626.4)
|
|
–
|
Environmental and social obligation costs
|
|
£m
|
|
–
|
|
(52.6)
|
|
–
|
|
(52.6)
|
|
(484.6)
|
|
(248.3)
|
|
(290.9)
|
|
–
|
|
(1,023.8)
|
|
–
|
Other direct costs
|
|
£m
|
|
(177.4)
|
|
(58.4)
|
|
(26.8)
|
|
(262.6)
|
|
(16.2)
|
|
(27.4)
|
|
(14.2)
|
|
(16.0)
|
|
(73.8)
|
|
(58.1)
|
Indirect costs
|
|
£m
|
|
(18.2)
|
|
(57.0)
|
|
(65.0)
|
|
(140.2)
|
|
(457.0)
|
|
(200.6)
|
|
(699.6)
|
|
(100.1)
|
|
(1,457.3)
|
|
(15.7)
|
WACOF/E/G
|
|
£/MWh, P/th
|
|
(6.7)
|
|
(50.9)
|
|
N/A
|
|
N/A
|
|
(61.0)
|
|
(58.6)
|
|
(71.1)
|
|
(68.3)
|
|
N/A
|
|
N/A
|
EBITDA
|
|
£m
|
|
268.7
|
|
(64.7)
|
|
48.2
|
|
252.2
|
|
77.3
|
|
61.0
|
|
435.2
|
|
71.9
|
|
645.4
|
|
31.8
|
DA
|
|
£m
|
|
(59.0)
|
|
(55.1)
|
|
(38.3)
|
|
(152.4)
|
|
(32.1)
|
|
(6.4)
|
|
(41.5)
|
|
(3.3)
|
|
(83.3)
|
|
(1.0)
|
EBIT
|
|
£m
|
|
209.7
|
|
(119.8)
|
|
9.9
|
|
99.8
|
|
45.2
|
|
54.6
|
|
393.7
|
|
68.6
|
|
562.1
|
|
30.8
|
Volume
|
|
TWh, MThms
|
|
|