After the break-up of British Gas plc in 1997, Centrica retained the British Gas brand in the UK, the domestic gas supply operations and substantial upstream gas assets. After initially diversifying into a range of services, Centrica now focuses on providing energy services and solutions to residential (c45% of EBITDA) and business customers (c10%). Centrica is the largest electricity supplier in the UK, with a market share of around 20%. Centrica also has upstream oil and gas assets, which it intends to exit.
Centrica says its outlook is “broadly positive” – yet there were no expectations given for EPS and FCF. The company disclosed that addition of some 176 new customers in Q1/22, the Whitegate power station went online again, LNG profitability has gone up and should increase even further, its nuclear reactors are back online again, and given the current market, upstream and trading should continue to benefit from market conditions.
We note that Centrica’s valuation is on an improving trajectory, but the full recovery of this capital-intensive utility will take time.