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Released August 05, 2015 | GALWAY, IRELAND
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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Centrica plc (OTC:CPYYY) (Windsor, England), one of the U.K.'s leading gas and energy companies, has announced 6,000 job cuts over the next five years and confirmed its exit from the wind energy sector.
The cuts, representing around 10% of its workforce, comes as the company redirects its investment into energy services and supply. Centrica plans to sell wind energy assets worth about £1 billion ($1.56 billion) and said it sees no future in investing in future gas-fired power plants.
"In thermal power, we will continue to operate our existing small gas-fired fleet, maximizing optimization activity and seeking opportunities to make small investments in improving the fleet where economics allow," said Iain Conn, chief executive of Centrica. "We will maintain a watching brief as the capacity market evolves, and will retain sufficient capability to enable us to continue to manage power assets in the future. However, we will not increase our emphasis on central thermal generation, preferring to seek opportunities in peaking units and distributed generation."
Overall, Centrica aims to reduce its investments in its power generation and exploration and production (E&P) businesses by about £1.5 billion ($2.3 billion) over the next five years.
Regarding wind energy, Conn added: "In wind power generation, with total operational capacity of only 245 megawatts (MW) and no existing potential developments in the pipeline, we plan to dispose of our interests, continuing to participate to a limited degree through power purchase agreements."
In 2013, Centrica abandoned plans to build new nuclear plants in the U.K. with French partner Electricite de France S.A. (EPA:EDF) (EDF) (Paris, France), blaming concerns over costs and project delays. The company had the option to own a 20% stake in four reactors. For additional information, see February 8, 2013, article - Centrica Abandons U.K. Nuclear Projects.
A year later, the company announced that it was going to sell off most of its gas-fired power plants due to weak demand and increased competition from coal-fired plants and renewables. The company intends to sell its Langage, Humber and Killingholme CCGT plants. For additional information, see May 19, 2014, article - Centrica Selling Three Gas-Fired Plants.
Centrica also announced plans to reduce its exploration and production operations by up to half from 80 million barrels of oil equivalent (boe) to between 40 million and 50 million, in order to reduce risk and lower capital investment.
Conn explained: "We have determined that a stable E&P business which produces around 40 to 50 mmboe [million boe] per annum, and requires between £400-£600 million of capital expenditure each year, is sized to fulfil this role. This compares to a business which produced 75-80 mmboe and incurred capital expenditures of around £1.1 billion in 2013 and 2014 as we sought to grow E&P. While we have built an E&P business with good capabilities over the past six years, we are participating in five countries, which we believe is too stretching for our scale and capabilities. As a result, we will focus our E&P activity on the North Sea and East Irish Sea, where we are material enough to play a major part in the U.K. and Netherlands, and have the capability and presence in Norway to allow us to access additional value opportunities."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. To contact an office in your area, visit the Industrial Info "Contact Us" page.
The cuts, representing around 10% of its workforce, comes as the company redirects its investment into energy services and supply. Centrica plans to sell wind energy assets worth about £1 billion ($1.56 billion) and said it sees no future in investing in future gas-fired power plants.
"In thermal power, we will continue to operate our existing small gas-fired fleet, maximizing optimization activity and seeking opportunities to make small investments in improving the fleet where economics allow," said Iain Conn, chief executive of Centrica. "We will maintain a watching brief as the capacity market evolves, and will retain sufficient capability to enable us to continue to manage power assets in the future. However, we will not increase our emphasis on central thermal generation, preferring to seek opportunities in peaking units and distributed generation."
Overall, Centrica aims to reduce its investments in its power generation and exploration and production (E&P) businesses by about £1.5 billion ($2.3 billion) over the next five years.
Regarding wind energy, Conn added: "In wind power generation, with total operational capacity of only 245 megawatts (MW) and no existing potential developments in the pipeline, we plan to dispose of our interests, continuing to participate to a limited degree through power purchase agreements."
In 2013, Centrica abandoned plans to build new nuclear plants in the U.K. with French partner Electricite de France S.A. (EPA:EDF) (EDF) (Paris, France), blaming concerns over costs and project delays. The company had the option to own a 20% stake in four reactors. For additional information, see February 8, 2013, article - Centrica Abandons U.K. Nuclear Projects.
A year later, the company announced that it was going to sell off most of its gas-fired power plants due to weak demand and increased competition from coal-fired plants and renewables. The company intends to sell its Langage, Humber and Killingholme CCGT plants. For additional information, see May 19, 2014, article - Centrica Selling Three Gas-Fired Plants.
Centrica also announced plans to reduce its exploration and production operations by up to half from 80 million barrels of oil equivalent (boe) to between 40 million and 50 million, in order to reduce risk and lower capital investment.
Conn explained: "We have determined that a stable E&P business which produces around 40 to 50 mmboe [million boe] per annum, and requires between £400-£600 million of capital expenditure each year, is sized to fulfil this role. This compares to a business which produced 75-80 mmboe and incurred capital expenditures of around £1.1 billion in 2013 and 2014 as we sought to grow E&P. While we have built an E&P business with good capabilities over the past six years, we are participating in five countries, which we believe is too stretching for our scale and capabilities. As a result, we will focus our E&P activity on the North Sea and East Irish Sea, where we are material enough to play a major part in the U.K. and Netherlands, and have the capability and presence in Norway to allow us to access additional value opportunities."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. To contact an office in your area, visit the Industrial Info "Contact Us" page.
