home | centrica plc - for the period ended 30 june 2015 results... · uplifts to property, plant...

for the period ended 30 June 2015

This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise

acquire or dispose of any Centrica shares or other securities.

This presentation contains certain forward-looking statements with respect to the financial

condition, results, operations and businesses of Centrica plc. These statements and

forecasts involve risk and uncertainty because they relate to events and depend on

circumstances that will occur in the future. There are a number of factors that could cause

actual results or developments to differ materially from those expressed or implied by these

forward-looking statements and forecasts.

Past performance is no guide to future performance and persons needing advice should

consult an independent financial adviser.

Chief Executive

4 INTERIM RESULTS 2015

FINANCIALPERFORMANCE

OPERATIONALPERFORMANCE

INTRODUCTION

Rick HaythornthwaiteChairman

Iain ConnChief Executive

Jeff BellChief Financial Officer

Jill SheddenGroup Director, Human Resources

Ian Peters Director, Customer Facing Strategy

Grant Dawson Group General

Counsel & Company Secretary

Mark HanafinManaging Director, Centrica Energy

Mark HodgesManaging Director, British Gas

Badar Khan President

and CEO, Direct Energy

Nick Baird Group

Corporate Affairs Director

5

09:00-10:00 Interims presentation and Q&A

10:00-10:20 Break

10:20-12:30 Strategy presentation and Q&A

12:30-13:30 Buffet lunch

INTERIM RESULTS 2015



INTRODUCTION

6

• Commodity prices

• UK General Election

• Competition and Markets Authority investigation




INTRODUCTION

7

• Earnings up 15%; EPS of 12.3p; operating cash flow of £1.1bn

• Good progress in strengthening balance sheet and financial metrics

• Full year outlook broadly unchanged

• Senior Management team changes

• Strategic review complete




INTRODUCTION

Chief Financial Officer


The above adjusted figures are before depreciation of fair value uplifts to property, plant and equipment from Strategic Investments and exceptional items and certain re-measurements. Adjusted operating profit also includes share of JVs and associates before interest and taxation.

A definition of the adjusted effective tax rate is provided in the Group Financial Review in the Interim Results announcement.

Period ended 30 June H1 2015 H1 2014 ∆%

Revenue (£m) 15,451 15,748 (2%)

Adjusted operating profit (£m) 1,000 1,032 (3%)

Adjusted effective tax rate 29% 37% (8ppt)

Group result:

Adjusted earnings (£m) 611 530 15%

Adjusted earnings per share (p) 12.3 10.5 17%

Interim dividend per share (p) 3.57 5.10 (30%)

Period ended Jun 2015 Dec 2014 ∆%

Net debt (£m) 4,905 5,196 (6%)



INTRODUCTION

-10

0

10

20

30

40

50

60

Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16

0

10

20

30

40

50

60

70

80


0

20

40

60

80

100

120

140



Average month ahead Brent oil price ($/boe)

Prices as at 29 July 2015

UK Power (£/MWh)

Average month ahead gas prices

UK power prices and clean dark and clean spark spreads

Clean spark spread (£/MWh)

Clean dark spread (£/MWh)

UK Gas (p/therm)

US Gas (p/therm)



INTRODUCTION


2015 average UK temperature(degrees Celsius)

Colder than normal

Warmer than normal

Seasonal normal temperature

2015 average US North East temperature(degrees Celsius)

0

5

10

15

20

25

Jan Feb Mar Apr May Jun

-20

-10

0

10

20

30

Jan Feb Mar Apr May Jun

2014 temperature



INTRODUCTION


Period ended 30 June (£m) H1 2015 H1 2014 ∆%

British Gas 656 455 44%

Direct Energy 192 41 368%

Bord Gáis Energy 23 - nm

Centrica Energy 116 526 (78%)

Centrica Storage 13 10 30%

Adjusted operating profit 1,000 1,032 (3%)

Share of JV / associates’ interest and taxation (51) (63) nm

Depreciation of FV uplifts to property, plant and

equipment(24) (40) nm

Group operating profit 925 929 (0%)

The above operating profit figures include share of JVs and associates before interest and taxation and are before depreciation of fair value uplifts to property, plant and equipment from Strategic Investments and exceptional items and certain re-measurements.



INTRODUCTION


Operating profit (£m)


Residential energy 528 265 99%

Residential services 125 129 (3%)

Business 3 61 (95%)



Residential energy revenue (£m)and post tax margin (%)

Residential services revenue (£m)and post tax margin (%)

Business revenue (£m)and post tax margin (%)

4,551

H1 2015 H1 2014

802 804

H1 2015 H1 2014

1,573

H1 2015 H1 2014

12.5% 12.6%

3.0%0.1%

1,4214,691

9.0%

4.5%



INTRODUCTION

223256

H1 2015 H1 2014

4,814

H1 2015 H1 2014

1,399

H1 2015 H1 2014



Residential energy (underlying) 67 80 (16%)

Business energy (underlying) 143 12 1,092%

Services (18) 14 nm

Direct Energy (underlying) 192 106 81%

Polar Vortex impact - (65) -



The above operating profit figures include share of JVs and associates before interest and taxation and are before depreciation of fair value uplifts to property, plant and equipment from Strategic Investments and exceptional items and certain re-measurements. The 2014 residential energy and business energy operating profit includes one-off costs associated with the polar vortex.

Residential energy revenue (£m)and post tax margin (%)

Business energy revenue (£m)and post tax margin (%)

Services revenue (£m)and post tax margin (%)

1,204

3.0% 2.1%

4,475

1.9%

3.9%



INTRODUCTION

(0.3%)(4.9%)

400

H1 2015

0.9

H1 2015










1.9


Generation (TWh)Revenue (£m) and post tax margin (%)

5.0%

1.1



INTRODUCTION

16

- GAS


Period ended 30 June (£m) H1 2015 H1 2014 ∆%

Operating profit before tax 48 465 (90%)

Operating profit after tax (23) 235 nm


A definition of operating profit after taxation is included in note 4b of the Interim Results announcement.

Average gas sales price

Europe (p/therm) Americas (US$/mmbtu)

Average liquid sales price

Europe (£/boe) Americas (US$/boe)

48.8

56.0

H1 2015 H1 2014

2.3

4.0

H1 2015 H1 2014

40.3

59.9

H1 2015 H1 2014

44.7

78.6

H1 2015 H1 2014



INTRODUCTION

17

- E&P VOLUMES AND COSTS


Production volumes1

Gas (mmth) Liquids (mmboe)

Europe

Americas

1. Production volumes include 100% share of Canadian assets owned in partnership with Qatar Petroleum.

Total unit production costs

Europe (£/boe) Americas (US$/boe) Total (£/boe)

DDA Costs

Lifting & other production costs

7.5 7.5

1.5 1.2

H1 2015 H1 2014

1,196

810 749

H1 2015 H1 2014

11.812.5

15.6 14.6

H1 2015 H1 2014

7.4 8.7

12.5

15.4

H1 2015 H1 2014

9.3 10.0

12.9 12.8

H1 2015 H1 2014

1,118



INTRODUCTION

H1 2015 H1 2014 H1 2015 H1 2014 H1 2015 H1 2014

18

- POWER




Gas-fired (62) (70) nm

Renewables 18 (17) nm

Nuclear 108 125 (14%)

Midstream 4 23 (83%)

Power 68 61 11%

The above operating profit figures include share of JVs and associates before interest and taxation and are before depreciation of fair value uplifts to property, plant and equipment from Strategic Investments and exceptional items and certain re-measurements. Renewables includes a net loss of £40m in H1 2014 relating to the write-down of our interest in the Celtic Array offshore wind development.

3.3 TWh

4.1 TWh

£9.8/MWh

£12.0/MWh

6.1 TWh 6.2 TWh

£51.0/MWh

£49.7/MWh

Gas-fired generation (TWh)& achieved clean spark spread

Nuclear generation (TWh)& achieved prices

0.4 TWh

0.5 TWh

£113.2/MWh

£118.2/MWh

Renewables generation (TWh)& achieved prices (incl. ROCs)



INTRODUCTION










Storage revenue (£m)

SBU

Additional space / other


2

4

6

8

10

12

Jan 12 Jan 13 Jan 14 Jan 15

Forward seasonal gas spreads (p/therm)

Prices as at 29 July 2015

W14 – S14 spread W15 – S15 spread

W13 – S13 spread W16 – S16 spread

4650

25 20

H1 2015 H1 2014



INTRODUCTION


Period ended 30 June (£m) H1 2015 H1 2014FY

2015e3

Centrica Energy gas and oil 424 556 800

Direct Energy 45 46 75

British Gas 41 78 100

Centrica Storage 14 13 25

Centrica Energy power1

0 37 25

Other 3 8 25

Total pre-acquisitions 527 738 1,050

Acquisitions / (disposals)2

(144) (329)

Net investment 383 409

1. Centrica Energy Power includes investments in wind farm JVs.

2. Acquisitions/ disposals in H1 2015 include the disposal of Lincs wind farm debt and the acquisition of AlertMe. Acquisitions / disposals in H1 2014 include the disposal of three Texas CCGTs,

the disposal of an interest in the Greater Kittiwake Area E&P assets, the acquisition of a package of Canadian assets from Shell and the acquisition of Bord Gáis Energy in Ireland.

3. Latest guidance for 2015.



INTRODUCTION


Period ended 30 June (£m) H1 2015 H1 2014 FY 2014

EBITDA 1,444 1,501 2,811

Working capital movements (97) 161 (37)

Tax (144) (413) (707)

Dividends received 65 43 138

Other1(119) (6) (4)

Adjusted operating cash flow 1,149 1,286 2,201

Net investment (383) (409) (829)

Interest (88) (111) (261)

Dividends (238) (605) (864)

Share repurchase - (207) (422)

Other2(83) (13) (80)

Net cash inflow / (outflow) 357 (59) (255)

1. Other includes re-measurement of energy contracts, profit on disposal of business, employee share scheme costs, movement on provisions and defined benefit pension service cost and normal

contributions.

2. Other includes net payments for own shares, net foreign exchange movement on financing activities, payments relating to exceptional charges and defined benefit pension deficit payments.



INTRODUCTION


1. H1 2014 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 or received as collateral under margin and collateral agreements relate, are not included within net debt. For further details see note 12 of the Interim Results announcement.

Period ended 30 June (£m) H1 2015 H1 2014 FY 2014

Opening net debt (5,196) (4,942) (4,942)

Net cash inflow / (outflow) 357 (59) (255)

Other non cash movements in net

debt(66) 34 1

Closing net debt1

(4,905) (4,967) (5,196)

Margin cash (465) (230) (776)

Closing net debt excluding margin

cash posted(5,370) (5,197) (5,972)



INTRODUCTION

23

• H1 earnings up 15%

• Operating cash flow of £1.1bn

• Good progress on reducing net debt and improving credit metrics

• Full year outlook broadly unchanged




INTRODUCTION

Chief Executive

25

• Low wholesale commodity prices

• Colder than normal weather

• Highly competitive market

• Operational performance generally strong

• UK General Election

• CMA investigation




INTRODUCTION

26

• Wide-ranging review

• Agree with most conclusions

• Some questions and concerns

• Active discussions ongoing




INTRODUCTION

27

CUSTOMER-FACING BUSINESSES

• Safety, compliance and customer service

• Energy supply market shares broadly stable

• UK and Ireland gas pricing

• UK services accounts down; North America stable

• Billing issues in BGB

• Focus on value in North America




INTRODUCTION

28

E&P AND POWER

• Safety and compliance

• E&P production broadly flat compared to 2014

• Valemon field on-stream in January 2015

• Cygnus first gas in H1 2016

• Good nuclear generation volumes


OPERATIONAL PERFORMANCEFINANCIAL

PERFORMANCEOPERATIONAL

PERFORMANCEINTRODUCTION

29

• 1.5m residential UK smart meters installed

• Acquisition of AlertMe; Hive 2 launched

• Accelerated investment in US solar

• FID on fifth train at Sabine Pass LNG facility

• UK gas-fired portfolio rationalisation




INTRODUCTION

30

• Solid first half performance

• Positive net cash flow

• Good progress on balance sheet

• Strategic review complete

• Clear purpose, direction and priorities




INTRODUCTION




Mark HanafinManaging Director,

Centrica Energy

Mark HodgesManaging Director,

British Gas

Badar KhanPresident and CEO,

Direct Energy

30 July 2015

This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise

acquire or dispose of any Centrica shares or other securities.

This presentation contains certain forward-looking statements with respect to the financial

condition, results, operations and businesses of Centrica plc. These statements and

forecasts involve risk and uncertainty because they relate to events and depend on

circumstances that will occur in the future. There are a number of factors that could cause

actual results or developments to differ materially from those expressed or implied by these

forward-looking statements and forecasts.

Past performance is no guide to future performance and persons needing advice should

consult an independent financial adviser.

33 STRATEGY PRESENTATION July 2015

Chief Executive

35STRATEGY PRESENTATION July 2015

Group financial framework

Operating capability and efficiency

Portfolio mix and capital intensity

Outlook and sources of growth

SUMMARYOUTLOOK AND

SOURCES OF GROWTHOPERATING CAPABILITY

AND EFFICIENCYGROUP FINANCIAL

FRAMEWORKPORTFOLIO MIX ANDCAPITAL INTENSITY

36

• Market trends and environment

− changes in global oil and gas markets

− changing trends in demand and customer behaviour

• Medium term view

• Sources of potential growth

STRATEGY PRESENTATION July 2015


SUMMARYOUTLOOK AND




37

• Upstream / downstream mix

• Focus areas for growth

• Investment priorities

• Capital intensity



SUMMARYOUTLOOK AND




38

• Capabilities assessed

• Efficiency benchmarked

• Material efficiency opportunities identified



SUMMARYOUTLOOK AND




39

• Robust financial framework

• Medium term expectations for:

− growth

− returns

− reinvestment

− distributions

− credit rating



SUMMARYOUTLOOK AND




40

• Centrica well positioned

• Strengths lie in being a customer facing business

• Purpose – “to provide energy and services to satisfy the changing needs of our customers”

• Increase shareholder value through returns and growth

• Growth = post-tax operating cash flow growth

• Focus on cash flow, not necessarily on expansion


SUMMARYOUTLOOK AND




41

• 3-5% post-tax operating cash flow growth to 2020 and beyond

• Flat real oil and gas prices

− $70/barrel Brent oil

− 50p/therm UK gas

• Normal weather patterns

• Excludes major inorganic activity and one-off costs


SUMMARYOUTLOOK AND




42

CONTINUED

• Customer-facing focus

− additional £1.5bn resource allocation to 2020

• Smaller E&P and central thermal generation businesses

− reduction of £1.5bn resource allocation to 2020

• Less capital-intense business model

• Efficiency programme to deliver £750m of annual savings by 2020

− Group operating cost base in 2020 below 2015, net of inflation and growth

• Clear financial framework


SUMMARYOUTLOOK AND




43

• Operating cash flow growth of 3-5% per annum

• Progressive dividend reflecting operating cash flow growth

• Capital limited to £1bn per annum in near term and to 70% of operating cash flow longer term

• Underpinning dividend and credit ratings

• Post-tax ROACE of 10-12%


SUMMARYOUTLOOK AND




44

• Primary energy demand growth

• Fastest growing contributors will be natural gas, nuclear and renewables

• Divergence of CO2 from energy growth

• Fossil fuels still important

• Growth in LNG trade and energy marketing and trading


SUMMARYOUTLOOK AND




45

CONTINUED

• OECD central power generation ‘market failure’

• Distributed generation likely to take market share

• Energy supply demand in core markets at best flat

• Energy services a source of differentiation

• ‘Internet of Things’ developing rapidly

SUMMARYOUTLOOK AND





46

“To provide energy and services to satisfy the changing needs of our customers”

SUMMARYOUTLOOK AND





47

CONTINUED

• Energy and services company

• Deliver for the changing needs of our customers

• Delivering long-term shareholder value through returns and cash flow growth

• Trusted corporate citizen

• Employer of choice

• A “21st century energy company”

SUMMARYOUTLOOK AND





48

• Customer-facing businesses a source of competitive advantage

• Energy supply cash flow broadly flat

− competitive market for British Gas

− market share growth in North America and Ireland

• Stable E&P remains a material source of cash flow

• Near term growth underpinned by efficiencies; longer term growth through investment in growth areas

• Operating cash flow growth of 3-5% per annum until 2020


SUMMARYOUTLOOK AND




49

• Energy supply

• Services

• Distributed Energy and Power

• Connected Home

• Energy Marketing and Trading


SUMMARYOUTLOOK AND




50

Consumption

Competitive environment

Current marketshare

UK market environment

Service excellence

Response

Innovative

offerings

Cost efficiency

Working capital

management

SUMMARYOUTLOOK AND




– UK AND IRELAND ENERGY SUPPLY


51

Consumption

Competitive environment

Current marketshare

North America market environment

Improved propositions

and customer mix

Response

Lower churn

Cost efficiency

Working capital

management

SUMMARYOUTLOOK AND




– NORTH AMERICA ENERGY SUPPLY


0

200

400

600

800

2013 2014

52

• Increased scale following Hess Energy Marketing acquisition

• Market leading position in provision of energy to business customers

• Optimisation opportunities around capacity and storage positions

Gas

Gas

Power

Power

Bcf

US business supply volumes

SUMMARYOUTLOOK AND




– NORTH AMERICA BUSINESS ENERGY SUPPLY


53

Insurance contracts

On-demand

Landlords

Efficiency

• Focus on refreshing core offerings to hold value in a mature market

• Low current market share in mature market

• Proportion of private tenants growing

• Increase in regulation driving need for insurance cover

• Efficiency opportunities

Installation• Mature market, shift from complex to simpler boiler replacements

• Connected boiler opportunity

SUMMARYOUTLOOK AND




– UK SERVICES


54

Protection plans

Connected homes

Solar

Efficiency

• Growth potential in a fragmented ‘on demand’ market

• Customer appetite for bundling with energy offerings

• Partnerships, leverage leading UK position

• Significant growth expected in US residential solar market

• Benefits from IT projects and operational improvements from scale

Franchise • Revenue growth opportunity

SUMMARYOUTLOOK AND




– NORTH AMERICA SERVICES


55

Distributed Energy AssetsFlexible Generation New Technology Energy Efficiency1 2 3

Solar PV

Combined Heat &

Power (CHP)

Lighting

Gas engine

Diesel generator

Battery storage

Future technology

Optimisation

Energy control centre

Optimisation

4

5

SUMMARYOUTLOOK AND




– DISTRIBUTED ENERGY


56

New information on their existing energy usage,

needs and audits

Right-sized measures and installation fit for the

customers usage needs

Access new revenue sources and reduce energy bill

Tailored energy bill; access to PPAs, innovative

financing arrangements

A guarantee of performance on new installations

Consultation

Define &design

Implementation

O&M

Optimisation

Additional services

Reduced need for customer resources to perform

O&M activity

Centrica capabilitiesWhat do customers want?Customerjourney

£700m investment over next five years

SUMMARYOUTLOOK AND





57

Gas

Lighting

Electrical appliances

Consumer electronics

Water

Ventilation / air conditioning

Electricity

Plumbing & DrainsElectrical wires

Insulation & Glazing

Security

Danger alerts

BroadbandEV charging

Micro-generation

Energy storage (battery)

Property Insurance

Heating

Non-heat gas appliances

Entertainment (e.g. TV, music)

Telephony

Gas pipes & gas safety

Integration & optimisation

Intelligent tech platform

Heartland

Energy adjacencies

Other adjacencies

New technology

Non-core

SUMMARYOUTLOOK AND




– THE CONNECTED HOME


58

Scale

• Large customer base

• High volume of customer data

Brand

• In both energy & services

• Potential to build global connected

consumer brand (Hive)

Capabilities

• Existing engineer workforce, both UK &

US

• Multi-channel sales & support

• Platform (AlertMe), product development &

analytics capabilities

• Only provider offering end-to-end delivery

capabilities

Product bundling

Standalone sales & installation

Subscription services

Data analytics & insight for 3rd parties

Product & platform services for 3rd parties

Complete home energy management solution

a

b

c

d

e

f


Pathways to success

SUMMARYOUTLOOK AND





59

• Good benchmarked capability

• Cheniere US export contract

• Route-to-market services

• Detailed knowledge of European gas and power markets

• International marketing and trading capability


SUMMARYOUTLOOK AND




– ENERGY MARKETING AND TRADING


60

• Shift of resource allocation from E&P and power to customer-facing activities

• £1.5 billion additional resources in customer-facing growth areas

− approximately half capex, half opex

• Lower capital intensity

• Capital discipline


SUMMARYOUTLOOK AND





SUMMARYOUTLOOK AND




62

• Diversification of cash flows

• Balance sheet strength to manage risk

• Role evolved away from security of supply and integration

• Appropriately scaled position

• Sufficient capability to participate effectively

• Concentrate on fewer geographies


SUMMARYOUTLOOK AND




63

• Size limited to 40-50mmboe per annum

• £400m-£600m per annum of capex

• Includes possible small inorganic additions post 2017

• Restoration of E&P margins a source of growth

• Strong E&P business sustainable within reduced scale


75

2014 2015 Future

80

40-50

£1.1bn

£800m

£400-

600m

2014 2015 Future

Production (mmboe)

Capex

SUMMARYOUTLOOK AND




64

• Currently in five countries

• Improve efficiencies in UK and Netherlands

• Continue to develop Norwegian assets

• Release capital from Trinidad and Tobago

• Canadian E&P business non-core


SUMMARYOUTLOOK AND




Canada Europe

Trinidad & Tobago

65

• More focused central power generation business

• Retain sufficient capability

• Each station considered on a plant-by-plant basis

• Capabilities transitioned towards distributed energy

• New Distributed Energy and Power business unit established

SUMMARYOUTLOOK AND





66

• Diversity of cash flows and balance sheet strength

• Limited optionality

• Future value dependent on

− operational excellence

− life extensions

− effective cost management

− capacity market

• Nuclear shareholding considered as a financial investment


SUMMARYOUTLOOK AND




67

• Exit our 245MW portfolio of wind assets

• Scale not material

• New offshore wind expensive

• No future potential projects


SUMMARYOUTLOOK AND




68

• Hold the Rough gas storage asset

• Not seen as a growth option given low seasonal gas spreads

• Focus on completing the assessment of operating integrity

• Strategic storage asset for the UK


SUMMARYOUTLOOK AND




69

SUMMARYOUTLOOK AND









4.2

2015 Inflation Efficiency 2020 Growth

70

• Gross efficiencies of £750m per annum by 2020

• Efficiency programme excludes

− cost of smart metering

− major acquisitions or disposals

− additional investment in growth areas

• Like-for-like opex base down £300m after taking account of inflation

• 2020 opex at or below 2015 including additional investment in growth areas


SUMMARYSUMMARYOUTLOOK AND




-£300m

2015 2018 2020

71

• Boundaries – safety, compliance and customer service

• Two-thirds of efficiencies by end 2018

• Required investments of £500m-£600m over next five years


Realised efficiency savings

SUMMARYOUTLOOK AND




Inflation

Underlying operating

cost base

-£500m -£750m

72

• Customer facing businesses

− back office simplification, consolidation and automation

− front office simplification and optimisation

− sales efficiencies

− shared services for marketing and network services

• Centrica Energy simplification and efficiency

• Group functions and corporate centre

• Procurement and supply chain efficiencies






73

Invest in service excellence

Increase efficiency and optimise working capital

Deepen customer relationships

Transform current energy and services offers

Develop talent

Common strategic priorities across our customer-facing businesses Leading to the same 5 core propositions

• We help you to use energy efficiently

• We give you peace of mind

• We help you conveniently control your devices

• We supply your energy needs

• We service your home / business

SUMMARYOUTLOOK AND





74

• Reduction in like-for-like headcount of around 6,000 roles

− half attrition

− half redundancy

• Redundancies mainly by 2017

• 2,000 roles created through growth

• Net reduction of 4,000 roles






75

SUMMARYOUTLOOK AND









Chief Financial Officer

• ROACE • 10-12%


• Operating cash flow • 3-5% growth p.a.

• Dividend • Progressive in line with operating cash flow

• Controllable costs • Cost growth < inflation

• Capital re-investment• Investment <70% of Operating cash flow

• Limited to £1bn p.a. in 2016-17

• Credit rating• Strong investment grade

(Baa1/BBB+ or above)

Targets Metrics

SUMMARYOUTLOOK AND




78

• Operating cash flow most appropriate measure of business performance

− underpins dividend and credit rating

− fundamental driver of shareholder value

• Deliver £300m-£600m of incremental cash flow by 2020

− ~£2bn current operating cash flow

− 3-5% growth rate range

− $70/barrel Brent oil, 50p/therm UK gas

• Excludes one-time cost to achieve of £500m-£600m

− will disclose separately


c£2bn

2015 2020

£300m-

£600m

SUMMARYOUTLOOK AND




2015 2016 2017 2018 2019 2020


Energy Supply

E&P

Services,

Distributed Energy

and Power,

Connected Homes,

Energy Marketing

and Trading

SUMMARYOUTLOOK AND




3-5%

80

• Strong investment grade credit ratings important for Centrica

− large user of collateral

− efficient procurement of energy

− cost effective short term sources of liquidity






Current

Strong

investment grade Baa1 BBB+

A-(negative outlook)

Baa1(stable outlook)






E&P (including maintenance)

Rest of Group

maintenance capex

Additional investment

consistent with financial

framework

Potential to invest

in growth areas

£1bn

£800m£400m-

£600m

£250m

£200m-

£300m

2015 2016 2017 2018 2019 2020


SUMMARYOUTLOOK AND




2014 2018+2015 2016 -17

EBITDA

Tax and interest

Dividends

Investment

83

• Progressive dividend policy

• Dividend linked to sustainable growth in operating cash flows

• Scrip alternative retained

− kept under review


Sustainable

cash flow growth

SUMMARYOUTLOOK AND




12.0p

Rebased dividend Future

84

• Progress measured against parameters set out in strategic review

• Finalise future reporting in the second half

− reporting segments and key performance indicators

− transparency of changes

• ‘Rules of thumb’ to help understanding of changes to commodity prices and weather


SUMMARYOUTLOOK AND




• ROACE • 10-12%


• Operating cash flow • 3-5% growth p.a.

• Dividend • Progressive in line with operating cash flow

• Controllable costs • Cost growth < inflation

• Capital re-investment• Investment <70% of Operating cash flow

• Limited to £1bn p.a. in 2016-17

• Credit rating• Strong investment grade

(Baa1/BBB+ or above)

Targets Metrics

SUMMARYOUTLOOK AND




Chief Executive

87

• Energy and services company

• Purpose – “to provide energy and services to satisfy the changing needs of our customers”

• Long term shareholder value through returns and growth

• 3-5% per annum operating cash flow growth

• £750m per annum cost efficiency programme

• Growth focus on customer-facing businesses and reduce scale in E&P and central power generation

− £1.5bn resource reallocation to 2020

• Progressive dividend policy and strong investment grade credit rating


SUMMARYOUTLOOK AND







Mark HanafinManaging Director,

Centrica Energy

Mark HodgesManaging Director,

British Gas

Badar KhanPresident and CEO,

Direct Energy

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