Wednesday 23 September 2020

Centrica: Decline of an Old Friend

 Picture ... thousand words ... etc

I've always had a soft spot for Centrica, ever since they got off on exactly the right foot back in the 1990s when British Gas was triumphantly de-merged.  Maybe it's to do with the mighty relief of the break-up of that ghastly, brutal monopoly.   Newly-liberated Centrica did an awful lot right; and as the years progressed, they were clear-sighted, objective and flexible enough to recalibrate their strategies in the face of changing market circumstances (including cutting their losses decisively when called for).  Not least, they've staved off being gobbled up.

You'll find we've written about them, on and off, for years - and not always in complimentary tones because they haven't been beyond reproach at all.  Worst of all has been their nuclear gamble, when they got hopelessly carried away by their stonking coup of buying a heap of electricity from the old British Energy at the absolute bottom of the market, when Gordon Brown (remember him ...) was engineering a bail-out.  That was very good business (one of several such opportunistic bottom-of-the-market coups - almost as good as John Browne / BP in 1998), but it wasn't to last.  Participating as a more-or-less passive partner (OK, patsy) in EDF's outright purchase of BE in 2009 was crass, and they've regretted it from the day they agreed it, probably even before the ink was dry.  And they've never found a way of severing the ties, despite committing to do so by the end of this year.

Still, it's sad to see them the way they are now, cancellation of dividend and all - even if they are by no means alone among broadly competent energy companies out of favour right now.  Earlier in the year we said there needed to be some meaningful asset sales and that remains the case, IMHO.  But it seems we have to wait for developments on the nuclear front ... 

Centrica still plans to exit both E&P and Nuclear, but divestment programmes have been paused until the financial and commodity markets have settled.  

Yeah, right - doesn't sound much like any time soon.  Which must mean selling something more conventional than a part-share in EDF's mouldering, cracking-up UK nukes (with the associated energy-sapping politics that EDF wages all the time against HMG).  

Still, they remain a competent lot.  How much of that former clear-sightedness and objectivity do they retain?  The sale of Direct Energy (their big North American supply company) is a start, and must be a wrench: they bought it in 2000 as part of their Enron wannabe strategy, and grew it to #2 position in North America.  So maybe they really are up for it.



Elby the Beserk said...

Ah, British Gas - how they bring back memories of the glory days of nationalised industry.

Maybe not.

My ex and I bought our first house, in Oxford, oin 1978 (£11.5k, tiny railway workers cottage, straight onto pavement at front, TINY yard at back. Now going for c550k).

Anyway, we wanted gas, and there was a sealed off gas pipe in the house. Contact the Gas board. Happy to put us back on the mains. As soon as we had a gas appliance. Off to the gas board shop to buy a cooker. Ah. Can't sell you one until you are properly back on the mains.

48 hours of bashing heads together finally got them to see sense

Anonymous said...

Tumbleweed here, or what? (Anyone would think this was a business blog!)

rwendland said...

Gazing into energy futures in a different direction, was interested to read Tesla battery division is targeting grid energy storage for 50% of revenue. Also looking likely battery prices will drop below $100/kWh within a few years. Doing some sums, assuming a battery lasts 2000 cycles at 5% energy loss and 25% non-battery costs, that works out at £51/MWh, which makes night to peak hours storage just about economic on a reasonable scale. That would help wind and nuclear economics, and negate the need for much peaking gas plant.

Also Tesla has got itself a UK Gas and Electricity Markets Authority electricity generation license, which suggests this isn't hot-air but real intent (though it might be for solar not battery). Perhaps the Tesla share price isn't as crazy as it first seems!

Nick Drew said...

it's a complicated picture, Mr W. Other aspects include ...

- Mr Tesla is a *monstrous bluffer* (or worse), so who knows what he plans / what he's actually got / why he does what he does

- I'd be more impressed if he could start by making car batteries that are capable of 2-way flow! (which he refuses to do, thus far). We all know that's where Octopus / Ovo et al see the big opportunity for serious system-efficiencies, even tho it's complicated by the degradation of battery life it entails

E-K said...

We talking a perpetual motion machine, Nick ?

As a kid in my A level physics I had this fantasy about a ram-jet engine and riding it like a cowboy in a rodeo. Tilt it down to build up speed.

The only problem I could see was that it would go TOO fast. Dire Straits were in the charts with Money for Nothing.

I failed A level physics.


E-K said...


Rule #1

Don't look at house prices. (No wonder you're 'berserk')

Don Cox said...

A headline on the BBC web site says: "Working from home 'costs central London £2.3bn'"

But shouldn't it be "Working from home saves Londoners £2.3bn" -- in fares, sandwiches and coffee ?

It's an ill wind ...


BTW, it seems the city of Manaus in Brazil has achieved herd immunity. About 66% of the population have been infected and the number of cases has gone steadily down.

Don Cox

dearieme said...

Every now and again I feel an impulse to put one of my whizzo business ideas on yer internet. I'm no entrepreneur - one of you other chaps will need to pursue them.

My latest is that someone should set up a business to exploit the health-giving properties of worms (the intestinal sort). The idea is that the worms would stimulate our immune systems in ways that did us a prodigious amount of good.

Naturally they'd have to develop worms that did humans no harm but genetic engineering should make that possible. Wotcha fink?

E-K said...


Seeing as the CCP can't be blamed it's the Tory party which must be ripped to shreds.

PushingTheBoundaries said...

@dearime you might want to watch this when it becomes available again. I think there's a C4 one as well with that Dr Christian dude who did roughly the same including the excretion.... which took some time to conclude!

You might also consider marketing them as weight loss or at least weight neutral to heavy food consumers.

andrew said...

I think maria callas used tapeworms as a method of weight loss
Under medical supervision.