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Its North American Energy Business To Be Sold By Britain’s Centrica For $3.63 Billion


07/24/2020


Its North American Energy Business To Be Sold By Britain’s Centrica For $3.63 Billion
The British energy services and solutions company Centrica Plc will be divesting its North American subsidiary Direct Energy in a deal worth $3.63 billion.
 
The news powered a 38 per cent rise in the stock price of the company that owns British Gas, Centrica Hive, Direct Energy and Bord Gais among others. This was the biggest intraday gain since 1997 for the company’s stocks.
 
The company has come to an agreement for the sale of ht business unit to the United States based integrated power firm NRG Energy.
 
This was announced by the British company alongside its half-year earnings with the group reporting a drop in its profits for the period because of the novel coronavirus pandemic as well as a depression in global commodity prices.
 
The aim of the company in utilizing the sale of the business unit is to free up cash to reduce its net debt burden and to finance its pension schemes. After the sale off, Centrica will focus on its home markets - the United Kingdom and Ireland, the company said.
 
"We had a number of expressions of interest in Direct Energy but it came down to the right price and the right buyer," Centrica Group chief executive Chris O'Shea told reporters on a conference call.
 
As a part of its plan of massive restructuring in its company because of the hit to business due ot to the pandemic, an announcement of about 5,000 jobs cuts, amounting to about 20 per cent of its global work force, was made last month by Centrica. The company said that jobs in management roles, mostly in the UK, will account for more than half of the total job cuts that as announced.
 
For the first half of the current year, a 14 per cent fall in operating profit, at was 343 million pounds ($436.3 million), was reported by the company compared to the number at 399 million in the same period a year ago. The company blamed this on the pandemic that has reduced energy usage and consequently demand, as well as weakening of commodity prices globally.
 
And with the company implementing mitigating measures such as cancelling bonuses for its senior management, various cost saving measures and using government job retention schemes, the company managed to keep the net impact on pre-tax profit because of the pandemic at around 60 million pounds for the period.
 
No guidance for the full year was given by Centrica as the company cited potential uncertainties such as the possibility of customers delaying or deferring payments due to the uncertain economic outlook and the impact on the job market because of the pandemic.
 
No interim dividends were also declared by the company.
 
While reinstating claims its commitment to exit the existing oil and gas production and nuclear power generation projects, Centrica said that it had paused a planned divestment of its 20 per cent stake in Britain's nuclear energy fleet as well as the planned divestment of its 69 per cent shares in the North Sea oil and gas producer Spirit Energy.
 
(Source:www.economictimes.com)