Centrica Agrees to Sell its Direct Energy to NRG Energy
Centrica plc today announced that it has entered into an agreement to sell its North American energy supply, services and trading business, Direct Energy, to NRG Energy, Inc. for $3.625 billion in cash (equivalent to approximately £2.85 billion) on a debt free, cash free basis.
The sale to U.S. integrated power company NRG Energy was announced along with Centrica’s half-year earnings, where the group reported a profit slump due to the COVID-19 impact and low commodity prices.
The company plans to use the cash from the sale to reduce net debt and contribute to its pension schemes. Following the sale, Centrica will focus on its home markets, the UK and Ireland.
Centrica’s shares surged as much as 38.7% early on Friday, heading for their biggest intraday gain since 1997.
“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.
Last month, Centrica said it planned to cut around 5,000 jobs, almost 20% of its global workforce, as it deepened restructuring efforts in the wake of the COVID-19 pandemic.
More than half the job cuts will come from management roles, mostly in the UK, Centrica said.
The group reported a 14% drop in half-year operating profit to 343 million pounds ($436.3 million) from 399 million a year earlier. This was due to the pandemic which reduced energy use and weakened commodity prices.
The net impact on pre-tax profit from the pandemic was around 60 million pounds as the company took mitigating measures such as not paying senior management bonuses, cost savings and using government job retention schemes.
Centrica gave no full-year financial guidance due to the possibility of customers delaying or deferring payments because of an uncertain economic outlook and its implications for unemployment.
Centrica said it remains committed to exiting exit oil and gas production and nuclear power generation but has paused planned divestment of its 20% stake in Britain’s nuclear energy fleet and the planned sale of its 69% shareholding in North Sea oil and gas producer Spirit Energy.
It plans to restart the Spirit Energy process when commodity and financial markets have settled and is considering options for the sale of its nuclear stake.
Neha writes articles on sectors including medicine, food, materials, and science & technology. A qualified statistician, she has the ability to observe and analyze the trends in global markets and write compelling articles that help CXOs in decision making. She is a bookworm and loves to read fiction, lifestyle, science and technology. Neha comes with 6 years of experience in content writing and editing that involves blog writing, preparation of study materials and OERs.