February 23, 2012 – 09:18
2011 Centrica Preliminary Financial Results Announcement
Centrica Storage faced difficult trading conditions in 2011, with the differential between summer and winter gas prices remaining narrow for much of the year reflecting an increasing amount of LNG coming to the
The Rough asset continued to perform well, with reliability of 96% (2010: 98%) impacted by a small number of disruptions at the Easington terminal in January and essential offshore maintenance work on the asset in June. Warmer weather in the first quarter of the year meant that injection started earlier than usual and further mild weather throughout spring and summer resulted in Rough reaching a record Net Reservoir Volume (NRV) of 132 billion cubic feet (BCF) early in the fourth quarter. Health and safety remains our top priority and during the year we undertook a number of process safety related initiatives, with further work planned in 2012.
Gross revenue fell by 31% to £184 million (2010: £267 million). The narrowing of seasonal spreads resulted in an average Standard Bundled Unit price of 30.0p (2010: 42.1p). In addition, revenue from optimisation and additional space sales was lower, again reflecting the narrowing of seasonal spreads, as well as reduced market volatility. After taking account of higher fuel-gas costs, higher depreciation resulting from previous investment in Rough and inflationary cost increases, operating profit* fell by 56% to £75 million (2010: £169 million).
We have taken the decision to terminate our Bains storage project, following a review of the results of 3D seismic survey data which indicated that the reservoir would not be sufficiently attractive to convert into a storage facility. Centrica Energy now plan to return the field to production, with work expected to commence in the first half of 2012.
We continue to assess our Baird storage project, which remains an attractive investment option subject to an improvement in market conditions. Our Caythorpe fast-cycle project remains on hold and we will continue to monitor market conditions going forward.
In April, the Competition Commission published its final decision on our request for a review of the Undertakings given to the Secretary of State following the acquisition of Rough. A number of variations have been agreed to the Undertakings to reflect the changes in the market, including an increase in the proportion of capacity that Centrica is allowed to acquire for its own use to 25% (from 15%). We expect to sign the revised Undertakings shortly.
While the seasonal spread for the 2012/13 storage year showed some improvement over the fourth quarter of 2011, the forward curve further out indicates that spreads are expected to remain tight for the medium term. With the
For the more information on the 2011 Centrica Preliminary Financial Results go to http://www.centrica.com/index.asp?pageid=26
* Including share of joint ventures and associates before interest and taxation, and before depreciation of fair value uplifts to property, plant and equipment from Strategic Investments and exceptional items and certain re-measurements
Registered office and corporate headquarters:
Centrica Storage Limited, Venture House, 42-54 London Road, Staines, Middlesex, TW18 4HF
Registered in England & Wales No. 3294124
VAT registration number: GB684966762