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Glossary
SYM
- $
Refers to US dollars unless specified otherwise
- <1 year
Less than 1 year
- >1 year
Greater than 1 year
- 2P
Proven and probable
A
- AFS
-
Available-for-sale
- Associate
-
An entity in which the Group has an equity interest and over which it has the ability to exercise significant influence
B
C
- CER
-
Certified emissions reduction (carbon emissions certificate)
- CERT
-
Carbon emissions reduction target
- CGU
-
Cash generating unit
- CPI
-
Consumer Price Index
E
- EBITDA
-
Earnings before interest, tax, depreciation and amortisation
- EUA
-
European Union allowance (carbon emissions certificate)
F
- FSA
-
Financial Services Authority
- FTSE 100
-
Financial Times Stock Exchange 100 share index, an average of share prices in the 100 largest, most actively traded companies on the London Stock Exchange
- FVLCS
-
Fair value less costs to sell
G
- g CO2/kWh
-
Grammes of carbon dioxide per kilowatt hour
- GFRMC
-
Group Financial Risk Management Committee
- GWh
-
Gigawatt hour
I
- IAS 19
-
The International Accounting Standard related to Employee Benefits. These financial reporting rules include requirements related to pension accounting
- IAS 39
-
The International Accounting Standard related to financial instruments (recognition & measurement)
- IFRS
-
International Financial Reporting Standard
J
- Jointly controlled entity
-
A joint venture which involves the establishment of an entity to engage in economic activity, which the Group controls jointly with its fellow venturers
L
- Level 1
-
Fair value is determined using observable inputs that reflect unadjusted quoted market prices for identical assets and liabilities, for example exchange-traded commodity contracts valued using close-of-day settlement prices. The adjusted market price used for financial assets held by the Group is the current bid price
- Level 2
-
Fair value is determined using significant inputs that may be either directly observable inputs or unobservable inputs that are corroborated by market data, for example over-the-counter energy contracts within the active period valued using broker-quotes or third-party pricing services and foreign exchange or interest rate derivatives valued using market-based data
- Level 3
-
Fair value is determined using significant unobservable inputs that are not corroborated by market data and may be used with internally developed methodologies that result in management's best estimate of fair value, for example energy contracts within the inactive period valued using in-house valuation techniques
- LNG
-
Liquefied natural gas
M
N
P
R
S
- Securities
-
Comprised of Treasury gilts designated at fair value through profit or loss on initial recognition and available-for-sale financial assets. The fair values of securities are based on quoted market prices, when available. If quoted market prices are not available, fair values are estimated using observable market data
- SCT
-
Supplementary charge associated with UK Corporation Tax
- Spark spread
-
The difference between the price of a unit of electricity and the cost of the gas used to generate it
V
-
My Report
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Chief Executive's Review
Building greater trust
between supplier and
customer
Sam Laidlaw
Chief Executive
How we're delivering our vision to be the leading integrated energy company in our chosen markets.
£50BN
The total value of our commitments to secure gas for the UK now stands at more than £50 billion
Our strategic priorities
Delivering against our priorities
Grow British Gas
Despite a reduction in operating profit*, British Gas delivered a solid financial performance in 2011 in challenging market conditions, underpinned by our scale, our service and our drive for innovation. Despite the current economic challenges, operational improvements and investment for the next phase of growth leave us well placed for the long term.
- Improved delivery for customers with Nectar, Sainsbury's and online.
- 4 star rating from Consumer Focus.
- First to reduce residential energy tariffs in 2012, regaining the cheapest electricity position.
- Services continued to see growth in accounts.
- Improved service flexibility.
- Further progress in new markets including social housing, insulation, microgeneration and smart meters.
Operating profit* in British Gas residential services increased by 10% to £264 million with increased operating margins, despite the challenging economic environment.
2.
Deliver value from our growing upstream business
Centrica Energy delivered a significant increase in operating profit* in 2011. Our focus will remain on growing our upstream gas and oil business, through acquisition and organic development, and on expanding the scale of our offshore wind operations.
- Good asset performance.
- Deploying distinctive capabilities enabled a production replacement ratio of 112% reflecting upgrades of existing fields.
- North Sea reserve additions through agreements to acquire 175mmboe of reserves in Norway and the UK continental shelf.
- Signed a new 10-year supply contract with Statoil.
- First delivery of LNG to Isle of Grain under Qatargas contract.
- Nuclear output up 16% and wind output up 21%.
In December, we announced an intention to increase our upstream gas and oil production by 50% to 75mmboe a year and to treble our offshore wind capacity.
3.
Build an integrated North American business
Direct Energy's operating profit* in 2011 benefited from operational improvements and cost efficiencies, and the impact of acquisitions. The business outlook remains positive and we expect continued growth across the business, both upstream and downstream.
- Increased scale in residential energy with Gateway, First Choice Power and Vectren Retail acquisitions plus organic growth in US North East.
- Further volume growth and sustained margins in business energy.
- Integration of Clockwork completed.
- Acquired insurance capability in the US through Home Warranty of America (HWA).
- Improved performance upstream with 14% increase in proven and probable reserves.
We delivered significantly higher operating profits* in North America, reflecting both the operational improvements we have made and the contribution from acquisitions. Direct Energy provides a strong platform for future growth.
4.
Drive superior financial returns
In tough economic conditions, our priority is to maximise returns from our existing assets, while maintaining a disciplined approach to investment. By streamlining our operations to create an improved, cost-efficient organisation, we expect to deliver £500 million of cost savings over the next two years, allowing us to continue to invest for further growth within the existing cost base.
- Strong returns from existing assets.
- Maintained efficiency and service levels downstream – leadership through scale and brand.
- Disciplined approach to investment, aligned with strategy and capabilities.
- Healthy balance between upstream and downstream.
- Strengthened the hedge, adding scale and value.
- Customer remained at the heart of everything we do.
Strong cash flows and an attractive range of investment opportunities is a key attribute of our business model. We will only deploy capital where we see a strong strategic fit, together with attractive returns commensurate to the risks being undertaken.
* 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
