Centrica is a uniquely integrated energy company operating primarily in the UK and Ireland. We aim to deliver long-term value for investors by driving and leading the energy transition through our distinct, but complementary businesses.
A uniquely integrated energy company
We are underpinning Centrica for the future, delivering sustainable earnings from our core businesses, investing for longer-term value and growth, and delivering attractive shareholder returns.
Each of our businesses complements, de-risks and adds value to at least one other business. Our business model has been designed to be resilient in all scenarios, able to benefit from the growing complexity of the evolving energy system.
In Retail, we have over 10m energy supply and services customers, strong brands, and the UK’s largest energy services workforce, who will play a key role in the UK’s decarbonisation journey.
At the centre of our Retail and Infrastructure energy flows sits our Energy Marketing & Trading Optimisation business. This is the glue that binds the Group together, using its world-class capabilities to add value to the Group.
Our Infrastructure businesses bring gas and electricity to the market every day through Spirit Energy and our stake in the UK’s nuclear fleet. We also have our unique Rough gas storage asset, which provides more than half the UK's gas storage capacity.
Delivering sustainable profitability
Having simplified our portfolio and improved operational performance, we remain focused on delivering sustainable profitability from our portfolio.
We expect to deliver around £800m of sustainable adjusted operating profit on average each year from our Retail and Optimisation activities. The exact number and mix may flex with market conditions in any given year.
In addition, we expect our existing Infrastructure assets to continue to contribute material cash flows for the majority of the rest of this decade. Over time, these cash flows will be replaced by a contribution from assets we are developing as part of our green-focused growth and investment strategy. Earnings from these new assets should be more stable, helping provide a more reliable, rateable earnings stream over the longer term.
Our businesses make us uniquely integrated across the UK energy industry. Distinct, but complementary, they all share the same goal and purpose – helping our customers live sustainably, simply, and affordably.
A green-focused growth and investment strategy
Our existing gas production and nuclear assets will decline naturally over time, so to maintain balance in our portfolio we need to invest to replace this with new infrastructure.
With the UK’s Electricity demand set to grow materially over the coming years, and the generation mix becoming greener and more intermittent with a growing penetration of renewables, we have material, attractive investment opportunities across the energy value chain, aligned to our capabilities today.
We have plans to materially increase investment over the coming years as part of our green-focused growth and investment strategy, where we will build our annual capital investment to £600m-£800m until at least 2028. As part of our investment framework we are targeting average portfolio post-tax unlevered returns of at least 7-10%+.
In customer activities, we will continue to invest in energy management and demand response capabilities, while we will also start our own smart meter asset provision.
We already have a growing number of flexible and renewable power assets in our portfolio, with a number of projects already underway, such as the two 100MW gas peaking plants in Ireland. We will also invest in new renewable and flexible power assets, which could be our own projects or by investing with partners. Our strong optimisation capabilities will allow us to capture additional value from these investments.
Longer term, we also retain optionality for potential hydrogen and carbon capture investments through our Rough and Spirit Energy assets. While still at an early stage, and dependent on government regulatory mechanisms, these provide us with long-term net zero aligned optionality. We may also be interested in investing in new nuclear, dependent on how the regulatory framework develops.
Over 50% of our capital expenditure is expected to go into green taxonomy eligible projects, compared to only 5% in 2019. This will help us meet our targets to achieve net zero by 2045, and help our customers reach net zero by 2050.
Balance Sheet Strength
A strong balance sheet and investment grade credit ratings are essential for the efficient running of the Group. As a responsible energy supplier, we manage the risk of providing energy to our customers by hedging our commodity exposures, and as a supplier to nearly a quarter of the UK's households those positions are significant. We also choose to hedge our electricity generation and gas production rateably, which again leverages our strong credit rating.
We believe the appropriate medium-term leverage for the Group is up to 1x Net Debt to EBITDA. This provides us with enough headroom to manage volatility in the energy system, to continue to invest for the future and to maintain and grow shareholder distributions.
Delivering compelling shareholder returns
Delivering cash returns to shareholders is a core priority for the Group. In July 2022 we reintroduced a progressive dividend policy and we expect dividend cover to move to around 2 times adjusted earnings over the coming years, supported by the core sustainable earnings of the Group.
We will maintain capital discipline and maintain a focus on the efficient use of capital, with surplus structural capital returned to shareholders. With a £550m share buyback programme already underway, in July 2023 we announced our intention to extend this to £1bn, to be completed by around July 2024.
Following this, our focus will be on delivering on our investment plans, with any further additional distributions on top of the dividend reviewed against our revised capital framework and our future outlooks.
Also in this section
Our Key Performance Indicators help the Board and executive management assess performance against our Group Priorities.
5 Year Summary
We have stabilised our business and improved operational performance to deliver long-term value for investors.
Our businesses make us uniquely integrated across the UK energy industry.