Centrica plc today announced that it has acquired a 60 per cent share in Humber Power Limited (HPL) which owns and operates a 1260MW gas fuelled power plant in Stallingborough, North East Lincolnshire, providing Centrica with 750MW average output.
The acquisition is made in partnership with TotalFinaElf (TFE), which is increasing its current stake in HPL from 12.5 per cent to 40 per cent. Centrica will assume responsibility for the day-to-day operation and management of the entire plant and existing staff will transfer to Centrica.
The transaction provides Centrica with more than 15 per cent of peak demand for its existing 4.4 million electricity customers. As part of its risk management strategy the company has said it plans to source 20-25 per cent of its future peak electricity requirements from its own generating capacity. This agreement, which offers increased long term stability and protection against major changes in electricity price changes, marks a significant step towards that goal.
HPL was established in 1991 to undertake the development, construction and operation of a power station in Lincolnshire comprising two phases, the first phase with a registered capacity of 793MW and the second with a registered capacity of 527MW. The plant has generated around 10 TWh of electricity per annum from some 2 billion cubic metres of natural gas per annum.
Under the terms of the agreement Centrica will be entitled to 100 per cent of the capacity of the first phase, which equates to approximately 60 per cent of the total output of both plants. TFE will be entitled to the output from the second phase.
The consideration comprises £31.3 million in cash and the assumption of lease liabilities with a book value of £267m as at 31 March 2000. Centrica estimates the effective price of the acquisition to be £374 per kW capacity. For the year ending 31 March 2000 HPL made a profit before tax of £8.9m and had closing net liabilities of £1.4m.
This agreement represents Centrica’s first move into power generation and the transaction is expected to be broadly neutral to earnings in the first year and will improve should electricity prices firm from current levels while gas prices remain stable. Cash flow is expected to be positive within the first year. There will be no goodwill arising from the transaction.
Roy Gardner, Chief Executive of Centrica said: “We have always maintained our interest in acquiring generating assets such as this at the right price.
“Since the electricity market opened three years ago, we have attracted 4.4 million customers and are on course to reach our target of 7 million customers. So far this year 400,000 customers have joined us and British Gas has become the most recognised brand in the electricity market.
“Today’s acquisition provides more than 15 per cent of peak electricity demand and reinforces our commitment to grow our electricity business and to continue offering customers a competitive package.”