Centrica enters Continental European energy market

Centrica plc has today announced the purchase of a 50 per cent share in Luminus N.V., a newly created energy supply business in Belgium. The transaction represents Centrica's first step into the liberalising energy markets of Continental Europe.

The joint venture has been established with a consortium of five Flemish municipal utilities ("intercommunales"), led by Interelectra and WVEM. The partners expect that Luminus will be the main alternative to Electrabel in the Belgian retail energy market.

The Flemish Government has announced a phased opening of the electricity market, with household competition starting on 1 July, 2003. The market for the largest electricity customers in Belgium above 100GWh has already opened. In Flanders the market above 20GWh is due to open on 1 July, 2001, with the above 1GWh market opening on 1 January, 2002. The opening dates for the electricity market in the other regions of Belgium and the gas market will be announced in due course, but are expected to follow close behind the timescale for Flanders.

On completion, Luminus will assume management of the supply business of the consortium members as part of the process of preparing for market opening. The electricity and gas distribution networks serving these customers will remain with the intercommunales. As the market opens up and the customers become eligible for competition, the beneficial interest from the customer base will transfer to the joint venture. The consortium has 595,000 electricity and 166,000 gas customers in the areas of Limburg, East and West Flanders, Antwerp and Brabant (around 90 per cent of the gas users are dual fuel customers).

This joint venture will establish a strong platform from which to grow market share throughout the rest of Belgium and cross border into the Dutch and north west German markets.

Centrica will pay a consideration of £52 million (Euro 85 million) for its 50 per cent stake, which values the whole business at an average cost per customer account of £135.

The agreement marks a key stage in Centrica's strategy of exporting the skills and expertise it has gained during deregulation in the UK and creates a platform for the provision of other products and services.

Centrica's Chief Executive, Roy Gardner, said: "In the consortium we have found a joint venture partner who shares our vision for developing the competitive European market. Most importantly, this enables us to be involved at the formative stage of market development. We aim to be a significant player in Benelux, which is attractive due to its favourable regulatory climate relative to the rest of Continental Europe."

The transaction follows Centrica's acquisition of Direct Energy in Canada and Energy America in the United States. "I am delighted that we have now established a presence in our two strategic growth areas of Continental Europe and North America," added Mr Gardner.

Energy Minister Brian Wilson today gave a warm welcome to Centrica's new joint venture. He said: "This deal is a strong first sign of progress in energy market reform - in which consumers across Europe will be the winners."

Jo Geebelen, CEO of Interelectra, commenting on behalf of the Belgian consortium, said: "We set out to find a joint venture partner with whom we could seize the opportunities offered by liberalisation of the Belgian and neighbouring markets. Centrica fits that bill perfectly. Together we aim to establish ourselves as a major competitive force in Benelux and bring benefits to millions of customers."

The joint venture will have a Belgian chairman and Rob Leonard, currently a Business Development Director at Centrica, will be appointed Managing Director.