Centrica secures Rough storage facility

Centrica plc, through a wholly owned subsidiary, has acquired Dynegy Storage Limited (DSL) and Dynegy Onshore Processing UK Limited (DOPUL), subsidiaries of Dynegy Inc., for a net cash consideration of £304 million plus £11.8m in respect of net working capital (comprising cash of £15.9m and net current liabilities of £4.1m).

DSL and DOPUL own the Rough offshore gas storage facility and the associated pipeline and onshore processing facility at Easington, Yorkshire (“Rough”).  The Rough asset is the largest gas storage facility in the UK, with a capacity for holding approximately 100 billion cubic feet (bcf) of stored gas and has a deliverability rate of 1.5 bcf per day.

Centrica intends to continue sourcing a significant proportion of its gas requirements from fields in which it owns equity interests, and the Rough facility will preserve Centrica’s flexibility to meet fluctuating demand and allow it to maximise the value of its diverse gas portfolio.

The majority of this storage will continue to be sold to other gas market participants.  As the supply of UK produced gas reduces and the UK becomes more reliant on imported gas, the facility will continue to provide users with the seasonal storage capacity so that summer produced gas can be used to meet peak winter demand. In this context, through the sale of storage capacity to third parties, the Rough facility is expected to be earnings enhancing in the first year.

The business has net assets (based upon an unaudited balance sheet) of £354.7 million at 30 September, 2002.  Unaudited profits before tax attributable to Rough in the nine months to 30 September, 2002, were £18.6 million, excluding one-off severance payments and asset write-offs of £10.9 million.

Sir Roy Gardner, Chief Executive of Centrica, said: “The acquisition of this asset is of strategic importance to Centrica, providing us with flexibility to meet the fluctuating gas requirements of our retail customers.  We also see potential for value creation through improved management of the commercial and operational arrangements of the facility for our storage customers.”