Centrica Plc on July 24 said it was selling its North American subsidiary Direct Energy LP for $3.63 billion to U.S. integrated power firm NRG Energy Inc., clearing the way for the new head of the British Gas owner to focus on its home markets.
The transaction was announced along with Centrica's half-year earnings, where the group reported a profit slump due to the COVID-19 impact and low commodity prices.
Both sets of shareholders welcomed the deal. Centrica's shares ended 16.7% higher, having surged almost 40% early on July 24, and NRG closed up 2.9%.
Centrica plans to use the cash from the sale to reduce net debt and contribute to its pension schemes, with its operations subsequently centered on the U.K. and Ireland.
"We had a number of expressions of interest in Direct Energy but it came down to the right price and the right buyer," Centrica Group CEO Chris O'Shea told reporters on a conference call. O'Shea took over permanently as CEO in April.
The transaction comes at a time of flux for power providers on both sides of the Atlantic, as companies shape their businesses to best cope with changed energy demands amid the coronavirus pandemic, such as greater working from home.
For NRG, the transaction doubles the number of retail customers it serves to 6 million people, and strengthens its operations in the eastern U.S., CEO Mauricio Gutierrez told Reuters in an interview.
"It's really exciting for NRG as we have national reach," said Gutierrez. Until now, NRG's business was primarily focused on Texas.
Centrica's Future
The sale of Direct Energy is part of a wider restructuring effort at Centrica which has gained additional significance amid the challenges of the pandemic.
Last month, Centrica said it planned to cut around 5,000 jobs, almost 20% of its global workforce.
The group reported a 14% drop in half-year operating profit to 343 million pounds (US$436.3 million) from 399 million a year earlier. This was due to the pandemic which reduced energy use and weakened commodity prices.
The net impact on pre-tax profit from the pandemic was around 60 million pounds as the company took mitigating measures such as not paying senior management bonuses, cost savings and using government job retention schemes.
Centrica gave no full-year financial guidance due to the possibility of customers delaying or deferring payments because of an uncertain economic outlook and its implications for unemployment.
It did not declare an interim dividend.
Centrica said it remains committed to exiting oil and gas production and nuclear power generation but has paused planned divestment of its 20% stake in Britain's nuclear energy fleet and the planned sale of its 69% shareholding in North Sea oil and gas producer Spirit Energy Ltd.
It plans to restart the Spirit Energy process when commodity and financial markets have settled and is considering options for the sale of its nuclear stake.
(US$1 = 0.7862 pounds)
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