CNA: Centrica plc: Acquisition
UK Regulatory Announcement
30 July 2013
Centrica’s subsidiary Direct Energy to become leading B2B gas supplier in the
Eastern US through £500m acquisition
Centrica plc’s North American subsidiary, Direct Energy Business, LLC, has
agreed to acquire the NewJersey-based Energy Marketing business of Hess
Corporation, for $731 million (£478 million) in cash plus net working capital,
estimated at approximately $300 million.
The Energy Marketing business is one of the largest B2B energy suppliers in
the Eastern US, operating in 18 states. The acquisition builds on Direct
Energy’s existing capabilities and further integrates these activities along
the gas value chain, linking gas supply from producers and other market
participants through secured transport and storage capacity to the gas and
power customer base.
In 2012, the Energy Marketing business supplied 378 billion cubic feet (bcf)
of gas and 28 terawatt hours (TWh) of power to over 23,000 customers. When
combined with Direct Energy’s existing business, which in 2012 supplied 77bcf
of gas and 51TWh of power, the acquisition will make Direct Energy the largest
business gas supplier on the East Coast of the US and the second largest
business power supplier in the competitive US retail markets.
The business has an extensive portfolio of existing gas and power contracts.
These include purchase agreements with Marcellus shale gas producers, gas
storage and pipeline capacity, and gas and power supply agreements with
customers, including local distribution companies. In addition it has a
tolling arrangement on the Bayonne Energy Centre gas-fired power plant, to
supply power to its customers in NewYork.
Hess’ Energy Marketing business had revenues of over $6 billion in 2012 and is
expected to deliver around $200million of EBITDA in 2013, with margins
similar to those of Direct Energy’s existing B2B activities. The combination
of the skills and capabilities of the employees of Direct Energy and Hess’
Energy Marketing business will enable the delivery of enhanced products and
services to our customers. The acquisition is expected to be earnings
accretive in its first full year, after the effect of fair value accounting,
and in addition is expected to deliver operational efficiencies.
Centrica Chief Executive, Sam Laidlaw, said: “This transaction will transform
our B2B operations in North America, giving us leading positions in business
gas and power supply and creating a unique dual fuel business in the US. It
marks a significant step towards delivering on our strategy – substantially
increasing the scale of our North American downstream business and integrating
along the gas value chain – with the aim of doubling the profitability of our
North American downstream business over the next 3-5 years.”
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Centrica Investor Relations:+44 (0)1753 494900
Centrica Media Relations: +44 (0)800 107 7014
*Further information summarising the transaction is available at
*Centrica will host a conference call for institutional investors and
analysts at 8:00am (UK time) on 30July2013. Dial in: + 44 20 3059 8125.
*Hess’ Energy Marketing business is headquartered in Woodbridge, New
*The transaction is subject to customary regulatory approvals and is
expected to close later this year.
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