Centrica May Mothball More Gas Plants as Capacity Trims Profits

Centrica Plc (CNA), the U.K.’s biggest supplier of residential gas and energy, may mothball three more of its eight gas-fired power plants, after announcing the closure of two today.

“Gas-fired generation is not making money at the moment,” Centrica Chief Executive Officer Sam Laidlaw said at a press conference today. “We’re shutting down two and we’ve moved three onto open-cycle.”

The U.K.’s reserve margin, the amount by which reliable generation capacity exceeds peak demand, stands at 32 percent, managing director Mark Hanafin said at the meeting. U.K. electricity demand dropped about 4 percent last year and as much as 6,500 megawatts of additional gas-fired capacity will have been added to the system over 2011 and 2012, he said.

“What’s happening is the older plants are just not running,” Hanafin said. The three plants being used to supply short-term generation needs will only continue operating if the company can continue winning contracts to do so, he said. “If we weren’t to win those contracts then those stations will be mothballed.”

Centrica announced the closure of its Barry and King’s Lynn plants in a statement today. Its Peterborough, Brigg and Roosecote stations are now configured to run more flexibly and operate in the Short Term Operating Reserve market, the Windsor, England-based company said.

About 10,000 megawatts of coal-fired power plants are due to close by 2015 because of European Union emissions laws. The retirement of nuclear plants towards the end of the decade, will also boost the need for new generation, Laidlaw said.

“At the moment you have no profitability in gas-fired generation, but if you roll forward towards the second half of the decade the country is going to need more gas fired generation,” Hanafin said.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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