Sept. 23 (Bloomberg) -- Centrica Plc, the U.K.’s largest natural gas supplier, acquired Texas-based First Choice Power for $270 million in cash, bolstering its position as the state’s third-biggest electricity retailer.
First Choice has 220,000 home and commercial accounts in Texas, raising Centrica’s customers in the state above 830,000, the Windsor, England-based company said today in a statement.
There have been 130 mergers and acquisitions among U.S. electricity companies this year, amounting to about $67 billion in deals, according to data compiled by Bloomberg. Centrica, which owns the British Gas brand in the U.K., is looking to expand in the U.S. through its Direct Energy unit. The division may spend as much as 2 billion pounds ($3.1 billion) to add North American power and natural-gas assets by 2015.
“First Choice Power is an established brand with a loyal customer base,” Direct Energy Chief Executive Officer Chris Weston said. The deal will “enlarge our business in one of the key U.S. deregulated residential markets,” he said.
Centrica rose 4.4 pence, or 1.6 percent, to 287 pence by the 4:30 p.m. close of London trading. The stock has fallen 13 percent this year, valuing the company at 14.8 billion pounds.
Direct Energy operates in 46 U.S. states, Washington D.C. and Canada and plans to double profit from 2009 levels in five years. In the past 18 months, it spent almost 1 billion pounds on acquisitions including Suncor Energy Inc.’s gas assets last year and New York-based Gateway Energy Services Corp. for $90 million in March. The company is exploring purchases of shale gas assets, people familiar with the matter said in August.
The cost of adding First Choice was $1,230 per customer, Evolution Securities analyst Lakis Athanasiou said in a note to investors today. That compares with $330 for Gateway, he said. The value of Direct Energy’s North American supply business is about $2.74 billion, or $760 for each of its 3 million users.
“The higher per-customer acquisition costs than Gateway are justified by higher consumption, 20 percent small-commercial customers in the mix, higher margins” and lower customer turnover, Athanasiou said.
Centrica is better placed than some rivals to fund deals as it has less debt. The company’s ratio of debt to earnings before interest, tax, depreciation and amortization of 1.1 compares with an average 2.5 for European utilities, Bloomberg data show.
The two largest energy retailers in Texas are TXU Corp. with 1.8 million customers and Reliant with 1.4 million, according to Centrica.
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