UK Edition
British Gas owner sets up new North Sea spin-off
The owner of British Gas has set up a new North Sea spin-off company after agreeing to merge its offshore oil and gas assets with Norway’s Bayerngas over the summer.
The creation of Spirit Energy is a major pillar in the FTSE 100 energy giant’s bid to shake off its history as capital intensive energy producer and emerge as a nimble, consumer-focused energy innovator.
Centrica will still hold a 69pc stake in Spirit Energy alongside Bayerngas, which will own 31pc, but said the new North Sea player will be self-financing thanks to Centrica’s existing cash-generating oil and gas production assets.
Spirit Energy also plans to invest between £400m to £600m a year which could include further consolidation and joint ventures in the North Sea oil basin.
Iain Conn, Centrica’s chief executive, said the new company will create a more focused and sustainable exploration and production (E&P) business “which will contribute to the resilience of Centrica while limiting the group’s E&P participation”.
“With the creation of Spirit Energy we have now completed the first phase of our portfolio transformation as we reallocate resources towards our customer-facing businesses, leaving Centrica well-positioned to deliver longer-term returns and growth,” Mr Conn said.
“As one of the largest independent E&P companies in North-West Europe, Spirit Energy will have the possibility to participate in further consolidation and joint ventures, and create further optionality for Centrica’s shareholders,” he added.
Mr Conn signalled the start of Centrica’s customer-centric transformation in the summer of 2015 in a three year strategy plan designed to adapt the group to changes in the energy market.
The strategy has involved selling off stakes in major power plants and wind farm projects and a strong push into smart homes devices such as internet-connected energy meters, light bulbs, sensors and thermostats.
However, the decision to double down on its customer business has coincided with a period of unprecedented political pressure on energy suppliers. Centrica’s share price has been steady decline for three years as politicians threatened to cap standard energy tariffs.
Last month Centrica’s share price took a record one-day tumble to fourteen year lows of 138p, a fraction of its 400p share price in late 2013, after the group revealed that 823,000 customers had left British Gas and said trouble in its North American business would also take a toll on full-year profits.