6 August, 2002 – Centrica Plc, which dominates Britain’s household energy supply through its British Gas arm, took a bigger share of the country’s commercial electricity market on Monday with the purchase of Electricity Direct.
In the latest in a string of acquisitions at home and abroad this year, the gas and home services group said it had paid £49.5m ($77.4m) in cash for the business – a re-seller of electricity set up in 1997 to take advantage of the liberalising British retail power market.
Centrica will also assume net debt of £13.5m.
With Monday’s deal, Centrica will have close to 20 per cent of the commercial market making it the third largest player in the commercial sector behind RWE’s NPower and London Electricity, the UK arm of Electricité de France.
“We already have a leading position in the residential market and that is where we want to be in the commercial sector,” Sir Roy Gardner, Chief Executive of Centrica.
British Gas and former regional electricity monopolies are now the main competitors in a free UK market for retail gas and electricity where “dual fuel” deals, often wrapped in with telecoms and other household services, are becoming the norm.
In the interests of competition, the retail end of the industry has been separated from the pipes and wires, which are run as regulated monopolies, and from the “upstream” gas production and power generation sectors.
Centrica and many of the other retailers are in the upstream business too, but Electricity Direct is purely a customer-focussed business, buying power through forward contracts and making a margin on billing and account management.
Last year Electricity Direct made operating profits of £7.4m.
It typically supplies shops, offices and small manufacturers. Its 97 000 customers use on average about eight times more power than household customers with annual bills of about 2 000 pounds, and are mostly on fixed-price contracts of up to five years.
At the end of last year Centrica bought Enron Direct, the UK commercial power business of the collapsed US energy trader Enron.