Renewables on ice at UK's Centrica
Amid falling earnings and stiff market headwinds, Centrica has made clear that any ambitions it may still harbour for renewable energy will be kept on the backburner for the foreseeable future.
Centrica, which two months ago sold its Round 2 Race Bank offshore wind project to Dong for £50m ($83m), expects its "near-term investment in the UK power sector to be limited”, says chief executive Sam Laidlaw.
Centrica, which owns British Gas, saw its full-year profits slide 2% last year to £2.69bn, with its British Gas residential energy-supply business under particularly intense pressure amid falling customer numbers.
Operating profits within Centrica’s renewables business fell 55%, to just £25m, while its gas-fired unit reported an operating loss of £133m.
While weakness in these areas was largely offset by strong growth in Centrica’s upstream hydrocarbons business, overall market conditions “are set to remain challenging in 2014”, the company says.
With Race Bank now off the table, the next major renewables project in the company’s pipeline is the Round 3 Celtic Array zone in the Irish Sea that it owns jointly with Dong. A final investment decision for the first project within that zone – the 2.2GW Rhiannon – is not expected for several years.
Centrica has been vocal in its view that the political uncertainty surrounding the UK’s energy sector is undermining investor confidence, including in offshore wind.
The company “will be increasingly selective in [its] investments, focusing on the projects that offer the best returns and the lowest political risk”, says Laidlaw.
A proposal by Ed Miliband, leader of the UK Labour Party, to impose a price freeze on UK energy bills is "not a credible solution" to the challenge of rising energy costs, Laidlaw says.
In addition to selling Race Bank, Centrica last year confirmed that it will not participate in any new nuclear-energy projects in the UK.
Centrica continues to hold stakes in the 270MW Lincs, 194MW Lynn and Inner Dowsing and 90MW Barrow offshore wind farms.