Direct Energy Releases 2009 Half Year Financial Results (C$)
Economic Conditions And One-Off Charge Impact Otherwise Encouraging Growth In Mass Market Energy and Commercial & Industrial Businesses
TORONTO, ON (7/30/2009) - Direct Energy, one of North America’s leading competitive energy and related services companies, today announced a 23 per cent increase in revenue for the first half of 2009 to $6 billion (2008: $4.9 billion) resulting from growth in the Company’s residential customer base and increased contribution from its commercial and industrial business following the acquisition of Strategic Energy in June 2008. Operating profit decreased by 36 per cent to $116 million (2008: $182 million) as a result of North America’s weak economic environment, low commodity prices and a one-off bad debt charge in the mass markets energy business.
“Direct Energy’s underlying performance was good against a backdrop of North America’s challenging market conditions,” said Chris Weston, Direct Energy’s President and CEO, who was appointed on July 1st. "Our immediate focus will be on enhancing profitability, specifically within the Mass Markets Energy and Wholesale Energy Groups, and in the pursuit of growth for the business overall."
Direct Energy, the 30th largest company in Canada†, is not publicly traded, but Centrica plc reports the financial performance of its North American subsidiary. Centrica, which trades on the London Stock Exchange (LSE: CNA), reported half-year 2009 revenues^ of £11.7 billion ($21 billion²). Earnings were £537 million^* ($1 billion²).
“Direct Energy’s strength is its diverse business model which operates across the energy value chain, from energy generation to wholesale and retail energy sales and energy conservation products and services. As a result, Direct Energy has the financial strength to provide a stable source of energy and energy-related services to millions of customers, whether commercial or residential, across North America,” added Mr. Weston.
Details on the first-half performance of each of Direct Energy’s lines of business are below.
Mass Markets Energy
• Grew customer base over the first-half of 2009 with the US North region achieving the milestone of serving 500,000 customers
• Incurred a one-off charge of $83 million to increase the bad debt provision against final debt in Texas following a change in methodology to better reflect the chances of collection from customers who have left Direct Energy.
Mass markets energy, which comprises natural gas and electricity sales to residential and small commercial customers, produced revenue of $2.6 billion in the first-half of 2009, a decrease of 4 per cent from 2008 and $80 million in operating profit (2008: $122 million.)
Commercial and Industrial Energy
• Delivered 119% profit growth, 68% growth in electricity volumes and 10% growth in gas volumes primarily as a result of the acquisition of Strategic Energy
• Cost synergies resulting from Strategic Energy acquisition are expected to exceed original expectations of US$15 million per annum.
The commercial and industrial energy segment, encompassing natural gas and electricity sales to small, medium and large-sized businesses, public institutions and government, increased its half-year revenue by 66 per cent to $2.4 billion while operating profit grew to $35 million (2008: $16 million.)
Home and Business Services
• Canada Services’ operating profit was slightly higher in the first-half of 2009 than 2008 as Home Services reduced costs and grew its number of customer relationships by 29,000 and Business Services secured more profitable contracts
• Market conditions for our US Home Services business remain challenging as the decline in new housing construction is showing now signs of an early recovery. As such, the business has reshaped its operation to continue profitable operations while increasing focus on the energy efficiency opportunities presented by the Obama administration
The home and business services’ segment, which provides HVAC, water heaters, plumbing and electrical appliances for residential customers and HVAC, building automation, facility maintenance and energy management consulting services for commercial, institutional and industrial customers, produced increased revenue of $361 million (2008: $335 million) while operating profit remained flat at $6 million (2008: $6 million.)
Upstream and Wholesale energy
• Increased reserves base by around 50 bcfe through some small scale acquisitions
• Profitability of various segments adversely impacted by lower gas and power prices
Upstream and wholesale energy comprises Direct Energy’s upstream and midstream activities which include upstream gas, power generation, gas storage and transportation leases, wholesale power and gas transactions, wind power purchase agreements and proprietary trading. Upstream and wholesale energy delivered an operating loss of $5 million (2008: profit of $37 million.)
About Direct Energy
Direct Energy is one of North America’s largest energy and energy-related services providers with over 5 million residential and commercial customer relationships. Direct Energy provides customers with choice and support in managing their energy costs through a portfolio of innovative products and services. A subsidiary of Centrica plc (LSE: CNA), one of the world’s leading integrated energy companies, Direct Energy operates in 21 states plus DC and 10 provinces in Canada. To learn more about Direct Energy, visit www.directenergy.com.
Notes:
Results are expressed in Canadian dollars (based on monthly average FX rates) except where noted. Average exchange rates for 2009: £1 = C$1.7979; 2008: £1 = C$1.9905.
† 2008 Financial Post 500; ranked by revenue
²Exchange rate used £1 = C$1.7979
^ from continuing operations
* including joint ventures and associates stated net of interest and taxation and before exceptional items and certain re-measurements
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For more information, please contact:
Hillary Marshall
Direct Energy
(416) 590-3210