TIDMCNA
RNS Number : 9570U
Centrica PLC
08 December 2021
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN
PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD
CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH
JURISDICTION
FOR IMMEDIATE RELEASE
8 December 2021
Centrica plc
Proposed sale of Spirit Energy's Norwegian Assets
Centrica announces major progress on strategic transformation
with the sale of Spirit Energy's Norwegian oil and gas assets and
run-off strategy for the remaining Spirit Energy business
-- Disposal of entire Norwegian portfolio plus the Statfjord field
-- Headline consideration to Spirit Energy of c.GBP800m with 1
Jan 2021 commercial effective date
-- Net consideration to be reduced by cash flows retained from 1 Jan 2021 to completion
-- In addition, related commodity price hedges will be closed at
a total pre-tax cost of c.GBP180m
-- All c.GBP830m of decommissioning liabilities transfer to the
buyers, Sval Energi and Equinor
-- Amended Shareholder Agreement focuses Spirit Energy on UK gas production & decommissioning
-- Centrica's 69% share of proceeds expected to be c.GBP560m
-- Amount of Net consideration dependent on date of completion, currently expected in Q2 2022
Chris O'Shea, Group Chief Executive of Centrica, said:
"We are pleased to continue to bring focus to Centrica's
portfolio with these transactions, which are aligned with our
strategy to reduce our exposure to carbon intensive oil and gas
exploration and production in a way that maximises shareholder
value. With the disposal of these largely oil producing assets to
buyers who will be able to meet the material decommissioning costs,
we can now focus on realising value for our shareholders from
Spirit's remaining gas reserves. Spirit will effectively be in
run-off, and we will not explore for new hydrocarbon reserves;
rather, we will focus on ensuring Spirit can fund its
decommissioning liabilities whilst pursuing opportunities to
leverage existing infrastructure to help the UK on its path to net
zero.
This sale is another important milestone in the turnaround of
Centrica and follows our significant organisational restructure
last year and the sale of Direct Energy earlier in 2021. I remain
excited about our future, as we continue to focus on creating
shareholder value and delivering for our customers by helping them
live sustainably, simply and affordably."
Transaction summary
Centrica plc ("Centrica" or the "Company" or the "Group")
announces that, in line with the Group's stated strategy,
subsidiaries of the 69% Centrica owned Spirit Energy Limited
("Spirit Energy") group ("Spirit Energy Group") have entered into
agreements to sell the Spirit Energy Group's Norwegian oil and gas
exploration and production business excluding the Statfjord field
to Sval Energi AS ("Sval") and its interests in the Statfjord field
to subsidiaries of Equinor ASA ("Equinor") (the "Sale Business and
Interests").
The transaction has a commercial effective date of 1 January
2021 with headline consideration of $1,076 million (equivalent to
approximately GBP800 million) in cash on a debt free, cash free
basis, plus a deferred commodity price linked contingent payment.
The consideration payable at closing (the "Net Consideration") will
be subject to customary adjustments to reflect working capital and
debt like items. It will also be reduced for net post-tax cash
flows generated by the Sale Business and Interests since 1 January
2021, adjusted for any remaining tax payable on these net cash
flows to be paid by the Spirit Energy Group (the "Net Cash Flow").
As of 31 October 2021, the Sale Business and Interests had
generated GBP376 million of net cash flows since 1 January 2021.
Whilst significantly dilutive to earnings in the near term, all
decommissioning liabilities related to the Sale Business and
Interests will be transferred to the buyers as part of the
transaction.
Spirit Energy will distribute the Net Consideration and Net Cash
Flow to Centrica and its joint venture partners, SWM Group, in
proportion to their ownership, after adjusting for certain
transaction taxes and costs and amounts in respect of certain
liabilities to be retained by the Spirit Energy Group. SWM Group's
share of this distribution from Spirit Energy is expected to be
approximately GBP250 million.
In addition, an estimated approximately GBP140 million cost of
closing commodity price hedges related to Statfjord U.K. will be
borne by Spirit Energy and there is an estimated approximately
GBP40 million cost of closing commodity price hedges at a Centrica
Group level related to its share of Spirit Energy's Norwegian
Business and Statfjord Norway Interests.
Transaction highlights
-- Headline consideration as at 1 January 2021 of $1,076 million
(approximately GBP800 million) in cash, plus a deferred commodity
price linked contingent payment, the transfer of all
decommissioning liabilities of the Sale Business and Interests of
approximately GBP830 million to the buyers, and reduced capital
expenditure commitments, represents attractive value for
shareholders.
-- Centrica's share of the proceeds of approximately GBP560
million to be retained by the Company.
-- The Sales result in a 92% reduction in the Spirit Energy
Group's oil and liquids reserves and a 38% reduction of its gas
reserves, and represent a significant step towards Centrica
delivering on its strategy to decarbonise its portfolio and reduce
its exposure to oil and gas production.
-- The Sales further simplify and de-risk Centrica's business
model while strengthening the balance sheet and reducing earnings
and cashflow volatility, and allow an increased focus on its
customer-facing activities in its core home markets of the U.K. and
Ireland where it has leading market positions.
-- Under an amended shareholders' agreement (the "Amended SHA"),
Spirit Energy's future strategy will be to realise value from its
remaining portfolio of assets in the UK and the Netherlands while
minimising further investment in oil and gas exploration and
development, and to utilise cash from the Spirit Energy Group's
operations to meet, and de-risk, decommissioning obligations in
respect of its remaining portfolio. Future cashflows generated from
Spirit Energy's continuing operations will be retained within
Spirit Energy until projected future pre-tax decommissioning costs
are 1.5 times covered.
-- Spirit Energy will also be able to pursue potential
opportunities to leverage existing infrastructure for net zero
projects.
-- The Sales are conditional upon Centrica and SWM Group
shareholder approvals, as well as various antitrust and regulatory
approvals, and are expected to complete in the second quarter of
2022.
-- Centrica's Board considers the Sales to be in the best
interests of Centrica and its shareholders as a whole and intends
to unanimously recommend that shareholders vote in favour of the
ordinary resolution of the Company seeking approval for the
Transaction (the "Resolution") at the General Meeting to be held in
January 2022. A circular convening the General Meeting will be
published in due course.
The Transaction (comprising the Sales and the terms of the
Amended SHA) constitutes a Class 1 transaction for Centrica under
the Listing Rules and completion of the Transaction is therefore
conditional on, inter alia, the approval of Centrica's shareholders
at a general meeting of the Company's shareholders (the "General
Meeting"). A circular containing details of the Transaction and a
notice convening the General Meeting will be sent to Centrica's
shareholders as soon as practicable, with the General Meeting
expected to be held in January 2022. This summary should be read in
conjunction with the full text of this announcement. This
announcement is available at www.centrica.com .
The person responsible for arranging the release of this
announcement on behalf of the Company is Raj Roy, the Company
Secretary.
Enquiries:
Centrica
Investor and Analysts Media Relations
T: 01753 494900 T: 01784 843000
E: ir@centrica.com E: media@centrica.com
Goldman Sachs International
Financial Adviser, Corporate Broker and Sponsor
Karen Cook, Mark Sorrell, Brian O'Keeffe, Bertie Whitehead
+44 (0) 20 7774 1000
_____________________________________________
Proposed sale of Spirit Energy's Norwegian business and
interests in the Statfjord field and amended joint venture
arrangements
Introduction
Centrica plc ("Centrica" or the "Company" or the "Group") today
announces that, in line with the Group's stated strategy,
subsidiaries of the Spirit Energy Limited ("Spirit Energy") group
("Spirit Energy Group") have entered into agreements to sell the
Spirit Energy Group's Norwegian oil and gas exploration and
production business and its interests in the Statfjord field (the
"Sale Business and Interests"). Centrica, via its subsidiary GB Gas
Holdings Limited ("GBGH"), owns 69% of Spirit Energy, with its
co-shareholders SWM Gasbeteiligungs GmbH ("SWM") and SWM Bayerische
E&P Beteiligungsgesellschaft mbH ("BE/PB") (SWM and BE/PB
together "SWM Group") owning the remaining 31%.
The headline consideration is $1,076 million (equivalent to
approximately GBP800 million) in cash, plus a deferred commodity
price linked contingent payment. The Sales are on a debt free, cash
free basis with a commercial effective date of 1 January 2021 and
the consideration payable at closing will be reduced for net cash
flows generated by the Sale Business and Interests since 1 January
2021, adjusted for tax payable on these net cash flows that will be
paid by the Spirit Energy Group (the "Net Cash Flow"). In addition,
all decommissioning liabilities related to the Sale Business and
Interests will be transferred to the buyers.
The "Sales" comprise the following:
-- Sval Energi AS ("Sval") will acquire the Norwegian oil and
gas business, held by Spirit Energy Norway AS ("SEN"), excluding
the Statfjord field (the "Norwegian Business") for $1,026 million
(the "Norwegian Business Sale"); and
-- Equinor Energy AS and Equinor UK Limited, subsidiaries of
Equinor ASA ("Equinor") will acquire SEN's Norwegian interests in
the Statfjord field (the "Statfjord Norway Interests") (the
"Statfjord Norway Sale") and Spirit Energy Resources Limited
("SERL")'s U.K. interests in the Statfjord field (the "Statfjord
U.K. Interests") (the "Statfjord U.K. Sale"), respectively, for $50
million in aggregate.
Completion of each of the Sales is interconditional, except that
the Norwegian Business Sale and the Statfjord Norway Sale can
complete if certain regulatory conditions to the Statfjord U.K.
Sale remain outstanding.
In addition, on 8 December 2021, GBGH entered into an agreement
to amend and restate the Spirit Energy shareholders' agreement and
an ancillary agreement relating to GBGH's ability to require, in
certain circumstances and after 31 December 2023, SWM Group to sell
their shares in Spirit Energy to a third party purchaser on no less
favourable terms and conditions than those offered to GBGH by such
third party purchaser (together, the "Amended SHA"), which will
take effect on the completion of the Norwegian Business Sale and
the Statfjord Norway Sale.
The Transaction (comprising the Sales and the terms of the
Amended SHA) constitutes a Class 1 transaction for Centrica under
the Listing Rules and completion of the Transaction is therefore
conditional on, inter alia, the approval of Centrica's shareholders
at a general meeting of the Company's shareholders (the "General
Meeting"). A circular containing details of the Transaction and a
notice convening the General Meeting will be sent to Centrica's
shareholders as soon as practicable, with the General Meeting
expected to be held in January 2022.
Background to and reasons for the Transaction
Centrica merged its exploration and production business with
Bayerngas Norge's business in 2017 to form Spirit Energy, which
alongside the previous disposals of Centrica's Canada and Trinidad
& Tobago assets created a more focused and more sustainable
European exploration and production business.
In July 2019, Centrica announced the strategic decision to focus
on its customer-facing businesses and transition to a lower carbon
future. This included the decision to exit oil and gas production
and the intention to divest its 69% shareholding in Spirit
Energy.
Centrica announced in April 2020 that the disposal process had
been paused due to the uncertain backdrop created by the Covid-19
pandemic and low commodity prices at that time. In addition, the
joint venture structure had limited the number of parties
interested in buying Centrica's interest in Spirit Energy as a
whole. Centrica subsequently decided to pursue alternative sale
options in order to simplify the sale structure and enable it to
maximise the value of the assets while de-risking liabilities,
which included pursuing the sale of the Sale Business and
Interests.
Having received a compelling offer from Sval and Equinor to
acquire the Sale Business and Interests, Centrica entered into a
limited period of exclusive negotiations with Sval and Equinor to
explore further the basis for a transaction. The Centrica board
(the "Board") believes that the resulting Sales at the agreed
headline consideration of $1,076 million (equivalent to
approximately GBP800 million), with a commercial effective date of
1 January 2021, plus a deferred commodity price linked contingent
payment, represent an attractive value for the Sale Business and
Interests. The Board has unanimously agreed that the Sales are in
the best interests of shareholders and other stakeholders as a
whole and intends to unanimously recommend that shareholders vote
in favour of the resolution (the "Resolution") at the General
Meeting to be held in January 2022.
Alongside the implementation of the revised operating model
announced in June 2020 and the sale of Direct Energy, which
completed in January 2021, the Sales will help create a simpler,
leaner, less carbon-intensive Group focused on delivering for its
customers. The Sales are also expected to result in a more stable
financial profile for the Group, with significantly less of the
Group's earnings and cashflow arising from oil and gas production
and the associated commodity price volatility.
Following completion, Centrica will remain primarily a U.K. and
Ireland focused energy services and solutions company with a large
customer base and attractive market positions. The simplification
of the Group is expected to allow Centrica to deliver high-quality
customer service and a more competitive cost base, to enable growth
in its core energy and services offerings and from targeted
opportunities in related, newer low-carbon services and
solutions.
The Group will retain its 69% shareholding in Spirit Energy,
which following the Sales will own oil and gas assets in the U.K.
and the Netherlands only. The Sale Business and Interests represent
52% of Spirit Energy's 2020 total production (83% of its oil and
liquids production and 34% of its gas production). The Sale
Business and Interests also represent 63% of total 2P reserves (92%
of its oil and liquids 2P reserves and 38% of its gas 2P reserves)
as at 31 December 2020.
A table comparing Spirit Energy's key metrics including and
excluding the Sale Business and Interests is shown below:
Spirit (incl. Spirit (excl.
Sale Business Sale Business
and Interests) and Interests)
2020 production (mmboe) 44.9 21.4
Liquids % 38% 13%
Gas % 62% 87%
------------------------------------- ----------------
2021e production (mmboe) c.37.0 c.18.0
Liquids c.36% c.12%
Gas c.64% c.88%
------------------------------------- ----------------
2020 Y/E reserves (mmboe) 246 93
Liquids 44% 9%
Gas 56% 91%
------------------------------------- ----------------
2020 Lifting costs (GBP/bbl) 13.2 17.3
------------------------------------- ----------------
2020 DDA (GBP/bbl) 11.3 10.4
------------------------------------- ----------------
Pre-tax decommissioning liabilities
(GBPbn) 2.1 1.2
------------------------------------- ----------------
Decommissioning liabilities
(net of deferred tax) (GBPbn) 1.0 0.8
------------------------------------- ----------------
Spirit Energy's future strategy will be to realise value from
its remaining portfolio of assets in the U.K. and Netherlands while
minimising further investment in oil and gas exploration and
development, and to utilise cash from the Spirit Energy Group's
operations to meet, and de-risk, decommissioning obligations in
respect of its remaining portfolio. Reflecting this, capital
expenditure is currently expected to be around GBP150 million in
2022 and in the range GBP10-50 million per year from 2023 onwards.
It will also seek to pursue potential investments in energy
transition opportunities that leverage existing Spirit Energy
assets and infrastructure, including the potential development of
carbon capture and storage and hydrogen projects that will enable
the transition to net zero.
Centrica expects to continue to fully consolidate Spirit Energy
in its financial statements, including the cash held by Spirit
Energy to fund its future decommissioning liabilities. Excluding
the distribution relating to the Sales, cash will be distributed to
Spirit Energy's shareholders only to the extent that cash held by
Spirit Energy exceeds 1.5x the estimated future pre-tax
decommissioning liabilities of the remaining Spirit Energy
portfolio. The Group will continue to assess opportunities to exit
from its remaining oil and gas exploration and production
activities over time.
It is expected that the Sales will have a significant near-term
dilutive effect on earnings per share given the expected earnings
profile from the Sale Business and Interests. However, the Board
believes that the Company's simplified and more stable financial
profile will result in greater predictability of earnings with the
ability to generate attractive profits and operating cash flows,
while the removal of decommissioning liabilities and capital
investment commitments associated with the Sale Business and
Interests further de-risk the Group. Therefore, the Board believes
that the Transaction is in the best interests of shareholders as a
whole.
Key terms of the Sales
Subsidiaries of the Spirit Energy Group will, on the terms and
subject to the conditions set out in the purchase agreements
entered into with Sval, Equinor Energy AS and Equinor UK Limited
(the "Purchase Agreements"), sell: (i) to Sval, the Norwegian
Business held by SEN for $1,026 million; and (ii) to Equinor Energy
AS and Equinor UK Limited, the Norwegian licence interests in the
Statfjord field held by SEN and the U.K. licence interests in the
Statfjord field held by SERL, respectively, for $50 million in
aggregate. The headline consideration is $1,076 million
(approximately GBP800 million).
The Sales are on a debt free, cash free basis with a 1 January
2021 commercial effective date. The consideration payable at
closing (the "Net Consideration") will be subject to customary
adjustments to reflect working capital and debt like items. It will
also be reduced for net cash flows generated by the Sale Business
and Interests since 1 January 2021 adjusted for any remaining tax
payable by Spirit Energy on these net cash flows (the "Net Cash
Flow"). The Sale Business and Interests generated GBP199 million of
net cash flows between 1 January 2021 and 30 June 2021 and GBP376
million of net cash flows between 1 January 2021 and 31 October
2021. Tax on these cash flows is expected to be paid in the fourth
quarter of 2021 and in 2022.
SEN and SERL will also receive contingent consideration if UK
NBP gas prices exceed certain floor prices from 5 October 2021
until the end of 2022. The gas floor price from 5 October 2021
until and including 31 December 2021 (the "First Relevant Period")
is 145.8p/therm and from 1 January 2022 until and including 31
December 2022 (the "Second Relevant Period") is 96.9p/therm. The
contingent consideration payable to SEN and SERL will be calculated
based on 50% of the post-tax cash flows for each day (the "Relevant
Day") during the First Relevant Period and the Second Relevant
Period (each, a "Relevant Period"), based on the difference between
the relevant floor price and the NBP day ahead index price on the
working day preceding the Relevant Day, multiplied by the volume of
gas delivered on the Relevant Day. SEN and SERL will each receive a
contingent consideration payment shortly after each Relevant Period
equal to the sum of the daily calculations for each Relevant
Period. The contingent consideration cannot be less than zero.
Spirit Energy will distribute the net proceeds of any contingent
consideration to Centrica and SWM Group, pro-rata to their
aggregate ownership interests.
Spirit Energy and Centrica will not retain any decommissioning
liabilities associated with the Sale Business and Interests beyond
the secondary or residual statutory liabilities (including through
the parent company guarantee provided by Centrica to the Norwegian
State relating to SEN's obligations and liabilities related to
exploration and production activities on the Norwegian Continental
Shelf, which is likely to remain in place after completion of the
Sales), which are mitigated by the decommissioning security
arrangements ("DSAs") and indemnities provided by Sval and
Equinor.
In addition, SEN has agreed to indemnify, and hold harmless,
Sval from and against all and any costs, expenses, liabilities,
obligations, demands, losses, debts, claims and actions (including
legal costs on an indemnity basis) due to certain notified tax
claims. The amount recognised on the Group's consolidated balance
sheet as at 31 December 2020 in respect of the uncertain tax
provision relating to such notified tax claims was GBP118 million
(2019: GBP128 million). Spirit Energy has the benefit of a tax
indemnity from GBGH and a parent company guarantee from Centrica,
put in place at the time of the formation of the Spirit Energy
joint venture, under which GBGH would pay the excess of any tax
liability above GBP60 million arising from matters relating to the
notified tax provision. GBGH and Centrica have undertaken to Sval
that GBGH and Centrica will perform their obligations under this
indemnity and the related parent company guarantee, respectively,
and will not amend or vary them without Sval's consent.
The Sales are conditional on, among other things, Centrica's
shareholders passing a vote on a Resolution approving the
Transaction by a simple majority at the General Meeting as required
under the Listing Rules, SWM Group shareholder approval and receipt
of certain antitrust and regulatory approvals in Norway and the
U.K. The completion of each of the Sales is interconditional,
except that the Norwegian Business Sale and the Statfjord Norway
Sale can complete if any of the necessary consents from the U.K.
Oil and Gas Authority, U.K. Government or Norwegian Government (if
applicable) to the Statfjord U.K. Sale remain outstanding.
Spirit Energy has agreed that it will not solicit any proposals
from a third party to acquire the Spirit Energy Norway assets.
However, Spirit Energy is permitted to engage with third parties in
relation to any unsolicited proposal which Spirit Energy
determines, acting reasonably, constitutes a superior transaction
to the Sales.
Sval has agreed to pay SEN a deposit of $50 million (equivalent
to approximately GBP37 million) upon signing of the Norwegian
Business Purchase Agreement. If completion of the Norwegian
Business Sale does not occur because Sval is in material breach of
its obligation to use reasonable endeavours to satisfy the
conditions to completion under the Norwegian Business Purchase
Agreement, the deposit can be retained in full by SEN.
Sval has obtained warranty and indemnity insurance which,
following completion of the Norwegian Business Sale, will be its
sole recourse for any claim in respect of the warranties given by
SEN in the Norwegian Business Purchase Agreement, other than title
warranties and subject to limited exceptions.
In addition, SEN and Sval have agreed to cooperate to finalise
the terms of a transition services agreement to be entered into at
completion of the Norwegian Business Sale pursuant to which Spirit
Energy will provide or procure the provision of certain services
relating to the Norwegian Business to be sold.
Distribution of proceeds by Spirit Energy to Centrica and SWM
Group
Spirit Energy will distribute the Net Consideration and the Net
Cash Flow generated from 1 January 2021 to the completion date of
the Sales to its shareholders. The amount to be distributed to the
Spirit Energy shareholders will be after adjusting for certain
transaction costs, taxes, amounts in respect of certain liabilities
to be retained by the Spirit Energy Group under the Purchase
Agreements, and any consideration adjustments from the buyers to
reflect assumed tax payments to be made by Spirit Energy related to
2021 cashflow. As of today, the proceeds to be distributed are
expected to be approximately GBP810 million (on a 100% basis), with
Centrica's 69% share expected to be approximately GBP560 million
and SWM Group's share expected to be approximately GBP250
million.
An estimated approximately GBP140 million cost of closing
commodity price hedges relating to the Statfjord U.K. Interests
will be borne by Spirit Energy, utilising its existing cash
balances. As at 31 December 2020, Spirit Energy had GBP444 million
of cash and cash equivalents. In addition there is an estimated
approximately GBP40 million cost of closing commodity price hedges
at a Centrica Group level related to its share of Spirit Energy's
Norwegian Business and Statfjord Norway Interests.
Use of proceeds to be distributed by Spirit Energy to its
shareholders
The distribution to Centrica of its 69% share of the Net
Consideration and Net Cash Flow generated since 1 January 2021 is
expected to be approximately GBP560 million.
As part of the agreement reached with the trustees of the
Group's U.K. defined benefit schemes ("Pension Schemes") at the
time of the announcement of the sale of Direct Energy in July 2020,
Centrica commenced discussions with the trustees of the Pension
Schemes regarding a contribution to the Pensions Schemes from the
net proceeds from the sale of Direct Energy. Pending conclusion of
these discussions as part of the 2021 triennial pensions valuation,
the Company has agreed not to make any distributions to
shareholders in excess of its cumulative free cash flows or to
prepay any external financial indebtedness before its scheduled
repayment date. The triennial valuation date was 31 March 2021 and
under U.K. pensions regulations the Company has 15 months from this
date to reach agreement with the trustees of the Pension Schemes on
the level of the deficit and any repair plan.
Given the ongoing discussions with the pension trustees, and the
current commodity price environment and its impact on the UK energy
supply market, the Company will retain the proceeds from the Sales,
including any proceeds received from the contingent consideration
arrangements, as cash on its balance sheet.
The cash flows generated by the continuing Group are expected to
result in an attractive proposition for Centrica shareholders, with
the potential for growth in earnings and operating cash flows. The
Board continues to recognise the importance of dividends to
Centrica shareholders and intends to recommence dividends when it
is prudent to do so.
Amended Spirit Energy shareholder arrangements
On 8 December 2021, GBGH, SWM Group and Spirit Energy entered
into a second deed of amendment and restatement relating to the
Spirit Energy shareholders' agreement (the "SHA"). With effect from
the date of the completion of the Norwegian Business Sale and the
Statfjord Norway Sale, the SHA will be amended to reflect that the
Spirit Energy Group will operate in the U.K. and the Netherlands
only and that Spirit Energy is in the process of being transitioned
to a low-cost, self-financing gas focused production company which
is primarily focused on utilising cash to meet, and de-risk,
decommissioning obligations of existing assets in its portfolio. In
addition, an ancillary arrangement was agreed relating to GBGH's
ability to require, in certain circumstances and after 31 December
2023, SWM Group to sell their shares in Spirit Energy to a third
party purchaser on no less favourable terms and conditions than
those offered to GBGH by such third party purchaser (together, the
"Amended SHA"). Subject to this primary focus, the parties have
also stated a willingness to explore potential new strategic energy
transition opportunities involving the exploitation, conversion or
repurposing of existing assets of the Spirit Energy Group.
Other amendments to the SHA include, but are not limited to:
(A) minority shareholders being granted a tag along right which
will allow them to join any sale by GBGH of its entire shareholding
in Spirit Energy to a third party;
(B) amendment of the fundamental reserved matters of Spirit
Energy to require all shareholders to consent to any sale of
interests in the Cygnus field or Morecambe Bay area; until the
earlier of the second anniversary of completion of the Norwegian
Business Sale and 31 December 2023 (or, in respect of the Morecambe
Bay area, such earlier date on which the shareholders agree that
they do not wish to consider strategic energy transition
opportunities in the Morecambe Bay area);
(C) to remove certain provisions relating to exploring the
opportunity of an initial public offering of Spirit Energy and
redemption of the preference shares held by the shareholders;
(D) the replacement of a call option granted to BE/PB to acquire
GBGH's shares in Spirit Energy, in the event of an event of default
relating to or caused by GBGH which has not been remedied, with a
put option to require GBGH to acquire SWM Group's shares in Spirit
Energy; the price payable under such put option would be the fair
market value of SWM Group's interest in Spirit Energy (assuming,
for these purposes, the ordinary and preference shares constitute a
single class of ordinary shares) plus 10%; and
(E) reflecting the new distribution policy described above.
Summary information on Centrica and future strategy
The Group's focus is on being an energy services and solutions
company, helping its customers live sustainably, simply and
affordably.
Centrica remains focused on improving its customer facing
businesses. In June 2020, it announced plans for a significant
restructure to create a simpler, leaner Group, designed to result
in empowered colleagues, lower costs and a better customer
experience. Around 4,000, mostly management, roles have been
removed across the Group and more modern and flexible terms and
conditions are now in place across the organisation.
Centrica also continues to target the simplification of the
Group through the divestment of non-core assets and in July 2020 it
announced the sale of its North American energy supply and services
business, Direct Energy, to NRG Energy, Inc. This transaction
closed in January 2021.
Following completion of the Sales, Centrica will remain
primarily a U.K. and Ireland focused company, focussing on the
Group's strengths of energy supply and its optimisation, and on
services and solutions, with a continued strong focus on delivering
high levels of customer service and cost-efficient operations.
-- British Gas Energy is the largest energy supplier to
households in the U.K., with 6.8 million customers as at 30 June
2021, and also supplies 0.4 million small business customers.
-- British Gas Services is the largest provider of contract
energy services and the largest installer of boilers and smart
thermostats in the U.K., with 3.4 million customers as at 30 June
2021.
-- Bord Gáis Energy is the largest gas supplier and the second
largest energy supplier overall in the Republic of Ireland with 0.5
million customers as at 30 June 2021.
-- Centrica Business Solutions provides energy insight and
solutions and optimisation services such as demand response to
customers internationally. It also supplies energy to medium and
large business customers in the U.K.
-- Centrica Energy Marketing & Trading is the procurement,
trading and optimisation arm of Centrica. It is responsible for
managing commodity risk and providing wholesale market access for
Centrica. It also trades energy and commodities, provides
route-to-market services to third-party asset owners across Europe,
and has global positions in LNG.
-- Centrica owns a 20% interest in EDF Energy's operating U.K.
nuclear power generation fleet ("Nuclear"). Having announced in
2018 that Centrica intended to divest its 20% interest in Nuclear,
Centrica announced in July 2021 that it was reconsidering whether
the Nuclear business can play a role for Centrica in the
future.
-- Centrica's CSL subsidiary also owns the Rough gas field,
previously the UK's largest gas storage facility, and the Easington
gas processing plant. Centrica is currently in the process of
producing the indigenous gas from the Rough field and planning for
decommissioning, while considering other options including the
potential to repurpose the field as a hydrogen storage
facility.
The Board believes that the Company's stronger balance sheet and
simplified and more stable financial profile resulting from the
Group's reorganisation and disposals (including the Sales) will
result in an attractive future earnings and cash flow stream. The
Group intends to recommence dividends to Centrica shareholders when
it is prudent to do so.
In the financial year ended 31 December 2020, the Sale Business
and Interests contributed loss before taxation of GBP65 million to
the Group. As at 30 June 2021, the Sale Business and Interests
contributed gross assets of GBP2.1 billion to the Group.
The following individuals are deemed by Centrica to be key to
the operations of the Sale Business and Interests:
Name Position
----------------- -----------------------------------------
Chris Cox Spirit Energy - Chief Executive Officer
Den Jones Spirit Energy - Chief Financial Officer
Spirit Energy - Senior Vice President
Gro Kyllingstad* Norway Production
Spirit Energy - Executive VP, General
Nicola MacLeod Counsel
Spirit Energy - Vice President Corporate
Kjersti Wilskov* Finance
* Employee to transfer to Sval under the terms of
the Norwegian Business Sale.
Expected timetable to Completion
A shareholder circular containing further details of the
Transaction, the Board's recommendation, and the notice of the
General Meeting and the Resolution required to approve the
Transaction will be sent to Centrica's shareholders as soon as
practicable, with the General Meeting expected to be held in
January 2022. Completion is expected to occur in the second quarter
of 2022.
Transaction Advisers
Goldman Sachs is acting as financial adviser, Corporate Broker
and Sponsor and Slaughter and May is acting as legal adviser to
Centrica in connection with the transaction.
Notes to Editors:
Information on Spirit Energy
-- An oil and gas exploration & production company with two
shareholding entities: Centrica (69%), and SWM Group (31%).
-- Operated and non-operated interests across the UK, Norway,
and the Netherlands, with more than 30 producing fields and approx.
128 exploration licences (2020).
-- 2020 production of 44.9 million barrels of oil equivalent (mmboe).
-- Proven and probable (2P) reserves of 246 mmboe as at 31 December 2020.
-- Approximately 850 employees.
Information on Spirit Energy Norway AS
-- 2020 production of 55,000 barrels of oil equivalent per day (boe/d).
-- 11 producing fields: Oda, Vale, Statfjord, Statfjord Øst,
Statfjord Nord, Sygna, Kvitebjørn, Ivar Aasen, Vega, Trymand Maria.
Operator of Oda and Vale.
-- Several development opportunities, including Fogelberg and
Ivory (both operated), Nova and Hanz (both in flight), HaltenØst,
Iris Hades, Bergknapp and Lille Prinsen.
-- Office in Stavanger with approximately 130 employees.
Information on the Statfjord area
The Statfjord area covers the following licences: Statfjord Unit
(or Statfjord main field), Statfjord Øst, Statfjord Nord and Sygna.
The Statfjord Unit development covers the big Statfjord A, B and C
concrete gravity base platforms, whereas the other fields are
subsea developments tied back to the main field platforms. Equinor
is operator for all licences.
Spirit Energy Norway AS's ownership in the Statfjord area
is:
-- 19.76464% in the Statfjord Unit (Statfjord A, B and C) (PL037)
-- 23.125% in Statfjord Nord (PL037)
-- 12.7187% in Sygna Unit (PL037 and PL 089)
-- 11.5625% in Statfjord Øst Unit (PL037 and PL089)
-- 34.29595% in PL1050 (exploration)
Spirit Energy Resources Limited ownership in the Statfjord area
is:
-- 14.53131% in the Statfjord Unit (Statfjord A, B and C -
comprised of interests in UKCS Licences P.104 and P.293)
-- 34.29595% in Barnacle (UKCS Licence P.2460, Blocks 211/29f and 211/30c)
-- 48.78049% in the Northern Leg Gas Pipeline System
Information on Sval Energi
Sval Energi is a privately owned Norwegian energy company,
headquartered in Stavanger, Norway. Backed by the leading energy
investor HitecVision, Sval Energi aims to be a major Norwegian
player in the energy sector through building a strong portfolio
combining oil and gas resources with decarbonisation value chains.
The company is a partner in 23 production licenses on the Norwegian
continental shelf, including the Duva, Nova and Dvalin fields, as
well as the Metsälamminkangas wind farm in Finland. Sval has
completed multiple acquisitions over the last two years, with the
most recent being the acquisition of Edison Norge, which closed in
March 2021.
Information on Equinor
Equinor Energy AS and Equinor UK Limited are wholly-owned
subsidiaries of Equinor ASA ("Equinor"), an international energy
company that is engaged in exploration, development and production
of oil and gas, as well as wind and solar power. Equinor is an
international energy company present in more than 30 countries
worldwide, including several of the world's most important oil and
gas provinces. Founded in 1972 under the name Den Norske Stats
Oljeselskap AS-Statoil (the Norwegian State Oil company), its name
was changed to Equinor in 2018. Equinor's headquarters are in
Stavanger, Norway, and it has over 21,000 employees.
Equinor is the leading operator on the Norwegian continental
shelf and has substantial international activities. Equinor sell
crude oil and are a major supplier of natural gas, with activities
in processing, refining, and trading. Its activities are managed
through business areas, staffs and support divisions, and it has
operations in North and South America, Africa, Asia, Europe and
Oceania.
Forward-looking statements
This announcement includes statements that are, or may be deemed
to be, forward-looking statements. These forward-looking statements
can be identified by the use of forward-looking terminology,
including the terms anticipates, believes, could, estimates,
expects, intends, may, plans, projects, should or will, or, in each
case, their negative or other variations or comparable terminology,
or by discussions of strategy, plans, objectives, goals, future
events or intentions.
These forward-looking statements include all matters that are
not historical facts. They appear in a number of places throughout
this announcement and include, but are not limited to, statements
regarding Centrica plc and its intentions, beliefs or current
expectations concerning, among other things, the business, results
of operations, prospects, growth and strategies of the Group and
Spirit Energy.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances.
Forward-looking statements are not guarantees of future performance
and the actual results of operations of the Group or Spirit Energy,
and the developments in the industries in which they operate, may
differ materially from those described in, or suggested by, the
forward-looking statements contained in this announcement. In
addition, even if the results of operations of the Group, or Spirit
Energy and the developments in the industries in which they operate
are consistent with the forward-looking statements contained in
this announcement, those results or developments may not be
indicative of results or developments in subsequent periods. A
number of factors could cause results and developments to differ
materially from those expressed or implied by the forward-looking
statements including, without limitation, general economic and
business conditions, industry trends, competition, changes in law
and regulation, currency fluctuations, changes in business strategy
and political and economic uncertainty.
Forward-looking statements may, and often do, differ materially
from actual results. Any forward-looking statements in this
announcement reflect Centrica plc's current view with respect to
future events and are subject to risks relating to future events
and other risks, uncertainties and assumptions relating to the
Group and its operations, results of operations and growth
strategy.
Other than in accordance with its legal or regulatory
obligations (including under the Listing Rules, the Disclosure
Guidance and Transparency Rules and the Prospectus Rules), Centrica
plc is not under any obligation and Centrica plc expressly
disclaims any intention or obligation (to the maximum extent
permitted by law) to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
Non-IFRS measures
Centrica's directors and management believe that reporting
adjusted measures provides additional useful information on
business performance and underlying trends. These measures are not
defined terms under IFRS and may not be comparable with similarly
titled measures reported by other companies.
In the ordinary course of the Group's reporting, Centrica's
directors and management use "Adjusted Operating Profit" to
evaluate segment performance. Adjusted Operating Profit is defined
as operating profit before exceptional items and certain derivative
re-measurements.
Full details explaining how these measures have been calculated
and reconciled to the historical financial information prepared in
respect of Spirit Energy for the purpose of the Sales will be set
out in the circular that Centrica will issue in due course.
Exchange rates
Throughout this announcement, unless otherwise stated, the USD
to GBP exchange rate used in this document is as derived from Eikon
on the latest practicable date prior to this announcement, being
$1.35 to GBP1.00. For Spirit Energy's 2020 income statement
financials, the USD to GBP exchange rate used is the average over
2020, being $1.28 to GBP1.00.
No profit forecasts or estimates
Unless otherwise stated, no statement in this announcement is
intended as a profit forecast or estimate for any period and no
statement in this announcement should be interpreted to mean that
earnings, earnings per share or income, cash flow from operations
or free cash flow for the Group or Spirit Energy, as appropriate,
for the current or future financial years would necessarily match
or exceed the historical published earnings, earnings per share or
income, cash flow from operations or free cash flow for the Group
or Spirit Energy as appropriate.
No offer or solicitation
This announcement is not a circular or a prospectus and is not
intended to, and does not constitute or form part of any offer or
invitation to purchase, acquire, subscribe for, sell, dispose of or
issue, or any solicitation of any offer to sell, dispose of,
purchase, acquire or subscribe for, any security. Centrica's
shareholders are advised to read carefully the circular that
Centrica will publish in due course.
Inside information
This announcement contains inside information as defined in the
retained UK version of the Market Abuse Regulation (596/2014).
Important information relating to financial advisers
Goldman Sachs International ("Goldman Sachs"), which is
authorised by the Prudential Regulation Authority and regulated by
the Financial Conduct Authority and the Prudential Regulation
Authority in the United Kingdom, is acting exclusively as sponsor
and joint lead financial adviser to Centrica and for no one else in
connection with the Transaction and will not be responsible to
anyone other than Centrica for providing the protections afforded
to clients of Goldman Sachs or for providing advice in relation to
the Transaction, the contents of this announcement or any
transaction, arrangement or other matter referred to in this
announcement.
Responsibility
This announcement has been issued by, and is the sole
responsibility of, Centrica. No representation or warranty express
or implied, is or will be made as to or in relation to, and no
responsibility or liability is or will be accepted by Goldman
Sachs, nor by any of its respective affiliates or agents as to or
in relation to, the accuracy or completeness of this announcement
or any other written or oral information made available to or
publicly available to any interested party or its advisers and any
liability therefore is expressly disclaimed.
This information is provided by RNS, the news service of the
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END
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