Centrica H1 2025 Earnings Report

Centrica EPS Results

• Actual EPS: GBX 7
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Centrica Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Centrica Announcement Details

• Quarter: H1 2025
• Date: 7/24/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, July 24, 2025
• Conference Call Time: 4:30AM ET

Centrica (LON:CNA) is energising a greener, fairer future for our colleagues, customers and communities. Our integrated business operates across the energy value chain, with over ten million Retail customers, leading brands such as British Gas and Bord Gáis Energy, and the UK’s largest energy services workforce. Our Infrastructure businesses bring gas and electricity to the market every day and provide more than half of the UK's gas storage capacity, while our Optimisation business delivers world-class procurement and route-to-market capabilities to the Group and third parties, supporting energy security and our customers' decarbonisation journeys. By focussing on operational excellence, commercial innovation and investing for value, we are underpinning Centrica for the future, delivering sustainable earnings from our core businesses, creating future growth opportunities, and delivering attractive shareholder returns. For more information about Centrica and our brands visit www.centrica.com.

Centrica H1 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Centrica delivered H1 earnings of 7p per share and EBITDA of £900 m despite a net weather headwind of £50 m, and kept its full-year outlook unchanged with confidence of hitting the top half of its 2028 EBITDA range.
• Positive Sentiment: Signed a strategic agreement to invest in Sizewell C, securing a 20% stake alongside the UK government and partners to build a zero-carbon base-load nuclear plant with attractive regulated returns and optional future stake increases.
• Negative Sentiment: The Rough gas storage facility incurred losses up to £26 m in H1 and faces a potential exit beyond this winter without swift government-agreed regulatory support, with a consultation due in the autumn.
• Positive Sentiment: The Meter Asset Provider business exceeded expectations with over 1 million smart meters installed, targeting 1.5 m by year-end and exploring wider commercial financing of customer energy assets.
• Positive Sentiment: Centrica accelerated its technology build-out, completing migration of 7.5 m households to the Ignition platform and planning an AI-driven transformation to lower cost-to-serve, boost revenues and narrow its 2028 EBITDA range above £1.6 bn.

Presentation

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Thank you very much for joining us. Great to hear again today. It's only two days since our last meeting for some of you, so I'm sure you're delighted to see a lot of us this week. As usual, I'm joined on the stage by our CFO, Russell O'Brien. The leadership team is in the front row and we've got our Chairman here as well, Kevin O'Brien. The work we've done to improve our operations and pivot our infrastructure portfolio mean that our business is becoming more balanced and more resilient. You can see that coming through in these results. We are increasingly able to offer our customers the solutions that will keep energy reliable, sustainable and affordable through the energy transition. We can look to the future with confidence. External conditions have been challenging so far this year and our results reflect that with earnings of 7p per share. Weather cost is about GBP 50,000,000 in the first half, whilst we can't control the weather, we've been able to use technology and data to improve our response.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

We've developed new models for predicting demand, which resulted in better performance during the recent exceptionally warm weather than it would otherwise have been, and we've moved away from full seasonal non hedging. This mitigated the weather impact by tens of millions of pounds. And although Centrica Energy faced headwinds in gas and solar trading, we were prudent about the way we traded in the first half. We were disciplined. We took risk capital off and we sat and we watched the market.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

But we're not alone in seeing these external trends, but we're also not complacent. We remain focused on creating value. And the way that we're managing the business means there's no change to our outlook for this year or beyond. In fact, we're increasingly confident that we can deliver in the top half of our EBITDA range by 2028. And personally, I'll be very disappointed if we don't do much, much better than that.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

We remain in good shape to deliver growth with our balance sheet in a very, very strong position. And that means we can also continue to recognize our owners, shareholders through the ongoing buyback program and our intended 5.5p dividend this year. The energy transition continues to present massive opportunities for Centrica, opportunities to keep energy secure and affordable for customers, while supporting the journey to net zero. We remain disciplined and pragmatic as we pursue these opportunities with the terms at the heart of everything that we do. And we're focused on our three strategic value drivers: number one, driving operational improvements across the group number two, more commercial innovation and number three, investing for value.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

And we've made progress across the board, but there's still much, much more that we can do, particularly on the commercial side and most notably in services and solutions. Profitability is growing. It's great to see that we need to get customer numbers moving in the right direction. And we can further simplify how we do things. The good news is that the steps we've taken over the past few years, moving our data to the cloud, beefing up our capabilities means that we can embrace the latest advances in AI technology.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

There is a huge amount of value here for us, both in the top line and in our cost base. And that's why we're accelerating our transformation plan, and I'll expand on that later. So when we launched our strategy in 2023, we laid out how we would position Centrica to benefit from the energy transition. Disciplined investment to grow our infrastructure business is a key part of the strategy with a clear target to increase our share of stable regulated earnings, and we've taken a significant step forward in that with Sizelc. We're delighted to be part of this project alongside the UK government, EDF, LACAS and Amber.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

We could not have better partners to push this development forward at pace. And once built, Sizwell C will provide vital energy security for The UK, generating affordable zero carbon base load power for decades to come, creating 10,000 highly skilled jobs and 1,500 apprenticeships. Developing nuclear plants is not easy. The government deserves huge credit for recognizing the need for this investment. And I'd like to reiterate my thanks to the UK government, to the chancellor, Rachel Reeves, and our team at the treasury, and to the secretary of state for energy security and net zero, Ed Miliband and his team.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

By creating a stable long term regulatory framework, they've addressed the key barriers to attracting private capital, allowing us to invest with confidence and delivering clear benefits to the country at the same time. Now we set a high bar to commit our capital. The structure we've agreed delivered attractive returns and it meets the requirements we laid out, phased investment, no pre productive capital and protection against delays and cost overruns. We've also secured valuable future options to potentially increase our stake and to provide route to market services. It's a long term investment.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

It's backed by regulation, and this will make us far more predictable. We're doing what we said we'd do, and we've got more fantastic opportunities under review to deploy capital. That remains our focus, subject, of course, to delivering value. And as I said before, we will be very disciplined. We like nuclear.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

It's the only truly reliable and sustainable source of energy. It's the backbone of the energy transition. And aside from size, we continue to study the case for even further life extensions out of four advanced gas cooled reactors. If any extension are pure, it will be a pure value upside that is limited or no additional investment required. Elsewhere, the meter asset provider continues to perform better than we expected.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

The team has done a fantastic job growing our business from scratch. It shows what we can do when we bring the right people together with the right focus. And as of last week, we've got over 1,000,000 meters in the wall, and we expect to take that to 1,500,000 meters by the end of this year. Our EBITDA target is well underpinned, and we're starting to think about broader commercial opportunities, exploring how we can grow this fantastic business even faster. In Ireland, we've now expected commissioning of our two gas speakers around the end of this year.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

We're working really hard to get the plants up and running and the case for reliable backup generation continues to grow. And that's why we're pleased to be building a third speaker in Galway, and that will take us to one gigawatt capacity in Ireland by 02/1930, which is 20% of Ireland's current electricity demand, with the tonnes underpinned by long term capacity market contracts at all four Irish gas power stations. Our long term pipeline remains strong, and we continue to review a broad range of opportunities. And at the same time, we've accelerated value by selling most of our share in the Cygnus gas field, and that continues our move away from gas production and it increases our focus on Spirit Energy and the really exciting carbon storage opportunity at Morecambe Net Zero. If you look at RAF, we welcome the government's recently announced consultation on gas storage, and this will consider possible regulatory frameworks to unlock investment.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

RAF is a vital strategic asset for this country, but we've been clear that a loss of up to a 100,000,000 this year is not sustainable. And we continue to produce the remaining gas just now, and we're ready to develop rough as soon as we get the right framework in place. This will be another long term project delivering energy security for the country and value for our shareholders. Now we remain hopeful that we can't keep this auction open indefinitely. Without a positive outcome from consultation, and consultation is due to start in the autumn, It's hard to see rough operating beyond the end of this winter.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

So we will be urging the government to move at speed. And that's enough for me. Russell is going to take you through the numbers, and then I'll come back and talk to you about the strategy later.

[Russell O’Brien, Group CFO at Centrica]

Thanks, Chris, and good morning, everyone. Before I dive into numbers, I just want to echo Chris' sentiment that we continue to see good progress across the group. We've delivered strong operating metrics, and we remain focused on further improvements as we move forward. So for the first half, EBITDA was £900,000,000 translating into earnings per share of 7p. Whilst resilient overall, certain elements of the first half have been challenging and our financial results reflect that.

[Russell O’Brien, Group CFO at Centrica]

We generated free cash flow of almost £250,000,000 which includes CapEx of £244,000,000 and our adjusted net cash closed at £2,500,000,000 after returning GBP $05,000,000,000 to our shareholders through the share buyback and dividends. We've declared a dividend of GBP 1.83 per share for the half. That's 22% year on year up, consistent with our intention to pay GBP 5.5 per share for the full year. And at the June, we had about £450,000,000 remaining on our £2,000,000,000 buyback. Group operating profit was £549,000,000 a softer result compared to last year.

[Russell O’Brien, Group CFO at Centrica]

And let me take you through the key elements of that. Retail and Optimization delivered £354,000,000 of operating profit for the half. Within that, our profits in Retail grew, a good result given that backdrop. Services and Solutions saw an improved result of £42,000,000 stronger operational performance supported by top line growth of 4% and margins grew. There is still much more to come in Services, and we are building momentum.

[Russell O’Brien, Group CFO at Centrica]

We remain confident we will hit our guidance range next year. Now despite the warmer than normal weather that Chris mentioned, British Gas Energy delivered £179,000,000 of operating profit, a year on year increase driven by a strong performance in small business. Centrica Energy was impacted by unusual market conditions with operating profit of £65,000,000 Infrastructure output was broadly flat against last year, although profits were lower due to falling commodity prices and that's partially offset by the hedging we did. We also saw a loss at rough of £26,000,000 principally driven by the high fixed cost base and lower gas price spreads, although we were able to accelerate delivery of some of the revenue and release working capital. So let me unpack a couple of the important dynamics behind the results.

[Russell O’Brien, Group CFO at Centrica]

Weather is our single biggest risk, and there is very limited scope to hedge it out. A cold start to the year meant we were about £50,000,000 ahead of by the February, but from March, that reversed. So unseasonably warm temperatures meant volumes were 12% lower than normal through to June. So that cost us overall £100,000,000 So overall, net, it was a £50,000,000 headwind from weather. And as is always the case with this business, there are timing differences between periods on revenues and costs, which influence the results.

[Russell O’Brien, Group CFO at Centrica]

And we saw that this half, a £40,000,000 benefit from the final reconciliation of the energy price guarantee scheme and the headwind from the shape of the commodity curves. In Centrica Energy, our LNG and renewable route to market businesses are performing well, but results were softer because of two important trends impacting gas and power trading. First, gas storage economics have been impacted by mandatory volume targets in Europe. That was a key driver of inverted summer winter spreads, which significantly reduced the opportunities we saw to secure capacity this year. But the result is that European Gas and Store is currently lower than average.

[Russell O’Brien, Group CFO at Centrica]

The risk to energy security is higher due to these measures. Secondly, we generate profit by optimizing based on market fundamentals and our diversified range of physical positions. And so far this year, volatility has been driven by geopolitics, tariff news flows, sound bites. The market saw short cycle volatility driven by speculative capital disrupting the fundamental physical trades we focus on. And as a result of these trends, we remain very disciplined and deployed far less capital in storage and elsewhere than we normally would.

[Russell O’Brien, Group CFO at Centrica]

Now we are beginning to see more rational behavior returning to the European gas markets. Fundamentals are reasserting themselves, storage targets have been eased and more opportunities are emerging. And that gives us more confidence heading into the second half. Our LNG and renewable route to market businesses are performing well and of course we're not standing still either. We're continuing to grow our capabilities including the recent opening of our first Centric Energy office in The U.

[Russell O’Brien, Group CFO at Centrica]

S. So we see a path to the low end of our $250,000,000 to £350,000,000 guidance range this year, albeit that requires a further normalization in the markets to get there. Moving on to cash flow. Including EBITDA and dividends received from our Nuclear business, we generated over £800,000,000 We paid cash tax of £200,000,000 The net working capital movement was almost £100,000,000 out, but that masks a couple of offsetting movements in British Gas Energy and Rough, highlighting again the value of the balanced diversified portfolio. Disciplined investment to grow our sustainable earnings is a key part of the strategy, and delivering attractive returns remains much more important to us than investing quickly.

[Russell O’Brien, Group CFO at Centrica]

We all welcome the progress we've made this year on the MAP and more recently on Sizewell C. So first half investment included £100,000,000 in the MAP and we expect CapEx to ramp up in the second half, including the initial spend on sizewell C. We also continue to invest in technology, supporting the improvements we've already delivered across the operations and the next phase of transformation, which will make Centric a much leaner, more agile company. All of this led to free cash flow of GBP $244,000,000 for the period. Our balance sheet remains strong even after accounting for pension and decommissioning liabilities.

[Russell O’Brien, Group CFO at Centrica]

And following completion of our Cygnus disposal, decommissioning will fall by around £100,000,000 will recall we reached agreement on our tri annual review with the pension trustees in February. The assumptions used in that review are now reflected in the IAS nineteen accounting valuation, which led to a rise in the deficit in the period. There is no change to our technical provisions or deficit funding plans. There is no change to the guidance we gave in our trading statement in May. Due to the factors I just discussed, we expect Residential Energy and Centric Energy to come in towards the lower end of their profit ranges.

[Russell O’Brien, Group CFO at Centrica]

Services and Solutions is expected to deliver a further improvement on last year's results and we expect to be in the range next year. We're still comfortable with the range we laid out for Infrastructure and within that we continue to expect a loss of up to £100,000,000 at rough. And of course, as normal, group profitability is expected to be weighted to the first half. So to summarize, our performance in the first half was softer than we would have liked, but it has no impact on our ability to create long term value. We've retained the guidance for the year and are focusing on significant opportunities across revenue and costs to maximize long term earnings. Our balance sheet remains extremely strong and our investment grade credit rating is well underpinned. And with the announcement of our own investment in Sizwell C earlier this week, almost two thirds of our investment program is now committed to delivering attractive returns. And as our share of regulated earnings grows, we look forward to creating more balance sheet flexibility over time.

[Russell O’Brien, Group CFO at Centrica]

And we are doing all of that while returning capital to shareholders, progressing the dividend and buying back shares consistently since 2022. Thanks for your time. Let me hand back to Chris.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Thanks, Russell. The situation that we faced five years ago was critical. We knew we needed to change, and I think that's exactly what we did. Our business today is far stronger as a result. We've got better relationships with our colleagues, better relationships with customers, we've got a more focused portfolio, we've got a balance sheet that supports our ambitions rather than restricting them.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

But the best companies are constantly improving and that's why we're looking at the next phase of transformation for Centrica. There are hundreds of millions of pounds of value at Plugen and I'm confident that we will secure every last penny. You can see the progress in our energy supply business. Hard work over many years has transformed the operational foundations. We recently completed the migration of our UK residential customers to the Ignition platform.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

The move in a quarter of The UK's households makes it the largest utility platform migration globally, and we did that without any external help. Our team has done an incredible job. Ignition is a key part of our strategy unlocking commercial flexibility and innovation, deeper customer insights and helping us lower our cost to serve. It's a key reason that we grew our customer base in the first half, helping us retain our existing customers and attract new customers. And our success gives us the confidence to accelerate the rollout of the Bourgoshe migration will start soon.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

We've now got 40% of our UK SME customers in Ignition as well. Now in the past, we served all types of business customers, including very large industrial and commercial users who have sophisticated and often complex needs. And we found these customers generated very low margins for the risks involved. So in 2022, we changed our focus, targeting smaller businesses prioritizing value over volume. At the same time, we've been selling more to the Ignition platform.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

We've been using data to optimize pricing, delivering a better experience for customers and better returns for our business. The impact, as you can see, has been significant. Margins have almost doubled from where they were five years ago. We've added almost 100,000 new customer sites, including 11,000 in the first half of this year alone. The foundations are stronger, the commercial strategy is working, and we've got further growth opportunities there.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

And you'll get services. Profitability in services has improved again in the first half. Better operational performance is now well embedded, margins are growing. But the market continues to change around us. Consumers are moving away from protection products and we are still losing customers.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

So we've had to think differently, fundamentally rethinking our go to market strategy. We started focusing on our on demand offer a couple of years ago to make the most of the shift towards self insurance. Now this continues to grow and is supported by more intelligent customer targeting and more dynamic pricing. I think we can still be much more commercial with our pricing. But we have created a gateway to bring in new customers, us to demonstrate the value and peace of mind that we can provide.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

We're also building a portfolio, as you can see, of warranty partnerships with leading OEMs. We offer nationwide scale and an expert workforce. We address key constraints for our customers. And for Centrica, we increase engineer utilization, we improve profitability. We've already signed up several leading manufacturers, but there are more to come.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Services can deliver those solutions independently, the real value emerges when we connect our capabilities. Every boiler, every heat pump installation opens the door to other offerings. Energy tariff, high thermostat EV charger, a membership. And our membership scheme gives us a customer insight and marketing channel to offer more of these integrated propositions, focusing on cross selling opportunities, generating recurring revenue and building customer loyalty. So we're showing progress, but as you know and as my colleagues know, I'm always rather impatient for more.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

And the world is changing. Meets forward in technology and AI are fueling huge growth in electricity demand. Complexity and intermittency is increasing, as a result, so is demand for reliable, sustainable energy, just like that which will come from Sighs, you'll see. It is a fantastic time to be an energy supplier. It's a great opportunity to deliver excellence for our customers.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

We have to be ready. And how are we going to do that? Firstly, we'll harness the full power of technology. Despite huge improvements in service quality, much of it driven by investing in our technology, last year we still had more than 18,000,000 customer contacts in British Gas Energy alone. Now we've not made our processes easy enough.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

In that case, unhappy customers, it creates unnecessary contact. Our home move process is a good example of that. But we've recognized the problem, we've identified the pain points and we've streamlined the system for our colleagues, ensuring that they can deliver for our customers. We're now working to almost completely automate that process, making it as simple as possible for our customers to change their address without wasting any time at all on the phone. And that's just one example of incremental steps to improve our customer experience and to reduce incoming contact.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

By doing that, when our customers do need to contact us, we can handle the questions much more efficiently. We think we're ahead of the pack adopting leading edge technology here and it's delivering significant benefits already. We've fewer incoming contacts, we've quicker resolution, we've got more satisfied customers and ultimately that gives you better customer retention, an improvement in cost and improvement in revenue. Secondly, we're accelerating commercial innovation. We are incentivizing our leaders to deliver the best outcome for the group rather than for the individual business, breaking down the barriers to delivering the coordinated products and services our customers want that only we can provide.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

And finally, are creating an even simpler centric. We have made great strides in efficiency, but we can't be complacent. What was efficient a few years ago is mediocre today and soon it will be lagging behind. I want us to be more focused to remove bureaucracy to promote faster decision making to spend more of our time delivering for our customers. I think we've got the potential to fundamentally debase our cost base here, which will make us much more competitive.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

And I've given a clear message to the business that this is delivering a step change in performance, we're not put the tinker around the edges. And that's why I'm confident that we can both narrow the 2028 EBITDA guidance range and deliver above the GBP 1,000,000,000 point midpoint. But my ambition is far, far higher than that. So to recap, despite external headwinds in the first half, the team did the right things and our underlying operations are performing well. The outlook for this year is unchanged and we're staying focused on creating long term value, taking a major step forward in size LC alongside strong progress elsewhere.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

This underpins our longer term trajectory and the transformation program means we can do much, much better. I'm really proud of the progress that we've made, and the teams across Centrica deserve huge credit for that led by the leadership team here. But I'm even more excited by what's to come. We've got incredibly strong foundations, and we remain laser focused on delivering. That's enough for me.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Thank you very much for listening. Russell, the leadership team and maybe even our Chairman and I will be delighted to take any questions that you've got.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Perfect. Let me take the last and the first, then Russell do the wizardry with the numbers on British Gas and Residential. We don't want be any more specific and rough. We've been very clear that we're not going to sustain losses on this. We'll see how the consultation goes.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

But you could also see a return to normality in the market, which I don't think is going to happen, which means that they could operate the merchant business. If we don't have a positive outcome from the consultation, then it's hard to see that rough will be open beyond the end of this coming winter. So that takes a little bit into the first half of next year. But we don't have unlimited patience on this. But there have been very positive statements from the Secretary of State Energy Security Summit in April about gas storage.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

The chancellor, when she did the company's suspended review, specifically mentioned, I can't remember what you said, a part of this slide, there's something about the stupid decision of the last government to close rough. And so I'm encouraged by what I see and then also the announcement of the consultation. So I think there's positive news there, the government's got to make sure that they get what they consider to be value for money. We'll see. They did obviously very well, think, the size of see.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

So I'm hoping they'll do very well with RAF as well. In terms of the remaining investment program, there are a bunch of things we're looking at. I like FlexGen. I like regulated assets. We are looking at opportunities to expand the meter asset provider as well.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

So you know we're agnostic in technology in this, and there's a number of things that we're looking at. It will be within the bounds of what we laid out before, which is that the tons will be good, ideally they'll be contracted or regulated with tons. And it will be more in the electricity space than in the gas production space or anything. The other thing we've got is Morecambe net zero. And we were encouraged by the announcement by the National Wealth Fund of an investment in the front end engineering and design for the pipeline from the peak cluster.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

And the reason we're really encouraged is because firstly, that's those are the customers who signed up to put carbon into Morecambe. But it was the fact that the National Wealth Fund and the government announcement specifically mentioned the carbon moves would be stored in Morecambe. And so we feel there's quite some momentum there. So you've got a whole bunch of things, roughly a 2,000,000,000 development over a number of years. Morecambe net zero is a bit earlier than the engineering stage, so the range which I find fairly frustrating from engineers is between GBP 2,000,000,000 and 4,000,000,000, which is quite a substantial range.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

But you're probably looking at investment there 2030 and beyond. So it's probably outside the window up to 2020, but there's a huge amount of opportunities. But what we're always very keen to do is to make sure that we have way more opportunities than we have capital for two reasons. One is, it means that you can be selective with your opportunity. The second thing is with the light of the size you'll see, the size you'll see hadn't happened, it wouldn't have been catastrophic for us because of the other ideas in there.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

So we will always look to have far more ideas. And once we complete the program, we'll then turn our mind to recycling capital. So if we get an idea that gives us a better return than something we've got, we'll sell what we've got, we'll buy more. Lots of ideas. Russell, British Gas Residential, are you holding out in marketing that was the question?

[Russell O’Brien, Group CFO at Centrica]

No, I'm not holding out. We're trying to give a balanced outlook. So a couple of things on the Residential Energy business. The total result there, as reported, was £179,000,000 but within that, it was 133,000,000 for residential energy and $46 for small business. And the small business number actually was up from $3,000,000 last year, so that had a big improvement.

[Russell O’Brien, Group CFO at Centrica]

The residential energy business was actually slightly softer half on half. I discussed the sort of moving parts in there, the weather, a few one offs. We've got GBP 13,000,000,000 worth a year of revenue and costs, so sometimes they don't always match in the same place. But your question was really about the second half of the year and why we're guiding to the bottom of the range. First main reason, there's just less colder months in the second half of the year, so seasonality drives the vast majority of that.

[Russell O’Brien, Group CFO at Centrica]

We've got a little bit of a headwind continuing with the shape of the commodity curve, which is because of the way that's got priced in. Think if you take all of that together, I'm thinking bottom half of the range is still the way to go. Excellent.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Tom, you can go ahead.

[Fraser Jamieson, Group Head - IR at Centrica]

Sorry, before Tom, ask your question, could I just remind anyone asking a question, please press and hold the gray button on the microphone so the people on the webcast can hear. Thank you.

[Dominic Nash, Head of European Utilities Research at Barclays]

Hi, there. It's Dominic Nash from Barclays. I'm sort of holding a two, but if Mark is going three three So, and well, I'm sure I can have subparts. So the first one, sort of top level question on Rima. Clearly, you must be pleased that the zonal power pricing has been dropped. But is Rima now basically a damp scrip? And should are there any concerns over what's left in it or reformed national pricing, the impacts of that on your company?

[Dominic Nash, Head of European Utilities Research at Barclays]

Secondly, is your ambition as far as we'll see the end of new nuclear? And could you just remind me again, what's your view on potentially sort of getting involved with SMRs or other sort of the larger ones? And finally, just a quick one on Centrica Energy. I think there's a slight change in your guidance here, if I'm not mistaken, which was before it was at the bottom end of the range. Now it's at the bottom of the range, caveated to a normalization of market.

[Dominic Nash, Head of European Utilities Research at Barclays]

Could you just give us sort of what we need to look out for, what our key KPIs are to know what normalization is? If it doesn't normalize, And is what we currently see, what would be the number materializing for the full year? Thanks,

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Don. I'll take the first two and then Russell. I'll start to take the Centricate Energy one. Size O C is at the end of the nuclear. No, it's not.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

So we don't think we'll be size O C and therefore we've looked at some of the SMRs, we've spoken to Rolls Royce about their technology, we've looked at X Energy and advanced module reactor business in The U. And we're talking to people to understand what's going on in technology. We have a competitive advantage because I don't think SMRs are the solution to distribute it. And I don't think we'll see SMRs appear all over the country because unless you've got a nuclear power station close to you, you're probably not going to be too keen to have one built near you. So those that have them close to them, they know that they are safe and they know that they bring really good well paid jobs.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

And so we along with EDF own most of the sites that would be suitable for the deployment of future nuclear technology. And so I think we're in quite a strong position there. So we'd be very happy to look at it, but you've got if you're going to deploy first of a kind, then there has to be some risk here. You're not going to find that we're to come out and say surprise, we're going to put the first Rolls Royce small modular reactor and we're going do it on merchant basis and we're going to keep our fingers crossed that everything is okay. And so there's has to be some kind of partnership with the government in terms of risk sharing there.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

But we would be interested. But I think what you'll find is I think you'll find I think Roll Royce is a four seventy mg reactor. I think you'll find three, four, five, six of these on the one site rather than lots of dotted around the country. And we were delighted that zonal pricing was dropped. Lots of people were against it because they thought it would harm the investment.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

We were actually against it because we thought it was staff for customers. And we think that the future energy market requires customer engagement. And if you've got an energy price that changes, you know, thirty minutes just now, it could change every five minutes. And if you've got nine zones, you've got 12 local distributions on you've got the nine pricing zones become a complete and utter nightmare. I also thought that the benefits were quite theoretical.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

So we're delighted to ask them. But look, in terms of agreement, I think we're going to learn over the next two, three, four, five years as we try and deploy more flexible tariffs. We're going to learn what we need to do. So I don't think we know right now what the electricity market has to look like going forward. I wouldn't say it's a damp script, but I think we're to have to learn and therefore the regulators are going have to be quicker and the government is going to have to be quicker in terms of how we change things.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

This is going to be an iterative process I think and that will require a complete fundamental reset of how we do things. We won't have twelve months for a consultation, twelve months for a response and then twelve months for an implementation. I think we're going have to be far better implementing change. So that will probably require some different kind of framework. The zonal pricing, we're comfortable that, that's been dropped.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

I think it's in the best interest of the customer.

[Russell O’Brien, Group CFO at Centrica]

And Centric Energy and where we expect that to go, maybe just a step back first and just remind everybody there's three business units there. So there's the LNG business, the renewable route to market and then the gas and power trading. LNG had a solid first half. We think it's going be solid in the second half. Route to market actually gigawatts under management grew in the first half, so that's going in the right direction.

[Russell O’Brien, Group CFO at Centrica]

So it's really gas and power trading that we're talking about. And the things that we're looking at in the first half that drove some of the results, so it was the gas storage economics of these mandatory volume targets that inverted the spreads, the volatility, the news flows, that was challenging. But the third thing was that there was no liquidity in the market. So people weren't trading. A lot of market participants got quite badly burned and stepped away from the market.

[Russell O’Brien, Group CFO at Centrica]

And we're very happy with Kasim and his team. They didn't chase the market. They stepped back. We took risk capital off and we ended up with a softer but not a terribly bad position. So as you look forward then, that's really dependent on the market conditions in gas and power trading.

[Russell O’Brien, Group CFO at Centrica]

So what are we looking for in terms of normalization and what we're seeing that's giving us a bit more confidence. So more rational behavior is returning to the markets. So there is more liquidity, there's more people trading, there's more people on the screen to connect with. And that liquidity allows us to then step in behind that. We're taking positions, physical positions as well as options to support the trajectory going forward.

[Russell O’Brien, Group CFO at Centrica]

And of course, storage spreads have returned to positive levels. So that's there's margin available for people to take. Just in the past couple of months, we've increased our gas storage capacity under management by 30%. So we're stepping back into the market, and so we'll continue that trend. You've to remember that the most of the money you make in this gas and powertrading business is over the winter season anyway.

[Russell O’Brien, Group CFO at Centrica]

So we've got a bit of a year to go. And in the past, we've seen different market dynamics, and we'll wait and see how that plays out. But that's the things that we're looking at. And then just to reinforce, that's not the only games we're playing, trying to grow elsewhere and of course trading already started in The U. S. There's a diversification.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

So we'll go to Jenny and then we'll to Ahmed and then Harry and come back to the panel.

[Jenny Ping, MD - Utilities and New Energy Equity Research at Citi]

Very much. Jenny Ping from Citi. Three questions also please. Firstly, Chris, can I just confirm something you've said in your last couple of lines of your closing remarks talking about narrowing the range to €1,600,000,000 in terms of EBITDA guidance? So we're really no longer looking at 1,300,000,000.0 to €1,900,000,000 and now it's 1,600,000,000.0 to €1,900,000,000 Can I just check that as the first point?

[Jenny Ping, MD - Utilities and New Energy Equity Research at Citi]

And then secondly, Miliband talked to the prospect of a MEPH sorry, a MEPH consultation or further announcement around the MEPH rollout in the coming weeks in the recent DESNES session he hosted earlier this week. Can you just talk a little bit of what you're expecting from that announcement? And then thirdly, another policy related question. I mean, the UK government seems to want to get quite close to the EU with linking of ETFs, etcetera. Is there a risk that there's a full integration integration of of the the energy market that takes place?

[Jenny Ping, MD - Utilities and New Energy Equity Research at Citi]

And if so, what does that mean in terms of price cap that we currently have in the retail business? Thank you.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Well, so not on the range, I think we can shave the bottom off now. I think you're 1.6 to 1.9 after what Russell's within reach and he's got quite a hard punch. So if I was to say, yes, that would be right. I'd get a punch in the face. The only thing we don't know, but we think that what we see in terms of the opportunities is that we can firm up that range.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

I'm quite clear that if we only hit 1.6, I'll be quite disappointed. But rather than we're not ready at the moment to see what new ranges. I think Ed was at the select committee when he mentioned a bit of consultation. I don't know what he's planning to do on this. I saw him on Tuesday.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Were talking about his size or he is you know, he's pretty busy at the moment, so he's he's he's very engaged. I don't know. But what I hope we're gonna talk about is is compulsory installation of smart meters. And maybe a smarter thing, I mean, unless everybody has a smart meter, it's it's kinda difficult for electricity. But then you can look and see smart meters for gas.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Do they actually give you anything? Probably not. They say the meter readers, but there's no you're not going to interact with the gas market in the way that you interact with the electricity market. So it's just a guess, but I would I would think if you really wanted this to go properly, you might drop the gas smart meter requirement because they just give us an allowance to have meter readers and you might make smart meter deployment compulsory. And if you want to go one step further, what I've spoken to government before about is rather than have each supplier responsible for installing smart meter than the customer, why don't you just count the country up, give us street by street.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

So our engineers go to number four is a customer, they go to number 17 and they go to number 42, the engineer could just go door to door, then you'd get a quicker and a cheaper smart meter rollout. And obviously, we'd be delighted with that given that we have this smart meter asset provision business. So we are even more interested. And then is there a road integration with the EU, is there a risk to the price cap? I'm not sure how I would see that necessarily following unless you had a full harmonization and you didn't have, for example, NBP and PTF prices, if you had a full harmonization of prices across Europe.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

You still have the price gap, you just set it by reference to price that was less local. So harmonization, I'm sure there'll be some risks, there'll be some opportunities. Certainly, I think we prefer the emission trading schemes to be more harmonized and you've got green certificates, etcetera. That would make our life easier administratively And Kasim and the team are brilliant at finding opportunities. If we stay deconsolidated, it will be fine.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

And if we harmonize, will be fine as well. There might just be different opportunities. But I don't see it as being a major risk of a threat. Excellent. Right. Ahmed.

[Ahmed Farman, Head of European Utilities & Clean Energy Research at Jefferies Financial Group]

Hi. Ahmed Farman, Jefferies. Chris, you talked about potential extension to existing nuclear power plants. I just wanted to ask you if you could talk a little bit more about it. Is that something that we could see visibility this year?

[Ahmed Farman, Head of European Utilities & Clean Energy Research at Jefferies Financial Group]

Is that something for 2026? What are the potential life life extension scenarios? Super helpful to sort of understand that better. I also wanted to ask you if you could talk a little bit about the sort of the residential supply business. What trends are you seeing in bad debts in terms of customer payment behavior?

[Ahmed Farman, Head of European Utilities & Clean Energy Research at Jefferies Financial Group]

Is there anything significant to call out there for the first half?

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Thank you. Let me take the first one and then Russell talk about the bad debts. Extension is just in plans. I'm looking at Dave. Perfect, sir.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Dave I mean, Dave, do you want to Dave Dave Carver, the CEO of our power business, and Dave sits there. I mean, I'm hopeful that he sees some issue, but I don't know, Dave, if you want to.

[Executive]

Sure. I mean, the news on DHR Lifetimes that was shared late last year extended Haitian, Harley Pool, Tornus according to those remit notices. The indications at the time was they're on watch. The AHR lifetime mechanisms are well understood. The EDF team continue their diligence and the preparation for safety case.

[Executive]

So the prospects for additional lifetimes is a watch. We've known the news. But in terms of any changes since last remit notice, nothing untoward, so no negatives. And obviously, we'll await outcomes of more diligence before any further notice is issued. So it's a little bit of as you were, but nothing untoward since with the operation of the fleet.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

You actually know, thought I was kiddier in man, so that's even better, you see.

[Executive]

And I'm catier than my boss.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Thanks, Steve.

[Russell O’Brien, Group CFO at Centrica]

So what's happening in bad debt? So total charge for the first half of year was $231,000,000 If you drill down into the 159,000,000 was in the Residential Energy business in The UK. As a percentage of revenue, bad debts remained flat, about 3% of revenue. So revenues are down, the actual charge came down. That's the improvement in the bad debt picture is probably it's not going as quickly as we thought as we come out of the energy crisis.

[Russell O’Brien, Group CFO at Centrica]

So many of our customers are still having challenges to pay the bills and we're tracking that. So not material moves, but maybe the trend is not going down as quickly as possible. The important thing to remember though, of course, in the residential business, the bad debt charge eventually gets covered by the price cap as an allowance. And so there's a phasing over time in that, but you get recovery there. So that's the main message in bad debt.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

I think the thing is that we hope to see the regulator taking some steps on this because if you look at the overall bad debt provision level just now, it's about three times what it was a few years ago. And we can't continue with something whereby we can't tell who can't pay and who won't pay and the regulators not do much about it. So there really is something that the people that don't pay have been subsidized by the people who do pay. And every time you add somebody to the don't pay list, it becomes more painful for people. So I think we need to see a step change here from the regulators and figuring out what to do.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

We don't cut people off. Prepayment meters are not particularly popular. And so Chairman and I met with the regulator recently they are concerned about it, but the solution has to be in their hands and can't be another. If somebody refuses to be, we're very limited in what we can do under the regulation. So this is a regulatory problem that needs to be fixed. Harry? Thank you. Hopefully, that's working.

[Harry Wyburd, MD, Head - European Utilities & Clean Energy Equity Research at Exane]

This is Harry Ribet from BNP. So two from me, please. The first, can I come back to your 1,300,000,000.0 to $1900000000.0.20 28 EBITDA range? So if I understood correctly, the reason you're more excited about that is that you see more efficiency potential in the business. So is that fair?

[Harry Wyburd, MD, Head - European Utilities & Clean Energy Equity Research at Exane]

And what has led to that kind of epiphany? Because I think you talked about it a bit more today than you have done previously. Is it AI? Is it better achievements on your efficiency so far? And is there any way you could quantify for us what kind of metric you would target financially or otherwise on an efficiency program if you were to launch a more formal one in six months' time?

[Harry Wyburd, MD, Head - European Utilities & Clean Energy Equity Research at Exane]

And then secondly, on the balance sheet deployment, guess one of your challenges is you're dependent on a lot of government decisions right now. It's one of the issues at times.

[Harry Wyburd, MD, Head - European Utilities & Clean Energy Equity Research at Exane]

Obviously, it took a little longer to come than all of us might have hoped. But how long would you wait for covered rough, but how long would you wait for Morecambe? And is there any bar that if that bar was cleared, you would do something instead of them, so you'd move faster? So if you saw a fantastic acquisition, would you go for that in the next nine months and say, we'll leave Morecambe for another day? And then maybe a final addition to that, I'm getting a high single digit real return on size well seen, that's a lot better than we can get in index linked bonds or premium bonds anyone in this room can get.

[Harry Wyburd, MD, Head - European Utilities & Clean Energy Equity Research at Exane]

So why not put more in that? And would you wait around to put more into Sizarc, which, from my perspective, would be a fantastic deal. I wish I could have to invest in your shares first, I'm not allowed to.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Thank you. So look, it's brilliant when you make an investment and somebody says, why do you not take more? We have the right first offer in any future government sell down along with Amber and Laquise in proportion to our ownership. Could we be interested? Definitely.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

But it just depends on what else we've got. The question is, could we have done 20% other than 50%? We could have but we could also have done 10%. So we're looking for a balance. Would we consider acquisition?

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

We are considering acquisition opportunities right now. And we're not going to do is we're not going to sit and wait and keep our fingers crossed that something's going to happen, but we're also not going to back. We've also got a phase which is quite likely, which is not going to be the first cap off the bank that we'll go for. The size of seat longer than anyone would have liked, but part of that was us shaping the investment with the government. So it wasn't just that we were like pushing, saying, let's get it sorted.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

We were pushing very hard to get the right terms. And if the terms hadn't been right, we wouldn't have invested. And so I'd rather be patient and wait and get the right terms. But we haven't just working on that, we've been working on other things at the same time. So we'll always do that and we'll push.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Morecambe there's a chance that Morecambe might be quicker than rough. And the reason for that is that you've already got an existing commitment of GBP 20,000,000,000 over twenty years to carbon capture and storage. You've got an existing approval process. And so Track one Track we didn't find Track one for Morecambe, applied Track two, but we're a bit late to the game. So we would have been amazed if we got it, but we thought it was also applying.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

But we think we're very, very well positioned for Track three when that comes out. And so Morecambe is about getting approval for an existing field and an existing framework. Rough is about applying an existing framework to something slightly different. So it's entirely possible that Morecambe approval could be in a slightly shorter term. And Morecambe remember is two reservoirs.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

So we could actually commence CO2 storage in Morecambe, we're still producing gas. As you've got North Morecambe and South Morecambe are rather imaginatively named. But I'm quite enthusiastic, I would rather sit like I'd rather in February sit my first preference would to sit and talk about great investments, but the second preference would be that we're sitting and saying, look, I know we still got too much cash in the balance sheet, we're working things through. What I don't want to do is to get to 2028, so this is great, we've invested 4,000,000,000 or $5 whatever the number is, and then spend the next five years regretting. I probably wouldn't get five years, Kevin would probably file me.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

So I'd rather take the time and make the right investments. So we'll be very patient and very disciplined, but also very challenging with the counterparts. And then regarding the the efficiency metrics, so we see opportunity both for revenue and for cost. The metric I would look at cost, I think, is always where are your costs, where is your OpEx and where is your cost of goods sold and are they lower or higher. I don't like getting into all of crap about let's show you a waterfall, which will explain to you why the cost would have been lower if these five things didn't happen.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

So the way that we would measure is if our OpEx is lower. And then I think we've got efficiencies probably also in cost of sales. But the revenue opportunities might be just as interesting. And so if you look, for example, we've got 7,500,000 residential energy customers and 2,800,000, I think, customers and services. I don't know why we got 7,500,000 customers and services because even if they don't buy contracts, like boiler still break down, heat pumps break down, people need their electrics fixed.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

And so I think there's as much in the revenue line. I would expect that we will be able to give far more clarity in February about what targets would be on the cost side and how you would measure that.

[Harry Wyburd, MD, Head - European Utilities & Clean Energy Equity Research at Exane]

Okay. Thank you. And in terms of what's changed, is there something that's changed since the AI is it So AI has sort of changed versus six months ago when you were

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

AI is part of the one of our colleagues will remain nameless. Was talking to them, I don't know, about three years after we signed the size of LC thing and I was moaning about something. He said, can you not just take the data to be happy about size of LC? So I'm always impatient I'm and always looking for more than I said to a number of my colleagues. So there's an element we can see more opportunity, we can see our operational performance is very, very strong.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Some things you just have to step back and look and say, can we do things differently? Developments in technology are helping us to think about that, but there's also just something about it. Think if you ever come into the office and you think, I said, we've done that, we're really good, think you should leave because you're never done. The opportunities are always there. So I think the need to come in think this is exactly what he said back to a few up and smoke a cigar.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

That's that's the day either the chairman will come in or I'll go to the chairman and look, it's time for somebody else to come in and ask for for fresh ideas. So just a constant evolution. Thank you. All right. Thanks, Harry.

[Pavan Mahbubani, Vice President - Equity Research at JP Morgan]

Palin? Hi, good morning. Palin Raghuldani from JPMorgan. Thank you for taking my questions. Chris, you mentioned there was a commercial opportunity in the META asset program, and I was wondering if you could elaborate a bit more on where you see those opportunities and how those could materialize.

[Pavan Mahbubani, Vice President - Equity Research at JP Morgan]

And then on the transformation program, you've given a good bit of detail. Do you think that, that will require incremental CapEx? And does that feed into some of the uncommitted that's left to spend by 2028 within the budget? And then I have a couple of questions on Spirit. Russell, if you can help with the phasing of profitability in Spirit between H1 and H2 and help us in terms of how we should think about that, particularly with disposal of the Cygnus?

[Pavan Mahbubani, Vice President - Equity Research at JP Morgan]

And finally, in your release this morning, there was an impairment in Spirit because of an assumed, I guess, earlier closure, economic life. Can you give a bit more detail on what your expectations are now versus what they were before? Thank you.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Excellent. Those two half spirit questions are clearly for Russell. I don't think I'd say with member of impairment. It depends on what he's because he feels session more comes got a very short time horizon. You've got a liquid curve, so that could change every six months, you just have to take the observable prices.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

The commercial opportunities in the MAP, I think that we have the opportunity to do that for other people. I also think that so the MAP business in and of itself is a brilliant business. Dan and Garris, who runs the business, have done an incredible job in setting up. But what it gives us the opportunity to own, track, and finance small assets, and we install best part of a 100,000 boilers a year, probably about 5,000 heat pumps. We're the biggest installer of heat pumps and boilers, and there are 20,000 EV chargers, whatever the number is.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

So if we're able to own and track and finance the smart meter, we could extend that potentially to boilers, heat pumps, EV chargers. We're not ready yet to start to do that, but that's always been in my mind in terms of why the smart I'd like to look at smart meter business because if we do that, none of our competitors can do it. They don't have the balance sheet. And then Russell and the team will make sure that if we do embark on that, we have the ability as we do with the map to turn up and turn down the investments. So we see a better investment elsewhere, we bring in some third party capital.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

So that's I think there's opportunities for other energy suppliers. There might be opportunities even in other countries as people go through a smart rollout, but there's a lot of opportunity in our existing customer base just now and to differentiate ourselves commercially. And transformation, I wouldn't expect there will be major additional CapEx, but there will definitely be implementation costs and that would mostly be OpEx. The technology costs will be mostly OpEx as you go through Software as a Service. And as we lay out what we'll what we expect to achieve, we'll also lay out what it will cost.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

What we won't do is go back to what we used to do years ago when I was a CFO, I have to say I inherited the practice, is to separately identify in the middle column all the transformation costs because we used to spend hundreds of millions a year on taking costs out, but we've never spent $400,000,000 taking out $200,000,000 of costs and felt very good about this part of the financials. As we won't separate it out, but we will and we won't put it in a different column, but we will tell people how much it costs because there will have to be investment. We can't deliver material cost synergies or revenue synergies without investing money. So we'll do that in February.

[Russell O’Brien, Group CFO at Centrica]

Good spirit. So just to give you a couple of numbers. So of course, 150,000,000 of AOP for the first half of this year, that's down from GBP 2,450,000.00 So what you're seeing just generally across all the infrastructure businesses is reduced income. A lot of that was hedged, the and that will continue, the curves are in that dynamic.

[Russell O’Brien, Group CFO at Centrica]

I think volumes we expect roughly flat half one, half two. And the sort of hedge price we've got for half two is about 111p per term. So most of that's already in the bag. Now we've got this divestment of Cygnus, so most of Cygnus goes. It's an asset held for sale at the moment.

[Russell O’Brien, Group CFO at Centrica]

We will book the revenue, we will book the earnings right through to the close date and then that will get unwound. I think overall, we're still okay with the guidance range for Spirit and the nuclear assets of two fifty to 400. And then that implies full year production of Spirit between June and 07/20. So nothing really changed there. It would just be the phasing of the curve that will take most of it.

[Russell O’Brien, Group CFO at Centrica]

And then on Morcom, I think Chris answered most of the questions. It's that liquid period that has come down in the first six months of this year, what you do is you do an economic end of life for those facilities and for Spirit, where we were previously more towards the end of the decade, that's come back down to sort of '27 sort of time, maybe '28. But we'll keep watching it. We'll be driving efficiencies. And of course, the game plan for Morecambe is to try and make sure that we extend that asset as long as possible so that it sinks into the future

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Yes. Remember, few years ago, Morgan was due to close in 2021. So we'll continue to eke out and these deals tend to go on. The question here and then, Fred, I don't know if he's getting it online, sir.

[Charles Swabey, Associate Director, Clean Energy & Utilities, Equity Research at HSBC]

Good morning. It's Charles Taylor here at HSBC. Two questions for me. First is on British Gas Energy. When we think about the warmer weather we saw this year, could you remind us, on your assumptions?

[Charles Swabey, Associate Director, Clean Energy & Utilities, Equity Research at HSBC]

Are they when you're guiding, is it based on historic ravages? Are we assuming a structurally warmer weather patterns? It's first question. And the second one is on Energy, Central Storage, and following on the comments about, spreads improving. Depending on how that evolves in the second half of the year, could you see a situation where you get closer to the GBP50 million rather than the GBP100 million loss? Thanks.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

I think the second one should come from Russell, but I would say I would be extremely doubtful. I'm looking at Kasim sitting here. Kasim doesn't look particularly hopeful of trimming GBP50 million of the losses. Look, British Gas Energy, don't assume the historic weather. We assume that we've got that we do see warming, but also that we see more volatility in the weather.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

And that's why developing a different way to hedge the weather. We see the seasonal norm demand, you make adjustments for how climate change is occurring about the extremes that we're seeing. Remember, we're 50,000,000 could, but we started in February or February, we're delighted with 50,000,000 could help. We thought we were having a party in there for 50,000,000 could then five months later. £100,000,000 of assets, we not changed the way that we had the forecast on the weather, that 50,000,000 have been well over GBP 100,000,000 in my view.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

So we do adjust that as we go forward. We always learn from experience there. Also what do you think was the chance of the 50?

[Russell O’Brien, Group CFO at Centrica]

That's not very likely, no. So just to remind you, this is you do have sort of close to GBP 100,000,000 cost base there. We do have some hedges this year from previous years that we're working through that gave a bit of support in the first half. We've been taking out some of the indigenous production. So there's currently 16 Bcf in rough as we sit today.

[Russell O’Brien, Group CFO at Centrica]

Of that 13 Bcf is the indigenous or the Cushion gas. That was 14 Bcf the beginning of the year, so we've taken out one Bcf of that Cushing gas. We will continue to do some of that in the second half of the year. That might support revenue a little bit, but I'm still very comfortable towards the top end of the 50 to 100.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Fraser, have you got some online questions? Are these really online questions or are these your questions?

[Fraser Jamieson, Group Head - IR at Centrica]

They're certainly not my questions. Yes, the first one is from AJ Patel at Goldman Sachs on gas storage. Can you please detail the path for gas storage? If no support is given, how much cushion gas can you extract? And what would be the cost of closure?

[Fraser Jamieson, Group Head - IR at Centrica]

Would you be interested in an interim measure where you're paid an annuity to keep the facility open? And what could that look like?

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Excellent. So Russell just mentioned about the gas that we take out, the cost of closure of about $300,000,000 that's decommissioned cost provision. And if AG is offering an annuity, I'd be delighted to take a bit. As Steve explained, we have spoken to the government to say, look, do you want to open, for example, for this winter? And the discussions are that we won't inject subsidized gas this winter, but that does remain an opportunity.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

But you've got OpEx in that business of about £80,000,000 And you've got to have a spread between your summer winter gas price in order to cover the OpEx and then to make a better profit as well. So we would absolutely be we're not in the business at all, like I said, we've had very constructive conversations with the government. They know the position. I think they would like to keep it open, but they've got to make sure that it passes the value for money test. We'll see.

[Fraser Jamieson, Group Head - IR at Centrica]

Thank you. The next one is from Pierre Alexandre Ramondek from Alpha Value. Following the divestment of your stake in Cygnus and your ambition to transition towards net zero operations, what's the rationale for retaining Spirit Energy?

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Could a full disposal be considered Or is the business too integrated with your other operations? Any clarity would be appreciated. So a full disposal of anything we've got could be considered. So we don't have anything that is so fully integrated that we can dispose that applies across the group. Spirit, after disposal of 4646.25% of Cygnus, has got 15% of Cygnus, it's got the Greater Market area and it's got Morecambe and it's got a bunch of decommissioning.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

And so if we were to dispose of Spirit, we'd be trusting that somebody who would take Spirit would fund all the paper of the decommissioning rather than it's happened not that long ago, take the money and run away. And so we'd have to have control over the decommissioning. We wouldn't want to sell Morecambe because we see that as a big opportunity. Peter Markham and Cygnus, the two remaining gas producers and fuel that said Morecambe for the right price, would sell them. We sold the price that we got for 46.25% stake in Cygnus was twice our whole value.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

It was a value decision. And we do the same for the remaining part of Cygnus and for the greater market area. But I'd like to keep Spirit. I'd like Spirit was at GBP 1,300,000,000.0 or something to decommission liabilities. That would be an awful lot of trust you would place on somebody.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

So we will execute the decommissioning and we will hopefully convert more come into The UK's largest and maybe even the world's largest carbon storage facility, which over forty year life will take 25 megatons of carbon every year. And so take one gigaton of carbon to put into context, The UK wants to get to the point of storing just over 100 megatons a year, so let's take 25% of The UK's planned storage. So it's a huge opportunity.

[Fraser Jamieson, Group Head - IR at Centrica]

Thank you. And then final question as it stands, although classically three parter, from Bartek Kubetsky at Bernstein. Part one, could you confirm the trend of households moving away from regulated tariffs to fixed tariffs? What does that mean for margins and competitive pressure? Would it also mean lower protection against extraordinary costs such as higher bad debts as there will be less and less people on regulated tariffs?

[Fraser Jamieson, Group Head - IR at Centrica]

And I'll maybe pause there and let you answer that one first.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Russell, that's the one for you.

[Russell O’Brien, Group CFO at Centrica]

Yes. So we are seeing a trend of people moving away from the price cap on to fixed rate tariffs that's going probably in the 25% to 30% sort of range now. We're seeing more churn. We're seeing more people moving between suppliers. And so what we have to do is make sure that we're competitive in that space.

[Russell O’Brien, Group CFO at Centrica]

We're trying to make sure we've got profitable tariffs out there that keep our customers for longer. So where that trend goes, it's hard to tell, but certainly, we're seeing a movement up in switching and movements to fixed rate tariffs over the past years that have come out of the crisis. So that's the main part of it.

[Fraser Jamieson, Group Head - IR at Centrica]

Thank you. Second part, what triggered the depreciation that sorry, excuse me, the depletion of liquidity on markets in the first half of twenty twenty five? And what needs to happen for liquidity to come back?

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Look, I think we've mentioned earlier on that it was, I think, geopolitical driven volatility, some things driven by comments from individuals, head to state and the like, you can't call that. So we sat on our hands a little bit. We took risk capital over, other people did as well. So just few people in the market, just a reaction to the events. So we saw that level of volatility and it was fundamentally driven.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

You'd seen an increase in liquidity, more people would have been in the market.

[Fraser Jamieson, Group Head - IR at Centrica]

You. Third and final bit. Our earnings from route to market increasingly linear with the higher level of capacities contracted?

[Russell O’Brien, Group CFO at Centrica]

I wouldn't say they are increasingly linear, but the route to market services have always had a good substantive base of contracted revenues. And if you go back to the teaching we did last December, you can see we unpicked that a little bit in terms of the type of contracts, the type of PPAs that we write for customers across Europe. So I'd say that's broadly the same, but still a very important part of the earnings mix for that business.

[Fraser Jamieson, Group Head - IR at Centrica]

Fantastic. That's everything we have on the webcast.

[Analyst]

Mark, it's Adam Webb from Citibank. Just a real quick question on the dual run IT costs. I think you said it's GBP 9 per customer in the first half. This year, you've moved everyone to 100% to Technique Vision platform now. Does that all come off?

[Analyst]

Is it as simple as just taking that and having the cost savings there? Or how should we think about

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Trust me. I mean remember, so we had a monolithic SAP platform called ECC6, which was designed for utilities. So with all our energy customers on there, but we also put our services customers on there. It wasn't designed for that, but we thought that was efficient. So they are still on that.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

So the system won't close until, I think, the end of next year. And the 2026 is the aim, I think, for the ECC6, I see, Daimler Chief Technology Officer nodding there. So we still have those costs in there, but that will be turned off at the end of twenty twenty six. Russell, don't know if there's anything to add on the fuel run-in the energy business.

[Russell O’Brien, Group CFO at Centrica]

No, that's so total cost per customer was GBP 97, that's up slightly from the end of last year of that GBP 9 to running costs. So yes, you've answered it.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

Excellent. Well, with that, thank you very much for your time. Thanks for your patience and thanks for obviously for those of you that attended on Tuesday as well, very short notice. So it's been a very busy week. We're happy with the operational performance.

[Chris O’Shea, Group Chief Executive & Executive Director at Centrica]

There's a lot more to go for commercial. We look forward to updating you on our results for the full year in February and also on our transformation program and what you can expect from that as we go forward. Thanks very much.

Participants

Executives

• Chris O’Shea, Group Chief Executive & Executive Director
• Russell O’Brien, Group CFO
• Fraser Jamieson, Group Head - IR

Analysts

• Dominic Nash, Head of European Utilities Research at Barclays
• Jenny Ping, MD - Utilities and New Energy Equity Research at Citi
• Ahmed Farman, Head of European Utilities & Clean Energy Research at Jefferies Financial Group
• Executive
• Harry Wyburd, MD, Head - European Utilities & Clean Energy Equity Research at Exane
• Pavan Mahbubani, Vice President - Equity Research at JP Morgan
• Charles Swabey, Associate Director, Clean Energy & Utilities, Equity Research at HSBC
• Analyst