8 June 2004 – UK utility Centrica plc today announced it has reached agreement with Killingholme Power Limited to acquire the 652MW Killingholme CCGT power station in North Lincolnshire. The gas fired power station will be acquired on a debt free basis for a cash payment of £142m ($261m), representing a purchase price of £218/kW.
Pending completion in early July, the acquisition will boost Centrica’s total generation capacity to 2910MW, approximately 43 per cent of its peak domestic demand projection for 2005. Based on expected load factors, Centrica’s total power generation portfolio, together with the Spalding tolling agreement and fixed price elements of the British Energy contract, will meet approximately 75 per cent of its forecast domestic demand requirements in 2005.
Killingholme will operate alongside Centrica’s five wholly owned power stations and its 60 per cent interest in Humber Power Limited, to provide electricity which matches the typical demand shape of British Gas’ customer base. The acquisition further underpins Centrica’s strategy of providing increased long term stability and protection against electricity price fluctuations and spikes.
Sir Roy Gardner, Chief Executive of Centrica, said: “Today’s acquisition is in keeping with our ‘asset right’ strategy of acquiring flexible upstream assets at advantaged prices. “Killingholme will help provide increased long term stability against electricity price fluctuations and boosts our generation capacity at a time when the market has seen increased wholesale costs. British Gas is the number one supplier to the domestic electricity market and this deal builds on our longer term ability to provide a significant proportion of electricity for our customers from our own sources.
“Given today’s high wholesale gas prices, the transaction will be marginally earnings dilutive in 2004.Killingholme entered commercial operation for National Power in 1994 and was subsequently owned and operated by NRG until late 2003 when it was taken over by a group of twenty stakeholder banks. Centrica Energy will take over responsibility for the operation and management of the plant which employs 62 staff.