# Centrica to sell its North American energy supply business, Direct Energy

- Link: https://www.directorstalkinterviews.com/centrica-to-sell-its-north-american-energy-supply-business-direct-energy/412845070
- Published: 2020-07-24T07:31:55+01:00
- Author: Amilia Stone

**Centrica plc** (LON:CNA) has announced that it has entered into an agreement to
sell its North American energy supply, services and trading business, Direct Energy,
to NRG Energy, Inc. for $3.625 billion in cash (equivalent to approximately £2.85
billion) on a debt free, cash free basis.

**Transaction headlines**

·      Attractive valuation for Direct Energy, representing an EV to 2019 Underlying
Adjusted EBITDA multiple of 7.9x

·      Increases the long term strength of the Group’s balance sheet with Net Cash
Proceeds intended to be used to reduce net debt significantly and to make a material
contribution to the Group’s defined benefit pension schemes

·      Alongside the significant restructure announced in June 2020, creates a simpler
and leaner energy services and solutions company, focused on delivering for its 
customers and enabling the transition to a lower carbon future

·      Centrica to focus on its core home markets of the U.K. and Ireland, where
it has leading market positions

·      More predictable and stable cash flows from the remaining Group

·      The Transaction is conditional upon agreement by Centrica’s shareholders 
and various other approvals, including regulatory approvals, and is expected to 
complete in the fourth quarter of 2020

·      Centrica’s Board considers the Transaction to be in the best interests of
Centrica and its shareholders

> **Chris O’Shea, Group Chief Executive of Centrica, said:**
> “The transaction provides Centrica with an opportunity to realise significant 
> value for our shareholders at an attractive valuation. This disposal is aligned
> to our strategy to become a simpler, leaner business and in addition it will materially
> strengthen our balance sheet and remove a source of earnings volatility from the
> Group. Combined with our focus on completing our intended exits from Spirit Energy
> and Nuclear at the appropriate time, this is expected to lead to a more predictable
> and high-quality earnings stream moving forward.
> Direct Energy is a strong business with a great team. I believe NRG will be an
> owner who will invest in the business and make it even better. The remaining Company
> will be an energy services and solutions company, helping customers to transition
> to a lower carbon future, focused on the U.K. and Ireland where we have leading
> market positions. Alongside our recently announced organisational restructure,
> which puts the customer at the heart of everything we do and accelerates the delivery
> of targeted cost savings, this transaction is a fundamental step in the turnaround
> of Centrica and will leave us well placed to deliver for both customers and shareholders.”

Centrica will host a conference call at 9am U.K. time on 24 July 2020 to discuss
the Transaction and its Interim results, which were also released today.

To register for the conference call please visit: https://webcasts.centrica.com/
centrica109/vip_connect

If you would like to join in listen only mode, please register by visiting: https://
webcasts.centrica.com/centrica109

The Transaction 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.
A circular containing details of the Transaction and a notice convening a general
meeting of the Company will be sent to Centrica’s shareholders as soon as practicable,
with the general meeting expected to be held in mid-August. This summary should 
be read in conjunction with the full text of this announcement. This announcement
is available at www.centrica.com.

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