Centrica to sell its North American subsidiary to NRG Energy

Centrica Plc (LON: CNA) expressed plans of offloading Direct Energy for £2.85 billion on Friday. The company said that it had already inked an agreement with NRG Energy that showed interest in acquiring its North American subsidiary.

Shares of the company opened about 28% higher on Friday but dropped roughly 5% on market open. At 48 pence per share, Centrica is currently a little under 50% down year to date in the stock market after recovering from a low of 30 pence per share in April. Learn more about capital markets.

Centrica to use the liquidity boost to minimise its net debt

The energy and services company also reported its earnings on Friday that highlighted its profit to have tanked in the first half (H1) of the ongoing fiscal year attributed to low commodity prices and the ongoing Coronavirus crisis.

According to Centrica, the liquidity boost from the sale will be directed at its pension schemes. The company will also use the cash to minimise its net debt. Following the completion of the transaction, Centrica now aims at focusing entirely at its business in the United Kingdom and Ireland.  

In an announcement in June, the British multinational said it will slash its workforce by 20% (around 5,000 jobs) to shore up finances amidst COVID-19. Over 50% of its suggested layoff was to affect the UK-based management positions.

Centrica’s pre-tax profit took a £60 million hit in the first half

At £343 million, Centrica’s operating profit in the first six months of the financial year saw a 14% drop as compared to £399 million in the same period last year. Consequently, its pre-tax profit for the period, the company added, took an around £60 million hit as it resorted to seeking help from the state-backed job retention schemes, cost-cutting, and suspending senior management bonuses.

Citing the rising Coronavirus uncertainty, Centrica refrained from providing its financial guidance for the full year on Friday. The board did not offer any insight into the interim dividend either.

Centrica is committed to pulling out of nuclear power generation and oil and gas production. Owing to the economic uncertainty, however, it has delayed the planned divestment of its 69% stake in Spirit Energy and a 20% stake in the United Kingdom’s nuclear energy fleet.

At the time of writing, the Windsor-based company has a market capitalisation of 2.79 billion.