Centrica to sell Texas plants in $685m deal

CENTRICA said it would sell its Texas gas-fired power stations to US private equity giant Blackstone for $685m in cash and return the proceeds to investors by extending its share buyback programme.

Shares in the energy company, which have fallen nearly 20 per cent in the last three months, jumped to the top of the FTSE 100 share index leaderboard after the deal was announced.

The three units have a combined capacity of 1,295MW, Centrica said.

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As part of the deal it agreed with Blackstone a three-year call option arrangement for an equivalent amount of capacity.

“This transaction allows us to realise value from our gas-fired fleet, while ensuring stability of price and supply in the Texas power market through the call option arrangement,” said Badar Khan, president and CEO of Centrica’s North American subsidiary Direct Energy.

Shares in Centrica were up 2.5 per cent in trading, outperforming a 0.3 per cent rise in the FTSE 100 index.

The stock has been buffeted by a debate around energy prices for consumers in Britain, particularly the Labour Party’s plan to freeze prices if it won power in 2015.

The shares fell further last month when Centrica cut its 2013 earnings forecast, citing not only rising costs in Britain but also intensifying competition in the United States.

Analysts at investment bank Liberum Capital said the Texas deal made sense.

“As the Texas market tends to be well supplied, a tolling agreement helps to free up capital,” they said.

“As we have long advocated, an extension of the share buyback scheme (especially at the current prices) could bring better shareholder returns.”

Centrica said it would return the proceeds from the sale to shareholders through a £420m extension of its share repurchase programme in 2014.