Direct Energy Profit Up 5% in 2012 as New President and CEO Appointed

Strong organic and acquisitive customer growth and continued operational efficiencies drive positive results

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Feb 27, 2013, 02:16 ET

HOUSTON, Feb. 27, 2013 /PRNewswire/ -- Direct Energy, North America's largest competitive energy and energy-related services company, today announced an operating profit of US$526 million (C$526 million, £331 million) for the full year 2012. Direct Energy is the North American subsidiary of Centrica plc (LSE: CNA). Centrica reported full year 2012 revenues of US$38.059 billion (C$38.050 billion, £23.9 billion) with an operating profit of US$4.36 billion (C$4.359 billion, £2.7 billion).

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For the full year 2012, Direct Energy reported a 5% increase in profit from US$500 million (C$493.7 million, £312 million) reported for the full year 2011, driven by operational efficiencies across business segments, including the move of the company's North American headquarters to Houston.

Solid growth in residential and small business customers segments due in part to the successful integrations of recently completed acquisitions in the U.S. Northeast including Vectren Source and New York-based energy retailers Energetix and NYSEG Solutions, helped offset the planned, gradual exit of the Ontario business and an increasingly competitive commercial industrial segment. Direct Energy's year-over-year revenue decreased 3% from US$9.841 billion (C$9.697 billion, £6.1 billion) in 2011 to $9.561 billion (C$9.558 billion, £6.0 billion) in 2012.

Chris Weston, President and CEO of Direct Energy, said: "We saw solid customer gains in the U.S. Northeast region and home energy services segment throughout 2012. Although weakened economic conditions, the operating environment in Ontario and low wholesale prices posed challenges to parts of the business, we were able to achieve organic and acquisitive growth in many of our downstream and upstream segments, and successfully implement operational efficiencies across the business. We are well positioned to continue to build our company to create scale, stability and value for our customers across North America."

Direct Energy also announced today that Chris Weston has been appointed Managing Director of Centrica's international downstream business with authority over British Gas and all of Direct Energy except its upstream gas assets. Mr. Weston will relocate from Houston to the United Kingdom for his new position.

Accordingly, current Direct Energy Upstream and Trading President, Badar Khan, will succeed Mr. Weston as President and CEO of Direct Energy effective April 1. Mr. Khan joined Direct Energy in 2003 and has served in several roles at Centrica and Direct Energy including Managing Director of British Gas Business. He is a veteran of the North American retail energy markets having been involved since 1999. His earlier career was spent in management consulting with Deloitte Consulting and KPMG in the US and the UK. He holds an engineering degree from the UK, and an MBA from the Wharton School. Mr. Khan will report to Mr. Weston.

"Direct Energy has enjoyed significant success over the last three and a half years as we have grown our lines of business and increased the company's revenue and operating profit," said Weston. "I look forward to working with Badar Khan as he takes on the role of running Direct Energy and increases our presence among customers and within the industry in the future."

Full year 2012 highlights from Direct Energy's lines of business include:

Direct Energy Residential

Operating profit for the business was broadly flat at US$249 million (C$249 million).
U.S. customer numbers increased to 3.5 million following organic growth and the successful integrations of Gateway Energy and Vectren Source in addition to the acquisition of an additional 245,000 residential and small business customers from New York-based energy retailers Energetix and NYSEG Solutions.
Continued expansion of residential customer base in Texas from the successful integration of First Choice Power and sustained success of "Power to Go" pre-paid product offering.

Direct Energy Business

Operating profit for the business increased 16% to US$205 million (C$205 million) from US$176.5 million (C$173.9 million) in 2011.
The business enjoyed record sales in 2012 reinforcing continued organic growth success.
Operating margin increased to 4.8% reflecting the positive impact of operational efficiencies achieved in competitive market conditions.
Sales channel optimization and headroom in key markets are driving the small business sector. The commercial and industrial segment is increasingly competitive, however we are holding market share through competitive price offerings.

Direct Energy Services

Operating profit increased 14% to US$51 million (C$51 million) from US$44.8 million (C44.1 million) in 2011 following full integration of Home Warranty of America (HWA), which provides a platform for further opportunities for the cross-selling of energy and services.
Contract relationships increased 5%, reflecting success of the HWA acquisition.
Sustained market share growth despite challenging economic environment.

Direct Energy Upstream

Operating profit for the business was US$21 million (C$20 million)
Successful integration of the producing natural gas weighted assets in the Carrot Creek region of Alberta acquired from Encana Corporation in December 2011.
In Texas, power generation volumes increased by 21% largely due to good asset performance.

Notes: The results reported in British pounds are expressed in U.S. and Canadian dollars (based on monthly average FX rates) except where noted. For reference average full year rates are: For 2012: £1 = US$1.5896; 2011: £1 = US$1.6103: 2012: £1 = C$1.5892; 2011: £1 = C$1.5855.

About Direct Energy

Direct Energy is one of North America's largest energy and energy-related services providers with over six million residential and commercial customer relationships. Direct Energy provides customers with choice and support in managing their energy costs through a portfolio of innovative products and services. A subsidiary of Centrica plc (LSE: CNA), one of the world's leading integrated energy companies, Direct Energy operates in 46 U.S. states plus the District of Columbia and 10 provinces in Canada. To learn more about Direct Energy, please visit www.directenergy.com.

SOURCE Direct Energy