Strength in Wholesale and Business Energy Markets Powers Direct Energy



    Toronto-based Firm Posts First Half Profit Increase of 20 Per Cent

    TORONTO, Aug. 2 /CNW/ - Revenues for Toronto-based Direct Energy, the
North American subsidiary of Centrica plc, rose 11 per cent in the first half
of 2007 to $4.7 billion on strong demand from business customers and growth in
the wholesale energy sector. The company reported first half operating profit
up 20 per cent on the prior year to $295 million(1).
    Direct Energy, the 43rd largest company in Canada, is not publicly
traded, but Centrica reports the financial performance of its North American
subsidiary. Centrica, which trades on the London Stock Exchange (LSE:   CNA),
reported first half revenues(*) of (pnds stlg)8.6 billion ($19.3 billion). Net
earnings rose to (pnds stlg)788 million(*)(xx) ($1.76 billion).
    "Our continued growth in fully competitive markets shows that customers
want choice and are prepared to exercise that choice when it is available,"
said Direct Energy Chairman and CEO Deryk King.
    Direct Energy is on track to achieve its full-year targets of
double-digit revenue and profit growth, he said, but the company expects the
second half will be more challenging as competitive pressures increase in some
markets.
    During the first half, Direct Energy was reorganized from a regional
structure into four pan-North American lines of business. This will enable
greater focus on common customer classes and efficiencies of scale through
shared operations. The business reports for the first time on this basis
below.
    Growth in the Commercial and Industrial Energy segment, encompassing
natural gas and electricity sales to medium and large-sized businesses, public
institutions and government, was substantial as the company expanded its
presence in existing markets. Revenue was up 45 per cent to $1.1 billion, with
volumes up 19 per cent and 55 per cent in natural gas and electricity
respectively. Continued investment in the infrastructure necessary to support
growth meant that the business posted a small loss of $2 million.
    "The Commercial and Industrial Energy sector, which has been deregulated
for some time, represents a major growth opportunity for Direct Energy," said
Mr. King. "With the investments we have made in this sector we are well
positioned to develop that growth."
    The Mass Markets Energy segment which comprises natural gas and
electricity sales to residential and small commercial customers suffered from
difficult market conditions during the first half. Customer numbers fell due
to increased competition in the Texas market and the expiry of five-year
electricity contracts in Ontario signed at market opening in 2002. The impact
of these was felt towards the end of the first half and both issues will be
more significant in the second half of the year. Despite these challenges,
revenue was up 1 per cent to $3.02 billion as year on year prices increased
and operating profit was up 9 per cent to $196 million due to lower commodity
costs.
    The Services segment comprises home and business services across North
America and the financial results of The Consumers' Waterheater Income Fund
which continue to be fully consolidated. Operating profit in the first half of
2007 was $56 million in what is traditionally the weaker half of the year due
to its seasonal nature, compared with $59 million in 2006 (which included a
$14 million gain on the sale of income fund units). Canadian home services
continued to grow, reinforced by the acquisition in January of MABE, which has
enabled the company to launch an appliance protection and repair business
across Canada. In the United States, the company's residential new
construction business has weathered the housing market downturn well and is
gaining market share. The Canadian business services operation was close to
break-even in the first half, following major restructuring at the end of
2006.
    The Wholesale Energy segment includes natural gas production, power
generation, natural gas storage and transportation, wholesale power and gas
transactions, wind power purchase agreements and proprietary trading. The
company is leveraging its expertise, infrastructure and unique position in
managing its large and diverse retail operations with wholesale activities.
The Wholesale Energy group had strong performances in gas storage and related
optimization, power plant management and power and natural gas utility
auctions in the first half. This segment reported a 129 per cent increase in
operating profit to $45 million compared with $20 million in 2006. The company
expects a similarly strong performance from Wholesale Energy in the second
half.

    About Direct Energy

    Direct Energy is one of North America's largest energy and energy-related
services providers with over 5 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 Texas, the northeastern
United States and across Canada. To learn more about Direct Energy, visit
www.directenergy.com.

    
    (1) All results were published originally in British pounds but are here
        expressed in Canadian dollars except where noted. Exchange rates
        used: for H1 2007: US$1= C$1.1327 and (pnds stlg) 1
        = C$2.2376; for H1 2006: US$1= C$1.1335 and
        (pnds stlg)1 = C$2.0303

    (*)    from continuing operations
    (xx)   including joint ventures and associates net of interest and
           taxation, and before exceptional items and certain re-measurements
    





For further information:

For further information: Aishling Cullen, Direct Energy, (416) 590-3779,
Aishling.cullen@directenergy.com


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