Centrica event on Gas Storage & Investor Relations

POWERHOUSE2030 EVENT SUMMARY: 20/7/2016 AT CENTRICA

Last week we were hosted by Centrica for an informal discussion on the operation of their Gas Storage facility, Rough, from Tahir Mahmood, Head of Risk and Controls for Centrica Storage and secondly on how Centrica manages its shareholder relationships from Martin Epsley, Group Head of Investor Relations. Both talks highlighted the importance of transparency in order to understand the potential risks, both so that the company knows how to manage operationally and to ensure that the external community and investors understand the associated risks and have confidence in Centrica’s risk management approach.

Centrica owns and operates the largest gas storage site in the UK, Rough, which is located in the North Sea. To give you an idea of size, the site covers the 30 square km and is located at a depth equivalent to 9 times the height of the Shard! Rough represents 75% of the UK’s gas storage and is capable of producing 10% of the UK’s daily peak daily demand. It was very topical that just a few days before this event it was announced that Rough would be unable to operate until the Spring whilst it investigates an issue with one of the wells.This is a perfect example of the operational risks facing a unique and ever aging asset. Safety and maintenance is much more complicated than that of a traditional power station due to access and technical considerations which is why the outage is likely to be for so long. We discussed a number of other risks such as strategic and financial risk, which included the potential reputational damage when issues arise. The other main risk is that of non-compliance, as with other regulated entities, Centrica Storage has to remain at arms length from the rest of the company to ensure that there is no competitive advantage to parts of Centrica which may wish to contract with Rough.

The investor relations team manage the relationship with the company’s shareholders. They want to ensure that investors are kept up to date with Centrica’s overall group strategy and current performance. Anything that surprises investors can negatively affect their share price and interest from potential investors. To manage that risk the investor relations team keeps up to date with performance in various parts of the business and keeps investors up to date with progress and news. A good relationship is importance for a good understanding of the company’s future direction and performance.

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