Centrica expands in £437m Canadian purchase

Centrica, the British Gas to AA road services group, yesterday doubled its presence in the Canadian energy market with the C$1bn (£437m) acquisition of an Ontario-based heating company.

The purchase of Enbridge Services will give Centrica an additional 1.3 million heating customers, 90,000 natural gas customers and a number of retail outlets in southern Ontario.

Centrica said that once the deal was complete it would give it the potential to sell energy and related services to 2 million Canadian households.

When the Ontario electricity market opens to competition in May, Centrica will have a total of 3.7 million North American customers. Its target is to have 10 million gas and electricity customers in North America by the end of next year.

Centrica is already the biggest unregulated energy retailer in North America with 1.3 million customers after the earlier acquisition of three other suppliers, the biggest of which is Direct Energy.

Enbridge Services leases water heaters to its 1.3 million customers of whom about 325,000 also have heating servicing contracts akin to the three-star boiler contracts British Gas offers in the UK.

As part of the deal, Centrica has acquired the water heaters leased by Enbridge for £295m. But it intends to sell these assets on, significantly reducing its initial £437m outlay.

Roy Gardner, Centrica's chief executive, said there were "significant synergies" to be extracted by combining its existing Canadian energy supply business, which is also largely Ontario-based, with Enbridge Services.

Leaving aside the £295m paid for the water heaters themselves, the cost of the deal works out at £109 per customer compared with the £200 Centrica thought it would have to pay.

Centrica shares closed virtually unchanged at 235.25p although JP Morgan said it rated them a buy and calculated margins on the heating service business of Enbridge at 20 per cent – double the return on energy retailing.

Enbridge Services has net assets of C$676m and made profits of C$55m before interest and tax in the nine months to 30 September, 2001.