REG - Centrica PLC - Investment in Grain LNG

CentricaAnnouncement

14/08/2025 07:00

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RNS Number : 2579V  Centrica PLC  14 August 2025

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN, INTO OR
FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF SUCH JURISDICTION.

 

Centrica plc

14 August 2025

Investment in Grain LNG

Centrica plc (the "Company", "Centrica") is pleased to announce the
acquisition of the Isle of Grain liquified natural gas terminal ("Grain LNG")
in partnership(1) with Energy Capital Partners LLP ("ECP") from National Grid
group ("National Grid") for an enterprise value of £1.5 billion. After taking
into account approximately £1.1 billion of new non-recourse project finance
debt, Centrica's 50% share of the equity investment is approximately £200
million.

Key highlights

·    Grain LNG delivers vital energy security for the UK, providing
critical LNG import/export, regasification and rapid response gas storage
capacity to balance the energy system

·   Aligned with Centrica's strategy of investing in regulated and
contracted assets supporting the energy transition, delivering predictable
long-term, inflation-linked cash flows, with 100% of capacity contracted until
2029, >70% until 2038 and >50% until 2045

·  Opportunities for efficiencies to create additional near-term value, and
future development options including a combined heat and power plant,
bunkering, hydrogen and ammonia

·  Highly efficient funding structure, with Centrica's equity investment of
approximately £200 million alongside non-recourse project financing

·    Strong life of asset returns aligned with Centrica's financial
framework, with an expected unlevered IRR(2) of around 9% and an equity IRR(2)
of around 14%+

·   Underpins delivery of £1.6 billion end-2028 EBITDA target(3) -
Centrica's share of EBITDA expected to be approximately £100 million per
annum and cash distributions expected to be around £20 million on average per
annum for 2026-2028, representing an attractive yield on Centrica's equity
investment

·   Partnership with ECP (part of Bridgepoint Group plc), one of the
largest private owners of natural gas generation and infrastructure assets in
the U.S. with direct experience in supporting grid reliability

Chris O'Shea, Group Chief Executive, Centrica plc, said:

"The Isle of Grain terminal is a strategic asset that will support the UK's
energy security for many decades to come, keeping energy flowing reliably and
affordably to households and businesses across the country as we transition to
net zero. That's why we are so pleased to be investing, continuing Centrica's
pivot towards long-term, predictable infrastructure cash flows, underpinning
our medium-term guidance and creating valuable future options.

"We are delighted to be partnering with ECP, a highly experienced investor in
energy infrastructure around the world. We look forward to working with them
and Grain LNG's management team to deliver on the full potential of this
unique asset for customers and the country.

"Our decision to commit £3bn of capital in both Sizewell C and the Isle of
Grain demonstrates the attractiveness of the UK as an investment location
underpinned by supportive government investment policies."

Tyler Reeder, President and Managing Partner, ECP, said:

"As one of the largest private owners of natural gas generation and
infrastructure assets in the U.S., ECP has long understood that natural gas is
indispensable to keeping grids resilient and advancing the transition to a
lower-carbon future. With the emergence of the U.S. as the global leader in
low-cost LNG supply and the growing need for reliable natural gas supply
across the UK and Europe, we believe Grain LNG will increasingly be relied
upon as critical infrastructure to deliver dependable energy to local markets.

"We are thrilled to be partnering with Centrica, who bring a wealth of
knowledge and experience in the UK energy markets, as we execute our joint
vision to optimise this world class asset and set up Grain LNG for success for
decades to come."

Transaction background

National Grid and Garden Bidco Limited ("Bidco"), which is ultimately owned
50% by each of Centrica and ECP(1), have entered into a sale and purchase
agreement pursuant to which National Grid has agreed to sell and Bidco has
agreed to acquire the entire issued share capital of National Grid Grain LNG
Limited and Thamesport Interchange Limited which together comprise National
Grid's liquified natural gas terminal business at Isle of Grain. Centrica and
ECP will hold the investment in Grain LNG through a jointly controlled entity
with customary governance provisions, including reserved matters.

Completion is expected to occur in Q4 this calendar year, conditional upon
certain regulatory approvals being received, including approval under the
National Security and Investment Act and certain mandatory anti-trust
approvals.

Supporting Centrica's strategy and financial framework

Grain LNG supports Centrica's strategy of investing in critical energy
infrastructure assets, aligned to the energy transition that deliver
attractive returns, regulated or contracted cash flows, and create future
options across the Company's broader portfolio.

LNG is expected to play an increasingly important role in the UK energy mix
over the long term, projected to meet c.60%(4) of the UK's gas demand by 2050
compared to c.15%(4) in 2024. Centrica already plays a central role in the
UK's gas value chain, supplying energy to around a quarter of the UK's
households, and operating the Morecambe gas field (including the planned
Morecambe Net Zero carbon storage project), the UK's largest natural gas
storage facility at Rough and the associated Barrow and Easington processing
terminals. This investment, alongside the recent investment in Sizewell C, is
a further demonstration of Centrica's commitment to promoting energy security
for the households and businesses we serve, today and into the future.

Grain LNG's cash flows are underpinned by long-term, inflation-linked capacity
contracts, with primarily investment grade customers. The terminal is 100%
contracted until 2029, >70% contracted until 2038 and >50% contracted to
2045, resulting in highly visible long-term earnings and cash flow, supporting
a life of asset expected unlevered IRR(2) of around 9% and an equity IRR(2) of
around 14%+ underpinned by approximately £1.1 billion of new non-recourse
project finance debt.

The Grain LNG management team will continue to operate the terminal as an
independent company. Supporting the operation, Centrica can leverage deep
operational knowledge and experience from its existing Barrow and Easington
gas processing terminals, which are both upper tier Control of Major Accident
Hazards sites with similar technical and operational characteristics as Grain
LNG, helping the team to drive operational and capital efficiencies. In
addition Centrica, through its Centrica Energy business, has been one of the
largest capacity holders and users of the Grain LNG terminal since 2008,
bringing unique customer insight to our position as an owner of the asset. In
the longer term, there are attractive options to develop projects in hydrogen
and ammonia, and a combined heat and power plant, areas in which Centrica is
already active across its broader portfolio.

The approximately £200 million equity investment in Grain LNG brings the
total Centrica has committed to assets with regulated or contracted cash flows
to around £2 billion, approximately 75% of the capital committed so far as
part of our ongoing investment programme.

Results from Grain LNG will be reflected in Centrica's financial statements in
the Share of profits/(losses) of joint ventures and associates, net of
interest and taxation commensurate with equity accounting. This measure is
shown after taking into account interest payments at Bidco. Cash will be
received in the form of dividends, and will be reflected in Dividends received
from joint ventures and associates.

Centrica also discloses adjusted EBITDA including Centrica's share of EBITDA
from joint ventures and associates. Accordingly, as is the case with other
joint ventures and associates, Centrica's 50% interest will be included in
this adjusted EBITDA measure. Grain LNG generated £176 million EBITDA on a
100% basis in the year ended 31-March-2025(5). For 2026-2028, Centrica's share
of EBITDA is expected to be approximately £100 million per annum, with cash
distributions expected to be approximately £20 million per annum, on average.
Centrica's share of net income will also reflect incremental depreciation
based on the fair value of assets acquired.

Financing

Centrica will fund its share of the equity investment from existing cash
resources. As a highly contracted energy infrastructure asset in the UK, Grain
LNG can be efficiently financed through non-recourse debt at Bidco. Bidco has
secured approximately £1.1 billion of committed financing, which will be
drawn at closing, to fund a portion of the enterprise value.

We currently expect that the debt financing associated with the Company's
share of Grain LNG, which is non-recourse project finance and does not benefit
from shareholder support, will be proportionally consolidated by S&P when
calculating Centrica's net cash / debt.

Background to Grain LNG

Grain LNG is Europe's largest LNG regasification terminal and is located at
Isle of Grain, to the East of London. The primary service is the provision of
LNG storage and regasification capacity to primarily strong investment-grade
customers under long term, inflation-linked capacity contracts. The terminal
has annual regasification capacity of 21.7 bcm and tank storage capacity of
1,000,000 m³. Grain is currently undergoing an expansion of 5.3 bcm
additional regasification capacity and an additional 200,000 m³ of storage
capacity. After completion of the ongoing expansion of the site it will be
able to provide up to a third of the UK's gas demand. Grain also offers
additional services such as ship reloading, transhipment, and road tanker
loading.

Grain's customer base consists of companies including Centrica, Qatar Energy,
TotalEnergies, Venture Global, Sonatrach, Shell and Uniper. Grain is 100%
contracted until 2029, >70% contracted until 2038 and >50% contracted to
2045. It is envisaged that future capacity auctions will be held on an arm's
length basis in accordance with current regulated third-party access
requirements.

Grain's location in the South East of the UK means it is strategically located
in terms of UK demand and proximity to UK interconnectors and networks. The
site has total acreage of 1,500 of which 300 acres are used by Grain.

Background on Energy Capital Partners

Energy Capital Partners (ECP), founded in 2005, is a leading investment firm
across energy transition infrastructure, with a focus on investing in
electricity and sustainability infrastructure providing reliable, affordable
and clean energy. It is one of the largest private owners of power generation
and renewables in the U.S. and is among the most active investors in North
American and UK energy infrastructure across the energy value chain, including
renewables, environmental infrastructure, natural gas marketing, and
downstream infrastructure.

In 2024, ECP combined with Bridgepoint Group Plc (LSE: BPT.L) to create a
global leader in value added middle-market investing with a combined $87
billion of assets under management across private equity, credit and
infrastructure.

 

The person responsible for arranging the release of this announcement on
behalf of the Company is Raj Roy, Group General Counsel & Company
Secretary.

Notes

1. Centrica and ECP each own 50% of Garden Topco Limited ("Topco"). Garden
Bidco Limited ("Bidco") is a wholly owned subsidiary of Topco.

2. Nominal, post-tax, assuming life of asset hold period.

3. Adjusted EBITDA including Centrica's share of EBITDA from joint ventures
and associates. £1.6 billion is the mid-point of a £1.3 billion - £1.9
billion range.

4. Source: S&P Global Commodity Insights.

5. Grain LNG financial results:

 Year ending          31 December 2024
 Revenue              £299m
 EBITDA               £178m
 Adjusted net income  £98m

12 months to 31 December 2024 figures calendarised, EBITDA excludes one-off EU
ETS credit income of £12.8 million.

Enquiries:

 Centrica
 Investors and Analysts:                       email: ir@centrica.com (mailto:ir@centrica.com)
 Media:                                        email: media@centrica.com (mailto:media@centrica.com)

                                               tel: +44 (0) 1784 843000

 ECP
 Media:                                        email: ECP@fgsglobal.com (mailto:ECP@fgsglobal.com)

 Santander London Branch                       tel: +44 (0) 20 7756 4034

 (Financial Adviser to Garden Bidco Limited)

 Brian O'Keeffe

Conor Hennebry

Martin Weltman

 Slaughter and May is acting as legal adviser to Centrica. Latham & Watkins
 is acting (i) as legal adviser to ECP; and (ii) as legal adviser to Garden
 Bidco Limited as purchaser.

 

This information contains regulated information as per Disclosure Guidance and
Transparency Rule (DTR) 6.3.7R.

 

END

Centrica plc is listed on the London Stock Exchange (CNA)

Registered Office: Millstream, Maidenhead Road, Windsor, Berkshire SL4 5GD

Registered in England & Wales number: 3033654

Legal Entity Identifier number: E26EDV109X6EEPBKVH76

ISIN number: GB00B033F229

 

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