UBS: Fast Take: Centrica "Heads of terms on a CfD on Sizewell ‘B’ due within..."

Research evidence excerpt

UBS: Fast Take: Centrica "Heads of terms on a CfD on Sizewell ‘B’ due within..."

Forecast returns

Forecast price appreciation 24.5%

Forecast dividend yield 3.1%

Forecast stock return 27.6%

Market return assumption 9.2%

Forecast excess return 18.3%

Company Description

After the break-up of British Gas plc in 1997, the downstream businesses were put into

Centrica. The company retained the British Gas brand in the UK, the domestic gas supply

operations and substantial upstream gas assets. After initially diversifying and geographically

expanding, Centrica now focuses on providing energy services and solutions to residential

and business customers in the UK and Ireland. Centrica also has upstream oil and gas assets,

and a 20% stake in the UK nuclear assets. There is an energy marketing and trading business,

as well as a gas storage business.

Valuation Method and Risk Statement

Centrica is subject to competitive pressure in the UK and Irish consumer- and business-facing

businesses (in both supply and services). Customers can switch and take large marginal/gross

profits elsewhere. There is energy commodity exposure mainly in the UK and Europe. There is

also regulatory and political risk, in that the product they sell most of (Energy) is a large

fraction of household expenditure, and a place in which Government has historically

intervened (e.g. with domestic price caps imposed by the UK Government in 2018 and

increased capital requirements from OFGEM). There is also exposure to global LNG prices.

Finally, Centrica owns 20% of the UK nuclear fleet and a 69% stake in the Spirit UK and

Dutch gas production business, where there are operational risks. Our valuation is based on a

business-by-business SOTP methodology.

Centrica 11 June 2026 ab 2