Centrica PLC’s Overseas Expansion Plans Are Great For Shareholders


Unfortunately, Centrica (LSE:CNA) (NASDAQOTH:CPYYY) has become somewhat of a public enemy here within the UK, as both regulators and politicians attack the company and its peers over the prices the utility industry charges to customers. As a result, Centrica’s shares have underperformed the FTSE 100 by around 12% during the space of the last year. 

So, strangled by political uncertainty here within the UK, Centrica is branching out overseas in search of growth, and the company is being welcomed with open arms. 

Putting plans on hold

Centrica is the parent company of energy giant British Gas, which has over 15 million residential customers here in the UK. Nevertheless, with politicians threatening to pile even more regulation onto the energy industry, British Gas’s outlook has become somewhat cloudy, so Centrica is stalling investment plans.

For example, at the beginning of last year Centrica stated that it will not take part in building any new nuclear reactors, or gas fired power stations here within the UK for the next four years. In addition, the company has cancelled plans to build two new natural gas storage facilities.

With these plans on hold, Centrica now has plenty of cash to invest elsewhere, in markets that are more accommodative to the energy giant. 

Growth away from home

In particular, Centrica is currently focusing its plans for growth on Ireland, where the company is part of a consortium bidding for Bord Gáis Eireann, Ireland’s state gas company.

What’s more, Centrica is expanding into the United States where the company already has 6 million customers across 14 States and Canadian provinces. Last year, the company brought the energy marketing unit of US oil giant Hess, making Centrica the second largest supplier of energy to businesses within the US. Moreover, Centric aims to double profits from its North American arm during the next five years. 

Black gold

Meanwhile, Centrica is also expanding its global energy production and marketing business. Specifically, Centrica’s management has set a production target of 220,000 barrels of oil equivalent each day from its oil & gas fields around the world.

Actually, output of 220,000 barrels per day is more than double the current output of Centrica’s FTSE 100 peer Tullow Oil. This energy production also means that Centrica is vertically integrated, so the company is able, to some extent, to secure energy for its customers at low prices — boosting profits.

Foolish summary

Overall, Centrica is struggling for growth here within the UK but the company is growing rapidly overseas. Indeed, this international growth should more than make up for sluggish growth within the UK and investors will be able to reap the benefits as Centrica transforms itself into a vertically-integrated global energy giant.  

Other opportunities 

Utility companies like Centrica are often thought of as the best investments for the long-term, due to their impressive dividend yields and defensive nature.  Centrica itself, has an impressive dividend track record and the company's current dividend payout is well covered by profits.

A company that can continue to deliver its dividend payout in bad times as well as good, is one of the five rules for creating dividends for life. To find out what the other four rules are, click here to download The Motley Fool's free report entitled 'How To Create Dividends For Life'.

Click here to download this report today -- it's free!

> Rupert does not own any share mentioned within this article.