Centrica (LSE:CNA) has finalised the acquisition of the Severn combined-cycle gas turbine power plant in South Wales from Calon Energy for £370 million. The transaction increases the company’s electricity generation portfolio across the UK and Ireland to 4GW, including projects currently under development and construction. The Severn facility, commissioned in 2010, has an 850MW capacity and is regarded as one of the UK’s most efficient gas-fired power stations, providing large-scale flexible generation capability at a time of growing demand for grid stability.
Plant expected to provide long-term earnings contribution
Centrica said the Severn asset is well positioned to benefit from several revenue streams, including wholesale electricity sales, capacity market payments and balancing services supplied to the National Energy System Operator. The company expects the station to deliver average annual capacity market revenues of around £35 million through to 2030, while EBITDA is projected to range between £30 million and £60 million annually from 2027 onward. Management also indicated the acquisition is expected to become earnings accretive on a per-share basis from the first full year following completion.
Flexible generation seen as key during energy transition
The company believes the Severn power station will play an important role in supporting system reliability during the UK’s ongoing energy transition. Centrica noted that gas-fired generation continues to provide essential dispatchable and flexible power capacity as older plants retire and grid constraints persist. The acquisition is aligned with the group’s broader capital allocation strategy and increases expected 2026 capital investment to approximately £1.1 billion. The purchase was funded entirely through existing cash resources on a cash-free, debt-free basis.
Integration costs expected to weigh on short-term earnings
Centrica warned that transaction-related expenses, integration costs and seasonally weaker summer revenues are likely to contribute to a modest net loss during 2026. Despite this, management sees opportunities to improve returns through operational optimisation and by applying its expertise in managing critical infrastructure assets. The deal also strengthens Centrica’s exposure to flexible power generation as electricity demand in South Wales is expected to rise, particularly from emerging high-energy users such as data centres.
Financial profile remains balanced
The company’s outlook is supported by solid revenue growth and consistently positive free cash flow generation, although this is balanced against volatile profitability, including a net loss recorded in 2025, and a balance sheet viewed as only moderately resilient. Technical indicators remain moderately constructive, with the stock trading above key long-term moving averages and momentum signals remaining neutral. Valuation metrics are considered reasonable, supported by a moderate price-to-earnings ratio and dividend yield.
More about Centrica
Centrica plc is a UK-based energy group listed on the London Stock Exchange, operating across electricity generation, energy supply and related services throughout the UK and Ireland. The company manages a portfolio of flexible generation assets, including combined-cycle gas turbine plants, and focuses on supporting energy security and the transition toward a lower-carbon energy system while generating returns for consumers, businesses and shareholders.
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