Centrica plans £289m refinancing move at Enbridge

CENTRICA, the UK home services group, is to recoup more than 70 per cent of its investment in Enbridge Services, the Canadian water heating firm it bought for £404 million earlier this year, by refinancing the business.

Centrica, which owns British Gas and the AA motoring services group, said at the time of the acquisition in January that it was interested only in its service contracts and 1.75 million customer relationships.

The UK group is now set to receive 289m in cash by selling Enbridge’s water heaters, which are leased to customers, to a special-purpose vehicle called the Consumer’s Waterheater Income Fund.

The fund will raise money to buy the assets by floating 25 million units on the Toronto Stock Exchange at around 4 per unit and issuing a 316m floating rate note. It will hope to attract investors who want a steady return on their money and will be entitled to receive 65 per cent of the rental income from the water heaters.

Enbridge Services will continue to receive the other 35 per cent of the rental income from the water heaters as well as continuing to service the assets. It will hold a 49.5 per cent equity interest in the fund as well as 13m of loan notes .

Centrica chief executive Sir Roy Gardner said the refinancing demonstrated that the group could increase its customer numbers in North America without having to use large amounts of capital.

He added: "Centrica has realised a significant proportion of its original investment in Enbridge Services."

A Centrica official said proceeds of the refinancing would be used for general corporate purposes, including possible further acquisitions in North America.

Centrica entered the North American market in 2000 when it paid 406m for Canada’s Direct Energy. It now has about 4.6 million customer contracts in North America and is aiming to more than double that to ten million by the end of next year.