Energy (First-half)

Energy (First-half)
2010 2009
Order book (£bn)1.31.3
Engine deliveries2827
Underlying revenues (£m)590447
Underlying OE revenues (£m)348236
Underlying services revenues (£m)242211
Underlying (loss)/profit before financing (£m)(19)1

The Energy business is a world-leading provider of power systems for onshore and offshore oil and gas applications with a growing presence in the electric power generation sector. It supplies customers in more than 120 countries. We are building a portfolio of power systems including large gas turbines, diesel and gas reciprocating engines, renewables and civil nuclear power capability.

Energy made solid progress in the period with strong revenue growth and improved operational performance. Against this, a £26m one-off charge relating to retrofit costs across the industrial Trent fleet of Dry Low Emissions (DLE) engines caused a loss for the period of £19m.

Order intake of £0.4bn kept the order book stable at £1.3bn with orders for eight industrial Trent units received in the period.

The oil and gas sector continued to move ahead with substantial investment plans, especially in Brazil, West Africa and Asia. It is too early to judge whether the Macondo well leak in the Gulf of Mexico will have implications for our business, but we have seen no significant changes in customer behaviour to date.

We reported exceptional growth of 47 per cent in original equipment revenues and double-digit service revenue growth in the period.

The Group continues to focus on improving operating performance. Investments in new assembly facilities and testbeds have helped support both improved execution and load growth.

In low carbon technology programmes, the tidal power demonstrator project in the Pentland Firth, Scotland, is expected to commence trials within the next few months. Ongoing development of the fuel cell technology programme continued with investment at a lower level than in prior years.

The Group made good progress in the civil nuclear area with the announcement of a memorandum of understanding with Larsen & Toubro in India focusing on light water reactors in India, and internationally.

Energy Outlook

Further revenue growth in the second half of 2010, improving operational performance and reduced investment in new programmes will more than offset the £26m one-off charge, and we expect profits to grow strongly in 2010.

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