BG Group has a profitable portfolio of gas-fired power plants.

2009 Performance

BG Group owns 4.4 gigawatt of power capacity which operates under two broadly different regimes: long-term off-take agreements and merchant plants.

In the UK, the majority of the Ballylumford plant capacity is under contract to NIE Energy Limited, with the balance operating in the Irish Single Electricity Market. For Seabank Power, all the plant capacity is under contract to Scottish and Southern Energy plc. In the Philippines, power is sold to Meralco, the country’s largest power distribution company and in Malaysia to Tenaga Nasional Berhad.

This provides largely stable operating profits for the Group in the UK, Philippines and Malaysia dependent on availability.

In Italy, the electricity generated by the Group’s five thermoelectric plants is sold to the national grid, while the steam/thermal power is sold to the adjacent FIAT plants and other off-takers for process and heating purposes.

In the USA, the Group’s three plants, Lake Road, Dighton and Masspower are located in New England and operate as merchant plants selling energy, capacity and ancillary services to the New England Independent System Operator (ISO-NE).
Energy and capacity markets represent the bulk of the US power assets’ revenues. Capacity prices are set in advance making this revenue stream predictable and only dependent on the assets’ availability.

The energy contribution, however, is more volatile and is mostly driven by system demand and gas prices.

In 2009, as anticipated, lower demand resulting from weakness in the US economy and low gas prices affecting the spark spreads, continued to impact asset performance. In January, the Regional Greenhouse Gas Initiative came into effect, resulting in additional costs that were not reflected in power prices as expected.

In Australia, the 140 megawatt (MW) Condamine Power Station in Queensland started operations in July and is scheduled to reach full capacity in the first half of 2010. The plant uses coal seam gas from QGC reserves and delivers power into the National Electricity Market. In April, the option agreement with AGL Energy Limited (“AGL”), under which AGL had the right to acquire certain assets, one of which was the Condamine plant, lapsed.

In the UK, at the Dragon LNG terminal, construction of the Milford Energy Limited (“MEL”) (BG Group 50%) plant was substantially completed in 2009. The plant is expected to complete commissioning and commence commercial operations during first quarter 2010.MEL is a combined heat and power plant supplying up to an aggregate of 48MWof electricity to Dragon LNG and the grid and 73 megawatt thermal (MWth) of heat, in the form of hot water, to Dragon LNG. The plant is supplied with fuel from the Dragon LNG terminal in the form of either natural gas or boil-off gas.