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

In the UK, the majority of the Ballylumford plant capacity is under contract to Northern Ireland Electricity, 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 revenues for the Group in these countries.

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

In the USA, the 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 (NE ISO). 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 2008, lower demand curtailed performance, and weakness in the US economy is expected to impact 2009 performance. In 2009, the Regional Greenhouse Gas Initiative (RGGI) comes into effect. This will compel all fossil fuel generators in the participating states to buy allowances for all their CO2 emissions. The incremental RGGI costs are likely to be passed on through an increase in the price of energy in the NE ISO market.

As part of its acquisition of QGC in Australia, BG Group also acquired an interest in the 140 MW Condamine power station in Queensland. The plant is expected to begin operating in mid-2009 using coal seam gas from QGC reserves and will feed power into the National Electricity Market. BG Group entered into an option agreement with AGL Energy Limited (AGL) under which AGL has the right to acquire certain assets, one of which is the Condamine plant (see page 23 of the 2008 Annual Report).

In Brazil, BG Group sold both of its Iqara subsidiaries, Iqara Gas Natural and Iqara Energy Services, during July 2008.