BP 2014 Annual Report Download - page 39

Other businesses
and corporate
Financial performance
$ million
2014 2013 2012
Sales and other operating revenuesa1,989 1,805 1,985
RC profit (loss) before interest and
tax (2,010) (2,319) (2,794)
Net (favourable) unfavourable impact
of non-operating items 670 421 798
Underlying RC profit (loss) before
interest and tax (1,340) (1,898) (1,996)
Capital expenditure and acquisitions 903 1,050 1,435
a
Includes sales to other segments.
The replacement cost (RC) loss before interest and tax for the year ended
31 December 2014 was $2.0 billion (2013 $2.3 billion, 2012 $2.8 billion).
The 2014 result included a net charge for non-operating items of
$670 million (2013 $421 million, 2012 $798 million). This represented
restructuring provisions and impairments, principally in respect of our
biofuels businesses in the UK and US.
After adjusting for these non-operating items, the underlying RC loss
before interest and tax for the year ended 31 December 2014 was
$1.3 billion (2013 $1.9 billion, 2012 $2.0 billion). This result reflected
improved shipping, biofuels and wind performance and a number of
one-off credits.
Biofuels
Our investment in alternative energies is focused on biofuels, where our
strategy is to focus on the conversion of cost-advantaged and sustainable
feedstocks that are materially scalable and can be competitive without
subsidies.
We operate three sugar cane mills in Brazil producing bioethanol and sugar
and exporting power to the local grid. We continue to evaluate options to
increase production at these facilities and completed work on expanding
ethanol production capacity at one mill as planned.
BP continues to invest throughout the entire biofuels value chain, from
growing sustainable higher-yielding and lower-carbon feedstocks through
to the development, production and marketing of the advantaged fuel
molecule biobutanol which has higher energy content than ethanol and
delivers improved fuel economy.
In conjunction with our partner DuPont, we are undertaking research into
the production of biobutanol under the company name Butamax.
Across our biofuels business, BP’s share of ethanol-equivalent production
(which includes ethanol and sugar) for 2014 was 653 million litres
compared with 521 million litres in 2013. The majority of this production
was from BP’s sugar cane mills in Brazil.
Wind
We have a wind energy business in the US, with interests in 16 operating
wind farms. Gross generating capacity from this portfolio is 2,585MW of
electricity. Our focus is on safe operations and optimizing performance at
our owned and joint venture wind farms.
Based on our financial stake, BP’s net wind generation capacity b was
1,588MW at 31 December 2014, compared with 1,590MW at
31 December 2013. Our net share of wind generation for 2014 was
4,617GWh, compared with 4,203GWh a year ago.
b Capacity figures include 32MW in the Netherlands managed by our Downstream segment.
Shipping
The primary purpose of BP’s shipping and chartering activities is the
transportation of the group’s hydrocarbon products using a combination of
BP-operated, time-chartered and spot-chartered vessels. Surplus capacity
may also be used to transport third-party products. All vessels conducting BP
shipping activities are subject to our health, safety, security and environmental
requirements. At 31 December 2014, our fleet included four Alaskan vessels,
46 BP-operated and 41 time-chartered vessels for our deep-sea, international
oil and gas shipping operations. In December 2014 BP shipping entered into
contracts with Daewoo Shipbuilding & Marine Engineering in South Korea for
the construction of LNG tankers to be delivered in 2018 and 2019.
Treas ur y
Treasury manages the financing of the group centrally, with responsibility
for managing the group’s debt profile, share buyback programmes and
dividend payments while ensuring liquidity is sufficient to meet group
requirements. It also manages key financial risks including interest rate,
foreign exchange, pension and financial institution credit risk. From
locations in the UK, the US and Singapore, treasury provides the interface
between BP and the international financial markets and supports the
financing of BP’s projects around the world. Treasury trades foreign
exchange and interest rate products in the financial markets, hedging group
exposures and generating incremental value through optimizing and
managing cash flows and the short-term investment of operational cash
balances. Trading activities are underpinned by the compliance, control and
risk management infrastructure common to all BP trading activities. For
further information, see Financial statements – Note 27.
Insurance
The group generally restricts its purchase of insurance to situations where
this is required for legal or contractual reasons. We bear losses as they
arise, rather than spreading them over time through insurance premiums
with attendant transaction costs. This approach is reviewed on a regular
basis and if specific circumstances require such a review.
Outlook
Other businesses and corporate annual charges, excluding non-operating
items, are expected to be around $1.6 billion in 2015.
Crew carrying out mooring operations on the deck of BP’s oil tanker, British
Chivalry, as it berths in Singapore.
Comprises our biofuels and wind businesses,
shipping, treasury and corporate activities including
centralized functions.
★ Defined on page 252. BP Annual Report and Form 20-F 2014
Strategic report
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