Gas profits set to ignite anger

0

British Gas parent Centrica is expected to unveil record profits

Utility giant Centrica is likely to inflame anger over high energy bills when its residential arm British Gas unveils record profits.

The UK’s biggest gas supplier is expected to report a 24% hike in operating profits of £740 million, according to analyst Redburn, just over a couple of months after the company pushed up bills by 7%.

BG’s parent company Centrica will also post record profits of £2.4 billion, Redburn said, but these will be driven by its gas exploration operations. The company dividend is also expected to increase, reportedly by 10%.

The energy giant has put recent price hikes down to soaring wholesale prices and has pledged to spend £15 billion on much-needed investment.

Ofgem, the energy watchdog, is leading an investigation into energy giants’ balance sheets after discovering average profit margins had increased as companies claimed they had no choice but to lift bills.

Ofgem found average margins on a standard dual-fuel tariff rose to £90 in November, from £65 in September. Around eight million British Gas customers were hit with a bill hike on December 10, lifting an average customer’s dual-fuel bill from £1,157 to £1,239.

The findings of the Ofgem inquiry will be published next month, with the potential outcome being a referral to the Competition Commission. Peter Atherton, analyst at Citigroup, warned commentators were “unlikely to let Centrica enjoy record profits without criticism” in the wake of rising prices, two cold winters in a row and squeezed household incomes.

With regards to the investigation, he added: “In our view a referral would be hard to justify, but for Ofgem it may have attractions.” But Centrica has defended its stance, claiming to be one of the most transparent of the “big six” energy firms.

Furthermore, British Gas, according to Redburn’s forecast, is expected to report a 48% decline in second-half profits, from £300 million to £155 million – the company’s lowest second-half profit in three years.

Centrica also claims British Gas prices were 0.5% lower at the end of 2010 than the start of the year after the supplier cut bills in February.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.