UPDATE 2-British Gas customers leave in droves, 2013 profit drops

Thu Feb 20, 2014 7:02am EST

Related Topics

* 2013 adjusted operating profit drops 2 pct to 2.7 bln stg

* British Gas profit falls 6 pct to 1 bln stg

* Company lost 362,000 residential gas customers last year

By Karolin Schaps

LONDON, Feb 20 (Reuters) - Householders left British Gas in their hundreds of thousands last year in a backlash against a 9-percent hike in already-high energy tariffs, owner Centrica said on Thursday when it reported a drop in 2013 group profits.

Public outrage at price rises has sparked a switching frenzy in the last few months and smaller energy providers, such as Ovo Energy and Good Energy, have been major beneficiaries of the move away from larger, integrated groups.

Britain's biggest energy supplier lost 362,000 residential customers in 2013, up 60 percent from 2012, after hiking prices just weeks after opposition Labour leader Ed Miliband promised he would freeze prices if elected, sparking a political storm.

Forty percent of customers switching electricity supplier in January moved to an independent company, up from 26 percent in December and 20 percent in November, data from energy lobby group EnergyUK showed.

The affordablity of heating British homes shot to the top of the political agenda last autumn, and resulted in the government allowing suppliers to cut bills by 53 pounds ($89).

British Gas, which has roughly 40 percent of the UK gas supply market and 25 percent of electricity - came under fire from Energy Secretary Ed Davey last week when he suggested the company's gas profit margins were excessive.

Centrica said on Thursday its pre-tax profit margins for gas supply were 8.9 percent and 0.8 percent in electricity.

The loss of customers coupled with high costs for wholesale gas and transmitting energy led to a 2 percent drop in the group's 2013 adjusted operating profit to 2.7 billion pounds, in line with analysts' expectations.

Profits at British Gas fell 6 percent to 1 billion pounds.

Chief Executive Sam Laidlaw said in a pre-recorded interview on Centrica's website that improved services, such as smart meters, were crucial to returning British Gas growth.

Centrica also said it would keep investing in its upstream exploration and production business to find new sources of cheap gas.

As Britain's domestic oil and gas reserves are falling, exploration companies are increasingly looking abroad to secure supplies.

Finance director Nick Luff told journalists he would not rule out further changes to the company's upstream portfolio, adding that Centrica was "constantly talking to all major gas suppliers in the world".

Last year, Centrica signed 14 billion pounds worth of gas supply deals, one with U.S. energy group Cheniere to import U.S. liquefied natural gas and an extension to its supply agreement with Qatargas.

The company also said on Thursday it expected 2014 earnings per share to fall partly due to the impact of damaged networks and equipment during a cold spell in North America.

"The company guidance that adjusted EPS is expected to be lower year on year is likely to bring down consensus estimates. We expect a high single digit consensus downgrade," Deutsche Bank analyst Martin Brough said.

Centrica's power generation business continued to struggle along with the wider European electricity market on persitent low demand and weak power prices.

The group's gas-fired power stations, under pressure from the low differential between gas and power prices, posted a 133 million pound loss in 2013, down from a 4 million loss in 2012.

"Market conditions look set to remain challenging for our gas-fired power stations with no sign of material recovery in 2014," Centrica said in its results statement.

Centrica shares were up 1.8 percent at 1156 GMT.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.