(Adds background, analyst comment, updates share price)
By Karolin Schaps
LONDON May 8 Britain's Centrica warned
2014 earnings would be lower than expected and said it would put
its three biggest gas-fired power plants up for sale, the latest
European utility to take a hit from loss-making power stations
and a mild winter.
The group, which owns the UK's largest energy supplier
British Gas, also said it expected to leave its residential
prices unchanged this year, stopping short of replicating a
pledge by competitor SSE to freeze prices.
Low energy demand due to mild winter weather and losses from
its gas-fired power stations prompted the company to reduce its
outlook for full-year earnings per share by around 10 percent to
The interim management announcement took the market by
surprise as it arrived four days early and sent Centrica's
shares 2.6 percent lower by 0834 GMT, one of the top losers on
Britain's blue-chip FTSE 100 index.
"While earnings are anticipated to fall in 2014, we expect
an improvement in 2015, assuming more normal weather conditions
and reflecting the prospects for underlying growth," Chief
Executive Sam Laidlaw said.
Centrica's struggle to make money from its conventional
power plants and low energy demand mirror problems across
Europe's utilities sector.
Germany's RWE reported a record loss due to harsh
competition from renewable energy, while E.ON and
Italy's Enel cut dividends as they announced further
power plant closures.
Centrica said it was seeking investors for the three power
plants at Langage, Killingholme and Humber, worth around 500
million pounds ($850 million) and accounting for the majority of
the utility's conventional generation capacity at 2.7 gigawatts.
Centrica is looking at a number of options to attract
investors to the plants, ranging from leasing agreements to
outright sales, chief financial officer Nick Luff said.
The company plans to focus on small-scale gas plants that
can operate more flexibly to respond to sudden changes in supply
and demand caused by renewable energy generation.
"A profit warning is never good news, but it will perhaps
highlight that UK energy supply is not just a 'money for old
rope' business," Whitman Howard analyst Angelos Anastasiou said.
Centrica and other big UK energy suppliers face a potential
sector probe by Britain's Competition and Markets Authority
after regulator Ofgem recommended the body investigate possible
Britain's "Big Six" energy suppliers, which have a 95
percent market share, are often accused by bill payers of
benefiting from their monopoly position as prices have risen
sharply in recent years.
Centrica has lost 180,000 customers since the same time last
year, with smaller players gaining prominence.
"Competition remains fierce, particularly from smaller
suppliers who are currently benefiting from an exemption from
some environmental obligations," Centrica said.
The company also announced on Thursday it was selling a 40
percent stake in its Canadian natural gas business to
joint-venture partner Qatar Petroleum International for around
($1 = 0.5894 British pound)
(Editing by Paul Sandle, Kate Holton and Dale Hudson)