4 Min Read
* British Gas profit up 9 pct, residential profit up 11 pct
* Gas consumption up 12 pct due to cold weather
* Group EPS up 5 pct to 27.1 pence, in line with forecasts
* Centrica to invest in North American business
By Lorraine Turner
LONDON, Feb 27 (Reuters) - Centrica posted a 9 percent rise in profit at its British Gas business, the country's biggest household energy supplier, putting pressure on it to justify an inflation-beating rise in prices in the midst of a recession.
All of Britain's big six energy suppliers, which control the majority of the retail market, raised tariffs this winter, prompting a public outcry and leading the government to promise action to ensure consumers get the best deal.
Centrica, which reported a 5 percent increase in group earnings for last year, said on Wednesday the price rises were needed to cover energy costs, investment and to secure supplies.
"We recognise that it is very difficult," Chief Executive Sam Laidlaw told the BBC's Today radio programme when grilled about a 6 percent rise in prices for consumers.
But he said the firm had entered into 50 billion pounds ($76 billion) worth of commitments to secure supplies and "you cannot do that unless you remain a successful company."
The government's latest energy poll showed Britons are increasingly worried about energy bills, with 12 percent saying energy costs were a greater concern than transport or food expenses.
This has prompted Prime Minister David Cameron to step into the debate about consumer bills by promising to force suppliers to put customers on their cheapest tariffs in October.
Gas and electricity companies are now ranked lower than banks in terms of trust, and on a par with car dealers, according to consumer watchdog Which, leading regulator Ofgem to unveil plans last week for tougher rules to deal with the public's mistrust of energy suppliers.
Centrica said British Gas's profits rose 9 percent to 1.09 billion pounds, just above analysts' average forecast of 1.07 billion and helped by an 11 percent increase at the unit's residential energy supply business.
Cold weather pushed up gas consumption by 12 percent.
Energy suppliers across Europe are battling rising costs as well as weak demand from recession-hit manufacturers. A drive in Germany to abandon nuclear power has also hit some hard.
"While offering a safer alternative to the turbulent continental utilities we see little reason to expect a rerating," Deutsche Bank analysts said of Centrica and its shares, citing a solid but unexciting outlook for earnings.
Centrica, which this month pulled out of plans to build new nuclear power stations in Britain with partner EDF, said it would focus on growing its North American business, as well securing sources of gas supply in the face of rising costs.
The short-term picture for wholesale prices was unclear, but higher energy prices would be a permanent fixture in the long-term in the drive to lower carbon emissions and produce greener energy, the company said.
"To get affordable, low-carbon, secure energy is a challenge ... it will put upward pressure (on prices)," finance director Nick Luff told journalists.
Centrica said profits rose across all four of its business units, with the biggest contributor to the rise from its production arm where profits increased 20 percent following investments in both Britain and Norway last year.
In a strategy update, the company said it aimed to double profitability at its North American processing and storage business over the next 3-5 years as well as increase international gas production.
Luff added investment in shale gas in Britain was not off the table.
Centrica reported earnings per share (EPS) for the year ended December up 5 percent to 27.1 pence, in line with forecasts. Adjusted operating profit rose 14 percent to 2.74 billion pounds, ahead of analysts' expectations of 2.61 billion.
At 1130 GMT, Centrica shares were steady at 347.9 pence.