British Gas’s owner, Centrica, has plunged to a loss of more than £1bn after the price cap cut the energy supplier’s earnings to all-time lows and falling gas market prices dealt a blow to the value of its North Sea business.
The parent company of Britain’s biggest energy supplier delivered its worst financial results since 2015, reporting a pre-tax loss of £1.1bn for last year, from a £575m profit in 2018. Profits generated by British Gas fell by 71% to £137m, the lowest levels in the supplier’s history, and shares slumped to a 22-year low.
Centrica’s outgoing chief executive, Iain Conn, complained that the government’s energy price cap had created an “unsustainable” market, and said it was “very difficult to find anyone who is making money”.
Analysts warned that the company’s profits would remain under pressure until it was able to sell off its fossil fuel and nuclear power businesses, which cost Centrica over £800m last year.
Shares in the company – which has an army of small shareholders – tumbled more than 17% to around 70p, compared with almost 300p a share when Conn took over as chief executive in early 2015, raising the risk that Centrica may soon tumble out of the FTSE 100. At their peak, in 2013, they were changing hands at more than 400p.
Conn brushed off the “simplistic reaction” of the market and said the energy firm was “demonstrating momentum as we enter 2020”.
British Gas lost 286,000 customers from its energy supply business last year, which is half the decline rate of the year before, and a quarter of the decline rate of 2017, Conn said. The business gained 78,000 customers for “energy services” such as boiler repair contracts.
However, the energy price cap cost the company about £300m last year. The government-imposed price cap limits the amount that suppliers can charge customers who use default energy tariffs to buy their gas or electricity.
The embattled energy company also reported a £1.7bn financial blow after writing down the value of its fossil fuel and nuclear businesses, which it hopes to sell by the end of the year, and from covering the costs of its recent corporate restructuring.
The company reported an impairment charge of £476m against its North Sea oil and gas business, Spirit Energy, and a £372m impairment on its stake in the Dungeness B and Hunterston B nuclear plants, which have suffered outages over the past year.
Conn confirmed that Centrica was in talks with a consortium of investors that may be willing to buy part of its 20% stake in the UK’s nuclear reactor fleet. It hopes to sell off its share in the ageing reactors by the end of the year, but problems at two of the older plants have raised doubts. The company is also trying to sell Spirit Energy.
The company also reported an exceptional cost of £356m for restructuring the business, which has included thousands of redundancies in recent years.
Conn is leaving the company later this year after a torrid five-year tenure marked by the company’s sliding share price, and heavy customer losses from British Gas. Centrica has yet to announce a replacement for Conn, who is expected to step down after the company’s annual investor meeting in May.
The company is also temporarily without a permanent chairman after Charles Berry began a leave of absence earlier this week due to a medical condition. Centrica said it expected Berry to return to his duties shortly.
