Centrica says gas costs are hitting profit
BRITISH energy giant Centrica has said its profits in the first half of 2011 will be lower than last year, and hinted that it could raise household bills to help offset this drop.
Centrica said UK residential energy will deliver just half the operating profits that it did in 2010, blaming higher commodity and operating costs.
While the firm said North Sea gas production would help pare the losses, it also complained of higher taxes on UK energy production denting profits in its gas storage business, based in the southern North Sea.
Centrica added in its stock market announcement that “retail margin recovery” would help it reach its full year forecasts, suggesting that consumer bills will be hiked.
The firm added that full year earnings will be in line with expectations, showing year on year growth.
Energy provider Scottish & Southern was the first to raise its prices earlier this month, with a 19 per cent gas bill hike that provoked the anger of consumer groups but was seen as the starting gun on an industry-wide price rise.
Centrica has previously said the warm weather and energy efficiency measures have dented household energy consumption, meaning a price hike is needed to offset the lost revenues.
Centrica also reiterated its plan to expand its profitable North American business to lower its exposure to the uncertainties of the UK market.
It told investors and analysts yesterday that the US market is more fragmented than the UK, with no national player, meaning expansion via a state-by-state plan is a more certain growth plan. The firm already provides power for 6m customers in the US and Canada.
Centrica shares gained 0.2 per cent to close at 324.4p yesterday. The firm will announce half-year results on 28 July.