Centrica blames UK price cap for profits slump

British Gas owner Centrica on Thursday blamed the UK government's price cap, nuclear power station outages and lower gas prices for a 35% slump in annual profits.

Operating profits fell to £901m from £1.3bn while turnover fell 2% to £26.8bn. The UK's largest energy supplier reported a pre-tax losses of £1.1bn compared with a profit of £575m.

The company booked £1.7bn in exceptional charges, including £476m relating to impairments at its upstream oil and gas operations (E&P) and nuclear assets due to a cut in commodity price forecasts and restructuring costs.

The company is in the process of divesting its E&P operations. It is selling its North Sea exploration arm Spirit Energy and a 20% stake in Electricite de France SA’s U.K. nuclear plants.

As a result, the statutory loss attributable to shareholders for the period was £1.02bn in 2019 compared to a profit of £183m a year earlier.

“2019 operating profit and earnings were materially impacted by a challenging environment, most significantly the implementation of the UK default tariff cap and falling natural gas prices,” chief executive Iain Conn said in a statement.

“Looking to 2020, we expect to deliver earnings momentum relative to 2019 from our core customer divisions, but upstream earnings are likely to be impacted by the lower commodity price environment.”

A statutory cap on electricity and gas bills came into effect a year ago to counter high consumer prices. The energy regulator Ofgem last week told suppliers to cut average standard bills and pre-pay bills by 1.4% from April 1 due to a fall in wholesale process between August 2019 and January 2020.

The company lost 286,000 energy supply accounts during the period as new competitors continue to grab market share.

Overall consumer account holdings rose by 722,000 or 3%, the company said as it offered new services such as boiler repairs and Internet of Things products like thermostats that can be operated from a mobile phone.