Centrica profits halve on lower gas prices as it books nuclear writedown

Times

4 days ago

Lower commodity prices have halved operating profits at Centrica and forced it to book writedowns on its nuclear and gas businesses.
The FTSE 100 energy group said that adjusted operating profits fell 47 per cent to £549 million in a 'challenging market'. Its British Gas supply arm was also hit by lower demand in the warm weather.
Centrica booked a £123 million impairment on its stake in Britain's nuclear plants 'as a result of reduced actual and forecast power prices, along with an update to operating expenditure assumptions'. It also booked a £78 million impairment after bringing forward the estimated closure date for its Morecambe gasfield 'as a result of lower forecasted gas prices'. It has not disclosed the planned closure date.
These one-off charges, which are excluded from the adjusted operating profits, contributed to Centrica recording a statutory first-half loss of £69 million, compared with a profit of £1.7 billion in the same period of 2024, although the change was primarily driven by swings in the value of derivative energy contracts as a result of accounting remeasurements.
Despite the weak results, Centrica said it would pay an interim dividend of 1.83p per share, up from 1.5p per share this time last year. Shares in the company, which have risen 12 per cent over the past year, were up 1¾p, or 1.1 per cent, to 160½p at Thursday's close.
Centrica is best known as the owner of British Gas, which was Britain's biggest household energy supplier until being overtaken by Octopus Energy this year.
Profits at British Gas fell 15 per cent to £133 million as it took a £50 million hit from the unusually warm weather curbing demand, more than offsetting the benefits of a 1 per cent rise in customer numbers.
This week Centrica confirmed a £1.3 billion investment in the Sizewell C nuclear plant due to be built in Suffolk, taking a 15 per cent equity stake. It already owns a 20 per cent stake in Britain's existing plants and profits from this business fell 52 per cent to £107 million in the first half owing to lower power prices.
Profits for Spirit Energy, Centrica's North Sea business, fell 39 per cent to £150 million on lower oil and gas prices.
Profits at Centrica's energy trading arm collapsed by 72 per cent to £65 million. 'Our physical gas and power trading business, which typically profits from price dislocations, has faced short-cycle volatility driven by wider geopolitics, tariff news flows and soundbites, with speculative capital disrupting fundamentals,' Centrica said.
The group also owns Britain's largest gas storage site at Rough in the North Sea. Having originally shuttered the facility as uneconomic in 2017, it partly reopened it in 2022 during the energy crisis and has been lobbying the government for subsidies to fully reopen it and, in time, convert it to a £2 billion hydrogen storage facility.
Rough fell to a £26 million loss in the first half of the year, compared with a £53 million profit a year earlier, and Centrica warned that it expected that 'Rough will make an adjusted operating loss towards the upper end of £50 million to £100 million this year, a situation which is not sustainable as we move into next year'.
• Cold snap triggers gas injection from largest storage plant
Chris O'Shea, Centrica chief executive, said it had not been refilling the site this summer as there was too little difference between summer and forecast winter prices.
He said it would cut its losses as much as possible by producing the gas remaining in Rough this winter, but there would only be about 10 to 15 million cubic feet in the site to produce, about a third of the volume that was produced last winter.
'What we're not going to do is to increase our losses by putting more gas in that we'll lose money on,' he said.
O'Shea said Centrica had been 'engaged in constructive talks with the UK government on Rough', describing it as 'a vital strategic asset for the country', and welcomed a promised consultation on gas storage.
'We're ready to redevelop the asset as soon as we get the right framework in place, but we can't keep this option indefinitely,' he said. 'So we're asking the government to move at speed.'
The British Gas owner has called for its larger rival Octopus Energy to be barred from taking on new customers after failing to hit financial resilience targets.
O'Shea said it was 'outrageous' that Ofgem had not placed such restrictions on all three companies that had fallen short of the minimum capital target that came into force at the end of March.
He said it was 'criminal' that the regulator was allowing a situation that he claimed was 'increasing the chance of systemic failure in the market'.
O'Shea denied his comments were 'sour grapes' after Octopus overtook British Gas as Britain's largest supplier in January and said he simply wanted regulation to be 'fair and evenly applied'. He said Octopus's accounts showed a shortfall of more than £1 billion compared with the target.
Ofgem's financial resilience rules were introduced after dozens of poorly capitalised suppliers went bust in the energy crisis of 2021-22, costing households billions of pounds. Ofgem has not named the three suppliers falling short of the minimum capital target but Octopus has confirmed it is one of them and Ovo is the only large supplier to decline to answer.
An Ofgem spokeswoman said: 'The financial resilience of the energy sector has improved significantly. Our financial resilience controls are clear that where a supplier is not meeting the capital target but has a credible and agreed plan in place, that is not a breach of the rules.'
She said the plans did come with restrictions and it was monitoring to ensure suppliers adhered to them.
An Octopus Energy spokeswoman said: 'This is yet more naked self-interest from British Gas. We fully comply with Ofgem's rules and our resilience meant we not only thrived through the energy crisis but bailed out Bulb. Thousands of British Gas customers join us every month because we're simply better.'