Centrica profits plunge as warm winter weather hurts
UK energy giant Centrica forecast yesterday that wholesale oil and gas prices could stay low until 2017.
The owner of British Gas in Britain and Bord Gáis Energy in Ireland said yesterday that its profits slumped by 35pc to £1.75bn (€2.37bn) in 2014 due to the plunge in oil and gas prices.
Profits at the gas and electricity supply business fell by 23pc to £439m after customers used a fifth less gas for heating in the warmest year on record.
Centrica's new chief executive, Iain Conn, said the company was planning on the basis that lower wholesale prices will persist for all of 2015 and potentially through 2016 and into 2017.
"If prices do stay low then, as we are buying ahead, the average price we have been buying ahead will also fall and if it stays low there is the possibility of further reductions we could pass through to our customers," Mr Conn said.
He added that it was "absolutely feasible" there could be further reductions in Britain this year, following a 5pc gas price cut announced last month.
Mr Conn said the company was cutting its dividend as well as writing down £1.4bn post-tax in the value of its North Sea and power plant assets, slashing North Sea investment by 40pc and launching a strategic review.
Shares in Centrica tumbled 8pc on the dividend cut and results, which were worse than analysts had expected.
Mr Conn said: "2014 was a very difficult year for Centrica and the recent fall in oil and gas prices creates further challenge. We are cutting investment and costs in response."
British Gas, the UK's biggest household energy supplier, continued to lose customers to rivals. The number of gas and electricity accounts it supplied fell by 368,000 over the year.
The results came in the same week that energy companies told a Dail committee that Irish wholesale gas prices have fallen by 18pc in the last year but households here are only set to get a fraction of that reduction in their energy bills.
International gas prices in euros have declined by 18pc between early 2014 and 2015, the Commission for Energy Regulation (CER) said.
Irish household electricity prices have meanwhile fallen or are set to fall by between 2pc and 4pc, though some of these reductions won't come in until April.
Customers were not getting the full benefit of world reductions in gas prices because energy companies buy ahead or "hedge" their supplies at fixed prices. "It tends to take six months for price changes to feed through to the retail market," regulator Laura Brien told the Dail.
A UK Competition and Markets Authority inquiry found this week that millions of households paid up to £234 a year too much for their energy by failing to switch supplier.
Most overpaid on standard variable tariffs