Centrica says gas price hike inevitable

Centrica says gas price hike inevitable

	Published : Fri, 19 May 2006 15:05 By : David Simms Print this Story

LONDON - British Gas owner Centrica delivered a further blow to its customers when it announced that residential gas prices would almost certainly go up again this year despite the 22 percent increase in February. Centrica chief executive Sir Roy Gardner said that its bottom line at the end of the year would be in red if prices remain at current levels.

"It has been a tough start to the year and at the operating level the group has to date traded below its expectations due primarily to higher than expected commodity costs.," he told shareholders at the company's annual meeting today. "Whilst we will endeavor to hold residential price levels during the year, we will not be immune from these external pressures and remain committed to our policy of fully recovering costs over time to return the business to acceptable levels of profitability."

Last year British Gas had hiked prices by 14.2 percent, but this year it's 22 percent raise has sent the annual electricity and gas bills to over £1,000 for the first time. An impending increase sent Centrica shares down by 8.25 per cent to 260.75 pence this morning. The shares have risen on speculation that the company was a takeover target of Russian giant Gazprom. Prime Minister Tony Blair has indicated that the government would not interfere in this business.

Analysts say that Centrica's shares would have gone down further had it not been for the takeover speculation. Added to the gloomy news was the fact that Centrica has lost a net 350,000 accounts since February. Sir Roy said the company has also been hit by storage and maintenance problems at Morecambe Gas Field. He added that consequently the profits expectations would be low this year.

"However, sales of energy accounts remained strong as a result of our sales and marketing activity and recovered within four weeks to pre-price rise levels. Sales of our 2009 fixed-price product were particularly strong with around 700,000 sold, taking the total number of fixed-price accounts to around 2.5 million. So far this year we have experienced a net loss of 350,000 energy accounts," he said. Analysts have already lowered the profits expectations by 10 percent.