British Gas owner Centrica has repaid a £27mn government loan used to pay staff furloughed during the pandemic and held back its chief executive’s bonus as it posted a doubling of profits weeks before households face a record increase in their bills.
Centrica, which has almost 11m customers, said adjusted operating profits rose by 112 per cent to £948mn in 2021, bolstered by surging profits from its North Sea oil and gas business.
The company also said it was helped by unusually warm weather in the last three months of the year, which allowed it to sell gas and electricity it had bought in advance and cash in on high energy costs.
The profit rise will fuel political concerns over rising energy bills for households. In April average bills will rise to almost £2,000, an increase of almost £700, driven primarily by high gas prices.
Chris O’Shea, Centrica’s chief executive, said the company had “delivered a huge tax windfall for the government and that’s quite right”.
He said he would waive a £1.1mn bonus awarded in addition to his £775,000 salary and postpone the reintroduction of dividend payments until later this year, after shelving payouts in 2020 in a move aimed at preserving capital at the onset of the pandemic.
O’Shea declined to comment on the impact of war in Ukraine after wholesale British Gas prices leapt on Thursday morning. “We were both surprised and not surprised by what we woke up to this morning. This is absolutely unprecedented,” he said, adding that “I don’t think it’s helpful to speculate on an unfolding situation.”
British Gas had been losing customers due to intense competition over the past decade, but the collapse of 33 energy suppliers since January 2021 has benefited the company, which has “hedged” or insured against price rises. Under its “supplier of last resort” regime, the industry regulator Ofgem has transferred hundreds of thousands of customers of failed energy groups over to British Gas, swelling customer numbers by 676,000
O’Shea called for strengthened regulations to ensure that a “crisis of this sort never happens again”. “We believe we need to see significant change to address the underlying issues in the UK’s complex energy regulations, by simplifying and strengthening regulations to protect customers,” O’Shea said.
O’Shea, who was appointed chief executive in 2020, is part way through a significant shake-up of the company, streamlining its management and refocusing the business on customer facing energy services.
The company has effectively ended its international expansion plans by selling Direct Energy, its US division, for £2.7bn. It has also agreed the sale of its Norwegian oil and gas assets, leaving Centrica with largely mature gasfields in the UK and the Netherlands from which it will continue to produce over the next decade. Adjusted operating profit in its Spirit Energy division, which operates in the UK and Norwegian North Sea, rose to £624mn from £84mn a year earlier.
The company is also ramping up its involvement in the net zero transition, rolling out the supply of heat pumps throughout the country, which it already installs in the south-west of the UK.