Article content
(Bloomberg) — The UK’s biggest energy supplier, Centrica Plc, expects “significantly higher” earnings from its household business after regulatory changes allowed it reclaim some losses from customers that couldn’t pay their bills during the pandemic.
Article content
Full-year earnings per share are expected at about 24.7 pence, the top end of a range estimated by analysts, the company said in a statement Tuesday ahead of its annual general meeting. The boost comes after regulator Ofgem increased the allowance within the energy price cap for suppliers to recoup losses from bad customer debt.
Article content
While bills are finally falling from the record levels reached during the energy crisis, companies like Centrica that produce power, natural gas and oil have been making huge profits from selling at elevated prices. That’s not the case for selling energy to households where tariffs are capped and suppliers are saddled with debt from a growing number of customers who can’t pay their bills as the cost of living crisis squeezes household budgets.
Article content
The price cap for household bills is due to drop from the start of next month to reflect a 63% drop in natural gas prices this year. The allowance that’s helping boost Centrica’s earnings is added into the calculation that sets the price level for bills.
High prices have eased but good availability and volumes from gas production, storage assets and nuclear have helped keep profits high, Centrica said.
Centrica’s shares rose as much as 2.2%, the most in two weeks.
To try to recoup some of the windfall profits companies have been making, the UK government announced last week it would keep a windfall tax on oil and gas in place until 2028. However, it did set a floor price to help encourage investment in the sector.
The company is due to report its interim results on July 27.
“We await the strategic update from management on July 27 as the market looks to Centrica’s strong balance sheet and how the company may better align itself with the energy transition going forward,” RBC Capital Markets analyst Alexander Wheeler said in a note.
—With assistance from Elena Mazneva.
(Adds context from third paragraph.)
Leave a Reply