British Gas tries to enlist Sids' aid

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The Independent Online
British Gas is attempting to enlist the support of its shareholders in fighting the new tougher regulatory regime proposed earlier this week by Ofgas director-general Clare Spottiswoode. The news came as the shares staged a minor recovery, rising 3p to 177.5p, but they still ended 50.5p down since Ms Spottiswoode unveiled her thoughts on Monday.

In a letter to the gas group's 1.7 million shareholders, the chairman, Richard Giordano, reiterated his rejection of the regulator's "damaging" proposals and called on them to write to Eileen Marshall, the Ofgas director of regulation, expressing their concerns.

"You can be sure that British Gas will defend the interests of shareholders against these unprecedentedly harsh and ill-founded measures from Ofgas. In this connection, individual shareholders can make a real difference because gas industry legislation obliges the regulator to consult with interested parties on new measures such as those now proposed."

Mr Giordano reiterated that the effect of the proposals could be to cut revenues between pounds 650m and pounds 850m, more than the total dividend paid to shareholders last year. He also warned that the price formula would "severely limit" any subsequent recovery of profitability, while the "draconian" cuts in operating expenditure would require job cuts of between 8,000 and 10,000.

A spokesman for the company said they had had several hundred calls from small shareholders expressing their concern at what Ofgas is proposing and asking what they can do. As this was a consultation process, they were now advising them to write direct to Ofgas.

He defended the pounds 400,000 cost of the exercise. "We think it is critical to communicate to shareholders because of the amount of revenue which is at stake and the proposals, which are very far reaching, are probably one of the most serious to affect the British gas industry."

This is the first time British Gas has written direct to shareholders over a corporate matter of this nature.

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