Centrica sets sights on 4m customers
Friday 11 September 1998
In the first six months of this year it made a pounds 90m profit against losses of pounds 149m in the same period of 1997.
With the launch of electricity competition just three days away, Roy Gardner, Centrica's chief executive, disclosed that it has signed up 440,000 customers already with its offer of a 12 per cent cut in electricity bills. It expects the number to reach 500,000 by the end of this month. But he said that in the longer term, Centrica was aiming for 15-20 per cent of the market, which would give it between 3.6 million and 4.8 million of the country's 24 million domestic consumers.
Centrica's marketing costs spent attacking the deregulated energy market will reach pounds 80m this year against pounds 55m last year.
Electricity industry executives have put a much more modest estimate on the number of customers who will switch, forecasting that only 10 per cent of the market will change suppliers.
Mr Gardner ruled out a bid for London Electricity, which has been put up for sale by its US owners, Entergy. But he said Centrica was keen to acquire power stations, indicating that it was interested in building up a portfolio of as much as 4,000 megawatts.
Centrica estimates it has captured 15,000 to 20,000 of the 750,000 households covered by the first wave of electricity liberalisation, starting on Monday.
Centrica's share of the domestic gas market has fallen to 85 per cent but in areas where competition has been established the longest it is down to between 70 and 75 per cent.
However, Mr Gardner said Centrica was now beginning to win back customers at a faster rate than it was losing them, producing a net gain in market share.
The turnaround into profit was largely due to a sharp fall in exceptional charges related to Centrica's North Sea take-or-pay gas contracts. These charges fell from pounds 252m in the first half of 1997 to pounds 35m in the same period this year.
Centrica will also be helped this year by a fall in the average cost of the gas it purchases from 19p to 17p a therm against a current spot market price of 13p.
However, at the operating level, Centrica also improved its performance, raising profits from pounds 89m to pounds 110m.
The improvement came despite a warm winter, increased marketing costs and a pounds 14m expenditure on computer systems linked to the opening of the domestic energy markets.
Decisions on how to return cash to Centrica's 1.3 million shareholders - almost certainly through a special dividend - will be taken towards the end of this year.
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