Centrica boss Sam Laidlaw has rejected calls for his company to be broken up as he unveiled a 6 per cent drop in profits at the group’s British Gas residential supply arm.
Speaking in the week after Energy Secretary Ed Davey suggested British Gas could need to be broken up because of its large market share and high supply profit margins, Laidlaw said it was essential that the group remain intact if it is to compete in global markets.
He was speaking as British Gas reported a decline in household supply profits to £571 million, despite hiking prices by 9.2 per cent in November, as the milder winter meant customers used less heating.
The warm winter meant that British Gas’s residential profits fell by 18 per cent in the second half of 2013 — a decline that helped drag down the bottom line of its parent company by 2 per cent to £2.7 billion for the full year.
The group’s 2013 profit was also hit by a £133 million loss from its gas-fired power stations in the UK and falling returns in North America, where profits from the supply arm tumbled by 36 per cent to £77 million. Meanwhile, profits at Centrica’s oil and gas production arm jumped by 23 per cent.
Unveiling the results, Laidlaw stressed the benefits of British Gas and parent company Centrica remaining whole. “The benefit of integration is actually that because we have the size and scale that we have we are able to contract new supplies for the UK, we are able to shield our customers from very volatile commodity prices,” he said.
“You have to be an integrated company if you’re going to be a sizeable retailer.” He added that Centrica would not have been able to sign £14 billion of crucial new gas supply agreements for the UK last year, with Cheniere of the US and Qatar, if the company had been broken up.
Centrica also announced today that it lost 362,000 customer accounts last year — 2 per cent of its total — after hiking prices, and has lost a further 100,000 so far this year.
Laidlaw cited the exodus as evidence that the market was working well and did not need to be overhauled.
He also criticised Labour leader Ed Miliband’s pledge to freeze energy prices for two years if elected prime minister and said “the prospect of political intervention and a wide range of potential policy initiatives has damaged investor confidence”. Shares in Centrica rose by 2.1p to 316.11p.