Centrica plans £1.2bn expansion into North America

Centrica, THE British Gas, financial services and AA breakdown group, is to invest £1.2bn over the next two years in an attempt to capture 10 million gas and electricity customers in North America.

Centrica, THE British Gas, financial services and AA breakdown group, is to invest £1.2bn over the next two years in an attempt to capture 10 million gas and electricity customers in North America.

The ambitious expansion plan was revealed yesterday as Centrica claimed to have toppled npower, the retail arm of Innogy, from number one position in the domestic UK electricity market by increasing customer numbers to 5 million.

Roy Gardner, the chief executive, said his aim was to increase Centrica's UK electricity customers to 7 million by 2003 – which would increase its market share to around 25 per cent.

He also criticised the "ridiculous" prices Innogy was paying to buy market share by acquiring existing electricity suppliers and derided npower's sponsorship of the Test series.

Mr Gardner said: "I would not be interested in being associated with the England cricket team at the moment."

Centrica still has 68 per cent of the domestic gas market and 18.4 million customers, giving it 40 per cent of the UK energy market. In addition to its new Goldfish bank, Centrica has ambitious plans for telecoms and hopes to capture 10 per cent of the residential market by 2003. Mr Gardner also disclosed yesterday that Centrica may enter the car selling business, through the AA road services division, which it bought 18 months ago. As well as roadside breakdown, Centrica also provides car insurance and repair services.

But he made it clear that the main thrust of the group's expansion strategy would be overseas, notably in North America and Europe. Despite the crisis in the US electricity market and the decision of other big operators such as Shell and Texaco to pull out of energy supply, Centrica has highly ambitious plans. At present, it has 1.3 million gas customers, acquired through the purchases of Direct Energy, Avalanche and Energy America. The group has also signed up 500,000 customers in Ontario to take electricity when the market is liberalised there.

Phil Bentley, Centrica's finance director, estimated that the 8 million additional customers it is aiming to capture by 2003 would come equally from organic growth and acquisition of existing suppliers.

In continental Europe, Centrica's aim is to reach 5 million customers by 2005. Earlier this year, it bought a 50 per cent stake in a Belgian energy group Luminus, giving it 595,000 electricity and 166,000 gas customers.

Operating profits rose 15 per cent in the first six months of the year to £437m. The squeeze on gas supply margins caused by a doubling in prices cut profits from the residential gas business from £305m to £58m. But Centrica, which owns the Morecambe gas field, benefited from a sharp rise in gas production profits from £91m to £336m.

The electricity supply business made an operating profit of £19m against a first-half loss in 2000 of £45m while the AA contributed profits of £38m – up 15 per cent – helped by a record rise in membership to 11.7 million.

Outlook, page 17