British Gas owner Centrica sells US supplier Direct Energy as earnings fall


The owner of British Gas has ended its international expansion plans to help shore up its battered balance sheet by selling its North American energy supply business for $3.6bn (£2.85bn).

Centrica revealed plans to sell Direct Energy to the US energy company NRG Energy alongside its latest financial result which revealed falling earnings over the first half of this year due to the coronavirus pandemic, and further customer losses at British Gas.

The sale effectively ends Centrica’s international expansion plans, but the multi-billion dollar cash windfall will help to reduce the struggling energy company’s debt pile and help rescue its defined benefit pension scheme.

The deal ignited a rally in Centrica’s share price, which leapt more than 20% to over 50p a share for the first time since the Covid-19 outbreak.

The pandemic has piled pressure on Centrica’s struggling finances over the first half of the year by triggering a collapse in oil and gas prices, and a slump in energy use from British Gas business customers during the UK’s lockdown.

The company may face further financial strain in the second half of the year if cash-strapped customers are unable to pay bills, and customer losses continue. Centrica said British Gas lost 226,000 customers in the first half of the year.

Justin Bowden, the national secretary of trade union GMB, described the figures as a “stark indictment of the governance of this once great British company”.

The company’s earnings before interest, debt and amortisation (Ebitda) for the first half of the year fell by 19% compared with the year before to £869m, leading to a pre-tax loss of £264m.

Centrica revealed earlier this year a loss of more than £1bn for 2019 before ousting its outgoing chief executive, Iain Conn, and suspending shareholder dividends, ahead of a major corporate restructuring which will include the loss of 5,000 jobs.

The company is in a dispute with unions, which claim that in addition to the job cuts Centrica is preparing to ask the rest of its 20,000 staff to sign up to new contracts with tougher terms and conditions.

Chris O’Shea, the company’s new chief executive, said Centrica’s mission now “is to turn around the company by putting customers at the heart of everything we do and creating a simpler, leaner, more modern and more sustainable company”.

He added: “The sale of Direct Energy is a fundamental step towards this, and although we have a lot more to do, we have the people, the brands and the market positions to deliver a successful turnaround.”

Source: Read Full Article