Centrica launches £250mn buyback as vitality costs drive up revenue

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Centrica has risked stoking additional controversy over vitality corporations cashing in on excessive wholesale gasoline and energy costs because it launched a £250mn share buyback, its first since 2014.

The vitality group behind British Fuel mentioned on Thursday that sturdy performances from its electrical energy era property, gasoline it sells from fields within the UK North Sea and its vitality buying and selling arm meant full-year revenue was more likely to be in direction of the highest finish of analysts’ expectations.

Analysts had forecast Centrica to ship earnings per share of between 15.1p and 26p.

Fellow British utility Nationwide Grid — which owns electrical energy community infrastructure — on Thursday additionally upgraded its earnings expectations for the total monetary yr after its underlying working revenue rose 50 per cent within the six months to September 30.

Nationwide Grid mentioned it had supplied £325mn in short-term loans to 2 of its UK remaining wage pension funds in October amid the gilts disaster, though it insisted they’d not been near collapse. The loans would permit the schemes further time to liquidate property “in an environment friendly method as a way to restore their vital liquidity buffers”, the corporate mentioned.

The UK authorities has been going through calls from opposition politicians to boost windfall taxes on vitality corporations which can be benefiting from report wholesale gasoline and electrical energy costs, whereas British households grapple with the price of residing disaster. Greater revenue forecasts from Centrica and Nationwide Grid observe a string of bumper third-quarter earnings bulletins in current weeks from oil and gasoline producers, together with BP and Shell.

Centrica is in a very difficult place because it produces electrical energy and gasoline however can also be Britain’s largest provider to households, that are going through the largest squeeze on their revenue for a era, fuelled by increased vitality payments. The corporate controversially resumed dividend funds this yr for the primary time since 2020.

It mentioned on Thursday it will repurchase as much as 5 per cent of its issued share capital over the following 3 to 4 months at an anticipated value of about £250mn.

Centrica acknowledged the “troublesome setting going through many individuals” as they struggled with excessive vitality payments. It mentioned it will put aside one other £25mn to assist clients this yr on high of £25mn already dedicated.

Nationwide Grid’s outcomes had been buoyed by plenty of components together with contributions from a brand new subsea electrical energy buying and selling cable between Britain and Norway, which opened in 2021. Nationwide Grid is now forecasting progress in earnings per share of 6-8 per cent; it had beforehand mentioned earnings this yr can be “broadly flat”.

Power community corporations similar to Nationwide Grid are regulated by Ofgem and haven’t but come underneath the scope of any windfall taxes. About 10 per cent of shopper vitality payments goes in direction of sustaining Britain’s vitality infrastructure and is distributed to corporations together with Nationwide Grid.

Nationwide Grid’s chief government John Pettigrew instructed the Monetary Instances it was attempting to be “very aware of the affordability points for UK shoppers” however insisted that for each £1 in revenue it was producing, it was investing about £2 to improve vitality infrastructure to accommodate extra renewables similar to wind and photo voltaic. “The way in which out of this vitality disaster is that we put money into networks to permit the connection of renewable era,” Pettigrew mentioned.

Chancellor Jeremy Hunt is predicted to announce a rise within the UK’s windfall tax on oil and gasoline producers when he delivers his Autumn Assertion on November 17. He has additionally been inspecting extending the levy to electrical energy era corporations.

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