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

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

The power group behind British Fuel stated on Thursday that strong performances from its electrical energy technology belongings, fuel it sells from fields within the UK North Sea and its power 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 stated it had offered £325mn in short-term loans to 2 of its UK last wage pension funds in October amid the gilts disaster, though it insisted they’d not been near collapse. The loans would enable the schemes extra time to liquidate belongings “in an environment friendly method with the intention to restore their important liquidity buffers”, the corporate stated.

The UK authorities has been going through calls from opposition politicians to lift windfall taxes on power firms which are benefiting from report wholesale fuel 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 fuel producers, together with BP and Shell.

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

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

Centrica acknowledged the “tough atmosphere going through many individuals” as they struggled with excessive power payments. It stated it will put aside one other £25mn to assist prospects this yr on high of £25mn already dedicated.

Nationwide Grid’s outcomes have been buoyed by plenty of elements 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 stated income this yr could be “broadly flat”.

Vitality community firms comparable 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 power payments goes in direction of sustaining Britain’s power infrastructure and is distributed to firms together with Nationwide Grid.

Nationwide Grid’s chief government John Pettigrew advised 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 power infrastructure to accommodate extra renewables comparable to wind and photo voltaic. “The way in which out of this power disaster is that we put money into networks to permit the connection of renewable technology,” Pettigrew stated.

Chancellor Jeremy Hunt is anticipated to announce a rise within the UK’s windfall tax on oil and fuel producers when he delivers his Autumn Assertion on November 17. He has additionally been analyzing extending the levy to electrical energy technology firms.