British Gas owner Centrica expects £70m hit from government’s energy cap

Shares in British Gas owner Centrica dropped almost eight per cent this morning as it revealed a new cap on energy bills will cost £70m in the first quarter of next year.

The £1,137 cap, revealed by regulator Ofgem earlier this month, is £68 lower than prices paid by 3.1m British Gas customers.

It has already reduced the number of customers on its £1,205 standard variable tariff from 4.3m at the start of this year.

The company said it expects to shed another 100,000 customers from the tariff by the end of the year as it prepares for the price cap, which starts on 1 January.

Centrica said it expects adjusted operating cash flow to fall between £2.1bn and £2.3bn, with net debt at £2.5-3bn, in 2018.

It will have delivered efficiencies of over £200m by the end of the year, and keep full-year dividend at 12p per share.

Lee Wild, head of equity strategy at Interactive Investor, said the £70m hit from the price cap “won’t make much of a dent in the annual profit figure”.

“A sprinkling of negatives in this third-quarter trading update have overshadowed solid progress in key areas,” he said.

“Customer retention and the generous dividend payment have been and remain two major factors for shareholders. Centrica’s British Gas arm has never been much good at the former, and another 372,000 customers have been lost in the past four months.”

Centrica chief executive Iain Conn said: “Our efficiency delivery and new customer propositions are helping to offset the effects of strong competition and regulation in energy supply.

“Maintaining a focus on performance delivery and financial discipline and demonstrating resilient cash flows remain our objectives for 2019 and beyond, as we deal with the impact of the UK energy supply default tariff cap.”