July 31, 2008 / 6:39 AM / 9 years ago

Centrica defends steep hike in gas prices

LONDON (Reuters) - British Gas-owner Centrica said on Thursday it had been “absolutely necessary” to raise household gas prices as first half operating profit fell nearly 20 percent to 992 million pounds.

<p>Gas flames are seen burning on a cooker in London in this February 21, 2008 file photo. Centrica said on Thursday it had been "absolutely necessary" to raise household gas prices as first half operating profit fell nearly 20 percent to 992 million pounds. REUTERS/Stephen Hird/Files</p>

The company, which on Wednesday hiked household gas bills by 35 percent -- its second rise this year -- added that the results were good considering tough market conditions.

“We are on track to deliver full year results in line with consensus. The forward price (of wholesale gas) for next winter made it absolutely necessary to put through price rises,” Finance Director Nick Luff told Reuters in a telephone interview.

He denied putting the business before its 16 million domestic energy customers, despite the group’s near 1 billion pound profit in just six months.

“The market is aware wholesale gas prices are significantly high. Profits are down on last year -- we are not immune to it,” he said.

<p>Centrica Chief Executive Sam Laidlaw is seen in this undated handout photo. REUTERS/Handout</p>

British Gas makes up about a fifth of the overall company, but Luff said Centrica could not take profit from its other divisions to help out customers due to the need for future investment.

“We need to make investment to stop the lights going out. To make an investment, it has to have a return. It’s important that each part of the business makes a profit,” he said.

And he added that the group would work hard to help those in fuel poverty and cutting people’s supplies would be “an absolute last resort”.

Shares in Centrica, down 14 percent this year, were up 1.7 percent at 324.5 pence by 8:27 a.m., valuing the company at 12 billion pounds.

The company said first half profit at its British Gas unit fell 69 percent but other parts did better.

British Gas Services operating profit increased 35 percent to 85 million pounds, while Centrica Energy -- which benefits from the higher wholesale gas price -- saw a 50 percent increase to 504 million pounds.

Reporting by John Bowker; Editing by David Holmes and David Cowell

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