May 13, 2019 / 6:29 AM / 3 months ago

British Gas owner Centrica expects tough first half trading conditions

(Reuters) - Britain’s largest energy supplier Centrica Plc faces a challenging trading environment in the first half of the year due to a national cap on energy prices, warmer-than-normal weather and weak UK natural gas prices, it said on Monday.

FILE PHOTO: A British Gas sign is seen outside its offices in Staines in southern England, July 31, 2014. REUTERS/Toby Melville

The company, whose British Gas unit is Britain’s largest energy supplier, said these factors would impact financial performance in the first half of 2019, but maintained its full-year outlook for operating cash flow and net debt.

The company said it expects to achieve 2019 adjusted operating cash flow in the 1.8-2 billion pound range but said the tough trading conditions would put pressure on the outlook for the year.

British energy regulator Ofgem was told by parliament last year to cap energy prices after lawmakers said customers were being overcharged for electricity and gas. Prime Minister Theresa May had called the tariffs a “rip-off”.

Centrica said earlier this year the cap on standard energy prices would lead to a 300 million pound hit to profits in 2019, including a one-off impact of about 70 million in the first quarter of 2019.

The company on Monday said its performance could be impacted by low output from Britain’s eight nuclear plants, in which it owns a 20% stake.

France’s EDF owns the remaining 80% in the plants.

The Hunterston plant has been offline since last year after cracks were found in the cores of its two reactors, while the two reactors at the Dungeness site are also currently offline and not expected to return to service until later in the year.

Centrica hopes to sell its stake in the nuclear fleet by the end of 2020 and said it would likely provide an update at its interim results.

“We intend to provide a strategic update regarding our portfolio and prospects at the time of our interim results in July,” Chief Executive Iain Conn said in a statement.

Shares in the company rose around 3% on Monday morning as analysts described the trading update as mildly positive.

“Despite a number of negative external factors (warm weather, outages at EDF-operated nuclear plants, falling gas prices), Centrica has confirmed all 2019 targets,” analysts at Jefferies said in a research note.

Reporting by Tanishaa Nadkar in Bengaluru; editing by Shounak Dasgupta and Jason Neely

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