Pre tax profits are at the moment estimated at 2 billion pounds, now that is a lot of money and a huge increase on last years profits up 30% on last years. Ok we have had an extremely cold winter, so that will obviously helped things along, but the concern is how you can make such a profit, when so many of us are struggling to pay our energy bills, my other concern is Centrica have just signed a deal with Qatar for natural gas, I can see and understand why the watchdog is keeping an eye on Centrica It looks very much like they are monopolizing the energy market at the moment, and that can only spell one thing for the consumer, trouble.
City forecasts predict that Britain’s leading energy company will announce pre-tax profits of £2bn, up 30pc on the previous year.
The high profits are likely to intensify calls for a Competition Commission inquiry into allegations of profiteering. The regulator, Ofgem, announced an investigation into the market last November and could order a further inquiry.
British Gas, the business that supplies 10m homes with gas and electricity, is expected to have made £740m in profits last year – up 24pc from £595m the year before – according to analysts Redfern.
But in the second half of the year, despite one of the coldest winters in decades, it will not have done as well as the previous year, with profits forecast to total £155m, down from £300m.
However, regulators are likely to look closely at ways in which Centrica may have sought to reduce British Gas’s profits in the last half – such as paying off more debt than normal.
Ofgem is investigating whether any companies have used the hike in wholesale gas prices to raise bills and make greater profits. The average household energy bill will be £65 a year higher than last year at £1,133.
Alistair Buchanan, the chief executive of Ofgem, warned: “If any company in generation or supply were to take advantage of rising prices the punishment meted out will be swift and appropriately ugly.”
If Ofgem finds any wrongdoing, it has the ability to take its own enforcement action, ask the Government for more powers to deal with the companies or, in the worst case scenario, order a Competition Commission inquiry. However, the companies warn that a referral to the watchdog could delay reforms – paving the way for new nuclear power to become profitable in the UK – needed for them to invest £200bn by 2020.
A civil service source said: “The energy companies have a lot of power over Britain because we need them to make big investments here and they could simply take their capital elsewhere if they don’t like what we’re doing.”
Edmund Reid and Ihor Okhrimenko, JP Morgan analysts, do not think Ofgem will make a referral. “But the Ofgem investigation seems to have created a Catch-22 in some investors’ minds,” they said. “The better Centrica’s financial performance the greater the likelihood of political intervention.”
Centrica says it invested £1.60 for every £1 of profit it made in Britain over the past five years and it also claims that its average margins of 7pc at British Gas are lower than most other FTSE 100 companies. The company’s share price closed down 1.32 at 342.88p on Friday.