Profit boost for Centrica as energy crisis pushes households to brink

Profit boost for Centrica fuels windfall tax row as soaring energy prices push households to brink

The owner of British Gas is set for another year of bumper profits as it cashes in on soaring energy prices – sparking fresh calls for a windfall tax.

Just days after BP and Shell posted bumper profits, FTSE 250 listed Centrica said earnings for 2022 would be at ‘the top of the range of analyst expectations’.

That put it on course for operating profits of £1.4billion – a 55 per cent increase from last year when it doubled its profits to £948million. Centrica shares rose 3.9 per cent, or 2.82p, to 74.76p.

Bumper profits: Just days after BP and Shell posted bumper profits, FTSE 250 listed Centrica said earnings for 2022 would be at ‘the top of the range of analyst expectations’

The update was met with renewed calls for a windfall tax on energy companies – including from Tesco chairman John Allan who said the case for one was now ‘overwhelming’.

But Centrica chief executive Chris O’Shea, pictured right, said a windfall tax would be akin to ‘burning the furniture to stay warm’ as it would hit investment and future energy supply.

Centrica defended itself against talk of a tax, saying it was spending £50million helping customers manage the cost of living crisis.

It is also in discussions with Business Secretary Kwasi Kwarteng about re-opening Rough, pictured, Britain’s biggest gas storage facility, off the Yorkshire coast, to boost energy reserves.

Centrica is best known as the owner of British Gas, which supplies gas and electricity to more than 7million customers. 

Centrica also trades and produces gas, with facilities in the North Sea, and has a 20 per cent stake in Britain’s existing nuclear plants.

Business has been boosted by sky-high energy prices, which began rising as the global economy emerged from the Covid pandemic and shot up after Russia invaded Ukraine.

But higher energy prices have also pushed household bills to record highs.

The cost of living crisis is mounting – the energy price cap rocketed to £1,971 in April – and calls for a windfall on oil and gas producers have intensified amid accusations of profiteering.

Allan, a former president of the CBI and now chairman of Barratt Developments as well as Tesco, said the supermarket’s customers were ‘extremely stretched’ and called for ‘action to help people cope with a very, very sharp increase in energy prices’.

He told the BBC: ‘There’s an overwhelming case for a windfall tax on profits from those energy producers fed back to those most in need of help with energy prices. 

‘I think the energy giants are expecting it and I doubt they would be much fazed by it. It should be short-term only. A lot of people are feeling a pinch, and lots are extremely stretched.’

His comments came despite Tesco posting profits of £2.2billion last year and revenues of £61bn.

But O’Shea told The Times: ‘You’ve got to look and say, “What will it do longer term? What if it does impact investment?” 

Prices are going to go up long term. You have to be careful you don’t burn the furniture to stay warm. You’ve got to think strategically.’

AJ Bell analyst Danni Hewson said: ‘There is political will from certain quarters for a tax. This is a headache that will not go away.’

The Government has resisted calls for a one-off levy. Last week BP and Shell hoped to quash the idea by pledging billions of pounds of investment into the UK. 

Centrica also hopes to deflect the tax by re-opening Rough, which has the potential to house 70 per cent of the UK’s natural gas reserves. It was shut in 2017 for being too expensive to maintain.

Centrica is looking for £1.5billion in investment and is in talks with the Government about implementing a regulated asset structure – similar to the Thames Tideway scheme. It would be boost the country’s energy reserves and create 4,000 jobs.