Scottish Gas owner Centrica has warned of “rising costs” in the North Sea after telling investors it will fail to meet the City’s expectations for annual profits.
The weaker-than-expected update came as the company said it had been forced into hiking bills for millions of households in order to offset losses in its residential arm.
The firm said overall group earnings, which had been expected to rise by 3% to 4%, were now likely to remain flat on the £2.7billion reported in 2012 after being affected by challenging conditions in its business supply arm across the UK and United States.
It moved to increase electricity and gas prices by 10.4% and 8.4% respectively from November 23 after the division was loss-making for a number of months.
It said profit margins in the residential business would largely hold firm, edging only slightly lower to just under 5%.
The “big six” supplier became the latest energy group to signal it would undo some of its imminent price rise by promising to pass on an expected cut in government green levies “in full” to customers.
Nick Luff, group finance director, said: “If there are any changes to the environmental programme that means it reduces our costs then we will pass that benefit back to our customers in full as quickly as possible.”
The firm has made £175million from North Sea sell-offs in recent months, including its 50% interests in the Greater Kittiwake Area – and will continue with its strategy to “optimise” its UK portfolio and sell non-core assets.
“We continue to invest in our North Sea portfolio, although the region is facing rising costs,” the firm’s interim management statement said yesterday.
“Production from a third well at our York project is expected by the end of the year, with a fourth well planned for the first half of 2014.
“The first well on the project is performing as expected, however production from the second well has been below expectations. First gas from Kew is now expected in the first half of 2014, while a sidetrack well at Grove is also expected to deliver first production in 2014.
“The non-operated Valemon and Cygnus projects are on schedule.”
In a move to calm mounting public anger, Centrica chief executive Sam Laidlaw said earlier this month he would donate his bonus – which could be worth up to £1.7million – to charity.
The group added today: “Energy suppliers and politicians both have a role to play in helping to minimise the impact of higher costs on bills and improving transparency to restore trust in the industry.”