Energy price cap threatens cut in Centrica dividend
THE owner of Britain’s largest energy supplier may need to raid its shareholder payouts to withstand a tougher-than-expected government crackdown on rising energy bills.
The looming energy price cap is likely to slash the earnings of British Gas three times deeper than investors first feared, which may force its parent company to cut shareholder dividends by a quarter and could also expose Centrica to the threat of a takeover.
The stark warning from City sources and analysts emerged after Prime Minister Theresa May brought raised the political heat on energy suppliers with the promise to begin legislation on a price cap for some 15m homes.
Roshan Patel at Investec described the Government’s plans as a “sea change in a long drawn-out saga” with “severe” financial consequences for the largest energy suppliers.
For the owner of British Gas it could mean a cut of between 20 to 25pc to shareholder payouts, which last year totalled £459m, in order to weather the political storm.
Meanwhile, City sources have warned that the FTSE 100 group’s dramatic share price plunge to 14-year lows is likely to reignite market chatter over the energy giant as a takeover target.
“A lot of the fear and disappointment in the market is already priced into Centrica’s share price but, depending on the details of the legislation, there could be further to fall,” one City source told The Sunday Telegraph.
Centrica cut its progressive dividend policy last year in order to tackle its onerous debt pile. It will reinstate growing payouts only if it manages to drive debts down, but a snap dividend cut could still be possible, as is a potential takeover of the British energy stalwart.