En­ergy price cap threat­ens cut in Cen­trica div­i­dend

The Sunday Telegraph - Money & Business - - Business - By Jil­lian Am­brose

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.

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