Wednesday, 27 February 2013

Centrica's Profit

Centrica's Profit

"Too much mucking around will raise the spectre of ENERGY NATIONALIZATION. Or so it jolly well should."

We heard today (27th Feb 2013) that Centrica (the giant energy company) has shown a healthy profit in preliminary results for the year 2012. Profits are up 11% on the previous year. Centrica's share price has risen over the last 12 month by a similar 11% (trading today at £3.50). So it would seem that shareholders are expecting to see a similar rise in their dividends. But should they?
Customers were asked to pay an extra 6% for their fuel in 2012 (c.f. 2011) in the face of flat or falling cost of energy feedstocks (gas, coal and oil). Admittedly, at the beginning of 2012 the management of Centrica may not have known that feedstocks would come down, for they rose the previous year. But feedstock prices did fall. So what do we do now; pay back the excess profit to the customers? Ha! Is that likely, when all those 5.2 billion shares each carry one vote, unless some wiser heads are heeded?
Part of the argument for the 6% price hike to the customer was the need to invest (in the near future). So we should see NO INCREASE in dividend (beyond 2% inflation), and all that profit kept in the company. Ha!  That also is most unlikely in the face of those 5 billion voting shares, unless wiser heads prevail.
For your benefit I have dug out the price of crude oil and natural gas over the last few years.

Table 1

All prices in US$. Germany Natural Gas Border Price (GNGBP). (http://ycharts.com/indicators/germany_natural_gas_border_price)
Oil prices quoted for Brent Crude (BC), and West Texas Intermediate (WTI)
http://oil-price.net/dashboard.php?lang=en#brent_crude_price_large
Year
GNGBP
BC
WTI
Feb 2013
410
113
93
Feb 2012
440
115
105
Feb 2011
329
110
100
Feb 2010

85
90
  
L. Cawstein
cawstein@gmail.com

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