energy

British Gas owner Centrica warns windfall tax will hit investor confidence


British Gas owner Centrica will not launch a legal challenge against the UK chancellor’s windfall tax but warned the levy would damage investor confidence.

Scott Wheway, Centrica’s chair, was asked by shareholders at the company’s annual general meeting in Leicester if he would challenge the decision by the UK government to impose a 25 per cent tax on North Sea oil and gas.

“We don’t see any scope, or requirement, or necessity for a legal challenge to those things that have been brought forward,” he said.

However, he warned the windfall tax and any move by the Treasury to extend it to energy generators could cause damage to investment in the UK.

Centrica is Britain’s biggest energy retailer to households, but also has a sizeable North Sea oil and gas production arm and owns a 20 per cent stake in the UK’s existing nuclear power plants. It expects post-tax profits to more than double to about £600mn this year as it benefits from soaring energy prices.

UK chancellor Rishi Sunak has announced a 25 per cent “energy profits levy” that will increase the rate paid by North Sea producers from 40 per cent to 65 per cent, raising £5bn this year to help UK households cope with rising domestic fuel bills.

He said he was also considering “appropriate steps” to target “extraordinary profits” made by electricity generators.

Wheway said that although the company empathised with its 7mn customers struggling with high energy bills, the taxes could cause a “medium- and long-term problem”.

He added: “We know that the industry we’re in is a very long-term industry and we urge everyone thinking of those things to strike the right balance.”

Other companies including Shell and EnQuest have also hit out at the windfall tax, which could stay in place until 2025.

Chris O’Shea, chief executive of Centrica, also criticised the regulator Ofgem, saying the failures in the energy market were “both predictable and predicted”.

“There have clearly been regulatory failures,” he added, referring to the collapse of 29 retail companies in the past year. He called for tighter rules including the ringfencing of customer deposits and stronger capital adequacy requirements for companies entering the market.

In February O’Shea said he would waive a £1.1mn bonus awarded in addition to his £775,000 salary and postpone the reintroduction of dividend payments until later this year, after shelving payouts in 2020 in a move aimed at preserving capital at the onset of the pandemic. The company declined to confirm whether it would restore the dividend this summer.

PIRC, the advisory group, had urged shareholders to vote against parts of the remuneration policy, arguing that the variable pay for executive directors was “excessively” high, as were the long-term share plans. However, all of the policies were passed at the meeting on Tuesday.

Centrica has been involved in a bitter dispute with its unions after it threatened to fire people and rehire on lesser pay.

The company said it “changed employment terms and our ways of working but kept base pay the same for all employees”.



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