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Centrica (CENTRI) – Too Good a Business?

10 February 2014 by HCM

In a market which was globally well supported, it was a bit surprising to see CENTRI (Centrica Plc), a traditionally well behaved issuer, among the underperformers. It suffered from a letter sent by the UK’s energy secretary to regulators asking them to investigate whether the company is not too profitable. The idea of a breakup of their British Gas unit was floated, and that led to a fall in the share price (-1.5% at the close but -4% at some stage during the day) and a firm bid to the 5 year protection (+4.5bps at 74.5bps at the close). Despite the claim that Britain is one of the most competitive energy market made by British Gas management, it seems that, across the board, political risks from government action could be rising for utilities.