Centrica, the biggest energy supplier to UK households and soon-to-be owner of Bord Gáis Energy sales, forecast lower earnings in 2014 as its gas-fired power generation business continues to lose money.

Adjusted earnings per share, which were unchanged in 2013 at 26.6p (44 cent), will fall this year, the England-based company said yesterday. “Market conditions are set to remain challenging in 2014,” said chief executive Sam Laidlaw.

He cited “unusual weather”, higher extraction costs in the North Sea and “weak economics” for gas-fired power generation. Centrica’s gas-fuelled plants were unprofitable in 2013 as carbon costs increased after free-emission permits ended, while milder weather in Britain cut demand for heating. The utility also lost UK household customers, leading to a 1.7 per cent drop in adjusted operating profit to £2.7 billion.

Forty per cent of customers switching electricity supplier in January moved to an independent firm, up from 26 per cent in December and 20 per cent in November, data from lobby group Energy UK showed.

The affordability of heating British homes shot to the top of the political agenda last autumn and resulted in the government allowing suppliers to cut bills by £53.

Adjusted EPS at Centrica may fall below 25p this year, said John Musk, an analyst at RBC Capital Markets who has an outperform rating on the stock. That’s lower than the 26.7p average estimate of 20 analysts surveyed by Bloomberg.

Centrica plans to cut capital spending by about £900 million, or 20 per cent, in the next three years. The company is targeting a return to growth in UK residential accounts this year after losing 100,000 customers amid price changes in 2013. The operating loss from gas-fired power plants widened to £133 million last year from £4 million in 2012.

Centrica agreed late last year to buy Bord Gáis Energy’s sales arm for more than €1 billion. – (Bloomberg/Reuters)