British Gas owner and British Energy shareholder Centrica says it will invest the huge profits from its gas business - £1.8bn for 2009 - in new energy infrastructure
Faced with claims of profiteering in the cold snap, British Gas parent Centrica argued that the returns are necessary to fund the £15bn planned for developing new UK energy sources over the next 10 years.
The investment - encompassing wind, nuclear power, gas and gas storage - comes after the company’s acquisition of a 20% stake in nuclear power provider British Energy as well as £1.3bn takeover of oil and gas firm Venture Production.
Centrica expects to invest several billions through British Energy majority owner EDF’s plans for four new nuclear reactors, as well as more than £3bn on offshore wind.
The company could also spend around £6bn on buying and developing gas assets in the UK and Norwegian Continental Shelf, as well as at least £1.5bn on three gas storage projects.
These involve the conversion of two offshore gas fields into storage facilities - the Baird field in the southern North Sea, and the Bains field in the East Irish Sea - as well as the conversion of the smaller onshore Caythorpe gas field, near Bridlington in Yorkshire.
The acquisitions so far boosted Centrica’s production business, which will give its 16M residential customers a greater measure of protection from volatile wholesale costs.
The boost to British Gas profits from December’s cold snap is the result of Britons turning up their heating, but energy firms point out that this reflects higher usage rather than higher prices.
Centrica also argues that a reasonable level of profitability is necessary at the business to allow the huge level of future investment.
Regulator Ofgem warned that the UK could have to spend £200bn to secure supply and meet environmental targets to tackle a looming shortfall from soon-to-expire power stations.