Energy supplier Centrica raises €890m to protect its credit rating

Britain’s largest energy supplier Centrica has raised £700m (€889m) in a surprise share sale to pay off debt and protect its credit rating after being hit by weak energy prices and tough retail market competition.

Energy supplier Centrica raises €890m to protect its credit rating

Credit ratings agency Moody’s said the share sale was credit positive, three months after warning the firm that it could be downgraded. It will keep its rating under review until mid-May.

The British Gas owner said it had placed 350m new shares, equivalent to roughly 7% of its issued share capital, at 200p, roughly 4% below market value. The utility said its intention was to raise money to pay off its debt pile, in order to maintain its credit rating, and to finance two acquisitions.

The utility is in the middle of a strategic turn-around spearheaded by former BP executive Iain Conn who wants to shift its focus away from oil and gas production to energy supply and trading.

“The credit metrics required for the current strong investment grade credit ratings are under pressure,” Centrica said in a statement.

“A 7% placing therefore allows ... for lowering of net debt, reducing pressure on credit metrics and the group’s targeted strong investment grade credit ratings, in what remains an uncertain environment,” it said.

Moody’s had placed Centrica’s Baa1 rating on “negative watch” in February, one step before an actual downgrade that would make it more difficult for the company to raise funds.

The utility had a net debt mountain of £4.4bn at the end of the first quarter and announced a £170m acquisition of Danish energy management company Neas Energy two weeks ago.

A second acquisition in the service sector, worth around £150m, is close to completion, Centrica said.

An alternative way to improve cashflow would have been another dividend cut, a move that would have likely angered important investors. Centrica trimmed shareholder payouts by 21% last year just one month after Mr Conn’s tenure started.

The utility has also tried to raise cash from upstream disposals, putting its Canadian business and assets in Trinidad and Tobago up for sale last year.

With energy prices remaining weak, Centrica is unlikely to have received appropriate bids for these assets, analysts said.

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