Centrica shares fall to 20-year low after British Gas price cap profit warning

Energy provider also revealed that it lost 742,000 customers last year

British Gas recently hiked bills for millions of customers after the price cap was increased (REUTERS)

Shares in British Gas owner Centrica have fallen to their lowest level since 1999, after the gas and electricity provider warned that the energy price cap would hit profits.

Ofgem introduced a cap on default tariffs earlier this year, and has since raised it by £117.

However, Centrica said the cap would reduce profits by around £70m in the first quarter of 2019.

“We have been very clear that we do not believe a price cap is a sustainable solution for the market, and is likely to have unintended consequences for customers and competition,” the firm said.

The group is seeking a judicial review of Ofgem's decision to impose a price cap “relating only to the treatment of wholesale cost transitional arrangements and Ofgem's decision not to investigate and correct its failure to enable the recovery of the wholesale energy costs that all suppliers incur”.

Centrica said it expects the process to be concluded in six to 12 months.

The warning came as the group reported a 12 per cent increase in operating profit last year, up to £1.39bn from £1.25bn, while revenue rose 6 per cent, from £28bn to £29.7bn.

It also revealed that it lost 742,000 customer accounts last year, “largely reflecting the highly competitive nature of the residential supply market”.

Centrica group chief executive Iain Conn said: “Centrica's financial performance in 2018 was mixed against a challenging external backdrop. Our 2019 financial performance will be impacted by the UK default tariff cap.

“We are taking actions to strengthen the company in 2019 and improve underlying performance in 2020, including driving cost efficiency hard and delivering further divestments, and as a result net debt levels remain underpinned.”

The stock fell 11 per cent in early trading to 121.50p.