Centrica has upset investors by issuing £700m of new equity as it attempts to boost its financial position in the face of tumbling commodity prices and a loss of retail customers.
Shares in the British Gas owner dived 12% at one stage on Thursday as the City expressed concern that the company might be in worse shape than thought.
The energy group said £350m of the share placing with institutional investors would help fund two acquisitions, the previously announced purchase of the Danish trading firm Neas and a similar “customer-facing” business.
But a Centrica statement also said the cash raising would allow “continued lowering of net debt, reducing pressure on the group’s targeted strong investment-grade credit rating in a continuing uncertain environment.”
That reference comes after negative comments from credit agencies, with Moody’s putting Centrica’s Baa1 rating on review for a downgrade and Standard & Poor’s giving the company a negative outlook.
Peter Atherton, a utility analyst at Jefferies investment bank, pointed out that raising equity was an expensive way of paying down debt: “Centrica’s new management have been trying to establish a reputation for tight capital management; it is difficult to say whether today’s announcement enhances or diminishes that reputation.”
Despite cutting its standard gas prices more than any other large supplier, British Gas lost 224,000 customers in the first three months of this year alone, meaning it has seen a near 900,000 loss in 12 months.
Centrica said at its annual general meeting two weeks ago that its business was in a “robust” state despite low oil, gas and power prices and a £857m operating loss in 2015.
