After gas price hike, Centrica profits are set to hit £2.2bn

Centrica yesterday teed up investors for higher-than-expected profits, just days after the firm announced price hikes for millions of British Gas customers.

Publishing a trading update, the group predicted operating profits for 2010 will be slightly ahead of analysts' expectations of 2.2 billion.

Earlier this month, Centrica-owned British Gas said it would put up its prices by 7 per cent on 10 December, blaming a 25 per cent increase in wholesale gas prices.

The power supplier trades under the Scottish Gas name north of the Border.

Centrica is expected to report an operating profit of 2.21bn for 2010, according to an average forecast of 12 analysts in a poll by financial news provider Thomson Reuters.

However, the group said earnings would be hit by interest and tax charges, in respect of joint ventures and associates, not yet fully reflected in market forecasts.

British Gas put in a strong performance during the year, having increased residential energy accounts by 270,000, according to the update.

It installed 29 per cent more boilers in the past ten months than in the same period the previous year.

The amount of gas and oil it produced was expected to rise by 50 per cent year-on-year, helped by drilling new wells in the North Sea.

British Gas became the second utility to announce prices hikes in recent weeks after Scottish & Southern Energy - owner of Southern Electric, Scottish Hydro and Swalec - said it would put up gas bills by 9 per cent from the start of next month.

The residential arm of British Gas recorded pre-tax profits of 585 million in the first half of 2010 - a 98 per cent increase year-on-year.

The UK's biggest energy supplier benefited from one of the coldest winters in 30 years, which caused shivering households to crank up the heating, helping sales of gas by volume to rise by 8 per cent in the period.

The strong first-half performance followed record operating profits of 595m in 2009 - up from 376m the year before.

British Gas cut its prices to consumers by 7 per cent in February, which helped it to sign up new customers, but it has recently been selling gas at a loss.

Despite the profit hike at the residential arm, the British Gas services business saw operating profits fall 3 per cent to 109m in the first half as the big chill sparked a record level of call-outs.

Parent company Centrica's overall operating profits rose 65 per cent to 1.56bn in the period.

Centrica has recently been looking to lessen its dependence on volatile wholesale energy markets through its acquisition of Aberdeen-based Venture Production and its 20 per cent stake in nuclear power firm British Energy.

News of potentially higher annual profits was described as "yet another kick in the teeth for customers of the energy giant" by Scott Byrom, energy manager at moneysupermarket.com.