Comment: Centrica earning kudos rather than brickbats

Martin Flanagan
Martin Flanagan
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CENTRICA is in the unusual position of being able to warm itself at the cheery flame of public and political approval.

So often berated for the relentless march upwards of profits from its gas operations, the energy giant’s £10 billion deal to secure 20 years of supplies from the United States is an authentic industry landmark.

It is a deal that will power 1.8 million British homes each year for two decades. And, with rising warnings from industry leaders, including Ian Marchant, head of SSE, that there is real danger down the line of the lights going out, no wonder Prime Minister David Cameron was in the line of back-slappers for Centrica yesterday.

The liquefied natural gas (LNG) from Louisiana-based Cheniere Energy both diversifies Britain’s 
energy mix and gives the country greater energy security in an era of increasing energy nationalism.

For evidence of the latter, just look at Russia putting the energy squeeze on Ukraine, and China securing ever-bigger supplies from Africa. More parochially, it also benefits Centrica that such deals reduce its exposure to price swings in the wholesale markets.

It has probably not cramped the British group’s US negotiations that in recent years it has steadily built up its North American arm, branded Direct Energy, in Canada, the north-east US and Texas. The tail is not wagging the UK dog yet, but it has unmistakably announced its presence.

Centrica chief executive Sam Laidlaw is also likely to see the Cheniere transaction as vindicating his oft-repeated assertion that the company needs its lightning-rod UK domestic gas profits to provide the funds to secure key long-term energy supplies.

Such diversification of international supply is welcome as Britain in recent times has looked uncomfortably reliant on LNG from oil-rich Qatar. The double-digit growth of Asian economies and their consequent energy needs has always looked likely to eventually put that Qatari wellhead of supplies under competitive pressure.

AAM steering a steady course, looking east

Rallying stock markets are putting wind in the sails of Aberdeen Asset Management. The Scottish fund 
manager, which sponsors Cowes Week, raked in £3.5bn in the first two months of 2013 as investors have tried to anticipate macro-economic recovery.

Of course, that came before the economic car crash that is Cyprus. And the reviving market confidence could also be derailed if geo-political events from Iran to North Korea take a turn for the worse.

To be fair, Aberdeen is not bucking any trend. A rising tide has lifted all fund management boats as investors have sought higher yields in the chronic low interest rate environment.

But the company’s strong point remains its strong exposure to Asian equities, a relative safe haven in these challenging economic times. Steady as she goes.