Centrica CEO's Dire Warning: UK's Gas Storage 'Nowhere Near Enough'

By Patricia Miller


The CEO of Centrica (CNA), British Gas's parent company, recently warned that the UK needs more gas storage to ensure energy security.

In Centrica's (LON: CNA) recent annual shareholder meeting, its CEO, Chris O'Shea voiced concern over the October partial reopening of Rough, the largest gas storage facility in the UK, owned by the company. Despite acknowledging the improvement in the country's fuel storage capacity, he asserted that it is inadequate to meet national requirements.

“We increased the UK’s gas storage capacity by 50% — this is no small achievement,” O'Shea stated, “But this increase means that the UK now has nine days of peak winter demand in storage capacity, which is by far the lowest in Europe and is nowhere near enough to make our energy system resilient.”

Centrica brought Rough back online at roughly 20% of its previous capacity late last year and has been seeking minimum revenue guarantees funded by consumers to support its long-term investments in the facility. The firm argues that the limited storage capacities, which are just a fraction of Germany's nearly 89 days of peak demand, underline the UK's susceptibility to extended cold periods or supply interruptions. However, discussions with the government have been at a standstill.

Centrica has a long-term vision to repurpose Rough into a significant hydrogen storage facility, but according to O'Shea, gas will continue to play a critical role in the market as a "transition fuel" for several years to come. The company is exploring methods to increase storage capacity in preparation for the upcoming heating season, but it needs appropriate regulatory support from the government to enact more sustainable, long-term solutions.

Since Rough reopened, there has been no consensus achieved with the government. However, Centrica's Chairman, Scott Wheway, conveyed at the meeting that the possibility for future dialogues still exists.

Chris O'Shea, the CEO of Centrica, British Gas's parent company, has warned that all UK households could face increased energy bills if suppliers cannot prevent customers from accruing large debts. This follows an industry-wide halt on forced installation of prepayment meters in February due to a scandal involving British Gas.

Despite stronger performance in 2023, Centrica's earnings per share are expected to decline by about 30% from last year. Energy regulator, Ofgem, is considering allowing suppliers to impose extra charges to cover bad debt costs, which are contributing approximately £30 million per month to nationwide customer debt.

With energy bills expected to remain high due to the ongoing energy crisis, O'Shea suggests that any potential "social tariff" for lower-income households should be funded by general taxation, not added to energy bills.

Analysts at FactSet have given an "Overweight" rating to CNA stock, setting a target price at £1.81.

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