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Centrica PLC Facing Ofgen Probe Into Profits

gasringThe shares of Centrica (LSE: CNA) (NASDAQOTH: CPYYY.US) fell 3% to 305p during late trading this morning after a warning that the energy sector might need to be broken up. Ed Davey, the energy secretary, has called for the regulator to investigate the profits made by the biggest energy companies, and make sure customers are getting a fair deal.

The cabinet minister’s comments wiped £600 million off the British Gas owner’s value — and it isn’t the first time a politician’s comments have damaged Centrica’s share price. Since the end of September, when Ed Miliband stated that he would freeze energy prices if Labour take power in 2015, the stock has dropped 16%.

Mr Davey singled out British Gas in particular with his comments, noting that it has the largest share of the gas market, and that over the last three years it has charged among the highest prices. The regulator, Ofgen, said that it was looking into competition issues and that it wouldn’t reveal more than that until its findings are published in March.

Before today, analysts were expecting Centrica’s annual results to show earnings of 28p per share, and a dividend equivalent to 17p per share.

Following this morning’s price movement the shares may therefore trade on a P/E of 11 and offer a potential income of around 5.5%.

The decision to ‘buy’ — based on those ratings, today’s results and the wider prospects for the energy sector — is, of course, entirely your decision.

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> Mark does not own shares in any company mentioned.