Hedgecutter Posted July 31, 2014 Share Posted July 31, 2014 This is an idiotic story, of course the profits of Gas firms go down in summer. It's frightening how easy people have been hooked into hatred of Gas distribution companies and it is to absolutely no ones benefit. The Return on Capital Employed by the Gas distribution industry their profit as percentage of revenue are both very low compared to others in the sector, and well below upstream activities, for example. Even the upstream sector doesn't have that high a margin, this being in an industry where drilling a single well costs the company £millions. Any profit involving the word 'million' whilst people are in fuel poverty has the media in an absolute frenzy. That doesn't excuse them from not dropping prices when the supply price also drops despite loving to do vice versa of course. Link to comment Share on other sites More sharing options...
Supras Posted July 31, 2014 Share Posted July 31, 2014 Even the upstream sector doesn't have that high a margin, this being in an industry where drilling a single well costs the company £millions. Any profit involving the word 'million' whilst people are in fuel poverty has the media in an absolute frenzy. That doesn't excuse them from not dropping prices when the supply price also drops despite loving to do vice versa of course. Well, depends what you are comparing it to, compared to the Gas Distribution industry it is high. In fact, there aren't that many major industries with higher margins than upstream E&P even with the prohibitive exploration cost and a punishing tax regime. People being in a fuel poverty is not really a failure of the distribution companies, and shouldn't really be their concern. They have a legal responsibility to their shareholders - of whom a large percentage will be British pension funds and other financial interests. To a company the size of Centrica of course they make millions or profit, their revenues are enormous. What's far more relevant is their Profit Percentage and ROCE which highlight it's a volatile, not very profitable business forever under the media glare. Fuel poverty is a problem, it's a problem that should be dealt with predominantly by government and NGOs. Using a public firm as a vehicle to solve social problems creates headaches for both, and ultimately ends in disaster. Link to comment Share on other sites More sharing options...
monkfish Posted July 31, 2014 Share Posted July 31, 2014 This is an idiotic story, of course the profits of Gas firms go down in summer. It's frightening how easy people have been hooked into hatred of Gas distribution companies and it is to absolutely no ones benefit. The Return on Capital Employed by the Gas distribution industry their profit as percentage of revenue are both very low compared to others in the sector, and well below upstream activities, for example. That plus a media witch hunt means that any top executives in the spotlight will quickly shuffle off elsewhere to places where they aren't publically reviled for making a profit in, er, a public limited company. The CEO of British Gas recently announced his departure only 15 months after taking the job, and the head of Centrica will be off soon too. Continued volatility with changing leadership is a bad thing. Lack of investment in an unprofitable industry is a bad thing. The only way for people to get over this is accept that just because you don't necessarily see Gas and Electricity doesn't mean you can or should get them for free. Pedantic point: British Gas aren't a gas distribution company. They're a retailer who also have a lot of other interests e.g. upstream assets, but I don't believe they distribute any gas (i.e. own and operate distribution or transmission networks). Link to comment Share on other sites More sharing options...
Zen Archer (Raconteur) Posted July 31, 2014 Share Posted July 31, 2014 FYI http://www.energynetworks.org/info/faqs/gas-distribution-map.html http://en.wikipedia.org/wiki/Scotia_Gas_Networks Link to comment Share on other sites More sharing options...
Hedgecutter Posted July 31, 2014 Share Posted July 31, 2014 Pedantic point: British Gas aren't a gas distribution company. They're a retailer who also have a lot of other interests e.g. upstream assets, but I don't believe they distribute any gas (i.e. own and operate distribution or transmission networks). Other pedantic point: Centrica Upstream (who funnily enough who deal with all the upstream assets) are a subsidary company in their own right. Link to comment Share on other sites More sharing options...
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