UK's Centrica to Swap Auto Unit for Boost to Energy Business

23 June 2004

The largest UK domestic gas and electricity supplier Centrica looks set to make a substantial profit as it puts its Automobile Association breakdown service up for sale.

Purchased for £1.1 billion ($2bn; €1.66bn) in 1999 (but including "cashback" so effectively £850 million), Centrica believes it has done as much as it can with the AA and expects to realise around £1.5bn. The five-year ownership period saw AA membership rise from 9m to 15m and profits soar from £73m to £93m.

Following its purchase earlier this month of the North Lincolnshire Killingholme power station for £142m, Centrica plans to use its sale profits to buy more of the same. Citing a growing need for independence from rising wholesale prices, it hopes to boost its energy retail business which currently has a 40% market share. The group also plans to increase its US and European energy businesses.

Such changes are likely to affect AA ad agencies such as M&C Saatchi as well as those agencies associated with Centrica's other businesses (British Gas and OneTel), among them Carat and Clemmow Hornby Inge.

Data sourced from: Financial Times; additional content by WARC staff