Centrica (LON: CNA) saw its shares tumble 5.16% to 198.7 pence on Thursday, as the British Gas parent flagged that retail energy earnings are tracking near the lower end of its 2026 target. This outlook weighed heavily on the stock, even as the company announced a £370 million acquisition of the Severn combined-cycle gas turbine power plant in South Wales.
Retail Weakness Overshadows Infrastructure Strength
The update comes as Centrica attempts to reassure investors that reliable infrastructure returns can help offset the drag from its household energy business, where mild weather and rising bad debts are squeezing profit. The company now sees retail EBITDA — earnings before interest, tax, depreciation and amortisation — tracking toward the bottom of its £500 million to £800 million target range, while infrastructure EBITDA is expected to exceed the £500 million to £650 million range.
Investors were looking for clearer signs of that transition. Hargreaves Lansdown equity analyst Aarin Chiekrie described Centrica's start to the year as "hot-and-cold," noting that solid infrastructure performance only partly compensated for retail weakness; the retail side, he said, is "under a bit of pressure."
Severn Acquisition: A Strategic Move
Centrica has acquired the 850-megawatt Severn combined-cycle gas turbine plant in South Wales from Calon Energy Group for approximately £370 million. Unlike basic gas plants, a combined-cycle setup captures waste heat from the turbine to generate additional power, boosting overall efficiency. With this acquisition, Centrica pushes its UK and Ireland power portfolio to 4 gigawatts — 1 GW of which is still in planning or under construction.
Severn is expected to generate about £35 million per year in capacity-market payments through 2030, reflecting what operators receive for keeping backup power ready for the grid. Starting from 2027, the site is projected to add between £30 million and £60 million to annual EBITDA. Centrica plans to fund the acquisition using existing cash, structuring the deal on a cash-free and debt-free basis.
Chris O'Shea, the chief executive, described Severn as a "high-quality asset" and argued that reliable, flexible power generation is becoming increasingly critical as the energy transition progresses. He cited grid-access delays, cost inflation, supply-chain bottlenecks, and the aging fleet of gas plants as factors driving up demand for assets like Severn.
Market Reaction and Broader Context
Despite the acquisition, the stock lost ground. Chiekrie called the purchase price a "good deal" but flagged concerns — warmer weather and squeezed consumer budgets are beyond Centrica's control, and many of the company's long-term advantages already appear to be priced into the current valuation.
London energy and utility stocks struggled in a sluggish session. Shell slipped even after reporting better earnings, with BP and SSE also among FTSE 100 decliners earlier. Centrica's retail warning underscored a broader slump for UK energy names.
AGM Approvals and Outlook
Centrica's shareholders approved all resolutions at the annual general meeting, including a 3.67 pence final dividend, Chris O'Shea's re-election to the board, buyback authorization, and updated articles of association. This clears the way for management to continue leveraging the balance sheet.
There is a risk that the divide between the retail and infrastructure sides could widen before Severn begins contributing. Centrica flagged that its outlook remains vulnerable to fluctuations in weather, commodity prices, regulation, government decisions, and geopolitical tensions in the Middle East. The company anticipates Severn will post a modest net loss in 2026, citing integration and transaction expenses as well as weaker summer revenue.
Centrica's next major test comes on July 23 with the release of interim results. For now, the story boils down to this: a larger power plant and stronger infrastructure provide investors with something to lean on, yet the household energy side continues to drag on the share price more than management would prefer.
