What’s going on at British giant Centrica?
What’s going on at British giant Centrica? British energy leader Centrica has announced it is selling its US unit. But the company’s cost-cutting strategies aren’t making everyone happy
British energy company Centrica announced on July 24 that it was selling its US unit, Direct Energy. Once the $ 3.6 billion sale is completed, the British Gas Company’s international operations will also be terminated.
Centrica plans to cover some of its debts with this sale, saving the day like other energy companies, which have been hit hard by shrinking demand during the pandemic.
But that’s not the only news that hasn’t dropped Centrica from British headlines in particular.
The company, which recently announced it would lay off 5,000 people, has been accused of forcing nearly 20 thousand employees to change their contracts under the pretext of the pandemic.
Trade union leaders in the sector say Centrica is trying to discourage employees from all their accumulated benefits thanks to the “Fire-re-hire” maneuver.
Is the pandemic the only culprit?
From the undeniable fact that all companies have had a hard time in the energy sector, one of the sectors hardest hit by the Covid-19 outbreak.
According to Morningstar Investment Analyst Tancrede Fulop, one of the factors hitting the British company’s profitability is the “price ceiling on energy” level set in February.
Fulop says the ceiling price the UK gas and Energy Market Unit dropped in February is a strong blow to the company’s profitability.
The new ceiling, which significantly cuts the energy costs of 15 million households, is seen as the main reason behind Centrica’s announcement of its worst financial results since 2015, which includes British Gas, the country’s largest gas firm.
According to Morningstar Investment analyst Tancrede Fulop, one of the factors that hit the profitability of the British company is the “ceiling price in energy” level set in February.
Fulop underlines that the price of the ceiling, which the UK Gas and Energy Market Unit dropped in February, hit a strong blow to the company’s profitability.
The sale is expected to be completed in the fourth quarter, following the official approval stages. With the completion of the sale, Centrica’s operations will be based in England and Ireland only.
Should the contracts change?
The company, which recently announced it would go on a cost reduction of £ 2 billion by 2021, is also trying to change its employee contracts to that end.
According to a statement by the company, 80 different types of contracts, and more than 7,000 different clauses are applied within the company. Re-structuring these contracts will simplify the structure of the company and reduce company costs in the long run.
Fulop also stated that some contracts may need to be reconsidered, “some of these contracts are 35-year contracts. Renegotiations should be welcomed naturally,” he says.
But employees and unions disagree. Especially during this period, when the effects of the pandemic forced all households, it was stated that the re-opening of contracts to debate, along with layoffs, weakened the hand of employees.
Centrica said it hoped to reach an agreement by winter with the Union and employees as talks continue.
Centrica has a total of 27 employees, 20 thousand of which are in the UK.