Section:OBS 2N PaGe:50 Edition Date:190804 Edition:01 Zone: Sent at 3/8/2019 9:39 cYanmaGentaYellowblac
- The Observer
50 04.08.19 Energy industry
How ‘smart homes’ and price
caps drained Centrica’s power
60%
50
40
30
20
10
0
06 08 10 12 14 16 18- British Gas • EON • npower • Scottish Power • SSE • EDF
Gas
Big six market share
Source: Ofgem25%010
5152004 06 08 10 12 14 16 18ElectricityW
ould any other
chief execu-
tive have done
things dif-
ferently? The
question has
been the topic of conversations in
the energy industry since Iain Conn ,
Centrica’s chief executive, said last
week that he would step down.
The boss of British Gas’s parent
company will move early next year,
leaving a company shaken by seismic
shifts in Britain’s energy industry and
facing an existential crisis.
Conn garnered little sympa-
thy after pocketing fat pay packets
while Centrica’s shares plummeted
and thousands lost their jobs. He
remained defi ant even as he cut the
dividend for a second time last week,
and the share price hit 22-year lows.
Grudgingly, many admit that the
odds were stacked against him. The
UK’s biggest energy supplier has been
hardest hit by the government’s deci-
sion to cap standard energy tariffs ,tious inroads into burgeoning energy
renewables. Conn’s tenure started as
oil prices began a precipitous decline
to 12-year lows and the economic case
for renewable energy accelerated.
“The truth is that if Sam Laidlaw
had spent his time investing in wind
power rather than snapping up oil
and gas assets, then the company
would be in a very different place,” a
senior industry source said.
Conn’s strategy was to shift thecompany away from high-cost energy
projects to focus on supplying more
homes with gas and electricity, and
selling them more “smart” home
products and services. It was widely
supported by investors and analysts
in the summer of 2015, but the bet
has failed to pay off.
Conn had predicted that the “smart
home” business, which includes its
Hive smart thermostats, would gen-
erate £1bn of revenue by 2022. Last
week, he admitted aspirations were
now a fi fth of what he predicted.
However, the direction of travel will
remain the same. “I have been con-
vinced, and am convinced, the strat-
egy is the right one ,” Conn said last
week. “The board has just spent six
months kicking the tyres and came
to the same conclusion.”
A vindication of sorts for Conn, but
it is also a damning indictment of the
company he leaves behind: there are
no new ideas.
Rick Haythornthwaite , Centrica’s
chairman, is expected to look outside
the company, and even the energy
industry, for Conn’s successor. It will
not be easy. “Who would want that job?
Seriously?” one City source quipped.
“ In a best-case scenario, if you were
able to do a great job and turn things
around, you’d be on the front of news-
papers vilifi ed for earning a big bonus
while energy bills go up.”
The worst-case scenario would
be presiding over the breakup of aand by the regulator’s bid to encour-
age more energy startups into the
market to compete against the big six.
“He didn’t play the perfect innings,
but the fi eld was tipped against him,”
a City source said.
Conn inherited the wrong kind of
company, at the worst possible time.
In 2015 he stepped into the shoes of
former BP executive Sam Laidlaw,
who had loaded the company with
oil and gas fi elds and made only cau-Whoever takes over
from Iain Conn will
fi nd no easy answers to
the energy fi rm’s woes.
However, most agree
the new boss must tap
i n to more t ha n just
delivering energy
to our homes.
Jillian Ambrose reportsРЕЛИЗ
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