Centrica's shareholders protest over new chief's pay package

British Gas now has 14.8 million customers, down from a peak of more than 17 million

Centrica shareholders have balked at chief executive Iain Conn’s pay deal

British Gas-owner Centrica was hit by the City’s latest pay revolt yesterday, over incentives handed to its new chief executive, the former BP man Iain Conn.

Overall, 33 per cent of investors failed to back the energy supplier’s remuneration policy at its annual meeting in London, following a critical report by the influential advisory group, ISS.

Although full details of the vote will not be published until today, shareholders are understood to be unhappy with elements of the package handed to Mr Conn, worth up to £3.7m this year, after he joined Centrica in January. At the time of his appointment last year, Labour MP John Robertson said: “The name Iain Conn is about right – he is conning the public with this insulting salary.”

Sam Laidlaw, Centrica’s former chief executive, handed part of his £600,000 bonus to charity but is still expected to pick up about £3m in pay for his work last year.

The annual meeting was held after the company issued a trading update in which a 10 per cent increase in the amount of gas used by British Gas customers amid the winter chill was not enough to make up for the poor performance in its owner Centrica’s upstream business, where it has been hit by the record low oil price.

Centrica, which announced a £1bn fall in profits in February and slashed its dividend by 30 per cent, did not change its guidance to analysts, saying the improved profitability of the downstream business was “more than offset by the impact of lower commodity prices” on the upstream business.

British Gas now has 14.8 million customers, down from a peak of more than 17 million. It cut its bills by 5 per cent in February but has yet to see customers returning. Customer numbers have also been falling in North America due to competition from rivals.

Centrica is responding to the dramatic fall in the oil price since last June by cutting capital spending in its exploration and production businesses. It said yesterday that it was on track to cut expenditure by a quarter to £800m this year, and by 40 per cent to £650m by 2016. It is also on track to cut costs in its oil and gas business by £100m by next year.

The low cost of gas is making it uneconomic to run some of Centrica’s gas-fired power stations and the energy company said it was reducing the maximum output from its South Humber gas plant until March 2017 on top of closing its Killingholme and Brigg gas-fired power stations.

The company is carrying out a group-wide strategic review under Mr Conn, the results of which will be revealed in July.

In the meantime, it has pledged to strengthen its balance sheet and cut its borrowing costs, after its credit rating was cut by Moody’s in March. The energy group said it has sold project debt on a wind farm in Lincolnshire, resulting in a cash inflow of £176m.

At the AGM, chairman Rick Haythornthwaite told investors that the company has made preparations in case it is approached with a takeover offer. Experts claim the energy sector is ripe for mergers and acquisitions, as a sharp decline in crude prices has devalued many companies. Its shares rose 4.6p to 269.1p yesterday.

“Do we have, as a matter of just good governance, an approach to dealing with potential takeovers? Absolutely we do,” he said.