Things are getting hairy for Centrica’s Chris O’Shea

Now we know why Chris O’Shea’s been growing a ridiculous Dickensian beard. Not so his whiskers can keep him extra warm this winter, by which time they’ll be around four-foot long and the energy-saving equivalent of a mobile duvet. No, it’s to disguise himself from Ed Miliband, Ed Davey and all the other ’edbangers calling for a “proper windfall tax”.

The Centrica boss has once again attracted their ire with the half-year operating profits from the group’s British Gas wing — up 889 per cent to a record £969 million. Miliband calls them the “windfalls of war”, saying Labour would “close loopholes” and “make Britain a clean energy superpower”.

And on the face of it British Gas’s profits are a bit provocative, not least after its breaking and entering routine, where a contractor sent debt collectors to forcibly install pre-payment meters on customers — an episode for which O’Shea has apologised. The figures were also part of a 55 per cent jump in the group’s underlying operating profits to £2.08 billion, results topped off with a one-third rise in the dividend to 1.33p and a £450 million extension to the share buyback.

Yet the British Gas profits do need context. About £500 million of them are simply the recovery of past costs, reimbursed under Ofgem’s price-cap regime, so not repeatable. And, averaging out its margins since the cap was introduced in 2019, they come in at 2 per cent — “around half what the supermarkets are making”, as O’Shea puts it.

There’s a wider point too. As he notes, energy companies have been through three iterations of windfall taxes “in the past year”. But “fiscal stability is very important when you want to attract investment into the green energy transition”. Ditto enough profit to reward investors for backing green projects.

• Tempus: British Gas owner Centrica has cash to burn

So, if Labour really wants to turn Britain into a “clean energy superpower”, fresh taxes hardly help. Indeed, when America’s £369 billion Inflation Reduction Act, and its EU equivalent, are incentivising investment, they’ll set us back.

True, having taken charge in March 2020, O’Shea has lucked out lately on higher energy prices. But it’s also to his credit that Centrica is now in a position to invest up to £4 billion over the next five years on green stuff, expecting to make a return on average capital employed of at least 20 per cent. His predecessor, Iain Conn, had successfully removed 75 per cent of the group’s value. But O’Shea has turned a balance sheet with £3 billion net debt into a similar amount of net cash, boosted by his £2.85 billion sale of the US wing for £1 billion more than the market expected; taken on the unions to revamp working practices; and made British Gas more efficient.

The shares, up 7.5 per cent to 133¼p, are a quid above where he took charge. And the group now has a nice complementary mix of businesses: capital-lite retail and trading, backed by more capital-heavy assets, spanning oil and gas, nuclear, the Rough storage facility and renewables. O’Shea says he’s “focused on running what we have got really well”, including extending the life of nuclear sites and the Morecambe Bay gasfield.

But his key test may prove choosing where to invest up to £800 million a year. And, if Britain is serious about net zero, to keep up that sort of spend he’ll have to make a profit. Politicians threatening fresh windfall taxes will only make things unnecessarily hairier.

Alpha’s bumpy ride

Think of the poor frazzled merger arbs. What a rollercoaster ride they’ve had with car dealer Lookers.

First, buying in at close to Alpha Auto’s initial 120p-a-share bid, when the Canadian outfit said it had 42.1 per cent of investors tucked up in the back of the car. Then finding out last week that the fattest one of the lot with 19 per cent, the Cinch online dealership of motor group Constellation Automotive, was reversing out to vote against the deal — sending the shares below £1. And now? Watching Alpha return with a 130p agreed bid, sending the shares back up 26 per cent to 123¼p.

The bid arbitrageurs who held their nerves are sitting pretty. But it’s been a bumpy ride, with the shares down to 98p on Wednesday night and the market betting that Alpha’s bid was clapped out. Not now it’s found some extra fuel, with its offer at a 46.6 per cent premium and valuing Lookers at £504 million.

To boot, Alpha’s changed the bid structure from a scheme of arrangement, requiring 75 per cent of the votes, to an offer, needing mere majority support. Of course it’s not quite that simple. Cinch is yet to reveal what it thinks of the new price — and, given there’ll now be a 60-day bid timetable, may be in no rush to reveal its hand.

And Alpha is unlikely to want a deal, where Cinch refused to sell, and stayed on as a backseat driver: an outcome probably unattractive to Cinch too. But Cinch bought in at 102p in January 2022, so would be sitting on a tidy profit. This offer has a lot more wheels.

Coutts farrago

So farewell Peter Flavel, the man who “revived Coutts’ branding and image to be more warm and modern”, complete with a website boasting: “We are a trusted partner, adviser and friend to our clients”. How did he prove it? By presiding over a 40-page hatchet job on the Brexiteer customer Nigel Farage, calling him a “disingenuous grifter”, seen as “xenophobic and pandering to racists”.

Farage is not universally liked. But, having had his account closed, he says he wrote to Flavel twice and “didn’t receive an acknowledgment”. Apart from the double-standards, was Flavel really stupid enough to think Farage would go quietly? He’s deservedly following his boss Dame Alison Rose out the NatWest door.