The owner of British Gas has announced plans to raise £750m from the sale of shares to pay off debts and protect its credit ratings in the process.
Centrica, which like rivals has come under pressure from the collapse in world energy costs, said it would be placing 350 million shares – equivalent to roughly 7% of its issued share capital.
The proceeds would also be used, the company said, to pay for two planned acquisitions including the previously announced £170m deal to buy Danish energy management firm, Neas Energy.
Centrica said £400m would go to trimming its net debt pile, last reported at £4.4bn.
Its share price fell more than 10% on the FTSE 100 in the hours after the surprise announcement was made, wiping £1.3bn from its market value.
The company, under chief executive Iain Conn, has moved to shift its strategic focus more towards energy supply and trading from oil and gas production amid the price crunch.
Brent crude oil costs were near $27 a barrel in January as the market crashed from mid-2014 prices of $100 over a global supply glut and weak demand – caused by a slowdown in the world economy and a warm start to winter in the northern hemisphere.
Stock markets were also hit hard at the start of 2016, reflecting not only worries linked to China’s economy in particular but also concerns that banks were heavily exposed to commodity sector loans.
Centrica said: “The credit metrics required for the current strong investment grade credit ratings are under pressure.
“A 7% placing therefore allows … for lowering of net debt, reducing pressure on credit metrics and the group’s targeted strong investment grade credit ratings, in what remains an uncertain environment”.
Credit ratings agency Moody’s placed Centrica’s Baa1 rating on ‘negative watch’ in February, one step before an actual downgrade that would make it more difficult for the company to raise funds.
Centrica could have moved to improve its cashflow by cutting its dividend further though such a move would have likely angered investors after a 21% cut last year.