Centrica closes in on new chief executive

  • 23 July 2014
  • From the section Companies
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British Gas bill & flame

Next week will be dominated by news of energy giants. Both BP and Centrica will update the market on their latest performance.

For BP, much of the focus will be on Ukraine and what affect any new sanctions may have on relations with the Russian energy business, Rosneft.

For Centrica, a difficult set of numbers will show operating profits down by as much as a third according to consensus estimates.

A relatively warm winter and pressure on margins as bills prices remain to all intents and purposes frozen has had an impact on the bottom line.

Another factor connects these two businesses beyond the dates that they are announcing their half-year figures.

And his name is Iain Conn.

Mr Conn is the group managing director or refining and marketing at BP. He is on a shortlist of one to replace Sam Laidlaw, the present chief executive of Centrica.

Life in the public eye

I am told that the discussions between the two sides are so far advanced that it would need some cataclysmic event to derail the announcement. Mr Conn's confirmation in the role could come as soon as next week.

According to sources, the major stumbling block - the share options Mr Conn has built up through a successful 27 year career at BP - has been overcome.

The options could have been worth up to £16m if they had paid out in full (an unlikely scenario). But even an announcement saying that Mr Conn was to receive a large proportion of the possible amount as a buyout would have created a slew of bad headlines.

Sources tell me that Rick Haythornthwaite, the relatively new chairman of Centrica, has always been clear during the negotiations that a balance had to be struck between getting the right man - Mr Conn - and ensuring that a company with as high a profile as Centrica can justify itself to the public it serves.

Those sources now say that Mr Haythornthwaite has struck a compromise with Mr Conn. The BP executive, if he finally agrees to sign on the dotted line (and I think he will), will leave some of his options on the table at BP.

If and when he moves, Mr Conn will have to become used to a life in the public eye. Much of his background is in marketing, useful when it comes to thinking about how Centrica and its British Gas division are viewed by the public.

Myriad of wounds

He is also at present in charge of BP's downstream operations - including the retail arm of the business. Centrica believes that will set him fair for dealing with the firm's vital residential operations.

Mr Laidlaw has made little secret of his desire to leave Centrica after eight years - many of them in a pretty uncomfortable spotlight.

Battles over the price of energy bills and his remuneration have left the son of the former deputy chairman of BP - Sir Christopher Laidlaw - with a myriad of wounds.

I am told he is more than a little tired of "all the politics" which come with running a business that supplies millions of people with the power to heat their homes and cook their food.

Centrica became something of a whipping boy for the austerity debate, blamed for increasing prices when customers were struggling with falling real incomes.

Mr Laidlaw's case for the defence - that wholesale gas price rises, green levies and increasing distribution costs forced his hand - did little to cut through.

Mr Conn will want to reset the terms of the debate. The fact that there is a Competition and Markets Authority inquiry into the whole energy sector will help as it will give a final judgement on whether the market is working for consumers.

That will probably come sometime towards the end of 2015 or early 2016.

The new Centrica chief executive - if it is indeed as predicted, Mr Conn - will hope that the amount he is being paid will not obscure that bigger issue.