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Profits At 'big Six' Energy Companies Have Rocketed Since The Financial Crisis Began

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http://www.telegraph.co.uk/news/politics/10472758/Profits-at-Big-Six-energy-companies-have-rocketed-since-the-financial-crisis-began.html

Profits at Britain's 'Big Six' energy suppliers are five times higher than they were in 2009 as millions of households suffer record bills for their gas and electricity, regulators revealed today.

Labour politicans launched fresh attacks on the Government over the cost of living tonight after Ofgem admitted competition in the energy sector "is not working as well as it could".

Ofgem said the 'Big Six' - British Gas, Npower, Scottish & Southern Energy (SSE), Scottish Power, E.ON and EDF - made a combined £1.2 billion in their household supply businesses last year, up 75 per cent on 2011 and five times higher than £221 million in 2009.

Profit per household was £53 in 2012, against just £8 three years before.

Ofgem said last year's dramatic jump was triggered by a 17 per cent rise in average bills during 2012 and the effect of the bitterly cold weather, which forced Britons to turn up the heating.

The wonders of privatisation and none of it is being reinvested by these companies in renewing the ageing UK power infrastructure, that has to be met by everyone barring the those that own the companies...

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http://www.telegraph...isis-began.html

The wonders of privatisation and none of it is being reinvested by these companies in renewing the ageing UK power infrastructure, that has to be met by everyone barring the those that own the companies...

from your article: Profit per household was £53 in 2012, against just £8 three years before.

do you think that anybody with a half a brain will do business for £8 before tax per year ??? I pay about £1500 per year for energies. so their profit margin is crazy 3.5% ...

Edited by Damik

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from your article: Profit per household was £53 in 2012, against just £8 three years before.

do you think that anybody with a half a brain will do business for £8 before tax per year ??? I pay about £1500 per year for energies. so their profit margin is crazy 3.5% ...

Depends if it's an oligopoly with price fixing. Are you suggesting the over inflated salaries the CEO's are getting means they aren't worth it for this type of profit?

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Depends if it's an oligopoly with price fixing. Are you suggesting the over inflated salaries the CEO's are getting means they aren't worth it for this type of profit?

what part of 3.5% profit margin do you have problem to understand? and yes CEOs are paid more than you. get used to it or get a better job ...

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from your article: Profit per household was £53 in 2012, against just £8 three years before.

do you think that anybody with a half a brain will do business for £8 before tax per year ??? I pay about £1500 per year for energies. so their profit margin is crazy 3.5% ...

They pay next to no tax as it is all accounted away, and the profit does not include generation where the margins are huge.

If some but not all companies made a profit on the 2009 figures, one can conclude the others would have made a profit too had they been run properly, and just increasing the cost of supply to consumers to make them profitable was unreasonable.

If I were chancellor I would windfall tax any profits not re-invested in the infrastructure. And close the tax loopholes too.

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from your article: Profit per household was £53 in 2012, against just £8 three years before.

do you think that anybody with a half a brain will do business for £8 before tax per year ??? I pay about £1500 per year for energies. so their profit margin is crazy 3.5% ...

Damik,,I used to work for GSK,they made £2 billion worth of Zantac in 4 rooms each 30ft x 30ft.36 people working on it direct.They also produced £1 billion of antibiotics,£1.5 billion of skincare creams,£500 million migraine injections,£300 million cancer drugs and another £700 million in smaller market drugs in one plant.That factory never made a profit on paper.

We paid R+D massive amounts and sold them to the sale forces in each country for cost price.They made the profits on paper.The factory was really making £3.5 billion a year profit.

The energy companies do the same,,they pay the generation side much more than they need to so the profits are made there instead of from the consumer business.

The regulator are a waste of time.

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They pay next to no tax as it is all accounted away, and the profit does not include generation where the margins are huge.

If some but not all companies made a profit on the 2009 figures, one can conclude the others would have made a profit too had they been run properly, and just increasing the cost of supply to consumers to make them profitable was unreasonable.

If I were chancellor I would windfall tax any profits not re-invested in the infrastructure. And close the tax loopholes too.

do you understand how much is the 3.5% of the profit??? here is a picture for you:

light-bulb_2682548b.jpg

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do you understand how much is the 3.5% of the profit??? here is a picture for you:

light-bulb_2682548b.jpg

£751 is spent by the residential supply company to the seperate generator and transmission companies, which are all part of the same group.

Are you quite happy to exclude the possibility that the generator/transmitter make any profits?

Edited by The B.L.T.

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Damik,,I used to work for GSK,they made £2 billion worth of Zantac in 4 rooms each 30ft x 30ft.36 people working on it direct.They also produced £1 billion of antibiotics,£1.5 billion of skincare creams,£500 million migraine injections,£300 million cancer drugs and another £700 million in smaller market drugs in one plant.That factory never made a profit on paper.

We paid R+D massive amounts and sold them to the sale forces in each country for cost price.They made the profits on paper.The factory was really making £3.5 billion a year profit.

The energy companies do the same,,they pay the generation side much more than they need to so the profits are made there instead of from the consumer business.

The regulator are a waste of time.

I am not sure what is your point. GSK 2012 core profit after tax was about 21% of the turnover. And majority went to the share holders. The dividend to share ratio is only about 6.8%, so nothing special ...

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£751 is spent by the residential supply company to the seperate generator and transmission companies, which are all part of the same group.

Are you quite happy to exclude the possibility that the generator/transmitter make any profits?

I am not aware that all Big 6 are somehow involved in the NationalGrid

Also UK wholesale electricity prices are comparable with the rest of EU: http://ec.europa.eu/energy/observatory/electricity/doc/20130814_q2_quarterly_report_on_european_electricity_markets.pdf - Figure 9

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I am not aware that all Big 6 are somehow involved in the NationalGrid

Also UK wholesale electricity prices are comparable with the rest of EU: http://ec.europa.eu/energy/observatory/electricity/doc/20130814_q2_quarterly_report_on_european_electricity_markets.pdf - Figure 9

That's not what I asked.

Are you prepared to exclude the possibility that some profits relating to the generation and transmission of energy to households are contained within costs paid from the residential supply business to other parts of the same group?

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I am not sure what is your point. GSK 2012 core profit after tax was about 21% of the turnover. And majority went to the share holders. The dividend to share ratio is only about 6.8%, so nothing special ...

The point is multi-nationals choose where they make the profit to suit the tax etc.The energy companies make the profit in generation so it looks like they make very little from the consumer.So they can claim "we only make 3.5%" when that's because the generation side simply charge enough so the consumer side makes little profit.

If the generation side made a 3.5% margin the consumer side would probably be making 50%+ profits.

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The point is multi-nationals choose where they make the profit to suit the tax etc.The energy companies make the profit in generation so it looks like they make very little from the consumer.So they can claim "we only make 3.5%" when that's because the generation side simply charge enough so the consumer side makes little profit.

If the generation side made a 3.5% margin the consumer side would probably be making 50%+ profits.

Hmm, let's check e.g. EDF financial results in H1 2013:

http://shareholders-...ults-42826.html

Sales: 39.4 billions

Operating profit: 5.8 billions (15%)

Net income: 2.9 billions (7.3%)

Earnings per share price: 1.56 * 2 / 26.83 = 11%

Somehow I am not able to see these large profits. It seems that it is better to run a pawn shop, where your profit margin is 50% ...

Edited by Damik

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Are you prepared to exclude the possibility that some profits relating to the generation and transmission of energy to households are contained within costs paid from the residential supply business to other parts of the same group?

Again:

1/ I am not aware that the Big 6 are involved in the National Grid / transmission.

2/ There is much more players in the UK and EU electricity wholesale market than the UK Big 6. So I am not really aware how the Big 6 can make some crazy profit from generation ???

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Again:

1/ I am not aware that the Big 6 are involved in the National Grid / transmission.

2/ There is much more players in the UK and EU electricity wholesale market than the UK Big 6. So I am not really aware how the Big 6 can make some crazy profit from generation ???

Congrats, you're the first person to make my ignore list. Goodbye.

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It's all very well criticizing Damik for his defence of modest energy profits and trying to play the generation hand, but what you all fail to recognise is that this latest criticism refers solely to the profit on household bills. Damik is right to point out that £8 per household is a stupid level of profit and that £53 is just modest. To put him on ignore for pointing this out is hardly fair.

Posters continue to ignore the huge sums power companies must invest in order to keep the lights on. The media makes out £1.2 bn is a huge profit. If people believe this I suggest they invest in the shares, but before you do, please note that the companies you are investing in will be called upon to invest hundreds of billions over the next decade - centrica alone is due to spend £110bn in the next ten years. Maybe buy to let doesn't sound such a bad investment after all eh? And when you think of it that way, maybe you are bashing the wrong guys. Heat and light along with water is probably your lowest expense. By comparison, food and shelter are much more expensive. If that does not give you a gut sense of cost, maybe it should.

Finally before you invest in those oh so profitable energy shares, bear in mind that UK consumers currently owe the utility firms a massive £29billion - that's over a grand for every single household in the country. If you owned a food shop and your average customer owed nearly a years worth of groceries, maybe you'd be wondering whether you should be in that business at all. No wonder the government privatised the industry!

And while we're talking government, maybe we'd be more advised to ignore this story of £1.2bn profits and concentrate on the £740 million the government casually wrote off today in old student loans. That's taxpayers money - your money too, and it's a taxpayer black hole that is only gonna get bigger. meanwhile Osborne will present this as a net £160m gain - the price the debt collection firms paid for the £900m loan book.

Edited by Sledgehead

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Damik, you are being wilfully dense right?

Vertical integration means that the distribution company buys its energy from a generating company which it owns as well. Profits on the retail side can be manipulated down by paying more, displacing the overall profit to the generating entity of the group. Which opens up a whole bunch of overseas tax arbitrage, avoidance and offsets (Amazon/Starbucks et al).

What BLT was saying is that your defence of the big 6 is based on assuming there is no profit being made at the generation stage which is patently false.

http://news.sky.com/story/1173380/big-six-energy-firms-face-new-profits-storm

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Damik, you are being wilfully dense right?

Vertical integration means that the distribution company buys its energy from a generating company which it owns as well. Profits on the retail side can be manipulated down by paying more, displacing the overall profit to the generating entity of the group.

But this thread is about the rise in household profits, not profit in generation. The fuss is being made because household profits have risen from nothing to 3.5%. ie a non story. That's what Damik is pointing out.

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Sledge...

Can't fault your post. Government have fecked up energy strategy by not having anything workable. A hotchpotch of can kicking and badly thought out knee jerk regulation has meant energy capacity investment (10-20 plus year time scales) has had no chance.

This is why l think the energy companies are simply happy to make what they can now and screw tomorrow. Would be interested to know what Centrica are spending £110bn on given we seem to have nothing planned other than fossil decomm's and Chinese nukes?

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But this thread is about the rise in household profits, not profit in generation. The fuss is being made because household profits have risen from nothing to 3.5%. ie a non story. That's what Damik is pointing out.

How many energy company stooges are trolling these boards? At least you're easier to spot than some of the estate agents.

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But this thread is about the rise in household profits, not profit in generation. The fuss is being made because household profits have risen from nothing to 3.5%. ie a non story. That's what Damik is pointing out.

Treat the gen and retail part as one company which they are, and this 3.5% is sophistry. Why are we forced to limit the argument to one manipulated facet of the companies overall profit from household supply?

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How many energy company stooges are trolling these boards? At least you're easier to spot than some of the estate agents.

To be fair Sledge would have to be some kind of deep sleeper cell/manchurian candidate to fulfil that accusation. :lol:

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