Centrica shares drop as shareholders revolt against CEO pay

Centrica’s share price has plummeted after nearly 40% of shareholders voted against remuneration at the firm’s annual general meeting.

The British Gas-owner’s shares were down 8% in midday trading as the company held an annual general meeting and shareholder vote on group chief executive Chris O’Shea’s pay.

At the AGM, 39.98% of shareholders voted against the resolution to approve the firm’s remuneration report for 2024, although this was still below the threshold required to defeat the resolution.

A smaller percentage, 6.69% voted against the firm’s remuneration policy and 5% refuse to support amendments to the firm’s long term incentive plan.

Centrica increased its chief executive’s annual basic pay by 29% to £1.1 million in April, up from £855,000, despite halving his overall annual compensation to approximately £4.3m last year following a sharp decline in profits.

This compares to National Grid’s new chief executive Zoë Yujnovich’s allotted basic salary of £1.3m and BP’s CEO Murray Auchincloss’s basic remuneration of £1.45m in 2024.

© Jessica Davies/DCT Media

In its annual report, the company said that O’Shea’s “remuneration no longer sufficiently aligned with our peers, and his performance and experience warrants positioning his pay between the median and upper quartile of the FTSE 100″.

Board member and chair of the remuneration committee, Carol Arrowsmith, said in her report that it was important to pay employees “competitively based on their role, skills, experience, and performance”, in order to “attract and retain high-performing executives”.

Shareholder advisory Institutional Shareholder Services circulated a report to clients this month, in which it said the rise in O’Shea’s basic salary was not backed by “cogent rationale”.

It advised shareholders to vote against his remuneration package, arguing that the percentage salary increase was greater than the 8.5% raise given to its finance chief and a wider workforce increase of up to 4%.

The company’s executives said that it remains committed to energising a “greener, fairer future”, and that it has now invested half of the £4bn green investment programme it outlined in July 2023 as part of its climate transition plan.

Its chief executive faced tough questions around human rights abuses at a liquefied natural gas plant in Mozambique that Centrica signed a supply agreement for in 2018, and new nuclear power.

Shareholders also raised concerns about Centrica’s proposed investment in new nuclear power at Sizewell C given the UK government’s review of taxonomy for the technology and whether it can be classified as green.

O’Shea said that the company will review ongoing investigations into the Mozambique gas plant, which is subject to a procurement arrangement it has in place with Tokyo Gas.

Three investigations have been launched into the plant in Mozambique, France and the Netherlands.

Sizewell C ‘emotive’

Centrica’s executives said that it had not taken a decision on its proposed investment in Sizewell C, a nuclear power plant planned for East Suffolk.

O’Shea called nuclear investment an “emotive topic” but said he was “optimistic” about the future of Sizewell C, the new nuclear development in East Suffolk, and did not rule out a possible investment in Hinkley Point C.

“I don’t accept that it will definitely be late or over budget,” he told shareholders during the annual general meeting held today at the Edwardian hotel in Manchester.

He dismissed shareholder concerns around the safety and efficiency of European pressurised water reactors (EPRs), where it has been highlighted that the vibrating fuel rods were dysfunctional.

O’Shea said that Centrica uses the European Union’s green taxonomy, as well as its own, to classify nuclear as green, or low carbon. He also pointed to Japan restarting nuclear reactors in 2024, which were switched off following the Fukushima disaster of 2011.

State-backed French energy company EDF is the developer behind both nuclear projects, while the UK government has invested a cornerstone sum and courted investment from potential private investors including Centrica.

French state auditor Cour des Comptes ordered the company earlier this year not to invest more in Sizewell without first refinancing its existing nuclear power plant Hinkley in Somerset, after losing a key Chinese investor, warning of escalating costs.

‘Constructive discussions’ on Rough

O’Shea said Centrica was engaged in “constructive discussions” with government around the future of gas storage facility Rough to unlock a £2bn redevelopment into a hydrogen storage facility.

He wrote in a social media post earlier this month that energy secretary Ed Miliband had pledged to reveal further information around government funding for hydrogen storage this summer.

Centrica’s chief executive told shareholders that Centrica Energy Storage+, the division that runs the facility, had generated a loss on the “upper end” of the predicted £50m to £100m range.

Last month, Centrica stopped filling the facility as the costs of buying gas from the wholesale market that it would then sell outweighed the potential returns, not foreseeing higher prices in the winter.

In an update before the AGM, Centrica reaffirmed its 2025 adjusted operating profit guidance for the full year and said it would increase this year’s dividend to 5.5 pence per share, up from 4.5p last year.