The same decision was taken at the end of April by ratings agency Moody’s, and follows a profit warning from the British Gas parent company in its interim management statement on 8 May.
The key factors weighing on the financial performance of Centrica include the low profitability of gas-fired power plants in the UK and challenging conditions facing its North American interests.
In Centrica’s latest interim financial statement it said it is looking to sell three large gas-fired power stations which have been running at low load factors in recent years amid declining profits related to the rising cost of wholesale gas.
In addition the ratings agency believes Centrica has a higher exposure to the political risk facing the UK’s energy companies.
“In downstream markets, we consider Centrica as the most exposed of the ‘Big Six’ suppliers to the unfavorable political climate, because of its leading market positions, especially in gas, where it makes above-industry-average margins,” a statement from S&P said.
The ratings agency added that while other energy companies retain a profit margin for the retail arms of their business interests at around 3%, British Gas holds a 5% margin which “could reduce toward the industry average”.
S&P said there is a one in two chance that it will downgrade the credit rating of ‘A-‘ in the next 90 days.