Chief executive welcome statement

Welcome to Centrica’s Corporate Responsibility Report 2005. This highlights our CR performance – and gives case studies of some of the people and communities we have been able to help.

In response to feedback from our stakeholders last year we have made some changes to the way we report our performance.

We have focused more closely on areas where our activities had the most significant impact - climate change, vulnerable customers and health and safety. In addition, we are publishing the full version of our report solely online for the first time, presenting information in various levels of detail to cater for our different audiences.

During the year, the increase in wholesale gas and power costs, to unprecedented levels, presented a massive challenge to our residential energy business and led to a round of price increases across the industry.

British Gas worked hard to minimise the effect, particularly on our vulnerable customers and brought in a range of innovative schemes to offer support. For example, we gave winter fuel rebates totalling £6.7 million to customers most in need.

In response to declining North Sea gas reserves, we have committed to invest £16 billion in future gas supply contracts, and gas and power projects for the UK. Projects include long-term supply contracts, investments in capacity at liquefied natural gas reception terminals and the acquisition of two exploration blocks in Nigeria. In 2006 we expect to develop our upstream activities in other parts of the world.

This will all, of course, present corporate responsibility (CR) risks but our business principles and risk management processes will guide the way we handle them.

One of our aims is to find ways to reduce our carbon footprint and make a positive contribution to the battle against climate change. Our major investment in renewable energy in the form of onshore and offshore wind farms demonstrates our commitment – and we have introduced a range of offers to encourage our customers to become more energy efficient. The energy efficiency measures installed by British Gas in 2005 helped our customers save more than £37 million.

Health and safety remains central to our thinking. We always run our operations with the safety of our employees, customers and members of the upper most in mind.

Despite the challenges we faced in 2005, I believe we made genuine progress in our social, ethical and environmental management. Our continued inclusion in key socially responsible investment indices - including the Dow Jones Sustainability Index and FTSE4Good Indices - and improved score in the Business in the Community CR Index are testimony to that.

One other area I’d like to highlight is the dedication of our employees. They have delivered an outstanding performance during a turbulent period, a sign of their commitment to Centrica. It is encouraging that our employee engagement score increased by 1.3% - in a year that was certainly the toughest since Centrica was formed in 1997.

Our workplace initiatives have been recognised in a number of awards. In particular, British Gas has become the first major UK Company to be accredited to the new 2004 ‘Revised Investor in People Standard’. Our graduate programme won the Personnel Today Award for Excellence in Graduate Recruitment in 2005, beating off challenges from more than 60 entrants. And British Gas Business was voted the 15th Best Workplace in the UK by the Financial Times sponsored Best Place to Work Institute.

During 2005, I announced my intention to step down as chief executive. During my nine years with Centrica, I have had the privilege of leading a remarkable team of talented individuals, all committed to our open and honest approach to our social, ethical and environmental responsibilities.

I shall be handing over to Sam Laidlaw, who joins us from Chevron at the end of June. Sam will bring an invaluable combination of upstream expertise and a very considerable reputation for managing a large-scale global energy business. I am confident that he will share my commitment to continual improvement in our corporate responsibility performance.

Our record in 2005 demonstrates good progress. Whatever happens in the energy market in 2006, Centrica will not be distracted from our goal of delivering a world-class performance in this field, as in every other.

Sir Roy Gardner
Chief Executive