City analysts have described as 'surprising' a move by British Gas owner Centrica (LON:CNA) to raise £750mln to help fund acquisitions, shore up its credit rating, and pay down debt.
Shares in the energy giant crashed almost 10% in early deals after it announced the move, to make it the biggest laggard on Footsie.
It plans to sell 350mln shares, or around 7% of its capital, to institutional investors, and the move comes only days after an AGM in which it said the business was robust despite ailing commodity markets and an oil price around the US$45 a barrel mark.
Around £350mln of funds will be used on the £170mln deal for the Danish trading firm Neas Energy A/S announced last month, while it said a further customer-facing acquisition was also nearing completion.
The rest will go on debt and to reduce pressure on its credit metrics.
Moody’s placed Centrica’s Baa1 credit rating on review for downgrade in February, citing low gas and power prices. Standard & Poors also put its BBB+ rating on negative outlook, citing low commodity markets.
Centrica said today it wanted to retain its investment grade ratings with both agencies, which are the "most efficient" for Centrica's business model, given the scale of its energy procurement activities and the resultant need for access to cost-effective short-term sources of liquidity to manage collateral requirements".
US broker Jefferies noted: "Raising equity is an expensive way of paying down debt.
"Nevertheless Centrica will clearly be in a modestly stronger financial position post the placing, albeit with existing shareholders facing a roughly 7pc dilution."
He added: "Centrica's new management have been trying to establish a reputation for tight capital management; it is difficult to say whether today's announcement enhances or diminishes that reputation."
Centrica shares plunged 9.87% to 208.3p.