Claer Barrett, companies writer, responds:
"I should preface these comments by saying that we can't give individual investment advice.
"Centrica announced a 3-for-8 rights issue at the end of October, when its shares were around 290p. It wants to raise £2.2bn, mostly to fund its acquisition of a stake in nuclear generator British Energy, which is being taken over by French utility EDF. The deal between EDF and British Energy is subject to regulatory approval and EDF raising the necessary money (although with the French state as a major shareholder, that should not be a problem!) Centrica's rights issue is fully underwritten, so if the shares aren't sold, the underwriters will buy them. Most major shareholders are backing it.
"Centrica shares are now trading without the right to buy additional shares at 160p ("ex-rights"). The rights are trading separately, at about 87p each. You have several choices:
■ Take up your rights and buy extra shares at 160p. This is the action we have recommended to IC readers generally. You have until 12 December to do this.
■ Sell your rights but hold onto your existing shares. You'd do this if you wanted to remain a Centrica shareholder, but are happy for your holding in the company to be diluted and don't want to commit more capital to it. There are two ways to do this. One is to do nothing, and let Centrica's underwriters sell the shares you don't want, and send you a cheque for the proceeds less brokers' commission. The other is to instruct your own stock broker to sell your rights now.
■ Sell some rights and use the proceeds to take up rights on your remaining shares. This is a common course of action for shareholders who don't want to be heavily diluted, but don't want to commit fresh capital either. The Centrica website (and the offer documentation you should have received) spells out how to go about doing this.
■ Sell your rights and your shares. You'd only do this if you thought Centrica was a disastrous investment and had lost all hope of it getting any better! To do it, you'd sell the rights and the shares now through your stock broker, and you'd cease to be a Centrica shareholder.
Our advice on rights issues and other forms of fundraising is summarised in the back pages of every week's edition of Investors Chronicle. This information does not currently appear on the website.
There's more information on the Centrica rights issue on the company's investor relations site; you have to agree to a legal disclaimer first.
For more articles about Centrica on the IC site, see this page.
