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ANSWER 22nd November 2008

Hi Avril,

Centrica are having a rights issue. They are raising money to pay for a stake in British Energy. Existing shareholders are being offered the right to buy more shares at a ratio of three shares for every eight held at a price of 160p each. You will automatically be alloted new shares on this basis. At this stage the shares will be NIL PAID and you have to decide whether you want to pay for them. Your adviser will tell you whether or not this is a good idea. Otherwise you will have to decide whether you think Centrica are going to use the new money to good effect. Two aspects you could consider. One, the markets are very low at the moment and should improve over the longer term (2-3 years). Nuclear energy is possibly the best alternative energy source we have. The issue is full underwritten so Centrica will get all the money they want anyway. Of course the Br. Energy deal may not go through, in which case Centrica will use the money to buy other forms of energy resources.

Your choices are: 1. Do nothing and let the new shares lapse 2. Whne you get the allotment letter sign it and return it with your cheque. 3. Sell the new shares in the market NIL PAID if there is a premium.

1. Do nothing. You will be paid the premium, if any, by Centrica in due course. Your holding wil be slightly DILUTED (your % of Centrica will diminish slightly meaning you will get a smaller % of their profits in the future (probably negligible outcome if a small holding). 2. Send cheque. You will receive the additional number of shares which will become just the same as your existing shares (which you will still own).3.You could sell the NEW NIL PAID shares 'in the market' if there is a premium and if the value would be economical after expenses. This could be done when they are listed on the 24th November but a few days before the call is due probably aroud 7th December. The premium, if any will fluctuate through the day and each day . Centrica will sell the shares not taken up at the price on the last day.

You can calculate the theoretical price of the shares after the rights issue as follows: You will have 3 shares at 160p and 8 shares at 268p ( Friday's closing price). This gives 11 shares at 2624p or 238p each. If it is perceived by the City to be a good plan and the markets in general are OK then there will be a premium to this price. If not they will be at a discount.. Hopefully they wil be somewhere around 268p still making the NEW NIL PAID shares worth 30p each (without you having to pay anything).

Hope this is clear.