ENERGY group Centrica announced last night that it was in talks to sell its AA motoring organisation.

The British Gas owner bought the AA from members for £1.1bn five years ago. It is thought the proposed sale will help fund acquisitions in the electricity and gas sector.

A statement from the group confirmed preliminary discussions were taking place, but it would not provide further details about the potential sale.

One report said the breakdown and financial services operation could fetch more than £1.5bn, with insurance groups the most likely buyers.

The announcement came a day after a report said chief executive Sir Roy Gardner no longer viewed the AA as a core element of Centrica's long-term strategy.

Since taking it over in 1999, Centrica, formed in 1997 from the privatised British Gas, has increased its number of roadside customers from 9.5 million to 15 million.

Profits have grown from £6m to £93m.

Proceeds from the AA deal would provide an important boost to Centrica's balance sheet at a time when it would like to increase its ownership of electricity generating capacity and gas fields.

Such a move would ensure that its energy business, which had 12.6 million gas customers and 6.2 million electricity customers at the end of last year, can position itself against the prospect of rising wholesale prices.

A recent acquisition of the Killingholme station, near Grimsby, should allow Centrica to meet 43 per cent of peak domestic demand for electricity next year, up from its current level of 32 per cent. It buys the rest on the open market.

As a result, British Gas customers can expect fewer changes in their bills at times of volatility in energy prices.