MOTORING organisation the AA is at the centre of talks that could lead to the business being sold for at least £1.5 billion by British Gas owner Centrica, it emerged today.

A statement from Centrica confirmed its involvement in "preliminary discussions regarding the potential sale of the AA", but it did not provide any further details.

The announcement comes a day after a report said chief executive Sir Roy Gardner no longer viewed the breakdown and financial services operation as a core element of Centrica's long-term strategy.

It is thought the AA, which employs 1,600 people at its headquarter sites at Basingstoke and Farnborough, could fetch more than £1.5 billion - six years after Centrica paid £1.1 billion for it.

However, it is too early to say whether any potential new owner will cut back on staff numbers.

One Centrica insider said: "The business strategy is certainly not focused around the AA motoring business any more."

The AA made a £93m profit last year, making up nine per cent of Centrica's £1.06 billion group profits for 2003.

As well as 15 million members, the AA is a leading insurance intermediary with about 1.6 million home and motor insurance policies in force.

That could mean potential buyers come from the insurance sector, although the Sunday Express said yesterday that no clear favourite had yet emerged.

The sale of the AA would enable Centrica to increase its focus on its core utilities and home services interests, as well as raise the possibility of returning cash to shareholders.

Earlier this month Centrica paid £142m for the Killingholme power station near Grimsby in a move that further cushioned the British Gas business against future swings in energy prices.

The news that Centrica is committed to its core residential energy and utilities business is good news for British Gas employees in Southampton.

More than 1,500 of them are based at the fuel giant's headquarters in the city.

Both the AA and Centrica have similar core operations - marketing and call centres supporting a field-based workforce of engineers and patrols.

But Centrica has increasingly been keen to fund a series of power-sector acquisitions in a bid to cash in on the rise in wholesale energy prices.