Utility Stocks Safe Following Conservative Win

Centrica escaped a disastrous outcome if the Labour Party's Ed Miliband had gone through with his proposals to freeze energy prices and break up the largest retailers

Charles Fishman 11 May, 2015 | 12:13PM

We are reaffirming our fair value estimates, moat ratings, and moat trend ratings for utilities with U.K. exposure following the Conservative Party's win in the United Kingdom's general election May 7. Last year, rising retail energy prices placed a bull's-eye on utilities and energy retailers in the early U.K. election rhetoric. 

In particular, Centrica (CNA) escaped what could have been a disastrous outcome if the Labour Party's Ed Miliband had gone through with his proposals to freeze energy prices and break up the largest retailers, like Centrica. The election could make Iain Conn, Centrica's new chief executive, less likely to divest the company's retail natural gas business, which currently has an industry-leading 36% market share.

Conn indicated in February, after being on the job only seven weeks, that he was making a complete review of Centrica's strategy. We are reaffirming our £3.40 fair value estimate and narrow moat and stable moat trend ratings for Centrica.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Centrica PLC46.63 GBX-2.00
National Grid PLC891.80 GBX-1.37
SSE PLC1,302.00 GBX-1.33

About Author

Charles Fishman  Morningstar Equity Analyst, Equity and Credit Analysis

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