Cen­trica picks up pace as fears over price caps re­cede

Financial Times USA - - MARKETS & I NVESTING - Bryce El­der

Bri­tish Gas owner Cen­trica was a gainer in a fall­ing London mar­ket yes­ter­day as fears re­ceded that price caps will erode sec­tor prof­itabil­ity.

The Con­ser­va­tive party’s gen­eral elec­tion man­i­festo set a more mod­er­ate tone on cap­ping en­ergy bills than the prime min­is­ter Theresa May had put for­ward in a Sun ed­i­to­rial the week be­fore. Ab­sent were com­mit­ments to “pro­tect around 17m cus­tomers on stan­dard vari­able tar­iffs” and to save all cus­tomers up to £100 a year. In­stead, it pledged to pro­tect “more cus­tomers” against “abusive price in­creases” by cap­ping the “poor­est value tar­iffs”.

The softer word­ing sug­gests the cap is “not in­tended to save money on cur­rent bills but to pre­vent fu­ture pre­cip­i­tate and un­war­ranted price hikes”, said Bern­stein. It es­ti­mated that, by rein­ing in the high­est tar­iff by £100 rather than tar­get­ing the av­er­age cost, res­i­den­tial dual-fuel bills would be capped at about £1,100 a year — higher than the cur­rent big-six av­er­age of £1,076.

Cen­trica closed 3.9 per cent higher at 200.9p and SSE took on 1.6 per cent to £14.92. The rally was tem­pered by news that a cap might be widened to in­clude “mi­cro busi­nesses”. “Given the continued lack of spe­cific in­for­ma­tion on the price cap pro­posal, es­ti­mat­ing the im­pact on the com­pa­nies re­mains fraught with er­ror,” said Jef­feries.

The tur­moil en­velop­ing Don­ald Trump’s pres­i­dency con­trib­uted to the wider mar­ket’s sharpest fall in two months, as did heavy­weight stocks in­clud­ing Royal Dutch Shell and HSBC los­ing rights to their lat­est div­i­dends. The FTSE 100 slipped 0.9 per cent or 67.05 points to close at 7,436.42.

Shire gained 1.8 per cent to £48.15 after re­leas­ing pos­i­tive top-line re­sults of a piv­otal trial of lanadelumab, an anti-swelling drug it bought in 2015 via the $6bn ac­qui­si­tion of Dyax.

The suc­cess bol­stered hopes that Shire could de­fend its mo­nop­oly for treat­ing hered­i­tary an­gioedema, a rare dis­ease that ac­counts for about 10 per cent of group rev­enue but faces pa­tent ex­piries and a chal­lenge from CSL of Aus­tralia, whose ri­val drug could win US reg­u­la­tory ap­proval this year.

TalkTalk rose 2.8 per cent to 179.5. RBC, upgrading to “out­per­form”, ar­gued that the broad­band provider could re­lease hid­den value by sell­ing its busi­ness-to-busi­ness divi­sion.

Body­cote was down 3.6 per cent to 760.5p on a down­grade to “un­der­weight” from Mor­gan Stan­ley, which turned cau­tious on the cap­i­tal goods maker. “The sec­tor typ­i­cally un­der­goes a three- to nine-month tac­ti­cal correction when PMIs peak,” Mor­gan Stan­ley told clients.

Laun­dries op­er­a­tor Berend­sen jumped 21.1 per cent to £10.46 on news that it had re­jected two of­fers from French peer Elis, the sec­ond of which was for £11.43 in cash and shares.

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