Labour energy price freeze plan wipes $4.3 billion off British utilities
LONDON (Reuters) - British utilities Centrica and SSE have lost 2.7 billion pounds ($4.34 billion) in market value since opposition Labour leader Ed Miliband promised on Tuesday to freeze energy prices for 20 months if his party wins power in May 2015.
Seeking to convince voters he can improve their standard of living, Miliband said energy companies had been overcharging consumers for too long and the energy market was not working.
"The companies aren't going to like this because it will cost them more," Miliband told the Labour party conference in the seaside resort of Brighton in southern England on Tuesday.
A Labour source close to Miliband said the plan could cost energy suppliers 4.5 billion pounds.
"Although there remains uncertainty surrounding the detail of the policies or whether Labour will even win the next election, we believe the risk level in the sector has now substantially increased," JP Morgan analyst Edmund Reid said in a note to clients.
Centrica has lost 7.3 percent, or 1.5 billion pounds, since the market close on Tuesday while SSE has fallen 7.5 percent, or 1.2 billion pounds, according to Reuters calculations. Centrica now has a market value of 18.8 billion pounds while SSE is worth 14 billion pounds.
While the companies' shares did not immediately react to Miliband's policy as he gave his speech on Tuesday, they have since retreated. For Centrica, Wednesday was the biggest one-day fall in value since May 2011, while SSE suffered its biggest one day fall since October 2008, or nearly five years.
On Thursday Centrica's shares were down 2.1 percent in afternoon trading, topping Britain's bluechip losers list, with SSE also featuring among the laggards, down 1.5 percent.
Energy Secretary Ed Davey said the Labour plan could lead to blackouts.
Centrica chairman Roger Carr, a high profile British business veteran who has chaired a string of companies including Cadbury, Thames Water and is due to take the chairman role at BAE Systems before next May, slammed Labour's policy.
"When costs are outside your control but someone is fixing your price and putting a ceiling on it, the risk of course is that it is potentially a recipe for economic ruin for a company," Carr, who also has a supervisory role at the Bank of England, told the BBC.
SSE warned that a prize freeze could result in cuts to investment, jobs and the dividends it pays out to British people's pensions.
SSE Chief Executive Alistair Phillips-Davies said Labour should instead reduce energy bills by removing the "stealth taxes" that energy companies charge customers to fund government policies on energy efficiency and lowering carbon emissions.
"There is nothing to stop them removing the cost of government polices from energy bills. It helps customers while keeping investment going," he said.
($1 = 0.6224 British pounds)
- Tweet this
- Share this
- Digg this
- Children's corpses reveal desperate attempts to escape Korean ferry |
- Australia, Malaysia vow to keep searching to solve plane mystery
- Russia says it will respond if Ukraine interests attacked |
- Search for MH370 reveals a military vulnerability for China
- Man United act to halt slide as power shifts back to Liverpool