Credit Suisse downgrades Centrica to 'neutral'

Analysts at Credit Suisse downgraded shares of energy and services outfit Centrica to 'neutral' on Wednesday, saying that they expected a rough time for the firm's share price throughout February.

In addition to stripping it of its 'outperform' rating, the Swiss bank also dropped its target price on Centrica shares from 180p to 155p.

The Swiss broker's change of heart was principally a result of the roughly 8% price rise seen in Centrica's shares of late, with the analysts now anticipating a 9% drop in earnings per share in 2018 due to the weaker UK home and lower hydrocarbon production volumes.

"Our TP falls to 155p (from 180p) reflecting a lower value for British Energy, as we model the CO2 tax being halved to £9/tn from April 2021, and a higher pension deficit."

CS noted that price caps were also still likely to be contentious - with prices for around 65% of households covered by caps, which themselves were set to rise by just 8% on 1 April.

"Potential non-recovery of capacity payments and the change in wholesale hedging formula keep price rises down and raise risk of interference."

The analysts also pointed out that Centrica's sale of British Energy - which CS said the firm "needs" to help fund its pension deficit - was "likely to prove difficult".

"We believe the standstill in the capacity market and uncertainty on the CO2 tax-which drives nuclear profitability - will both make a sale of the 20% stake in British Energy - worth circa £900,000 - unlikely in 2019."