JPMorgan upgrades Centrica as energy price cap now looks unlikely
JP Morgan Cazenove lifted Centrica to 'neutral' from 'underweight' and upped the price target to 205p from 180p, noting that the worst case scenario was now off the table after the Queen's Speech left out any mention of an energy price cap.
"The UK general election is shaping to be a tipping point for UK supply markets, with a weakened Tory government opting for further consultation on energy market reform rather than pressing ahead with a market-wide price cap.
"In doing so, the government has effectively taken off the table the ‘worst case’ scenario we had feared."
In the Queen's Speech, the government proposed to "extend the price protection currently in place for some vulnerable customers to more customers on the poorest value tariffs". JPM concluded from this that the likelihood of a market-wide cap has fallen.
Although some relief is warranted, JPM cautioned that there is a caveat in that the spectre of price regulation still hangs over the industry, with Ofgem exploring further options to help the energy market "work better for all consumers".
Earlier this week, Ofgem responded to a latter from the Department for Business, Energy and Industrial Strategy by saying that it shares the government's belief that the energy market needs to do more to help loyal consumers get a better deal.
In addition the bank pointed to the fact that competition is gathering pace, with the likes of Engie and Vattenfall entering the market in recent months.
At 0945 BST, Centrica shares were up 1.3% to 209p.