Standard content for Members only
To continue reading this article, please login to your Utility Week account, Start 14 day trial or Become a member.
If your organisation already has a corporate membership and you haven’t activated it simply follow the register link below. Check here.
Centrica’s billion pound strategy overhaul still faces the threat of commodity price moves and government intervention a major bank has warned.
RBC Capital said on Friday that the company’s shift towards growing its connected homes and distributed generation offerings represent “a positive step” to position the utility “for the transformation we see happening in the sector”.
But the bank warned that Centrica still faces a risk to its share price targets due to its exposure to commodity prices and the threat of government intervention.
The analysts said that the company’s remaining upstream assets could face a material impact due to movements in the oil and gas price, as well as changes to the North Sea tax rates.
Centrica has moved to downplay its investment in upstream assets by halving production from 80 million barrels of oil equivalent (boe) to 40-50 million boe.
In its downstream business, where it is ploughing around £1.5 billion of investment, the company is exposed to possible Ofgem and government actions in the hotly debated residential supply market. RBC said this, along with the outcome of the extended Competition and Market Authority probe, could alter its valuation of the company.
Although the strategy shift was broadly welcomed by the investment community when it was announced in late July, the weight of challenges facing the company in implementing the plans has pressured the share price over 15 per cent lower.
In late July the shares were seen trading at around 282 pence but are now trading just below the 240 pence level.
Please login or Register to leave a comment.