Utility firms Centrica and SSE are the companies left most exposed by Prime Minister Theresa May’s plans to cap the standard variable tariff energy bills, according to a new report.
Mrs May’s plans to impose a ceiling on household bills caused shares in UK based Centrica – owner of British Gas- to fall to a 14 year low.
But ratings firm S&P Global has produced a new report which suggests energy companies should be able to mostly offset any negative impact of the proposed legislation.
The paper shows that the most exposed companies to the change would likely be Centrica and SSE.
However the effect on EDF, innogy, Scottish Power, and E.ON, will be limited because their respective U.K. supply operations are not significant contributors to overall operating profits, according to S&P.
The report goes on to highlight that, contrary to the proposal’s aims, S&P believes the tariff cap may not incentivise consumers to change to cheaper suppliers.
The cap will, however, put pressure on energy companies’ cash flows, which will require them to lower their operating expenses, capex, or potentially adjust their financial policies.
The paper conclude that despite this, the largest players’ ratings may not be immediately altered following the introduction of a tariff cap.
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