City experts today predicted that an energy price cap would have little impact on profits of the power generators.
While no details have been released as yet, speculation among analysts suggests that a cap based on forecasts made before Russia invaded Ukraine in February at between £110-£150MWh, would see generators still continue to profit even with the current price much higher at £490/MWh.
According to a Stifel, a price cap similar to the European level of €180MWh, or £150/MWh, would have little impact on generators portfolio values.
Berenberg agreed, saying it is “unlikely that the UK cap will be below £150/MWh” as generators “revert back to their original target returns” when liaising with the government over the cap.
Even at £100/MWh, Jeffries estimates a cap would have limited impact on generators, highlighting that the pre-invasion forward curve had predicted electricity prices at this figure, whilst Numis stockbroker, using Nordpool data, set its predictions at £110/MWh.
Jefferies repeated its buy recommendations on Greencoat UK Wind PLC (LSE:UKW) and Foresight Solar Fund Ltd (LSE:FSFL) shares, in light of its confidence that the cap will not drastically affect renewable generators.
In response to the proposed cap, Emma Pinchbeck, Energy UK Chief Executive, warned against deterring investment in solar power, following much concern that a cap may do just that.
SSE PLC (LSE:SSE) previously suggested that investment could be affected by a cap and said it would work with the government to minimise its impact, alongside Drax Group (LSE:DRX) and RWE (ETR:RWE).
Shares in Greencoat are up 0.7% to 138p, Foresight Solar 2.1% to 105p, SSE 1.3% to 1,446p and Centrica PLC 1.2% to 69p.