SSE PLC (LSE:SSE) is in a good position to benefit from rising power prices even with the threat of the UK revenue cap, according to analysts at RBC.
Prices for electricity have moderated recently since the end of the quarter but ‘clean spark’ spreads remain "especially attractive", according to the broker.
“In particular, we note Q1 2023 clean spark spreads are trading >£400/MWh which should benefit those with larger scale efficient CCGTs [combined cycle power stations] such as SSE.”
CCGTs accounted for 55% of the overall UK energy output in the third quarter, according to Elexon data.
RBC also believes the UK government revenue cap plans will not be “overly draconian”.
“In our view, the €180/MWh price cap suggested in the EU should serve as a strong navigational beacon for the UK government.”
One issue is average windspeeds [key for wind farms]. While better than the exceptionally low levels seen in 2021, wind-powered generation is still below budgeted levels in 2022.
SSE shares remain attractive, even so, says the broker.
Shares up 0.8% at 1,504p.