Fund management guru Neil Woodford slams Labour's energy prices policy as shares in Centrica and SSE plunge
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A million small investors were yesterday hit by a plunge in Centrica and SSE shares on the back of fears over Labour plans to cap energy prices after the next election.
Centrica shares fell 5 per cent to finish 21.1p lower at 375.6p – wiping £1.1billion off the value of the company.
SSE saw its stock slide by nearly 6 per cent, ending the day 91p down at 1489p – shedding £877million from the firm’s market cap.
The policy, which critics say would stifle investment and could lead to blackouts, came under fire from leading investors and City analysts.
Stunned: Fund management guru Neil Woodford is a large shareholder in both Centrica and SSE
Fund management guru Neil Woodford, the largest investor in Centrica with a 5 per cent holding, slammed the move.
He said: ‘Here we have a serious politician, standing up and saying what he said which I think at a stroke torpedoed any chance that any of that investment will happen between now and the next election.’
Woodford, one of Britain’s most influential fund managers, is also a major shareholder in SSE and the largest investor in power plant operator Drax. Hundreds of thousands of small savers hold their nest-eggs in his flagship fund.
In total some 245 funds including pensions have holdings in Centrica.
In addition, around 680,000 small investors are direct shareholders in Centrica, according to the most recently available figures.
SSE, which was previously known as Scottish and Southern Energy, has around 300,000 individual shareholders.
Centrica’s shares yesterday went ex-dividend – meaning it was the last day when investors were able to qualify for the payout.
That only accounted for 4.92p of the share drop, the company said.
Angelos Anastasiou, analyst at Whitman-Howard, said the Labour proposal was ‘impractical and unworkable, unless perhaps financed by a state subsidy – which we don’t see happening’.
He added: ‘Any direct and overt state intervention would undoubtedly increase the cost of capital for future investment in the sector, and would decrease the willingness of private companies’ participation in investment in the sector.
‘Given that many billions of pounds of investment are needed, we do not see this as a realistic scenario.’
Because the majority of Britain’s power providers are overseas-owned – including French EDF, Germany’s Npower and Eon and Spanish ScottishPower – there are few power companies on the London Stock Exchange.
‘Investors will need to reconsider the relative attractiveness of the UK utility market now that the crisis in policy has been triggered,’ said Peter Atherton at Liberum Capital.
He added that Centrica should focus on its US activities instead of supplying UK homes and businesses.
‘The companies should also consider a legal challenge to Labour’s proposal as, on the face of it, it is hard to reconcile price caps with the EU energy liberalisation directives,’ he said.
But smaller energy companies welcomed the move. Ramsey Dunning, the boss of Co-operative Energy, said: ‘It’s no surprise to see the Big Six objecting to Ed Miliband’s pledge to freeze energy prices from 2015 until 2017.
‘The British energy industry has been in the grip of a stranglehold by these companies for far too long.’
Since the squeeze on household incomes the debate around energy prices has shot to the top of the political agenda. The issue is likely to escalate next month, when British Gas is expected to announce a price rise of around 8 per cent – adding £100 on to family bills.
Every other major energy provider – SSE, EDF, Npower, ScottishPower and Eon – is expected to follow suit. All of the firms have refused to comment on whether they will hike rates before winter.
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Cameron, no doubt, sees it as expedient to blame Clegg for his shortcomings, but he is supposed to be the Prime - Minister and he is rightly expected to be looking after the country's interests and should exert his authority when necessary to achieve that result, even if it means overruling his deputy! He could still run a minority government, should it be overtly necessary.
Jim Callaghan use electric and gas prices as a form of Tax when they were state owned So who ever owns these company's they are just as bad as on another
To day the FTSE100 stands at 6556.8 just the slightest hint that labour might get back into power in 2015 and you can wipe a 1000 points of that. I can remember as a child in the fifties and sixties every winter the blackouts caused by the unions holding the country to ransom and they will do it again if their Labour lackeys get back in
He is right and an investment legend, these companies don't make a great percentage of profit. Far less than the increases due to Green stealth taxes used to subsidise stupid windfarms. All under labour's watch!
Good ! About time someone stood up to this lot, lol they threw their dummies out the pram PDQ when that was announced, Also how about using some of those ill goton gains you called profit, to re-invest in the Infustrucuture you say needs replacing, Christ this must be the only country in the world that lets snivelling rich energy firms, rob the public, to pay for their future profit! Scandalous!
Just look at the wholesale price increases of electricity and gas over the past 5 years. Then look at the price increases consumers are charged. Something to me just not add up.
It is us the poorer in society that are paying the dividends of investor shareholders.
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Mr Patient, Newcastle, United Kingdom, 6 hours ago
Yeah, like anyone's gonna vote for that lot. Ed Balls? No thanks. And why do they call him Red Ed: Wet Ed would be better. He has no idea, no ability, no policies, and makes the lacklustre Callmedave look competent.