- Centrica
- 22 May 2026 10:14:55
Source: Sharecast
The bank noted calls in recent weeks for Prime Minister Keir Starmer to resign, with former Health Secretary Wes Streeting and Manchester Mayor Andy Burnham positioning themselves to be the next leader of the Labour party.
"Alongside this we have seen initial views of policy, varying from the ‘stronger public control’ view of Mr Burnham to the Labour Growth Group caucus of MPs pushing for the government to bring zonal pricing back to the table," it said. "Our conversations with investors have primarily focused on nationalisation risk, especially for the UK water names - we see these concerns as overdone."
JPM said that against a backdrop of uncertainty, overweight-rated Centrica and Drax should fare better, with exposure to higher, more volatile power prices, with under-levered balance sheets that provide insulation against higher yields.
The bank said it prefers exposure to UK electricity networks growth through overweight-rated SSE against National Grid (also rated OW), although it acknowledged that the latter’s more defensive business mix and exposure to the US may be preferred by investors.
"Finally, while we are currently ‘neutral’ on the UK water names, we believe investors underappreciate inflation driving higher than expected returns on equity, underpinning value creation alongside more RAB growth than we anticipated when we downgraded the sub-sector six months ago," JPM said.
Within the UK water sector, it prefers Pennon and United Utilities to Severn Trent, with the first two trading at FY30 discounts to RAB (Regulatory Asset Base).