Archived article
Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
magazineWhat would Labour's plan mean for utility funds?
Sterling continues to slide amid ongoing uncertainty over Brexit. It now looks like Theresa May will have one last shot at getting her Brexit deal across the line in early June before exiting stage left.
In the background the Brexit Party is leading in the polls for the looming European elections with results coming through in the early hours of 24 May.
Most observers think any hopes of May getting MPs on side are forlorn and with a general election one of the possible ways of breaking the deadlock in Westminster, markets have been reacting to some of the policies outlined by the Labour party should Jeremy Corbyn end up with the keys to Number 10.
Among the least market-friendly is the ‘Bringing Energy Home’ plan which would see utilities infrastructure taken into public ownership at below market value. Shares in National Grid (NG.) are down around 4% since details of the proposals first emerged.
Analysts at stockbroker Stifel have done some number-crunching to look at how UK infrastructure funds might be impacted.
These funds are exposed in two ways, both through private finance initiatives (PFIs) – where public sector projects are delivered by the private sector – and through direct exposure to the infrastructure or utilities themselves.
Stifel says: ‘The threat of UK PFI nationalisation has been an issue for the sector for the past 18 months. We think that assuming the contractual obligations and payments due to PFI investors are met (potentially a big assumption), the impact of PFI nationalisation may be easier to quantify than utility nationalisation.
‘The PFI projects are subject to significant legal documentation around contract termination compensation and the listed funds have already indicated what they may expect to receive in such a scenario. In the case of utilities, the valuation to be paid appears more subjective to the opinions of a government and parliament, which is a cause for concern.’
The table shows the utilities exposure of a selection of infrastructure funds with International Public Partnerships (INPP) seemingly the most exposed.
Important information:
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
