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Research Announcement:

Moody's - British electricity decarbonisation on track but retail energy market turmoil to continue

19 November 2019


London, November 19, 2019 --

● Coal largely displaced from Britain's energy mix; price caps will continue to hurt large energy providers

● Wholesale power prices to vary in a range of £45-55 MWh through 2022

As coal phase-out nears completion in Great Britain, the country's electricity industry will continue to decarbonise rapidly because of growth in offshore wind, Moody's Investors Service said today in a new report. Half of electricity output will come from renewables by 2025, the highest share, excluding hydro, of any large EU market.

At the same time, price caps in the retail energy market, coupled with ongoing intense competition from new entrants, have sharply reduced the profitability of some large suppliers and trapped others in losses. However, recent regulatory interventions may limit the ability of new suppliers to use customers' money as risk capital, which may reduce competitive pressures over time.

"The restoration of the capacity market and broadly stable power prices will benefit companies including InterGen NV, RWE AG and the UK nuclear operations of Electricite de France," said Graham Taylor, a Moody's Vice President, Senior Credit Officer.

SSE plc has responded to difficult trading conditions in its retail business by selling it, while an increasing number of small suppliers have failed, imposing significant costs on those still operating. Centrica plc remains significantly exposed to regulatory and political risk.

UK power prices will vary in a range of £45-55 per megawatt hour (MWh) through 2022, up from last year's estimate of £40-50/MWh. While the UK is likely to remain aligned with the EU Emissions Trading Scheme, electricity prices could fall if the carbon price support is reduced or is replaced by a lower carbon tax in a no-deal Brexit scenario.

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at [email protected] or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Graham W Taylor
VP-Sr Credit Officer
Project & Infrastructure Finance
Moody's Investors Service Ltd.
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

Neil Griffiths-Lambeth
Associate Managing Director
Project & Infrastructure Finance
Moody's Investors Service Ltd.
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

Releasing Office :
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London, E14 5FA
United Kingdom
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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