SSE cut to 'neutral' by Credit Suisse

17th Sep 2015 11:16

(ShareCast News) - Energy company SSE has been downgraded by Credit Suisse due to lower gas prices and recent government moves increasing the risk around renewable subsidies.Credit Suisse cut what it admitted was a "solid performer" to a 'neutral' recommendation, with its target price trimmed to 1,600p from 1,700p.Due partly to lower gas prices, the Swiss bank cut its EPS estimates by circa 6% in 2016, by roughly 9% for 2017 and around 6% in 2018.CS said it saw just 12% total return upside, in line with the sector, and said recent government moves "have increased risk on renewable subsidies that is not reflected in SSE's share price".The UK government decided to remove the Climate Change Levy exemption for renewable electricity generated after 1 August 2015.While SSE generation fleet and energy supply business reduces sensitivity to gas and coal, from here on, "the key risk is rising rates", analysts said.This is because the long-duration nature of SSE means each 50 basis points move on discount rates has a consequent near-6% of equity value.