Tory win removes major political risk for Centrica, says Deutsche Bank

11th May 2015 10:01

Deutsche Bank has lifted its recommendation on British Gas owner Centrica from 'sell' to 'hold', saying that the risk that a Labour government posed to the group has now been removed."The Conservative election victory removes a significant political risk from the UK energy retailers and Centrica in particular," Deutsche Bank said.With the Tories likely to form a majority government lasting through to 2020, the threat of Labour legislation to freeze energy bills and replace Ofgem with a tougher regulator have now disappeared.As a result, Deutsche Bank has raised its long-term British Gas retail margin assumption from 4% to 5%, boosting earnings per share estimates from 2017 by 10%."The remaining challenges facing Centrica should not be dismissed however. If green policies are retained Centrica may need to push through electricity unit price increases of 35% over the next five years against a backdrop of increasing retail competition and continued scrutiny of profits," the bank said.The target price for the stock has been raised from 225p to 250p, lifting the shares 0.8% to 280.3p by 11:08.