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Plutus Powergen shares plunge on Ofgem TRIAD payments plan; house broker cuts to 'hold'

Ofgem said yesterday that it is ‘minded’ to reduce the TRIAD benefit, currently £45 per Kilowat (kW), to just £2/kW over three years starting in 2018.

Power stations on the horizon
Cantor Fitzgerald has downgraded its rating for Plutus to ‘hold’ from ‘buy’ and put its target 'under review'

Shares in Plutus PowerGen PLC (LON:PPG) lost over a quarter of their value today after the small UK power generator warned that regulator Ofgem’s plan to cut TRIAD payments to local embedded generators could “cause significant harm to the UK's industrial sector, and in turn consumers”.

Ofgem said yesterday that it is ‘minded’ to reduce the TRIAD benefit, currently £45 per Kilowat (kW), to just £2/kW over three years starting in 2018, which would mean big cuts in the revenues earned by small power generators.

The regulator suggested that the TRIAD component of so-called embedded benefits is spiralling out of control, over-rewarding small generators and distorting the outcome of the capacity market.

In a statement today, AIM-listed Plutus said: “The Board supports National Grid's view that the proposed changes further threaten security of supply as necessary capacity is forced off or delayed. 

“Accordingly, it believes the OFGEM proposals to be deeply flawed, narrowly focused and potentially very damaging to UK industry and investor confidence at a critical time.”

It added: “The Company looks forward to an active participation in the consultation process.”

Broker downgrades …

In a note to clients, ‘house’ broker Cantor Fitzgerald said: “OFGEM’s proposal to move away from grandfathering in its Embedded Benefits Review places one of Plutus’ key income streams at risk.”

The broker has downgraded its rating for Plutus to ‘hold’ from ‘buy’ and put its target price for the stock ‘under review’.

In mid morning trading, Plutus shares dropped 26.8%, or 0.65p to 1.775p.

Cantor’s analysts said: “Other market developments could offset at least some of this and it should also be remembered that this is a ‘minded to’ proposal and not a final ruling.

“With many in the industry concerned about the impact on system security, the eventual outcome could be more benign.

“However, given the uncertainty we move our recommendation to a HOLD and place our forecasts under review.”

The final decision from Ofgem is expected in May.

Quick facts: Plutus PowerGen

Price: 0.023 GBX

AIM:PPG
Market: AIM
Market Cap: £200.68 k
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