Regulation in Portugal benefits EDP shares in the short term – JP Morgan analysts
Contrary to what will happen in Spain, measures in Portugal to counter rising electricity prices should not affect EDP's results, according to analysts at JP Morgan.
JP Morgan analysts believe that the regulatory environment in Portugal’s electricity sector will be favourable to the performance of EDP shares in the short term. According to Reuters, which cites the note from the US bank, the analysis points to a rise in shares in the coming sessions, after the listed company was penalised by the risk of contagion from Spanish intervention to Portugal. This Wednesday the stock is up more than 1%, outperforming the PSI-20.
In question is a package of measures put forward by the Spanish government to curb electricity prices for end consumers, which includes cutting extraordinary benefits given to energy companies, such as the payments they receive for CO2 not emitted. According to Prime Minister Pedro Sanchéz, this measure alone is expected to cost Spanish energy companies €650 million. Faced with the possibility of Portugal taking similar measures, EDP shares were down.
However, the Portuguese government has now left assurances that it has the necessary means to control the impact of rising electricity prices in the wholesale market. JP Morgan analysts’ expectation is that the measures “will not impact the companies’ accounts” and “confirm that EDP does not face substantial regulatory risk in the current environment”. “This should help the company’s share prices in the short term, given that the stock has been penalised by the risk of spillover from Spain’s intervention in Portugal,” they point out.
