Return of the Corbyn threat ?

[PrefInvestor]

Hi All, Cant help but notice that NG and the big utilities (SVT, SSE, UU.) have all taken a hit with the recent political developments and the almost certainty of a general election in the near future. Guessing that this might be being caused by people getting worried about Corbyns plans should Labour get in ?.

ATB

Pref

[77ss]

Hi All, Cant help but notice that NG and the big utilities (SVT, SSE, UU.) have all taken a hit with the recent political developments and the almost certainty of a general election in the near future. Guessing that this might be being caused by people getting worried about Corbyns plans should Labour get in ?.

ATB

Pref

Worries about Corbyn's plans are hypotheticals. We don't know who is going to win the next election and even if Labour get an absolute majority we don't know what they will actually do. Manifesto commitments have a habit of dying when confronted with the realities of power.

Have you had a look at the capital values of the utilities in period since the May 2015 election? Under the allegedly 'business friendly' Conservatives?

Not a pretty sight. And it looks even worse against the background of a modest rise in the FT100.

Personally, I wonder whether the utilities have just run out of steam - the easy pickings in the post denationalisation period are long gone and competition is being encouraged. Simple, apolitical, facts of life.

[PrefInvestor]

Have you had a look at the capital values of the utilities in period since the May 2015 election? Under the allegedly 'business friendly' Conservatives?

Not a pretty sight. And it looks even worse against the background of a modest rise in the FT100.

Hi 77ss, Well I agree a simple share price chart starting in March 2015 doesn’t look good, but a total return chart looks very different. NG and SVT are up perhaps 30%, PNN about 20% by the look of it. Not too shabby, I’d take it. It’s the accumulated dividends that make the difference, probably why Corbyn wants to stop them being paid.

ATB

Pref

[richfool]

Hi All, Cant help but notice that NG and the big utilities (SVT, SSE, UU.) have all taken a hit with the recent political developments and the almost certainty of a general election in the near future. Guessing that this might be being caused by people getting worried about Corbyns plans should Labour get in ?.

ATB

Pref

Since Corbyn and McDonnell made their comments about nationalising utilities last year, I have kept away from all the utilities, apart from NG, which I already held. Since then I have stuck with NG in the belief that Corbyn won't get elected, or if he did, that he won't have the support to push through such drastic policies, along with the fact that NG has significant involvement with the US. Though I certainly don't plan to top up, or to add any other Utilities.

Currently, I see the risk of Corbyn being elected as low and getting lower.

[Dod101]

There are a great many High Yielding shares which are well under the weather at the moment. You only need to look at the yields on offer to see that. Certainly I think the utilities are under pressure but I do not think it is only or necessarily very much to do with Corbyn. The regulators are toughening their stand as well and some of them at least (SSE as an example) are not very strong financially so I think there is a host of reasons for concern with utilities in particular. I hold only National Grid of the utilities having sold SSE and Vodafone both ahead of dividend cuts. I held on to it because at least it has some North American assets which I guess at worst Corbyn could not really get his hands on given trump in the White House. The grid itself might be spun off without the aid of Corbyn by all accounts.

The uncertainties of Brexit never mind Corbyn are another factor of course. Despite all that, the UK economy seems to me to be surprisingly resilient but it is simply not being reflected in the share prices.

Dod

[Lootman]

There are a great many High Yielding shares which are well under the weather at the moment. You only need to look at the yields on offer to see that. Certainly I think the utilities are under pressure but I do not think it is only or necessarily very much to do with Corbyn. The regulators are toughening their stand as well and some of them at least (SSE as an example) are not very strong financially so I think there is a host of reasons for concern with utilities in particular. I hold only National Grid of the utilities having sold SSE and Vodafone both ahead of dividend cuts. I held on to it because at least it has some North American assets which I guess at worst Corbyn could not really get his hands on given trump in the White House. The grid itself might be spun off without the aid of Corbyn by all accounts.

The uncertainties of Brexit never mind Corbyn are another factor of course. Despite all that, the UK economy seems to me to be surprisingly resilient but it is simply not being reflected in the share prices.

In contrast US utilities have been doing very well recently. Seen as an interest rate play, they have flourished as interest rates have declined (as also have REITs).

So as an asset class there should be a solid demand for utilities. They ought to be the ideal widows-and-orphans investment. But they are political footballs in many ways, at least in the UK. They are seen as less vulnerable to that in the US, and so flourish. Even though they sometimes go bankrupt, as Pacific Gas and Electric currently is, as a result of being blamed for forest wildfires.

The only utility I own is NewEra, which is based in Florida and has a focus on solar and sustainable energy. It fits my vision of a perfect utility - a decent source of renewable income, but with growth.

[richfool]

In my Investment trust portfolio, I do in fact hold EGL - Ecofin Global Utilities & Infrastructure trust, which holds a portfolio of global utilities & infrastructure stocks, including NG. I am happy to continue to hold that and am pleased with its performance (17.9% over 1 year, 12.6% over 2 years, and dividend yield of 4.22%. Currently trading at a discount of: 15.24%.

https://www.hl.co.uk/shares/shares-sear ... ructure-1p

[Dod101]

In my Investment trust portfolio, I do in fact hold EGL - Ecofin Global Utilities & Infrastructure trust, which holds a portfolio of global utilities & infrastructure stocks, including NG. I am happy to continue to hold that and am pleased with its performance (17.9% over 1 year, 12.6% over 2 years, and dividend yield of 4.22%. Currently trading at a discount of: 15.24%.

https://www.hl.co.uk/shares/shares-sear ... ructure-1p

That sounds like a good IT. I will take a look tomorrow. Why is the discount so high though?

Dod

[monabri]

https://www.hl.co.uk/shares/shares-sear ... ructure-1p

Note the ongoing charge of 2.01% and the current price v year high.

[Dod101]

So as an asset class there should be a solid demand for utilities. They ought to be the ideal widows-and-orphans investment. But they are political footballs in many ways, at least in the UK. They are seen as less vulnerable to that in the US, and so flourish. Even though they sometimes go bankrupt, as Pacific Gas and Electric currently is, as a result of being blamed for forest wildfires.

The only utility I own is NewEra, which is based in Florida

Utilities should be an interest play in the UK as well, but we do not seem to have been able to grasp the idea that they need not be owned by the state just because they are a general requirement. Maybe our sense of deserving or that socially there is some money tree which will look after us. I blame the sense of community (not far removed from communist state) that for some reason seems to persist in the UK, rather than the rugged independence of the US.

Dod

[Dod101]

https://www.hl.co.uk/shares/shares-search-results/e/ecofin-global-utilities-and-infrastructure-1p

Note the ongoing charge of 2.01% and the current price v year high.

Thanks monabri. I do not like the sound of that but I have not even looked at it.

Dod

[PrefInvestor]

In my Investment trust portfolio, I do in fact hold EGL - Ecofin Global Utilities & Infrastructure trust, which holds a portfolio of global utilities & infrastructure stocks, including NG. I am happy to continue to hold that and am pleased with its performance (17.9% over 1 year, 12.6% over 2 years, and dividend yield of 4.22%. Currently trading at a discount of: 15.24%.

https://www.hl.co.uk/shares/shares-sear ... ructure-1p

Hi richfool, Yes EGL looks potentially interesting. Ongoing costs a bit high (though comparable with some other ITs that I hold). Yield a bit low for me (I really look for 4.5%+) but OKish. Discount is good - if surprising. Like the overseas and currency exposure. Guessing the share price has benefited from its overseas holdings / currency moves. Have added to a list I keep of potential future investments.

ATB

Pref

[TheMotorcycleBoy]

Hi All, Cant help but notice that NG and the big utilities (SVT, SSE, UU.) have all taken a hit with the recent political developments and the almost certainty of a general election in the near future. Guessing that this might be being caused by people getting worried about Corbyns plans should Labour get in ?.

ATB

Pref

I've only been investing for about a year and a half. But I've listened a lot to peeps like SalvorHardin saying that the market prices in short term expectations. Personally I think that in all that time (i.e. the 18 months or so) NG. price moves almost in lockstep with Corbyn.

However, I don't think you can assign a linear relationship between the two, (e.g. 800p == 25% chance of a JC govt). But I do think there's a current pattern. IOW at wednesday the 4th when NG. was at about 875p the market priced less likelihood of JC, than as I type now at 841p in my naive opinion.

That's just my view. Someone with lots of money could probably make a lot more by just repeatedly buying at 800p and selling at 850p!

Matt

[SalvorHardin]

National Grid has a problem that the other UK-listed utilities don't have, because it has been taking a lot of political flak in America in the last few months. National Grid has a sizeable business in America, unlike the other utilities.

The Mayor of New York and the Governor of New York state have been bashing National Grid for several months because it is refusing to accept new customers. The Governor vetoed a new pipeline so National Grid can't get gas to these potential new customers because its network is already overloaded and is now threatening to take its franchise away.

This has generated quite a bit of anti-British sentiment, though nothing as bad as Obama stirred up when he bashed BP for the Deepwater Horizon spill.

"They Have A Greed Problem’: National Grid Refuses To Give Desperate Brooklyn Residents New Gas Hookups"

https://newyork.cbslocal.com/2019/08/23 ... s-hookups/

"Gov. Andrew Cuomo doubled down last week on his blame-the-messenger approach to New York’s growing shortage of natural-gas supplies by ordering the Department of Public Service to “broaden its investigation” of National Grid and threatening to “find another franchisee.” Anything, rather than admit that his own policies are at fault.

The utility has stopped taking new gas customers in parts of Long Island, Brooklyn and Queens where it can’t handle the new demand — because Team Cuomo vetoed the proposed Williams pipeline to bring in supplies from New Jersey. (Jersey is also blocking the pipeline, since Gov. Phil Murphy is appeasing the same green extremists.)"

https://nypost.com/2019/08/31/new-york- ... o-planned/

National Grid is the only utility share I own. It's my smallest holding by quite some way and it's going to stay that way.

[richfool]

monabri wrote:
https://www.hl.co.uk/shares/shares-sear ... ructure-1p

Note the ongoing charge of 2.01% and the current price v year high.

Thanks monabri. I do not like the sound of that but I have not even looked at it.

Dod

In my Investment trust portfolio, I do in fact hold EGL - Ecofin Global Utilities & Infrastructure trust, which holds a portfolio of global utilities & infrastructure stocks, including NG. I am happy to continue to hold that and am pleased with its performance (17.9% over 1 year, 12.6% over 2 years, and dividend yield of 4.22%. Currently trading at a discount of: 15.24%.

https://www.hl.co.uk/shares/shares-sear ... ructure-1p

Hi richfool, Yes EGL looks potentially interesting. Ongoing costs a bit high (though comparable with some other ITs that I hold). Yield a bit low for me (I really look for 4.5%+) but OKish. Discount is good - if surprising. Like the overseas and currency exposure. Guessing the share price has benefited from its overseas holdings / currency moves. Have added to a list I keep of potential future investments.

ATB

Pref

Re charges on EGL, the KID shows:
Transaction costs: 0.34%
Other ongoing costs: 1.79%
Risk factor: 5

So yes, other ongoing costs higher than average for IT's.
I note though that it holds a global range of stocks, from the 2018 R&A's:
Nth America: 39.8%
Europe: 37.9%
UK: 15.00%
EM: 5.5%

And invests in:
Integrated Utils: 41.2%
Renewables: 21.8%
Regulated Utils: 20.9%
Infrastructure: 16.1%

I had assumed that the significant discount (15.24%) was because of the risks to Utilities of nationalisation or other government/watchdog interference, though I note that the trust only has 15% of the portfolio in the UK.

[TheMotorcycleBoy]

National Grid has a problem that the other UK-listed utilities don't have, because it has been taking a lot of political flak in America in the last few months. National Grid has a sizeable business in America, unlike the other utilities.

The Mayor of New York and the Governor of New York state have been bashing National Grid for several months because it is refusing to accept new customers. The Governor vetoed a new pipeline so National Grid can't get gas to these potential new customers because its network is already overloaded and is now threatening to take its franchise away.

This has generated quite a bit of anti-British sentiment, though nothing as bad as Obama stirred up when he bashed BP for the Deepwater Horizon spill.

"They Have A Greed Problem’: National Grid Refuses To Give Desperate Brooklyn Residents New Gas Hookups"

https://newyork.cbslocal.com/2019/08/23 ... s-hookups/

"Gov. Andrew Cuomo doubled down last week on his blame-the-messenger approach to New York’s growing shortage of natural-gas supplies by ordering the Department of Public Service to “broaden its investigation” of National Grid and threatening to “find another franchisee.” Anything, rather than admit that his own policies are at fault.

The utility has stopped taking new gas customers in parts of Long Island, Brooklyn and Queens where it can’t handle the new demand — because Team Cuomo vetoed the proposed Williams pipeline to bring in supplies from New Jersey. (Jersey is also blocking the pipeline, since Gov. Phil Murphy is appeasing the same green extremists.)"

https://nypost.com/2019/08/31/new-york- ... o-planned/

National Grid is the only utility share I own. It's my smallest holding by quite some way and it's going to stay that way.

I'd forgotten about their Stateside businesses in my earlier post.

What I've been curious over, of late, is whether having a fair chunk of their assets over in the US, derisks that part of their portfolio from being re-nationalised a la JC. Surely that would seriously complicate any attempt for a UK govt. to (re)take ownership?

Matt

FWIW I flogged our NG. shares a few months back at just a tad higher than our purchase price. At least we scored partly on the divs. I swapped them out for UKW Greencoat wind IT shares, as our leccy generation exposure.

[SalvorHardin]

What I've been curious over, of late, is whether having a fair chunk of their assets over in the US, derisks that part of their portfolio from being re-nationalised a la JC. Surely that would seriously complicate any attempt for a UK govt. to (re)take ownership?

A politician who wanted to nationalise National Grid's UK assets would be well advised to concentrate solely on those rather than to nationalise National Grid plc.

The pushback in the States would be huge. Even if they paid market price I'd be surprised if there wasn't a class-action lawsuit targeting the UK government (and individual ministers), arguing that they have deliberately depressed the market price thus committing securities fraud. Lawyers would be all over this.

I'd also expect there to be legal action in the UK if the British assets were nationalised.

[PrefInvestor]

What I've been curious over, of late, is whether having a fair chunk of their assets over in the US, derisks that part of their portfolio from being re-nationalised a la JC. Surely that would seriously complicate any attempt for a UK govt. to (re)take ownership?

A politician who wanted to nationalise National Grid's UK assets would be well advised to concentrate solely on those rather than to nationalise National Grid plc.

The pushback in the States would be huge. Even if they paid market price I'd be surprised if there wasn't a class-action lawsuit targeting the UK government (and individual ministers), arguing that they have deliberately depressed the market price thus committing securities fraud. Lawyers would be all over this.

I'd also expect there to be legal action in the UK if the British assets were nationalised.

Hi All, Well I dumped all my utilities when I changed from my HY largely single share based portfolio to my current largely IT & ETF based one, so I have minimal exposure to utilities - but probably some buried in my IT & ETF holdings.

I think that the problems for JC & Labour implementing their plans (were they to get in) would be huge. But that wouldnt stop them trying and the damage that would cause to the share prices could well be significant I suspect. And its not just utilities is it, I believe that RMG and the banks are also in labour's crosshairs ?. Were I still investing in single stocks I wouldn't want to take that risk.

ATB

Pref

[PrefInvestor]

Re charges on EGL, the KID shows:
Transaction costs: 0.34%
Other ongoing costs: 1.79%
Risk factor: 5

Hi richfool, Quite so, though I'm told that the charges figures presented on KIDs are best treated with caution and that one is better advised to look elsewhere to get the most reliable figure eg the AIC or the OCF figure on the latest factsheet if there is one. I see that the AIC & MorningStar both reckon that the charges for EGL are 2.01% so slightly less than the KID.

ATB

Pref

[Alaric]

A politician who wanted to nationalise National Grid's UK assets would be well advised to concentrate solely on those rather than to nationalise National Grid plc.

The "market" way of doing this would be to buy enough of National Grid to have a controlling interest and then demerge the non-UK assets. That's liable to be expensive and contrary to the belief that you can nationalise at no cost by exchanging Gilts for shares. The remaining minority shareholders would still need to be bought out.