October 4, 2017 / 12:25 PM / a year ago

UPDATE 1-Shares in Centrica, SSE sink as May announces energy price cap

(Updates with more details)

By Helen Reid and Julien Ponthus

LONDON, Oct 4 (Reuters) - Shares in British energy providers Centrica and SSE hit session lows on Wednesday after Prime Minister Theresa May said she would impose a price cap on the domestic energy market.

Both utilities’ stocks were already in negative territory as traders anticipated an energy policy announcement in May’s speech at the Conservative Party conference, but they extended losses on her comments, in which she hit out at “rip-off” energy prices.

Centrica shares hit their lowest level in nearly 14 years, last down 6.4 percent, while SSE hit a 20-month low, down 3.6 percent, as analysts dissected the likely impact of the policy change.

“Any move to cap prices would be a massive hit to the industry,” said Neil Wilson, senior market analyst at ETX Capital.

“It might cost Centrica something like 200 million pounds and make it much tougher for the firm to reintroduce the progressive dividend policy,” he added.

Concerns over an energy price cap have weighed on Centrica, which is down 24 percent in the year to date, while SSE is down 13 percent since January.

With attractive dividends in jeopardy, analysts said investors were likely to shun the utilities.

“With the government looming on them ... the reasons to buy them are quickly disappearing”, said Chris Beauchamp, chief market analyst at IG, adding that the government had taken action in the sector in an attempt to appeal to voters at a difficult time.

Shares in France’s EDF, another leading energy provider in the UK, also fell 1.7 percent.

Reporting by Helen Reid and Editing by Kevin Liffey

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