Utility Investors Are Not Afraid of Nationalisation

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Shadrach   in Alternatives

Last updated: 08 January 2020, 05:27 GMT


The arrangement of the labour party to nationalise swaths of the UK’s telecommunications infrastructure have greatly  intensified a sense of alarm in the utility sector. Investors strive to protect their holdings in case a Jeremy Corbyn-led government will be concluded on the December 12th election. 

That uncertainty has now spread to the telecom sector with news that Labour plans to break up BT and take its network-owning Openreach division into public ownership. Nationalisation would threaten not only BT shareholders, but the companies that have invested billions of pounds in private telecoms as well, whose interests could be jeopardised by the proposed policy of offering free broadband to all British customers.  

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Investors were warned by the Lawyers to never accept these losses simply if Labour sought to implement their pledges. “If Jeremy Corbyn actually makes it to Number 10, expect to see them come out of the defensive crouch and fight,” said one lawyer who declined to be identified. 

International private equity, pension and sovereign wealth funds have piled into water, telecoms and electricity assets in the UK in recent years, considering them a safe haven that delivers stable and generous returns.

These assessments have been thrown into doubt by Labour’s pledge of nationalisation — and its apparent popularity. The share prices of regulated utilities have historically risen steadily in line with their regulated capital value (RCV) — an inflation-linked asset figure on which they are allowed to earn a return.