OREANDA-NEWS. The Brexit vote will have a range of effects on UK-focussed utilities, with potential benefits for some from a weaker pound and higher inflation, but greater regulatory uncertainty and increased risk for firms with Scottish operations, Fitch Ratings says.

Weaker sterling supports higher UK wholesale baseload electricity prices due to the link to dollar-denominated oil, gas and coal prices and because of more expensive imported electricity from Europe. Sterling UK baseloads have risen 8% since the beginning of June to GBP37/MWh and could increase further as the effect of higher gas prices is not yet fully reflected.

This will be positive for renewable energy companies such as Infinis and Melton Renewable Energy, but only if higher prices are sustained, because their output is contracted forward for six to 12 months. Centrica's exploration and production and SSE's renewables will benefit, although this will be offset by higher gas costs for gas-fired generation and residential supply.