LONDON (ShareCast) - Utilities stocks were performing well on Wednesday afternoon after an Ofwat statement eased concerns in the sector about water price controls.

Industry regulator Ofwat released a statement on Tuesday evening that sought to clarify some licence modification proposals following requests for more information from shareholders.

The regulator began by saying: “The challenges facing the sectors means there is a need for new, innovative ways to deliver sustainable water. Flexibility is needed in the licence since it is one of the key tools of regulation so that we, as regulator, can adapt to changing circumstances.”

Ofwat said that this flexibility would allow it to set segmental price controls and targeted incentives.

However, the regulator did welcome “constructive” responses if they have concerns with the proposals. If some companies don’t accept the proposals, then the matter will be referred to the Competition Commission (CC).

Analysts at JPMorgan Chase & Co said today that Ofwat had “softened” its stance on a CC referral, which “reduces the near-term risk of negative newsflow and highlights how important a consensus driven outcome is to this process.”

The broker said that this “should help reassure the market that UK water regulation remains sensible and proportionate”.

Meanwhile, analyst John Musk from RBS Capital Markets agreed that Ofwat used a “softer tone” and said the statement “suggests that there may be a middle ground here.”

Sector peers United Utilities, Severn Trent and Pennon were among the best performers of the day on the FTSE 100 in London.



Top performing sectors so far today
Gas, Water & Multiutilities 5,179.37 +1.19%
Real Estate Investment Trusts 2,101.12 +0.98%
Automobiles & Parts 4,952.02 +0.86%
Technology Hardware & Equipment 908.65 +0.77%
Tobacco 36,740.78 +0.77%

Bottom performing sectors so far today
Chemicals 8,393.90 -3.28%
Mobile Telecommunications 3,704.00 -2.19%
Industrial Metals & Mining 2,421.24 -1.18%
Personal Goods 19,360.16 -1.01%
Mining 17,815.69 -0.85%

BC

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