LONDON (ShareCast) - Centrica was weighing on the utilities sector on Monday after the British Gas owner announced plans to shelve two gas storage projects.

The group said it has decided not to proceed with its new-build gas storage project at Baird in the UK Southern North Sea and to put its project at Caythorpe in East Yorkshire on hold indefinitely.

"This decision was taken in light of weak economics for storage projects and the announcement by the UK government on September 4th ruling out intervention in the market to encourage additional gas storage capacity to be built," Centrica said.

The move means that the firm will recognise impairments of £240m this year after writing off all the costs incurred and committed for these projects.

The stock was down 1.37% at 396.7p by 15:53 on Monday afternoon.

Water groups Severn Trent, Pennon and United Utilities were also trading in the red today, along with gas and electricity firm National Grid.

National Grid was out of favour this afternoon after analysts at UBS downgraded the stock from 'buy' to 'neutral', saying that the estimated future regulatory asset value (RAV) growth is already priced in.

The Swiss bank said that the stock trades at a 30% premium to enterprise value and at a 71% equity premium to the current-year (ending March 2014) global RAV - "far above European peers".

"While we believe a premium is warranted, as we see National Grid’s RAV growth as largely funded through net debt and scrip-driven equity growth means that, at the current share price, investors are likely paying for all RAV growth to c.2030."



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BC

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