CreditSights downgraded PPL Corp. to "market perform" from "outperform" Jan. 7, citing current spreads, relatively weak metrics and the continued risk at its U.K. electric distribution business, Western Power Distribution PLC.
According to the research firm's note to investors, PPL's U.K. electric distribution business makes up more than 50% of the parent company's overall earnings. Recently, its equity has been negatively impacted by a pending regulatory framework for U.K. electric distribution utilities.
The U.K. Office of Gas and Electricity Markets unveiled a proposal Dec. 18, 2018, to slash returns for investors in U.K. electricity and gas network companies and cap the operators' profits.
If implemented, it would reduce the cost of equity, or how much firms can pay their investors, by almost half from the 7% to 8% set under the current price control period.
PPL's stock fell nearly 7% the day the proposal was announced.