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Highlights
- UK’s energy suppliers are expected to undergo new stress tests from January 2022, as part of Ofgem’s plans to help the consumer energy sector.
- The energy regulator faced criticism for the collapse of over 20 energy suppliers within the span of a few months amid soaring energy market prices.
- Ofgem plans to test against various scenarios and introduce an improvement plan in cases where suppliers fall short.
UK’s energy suppliers are expected to undergo new stress tests from January next year, as part of the UK’s energy regulator Ofgem’s plan to help the consumer energy sector.
The move is part of Ofgem’s aim to help boost the energy sector’s financial resilience after record-high gas and electricity prices led to over 20 energy suppliers collapsing in the last 4 months.
It also comes after Ofgem faced criticism for the aforementioned collapse of several energy suppliers. The regulator now intends to test energy suppliers against several different types of scenarios and introduce an improvement plan in cases where suppliers show indications of some financial weakness.
The new rules are expected to be similar to the type of stress tests various banks faced amid the 2008 financial crisis. Moreover, Ofgem aims to strengthen its existing rules and also introduce certain new measures by spring of next year for better oversight.
In view of this, let us take a look at 2 FTSE 100 index listed energy stocks and explore their investment prospects:
- National Grid plc (LON: NG)
National Grid is a UK based gas and electricity utility business.
The company’s underlying operating profit (from continuing operations), for the six months ended 30 September, rose by 47 per cent to £1,407 million, from 959 million a year ago. The group forecasts its 2021/2022 operating cashflow (from continuing operations) to jump by about 30 per cent from 2020/21 due to higher operating profits.
National Grid’s scrip dividend reference price is at 1015.80 pence per ordinary share. The payment date for the 2021/22 interim dividend is next year on 19 January.
Image source: Refinitiv
As seen in the above Refinitiv chart, National Grid’s shares ended at GBX 1,059.00, up by 0.34 per cent on 15 December, while the FTSE 100 index closed at 7,170.75, down by 0.66 per cent.
The company had a market cap of £38,305.04 million, and its one-year return was at 21.31 per cent as of Wednesday.
- SSE plc (LON: SSE)
SSE is a Scotland based energy company.
The company’s board recently reaffirmed that its £12.5 billion fully funded net-zero acceleration programme was the optimal route for generating value for its shareholders on a longer-term basis.
The statement came after the board undertook a strategic review of the company, following activist investor Elliott Advisors’ recommendation to split off SSE’s renewables business.
Image source: Refinitiv
As seen in the above Refinitiv chart, SSE’s shares ended at GBX 1,613.00, up by 1.57 per cent on 15 December
The company had a market cap of £ 17,190.09 million, and its one-year return was at 11.66 per cent as of Wednesday.
