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Highlights
- The government is in talks with Centrica to reopen a mothballed gas storage facility that will require a £2 billion investment.
- The development is a part of the contingency plans if Russia stops natural gas supplies to Europe.
It's been over three months since Russia invaded Ukraine. Several countries have imposed severe sanctions on Russia, putting a huge dent in its economy. In response, Russia has demanded countries pay for its natural gas in rubles and even cut off supplies to Poland and Bulgaria for failure to do so. Amid the tensions, the UK government has scrambled to prepare for a situation if Russia disconnects the gas supplies to Europe.
The government is said to be in discussions with energy company Centrica to reopen its mothballed gas storage facility before the winter. The rough site under the North Sea may begin receiving gas again soon if all goes well. The site was mothballed in 2017 after the government refused to subsidise it.
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According to news reports, Business Secretary Kwasi Kwarteng is in talks with Centrica as part of the contingency plans being explored amid the Russia-Ukraine war. Restarting the site will cost around £2 billion and will allow the UK to store gas supply sufficient for ten days.
Notably, several reports have claimed that almost 6 million people could be hit by power cuts this winter. However, the government on Monday said that it does not expect power cuts.
Let us take a look at some energy stocks and how they reacted to the development.
Centrica Plc (LON: CNA)
The multinational energy firm supplies electricity and gas to its consumers in the UK and Ireland and also offers energy-related services. The company reported a strong performance in the first four months of 2022.
Centrica holds a market cap of £4,574.73 million at present, and its shares have given good returns to the investors in the past one year at 43.47%. The year-to-date returns, on the other hand, stand at 9.82%. The shares traded at GBX 78.40 as of 8:19 am GMT+1 on 31 May 2022.
National Grid Plc (LON: NG.)
National Grid provides electricity and natural gas to consumers and businesses in the UK and the US. It is among the world's largest utility companies and is listed on the FTSE 100 index. The company has a market cap of £42,391.73 million, and its share price has appreciated by 24% over the past year. The shares have given a YTD return of 10% to the investors.
Shares of the company were trading at GBX 1,168.79 as of 8:26 am GMT+1 on 31 May.
SSE Plc (LON: SSE)
The Scotland-headquartered company generates, transmits, and supplies electricity across the UK and Ireland. It is also engaged in the storage and distribution of natural gas.
The FTSE 100 constituent holds a market cap of £18,844.41, and its share value has increased by 13.77% in the last one year. The shares were trading 0.10% down at GBX 1,763.15 as of 8:41 am GMT+1 on Tuesday.
Note: The above content constitutes a very preliminary observation or view based on market trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.
