Energy bills could increase further in 2022: 2 FTSE 250 stocks to buy

Highlights 

• Energy UK’s CEO, Emma Pinchbeck, said that energy bills could likely increase further in October, following an expected price hike of around 50 per cent in April this year.
• Pinchbeck said the Oct price rise could happen in case of ‘no change’ in the current scenario.

Emma Pinchbeck, the CEO of the energy trade body for suppliers, Energy UK, said that energy bills could likely increase further in October, following an expected price hike of around 50 per cent, which could occur in April this year.

Ms Pinchbeck stated that the October rise could occur in case of no change, as soaring natural gases would be passed on to UK households’ domestic energy bills.

The industry regulator Ofgem is expected to increase the energy price cap in February, which will likely come into effect in April.

The UK has been grappling with an energy crisis as record levels of gas prices have led to several energy providers ceasing trading since 2021 due to energy price caps restricting providers from being unable to pass on the steep prices to their customers.

Earlier this week, Together Energy became the 27th energy provider to collapse in the UK.

In the backdrop of this development, let us explore 2 gas and electricity utility stocks, which are part of the FTSE 250 index:

1. ContourGlobal PLC (LON: GLO)

ContourGlobal is a UK-based power generation group.

The group, via its majority owner subsidiary Kani Lux Holdings, signed a deal to sell off its Brazil-based hydropower assets for a total cash consideration of BRL 1.73 billion (which equates to about US$ 313 million).

The assets were sold to Patria Investments, and the deal is expected to close by Q2 2022.

The sale is expected to help unlock value for its shareholders and is part of a strategy to help close the gap between the group’s share price and its intrinsic value. 

Image source: Refinitiv

The group’s shares last closed at GBX 186.80 on 20 January 2022, while the FTSE 250 index was at 22,714.98, up by 0.27 per cent.

The group’s market cap is at £1,225.67 million as of date.

2. Drax Group PLC (LON: DRX)

Drax is a power generation business and has a goal to be carbon negative by 2030.

An engineering group Worley Europe has been hired by the group’s subsidiary Drax Power Ltd to start a Front-End Engineering Design (FEED) study for its BECCS (bioenergy with carbon capture and storage) project.

The group stated that its combined program of works would have an estimated capital investment of about £40 million in BECCS at Drax Power Station during 2022. This is expected to help its first BECCS operations unit in 2027. 

Image source: Refinitiv

The company’s last close was at GBX 596.50, up by 2.14 per cent on 20 January 2022. The group’s market cap is at £2,331.48 million and it has given a one-year return of 54.29 per cent as of the date.