National Grid, Centrica: Stocks to focus on if energy price cap rises again

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National Grid, Centrica: Stocks to focus on if energy price cap rises again

 National Grid, Centrica: Stocks to focus on if energy price cap rises again
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Highlights

  • The global energy market is going through a turbulent time with several energy suppliers going out of business.
  • According to a news report, energy bills in the UK are likely to rise by a further £500 this autumn as the war in Ukraine continues to disrupt energy supplies and is adding on wholesale oil and gas prices.
  • Ofgem said that the energy price cap may rise to about £2,400 in October taking energy bills to £5,000 a year.

The global energy market is going through a turbulent time with several energy suppliers going out of business. According to a news report in The Times, energy bills in the UK are likely to rise by a further £500 this autumn as the war in Ukraine is disrupting energy supplies and is adding to the wholesale oil and gas prices.

 

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UK energy regulator Ofgem said that the energy price cap in the UK may rise to about £2,400 in October taking energy bills to £5,000 a year, as there are no signs of cooling energy prices this year. This will further add pressure on households that are already struggling with rising food, energy, national insurance, and other prices.

The regulator warned that there is considerable uncertainty in the estimate, and it could even be higher if the disruption in the market continues in near future. From April 2022, the energy price cap rose by 54% to £1,971. According to recent data from the Office for National Statistics (ONS), UK Gross Domestic Product significantly reduced from 0.8% in January to 0.1% in February. 

Chancellor Rishi Sunak has already announced a £200 energy rebate, which will be repaid over five years from 2023. But experts said that it is not enough to counter the £700 rise in the energy price cap from April 2022.

Let us look at 3 energy utility stocks that may get impacted by the rising energy price cap.

Drax Group Plc (LON: DRX)

Drax Group Plc is a power generation company that also runs an independent biomass supply chain business. The company’s market cap stands at £3,214.96 million as of 12 April 2022 and it has reported an adjusted EBITDA of £398 million in FY2021, down from £412 million in FY2020. Its profit before tax stood at £122 million, up from the loss of £235 million in FY2020.

The company’s shares were trading at GBX 793.00, down by 1.25%, at 9:40 AM, on 12 April 2022. The FTSE250 company has provided its shareholders with a return of 91.18% over the last one year as of 12 April 2022, while its year-to-date return stands at 31.07%.

Also Read: UK economic growth slows down to 0.1% in February: Tougher times ahead?

National Grid Plc (LON: NG)

National Grid Plc is the world’s leading energy transmission and distribution company operating in the UK and US through business segments that include Electricity System Operator (ESO), Western Power Distribution (WPD), Electricity Transmission (ET), Gas Transmission, and the United States.

The company’s market cap stands at £44,450.08 million as of 12 April 2022 and it has recently announced that it has agreed to sell a 60% interest in its UK gas transmission and metering business to a consortium that includes British Columbia Investment Management Corporation and Macquarie Asset Management.

The company’s shares were trading at GBX 1,201.50, down by 1.48%, at 9:40 AM, on 12 April 2022. The FTSE 100 company has provided its shareholders with a return of 33.37% over the last one year as of 12 April 2022, while its year-to-date return stands at 13.33%.

2022 Kalkine Media®

Centrica Plc (LON: CNA)

British Gas is an energy and homes services provider in the UK and is owned by Centrica Plc, which is an international energy services and solution company. The company’s market cap stands at £4,755.96 million as of 12 April 2022 and it has reported a 38% increase in EBITDA to £1,850 million in FY2021, from £1,336 million in FY2020. Its British Gas division generated an adjusted operating profit of £118 million, a 44% increase from £82 million in FY2020.

 The company’s shares were trading at GBX 79.90, down by 0.99%, at 9:40 AM, on 12 April 2022. The FTSE 250 company has provided its shareholders with a return of 39.12% over the last one year as of 12 April 2022, while its year-to-date return stands at 11.72%.

Also Read: Gore Street, SSE: Stocks you may invest in with renewable power boom

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.

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