Nord Stream 2’s certification suspension: 2 energy stocks to buy

Highlights

  • Germany’s energy regulator suspended the Nord Stream 2 pipeline’s certification process due to its failure to comply with German regulations.
  • The move led gas prices to jump by about 17 per cent in the UK and the EU.
  • 21 energy suppliers have collapsed in the UK so far, with Neon Reef and Social Energy being the latest to be affected by soaring gas prices.

Germany’s energy regulatory body, the Federal Network Agency or Bundesnetzagentur, halted the natural gas pipeline, Nord Stream 2 project’s certification process after its operating company failed to meet Germany’s laws, causing gas prices in the UK and the EU to rise by about 17 per cent.

The Swiss-based Nord Stream 2 project is a new export gas pipeline running from Russia to Europe across the Baltic Sea, thus allowing Russian state-owned energy major PJSC Gazprom to supply to the EU, bypassing Ukraine.

The pipeline is expected to meet almost 33 per cent of the EU’s energy requirements, according to Gazprom. Some sections fear that the pipeline would thus increase the EU’s dependence on Russia.

Nord Stream 2 created a German subsidiary to own and operate its German part of the pipeline, however, under EU guidelines, gas producers must be separate from the owner of a pipeline.

The pipeline was completed in September but has since faced delays. This suspension is expected to delay the project by several months. The 760-mile project had a cost of about EUR 9.5 billion.

Gas prices have touched record highs, soaring over 500 per cent, in the UK and EU due to the global gas supply squeeze. About 21 energy suppliers in the UK have collapsed in the last 10 weeks.

UK December gas contracts rose by 10 per cent to £2.24 per therm, while Europe’s gas benchmark increased by 8 per cent to EUR 87.80 per megawatt hour, as of Tuesday.

Neon Reef and Social Energy were the latest UK energy suppliers to go bust amid soaring gas prices. Neon had about 30,000 customers, while Social supplied gas to about 5,500 households.

Several more companies, barring the 6 biggest energy suppliers in the UK, are expected to collapse due to this energy crisis.

In view of this, let us take a look at 2 FTSE listed big energy stocks and their investment prospects:

  1. Centrica PLC (LON: CNA)

Centrica is a UK based electricity and gas supplier and owner of British Gas, the UK’s largest energy and home services company. It is also part of the FTSE 250 index.

The company’s British Gas would supply energy to energy suppliers Zebra and Bluegreen, which collapsed earlier this month, under Ofgem’s Supplier of Last Resort (SOLR) process.

Zebra had about 14,800 domestic customers, while Bluegreen had about 5,900 domestic customers and some business customers. Ofgem is the UK’s energy regulator.

CNA share price and volume

(Image source: Refinitiv)

Centrica’s shares closed at GBX 67.48, up by 2.15 per cent on 16 November, while the FTSE 250 index ended at 23,539.71, down by 0.35 per cent.

The company’s market cap stood at £3,968.31 million, and its one-year return was at 50.16 per cent as of Tuesday.

  1. Yu Group (LON: YU)

AIM-listed firm Yu Group is a specialist energy and utility services supplier to UK businesses. It supplies commercial electricity, gas and water to its customers.

The company was appointed as the SOLR for Ampower, another energy supplier which shut down recently by Ofgem.

Ampower had about 8,158 customers, which is expected to boost Yu’s meter portfolio by 38 per cent. It is also estimated to increase Yu’s revenues by over £7.5 million per month immediately.

 YU share price and volume

(Image source: Refinitiv)

Yu’s shares closed at GBX 242.50, down by 2.02per cent on 16 November, while the FTSE AIM All-Share index, which it is a part of, ended at 1,245.21 down by 0.76 per cent.

The company’s market cap stood at £39.57 million, and its one-year return was at 104.22 per cent as of Tuesday.

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