SSE & Drax (DRX): Is it the right time to buy these 2 energy stocks?

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SSE & Drax (DRX): Is it the right time to buy these 2 energy stocks?

 SSE & Drax (DRX): Is it the right time to buy these 2 energy stocks?
Image source: chuyuss, Shutterstock

Highlights

  • Four more energy suppliers, Omni Energy Limited, MA Energy Limited, Zebra Power Limited, and Ampoweruk, collapsed on Wednesday due to rising gas prices.
  • The four companies had a total of 23,700 domestic and non-domestic customers.

Four more small gas and electricity suppliers collapsed today due to soaring energy prices, according to UK’s energy regulator Ofgem.

The four suppliers that include Omni Energy Limited, MA Energy Limited, Zebra Power Limited, and Ampoweruk have a combined total of 23,700 domestic and non-domestic customers.

Of the 23,700 customers, Zebra Power has about 14,800 domestic customers, whereas 6,000 pre-payment domestic customers received their energy supply from Omni Energy. And MA Energy has about 300 business customers, while Ampoweruk supplied energy to around 600 domestic customers and 2,000 businesses.

The news also comes a day after another energy supplier with about 5,900 customers, Bluegreen Energy Services, ceased trading on Monday.

The collapse of these suppliers brings the total number of small energy suppliers going bust to around 18 in the span of about 2 months, amid record gas prices.

Gas prices have soared due to a global demand recovery, low reserves, and other factors.

Ofgem stated that it will select a new energy supplier with the impacted households and that customers’ funds will be protected. The watchdog also said that customers would have an energy price cap upon switching to its new energy supplier.

In view of this, let us take a closer look at 2 FTSE listed energy companies and how their stocks reacted to the development:

  1. SSE PLC (LON: SSE)

FTSE 100 index constituent SSE PLC is a Scotland based multinational energy company.

The group confirmed its 10 per cent stake sale in the 1.2 GW offshore windfarm Dogger Bank C, in the North Sea, to Italian oil and gas major Eni.

The stake sale is for an equity consideration of £70 million. Energy firm Equinor also sold 10 per cent of its stake to Eni. The transaction is expected to be completed by Q1 2022.

SSE plans to use the proceeds from the deal for its net-zero strategy delivery.

Dogger Bank C is expected to be the world’s largest offshore wind farm upon completion of the acquisition, with SSE and Equinor having a 50-50 per cent ownership.

The windfarm’s new shareholding is 40 per cent for SSE, 40 per cent for Equinor and 20 per cent for Eni.

SSE share price and volume

(Image source: Refinitiv)

SSE’s shares ended at GBX 1,674.50, down by 0.03 per cent on 2 November. The FTSE 100 closed at 7,274.81, down by 0.19 per cent.

The market cap stood at £17,845.04 million, and its one-year return is at 33.21 per cent as of Tuesday

  1. Drax Group PLC (LON: DRX)

FTSE 250 index listed firm Drax Group is a power generation business.

Recently, the state of Louisiana’s governor Edwards visited Drax’s global operations site in the state. The goal was for the governor to gain a better understanding of Drax’s bioenergy with carbon capture and storage (BECCS) technology and how it can be deployed ahead of the COP 26 climate summit.

Drax Biomass is based in Monroe, and its pellet plants in LaSalle and Morehouse are based in Louisiana.

Drax, in collaboration with engineering company Bechtel, plans to explore possible new BECCS projects in the US and other places overseas.

The news also comes after Drax recently launched a public consultation over its BECCS development plans at its North Yorkshire power station in the UK. The technology is expected to remove 8 million tonnes of CO2 per annum, and the proposal is expected to create and support over 10,000 jobs in the region.

DRX share price and volume

(Image source: Refinitiv)

Drax’s shares ended at GBX 550.50, up by 2.23 per cent on 2 November. The FTSE 250 index closed at 23,140.00, down by 0.31 per cent.

The market cap stood at £2,197.65 million, and its one-year return is at 89.83 per cent as of Tuesday.

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