SSE & Drax (DRX): Should you buy these 2 FTSE electric utility stocks?

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SSE & Drax (DRX): Should you buy these 2 FTSE electric utility stocks?

 SSE & Drax (DRX): Should you buy these 2 FTSE electric utility stocks?
Image source: ranjith ravindran. Shutterstock.com

Highlights

  • Ofgem, UK’s energy regulator stated that energy suppliers Pfp Energy and Moneyplus Energy would transfer 94,000 of their customers to a new supplier.
  • Small British energy suppliers have been disproportionately impacted by rising energy prices due to limited hedging capacity.
  • Natural gas and power prices have touched record highs in the EU recently.

UK energy regulatory body Ofgem in a statement on 7 September stated that smaller British energy suppliers Pfp Energy and Moneyplus Energy would have to transfer 94,000 of their customers to a new electric utility supplier.

UK based smaller energy suppliers have recently been going bust as natural gas and power prices touch highs across the EU, and smaller companies have lesser hedging capacity. Higher volatility in prices thus leaves such suppliers vulnerable to price shocks as they may sometimes have to sell electricity at lower prices to their customers.

The news comes a month after another small electricity supplier, Hub Energy, also announced it was closing shop.

Let us take a closer look at 2 FTSE listed electricity utility companies and see how they reacted to the development:

  1. SSE PLC (LON: SSE)

FTSE 100 index listed firm SSE is an electricity utility giant in the UK.  SSE had recently declared a scrip dividend option for its FY 2021 dividend payout.

However, about 26,698 shareholders chose to receive a final dividend of 56.6 pence per share in place of a scrip dividend. This will thus reduce SSE’s FY 2021 final dividend cash funding by £327.478 million.

(Image Source: Refinitiv)

SSE’s shares were trading at GBX 1,620.50, down by 0.58 per cent on 8 September 2021 at 08:01 AM GMT+1. The FTSE 100 index, on the other hand, was trading at 7,103.57, down by 0.64 per cent.

SSE’s market cap is at £17,005.70 million, and its one-year return is 31.63 per cent as of 8 September.

Related Article: SSE Plc to Continue Its Five-Year Dividend Plan Up to March 2023

  1. Drax Group PLC (LON: DRX)

FTSE 250 index constituent Drax Group is a UK based renewable energy electricity producer. The company recently set its adjusted earnings per share (EPS) targets as part of its long term incentive plan of grants for its proposed acquisition of energy firm Pinnacle Renewable Energy.

A threshold performance resulting in a cumulative adjusted EPS target of 104.9 pence per share will result in 25 per cent of award vesting. A maximum performance of EPS target 128.2 pence per share will result in 100 per cent of 2021 grants award vesting by Drax.

(Image Source: Refinitiv)

Drax’s shares were trading at GBX 430.00, down by 0.33 per cent on 8 September 2021 at 08:37AM GMT+1. The FTSE 250 index, on the other hand, was trading at 23,971.46, down by 0.52 per cent.

Drax’s market cap is at £1.720 billion, and its one-year return is 52.66 per cent as of 8 September.

Bottom Line

UK gas and power prices have been touching record highs recently due to rising prices across the EU and a supply shortage. Natural Gas October futures were trading at USD 4.611, up by 0.94 per cent today at 09:11 AM GMT+1. Energy prices are expected to remain high until supply-side constraints are addressed.

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