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Energy Shares Fall Following Break-up Proposals

Following proposals to break up overly-profitable energy companies, shares in Centrica and SSE have fallen in value

Morningstar News Team 10 February, 2014 | 12:25PM

British Gas’ parent company Centrica has seen its share price fall 3.3%, and SSE is down 1.5% following proposals to break up the energy companies. UK Energy Secretary Ed Davey has written a letter to UK energy regulators claiming that the profit margins made by the big six energy firms in the UK when supplying gas are much higher than previously thought, according to the BBC. Davey has now asked the UK competition authorities, which are currently reviewing the cost of energy and transparency of the big six, to also investigate the profit margins at these companies.

Morningstar equity analysts give their views on the stocks below.

Centrica (CNA)

Centrica PLC is a vertically integrated utility based in the U.K. with operations that produce and supply natural gas and electricity. Its British Gas business unit is the largest residential supplier of natural gas, electricity, and HVAC services in Britain. Centrica owns the Rough natural gas storage facility, representing 70% of the U.K.'s total storage capacity. Its North American Direct Energy unit, although growing rapidly, is smaller than British Gas, but has a similar business model.

SSE (SSE)

SSE is an energy holding company based in the United Kingdom. The bulk of its profits comes from the company's 12 gigawatts of power generation, unregulated electric and gas supply businesses, and regulated networks business, which includes electric and gas distribution and transmission systems. The firm is also involved in smaller related businesses such as gas storage, home energy services, contracting, and oil and gas production.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
Centrica PLC141.00 GBX-2.62
SSE PLC1,313.06 GBX-0.83
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