Investing in Energy ETFs

As energy stocks fall 3% this week, we consider the longer term outlook for the sector, and the best passive funds to get low-cost exposure

Karen Kwok 26 April, 2017 | 4:27PM

Energy companies’ profits could be at risk if the Conservative Party win next month’s General Election. The Tories have pledged to cap energy prices – with current Prime Minister saying it was “unfair” two thirds of British households were stuck on the most expensive tariffs.

Shares in UK energy providers Centrica (CNA) and SSE (SSE) both fell more than 3% this week as the market digested the news.

Regulation is a key restriction to energy companies’ profits in the UK, according to Charles Fishman, Morningstar equity analyst. Regulators seek to keep customer bills low, while the company tries to increase profits. Investor returns depend on the rates regulators set. In the UK, regulators prefer incentive-based rates that require certain investments and efficiency standards.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Centrica PLC46.63 GBX-2.00
ETFS WTI Crude Oil ETC EUR3.35 EUR-0.74
SSE PLC1,302.00 GBX-1.33

About Author

Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk

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