Good Energy (GOOD) stock plummets on profit warning
By Rob Griffin
12:11, 22 December 2021
Good Energy Group, the UK renewable energy supplier, saw its stock price plummet today after warning of a £3m hit to profits due to unfavourable weather.
In a trading update, the company said that since mid-December the industry has been experiencing a “further sustained period of low wind” that should last until Christmas.
The AIM-listed company also revealed that it expects to continue incurring additional commodity costs into the first quarter of 2022.
Share price falls
The gloomy comments were enough to send the company’s stock price down 10% to 225p, by midday on the London markets.
The update highlighted how power and gas prices had increased sharply to “unprecedented levels” during December, driven in part by the tension between Russia and Ukraine.
It also said that colder, calmer weather forecasts and a French nuclear plant being taken offline had contributed to the situation.
National crisis
Chief executive Nigel Pocklington declared the current situation a “national crisis” and urged the UK government to support the industry as it navigates these short-term challenges, and protect bill payers.
“Wholesale gas and power prices have increased to unprecedented levels over the last three weeks, creating an extremely difficult operating environment for every business in the industry,” he said.
Pocklington warned no-one was immune. “While we have a very strong track record in forecasting and hedging, these unparalleled price hikes, together with the very low levels of churn within our customer base, means that we require far greater working capital to trade similar volumes at these stratospheric price levels,” he said.
Tariffs increase
Good Energy said its financial performance for November was in line with expectations, while the first increase to its domestic standard variable tariff (SVT) became effective at the start of the month.
This provided “some mitigation” against another low-wind month, it pointed out, with wind levels 18% below seasonal norms.
“To absorb some of the higher input costs, we announced a second domestic SVT price rise of 30%, to be effective from 17 January 2022,” it added.
Additional working capital
The company expects the SVT rise to minimise the impact of rising forward prices over the medium term, although it will continue monitoring the need to raise tariffs further.
The company noted that colder and calmer weather conditions, coupled with higher customer volumes and elevated market prices throughout the winter will require additional working capital.
“We are actively engaged with our financing partners to help ensure we can meet these short term working capital requirements as appropriate,” it stated.
Read more: Renewable energy sector grows to meet world net zero target
Related topics