Failed energy suppliers will squeeze margins of survivors, says Moody’s

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The expected demise of more energy suppliers is expected to come at a cost for their surviving competitors.


After nine companies folded in the past few weeks, Moody’s expects more to follow, The Telegraph reported.


READ: Gas prices continue to soar as increased demands drains inventories


Larger suppliers, such as National Grid PLC (LSE:NG.) and Centrica PLC (LSE:CNA)’s British Gas, are likely to pick up the pieces with margins at risk.


Profits will be hit until the rocketing commodity prices aren’t passed onto customers, the rating agency said.


“The cost of energy supplier failures – which could well exceed GBP1bn and could be a multiple of that in a scenario with a higher number of market exits – and higher energy bills will exacerbate affordability concerns and the risk of credit negative political intervention,” analyst Joanna Fic commented.


The nine suppliers that have stopped trading were covering a total of 1.7mln customers, corresponding to 6% of the market.


Wholesale gas prices continue to rise as the reopening of worldwide economies has prompted a surge in demand that is outstripping supply.


The price of gas in the UK rallied nearly 40% in Wednesday’s session to over 400p per therm, up by more than 100% over the last month.


“European natural gas prices are also surging over 20% also at a record high. Britain has been hit hardest by the crisis with around 40% of its energy coming from gas. There is a major imbalance in the market with some describing this as the global financial crisis for commodities,” said Victoria Scholar, head of investment at Interactive Investor.


“Expectations for a cold winter ahead, low investment in substitute fossil fuels and unusually low levels of wind to power renewables turbines are all adding to the pressure.”


Centrica shed 3% to 56.98p while National Grid was down 1% to 899.9p on Wednesday at noon.

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