Good Energy calls on government support as energy prices rise further

Renewable electricity supplier and energy services company Good Energy Group updated the market on its trading on Wednesday, reporting that its financial performance in November was in line with expectations.

The AIM-traded firm said its first domestic standard variable tariff rise became effective on 1 November, which provided some mitigation against another low wind month, with wind levels 18% below seasonal norms.

During December, power and gas prices had increased “sharply” to unprecedented levels, driven in part again by tension between Russia and Ukraine, together with colder, calmer weather forecasts and a French nuclear plant being taken offline.

Since its last trading update on 25 November, Good Energy said power and gas prices on a day-ahead basis for December compared to November had been on average 36% and 35% more expensive respectively, at £256 per megawatt hour, and £2.71 per therm.

First quarter baseload power and gas prices for 2022, meanwhile, at £489 per megawatt hour and £4.39 per therm, were 102% and 89% higher, respectively.

The company said the increases in nearer-term power and gas prices were all now feeding “very strongly” in 2022-2023 seasonal contracts.

It said the industry had also experienced a further sustained period of low wind since 16 December, which was expected to continue until Christmas.

Current wind levels were around 33% of seasonal norms, and the impact of that shortfall had been material across the industry.

Good Energy said the changed conditions were expected to adversely impact full-year profits by a further £3m, following guidance given in its last update in late November.

In that update, the firm highlighted the impact of incurring additional commodity costs from a higher number of business and domestic customers than expected.

That was now expected to continue into the first quarter of 2022, at sustained high commodity prices.

To absorb some of the higher input costs, Good Energy announced a second domestic standard variable tariff price rise of 30% to be effective from 17 January.

It said it expected to “minimise the impact” of the rising forward prices over the medium term, adding that it would continue to monitor the need to increase prices further, given its exemption from the price cap.

Colder and calmer weather conditions, coupled with higher customer volumes and elevated market prices throughout the winter, would require additional working capital, so the company was actively engaged with its financing partners to help ensure it could meet those short term working capital requirements as appropriate.

“This is a national crisis,” said chief executive officer Nigel Pocklington.

“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.

“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.”

Pocklington said no player in the industry was immune.

“We urge the UK government to support the industry at large in navigating these short-term challenges to protect bill-payers and those that serve them.”

At 1516 GMT, shares in Good Energy Group were down 5.8% at 235.5p.