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Central (LSE:CNA) shares are in the top three FTSE 100 Performers in the previous year. As a seasoned UK energy company, its shares are up 48% in the last 12 trading months. And I think this could be the start of a big bull run in 2023.
The rise in stock prices is mainly due to the energy crisis in the UK and Europe. The increase in fuel prices is causing high inflation in the region. Germany was in the news earlier this week, with inflation hitting a nearly 50-year high. Nine other countries in the region recorded double-digit annual inflation, with a sharp increase in August.
According to a recent report from the International Energy Agency, coal prices will remain near all-time highs for at least the next six months. As a result, energy companies may see further revenue growth in 2023. And I think investors were still clamoring to buy renewable energy shares in the UK on the cheap.
Centrica’s share price has strong momentum.
Centrica is one of the largest suppliers of electricity and natural gas to consumers in the UK and Ireland. The company works British GasThis will provide gas to houses over 9 meters across the country.
Just this week, UK wholesale gas prices fell more than 20% amid Centrica’s push to open the UK’s largest gas storage facility under the North Sea. However, despite this reduction, prices are still 12 times higher than 2021 levels.
While many investors see this as a move to lower gas prices, I think this still benefits the company. Gas storage facilities are now holding reserves at 80% capacity. This is to avoid sudden supply cuts when Russia further cuts its gas exports ahead of winter. This is what it means. British GasIn the year By early 2023, reserves could quickly jump in value if reserves decline.
That’s the main reason Centrica shares look cheap right now, despite a 143% gain since the 2020 crash. At 77.8p, the share price is currently 20% below its 2022 peak of 93p. And if current demand continues into 2023, I think the company could post new highs post-pandemic.
Concerns and judgment
However, this strongly depends on how the UK government handles the current energy crisis. Relief measures, including cash payments to families, have been put in place to minimize the impact on the population. European leaders have turned to non-major exporters such as the Middle East and the United States. However, given the demand, this can be expensive.
Crude oil prices are a big issue for Europe and the UK to address. Companies including Centrica have an established renewable energy network. But if they are forced to increase green power capacity, it can put pressure on operations and cash reserves. This can turn off investors as it affects profit margins and revenue.
While this energy crisis is a concern, it also offers an opportunity. Centrica holds leading green energy assets and is the market leader in the UK. A gas giant could play a role in providing the infrastructure to help the UK’s transition.
I am bullish on the company and will be tempted to invest in Centrica shares if there is a significant correction in the coming months.