InvestingDaily.com

Account Information

  • My Account

    Manage all your subscriptions, update your address, email preferences and change your password.

  • Help Center

    Get answers to common service questions, ask the analyst or contact our customer service department.

  • My Stock Talk Profile

    Update your stock talk name and/or picture.



Close
FEATURED STRATEGY

How To Collect Your Share of My Million Dollar Giveaway

How To Collect Your Share of My Million Dollar GiveawayWe recently kicked off the most outrageous initiative in the history of investment research. It’s called the Income Millionaire Project. And the goal is simple: create 1,000 income millionaires. That’s a $1 billion goal! No one has ever tried it before, but that doesn’t bother me. I’m so sure you can use this program to make a million bucks… I’ll pay you $1,000 to start your journey. Go here for details.

 

Utilities See Green by Going Green

By Richard Stavros on December 4, 2015

There was a time when global climate talks, such as the ones being held in Paris this week, were thought to be critical in spurring adoption of renewable energy. But that’s not the case anymore.

U.S. utilities already see the money to be made in green energy, and their planned investments in generating cleaner power will rise dramatically in the years to come, helping drive future earnings growth.

Indeed, the U.S. Energy Information Administration projects that gas-fired generation will grow by 40% through 2040.

Furthermore, the government predicts that renewables will account for more than half of the generating capacity added through 2022, as utilities take advantage of tax credits while helping their states meet renewable mandates.

But utilities’ main incentive is to grow their earnings by adding greener infrastructure to their regulated rate base.

That’s why even with the politically contentious Clean Power Plan, the majority of the industry has chosen to move toward compliance.

In fact, that was one of the big surprises of last year’s Edison Electric Institute Financial Conference. Utility executives argued that new rules were coming so quickly that their firms didn’t have the luxury of waiting to see which way the political winds would blow.

In anticipation of more stringent environmental regulations, many utilities have already developed multi-year plans to shutter coal-fired plants and build gas-fired replacements.

But even without the Clean Power Plan, the industry would have continued to move toward cleaner gas-fired plants simply because the prolific shale plays have made natural gas cheap and plentiful.

To be sure, my colleague Robert Rapier, who helms our sister publication, The Energy Strategist, argues that investors should care what policies arise from the climate conference in Paris, as they can have “big impacts on money flows in the energy sector.”

Rapier notes that carbon-emissions regulations have been a big factor in investors’ avoidance of coal stocks in recent years. And government policy explains the “explosive growth of the wind and solar power sectors,” he wrote.

He also warned that government edicts can make or break new companies. That’s why even if the world’s governments were able to reach an agreement on climate change in Paris this week, we would carefully evaluate new entrants to the sector.

In fact, a recent report on the Paris talks by Berkeley Research Group concluded that governments will likely pursue one or more of the following three approaches toward reducing carbon emissions: 1) implement energy efficiency and conservation programs; 2) create subsidized investment into non-carbon technology; and 3) “last resort” carbon capture and sequestration/storage.

The report concludes that most of the 183 nations that have filed plans so far are taking the first two approaches.

Of course, the Clean Power Plan is significantly ahead of many other countries’ initiatives, since these rules have been vetted, debated and discussed for many years at this point.

And the conclusion by Wall Street investment banks and ratings agencies is that the Clean Power Plan will be a positive for a number of our favorite utilities. The two biggest factors are the size of their coal fleet and whether they operate in states known for having constructive regulatory environments.

Utilities with big coal fleets have opportunities for earnings growth by retiring aging coal plants and building new gas-fired plants. And constructive relationships with regulators help ensure that such spending is quickly recovered by passing the costs along to ratepayers.

Analysts with Morgan Stanley believe that fully regulated utilities in the Southeast with sizable carbon footprints could be the biggest beneficiaries of the Clean Power Plan. They project as much as $50 billion in spending will be needed to decarbonize the region. A number of our portfolio holdings stand to gain from this regulatory windfall.

Ratings agency Fitch conducted its own analysis by ranking the states most likely to be affected by the Clean Power Plan, as well as those that have demonstrated above-average timeliness of cost recovery.

The states that ranked most highly in both categories were Illinois, Indiana, Maryland, Ohio and New Jersey.

We’ve long argued that as the U.S. moves toward renewable energy, there will be winners and losers as the utilities sector is held to a new, higher standard.

As we’ve seen already in the great gas-utility grab, this new regulatory environment will redefine strategies, mergers and acquisitions, and ultimately valuations. We just hope to profit by following the money.


You might also enjoy…

 

Forget Buy and Hold. Here’s how to retire faster…

I’m not a fan of “buy and hold.” Gurus like to tell you that patience is the key, but I call horse puckey.

We’ve discovered an investing technique that consistently pays out easy-to-repeat profits.

One that’s proven to beat the market 2,082% in head-to-head testing.

And one that’s generated over 488 winners since 2011.

This method is so powerful, in fact, some of the investors we’ve let use it reported back to us saying they’ve made $71,425… $82,371… and even as much as $151,000 in a single year thanks to this “trick.”

That’s how powerful this investing technique is!

What what exactly is this mysterious method? I’ve put all the details together here.

Stock Talk — Post a comment Comment Guidelines

Our Stock Talk section is reserved for productive dialogue pertaining to the content and portfolio recommendations of this service. We reserve the right to remove any comments we feel do not benefit other readers. If you have a general investment comment not related to this article, please post to our Stock Talk page. If you have a personal question about your subscription or need technical help, please contact our customer service team. And if you have any success stories to share with our analysts, they’re always happy to hear them. Note that we may use your kind words in our promotional materials. Thank you.

You must be logged in to post to Stock Talk OR create an account.

Create a new Investing Daily account

  • - OR -

* Investing Daily will use any information you provide in a manner consistent with our Privacy Policy. Your email address is used for account verification and will remain private.