1009 Executive Digest.Market in Brief

July was a great month for C Three’s component companies. Only three companies were in negative territory—something that has occurred only four times since January 2002. It appears that rising water raised many of the companies in the indices. The market probably had factored in the demise of cap and trade for those companies most logically impacted.

Less Regulated Gas Significantly Cools. The one, clear trend is the cooling of the perennially hot less regulated natural gas companies. Continued announcements of increasing natural gas reserves driven by new extraction techniques have taken a toll on companies such as National Fuel Gas, EQT (formerly Equitable Resources) and Energen. This discounting, however, seems to ignore the longer-term increasing demand forecast driven by new natural gas-fired electric generation capacity additions. 

45,000 MW of New Gas-fired Capacity by 2015. Currently, C Three is forecasting the potential addition of up to 45,000 new megawatts of natural gas-fired power plants between 2010 and 2015. NextEra Energy leads with more than 4,900 MW of planned, new gas-fired generation, much of which will be in Florida. Southern Co. is right behind with 4,000 MW and the capacity split between its regulated subsidiary, Georgia Power, and its nonregulated subsidiary, Southern Power. Duke, AEP, Progress Energy, TVA and PG&E have significant natural gas-fired plant additions planned or under construction.
 
Natural Gas-fired Plants Announced; Older Coal-fired Plants Retiring. During July, C Three added five new in-development natural gas-fired power plants and two coal plant retirements or conversions:
  • Seminole Electric’s Gilchrist County (legal name unknown) potentially with 1,000 MW,
  • City of Lansing’s REO Town Lansing, city of Michigan at 100 MW,
  • Oglethorpe Power’s Rumble Road Energy Facility (Smarr) with up to 1,200 MW,
  • Southern Co.’s Dahlberg (four new units, 11-14), 760 MW,
  • Green Energy Partner’s Loudoun Power (Green Energy) with up to 1,000 MW,
  • Xcel Energy announced it will retire Black Dog Units 3 and 4 by 2016, and
  • Dominion announced the conversion of Bremo Bluff Units 3 and 4 from coal to natural gas by 2014.
Questar Spun off Exploration, Production Unit. The company did not adjust its stock price, with the new company being listed separately as QEP Resources. Because C Three does not track exploration and production company equities as pure plays, it will not add QEP Resources to its indices. Questar (STR) essentially paid a $30.83 dividend July 1. The value of STR, however, dropped nearly 60 percent with the dividend. The magnitude of its decline was not offset by the inclusion of QEP in the indices. C Three will adjust the indices with Questar’s approval, but until then, it removed Questar from the indices because of the impact it had on the Less Regulated Gas Index and on the C Three Composite Index.
 
Despite July’s Good News, Longer-term Story. The events of 2008 removed more than five years of market gains for all C Three indices and the component companies of which they are composed. While a 6 percent July increase was great news, a long way remains to recoup 2008 losses. Less Regulated Gas and LDC Gas Distribution Indices are leading the pack out of the 2008 bottom.
 
Energy Policy Ambiguity Hurts Electric Component Companies. A national energy policy is far from dead, with or without cap and trade. This continued ambiguity will continue to weigh on those companies that could be affected positively and negatively by energy legislation. Markets do not like ambiguity. This can be seen in the Electric Indices, which continue to lag all others. It will take the resolution of cap and trade and a proactive national energy policy before the electric group can regain its footing.
 
Methodology and Components of Each Index Tracked by The C Three Group
Less Regulated Electric Focus. More than 50 percent of revenues come from nonstate-regulated sources and/or more than 33 percent of assets are nonstate-regulated.
 
Less Regulated Gas Focus. More than 50 percent of revenues come from nonstate-regulated natural gas distribution and/or more than 33 percent of assets are nonstate-regulated.
 
Regulated Electric. No more than 20 percent of revenues can come from natural gas distribution and no more than 49 percent of revenues and 33 percent of assets can be associated with nonregulated activities.
 
LDC. No more than 20 percent of revenues can come from electric distribution or generation and no more than 50 percent of revenues and 33 percent of assets can be associated with nonregulated activities.
 
Regulated Electric and Gas Combination. More than 20 percent of revenues derived from natural gas distribution, no more than 50 percent of revenues and 33 percent of assets from nonregulated activities.
 
The C Three Index. The C Three Index is the nonweighted average of each of the companies included in the groupings above. The C Three Indices are developed based on a straightforward premise: If you invested $100 in each of the stocks of the companies we track, what would those shares be worth after a certain time? Historical share prices are adjusted for dividends, splits and spin-offs.
 

Author

  • The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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