Exelon Corporation (EXC), Duke Energy Corp (DUK): The Scariest Graph for Utility Investors Everywhere

Page 1 of 2

Keep your lights on and your fridge open if you know what’s good for your investments. According to a recent report, electricity demand growth is dropping – fast. Let’s take a look at the numbers, and whether this report is fuel on the fire for this overvalued sector.

Going, going, gone

In the 1950s, the U.S. experienced electricity demand growth rates of 10%. That’s greater than China’s current GDP growth and smacks of yesteryear economic prosperity, when Mr. and Mrs. Smith probably did leave their lights on.

Since 2000, electricity demand growth has averaged a minuscule 0.7% per year, and dropped into the red for the first time since WWII during the Great Recession. The Energy Information Administration’s (EIA) projections for the next 40 years don’t look any peachier. From now through 2040, annual growth rates are expected to hit just 0.9% a year, just over a third of our currently estimated GDP growth rate.

Source: EIA.gov

So why, then, have utilities stocks been skyrocketing over the last year? And why shouldn’t investors be listening to overvaluation fears of utilities bears? In two words: creative destruction.

Exelon Corporation (NYSE:EXC)

Growth isn’t everything

The era of baby boomer electricity use is over, but utilities are making major moves to keep bottom lines intact as top-line growth fizzles. This is a good move for utilities everywhere. Electricity use comes and goes with economic fortune and failings, and the only way utilities can keep pulling profits is to improve their own efficiency.

Exelon Corporation (NYSE:EXC) is the nation’s largest owner and operator of nuclear energy, with just over 19,000 MW of nuclear capacity comprising 55% of the utility’s total energy portfolio.

Source: exeloncorp.com

The company announced last week that it has filed renewal applications for two of its nuclear power stations, which collectively account for 13% of Exelon Corporation (NYSE:EXC)’s overall capacity and 24% of its nuclear energy. The applications are likely to be approved, allowing Exelon Corporation (NYSE:EXC) to prolong the life of its current capacity without adding on unnecessary (and expensive) major new projects.

Similarly, Duke Energy Corp (NYSE:DUK) recently announced that it would hold off on new North Carolina nuclear facilities the utility had previously been pushing. “Our most recent forecast indicates two additional nuclear units at Harris will not be needed in the next 15 years,” noted Duke Energy Corp (NYSE:DUK) President Dhiaa Jamil in a statement. Instead, the utility will continue to make the most of its $9 billion modernization project, which includes combined-cycle and “clean coal” plants.

More recently, improved technology and production tax credits have pushed power companies to ramp up their renewables efforts. It should come as no surprise that NextEra Energy, Inc. (NYSE:NEE) is adding on to its 10,000 net MW of wind capacity with General Electric Company (NYSE:GE)‘s  newest turbines, but other traditional companies are making the renewables leap, as well. Atlantic Power Corp (NYSE:AT) bought a renewables business from Veolia Environnement SA (ADR) (NYSE:VE) in 2012 that added 150 net MW of wind to its power portfolio. With over 350 net MW of wind power and 195 MW of biomass under its belt, the “growth by acquisition” utility is trying its hand at renewable energy efficiency.

Source:nexteraenergyresources.com

American Electric Power Company, Inc. (NYSE:AEP) was recently awarded accolades for the successful completion of its new 600 MW “clean coal” power plant. With a $1.7 billion price tag and seven years of regulatory battles to boot, this new facility promises to be the most efficient coal energy converter to date. Its “advanced ultra-supercritical steam cycle technology” will squeeze more from less, converting 39% of low-sulfur coal’s energy into electricity.

Source: AEP.com

Don’t keep your lights on

Economic recessions are never a good thing, but in this case, it’s caused power companies to take a critical closer look at their production processes. Whether it’s improving efficiencies or carefully calculating new expansions, utilities know that less can still mean more.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!